<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-7898
GREY ADVERTISING INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-0802840
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
777 Third Avenue, New York, New York 10017
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: 212-546-2000
-----------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1 per share
------------------------------------
(Title of Class)
Indicate by check mark 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 and (2) has been subject to the filing requirements for
the past 90 days.
Yes X No
---------- -----------
Indicate by check mark 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 the 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.
Yes X No
---------- -----------
<PAGE> 2
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $265,719,042 as at March 1, 1998.
The registrant had 900,830 shares of its Common Stock, par value $1 per share,
and 279,973 shares of its Limited Duration Class B Common Stock, par value $1
per share, outstanding as at March 1,1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement to be furnished in connection with the
registrant's 1998 annual meeting of stockholders are incorporated by reference
into Part III.
<PAGE> 3
PART I.
ITEM 1. Business.
The Registrant ("Grey") and its subsidiaries (collectively with
Grey, the "Company") have been engaged in the planning, creation, supervision
and placing of advertising since the Company's formation in 1917. Grey was
incorporated in New York in 1925 and changed its state of incorporation to
Delaware in 1974.
The Company's principal business activity consists of providing a
full range of advertising services to its clients. Typically, this involves
developing an advertising and/or marketing plan after study of a client's
business, the distribution or utilization of the client's products or services
and the use of various media (e.g., television, radio, newspapers, magazines,
direct mail, outdoor billboards and the Internet) by which desired market
performance can best be achieved. The Company then creates advertising, prepares
media recommendations and places advertising in the media. The Company's
business also involves it in allied areas such as marketing consultation,
audio-visual production, co-marketing programs, direct marketing, interactive
consulting and production, media research and buying, research, product
publicity, public affairs, public relations and sales promotion.
The Company is not engaged in more than one industry segment,
and no separate class of similar services contributed 10% or more of the
Company's commissions and fees or net income during 1997, 1996 or 1995.
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<PAGE> 4
The Company serves a diversified client roster in the apparel,
automobile, beverage, chemical, communications, community service, computer,
corporate, electrical appliance, entertainment, food product, home furnishing,
houseware, healthcare, office product, packaged goods, publishing, restaurant,
retailing, toy, travel and other sectors.
Advertising is a highly competitive business in which agencies of
all sizes and other providers of creative or media services strive to attract
new clients or additional assignments from existing clients. Competition for new
business, however, is restricted from time to time because large agencies (such
as the Company) often are precluded from providing advertising services to
products or services that may be viewed as being competitive with those of an
existing client. Generally, since advertising agencies charge clients
substantially equivalent rates for their services, competitive efforts
principally focus on the skills of the competing agencies.
Published reports indicate that there are over 500 advertising
agencies of all sizes in the United States. According to a report published in
1997 (Advertising Age, a trade publication), the Company was the 7th largest
United States advertising agency in terms of worldwide gross income.
Approximately 66% of Grey's domestic gross income is from clients
that have been with the Company since 1992. The agreements between the Company
and most of its clients are generally terminable by either the Company or the
client upon mutually agreed notice, as is the custom in the industry. Clients
may also modify advertising budgets at any time and for any reason, and because
the agency's compensation for many clients is determined on the basis of
commission rates, shifts in advertising budgets may result in increased or
reduced levels of revenue for the Company.
4
<PAGE> 5
During 1997, one client (The Procter & Gamble Company), which has
been a client of the Company for more than forty years, represented more than
10% of the Company's consolidated income from commissions and fees. The loss of
this client would be expected to have an adverse effect on the results of the
Company. No other client represented more than 5% of the Company's total
consolidated income from commissions and fees. The loss of any single client in
past years has not had a long-term negative impact on the Company's financial
condition or its competitive position.
On December 31, 1997, the Company and its nonconsolidated affiliated
companies employed approximately 9,900 persons, of whom eight are executive
officers of Grey.
As is generally the case in the advertising industry, the Company's
business traditionally has been seasonal, with greater revenues generated in the
second and fourth quarters of each year. This reflects, in large degree, the
media placement patterns of the Company's clients.
Advertising programs created by the Company and its nonconsolidated
affiliated companies are placed principally in media distributed within the
United States and internationally through its offices in the United States and
more than 70 other countries. While the Company operates on a worldwide basis,
for the purpose of presenting certain financial information in accordance with
Generally Accepted Accounting Principles, its operations are deemed to be
conducted in three geographic areas. Commissions and fees, and operating profit
by each such geographic area for the years ended December 31, 1997, 1996 and
1995, and related identifiable assets at December 31 of each of the years, are
summarized in Note M of the Notes to Consolidated Financial Statements, which is
incorporated herein by reference.
5
<PAGE> 6
While the Company has no reason to believe that its foreign
operations as a whole are presently jeopardized in any material respect, there
are certain risks of operating which do not affect domestic operations but which
may affect the Company's foreign operations from time to time. Such risks
include the possibility of limitations on repatriation of capital or dividends,
political instability, currency devaluation and restrictions on the percentage
of permitted foreign ownership.
In connection with the provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company may include
Forward Looking Statements (as defined in the Reform Act) in oral or written
public statements issued by or on behalf of the Company. These Forward Looking
Statements may include, among other things, plans, objectives, projections,
anticipated future economic performance or assumptions and the like that are
subject to risks and uncertainties. As such, actual results or outcomes may
differ materially from those discussed in the Forward Looking Statements.
Important factors which may cause actual results to differ include, but are not
limited to, the following: the unanticipated loss of a material client or key
personnel, delays or reductions in client budgets, shifts in industry rates of
compensation, government compliance costs or litigation, unanticipated natural
disasters, changes in the general economic conditions that affect interest rates
and/or consumer spending both in the U.S. and the international markets in which
the Company operates, unanticipated expenses, client preferences which can be
affected by competition, the inability to implement upgrades for certain
computer programs which are not year 2000 compliant and the ability to project
risk factors which may vary. Certain of these factors are discussed in greater
detail elsewhere herein.
6
<PAGE> 7
Executive Officers of the Registrant
------------------------------------
as of March 1, 1998
-------------------
<TABLE>
<CAPTION>
Year First
Became
Executive Executive
Officers (a) Position Age Officer
------------ -------- --- -------
<S> <C> <C> <C>
Robert L. Berenson President - Grey, N.Y. 58 1978
Barbara S. Feigin Exec. Vice President 60 1983
Steven G. Felsher Exec. Vice President
Finance - Worldwide,
Secretary & Treasurer 48 1989
William P. Garvey(b) Exec. Vice President,
Chief Financial Officer
- United States 60 1970
John A. Gerster Exec. Vice President 50 1983
Edward H. Meyer Chairman of the Board,
President & Chief
Executive Officer 71 1959
Stephen A. Novick Exec. Vice President 57 1984
O. John C. Shannon President - Grey Int'l. 61 1993
</TABLE>
(a) All executive officers are elected annually by the Board of Directors of
Grey. Each executive officer has been with Grey for a period greater than
five years. There exists no family relationship between any of Grey's
directors or executive officers and any other director or executive officer
or person nominated or chosen to become a director or executive officer.
(b) Retiring effective March 31, 1998
7
<PAGE> 8
ITEM 2. Properties.
Substantially all offices of the Company are located in leased
premises. The Company's principal office is at 777 Third Avenue, New York, New
York, where it occupies approximately 400,000 square feet of space. The
Company's lease covering this space expires at the end of 2009. The Company also
has leases covering other offices, including New York, Los Angeles, Amsterdam,
Brussels, Copenhagen, Dusseldorf, Hong Kong, London, Madrid, Melbourne, Milan,
Paris, Stockholm and Toronto.
The Company considers all space leased by it to be adequate for
the operation of its business and does not foresee any significant difficulty in
meeting its space requirements.
ITEM 3. Legal Proceedings.
In the Company's judgment, it is not involved in any material
pending legal proceedings other than ordinary routine litigation incidental to
the business of the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
8
<PAGE> 9
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The Common Stock is traded on The NASDAQ Stock Market's National
Market and listed on the NASDAQ Stock Market under the symbol GREY.
As of March 1, 1998, there were 520 holders of record of the
Common Stock and 297 holders of record of the Limited Duration Class B Common
Stock.
The following table sets forth certain information about dividends
paid, and the bid prices on the NASDAQ Stock Market during the periods indicated
with respect to the Common Stock:
<TABLE>
<CAPTION>
Bid Prices*
Dollars per Share Dividends
High Low Per Share
---- --- ---------
<S> <C> <C> <C> <C>
1996 First Quarter 223 190 .9375
Second Quarter 233 219 .9375
Third Quarter 240 204 .9375
Fourth Quarter 251 230 1.0000
1997 First Quarter 278 253 1.0000
Second Quarter 322 250 1.0000
Third Quarter 341 292 1.0000
Fourth Quarter 360 328 1.0000
</TABLE>
* Such over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
9
<PAGE> 10
ITEM 6. Selected Financial Data.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commissions and fees ..... $858,752,000 $765,498,000 $688,219,000 $593,317,000 $567,243,000
Expenses ................. 793,832,000 706,965,000 637,979,000 552,022,000 526,455,000
Goodwill write-off (a) ... 39,944,000
Income of consolidated
companies before taxes on
income ................. 69,291,000 65,693,000 54,327,000 1,610,000 42,705,000
Provision for taxes on
income ................. 33,719,000 31,612,000 26,966,000 21,621,000 22,487,000
Net income (loss) ........ 30,451,000 28,602,000 23,438,000 (21,378,000) 17,681,000
Net income (loss) per
common share (b)(c)
Basic .................... 25.03 22.98 18.19 (18.45) 13.96
Diluted .................. 21.89 20.45 16.32 (18.45) 13.14
Weighted average number
of common shares
outstanding(c)
Basic .................... 1,180,146 1,185,841 1,195,314 1,220,529 1,218,674
Diluted .................. 1,355,452 1,339,111 1,340,261 1,220,529 1,304,972
Working capital .......... 50,526,000 3,843,000 9,582,000 33,735,000 25,001,000
Total assets ............. 1,199,987,000 1,089,394,000 963,433,000 830,076,000 820,633,000
Long-term debt ........... 78,025,000 33,025,000 33,025,000 33,025,000 33,025,000
Redeemable preferred stock
at redemption
value .................. 10,760,000 10,098,000 8,986,000 7,516,000 6,590,000
Common stockholders'
equity ................. 162,306,000 147,922,000 127,663,000 108,705,000 129,077,000
Cash dividend per share
of Common Stock
and Limited Duration
Class B Common Stock ... 4.00 3.8125 3.5625 3.3125 3.1375
</TABLE>
(a) In 1994, the Company recorded a charge of $39,944,000, on both a
pre-tax and after-tax basis, for a non-cash write-off which related
almost exclusively to write-offs of goodwill.
(b) After giving effect to amounts attributable to redeemable preferred
stock and for diluted net income per common share (i) to the assumed
exercise of dilutive stock options, (ii) to the shares issuable
pursuant to the Company's Senior Management Incentive Plan and (iii)
to the assumed conversion of 8 1/2% Convertible Subordinated
Debentures.
(c) After restatement for adoption of FAS 128, Earnings Per Share.
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<PAGE> 11
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
Income from commissions and fees ("gross income") increased 12.2% in 1997
and 11.2% in 1996 as compared to the respective prior years. Absent exchange
rate fluctuations, gross income increased 16.9% in 1997 and 11.6% in 1996. In
1997, 1996 and 1995, respectively, 44.5%, 44.2% and 44.1% of consolidated gross
income was attributable to domestic operations and 55.5%, 55.8% and 55.9%,
respectively, to international operations. In 1997, gross income from domestic
operations increased 12.9% versus 1996 and was up 11.4% in 1996 versus 1995.
Gross income from international operations increased 11.6% (20.0% absent
exchange rate fluctuations) in 1997 when compared to 1996 and 11.1% (11.8%
absent exchange rate fluctuations) in 1996 when compared to 1995. The increases
in gross income in both years primarily resulted from expanded activities from
existing clients, and the continued growth of the Company's general agency and
specialized communications operations.
Salaries and employee-related expenses increased 11.6% in 1997 and 9.8% in
1996 as compared to the respective prior years. Office and general expenses
increased 13.6% in 1997 and 12.9% in 1996 versus respective prior years. The
increases in expenses are generally in line with the increases in gross income
in such years.
Inflation did not have a material effect on revenue or expenses in 1997,
1996 or 1995.
Other income decreased in 1997 by $2,789,000 and increased in 1996 by
$3,073,000 as compared to the comparable prior periods. Both the 1997 decrease
and the 1996 increase result primarily from a 1996 non-recurring, non-operating
pre-tax income amount of
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<PAGE> 12
approximately $4,000,000 primarily related to gains on the sale of the Company's
equity position in a nonconsolidated subsidiary and the liquidation of a
non-marketable investment security.
The effective tax rate remained relatively constant at 48.7% in 1997 as
compared to 48.1% in 1996. The tax rate in 1995 was 49.6%. The decrease in the
effective tax rate in 1996 as compared to 1995 is due, in large part, to a lower
effective foreign tax rate in 1996.
Minority interest increased $80,000 in 1997 and $390,000 in 1996 as
compared to the respective prior years. The changes in 1997 and in 1996 were
primarily due to changes in the level of profits of majority-owned companies.
Equity in earnings of nonconsolidated companies increased $438,000 in
1997 and decreased $1,166,000 in 1996 as compared to the respective prior years.
These changes are due primarily to changes in the level of profits attributable
to the nonconsolidated companies.
The Company reported net income of $30,451,000 for 1997 as compared to
$28,602,000 in 1996 and $23,438,000 in 1995. Diluted earnings per common share
was $21.89 in 1997 as compared to $20.45 in 1996 and $16.32 in 1995. Absent
non-recurring, non-operating pre-tax income recognized in 1996, net income for
1997 and 1996 was up 15.0% and 13.0%, respectively, and diluted earnings per
common share was up 15.5% and 16.1% versus the respective prior periods.
For purposes of computing basic earnings per common share, the Company's
net income was adjusted by (i) dividends paid on the Company's preferred stock
and (ii) by the change in redemption value of the Company's preferred stock. For
the purposes of computing
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<PAGE> 13
diluted earnings per common share, net income was also adjusted by the interest
savings, net of tax, on the assumed conversion of the Company's 8.5% convertible
subordinated debentures.
The Company's results may be affected by currency exchange rate
fluctuations given the Company's extensive non-United States operations.
Generally, the foreign currency exchange risk is limited to net income because
the Company's revenues and expenses, by country, are almost exclusively
denominated in the local currency of each respective country with both revenue
and expense items matched. Occasionally, the Company enters into foreign
currency contracts for known cash flows related to repatriation of earnings from
its international subsidiaries. The term of each such foreign currency contract
entered into in 1997 was for less than three months. At December 31, 1997, there
were no foreign currency contract transactions open. In addition, the Company
had no derivative contracts outstanding at December 31, 1997 and did not enter
into any derivative contracts during 1997.
Some of the Company's older computer programs were written using a two
digit year. As a result, those computer programs may be unable to process
time-sensitive information beyond the year 2000. This situation, which is not
uncommon, is frequently referred to as the Year 2000 Issue and can cause a
temporary disruption of the ordinary course of business. The Company has
completed an assessment of its computer programs and those of its third party
software vendors and has undertaken what it believes to be the appropriate
steps to modify or replace software as necessary. The Company anticipates
having a significant portion of the modifications to existing software and
conversions to new software be completed by December 31, 1998 and that the Year
2000 Issue should not pose significant operational problems for its computer
network. The estimated cost of the project has been determined and is not
expected to have a material adverse effect on the Company. The project is being
funded through operating cash and is being expensed as incurred. The cost and
time of completion are based on management's best estimates which were derived
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<PAGE> 14
utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. There can, however, be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes, the timely receipt and installation of upgrades from
third party software vendors, compliance of third party vendors with whom the
Company interacts and similar circumstances.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to be highly liquid by maintaining significant
levels of cash, cash equivalents and investments in highly liquid marketable
securities, a majority of which are United States government securities and
corporate bonds. Cash and cash equivalents were $150,553,000 and $112,485,000 at
December 31, 1997 and 1996, respectively, and the Company's investment in
marketable securities was $72,741,000 and $96,107,000 at December 31, 1997 and
1996, respectively. The continued high level of liquidity reflects the Company's
ongoing focus on its cash management process. Working capital increased by
$46,683,000 from $3,843,000 at December 31, 1996 to $50,526,000 at December 31,
1997. The increase in working capital is largely attributable to the investment,
in cash equivalents, of the net proceeds from the refinancing of a term loan.
Domestically, the Company maintains committed bank lines of credit
totaling $51,000,000. These lines of credit were partially utilized during both
1997 and 1996 to secure obligations of selected foreign subsidiaries in the
amounts of $3,000,000 and $26,000,000 at December 31, 1997 and 1996,
respectively.
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<PAGE> 15
Other lines of credit are available to the Company in foreign countries in
connection with short-term borrowings and bank overdrafts used in the normal
course of business. Amounts outstanding under such facilities at December 31,
1997 and 1996 were $19,455,000 and $60,004,000, respectively. The decrease in
the borrowings is largely attributable to the Company's paydown of short-term
borrowings in Europe.
Historically, funds from operations and short-term bank borrowings have
been sufficient to meet the Company's dividend, capital expenditure and working
capital needs. The Company expects that such sources will be sufficient to meet
its short-term cash requirements in the future. While the Company has not
utilized long-term borrowing to fund its operating needs, in 1997 it refinanced
its borrowings with the Prudential Insurance Company of America. Pursuant to the
refinancing, the Company repaid the 7.68% $30,000,000 loan it had taken down in
early 1993 and, in turn, borrowed $75,000,000 in December 1997. The new loan
bears an interest at the rate of 6.94% and is repayable in three equal annual
installments, commencing in December 2003. The Company does not anticipate any
material increased requirement for capital or other expenditures which will
adversely affect its liquidity.
The Company's business generally has been seasonal with greater gross
income earned in the second and fourth quarters, particularly the fourth
quarter. As a result, cash, accounts receivable, accounts payable and accrued
expenses are typically higher on the Company's year-end balance sheet than at
the end of any of the preceding three quarters.
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<PAGE> 16
FASB STATEMENT 130
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income ("FAS 130"). FAS 130 establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. FAS 130 is effective for fiscal years beginning
after December 15, 1997. The Company will adopt the new statement in the first
quarter of 1998. The adoption of this standard is not expected to have any
impact on the Company's Statements of Income , Balance Sheet or Cash Flows.
FASB STATEMENT 131
In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, Disclosure About Segments of an Enterprise and Related Information
("FAS 131"). FAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. FAS 131 is effective for fiscal years beginning after December 15,
1997. The Company will adopt the new statement in 1998. The adoption of this
standard is not expected to have any impact on the Company's Statements of
Income, Balance Sheet or Cash Flows.
ITEM 8. Financial Statements and Supplementary Data.
The information required by this Item is presented in this report beginning
on Page F-1.
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<PAGE> 17
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.
Information with respect to the directors of the Company is incorporated
herein by reference to the Company's proxy statement ("Proxy Statement") to be
sent to its stockholders in connection with its 1998 Annual Meeting, under the
caption "Election of Directors". Information with respect to the Company's
executive officers is set forth in Part I of this report.
ITEM 11. Executive Compensation.
The information required by this Item is incorporated herein by reference
to the Proxy Statement and will be included under the caption "Management
Remuneration and Other Transactions".
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this Item is incorporated herein by reference
to the Proxy Statement and will be included under the captions "Election of
Directors" and "Voting Securities".
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<PAGE> 18
ITEM 13. Certain Relationships and Related Transactions.
The information required by this Item is incorporated herein by reference
to the Proxy Statement and will be included under the captions "Election of
Directors" and "Voting Securities".
PART IV.
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) (1) (2) The information required by this subsection of this
Item is presented in the index to Financial Statements on Page
F-1.
(3) The information required by this subsection of this Item
is provided in the Index of Exhibits at Page E-1 of this
report. Such index provides a listing of exhibits filed with
this report and those incorporated herein by reference.
(b) Press Release issued by the Company on December 23, 1997.
(Incorporated herein by reference to Grey's report on Form 8-K
dated and filed as of January 6, 1998.)
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<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) needs of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GREY ADVERTISING INC.
By: /s/ Edward H. Meyer
--------------------
Edward H. Meyer,
Chairman, Chief Executive
Officer & President
Dated: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities and on the date indicated.
/s/ Mark N. Kaplan Dated: March 30, 1998
- -----------------------------
Mark N. Kaplan, Director
/s/ Edward H. Meyer Dated: March 30, 1998
- -----------------------------
Edward H. Meyer, Director;
Principal Executive Officer
/s/ O. John C. Shannon Dated: March 30, 1998
- -----------------------------
O. John C. Shannon, Director;
President - Grey International
/s/ Richard R. Shinn Dated: March 30, 1998
- -----------------------------
Richard R. Shinn, Director
/s/ Steven G. Felsher Dated: March 30, 1998
- -----------------------------
Steven G. Felsher
Principal Financial Officer
/s/ William P. Garvey Dated: March 30, 1998
- -----------------------------
William P. Garvey,
Principal Accounting Officer
<PAGE> 20
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2) and Item 14(d)
Financial Statements and Supplementary Data
List of Financial Statements
Year ended December 31, 1997
Grey Advertising Inc.
New York, New York
<PAGE> 21
Form 10-K-Item 8, Item 14(a)(1) and (2)
Grey Advertising Inc. and Consolidated Subsidiary Companies
Index to Financial Statements
The following consolidated financial statements of Grey Advertising Inc. and
consolidated subsidiary companies are included in Item 8:
Report of Independent Auditors.................................. F- 2
Consolidated Balance Sheets--December 31, 1997 and 1996......... F- 3
Consolidated Statements of Income--Years Ended
December 31, 1997, 1996 and 1995............................... F- 5
Consolidated Statements of Common Stockholders' Equity--
Years Ended December 31, 1997, 1996 and 1995................... F- 6
Consolidated Statements of Cash Flows--
Years Ended December 31, 1997, 1996 and 1995................... F- 8
Notes to Consolidated Financial Statements--
December 31, 1997.............................................. F- 10
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
Summarized financial information and financial statements for nonconsolidated
foreign investee companies accounted for by the equity method have been omitted
because such companies, considered individually or in the aggregate, do not
constitute a significant subsidiary.
F-1
<PAGE> 22
Report of Independent Auditors
Board of Directors
Grey Advertising Inc.
We have audited the accompanying consolidated balance sheets of Grey Advertising
Inc. and consolidated subsidiary companies as of December 31, 1997 and 1996, and
the related consolidated statements of income, common stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Grey
Advertising Inc. and consolidated subsidiary companies at December 31, 1997 and
1996, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 6, 1998
F-2
<PAGE> 23
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1997 1996
-------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 150,553,000 $ 112,485,000
Marketable securities (Notes A and E) 15,401,000 28,688,000
Accounts receivable 647,524,000 590,002,000
Expenditures billable to clients 54,687,000 52,285,000
Other current assets (Note K) 56,225,000 52,982,000
-------------------------------
Total current assets 924,390,000 836,442,000
Investments in and advances to
nonconsolidated
affiliated companies (Notes A and B) 18,386,000 17,723,000
Fixed assets-net (Note D) 88,006,000 78,223,000
Marketable securities (Notes A and E) 57,340,000 67,419,000
Intangibles and other assets-including
loans to executive officers of
$5,572,000 in 1997 and $5,822,000 in
1996 (Notes A, F, G, K and L(2)) 111,865,000 89,587,000
-------------------------------
Total assets $1,199,987,000 $1,089,394,000
===============================
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 24
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
December 31
1997 1996
--------------------------------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 709,959,000 $ 619,003,000
Notes payable to banks (Note F) 22,455,000 86,004,000
Accrued expenses and other 122,269,000 107,368,000
Income taxes payable 19,181,000 20,224,000
--------------------------------
Total current liabilities 873,864,000 832,599,000
Other liabilities-including deferred
compensation of $36,481,000 in 1997 and
$28,738,000 in 1996 (Note L(1)) 61,723,000 55,217,000
Long-term debt (Note F) 78,025,000 33,025,000
Minority interest 13,309,000 10,533,000
Redeemable preferred stock-at redemption value;
par value $1 per share; authorized 500,000
shares; issued and outstanding 32,000 shares in
1997 and 1996 (Note G) 10,760,000 10,098,000
Common stockholders' equity:
Common Stock-par value $1 per share;
authorized 10,000,000 shares; issued
1,124,324 in 1997 and 1,110,918 shares in 1996
and 1,077,116 shares in 1994 1,124,000 1,111,000
Limited Duration Class B Common Stock-par value
$1 per share; authorized 2,000,000 shares;
issued 307,460 in 1997 and 320,866 shares in
1996 308,000 321,000
Paid-in additional capital 44,349,000 42,814,000
Retained earnings 169,214,000 144,789,000
Cumulative translation adjustment (9,422,000) 2,579,000
Unrealized gain (loss) on marketable
securities
(Notes A and E) 189,000 (870,000)
Loans to officer used to purchase Common Stock
and Limited Duration Class B Common Stock
(Note L(2)) (4,726,000) (4,726,000)
--------------------------------
201,036,000 186,018,000
Less-cost of 222,098 and 222,810 shares of
Common Stock and 26,762 and 26,759 shares
of Limited Duration Class B Common Stock
held in treasury at December 31, 1997 and
1996, respectively 38,730,000 38,096,000
--------------------------------
Total common stockholders' equity 162,306,000 147,922,000
Retirement plans, leases and contingencies
(Note L)
================================
Total liabilities and stockholders' equity $1,199,987,000 $1,089,394,000
================================
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 25
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
---------------------------------------------
<S> <C> <C> <C>
Commissions and fees $858,752,000 $765,498,000 $688,219,000
Expenses:
Salaries and employee related
expenses (Note L(1)) 529,863,000 474,686,000 432,311,000
Office and general expenses
(Note L(3)) 263,969,000 232,279,000 205,668,000
---------------------------------------------
793,832,000 706,965,000 637,979,000
---------------------------------------------
64,920,000 58,533,000 50,240,000
Other income-net (Note C) 4,371,000 7,160,000 4,087,000
---------------------------------------------
Income of consolidated companies
before taxes on income 69,291,000 65,693,000 54,327,000
Provision for taxes on income
(Note K) 33,719,000 31,612,000 26,966,000
---------------------------------------------
Income of consolidated companies 35,572,000 34,081,000 27,361,000
Minority interest applicable to
consolidated companies (6,743,000) (6,663,000) (6,273,000)
Equity in earnings of
nonconsolidated affiliated
companies 1,622,000 1,184,000 2,350,000
---------------------------------------------
Net income $ 30,451,000 $ 28,602,000 $ 23,438,000
=============================================
Earnings per Common Share (Note J):
Basic $25.03 $22.98 $18.19
Diluted $21.89 $20.45 $16.32
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 26
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Common Stockholders' Equity
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Common Stock
Paid-In Held in Treasury
Common Additional Retained ---------------------------
Stock Capital Earnings Shares Amount
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 1,432,000 $ 31,895,000 $ 105,123,000 188,133 $ (22,799,000)
Net Income 23,438,000
Cash dividends-Common Shares $3.5625 per share (4,333,000)
Cash dividends-Redeemable Preferred Stock-$7.125 per
share (228,000)
Common Shares acquired-at cost 77,001 (14,434,000)
Dividends Payable in Company Stock pursuant to Senior
Management Incentive Plan (Note L) 185,000 (185,000)
Increase in redemption value of Redeemable Preferred
Stock (Note G) (1,470,000)
Restricted stock activity (Note I) 133,000
Tax benefit from restricted stock (Note K) 164,000
Common Shares issued upon exercise of stock options (287,000) (25,535) 2,733,000
Tax benefit from exercise of stock options (Note K) 959,000
Senior Management Incentive Plan activity (Note L) 4,849,000
Translation adjustment
Unrealized gain on marketable securities (Notes A
and E)
---------------------------------------------------------------------------
Balance at December 31, 1995 1,432,000 37,898,000 122,345,000 239,599 (34,500,000)
Net income 28,602,000
Cash dividends-Common Shares-$3.8125 per share (4,527,000)
Cash dividends-Redeemable Preferred Stock-$7.625 per
share (244,000)
Common Shares acquired-at cost 20,818 (4,733,000)
Dividends Payable in Company Stock pursuant to Senior
Management Incentive Plan (Note L) 275,000 (275,000)
Increase in redemption value of Redeemable Preferred
Stock (Note G) (1,112,000)
Restricted stock activity (Note I) 43,000 (250) 14,000
Tax benefit from restricted stock (Note K) 3,000
Common Shares issued upon exercise of stock options 250,000 (10,598) 1,123,000
Tax benefit from exercise of stock options (Note K) 483,000
Senior Management Incentive Plan activity (Note L) 3,862,000
Translation adjustment
Unrealized loss on marketable securities (Notes A
and E)
---------------------------------------------------------------------------
Balance at December 31, 1996 $ 1,432,000 $ 42,814,000 $ 144,789,000 249,569 $ (38,096,000)
<CAPTION>
Other
Equity
Accounts Total
---------------------------------------
<S> <C> <C>
Balance at December 31, 1994 $ (6,946,000) $ 108,705,000
Net Income 23,438,000
Cash dividends-Common Shares $3.5625 per share (4,333,000)
Cash dividends-Redeemable Preferred Stock-$7.125 per
share (228,000)
Common Shares acquired-at cost (14,434,000)
Dividends Payable in Company Stock pursuant to Senior
Management Incentive Plan (Note L)
Increase in redemption value of Redeemable Preferred
Stock (Note G) (1,470,000)
Restricted stock activity (Note I) 133,000
Tax benefit from restricted stock (Note K) 164,000
Common Shares issued upon exercise of stock options 2,446,000
Tax benefit from exercise of stock options (Note K) 959,000
Senior Management Incentive Plan activity (Note L) 4,849,000
Translation adjustment 5,392,000 5,392,000
Unrealized gain on marketable securities (Notes A
and E) 2,042,000 2,042,000
---------------------------------------
Balance at December 31, 1995 488,000 127,663,000
Net income 28,602,000
Cash dividends-Common Shares-$3.8125 per share (4,527,000)
Cash dividends-Redeemable Preferred Stock-$7.625 per
share (244,000)
Common Shares acquired-at cost (4,733,000)
Dividends Payable in Company Stock pursuant to Senior
Management Incentive Plan (Note L)
Increase in redemption value of Redeemable Preferred
Stock (Note G) (1,112,000)
Restricted stock activity (Note I) 57,000
Tax benefit from restricted stock (Note K) 3,000
Common Shares issued upon exercise of stock options 1,373,000
Tax benefit from exercise of stock options (Note K) 483,000
Senior Management Incentive Plan activity (Note L) 3,862,000
Translation adjustment (2,085,000) (2,085,000)
Unrealized loss on marketable securities (Notes A
and E) (1,420,000) (1,420,000)
---------------------------------------
Balance at December 31, 1996 $ (3,017,000) $ 147,922,000
</TABLE>
F-6
<PAGE> 27
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Common Stockholders' Equity
Years ended December 31, 1997, 1996 and 1995 (continued)
<TABLE>
<CAPTION>
Common Stock
Paid-In Held in Treasury
Common Additional Retained ----------------------------
Stock Capital Earnings Shares Amount
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 1,432,000 $ 42,814,000 $ 144,789,000 249,569 $(38,096,000)
Net income 30,451,000
Cash dividends-Common Shares-$4.00 per share (4,738,000)
Cash dividends - Redeemable Preferred Stock $8.00
per share (256,000)
Common Shares acquired-at cost 3,007 (962,000)
Dividends Payable in Cash pursuant to Senior
Management Incentive Plan (Note L) (370,000)
Increase in redemption value of Redeemable Preferred
Stock (Note G) (662,000)
Restricted stock activity (Note I) (143,000) (3,000) 309,000
Tax benefit from restricted stock (Note K) 8,000
Common Shares issued upon exercise of stock options 52,000 (716) 19,000
Senior Management Incentive Plan activity (Note L) 1,618,000
Translation adjustment
Unrealized gain on marketable securities (Notes A
and E)
---------------------------------------------------------------------------
Balance at December 31, 1997 $ 1,432,000 $ 44,349,000 $ 169,214,000 248,860 $(38,730,000)
===========================================================================
<CAPTION>
Other
Equity
Accounts Total
---------------------------------------
<S> <C> <C>
Balance at December 31, 1996 $ (3,017,000) $ 147,922,000
Net income 30,451,000
Cash dividends-Common Shares-$4.00 per share (4,738,000)
Cash dividends - Redeemable Preferred Stock $8.00
per share (256,000)
Common Shares acquired-at cost (962,000)
Dividends Payable in Cash pursuant to Senior
Management Incentive Plan (Note L) (370,000)
Increase in redemption value of Redeemable Preferred
Stock (Note G) (662,000)
Restricted stock activity (Note I) 166,000
Tax benefit from restricted stock (Note K) 8,000
Common Shares issued upon exercise of stock options 71,000
Senior Management Incentive Plan activity (Note L) 1,618,000
Translation adjustment (12,001,000) (12,001,000)
Unrealized gain on marketable securities (Notes A
and E) 1,059,000 1,059,000
---------------------------------------
Balance at December 31, 1997 $(13,959,000) $ 162,306,000
=======================================
</TABLE>
See notes to consolidated financial statements
F-7
<PAGE> 28
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Cash Flows
Year ended December 31
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 30,451,000 $ 28,602,000 $ 23,438,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization of fixed
assets 25,866,000 22,880,000 17,388,000
Amortization of intangibles 6,160,000 4,976,000 4,146,000
Deferred compensation 14,002,000 16,217,000 15,162,000
Equity in earnings of nonconsolidated
affiliated companies, net of
dividends received of $658,000,
$441,000 and $483,000 (964,000) (743,000) (1,867,000)
Gains from the sale of marketable
securities (599,000) (378,000)
Gains from the sale of a
nonconsolidated affiliated company
and a non-marketable investment
security (4,533,000)
Minority interest applicable to
consolidated companies 6,743,000 6,663,000 6,273,000
Amortization of restricted stock
expense 140,000 33,000 133,000
Deferred income taxes (7,366,000) (7,085,000) (2,999,000)
Changes in operating assets and liabilities:
Increase in accounts receivable (89,556,000) (103,252,000) (79,612,000)
Increase in expenditures billable to
clients (6,103,000) (7,229,000) (14,109,000)
(Increase) decrease in other current
assets (5,314,000) (4,782,000) 4,351,000
(Increase) decrease in other assets (652,000) (2,741,000) 3,680,000
Increase in accounts payable 121,303,000 78,157,000 61,846,000
Increase in accrued expenses and
other 14,473,000 8,611,000 3,180,000
Increase in income taxes payable 480,000 2,419,000 2,431,000
Increase (decrease) in other
liabilities 1,380,000 (2,592,000) (2,509,000)
-----------------------------------------------
Net cash provided by operating activities 110,444,000 35,223,000 40,932,000
Investing activities
Purchases of fixed assets (39,718,000) (27,896,000) (29,136,000)
Trust fund deposits (2,974,000) (2,833,000) (2,426,000)
Increase in investments in and advances
to non-consolidated affiliated companies (1,142,000) (320,000) (1,686,000)
Purchases of marketable securities (25,038,000) (129,491,000) (68,500,000)
Proceeds from the sales of marketable
securities 49,613,000 101,012,000 26,957,000
Proceeds from the sale of a
nonconsolidated affiliated company
and a non-marketable investment security 8,568,000
Increase in intangibles, primarily
goodwill (19,912,000) (13,103,000) (6,183,000)
-----------------------------------------------
Net cash used in investing activities (39,171,000) (64,063,000) (80,974,000)
</TABLE>
F-8
<PAGE> 29
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Cash Flows (continued)
Year ended December 31
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Financing activities
Net (repayments of) proceeds from
short-term borrowings (60,895,000) 18,180,000 4,834,000
Proceeds from term loan 75,000,000
Repayment of term loan (30,000,000)
Common Shares acquired for treasury (962,000) (4,733,000) (14,434,000)
Cash dividends paid on Common Shares (4,738,000) (4,527,000) (4,333,000)
Cash dividends paid on Redeemable
Preferred Stock (256,000) (244,000) (228,000)
Proceeds from the issuance of
Restricted Stock 27,000 24,000
Proceeds from exercise of stock options 71,000 1,373,000 2,446,000
Borrowings under life insurance policies 450,000 464,000 11,779,000
-----------------------------------------------
Net cash (used in) provided by
financing activities (21,303,000) 10,537,000 64,000
Effect of exchange rate changes on cash (11,902,000) (3,525,000) 4,214,000
-----------------------------------------------
Increase (decrease) in cash and cash
equivalents 38,068,000 (21,828,000) (35,764,000)
Cash and cash equivalents at beginning
of year 112,485,000 134,313,000 170,077,000
-----------------------------------------------
Cash and cash equivalents at end of year $ 150,553,000 $ 112,485,000 $ 134,313,000
===============================================
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE> 30
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements
A. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries. Material intercompany balances and transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Commissions and Fees and Accounts Receivable
Income derived from advertising placed with media is generally recognized based
upon the publication or broadcast dates. Income resulting from expenditures
billable to clients is generally recognized when billed. Payroll costs are
expensed as incurred. Accounts receivable include both the income recognized as
well as the actual media and production costs which are paid for by the Company
and rebilled to clients at the Company's cost.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less from the purchase date to be cash equivalents. The carrying
amount of cash equivalents approximates fair value because of the short
maturities of those instruments.
Investments in and Advances to Nonconsolidated Affiliated Companies
The Company generally carries its investments in nonconsolidated affiliated
companies on the equity method. Certain investments which are not material in
the aggregate are carried on the cost method.
Fixed Assets
Depreciation of furniture, fixtures and equipment is provided for over their
estimated useful lives ranging from three to ten years and has been computed
principally by the straight-line method. Amortization of leaseholds and
leasehold improvements is provided for principally over the terms of the related
leases, which are not in excess of the lives of the assets.
F-10
<PAGE> 31
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
A. Summary of Significant Accounting Policies (continued)
Foreign Currency Translation
Primarily all balance sheet accounts of the Company's foreign operations are
translated at the exchange rate in effect at each year end and statement of
income accounts are translated at the average exchange rates prevailing during
the year. Resulting translation adjustments are made directly to a separate
component of stockholders' equity. Foreign currency transaction gains and losses
are reported in income. During 1997, 1996 and 1995, foreign currency transaction
gains and losses were not material.
Intangibles
The excess of purchase price over underlying net equity of certain consolidated
subsidiaries and nonconsolidated affiliated companies at the date of acquisition
("goodwill") is amortized by the straight-line method over periods of up to
twenty years. The amounts of goodwill, net of accumulated amortization,
associated with consolidated subsidiaries (included in Other Assets) and
nonconsolidated investments (included in Investments in and Advances to
Nonconsolidated Affiliated Companies) were $59,851,000 and $3,685,000 in 1997,
and $46,084,000 and $5,592,000 in 1996, respectively.
Annually, the Company assesses the carrying value of its goodwill and the
respective periods of amortization. As part of the evaluation, the Company
considers a number of factors including actual operating results, the impact of
gains and losses of major local clients, the impact of any loss of key local
management staff and any changes in general economic conditions. The Company
quantifies the recoverability of goodwill based on each agency's estimated
future non-discounted cash flows over the applicable remaining amortization
periods. This requires management to make certain specific assumptions with
respect to future revenue and expense levels. Where multiple investments had
been made in a single company, a weighted average amortization period is used.
Charges to reflect permanent impairment are recorded to the extent that the
unamortized book value of the goodwill exceeds the future cumulative discounted
cash flows.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company provides appropriate foreign
withholding taxes on unremitted earnings of consolidated and nonconsolidated
foreign companies.
F-11
<PAGE> 32
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
A. Summary of Significant Accounting Policies (continued)
Marketable Securities
The Company considers all its investments in marketable securities as
available-for-sale. Available-for-sale securities are carried at fair value,
based on publicly quoted market prices, with unrealized gains and losses
reported as a separate component of stockholders' equity.
Stock-Based Compensation
As permitted by Financial Accounting Standards Statement No. 123, Accounting for
Stock-Based Compensation, the Company accounts for stock-based awards in
accordance with APB Opinion No. 25, Accounting For Stock Issued to Employees. No
compensation expense is recorded for options granted at fair market value at the
date of grant. The excess of the fair market value of Restricted Stock over the
cash consideration received is amortized, as compensation, over the period of
restriction. The future obligation to issue stock, pursuant to the Company's
Senior Management Incentive Plan, is included in Paid-In Additional Capital and
results in periodic charges to compensation.
Earnings Per Share
In 1997, the Company adopted Financial Accounting Standards Statement No. 128,
Earnings Per Share and, accordingly, has restated the earnings per share amount
for all prior periods, including pro forma information. The computation of
basic earnings per common share is based on the weighted average number of
common shares outstanding and for diluted earnings per common share includes
adjustments for the effect of the assumed exercise of dilutive stock options,
shares issuable pursuant to the Company's Senior Management Incentive Plan (see
Note L(1)) and the assumed conversion of the 8 1/2% Convertible Subordinated
Debentures. Also, for the purpose of computing earnings per common share, the
Company's net income is adjusted by dividends on the Preferred Stock and by the
increase or decrease in redemption value of the Preferred Stock.
F-12
<PAGE> 33
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
B. Foreign Operations
The following financial data is applicable to consolidated foreign subsidiaries:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Current assets $489,242,000 $429,863,000 $395,016,000
Current liabilities 480,514,000 452,220,000 408,541,000
Other assets--net of
other liabilities 79,391,000 62,363,000 56,312,000
Net income 8,921,000 9,276,000 9,384,000
</TABLE>
Consolidated retained earnings at December 31, 1997 includes equity in
unremitted earnings of nonconsolidated foreign companies of approximately
$10,488,000.
C. Other Income - Net
Details of other income - net are:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
Interest income $13,826,000 $12,211,000 $12,183,000
Interest expense (11,095,000) (10,065,000) (8,928,000)
Gains from the sale of a
non-consolidated affiliated
company, a non-marketable
investment security and
marketable securities 599,000 4,911,000
Dividends from affiliates 83,000 151,000 217,000
Income (expense)-net 958,000 (48,000) 615,000
------------------------------------------
$ 4,371,000 $ 7,160,000 $ 4,087,000
==========================================
</TABLE>
D. Fixed Assets
Components of fixed assets-at cost are:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------
<S> <C> <C>
Furniture, fixtures and
equipment $ 145,116,000 $ 131,329,000
Leaseholds and leasehold
improvements 59,333,000 51,705,000
--------------------------------------
204,449,000 183,034,000
Accumulated depreciation and
amortization (116,443,000) (104,811,000)
--------------------------------------
$ 88,006,000 $ 78,223,000
======================================
</TABLE>
F-13
<PAGE> 34
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
E. Marketable Securities
The marketable securities, by type of investment, held by the Company at
December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------
<S> <C> <C>
Maturities of one year or less:
U.S. Treasury Securities $ 995,000 $ 2,506,000
Money market funds 14,406,000 22,556,000
Corporate bonds 3,626,000
------------------------------------
15,401,000 28,688,000
------------------------------------
Maturities greater than one year:
U.S. Treasury Securities 32,310,000 49,355,000
Government National Mortgage
Association Securities 1,622,000 4,920,000
Corporate bonds 23,408,000 13,144,000
------------------------------------
57,340,000 67,419,000
------------------------------------
$72,741,000 $96,107,000
====================================
</TABLE>
At December 31, 1997, the Company had unrealized gains of $748,000 related
primarily to investments in corporate bonds and unrealized losses of $559,000
primarily related to investments in U.S. Treasury Securities and Money Market
Funds. At December 31, 1996 the Company had unrealized losses of $870,000,
principally related to the investments in U.S. Treasury Securities. At December
31, 1997 and 1996, the Company's investments in marketable securities,
classified as non-current, had an average maturity of approximately 7 and 6
years, respectively.
F. Credit Arrangements and Long-Term Debt
The Company maintains committed lines of credit of $51,000,000 with various
domestic banks and may draw against the lines on unsecured demand notes at rates
below the applicable bank's prime interest rate. These lines of credit, which
are renewable annually, were partially utilized during both 1997 and 1996 by
selected foreign subsidiaries in the amount of $3,000,000 and $26,000,000 at the
end of each respective year. The weighted average interest rate related to the
debt associated with the committed lines of credit was 6.92% and 7.11% at
December 31, 1997 and 1996, respectively. The Company had $19,455,000 and
$60,004,000 outstanding under other uncommitted lines of credit at December 31,
1997 and 1996, respectively. The weighted average interest rate for the
borrowings under the uncommitted lines of credit was 6.64% and 6.94% at December
31, 1997 and 1996, respectively. The carrying amount of the debt outstanding
under both the committed and uncommitted lines of credit approximates fair value
because of the short maturities of the underlying notes. Occasionally, the
Company enters into foreign currency contracts for known cash flows related to
the repatriation of earnings from its international subsidiaries. The term of
each foreign currency contract entered into in 1997 was
F-14
<PAGE> 35
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
F. Credit Arrangements and Long-Term Debt (continued)
for less than three months. At December 31, 1997, there were no foreign currency
contract transactions open. In addition, the Company had no derivative contracts
outstanding at December 31, 1997, and did not enter into any derivative
contracts during 1997.
Long-term debt at December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
Term loans $75,000,000 $30,000,000
Convertible debentures 3,025,000 3,025,000
----------------------------
Long-term debt $78,025,000 $33,025,000
============================
</TABLE>
During 1997, the Company repaid the 7.68%, $30,000,000 loan it had taken down in
1993 from the Prudential Insurance Company ("Prudential") and, in turn, borrowed
$75,000,000 in December 1997 at a fixed interest rate of 6.94% with principal
repayable in equal installments of $25,000,000 in December 2003, 2004 and 2005.
The terms of the loan agreement require, inter alia, that the Company meet
certain cash flow requirements and limit its incurrence of additional
indebtedness to certain specified amounts. At December 31, 1997, the Company was
in compliance with all of these covenants. The fair value of the Prudential debt
is estimated to be $75,000,000 and $30,275,000 at December 31, 1997 and 1996,
respectively. This estimate was determined using a discounted cash flow analysis
using current interest rates for debt having similar terms and remaining
maturities.
The remaining portion of long-term debt consists of 8 1/2% Convertible
Subordinated Debentures, due December 31, 2003, which are currently convertible
into 8.50 shares of Common Stock and an equal number of shares of Limited
Duration Class B Common Stock (Class B Common Stock), subject to certain
adjustments, for each $1,000 principal amount of such debentures. The debentures
were issued in exchange for cash and a $3,000,000, 9% promissory note from the
Chairman and Chief Executive Officer of the Company, payable on December 31,
2004 (included in Other Assets at December 31, 1997 and 1996). During each of
the years 1997, 1996 and 1995, the Company paid to the officer interest of
$257,000 pursuant to the terms of the debentures and the officer paid to the
Company interest of $270,000 pursuant to the terms of the 9% promissory note.
The scheduled repayment of long-term debt is as follows:
<TABLE>
<CAPTION>
Years ending
December 31 Amount
----------------------------
<S> <C>
2003 $28,025,000
2004 25,000,000
2005 25,000,000
-----------
$78,025,000
============
</TABLE>
F-15
<PAGE> 36
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
F. Credit Arrangements and Long-Term Debt (continued)
During 1997 and 1996, the Company borrowed against the cash surrender value of
the life insurance policies that it owns on the life of its Chairman and Chief
Executive Officer. The amounts borrowed at December 31, 1997 and 1996 are
$16,428,000 and $14,733,000, respectively, with an interest rate 7.30% in each
year, and are carried as a reduction of the related cash surrender value that is
included in Other Assets. Of the amounts borrowed in 1997 and 1996, the Company
received $450,000 and $464,000 in cash, respectively, and $1,245,000 was used in
each year to pay premiums on the underlying life insurance policies.
For the years 1997, 1996 and 1995, the Company made interest payments of
$11,969,000, $10,065,000 and $8,934,000, respectively.
G. Redeemable Preferred Stock
As of December 31, 1997 and 1996, the Company had outstanding 20,000 shares of
Series I Preferred Stock, 5,000 shares each of Series II and Series III
Preferred Stock, and 2,000 shares of Series 1 Preferred Stock. The holder of the
Series I, Series II and Series III Preferred Stock is the Chairman and Chief
Executive Office of the Company, and the Series 1 Preferred Stock is held by a
former employee. The terms of each class of Preferred Stock, including the basic
economic terms relating thereto, are essentially the same, except with respect
to the redemption date of each series. The redemption date for the Series I,
Series II and Series III Preferred Stock is fixed at April 7, 2004, unless
redeemed earlier under circumstances described below. The terms of the Series I,
Series II and Series III Preferred Stock also give the holder, his estate or
legal representative, as the case may be, the option to require the Company to
redeem his Preferred Stock for a period of 12 months following his (i) death,
(ii) permanent disability or permanent mental disability, (iii) termination of
full-time employment for good reason or (iv) termination of full-time employment
by the Company without cause. The Company is obligated to redeem the Series 1
Preferred Stock in 1998.
Each share of Preferred Stock is to be redeemed by the Company at a price equal
to the book value per share attributable to one share of Common Stock and one
share of Class B Common Stock (subject to certain adjustments) upon redemption,
less a fixed discount established upon the issuance of the Preferred Stock. The
holders of each class of Preferred Stock are entitled to receive cumulative
preferential dividends at the annual rate of $.25 per share, and to participate
in dividends on one share of the Common Stock and one share of the Class B
Common Stock to the extent such dividends exceed the per share preferential
dividend. In connection with his ownership of the Series I, Series II and Series
III Preferred Stock, the holder issued to the Company full recourse promissory
notes totaling $763,000 (included in Other Assets at December 31, 1997 and 1996)
with a maturity date of April 2004. The interest paid by the senior executive to
the Company in 1997, 1996 and 1995 pursuant to the terms of these notes was
approximately $70,000 in each year.
