<PAGE>
[As filed with the Securities and Exchange Commission on March 15, 1995]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 29, 1995
----------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________to___________________
Commission File Number: 1-9474
FORSTMANN & COMPANY, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1651326
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1185 Avenue of the Americas
New York, New York 10036
(Address of principal executive offices)
(212) 642-6900
(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes _____ No
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 5,618,800 shares of common stock, $.001 par value, outstanding as
of March 14, 1995.
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 29, 1995
----------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________to___________________
Commission File Number: 1-9474
FORSTMANN & COMPANY, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1651326
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1185 Avenue of the Americas
New York, New York 10036
(Address of principal executive offices)
(212) 642-6900
(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes _____ No
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 5,618,800 shares of common stock, $.001 par value, outstanding as
of March 14, 1995.
Total number of pages: _____ pages.
-1-
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
FORSTMANN & COMPANY, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED JANUARY 29, 1995
AND JANUARY 30, 1994
(unaudited)
<TABLE>
<CAPTION>
January 29, January 30,
1995 1994
---- ----
<S> <C> <C>
Net sales $43,527,000 $37,451,000
Cost of goods sold 36,624,000 28,683,000
----------- -----------
Gross profit 6,903,000 8,768,000
Selling, general and administrative expenses 5,196,000 5,578,000
Provision for uncollectible accounts 226,000 1,219,000
----------- -----------
Operating income 1,481,000 1,971,000
Interest expense 4,598,000 3,854,000
----------- -----------
Loss before income taxes (3,117,000) (1,883,000)
Income tax benefit - principally deferred (1,231,000) (744,000)
----------- -----------
Net loss (1,886,000) (1,139,000)
Preferred stock in-kind dividends and
accretion to redemption value 64,000 58,000
----------- -----------
Loss applicable to common shareholders $(1,950,000) $(1,197,000)
=========== ===========
Per share and share information:
Loss per common share $(.35) $(.21)
=========== ===========
Weighted average common shares outstanding 5,618,800 5,585,540
=========== ===========
</TABLE>
See notes to financial statements.
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<PAGE>
FORSTMANN & COMPANY, INC.
CONDENSED BALANCE SHEETS
JANUARY 29, 1995 AND OCTOBER 30, 1994
(unaudited)
<TABLE>
<CAPTION>
January 29, October 30,
1995 1994
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 46,000 $ 49,000
Accounts receivable, net of allowance of
$2,318,000 and $2,100,000 48,924,000 57,089,000
Current income taxes receivable 1,500,000 1,500,000
Inventories 94,495,000 76,881,000
Current deferred tax assets 4,339,000 4,339,000
Other current assets 1,185,000 943,000
------------ ------------
Total current assets 150,489,000 140,801,000
Property, plant and equipment, net 80,831,000 79,479,000
Other assets 9,039,000 8,976,000
------------ ------------
Total $240,359,000 $229,256,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 7,280,000 $ 2,714,000
Accounts payable 20,868,000 13,153,000
Accrued liabilities 14,499,000 12,272,000
------------ ------------
Total current liabilities 42,647,000 28,139,000
Long-term debt 155,347,000 155,597,000
Deferred tax liabilities 5,085,000 6,316,000
Accrued additional pension liability in
excess of accumulated benefit obligation 943,000 943,000
Redeemable preferred stock 2,489,000 2,425,000
Shareholders' Equity:
Common stock 5,619 5,619
Additional paid-in capital 26,564,381 26,602,381
Excess of additional pension liability
over unrecognized prior service cost, net (526,000) (526,000)
Retained earnings since November 2, 1992 7,804,000 9,754,000
------------ ------------
Total shareholders' equity 33,848,000 35,836,000
------------ ------------
Total $240,359,000 $229,256,000
============ ============
</TABLE>
See notes to financial statements.
-3-
<PAGE>
FORSTMANN & COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED JANUARY 29, 1995
AND JANUARY 30, 1994
(unaudited)
<TABLE>
<CAPTION>
January 29, January 30,
1995 1994
---- ----
<S> <C> <C>
Net loss $ (1,886,000) $ (1,139,000)
------------ ------------
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 3,338,000 3,414,000
Income tax benefit (1,231,000) (744,000)
Provision for uncollectible accounts 226,000 1,219,000
Loss (gain) from disposal of machinery
and equipment 49,000 (20,000)
Changes in current assets and current
liabilities:
Accounts receivable 7,939,000 7,318,000
Inventories (17,614,000) (18,423,000)
Other current assets (247,000) 426,000
Accounts payable 7,715,000 (7,391,000)
Accrued liabilities 452,000 (1,798,000)
Accrued interest payable 2,607,000 1,989,000
Investment in notes receivable, net (10,000) 316,000
Deferred financing costs (303,000) (138,000)
------------ ------------
Total adjustments 2,921,000 (13,832,000)
------------ ------------
Net cash provided (used) by operations 1,035,000 (14,971,000)
------------ ------------
Cash flows used in investing activities:
Capital expenditures (4,382,000) (4,728,000)
Investment in computer information systems (407,000) (637,000)
Net proceeds from disposal of machinery
and equipment 100,000 25,000
------------ ------------
Net cash used by investing activities (4,689,000) (5,340,000)
------------ ------------
Cash flows from financing activities:
Net (payments) borrowings under the
Revolving Line of Credit (4,786,000) 20,015,000
Proceeds from the Term Loan 7,500,000 -
Borrowings under the CIT Equipment Facility 2,487,000 1,113,000
Repayment of CIT Equipment Facility and
capital leases (686,000) (838,000)
Incentive stock options exercised - 21,000
Cash paid in connection with Dissenters'
Proceeding (864,000) -
------------ ------------
Net cash provided by financing activities 3,651,000 20,311,000
------------ ------------
Net decrease in cash (3,000) -
Cash at beginning of period 49,000 53,000
------------ ------------
Cash at end of period $ 46,000 $ 53,000
============ ============
</TABLE>
See notes to financial statements.
-4-
<PAGE>
FORSTMANN & COMPANY, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THIRTEEN WEEKS ENDED JANUARY 29, 1995
(unaudited)
<TABLE>
<CAPTION>
Pension
Additional Liability Total
Common Paid-In Over Prior Retained Shareholders'
Stock Capital Service Cost Earnings Equity
----- ------- ------------ -------- ------
<S> <C> <C> <C> <C> <C>
Balance, October 30, 1994 $5,619 $26,602,381 $(526,000) $ 9,754,000 $35,836,000
Quasi-reorganization
adjustment - (38,000) - - (38,000)
Loss applicable to
common shareholders - - - (1,950,000) (1,950,000)
------ ----------- ------------ ----------- -----------
Balance, January 29, 1995 $5,619 $26,564,381 $(526,000) $ 7,804,000 $33,848,000
====== =========== ============ ============ ===========
</TABLE>
See notes to financial statements.