F-16
<PAGE> 37
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
G. Redeemable Preferred Stock (continued)
In accordance with the terms of the respective Certificates of Designation and
Terms of each Series of Preferred Stock ("Certificates"), the Board of Directors
determined the change in redemption value would not reflect a 1994 write-off of
goodwill but rather reflect amortization as if the Company had continued to
write-off goodwill in accordance with historical amortization schedules.
Following the distribution of Class B Common Stock, the holders of the Preferred
Stock became entitled to eleven votes per share on all matters submitted to the
vote of stockholders. The holder of the Series I Preferred Stock is entitled, as
well, to vote as a single class to elect or remove one-quarter of the Board of
Directors, to approve the merger or consolidation of the Company or the sale by
it of all or substantially all of its assets, and to approve the authorization
or issuance of any other class of Preferred Stock having equivalent voting
rights.
In the event of the liquidation of the Company, holders of Preferred Stock are
entitled to a preferential liquidation distribution of $1.00 per share in
addition to all accrued and unpaid preferential dividends.
The total carrying value of the Preferred Stock (applicable to those shares
outstanding at each respective year end) increased by $662,000, $1,112,000 and
$1,470,000 in 1997, 1996 and 1995, respectively. The change in carrying value
represents the change in aggregate redemption value during those periods. This
change is referred to as "Additional Capital Applicable to Redeemable Preferred
Stock" in the respective Certificates.
H. Common Stock
The Company has authorized and outstanding two classes of common stock, Common
Stock and Class B Common Stock, each having a $1 par value per share. The Class
B Common Stock has the same dividend and liquidation rights as the Common Stock,
and a holder of each share of Class B Common Stock is entitled to ten votes on
all matters submitted to stockholders. The shares of Class B Common Stock are
restricted as to transferability and upon transfer, except to specified limited
classes of transferees, will convert into shares of Common Stock which have one
vote per share. The Class B Common Stock will automatically convert to Common
Stock on April 3, 2006.
I. Restricted Stock and Stock Option Plans
The Company's 1994 Stock Incentive Plan ("Stock Incentive Plan") is the
Company's active restricted stock and stock option plan. The Stock Incentive
Plan replaced the Restricted Stock Plan, the Executive Growth Plan, the
Incentive Stock Option Plan and the Nonqualified Stock Option Plan
(collectively, the "Prior Plans"), and any shares available for granting of
awards under the Prior Plans are no longer available for such awards. Options
granted pursuant to the
F-17
<PAGE> 38
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. Restricted Stock and Stock Option Plans (continued)
Prior Plans remain outstanding and in full force, and shares reserved thereunder
remain so for such purposes.
Stock Incentive Plan
Under the Stock Incentive Plan, awards in the form of incentive or nonqualified
stock options or restricted stock are available to be granted through June 2003
to officers and other key employees. A maximum of 250,000 shares of Common Stock
are available for grant under the Stock Incentive Plan. Stock options cannot be
granted at a price less than 100% of the fair market value of the shares on the
date of grant. A committee of the Board of Directors ("Committee") determines
the terms and conditions under which the awards may be granted, vest or are
exercisable. Options must be exercised within ten years of the date of grant.
Shares of restricted stock may be sold to participants at a purchase price
determined by the Committee (which may be less than fair market value per
share).
Under the Prior Plans, nonqualified and incentive stock options were granted to
employees eligible to receive options at prices not less than 100% of the fair
market value of the shares on the date of grant. Options must be exercised
within ten years of grant and for only specified limited periods beyond
termination of employment. There were 1,200 shares reserved for issuance under
the Prior Plans at December 31, 1997.
Nonqualified Options
Transactions involving nonqualified options under the Stock Incentive and Prior
Plans were:
<TABLE>
<CAPTION>
Weighted
Number Average
of Shares Exercise Price
-----------------------------
<S> <C> <C>
Outstanding, December 31, 1994 36,399 $112
Granted 84,174 151
Exercised (21,965) 95
Forfeited (284) 165
-----------------------------
Outstanding, December 31, 1995 98,324 149
Granted 47,100 229
Exercised (9,884) 130
Forfeited (66) 118
-----------------------------
Outstanding, December 31, 1996 135,474 178
Granted 8,450 260
Exercised -0- -0-
Forfeited (1,500) 189
-----------------------------
Outstanding, December 31, 1997 142,424 183
=============================
</TABLE>
F-18
<PAGE> 39
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. Restricted Stock and Stock Option Plans (continued)
There were 50,133, 33,400 and 23,283 options exercisable at December 31, 1997,
1996 and 1995, respectively. The weighted average fair value of the options
granted during 1997, 1996 and 1995 was $101, $77 and $51, respectively.
The remaining weighted average contractual life of options outstanding as of
December 31, 1997 and the weighted average exercise price for options
exercisable at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Weighted
Average Weighted Weighted
Range of Number of Remaining Average Number of Average
Exercise Shares Contractual Exercise Shares Exercise
Prices Outstanding Life Price Exercisable Price
- ------------------------------------------------- ----------------------
$131-142 1,200 2.2 years $133 133 $141
149-171 85,974 6.6 years 157 40,000 149
188-196 7,400 8.0 years 195 -0- -0-
235 39,400 8.8 years 235 10,000 235
251-290 8,450 9.6 years 260 -0- -0-
--------------------------------------- ----------------------
Total 142,424 50,133
======================================= ======================
</TABLE>
Incentive Stock Options
Transactions involving outstanding incentive stock options under the plans were:
<TABLE>
<CAPTION>
Number of Shares of Weighted Average
Common Stock Exercise Price
-------------------------------------------
<S> <C> <C>
Outstanding, December 31, 1994 5,000 $99
Exercised (3,570) 99
-------------------------------------------
Outstanding, December 31, 1995 1,430 99
Exercised (714) 99
-------------------------------------------
Outstanding, December 31, 1996 716 99
Exercised (716) 99
-------------------------------------------
Outstanding, December 31, 1997 -0-
===========================================
</TABLE>
As of December 31, 1996, there were no incentive stock options which were
exercisable. As of December 31, 1995, options to acquire 714 shares of Common
Stock were exercisable.
F-19
<PAGE> 40
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. Restricted Stock and Stock Options Plans (continued)
Restricted Stock
In 1997, 3,000 shares of Restricted Stock were issued at prices between $1 and
$93.50 per share. In 1996, 250 shares of Restricted Stock were issued at a price
of $97.75 per share. All stock is issued with restrictions as to transferability
expiring after five years. No shares of Restricted Stock were issued in 1995.
During 1995, the restrictions lapsed on 5,000 shares of Common Stock. No
restrictions lapsed in either 1997 or 1996.
Compensation to employees under the Stock Incentive and Prior Plans of $756,000
in 1997, $98,000 in 1996 and $106,000 in 1995, representing the unamortized
excess of the market value of restricted stock over any cash consideration
received, is carried as a reduction of Paid-In Additional Capital and is charged
to income ($140,000 in 1997, $33,000 in 1996, and $133,000 in 1995) over the
related required period of service of the respective employees.
Pro Forma Information
Pro forma information regarding net income and earnings per share has been
determined as if the Company had accounted for its employee stock options under
the fair value method. The approximate fair value for these options was
estimated at the date of grant using a Black-Scholes option valuation model with
the following weighted average assumptions for the years 1997, 1996 and 1995,
respectively; risk-free interest rates of 6.70%, 6.16% and 7.85%; dividend
yields of 1.40%, 1.73% and 2.37%; volatility factors of the expected market
price of the Company's Common Stock of .19, .17 and .17; and a weighted-average
expected life for the options of 10.0, 10.0 and 9.4 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restriction and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------
<S> <C> <C> <C>
Pro forma net income $29,689,000 $27,861,000 $22,493,000
Pro forma earnings per
share:
Basic $24.41 $22.38 $17.44
Diluted $21.39 $19.87 $15.72
</TABLE>
F-20
<PAGE> 41
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. Restricted Stock and Stock Options Plans (continued)
The pro forma information for 1997, 1996 and 1995 is not necessarily indicative
of future year calculations because options issued prior to 1995 have not been
valued for purposes of the pro forma calculation.
J. Computation of Earnings per Common Share
The following table shows the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock.
<TABLE>
<CAPTION>
For the Year Ended December 31
----------------------------------------
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Weighted-average shares 1,180,146 1,185,841 1,195,314
----------------------------------------
Net Income $30,451,000 $28,602,000 $23,438,000
Effect of dividend requirements
and the change in redemption value
of redeemable preferred stock (917,000) (1,356,000) (1,698,000)
----------------------------------------
Net earnings used in computation $29,534,000 $27,246,000 $21,740,000
----------------------------------------
Per share amount $ 25.03 $ 22.98 $ 18.19
========================================
DILUTED EARNINGS PER SHARE
Weighted-average shares used in
Basic 1,180,146 1,185,841 1,195,314
Net effect of dilutive stock options
and stock incentive plans(1) 124,289 102,378 93,947
Assumed conversion of 8.5%
convertible subordinated
debentures issued December 1983 51,017 50,892 51,000
----------------------------------------
Adjusted weighted-average shares 1,355,452 1,339,111 1,340,261
----------------------------------------
Net Income used in Basic $29,534,000 $27,246,000 $21,740,000
8.5% convertible subordinated
debentures interest net of
income tax effect 139,000 139,000 139,000
----------------------------------------
Net earnings used in computation $29,673,000 $27,385,000 $21,879,000
----------------------------------------
Per share amount $ 21.89 $ 20.45 $ 16.32
========================================
</TABLE>
(1) Includes 92,351, 83,350 and 69,260 share for 1997, 1996 and 1995,
respectively, expected to be issued pursuant to the terms of The Senior
Management Incentive Plan.
F-21
<PAGE> 42
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
K. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. At December 31, 1997 and
1996, the Company had deferred tax assets and deferred tax liabilities as
follows:
<TABLE>
<CAPTION>
Deferred Tax Assets (Liabilities)
1997 1996
------------------------------
<S> <C> <C>
Deferred compensation $ 27,966,000 $ 23,056,000
Accrued expenses 3,315,000 2,613,000
Safe harbor lease and depreciation (1,225,000) (3,415,000)
Tax on unremitted foreign earnings
and other (3,414,000) (2,978,000)
------------------------------
Net deferred tax assets $ 26,642,000 $ 19,276,000
==============================
Included in:
Other current assets $ 6,779,000 $ 4,426,000
Intangibles and other assets 19,863,000 14,850,000
------------------------------
$ 26,642,000 $ 19,276,000
==============================
</TABLE>
The components of income of consolidated companies before taxes on income are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Domestic $40,476,000 $36,553,000 $26,704,000
Foreign 28,815,000 29,140,000 27,623,000
-------------------------------------------
$69,291,000 $65,693,000 $54,327,000
===========================================
</TABLE>
Provisions (benefits) for Federal, foreign, state and local income taxes
consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- -------------------------- --------------------------
Current Deferred Current Deferred Current Deferred
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal $ 16,763,000 $ (3,989,000) $ 16,285,000 $ (3,890,000) $ 13,607,000 $(4,248,000)
Foreign 15,171,000 (1,204,000) 13,677,000 (280,000) 10,167,000 2,888,000
State and
local 9,151,000 (2,173,000) 8,735,000 (2,915,000) 6,191,000 (1,639,000)
--------------------------------------------------------------------------------------
$ 41,085,000 $ (7,366,000) $ 38,697,000 $ (7,085,000) $ 29,965,000 $(2,999,000)
======================================================================================
</TABLE>
F-22
<PAGE> 43
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
K. Income Taxes (continued)
The effective tax rate varied from the statutory Federal income tax rate as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------
<S> <C> <C> <C>
Statutory Federal tax rate 35.0% 35.0% 35.0%
State and local income taxes, net of
Federal income tax benefits 6.6 5.8 5.4
Difference in foreign tax rates 4.7 4.3 6.5
Withholding tax on unremitted foreign
earnings 0.9 0.6 0.5
Other--net 1.5 2.4 2.2
------------------------------
48.7% 48.1% 49.6%
==============================
</TABLE>
During the years 1997, 1996 and 1995, the Company made income tax payments of
$39,689,000, $36,513,000 and $21,368,000, respectively.
The tax benefit resulting from the difference between compensation expense
deducted for tax purposes and compensation expense charged to income for
restricted stock and nonqualified stock options is recorded as an increase to
Paid-In Additional Capital.
L. Retirement Plans, Deferred Compensation, Executive Officer Loans, Leases and
Contingencies
1. The Company's Profit Sharing Plan is available to employees of the Company
and qualifying subsidiaries meeting certain eligibility requirements. This
plan provides for contributions by the Company at the discretion of the Board
of Directors, subject to maximum limitations. The Company also maintains a
noncontributory Employee Stock Ownership Plan covering eligible employees of
the Company and specified, qualifying subsidiaries, under which the Company
may make contributions (in stock or cash) to an Employee Stock Ownership
Trust (ESOT) in amounts each year as determined at the discretion of the
Board of Directors. The Company made only cash contributions to the ESOT in
1997, 1996 and 1995. The Company and the ESOT have certain rights to purchase
shares from participants whose employment has terminated. In addition to the
two plans noted above, a number of subsidiaries maintain separate profit
sharing and retirement arrangements. Furthermore, the Company also provides
additional retirement and deferred compensation benefits to certain officers
and employees.
F-23
<PAGE> 44
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
L. Retirement Plans, Deferred Compensation, Executive Officer Loans, Leases and
Contingencies (continued)
The Company maintains a Senior Management Incentive Plan ("Plan") in which
deferred compensation is granted to senior executive or management employees
deemed important to the continued success of the Company. The Plan operates
as an ongoing series of individual five year plans. The latest plan in the
series commenced in 1993 and ended on December 31, 1997. Individuals with 5
years of participation in the current plan will vest in their awards. Those
participants who commenced participation after 1993 will vest in their awards
five years from the year of their initial participation. The amount recorded
as an expense related to this plan amounted to $8,377,000, $8,211,000 and
$6,873,000 in 1997, 1996 and 1995, respectively. Approximately $1,113,000,
$5,634,000 and $5,223,000 of plan expense incurred in 1997, 1996 and 1995,
respectively, will be payable in Common Stock in accordance with the terms of
the plan. The awards {payable in Common Stock} were converted at the fair
value of the Common Stock on the date of grant into an equivalent number of
shares shares of Common Stock. The future obligation to issue Common Stock
related to these stock awards has been reflected as an increase to Paid-In
Additional Capital. At December 31, 1997, approximately 96,000 shares are
payable in Common Stock pursuant to the Plan of which approximately 87,000
share are vested. Stock and cash awards which are vested under the plan
will be distributed in 1998.
In 1995, the Company and its Chairman and Chief Executive Officer entered
into an agreement extending the term of his employment agreement with the
Company through December 31, 2002. This agreement further provides for the
deferral of certain compensation otherwise payable to the Chairman and Chief
Executive pursuant to his employment agreement and the payment of such
deferred compensation into a trust, commonly referred to as a rabbi trust,
established with United States Trust Company of New York. The purpose of the
trust arrangement is to ensure the Company's ability to deduct compensation
paid to the Chairman and Chief Executive Officer without the application of
Section 162(m) of the Internal Revenue Code ("Section"). The Section, under
certain circumstances, denies a tax deduction to an employer for certain
compensation expenses in excess of $1,000,000 per year paid by a
publicly-held corporation to certain of its executives. Amounts deferred and
paid into the trust, as adjusted for the earnings and gains or losses on the
trust assets, will be paid to the Chairman and Chief Executive Officer or to
his estate, as the case may be, upon the expiration of his employment
agreement, or the termination of his employment by reason of death or
disability.
F-24
<PAGE> 45
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
L. Retirement Plans, Deferred Compensation, Executive Officer Loans, Leases and
Contingencies (continued)
At December 31, 1997 and 1996, the value of the trust was $10,400,000 and
$5,648,000, respectively, and is included in Other Assets and the Company's
related deferred compensation obligation for the same amount is included in
Other Liabilities.
Expenses related to the foregoing plans and benefits aggregated $33,230,000
in 1997, $36,140,000 in 1996 and $29,307,000 in 1995.
2. Pursuant to an employment agreement, dated December 21, 1990, an executive
officer of the Company borrowed $1,000,000 from the Company. One-fifth of the
principal amount of the loan was forgiven by the Company each December 31,
beginning with December 31, 1991, as the officer continued to be employed by
the Company on those dates. In 1994, the executive officer entered into a new
employment agreement. Pursuant to that agreement, the executive officer
borrowed an additional $600,000 from the Company repayable at December 31,
1998, except that one-third of the principal amount of the loan is forgiven
by the Company each December 31, beginning with December 31, 1996, provided
that the officer continues to be employed by the Company on those dates. In
1997, 1996 and 1995, the Company has included in each year $200,000 of
compensation expense, representing the amount of loan forgiven each year. As
of December 31, 1997 and 1996, the remaining loan balance was $200,000 and
$400,000, respectively, and is included in Other Assets.
In addition, a second executive officer has outstanding loans with the
Company totaling $825,000 and $875,000 as of December 31, 1997 and 1996,
respectively, which are reflected in Other Assets. The first of these loans,
granted in 1994, was for $50,000 and was forgiven on December 31, 1997. Two
other loans for $125,000 and $200,000 were made in 1995 and are repayable
with accrued interest in December 1999 and May 1999, respectively. The loan
for $125,000 is forgivable on December 31, 1999 provided that the executive
officer is employed by the Company on that date. During 1996, the Company
made two additional loans to this executive officer for $175,000 and $325,000
which are repayable with accrued interest in December 2003.
F-25
<PAGE> 46
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
L. Retirement Plans, Deferred Compensation, Executive Officer Loans, Leases and
Contingencies (continued)
In connection with a 1992 exercise of the stock options, the Company received
a cash payment of $67,000 and a note from the Chairman and Chief Executive
Officer of the Company in the amount of $3,170,000, due in December 2001, at
a fixed interest rate of 6.06%. In addition, and in accordance with the terms
of the option agreement, the holder of the options issued to the Company a
promissory note in the principal amount of $2,340,000 bearing interest at the
rate of 6.06%, payable in December 2001, to settle his obligation to provide
the Company with funds necessary to pay the required withholding taxes due
upon the exercise of the options. A portion of the second note ($1,556,000)
equal to the tax benefit received by the Company upon exercise and the full
amount of the note for $3,170,000 are reflected in a separate component of
stockholders' equity. The interest paid to the Company by the holder pursuant
to the terms of the two notes issued in connection with the option exercise
was $334,000 in 1997, 1996 and 1995.
3. Rental expense amounted to approximately $41,239,000 in 1997, $41,104,000 in
1996 and $36,445,000 in 1995. Approximate minimum rental commitments,
excluding escalations, under noncancellable operating leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 34,929,000
1999 34,328,000
2000 38,371,000
2001 36,641,000
2002 35,600,000
Beyond 2002 135,179,000
---------------
$315,048,000
===============
</TABLE>
4. The Company is not involved in any pending legal proceedings not covered by
insurance or by adequate indemnification or which, if decided adversely,
would have a material effect on the results of operations, liquidity or
financial position of the Company.
F-26
<PAGE> 47
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
M. Industry Segment and Related Information
Commissions and fees and operating profit by geographic area for the years ended
December 31, 1997, 1996 and 1995, and related identifiable assets at December
31, 1997, 1996 and 1995 are summarized below (000s omitted):
<TABLE>
<CAPTION>
United States Western Europe Other
1997 1996 1995 1997 1996 1995 1997 1996
--------------------------------- ------------------------------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commissions and fees $382,288 $338,496 $303,826 $380,675 $ 370,888 $337,726 $95,789 $56,114
===============================================================================================
Operating profit $ 32,570 $ 26,174 $ 21,368 $ 30,534 $ 30,279 $ 27,212 $ 1,816 $ 2,080
===============================================================================================
Other income-net
Income of consolidated companies
before taxes on income
Identifiable assets $581,557 $549,160 $464,067 $457,099 $445,038 $406,757 $142,945 $77,473
===============================================================================================
Investments in and advances to
nonconsolidated affiliated
companies
Total assets
<CAPTION>
Consolidated
1995 1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C> <C>
Commissions and fees $46,667 $ 858,752 $ 765,498 $688,219
==================================================
Operating profit $ 1,660 $ 64,920 $ 58,533 $ 50,240
===========
Other income-net 4,371 7,160 4,087
-------------------------------------
Income of consolidated companies
before taxes on income $ 69,291 $ 65,693 $ 54,327
=====================================
Identifiable assets $71,916 $1,181,601 $1,071,671 $942,740
===========
Investments in and advances to
nonconsolidated affiliated
companies 18,386 17,723 20,693
-------------------------------------
Total assets $1,199,987 $1,089,394 $963,433
=====================================
</TABLE>
Commissions and fees from one client amounted to 12.8%, 13.2% and 13.8% of the
consolidated total in 1997, 1996 and 1995, respectively.
F-27
<PAGE> 48
INDEX TO EXHIBITS
Number Assigned to
Exhibit (i.e. 601 of
Regulation S-K) Description of Exhibits
--------------- -----------------------
3.01 Restated Certificate of
Incorporation of Grey Advertising
Inc. ("Grey"). (Incorporated
herein by reference to Exhibit
3.01 to Grey's Current Report on
Form 8-K, dated October 31, 1995,
filed with the SEC pursuant to
Section 13 of the 1934 Act.)
3.02 By-Laws of Grey as amended.
(Incorporated herein by reference
to Exhibit 3.02 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1988.)
4.01 Stockholder Exchange Agreement,
dated as of April 7, 1994, by and
between Grey and Edward H. Meyer.
(Incorporated herein by reference
to Exhibit 10(a) of Grey's Current
Report on Form 8-K, dated April 7,
1994, filed with the SEC pursuant
to Section 13 of the 1934 Act.
4.02 Purchase Agreement, dated as of
December 10, 1983, between Grey
and Edward H. Meyer relating to
the sale to Mr. Meyer of Grey's
8 1/2% Convertible Debentures, of
even date therewith ("Convertible
Debenture"). (Incorporated herein
by reference to Exhibit 3.08 to
Grey's Annual Report on Form 10-K
for the fiscal year ended December
31, 1983.)
4.03 Extension Agreement, dated as of
November 19, 1991 between Grey and
Edward H. Meyer relating to the
extension of the maturity dates of
the Convertible Debenture and
related Promissory Note.
(Incorporated herein by reference
to Exhibit 3.07 to Grey's Annual
Report on Form 10-K for the
fiscal year ended December 31,
1991.)
4.04 Form of Convertible Debenture.
(Incorporated herein by reference
to Exhibit 3.09 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1983.)
4.05 Extension Agreements dated as of
July 29, 1996 between Grey and
Edward H. Meyer relating to the
extension of the maturity dates of
the Convertible Debenture and
related Promissory Note.
(Incorporated herein by reference
to Exhibit 4.01 and 4.02 to Grey's
Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996).
E-1
<PAGE> 49
INDEX TO EXHIBITS
Number Assigned to
Exhibit (i.e. 601 of
Regulation S-K) Description of Exhibits
--------------- -----------------------
9.01 Voting Trust Agreement, dated as
of December 1, 1989, among the
several Beneficiaries, Grey and
Edward H. Meyer as Voting
Trustee. (Incorporated herein by
reference to Exhibit 9.03 to
Grey's Annual report on Form 10-K
for the fiscal year ended December
31, 1989.)
9.02 Amended and Restated Voting Trust
Agreement, dated as of February
24, 1986, as amended and restated
as of August 31, 1987 and again
amended and restated as of March
21, 1994, among the several
Beneficiaries where-under, Grey
and Edward H. Meyer as Voting
Trustee. (Incorporated herein by
reference to Exhibit 9.04 to
Grey's Annual Report on Form 10-K
for the fiscal year ended December
31, 1993.)
10.01 * Employment Agreement, dated as of
February 9, 1984, between Grey and
Edward H. Meyer ("Meyer Employment
Agreement"). (Incorporated herein
by reference to Exhibit 10.01 to
Grey's Annual Report on Form 10-K
for the fiscal year ended December
31, 1983.)
10.02 * Amendments Two through Eight to
Meyer Employment Agreement.
(Incorporated herein by reference
to Exhibit 10.02 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1985,
Exhibit 10.03 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1987,
Exhibit 1 to Grey's Current Report
on Form 8-K, dated May 9, 1988,
filed with the SEC pursuant to
Section 13 of the 1934 Act,
Exhibit 2 to Grey's Current Report
on Form 8-K, dated May 9, 1988,
filed with the SEC pursuant to
Section 13 of the 1934 Act.
Exhibit I to Grey's Current Report
on Form 8-K, dated June 9, 1989,
filed with the SEC pursuant to
Section 13 of the 1934 Act,
Exhibit 10.07 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1990 and
Exhibit 10.03 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1994,
respectively.)
10.03 * Ninth Amendment to Meyer Employment
Agreement, dated April 22, 1996, by
and between Grey and Edward H.
Meyer.
E-2
<PAGE> 50
INDEX TO EXHIBITS
Number Assigned to
Exhibit (i.e. 601 of
Regulation S-K) Description of Exhibits
--------------- -----------------------
10.04 * Deferred Compensation Trust
Agreement dated March 22, 1995
("Trust Agreement"), by and
between Grey and United States
Trust Company of New York.
(Incorporated herein by reference
to Exhibit 10.04 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1994.)
10.05 * First Amendment to Trust
Agreement, dated as of February
26, 1996, by and between Grey and
United States Trust Company of New
York. (Incorporated herein by
reference to Exhibit 10.05 to
Grey's Annual Report on Form 10-K
for the fiscal year ended December
31, 1995.)
10.06 * Employment Agreement, dated as of
December 21, 1990, by and between
Grey and Stephen A. Novick.
(Incorporated herein by reference
to exhibit 10.11 to Grey's Annual
Report on Form 10-K for the
fiscal year ended December 31,
1990.)
10.07 * Amendment to Employment
Agreement, dated as of April 26,
1994, by and between Grey and
Stephen A. Novick. (Incorporated
herein by reference to Exhibit
10.07 to Grey's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1994.)
10.08 * Employment Agreement, dated as of
December 1, 1992, by and between
Grey and Robert L. Berenson.
(Incorporated herein by reference
to Exhibit 10.05 to Grey's Annual
Report on Form 10-K for the
fiscal year ended December 31,
1992.)
10.09 * Grey Advertising Inc. Book Value
Preferred Stock Plan, as
amended. (Incorporated herein by
reference to Exhibit 4.1 to
Grey's Current Report on Form
8-K, dated June 14, 1983, filed
with the SEC pursuant to Section
13 of the 1934 Act.)
10.10 * Grey Advertising Inc. Amended and
Restated Senior Executive Officer
Pension Plan. (Incorporated
herein by reference to Exhibit
10.08 to Grey's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1984.)
E-3
<PAGE> 51
INDEX TO EXHIBITS
Number Assigned to
Exhibit (i.e. 601 of
Regulation S-K) Description of Exhibits
--------------- -----------------------
10.11 * Grey Advertising Inc. Amended and
Restated 1993 Senior Management
Incentive Plan. (Incorporated
herein by reference to Exhibit
10.01 to Grey's Quarterly Report
on Form 10-Q for the quarter
ended September 30, 1996.)
10.12 * Promissory Notes I and II, dated
as of December 29, 1992, from
Edward H. Meyer to Grey,
delivered pursuant to the Stock
Option Agreement dated as of
October 13, 1984 by and between
Grey and Edward H. Meyer.
(Incorporated herein by reference
to Exhibit 10.16 to Grey's Annual
Report on Form 10-K for the
fiscal year ended December 31,
1992.)
10.13 * Stock Option Agreement, effective
as of January 5, 1995, by and
between Grey and Edward H.
Meyer. (Incorporated herein by
reference to Exhibit 13 to
Amendment No. 8 to the Statement
on Schedule 13D, dated as of
March 10, 1995, filed by Edward
H. Meyer.)
10.14* Stock Option Agreement effective
as of November 26, 1996, by and
between Grey and Edward H.
Meyer. (Incorporated herein by
reference to Exhibit 15 to
Amendment No. 10 to the Statement
on Schedule 13D, dated as of
February 11, 1997, filed by
Edward H. Meyer.)
10.15* Stock Option Agreement, effective
as of January 23, 1998, by and
between Grey and Edward H.
Meyer. (Incorporated herein by
reference to Exhibit 16 to
Amendment No. 11 to the Statement
on Schedule 13D, dated as of
March 13, 1998, filed by Edward
H. Meyer.)
10.16 Registration Rights Agreement,
dated as of June 5, 1986, between
Grey and Edward H. Meyer.
(Incorporated herein by reference
to Exhibit 12 to Amendment No. 8
to the Statement on Schedule 13D,
dated as of March 10, 1995, filed
by Edward H. Meyer.)
10.17* Grey Advertising Inc. Incentive
Stock Option Plan, as amended and
restated as of April 3, 1986.
(Incorporated herein by reference
to Exhibit 4.04 to Grey's
Registration Statement on Form
S-8 filed with the SEC pursuant
to Section 6(a) of the '33 Act.)
E-4
<PAGE> 52
INDEX TO EXHIBITS
Number Assigned to
Exhibit (i.e. 601 of
Regulation S-K) Description of Exhibits
--------------- -----------------------
10.18 * Grey Advertising Inc. 1987 Stock
Option Plan. (Incorporated
herein by reference to Exhibit
10.24 to Grey's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1988.)
10.19 * Grey Advertising Inc. amended and
restated 1994 Stock Incentive
Plan. (Incorporated herein by
reference to Exhibit 10.02 to
Grey's Quarterly Report on Form
10-Q for the quarter ended
September 30, 1996.)
10.20 Note Agreement, dated as of
December 23, 1997, by and between
Grey and the Prudential Insurance
Company of America.
10.21 * Bonuses - Grey has paid bonuses
to certain of its executive
officers (including those who are
directors) and employees in prior
years including 1993, and may do
so in future years. Bonuses have
been and may be in the form of
cash, shares of stock or both
although Grey presently does not
have any plans to pay stock
bonuses. Bonuses are not granted
pursuant to any formal plan.
10.22 * Director's Fees - It is the
policy of Grey to pay each of its
non-employee directors a fee of
$4,500 per fiscal quarter and a
fee of $3,000 for each meeting of
the Board of Directors attended.
This policy is not embodied in
any written document.
10.23 * Deferred Compensation Agreement,
dated December 23, 1981, between
Grey and Mark N. Kaplan,
regarding deferral of payment of
director's fees to which Mr.
Kaplan may become entitled.
(Incorporated herein by reference
to Exhibit 10.18 to Grey's Annual
Report on Form 10-K for the
fiscal year ended December 31,
1982.)
E-5
<PAGE> 53
INDEX TO EXHIBITS
Number Assigned to
Exhibit (i.e. 601 of
Regulation S-K) Description of Exhibits
--------------- -----------------------
10.24 * On March 23, 1978, Grey's Board
of Directors, at a meeting
thereof held on such date,
approved an arrangement whereby
Grey is required to accrue for
Edward H. Meyer, the difference
between the amount contributed by
Grey on behalf of Mr. Meyer under
the Profit Sharing Plan and
Grey's Employee Stock Ownership
Plan, and the amount which would
have been contributed to such
plans on his behalf had such
plans not contained maximum
annual limitations on
contributions and credits, as
required by the Employee
Retirement Income Security Act of
1974. Such accrual is to be paid
to Mr. Meyer as if it had been
contributed to his account under
the Profit Sharing Plan. Such
arrangement is not embodied in
any written document.
10.25 Lease, dated as of July 1, 1978,
by and between Grey and William
Kaufman and J. D. Weiler,
regarding space at 777 Third
Avenue, New York, New York ("Main
Lease"). (Incorporated herein by
reference to Exhibit 10.21 to
Grey's Annual Report on Form 10-K
for the fiscal year ended
December 31, 1982.)
10.26 First through Fourteenth
Amendments to Main Lease
(Incorporated herein by reference
to Exhibits 10.22, 10.23, 10.24,
10.25, 10.26, 10.27, 10.28 and
10.29 to Grey's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1982, Exhibit
10.30 to Grey's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1983, Exhibits
10.33 and 10.34 to Grey's Annual
Report on Form 10-K for the
fiscal year ended December 31,
1984, Exhibits 10.35 and 10.36 to
Grey's Annual Report on Form 10-K
for the fiscal year ended
December 31, 1985, and Exhibit
10.36 to Grey's Annual Report on
Form 10-K for the fiscal year
ended December 31, 1986,
respectively.)
10.27 Fifteenth, Sixteenth and
Seventeenth Amendments to Main
Lease dated as of September 30,
1986, April 28, 1989 and February
3, 1998 respectively.
21.01 Subsidiaries of Grey
23.01 Consent of Independent Auditors
E-6
<PAGE> 54
INDEX TO EXHIBITS
Number Assigned to
Exhibit (i.e. 601 of
Regulation S-K) Description of Exhibits
--------------- -----------------------
27.01 Financial Data Schedule
*Management contract or
compensatory plan or arrangement
identified in compliance with
Item 14(c) of the rules governing
the preparation of this report.
10K-Exhibits
E-7
<PAGE> 1
EXHIBIT 10.03
NINTH AMENDMENT
---------------
AGREEMENT made as of April 22, 1996, between GREY ADVERTISING INC.,
A Delaware corporation with principal offices at 777 Third Avenue, New York,
New York 10017 ("Grey"), and Edward H. Meyer, residing at 580 Park Avenue, New
York, New York ("Meyer").
Meyer is employed by Grey as its President, Chairman of the Board
and Chief Executive Officer pursuant to an employment agreement originally
executed effective February 9, 1984 and amended from time to time thereafter
(such employment agreement, as so amended, being hereinafter referred to as the
"Current Agreement").
The parties desire to amend the Current Agreement in certain
respects.
Now, therefore, in consideration of the foregoing, the parties hereby
agree as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein, unless
otherwise defined herein, have the meaning ascribed to such terms in the
Current Agreement.
2. GROSS-UP PAYMENT. Section 11.1 of the Current Agreement is
hereby further amended by adding the following new Section 11.1(g) thereto:
(g) In the event that Meyer is required to pay an excise tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), on "excess parachute payments", as defined in
Section 280G of the Code, Grey shall promptly pay Meyer the amount or
amounts that are necessary to place him in the same after-tax financial
position that he would have been in had he not incurred any tax liability
under Section 4999 of the Code, PROVIDED, HOWEVER, that for purposes of
this sentence, if the event or transaction constituting a change in the
ownership or effective control of Grey or in the ownership of a substantial
portion of the assets of Grey (within the meaning of Section 280G of the
Code) is consummated prior to January 1, 2000, the portion of payments and
benefits which
<PAGE> 2
shall be treated as "excess parachute payments" shall not
exceed 300% of Meyer's Total Compensation as defined in Section 11.1
hereof, including, without limitation, any amount deferred and contributed
on behalf of Meyer to the Grey Advertising Inc. Deferred Compensation
Trust, dated March 22, 1995.
3. STATUS OF CURRENT AGREEMENT. This Amendment shall be effective
as of April 22, 1996, and except as set forth herein, the Current Agreement
shall remain in full force and effect and shall be otherwise unaffected hereby.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written.
GREY ADVERTISING INC.
BY: /s/ STEVEN G. FELSHER
-------------------------
Steven G. Felsher
/s/ EDWARD H. MEYER
-------------------------
Edward H. Meyer
2
<PAGE> 1
EXECUTION COPY
================================================================================
GREY ADVERTISING INC.
$75,000,000
6.94% Senior Notes Due December 23, 2005
----------------
NOTE AGREEMENT
----------------
Dated as of December 23, 1997
==============================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not Part of Agreement)
Page
----
1. AUTHORIZATION OF ISSUE OF NOTES........................................1
2. PURCHASE AND SALE OF NOTES.............................................1
3. CONDITIONS OF CLOSING..................................................2
4. PREPAYMENTS............................................................2
5. AFFIRMATIVE COVENANTS..................................................4
6. NEGATIVE COVENANTS.....................................................8
7. EVENTS OF DEFAULT.....................................................11
8. REPRESENTATIONS, COVENANTS AND WARRANTIES.............................15
9. REPRESENTATIONS OF THE PURCHASER......................................19
10. DEFINITIONS...........................................................19
11. MISCELLANEOUS.........................................................27
PURCHASER SCHEDULE
SCHEDULE 6A. -- INTERNATIONAL SCHEDULE OF LIENS
SCHEDULE 8G. -- LIST OF AGREEMENTS RESTRICTING DEBT
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF OPINION OF COMPANY'S COUNSEL
<PAGE> 3
GREY ADVERTISING INC.
777 Third Avenue
New York, NY 10017
As of December 23, 1997
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Gateway Center
11th Floor
Newark, New Jersey 07102-5311
Ladies and Gentlemen:
The undersigned, Grey Advertising Inc. (herein called the "Company"),
hereby agrees with you as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the issue
of its senior promissory notes in the aggregate principal amount of $75,000,000,
to be dated the date of issue thereof, to mature December 23, 2005, to bear
interest on the unpaid balance thereof from the date thereof until the principal
thereof shall have become due and payable at the rate of 6.94% per annum and on
overdue payments at the rate specified therein, and to be substantially in the
form of Exhibit A attached hereto. The term "Notes" as used herein shall include
each such senior promissory note delivered pursuant to any provision of this
Agreement and each such senior promissory note delivered in substitution or
exchange for any other Note pursuant to any such provision.
2. PURCHASE AND SALE OF NOTES. Subject to the terms and conditions herein
set forth, the Company hereby agrees to sell to you and you agree to purchase
from the Company Notes in the aggregate principal amount of $75,000,000 at 100%
of such aggregate principal amount. The Company will deliver to you on the date
of closing, at the offices of Prudential Capital Group, One Gateway Center, 11th
Floor, Newark, New Jersey, one or more Notes registered in your name, evidencing
the aggregate principal amount of Notes to be purchased by you and in the
denomination or denominations specified in the Purchaser Schedule attached
hereto, against payment of the purchase price thereof by (a) cancellation of the
Company's promissory note, dated January 19, 1993, payable to you and in the
outstanding principal amount of $30,000,000, which shall be credited at the
outstanding principal amount thereof plus interest accrued thereon to the date
of closing and (b) transfer of immediately available funds for credit to the
Company's account GLA/111363 (for further credit to the account of Grey
Advertising Inc. account #142821) at Bank of New York, New York, NY ABA#
021000018 for the balance. The date of closing shall be December 23, 1997
(herein called the "closing" or the "date of closing").
<PAGE> 4
3. CONDITIONS OF CLOSING. Your obligation to purchase and pay for the
Notes to be purchased by you hereunder is subject to the satisfaction, on or
before the date of closing, of the following conditions:
3A. Opinion of Company's Counsel. You shall have received from Skadden,
Arps, Slate, Meagher & Flom, counsel for the Company, a favorable opinion
satisfactory to you and substantially in the form of Exhibit B attached hereto.
3B. Representations and Warranties; No Default. The representations and
warranties contained in paragraph 8 shall be true on and as of the date of
closing, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the date of closing no Event of Default or
Default; and the Company shall have delivered to you an Officer's Certificate,
dated the date of closing, to both such effects.
3C. Purchase Permitted By Applicable Laws. The purchase of and payment for
the Notes to be purchased by you on the date of closing on the terms and
conditions herein provided (including the use of the proceeds of such Notes by
the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, section 5 of the Securities Act or Regulation G,
T or X of the Board of Governors of the Federal Reserve System) and shall not
subject you to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation, and you shall have
received such certificates or other evidence as you may request to establish
compliance with this condition.
3D. Proceedings. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to you, and you
shall have received all such counterpart originals or certified or other copies
of such documents as you may reasonably request.
3E. Structuring Fee. The Company shall have paid you, on or before the
date of closing, in immediately available funds, a structuring fee in the amount
of $20,000.
4. PREPAYMENTS. The Notes shall be subject to prepayment with respect to
the required prepayments specified in paragraph 4A and the optional prepayments
permitted by paragraph 4B.
4A. Required Prepayments. Until the Notes shall be paid in full, the
Company shall apply to the prepayment of the Notes, without premium, the sum of
$25,000,000 on December 23 in each of the years 2003 and 2004, and such
principal amounts of the Notes, together with interest thereon to the prepayment
dates, shall become due on such prepayment dates. The remaining $25,000,000
- 2 -
<PAGE> 5
principal amount of the Notes, together with interest accrued thereon, shall
become due on the maturity date of the Notes.
4B. Optional Prepayment With Yield-Maintenance Amount. The Notes shall be
subject to prepayment, in whole at any time or from time to time in part (in
multiples of $5,000,000), at the option of the Company, at 100% of the principal
amount so prepaid plus interest thereon to the prepayment date and the
Yield-Maintenance Amount, if any, with respect to each Note. Any partial
prepayment of the Notes pursuant to this paragraph 4B shall be applied in
satisfaction of required payments of principal in inverse order of their
scheduled due dates.
4C. Notice of Optional Prepayment. The Company shall give the holder of
each Note irrevocable written notice of any prepayment pursuant to paragraph 4B
not less than 10 Business Days prior to the prepayment date, specifying such
prepayment date and the principal amount of the Notes, and of the Notes held by
such holder, to be prepaid on such date and stating that such prepayment is to
be made pursuant to paragraph 4B. Notice of prepayment having been given as
aforesaid, the principal amount of the Notes specified in such notice, together
with interest thereon to the prepayment date and together with the
Yield-Maintenance Amount, if any, with respect thereto, shall become due and
payable on such prepayment date. The Company shall, on or before the day on
which it gives written notice of any prepayment pursuant to paragraph 4B, give
telephonic notice of the principal amount of the Notes to be prepaid and the
prepayment date to each Significant Holder which shall have designated a
recipient of such notices in the Purchaser Schedule attached hereto or by notice
in writing to the Company.
4D. Partial Payments Pro Rata. Upon any partial prepayment of the Notes
pursuant to paragraph 4A or 4B, the principal amount so prepaid shall be
allocated to all Notes at the time outstanding (including, for the purpose of
this paragraph 4D only, all Notes prepaid or otherwise retired or purchased or
otherwise acquired by the Company or any of its Subsidiaries or Affiliates other
than by prepayment pursuant to paragraph 4A or 4B) in proportion to the
respective outstanding principal amounts thereof.
4E. Retirement of Notes. The Company shall not, and shall not permit any
of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraph 4A or 4B or upon acceleration of such final maturity pursuant to
paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes
held by any holder unless the Company or such Subsidiary or Affiliate shall have
offered to prepay or otherwise retire or purchase or otherwise acquire, as the
case may be, the same proportion of the aggregate principal amount of Notes held
by each other holder of Notes at the time outstanding upon the same
- 3 -
<PAGE> 6
terms and conditions. Any Notes so prepaid or otherwise retired or purchased or
otherwise acquired by the Company or any of its Subsidiaries or Affiliates shall
not be deemed to be outstanding for any purpose under this Agreement, except as
provided in paragraph 4D.
5. AFFIRMATIVE COVENANTS.
5A. Financial Statements. The Company covenants that it will deliver to
each holder of Notes in quadruplicate:
(i) as soon as practicable and in any event within 60 days after the
end of each quarterly period (other than the last quarterly period) in
each fiscal year, consolidated statements of income and cash flows and a
consolidated statement of stockholders' equity of the Company and its
Subsidiaries for the period from the beginning of the current fiscal year
to the end of such quarterly period, and a consolidated balance sheet of
the Company and its Subsidiaries as at the end of such quarterly period,
setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year, all in reasonable
detail and substantially in the same form as at the time required for
Quarterly Reports on Form 10-Q filed with the Securities and Exchange
Commission and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments; provided,
however, that delivery pursuant to clause (iii) below of copies of the
Quarterly Report on Form 10-Q of the Company for such quarterly period
filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this clause (i);
(ii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, consolidated statements of income and cash
flows and a consolidated statement of stockholders' equity of the Company
and its Subsidiaries for such year, and a consolidated balance sheet of
the Company and its Subsidiaries as at the end of such year, setting forth
in each case in comparative form corresponding consolidated figures from
the preceding annual audit, all in reasonable detail and substantially in
the same form as at the time required for Annual Reports on Form 10-K
filed with the Securities and Exchange Commission and reported on by
independent public accountants of recognized national standing selected by
the Company whose report shall be without limitation as to the scope of
the audit; provided, however, that delivery pursuant to clause (iii) below
of copies of the Annual Report on Form 10-K of the Company for such fiscal
year filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this clause (ii);
- 4 -
<PAGE> 7
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports which it files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a final copy of each other
report submitted to the Company by independent accountants in connection
with any annual audit made by them of the books of the Company, and notice
of the submission by independent accountants of any final report in
connection with any interim or special audit of the books of the Company
or any of its Subsidiaries; and
(v) if such holder is a Significant Holder, with reasonable
promptness, such other financial data as such Significant Holder may
reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each holder of Notes an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company and its Subsidiaries with the provisions of paragraphs 6A
(identifying the nature of any Liens permitted by the provisions of paragraph 6A
(vi) or (vii) securing Debt in excess of $250,000), 6B, 6C and 6D and stating
that there exists no Event of Default or Default, or, if any Event of Default or
Default exists, specifying the nature and period of existence thereof and what
action the Company proposes to take with respect thereto. Together with each
delivery of financial statements required by clause (ii) above, the Company will
deliver to each holder of the Notes a certificate of such accountants stating
that, in making the audit necessary for their report on such financial
statements, they have obtained no knowledge of any Event of Default or Default,
or, if they have obtained knowledge of any Event of Default or Default,
specifying the nature and period of existence thereof. Such accountants,
however, shall not be liable to anyone by reason of their failure to obtain
knowledge of any Event of Default or Default which would not be disclosed in the
course of an audit conducted in accordance with generally accepted auditing
standards. The Company also covenants that within five days after any
Responsible Officer obtains knowledge of an Event of Default or Default, it will
deliver to each holder of Notes an Officer's Certificate specifying the nature
and period of existence thereof and what action the Company proposes to take
with respect thereto.
5B. Information Required by Rule 144A. The Company covenants that it will,
upon the request of the holder of any Note, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information
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as such holder may reasonably determine to be necessary in order to permit
compliance with the information requirements of Rule 144A under the Securities
Act in connection with the resale of Notes, except at such times as the Company
is subject to the reporting requirements of section 13 or 15(d) of the Exchange
Act. For the purpose of this paragraph 5B, the term "qualified institutional
buyer" shall have the meaning specified in Rule 144A under the Securities Act.
5C. Inspection of Property; Books and Records. The Company covenants that
it will permit any Person (other than a Competitor) designated by you, at your
expense, to visit and inspect any of the properties of the Company and its
Subsidiaries, to examine the corporate books and financial records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of any of such corporations with
the principal officers of the Company and its independent public accountants,
all at such reasonable times and as often as you may reasonably request and upon
reasonable notice. The Company further covenants to afford any other Significant
Holder of a Note (other than a Competitor) the benefits of this paragraph 5C so
long as such Significant Holder agrees to execute a confidentiality agreement
consistent with the provisions of paragraph 11H and reasonably satisfactory to
the Company. The Company will maintain or cause to be maintained the books of
record and account of the Company and its Subsidiaries in good order in
accordance with sound business and financial practice and its financial
statements to be prepared in accordance with generally accepted accounting
principles.
5D. Maintenance of Properties; Insurance. The Company will maintain or
cause to be maintained in good repair, working order and condition all
properties used or useful in the business of the Company and its Subsidiaries
(ordinary wear and tear excepted) and from time to time will make or cause to be
made all appropriate repairs, renewals and replacements thereof, all to the
extent material to the business and operations of the Company and its
Subsidiaries taken as a whole. The Company will procure and maintain in full
force and effect all franchises, certificates, licenses, permits and other
authorizations from governmental political subdivisions or regulatory
authorities and all patents, trademarks, service marks, trade names, copyrights,
licenses and other rights, in each case where the failure to so procure or
maintain would have a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole. The Company will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and businesses of its Subsidiaries
against loss or damage or liability to others of the kinds customarily insured
against by corporations of established reputation engaged in the same or similar
businesses and similarly situated, of such type
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and in such amounts as are customarily carried under similar circumstances by
such other corporations (which may include reasonable and prudent levels of self
insurance and deductibles as are customarily provided in the insurance programs
maintained by such other corporations).
5E. Conduct of Business and Corporate Existence, Etc. The Company and its
Subsidiaries will continue to be predominently engaged in business of the same
general type as is now conducted by the Company and its Subsidiaries. Subject to
the provisions of paragraph 6E, the Company will (i) at all times preserve and
keep in full force and effect its and its Subsidiaries' corporate existence,
rights and franchises where the failure to so preserve and keep in full force
and effect would have a material adverse effect on the business, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole, and (ii) qualify, and cause each of its Subsidiaries to qualify, to
do business in any jurisdiction where the failure to do so would have a material
adverse effect on the business, condition (financial or otherwise) or operations
of the Company and its Subsidiaries taken as a whole.
5F. Payment of Taxes and Claims. The Company will, and will cause each of
its Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or property before any penalty or significant
interest accrues thereon, and all claims (including, without limitation, claims
for labor, services, materials and supplies) for sums which have become due and
payable and which by law have or may become a Lien upon any of its properties or
assets if the failure to pay such tax, assessment, charge or claim would result
in liability to the Company or a Subsidiary and would materially adversely
affect the business, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole; provided, that no such charge or
claim need be paid if being contested in good faith by appropriate proceedings
and if such accrual, reserve or other appropriate provision, if any, as shall be
required by generally accepted accounting principles shall have been made
therefor.
5G. Compliance With Laws, Etc. The Company will comply and cause its
Subsidiaries to comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority (including ERISA and those
relating to environmental protection and employee safety), the noncompliance
with which would materially adversely affect the business, condition (financial
or other) or operations of the Company and its Subsidiaries taken as a whole.