-5-
<PAGE>
FORSTMANN & COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 29, 1995
(unaudited)
1. Forstmann & Company, Inc. ("the Company") is a leading designer, marketer
and manufacturer of innovative, high quality fabrics which are used
primarily in the production of brand-name and private label apparel for men
and women. The Company also produces specialty fabrics for use in billiard
and gaming tables, sports caps and career uniforms. A majority of the
Company's common stock is owned by Odyssey Partners, L.P.
The condensed financial statements presented herein are unaudited and have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of such information have been made. These financial
statements should be read in conjunction with the financial statements and
related notes contained in the Company's Annual Report on Form 10-K for the
fiscal year ended October 30, 1994 (the "1994 Form 10-K"), to which
reference is made. Certain information normally included in financial
statements and related notes prepared in accordance with generally accepted
accounting principles has been condensed or omitted. Because of the
seasonal nature of the Company's business, the results for the interim
periods presented are not indicative of the results for a full fiscal year.
Certain prior year's financial statement balances have been reclassified to
conform with the current year's presentations.
2. Inventories are stated at the lower of cost, determined principally by the
LIFO method, or market and consist of:
<TABLE>
<CAPTION>
January 29, October 30,
1995 1994
---- ----
<S> <C> <C>
Raw materials and supplies $12,954,000 $ 9,873,000
Work-in-process 57,822,000 53,730,000
Finished products 25,614,000 15,471,000
Less market reserves (1,895,000) (2,193,000)
----------- -----------
Total 94,495,000 76,881,000
Difference between LIFO
carrying value and current
replacement cost 2,408,000 2,558,000
----------- -----------
Current replacement cost $96,903,000 $79,439,000
=========== ===========
3. Other assets consist of:
January 29, October 30,
1995 1994
---- ----
Computer information systems,
net of accumulated amortization
of $3,043,000 and $2,669,000 $ 5,779,000 $ 5,896,000
Deferred financing costs, net of
amortization of $1,762,000 and
$1,512,000 3,014,000 2,961,000
Other 246,000 119,000
----------- -----------
Total $ 9,039,000 $ 8,976,000
=========== ===========
</TABLE>
-6-
<PAGE>
4. Accrued liabilities consist of:
<TABLE>
<CAPTION>
January 29, October 30,
1995 1994
---- ----
<S> <C> <C>
Salaries, wages and related
payroll taxes $ 2,533,000 $ 1,314,000
Incentive compensation and ERA's 1,070,000 1,027,000
Vacation 2,265,000 2,022,000
Employee benefits plans 854,000 834,000
Interest on long-term debt 3,380,000 773,000
Medical insurance premiums 1,362,000 1,540,000
Environmental remediation 563,000 589,000
Dissenters' settlement 5,000 831,000
Other 2,467,000 3,342,000
------------ ------------
Total $ 14,499,000 $ 12,272,000
============ ============
<CAPTION>
5. Long-term debt consists of:
January 29, October 30,
1995 1994
---- ----
<S> <C> <C>
GECC Facility $ 61,411,000 $ 58,696,000
Senior Secured Notes 27,000,000 27,000,000
Subordinated Notes 56,632,000 56,632,000
CIT Equipment Facility 9,102,000 7,082,000
Capital lease obligations 4,353,000 4,572,000
------------ ------------
Total 158,498,000 153,982,000
Debt premium - Subordinated Notes 4,129,000 4,329,000
Current portion of long-term debt (7,280,000) (2,714,000)
------------ ------------
Long-term debt $155,347,000 $155,597,000
============ ============
</TABLE>
The GECC Facility consists of an $85 million revolving line of credit and
as of January 23, 1995, a $7.5 million term loan. Borrowings outstanding
under the GECC Facility are due October 30, 1997.
On December 22, 1994, the CIT Equipment Facility with the CIT
Group/Equipment Financing, Inc. was amended to permit up to two additional
loans not to exceed an aggregate of $5.0 million with the commitment period
ending July 31, 1995. On December 22, 1994, the Company borrowed $2.5
million at an interest rate of 10.58%.
6. Per share and share information for the thirteen weeks ended January 29,
1995 and January 30, 1994 are based upon actual loss applicable to common
shareholders and the weighted average shares outstanding during the
periods.
7. As discussed in Note 11 to the Company's annual financial statements in the
1994 Form 10-K, the Company has accrued certain estimated costs for
environmental matters. Based upon the advice of outside environmental
consultants, management believes that such accrual at January 29, 1995, is
appropriate and reasonable.
8. As discussed in Note 11 to the Company's annual financial statements in the
1994 Form 10-K, the Company was involved in legal proceedings with certain
shareholders who dissented from a 1992 merger with an affiliated company
(the "Dissenters' Proceeding"). In September 1994, the Company concluded a
settlement and a dismissal of claims with one of the dissenting
shareholders and in December 1994, the Company concluded settlement of the
remaining claims, paid such remaining dissenters $365,000 and agreed to pay
certain other costs. The action has been dismissed and no claims remain
pending in the Dissenters' Proceeding. During the first quarter of fiscal
year 1995, the Company finalized and paid all remaining costs associated
with the Dissenters' Proceeding. This increased the total estimated costs
associated with the Dissenters' Proceeding from $1,788,000 to $1,826,000,
all of which were charged to additional paid-in capital in accordance with
the principles of quasi-reorganization accounting (see Note 14 to the
Company's annual financial statements in the 1994 Form 10-K).
-7-
<PAGE>
9. Subsequent to January 29, 1995, the Company entered into a 20 (twenty) year
lease for its corporate and marketing offices. Concurrent with the
consummation of the new lease, the landlord and the Company entered into a
takeover agreement, effective August 1, 1995, whereby the landlord agreed
to takeover the Company's remaining obligations under its existing office
lease which expires in October 1996. Based on the estimated market value of
the new lease compared to the Company's remaining obligation under the old
lease, net of remaining deferred rent associated with the old lease, the
Company expects to recognize a loss of $0.2 million. Additionally, the
Company will incur accelerated amortization on leasehold improvements
associated with the old lease.
Under the terms of the new lease, the Company's rental payments will
commence January 1, 1996 and future minimum rental payments, on a calendar
year basis, will be $1.6 million per year through 2015. Such minimum rental
payments will be adjusted periodically, subject to certain maximum
limitations, based on changes in the Consumer Price Index (as defined). The
Company expects to spend approximately $4.5 million in leasehold
improvements and related fees and expenses, of which the landlord will
contribute approximately $1.9 million.
-8-
<PAGE>
Item 2.
- -------
FORSTMANN & COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the 1994 Form 10-K for a
discussion of the Company's financial condition as of October 30, 1994,
including a discussion of the Company's anticipated liquidity and working
capital requirements during its 1995 fiscal year.
Financial Condition and Liquidity
- ---------------------------------
The Company has historically financed its operations and investing
activities through a combination of borrowings, equipment financing and leasing,
and internally generated funds. The Company's financing needs have arisen
principally in connection with modernization and expansion of the Company's
production capacity and with increased working capital needs that have
accompanied seasonal sales growth.
The Company's financing needs are funded from the proceeds from
borrowings under the Company's five-year loan agreement dated as of October 30,
1992 with General Electric Capital Corporation ("GECC"), as agent and lender
(the "GECC Facility"). The GECC Facility, which, as subsequently amended,
includes a $7.5 million term loan (the "Term Loan") and a $85.0 million
revolving line of credit (the "Revolving Line of Credit") (which includes a $7.5
million letter of credit facility). Proceeds from the Company's ordinary
operations are applied to reduce the principal amount of borrowings outstanding
under the Revolving Line of Credit. Unused portions of the Revolving Line of
Credit may be borrowed and reborrowed, subject to availability in accordance
with the then applicable commitment and borrowing base limitations. At January
29, 1995 the aggregate amount of borrowings and letters of credit outstanding
under the GECC Facility was approximately $66.5 million and loan availability,
in excess of such borrowings and letters of credit under the GECC Facility, was
approximately $4.5 million. In order to provide additional borrowing capacity
during peak seasonal borrowing periods, on January 23, 1995, the GECC Facility
was amended to provide the $7.5 million Term Loan, the proceeds of which were
used to repay a portion of outstanding borrowings under the Revolving Line of
Credit.
Since December 1991, the Company has been a party to a loan and Security
Agreement (the "CIT Equipment Facility") with the CIT Group/Equipment Financing,
Inc. which provides financing for the acquisition of, and to refinance
borrowings incurred to acquire, various textile machinery and equipment. Each
loan under the CIT Equipment Facility is a five-year purchase money loan,
secured by a first (and only) perfected security interest in the equipment, and
is payable in 60 consecutive installments of principal plus interest, payable
monthly. Certain loans under the CIT Equipment Facility are additionally secured
by $1.5 million in letters of credit. On December 22, 1994, the CIT Equipment
Facility was further amended to permit up to two additional loans not to exceed
an aggregate of $5.0 million with the commitment period ending on July 31, 1995.
On December 22, 1994, the Company borrowed $2.5 million at an interest rate of
10.58%. The interest rate on the remaining loan available under the CIT
Equipment Facility is fixed at the Treasury Rate (as defined) plus 287 basis
points.
Historically, during the first half of its fiscal year, the Company
utilizes cash to fund operations, whereas operations provide cash during the
second half of the Company's fiscal year. However, due to the timing of wool
purchases together with increased wool payables terms and stronger accounts
receivable collections, operations provided approximately $1.0 million during
the thirteen week period ended January 29, 1995 (the "1995 Period") as compared
to operations using approximately $15.0 million during the thirteen week period
ended January 30, 1994 (the "1994 Period"). Net cash used by investing
activities during the 1995 Period, primarily for capital expenditures was $4.7
-9-
<PAGE>
million, a decrease of $0.7 million from the 1994 Period. Investing activities
during the 1995 Period were funded from cash provided by operations and from the
$7.5 million proceeds of the Term Loan (which were used to repay a portion of
outstanding borrowings under the Revolving Line of Credit), and $2.5 million of
additional borrowings under the CIT Equipment Facility which were somewhat
offset by $4.8 million repayment of borrowings under the Revolving Line of
Credit, $0.7 million repayment of loans under the CIT Equipment Facility and
capital leases, and $0.9 million paid in connection with the Dissenters'
Proceeding (see Note 8 to the Financial Statements contained in this Form 10-Q).
The Company expects spending for capital expenditures, primarily
machinery and equipment, in fiscal year 1995 to be slightly less than fiscal
year 1994. The Company believes that cash generated from operations during the
remaining portion of fiscal year 1995, borrowings under the GECC Facility, the
remaining loan available under the CIT Equipment Facility and permitted
operating leases will be sufficient to fund its ongoing working capital and
capital expenditure requirements in fiscal year 1995.
Working Capital at January 29, 1995 was $107.8 million, a decrease of
$4.8 million from October 30, 1994. This decrease is attributable to a $14.5
million increase in current liabilities which was somewhat offset by a $9.7
million increase in current assets. The increase in current liabilities is
primarily attributable to a $7.7 million increase in accounts payable primarily
due to higher and extended terms wool payables, a $4.6 million increase in the
current portion of long-term debt primarily due to reclassification of the $4.0
million payment due October 31, 1995 under the Company's Senior Secured Floating
Rate Notes and $2.2 million increase in accrued liabilities primarily due to
accrued interest on long-term debt due to quarterly and semi-annual interest
payment requirements under certain of the Company's credit obligations. Further,
due to the quarter ending prior to the calendar month-end, accrued salaries were
higher at January 29, 1995.
The increase in current assets is primarily due to a $17.6 million
increase in inventories which was somewhat offset by an $8.2 million decline in
accounts receivable. The increase in inventories is due to a $3.1 million
increase in raw materials and supplies, a $4.1 million increase in work-in-
process and a $10.1 million increase in finished products. Such increases in
inventories precedes the historical seasonal increase in sales, which primarily
occurs in the Company's second and third fiscal quarters. The decrease in
accounts receivable is primarily attributable to collecting receivables during
the 1995 Period which arose during the fourth quarter of fiscal year 1994 when
the Company granted extended payment terms for the sale of certain products in
response to competitive pressures in certain markets. Further, the collecting of
receivables generated from higher sales in the fourth quarter of fiscal year
1994 as compared to the fourth quarter of fiscal year 1993 contributed to higher
collections in the 1995 Period compared to the 1994 Period.