5H. Covenant to Secure Notes Equally. The Company covenants that if it or
any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter
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acquired, other than Liens permitted by the provisions of paragraph 6A (unless
prior written consent to the creation or assumption thereof shall have been
obtained pursuant to paragraph 11C), it will make or cause to be made effective
provision satisfactory in form and substance to the Required Holder(s) whereby
the Notes will be secured by such Lien equally and ratably with any and all
other Debt thereby secured so long as any such other Debt shall be so secured.
Securing the Notes as provided in this paragraph 5H shall not permit the
existence of any Lien not permitted by paragraph 6A.
6. NEGATIVE COVENANTS.
6A. Limitations on Liens. The Company covenants that neither it nor any of
its Subsidiaries will create, assume or suffer to exist any Lien upon any of its
property or assets (including, without limitation, any capital stock of a
Subsidiary owned by the Company or any Subsidiary), whether now owned or
hereafter acquired and whether or not provision is made for equally and ratably
securing the Notes as provided in paragraph 5H; provided, however, that the
foregoing restriction and limitation shall not apply to the following Liens:
(i) Liens for taxes, assessments or governmental charges or levies
not yet delinquent or which are being contested in good faith by
appropriate proceedings for which adequate reserves have been established
in accordance with, and as permitted by, paragraph 5F;
(ii) Liens imposed by law, such as carriers', landlords',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more
than 60 days past due or which are being contested in good faith by
appropriate proceedings as permitted by paragraph 5F; Liens arising out of
pledges or deposits under worker's compensation laws, unemployment
insurance, old age pensions, or other social security or retirement
benefits, or similar legislation; servitudes, easements, rights-of-way,
restrictions, minor defects or irregularities in title and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do
not in any material way affect the marketability of the same or interfere
in any material way with the use thereof in the business of the Company or
its Subsidiaries; and other Liens incidental to the conduct of the
Company's or any Subsidiary's business or the ownership of its property
and assets which were not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than vendors' liens in
respect of current accounts payable not overdue and extended in the
ordinary course of business), and which do not in the aggregate materially
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detract from the value of its property or assets, or materially impair the
use thereof in the operation of its business;
(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or any other Subsidiary;
(iv) deposits, bonding arrangements and Liens to secure the
performance of (or to secure obligations in respect of letters of credit
posted to secure the performance of) bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
(v) Liens securing Debt of Subsidiaries of the nature and not
exceeding the respective amounts specified on Schedule A;
(vi) any Lien on any asset of any Person existing at the time such
Person is acquired by or merged or consolidated with the Company or a
Subsidiary and not created in contemplation of such event and which Lien
does not extend to any other property;
(vii) any Lien existing on any asset prior to the acquisition
thereof by the Company or a Subsidiary and not created in contemplation of
such acquisition and which Lien does not extend to any other property;
(viii)......any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any of
the foregoing clauses of this paragraph 6A, provided that the principal
amount secured and then outstanding is not increased and the Lien is not
extended to other property;
(ix) any Lien existing on assets of a Non-Qualifying Subsidiary
Group provided, that any Lien on assets of a Non-Qualifying Subsidiary
Group first permitted by this subparagraph (ix) shall remain a permitted
Lien, notwithstanding the fact that such Non-Qualifying Subsidiary Group
shall cease to qualify as such;
(x) Liens in connection with loans on life insurance policies
7524455, 7524456 and 7524457 issued by Penn Mutual Life Insurance Company
(the "Policies"), provided that, (A) the aggregate amount borrowed under
the Policies may not exceed the lesser of (1) the cash value of the
Policies and (2) $40,000,000, (B) such loans shall be without recourse to
the Company and may be secured solely by the cash value (and death
benefits) of the Policies, and (C) any Lien created in
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connection therewith shall not extend to any other property of the
Company; and
(xi) other Liens securing Priority Debt the existence of which is
permitted under the provisions of paragraphs 6B, 6C and 6D.
6B. Limitation on Total Borrowed Funds. The Company will not at any time
permit Total Borrowed Funds to exceed 125% of Consolidated Net Worth.
6C. Limitation on Debt to Cash Flow. The Company will not permit the ratio
of Total Borrowed Funds to Consolidated Cash Flow for any period of four
consecutive complete fiscal quarters of the Company to exceed 3.0 to 1.
For purposes of this paragraph 6C only, Consolidated Cash Flow shall be
adjusted to include and give effect on a pro forma basis (x) to additional cash
flows of all entities or businesses to be acquired with the proceeds of any such
Funded Debt and to exclude the cash flows of all operations or businesses no
longer owned by the Company and its Subsidiaries and (y) to treat all Funded
Debt then existing and any Funded Debt then being incurred as being outstanding
for any such four quarter period.
6D. Limitations on Priority Debt. The Company covenants that it will not,
and will not permit any of its Subsidiaries to, incur, assume or otherwise
become liable with respect to any Priority Debt unless, at the time of incurence
thereof and after giving effect thereto and to the application of the proceeds
thereof, such Debt is permitted under the provisions of paragraph 6B and
paragraph 6C and the aggregate principal amount of Priority Debt then
outstanding does not exceed 20% of Consolidated Net Worth.
6E. Merger, Consolidation, Sale or Transfer of Assets. The Company
covenants that it will not, and will not permit any of its Subsidiaries to, be a
party to any merger, amalgamation, consolidation, reorganization, reconstruction
or arrangement with any other Person or sell, lease or transfer or otherwise
dispose of all or substantially all of its assets to any Person, except that:
(i) any Subsidiary may merge or consolidate with the Company
(provided the Company shall be the continuing or surviving corporation) or
any one or more other Subsidiaries;
(ii) any Subsidiary may sell, lease, transfer or otherwise dispose
of any of its assets to the Company or to any other Subsidiary, whether by
dissolution, liquidation or otherwise;
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<PAGE> 13
(iii) any Subsidiary may merge or consolidate with, or sell, lease,
transfer or otherwise dispose of all or substantially all of its assets
to, any other Person; and
(iv) the Company may merge or consolidate or amalgamate with any
other corporation, or enter into a plan of reconstruction, reorganization
or arrangement, or sell, transfer, or otherwise dispose of all or
substantially all of its assets, provided that the Company shall be the
continuing or surviving corporation, or the continuing, surviving or
acquiring corporation shall be a corporation organized under the laws of
any State of the United States or the District of Columbia which shall
expressly assume in writing (in an instrument satisfactory in form and
substance to the Required Holder(s)) all of the obligations of the Company
under this Agreement and the Notes;
and in the case of any of the transactions described in clause (iii) above, at
the time of such merger, consolidation, sale, transfer or disposition and after
giving effect thereto there shall exist no Default or Event of Default, and the
Company shall have delivered to the holders of the Notes an opinion of
independent counsel (who may be counsel for the Company) and an Officer's
Certificate each to the effect that the foregoing provisions have been complied
with.
7. EVENTS OF DEFAULT.
7A. Acceleration. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or
Yield-Maintenance Amount payable with respect to any Note when the same
shall become due, either by the terms thereof or otherwise as herein
provided; or
(ii) the Company defaults in the payment of any interest on any Note
for more than 5 days after the date due; or
(iii) the Company or any Subsidiary defaults (whether as primary
obligor or as guarantor or other surety) in any payment of principal of or
interest on any other obligation for money borrowed (or any Capitalized
Lease Obligation, any obligation under a conditional sale or other title
retention agreement, any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money mortgage
or any obligation under notes payable or drafts accepted representing
extensions of credit) beyond any period of grace provided with respect
thereto, or the Company or any Subsidiary fails to perform
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<PAGE> 14
or observe any other agreement, term or condition contained in any
agreement under which any such obligation is created (or if any other
event thereunder or under any such agreement shall occur and be
continuing) and the effect of such failure or other event is to cause, or
to permit the holder or holders of such obligation (or a trustee on behalf
of such holder or holders) to cause, such obligation to become due (or to
be repurchased by the Company or any Subsidiary) prior to any stated
maturity, provided that the aggregate amount of all obligations as to
which such a payment default shall occur and be continuing or such a
failure or other event causing or permitting acceleration (or resale to
the Company or any Subsidiary) shall occur and be continuing exceeds
$10,000,000 (or the equivalent amount in any foreign currency); or
(iv) any representation or warranty made by the Company herein or by
the Company or any of its officers in any writing furnished in connection
with or pursuant to this Agreement and which is material shall be false in
any material respect on the date as of which made; or
(v) the Company fails to perform or observe any agreement contained
in paragraph 6; or
(vi) the Company fails to perform or observe any other agreement,
term or condition contained herein and such failure shall not be remedied
within 30 days after any Responsible Officer obtains actual knowledge
thereof; or
(vii) the Company or any Subsidiary Group makes an assignment for
the benefit of creditors or is generally not paying its debts as such
debts become due; or
(viii) any decree or order for relief in respect of the Company or
any Subsidiary Group is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect (herein
called the "Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession by,
a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary Group, or of any substantial part of the assets
of the Company or any Subsidiary Group, or commences a voluntary case
under the Bankruptcy Law of the United States or any proceedings (other
than proceedings for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Company or any Subsidiary Group under the
Bankruptcy Law of any other jurisdiction; or
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<PAGE> 15
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary Group and
the Company or member of such Subsidiary Group by any act indicates its
approval thereof, consent thereto or acquiescence therein on behalf of
such Subsidiary Group, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a Subsidiary whose
assets represent a substantial part, of the consolidated assets of the
Company and its Subsidiaries (determined in accordance with generally
accepted accounting principles) or which requires the divestiture of
assets, or stock of a Subsidiary, which shall have contributed a
substantial part of the consolidated net income of the Company and its
Subsidiaries (determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently ended,
and such order, judgment or decree remains unstayed and in effect for more
than 60 days; or
(xiii) a final judgment in an amount in excess of $10,000,000 (or
the equivalent amount in any foreign currency) over the amount as to which
insurance coverage has been acknowledged by a solvent insurer is rendered
against the Company or any Subsidiary and, within 90 days after entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within 90 days after the expiration of any such stay,
such judgment is not discharged; or
(xiv) any Plan shall fail to maintain the minimum funding standard
required by Section 412 of the Code for any plan year, or any Plan shall
become the subject of termination proceedings under ERISA, or the Company
or any ERISA affiliate shall withdraw from a Multiemployer Plan in whole
or in part or any Plan or Multiemployer Plan shall be terminated; and as a
result of any one or more of the foregoing there exists a liability of the
Company or any Subsidiary in an aggregate amount exceeding $10,000,000 (or
the equivalent amount in any foreign currency);
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<PAGE> 16
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, the holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (viii), (ix) or (x) of this paragraph 7A with respect to the
Company, all of the Notes at the time outstanding shall automatically become
immediately due and payable at par together with interest accrued thereon and
together with the Yield-Maintenance Amount, if any, with respect to each Note,
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Company, and (c) if such event is not an Event of Default
specified in clause (viii), (ix) or (x) of this paragraph 7A with respect to the
Company, the Required Holder(s) may at its or their option, by notice in writing
to the Company, declare all of the Notes to be, and all of the Notes shall
thereupon be and become, immediately due and payable together with interest
accrued thereon and together with the Yield-Maintenance Amount, if any, with
respect to each Note, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Company.
7B. Rescission of Acceleration. At any time after any or all of the
Notes shall have been declared immediately due and payable pursuant to paragraph
7A, the Required Holder(s) may, by notice in writing to the Company, rescind and
annul such declaration and its consequences if (i) the Company shall have paid
all overdue interest on the Notes, the principal of and Yield-Maintenance
Amount, if any, payable with respect to any Notes which have become due
otherwise than by reason of such declaration, and interest on such overdue
interest and overdue principal and Yield-Maintenance Amount at the rate
specified in the Notes, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 11C, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. Notice of Acceleration or Rescission. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
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<PAGE> 17
7D. Other Remedies. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights
under this Agreement and such Note by exercising such remedies as are available
to such holder in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of any covenant
or other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
8A. Organization. The Company is a corporation duly organized and existing
in good standing under the laws of the State of Delaware and each Subsidiary is
duly organized and existing in good standing under the laws of the jurisdiction
in which it is incorporated.
8B. Financial Statements. The Company has furnished you with the following
financial statements, identified by a principal financial officer of the
Company: (i) a consolidated balance sheet of the Company and its Subsidiaries as
at December 31 in each of the years 1994 to 1996, inclusive, and consolidated
statements of income, stockholders' equity and cash flows of the Company and its
Subsidiaries for each such year, all reported on by Ernst & Young; and (ii) a
consolidated balance sheet of the Company and its Subsidiaries as at September
30 in each of the years 1996 and 1997 and consolidated statements of income,
stockholders' equity and cash flows for the nine-month period ended on each such
date, prepared by the Company. Such financial statements (including any related
schedules and/or notes) are true and correct in all material respects (subject,
as to interim statements, to changes resulting from audits and year-end
adjustments), have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods involved and
show all liabilities, direct and contingent, of the Company and its Subsidiaries
required to be shown in accordance with such principles. The balance sheets
fairly present the condition of the Company and its Subsidiaries as at the dates
thereof, and the statements of income, stockholders' equity and cash flows
fairly present the results of the operations of the Company and its Subsidiaries
and their cash flows for the periods indicated. There has been no material
adverse change in the business, condition (financial or otherwise) or operations
of the Company and its Subsidiaries taken as a whole since December 31, 1996.
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<PAGE> 18
8C. Actions Pending. There is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries, or any properties or rights of the Company or any of
its Subsidiaries, by or before any court, arbitrator or administrative or
governmental body which is reasonably likely to result in any material adverse
change in the business, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole.
8D. Outstanding Debt. Neither the Company nor any of its Subsidiaries has
outstanding any Debt except as permitted by paragraphs 6B, 6C, 6D and 6E. There
exists no default (nor any temporary waiver of any default) under the provisions
of any instrument evidencing such Debt or of any agreement relating thereto.
8E. Title to Properties. The Company has and each of its Subsidiaries has
good and indefeasible title to its respective real properties (other than
properties which it leases) and good title to all of its other respective
properties and assets, including the properties and assets reflected in the
balance sheet as at December 31, 1996 referred to in paragraph 8B (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by paragraph 6A. All leases of the
Company and its Subsidiaries are valid and subsisting and are in full force and
effect except where the failure of such lease would not have a material adverse
effect on the business, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole.
8F. Taxes. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in
good faith by appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting principles.
8G. Conflicting Agreements and Other Matters. Neither the Company nor any
of its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and adversely affects
the business, property or assets, or financial condition of the Company and its
Subsidiaries taken as a whole. Neither the execution nor delivery of this
Agreement or the Notes, nor the offering, issuance and sale of the Notes, nor
fulfillment of nor compliance with the terms and provisions hereof and of the
Notes will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of, or
result in the creation of any Lien upon any of
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<PAGE> 19
the properties or assets of the Company or any of its Subsidiaries pursuant to,
the charter or by-laws of the Company or any of its Subsidiaries, any award of
any arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or any of its Subsidiaries is subject. Neither the Company nor any
of its Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing Indebtedness of the Company or such
Subsidiary, any agreement relating thereto or any other contract or agreement
(including its charter) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Debt of the Company of the type to be
evidenced by the Notes except as set forth in the agreements listed in Schedule
8G attached hereto.
8H. Offering of Notes. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes or any similar security of
the Company for sale to, or solicited any offers to buy the Notes or any similar
security of the Company from, or otherwise approached or negotiated with respect
thereto with, any Person other than you and not more than 5 other institutional
investors, and neither the Company nor any agent acting on its behalf has taken
or will take any action which would subject the issuance or sale of the Notes to
the provisions of section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of any applicable jurisdiction.
8I. Use of Proceeds. Neither the Company nor any Subsidiary owns or has
any present intention of acquiring any "margin stock" as defined in Regulation G
(12 CFR Part 207) of the Board of Governors of the Federal Reserve System
(herein called "margin stock") other than purchases of the Company's outstanding
common stock (and rights to acquire such stock). The proceeds of sale of the
Notes will be used for general corporate purposes. Except as referenced in the
first sentence of this paragraph, none of such proceeds will be used, directly
or indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry any stock that is currently a margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the meaning of
such Regulation G. Neither the Company nor any agent acting on its behalf has
taken or will take any action which might cause this Agreement or the Notes to
violate Regulation G, Regulation T or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Exchange Act, in each
case as in effect now or as the same may hereafter be in effect.
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<PAGE> 20
8J. ERISA. No accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with respect
to any Plan (other than a Multiemployer Plan). No liability to the Pension
Benefit Guaranty Corporation has been or is expected by the Company or any ERISA
Affiliate to be incurred with respect to any Plan (other than a Multiemployer
Plan) by the Company, any Subsidiary or any ERISA Affiliate which is or would be
materially adverse to the business, condition (financial or otherwise) or
operations of the Company and its Subsidiaries taken as a whole. Neither the
Company, any Subsidiary nor any ERISA Affiliate has incurred or presently
expects to incur any withdrawal liability under Title IV of ERISA with respect
to any Multiemployer Plan which is or would be materially adverse to the
business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole. The execution and delivery of this Agreement
and the issuance and sale of the Notes will be exempt from, or will not involve
any transaction which is subject to, the prohibitions of section 406 of ERISA
and will not involve any transaction in connection with which a penalty could be
imposed under section 502(i) of ERISA or a tax could be imposed pursuant to
section 4975 of the Code. The representation by the Company in the next
preceding sentence is made in reliance upon and subject to the accuracy of your
representation in paragraph 9B.
8K. Governmental Consent. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or
other action by or notice to or filing with any court or administrative or
governmental body (other than routine filings after the date of closing with the
Securities and Exchange Commission and/or state Blue Sky authorities) in
connection with the execution and delivery of this Agreement, the offering,
issuance, sale or delivery of the Notes or fulfillment of or compliance with the
terms and provisions hereof or of the Notes.
8L. Environmental Compliance. The Company and its Subsidiaries and all of
their respective properties and facilities have complied at all times and in all
respects with all federal, state, local and regional statutes, laws, ordinances
and judicial or administrative orders, judgments, rulings and regulations
relating to protection of the environment except, in any such case, where
failure to comply would not result in a material adverse effect on the business,
condition (financial or otherwise) or operations of the Company and its
Subsidiaries taken as a whole.
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<PAGE> 21
8M. Disclosure. Neither this Agreement nor any other document, certificate
or statement furnished to you by or on behalf of the Company in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact peculiar to the Company or any of its
Subsidiaries which materially adversely affects or in the future is reasonably
likely to (so far as the Company can now foresee) materially adversely affect
the business, property or assets, or financial condition of the Company and its
Subsidiaries taken as a whole and which has not been set forth in this Agreement
or in the other documents, certificates and statements furnished to you by or on
behalf of the Company prior to the date hereof in connection with the
transactions contemplated hereby.
9. REPRESENTATIONS OF THE PURCHASER. You represent as follows:
9A. Nature of Purchase. You are not acquiring the Notes to be purchased by
you hereunder with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act, provided that the disposition
of your property shall at all times be and remain within your control.
9B. Source of Funds. No part of the funds being used by you to pay the
purchase price of the Notes being purchased by you hereunder constitutes assets
allocated to any separate account maintained by you in which any employee
benefit plan, other than employee benefit plans identified on a list which has
been furnished by you to the Company, participates to the extent of 10% or more.
For the purpose of this paragraph 9B, the terms "separate account" and "employee
benefit plan" shall have the respective meanings specified in section 3 of
ERISA.
10. DEFINITIONS. For the purpose of this Agreement, the terms defined in
the introductory sentence and in paragraphs 1 and 2 shall have the respective
meanings specified therein, and the following terms shall have the meanings
specified with respect thereto below:
10A. Yield-Maintenance Terms.
"Business Day" shall mean any day other than a Saturday, a Sunday or
a day on which commercial banks in New York City are required or authorized to
be closed.
"Called Principal" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to paragraph 4B or is
declared to be immediately due and payable pursuant to paragraph 7A, as the
context requires.
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<PAGE> 22
"Discounted Value" shall mean, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" shall mean, with respect to the Called
Principal of any Note, 0.5% plus the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York City time) on the Business Day next
preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace Page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between yields reported for various maturities.
"Remaining Average Life" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
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<PAGE> 23
"Settlement Date" shall mean, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid pursuant
to paragraph 4B or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.
"Yield-Maintenance Amount" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance Amount shall in no
event be less than zero.
10B. Other Terms.
"Affiliate" shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with, the
Company, except a Subsidiary. A Person shall be deemed to control a corporation
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
"Bankruptcy Law" shall have the meaning specified in clause (viii)
of paragraph 7A.
"Capital Stock" shall mean any and all shares or other equivalents
(however designated) of corporate stock of the Company.
"Capitalized Lease Obligation" shall mean any rental obligation
which, under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"Cash Equivalents" shall mean, at any date of determination, "cash"
and "cash equivalents" as determined in accordance with generally accepted
accounting principles.
"closing" and "date of closing" shall have the respective meanings
specified in paragraph 2.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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<PAGE> 24
"Competitor" shall mean any Person who is engaged or who is an
Affiliate of another Person who is engaged to any significant extent in the
advertising, public relations, direct marketing or marketing research business;
provided, however, that in no event shall any insurance company, bank, bank
holding company, savings institution or trust company or fraternal benefit
society be deemed to be a Competitor for purposes of this Agreement.
"Consolidated Cash Flow" for any period shall mean the sum of
Consolidated Net Income, depreciation expenses, amortization costs (including
amortization of restricted stock granted as compensation to employees), deferred
compensation expenses (net of deferred compensation due and payable within one
year), minority interests and changes in deferred taxes, less any equity in the
earnings of unconsolidated affiliated entities (net of dividends received), all
as computed and consolidated for the Company and its Subsidiaries for such
period in accordance with generally accepted accounting principles.
"Consolidated Current Debt" as of any date shall mean the aggregate
amount of Current Debt of the Company and its Subsidiaries as would be shown on
a consolidated balance sheet of the Company and its Subsidiaries prepared as of
such date in accordance with generally accepted accounting principles.
"Consolidated Funded Debt" as of any date shall mean the aggregate
amount of Funded Debt of the Company and its Subsidiaries as would be shown on a
consolidated balance sheet of the Company and its Subsidiaries prepared as of
such date in accordance with generally accepted accounting principles.
"Consolidated Net Income" for any period shall mean the consolidated
net income (loss) of the Company and its Subsidiaries for such period, all
determined in accordance with generally accepted accounting principles
consistently applied.
"Consolidated Net Worth" shall mean, at any date, the excess, if
any, of the total assets of the Company and its Subsidiaries over the total
liabilities of the Company and its Subsidiaries, all as would be shown on a
consolidated balance sheet of the Company and its Subsidiaries prepared as of
such date in accordance with generally accepted accounting principles (but
Preferred Stock of the Company shall not in any event be treated as a
liability).
"Current Debt" shall mean, with respect to any Person, all
Indebtedness of such Person for borrowed money which by its terms or by the
terms of any instrument or agreement relating thereto matures on demand or
within one year from the date of the creation thereof and is not directly or
indirectly renewable or extendible at the option of the debtor to a date more
than one
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<PAGE> 25
year from the date of the creation thereof, provided that Indebtedness for
borrowed money outstanding under a revolving credit or similar agreement which
obligates the lender or lenders to extend credit over a period of more than one
year shall constitute Funded Debt and not Current Debt, even though such
Indebtedness by its terms matures on demand or within one year from the date of
the creation thereof.
"Debt" shall mean Current Debt and Funded Debt.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any corporation which is a member of
the same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"Event of Default" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Funded Debt" shall mean, with respect to any Person, all
Indebtedness of such Person which by its terms or by the terms of any instrument
or agreement relating thereto matures more than one year from, or is directly or
indirectly renewable or extendible at the option of the debtor to a date more
than one year (including an option of the debtor under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of more than one year) from, the date of the creation thereof.
"Guarantee" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation or asset of another,
including, without limitation, any such obligation or asset directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in the
ordinary course of business) or discounted or sold with recourse by such Person,
or in respect of which such Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation or asset in effect guaranteed
by such Person through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or asset or any security
therefor, or to provide funds for the payment or
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<PAGE> 26
discharge of such obligation or maintain the value of such asset (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain the solvency or any balance sheet or other financial condition of
the obligor of such obligation, or to make payment for any products, materials
or supplies or for any transportation or services regardless of the non-delivery
or non-furnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged or the value of any asset maintained, or that any agreements relating
thereto will be complied with, or that the holders of such obligation or asset
will be protected against loss in respect thereof. The amount of any Guarantee
shall be equal to the outstanding principal amount of the obligation guaranteed
or the minimum value of the asset to be maintained or such lesser amount to
which the maximum exposure of the guarantor shall have been specifically
limited.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) all items (excluding items of contingency reserves or of
reserves for deferred income taxes) which in accordance with generally accepted
accounting principles would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as of the date on
which Indebtedness is to be determined, (ii) all indebtedness secured by any
Lien on any property or asset owned or held by such Person subject thereto,
whether or not the indebtedness secured thereby shall have been assumed (limited
to the value of such asset where the indebtedness has not been assumed), and
(iii) all indebtedness of others with respect to which such Person has become
liable by way of a Guarantee (limited to the amount of such indebtedness which
is Guaranteed), it being understood that any Guarantee of obligations that are
otherwise permitted hereunder but would not otherwise constitute Indebtedness
under clauses (i) or (iii) above shall not constitute Indebtedness hereunder.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"Multiemployer Plan" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
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<PAGE> 27
"Non-Qualifying Subsidiary Group" as of any date shall mean a
Subsidiary or any group of Subsidiaries which carries on its business in a
single country other than the United States of America or Canada and, on an
aggregate basis, had gross income of less than $14,000,000 (or the equivalent
amount in any foreign currency) for the most recently ended fiscal year of the
Company.
"Officer's Certificate" shall mean a certificate signed in the name
of the Company by its President, one of its Vice Presidents or its Treasurer.
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"Plan" shall mean any "employee pension benefit plan" (as such term
is defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any ERISA Affiliate.
"Preferred Stock" shall mean any class of capital stock of the
Company or any of its Subsidiaries which is redeemable or which has a preference
upon liquidation or in the payment of dividends over the respective common stock
of the Company or any of its Subsidiaries.
"Priority Debt" shall mean, without duplication, (x) all Funded Debt
of Subsidiaries other than (a) Funded Debt of any Subsidiary owing to the
Company or to another Subsidiary and (b) Funded Debt of a Non-Qualifying
Subsidiary Group, and (y) all Debt of the Company or any of its Subsidiaries
secured by a Lien other than a Lien permitted by clauses (i) through (x) of
paragraph 6A, and (z) all Preferred Stock of Subsidiaries not owned by the
Company directly or indirectly through a wholly-owned Subsidiary, to the extent
the total aggregate amount of the foregoing items (x), (y) and (z) is in excess
of $10,000,000.
"Responsible Officer" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company or any other officer of the Company involved principally in its
financial administration or its controllership function.
"Required Holder(s)" shall mean the holder or holders of at least 66
2/3% of the aggregate principal amount of the Notes from time to time
outstanding.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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<PAGE> 28
"Significant Holder" shall mean (i) you, so long as you shall hold
(or be committed under this Agreement to purchase) any Note, or (ii) any other
holder of at least 10% of the aggregate principal amount of the Notes from time
to time outstanding.
"Subsidiary" shall mean any corporation at least a majority of the
total combined voting power of all classes of Voting Stock of which shall, at
the time as of which any determination is being made, be owned by the Company
either directly or through Subsidiaries.
"Subsidiary Group" shall mean any Subsidiary which is, or a group of
Subsidiaries all of which are, at any time of determination, subject to one or
more of the proceedings or conditions described in paragraph 7A (vii), (viii),
(ix) or (x) and, on an aggregate basis, either (i) such Subsidiary or group had
gross revenues which represented more than 5% of consolidated gross revenues of
the Company and its Subsidiaries for the most recently ended fiscal year of the
Company (or on a pro forma basis in the case of a newly acquired or created
Subsidiary would have accounted for 5% or more of such consolidated gross
revenues) or (ii) has total assets which represent 5% or more of the
consolidated total assets of the Company and its Subsidiaries as of the end of
the most recently ended fiscal year of the Company (adjusted on a pro forma
basis to give effect to acquisitions or dispositions of assets since the end of
such fiscal year).
"Total Borrowed Funds" shall mean, at any date, the sum of (x)
Consolidated Funded Debt as of such date plus (y) the excess, if any, of
Consolidated Current Debt as of such date over the aggregate of Cash Equivalents
of the Company and its Subsidiaries on hand as of such date (valued at the
amount as would be shown for such items on a consolidated balance sheet of the
Company and its Subsidiaries prepared as of such date in accordance with
generally accepted accounting principles) and not subject to any Lien (other
than a Lien in favor of any such Consolidated Current Debt).
"Transferee" shall mean any direct or indirect transferee of all or
any part of any Note purchased by you under this Agreement.
"Voting Stock" shall mean, with respect to any corporation, any
shares of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
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<PAGE> 29
10C. Accounting Principles, Terms and Determinations. All references in
this Agreement to "generally accepted accounting principles" shall be deemed to
refer to generally accepted accounting principles in effect in the United States
at the time of application thereof. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles, applied on a basis consistent with the
most recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no such
statements have been so delivered, the most recent audited financial statements
referred to in clause (i) of paragraph 8B.
11. MISCELLANEOUS.
11A. Note Payments. The Company agrees that, so long as you shall hold any
Note, it will make payments of principal of, interest on and any
Yield-Maintenance Amount payable with respect to such Note, which comply with
the terms of this Agreement, by wire transfer of immediately available funds for
credit (not later than 12:00 noon, New York City time, on the date due) to your
account or accounts as specified in the Purchaser Schedule attached hereto, or
such other account or accounts in the United States as you may designate in
writing, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. You agree that, before disposing of any Note,
you will make a notation thereon (or on a schedule attached thereto) of all
principal payments previously made thereon and of the date to which interest
thereon has been paid. The Company agrees to afford the benefits of this
paragraph 11A to any Transferee which shall have made the same agreement as you
have made in this paragraph 11A.
11B. Expenses. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save you and any
Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including (i) all
document production and duplication charges and the fees and expenses of any
special counsel engaged by you or such Transferee in connection with this
Agreement, the transactions contemplated hereby (but not the fees and expenses
of any Transferee or its counsel in connection with the acquisition of any Note)
and any subsequent proposed modification of, or proposed consent under, this
Agreement, whether or not such proposed modification shall be effected or
proposed consent granted, and (ii) the costs and expenses, including attorneys'
fees, incurred by you or such Transferee in enforcing (or determining whether or
how to enforce) any rights under this Agreement or the Notes or in responding to
any
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<PAGE> 30
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or the transactions contemplated hereby or by
reason of your or such Transferee's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case. The obligations
of the Company under this paragraph 11B shall survive the transfer of any Note
or portion thereof or interest therein by you or any Transferee and the payment
of any Note.
11C. Consent to Amendments. This Agreement may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holder(s) except
that, without the written consent of the holder or holders of all Notes at the
time outstanding, no amendment to this Agreement shall change the maturity of
any Note, or change the principal of, or the rate or time of payment of interest
on or any Yield-Maintenance Amount payable with respect to any Note, or affect
the time, amount or allocation of any prepayments, or change the proportion of
the principal amount of the Notes required with respect to any consent,
amendment, waiver or declaration. Each holder of any Note at the time or
thereafter outstanding shall be bound by any consent authorized by this
paragraph 11C, whether or not such Note shall have been marked to indicate such
consent, but any Notes issued thereafter may bear a notation referring to any
such consent. No course of dealing between the Company and the holder of any
Note nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note. As used herein and
in the Notes, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes. The
Notes are issuable as registered notes without coupons in denominations of at
least $1,000,000 and larger integral multiples of $100,000, except as may be
necessary to reflect any principal amount not evenly divisible by $100,000. The
Company shall keep at its principal office a register in which the Company shall
provide for the registration of Notes and of transfers of Notes. Upon surrender
for registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes of
like tenor and of a like aggregate principal amount, registered in the name of
such transferee or transferees. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the holder making the exchange is entitled to receive.
Every Note
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<PAGE> 31
surrendered for registration of transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument of transfer duly executed, by the holder
of such Note or such holder's attorney duly authorized in writing. Any Note or
Notes issued in exchange for any Note or upon transfer thereof shall carry the
rights to unpaid interest and interest to accrue which were carried by the Note
so exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of written notice from
the holder of any Note of the loss, theft, destruction or mutilation of such
Note and, in the case of any such loss, theft or destruction, upon receipt of
such holder's unsecured indemnity agreement, or in the case of any such
mutilation upon surrender and cancellation of such Note, the Company will make
and deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
11E. Persons Deemed Owners; Participations. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, interest on and any Yield-Maintenance Amount
payable with respect to such Note and for all other purposes whatsoever, whether
or not such Note shall be overdue, and the Company shall not be affected by
notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in such Note to any Person on
such terms and conditions as may be determined by such holder in its sole and
absolute discretion, provided that any such participation shall be in a
principal amount of at least $100,000.
11F. Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by you of any Note or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any Transferee, regardless of any investigation made at any time
by or on behalf of you or any Transferee. Subject to the preceding sentence,
this Agreement and the Notes embody the entire agreement and understanding
between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
11G. Successors and Assigns. All covenants and other agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
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<PAGE> 32
11H. Disclosure to Other Persons. The Company acknowledges that the holder
of any Note may deliver copies of any financial statements and other documents
delivered to such holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company or any Subsidiary in connection with or
pursuant to this Agreement to (i) such holder's directors, officers, employees,
agents and professional consultants, (ii) any other holder of any Note, (iii)
any Person (other than a Competitor) to which such holder offers to sell such
Note or any part thereof and which agrees to be bound by the provisions of this
paragraph 11H, (iv) any Person (other than a Competitor) to which such holder
sells or offers to sell a participation in all or any part of such Note and
which agrees to be bound by the provisions of this paragraph 11H, (v) any Person
from which such holder offers to purchase any security of the Company and which
agrees to be bound by the provisions of this paragraph 11H, (vi) any federal or
state regulatory authority having jurisdiction over such holder, (vii) the
National Association of Insurance Commissioners or any similar organization or
(viii) any other Person to which such delivery or disclosure may be necessary or
appropriate (a) in compliance with any law, rule, regulation or order applicable
to such holder, (b) in response to any subpoena or other legal process or
informal investigative demand or (c) in connection with any litigation to which
such holder is a party. You agree to use your best efforts (and any Transferee
which avails itself of the benefits of paragraph 5A(iv) or (v) or paragraph 5C
shall be deemed to have agreed to use its best efforts - you and any such
Transferee each herein called a "Holder") to hold in confidence and not disclose
any information (other than information (a) which was publicly known or
otherwise known to such Holder at the time of disclosure (except pursuant to
disclosure in connection with this Agreement), (b) which subsequently becomes
publicly known through no act or omission by such Holder, or (c) which otherwise
becomes known to such Holder, other than through disclosure by the Company or
any of its Subsidiaries) delivered or made available by or on behalf of the
Company or any of its Subsidiaries to such Holder (including without limitation
any non-public information obtained pursuant to paragraph 5A or 5C) in
connection with or pursuant to this Agreement which is clearly marked or labeled
as being confidential information, provided that nothing herein shall prevent
the holder of any Note from disclosing such information as provided in the
preceding sentence.
11I. Notices. All written communications provided for hereunder shall be
sent by first class mail or nationwide overnight delivery service (with charges
prepaid) and (i) if to you, addressed to you at the address specified for such
communications in the Purchaser Schedule attached hereto, or at such other
address as you shall have specified to the Company in writing, (ii) if to any
other holder of any Note, addressed to such other holder at such address as such
other holder shall have specified to the Company in writing or, if any such
other holder
- 30 -
<PAGE> 33
shall not have so specified an address to the Company, then addressed to such
other holder in care of the last holder of such Note which shall have so
specified an address to the Company, and (iii) if to the Company, addressed to
it at 777 Third Avenue, New York, NY 10017, Attention: Mr. Steven Felsher, or at
such other address as the Company shall have specified to the holder of each
Note in writing; provided, however, that any such communication to the Company
may also, at the option of the holder of any Note, be delivered by any other
means either to the Company at its address specified above or to any officer of
the Company.
11J. Payments Due on Non-Business Days. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day. If the date for any payment is extended to the
next succeeding Business Day by reason of the preceding sentence, the period of
such extension shall not be included in the computation of the interest payable
on such Business Day.
11K. Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to you or to the Required Holder(s), the
determination of such satisfaction shall be made by you or the Required
Holder(s), as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
11L. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York.
11M. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11N. Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11O. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
- 31 -
<PAGE> 34
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between the
Company and you.
Very truly yours,
GREY ADVERTISING INC.
By /s/ Steven G. Felsher
-------------------------------
Title: Executive Vice President
By /s/ William P. Garvey
-------------------------------
Title: EVP-CFO U.S.A.
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By /s/ Kevin J. Kraska
-------------------------------
Vice President
-32-
<PAGE> 35
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between the
Company and you.
Very truly yours,
GREY ADVERTISING INC.
By
-------------------------------
Title:
By
-------------------------------
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By
-------------------------------
Vice President
-32-
<PAGE> 36
PURCHASER SCHEDULE
Aggregate
Principal
Amount of
Notes to be Note Denom-
Purchased ination(s)
----------- -----------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA $75,000,000 $60,000,000
$15,000,000
(1) All payments on account of Notes held by such purchaser shall be made by
wire transfer of immediately available funds for credit to:
Account No. 890-0304-391 (in the case of payments on account of the Note
originally issued in the principal amount of $60,000,000)
Account No. 890-0304-944 (in the case of payments on account of the Note
originally issued in the principal amount of $15,000,000)
Bank of New York
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name of the Company, a
reference to "6.94% Senior Notes due December 23, 2005, PPN #397838\B
Security No. INV5824 (in the case of the $60,000,000 Note) and PPN
#397838\B INV5825 (in the case of the $15,000,000 Note)", and the due date
and application (as among principal, interest and Yield-Maintenance
Amount) of the payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
Three Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4077
Attention: Manager, Billings and Collections
Telephone: (973) 802-5260
Fax: (973) 802-8055
<PAGE> 37
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Gateway Center
11th Floor
Newark, New Jersey 07102-5311
Attention: Managing Director
Telephone: (973) 802-9182
Fax: (973) 802-3200
(4) Recipient of telephonic prepayment notices:
Manager, Trade Management
Telephone: (973) 802-7398
Fax: (973) 802-9425
(5) Tax Identification No.: 22-1211670
<PAGE> 38
GREY ADVERTISING INC.
LIEN INFORMATION - SCHEDULE 6A
- --------------------------------------------------------------------------------
CURRENT
------------
COUNTRY TYPE OF LIEN LOCAL AMOUNT
- --------------------------------------------------------------------------------
NETHERLANDS OVERDRAFT FACILITY NLG 4,500,000
Grey Communications Pledge of A/R &
Group B.V. Furn & Fixtures
DENMARK CAPITALIZED LEASES DKK 20,500,000
Grey Communications Office & Computer Equipment
Group A/S
DENMARK
GREY COMMUNICATIONS
GROUP A/S MORTGAGE DEBT DKK 100,000
CANADA OVERDRAFT FACILITY CAD 4,000,000
Grey Advertising Ltd. Pledge of A/R
SWEDEN OVERDRAFT FACILITY SEK 12,000,000
Grey Communications A.D. Pledge of all assets
UK OVERDRAFT FACILITY GBP 5,000,000
Grey Communications Pledge of A/R
Group Ltd.
NORWAY
GCG NORGE & SUBS. BANK OVERDRAFTS NOK 11,200,000
Pledge of A/R
GCG NORGE & SUBS. LOANS - CARS NOK 200,000
AUSTRALIA
GREY ADVERTISING CAPITALIZED LEASES AUD 1,300,000
Office & Computer Equipment
HONG KONG
GREY ADVERTISING HONG OVERDRAFT FACILITY
KONG LTD. PLEDGE OF LIQUID ASSETS HKD 5,000,000
GREY ADVERTISING HONG OVERDRAFT FACILITY
KONG LTD. BLOCKED DEPOSIT HKD 2,000,000
GREY ADVERTISING HONG CAPITALIZED LEASES
KONG LTD. Office & Computer Equipment HKD 7,500,000
GREY ADVERTISING HONG CAPITALIZED LEASES
KONG LTD. Graphic Production Equipment HKD 2,100,000
OTHER OTHER USD 5,000,000
- --------------------------------------------------------------------------------
Non-qualifying Subsidiaries
- ---------------------------
THAILAND
GREY THAILAND LTD. BANK LOANS THB 57,406,000
GREY THAILAND LTD. PROMISSORY NOTES THB 21,000,000
- --------------------------------------------------------------------------------
<PAGE> 39
SCHEDULE 8G
List of Agreements Restricting Debt
<PAGE> 40
EXHIBIT A
[FORM OF NOTE]
GREY ADVERTISING INC.
6.94% SENIOR NOTE DUE DECEMBER ___, 2005
No. _____ [Date]
$___________
FOR VALUE RECEIVED, the undersigned, GREY ADVERTISING INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of ________________________, hereby promises to pay to ________________________,
or registered assigns, the principal sum of _____________________ DOLLARS on
December ___, 2005, with interest (computed on the basis of a 360-day year--30-
day month) (a) on the unpaid balance thereof at the rate of 6.94% per annum from
the date hereof, payable semiannually on the _____ day of December and June in
each year, commencing with the June ___ next succeeding the date hereof, until
the principal hereof shall have become due and payable, and (b) on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
interest and any overdue payment of any Yield-Maintenance Amount (as defined in
the Note Agreement referred to below), payable semiannually as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 8.94% or (ii) 2.0% over the rate of
interest publicly announced by Morgan Guaranty Trust Company of New York from
time to time in New York City as its Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of Bank of
New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of a series of Senior Notes (herein called the "Notes")
issued pursuant to a Note Agreement, dated as of December ___, 1997 (herein
called the "Agreement"), between the Company and The Prudential Insurance
Company of America and is entitled to the benefits thereof.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in
<PAGE> 41
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
The Company agrees to make required prepayments of principal on the dates
and in the amounts specified in the Agreement. This Note is also subject to
optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
This Note is intended to be performed in the State of New York and shall
be construed and enforced in accordance with the law of such State.
GREY ADVERTISING INC.
By ________________________
[Vice] President
By ________________________
Treasurer
<PAGE> 42
EXHIBIT B
[FORM OF OPINION OF COMPANY'S COUNSEL]
[Letterhead of Skadden, Arps, Slate, Meagher & Flom]
[Date of Closing]
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Gateway Center, 11th Floor
Newark, New Jersey 07102-5311
Ladies and Gentlemen:
We have acted as counsel for Grey Advertising Inc. (the "Company") in
connection with the Note Agreement, dated as of December ___, 1997, between the
Company and you (the "Note Agreement"), pursuant to which the Company has issued
to you today 6.94% Senior Notes due December ___, 2005 of the Company in the
aggregate principal amount of $75,000,000. All terms used herein that are
defined in the Note Agreement have the respective meanings specified in the Note
Agreement. This letter is being delivered to you in satisfaction of the
condition set forth in paragraph 3A of the Note Agreement and with the
understanding that you are purchasing the Notes in reliance on the opinions
expressed herein.
In this connection, we have examined such certificates of public
officials, certificates of officers of the Company and copies certified to our
satisfaction of corporate documents and records of the Company and of other
papers, and have made such other investigations, as we have deemed relevant and
necessary as a basis for our opinion hereinafter set forth. We have relied upon
such certificates of public officials and of officers of the Company with
respect to the accuracy of material factual matters contained therein which were
not independently established. With respect to the opinion expressed in
paragraph 3 below, we have also relied upon the representation made by you in
paragraph 9A of the Note Agreement.
Based on the foregoing, it is our opinion that:
1. The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of ________________________.
2. The Note Agreement and the Notes have been duly authorized by all
requisite corporate action and duly executed and delivered by authorized
officers of the Company, and are valid obligations of the Company, legally
binding upon and enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by
<PAGE> 43
(a) bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3. It is not necessary in connection with the offering, issuance,
sale and delivery of the Notes under the circumstances contemplated by the Note
Agreement to register the Notes under the Securities Act or to qualify an
indenture in respect of the Notes under the Trust Indenture Act of 1939, as
amended.
4. The extension, arranging and obtaining of the credit represented
by the Notes do not result in any violation of Regulation G, T or X of the Board
of Governors of the Federal Reserve System.
5. The execution and delivery of the Note Agreement and the Notes,
the offering, issuance and sale of the Notes and fulfillment of and compliance
with the respective provisions of the Note Agreement and the Notes do not
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries pursuant to, or require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court,
administrative or governmental body or other Person (other than routine filings
after the date hereof with the Securities and Exchange Commission and/or state
Blue Sky authorities) pursuant to, the charter or by-laws of the Company or any
of its Subsidiaries, any applicable law (including any securities or Blue Sky
law), statute, rule or regulation or (insofar as is known to us after having
made due inquiry with respect thereto) any agreement (including, without
limitation, any agreement listed in Schedule 8G to the Note Agreement),
instrument, order, judgment or decree to which the Company or any of its
Subsidiaries is a party or otherwise subject.
Very truly yours,
<PAGE> 44
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK 10022-3897
-----
TEL: (212) 735-3000
FAX: (212) 735-2000
FIRM/AFFILIATE OFFICES
-----
BOSTON
CHICAGO
HOUSTON
LOS ANGELES
NEWARK
SAN FRANCISCO
WASHINGTON, D.C.
WILMINGTON
-----
BEIJING
BRUSSELS
FRANKFURT
HONG KONG
LONDON
MOSCOW
PARIS
SINGAPORE
SYDNEY
TOKYO
TORONTO
December 23, 1997
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Gateway Center - 11th Floor
Newark, New Jersey 07102-5311
Re: Grey Advertising Inc.
Dear Ladies and Gentlemen:
We have acted as special counsel to Grey Advertising Inc., a Delaware
corporation (the "Company"), in connection with the negotiation, execution and
delivery of the Note Agreement, dated as of December 23, 1997 (the "Note
Agreement"), between the Company and you and the negotiation, execution and
issuance of the 6.94% Senior Notes due December 23, 2005 of the Company made
payable to you (the "Notes"). This opinion is being delivered pursuant to
paragraph 3A of the Note Agreement. Capitalized terms used herein and not
otherwise defined herein shall have the same meanings herein as ascribed thereto
in the Note Agreement.
In our examination we have assumed the genuineness of all signatures
including endorsements, the legal capacity of natural persons, the authority of
all persons signing each of the documents on behalf of the parties (other than
the Company) thereto, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified, conformed, telefacsimile or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion, we have relied upon statements and representations of the Company and
its officers and other representatives and of public
<PAGE> 45
The Prudential Insurance Company of America
December 23, 1997
Page 2
officials and the representations and warranties of the Company set forth in the
Note Agreement, including the facts set forth in the Officer's Certificate
described below.
In rendering the opinions set forth herein, we have examined and relied on
originals or copies of the following:
(a) the Note Agreement;
(b) the Notes;
(c) the certificate of the Company executed by an officer of the Company
dated the date hereof, a copy of which is attached as Exhibit A hereto (the
"Officer's Certificate");
(d) certified copies of the Certificate of Incorporation and By-laws of
the Company;
(e) a certified copy of certain resolutions of the Board of Directors of
the Company adopted on November 21, 1997;
(f) certificates from public officials in the State of Delaware as to the
good standing of the Company in such jurisdiction; and
(g) such other documents as we have deemed necessary or appropriate as a
basis for the opinions set forth below.
We express no opinion as to the laws of any jurisdiction other than (i)
the laws of the State of New York, (ii) the General Corporation Law of the State
of Delaware and (iii) the federal laws of the United States of America to the
extent specifically referred to herein.
The opinions set forth below are subject to the qualifications that
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights gener-
<PAGE> 46
The Prudential Insurance Company of America
December 23, 1997
Page 3
ally and by general principles of equity (regardless of whether enforcement is
sought in equity or at law).
Based upon the foregoing and subject to the limitations, qualifications,
exceptions and assumptions set forth herein, we are of the opinion that:
1. The Company is validly existing and in good standing under the
laws of the State of Delaware.
2. The execution, delivery and performance of each of the Note
Agreement and the Notes and the consummation by the Company of the transactions
contemplated thereby have been duly authorized by all requisite corporate action
on the part of the Company. Each of the Note Agreement and the Notes has been
duly executed and delivered by the Company.
3. Each of the Note Agreement and the Notes constitutes the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms.
4. Neither the execution, delivery or performance by the Company of
each of the Note Agreement and the Notes and the performance by the Company of
its obligations under each of the Note Agreement and the Notes, each in
accordance with its terms, will (i) conflict with the Certificate of
Incorporation or By- laws of the Company, (ii) constitute a violation of or a
default under any Applicable Contracts or (iii) cause the creation of any Lien
upon any of the property of the Company or any of the Company's subsidiaries
pursuant to any Applicable Contracts. We do not express any opinion, however, as
to whether the execution, delivery or performance by the Company of the Note
Agreement and the Notes will constitute a violation of or a default under any
covenant, restriction or provision with respect to financial ratios or tests or
any aspect of the financial condition or results of operations of the Company or
its Subsidiaries. For purposes of this Paragraph 4, the term "Applicable
Contracts" means those agreements or instruments set forth on Schedule I to the
Officer's Certifi-
<PAGE> 47
The Prudential Insurance Company of America
December 23, 1997
Page 4
cate and which have been identified to us as all the agreements and instruments
which are material to the business or financial condition of the Company and its
subsidiaries taken as a whole.
5. Neither the execution, delivery or performance by the Company of
the Note Agreement and the Notes nor the compliance by the Company with the
terms and provisions thereof will contravene any provision of any Applicable Law
or any Applicable Order. For purposes of this paragraph 5 and paragraph 6, the
term "Applicable Laws" means those laws, rules and regulations of the State of
New York and of the United States of America (including, without limitation,
Regulations G, U and x of the Federal Reserve Board) which, in our experience,
are normally applicable to transactions of the type contemplated by the Note
Agreement and the Notes. For purposes of this paragraph 5, the term "Applicable
Orders" means those orders or decrees of Governmental Authorities identified on
Schedule III to the Officer's Certificate. For purposes of this paragraph 5 and
paragraph 6, the term "Governmental Authority" means any New York, Delaware or
federal executive, legislative, judicial, administrative or regulatory body.