The Company's business is seasonal, with the vast majority of orders for
woolen fabrics placed from December through April for manufacturers to produce
apparel for retail sale during the fall and winter months. As a result of normal
payment terms for such fabrics, the Company historically receives the major
portion of its payments thereon during July through October. This seasonal
pattern is further influenced by the industry practice of providing coating
fabric customers with favorable billing terms (referred to as "dating"), which
permit payment 60 (sixty) days beyond July 1 for invoices billed in January
through June. Accounts receivable at January 29, 1995 included $11.1 million of
receivables with dating, an increase of $2.6 million compared to January 30,
1994. This increase is primarily attributable to sales in the fourth quarter of
fiscal year 1994 which were made on extended credit terms due to competitive
pressures. Such increase in extended term sales during the fourth quarter of
fiscal year 1994 was somewhat offset by a $3.6 million decline in women's
outerwear (coating) fabric sales during the 1995 Period compared to the 1994
Period. The Company believes that the decline in sales of coating fabrics is due
to the exceptionally warm temperatures registered across the country in the fall
and winter which has resulted in higher levels of women's coats remaining in
retail inventories during the 1995 Period. Although the Company expects the
recent downward trend in sales of women's coats, to somewhat reverse itself
during the remainder of fiscal year 1995, there can be no assurance that such
market improvement will occur. Further, should the demand for outerwear fabrics
-10-
<PAGE>
rebound to fiscal year 1994 levels, due to manufacturing constraints and the
Company's customers' delivery requirements, the Company expects women's
outerwear sales to be less in fiscal year 1995 than in fiscal year 1994.
The backlog at February 27, 1995 was $67.3 million as compared to $79.7 million
at the same time a year earlier. The decline is primarily attributable to the
reduced demand for women's coating fabrics as well as the effects of government
orders being filled. Excluding government orders, which traditionally yield
significantly lower gross profit margins, the backlog declined from $73.9
million to $66.2 million at February 27, 1995. The backlog reflects continued
growth in men's woolens, Carpini/TM/ USA and the converting operations.
The Company purchases a significant amount of its raw wool inventory
from Australia. Since all of the Company's forward purchase commitments for raw
wool are denominated in U.S. dollars, there is no actual currency exposure on
outstanding contracts. However, future changes in the relative exchange rates
between United States and Australian dollars can materially affect the Company's
results of operations for financial reporting purposes. The cost of certain raw
wool categories sourced from Australia has risen significantly, and a drought in
Australia, which has resulted in a reduction in sheep herds, indicates that such
costs will continue to increase in the near future. Based on wool costs
incurred during the 1995 Period and the Company's forward purchase commitments
and current wool market trends, the Company expects wool costs to increase
significantly in fiscal year 1995 compared to fiscal year 1994.
Subsequent to January 29, 1995, the Company entered into a 20 (twenty)
year lease for its corporate and marketing offices. Concurrent with the
consummation of the new lease, the landlord and the Company entered into a
takeover agreement, effective August 1, 1995, whereby the landlord agreed to
takeover the Company's remaining obligation under its existing office lease
which expires in October 1996. Based on the estimated market value of the new
lease compared to the Company's remaining obligations under the old lease, net
of remaining deferred rent associated with the old lease, the Company expects to
recognize a loss of $0.2 million. Additionally, the Company will incur
accelerated amortization on leasehold improvements associated with the old
lease.
Under the terms of the new lease, the Company's rental payments will commence
January 1, 1996 and future minimum rental payments, on a calendar year basis,
will be $1.6 million per year through 2015. Such minimum rental payments will be
adjusted periodically, subject to certain maximum limitations, based on changes
in the Consumer Price Index (as defined). The Company expects to spend
approximately $4.5 million in leasehold improvements and related fees and
expenses, of which the landlord will contribute approximately $1.9 million. Such
leasehold improvements will be funded from borrowings under the GECC Facility
and internally generated funds.
Results of Operations
- ---------------------
The 1995 Period Compared to the 1994 Period
Net sales for the 1995 Period were $43.5 million, an increase of 16.2%
from the 1994 Period. Total yards of fabric sold increased 24.0% during the 1995
Period. However, due to shifts in product mix, the average per yard selling
price declined. The increase in sales was primarily due to an increase in
womenswear woolen and worsted fabric sales. The increase in womenswear woolen
sales reflects the return to historical sales levels of certain womenswear
woolen fabrics which were depressed during the 1994 Period due to the over-
ordering of certain wool fabrics by the Company's customers in 1993. Excluding
government sales ($1.7 million in the 1995 Period and $0.2 million in 1994
Period), which traditionally yield lower gross profit margins, net sales for the
1995 Period increased 13.1% over the 1994 Period.
Cost of goods sold increased $7.9 million to $36.6 million during the
1995 Period. Gross profit decreased $1.9 million or 21.3% to $6.9 million in the
1995 Period, and gross profit margin for the 1995 Period was 15.9% compared to
23.4% for the 1994 Period. The decline in gross profit is primarily due to the
shift in product mix, including the increase in government sales, to fabrics
yielding lower profit margins and the significant increase in raw wool costs.
Selling, general and administrative expenses, excluding the provision
for uncollectible accounts, decreased 6.9% to $5.2 million in the 1995 Period
compared to $5.6 million in the 1994 Period. Over half of the decrease is
attributable to a decrease in expenses associated with management incentive
compensation during the 1995 Period due to targeted operating results not being
-11-
<PAGE>
achieved. A decrease in expenses associated with the recruitment and relocation
of new employees further contributed to decreased selling, general, and
administrative expenses during the 1995 Period.
The provision for uncollectible accounts decreased from $1.2 million in
the 1994 Period to $0.2 million in the 1995 Period. Such decrease is primarily
attributable to the Company increasing its allowance for uncollectible accounts
during the 1994 Period due to one of the Company's outerwear customers, which
owed the Company $2.4 million, filing for protection under the federal
Bankruptcy Code in February 1994.
Interest expense for the 1995 Period was $4.6 million or $0.7 million
higher than the 1994 Period. This increase is primarily due to the increases in
the Federal Reserve discounts rates which began during calendar year 1994.
Increases in the Federal Reserve discounts rates since the beginning of fiscal
year 1994 have resulted in the Company's interest rates applicable to borrowings
under the GECC Facility and Senior Secured Floating Rate Notes increasing by
approximately 2.0% per annum.
In both the 1995 Period and 1994 Period, the Company recognized an
income tax benefit at an effective income tax rate of 39.5%
Preferred stock in-kind dividends and accretion to redemption value was
$64,000 in the 1995 Period and $58,000 in the 1994 Period, and the loss
applicable to common shareholders was $2.0 million in the 1995 Period compared
to $1.2 million in the 1994 Period.
-12-
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
10.1(a) Lease dated January 31, 1995 between 1155 Avamer Realty Corp.
and the Company.
10.1(b) Lease Takeover Agreement dated January 31, 1995 between the
Company and 1155 Avamer Realty Corp.
11.1 Statement re computation of per share earnings - not required
since such computation can be clearly determined from the
material contained herein.
15.1 Independent Accountants' Report, dated March 13, 1995 from
Deloitte & Touche LLP to Forstmann & Company, Inc.
23.1 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
(b) Current Reports on Form 8-K
Form 8-K filed November 18, 1994 regarding press release
regarding anticipated results for fiscal 1994.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORSTMANN & COMPANY, INC.
------------------------------
(Registrant)
/s/ Rodney J. Peckham
------------------------------
Rodney J. Peckham
Vice President, Treasurer
and Chief Accounting Officer
March 15, 1995
- --------------
Date
-14-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
- ------- ----------- ----------
<S> <C>
10.1(a) Lease dated January 31, 1995 between 1155
Avamer Realty Corp., and the Company.
10.1(b) Lease Takeover Agreement dated January 31, 1995
between the Company and 1155 Avamer Realty Corp.
11.1 Statement re computation of per share earnings -
not required since such computation can be
clearly determined from the material contained
herein.
15.1 Independent Accountants' Report, dated
March 13, 1995, from Deloitte & Touche
LLP to Forstmann & Company, Inc.
23.1 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule
</TABLE>
-15-
<PAGE>
EXHIBIT 10.1(a)
LEASE
1155 AVAMER REALTY CORP.
as Landlord,
to
FORSTMANN & COMPANY, INC.
as Tenant
Date: January __, 1995
Premises: Entire 3rd and 4th Floors
1155 Avenue of the Americas
New York, New York 10036
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
ARTICLE 1 PREMISES; TERM................................ 1
ARTICLE 2 COMMENCEMENT OF TERM.......................... 2
ARTICLE 3 RENT.......................................... 2
ARTICLE 4 ADJUSTMENT OF RENT, ESCALATION................ 9
ARTICLE 5 USE........................................... 19
ARTICLE 6 SERVICES AND EQUIPMENT........................ 21
ARTICLE 7 ELECTRIC...................................... 25
ARTICLE 8 ASSIGNMENT, SUBLETTING,
MORTGAGING.................................... 29
ARTICLE 9 SUBORDINATION, NON-DISTURBANCE,
ESTOPPEL CERTIFICATE.......................... 36
ARTICLE 10 ENTRY; RIGHT TO CHANGE PUBLIC
PORTIONS OF THE BUILDING...................... 40
ARTICLE 11 LAWS, ORDINANCES, REQUIREMENTS OF
PUBLIC AUTHORITIES............................ 42
ARTICLE 12 REPAIRS....................................... 42
ARTICLE 13 ALTERATIONS; FIXTURES......................... 43
ARTICLE 14 LANDLORD'S RIGHT TO PERFORM
TENANT'S OBLIGATIONS.......................... 50
ARTICLE 15 NO LIABILITY OF LANDLORD...................... 50
ARTICLE 16 INSURANCE..................................... 53
ARTICLE 17 DAMAGE BY FIRE OR OTHER CAUSE................. 55
ARTICLE 18 CONDEMNATION.................................. 57
ARTICLE 19 BANKRUPTCY.................................... 59
</TABLE>
(i)
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
ARTICLE 20 DEFAULTS AND REMEDIES; WAIVER OF
REDEMPTION.................................... 61
ARTICLE 21 COVENANT OF QUIET ENJOYMENT................... 64
ARTICLE 22 SURRENDER OF PREMISES......................... 64
ARTICLE 23 DEFINITION OF LANDLORD........................ 65
ARTICLE 24 NOTICES....................................... 66
ARTICLE 25 ARBITRATION................................... 66
ARTICLE 26 RULES AND REGULATIONS......................... 67
ARTICLE 27 BROKER........................................ 68
ARTICLE 28 ZONING RIGHTS................................. 68
ARTICLE 29 SECURITY DEPOSIT.............................. 70
ARTICLE 30 WINDOW CLEANING............................... 76
ARTICLE 31 CONSENTS...................................... 76
ARTICLE 32 MISCELLANEOUS................................. 77
ARTICLE 33 SUCCESSORS AND ASSIGNS........................ 81
ARTICLE 34 HAZARDOUS MATERIALS........................... 81
ARTICLE 35 PARTNERSHIP TENANT............................ 82
ARTICLE 36 SUBMISSION TO JURISDICTION.................... 83
ARTICLE 37 PREPARATION OF DEMISED PREMISES............... 83
ARTICLE 38 RENEWAL OPTION................................ 87
ARTICLE 39 LEASE TAKEOVER AGREEMENT...................... 90
ARTICLE 40 CANCELLATION OPTION........................... 90
</TABLE>
(ii)
<PAGE>
Exhibits listed below not filed herewith in Form 10-Q
EXHIBIT A FLOOR PLAN
EXHIBIT B INTENTIONALLY DELETED
EXHIBIT C CLEANING SPECIFICATIONS
EXHIBIT D RULES AND REGULATIONS
EXHIBIT E LIST OF APPROVED CONTRACTORS
EXHIBIT E-1 BUILDING STANDARDS
EXHIBIT F LETTER OF CREDIT
EXHIBIT G FORM OF PRUDENTIAL NON-DISTURBANCE AGREEMENT
EXHIBIT H LIST OF CURRENT SUPERIOR MORTGAGE AND LEASES
(iii)
<PAGE>
INDENTURE OF LEASE, dated as of this ____ day of January, 1995,
between 1155 AVAMER REALTY CORP., a New York corporation, with offices at 1133
Avenue of the Americas, New York, New York 10036 (hereinafter referred to as
"Landlord") and FORSTMANN & COMPANY, INC., a Georgia corporation having offices
at 1185 Avenue of the Americas, New York, N.Y. (hereinafter referred to as
"Tenant").