6. No Governmental Approval, which has not been obtained or taken
and is not in full force and effect, is required to authorize or is required in
connection with the execution, delivery or performance of the Note Agreement or
the Notes by the Company except (a) those Governmental Approvals set forth in
Schedule II to the Officer's Certificate and (b) routine filings after the date
hereof with the Securities and Exchange Commission and/or state Blue Sky
authorities. For the purposes of this paragraph 6, the term "Governmental
Approval" means any order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
Governmental Authority pursuant to Applicable Laws.
7. Assuming that the Company offered and sold the Notes in
accordance with the terms of the Note Agreement, the offer and sale of the Notes
would be ex-
<PAGE> 48
The Prudential Insurance Company of America
December 23, 1997
Page 5
empt transactions and no registration of the Notes under the Securities Act of
1933, as amended (the "Securities Act"), or qualification of an indenture under
the Trust Indenture Act of 1939, as amended, would be required in connection
with the issuance, offer or sale of the Notes in the manner contemplated by the
Note Agreement.
In rendering the foregoing opinions, we have assumed, with your
consent, that:
(a) the execution, delivery and performance by the Company of any of
its obligations under the Note Agreement and the Notes does not and will not
conflict with, contravene, violate or constitute a default under (i) any lease,
indenture, instrument or other agreement to which the Company or any of its
subsidiaries or its property is subject (other than the Applicable Contracts as
to which we express our opinion in paragraph 4 herein), (ii) any rule, law or
regulation to which the Company is subject (other than Applicable Laws as to
which we express our opinion in paragraph 5 herein) or (iii) any judicial or
administrative order or decree of any governmental authority (other than
Applicable Orders as to which we express our opinion in paragraph 5 herein); and
(b) no authorization, consent or other approval of, notice to or
filing with any court, governmental authority or regulatory body (other than
Governmental Approvals as to which we express our opinion in paragraph 6 herein)
is required to authorize or is required in connection with the execution,
delivery or performance by the Company of the Note Agreement and the Notes or
the transactions contemplated thereby.
Our opinions are also subject to the following assumptions and
qualifications:
(a) we have assumed the Note Agreement constitutes the legal, valid
and binding obligation of each party to such Note Agreement (other than the
Company) enforceable against such party (other than the Company) in accordance
with its terms;
<PAGE> 49
The Prudential Insurance Company of America
December 23, 1997
Page 6
(b) we express no opinion as to the effect on the opinion expressed
herein of (i) the compliance or non-compliance of any party (other than the
Company) to the Note Agreement with any state, federal or other laws or
regulations applicable to it or (ii) the legal or regulatory status or the
nature of the business of such party;
(c) in rendering our opinions expressed herein, we express no
opinion as to the applicability or effect of any fraudulent transfer or similar
law on the Note Agreement or the Notes or any transactions contemplated thereby;
(d) we express no opinion as to the enforceability of any rights to
contribution or indemnification provided for in the Note Agreement which are
violative of the public policy underlying any law, rule or regulation (including
any federal or state securities law, rule or regulation).
This opinion is being furnished only to you and is solely for your
benefit in connection with the transactions contemplated by the Note Agreement
and is not to be relied upon by any other Person for any other purpose without
our prior written consent.
Very truly yours,
/s/Skadden, Arps, Slate,
Meagher & Flom LLP
<PAGE> 50
Exhibit A to Opinion of
Special Counsel to Grey Advertising Inc.
Officer' s Certificate
I, Steven G. Felsher, Executive Vice President, Treasurer and
Secretary of Grey Advertising Inc., a Delaware corporation (the "Company"),
understand that pursuant to paragraph 3A of that certain Note Agreement, dated
as of December 23, 1997 (the "Note Agreement"), between the Company and The
Prudential Insurance Company of America (the "Purchaser"), Skadden, Arps, Slate,
Meagher & Flom LLP is rendering an opinion to the Purchaser. I further
understand that Skadden, Arps, Slate, Meagher & Flom LLP is relying on this
certificate and the statements made herein in rendering such opinion. Defined
terms used herein but not otherwise defined shall have the meaning set forth in
the Note Agreement.
With regard to the foregoing, on behalf of the Company I certify
that:
1. Set forth on Schedule I hereto are all of the agreements and
instruments to which the Company or any of its Subsidiaries is a party or by
which it or any of its assets are bound and which are material to the business
or property of the Company and its Subsidiaries taken as a whole.
2. Set forth on Schedule II hereto are all of the consents,
approvals, licenses, authorizations or validations of any governmental authority
obtained by the Company in connection with the Note Agreement or any transaction
contemplated thereby.
3. Set forth on Schedule III hereto are all of the orders, judgments
and decrees of any governmental authority which are material to the business or
property of the Company and its Subsidiaries taken as a whole.
4. Attached hereto as Exhibit A is a true and complete copy of the
By-Laws of the Company, which By-Laws are in full force and effect on the date
hereof and no amendment to said By-Laws is contemplated.
<PAGE> 51
5. Attached hereto as Exhibit B are true, correct and complete
copies of the resolutions duly and validly adopted by the Board of Directors of
the Company on November 21, 1997 which constitute all the resolutions of the
Board of Directors of the Company relating to the Note Agreement and the Notes
and all such resolutions are in full force and effect on the date hereof and
have not been amended, modified or rescinded.
6. Less than 25 percent of the assets of the Company on a
consolidated basis and on an unconsolidated basis consist of margin stock (as
such term is defined in Regulation G or Regulation U of the Board of Governors
of the Federal Reserve System).
IN WITNESS WHEREOF, I have executed this certificate this 23rd day
of December, 1997.
By: /s/Steven G. Felsher
-----------------------------------
Name: Steven G. Felsher
Title: Executive Vice President,
Treasurer and Secretary
2
<PAGE> 1
NUMBER 3 OF
4 EXECUTED
COUNTERPARTS
FIFTEENTH AMENDMENT OF LEASE
THIS AGREEMENT, made and entered into as of the 30th day of September,
1986, by and between MELVYN KAUFMAN, of 777 Third Avenue, New York, New York
10017 (hereinafter jointly referred to as "Landlord") and GREY ADVERTISING,
INC., a Delaware corporation, having its principal office at 777 Third Avenue,
New York, New York 10017 (hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into a Lease, dated as of July 1,
1978, amended as of October 1, 1979; November 1, 1979; April 1, 1980; April 21,
1980; August 9, 1980; March 23, 1981; December 2, 1981; April 13, 1982; January
31, 1983; September 25, 1984; January 31, 1985; July 25, 1985; February 20, 1986
and July 31, 1986 (as so amended, the "Lease") demising certain space in the
building known as and by the street number 777 Third Avenue, New York, New York
(the "Building"), as described in the Lease; and
WHEREAS, Landlord and Tenant wish to amend the Lease in order to (a)
increase the amount of space demised under the Lease by adding to the Demised
Premises, in accordance with the provisions of Article 37 of the Lease, a
portion of the 6th floor of the Building heretofore leased to The Kenzer
Corporation (being hereinafter referred to as the "Option Space"), as referred
to in Schedule E-1 of the Lease and as the Option Space as shown on the plan
annexed hereto as Exhibit A and made a part hereof, and by such addition, the
Demised Premises include an additional portion of the 6th floor and (b) modify
certain other provisions of the Lease.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
provisions contained in the Lease and the mutual agreements, covenants and
provisions hereinafter set forth and for other good and valuable consideration,
Landlord and Tenant agree as follows:
1. Effective October 1, 1986 (the "Option Space Commencement Date"), but subject
to the provisions of Section 37.04H of the Lease, Section 1.01 of the Lease is
hereby amended so that the Option Space shall be added to and form a part of the
space demised and leased to Tenant under the Lease with the same force and
effect as if said space had been included within the Demised Premises thereunder
from the inception of the Lease.
2. Subject to the provisions of Section 37.04H of the Lease, Tenant agrees to
pay annual fixed minimum rent for the Option Space equal to THIRTY-NINE THOUSAND
THREE HUNDRED TWELVE DOLLARS AND 50/100 ($39,312.50) (the "Option Space Rent").
Section 3.01 of the Lease is, therefore, hereby amended to provide that the
annual fixed minimum rent specified therein, shall be increased by $39,312.50),
which amount shall be payable in equal monthly installments in advance on the
first day of each month commencing on the Option Space Commencement Date and
continuing during the Term of the Lease.
3. (a) The Option Percentage of the Option Space is .954%. Section 23.01 of the
Lease is, therefore, hereby amended effective as of the Option Space
Commencement Date, so that the Section 23.01 percentage set forth therein is
increased by .954%; and
<PAGE> 2
(b) The Option Square Footage of the Option Space is 4,250 square feet.
Section 23.03 of the Lease is, therefore, hereby amended so that effective as of
the Option Space Commencement Date, the Square Foot Area set forth therein is
increased by 4,250 square feet.
4. In order to reflect the addition of the Option Space, the plan annexed hereto
as Exhibit A is hereby added to Schedule B-1 of the Lease.
5. Any failure by either party hereto to insist upon the strict performance by
the other of any of the terms and provisions of Article 37 of the Lease in
connection with adding the Option Space to the Demised Premises shall not be
construed as a waiver of such terms and provisions in connection with any future
addition of space to the Demised Premises in accordance with said Article 37.
6. Except to the extent modified herein, all of the terms and conditions of the
Lease as heretofore in effect shall remain in full force and effect, and, as
modified hereby, the Lease is hereby ratified and confirmed in all respects.
7. Landlord shall be under no obligation to make any changes, improvements or
alterations to the premises as a result of entering into this Agreement.
8. This Agreement shall bind and inure to the benefit of the parties hereto, and
their respective heirs, legal representatives, successors, and except as
otherwise provided in the Lease, their assigns.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this Agreement as of the day and year first above written.
/s/ Melvyn Kaufman
-----------------------------------
Melvyn Kaufman
Landlord
GREY ADVERTISING, INC.
/s/ Robert L. Berenson
-----------------------------------
(Executive Vice) President
Tenant
<PAGE> 3
STATE OF NEW YORK )
COUNTY OF NEW YORK ) SS.:
On the 28th day of October, 1986, before me personally came Robert L.
Robert L. Berenson, to me known, who being by me duly sworn, did depose and say
that he resides at 7 Farmers Road, Kings Point, NY, that he is the Exec. Vice
President of Grey Advertising Inc., the corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation, and that he
signed his name thereto by like order.
/s/ Arnold Markowitz
---------------------------
NOTARY PUBLIC
ARNOLD MARKOWITZ. Notary Public
State of New York. No. 30.7720750
Qualified in Nassau County
Cert. Filed with N.Y. Co. Clk.
Commission Expires Feb. 28, 1989
STATE OF NEW YORK )
COUNTY OF NEW YORK ) SS.:
On the _____ day of ____________, 198__, before me personally came
_____________________________, to me known, who being by me duly sworn, did
depose and say that he resides at _____________________ that he is the
_____________________ of _____________________, the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that he signed his name thereto by like order.
---------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
COUNTY OF NEW YORK ) SS.:
On the 10th day of November, 1986, before me personally came Melvyn
Kaufman, to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged that he executed the same.
/s/ Diana Costanzo
---------------------------
NOTARY PUBLIC
DIANA COSTANZO
NOTARY PUBLIC, State of New York
No. 41-4821225
Qualified in Queens County
Commission Expires April 30, 1988
<PAGE> 4
EXHIBIT "A"
[GRAPHIC OMITTED]
ALL AREAS, CONDITIONS AND DIMENSIONS ARE APPROXIMATE.
<PAGE> 5
NUMBER 3 OF
4 EXECUTED
COUNTERPARTS
SIXTEENTH AMENDMENT OF LEASE
THIS SIXTEENTH AMENDMENT OF LEASE made this 28th day of April, 1989, by
SAGE REALTY CORPORATION, as Agent, having an office at 777 Third Avenue, New
York, New York 10017, (hereinafter referred to as the "Landlord) and GREY
ADVERTISING INC., a corporation having an office at 777 Third Avenue, New York,
New York 10017 (hereinafter referred to as the "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant, have entered into a certain Indenture of
Lease dated as of July 1, 1978, as amended (the Lease"), including a portion of
the 39th Floor (the "East 39th Floor Demised Premises") in the building known as
777 Third Avenue, New York, New York, 10017 and more particularly being the most
easterly of two rooms and approximately 11 feet wide and 25 feet in depth; and
WHEREAS, the parties desire to modify and amend the Lease by exchanging
the space demised, by substituting a portion of the ground floor, otherwise as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual convenants
and agreements herein contained and hereby acknowledged, the parties hereby
agree as follows:
1. The plan annexed to this Amendment of Lease as Exhibit "A-16" hereto, is
hereby added to the plan annexed to the Lease as Schedule "A-16" thereto and the
area hatched thereon, being a portion of the ground floor, is demised hereunder
(the "Substitute Demised Premises"), effective as of May 1, 1989, and from and
after such date whenever the term "Demised Premises" is referred to in the
Lease, the same shall be deemed to include the Substitute Demised Premises.
2. Tenant shall accept the Substitute Demised Premises in their present "as is"
condition and Landlord shall not be required to do any work or things to prepare
the space.
3. Tenant shall surrender possession of the East 39th floor Demised Premises on
or before April 30, 1989 free of Tenant's personal property and in broom clean
condition.
<PAGE> 6
4. The parties acknowledge that the purpose of this substitution is to establish
a Messenger Center so as to have all deliveries and pick-ups by outside
messengers be made to and from the Substitute Demised Premises. Both Landlord
and Tenant will cooperate to effectuate such a program as more fully set forth
in a Memorandum Agreement attached hereto as Exhibit "B".
5. Tenant represents and warrants to Landlord that no broker has been involved
in connection with this Sixteenth Amendment of Lease, except SAGE REALTY
CORPORATION, and hereby indemnifies Landlord against any claims made by any
broker as a result of any conversation, actions or other contacts between Tenant
and any such broker.
6. Except as specifically modified herein, all of the terms, provisions and
computations of the Lease are in full force and effect, and shall continue to
apply during the extended term.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Sixteenth
Amendment of Lease as of the day and year first above written.
SAGE REALTY CORPORATION, Agent
BY: /s/ [ILLEGIBLE]
----------------------------
LANDLORD
GREY ADVERTISING INC.
BY: /s/ Robert L. Berenson
----------------------------
TENANT
<PAGE> 7
EXHIBIT "A-16"
[GRAPHIC OMITTED]
<PAGE> 8
EXHIBIT "B"
April 17, 1989
Mr. Pat Grecco
Building Manager
Sage Realty
777 Third Avenue
New York, New York 10017
RE: Messenger Room
Dear Pat:
Following up on out meeting of this morning, please be advised that:
o We had originally planned to open the Loading Dock area Grey
Messenger Center on April 24, 1989. After reviewing the procedures
and policies that we will have to place into effect, as well as
relocating the necessary equipment and telephones lines, we have
delayed our opening until around May 1, l989.
o The Center will be managed by our existing Mailroom Supervisors in
the same professional manner that our present Mailroom is run. We,
like you, will not tolerate any horseplay.
o The signage for the glass door will be submitted to the building for
review.
o We have sent notices out to the major messenger companies doing
business with Grey informing them of the location of the new Center.
We will also be posting notices at each of the locations within Grey
where messengers now go.
o As stated before, Grey personnel delivering packages will use the
Freight Elevator except when it is broken, or it is after hours. In
that situation our Messenger Personnel would use the Passenger
Elevators on an interim basis.
Should you have any questions, please do not hesitate to let me know. Thanks,
Pat.
Sincerely yours,
/s/ Marie Illos
Marie Illos
Vice President
Director of Office Administration
<PAGE> 9
NUMBER 4 OF
4 EXECUTED
COUNTERPARTS
SIXTEENTH AMENDMENT OF LEASE
THIS SIXTEENTH AMENDMENT OF LEASE made this 28th day of April, 1989, by
SAGE REALTY CORPORATION, as Agent, having an office at 777 Third Avenue, New
York, New York 10017, (hereinafter referred to as the "Landlord") and GREY
ADVERTISING INC., a corporation having an office at 777 Third Avenue, New York,
New York 10017 (hereinafter referred to as the "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant, have entered into a certain Indenture of
Lease dated as of July 1, 1978, as amended (the "Lease"), including a portion of
the 39th Floor (the "East 39th Floor Demised Premises") in the building known as
777 Third Avenue, New York, New York, 10017 and more particularly being the most
easterly of two rooms and approximately 11 feet wide and 25 feet in depth; and
WHEREAS, the parties desire to modify and amend the Lease by exchanging
the space demised, by substituting a portion of the ground floor, otherwise as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual convenants
and agreements herein contained and hereby acknowledged, the parties hereby
agree as follows:
1. The plan annexed to this Amendment of Lease as Exhibit "A-16" hereto, is
hereby added to the plan annexed to the Lease as Schedule "A-16" thereto and the
area hatched thereon, being a portion of the ground floor, is demised hereunder
(the "Substitute Demised Premises"), effective as of May 1, 1989, and from and
after such date whenever the term "Demised Premises" is referred to in the
Lease, the same shall be deemed to include the Substitute Demised Premises.
2. Tenant shall accept the Substitute Demised Premises in their present "as is"
condition and Landlord shall not be required to do any work or things to prepare
the space.
3. Tenant shall surrender possession of the East 39th floor Demised Premises on
or before April 30, 1989 free of Tenant's personal property and in broom clean
condition.
<PAGE> 10
4. The parties acknowledge that the purpose of this substitution is to establish
a Messenger Center so as to have all deliveries and pick-ups by outside
messengers be made to and from the Substitute Demised Premises. Both Landlord
and Tenant will cooperate to effectuate such a program as more fully set forth
in a Memorandum Agreement attached hereto as Exhibit "B".
5. Tenant represents and warrants to Landlord that no broker has been involved
in connection with this Sixteenth Amendment of Lease, except SAGE REALTY
CORPORATION, and hereby indemnifies Landlord against any claims made by any
broker as a result of any conversation, actions or other contacts between Tenant
and any such broker.
6. Except as specifically modified herein, all of the terms, provisions and
computations of the Lease are in full force and effect, and shall continue to
apply during the extended term.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Sixteenth
Amendment of Lease as of the day and year first above written.
SAGE REALTY CORPORATION, Agent
BY: /s/ [ILLEGIBLE]
----------------------------
LANDLORD
GREY ADVERTISING INC.
BY: /s/ Robert L. Berenson
----------------------------
TENANT
<PAGE> 11
EXHIBIT "A-16"
[GRAPHIC OMITTED]
<PAGE> 12
EXHIBIT "B"
April 17, 1989
Mr. Pat Grecco
Building Manager
Sage Realty
777 Third Avenue
New York, New York 10017
RE: Messenger Room
Dear Pat:
Following up on out meeting of this morning, please be advised that:
o We had originally planned to open the Loading Dock area Grey
Messenger Center on April 24, 1989. After reviewing the procedures
and policies that we will have to place into effect, as well as
relocating the necessary equipment and telephones lines, we have
delayed our opening until around May 1, l989.
o The Center will be managed by our existing Mailroom Supervisors in
the same professional manner that our present Mailroom is run. We,
like you, will not tolerate any horseplay.
o The signage for the glass door will be submitted to the building for
review.
o We have sent notices out to the major messenger companies doing
business with Grey informing them of the location of the new Center.
We will also be posting notices at each of the locations within Grey
where messengers now go.
o As stated before, Grey personnel delivering packages will use the
Freight Elevator except when it is broken, or it is after hours. In
that situation our Messenger Personnel would use the Passenger
Elevators on an interim basis.
Should you have any questions, please do not hesitate to let me know. Thanks,
Pat.
Sincerely yours,
/s/ Marie Illos
Marie Illos
Vice President
Director of Office Administration
<PAGE> 13
SEVENTEENTH AMENDMENT OF LEASE
THIS SEVENTEENTH AMENDMENT OF LEASE (this "Seventeenth Amendment"),
dated as of the 3rd day of February, 1998, by and between SAGE REALTY
CORPORATION, a New York corporation, having its principal office at 777 Third
Avenue, New York, New York 10017, as Agent for the owner of 777 Third Avenue,
New York, New York 10017 ("Landlord"), and GREY ADVERTISING INC., a Delaware
corporation, having its principal office at 777 Third Avenue, New York, New York
10017 ("Tenant").
W I T N E S S E T H:
WHEREAS, Melvyn Kaufman and J. D. Weiler (predecessor-in-interest to
Landlord), as landlord, and Tenant, as tenant, entered into that certain Lease,
made as of July 1, 1978 (the "Original Lease"), as amended by (i) First
Amendment of Lease, made as of October 1, 1979, (ii) Second Amendment of Lease,
made as of November 1, 1979, (iii) Third Amendment of Lease, made as of April 1,
1980, (iv) Fourth Amendment of Lease, made as of April 21, 1980, (v) Fifth
Amendment of Lease, made as of August 9, 1980, (vi) Sixth Amendment of Lease,
made as of March 23, 1981, (vii) Seventh Amendment of Lease, made as of December
2, 1981, (viii) Eighth Amendment of Lease, made as of April 13, 1982, (ix) Ninth
Amendment of Lease, made as of January 31, 1983, (x) Letter, dated July 27,
1984, (xi) Tenth Amendment of Lease, made as of September 25, 1984, (xii)
Letter, dated November 14, 1984, (xiii) Letter, dated January 16, 1985, (xiv)
Eleventh Amendment of Lease, made as of January 31, 1985, (xv) Twelfth Amendment
of Lease, made as of July 25, 1985, (xvi) Thirteenth Amendment of Lease, made
February 20, 1986, (xvii) Fourteenth Amendment of Lease, made as of July 31,
1986, (xviii) Letter, dated August 14, 1986, (xix) Fifteenth Amendment of Lease,
made
<PAGE> 14
-2-
as of September 30, 1986, (xx) Sixteenth Amendment of Lease (the "Sixteenth
Amendment"), made as of April 28, 1989, and (xxi) Settlement Agreement and
Modification of Lease, dated as of October 16, 1996 (the Original Lease, as so
amended, collectively, the "Lease"), pursuant to which Landlord demised to
Tenant various spaces (together with certain additional spaces being added
pursuant to Section 6 of this Seventeenth Amendment, collectively, the "Leased
Premises") in the building known as 777 Third Avenue, New York, New York 10017
(the "Building") more fully described therein; and
WHEREAS, Landlord and Tenant entered into (i) that certain Agreement
for Rental of Basement Space, dated as of July 13, 1979, as amended by Letters,
dated April 14, 1980, January 7, 1982, February 1, 1984, October 4, 1994, and
June 26, 1995, respectively, (ii) that certain Agreement for Rental of Basement
Space, made as of October 30, 1985, as amended by Letter, dated October 4, 1994,
and (iii) that certain Basement Lease, dated November 21, 1991, as amended by
Letter, dated October 4, 1994 (collectively, the "Basement Space Agreements"),
pursuant to which Landlord leased to Tenant various spaces in the basement and
in the loading dock area of the Building more fully described therein (together
with certain additional basement space being added pursuant to Section 5 of this
Seventeenth Amendment, collectively, the "Basement Space"); and
WHEREAS, Landlord and Tenant desire to (i) extend the term of the
Lease, (ii) add the Basement Space to the Leased Premises, and (iii) make
certain changes to the Lease, all upon the terms and conditions herein set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and other
<PAGE> 15
-3-
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, Landlord and Tenant hereby agree as follows:
1. Definitions. All capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Lease.
2. Extension of Term. (a) The term of the Lease with respect to the
Leased Premises hereby is extended for a period of ten (10) years beyond the
present Term of the Lease (the "Further Extended Term"), commencing on January
1, 2000 (the "Further Extended Term Commencement Date"), and expiring on
December 31, 2009 (the "Further Extended Term Expiration Date"), as if such
latter date were the date set forth as the expiration date of the Lease, unless
sooner terminated or extended pursuant to the terms of the Lease, as modified by
this Seventeenth Amendment, or pursuant to law.
(b) All of the rents, additional rents, covenants, conditions
and agreements of the Lease shall continue in force and effect during the
Further Extended Term, as modified by this Seventeenth Amendment.
3. Leased Premises. Landlord and Tenant hereby confirm and
acknowledge that, as of the date hereof, the Leased Premises is comprised of (i)
the spaces listed below; (ii) certain of the "Additional Premises Spaces" (as
hereinafter defined) (as provided for in Section 6 of this Seventeenth
Amendment); and (iii) the Basement Space (as provided for in Section 5 of this
Seventeenth Amendment):
<PAGE> 16
-4-
<TABLE>
<CAPTION>
Rentable Square
Footage for Purposes
of the Lease, as Section 23.01
Space modified hereby Percentage
- ----- --------------- ----------
<S> <C> <C>
Entire 38th Floor 12,000 2.255%
Entire 37th Floor 12,000 2.255%
Entire 36th Floor 12,000 2.255%
Entire 34th Floor 12,000 2.255%
Entire 33rd Floor 12,000 2.255%
Entire 29th Floor 12,000 2.255%
Entire 28th Floor 12,000 2.255%
Entire 25th Floor 12,000 2.255%
Entire 23rd Floor 12,000 2.255%
Entire 22nd Floor 12,000 2.255%
Entire 20th Floor 12,000 2.255%
Part of the 19th Floor 6,428 1.208%
Entire 14th Floor 15,750 2.960%
Entire 12th Floor 22,350 4.201%
Entire 11th Floor 22,350 4.201%
Entire 10th Floor 22,350 4.201%
Entire 9th Floor 22,350 4.201%
Entire 8th Floor 22,350 4.201%
Entire 7th Floor 22,350 4.201%
Entire 6th Floor 22,350 4.201%
Entire 5th Floor 22,350 4.201%
Entire 4th Floor 22,350 4.201%
Entire 3rd Floor 22,350 4.201%
Entire 2nd Floor 22,350 4.201%
------ ------
Total: 400,028 75.18%
</TABLE>
4. Annual Fixed Minimum Rent and Additional Rent: (a) The fixed
minimum rent payable pursuant to Section 3.01 of the Lease (exclusive of the
annual fixed minimum rent payable for the Basement Space and subject to
adjustment as hereinafter provided to reflect increases in the amount of such
<PAGE> 17
-5-
annual fixed minimum rent resulting from the addition to the Leased Premises of
any Additional Premises Space) shall be at the annual rate of (i) ELEVEN MILLION
TWO HUNDRED FIFTY-TWO THOUSAND SEVEN HUNDRED NINETY AND 00/100 DOLLARS
($11,252,790.00) for the period commencing on January 1, 2000 and continuing
until December 31, 2004, and (ii) TWELVE MILLION FOUR HUNDRED FIFTY-TWO THOUSAND
EIGHT HUNDRED SEVENTY-FOUR AND 00/100 DOLLARS ($12,452,874.00) for the period
commencing on January 1, 2005 and continuing until the Further Extended Term
Expiration Date, which annual fixed minimum rent shall be payable in equal
monthly installments in advance on the first day of each month occurring during
such periods.
(b) The Section 23.01 Percentage of the Leased Premises
(exclusive of the Basement Space) specified in Section 23.01 of the Lease shall
be 75.18% during the Further Extended Term (subject to adjustment as hereinafter
provided to reflect increases in such percentage resulting from the addition to
the Leased Premises of any Additional Premises Space).
(c) During the Further Extended Term, (i) the Base Period for
Taxes shall be defined as the twelve (12) month period from January 1, 2000, to
December 31, 2000, (ii) the Base Period Tax Expense shall be defined as the
average of the real estate taxes and special assessments specified in Section
23.01.B of the Lease imposed for the fiscal years July 1, 1999 through June 30,
2000 and July 1, 2000 through June 30, 2001, (iii) the Lease Year Tax Period
shall be defined as each twelve (12) month period commencing July 1, any portion
or all of which shall occur during the Further Extended Term, and (iv)
notwithstanding anything to the contrary contained herein (except as is
expressly provided for in Section 6.A.(c)(ii)(B)(y) of this Seventeenth
Amendment), Tenant shall not be obligated to
<PAGE> 18
-6-
make any payment on account of Tenant's pro rata portion, if any, of the real
estate taxes and special assessments for any period prior to January 1, 2001.
(d) Section 23.01.B of the Lease hereby is amended to add the
following sentence after the end of the last sentence thereof: "In the event
that the Base Period Tax Expense shall include any charge with respect to any
so-called "Business Improvement District" or similar charge (a "Bid Charge"),
and if any such Bid Charge is subsequently discontinued or eliminated, then, as
of the date of such discontinuance or elimination, the Base Period Tax Expense
shall be recalculated as if the Bid Charge had not originally been included
therein. If after any such Bid Charge is discontinued or eliminated, and such
Bid Charge subsequently is restored or a new charge is substituted in lieu
thereof and specifically identified as such, then, as of the date of such
restoration or substitution, the Base Period Tax Expense shall be recalculated
as if any such Bid Charge or substitute therefor had originally been included in
the Base Period Tax Expense (but not in excess of the amount originally included
in the Base Period Tax Expense) and thereafter the amount of any such Bid Charge
or substitute therefor also shall be included in the Lease Year Tax Expense for
each Lease Tax Year Period."
(e) During the Further Extended Term, Section 23.03 of the
Lease shall be deleted in its entirety and the following shall be substituted in
lieu thereof for all of the Leased Premises (exclusive of the Basement Space):
"Section 23.03. In addition to the fixed minimum rent reserved in
Section 3.01, Tenant shall pay Landlord as additional rental, sums computed in
accordance with the following provisions:
<PAGE> 19
-7-
(a) The term "Wage Rate" shall mean the minimum regular hourly
wage rate for employees who have been employed for five (5) years plus all other
sums, calculated on an hourly basis, including, but not limited to, sums paid
for pensions, welfare funds, vacations, bonuses, social security, unemployment,
disability benefits, health, life, accident and other types of insurance
required to be paid to or for the benefit of such employees engaged in the
general maintenance and operation of office buildings of the type and in the
vicinity of the Building pursuant to a collective bargaining agreement
(designated as "Others" in said agreement) between Realty Advisory Board on
Labor Relations, Inc. (or any successor thereto) and Local 32B/32J of the
Building Service Employees International Union AFL-CIO (or any successor
thereto). As of the date of this Seventeenth Amendment, fringe benefits consist
of the categories set forth on Schedule 5 annexed hereto. Landlord agrees that,
throughout the Further Extended Term, fringe benefits shall continue to be
calculated on the basis of only the categories set forth on Schedule 5 unless
such categories shall be expanded or otherwise amended pursuant to the aforesaid
collective bargaining agreement or pursuant to law. The Wage Rate is intended to
be an index in the nature of a cost of living index and is not intended to
reflect the actual costs of wages or expenses for the Building. If any such
agreement is not entered into, or such parties or their successors shall cease
to bargain collectively, then the Wage Rate shall be the minimum regular hourly
wage rate and other sums as aforesaid payable to or for the benefit of such
employees engaged in the maintenance and operation of first class office
buildings of the same general type as the Building in the Manhattan area.
<PAGE> 20
-8-
(b) The term "Base Wage Rate" shall mean the Wage Rate in
effect for the calendar year 2000.
(c) The term "Wage Rate Factor" shall mean 400,028.
It is agreed that if at any time the Wage Rate shall be greater than
the Base Wage Rate, Tenant shall be required to pay to Landlord as additional
rent an "Operating Expense Adjustment" in an annual sum equal to the product
obtained by multiplying (i) the number of cents (including any fraction of a
cent taken to three decimal places) by which the Wage Rate exceeds the Base Wage
Rate by (ii) the Wage Rate Factor by (iii) 66.375%; provided, however, that,
notwithstanding anything to the contrary contained herein (except as is
expressly provided for in Section 6.A.(c)(ii)(B)(x) of this Seventeenth
Amendment), Tenant shall not be obligated to make any payment on account of any
such Operating Expense Adjustment for any period prior to January 1, 2001. Such
Operating Expense Adjustment shall be payable to Landlord together with annual
fixed minimum rent in equal monthly installments on the first day of each
calendar month commencing with the first month during the Further Extended Term
of this Lease in which the Wage Rate shall be greater than the Base Wage Rate
(provided, however, that, notwithstanding anything to the contrary contained
herein [except as is expressly provided for in Section 6.A.(c)(ii)(B)(x) of this
Seventeenth Amendment], Tenant shall not be obligated to make any payment on
account of any such Operating Expense Adjustment for any period prior to January
1, 2001) and, as billed by Landlord, continuing thereafter until a new
adjustment in the additional rent shall be established and become effective in
accordance with the provisions of this Section 23.03. In the event any change in
the Wage Rate shall be made retroactive, Tenant shall pay Landlord the amount of
any
<PAGE> 21
-9-
resulting retroactive adjustment in such additional rent within ten (10) days
after being billed therefor. If within ninety (90) days after such bill has been
rendered to Tenant, Tenant shall dispute the accuracy of any portion thereof and
if such dispute is not settled by agreement, Tenant may, within one hundred
twenty (120) days after the rendering of such bill, submit the dispute to
determination by arbitration pursuant to Article 26 hereof, provided, however,
Tenant shall continue to pay on account thereof the same monthly amount required
thereunder until such dispute is resolved. The failure of Tenant to dispute any
matter contained in the notice within the above mentioned ninety (90) day
period, or to refer any unresolved dispute to determination by such arbitration
within the above mentioned one hundred twenty (120) day period, shall be deemed
to constitute Tenant's approval of such statement. Payment of additional rent by
Tenant in accordance with such bill pending assertion of dispute, settlement or
agreement or determination by arbitration, as aforesaid, shall not be deemed to
constitute Tenant's approval thereof."
5. Addition of Basement Space to Leased Premises. (a) Effective as
of the date hereof, the Basement Space (including Basement Space B-16, which
Tenant hereby has elected to add to the Basement Space for all purposes of the
Lease, as modified by this Seventeenth Amendment) shall be added to and form a
part of the Leased Premises, and all relevant covenants, conditions and
agreements of the Lease, as modified by this Seventeenth Amendment, shall apply
thereto.
(b) Landlord and Tenant hereby confirm and acknowledge that,
as of the date hereof, the Basement Space is comprised of the following spaces:
<PAGE> 22
-10-
<TABLE>
<CAPTION>
Rentable Square Footage for
Purposes of the Lease, as
Space modified hereby
----- ---------------------------
<S> <C>
B-1,4,15 3,937
B-5 1,170
B-6 250
B-12 300
B-16 1,422
39-A 1,320
Loading Dock Area 221
------
Total: 8,620
</TABLE>
(c) (i) During the period from the date hereof and continuing
throughout the Term, the fixed minimum rent payable pursuant to Section 3.01 of
the Lease, as modified by this Seventeenth Amendment, solely for Basement Space
B-16 shall be at the annual rate of TWENTY-FIVE THOUSAND FIVE HUNDRED NINETY-SIX
AND 00/100 DOLLARS ($25,596.00), and which fixed minimum rent amount shall on
each anniversary of the date hereof commencing with the first such anniversary
be increased by an amount equal to three percent (3%) of the fixed minimum rent
payable for the preceding year, and shall be payable in equal monthly
installments in advance on the first day of each month occurring such period.
(ii) During the period from the date hereof and
continuing until December 31, 1999, the fixed minimum and additional rent
provisions of the Basement Space Agreements shall continue to apply with respect
to the Basement Space other than with respect to Basement Space B-16, which
shall be governed by clause (i) above, all of which are incorporated herein by
reference as if fully set forth herein at length. Except as hereinbefore set
forth in this Section 5, effective as of the date hereof, the Basement Space
Agreements shall terminate and be of no force and effect.
<PAGE> 23
-11-
(d) The fixed minimum rent payable pursuant to Section 3.01 of
the Lease, as amended by this Seventeenth Amendment, solely for the Basement
Space other than with respect to Basement Space B-16 which shall be governed by
Section 5(c)(i) of this Seventeenth Amendment shall be at the annual rate of ONE
HUNDRED TWENTY-NINE THOUSAND FIVE HUNDRED SIXTY-FOUR AND 00/100 DOLLARS
($129,564.00) for the period commencing on the Further Extended Term
Commencement Date and continuing until the day preceding the first anniversary
of the Further Extended Term
<PAGE> 24
-12-
Commencement Date, and which fixed minimum rent amount shall on each anniversary
of the Further Extended Term Commencement Date commencing with the first
anniversary thereof be increased by an amount equal to three percent (3%) of the
fixed minimum rent payable for the preceding year, and shall be payable in equal
monthly installments in advance on the first day of each month occurring during
such period.
(e) Tenant agrees to use and occupy the Basement Space for
storage only (other than the space in the loading dock area which may be used as
a messenger center in accordance with the provisions of paragraph 4 of the
Sixteenth Amendment and the space currently used for a photocopying center
incidental to Tenant's use and occupancy of the Leased Premises as in effect as
of the date hereof which may continue to be used for such purposes
[collectively, the "Additional Existing Basement Uses"]) or for such other
lawful uses as may be permitted from time to time, in each such case, incidental
to Tenant's then actual use and occupancy of the other Leased Premises (but not
for any use or occupancy which requires the Basement Space to be open to the
public or for any sale of goods or services to the public), in keeping with the
character of the Building and in conformity with all applicable laws, rules and
regulations of all governmental agencies or departments thereof having or
claiming jurisdiction and the certificate of occupancy for the Building. Tenant
acknowledges that Landlord makes no representations whatsoever regarding the
suitability of the Basement Space for uses other than storage and that Landlord
shall have no obligation to make any changes, improvements or alterations to the
Basement Space, nor to contribute any monies to Tenant as a result of entering
into this Seventeenth Amendment or otherwise. Tenant further acknowledges that
no services shall be provided to the Basement Space, except for the provision of
<PAGE> 25
-13-
electricity, and heating, ventilating and air-conditioning to those portions of
the Basement Space to which such services are currently provided, in keeping
with that currently provided to the Basement Space as of the date hereof;
provided, however, that the foregoing acknowledgment by Tenant shall not impair,
abrogate or otherwise diminish Landlord's other obligations as are expressly set
forth elsewhere in the Lease, as modified by this Seventeenth Amendment.
(f) So long as Tenant shall use and occupy the Basement Space
for storage only, Tenant shall not be required to pay any rent on account of the
Basement Space other than the fixed minimum rent payable pursuant to subsections
(c) and (d) above. In the event that Tenant shall use and occupy the Basement
Space other than for storage only (including for this purpose any such space
used for the Additional Existing Basement Uses or for any other lawful uses as
may be permitted under subsection (e) above), then, in addition to the fixed
minimum rent payable pursuant to subsections (c) and (d) above, Tenant shall pay
to Landlord Landlord's reasonable charge for all electricity required by Tenant
for the Basement Space, which shall be measured by separate meter installed by
Landlord for Tenant, at Tenant's sole cost and expense, if the same does not
exist and if feasible to meter, or, if not by meter, by a survey prepared by an
independent electrical engineer or utility consultant selected by Landlord
(which Landlord shall have the right to do from time to time) of the electrical
energy so required by Tenant for the Basement Space. In the event of any dispute
between Landlord and Tenant of the findings of any such survey or any other
matter relating to the reasonable charge so required to be paid by Tenant for
all such electricity, then the dispute shall be resolved by arbitration under
Section 26.02 of the Lease, as modified by this Seventeenth Amendment.
<PAGE> 26
-14-
Additionally, if Tenant shall use the Basement Space other than for storage only
(including for this purpose any such space used for the Additional Existing
Basement Uses or for any other lawful uses as may be permitted under subsection
(e) above), then in addition to paying the fixed minimum rent and Landlord's
reasonable charges for all electricity as provided for above, Tenant shall pay
to Landlord for all services, if any, provided by Landlord to Tenant, Landlord's
then standard charges therefor. Tenant shall pay to Landlord all such amounts
required to be paid under this subsection (f) within fifteen (15) days after
written demand therefor (together with reasonably detailed back-up and
invoices).
6. Additional Premises Spaces. A. (a) Annexed hereto is Schedule 1,
which is comprised of two parts - part 1-A and part 1-B. Part 1-A shows (i)
spaces leased to certain tenants in the Building as of the date hereof, whose
leases expire within the Term and the expiration dates thereof (such expiration
date as to each such space on Schedule 1, parts 1-A and 1-B, being referred to
herein as the "Additional Premises Space Lease Expiration Date"), and certain
spaces which as of the date hereof are vacant, and (ii) as to each such space,
the agreed upon rentable square footage thereof (such agreed upon rentable
square footage as to each space on Schedule 1, parts 1-A and 1-B, being herein
referred to as the "Additional Premises Space Square Footage")(1), the annual
fixed minimum rent payable
- ----------
(1) The aggregate rentable square footage of the Additional Premises Spaces
added to the Leased Premises by Tenant in accordance with Section 6 of
this Seventeenth Amendment shall not exceed 53,572 rentable square feet
and provided further that Tenant must take space as full floors except for
the balance of 19 and 27 and such space will be a combination of space
taken as of the date hereof (as reflected on Schedule 1, part 1-A) and
space taken, if at all, under option (as reflected on Schedule 1, part
1-B).
<PAGE> 27
-15-
with respect thereto as to those spaces shown on Schedule 1, part 1-A only (the
"Additional Premises Space Rent") and the Section 23.01 Percentage thereof (such
percentage as to each space on Schedule 1, parts 1-A and 1-B, being herein
referred to as the "Additional Premises Space Percentage"), all of which spaces
in the aggregate if and when added to the Leased Premises shall not exceed
53,572 rentable square feet (each such space shown on Schedule 1, parts 1-A and
1-B, being herein referred to individually, as an "Additional Premises Space"
and collectively, as the "Additional Premises Spaces"). Tenant, subject to the
conditions and limitations hereafter stipulated, hereby has elected to add each
Additional Premises Space set forth on Schedule 1, part 1-A, to the Leased
Premises for all purposes of the Lease, as modified by this Seventeenth
Amendment, to commence on the date following the present tenant's lease
expiration date or simultaneously herewith in the case of vacant space, subject
to the provisions of subsections (d) (requiring Landlord to perform certain
construction and improvement items as a pre-condition to the delivery of any
Additional Premises Space) and (g) (regarding the removal of any prior tenant or
occupant) below (the date of the addition of any Additional Premises Space as to
each such space shown on Schedule 1, parts 1-A and 1-B, being herein referred to
as the "Additional Premises Space Effective Date") for the then balance of the
Term.
(b) If possession of any Additional Premises Space shown on
Schedule 1, parts 1-A and 1-B, shall become available earlier than its stated
expiration date as set forth on Schedule 1, parts 1-A and 1-B, Landlord shall
give notice thereof to Tenant and the commencement date of leasing shall be
accelerated to such earlier date specified by Landlord to Tenant (but in no
event sooner than one hundred twenty (120) days from the date of Landlord's
notice) (the date to which the
<PAGE> 28
-16-
commencement date of the leasing shall be so accelerated as to each such space
being herein referred to as the "Additional Premises Space Lease Acceleration
Date"); provided, however, that Tenant shall not be obligated to take any
Additional Premises Space earlier than its stated expiration date as set forth
on Schedule 1 if such space shall become available as a result of Landlord's
having agreed with the applicable tenant or occupant to accept any early
surrender of the space (other than on account of the settlement of any action or
proceeding brought by Landlord seeking to recover possession of the space
following a default by any such tenant or occupant in its obligations to
Landlord). If the commencement date of leasing shall be so accelerated, Tenant
shall have the right, in addition to all rights of subletting granted Tenant in
the Lease, as modified by this Seventeenth Amendment, to sublet such space for a
term expiring on the expiration date set forth on Schedule 1, parts 1-A and 1-B,
for such space, subject, however, to furnishing Landlord the information
required by Section 11.03.C(1) of the Lease, as modified by this Seventeenth
Amendment, and to Landlord's prior written consent (which Landlord agrees shall
not be unreasonably withheld or delayed, subject to Section 11.03.E of the
Lease, as modified by this Seventeenth Amendment), but otherwise free of all
rights and options of Landlord under Article 11 of the Lease, as modified by
this Seventeenth Amendment. Landlord shall endeavor to give Tenant notice of the
commencement of any action or proceeding seeking to dispossess or to terminate
the lease of or otherwise regain possession of the space of any tenant listed on
Schedule 1, parts 1-A and 1-B, but Landlord shall have no liability to Tenant
hereunder and the rights and obligations of Tenant under the Lease, as modified
by this Seventeenth Amendment, shall not be affected in any manner whatsoever if
Landlord shall fail to do so.
<PAGE> 29
-17-
(c) Effective as of the Additional Premises Space Effective
Date, any Additional Premises Space shall be added to the Leased Premises and
the Lease, as modified by this Seventeenth Amendment, shall be deemed amended as
follows, from and after such date:
(i) The annual fixed minimum rent payable pursuant to
Article 3 thereof shall be increased by the Additional Premises Space Rent for
such Additional Premises Space; and
(ii) (A) To the extent the Additional Premises Space
Effective Date with respect to any Additional Premises Space occurs on or after
January 1, 2000, then the Section 23.01 Percentage shall be increased by the
Additional Premises Space Percentage for each such space; the Wage Rate Factor
referred to in Section 23.03 of the Lease as contained in Section 4(c) of this
Seventeenth Amendment shall be increased by the Additional Premises Space Square
Footage for each such space; and all of the other provisions of Article 23 of
the Lease, as modified by this Seventeenth Amendment, shall apply to each such
space; and
(B) To the extent the Additional Premises Space Effective Date
with respect to any Additional Premises Space occurs prior to January 1, 2000,
then the Section 23.01 Percentage shall be equal to the Additional Premises
Space Percentage for each such space; the Wage Rate Factor referred to in
Section 23.03 of the Lease as contained in Section 4(c) of this Seventeenth
Amendment shall be equal to the Additional Premises Space Square Footage for
each such space; and all of the other provisions of Article 23 of the Lease, as
modified by this Seventeenth Amendment, shall apply to each such space (except
<PAGE> 30
-18-
that (x) for such purposes the Base Wage Rate shall mean the Wage Rate in effect
for the calendar year in which the Additional Premises Space Effective Date
occurs for each such space, (y) the Base Period for Taxes shall mean the fiscal
year July 1 to June 30 which immediately precedes the Additional Premises Space
Effective Date for such space and (z) Tenant shall be entitled to a full period
of twelve (12) months for each Additional Premises Space, respectively, during
which Tenant shall not be obligated to make any payment on account of Tenant's
pro rata portion, if any, of real estate taxes and special assessments or for
any Operating Expense Adjustment); and
(iii) in the case of both clauses (ii) (A) and (B)
above, the amounts payable under Article 23 of the Lease, as modified by this
Seventeenth Amendment, shall commence to accrue and become payable from and
after the Additional Premises Space Effective Date as to each Additional
Premises Space, and Tenant shall have no responsibility for payment for any
period prior thereto.
(d) All Additional Premises Space shall be leased and
delivered to Tenant "as-is", in the condition in which the same shall be upon
removal by the preceding tenant or occupant, except as is expressly provided for
immediately below, and Tenant shall not be entitled to any abatement or
reduction of rent by reason of such condition. Except as is expressly provided
for immediately below, Landlord shall not be obligated to do any work or
alterations for Tenant therein in order to prepare same for Tenant's occupancy,
nor shall Landlord be obligated to contribute any monies to Tenant as a result
of entering into this Seventeenth Amendment or otherwise. Landlord shall assign
to Tenant, without recourse, all rights of Landlord against such preceding
tenant or occupant, if any, in respect of
<PAGE> 31
-19-
such condition of the Additional Premises Space.
Landlord shall, at Landlord's cost and expense, perform the
construction and improvement items set forth below with respect to each
Additional Premises Space (all of which shall be in compliance with all
applicable laws, ordinances, statutes, rules and regulations of all governmental
authorities having jurisdiction thereof, of a first-class quality and done in a
good and workmanlike manner and with due diligence but without any obligation
whatsoever for Landlord to incur any overtime charges and subject to any
Unavoidable Delay):
(i) Comply, or cause compliance, with all then
applicable laws, orders, ordinances and regulations of Federal, State, County
and Municipal authorities and any direction made pursuant to law by any public
officer or officers with respect to the Building or occupancy or use of each
such Additional Premises Space, including the Americans with Disabilities Act of
1990, as amended (as then in effect) (which shall include providing one
conforming unisex bathroom for every two (2) full floors of such Additional
Premises Space using Building standard materials limited to a toilet bowl and a
sink, and which bathroom shall not be located in the core of the Building) and
further including for this purpose the certificate of occupancy for the
Building. Tenant shall have the right to designate the location of any such
unisex bathroom provided that Tenant shall make such designation in a plan
provided to Landlord not less than forty-five (45) days prior to the applicable
Additional Premises Space Effective Date and the designated location is in
reasonable proximity to the Building's plumbing, sanitary and other necessary
utility and service systems (including for this purpose the distribution systems
servicing the Additional Premises Space by which such systems of the
<PAGE> 32
-20-
Building are distributed). If Tenant fails timely to provide such a plan to
Landlord, then Landlord shall have the right to designate the location of any
such unisex bathroom and shall provide written notice thereof to Tenant promptly
following Landlord's determination of the location of the same. The completion
of any such unisex bathroom shall not be a condition to the occurrence of the
Additional Premises Space Effective Date provided that (i) Landlord shall be
proceeding and shall continue with due diligence to complete the same and (ii)
the failure to complete any such unisex bathroom shall not interfere with
Tenant's buildout of any such Additional Premises Space other than in a de
minimus manner.
(ii) Fireproof any exposed structural steel.