W I T N E S S E T H :
-------------------
ARTICLE 1
PREMISES; TERM
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
the entire third (3rd) and fourth (4th) floors (as shown on the floor plans
annexed hereto as Exhibit A and made a part hereof) in the building known as
---------
1155 Avenue of the Americas, hereinafter called the "Building," in the Borough
of Manhattan, City, County and State of New York (herein called the "Premises"
or the "Demised Premises"). Floor references are designated rental floor
numbers, there being no rental floor designated as the l3th floor.
The Demised Premises are leased, together with the appurtenances,
including without limitation the right to use in common with others, the
lobbies, elevators and other public portions of the Building.
TO HAVE AND TO HOLD unto Tenant, its successors and permitted assigns,
for the term which shall commence on January 1, 1995 (the "Commencement Date"),
provided the consent of the mortgagee named in Section 9.02 below shall have
been delivered to Tenant within 15 business days after Tenant delivers this
Lease, and shall end on December 31, 2015 ("Expiration Date") unless the term
shall terminate sooner pursuant to any of the terms of this Lease or pursuant to
law, YIELDING AND PAYING the rents and additional rents hereinafter set forth,
all on the covenants, conditions and agreements hereinbefore and hereinafter
stated.
<PAGE>
ARTICLE 2
COMMENCEMENT OF TERM
2.01. The term of this Lease shall commence on the Commencement Date.
ARTICLE 3
RENT
3.01. During the term of this Lease, Tenant covenants and agrees to
pay to Landlord a fixed annual minimum rent (the "Fixed Rent") in lawful money
of the United States, in the amount of $1,560,571.00, subject to adjustment
pursuant to the provisions of Sections 3.02, 3.03 and 3.09 hereinbelow.
3.02. A. The annual Fixed Rent shall be increased as follows:
1. From 1/1/99 to and including 12/31/01 (the "First Adjustment
Period"), the annual Fixed Rent (the "First Adjusted Rent") shall be the
lesser of (i) $1,661,253 (the "Maximum First Rent") and (ii) $1,560,571
increased by 150% of the percentage change in the Index (as hereinafter
defined) in effect on 10/1/98 over the Index in effect on 10/1/94 (the
"Base Index").
2. From 1/1/02 to and including 12/31/04 (the "Second Adjustment
Period"), the annual Fixed Rent (the "Second Adjusted Rent") shall be the
lesser of (i) $1,761,935 (the "Maximum Second Rent") and (ii) $1,560,571
increased by 150% of the percentage change in the Index (as hereinafter
defined) in effect on 10/1/01 over the Base Index.
3. From 1/1/05 to and including 12/31/07 (the "Third Adjustment
Period"), the annual Fixed Rent (the "Third Adjusted Rent") shall be the
lesser of (i) $1,862,617 (the "Maximum Third Rent") and (ii) $1,560,571
increased by 150% of the percentage change in the Index (as hereinafter
defined) in effect on 10/1/04 over the Base Index.
-2-
<PAGE>
4. From 1/1/08 to and including 12/31/10 (the "Fourth Adjustment
Period"), the annual Fixed Rent (the "Fourth Adjusted Rent") shall be the
lesser of (i) $1,963,299 (the "Maximum Fourth Rent") and (ii) $1,560,571
increased by 150% of the percentage change in the Index (as hereinafter
defined) in effect on 10/1/07 over the Base Index.
5. From 1/1/11 to and including 12/31/13 (the "Fifth Adjustment
Period"), the annual Fixed Rent (the "Fifth Adjusted Rent") shall be the
lesser of (i) $2,114,322 (the Maximum Fifth Rent") and (ii) $1,560,571
increased by 150% of the percentage change in the Index (as hereinafter
defined) in effect on 10/1/10 over the Base Index.
6. From 1/1/14 to and including 12/31/15 (the "Sixth Adjustment
Period"), the annual Fixed Rent (the "Sixth Adjusted Rent") shall be the
lesser of (i) $2,265,345 (the Maximum Sixth Rent") and (ii) $1,560,571
increased by 150% of the percentage change in the Index (as hereinafter
defined) in effect on 10/1/13 over the Base Index.
B. 1. In the event that the First Adjusted Rent is less than the
Maximum First Rent, then the First Adjusted Rent shall be further adjusted
during the First Adjustment Period by applying the same computation specified in
subsection (A)(1)(ii) above, as of January 1st of each current year in the
First Adjustment Period using the Index in effect as of October 1st of the
preceding year to compute the percentage change over the Base Index.
2. In the event that the Second Adjusted Rent is less than the
Maximum Second Rent, then the Second Adjusted Rent shall be further
adjusted during the Second Adjustment Period by applying the same
computation specified in subsection (A)(2)(ii) above, as of January 1st of
each current year in the Second Adjustment Period using the Index in effect
as of October 1st of the preceding year to compute the percentage change
over the Base Index.
3. In the event that the Third Adjusted Rent is less than the Maximum
Third Rent, then the Third Adjusted Rent shall be further adjusted during
the Third Adjustment Period by applying the same
-3-
<PAGE>
computation specified in subsection (A)(3)(ii) above, as of January 1st of
each current year in the Third Adjustment Period using the Index in effect
as of October 1st of the preceding year to compute the percentage change
over the Base Index.
4. In the event that the Fourth Adjusted Rent is less than the
Maximum Fourth Rent, then the Fourth Adjusted Rent shall be further
adjusted during the Fourth Adjustment Period by applying the same
computation specified in subsection (A)(4)(ii) above, as of January 1st of
each current year in the Fourth Adjustment Period using the Index in effect
as of October 1st of the preceding year to compute the percentage change
over the Base Index.
5. In the event that the Fifth Adjusted Rent is less than the Maximum
Fifth Rent,then the Fifth Adjusted Rent shall be further adjusted during
the Fifth Adjustment Period by applying the same computation specified in
subsection (A)(5)(ii) above, as of January 1st of each current year in the
Fifth Adjustment Period using the Index in effect as of October 1st of the
preceding year to compute the percentage change over the Base Index.
6. In the event that the Sixth Adjusted Rent is less than the Maximum
Sixth Rent,then the Sixth Adjusted Rent shall be further adjusted during
the Sixth Adjustment Period by applying the same computation specified in
subsection (A)(6)(ii) above, as of January 1st of each current year in the
Sixth Adjustment Period using the Index in effect as of October 1st of the
preceding year to compute the percentage change over the Base Index.
C. The monthly installments of Fixed Rent payable for any period from
January 1st through the following December 31st ("Lease Year") during the term
of this Lease (as increased by the provisions of this Section 3.02) shall never
be less than the monthly installment of Fixed Rent payable for the last month of
the immediately preceding Lease Year.
D. Any disputes between the parties with respect to the increases in
Fixed Rent calculated pursuant to the terms of this Section 3.02 shall be
determined by a "big six" public accounting firm mutually selected by the
-4-
<PAGE>
parties hereto, provided such accounting firm shall have had no relationship
with either Landlord or Tenant in the immediately preceding three (3) year
period. The fees of such accounting firm shall be shared equally by the parties
hereto; provided, however, until such dispute is resolved, Tenant shall pay
Fixed Rent hereunder in accordance with Landlord's statement. If Landlord and
Tenant are unable to agree upon an accounting firm to determine any dispute,
then the designation of the accounting firm shall be made by the American
Arbitration Association or any successor organization.
E. For purposes of this Section 3.02, the term "Index" shall mean the
Consumer Price Index for all Urban Consumers published by the Bureau of Labor
Statistics of the United States Department of Labor, New York, N.Y.-Northeastern
N.J. Area, All Items (1982-84 = 100), or any successor index thereto,
appropriately adjusted. In the event that the Consumer Price Index is converted
to a different standard reference base or otherwise revised, the determination
of adjustments provided for herein shall be made with the use of such conversion
factor, formula or table for converting the Consumer Price Index as may be
published by the Bureau of Labor Statistics or, if said Bureau shall not publish
the same, then with the use of such conversion factor, formula or table as may
be published by Prentice Hall, Inc., or any other nationally recognized
publisher of similar statistical information. If the Consumer Price Index
ceases to be published, and there is no successor thereto, such other index as
Landlord and Tenant shall agree upon in writing shall be substituted for the
Consumer Price Index. If Landlord and Tenant are unable to agree as to such
substituted index, such matter shall be submitted to the American Arbitration
Association or any successor organization for determination in accordance with
the regulations and procedures thereof for commercial arbitration. Landlord and
Tenant recognize that the United States Department of Labor may be directed to
decrease future increases in said index or may recalculate said index to insure
smaller future increases. In the event that such a recalculation or change in
methodology occurs, then the multiplier of 150% specified in Subparagraphs
(A)(1), (A)(2), (A)(3), (A)(4), (A)(5), and (A)(6), above shall be amended to be
200%
F. Commencing on January 1, 1999, Landlord shall endeavor to provide
Tenant with an annual statement setting forth the increases in Fixed Rent
calculated pursuant to
-5-
<PAGE>
the provisions of this Section 3.02, for the current Lease Year, over the prior
Lease Year's Fixed Rent, by the commencement of the applicable Lease Year.
Unless and until a statement is furnished to Tenant for the current Lease Year,
Tenant shall pay the Fixed Rent payable for the immediately preceding Lease
Year, provided, however, the First Adjusted Rent, Second Adjusted Rent, Third
Adjusted Rent, Fourth Adjusted Rent, Fifth Adjusted Rent and Sixth Adjusted Rent
shall be deemed to be the Maximum First Rent, Maximum Second Rent, Maximum Third
Rent, Maximum Fourth Rent, Maximum Fifth Rent and Maximum Sixth Rent
respectively, unless otherwise provided by Landlord in its statement to Tenant.
If the statement to Tenant reflects an overpayment or underpayment made by
Tenant for the portion of the Lease Year then elapsed prior to the calendar
month immediately following the month in which such statement was delivered to
Tenant, then any such overpayment shall be credited against the next monthly
installment or installments (as applicable) of Fixed Rent payable under this
Lease and any such underpayment shall be paid by Tenant to Landlord within
twenty (20) days after delivery of the statement by Landlord to Tenant.
Notwithstanding the foregoing, Landlord shall have no obligation to furnish any
further statements to Tenant during the remainder of the current Period once the
Fixed Rent equals either the Maximum First Rent, Maximum Second Rent, Maximum
Third Rent, Maximum Fourth Rent, Maximum Fifth Rent or Maximum Sixth Rent, as
the case may be.
G. Landlord's failure to render statements under this Section 3.02
shall not be deemed a waiver of Landlord's right to (i) subsequently furnish a
statement to Tenant reflecting amounts owed by Tenant hereunder and (ii) collect
the amounts owed by Tenant under this Section 3.02.
H. The provisions of this Section 3.02 shall survive the expiration
or sooner termination of this Lease.
I. The following is an example of the rental adjustment set forth in
Section 3.02(A) above: If the Index in effect on 10/1/98 exceeds the Base Index
by 2%, then the First Adjusted Rent shall initially be $1,607,388.13
(($1,560,571 x [150% x 2%]) + $1,560,571). The First Adjusted Rent will remain
in effect from 1/1/99 through 12/31/99. Since the First Rent does not equal the
Maximum First Rent, then the computation shall be made again utilizing the Index
in effect on 10/1/99. If the Index in effect on 10/1/99 exceeds the Base Index
by 8%,
-6-
<PAGE>
then the First Rent commencing 1/1/00 shall be the Maximum First Adjusted
Rent since the computation would otherwise exceed $1,661,253.
3.03. During the period from 1/01/96 through and including 6/30/2003,
the annual Fixed Rent shall be further increased by the amount of $201,364 per
annum.
3.04. All Fixed Rent shall be payable in equal monthly installments
in advance on the first day of each month during the term of this Lease at the
office of Landlord or such other place as Landlord may designate, without any
setoff or deduction whatsoever, except as otherwise provided in Section 3.09
below, the first installment to be paid on the delivery of this Lease.
All Fixed Rent and additional rent payable under this Lease shall be
paid by check of Tenant drawn on Norwest Bank International, ABN Amro Bank N.V.
or a bank which is a member of the New York Clearing House Association.
3.05. All adjustments of rent, costs, charges and expenses which
Tenant assumes, agrees or is obligated to pay to Landlord pursuant to this Lease
shall be deemed additional rent which Tenant covenants to pay when due. In the
event of nonpayment, Landlord shall have all the rights and remedies with
respect thereto as is herein provided for in case of nonpayment of Fixed Rent.
All rent shall be payable by Tenant to Landlord without offset, reduction,
counterclaim and/or deduction.