(iii) Demolition and delivery of each such Additional
Premises Space in a vacant and broom clean condition. Tenant shall, at Tenant's
cost and expense, provide to Landlord a demolition plan for each Additional
Premises Space (x) not less than seventy-five (75) days prior to the applicable
Additional Premises Space Lease Expiration Date in the case of any space for
which such a date exists, or (y) within thirty (30) days after the date hereof
in the case of any space which is vacant as of the date hereof, or (z) not less
than seventy-five (75) days prior to the Additional Premises Space Lease
Acceleration Date in the case of any space which shall become available earlier
than its stated date, as the case may be, in each case together, if applicable,
with Tenant's written notice of any existing improvements which Tenant desires
shall remain in the applicable Additional Premises Space. If Tenant timely
delivers the foregoing notice to Landlord together with such demolition plan
reflecting Tenant's desire to retain any existing
<PAGE> 33
-21-
improvements in any Additional Premises Space, Landlord shall to the extent
reasonably practicable and so long as the same shall not impose any additional
material cost on Landlord (unless Tenant shall have agreed in writing in advance
to reimburse Landlord for any such additional cost within fifteen (15) days
after written demand therefor), or materially interfere with Landlord's
obligations under item (iv) below, comply with Tenant's written request.
(iv) Removal of all asbestos, if any, from each
Additional Premises Space in accordance with all then applicable legal
requirements, provided that any such Additional Premises Space shall be
delivered by Landlord to Tenant fully demolished, and to the extent that any
such Additional Premises Space shall be delivered by Landlord to Tenant in a
less than fully demolished condition, Landlord shall remove all asbestos, if
any, in accordance with all then applicable legal requirements from that portion
of the space which is delivered in a demolished condition or which asbestos is
otherwise encountered by Landlord during the performance of such demolition. In
addition, provided that any such Additional Premises Space shall be delivered by
Landlord to Tenant fully demolished, Landlord shall (x) deliver to Tenant a Form
ACP-5 certifying that such Additional Premises Space is free of asbestos and (y)
be deemed to have represented to Tenant that, as of the delivery date, there are
no hazardous substances ("Hazardous Substances") located in such Additional
Premises Spaces within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq. (as then in effect)
("CERCLA").
(v) Scraping, patching and leveling of all floors (i.e.,
commonly called "flash patching").
<PAGE> 34
-22-
(vi) Scraping and patching of all walls.
(vii) Provide to each Additional Premises Space the
mechanical, electrical, heating, ventilating and air-conditioning, elevator,
plumbing, sanitary, life safety and other utility and service systems of the
Building and the distribution systems servicing the Additional Premises Space by
which such systems of the Building are distributed from the base Building
risers, feeders, panelboards, etc. for provision of such services to each
Additional Premises Space in accordance with the Building standard, all as same
shall then exist (it being understood that Landlord shall have no obligation to
extend or redistribute any such systems and that Tenant shall be responsible for
any hook-ups required in connection therewith).
With respect to each Additional Premises Space, Tenant shall, at
Tenant's cost and expense, install submeters to measure Tenant's electricity
consumption in accordance with Section 13 of this Seventeenth Amendment.
(e) With respect to any initial Alterations to the Additional
Premises Spaces performed by Tenant to prepare the same for Tenant's occupancy,
Landlord shall not charge Tenant for the cost to review any plans and details of
Tenant's work or for any inspections, supervision or coordination that Landlord
deems necessary.
(f) Landlord represents that the dates shown on Schedule 1,
parts 1-A and 1-B, are accurate as of the date hereof, and that all other
information set forth on said Schedule is reasonably accurate.
<PAGE> 35
-23-
(g) Landlord shall have no liability for the failure or
refusal of the prior tenant or occupant to deliver possession of any Additional
Premises Space on the expiration of its lease therefor, and Tenant shall be
entitled as its sole and exclusive remedy against Landlord (waiving any right to
rescind which Tenant might otherwise have under Section 223-a of the New York
Real Property Law or any other law of like import now or hereafter in effect) to
complete abatement of rent and all other obligations of Tenant under the Lease,
as amended by this Seventeenth Amendment, for such Additional Premises Space by
reason of such failure or refusal until Landlord shall deliver possession
thereof to Tenant, and the term of the leasing of any Additional Premises Space
shall not be extended thereby. Landlord shall take reasonable steps to endeavor
promptly to obtain possession thereof, including the prompt commencement and
diligent prosecution of summary dispossess proceedings to enforce Landlord's
right to obtain possession thereof. If Landlord has not delivered possession
thereof within five (5) months of the date of expiration of the prior tenant's
and/or occupant's right thereto, Tenant may, as its sole and exclusive remedy
against Landlord, in addition to the abatement referred to above, cancel only
the leasing of such Additional Premises Space on thirty (30) days notice,
effective only if such possession remains undelivered at the expiration of such
thirty (30) days. Notwithstanding the foregoing, upon written notice to
Landlord, Tenant shall have the right, in its own name or in Landlord's name, at
Tenant's sole cost and expense, to commence and prosecute summary dispossess
proceedings against any such holdover tenant or occupant, and at Tenant's
request, Landlord shall assign to Tenant Landlord's right to obtain possession
of such Additional Premises Space and Tenant shall in good faith seek to obtain
possession as rapidly as is feasible. In such
<PAGE> 36
-24-
event, (i) Landlord shall cooperate with Tenant in all respects in Tenant's
proceedings brought to obtain possession of such Additional Premises Space and
Tenant shall keep Landlord advised with respect thereto, and the abatement of
rent for such Additional Premises Space shall cease upon the date which is sixty
(60) days after the date of commencement of Tenant's proceedings and (ii) if
Tenant proceeds in Landlord's name, then Tenant agrees and hereby does indemnify
Landlord against all third-party, out-of-pocket legal expenses which may be
incurred by Landlord as well as any damages and costs which may be finally
assessed against Landlord in or as a result of such proceedings. If Tenant has
not obtained possession thereof within (5) months of the date of the
commencement of Tenant's proceedings, as its sole and exclusive remedy against
Landlord, Tenant may cancel only the leasing of such Additional Premises Space
on thirty (30) days notice, effective only if such possession remains
undelivered at the expiration of such thirty (30) days, and in that event the
obligations of Tenant under this Lease in respect of such Additional Premises
Space only shall cease from and after the expiration of said thirty (30) days.
Nothing herein contained shall be deemed to be a waiver of any right Tenant may
have against a holdover tenant or occupant in such Additional Premises Space for
damages suffered by Tenant based upon the holding over or retention of
possession of such Additional Premises Space by such holdover tenant or
occupant. Landlord hereby covenants that it shall not, without Tenant's prior
written consent, (i) modify any existing lease with respect to any Additional
Premises Space in any manner that will affect the right of Tenant to occupy any
such Additional Premises Space as of the respective Additional Premises Space
Effective Date set forth on Schedule 1, parts 1-A and 1-B, or (ii) enter into
any new lease with respect to any such Additional Premises Space.
Notwithstanding anything to the contrary contained herein, to the
<PAGE> 37
-25-
extent that any existing tenant in any Additional Premises Space actually pays
to Landlord after the Additional Premises Space Effective Date applicable to
such space an amount in excess of the fixed minimum rent and all additional rent
payable under the Lease, as modified by this Seventeenth Amendment (computed at
the rate per square foot payable by Tenant thereunder), as a result of such
tenant continuing to occupy such space after the applicable Additional Premises
Space Effective Date, Tenant shall be entitled to a rent credit equal to the
amount of such excess payment less an amount equal to all of Landlord's legal
costs and expenses incurred by Landlord in attempting to secure possession of
such Additional Premises Space. Such credit shall be available to Tenant and
shall be applied against the next ensuing installments of fixed minimum rent
payable by Tenant following delivery of possession of such Additional Premises
Space to Tenant and, further, only if Tenant shall not have cancelled the
leasing of such Additional Premises Space as hereinbefore provided in this
Section (g).
(h) Promptly following the Additional Premises Space Effective
Date for each space, Landlord and Tenant agree to execute an agreement in form
and substance reasonably satisfactory to both Landlord and Tenant setting forth
the Additional Premises Space Effective Date with respect to each such
Additional Premises Space, provided the failure of the parties to do so shall
not affect their respective rights and obligations under the Lease, as modified
by this Seventeenth Amendment.
B. (a) Annexed hereto as part of Schedule 1 is part 1-B showing (i)
spaces leased to certain tenants in the Building as of the date hereof, whose
leases expire within the Term and the expiration dates thereof (and any options
or rights
<PAGE> 38
-26-
of first refusal or other similar rights which affect such spaces in effect as
of the date hereof [any such rights as they apply to each such space, being
herein referred to as the "Existing Option Rights"]), (ii) as to each such
space, the Additional Premises Space Square Footage and the Additional Premises
Space Percentage and (iii) the last date upon which Tenant may exercise its
option for each such space (the "Last Additional Premises Space Notice Date"),
as to which spaces Landlord, subject to the conditions and limitations hereafter
stipulated, hereby grants to Tenant the option to add to the Leased Premises for
all purposes of the Lease, as modified by this Seventeenth Amendment, to
commence on the date following the present tenant's lease expiration date,
subject to the provisions of Subsection 6.A(d) of this Seventeenth Amendment
(requiring Landlord to perform certain construction and improvement items as a
pre-condition to the delivery of any Additional Premises Space) and Section
6.A.(g) of this Seventeenth Amendment (regarding the removal of the prior tenant
or occupant) which are made applicable to the delivery of such space as
hereinafter provided in Section 6.B(c) of this Seventeenth Amendment, for the
then balance of the Term.
(b) Tenant shall have the right from time-to-time to exercise
the option to lease the spaces shown on part 1-B of Schedule 1 by giving to
Landlord written notice of such exercise on or before the Last Additional
Premises Space Notice Date for the applicable space as set forth on said
schedule. In the event that Tenant shall fail to exercise the option as to any
Additional Premises Spaces on or before the Last Additional Premises Space
Notice Date for the applicable space (time being of the essence as to any such
date), Landlord shall have the right to lease such space to any other proposed
tenant for any term whatsoever or otherwise deal with such space as Landlord
sees fit, and Tenant shall be deemed irrevocably to have waived
<PAGE> 39
-27-
its right to any such Additional Premises Space. In the event that Tenant has
timely notified Landlord in writing that it elects to add to the Leased Premises
any Additional Premises Space shown on part 1-B of Schedule 1 and provided same
becomes available for direct leasing (i.e., a lease of such space expires or is
terminated and such space is not leased again by virtue of any Existing Option
Rights but not on any other basis), and, further, provided the Lease, as
modified by this Seventeenth Amendment, shall be in full force and effect and
that Tenant shall not be in default under the Lease, as modified by this
Seventeenth Amendment, beyond any applicable notice or grace period with respect
to any monetary (i.e., the payment of fixed minimum rent or additional rent) or
material non-monetary covenants, as of the date of Tenant's exercise of the
option (which condition regarding default may be waived by Landlord in its sole
discretion), then effective as of the Additional Premises Space Effective Date,
such Additional Premises Space shall be added to the Leased Premises for all
purposes of the Lease, as modified by this Seventeenth Amendment, for the then
balance of the Term. In the event that any such space is leased to another
tenant by virtue of any Existing Option Rights, then such space shall be deemed
stricken from the Lease, as modified by this Seventeenth Amendment, and Tenant
shall have no further rights or obligations with respect to such space.
(c) If any such Additional Premises Space shall be added to
the Leased Premises, all of the terms and conditions of Section 6.A.(b) through
(i) inclusive of this Seventeenth Amendment shall apply thereto, except that,
notwithstanding anything to the contrary contained in Section 6.A.(c) (ii) of
this Seventeenth Amendment, the annual fixed rent payable by Tenant for each
such Additional Premises Space shall be equal to the fair market rental value
(the "Additional Premises Space
<PAGE> 40
-28-
FMRV") of each such Additional Premises Space prevailing as of the applicable
Additional Premises Space Effective Date, taking into consideration all relevant
factors, including the rental Landlord is then commanding or requiring or
accepting for comparable space in the Building (or, if there is then no
comparable space in the Building, taking into consideration the quality of
non-comparable space in the Building relative to such Additional Premises
Space), the provisions of Section 6.A.(c) of this Seventeenth Amendment, that
the space shall be in an "as is" condition (except as is otherwise expressly
provided for in Section 6.A.(d) of this Seventeenth Amendment), that there shall
be no interruption in the rental stream for lease-up time or construction time
(except as is otherwise expressly provided for in Section 6.A.(d) of this
Seventeenth Amendment) and that there shall be no rental concessions or other
lease procurement costs. The Additional Premises Space FMRV shall be determined
in accordance with the procedure specified in Section 8 of this Seventeenth
Amendment otherwise applicable to a determination of the fair market rental
value for the Leased Premises following Tenant's exercise of Tenant's extension
option therein contained.
(d) In the event that the annual fixed minimum rent for any
such Additional Premises Space shall not have been determined prior to the
applicable Additional Premises Space Effective Date, then the annual fixed
minimum rent for any such Additional Premises Space to be paid by Tenant to
Landlord until such determination has been made shall be the annual fixed
minimum rent for the Leased Premises (on a per square foot basis) immediately
preceding the applicable Additional Premises Space Effective Date, including all
escalations or additional rent payable under the Lease, as modified of this
Seventeenth Amendment. After such determination of the annual fixed minimum rent
for the applicable Additional Premises Space has been made,
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any excess rental for any such Additional Premises Space theretofore paid by
Tenant to Landlord, shall be credited by Landlord against the next ensuing
monthly installments of annual fixed minimum rent payable by Tenant to Landlord,
and any deficiency in annual fixed minimum rent due from Tenant to Landlord
attributable to such Additional Premises Space shall be paid promptly and in no
event later than twenty (20) days after such determination.
(e) Promptly after the annual fixed minimum rent for any such
Additional Premises Space shall have been determined, Landlord and Tenant shall
execute and deliver an agreement (i) incorporating any such Additional Premises
Space into the definition of the Leased Premises, (ii) setting forth the annual
fixed minimum rent for any such Additional Premises Space and (iii) effectuating
the provisions of Section 6.A.(c) of this Seventeenth Amendment. The failure of
the parties to enter into such an agreement shall not affect their respective
rights and obligations hereunder.
7. Additional Construction and Improvement Items. Landlord and
Tenant agree with respect to the additional construction and improvement items
set forth below as follows (all of which shall be in compliance with applicable
laws, ordinances, statutes, rules and regulations of all governmental
authorities having jurisdiction thereof, of a first-class quality and performed
with reasonable diligence in a good and workmanlike manner within the time
provided for below but without any obligation whatsoever for Landlord or Tenant
to incur any overtime charges and subject to any Unavoidable Delay):
(a) Elevators: (i) By the date which shall be thirty (36)
months after the date hereof (the "Elevator Work
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Completion Date"), Landlord shall, at Landlord's cost and expense, modify the
elevators and perform other work determined by Landlord in consultation with
Landlord's elevator consultant, Jenkins & Huntington, Inc., to upgrade the
elevator system servicing the Leased Premises (the "Elevator Work") (Landlord
reserving the right to select another first quality, independent consultant from
time to time); provided, however, that the Elevator Work Completion Date shall
be extended by the actual number of days that Landlord shall have been delayed
in completing the Elevator Work on account of any Unavoidable Delays, including,
without limitation, the failure of the vendor(s) of the initial components
necessary for Landlord to commence the performance of the Elevator Work to
manufacture, have components on hand, fabricate or to ship the same (Landlord
agreeing to take commercially reasonable measures to mitigate the effect of the
same), but in no event shall the Elevator Work Completion Date be extended
beyond the date which shall be ninety (90) weeks from the date of the initial
delivery to Landlord of such components (subject to any Unavoidable Delays).
Landlord shall advise Tenant as to the scope of the Elevator Work promptly
following the development thereof by Landlord and Landlord's elevator consultant
and thereafter shall advise Tenant of changes, if any, in the scope thereof.
Following the execution and delivery hereof by Landlord and Tenant, Landlord
agrees to proceed with reasonable diligence to complete the development of the
scope of the Elevator Work and promptly thereafter to order the components
necessary for Landlord to commence the performance of the Elevator Work.
Landlord shall commence the performance of the Elevator Work on or before the
date which shall be three (3) months after the date hereof (the "Elevator Work
Commencement Date"); provided, however, that the Elevator Work Commencement Date
shall be extended by the actual number of days that Landlord shall have been
delayed in commencing the performance of the
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Elevator Work on account of any Unavoidable Delays, including, without
limitation, the failure of the vendor(s) of such components to manufacture, have
the components on hand, to fabricate or to ship the same) (Landlord agreeing to
take commercially reasonable measures to mitigate the effect of the same).
Landlord and/or at Landlord's election, Landlord's elevator consultant, shall
make itself or themselves, as the case may be, reasonably available, to meet
with Tenant to review and consider any suggestions made by Tenant in connection
with the scope and performance of the Elevator Work, but Landlord shall not be
obligated to incorporate any such suggestions into the scope of the Elevator
Work or the performance thereof or to modify the same or to delay the
performance of the Elevator Work in any manner whatsoever to enable Landlord or
its elevator consultant to review and consider any such proposals. In the event
that the cost to Landlord of making its elevator consultant available to meet
with Tenant shall increase the cost of Landlord's contract with its elevator
consultant, then Tenant shall reimburse Landlord for such increased cost within
fifteen (15) days after written demand therefor (together with reasonably
detailed back-up and invoices). Landlord represents that Landlord's current
contract with Landlord's elevator consultant provides (and any future contract
with any other consultant will provide) for consultations with such consultant
as are customary in comparable contracts. The Elevator Work shall be performed
by Landlord on an elevator by elevator basis, one elevator at a time so that the
performance of the Elevator Work shall interfere as little as possible with
Tenant's operations. Tenant acknowledges that the performance of the Elevator
Work by Landlord shall result in a reduction of the elevator service provided by
Landlord during the period in which Landlord shall be performing the Elevator
Work. Tenant further acknowledges that, except as is otherwise expressly set
forth in Section 22.02 B of the Lease,
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as modified by this Seventeenth Amendment, other than as a result of any
reduction of elevator service attributable to or otherwise occurring in
connection with any elevator programming or other work which under good practice
requires taking one or more elevators out of service to perform the work as to
which such Section shall not apply, Tenant shall not be entitled to any
diminution or abatement of rent or other compensation, nor shall the Lease, as
amended by this Seventeenth Amendment, or any of the obligations of Tenant, be
affected or reduced by reason of any inconvenience or annoyance or reduction of
elevator service or otherwise arising from the performance of the Elevator Work;
provided, however, that Landlord and Tenant shall cooperate with each other so
as not to unreasonably interfere with Tenant's or any other tenant's occupancy
or Landlord's performance of the Elevator Work. Subject to the provisions of the
next succeeding sentence, Landlord shall spend not less than $1,000,000 (the
"Minimum Elevator Work Amount") on the Elevator Work (including for this purpose
all so-called "hard" and "soft" costs incurred in connection with performing the
Elevator Work). In the event that Landlord shall spend less than the Minimum
Elevator Work Amount, then an amount equal to fifty percent (50%) of the
difference between the Minimum Elevator Work Amount and the amount actually
spent shall be credited against the annual fixed minimum rent in equal monthly
installments spread over the then remaining portion of the Term which precedes
the Further Extended Term Expiration Date. Such credit shall commence on the
first day of the month following the month in which the Elevator Work shall have
been completed. Promptly following the completion of the Elevator Work, Landlord
shall furnish Tenant with a statement of the entire amount spent by Landlord to
complete the Elevator Work (together with reasonably detailed back-up and
invoices).
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(ii) By the date which shall be thirty (30) days after
the date hereof (the date on which Landlord first provides the "Elevator
Technician" (as hereinafter defined), the "Elevator Technician Start Date"),
Landlord shall provide an elevator technician (the "Elevator Technician"), who
shall be based at the Building, for overtime elevator service on Mondays through
Fridays, holidays excepted, during the hours of 6:00 p.m. and 8.00 p.m. During
the period commencing on the Elevator Technician Start Date and for the balance
of the Term, Tenant shall reimburse Landlord for the cost of the Elevator
Technician at the agreed upon amount of $40,000 per annum (which amount shall be
prorated for the period commencing on the Elevator Technician Start Date and
ending on December 31, 1997 or for any other period if appropriate), which
amount shall be payable by Tenant in equal monthly installments in advance
together with each payment of annual fixed minimum rent payable under Section
3.01 of the Lease, as amended by this Seventeenth Amendment; provided, however,
that Tenant shall have the right at any time during the Term, upon not less than
fifteen (15) days prior written notice to Landlord, to elect not to bear the
cost of the Elevator Technician, in which event Landlord shall not be obligated
to provide the same and, provided, further, that once discontinued, Tenant shall
have the one time right, upon not less than fifteen (15) days prior written
notice to Landlord, to elect to require Landlord to reinstate the Elevator
Technician for a period of not less than one (1) year and to bear the cost
therefor as aforesaid and thereafter, upon not less than fifteen (15) days prior
written notice to Landlord, to elect not to bear the cost of the Elevator
Technician, and if Tenant so elects, Landlord shall not be obligated to provide
the same, which final election by Tenant once made shall be irrevocable.
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(iii) Tenant shall have the right at any time during the
Term, but one (1) time only, to request that Landlord open a so-called
"cross-over floor" for elevator passenger purposes, which shall be exercisable
by delivering a written notice to Landlord specifying the floor from among
floors 2 through 14 then constituting the Leased Premises to serve as the
cross-over floor. Promptly following Tenant's designation of the cross-over
floor, Landlord, at Landlord's sole cost and expense, shall take the steps
necessary and shall perform all elevator-related work required to create the
cross-over floor (such as opening up shafts, if any, but not the cost of any
redecoration or restoration of the Leased Premises necessitated by the creation
of the cross-over floor such as the removal and relocation of any interior
bathroom, all of which shall be performed by Tenant, at Tenant's sole cost and
expense, in accordance with applicable provisions of the Lease, as modified by
this Seventeenth Amendment), the completion of which work by Landlord shall be
pursued with reasonable diligence. The last two (2) sentences of clause (i)
above shall apply to the creation of the cross-over floor. If Tenant shall elect
to have Landlord create a cross-over floor and for so long as the cross-over
floor shall exist, Tenant acknowledges and agrees that Landlord shall have the
right to designate three (3) of the six (6) elevators in the elevator bank
serving the tower portion of the Building (i.e., floors 15 and above) to service
Tenant and three (3) of the six (6) elevators to service other tenants and
occupants in the Building using that elevator bank; provided, however, that, if
Tenant adds to the Leased Premises an additional three (3) full floors or more
pursuant to Tenant's rights under Section 6. B of this Seventeenth Amendment,
then Landlord shall designate an additional elevator in the elevator bank
servicing the tower portion of the Building to service Tenant (which may in
Landlord's discretion be the freight elevator, in which event
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other tenants, and occupants shall only have the right to use same for freight
purposes during the period of such designation). If after Landlord shall have
created the cross-over floor, Tenant shall reduce its occupancy of the tower
portion of the Building (i.e., floors 15 and above) by eliminating from the
Leased Premises all or portions thereof pursuant to Tenant's right to eliminate
portions of the Leased Premises under Section 8 of this Seventeenth Amendment
(regarding Tenant's extension option) such that, in the reasonable opinion of
Landlord's then elevator consultant, a cross-over floor is no longer appropriate
taking into account the needs of all tenants (including Tenant) occupying such
tower portion, then, upon thirty (30) days' prior written notice to Tenant,
Landlord, at Landlord's sole cost and expense, shall have the right to eliminate
the cross-over floor and to perform all such work as shall be necessary to do
so; provided, however, that under no circumstances shall such right in Landlord
be triggered so long as Tenant exercises Tenant's extension option and extends
as to at least 138,428 rentable square feet of space in the tower portion of the
Building (i.e., floors 15 and above). The second sentence of this clause (iii)
shall apply to the elimination of the cross-over floor. If after Landlord shall
have designated an additional elevator in the elevator bank serving the tower
portion of the Building to service Tenant, Tenant shall reduce its occupancy of
the tower portion of the Building such that, in the reasonable opinion of
Landlord's then elevator consultant, such additional designated elevator is no
longer appropriate taking into account the needs of all tenants (including
Tenant) occupying such tower portion, then, upon thirty (30) days' prior written
notice to Tenant, Landlord shall have the right to eliminate such additional
designated elevator as servicing Tenant; provided, however, that under no
circumstances shall such right in Landlord be triggered so long as Tenant shall
occupy at least 174,428 rentable square
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feet of space in the tower portion of the Building (i.e., floors 15 and above).
In each of the cases where Landlord has a right to eliminate the cross-over
floor or to eliminate the designation of an additional elevator, Landlord shall
notify Tenant in writing within one hundred twenty (120) days after the
occurrence of the event which gives rise to Landlord's elimination right of
whether or not Landlord elects to eliminate the cross-over floor or the
designation of an additional elevator, as the case may be. If Landlord fails to
so notify Tenant within such 120-day period, then Tenant shall have the right at
any time prior to Landlord's giving such a written notice to Tenant to give
Landlord a reminder notice stating that Landlord's failure to respond and advise
Tenant whether or not Landlord elects to exercise the right in question within
ten (10) business days of receipt of Tenant's notice shall be and be deemed to
be Landlord's election not to exercise the right in question. If Landlord fails
to respond to Tenant's reminder notice within such 10-business day period, then
Landlord shall be deemed to have elected not to exercise the right in question,
which shall be conclusive and binding upon Landlord. Notwithstanding anything to
the contrary hereinbefore provided regarding Tenant's obligation to give such a
reminder notice to Landlord, Tenant shall not be required to give to Landlord
such a reminder notice if Tenant shall state in writing in Tenant's notice to
Landlord under Section 8 of this Seventeenth Amendment exercising Tenant's
extension option therein contained the existence of Landlord's right to
eliminate the cross-over floor or the designation of an additional elevator, as
the case may be. If Tenant shall state in writing the existence of such right in
Tenant's notice exercising Tenant's extension option, then Landlord shall notify
Tenant in writing within one hundred twenty (120) days after receipt thereof
whether or not Landlord elects to eliminate the cross-over floor or the
designation of an additional elevator, as
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the case may be, failing which Landlord shall be deemed to have elected not to
exercise the right in question, which shall be conclusive and binding upon
Landlord.
(b) Cooling Tower: Tenant shall have the right at any time
during the Term, but one (1) time only, to request that Landlord install on the
roof of the Building, in a location selected by Landlord, a new cooling tower
(which may be one (1) tower or two (2) tower(s), as designated by Tenant so long
as the towers shall be contiguous to each other if Tenant elects two (2) towers)
to provide condenser water for Tenant's supplemental air-conditioning installed
in the Leased Premises by Tenant, such tower to be of a design, as determined by
Landlord, and have a capacity of between 150 and 300 tons, as specified by
Tenant in the written notice to Landlord pursuant to which Tenant requests
Landlord to install the cooling tower(s)(the exact tonnage required by Tenant
being referred to herein as the "Specified Tonnage"). Promptly following
Tenant's notification to Landlord of its election to have Landlord install such
tower(s), Landlord shall cause the same to be designed if such tower has not
theretofore been designed. Landlord shall provide the Specified Tonnage of
condenser water to Tenant for its supplemental air-conditioning based on 2.5 GMP
per ton installed in the Leased Premises by Tenant. Tenant shall reimburse
Landlord within fifteen (15) days after written demand therefor (together with
reasonably detailed back-up and invoices) for the entire cost, including,
without limitation, the cost of any necessary architectural or engineering
services (mechanical, structural or otherwise), of permits and filing fees, of
relocating any existing water tower servicing the Building and of any
redecorating or restoration work required to be performed in the premises of any
other tenant or occupant of the Building if necessitated by the performance of
the Cooling Tower Work to
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contractors appearing on the "Approved Contractors List (as hereinafter defined)
and the need to run the risers and other equipment required to provide for the
distribution of condenser water from the cooling tower(s) through the Building
to the Leased Premises, plus a sum equal to ten (10%) percent of the entire cost
of such work (the "Cooling Tower Supervisory Charge") for Landlord's indirect
costs, field supervision and coordination in connection therewith (the "Initial
Installation Costs") to purchase and install the cooling tower and the risers
and other equipment or installation required to provide for the distribution of
condenser water from the cooling tower(s), including the design thereof
(collectively, the "Cooling Tower Work"); provided, however, that if Landlord
engages a general contractor to perform the Cooling Tower Work (as opposed to
Landlord engaging subcontractors to perform the Cooling Tower Work), then
Landlord shall not be entitled to receive the Cooling Tower Supervisory Charge
and, provided, further, that if Landlord engages a construction manager in
connection with the performance of the Cooling Tower Work, then the cost of such
construction manager shall be paid by Landlord out of the Cooling Tower
Supervisory Charge (it being the intention of the parties that Tenant shall pay
only one supervisory charge in connection with the Cooling Tower Work). Landlord
shall be entitled to render invoices from time to time during the performance of
the Cooling Tower Work, but not more often than one (1) time in any thirty (30)
day period. Landlord shall bid out the Cooling Tower Work and shall review all
bids with Tenant and Tenant's designated consultant. Landlord shall accept the
best bid from among the various bids submitted by each of the trade groups to
the extent that bids have been solicited from trades with more than one (1)
contractor appearing on the Approved Contractors List. If Landlord and Tenant
shall be unable to agree upon the best bid in any instance, then either Landlord
or Tenant shall have the right
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to submit the dispute to arbitration in accordance with the provisions of
Section 26.02 of the Lease, as modified by this Seventeenth Amendment. In
addition, Tenant shall compensate Landlord for Landlord's supplemental
air-conditioning water charges, which shall be based upon the increase in actual
operating expense for utilities and labor relating to such supplemental
air-conditioning use, including any maintenance or repair expense (the "Use and
Maintenance Costs"), which Use and Maintenance Costs shall be paid by Tenant
within fifteen (15) days after written demand therefor (together with reasonably
detailed back-up and invoices). Landlord and Tenant agree that the cost to
Tenant to design the cooling tower and the risers and other equipment or
installation shall not exceed $40,500, unless any modifications to or further
design work is required by reason of Tenant's specification of the required
tonnage and/or other modifications. Prior to actually performing any of the
Cooling Tower Work required to install the cooling tower(s) and the risers and
other equipment or installation, Landlord or Landlord's agent shall inform
Tenant of the other Initial Installation Costs and shall provide to Tenant plans
and specifications covering the Cooling Tower Work and a written statement from
the contractor(s) which shall perform the Cooling Tower Work containing a
reasonably detailed estimate of such other Initial Installation Costs. Landlord
shall perform the Cooling Tower Work only if Tenant's designated consultant
approves in writing of such plans and specifications and Tenant approves in
writing of such other Initial Installation Costs within twenty (20) days from
Landlord's delivery thereof. Tenant shall designate in a writing furnished to
Landlord Sail Van Nostrand or another reputable consultant for the purposes of
providing consulting services to Tenant in connection with such cooling
tower(s). Tenant shall not be required to pay any tap-in charges to Landlord to
connect to the cooling tower(s) and the
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condenser water system and Tenant, at its sole cost and expense, shall cause any
such tap-ins to be performed in accordance with the applicable provisions of the
Lease, as modified by this Seventeenth Amendment. Once Tenant has approved in
writing of such other Initial Installation Costs, Landlord shall not make any
changes or modifications to the Cooling Tower Work, without the prior written
consent of Tenant, other than de minimus changes and those determined by
Landlord in the exercise of its reasonable judgment to be necessary or required
by good construction practices, the circumstances resulting from so-called
concealed conditions, legal requirements (i.e., all applicable laws, ordinances,
statutes, rules and regulations of all authorities having jurisdiction thereof
[including, without limitation, all building codes and zoning regulations and
ordinances]) and insurance requirements (i.e., all requirements of any insurance
policy covering or applicable to the Building or use thereof, all requirements
of the issuer of any such policy, and all orders, rules, regulations,
recommendations and other requirements of the New York Board of Fire
Underwriters or the Insurance Service Office or any other body exercising the
same or similar functions and having jurisdiction of the Building); provided,
however, that Landlord shall notify Tenant in writing of any such changes or
modifications promptly following the occurrence of the same and, further, that,
with respect to any such change or modification that would materially affect the
Cooling Tower Work and/or the other Initial Installation Costs, Landlord shall
not make such change or modification unless Tenant approves in writing of the
same, such approval not to be unreasonably withheld by Tenant, and Tenant's
response in all events shall be required within five (5) business days following
Landlord's written notification to Tenant (failing which response Tenant shall
be deemed to have approved the same). Tenant shall reimburse Landlord within
fifteen (15) days after written demand
<PAGE> 53
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for the costs of any such changes or modifications (together with reasonably
detailed back-up and invoices). If the installation of the cooling tower, risers
and other equipment or installation shall result in an increase in real estate
taxes and special assessments applicable to the Land and Building and its
appurtenances or any imposition or charge in lieu thereof (the "Increased Tax
Costs") which shall be designated as such in the records of the Department of
Finance of the City of New York or any successor department (the "Department of
Finance"), Tenant shall be obligated to Landlord for such increase or imposition
or charge and shall pay the same to Landlord in the same manner that Tenant pays
for its pro-rata portion of taxes and assessments under Section 23.01.C of the
Lease, as amended by this Seventeenth Amendment, provided that the same is not
duplicative of any other charge or tax paid by Tenant under the Lease, as
modified by this Seventeenth Amendment.
(ii) If Landlord shall install such a cooling tower(s)
and if Tenant shall install supplemental air-conditioning in the Leased Premises
which uses condenser water supplied by such cooling tower(s), then within thirty
(30) days following the completion of the installation of such supplemental
air-conditioning by Tenant, Tenant shall, at Tenant's sole cost and expense,
commence to cause all of Tenant's air-conditioning equipment and installation
which penetrate the east wall of the Building to be removed (to the extent that
the same can be effectuated from inside to Leased Premises) and the redecoration
and restoration of those portions of the Leased Premises affected thereby in
accordance with the applicable provisions of the Lease, as modified by this
Seventeenth Amendment. Landlord, at Tenant's sole cost and expense, shall cause
the removal of such portion, if any, of such equipment and installation to the
extent the same must be effectuated from outside of the Building and the
<PAGE> 54
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exterior portion of the wall (including for this purpose repairing any damage to
the wall caused by such penetration and removal of such equipment and
installation) to be restored to its original condition (and the same shall be
completed using reasonable diligence). Thereafter, Tenant shall not be permitted
to penetrate such wall, except with the prior written consent of Landlord, which
Landlord may grant or withhold in its discretion; provided, however, that if
Tenant shall install supplemental air-conditioning in the Leased Premises on a
so-called "phased basis," then Tenant's obligation to remove any such
penetrations and to redecorate and restore shall be on a phased basis commencing
within thirty (30) days following the completion of any such phase (and the same
shall be completed using reasonable diligence). To the extent that Tenant's
supplemental air-conditioning is serviced by cooling tower(s) located on the
15th floor set-back of the Building (the "Fifteenth Floor Cooling Tower(s)") or
in the basement of the Building (the "Basement Cooling Tower(s)"), Tenant shall
be allowed to keep the Fifteenth Floor Cooling Tower(s) and the Basement Cooling
Tower(s) throughout the Term so long as the same continue to be used by Tenant
to service Tenant's supplemental air-conditioning and Tenant, at Tenant's sole
cost and expense, shall be obligated to maintain and repair the Fifteenth Floor
Cooling Tower(s) and the Basement Cooling Tower(s). If Landlord shall install
such a cooling tower(s), then at such time as the Fifteenth Floor Cooling
Tower(s) and/or the Basement Cooling Tower(s) shall no longer service Tenant's
supplemental air-conditioning, Tenant, at Tenant's sole cost and expense shall,
at the written request of Landlord, cause the same to be removed and shall
repair any damage caused thereby and shall restore the area of the set-back
and/or the basement, as the case may be, affected thereby to its original
condition (and the same shall be completed using reasonable diligence).
<PAGE> 55
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(iii) If during the Term, the cooling tower(s) shall
require any maintenance or repair, and if Tenant shall be unable to contact
Landlord's management representative in charge of the Building (or otherwise
contact Landlord) after having made a good faith attempt to do so, Landlord
agrees that Tenant shall have a right to use a contractor from the Approved
Contractors List to perform such maintenance or repair. Landlord represents that
the cooling tower(s) under ordinary circumstances will not require the presence
of a mechanic, engineer or other personnel on a twenty-four (24) hour or
over-time basis as a matter of course.
(iv) Landlord represents that, as of the date hereof, to
its actual knowledge, there is no asbestos located in the rooftop area available
for such cooling tower(s). In the event of a breach of the foregoing
representation, Landlord, at Landlord's sole cost and expense, shall remove all
asbestos from such areas in accordance with all then applicable legal
requirements.
(c) Repainting: Between the date hereof and June 30, 2005,
Tenant shall, at Tenant's cost and expense, repaint substantially the entire
Leased Premises.
(d) Tenant acknowledges that, except as is expressly set forth
in this Seventeenth Amendment, Landlord shall have no obligation to make any
changes, improvements or alterations to the Leased Premises or the Building, nor
to contribute any monies to Tenant or to grant any rental concessions or other
lease procurement costs as a result of entering into this Seventeenth Amendment
or otherwise; provided, however, that the foregoing shall not impair, abrogate
or
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otherwise diminish Landlord's other obligations as are expressly set forth
elsewhere in the Lease, as modified by this Seventeenth Amendment.
8. Tenant's Extension Option. (a) Provided the Lease, as modified by
this Seventeenth Amendment, shall then be in full force and effect and Tenant
shall not be in default thereunder beyond any applicable notice or grace period
with respect to any monetary (i.e., the payment of fixed minimum rent or
additional rent) or material non-monetary covenants of the Lease, as modified by
this Seventeenth Amendment, as of the date of Tenant's exercise of the extension
option described herein (which condition regarding default may be waived by
Landlord in its sole discretion), Tenant shall have the right, at its option, to
extend the Term for a single five (5) year period (the "New Extension Term"),
subject to the conditions and limitations hereafter stipulated. The New
Extension Term shall commence on the day immediately following the Further
Extended Term Expiration Date and shall expire on the day prior to the fifth
(5th) anniversary of such date unless the New Extension Term shall sooner end
pursuant to any of the covenants, conditions or agreements of the Lease, as
modified by this Seventeenth Amendment, or pursuant to law. Tenant shall give
Landlord written notice of Tenant's exercise of such option on or before the
date which is twenty-four (24) months prior to the Further Extended Term
Expiration Date (the date which is 24 months prior to the Further Extended Term
Expiration Date being hereinafter referred to as the "New Extension Exercise
Date"), the time of exercise being of the essence, and upon the giving of such
notice, the Lease, as modified by this Seventeenth Amendment, and the Term shall
be extended without execution or delivery of any other or further documents,
with the same force and effect as if the New Extension Term had originally been
included in the Term
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and the expiration date shall thereupon be deemed to be the last day of the New
Extension Term. Tenant shall have the right to extend for any or all of the
Leased Premises (inclusive of the Basement Space) existing as of the New
Extension Exercise Date (the "Premises Under Lease as of the New Extension
Exercise Date"), provided that (i) Tenant (including for this purpose any
affiliate of Tenant permitted to occupy all or any portion of the Leased
Premises in accordance with the terms of the Lease, as modified by this
Seventeenth Amendment, but exclusive of any Basement Space and any space under
sublease by or to Tenant) shall as of the New Extension Exercise Date physically
occupy not less than seventy-five percent (75%) of the aggregate of the Leased
Premises as to which the Lease, as modified by this Seventeenth Amendment, is
being extended and Tenant shall elect to extend the Term with respect to not
less than seventy-five percent (75%) of the aggregate of the Premises Under
Lease as of the New Extension Exercise Date (which for purposes of computing the
75% threshold shall not include any Basement Space in either the numerator or
the denominator) and (ii) Tenant may not elect to extend the Term with respect
to any space being under sublet by Tenant (unless Landlord, if Landlord shall be
entitled to, and actually shall be receiving as additional rent the "profit," if
any, on any such subletting as is provided for in Section 11.03.C(2)(b) of the
Lease, as modified by this Seventeenth Amendment), and (iii) such space as to
which Tenant elects to extend the Term, (x) shall include all space on floors 2
through 12 then comprising a part of the Premises Under Lease as of the New
Extension Exercise Date, (y) shall be full floors to the extent that any of the
Premises Under Lease as of the New Extension Exercise Date shall be a full floor
and all of the space on any floor that is part of the Premises Under Lease as of
the New Extension Exercise Date that is not a full floor and (z) all of the
spaces leased by Tenant (other than the Basement
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Space) shall be contiguous to one another to the extent they are contiguous in
the Premises Under Lease as of the New Extension Exercise Date (by way of
example, Tenant may not lease the 36th and 38th floors without also leasing the
37th floor). Tenant's written notice of its exercise of Tenant's option shall
specify the spaces as to which Tenant elects to extend the Term; provided,
however, that as long as Tenant shall have extended the Term and actually
ultimately extends as to not less than 245,850 rentable square feet of space
after giving effect to the option contained immediately below, Tenant shall have
the option to give Landlord a written notice of Tenant's election to reduce the
space as to which Tenant elects to extend the Term by eliminating either one (1)
or two (2) full floors (and with respect to full floors only) on or before the
date which is six (6) months after the New Extension Exercise Date, the time of
exercise being of the essence, and upon the giving of such notice, such space
shall, automatically and without more, be eliminated from the space covered by
the New Extension Term and without any other effect whatsoever on the exercise
by Tenant of its option to extend the Term, provided, however, further, that
such option to eliminate either one (1) or two (2) full floors shall be
expressly conditioned upon the remaining space as to which the Term shall have
been extended satisfying all of the conditions of clauses (ii) and (iii) of the
immediately preceding sentence. All of the covenants, conditions and agreements
of the Lease, as amended by this Seventeenth Amendment, shall continue in full
force and effect during the New Extension Term, including items of additional
rent and escalation which shall remain payable on the terms herein set forth,
except that (i) the annual fixed minimum rent specified in Section 3.01 of the
Lease, as modified by this Seventeenth Amendment, shall be as determined in
accordance with subsection (b) of this Section 8, (ii) Landlord shall have no
obligation to make any changes, improvements or
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alterations to the Leased Premises and/or the Building, nor to contribute any
monies to Tenant in connection therewith (provided, however, that the foregoing
shall not impair, abrogate or otherwise diminish Landlord's other obligations as
are expressly set forth elsewhere in the Lease, as modified by this Seventeenth
Amendment), nor to grant any rental concessions or other lease procurement costs
and (iii) Tenant shall have no further right to extend the Term pursuant to this
Section 8 or otherwise.
(b) The annual fixed minimum rent payable by Tenant for the
Leased Premises during the New Extension Term shall be the fair market rental
value of the Leased Premises prevailing six (6) months prior to the New
Extension Exercise Date, taking into consideration all relevant factors,
including, the rental which Landlord is then commanding or requiring or
accepting for comparable space in the Building (or, if there is then no
comparable space in the Building, taking into consideration the quality of
non-comparable space in the Building relative to the Leased Premises), that the
Leased Premises shall be in an "as is" condition, that there shall be no
interruption in the rental stream for lease-up time or construction time, and
that there shall be no rental concessions or other lease procurement costs (fair
market rental value taking into account the foregoing being hereinafter referred
to as the "FMRV"). The FMRV shall be determined in accordance with the following
procedure:
(i) Immediately after the exercise by Tenant of its option under
subsection (a) above, Landlord and Tenant shall endeavor in good faith to
agree upon the FMRV. In the event Landlord and Tenant cannot reach
agreement within sixty (60) business days after the
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date of Tenant's notice of exercise of its option, Landlord and Tenant
shall within thirty (30) days after the expiration of such 60-business day
period each select a reputable, qualified, independent licensed real
estate broker having an office in New York County and who has at least ten
(10) years prior experience in commercial real estate involving comparable
class A office buildings and who is familiar with the rentals then being
charged in the Building and in comparable class A office buildings
(respectively, "Landlord's Broker" and "Tenant's Broker") who shall confer
promptly after their selection by Landlord and Tenant and shall endeavor
in good faith to agree upon the FMRV. If either Landlord or Tenant shall
fail to select a broker, the party which shall have selected a broker (the
"Selecting Party") shall have the right to give a reminder notice to the
party which shall have failed to make a selection stating that, unless
such a broker shall be selected within fifteen (15) days thereafter, then
the broker which shall have been selected by the Selecting Party shall
determine the FMRV. If such failure shall continue for such 15-day period
following the giving of the reminder notice, then the broker who shall
have been selected by the Selecting Party shall determine the FMRV and
shall submit his determination in writing to Landlord and Tenant within
sixty (60) days thereafter, which shall be binding upon Landlord and
Tenant. If both Landlord and Tenant shall select a broker and if
Landlord's Broker and Tenant's Broker cannot reach agreement within sixty
(60) days after the date of their selection, then within fifteen (15) days
thereafter, Landlord's Broker and Tenant's Broker shall designate a
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third reputable, qualified independent person in the real estate business
(who may or may not be a broker) having an office in New York County and
who has at least ten (10) years prior experience in commercial real estate
involving comparable class A office buildings and who is familiar with the
rentals then being charged in the Building and in comparable class A
office buildings (the "Independent Real Estate Person"). Upon the failure
of Landlord's Broker and Tenant's Broker to agree upon the designation of
the Independent Real Estate Person under this clause (i) or under clause
(ii) below, then the Independent Real Estate Person shall be appointed by
a Justice of the Supreme Court of the State of New York, or by any other
court in New York County having jurisdiction and exercising functions
similar to those exercised by the Supreme Court of the State of New York
upon ten (10) days notice from either Landlord or Tenant. Concurrently
with the appointment of the Independent Real Estate Person, Landlord's
Broker and Tenant's Broker shall each submit a letter to the Independent
Real Estate Person, with a copy to Landlord and Tenant, setting forth such
broker's determination of the FMRV (respectively, "Landlord's Broker's
Letter" and "Tenant's Broker's Letter"). If either Landlord's Broker or
Tenant's Broker shall fail to submit a letter to the Independent Real
Estate Person, the party whose broker shall have so submitted a broker's
letter (the "Submitting Party") shall have the right to give a reminder
notice to the party whose broker shall have failed to submit its
determination stating that, unless such broker shall submit a letter to
the Independent Real Estate Person within fifteen (15) days thereafter
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setting forth its determination, then the FMRV shall not be determined by
the Independent Real Estate Person, and the FMRV shall be the FMRV set
forth in the letter submitted to the Independent Real Estate Person by the
Submitting Party's broker. If such failure shall continue for such 15-day
period following the giving of the reminder notice, then the FMRV shall be
the FMRV set forth in the letter submitted to the Independent Real Estate
Person by the Submitting Party's broker, which shall be binding upon
Landlord and Tenant.
(ii) In the event the FMRV set forth in Landlord's Broker's Letter
and Tenant's Broker's Letter shall differ by less than $2.50 per square
foot per annum on the average (rounded to the nearest one cent) for each
year during the New Extension Term, then the FMRV shall not be determined
by the Independent Real Estate Person, and the FMRV shall be the average
of the FMRV set forth in Landlord's Broker's Letter and Tenant's Broker's
Letter. In the event the FMRV set forth in Landlord's Broker's Letter and
Tenant's Broker's Letter shall differ by more than $2.49 on the average
(rounded to the nearest one cent) per square foot per annum for any year
during the New Extension Term, the Independent Real Estate Person shall
conduct such investigations and hearings as he may deem appropriate and
shall, within sixty (60) days after the date of his designation, choose
either the rental set forth in Landlord's Broker's Letter or Tenant's
Broker's Letter to be the FMRV during the New Extension Term and such
choice shall be binding upon Landlord and Tenant. If the Independent Real
Estate Person shall
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fail to make such a choice within such 60-day period, then either Landlord
or Tenant shall have the right to seek the appointment of a new
Independent Real Estate Person under clause (i) above to make the
determination, and if either Landlord or Tenant shall give the other party
written notice to such effect within five (5) business days after the
expiration of such 60-day period, then the new Independent Real Estate
Person shall make the determination of the FMRV in accordance with the
provisions of this clause (ii), and the foregoing provisions shall apply
to the new Independent Real Estate Person. Landlord and Tenant shall each
pay the fees and expenses of its respective broker. The fees and expenses
of any Independent Real Estate Person shall be shared equally by Landlord
and Tenant.
(c) In the event the New Extension Term shall commence prior
to determination of the annual fixed minimum rent for the New Extension Term as
herein provided, then the annual fixed minimum rent to be paid by Tenant to
Landlord until such determination has been made shall be the annual fixed
minimum rent for the twelve (12) month period immediately preceding the
commencement of the New Extension Term, including all additional rent or
escalations payable pursuant to Section 23 of the Lease or otherwise, as
modified by this Seventeenth Amendment, or as otherwise provided therein. After
such determination has been made for the annual fixed minimum rent during the
New Extension Term, any excess rental for the New Extension Term theretofore
paid by Tenant to Landlord shall be credited by Landlord against the next
ensuing monthly installment(s) of annual fixed minimum rent payable by Tenant to
Landlord, and any deficiency in annual fixed minimum rent due
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from Tenant to Landlord during the New Extension Term shall be paid promptly and
in no event later than twenty (20) days after such determination.
(d) Promptly after the annual fixed minimum rent has been
determined, Landlord and Tenant shall execute and deliver an agreement setting
forth the annual fixed minimum rent for the New Extension Term, as finally
determined, provided the failure of the parties to do so shall not affect their
respective rights and obligations under the Lease, as modified by this
Seventeenth Amendment.
(e) From and after the exercise by Tenant of its option to
extend the Term under subsection (a) above, any dispute regarding whether Tenant
is in default in performing any covenants of the Lease, as modified by this
Seventeenth Amendment, arising on or prior to January 1, 2009 shall, at
Landlord's election, be subject to arbitration under Section 26.02 of the Lease,
as modified by this Seventeenth Amendment. The foregoing provisions shall not
limit or otherwise affect Tenant's rights under Section 26.02 of the Lease, as
modified by this Seventeenth, to elect arbitration of any matter therein
specified as being subject to arbitration at Tenant's election.
9. Rooftop Antenna. (a) Landlord agrees that, subject to Tenant
complying with all applicable laws, ordinances, statutes, rules and regulations
of all governmental authorities having jurisdiction thereof, and further subject
to the conditions and limitations hereafter stipulated, Tenant may install and
thereafter maintain and operate a receiving and/or transmitting antenna or
antennae (hereinafter referred to as the "Antenna") of reasonable size along
with any reasonably required support structures on a portion of the rooftop of
the Building to
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be mutually agreed upon between Landlord and Tenant. Landlord shall use
commercially reasonable efforts to make available to Tenant such portion of the
rooftop of the Building as shall afford satisfactory "lines of sight" required
for antennae located on a rooftop and to accommodate Tenant's reasonable
requirements. The parties agree that Tenant's use of the rooftop of the Building
is a nonexclusive use, and Landlord may permit the use of any other portion of
the roof to any other person, firm or corporation for any use, including the
installation of other antennae and support equipment, Landlord agreeing to use
commercially reasonable efforts to ensure that all such antennae of all tenants
of the Building (including Tenant) do not interfere with or disturb the
reception or transmission of communication signals from each tenant's respective
antennae. Landlord shall include a similar provision permitting only a
nonexclusive use in the lease of each tenant to which Landlord shall grant
antenna rights.
(b) Tenant shall have reasonable access to the rooftop of the
Building upon prior reasonable request of Landlord for the purpose of
installing, servicing or repairing the Antenna and related equipment. In
addition, Tenant shall have reasonable access to the existing shaft ways of the
Building upon prior reasonable request of Landlord for the purpose of
installing, servicing or repairing the Antenna and related equipment, which
access shall be non-exclusive, and Landlord may permit the use of any portion of
the existing shaft ways to any other person, firm or corporation for any use,
Landlord agreeing to use commercially reasonable efforts to ensure that any such
use by all tenants of the Building (including Tenant) does not interfere with or
disturb the use by any other tenant or with the use of any tenant's antennae.
Landlord represents that, as of the date hereof, to its actual knowledge, there
is no asbestos
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located in the existing shaft ways or rooftop areas available for such antennae.
In the event of a breach of the foregoing representation, Landlord, at
Landlord's cost and expense, shall remove all asbestos from such areas in
accordance with all then applicable legal requirements.
(c) Tenant agrees promptly and faithfully to obey, observe and
comply with all applicable laws, ordinances, regulations, requirements and rules
of all duly constituted public authorities in any manner affecting or relating
to Tenant's use of the roof or shaft ways, including with respect to the
installation, repair, maintenance and operation of any support structures and
the Antenna and related equipment erected or installed by Tenant pursuant to the
provisions of this Section 9. Tenant shall secure all permits and licenses
required for the installation and operation of the Antenna and any support
structures and related equipment erected or installed by Tenant pursuant to the
provisions of this Section 9, as well as all permits and licenses required for
the use and operation of the Antenna, support structures or related equipment,
including, without limitation, any approval, license or permit required from the
Federal Communications Commission. In no event shall the maximum level of
microwave emissions from the Antenna exceed a reasonable amount of the total
microwave emissions allowable for the Building as determined by the governmental
authorities having jurisdiction thereof taking into account the needs of all
tenant's reasonable requirements (including those of Tenant).
(d) Tenant agrees that Tenant shall pay a reasonable sum for
all electrical service required for Tenant's use of the Antenna and related
equipment erected or installed by Tenant pursuant to the provisions of this
Section 9. Landlord's reasonable sum for all such electrical service shall be
measured
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by separate meter installed by Landlord for Tenant, at Tenant's sole cost and
expense, if requested by Tenant and, further, if the same does not exist and if
feasible, or, if not by meter, by a survey prepared by an independent electrical
engineer or utility consultant selected by Landlord (which Landlord shall have
the right to do from time to time) of the electrical energy so required by
Tenant for Tenant's use of the Antenna and related equipment so erected or
installed by Tenant. In the event of any dispute between Landlord and Tenant of
the findings of any such survey or any other matter relating to the reasonable
sum so required to be paid by Tenant for all such electrical service, then the
dispute shall be resolved by arbitration under Section 26.02 of the Lease, as
modified by this Seventeenth Amendment.
(e) Tenant promptly shall repair any and all damage and/or
make any replacements, as required, to the rooftop of the Building and to any
other part of the Building, including the shaft ways, caused by or resulting
from the installation, maintenance and repair, operation or removal of the
Antenna, support structures and related equipment erected or installed by Tenant
pursuant to the provisions of this Section 9.
(f) Tenant agrees that Landlord shall not be required to
provide any services whatsoever, except electricity, to the rooftop or the shaft
ways of the Building; provided, however, that the foregoing shall not impair,
abrogate or otherwise diminish Landlord's other obligations as are expressly set
forth elsewhere in the Lease, as modified by this Seventeenth Amendment.
(g) Tenant covenants and agrees that all installations made by
Tenant on the rooftop of the Building or in any other part of the Building
pursuant to the provisions of this Section 9 shall be at the sole risk of
Tenant, and neither
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Landlord nor Landlord's agents or employees shall be liable for any damage or
injury thereto caused in any manner (other than if caused by the willful
misconduct or the negligent act or omission of Landlord or Landlord's agents or
employees). Tenant further covenants and agrees that the Antenna, support
structures and any related equipment erected or installed by Tenant pursuant to
the provisions of this Section 9 shall be erected, installed, repaired,
maintained and operated by Tenant at the sole cost and expense of Tenant and
without charge, cost or expense to Landlord.
(h) Tenant shall, and does hereby, indemnify and save harmless
Landlord from and against: (i) any and all claims, actions, causes of action,
demands, damages, costs, expenses (including, without limitation, reasonable
attorneys' fees and expenses) and losses by reason of any liens, materials or
supplies furnished in connection with the fabrication, erection, installation,
maintenance and operation of the Antenna, support structures and any related
equipment installed by Tenant pursuant to the provisions of this Section 9; and
(ii) any and all claims, actions, causes of action, demands, damages, costs,
expenses (including, without limitation, reasonable attorneys' fees and
expenses) and losses arising out of accidents, damage, injury or loss to any and
all persons and property, or either, whomsoever or whatsoever resulting from or
arising in connection with the erection, installation, maintenance, operation
and repair of the Antenna, support structures and related equipment installed by
Tenant pursuant to the provisions of this Section 9 (other than if caused by the
willful misconduct or the negligent act or omission of Landlord or Landlord's
agents or employees).
(i) Tenant covenants and agrees that all work and
installations (including, without limitation, any
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electrical equipment) to be done and made by Tenant pursuant to the provisions
of this Section 9 shall be done and made in compliance with all applicable law,
ordinances, regulations, requirements and rules of all governmental authorities
having jurisdiction thereof, and, further, in accordance with the covenants,
conditions and agreements of the Lease, as modified by this Seventeenth
Amendment. All plans and specifications of Tenant's work and installations to be
done and made by Tenant pursuant to the provisions of this Section 9 shall be
subject to the prior approval of Landlord, which approval shall not be
unreasonably withheld or delayed by Landlord.
(j) The Antenna, support structures and related equipment and
the installation of any electrical lines and equipment in connection with the
installation and operation of the Antenna shall be subject to the prior written
consent of Landlord, which consent shall not be unreasonably withheld or delayed
by Landlord. The Antenna, support structures and related equipment and
electrical equipment shall be Tenant's personal property and shall be maintained
and kept in repair by Tenant. Upon the expiration of the Term or upon its
earlier termination in any manner, if Landlord so directs by written notice to
Tenant, Tenant shall promptly remove the Antenna, support structures and related
equipment and electrical equipment as designated in such notice, and Tenant
shall repair any damage to the rooftop of the Building or to any other portion
or portions of the Building, including the shaft ways, caused by or resulting
from said removal by Tenant. In addition, Tenant, at its option, shall have the
right to remove the Antenna, support structures and related equipment and
electrical equipment at or any time prior to the expiration of the Term, in
which event Tenant shall repair any damage to the rooftop of the Building or to
any other portion or portions of the Building, including the shaft ways,
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caused by or resulting from said removal by Tenant.
(k) Tenant covenants and agrees that neither the Antenna nor
any electrical equipment to be installed by Tenant shall interfere with or
adversely affect any equipment, installations, lines or machinery of the
Building, including, without limitation, in the shaft ways, or any other tenant
of the Building. Landlord shall include a similar prohibitory provision in the
lease of each tenant to which Landlord shall grant antenna rights. The
installation of the Antenna and electrical equipment shall be subject to
inspection and reasonable supervision by Landlord, but Landlord shall not charge
any supervisory fees, surcharges or any other charges in connection with the
initial installation, inspection or supervision of the Antenna and electrical
equipment.
(l) Landlord, at its sole cost and expense, upon thirty (30)
days prior written notice to Tenant, may relocate the Antenna, support
structures and related equipment to other areas of the Building and rooftop
thereof, which relocation shall be performed during hours other than Tenant's
regular business hours so as to minimize any disruption of Tenant's normal
business activities and shall not unreasonably impair Tenant's data transmission
and reception via such antenna. In addition, should Landlord so desire, Landlord
may substitute one antenna or more than one antenna on the roof of the Building
to serve Tenant and other tenants so long as such substitution shall not
diminish the quality of service available to Tenant or interfere with Tenant's
privacy or ability to receive and/or transmit proprietary information, in which
event Landlord shall have the right to remove Tenant's Antenna at Landlord's
expense. Should Landlord install its own antenna or antennae, and if Tenant
shall utilize the same, Tenant agrees to pay to Landlord
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an appropriate share of the costs of maintaining the same.
(m) To the extent Tenant is receiving non-proprietary
information, Tenant shall make its satellite resource available to other tenants
in the Building provided that (i) making its satellite resource available to
other tenants shall not diminish the quality of service provided by such
satellite resource, (ii) that such tenants reimburse Tenant for an allocable
share of the expense of the installation and operation of the Antenna and (iii)
Tenant in the exercise of its reasonable judgment is otherwise satisfied with
the terms and conditions by which it shall make such satellite resource
available.
10. Heating, Ventilating and Air-Conditioning. Sections
22.01.A(2)(a) and (b) of the Lease hereby are deleted in their entirety and the
following are substituted in lieu thereof: "Maintain and keep in good order and
repair the heating, ventilating and air-conditioning systems installed by
Landlord. The aforesaid systems shall be operated by Landlord as and when
required on business days and "after-hours" as herein provided for, and shall be
effective from 8:00 A.M. to 6:00 P.M. (and during such "after-hours"). Landlord
shall have no responsibility or liability for the ventilating conditions and/or
temperature of the Demised Premises during the hours or days Landlord is not
required (which requirement shall include for such purpose such "after-hours"
service) to furnish heat,
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ventilation or air-conditioning pursuant to this section. Landlord has informed
Tenant that the windows of the Demised Premises and the Building may be sealed,
and that the Demised Premises may become uninhabitable and the air therein may
become unbreathable during the hours or days when Landlord is not required
(which requirement shall include for such purpose such "after-hours" service)
pursuant to this section to furnish heat, ventilation or air-conditioning. Any
use or occupancy of the Demised Premises during the hours or days Landlord is
not so required (which requirement shall include for such purpose such
"after-hours" service) to furnish heat, ventilation or air-conditioning to the
Demised Premises shall be at the sole risk, responsibility and hazard of Tenant.
Such condition of the Demised Premises shall not constitute nor be deemed to be
a breach or a violation of this Lease or of any provision thereof, nor shall it
be deemed an eviction nor shall Tenant claim or be entitled to claim any
abatement of rent nor make any claim for any damages or compensation by reason
of such condition of the Demised Premises unless such condition persists during
such periods that Landlord is required (which requirement shall include for such
purpose such "after-hours" service) to furnish heat, ventilation or
air-conditioning to the Demised Premises, for which Landlord shall remain
obligated subject to all of the other terms and provisions of this Lease
applicable to Landlord's failure to perform its obligations. Tenant shall in any
event cause all of the windows in the Demised Premises to be kept closed and
shall cause and keep entirely unobstructed all of the vents, intakes, outlets
and grilles at all times and shall comply with and observe all reasonable
regulations and requirements prescribed by Landlord for the proper functioning
of the heating, ventilating and air-conditioning systems. The air-conditioning,
heating and ventilating equipment has been designed to give the results set
forth on Schedule 2 annexed hereto (the "HVAC Performance Criteria")."
11. Alterations. (a) Section 5.01 of the Lease hereby is amended as
follows:
(i) The following sentence shall be added after the
end of the first sentence: "Annexed hereto as Schedule
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F is a schedule showing the names of contractors currently approved by Landlord
to perform Alterations (said schedule, as the same may be amended from time to
time by Landlord pursuant to the provisions set forth below being referred to
herein as the "Grey Approved Contractors List)".(2)
(ii) The second sentence shall be deleted in its
entirety and the following sentences shall be substituted therefor: "Upon the
request from time to time by Tenant, Landlord shall furnish Tenant with the then
current Grey Approved Contractors List which shall contain not less than the
same number of contractors for each trade as currently appear on said Exhibit F.
Landlord agrees that Landlord shall not remove any contractor on the then Grey
Approved Contractor List without the prior written consent of Tenant unless for
cause, in which event Landlord shall provide to Tenant in writing the name of a
substitute contractor, which substitute contractor shall be reasonably
acceptable to Tenant. Tenant shall notify Landlord in writing of Tenant's
acceptance or rejection of any such substitute contractor within ten (10) days
from Landlord's designation thereof, failing which such substitute contractor
shall be deemed acceptable to Tenant. With respect to each trade on the then
current Grey Approved Contractors List as to which more than one (1) contractor
for a trade exists, Tenant may for cause propose in writing that Landlord
provide to Tenant the name of a contractor for addition thereto, which
additional contractor shall be reasonably acceptable to Tenant. Alternatively,
at Tenant's option, Tenant may for cause propose in writing to Landlord the name
of a
- ----------
(2) Schedule F is attached to this Seventeenth Amendment as Schedule 3.
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subcontractor for addition thereto in any of the "Permitted Trades" (as
hereinafter defined) (whether or not there is then only one (1) subcontractor
for any such trade), which subcontractor shall be reasonably acceptable to
Landlord. If Tenant shall propose that Landlord provide a contractor to Tenant,
Landlord shall provide the name of such a contractor to Tenant in writing within
ten (10) days from Landlord's receipt of Tenant's request. Tenant shall notify
Landlord in writing of Tenant's acceptance or rejection of any such additional
contractor within ten (10) days from Tenant's receipt of Landlord's designation
thereof, failing which such additional contractor shall be deemed acceptable to
Tenant. If Tenant shall propose a subcontractor to Landlord for a Permitted
Trade, Landlord shall notify Tenant of Landlord's acceptance or rejection of any
such additional subcontractor for a Permitted Trade proposed by Tenant within
ten (10) days from Landlord's receipt of Tenant's proposal thereof, failing
which such additional subcontractor for a Permitted Trade shall be deemed
acceptable to Landlord. In addition, (x) in connection with any specific
Alteration, Tenant may propose to Landlord that Tenant be permitted to use a
specific subcontractor in connection with such specific Alteration (but not any
general contractor) for any of the following trades (the "Permitted Trades"):
air balancing, carpet and flooring, ceiling tiles, ceramic tile, cooling tower
repair, controls, electronics and tape management, fire extinguishers supplier
and maintenance, fire protection consultants, glass work (but not any full
height glass partitioning or system or any exterior glass work), hollow metal
doors and bucks, insulation piping, interior design, purchasing of any locks and
material (but not the locksmith), metal and marble work, millwork/wood and
doors, painting, sheet metal work, terrazzo and window treatments (but only
window treatments interior to the Building standard window treatment), and
Landlord agrees not to unreasonably withhold its consent to any such
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Tenant proposed contractor and (y) Landlord's consent shall not be required for
any interior designer. Landlord shall notify Tenant of Landlord's acceptance or
rejection of any such Tenant proposed contractor within ten (10) days from
Landlord's receipt of Tenant's proposal of such contractor, failing which such
Tenant proposed contractor shall be deemed acceptable to Landlord. In no event
shall Landlord be obligated to accept New York Paint and Decorating ("New York
Paint") or Dorff Construction Co. Inc. ("Dorff") for any purposes, except in the
case of Dorff as hereinafter provided below; provided, however, that Tenant
shall have the right to continue to use New York Paint and Dorff for a period of
forty-five (45) days after the date hereof to finish up work in progress or work
previously committed for by Tenant but not for any new work. Except as provided
for above, Landlord shall have the right to approve or to reject any contractor
in its sole discretion. Any dispute between Landlord and Tenant regarding any
such substitute and/or additional contractor and/or Tenant proposed contractor
(including any subcontractor for any Permitted Trade or any dispute involving
cause) shall be resolved by arbitration in accordance with Section 26.02 of the
Lease, as modified by this Seventeenth Amendment. In each instance where either
Landlord or Tenant has a right to designate or propose a contractor or
subcontractor under this Section 26.02, if the same shall be rejected by the
party to which it shall be presented, then the party designating or proposing
the same shall be obligated to designate or propose a different contractor or
subcontractor, as the case may be, in accordance with the provisions of this
Section 5.01 within ten (10) days after receipt of written notice of such
rejection until a contractor or subcontractor shall have been selected as herein
provided. In the event that any dispute between Landlord and Tenant regarding
any such substitute and/or additional contractor and/or Tenant proposed
contractor (including any subcontractor for any Permitted Trade) shall be
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resolved by arbitration, then, if either Landlord or Tenant, as the case may be,
shall have been found to have acted unreasonably in rejecting a contractor or
subcontractor, then the contractor or subcontractor in question shall be
approved; and if Landlord or Tenant, as the case may be, shall have been found
to have acted reasonably in rejecting a contractor or subcontractor, then the
party which designated or proposed the contractor or subcontractor shall be
obligated to designate or propose another contractor or subcontractor as
aforesaid. As used in this Section 26.02, "cause" shall include, but not be
limited to, the cessation of any contractor to conduct business, whether as a
result of death, retirement, dissolution or going out of business of any
contractor. Notwithstanding anything hereinbefore provided to the contrary,
Tenant may use Dorff as a maintenance construction manager on the following
terms and conditions:
1. Tenant shall cause Dorff strictly to comply and adhere to
all of Landlord's standard Building-wide rules and regulations and to any
additional rules and regulations reasonably imposed by Landlord regarding
Dorff's performance of services for Tenant (including, without limitation,
Tenant advising Landlord's management representative in writing in advance of
each time Dorff has been engaged by Tenant as permitted hereunder).
2. Tenant shall ensure that, under no circumstances shall
Dorff act as a general contractor or subcontractor, and, when Dorff is acting as
a maintenance construction manager, Tenant shall be the contracting party with
all subcontractors (each of whom or which shall satisfy the requirements of this
Section 5.01).
3. Tenant shall ensure that, under no circumstances shall any
work as to which Dorff shall be acting as
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the maintenance construction manager either (x) have a cost in excess of $75,000
(the "Base Amount") or (y) require or involve any submission, filing and/or
other processing of any permits, consents, licenses, authorizations, approvals,
certificates or applications with respect to the construction, use and/or
occupancy of the Leased Premises with the building department and/or any other
department, agency, authority, bureau or instrumentality of any federal, state,
local or other governmental body or political subdivision thereof having
jurisdiction of the Building (or any portion thereof) or with the National Board
of Fire Underwriters (or any other body exercising similar functions) or any
issuer of any insurance policy maintained by Landlord covering or applicable to
the Building or any portion thereof; provided, however, that the foregoing
limitations set forth in clauses (x) and (y) shall not apply regardless of the
nature or scope of the work and Tenant may use Dorff as a construction manager
if Tenant shall also be using a general contractor on the Grey Approved
Contractors List to perform the actual work. With respect to clause (x), (A) the
costs of different aspects of what is essentially the same project will be
aggregated if the same is done in such a manner as to circumvent the
prohibitions contained in these provisions applicable to Tenant's use of Dorff
and (B) the Base Amount shall be adjusted on each anniversary of the date hereof
commencing on the first anniversary thereof to reflect decreases in purchasing
power of the dollar as evidenced by the change, if any, in the Consumer Price
Index (i.e., All Urban Consumers published by the Bureau of Labor Statistics of
the United States Department of Labor, New York - Northern, New Jersey - Long
Island, NY-NJ-CT area, all items (1982-1984=100) or any successor index thereto,
as appropriately adjusted) and, if the Consumer Price Index ceases to use
1982-1984 = 100 as the basis of calculation, the Consumer Price Index shall be
adjusted accordingly. Nothing contained in subparagraphs 2 and 5 is intended to
impair or limit
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the rights granted to Tenant under this subparagraph 3. Nothing contained in
subparagraphs 2 and 5 is intended to impair or limit the rights granted to
Tenant under this subparagraph 3.
4. Tenant agrees that, in the event that these provisions
applicable to Tenant's use of Dorff are breached, then, without limiting
Landlord's remedies under the Lease, as amended by this Seventeenth Amendment,
thereafter Landlord shall be under no obligation to accept Dorff or permit
Tenant to use Dorff for any purpose, and Tenant shall immediately discontinue
such use.
5. For avoidance of doubt, Landlord and Tenant acknowledge
that it is not the intention of the parties that Dorff perform services usually
performed by a general contractor and/or subcontractor.
6. Any dispute between Landlord and Tenant under these
provisions applicable to Tenant's right to continue to use Dorff shall be
resolved by arbitration in accordance with Section 26.02 of the Lease, as
modified by this Seventeenth Amendment."
(iii) The following sentences shall be added after the
end of the last sentence: "Landlord shall not be responsible for supervision
and/or coordination in respect to Tenant's activities pursuant to this Lease.
Landlord hereby designates Landlord's managing agent to perform such supervision
and coordination, which designation Landlord shall have the right to revoke by
written notice given to Tenant. Landlord and Landlord's managing agent shall not
charge any supervisory fees, surcharges or any other charges in connection with
any Alterations performed by Tenant, at Tenant's sole cost and expense, provided
that Tenant uses a general contractor or a subcontractor then designated by
Landlord as a general contractor
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and/or a subcontractor who has been approved to perform work in the Building
appearing on the Grey Approved Contractors List (including, without limitation,
any Landlord proposed substitute contractor and/or additional contractor added
thereto). With respect to any Alterations performed by contractors (whether by a
general contractor or a subcontractor) who have been approved to work in the
Building at the request of Tenant (whether a Tenant proposed contractor or a
contractor as to which Landlord may grant or withhold its approval in its
discretion) (as opposed to being designated approved contractors appearing on
the Grey Approved Contractors List, including, without limitation, a Landlord
proposed substitute contractor and/or additional contractor added thereto),
Tenant agrees to pay such managing agent, promptly upon being billed therefor, a
sum equal to ten (10%) percent of the cost of such work for indirect costs,
field supervision and coordination in connection therewith for work costing
$100,000 or less and a sum equal to five (5%) percent of the cost of such work
for indirect costs, field supervision and coordination in connection therewith
for work costing in excess of $100,000. Tenant agrees to keep records of any
such Alterations and of the cost thereof for a period of not less than six (6)
years from the date of the completion of any such Alterations. Tenant agrees to
furnish to Landlord's managing agent copies of such records certified as correct
by Tenant within forty-five (45) days after Landlord's managing agent's request
therefor."
(b) The following sentences shall be added to the end of
Section 5.02: "Landlord, upon the request of Tenant, without any expense to
Landlord, shall cooperate with Tenant and its duly licensed architects and
designers in obtaining any permits, approvals and certificates required to be
obtained by Tenant in connection with any Alteration permitted under this Lease,
and shall within a reasonable period of time
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following the presentation to Landlord execute any applications or documents
presented to Landlord in a complete and proper form which are required to be
executed by Landlord for such purpose. Landlord shall execute all building
department applications presented to Landlord in a complete and proper form
which are required to be executed by Landlord for any Alteration permitted under
this Lease within ten (10) business days after presentation for Landlord's
signature. Landlord, at its sole cost and expense, shall have the right to
consult with its outside consultants in connection with any such permits,
approvals, certificates or building department applications so presented to
Landlord. Tenant shall advise Landlord in writing in connection with any
Alteration involving any submission, filing and/or other processing of any such
permits, approvals, certificates or building department applications prior to
submitting, filing and/or other processing of any such permits, approvals,
certificates or building department applications whether or not Tenant will use
the services of an expeditor. Landlord shall have the right to require Tenant to
use an expeditor if Tenant does not intend to do so if Landlord in its
reasonable judgment determines that is appropriate to do so in connection with
the Alteration in question. If Landlord shall fail to advise Tenant in writing
that Landlord has so determined that it is appropriate to use an expeditor
within ten (10) days after Landlord's receipt of Tenant's written advice that
Tenant does not intend to use an expeditor in connection with an Alteration,
then Landlord shall be deemed to have accepted Tenant's decision not to use an
expeditor. Any dispute between Landlord and Tenant regarding Landlord's
reasonableness in determining that an expeditor is appropriate shall be resolved
by arbitration in accordance with Section 26.02 of the Lease, as modified by
this Seventeenth Amendment. Tenant agrees to employ such expeditor as Landlord
may from time to time designate in connection with submitting, filing and/or
other processing of any such permits, approvals,
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certificates or building department applications in connection with which Tenant
intends or is reasonably required by Landlord to use an expeditor as
hereinbefore provided, provided that the quality of such expeditor's services
and the charges therefor are reasonably comparable to that of other expeditors.
Tenant shall not employ any other expeditor without Landlord's prior written
consent unless for cause, notice of which shall have been sent to Landlord in
writing. Before employing any other expeditor following the giving by Tenant to
Landlord of such a notice of Tenant's desire to employ another expeditor for
cause, Landlord and Tenant shall confer and Landlord shall have a reasonable
opportunity to remedy Tenant's prior grievances. Notwithstanding anything to the
contrary contained in this Lease, (i) Tenant shall have no right to seek or
obtain an amendment to the certificate of occupancy or an amended certificate of
occupancy for the Building or any portion thereof without the prior consent of
Landlord, which may be granted or withheld in Landlord's discretion, nor to
require Landlord to seek or obtain any such amendment and (ii) Landlord shall
not be required to execute any applications or documents in connection with any
Alteration which would necessitate an amendment to the certificate of occupancy
or an amended certificate of occupancy for the Building or any portion thereof,
nor shall Tenant file any such application or document without the prior written
consent of Landlord, which may be granted or withheld in Landlord's discretion."
12. Building Name; Signs. (a) Section 16.01 of the Lease
hereby is amended by adding the following sentence after the last sentence
thereof: "Tenant shall have the right to designate the name of the Building (but
not to change the post office address of the Building), subject to Tenant
complying with all applicable ordinances, orders, rules, regulations,
requirements or directions of any governmental body or officer or officers
having jurisdiction and provided that (i) Tenant shall give Landlord not less
than thirty (30) days' prior written
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notice of any proposed name of the Building or change in the designation
thereof, (ii) at the time of the designation and at all times while such
designation shall be in effect, Tenant (including for this purpose any affiliate
of Tenant permitted to occupy all or any portion of the Leased Premises in
accordance with the terms of the Lease, as modified by this Seventeenth
Amendment) shall actually occupy not less than 245,850 rentable square feet in
the Building (exclusive of any Basement Space and any space under sublease by or
to Tenant), (iii) subject to the provisions of clause (iv) below, the name
"Grey" shall appear in the designation (and the designation shall not contain
any other name which would adversely affect the reputation of the Building),
(iv) if the name "Grey" shall not appear in the designation or if any person,
firm or corporation shall succeed to Tenant's interest in this Lease as provided
for in Article 11 of this Lease, then the name of the Building (including any
change in designation thereof) shall not contain any other name which would
adversely affect the reputation of the Building, and (v) if any such designation
shall result in an increase in real estate taxes and special assessments
applicable to the Land and Building and its appurtenances or any imposition or
charge in lieu thereof which shall be designated as such in the records of the
Department of Finance, Tenant shall be obligated to Landlord for the full amount
of such increase or imposition or charge and shall pay the same to Landlord in
the same manner that Tenant pays for its pro rata portion of taxes and
assessments under Section 23.01.C of this Lease, provided that the same is not
duplicative of any other charge or cost paid by Tenant under this Lease."
(b) Section 16.02 of the Lease hereby is amended by
adding the following sentences before the first sentence thereof: "Subject to
the provisions of Section 16.01 of this Lease, Tenant shall have the right to
exhibit prominent
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lobby and exterior signs, which shall be designed by Roy Gee Associates or by
another architect designated for such purposes by Landlord and which design
shall be subject to Landlord's and Tenant's reasonable approval, which shall not
be unreasonably withheld or delayed, subject to the signage complying with all
applicable ordinances, orders, rules, regulations, requirements or directions of
any governmental body or officer or officers having jurisdiction. Any such signs
shall be installed, repaired, replaced and maintained for Tenant by Landlord.
The cost and expense of designing, installing, repairing, replacing and
maintaining any such signage shall be the sole responsibility and obligation of
Tenant, which shall be paid by Tenant within fifteen (15) days following
Landlord's demand therefor (together with reasonably detailed back-up and
invoices)."
13. Electricity. (a) With respect to each Additional Premises Space
and with respect to all of the Leased Premises (exclusive of the Basement Space)
during the Further Extended Term (or earlier at any time following the date
hereof at Tenant's election with respect to all or any portions of the Leased
Premises (exclusive of the Basement Space) provided that Tenant gives to
Landlord prior written notice of its intention to elect having its electric
consumption measured by submeters and the installation thereof as hereafter
provided), the following provisions shall apply with respect to Tenant's use of
electricity with respect to those portions of the Leased Premises intended to be
covered thereby in lieu of the provisions of Section 24.01 of the Lease, Section
24.03 of the Lease, the first paragraph of Section 24.05 of the Lease, the
second paragraph of Section 24.05 of the Lease, Section 24.08 of the Lease and
Section 24.10 of the Lease and, additionally, there shall be no reduction in the
fixed minimum rent payable under the Lease as is otherwise provided for in
Section 24.04.A of the Lease (except to the extent that Tenant shall elect to
have its electric
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consumption measured by submeters prior to the Commencement of the Further
Extended Term and then only for such period prior thereto): Tenant's electricity
consumption and demand in the Leased Premises (exclusive of the Basement Space)
shall be measured by submeters (including for this purpose any totalizing meter)
installed by Landlord, at Tenant's cost and expense.
At any time during the Term, Landlord may obtain electricity service
from a company or companies other than the Utility Company (such other company
or companies being herein referred to as an "Alternate Utility"; and the
provider of such electricity service from time to time being herein sometimes
referred to as the "Providing Utility"). Whether Landlord obtains electricity
from the Utility Company or from the Alternate Utility, Tenant shall purchase
electricity from Landlord or Landlord's designated agent at the same terms and
rates for electricity that Landlord is charged by the Providing Utility
regardless of whether Landlord is obtaining such electricity for the Building
alone or in conjunction with other buildings owned by Landlord or others
(including, without limitation, all charges regardless of how denominated for
generation, transportation, distribution or otherwise, including for this
purpose any such charges imposed by the Providing Utility for using all or any
portion of its facilities; provided, however, that Tenant shall receive the
benefits of any discounts Landlord actually receives for the Building from any
such Providing Utility [whether due to aggregation or otherwise]), plus six
percent (6%) to reimburse Landlord for administrative services and line loss in
connection with supplying and billing such electricity (collectively, the
"Administrative Services Charges"), but in no event shall the amount payable by
Tenant per Kilowatt and Kilowatt Hour be more than what Landlord pays to supply
same at the service classification that applies to the entire Building, plus the
Administrative Service Charges. All
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such sums shall be paid by Tenant to Landlord as additional rent hereunder. If
more than one meter measures the electricity consumption and demand of Tenant in
the Building, the services rendered through all the meters shall be accumulated
through a totalizing meter and billed on a coincident demand basis for the
applicable billing period, aggregated and billed in accordance with the above
provisions. Landlord may at any time (but not more frequently than monthly
unless Landlord shall be receiving bills more frequently) render bills for
Tenant's consumption and demand and Tenant shall pay the same within ten (10)
days following the date the same are rendered.
Landlord shall have the right at any time and from time to time
during the Term to discontinue obtaining electricity from the Providing Utility
and to obtain electricity from any other utility provider (which may be either
the Utility Company or an Alternate Utility), in which event Tenant's cost for
electricity shall not exceed Tenant's cost had Landlord not switched companies
(unless Landlord shall have switched companies because of Landlord's good faith
dissatisfaction with the service being provided by a utility provider, in which
event the foregoing limitation shall not apply).
Notwithstanding anything to the contrary hereinbefore provided: (i)
under no circumstances shall Landlord incur any loss in connection with Tenant's
use and consumption of electricity covered by this Section 13 (including for
this purpose for administrative services), it being the intention of Landlord
and Tenant that there shall not be a deficiency between what Landlord pays to
purchase electricity and what Landlord charges Tenant for purchasing such
electricity from Landlord or Landlord's designated agent. The Administrative
Services Charges shall be treated separately and is intended to reimburse
Landlord solely for administrative services in connection with supplying
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and billing such electricity. In furtherance of the foregoing, Tenant agrees to
pay to Landlord in addition to the foregoing amounts, within fifteen (15) days
following demand therefor made from time-to-time (together with reasonably
detailed back-up and an invoice), an amount equal to that amount reasonably
calculated by Landlord as shall be necessary to prevent Landlord from suffering
such a loss; and (ii) under no circumstances shall Tenant pay more per Kilowatt
and Kilowatt Hour for Tenant's use and consumption of electricity covered by
this Section 13 than shall be paid by any other tenant in the Building which
obtains electric energy on a sub-metered basis.
(b) Effective as of the date hereof, the words "January
1, 1999" appearing in the sixth line of Section 24.04.B are deleted and the
words "January 1, 2014" are substituted in lieu thereof.
(c) Effective as of the date hereof, Section 24.09 of
the Lease hereby is deleted in its entirety.
(d) In the event that (i) Tenant shall occupy any
Additional Premises Space and consume electricity prior to the installation by
Landlord for Tenant of submeters, or (ii) any portion of Tenant's electric
consumption is measured on a meter that also measures the electric consumption
of another tenant occupying space in the Building, then, in any such case,
Landlord shall furnish electricity to Tenant (x) in the case of all of the
Leased Premises (exclusive of the Basement Space) other than any Additional
Premises Space, on the same basis that electricity presently is being furnished
to Tenant, and (y) in the case of any Additional Premises Space, on the same
basis that it currently is being furnished to Tenant and using the Additional
Premises Space Square Footage for determining the increase in the Square Foot
Area and the Additional Premises
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Space Percentage for determining the increase in the Section 23.01 Percentage,
but in no event shall the charges for electricity for such space be less than
$2.90 per rentable square foot per annum; provided, however, that if Tenant
shall have requested that Landlord install electrical metering devices for
Tenant in any Additional Premises Space as aforesaid, and if Landlord shall not
have installed the same in such Additional Premises Space within ninety (90)
days after Tenant's written request and authorization to proceed, then the
charges for electricity for such space shall be $1.00 per rentable square foot
per annum until the electrical metering devices shall have been installed by
Landlord for Tenant.
(e) During the Further Extended Term (or earlier at any
time following the date hereof with respect to all or any portions of the Leased
Premises (inclusive of the Basement Space so long as the same shall be used for
storage only or for the Additional Existing Basement Uses as herein permitted)
with respect to which Tenant shall have elected to have its electric consumption
measured by submeters (including for this purpose any totalizing meter) and the
installation thereof shall have occurred as hereinbefore provided), Landlord
shall furnish the electric energy that Tenant shall reasonably require for the
Leased Premises (inclusive of the Basement Space so long as the same shall be
used for storage only or for the Additional Existing Basement Uses as herein
permitted) to operate in the manner Tenant deems satisfactory for such normal
business office purposes for an advertising agency and the other uses incidental
thereto permitted under the Lease, as modified by this Seventeenth Amendment, or
for another use permitted under the Lease, as modified by this Seventeenth
Amendment, which requires electric energy on a comparable basis, subject to the
then capacity of the Building's electric service. If, in order to furnish the
electric energy that Tenant shall reasonably require
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in the Leased Premises (exclusive of the Basement Space) to operate in the
manner Tenant deems satisfactory for normal business office purposes for an
advertising agency and the other uses incidental thereto, or for another use
permitted under the Lease, as modified by this Seventeenth Amendment, which
requires electric energy on a comparable basis, it shall be necessary to install
any additional risers, other equipment, electrical installation or work to
satisfy such requirements (including for this purpose if it shall be necessary
to apply to the Utility Company to increase the capacity of the Building's
electric service), Landlord, at Landlord's sole cost and expense (with due
diligence, subject, however, to any Unavoidable Delay, and with as little
interference as possible with the conduct of Tenant's business in the Leased
Premises), shall provide the same, subject to and in compliance with all
applicable ordinances, orders, rules, regulations, requirements, or directions
of any governmental body or officer or officers having jurisdiction and/or of
the Utility Company. If Tenant shall use the Leased Premises (inclusive of the
Basement Space so long as the same shall be used for storage only or for the
Additional Existing Basement Uses as herein permitted) for any use permitted
under the Lease, as modified by this Seventeenth Amendment, other than for such
normal business office purposes for an advertising agency and the other uses
incidental thereto, or for another use permitted under the Lease, as modified by
this Seventeenth Amendment, which requires electric energy on a comparable
basis, then Tenant's metered demand electrical load in the Leased Premises
(inclusive of the Basement Space) shall not exceed six (6) watts per square foot
with respect to the portion(s) of the Leased Premises subject to such use unless
Landlord shall be able to provide additional electrical energy based upon the
then existing capacity of the Building's electric service and without any
possible adverse effect on such service and taking into account the needs of
other existing and potential future tenants
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of the Building and of the Building itself as determined by Landlord in its
reasonable judgment. All work necessary to furnish such additional electrical
energy, if any, shall be provided and maintained by Landlord (with due
diligence, subject, however, to any Unavoidable Delay, and with as little
interference as possible with the conduct of Tenant's business in the Leased
Premises), subject to and in compliance with all applicable ordinances, orders,
rules, regulations, requirements or directions of any governmental body or
officer or officers having jurisdiction and/or of the Utility Company, and the
cost thereof shall be paid by Tenant within fifteen (15) days following
Landlord's demand therefor together with reasonably detailed back-up and
invoices therefor. Landlord shall use commercially reasonable efforts to perform
such work in a cost-effective manner. If Tenant shall so require additional
electrical energy which shall exceed the then existing capacity of the
Building's electric service (taking into account the needs of other existing and
potential future tenants of the Building and of the Building itself as
determined by Landlord in its reasonable judgment), then in order to insure that
the capacity of the electrical conductors, machinery and equipment in or
otherwise serving the Leased Premises is not exceeded to avert possible adverse
effect upon the Building's electric service and to insure compliance with all
applicable ordinances, orders, rules, regulations, requirements, or directions
of any governmental body or officer or officers having jurisdiction and/or of
the Utility Company, Landlord's prior written consent, which shall not be
unreasonably withheld or delayed, shall be required for any additional risers,
other equipment, electrical installation or work required to satisfy Tenant's
electrical requirements. Should Landlord grant such consent, any additional
risers or other equipment or work required therefor shall be provided and
maintained by Landlord (with due diligence, subject, however, to any Unavoidable
Delay, and with as little
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interference as possible with the conduct of Tenant's business in the Leased
Premises), subject to and in compliance with all applicable ordinances, orders,
rules, regulations, requirements or directions of any governmental body or
officer or officers having jurisdiction and/or of the Utility Company, and the
cost thereof shall be paid by Tenant within fifteen (15) days following
Landlord's demand therefor together with reasonable detailed back-up and
invoices therefor. Landlord shall use commercially reasonable efforts to perform
such work in a cost-effective manner.
(f) All electric metering devices installed by Landlord
for Tenant as aforesaid shall conform in every respect to the requirements,
rules and regulations of the local public utility as approved from time to time
by the Public Service Commission of the State of New York (or its successor) as
to the accuracy of measurement of such meters or metering devices, including,
but not limited to, proper measurement and reflection of power factor and,
additionally, shall have been approved by Landlord, which shall not be
unreasonably withheld or delayed. Tenant shall have the right from time to time,
at Tenant's expense, to test all such electrical metering devices upon
reasonable advance written notice to Landlord and in the presence of Landlord or
its representatives if Landlord shall so elect.
(g) Landlord shall not be liable in any way to
Tenant for any failure or defect in the supply or character of electric energy,
steam or other utilities furnished to the Leased Premises by reason of any
requirement, act or omission of the utility company (or other supplier) serving
the Building with electricity or steam or other utility or for any reason not
attributable to Landlord.
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(h) If any tax is imposed upon Landlord with respect to
electrical energy furnished as a service to Tenant by any Federal, State, County
or Municipal authority, Tenant covenants and agrees that where permitted by law
or applicable regulations, Tenant's pro rata share of such taxes shall be
reimbursed by Tenant to Landlord as additional rent.
14. Brokers. Each party hereto represents and warrants to the other
that it has not dealt with any broker in connection with this Seventeenth
Amendment other than SageGroupAssociates Inc.("SageGroup") and Insignia/Edward
S. Gordon Co., Inc. ("Insignia"). Landlord agrees to pay SageGroup any
commissions or other compensation due SageGroup in connection with this
Seventeenth Amendment pursuant to a separate agreement, and Tenant agrees to pay
Insignia any commissions or other compensation due Insignia in connection with
this Seventeenth Amendment pursuant to a separate agreement. Tenant does hereby
indemnify and agree to hold Landlord harmless of and from any liability, claim,
damage, cost or expense (including, without limitation, reasonable attorneys'
fees and disbursements) arising out of or in connection with claims for
commissions or other compensation made against Landlord by Insignia or any other
broker, finder or like agent who claims to have dealt with Tenant in connection
with this Seventeenth Amendment (other than SageGroup). Landlord does hereby
indemnify and agree to hold Tenant harmless of and from any liability, claim,
damage, cost or expense (including without limitation, reasonable attorneys'
fees and disbursements) arising out of or in connection with claims for
commissions or other compensation made against Tenant by SageGroup or any other
broker, finder or like agent who claims to have dealt with Landlord in
connection with this Seventeenth Amendment (other than Insignia).
15. Non-Disturbance. (a) Landlord and Tenant
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agree that the effectiveness of this Seventeenth Amendment is conditioned upon
the parties entering into (i) simultaneously with the execution and delivery of
this Seventeenth Amendment, a non-disturbance and attornment agreement (the
"Ground Lease Non-Disturbance Agreement") in form and substance satisfactory to
Landlord, Tenant and 7 Third Avenue Fee LLC, the existing superior lessor as is
more fully described in Section 28.05 of the Lease, as modified by this
Seventeenth Amendment, and (ii) a non-disturbance and attornment agreement (the
"Mortgage Non-Disturbance Agreement") in form and substance satisfactory to
Landlord, Tenant and LaSalle National Bank, as Trustee for Nomura Asset
Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series
1995 - MD III (sometimes referred to herein as "LaSalle"), the existing
mortgagee as is more fully described in Section 28.05 of the Lease, as modified
by this Seventeenth Amendment. If the parties shall not have entered into the
Mortgage Non-Disturbance Agreement within forty-five (45) days after the
execution and delivery of this Seventeenth Amendment (including for this purpose
the execution and delivery of both such agreements by the existing superior
lessor and by the existing mortgagee, as applicable), then unless such date is
extended in writing by both parties or Tenant shall deliver to Landlord on or
prior to such date an unconditional and irrevocable waiver of the requirement to
deliver the Mortgage Non-Disturbance Agreement (which shall include an
acknowledgement that the Lease, as modified by this Seventeenth Amendment, is
subject and subordinate to the existing mortgage held by LaSalle, this
Seventeenth Amendment shall become null and void and the Lease shall remain in
full force and effect and not be amended hereby. Landlord shall use commercially
reasonable efforts to obtain the Mortgage Non-Disturbance Agreement from
LaSalle. In furtherance of the foregoing (except as may be expressly provided
for in the immediately preceding sentence regarding Tenant's right to waive the
requirement of the Mortgage Non-Disturbance
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Agreement), prior to the entry by all of the required parties into both such
agreements, none of the provisions of this Seventeenth Amendment shall be
effective, and any provision of this Seventeenth Amendment requiring the
performance of any obligation on the part of either Landlord and Tenant within a
stated period of time measured from the date hereof shall be tolled and extended
by the period of time required to obtain such agreements.
(b) The following sentence hereby is added after the last
sentence of Section 28.01 of the Lease: "Notwithstanding the foregoing
provisions, Landlord shall use commercially reasonable efforts to obtain from
any future mortgagee and from any future holder of any ground or underlying
lease to which this Lease is subject and subordinate a non-disturbance
attornment agreement, in the usual form then used by such mortgagee or such
holder for major tenants (and in all events reasonably satisfactory to Landlord
and Tenant), but Landlord shall have no liability to Tenant hereunder and the
rights and obligations of Tenant hereunder shall not be affected in any manner
whatsoever if any mortgagee(s) or any holder(s) of any ground or underlying
lease shall fail or refuse to execute such a non-disturbance attornment
agreement; provided, however, that this Lease shall not be subject and
subordinate to any such mortgage(s) or ground or underlying lease(s) if any
mortgagee(s) or any holder(s) of any ground or underlying lease shall fail or
refuse to execute such a non-disturbance agreement and, provided, further, that
if Tenant shall fail or refuse to execute such a non-disturbance agreement in
the form required hereunder presented pursuant to the provisions hereof to
Tenant by Landlord or any such mortgagee(s) or holder(s), then this Lease shall
be subject and subordinate to any such mortgage(s) or ground or underlying
lease(s), as the case may be."
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(c) Article 28 of the Lease hereby is amended to add a new
Section 28.06 as follows:
"Section 28.06. If Tenant shall sublet all or any portion of the
Demised Premises in compliance with the terms of Article 11 of this Lease,
Landlord, within thirty (30) days following Tenant's request, shall deliver a
non-disturbance and attornment agreement (the "Subtenant NDA") for the benefit
of such subtenant upon the following conditions:
(i) the sublease shall be for the balance of the then unexpired
portion of the Term less one day but in all events for a term
of not less than four (4) years;
(ii) the sublease shall be for not less than four (4) contiguous
full floors and shall cover (x) the highest numerical full
floors then not covered by a Subtenant NDA in the base portion
of the Building (i.e., floors 2-14) and (y) the lowest
numerical full floors then not covered by a Subtenant NDA in
the tower portion of the Building (i.e., floors 15 and above),
respectively, the base and tower portions of the Building
being considered separately for this purpose;
(iii) the fixed rent and additional rent payable by such subtenant
with respect to the subleased premises shall be (A) not more
than $2.00 per square foot (inclusive of fixed minimum rent
and all additional rent)
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less than the fixed minimum rent and all additional rent
payable under this Lease by Tenant (computed at the rate per
square foot payable by Tenant hereunder) prior to the actual
date of any such attornment and (B) the greater of (x) the
fixed minimum rent and all additional rent payable under the
sublease by such subtenant or (y) the fixed minimum rent and
all additional rent payable under this Lease by Tenant
(computed at the rate per square foot payable by Tenant
hereunder) effective as of the actual date of any such
attornment;
(iv) the net worth of the subtenant (exclusive of goodwill) as of
the date of the request for the Subtenant NDA and for the
three (3) fiscal years immediately preceding the date of the
request for the Subtenant NDA shall be not less than six (6)
times the greater of (w) the fixed minimum rent and all
additional rent payable under the sublease or (x) the fixed
minimum rent and all additional rent payable under this Lease
by Tenant (computed at the rate per square foot payable by
Tenant hereunder) and the subtenant shall have as of the date
of such request and for its three (3) most recently ended
fiscal years annual net cash flow of not less than four (4)
times the greater of (y) the fixed minimum rent and all
additional rent payable under the sublease
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or (z) the fixed minimum rent and all additional rent payable
under this Lease by Tenant (computed at the rate per square
foot payable by Tenant hereunder), in each case, determined in
accordance with generally accepted accounting principles,
consistently applied ("GAAP") (or any other comprehensive
basis for accounting reasonably acceptable to Landlord in the
case of any subtenant that does not regularly and normally
prepare its financial statements in accordance with GAAP) and
as reasonably determined by Landlord based upon such financial
statements and other proof reasonably satisfactory to Landlord
as Landlord shall reasonably request;
(v) if any provision of the sublease shall be less favorable to
Landlord than is any term of this Lease (including for this
purpose any term in the sublease for which there is no
corresponding term in this Lease or vice-versa), the same
shall be deemed overridden by such term in this Lease which
shall govern and control or shall be deemed stricken from the
sublease, as the case may be; and
(vi) at the time of the request for the Subtenant NDA, there shall
be no default beyond any applicable notice and grace period in
any of the economic or material non-economic terms of the
sublease by the
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subtenant thereunder.
The Subtenant NDA to be delivered by Landlord shall be in Landlord's
then form and shall provide in effect that so long as such sublease shall be in
full force and effect and no event of default on the part of such subtenant has
occurred and is continuing beyond applicable grace periods pursuant to such
sublease, such subtenant shall not be evicted from the portion or portions of
the Demised Premises that are demised under the sublease of such subtenant, nor
shall such subtenant's rights or leasehold estate under such sublease be
terminated or disturbed or affected except to the extent provided below, by
reason of a termination of this Lease resulting from any default by Tenant under
this Lease. It shall further provide that such subtenant shall attorn to and
recognize Landlord, as its landlord, under all of the then executory terms of
such sublease, except that Landlord shall not be (a) liable for any previous
act, omission or negligence of Tenant or breach of any representation or
warranty by Tenant under such sublease, (b) subject to any counterclaim,
defense, or offset theretofore accruing to such subtenant against Tenant, (c)
subject to any rent credit or rent abatement provided for in such sublease, (d)
bound by any previous modification, amendment, extension, expansion,
termination, cancellation or surrender of such sublease made without Landlord's
consent or by any previous prepayment of more than one month's rent and
additional rent in advance, (e) bound to make any payments to the subtenant
provided for in the sublease, (f) obligated to perform any repairs or other work
or capital improvements in the subleased premises or the Building beyond
Landlord's obligations under this Lease with respect to such subleased premises,
(g) provide or perform any services not related to possession of the subleased
premises, (h) bound to refund, or liable for the refund of, all or any part of
any security deposit of the subtenant with Tenant for any purpose,
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unless and until all such security deposit shall have actually been delivered
and received by Landlord (and then the obligations of Landlord shall be limited
to the amount of such security deposit actually received) or (i) required to
cure any default, act or omission which is personal to Tenant and, therefore,
not susceptible of cure by Landlord. Landlord's current form of Subtenant NDA is
attached to this Lease as Exhibit A(3)" Landlord further agrees that, if
Landlord is required to deliver a Subtenant NDA in favor of any subtenant of
Tenant, Landlord shall request from any mortgagee and/or holder of any ground or
underlying lease a Subtenant NDA in the usual form then used by such
mortgagee(s) and/or holder(s) for subtenants (and if any such mortgagee(s) or
holder(s) shall not have such a form, then in the same form, delivered by such
mortgagee(s) and/or holder(s) to Tenant with such changes thereto as such
mortgagee(s) and/or holder(s) shall deem necessary or appropriate under the
circumstances, but Landlord shall have no obligation to make any payment to any
such mortgagee(s) and/or holder(s) (unless Tenant shall have agreed in writing
in advance to reimburse Landlord for any such cost within fifteen (15) days
after written demand therefor, or at Landlord's election, Tenant shall have
first agreed in writing to pay the same and shall have provided to Landlord good
funds sufficient to make such payment) or to take any action whatsoever beyond
making such request in good faith and diligently pursuing a response, but
Landlord shall have no liability to Tenant hereunder and the rights and
obligations of Tenant hereunder shall not be affected in any manner whatsoever
if and such mortgagee(s) and/or holder(s) shall fail or refuse to execute such a
Subtenant NDA. Tenant shall reimburse Landlord, within fifteen (15) days
following Landlord's demand therefor, for all costs, including reasonable
attorney's fees, incurred by
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(3) Exhibit A is attached to this Seventeenth Amendment as Exhibit 1.
<PAGE> 99
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Landlord in connection with any request by Tenant for a Subtenant NDA (including
from Landlord and/or any mortgagee(s) and/or holders, including for this purpose
preparing and/or seeking to obtain any such Subtenant NDA and in obtaining the
same from any mortgagee(s) and/or holders. Notwithstanding anything to the
contrary contained in this Section 28.06, no holder of any ground or underlying
lease which succeeds to Landlord's interest in this Lease shall be required to
deliver a Subtenant NDA in its capacity as successor Landlord, unless (x) such
holder of any ground or underlying lease is a "Related Party" (as hereinafter
defined) of Landlord at the time such successor succeeded to Landlord's interest
under this Lease and (y) such Related Party successor became Landlord under this
Lease as a result of the voluntary merger of the fee and leasehold estates in
and to the Building in a transaction participated in by such holder, but not
under any other circumstances, including, without limitation, any surrender,
termination or merger resulting from a default by Landlord under any such ground
or underlying lease no matter how so effectuated (it being agreed that such
holder shall not be obligated to deliver a Subtenant NDA unless the requirements
of both clauses (x) and (y) are satisfied)." For purposes of this Section 28.06,
the term "Related Party" shall mean any person or entity which controls, is
controlled by or is under common control with another person or entity, where
control, controlled or controlling shall mean (x) direct or indirect ownership
of more than fifty percent (50%) of the outstanding voting capital stock of a
corporation or more than fifty percent (50%) of the beneficial interests of any
other entity, and (y) in either case, the ability effectively to control or
direct the business decisions of such corporation or other entity (it being
agreed that "control" shall not exist unless the requirements of both clauses
(x) and (y) are satisfied).
16. Concierge Booth. From and after the date
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hereof and during the balance of the Term, Tenant (but not any subtenant) shall
have the right to use the concierge booth on the north side of the Building as
an information center and security desk upon the following conditions:
(i) the provisions of Section 16.02 of the Lease, as modified by
this Seventeenth Amendment, shall apply to all lobby signs
used in connection with the booth;
(ii) Tenant (including any affiliate of Tenant permitted to occupy
all or any portion of the Leased Premises in accordance with
the terms of the Lease, as modified by this Seventeenth
Amendment, shall actually occupy not less than 245,850
rentable square feet in the Building (exclusive of any
Basement Space and any space under sublease by or to Tenant);
(iii) the booth attendant shall be an employee of SPC Services Inc.
(or of another company designated by Landlord to provide
security services at the Building to Landlord);
(iv) Tenant shall bear the entire cost of the booth attendant;
(v) the booth attendant shall at all times be appropriately
attired and the general appearance of the booth at all times
shall be maintained in a neat and businesslike manner so as
not to reflect adversely on the reputation and character of
the
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Building as a class A office building;
(vi) Tenant shall have the right to use the booth for a secure
controlled access point or system for those floors in the base
portion of the Building (i.e., floors 2-14) constituting a
portion of the Leased Premises; and
(vii) Landlord shall have the right to impose such additional
reasonable conditions upon the continued use by Tenant of the
booth as Landlord shall from time to time deem necessary so as
not to reflect adversely on the reputation and character or
operation of the Building as a class A office building.
17. Additional Provisions. (a) Section 2.01(c) of the Lease hereby
is amended to add the following words at the end thereof: "or otherwise as
expressly provided for herein".
(b) Section 2.01(f) of the Lease hereby is amended as follows:
(i) The words "(including any delay in receipt of any
monies from insurance or any condemnation award to effect any restoration,
including any period to adjust such monies or award or to obtain the release of
funds from a mortgagee, provided the party in question uses reasonable diligence
to adjust and collect such monies or award or to obtain such release)" are added
immediately following the word "fire" in the eighth line of the first sentence
thereof.
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(ii) The words", except for any lack of funds
attributable to any delay described in the immediately preceding sentence and
not any other lack of funds" are added at the end of the last sentence thereof.
(c) Section 2.01 of the Lease hereby is amended to add a
new subsection (i) at the end thereof as follows:
"(i) "business days" shall mean all days, excluding
Saturdays, Sundays and holidays established by any union contract applicable to
employees at the Building, or if there is no contract in effect, all holidays
recognized by the State of New York and all Federal holidays (provided, if a
holiday is celebrated on different days by the State and the Federal
governments, only one of such days, as selected by Landlord shall be a holiday),
all of which excluded days shall be "holidays" for the purposes of this Lease."
(d) Section 3.02.B of the Lease hereby is amended to add
the following words at the end thereof: ", and which fixed minimum rent and
additional rent shall, if payable by check, be by check of Tenant drawn on a
bank located in the United States so long as Landlord or Landlord's designated
collection agent actually receives the check on the first business day of each
month during the Term, otherwise the check shall be drawn on a bank that is a
member of the New York Clearinghouse Association".
(e) Section 4.02(d) of the Lease hereby is amended to
add the following sentences at the end thereof: "In furtherance of the
foregoing, Tenant shall not, without the prior written consent of Landlord,
allow a "Servicing Company" (defined
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below) to install any telephone, data, information or other communications
equipment in the Demised Premises to service premises occupied by persons other
than Tenant (and/or its affiliates and/or subtenants which are permitted to
occupy all or any portion of the Leased Premises in accordance with the terms of
the Lease, as modified by this Seventeenth Amendment). For example, the Demised
Premises may not be used as a so-called "switching" or "relay" station serving
third parties (that is, parties other than Tenant and its affiliates) without
such consent by Landlord. In granting such consent, Landlord may require that
the Servicing Company enter into a license agreement with Landlord confirming
that the Servicing Company shall have no independent rights in the Demised
Premises and that upon termination of this Lease, for whatever reason, the
Servicing Company shall have no right to leave its equipment in the Demised
Premises. Landlord may make a reasonable charge to the Servicing Company for
allowing it to install its equipment in the Demised Premises. A "Servicing
Company" means a person, firm, corporation or other entity other than Tenant
whose equipment services not only the Demised Premises, but other premises or
parties as well."
(f) A new Section 4.04 hereby is added to the Lease
providing as follows:
"Section 4.04. Tenant represents and covenants that
it shall not introduce or maintain, or permit to be introduced or maintained,
any Hazardous Substances on or about the Demised Premises other than common
cleaning fluids, janitorial supplies and other chemicals and substances
customarily used by Tenant in the operation of its business then conducted at
the Leased Premises in quantities considered reasonable, properly stored,
handled and consumed or used and at all times in accordance with good management
practices regarding
<PAGE> 104
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the same and in compliance with and so long as the same shall be permitted by
all applicable laws, ordinances, statutes, rules and regulations of all
governmental authorities having jurisdiction thereof, including, without
limitation, all environmental laws, ordinances, statutes, rules and
regulations."
(g) Section 5.03 of the Lease hereby is deleted in its
entirety and the following Section 5.03 is substituted in lieu thereof:
"Section 5.03. Tenant will not suffer or permit any
liens to stand against the Demised Premises, the Building or the Land or any
part thereof, by reason of any work, labor, services or materials done for, or
supplied to, or claimed to have been done for, or supplied to, Tenant, or anyone
holding the Demised Premises or any part thereof through or under Tenant. If any
such lien is at any time filed against the Demised Premises or the Building or
the Land, Tenant shall cause the same to be discharged of record within thirty
(30) days after the date of filing of the same, by either payment, deposit or
bonding (and the failure of Tenant to do so shall be a material default
hereunder entitling Landlord to give a notice to Tenant pursuant to the
provisions of Section 18.01 hereof). In addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, procure the discharge of
such lien either by paying the amount claimed to be due by deposit in court or
bonding, and/or Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by the lienor and to
pay the amount of the judgment, if any, in favor of the lienor with interest and
costs. Any amount paid or deposited by Landlord for any of the aforesaid
purposes, and all legal and other expenses of Landlord, including, without
limitation, attorneys' fees incurred in defending such action or in procuring
the discharge of such lien, with all necessary
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disbursements in connection therewith, shall become due and payable on the date
of payment or deposit, as additional rent hereunder and shall be paid to
Landlord by Tenant within fifteen (15) days after demand therefor. Nothing in
this Lease will be deemed to be, or construed in any way as constituting, the
consent or request of Landlord, express or implied by inference or otherwise, to
any person, firm or corporation for the performance of any labor or the
furnishing of any materials for any construction, rebuilding, alteration or
repair of or to the Demised Premises, the Building or the Land or any part
thereof, nor as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials which
might in any way give rise to the right to file any lien against Landlord's
interest in the Demised Premises, the Building or the Land."
(h) Section 8.01 of the Lease hereby is amended as follows:
(i) The words "(including Section 8.05 with respect to
the 7th through 14th floors only)" appearing in the first and second lines
thereof are deleted.
(ii) The words "including, without limitation, any
requirement pursuant to the provisions of New York City Local Law No. 5 of 1973
(or successor law)" are added after the words "any public officer or officers"
appearing in the fifth line thereof.
(i) Section 8.05 of the Lease hereby is deleted in its
entirety.
(j) Section 9.04.A of the Lease hereby is amended by adding
the words "or Tenant's manner of use of the Basement Space, if such use shall be
for other than storage or
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for the other Additional Existing Basement Uses" after the words "this Lease"
appearing in the second line of the first sentence.
(k) Section 9.05.A of the Lease hereby is amended as follows:
(i) The words "as well as the holder of any mortgage"
are added after the words "underlying lease" appearing in the third line of the
first sentence thereof.
(ii) The words "Three Million ($3,000,000)" appearing in
the eighth line of the first sentence thereof are deleted and the words "Ten
Million ($10,0000,000)" are substituted in lieu thereof.
(iii) The second sentence thereof is deleted in its
entirety.
(l) Section 9.05.B of the Lease hereby is amended by deleting
the words "of recognized responsibility" appearing in the third line thereof and
substituting the words "having a minimum AM Best Rating of A X and be licensed
to do business in the State of New York" in lieu thereof.
(m) Section 10.01.C of the Lease hereby is amended as follows:
(i) The words "thirty (30)" appearing in the sixth line
of the first sentence thereof are deleted and the words "ninety (90)" are
substituted in lieu thereof.
(ii) The words "six (6)" appearing in the eighth line of
the first sentence thereof and the second
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line of the third sentence thereof are deleted and the words "fourteen (14)" are
substituted in lieu thereof.
(iii) The words "three (3)" appearing in the fourth line
of the third sentence are deleted and the words "six (6)" are substituted in
lieu thereof; such sentence is further amended by adding the words "(said period
to be extended for a period of time equal to Unavoidable Delays, but in no event
beyond a period of three (3) additional months" in the fourth line thereof
immediately following the words "such fire or casualty"; and such sentence is
further amended by deleting the words "three (3) month period" appearing as the
last words in the last line thereof and substituting the words "six (6) month
period (as the same may be extended by reason of Unavoidable Delays, but in no
event beyond a period of three (3) additional months)" in lieu thereof.
(iv) The words "three (3) month period" appearing in the
second line of the fourth sentence are deleted and the words "six (6) month
period (as the same may be extended by reason of Unavoidable Delays, but in no
event beyond a period of three (3) additional months)" are substituted in lieu
thereof; and such sentence is further amended to delete the words "eight (8)"
appearing in the second and third sentences thereof and substituting the words
"fourteen (14)" in lieu thereof.
(n) Section 10.02 of the Lease hereby is amended as follows:
(i) The words "three (3)" appearing in the second and
third lines of the first sentence thereof are deleted and the words "two (2)"
are substituted in lieu thereof.
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(ii) The entire third sentence thereof is deleted and
the following is substituted in lieu thereof: "Any notice to terminate given by
Landlord or Tenant as hereinabove provided in this Section 10.02 on or prior to
the date by which Tenant shall have the right to elect at its option to extend
the Term of this Lease pursuant to an express provision of this Lease shall be
of no force or effect if (a) Tenant shall have theretofore exercised its option
to extend the Term under such provision or (b) Tenant shall, within twenty (20)
days after the giving of such notice of termination by Landlord, exercise its
option to extend the Term under such provision."
(o) Section 11.03.A of the Lease hereby is amended by deleting
the last sentence thereof.
(p) Section 11.03.B of the Lease hereby is amended by deleting
the date "July 1, 1998" appearing in clause B(1)(iv) thereof and substituting
the date "July 1, 2013" in lieu thereof.
(q) Section 12.04 of the Lease hereby is amended by deleting
the entire proviso at the end of the first sentence thereof starting with the
words "provided, however" and ending with the words "of such indemnity".
(r) Article 12 of the Lease hereby is amended by adding the
following Section 12.05:
"Section 12.05. Landlord agrees to indemnify, defend and save
harmless Tenant and its agents and employees from and against any and all
liability (statutory or otherwise), claims, suits, demands, damages, judgments,
costs, fines, penalties, interest and expenses (including, but not limited to,
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attorneys' fees and disbursements incurred in any action or proceeding), to
which Tenant or any such agent or employee may be subject or suffer arising
from, or in connection with, (i) any liability or claim for any personal or
bodily injury to, or death of, any person or persons or damage to property
(including any loss of use thereof) occurring in or about the common areas of
the Building, or (ii) any work, installation or thing whatsoever done or omitted
(other than by Tenant or its contractors or the agents or employees of either)
in the common areas of the Building, or (iii) negligent or other wrongful act on
the part of Landlord's agents, servants, invitees or employees, in each case
during the Term of this Lease. Nothing contained in this Section 12.05 shall be
construed as indemnifying Tenant against the acts, omissions or negligence of
Tenant, its agents, servants, invitees or employees."
(s) Section 15.02 of the Lease hereby is amended as follows:
(i) The words "twelve (12)" appearing in the first line
thereof are deleted and the words "twenty-four (24)" are substituted in lieu
thereof.
(ii) The following sentence is added at the end thereof:
"In addition, Tenant shall cooperate in good faith with Landlord if Landlord
shall make a good faith request of Tenant that Landlord be allowed to exhibit
the Demised Premises to prospective tenants at any earlier time without
interfering with Tenant's usual business operations."
(t) Section 18.04.A(a) of the Lease hereby is amended by
adding the words "or any further extended Term if such further extended Term has
commenced" immediately following the words "has commenced" in the ninth and
tenth lines thereof.
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(u) Section 18.04.A(b) of the Lease hereby is amended by
adding the words "or any further extended Term if the option therefor shall have
been validly exercised pursuant to an express provision of this Lease granting
such an option" immediately following the words "pursuant to Article 38" in the
eighth line thereof.
(v) Section 22.01.A(1) of the Lease hereby is amended by
deleting in its entirety the balance of the first sentence following the words
"Friday, holidays excepted" appearing in the second line thereof; and such
section is further amended by adding the words "to enable Tenant" after the
words "cost and expense," appearing in the first line of the last sentence
thereof.
(w) Section 22.01.A(3) of the Lease hereby is deleted in its
entirety and the following is substituted in lieu thereof: "Provide cleaning and
janitorial services on business days as is set forth on Schedule C."(1) Tenant
agrees to employ such office maintenance contractor as Landlord may from time to
time designate, for all office cleaning (other than those cleaning services
Landlord is obligated to furnish), including, without limitation, all waxing,
polishing, and lamp replacement, and all maintenance work in the Demised
Premises, provided that (x) the quality thereof and the charges therefor are
reasonably comparable to that of other contractors and (y) that, if Landlord
shall hereafter change office maintenance contractors (for services other than
those cleaning services Landlord is obligated to furnish), Landlord shall use
commercially reasonable efforts
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(1) Schedule C is attached to this Seventeenth Amendment as Schedule 4 and
supersedes and replaces Schedule C to the Original Lease.
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to secure in its contract with such contractor the requirement that it make
available to Tenant employees selected by Tenant to perform office maintenance
work at the hourly rate provided therefor in such contract and, provided,
further, that any such office maintenance contractor shall be overseen by SPC
Services Inc. ("SPC") (so long as SPC shall continue to provide quality services
at charges therefor that are reasonably comparable to that of other contractors
providing similar services) or by another company designated by Landlord to
provide such security services or such oversight supervision of maintenance and
cleaning at the Building to Landlord; provided, however, that if Landlord shall
desire to designate another company to provide security services or such
oversight supervision of maintenance and cleaning at the Building to Landlord,
Landlord shall first notify Tenant in writing of such intention and shall
furnish Tenant with the name of at least two (2) such companies (which shall be
independent and of comparable quality and the charges thereof shall be
reasonably comparable to that of other companies providing such security
services or such oversight supervision of maintenance and cleaning), and Tenant
shall have the right to select the company from among such companies to provide
such services. Tenant shall make such selection within ten (10) business days of
notice from Landlord to Tenant of Landlord's intention to employ another company
(failing which Landlord shall make such selection); provided, however, that, if
Landlord shall, in Landlord's good faith judgment, determine that it must in the
best interests of Landlord, the Building and all tenants (including Tenant) make
such a change under circumstances that do not allow for such notice and response
from Tenant, then Landlord shall give Tenant such notice and opportunity to
select, if any, as shall be practicable under the circumstances. If Landlord
shall not have followed the procedure of providing Tenant with the name of at
least two (2) such other companies and ten (10) business days' within which to
make its selection, then
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Landlord's right to employ another company to provide security services or such
overnight supervision of maintenance and cleaning shall be temporary and for a
period not to exceed ninety (90) days, during which 90-day period Landlord shall
be obligated to follow the aforesaid procedure. Tenant shall not employ any
other contractor without Landlord's prior written consent unless for cause,
notice of which shall have first been sent to Landlord in writing. Before
employing any other contractor following the giving by Tenant to Landlord of
such a notice of Tenant's desire to employ another contractor for cause,
Landlord and Tenant shall confer and Landlord shall have a reasonable
opportunity to remedy Tenant's proper grievances."
(x) Section 22.03 of the Lease hereby is amended by adding the
words "(after-hours services)" after the words "this Article" appearing in the
fourth line thereof; and such section is further amended by deleting the words
", after receipt of reasonable notice from Tenant of the necessity therefor,"
appearing in the fourth and fifth lines thereof and by adding the following at
the end thereof immediately following the words "administrative charges":
"subject to the following provisions:
(1) Tenant shall give written notice of its desire for
after-hours service to Landlord's management representative in charge of the
Building as follows:
(i) Prior to 3:00 P.M. in the case of after-hours
service on business days.
(ii) Prior to 3:00 P.M. on Friday in the case of
after-hours service on Saturday or Sunday.
<PAGE> 113
- 101 -
(iii) Prior to 3:00 P.M on the business day preceding a
holiday in case of after-hours service on a holiday.
In addition, Landlord shall cooperate in good faith with Tenant if Tenant shall
make a good faith request in writing of Landlord's management representative in
charge of the Building at other hours that Landlord provide after-hours service;
provided, however, that Tenant shall reimburse Landlord within fifteen (15) days
after written demand therefor (together with reasonably detailed back-up and an
invoice) for the additional cost to Landlord, if any, for labor or otherwise
necessitated by such late request.
(2) Tenant agrees to pay such additional charges within
fifteen (15) days after demand therefor by Landlord."
(y) Section 22.04 of the Lease hereby is deleted in its
entirety and the following Section 22.04 is substituted in lieu thereof:
"Section 22.04.(a) Tenant, at its sole cost and expense shall
cause the Demised Premises to be exterminated on a monthly basis to the
satisfaction of Landlord and shall for such purposes employ exterminators
designated by Landlord.
(b) If Tenant shall have facilities on the Demised Premises
for cooking, drinking, eating, washing and/or storage of food, or similar items,
Tenant shall, on a weekly basis, cause the portion of the Demised Premises on
which such facilities are located to be exterminated to the satisfaction of
Landlord by exterminators designated by Landlord. The foregoing shall not,
however, constitute any approval to the use of the
<PAGE> 114
- 102 -
Demised Premises for such purposes (unless expressly permitted in this Lease).
(c) If Tenant fails to comply with the provisions of this
Section 22.04, Landlord, in addition to any other remedies available to it under
this Lease or pursuant to law, may perform such service, and the cost therefor
shall be paid by Tenant as additional rent within fifteen (15) days after demand
therefor."
(z) Section 22.05 of the Lease hereby is amended by adding the
words "or shall pay to Landlord's contractor at Landlord's direction the cost
of" after the words "cost to Landlord of" appearing in the second and third
lines thereof; and such section is further amended by adding the words "or by
any use of the Demised Premises after customary business hours" at the end
thereof.
(aa) Section 26.01 of the Lease hereby is amended by adding
the words "Landlord or" after the words "at the election of" appearing in the
third and sixth lines thereof.
(bb) Section 26.02 of the Lease hereby is amended by deleting
such section in its entirety and substituting the following Section 26.02 in
lieu thereof:
"Section 26.02. The arbitration of disputes hereunder shall be
conducted as follows:
With respect to any matter under this Lease for which arbitration is
provided as the method of dispute resolution, such matter shall be resolved by
arbitration in Manhattan by an arbitration panel selected from the panel of
retired judges or arbitrators (each, an "arbitrator") maintained
<PAGE> 115
- 103 -
by Comprehensive Alternative Dispute Resolution Enterprises, Inc. ("CADRE"). If
CADRE shall no longer exist or shall be unwilling or unable to act, such dispute
shall be resolved by another reputable commercial arbitration company which has
expedited arbitration procedures which meet the time frame set forth herein, as
Landlord shall select (the "Company"), provided, however, that Tenant may
dispute Landlord's choice of the Company, in which event the parties shall
mutually agree upon the Company, and if the parties shall be unable to agree
upon the Company, the Company shall be appointed by any judge of a court of
competent jurisdiction in the City of New York. Upon selection of the Company,
the parties agree that the balance of this Section 26.02 shall continue to apply
with the substitution of the Company in lieu of CADRE.
If Landlord or Tenant so desires to submit such a dispute to CADRE,
such party shall notify the other in writing of such desire, and within ten (10)
business days thereafter (the "Arbitration Commencement Date"), shall make such
submission and deliver all applicable applications and documents to CADRE,
including, but not limited to, an agreement to arbitrate (which shall be joined
in by both Landlord and Tenant) to initiate the arbitration with a copy of the
entire submission being delivered simultaneously to the other party. The
arbitration shall be conducted pursuant to the then existing rules, regulations,
practices and expedited procedures of CADRE, modified as herein provided. If
such rules do not permit such expedited procedure or modification to the rules,
then such rules of CADRE shall govern, it being the intent of the parties,
however, to conduct the arbitration in the most expeditious manner permitted by
the rules. To the extent that any applicable law imposes requirements different
than those of CADRE, as modified herein, in order for the determination of the
arbitration panel to be enforceable in the courts of the State of New York, then
such
<PAGE> 116
- 104 -
requirements shall be complied with in the arbitration.
Each party shall designate in writing to the other an arbitrator
from among the list of CADRE arbitrators within ten (10) business days after the
Arbitration Commencement Date. If either Landlord or Tenant shall fail to select
an arbitrator, the party which shall have selected an arbitrator (the
"Designating Party") shall have the right to give a reminder notice to the party
which shall have failed to make a selection stating that, unless such an
arbitrator shall be selected within ten (10) days thereafter (the "Reminder
Period"), then the arbitrator selected by the Designating Party shall be the
sole arbitrator who shall conduct the arbitration. If such failure shall
continue for such 10-day period following the giving of the reminder notice,
then the arbitrator selected by the Designating Party shall conduct the
arbitration alone and the balance of this Section 26.02 shall apply. Such
arbitration shall commence within five (5) business days after the expiration of
the Reminder Period, and the arbitrator selected by the Designating Party shall
make a determination within ten (10) business days after conclusion of the
arbitration.
The two (2) arbitrators so selected by Landlord and Tenant shall
select a third arbitrator from among the list of CADRE arbitrators within five
(5) business days of the designation of the second arbitrator and, if the two
(2) arbitrators designated by the parties cannot agree, the third arbitrator
shall be designated upon the application of either Landlord or Tenant to CADRE
in accordance with its rules and regulations.
The three (3) arbitrators so designated shall thereupon conduct the
arbitration of such issue, which shall commence within five (5) business days
after the designation of
<PAGE> 117
- 105 -
the complete panel, and the written determination by a majority of such
arbitrators shall be conclusive and binding upon Landlord and Tenant, shall
constitute an "award" and judgment may be entered thereon in any court of
competent jurisdiction.
The arbitrators shall render their determination in a signed and
acknowledged written instrument, original counterparts of which shall be sent
simultaneously to Landlord and Tenant, within ten (10) business days after their
conclusion of the arbitration but in any event no later than forty-five (45)
days after the designation of the complete panel.
Each party shall pay its respective costs of any proceedings
pursuant to this Section 26.02, including those relating to the arbitrator
designated by it, and each shall pay one-half (1/2) of the costs of the third
arbitrator (provided, however, that the prevailing party shall have the right to
be reimbursed for its reasonable fees and expenses within twenty (20) days after
submission of a bill therefor to the losing party, which shall include, without
limitation, reasonable attorneys' fees and expenses, the cost of the arbitrators
and the cost for any court reporter or stenographic service).
Any determination pursuant to this Section shall be confidential and
neither Tenant, nor any person, firm or corporation acting on behalf of Tenant
shall in any manner whatsoever make any public disclosure of any such
determination to representatives of the press, to other tenants of the Building
or otherwise, unless required to confirm the award and to enter judgment
thereon, or unless required by law or regulation or order or directive of a
court of competent jurisdiction.
(cc) Section 28.05 of the Lease hereby is deleted in its
entirety. In lieu thereof, Landlord hereby
<PAGE> 118
- 106 -
represents and warrants as follows:
(a) That 7 Third Avenue Leasehold LLC, of c/o Sage Realty
Corporation, 777 Third Avenue, New York, New York 10017, is the holder of
record, as of the date of execution of this Seventeenth Amendment by Landlord,
of the leasehold estate in the "Ground Lease," as such term is hereinafter
defined, and title to the Building, with full right, power and authority to
execute and deliver this Seventeenth Amendment as Landlord, and that 7 Third
Avenue Fee LLC, of c/o Sage Realty Corporation, 777 Third Avenue, New York, New
York 10017, is the holder of record, as of the date of the execution of this
Seventeenth Amendment by Landlord, of the lessor's interest in the Ground Lease.
(b) That as of the date of execution of this Seventeenth
Amendment by Landlord, there are no leases superior in lien to the Lease, as
modified by this Seventeenth Amendment, other than that certain ground lease,
dated as of June 1, 1964 (the "Ground Lease"), between John Hancock Mutual Life
Insurance Company, as landlord, and William Kaufman and Jack D. Weiler, as
tenant, a memorandum of which Ground Lease was recorded on June 24, 1964 in
Liber 5280, Cp.169 in the Office of the City Register of the City of New York,
New York County (the "City Register's Office"), and which Ground Lease has been
amended by a First Lease Amendment, dated as of September 2, 1965, and recorded
on September 2, 1965 in Liber 5341, Cp. 228, and a Second Lease Amendment, dated
as of April 15, 1976, a memorandum of which was recorded on December 2, 1976 in
Reel 385, page 5, all in the City Register's Office.
(c) That, as of the date of execution of this Seventeenth
Amendment by Landlord, there are no mortgages upon the Ground Lease or the
Building other than that certain (i) consolidated first mortgage created
pursuant to that certain
<PAGE> 119
- 107 -
Mortgage Modification, Consolidation, Spreader and Security Agreement, dated as
of February 8, 1995, held by LaSalle National Bank, as Trustee for Nomura Asset
Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series
1995-MD III and recorded on February 16, 1995 in Reel 2183 at Page 907 in the
City Register's Office, as thereafter modified by that certain Amendment to
Mortgage Modification, Consolidation, Spreader and Security Agreement, made as
of the 4th day of April, 1995, and recorded on April __, 1995 in Reel ____ at
Page ____ in the City Register's Office and (ii) additional mortgage created
pursuant to that certain Collateral Mortgage, Assignment of Leases and Rents and
Security Agreement, dated as of February 8, 1995, also held by LaSalle and
recorded on February 16, 1995, in Reel _____ at Page_____.
(dd) Section 32.01 of the Lease hereby is amended by the
addition of the following sentences at the end thereof: "Tenant shall have the
right to dispute the reasonableness of any rules and regulations hereafter
adopted by Landlord or any modifications to any existing rules made after the
date hereof. If Tenant disputes the reasonableness of any such additional Rule
or Regulation or any such modification hereafter adopted by Landlord (which
shall include for the purposes of this Section 32.01 any such rule or regulation
or modification thereof affecting Tenant's use of the concierge booth on the
north side of the Building) or any such modification hereafter adopted by
Landlord, the dispute shall be submitted for arbitration pursuant to Article 26
of this Lease. The right to dispute the reasonableness of any such additional
rule or regulation or any such modification upon Tenant's part shall be deemed
waived unless the same shall be asserted by service of a notice upon Landlord
within sixty (60) days after receipt by Tenant of notice of the adoption of any
such additional rule or regulation or any such modification. Tenant's compliance
with
<PAGE> 120
- 108 -
any such additional rule or regulation or any such modification shall not be
deemed a waiver of Tenant's right to contest the reasonableness of the same.
Notwithstanding anything to the contrary contained herein, Tenant shall be bound
to comply with any such additional rule or regulation or any such modification
during any period of dispute with respect to the reasonableness of the same
until Tenant shall be the prevailing party in any such arbitration or unless
agreed to otherwise in writing by Landlord and Tenant."
(ee) Article 37 of the Lease hereby is deleted in its
entirety; provided, however, that the rights and obligations of Landlord and
Tenant with respect to any period prior to the date hereof shall be determined
by such Article unaffected by this section and, provided, further, that any
terms which are defined in such Article which are used elsewhere in the Lease,
as modified by this Seventeenth Amendment, shall continue to have the meanings
ascribed to them in the deleted Article.
(ff) Schedule D to the Lease hereby is amended by adding a new
paragraph 21 as follows: "21. Any and all wet and/or food garbage, including
coffee grinds, are to be deposited in a plastic liner bag in a waste basket or
other receptacle."
18. Lease in Full Force. Except as hereby expressly modified, the
parties agree that the Lease is and shall continue in full force and effect.
19. Prior Understanding. This Seventeenth Amendment supersedes all
prior understandings and agreements, whether written or oral, between the
parties hereto relating to the transactions provided for herein.
<PAGE> 121
- 109 -
20. Construction of Lease. The parties agree that they have each
been represented by counsel in connection with the Lease, as modified by this
Seventeenth Amendment, and that the Lease, as modified by this Seventeenth
Amendment, shall be interpreted according to its fair construction and shall not
be construed against either party as drafter.
21. Enforceability. This Seventeenth Amendment shall be of no force
or effect, and neither Landlord nor Tenant shall have any rights hereunder,
until each of Landlord and Tenant shall have executed and delivered to the other
a signed copy thereof.
With reference to the forty-five day period provided for in Section
5.01 of the Lease, as modified by this Seventeenth Amendment, contained on page
60 hereof, Landlord further agrees that Tenant shall have a right (x) to
complete any work already in progress and/or committed to and/or (y) to commence
maintenance projects(s) and use New York Paint or Dorff in connection therewith
so long as the work is commenced within the forty-five day period, in each case,
so long as the same is thereafter prosecuted to completion using due diligence
(regardless of whether the same extends beyond 45 days).
With reference to Annex I to Schedule I of this Seventeenth
Amendment, Landlord agrees that if Landlord is able to obtain an assignment or
sublease from Executive Health Group of the 21st floor, then Landlord shall
notify Tenant thereof and Tenant shall have the right to elect, such right to be
exercised by notice to Landlord given within one hundred and eighty (180) days
of Landlord's notice to Tenant, to further sublease from Landlord such space on
the rental terms payable by Landlord and otherwise on the terms of Landlord's
assignment or sublease for the entire term that Landlord has under its
assignment or sublease and to add the 21st floor to the Leased Premises at the
expiration thereof on all the terms of the Lease, as modified by
<PAGE> 122
- 110 -
this Seventeenth Amendment, except that Tenant shall take the 21st floor "as is"
in the condition it exists on the date that the further sublease with Landlord
commences and Landlord shall pay to Tenant $165,550 within fifteen (15) days of
the presentation to Landlord of invoices together with reasonably detailed
back-up for improvements to such floor made by Tenant in lieu of Landlord
satisfying the provisions of Sections 6. A.(a)(i) through (vii) inclusive of
this Seventeenth Amendment which shall be waived by Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed
this Seventeenth Amendment as of the date and year first above written.
SAGE REALTY CORPORATION, as Agent
By:_______________________________
Name: Robert Kaufman
Title: Executive Vice President
GREY ADVERTISING INC.
By:____________________________________
Name: Edward H. Meyer
Title: Chairman and President
<PAGE> 123
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 3rd day of February, 1998, before me personally came ROBERT
KAUFMAN, to me known, who being by me duly sworn, did depose and say that he
resides at 18 Martin Court, Great Neck, New York; that he is the Executive Vice
President of SAGE REALTY CORPORATION, the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by
authority of the Board of Directors of said corporation.
- -----------------------------------
Notary Public
<PAGE> 124
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 3rd day of February, 1998, before me personally came Edward
H. Meyer, to me known, who being by me duly sworn, did depose and say that he
resides at 580 Park Avenue, New York, New York; that he is the Chairman and
President of GREY ADVERTISING INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by
authority of the Board of Directors of said corporation.
- --------------------------------
Notary Public
<PAGE> 125
SCHEDULE 1
Schedule Regarding Additional Premises Space
[Follows this page]
<PAGE> 126
ADDITIONAL PREMISES SPACE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SCHEDULE 1
- --------------------------------------------------------------------------------
Part 1-A
- --------------------------------------------------------------------------------
ANNUAL ANNUAL
MINIMUM MINIMUM
RENTABLE FIXED RENT FIXED RENT
EXPIRATION/ SQUARE SECTION 23.01 THROUGH AFTER
FLOOR/UNIT VACANCY FOOTAGE PERCENTAGE 12/31/04 12/31/04
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
19 A 09/30/02 5,572 1.047% $156,016.00 $172,732.00
- --------------------------------------------------------------------------------
27 A (1) VACANT 7,167 1.347% $200,676.00 $222,177.00
- --------------------------------------------------------------------------------
30 (2) 12/31/99 12,000 2.255% $336,000.00 $372,000.00
- ---------------------------=====================================================
- --------------------------------------------------------------------------------
SCHEDULE 1
- --------------------------------------------------------------------------------
Part 1-B
- --------------------------------------------------------------------------------
LAST
ADDITIONAL
RENTABLE EXISTING PREMISES
EXPIRATION/ SQUARE SECTION 23.01 OPTION SPACE
FLOOR/UNIT VACANCY FOOTAGE PERCENTAGE RIGHTS NOTICE DATE
- --------------------------------------------------------------------------------
17 04/30/99 12,000 2.255% None 04/30/98
- --------------------------------------------------------------------------------
18 A (3) 07/31/04 6,354 1.194% (4) 07/31/03
- --------------------------------------------------------------------------------
18 B 04/30/99 5,646 1.061% None 04/30/98
- ---------------------------=====================================================
12,000 2.255%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
21 04/30/99 12,000 2.255% None 04/30/98
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
24 A,B (7) 12/31/05 9,348 1.757% (5) 12/31/04
- --------------------------------------------------------------------------------
24 C 10/31/99 1,057 0.199% (9) 10/31/98
- --------------------------------------------------------------------------------
24 D 04/30/01 1,595 0.300% (9) 04/30/00
- ---------------------------=====================================================
12,000 2.255%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
26 A,B (7) 07/31/04 7,583 1.425% (8) 07/31/03
- --------------------------------------------------------------------------------
26 C 07/31/03 2,513 0.472% None 03/01/98
- --------------------------------------------------------------------------------
26 D 05/31/99 1,904 0.358% None 05/31/98
- ---------------------------=====================================================
</TABLE>
- ----------
(1) Tenant has agreed to waive the provisions of Sections 6.A.(d) (i) through
(vii) inclusive and has agreed to take such space "as-is," in the present
condition thereof.
(2) See Annex I. Captioned terms used but not defined in Annex I and Annex II
have the meanings ascribed to them in this Seventeenth Amendment.
(3) See Annex III.
(4) See Annex IV.
(5) See Annex V.
<PAGE> 127
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SCHEDULE 1
- --------------------------------------------------------------------------------
Part 1-A
- ---------------------------=====================================================
<S> <C> <C> <C> <C> <C>
12,000 2.255%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
27 B 12/31/99 4,833 0.908% (6) (10)
================================================================================
- --------------------------------------------------------------------------------
32 A (7) 07/31/99 3,454 0.649% None 07/31/98
- --------------------------------------------------------------------------------
32 B 12/31/99 2,801 0.526% None 12/31/98
- --------------------------------------------------------------------------------
32 C 04/30/99 1,780 0.335% None 04/30/98
- --------------------------------------------------------------------------------
32 D 02/28/01 3,965 0.745% None 02/28/00
- ---------------------------=====================================================
12,000 2.255%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
35 12/31/99 12,000 2.255% 10/ 12/31/98
- --------------------------------------------------------------------------------
</TABLE>
ANNEX I
Landlord and Tenant have discussed the possible substitution of the 21st floor
for the 30th floor, but have not yet agreed to the same. If Landlord and Tenant
hereafter shall agree to such substitution, then such substitution shall be
effected by an amendment to this Schedule 1, Part 1-A containing the particulars
of such substitution. If the 21st floor shall be so substituted for the 30th
floor, then Tenant shall be deemed to have waived its right to add the 30th
floor to the Leased Premises. If the 21st floor shall not be so substituted for
the 30th floor, then the 21st floor shall remain on Schedule 1, Part 1-B*.
Neither Landlord nor Tenant shall be obligated to agree to any such
substitution, and the failure to so agree shall not affect in any manner
whatsoever the respective rights and obligations of Landlord or of Tenant under
the Lease, as modified by this Seventeenth Amendment.
- ----------
(6) See Annex II.
* except that if Tenant shall exercise its option to add the 21st floor
under the option applicable to Schedule 1, Part 1-B then Landlord shall
pay to Tenant $165,550 within fifteen (15) days of presentation to
Landlord of invoices together with reasonably detailed back-up for
improvements to such floor made by Tenant in lieu of Landlord satisfying
the provisions of Sections 6.A(a)(i) through (vii) inclusive of this
Seventeenth Amendment which shall be waived by Tenant.
<PAGE> 128
ANNEX II
Cable and Wireless, Inc. ("Cable"), the existing tenant, has an option to extend
the term of its lease for a single 5-year period which is required to be
exercised nine (9) months (i.e., March 31, 1999) prior to its lease expiration
date. Landlord agrees to give Tenant notice within ten (10) days of Cable's
effectively exercising its option to extend or of Cable's failure to exercise
such option. If Cable exercises its option to extend its lease, then Tenant
shall have the option, to be exercised within thirty (30) days after Landlord
shall have notified Tenant of Cable's exercise of its option to extend (time
being of the essence as to any such date), to surrender Unit 27 A upon the date
the ("Surrender Date") specified in Tenant's notice to Landlord of its intention
to surrender Unit 27 A. The Surrender Date shall not be earlier than thirty (30)
days nor later than three hundred sixty-five (365) days after Tenant's notice of
its intention to surrender and vacate Unit 27 A unless Tenant shall have
together with its notice of intention to surrender Unit 27 A exercised Tenant's
option to add to the Leased Premises an additional floor from among the floors
contained on Schedule 1, part 1-B, in which event the date shall be up to ninety
(90) days after the Additional Premises Space Effective Date as to such floor
(or if such floor consists of more than one unit of space, such date as to one
or more units which in the aggregate equal or exceed the rentable square footage
of Unit 27 A. For avoidance of doubt, it hereby is acknowledged that Tenant
shall not be obligated to exercise its option to surrender Unit 27 A, and the
failure of Tenant to give any such notice shall be deemed an election by Tenant
not to surrender such space. Tenant shall deliver vacant possession of Unit 27 A
to Landlord on the Surrender Date in the condition required by the Lease, as
modified by this Seventeenth Amendment, as if such date were the date set forth
therein for the termination thereof, as it affects such space. Tenant shall have
no responsibility from and after the Surrender Date regarding any obligations
with respect to Unit 27 A occurring after Tenant's vacating and surrendering of
Unit 27 A, provided, however, that notwithstanding such surrender, Tenant shall
be and remain liable for any and all fixed minimum rent and additional rent due
and owing for Unit 27 A, whether or not theretofore billed, for the period
through and including the Surrender Date, and for any occurrences therein prior
to Tenant's vacating and surrendering of Unit 27 A. Tenant's failure to pay any
such sums and/or to deliver Unit 27 A to Landlord as herein required shall be
deemed a default entitling Landlord to all remedies provided for in the Lease,
as modified by this Seventeenth Amendment, or otherwise available at law. As of
the Surrender Date, and if Tenant shall have vacated and surrendered Unit 27 A
as herein provided, the Lease, as modified by this Seventeenth Amendment, shall
be amended to provide for a reduction in the annual fixed minimum rent payable
pursuant to Article 3 thereof by the Additional Premises Space Rent for such
space, an appropriate reduction of the Section 23.01 Percentage, a reduction of
the Wage Rate Factor referred to in Section 23.03 thereof as contained in
Section 4(c) of this Seventeenth Amendment by the Additional Premises Space
Square Footage for such space and otherwise as shall be necessary to reflect the
elimination of Unit 27 A from the Leased Premises. Promptly
<PAGE> 129
after Tenant's vacating and surrendering of Unit 27 A, Landlord and Tenant shall
execute and deliver an agreement eliminating Unit 27 A from the definition of
the Leased Premises and otherwise effectuating such elimination. The failure of
the parties to enter into such an agreement hereunder shall not affect their
respective rights and obligations.
If Cable fails to exercise its option to extend the term of its lease, then
Tenant shall have fifteen (15) days following Tenant's receipt of Landlord's
notice of such failure to exercise Tenant's option to add such space to the
Leased Premises for all purposes of the Lease, as modified by this Seventeenth
Amendment (i.e., such tenth day shall be the Last Additional Premises Space
Notice Date as to such space).
<PAGE> 130
ANNEX III
If Tenant shall exercise its option to add to the Leased Premises any unit of
space which is less than a full floor, then Tenant shall be deemed,
automatically and without the need for any further notice to have exercised the
option to add the remaining units on such floor to the Leased Premises (the
intention of the parties being that, with the exception of floors 19 and 27,
Tenant shall take space as full floors).
<PAGE> 131
ANNEX IV
Kenzer Corporation ("Kenzer"), the existing tenant, has a right to extend its
lease for a single 5-year period which is required to be exercised on or before
July 31, 2003, which is twelve (12) months prior to its lease expiration.
<PAGE> 132
ANNEX V
Kaufmann, Feiner, Yamin, Goldin & Robbins, LLP ("Kaufmann"), the existing
tenant, has an option to expand for any space that becomes available on the 24th
floor, provided that Kaufmann has notified Landlord that they require additional
space (which notice can be given at any time). Kaufmann must respond within ten
(10) days after Landlord's notice to Kaufmann of the availability of space (and
provided that not less than four (4) years remain in the lease term as of the
expansion space commencement date), the lease term expiring on December 31,
2005.
<PAGE> 133
SCHEDULE 2
Performance Criteria for Air-Conditioning,
Heating and Ventilation
[Follows this page]
<PAGE> 134
HEATING, VENTILATING AND AIR-CONDITIONING
SCHEDULE 2
Year round air-conditioning system providing heating, ventilation
and cooling.
1. The system shall be designed to be capable of maintaining inside
conditions of not more than 75 degrees F and 50% relative humidity
when outside conditions are not more than 92 degrees F Dry Bulb and
73 degrees F Wet Bulb, and a temperature of not less than 70 degrees
F when outside temperature is 10 degrees F.
2. The design capabilities of the system are based upon, and limited
to, the following conditions:
a. The occupancy does not exceed one (1) person for each 100
square feet of usable area.
b. The total connected electrical load does not exceed four (4)
watts per square foot of usable area for all purposes,
including lighting and power (but excluding electricity for
the air-conditioning system providing heating, ventilation and
cooling).
c. Proper use of venetian blinds to control sun load.
3. The system shall provide minimum outside air of .2 CFM per usable
square foot.
4. The foregoing is subject to limitations in conformance with
prevailing codes in effect from time to time.
<PAGE> 135
SCHEDULE 3
Schedule of Approved Contractors (SCHEDULE "F")
[Follows this page]
<PAGE> 136
APPROVED CONTRACTORS LIST
GREY ADVERTISING
777 THIRD AVENUE
NEW YORK, NY 1017
TABLE OF CONTENTS
AIR BALANCING .............................................................. 1
ASBESTOS TREATMENT ......................................................... 1
BOILER REPAIR .............................................................. 1
CARPET & FLOORING .......................................................... 2
CEILING TILES .............................................................. 2
CENTRAL STATION ALARM SYSTEMS .............................................. 3
CERAMIC TILE ............................................................... 3
COOLING TOWER REPAIR ....................................................... 4
CONSTRUCTION (GENERAL CONTRACTORS) ......................................... 5
CONTROLS ................................................................... 5
ELECTRICAL ................................................................. 6
ELECTRONICS AND TAPE MANAGEMENT ............................................ 6
ENVIRONMENTAL CONSULTING & LAB SERVICES .................................... 6
FIRE EXTINGUISHERS SUPPLIER AND MAINTENANCE ................................ 7
FIRE PROTECTION CONSULTANTS ................................................ 7
GLASS WORK ................................................................. 7
HOLLOW METAL DOORS & BUCKS ................................................. 8
HVAC SERVICE COMPANIES ..................................................... 8
<PAGE> 137
INSULATION PIPING .......................................................... 9
LL-5/MAINTENANCE ........................................................... 10
LOCKSMITH .................................................................. 10
METAL & MARBLE WORK ........................................................ 11
MILLWORK/WOOD & DOORS ...................................................... 11
PAINTING ................................................................... 12
PLUMBING ................................................................... 12
SHEET METAL WORKS .......................................................... 13
SPRINKLERS ................................................................. 13
TERRAZZO ................................................................... 14
WATERPROOFING .............................................................. 15
WATER TANKS ................................................................ 15
WINDOW TREATMENTS .......................................................... 15
<PAGE> 138
AIR BALANCING:
- --------------
MERENDINO ASSOCIATES
524 GRAHAM AVENUE
BROOKLYN, NY 11222
CONTACT: MIKE MERENDINO
(718) 388-3900
- --------------------------------------------------------------------------------
ASBESTOS TREATMENT:
- -------------------
QUADRANT CONSTRUCTION
420 LEXINGTON AVENUE
New York, NY 10170
CONTACT: ROBERT JACOBSEN
(212) 697-4007
JOHN GALLIN & SON, INC.
40 GOLD STREET
NEW YORK, NY 10038
CONTACT: CHRISTOPHER GALLIN
(212) 267-8624
- --------------------------------------------------------------------------------
BOILER REPAIR:
- --------------
MILLER, PROCTOR, NICHOLAS INC.
2 HUDSON STREET
NORTH TARRYTOWN, NY 10591
CONTACT: SERVICE DEPT.
(914) 332-0088
H. LIEBLICH & CO., INC.
687 EAST 137TH STREET
BRONX, NY 10454
CONTACT: BRUCE LIEBLICH (PRESIDENT)
(718) 585-5200
- --------------------------------------------------------------------------------
1
<PAGE> 139
CARPET & FLOORING:
- ------------------
LASHER-WHITE CARPET (WAREHOUSE)
165 WEST 18TH STREET 39 LAWRENCE STREET
NEW YORK, NY 10011 YONKERS, NY 10705
CONTACT: VINCENT DEMPSEY
(212) 366-0666 EUGENE KNOPF
(914) 965-6667
J. GRAHAM CARPET CO., INC.
276 FIFTH AVENUE
NEW YORK, NY 10001
CONTACT: JOHN GRAHAM
(212) 679-1880 FAX (2120 679-1933
- --------------------------------------------------------------------------------
SHERLAND & FARRINGTON, INC.
155 AVENUE OF THE AMERICAS
NEW YORK, NY 10013
CONTACT: DWAYNE H. SHERLAND (V.P.)
(212) 206-7500 FAX (212) 206-7517
SOUNDTONE FLOORS, INC.
43-02 37TH STREET
LONG ISLAND CITY, NY 11101
CONTACT: BRETT MORROW
(718) 392-4001 FAX (718) 392-4575
- --------------------------------------------------------------------------------
CEILING TILES:
- --------------
WETZEL ACOUSTICAL
393 FIFTH AVENUE, RM 703
NEW YORK, NY 10016
CONTACT: JERRY WETZEL (PRESIDENT)
(212) 481-7743
2
<PAGE> 140
NATIONAL ACOUSTICS
514 WEST 36TH STREET
NEW YORK, NY 10018
CONTACT: JACK TEAHAN
(212) 695-1252
SUPERIOR ACOUSTICS
270 INDIAN HEAD ROAD
KINGS PARK, NY 11754
CONTACT, KENNETH MCGUIGAN
(718) 894-2417
- --------------------------------------------------------------------------------
CENTRAL STATION ALARM SYSTEMS NEW YORK OFFICE:
- ----------------------------------------------
HOLMES PROTECTION
440-9TH AVENUE
NEW YORK, NY 10001
CONTACT: LEON KASSMAN
(212) 760-0640
WELLS FARGO
53 WEST 23RD STREET
NEW YORK, NY 10010
CONTACT: BERNARD DRURY
(212) 337-4040
- --------------------------------------------------------------------------------
CERAMIC TILE:
- -------------
DEL TURCO BROTHERS, INC.
25 VERONER AVENUE
NEWARK, NJ 07104
CONTACT: ALDO DEL TURCO (PRESIDENT)
(201) 483-5770 (212) 267-8246
3
<PAGE> 141
BIORDI & BIORDI
43-20 102ND STREET
CORONA, NY 11368
CONTACT: DINO BIORDI
(718) 457-1222
WM. ERATH & SONS
4 REITH STREET
COPIAGUE, NY 11726
CONTACT: JEFF ERATH
(516) 842-2244
PORT MORRIS
1285 OAK POINT AVENUE
BRONX, NY 10474
CONTACT: JIM DELAZZERO
(718) 378-6100
- --------------------------------------------------------------------------------
COOLING TOWER REPAIR:
- ---------------------
N.Y. COOLING TOWER
60-19 54TH PLACE
MASPETH, NY 11378
CONTACT: ART WENER
(718) 467-0545
ISSEKS BROS, INC.
298 BROOME STREET
NEW YORK, NY 10002
CONTACT: DAVID HOCHHAUSER
(212) 267-2688
P.J. MECHANICAL
135 WEST 18TH STREET
NEW YORK, NY 10011
CONTACT: PETER SAROS
(212) 243-2555
PJM
1775 BROADWAY
NEW YORK, NY 10019
4
<PAGE> 142
CONTACT: PAT MURRAY, JR.
(212) 246-7671
- --------------------------------------------------------------------------------
CONSTRUCTION (GENERAL CONTRACTORS):
- -----------------------------------
QUADRANT CONSTRUCTION
420 LEXINGTON AVENUE
NEW YORK, NY 10170
CONTACT: ROBERT JACOBSEN
(212) 697-4007
JOHN GALLIN & SON, INC.
40 GOLD STREET
NEW YORK, NY 10038
CONTACT: CHRISTOPHER GALLIN
(212) 267-8624
JAMES E. FITZGERALD, INC.
54 WEST 39TH STREET
NEW YORK, NY 10018-3808
CONTACT: JAMES E. FITZGERALD
(212) 921-8700
- --------------------------------------------------------------------------------
CONTROLS:
- ---------
HONEYWELL INC.
24-30 SKILLMAN AVENUE
LONG ISLAND CITY, NY 11101
CONTACT: SALES DEPARTMENT
(718) 392-4300
5
<PAGE> 143
THOMAS S. BROWN CONTROLS, INC. (TSBA)
38-30 WOODSIDE AVENUE
LONG ISLAND CITY, NY 11104
CONTACT: MICHAEL OSBORNE
(718) 565-6000
ELECTRICAL:
- -----------
MUNICIPAL ELECTRIC CO., INC.
122 WEST 27TH STREET
NEW YORK, NY 10001
CONTACT: HERB FLAUM
(212) 243-5258
- --------------------------------------------------------------------------------
ELECTRONICS AND TAPE MANAGEMENT:
- --------------------------------
TECHNOLIFT INDUSTRIES, INC.
747 THIRD AVENUE
NEW YORK, NY 10017
CONTACT: BRET BOUDI
(212) 888-1692
- --------------------------------------------------------------------------------
ENVIRONMENTAL CONSULTING & LAB SERVICES:
- ----------------------------------------
DETAIL ASSOCIATES
300 GRAND AVENUE
ENGLEWOOD, NJ 07631
CONTACT: RALPH YOUNG
(201) 569-6708
- --------------------------------------------------------------------------------
6
<PAGE> 144
FIRE EXTINGUISHERS SUPPLIER AND MAINTENANCE:
- --------------------------------------------
H.J. MURRAY & CO.
66 READE STREET
NEW YORK, NY 10007
CONTACT: ED BURGY
(212) 227-7050
ABLE FIRE PREVENTION
241 WEST 26TH STREET
NEW YORK, NY 10001
CONTACT: MARK ORITZ
(212) 685-8314
- --------------------------------------------------------------------------------
FIRE PROTECTION CONSULTANTS:
- ----------------------------
QUALITY FIRE PROTECTION CONSULTANTS
255 WEST 34TH STREET
NEW YORK, NY 10122
CONTACT: JOHN MANGO
(212) 695-0890
- --------------------------------------------------------------------------------
GLASS WORK:
- -----------
PHILIP KAPLAN GLASS WORKS
49 MONROE STREET
NEW YORK, NY 10002
(212) 269-0031, 0033
CONTACT: GREG POMCHINSKY
EMERGENCY BOARDING SERVICE (718) 845-4798
- --------------------------------------------------------------------------------
7
<PAGE> 145
HOLLOW METAL DOORS & BUCKS:
- ---------------------------
LIBERTY DOOR WORKS
20 RAILROAD STREET
HUNTINGTON STATION, NY 11746
CONTACT: BOB GOUGH
(516) 549-9138
ACME PARTITION
513 PORTER AVENUE
BROOKLYN, NY 11222
CONTACT: GEORGE DEFEIS
(718) 387-6400
GENERAL FIREPROOF DOOR
913 EDGEWATER ROAD
BRONX, NY 10474
CONTACT: RUBIN KUJZEL
(718) 893-5500
- --------------------------------------------------------------------------------
HVAC SERVICE COMPANIES:
- -----------------------
WYANT AIR CONDITIONING
5-40 50TH AVENUE
LONG ISLAND CITY, NY 11101
CONTACT: MARK KATTALIA
(718) 392-6000
MATCO SERVICE COMPANY
130 COUNTRY COURTHOUSE ROAD
GARDEN CITY PARK, NY 11540
CONTACT: JAMES T. TURRISI
(516) 877-8000 FAX (516) 877-9010
8
<PAGE> 146
INDUSTRIAL SALES & SERVICE CORPORATION
P.O. BOX 1578
WEST BABYLON, NY 11704
CONTACT: TOMMY NELAN
(516) 491-5300
WEIKERT SHEET METAL INC.
29-76 NORTHERN BOULEVARD
LONG ISLAND CITY, NY 11101
CONTACT: TOM WEICKERT OR JOHN WEICKERT
(718) 706-0707, 0708
PJ MECHANICAL
135 WEST 18TH STREET
NEW YORK, NY 10011
CONTACT: PETER SAROS
(212) 243-2555
PJM
1775 BROADWAY
NEW YORK, NY 10019
CONTACT: PAT MURRAY, JR.
(212) 246-7671
- --------------------------------------------------------------------------------
INSULATION PIPING:
- ------------------
JOHN GRANDO INSULATION CONTRACTORS
68-08 WOODSIDE AVENUE
WOODSIDE, NY 11377
CONTACT: JOHN GRANDO
(718) 335-5005
- --------------------------------------------------------------------------------
9
<PAGE> 147
LL-5/MAINTENANCE:
- -----------------
FIRECRAFT, INC.
89-20 LIBERTY AVENUE
OZONE PARK, NY 11417
CONTACT: DONALD OELLERICH (PRESIDENT)
(718) 822-2600
WALKER THOMAS ASSOCIATES LTD.
10-35 47TH ROAD
LONG ISLAND CITY, NY 11101
CONTACT: BOB RIECHEL
(718) 937-3275
- --------------------------------------------------------------------------------
LOCKSMITH:
- ----------
AAA ARCHITECTURAL HARDWARE
44 WEST 46TH STREET
NEW YORK, NY 10036
CONTACT: WILLIAM BROWN
(212) 840-3939 FAX (212) 921-5086
- --------------------------------------------------------------------------------
ATLANTIC (MATERIAL ONLY)
601 WEST 26TH STREET
NEW YORK, NY 10001
CONTACT: PAUL SELDON
(212) 924-0700
WEINSTEIN & HOLTZMAN (MATERIAL ONLY)
29 PARK ROW
NEW YORK, NY 10038
CONTACT: FRAN LERNER
(212) 233-4651
- --------------------------------------------------------------------------------
10
<PAGE> 148
METAL & MARBLE WORK:
- --------------------
AZTEC METAL & MAINTENANCE CO.
211 EAST 43RD STREET
NEW YORK, NY 10017
CONTACT: TIM CHASE (PRESIDENT)
(212) 293-2777
MERLIN INDUSTRIES, INC.
248 WEST 14TH STREET
NEW YORK, NY 10014
CONTACT: BILL RIZZI
(212) 206-6800
- --------------------------------------------------------------------------------
MILLWORK/WOOD & DOORS
- ---------------------
HIRD BLAKER
620 EAST 132ND STREET
BRONX, NY 10454
CONTACT: JEFF NORTON
(718) 665-3434
WM. SOMERVILLE
166 EAST 124TH STREET
NEW YORK, NY 10035
CONTACT: BETH MILLER
(212) 534-4600
NORLANDER
10-61 JACKSON AVENUE
LONG ISLAND CITY, NY 11101
CONTACT: JOHN O'HARE
(718) 361-3707
11
<PAGE> 149
MIDHATTAN
3130 BORDENTOWN AVENUE
OLD BRIDGE, NJ 08857
CONTACT: FRANK MAROTTA
(908) 727-3020
- --------------------------------------------------------------------------------
PAINTING
- --------
PEARLMAN PAINTING
60 EAST 42ND STREET
NEW YORK, NY 10165
CONTACT: RANDY PEARLMAN
(212) 687-5055
MURRAY HILL PAINTING CO., INC.
10-29 48TH AVENUE
LONG ISLAND CITY, NY 11101
CONTACT: DAVID BARTON
(718) 482-7575 FAX (718) 482-7581
ROTH PAINTING COMPANY, INC.,
305 EAST 46TH STREET
NEW YORK, NY 10017
CONTACT: GORDON ROTH
(212) 758-2170 FAX (212) 688-5293
- --------------------------------------------------------------------------------
PLUMBING:
- ---------
M & T PLUMBING
120 EAST 13TH STREET
NEW YORK, NY 10003 CONTACT: MARK TEICH (VICE PRESIDENT)
(212) 673-6700
12
<PAGE> 150
KAPLAN.BRESLAW.ASH (SUPERVISED BY M & T PLUMBING)
536 WEST 50TH STREET
NEW YORK, NY 10019
CONTACT: MARK BRESLAW
(212) 307-5850
MAC FELDER (SUPERVISED BY M & T PLUMBING)
138 WEST 83RD STREET
NEW YORK, NY 10024
CONTACT: MICKEY SCHAKENBERG
(212) 877-8450
- --------------------------------------------------------------------------------
SHEET METAL WORKS (DUCTS, DIFFUSERS, ETC.):
- -------------------------------------------
WEICHERT SHEET METAL INC.
29-76 NORTHERN BOULEVARD
LONG ISLAND CITY, NY 11101
CONTACT: TOM WEICKERT OR JOHN WEICKERT
(718) 706-0707, 0708
WYANT AIR CONDITIONING
5-40 50TH AVENUE
LONG ISLAND CITY, NY 11101
CONTACT: MARK KATTALIA
(718) 392-6000
PJ MECHANICAL 135 WEST 18TH STREET
NEW YORK, NY 10011
CONTACT: PETER SAROS
(212) 243-2555
PJM
1775 BROADWAY
NEW YORK, NY 10019
CONTACT: PAT MURRAY, JR.
(212) 246-7671
- --------------------------------------------------------------------------------
SPRINKLERS:
- -----------
M & T PLUMBING
13
<PAGE> 151
120 EAST 13TH STREET
NEW YORK, NY 10003
CONTACT: MARK TEICH (VICE PRESIDENT)
(212) 673-6700
ABCO PERRLESS SPRINKLER
151 HERRICKS ROAD
GARDEN CITY, NY 11040
CONTACT: JIM STANTON
(516) 294-6850 (516) 294-6823
TRIANGLE FIRE SERVICES
75-17 COOPER AVENUE
GLENNDALE, NY 11385
CONTACT: MR. GRENTER RECHSTEINER (PRESIDENT)
(718) 326-9120 FAX (718) 326-9446
KAPLAN.BRESLAW.ASH (SUPERVISED BY M & T PLUMBING)
536 WEST 50TH STREET
NEW YORK, NY 10019
CONTACT: MARK BRESLAW
(212) 307-5850
- --------------------------------------------------------------------------------
TERRAZZO:
- ---------
PORT MORRIS TILE & TERRAZZO CORP.
1285 OAK POINT AVENUE
BRONX, NY 10474
CONTACT: MR. DE LAZARO
(718) 378-6100
- --------------------------------------------------------------------------------
14
<PAGE> 152
WATERPROOFING:
- --------------
R. SMITH RESTORATION
47-49 PARK AVENUE
BAYSHORE, NY 11706
CONTACT: RICHARD SMITH
(516) 665-0742
ABESTCO.
39-63 63RD STREET
WOODSIDE, NY 11377
CONTACT: LON BEST (PRESIDENT)
(718) 779-3000
- --------------------------------------------------------------------------------
WATER TANKS:
- ------------
ROSENWACH TANK CO., INC.
40-25 CRESCENT STREET
LONG ISLAND CITY, NY 11101
CONTACT: MR. ANDREW ROSENWACH
(718) 972-4411
- --------------------------------------------------------------------------------
WINDOW TREATMENTS:
- ------------------
DRAPERIES FOR HOME AND INDUSTRY
150 5TH AVENUE
NEW YORK, NY 10011
CONTACT: MAC WEISS/MARVIN GOLDSTEIN
(212) 242-2804
15
<PAGE> 153
SCHEDULE 4
Cleaning and Janitorial Services (SCHEDULE "C")
[Follows this page]
<PAGE> 154
SCHEDULE "C"
Cleaning Services
General Cleaning
Nightly
Damp mop ceramic tile, marble and terrazzo flooring in
entrance foyers.
Vacuum clean twice a week, moving light furniture other than
desks, file cabinets, etc.
Sweep all private stairways.
Empty and clean all wastepaper baskets, ash trays,
receptacles, etc., damp dust as necessary.
Remove wastepaper and waste materials from premises.
Dust and wipe clean all furniture, fixtures and window sills,
including telephones.
Clean all glass furniture tops.
Dust all chair rails, trim, etc.
Dust all baseboards.
Wash clean all water fountains.
Keep locker and slop sink rooms in clean and orderly
condition.
<PAGE> 155
Lavatories
Nightly
Sweep and wash all flooring.
Wash and polish all mirrors, powder shelves, bright work, etc., including
flushometers, piping, toilet seat hinges.
Wash all basins, bowls and urinals.
Dust all partition, tile walls, dispensers and receptacles.
Empty and clean paper towel and sanitary disposal receptacles.
Remove wastepaper and refuse.
Fill toilet tissue holders, soap dispensers and towel dispensers. The cost
of hand towels and soap are the responsibility of the tenant. The landlord shall
pay for the toilet paper.
Entrance Lobby
Nightly
Sweep and wash flooring.
Wash all rubber mats.
Floors in elevator cabs to be washed, waxed and polished or vacuum
cleaned, if carpeted.
Dust and rub down walls, metal work and saddles in elevator cabs.
Dust and rub down all elevator doors, mail chutes, mail depository.
2
<PAGE> 156
High Dusting
Office Areas
Do all high dusting approximately every 3 months which includes the
following:
Dust all pictures, frames, charts, graphs, and similar wall hangings not
reached in nightly cleaning.
Dust all vertical surfaces, such as walls, partitions, ventilating louvers
and other surfaces not reached in nightly cleaning.
Dust all lighting fixtures (Exterior only).
Dust all overhead pipes, sprinklers, etc.
Dust all venetian blinds.
Dust all window frames.
Periodic Cleaning
Office Areas
Wipe clean all interior metal as necessary.
Elevator, stairway, office and utility doors on all floors to be checked
for general cleanliness as necessary, removing fingermarks.
Once a week, dust all door louvers and other ventilating louvers within
reach.
Remove all fingermarks from metal partitions and other surfaces as
necessary.
Clean peripheral air units annually.
3
<PAGE> 157
Lavatories
Periodic Cleaning
Machine scrub flooring as necessary.
Wash all partitions, tile wall, enamel surfaces twice a month, using
proper disinfectant when necessary. Dust all lighting fixtures once a month
(Exterior only).
Do all high dusting once a month.
Glass
The cleaning of interior glass partitions is the responsibility of the
tenant.
Window cleaning, other than interior glass partitions, shall be in
accordance with the existing or future schedule established at the building. The
landlord is responsible for the cost of this service.
Clean entrance doors daily.
Clean lobby glass daily.
Schedule of Cleaning
All of the nightly cleaning services as listed to be done 5 nights each
week, Monday through Friday, on business days.
Sidewalks
Sweep and hose sidewalks, weather permitting, and clean and remove snow
and ice when necessary.
4
<PAGE> 158
SCHEDULE 5
Categories of Fringe Benefits
[Follows this page]
<PAGE> 159
1997 PORTERS WAGE ESCALATION
<TABLE>
<CAPTION>
(Rounded to 4 decimal
points)
<S> <C> <C> <C>
Base Wage: $14.7120 (1996) + .375 15.087000 15.0870
Pension Fund: $27.52 per week/40 hours 0.688000 0.6880
Legal fund: $3.50 per week/40 hours 0.087500 0.0875
Welfare: $5486.64 per annum/2080 hours 2.637808 2.6378
Vacation: 3 weeks $1810.44/1960 hours 0.923694 0.9237
Social Security: 7.65% of $15.0870 1.154156 1.1542
Unemployment Ins. State 4.6%
Federal .8%
5.4% of $7000 =
$378/2080 hours 0.181731 0.1817
Disability Ins: $9.48 x 12 months =
$113.76/2080 hours 0.054692 0.0547
Sick Benefits: 10 days=$1206.96/2080 hours 0.580269 0.5803
Medical Checkup: 2 days=$241.392/2080 hours 0.116054 0.1161
Additional Paid Holiday: 2/1/2 days=$301.74/2080 hours 0.145067 0.1451
Birthday: 1 day=$120.696/2080 hours 0.058027 0.0580
Worker's Comp. $4.98 per $100 of $31380.96=$1562.77/
2080 hours 0.751333 0.7513
Special Training Fund: $89.48 per annum/2080 hours 0.043019 0.0430
Annuity Fund: $7.00 per week/40 hours 0.175000 0.1750
</TABLE>
1
<PAGE> 160
<TABLE>
<S> <C> <C> <C>
Attendance Fund: $100 per annum/2080 hours 0.048077 0.0481
TOTAL: 22.731426 22.7314
</TABLE>
2
<PAGE> 161
EXHIBIT 1
Form of Subtenant NDA
[Follows this page]
<PAGE> 162
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
AND SUBLESSEE'S AGREEMENT TO ATTORN
AGREEMENT, made this ___ day of ________, 199__, by and between 7 THIRD
AVENUE LEASEHOLD LLC, a New York limited liability company, having an office for
the conduct of business c/o Sage Realty Corporation, 777 Third Avenue, New York,
New York 10017 ("Owner"), GREY ADVERTISING INC., a Delaware corporation, with an
office for the conduct of business at 777 Third Avenue, New York, New York 10017
("Sublessor"), and _____________________ ____________________________________, a
________________________, with an office for the conduct of business at 777
Third Avenue, New York, New York 10017 ("Sublessee").
W I T N E S S E T H :
WHEREAS, Owner is the owner of the lessee's interest under that certain
ground lease, dated as of June 1, 1964, between John Hancock Mutual Life
Insurance Company (predecessor-in-interest to the current fee owner), as
landlord, and William Kaufman and Jack D. Weiler (predecessor-in-interest to
Owner), as tenant, a memorandum of which ground lease was recorded on June 24,
1964 in Liber 5280, Cp.196 in the Office of the City Register of the City of New
York, New York County (the "City Register's Office"), and which ground lease was
amended by a First Lease Amendment, dated as of September 2, 1965, and recorded
on September 2, 1965 in Liber 5341, Cp. 228, and a Second Lease Amendment, dated
as of April 15, 1976, a memorandum of which was recorded on December 2, 1976 in
Reel 385, page 5, all in the City Register's Office (collectively, the "Ground
Lease"), the lessee's interest in which Ground Lease was assigned by mesne
assignments, the last of
1
<PAGE> 163
which was made by Melvyn Kaufman, as assignor, to Owner, as assignee, dated
January 24, 1995, and recorded on _______________, 1995 in Reel ______, page __
in the City Register's Office; and which Ground Lease demises to Owner the land
together with the improvements erected thereon (collectively, the "Building"),
located at and known as 777 Third Avenue, in the Borough of Manhattan, City
County and State of New York, which land is more particularly described on
Schedule A annexed hereto and made a part hereof; and
WHEREAS, Sublessor is a party to a certain lease, dated July 1, 1978, as
thereafter amended by Amendments and Letter Agreements as described in the first
whereas clause to that certain Seventeenth Amendment of Lease, dated as of the
__ day of February, 1998 (the "Seventeenth Amendment"), between Sage Realty
Corporation, as Agent for 7 Third Avenue Leasehold LLC, as landlord, and
Sublessee, as tenant (the original lease, as modified through and including the
Seventeenth Amendment, collectively, the "Space Lease"; and the space covered by
the Space Lease is referred to herein as the "Demised Premises"); and
WHEREAS, Sublessor and Sublessee are parties to a certain sublease, dated
_________, 199__ (the "Sublease"), covering a portion of the Demised Premises
(the "Subleased Premises"); and
WHEREAS, Owner has been requested by Sublessor and Sublessee to enter into
a non-disturbance agreement with Sublessor and Sublessee.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto mutually covenant and agree as follows:
22. Sublessee's interest in the Sublease and all
2
<PAGE> 164
rights of Sublessee thereunder are and shall be subject and subordinate to the
Space Lease and all renewals, modifications, replacements and extensions
thereof. This provision shall be self-operative.
23. In the event of the expiration or sooner termination of the
Space Lease prior to the date provided in the Sublease for the expiration of the
term of the Sublease, provided, that the Sublease is then in full force and
effect and no event of default on the part of Sublessee has occurred and is
continuing beyond applicable grace periods pursuant to the Sublease and/or
hereunder, Sublessee shall not be joined as a party defendant for the purpose of
terminating Sublessee's interest in the Sublease in any action or proceeding
brought by Owner for the purpose of enforcing any of Owner's rights under the
Space Lease (provided, however, that Owner may join Sublessee as a party in any
such action or proceeding if such joinder is necessary under any statute or law
or otherwise for the purpose of effecting the remedies available to Owner under
the Space Lease or otherwise, but only for such purposes and not for the purpose
of terminating the Sublease), shall not be evicted from the Subleased Premises
nor shall its possession of the Subleased Premises be disturbed or terminated or
affected except to the extent provided for in Paragraph 4 below, by reason of a
termination of the Space Lease resulting from any default by Sublessor under the
Space Lease, and the Sublease shall continue in full force and effect as a
direct lease and demise of the Subleased Premises from Owner upon all of the
then executory terms and provisions set forth in the Sublease except to the
extent provided for in Paragraph 4 below.
24. In the event of the expiration or sooner termination of the
Space Lease prior to the date provided in the
3
<PAGE> 165
Sublease for the expiration of the term of the Sublease, Sublessee agrees to (i)
attorn to and recognize Owner as the landlord under the Sublease and the
Sublease shall continue in full force and effect as a direct lease and demise of
the Subleased Premises from Owner upon all of the then executory terms and
provisions of the Sublease, except to the extent provided for in Paragraph 4
below, and (ii) upon request of Owner, execute and deliver to Owner within ten
(10) days after request therefor by Owner any instrument or instruments in
recordable form which may be reasonably necessary or appropriate to effect the
performance of the agreements herein contained. In the event that Sublessee
fails to execute any such instrument within ten (10) days after request therefor
by Owner, such failure shall constitute a default under the Sublease; provided,
however, that the failure by Owner to receive such a written instrument from
Sublessee shall not modify or reduce Sublessee's obligations to Owner hereunder
or under the Sublease.
25. Notwithstanding anything to the contrary contained herein or in
the Sublease, if the Sublease shall become a direct lease and demise of the
Subleased Premises hereunder then:
(i) Owner shall not be (a) liable for any previous act,
omission or negligence of Sublessor or breach of any representation or warranty
by Sublessor under the Sublease, (b) subject to any counterclaim, defense, or
offset theretofore accruing to Sublessee against Sublessor, (c) subject to any
rent credit or rent abatement provided for in the Sublease, (d) bound by any
previous modification, amendment, extension, expansion, termination,
cancellation or surrender of the Sublease made without Owner's consent or by any
previous prepayment of more than one (1) month's rent and additional rent
4
<PAGE> 166
in advance unless actually received by Owner, (e) bound to make any payments to
Sublessee provided for in the Sublease, (f) obligated to perform any repairs or
other work or capital improvements in the Subleased Premises or the Building
beyond Owner's obligations under the Space Lease with respect to the Subleased
Premises, (g) provide or perform any services not related to possession of the
Subleased Premises, (h) bound to refund, or liable for the refund of, all or any
part of any security deposit of the Sublessee with Sublessor for any purpose,
unless and until all such security deposit shall have actually been delivered
and received by Owner (and then the obligations of Owner shall be limited to the
amount of such security deposit actually received), or (i) required to cure any
default, act or omission which is personal to Sublessor and, therefore, not
susceptible of cure by Owner.
(ii) If any term of the Sublease shall be less favorable
to Owner than is any term of the Space Lease (including for this purpose any
term of the Sublease for which there is no corresponding term in the Space Lease
or vice-versa), the same shall be deemed overridden by such term in the Space
Lease, which shall govern and control or shall be deemed stricken from the
Sublease, as the case may be.
(iii) Effective as of the actual date the Sublease shall
become a direct lease and demise of the Subleased Premises hereunder, the fixed
rent and additional rent payable by Sublessee with respect to the Subleased
Premises shall be the greater of (x) the fixed minimum rent and all additional
rent payable under the Sublease by Sublessee or (y) the fixed minimum rent and
all additional rent payable under the Space Lease by Sublessor (computed at the
rate per square foot payable under the Space Lease by Sublessor effective as of
the actual
5
<PAGE> 167
date of the attornment provided for hereunder).
26. Anything herein or in the Sublease to the contrary
notwithstanding, in the event that the Sublease shall become a direct lease and
demise of the Subleased Premises from Owner, Owner shall have no obligations nor
incur any liability beyond Owner's then interest in the Building, and Sublessee
shall look exclusively to such interest of Owner (or of the then owner at the
time in question, as the case may be) in the Building for the payment and
discharge of any obligations and/or liabilities imposed upon Owner hereunder or
under the Sublease, or otherwise, subject to the limitations of Owner's
obligations provided for herein, and Owner is hereby released and relieved of
any other liability hereunder and under the Sublease. Sublessee agrees that,
with respect to any money judgment which may be obtained or secured by Sublessee
against Owner, Sublessee shall look solely to the estate or interest owned by
Owner (or the then owner at the time in question, as the case may be) in the
Building, and Sublessee will not collect or attempt to collect any such judgment
out of any other assets of Owner or its agents, officers, directors,
shareholders, partners, members or principals, disclosed or undisclosed.
27. (a) Sublessee shall notify Owner of any default or other act or
omission of Sublessor or of the occurrence or non-occurrence of any event (any
of the foregoing herein an "Act or Event") which would entitle Sublessee to
cancel the Sublease or abate the rent or additional rent payable thereunder, if
applicable, and agrees that notwithstanding any provision of the Sublease to the
contrary, no notice of cancellation thereof or right to abate or withhold the
rent or additional rent shall be effective unless (x) Owner has failed within
thirty (30) days of the date of receipt of Sublessee's
6
<PAGE> 168
notice thereof, to notify Sublessee of Owner's intention to cure the default of
Sublessor ("Owner's Notice") and (y) if Owner shall have given Owner's Notice,
as aforesaid, until a reasonable period of time (considering the nature of the
Act or Event, as the case may be) shall have elapsed following the giving of
Owner's Notice (which reasonable time period shall be extended by any time
necessary for Owner to recover possession of the Demised Premises and/or the
Subleased Premises or have a receiver appointed in order to cure such Act or
Event, as the case may be) during which period Owner may, but shall not be
obligated to, cure such Act or Event; provided, however, that sixty (60) days
shall be deemed to be a reasonable period of time to cure any default capable of
being cured solely by the payment of a fixed sum of money, and, provided
further, that if Owner shall give an Owner's Notice, then Owner shall thereafter
use commercially reasonable efforts and diligence to prosecute the curing of any
such other default (including where necessary to obtain possession of the
Demised Premises) unless Owner thereafter decides to abandon any such efforts by
sending to Sublessee written notice thereof, in which event Sublessee shall have
its rights and remedies under the Sublease, as modified by this Agreement.
(b) Owner shall be subrogated to Sublessee's rights against
Sublessor to the extent that Owner reimburses Sublessee for costs and expenses
incurred by Sublessee in curing or remedying a Sublessor default.
(c) Except as is expressly provided for in Paragraph 6(a)
hereof, Owner shall have no obligation hereunder to remedy any default of
Sublessor under the Sublease. Owner shall not be or become subject to any
liability or obligation to Sublessee under the Sublease or otherwise until the
Sublease
7
<PAGE> 169
shall become a direct lease and demise of the Subleased Premises from Owner, and
then only to the extent provided for herein.
28. Sublessor and Sublessee agree that, without the prior written
consent of Owner, to be granted or withheld in Owner's sole discretion, they
shall not (i) amend, modify, terminate or cancel the Sublease or any extension
or renewal thereof, or (ii) tender a surrender of the Sublease or make a
prepayment in excess of the amount of one (1) month's rent thereunder. Any such
purported action without such consent shall be void as against Owner.
29. Sublessor and/or Sublessee, as the case may be, shall deliver to
Owner copies of all notices of default or demand which it gives or receives in
connection with the Sublease simultaneously with its giving of, or promptly upon
its receipt of, such notice, and any right of Sublessor and/or Sublessee
dependent upon such notice shall take effect only after such notice is so given
to both Owner and Sublessor or Sublessee, as the case may be.
30. Any notice or other communication that is required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given (i) when deposited in the mail, postage prepaid for registered
or certified mail, return receipt requested, or (ii) when personally delivered
or (iii) when sent by overnight courier (e.g., Federal Express or Airborne
Express), in each case, to the parties hereto at their respective addresses set
forth above, or at such other address as any party hereto shall hereafter
specify by five (5) days' prior notice to the other parties given and received
in the manner provided in this Paragraph 9. A notice shall be deemed to have
been duly received (and any time period measured by the
8
<PAGE> 170
giving of notice shall commence) (i) if mailed, on the date of delivery set
forth on the return receipt, or (ii) if personally delivered, on the date of
delivery, or (iii) if sent by overnight courier, on the date of delivery. The
inability to make delivery because of changed address of which no notice was
given, or rejection or refusal to accept any notice offered for delivery, shall
be deemed to be receipt of the notice as of the date of such inability to
deliver or rejection or refusal to accept. Any notice may be given by counsel
for the party giving same.
31. Sublessor and Sublessee acknowledge that under Section 11.05 of
the Space Lease, Owner may, after default by Sublessor under the Space Lease,
collect directly from Sublessee the rent and all additional rent due under the
Sublease. Sublessee agrees that it shall, and Sublessor, as landlord under the
Sublease, hereby authorizes and directs Sublessee to, honor such demand and pay
the rent and all additional rent due under the Sublease directly to Owner. In
the event that Owner notifies Sublessee and Sublessor that there has been a
default by Sublessor under the Space Lease and demands that Sublessee pay to
Owner the rent and all additional rent under the Sublease, such demand by Owner
on Sublessee shall be sufficient to authorize Sublessee to pay the rent and all
additional rent due under the Sublease to Owner without necessity for consent by
Sublessor or any further evidence of Owner's rights under the Space Lease or
otherwise and notwithstanding any claim by Sublessor to the contrary, and
Sublessee shall have the right, and Sublessor hereby irrevocably authorizes and
directs Sublessee to, pay the rent and all additional rent due under the
Sublease directly to Owner for application by Owner in accordance with the terms
of the Space Lease, until further notice by Owner authorizing Sublessee to
resume such payments to Sublessor. Sublessor hereby acknowledges and agrees that
Sublessor shall
9
<PAGE> 171
have no claim against Sublessee for any amounts paid hereunder by Sublessee to
Owner.
32. (a) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, without
giving effect to conflict of law principles.
(b) This Agreement may not be modified except by an agreement
in writing signed by the parties hereto.
(c) If any term of this Agreement or the application thereof
to any person or circumstance shall to any extent be invalid or unenforceable,
the remainder of this Agreement or the application of such term to any person or
circumstance other than those as to which it is invalid or unenforceable shall
not be affected thereby, and each term of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
(d) The parties hereto hereby irrevocably waive all right to
trial by jury in any action, proceeding or counterclaim arising out of or
relating to this Agreement.
(e) Owner's, Sublessor's and/or Sublessee's failure to comply
with any of its agreements or covenants under this Agreement shall constitute a
default hereunder. In the event of such default, each party shall be entitled to
exercise all rights and remedies available to it under this Agreement and at law
and in equity. In the event of such default by Sublessor, the same shall
constitute a default under the Space Lease as well as a default hereunder, and
Owner shall be entitled to exercise all rights and remedies available to it
hereunder, under the
10
<PAGE> 172
Space Lease and at law and in equity.
(f) Owner shall not, by virtue of this Agreement, or any other
instrument to which Owner may be a party, be or become subject to any liability
or obligation to Sublessee under the Sublease or otherwise until the Sublease
shall become a direct lease and demise of the Subleased Premises from Owner and
then only subject to the extent and the limitations herein provided.
(g) This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing same
to be drafted.
33. All the provisions hereof shall run with the Demised Premises
and shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns and may not be modified or terminated
orally.
34. The terms and conditions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, provided, however that in the event of the assignment or transfer
of the interest of Owner, all obligations and liabilities of Owner under this
Agreement shall terminate and thereupon all such obligations and liabilities
shall be the responsibility of the party to whom Owner's interest is assigned or
transferred.
14. Each of the parties hereto represents to each other party that
it has full authority to enter into this Agreement and that the entry into this
Agreement has been duly authorized by all necessary actions.
11
<PAGE> 173
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
OWNER:
7 THIRD AVENUE LEASEHOLD LLC
By: W-7 Third Lease LLC,
Managing Member
By:________________________________
Name: Robert Kaufman
Title: Managing Member
SUBLESSOR:
GREY ADVERTISING INC.
By:________________________________
Name:
Title:
SUBLESSEE:
[Name of Sublessee]
By:_______________________________
Name:
Title:
12
<PAGE> 174
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this _____ day of ________, 199__, before me personally appeared Robert
Kaufman, residing at 18 Martin Court, Great Neck, New York, to me known, and
known to me to be the individual who executed the foregoing instrument, who
being duly sworn, did depose and say that the deponent is a Managing Member of
W-7 Third Lease LLC, a New York limited liability company which is the Managing
Member of 7 Third Avenue Leasehold LLC, the New York limited liability company
described in and which executed the foregoing instrument, and that he has the
authority to and did execute the foregoing instrument as the act of and deed of
said 7 Third Avenue Leasehold LLC.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ___ day of ________, 199__, before me personally came
_______________, to me known, who being by me duly sworn, did depose and say
that (s)he resides at __________________________; that (s)he is the
________________________ of GREY ADVERTISING INC., the corporation described in
and which executed the foregoing instrument; and that (s)he signed (her)his name
thereto by authority of the Board of Directors of such corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the ___ day of _____________, 199__, before me personally came
__________________, to me known, who being by me duly sworn, did depose and say
that (s)he resides at ______________________; that (s)he is the _______________
of ___________________, the corporation described in and who executed the
foregoing instrument; that (s)he signed (her)his name thereto by authority of
the Board of Directors of such corporation.
------------------------------
Notary Public
<PAGE> 175
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
AND LESSEE'S AGREEMENT TO ATTORN
AGREEMENT, made this 3rd day of February, 1998, by and between 7
THIRD AVENUE FEE LLC, a New York limited liability company, having an office for
the conduct of business c/o Sage Realty Corporation, 777 Third Avenue, New York,
New York 10017 ("Owner"), and GREY ADVERTISING INC., a Delaware corporation,
with an office for the conduct of business at 777 Third Avenue, New York, New
York 10017 ("Tenant").
W I T N E S S E T H :
WHEREAS, Owner is the owner in fee of the land located at and known
as 777 Third Avenue, in the Borough of Manhattan, City, County and State of New
York, which land is more particularly described on Schedule A annexed hereto and
made a part hereof (the "Land"), and which Land is demised under that certain
ground lease, dated as of June 1, 1964, between John Hancock Mutual Life
Insurance Company (predecessor-in-interest to Owner), as landlord, and William
Kaufman and Jack D. Weiler (predecessor-in-interest to 7 Third Avenue Leasehold
LLC), as tenant, a memorandum of which ground lease was recorded on June 24,
1964 in Liber 5280, Cp.196 in the Office of the City Register of the City of New
York, New York County (the "City Register's Office"), and which ground lease was
amended by a First Lease Amendment, dated as of September 2, 1965, and recorded
on September 2, 1965 in Liber 5341, Cp. 228, and a Second Lease Amendment, dated
as of April 15, 1976, a memorandum of which was recorded on December 2, 1976 in
Reel 385, page 5, all in the City Register's Office (collectively, the "Ground
Lease"), the lessee's interest in which Ground Lease was assigned by mesne
assignments, the last of which was made by Melvyn Kaufman, as assignor, to
Owner, as assignee, dated January 24, 1995, and recorded on
<PAGE> 176
- 2 -
_______________,
1995 in Reel ______, page __ in the City Register's Office; and
WHEREAS, Tenant is a party to a certain lease, dated July 1, 1978,
as thereafter amended by Amendments and Letter Agreements as described in the
first whereas clause to that certain Seventeenth Amendment of Lease, dated as of
the __ day of February, 1998 (the "Seventeenth Amendment"), between Sage Realty
Corporation, as Agent for 7 Third Avenue Leasehold LLC, as Landlord, and Tenant,
as Tenant, being executed and delivered simultaneously herewith (the original
lease, as modified through and including the Seventeenth Amendment,
collectively, the "Space Lease"; and the space covered by the Space Lease
together with any other space hereafter leased by Tenant pursuant to the Space
Lease is referred to herein as the "Demised Premises").
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the parties hereto mutually covenant and agree as
follows:
1. Tenant's interest in the Space Lease and all rights of
Tenant thereunder are and shall be subject and subordinate to the Ground Lease
and all renewals, modifications, replacements and extensions thereof.
2. In the event of the expiration or sooner termination of the
Ground Lease prior to the date provided in the Space Lease for the expiration of
the Term thereof, provided, however, no event of default on the part of Tenant
has occurred and is continuing beyond applicable grace periods pursuant to the
Space Lease, Tenant shall not be evicted from the Demised Premises nor shall its
possession of the Demised Premises be disturbed or terminated, and the Space
Lease shall continue in full force and effect as a direct lease and demise of
the Demised
<PAGE> 177
- 3 -
Premises from Owner upon all the terms and provisions set forth in the Space
Lease.
3. In the event of the expiration or sooner termination of the
Ground Lease prior to the date provided in the Space Lease for the expiration of
the Term thereof, Tenant agrees to attorn to and recognize Owner as the landlord
under the Space Lease, and further agrees, upon request of Owner, to execute and
deliver to Owner any instrument or instruments in recordable form which may be
reasonably necessary or appropriate to effect the performance of the agreements
herein contained.
4. All the provisions hereof shall run with the Demised
Premises and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns and may not be modified or
terminated orally.
5. Capitalized terms not otherwise defined herein shall have
the respective meanings ascribed to them in the Space Lease.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year first above written.
7 THIRD AVENUE FEE LLC
By: W-7 Third Fee LLC, Managing Member
By:____________________________________
Name: Robert Kaufman
Title: Managing Member
GREY ADVERTISING INC.
By:____________________________________
Name: Edward H. Meyer
Title: Chairman and President
<PAGE> 178
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 3rd day of February, 1998, before me personally appeared Robert
Kaufman, residing at 18 Martin Court, Great Neck, New York, to me known, and
known to me to be the individual who executed the foregoing instrument, who
being duly sworn, did depose and say that the deponent is a Member of W-7 Third
Fee LLC, a New York limited liability company which is a Managing Member of 7
Third Avenue Fee LLC, the New York limited liability company described in and
which executed the foregoing instrument, and that he has the authority to and
did execute the foregoing instrument as the act of and deed of said 7 Third
Avenue Fee LLC.
--------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 3rd day of February, 1998, before me personally came Edward H.
Meyer, to me known, who being by me duly sworn, did depose and say that he
resides at 580 Park Avenue, New York, New York; that he is the Chairman and
President of GREY ADVERTISING INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by
authority of the Board of Directors of such corporation.
--------------------------------
Notary Public
<PAGE> 179
SCHEDULE A
[Property description follows this page]
<PAGE> 180
777 THIRD AVENUE
All that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:
BEGINNING at the corner formed by the intersection of the easterly side of Third
Avenue and the northerly side of East 48th Street:
RUNNING THENCE northerly along the said easterly side of Third Avenue, 200 feet
10 inches to the corner formed by the intersection of said easterly side of
Third Avenue and the southerly side of East 49th Street;
THENCE easterly along the southerly side of East 49th Street, 120 feet;
THENCE southerly and parallel with the easterly side of Third Avenue and part of
the way through a party wall, 88 feet and 11 inches;
THENCE easterly in a straight line, 25 feet 3-3/8 inches to a point in a line
distant 115 feet 8 inches northerly from the northerly side of East 48th Street,
measured along a line drawn parallel with Third Avenue and distant 145 feet
easterly therefrom;
THENCE southerly and parallel with the easterly side of Third Avenue, 115 feet 8
inches to the northerly side of East 48th Street;
THENCE westerly along the said northerly side of East 48th Street, 145 feet to
the corner first mentioned at the point or place of BEGINNING.
<PAGE> 181
SEVENTEENTH AMENDMENT OF LEASE
SAGE REALTY CORPORATION, AS AGENT,
Landlord
and
GREY ADVERTISING INC.,
Tenant
Premises:
777 Third Avenue
New York, New York 10017
<PAGE> 182
TABLE OF CONTENTS
Page
1. Definitions............................................................3
2. Extension of Term......................................................3
3. Leased Premises........................................................3
4. Annual Fixed Minimum Rent and Additional Rent..........................4
5. Addition of Basement Space to Leased Premises..........................9
6. Additional Premises Spaces............................................13
7. Additional Construction and Improvement Items.........................28
8. Tenant's Extension Option.............................................42
9. Rooftop Antenna.......................................................50
10. Heating, Ventilating and Air-Conditioning.............................56
11. Alterations...........................................................58
12. Building Name; Signs..................................................67
13. Electricity...........................................................68
14. Brokers...............................................................76
15. Non-Disturbance.......................................................76
16. Concierge Booth.......................................................84
17. Additional Provisions.................................................86
18. Lease in Full Force..................................................105
19. Prior Understanding..................................................105
20. Construction of Lease................................................105
21. Enforceability.......................................................105
SCHEDULE 1 Schedule Regarding Additional Premises Space
SCHEDULE 2 Performance Criteria for Air-Conditioning, Heating and Ventilation
SCHEDULE 3 Schedule of Approved Contractors (SCHEDULE "F")
SCHEDULE 4 Cleaning and Janitorial Services (SCHEDULE "C")
SCHEDULE 5 Categories of Fringe Benefits
EXHIBIT 1 Form of Subtenant NDA
i
<PAGE> 1
Grey Advertising Inc. and Consolidated Subsidiary Companies
Exhibit 21.01
Subsidiaries of Grey
(as of March 1, 1998)
Name Jurisdiction of Organization
---- ----------------------------
Alonso y Asociados S.A. Mexico
AS Grey Oy Finland
CR & Grey Advertising Pty. Ltd. Singapore
CSS & Grey Cyprus
Cenajans Grey Reklamcilik A.S. Turkey
Creative Collaboration Grey S.A. Switzerland
Crescendo Productions Inc. New York
Dorland & Grey S.A. Belgium
Dorland & Grey S.A. France
Esfera Grey, S.A. Columbia
Fischer-Grey, C.A. Venezuela
FOVA Inc. Delaware
G2 Advertising Inc. California
GCG Norge A/S Norway
GCG Scandinavia A/S Denmark
GCI Group Inc. New York
GEM F&C Inc. California
Great Productions Inc. Delaware
Great Spot Films Ltd. Delaware
Grey Advertising (Hong Kong) Ltd. Hong Kong
Grey Advertising (NSW) Pty. Ltd. Australia
Grey Advertising (New Zealand) Ltd. New Zealand
Grey Advertising de Venezuela, C.A. Venezuela
Grey Advertising (Victoria) Pty. Ltd. Australia
-1-
<PAGE> 2
Grey Advertising Inc. and Consolidated Subsidiary Companies
Exhibit 21.01
Subsidiaries of Grey
(as of March 1, 1998)
Name Jurisdiction of Organization
---- ----------------------------
Grey Advertising Inc. Maryland
Grey Advertising Ltd. Canada
Grey Argentina S.A. Argentina
Grey Athens Advertising S.A. Greece
Grey Australia Pty. Ltd. Australia
Grey Austria GmbH Austria
Grey Chile S.A. Chile
Grey Communications Group A/S Denmark
Grey Communications Group B.V. The Netherlands
Grey Communications Group Ltd. United Kingdom
Grey-Daiko Advertising, Inc. Japan
Grey Denmark A/S Denmark
Grey Diciembre S.A. Uruguay
Grey Direct Inc. Delaware
Grey Direct International GmbH Germany
Grey Directory Marketing Inc. Delaware
Grey Dusseldorf GmbH Co. Kommanditgesellschaft Germany
Grey Entertainment Inc. New York
Grey Espana S.A. Spain
Grey GmbH Germany
Grey Healthcare Group Inc. Delaware
Grey Holding S.A. Belgium
Grey Holding GmbH Germany
Grey Holdings A.B. Sweden
-2-
<PAGE> 3
Grey Advertising Inc. and Consolidated Subsidiary Companies
Exhibit 21.01
Subsidiaries of Grey
(as of March 1, 1998)
Name Jurisdiction of Organization
---- ----------------------------
Grey Holdings Pty. Ltd. South Africa
Grey IFC Inc. Delaware
Grey India Inc. Delaware
Grey Advertising (Malaysia) Sdn. Bhd. Malaysia
Grey Media Connections Inc. New York
Grey Mexico, S.A. de C.V. Mexico
Grey Peru S.A. Peru
Grey Strategic Marketing Inc. Delaware
Grey Thailand Co. Ltd. Thailand
Grey Ventures Inc. New York
Greycom S.A.R.L. France
Group Trace, S.A. Spain
Hwa Wei & Grey Advertising Co. Ltd. Taiwan
Indigo Entertainment Inc. Delaware
Local Marketing Corporation Ohio
Mediacom Inc. Delaware
Milano e Grey S.p.A. Italy
National Research Foundation for
Business Statistics, Inc. New York
Principal Communications Inc. Delaware
Preferred Professionals Inc. New York
Rigel Ltd. Cayman Islands
SEK & Grey Ltd. Finland
-3-
<PAGE> 4
Grey Advertising Inc. and Consolidated Subsidiary Companies
Exhibit 21.01
Subsidiaries of Grey
(as of March 1, 1998)
Name Jurisdiction of Organization
---- ----------------------------
The Tape Center Inc. Delaware
Triple Seven Concepts Inc. Delaware
Visual Communications Group Inc. New York
Walther, Gesess, Grey AG Switzerland
West Indies & Grey Advertising Inc. Puerto Rico
Z&G Grey Comunicacao Ltda. Brazil
-4-
<PAGE> 1
Exhibit 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-98101 and 2-97465) pertaining to the Incentive Stock Option
Plan of Grey Advertising Inc. of our report dated February 6, 1998 on the
consolidated financial statements of Grey Advertising Inc. and consolidated
subsidiary companies included in the Annual Report (Form 10-K) for the year
ended December 31, 1997.
ERNST & YOUNG LLP
New York, New York
March 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE AUDITED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 OF GREY
ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 150,553
<SECURITIES> 15,401
<RECEIVABLES> 647,524
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 924,390
<PP&E> 204,449
<DEPRECIATION> 116,443
<TOTAL-ASSETS> 1,199,987
<CURRENT-LIABILITIES> 873,864
<BONDS> 78,025
1,432
10,760
<COMMON> 0
<OTHER-SE> 160,874
<TOTAL-LIABILITY-AND-EQUITY> 1,199,987
<SALES> 858,752
<TOTAL-REVENUES> 858,752
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 793,832
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,095
<INCOME-PRETAX> 69,291
<INCOME-TAX> 33,719
<INCOME-CONTINUING> 30,451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,451
<EPS-PRIMARY> 25.03
<EPS-DILUTED> 21.89
</TABLE>