3.06. If any of the rent payable under the terms of this Lease shall
be or become uncollectible, reduced or required to be refunded because of any
rent control, federal, state or local law, regulation, proclamation or other
legal requirement, Tenant shall enter into such agreement(s) and take such other
steps (without additional expense to Tenant) as Landlord may request and as may
be legally permissible to permit Landlord to collect the maximum rent which,
from time to time, during the continuance of such legal rent restriction may be
legally permissible (and not in excess of the amounts then reserved therefor
under this Lease). Upon the termination of such legal rent restriction, (a) the
Fixed Rent and additional rent shall become and shall thereafter be payable in
accordance with the amounts reserved herein for the periods following such
termination and (b) Tenant shall promptly
-7-
<PAGE>
pay in full to Landlord, unless expressly prohibited by law, an amount equal to
(i) rentals which would have been paid pursuant to this Lease but for such legal
rent restriction less (ii) the rent actually paid by Tenant during the period
such legal rent restriction was in effect.
3.07. If any installment of Fixed Rent or additional rent is not paid
within five (5) days of the date due (or if any such installment is not paid
within five (5) days of its due date more than four (4) times in any twelve (12)
month period and/or more than twenty (20) times over the term of this Lease, in
each case provided that Landlord has notified Tenant in writing of the same,
then as to all succeeding installments within such twelve (12) month period
and/or for the balance of the term of this Lease), Tenant shall also pay
Landlord interest thereon from the due date until paid at 2% per annum above the
then published prime interest rate upon unsecured loans charged by Chemical Bank
(or The Chase Manhattan Bank, N.A. if Chemical Bank shall not then have an
announced prime rate) on loans of 90 days (herein such announced rate plus 2%
per annum being herein called the "Prime Rate"). The term "rent" shall include
all Fixed Rent, additional rent or other charges payable under this Lease, for
nonpayment of which Landlord shall have the same remedies as for a default in
the payment of Fixed Rent.
3.08. Anything to the contrary provided for hereinabove
notwithstanding, so long as Tenant shall not be in default of any of the terms
and provisions of this Lease beyond any applicable notice or grace periods,
Tenant shall have no obligation to pay the Fixed Rent provided for hereinabove
for that period of time commencing on the Commencement Date and ending on
December 31, 1995 (the following day, January 1, 1996, being the "Rent
Commencement Date").
3.09. Provided Tenant is not then in default of any of the terms and
provisions of this Lease beyond any applicable notice or grace periods, Tenant
shall receive credits (the "Credits") against the Fixed Rent in the amount of
$12,916.67 per month from the Rent Commencement Date through and including the
day before the third anniversary of the Rent Commencement Date. Tenant shall
repay the Credits (inclusive of interest on the Credits) to the Landlord as
Fixed Rent in the amount of $9,581.59 per month during the period commencing on
the third anniversary of the Rent Commencement Date through and including the
day before the ninth anniversary of the Rent Commencement Date.
-8-
<PAGE>
ARTICLE 4
ADJUSTMENT OF RENT, ESCALATION
4.01. The annual rental rate hereinbefore set forth shall be adjusted
from time to time as in this Article provided to reflect the decrease or
increase in Landlord's expenses incurred in operating the Building and Tenant
shall pay such rental, as adjusted pursuant to the provisions hereof, as
hereinbefore provided. Landlord shall have all of the rights and remedies for
Tenant's failure to make a payment under this Article as Landlord has for
Tenant's failure to pay Fixed Rent.
A. For the purposes of this Article:
1. "Base Tax" shall mean the Taxes, as finally determined, for the
--------
Base Tax Year.
2. "Base Tax Year" shall mean the fiscal year July 1, 1995 to June
-------------
30, 1996, inclusive.
3. "Tax Year" shall mean each successive New York City real estate
--------
fiscal year commencing on July 1st and expiring on June 30th. If the
present use of July 1 to June 30 real estate tax year shall change, then
such changed tax year shall be used with appropriate adjustment for the
transition.
4. "Taxes" shall mean (a) the product of the total assessed valuation
-----
(all references in this Article to "assessed valuation" shall be deemed to
refer to the lesser of the so-called transitional value assessed valuation
and the actual assessed valuation) of the Land and Building of which the
Demised Premises are a part for any Tax Year multiplied by the applicable
real estate tax rate for such Tax Year plus (b) any assessments, special
and extraordinary assessments, and government levies imposed upon or with
respect to the Land and Building and (c) any franchise, income, profit,
value added, use, or other tax imposed in addition to, in whole or partial
substitution for, or in lieu of an increase (in whole or part) in such real
estate taxes, whether due to a change in the method of taxation or
otherwise, it being understood and agreed that the Taxes computed under
clause (a) above shall be the
-9-
<PAGE>
real estate taxes actually payable by Landlord in any Tax Year.
5. "Expense Year" shall mean the 1995 calendar year and each
------------
subsequent calendar year.
6. "Tenant's Percentage" shall mean for purposes of this Lease and
-------------------
all calculations in connection therewith eight and twenty-five one
hundredths percent (8.25%) which has been computed on the basis of a
fraction, the numerator of which is the agreed rentable square foot area of
the Demised Premises and the denominator of which is the agreed rentable
square foot area of the Building, both as set forth below. The parties
agree that the rentable square foot area of the Demised Premises shall be
deemed to be 50,341 square feet, and that the agreed rentable square foot
area of the Building shall be deemed to be 610,191 square feet, and that
the useable square footage of the Demised Premises is 39,623 square feet.
7. "Expense Base" shall mean the Expenses (as hereinafter defined)
------------
for the 1995 Expense Year.
8. "Expenses" shall mean the total of all the costs and expenses
--------
(computed on the basis of GAAP (as defined in clause (iii)(a) below)
consistently applied to real estate) incurred or borne by Landlord with
respect to the operation and maintenance of the Land and Building and all
appurtenances thereto, and the services provided to the tenants thereof,
including, but not limited to, the costs and expenses incurred for and with
respect to: electricity for common areas; steam and any other fuel, water
rates and sewer rents; air conditioning, ventilation and heating (other
than overtime (i.e., hours other than between 9:00 A.M. and 6:00 P.M.
----
Mondays through Fridays, holidays set forth in Section 6.02 hereof
excepted) air-conditioning, ventilation and heating); metal, elevator and
elevator cab, lobby, sidewalk and plaza maintenance; equipment, services
and personnel for protection and security; lobby decoration and interior
and exterior landscape maintenance; sprinkler maintenance and alarm
service; maintenance, repairs, replacements, and improvements which are
appropriate for the continued operation of the Building as a first-class
building; rental (or depreciation except as excluded under clause (iii)
below) of vacuums, window washing rigs and other
-10-
<PAGE>
equipment used in cleaning and maintenance; painting and decoration of non-
tenant areas; cleaning and window washing (interior and exterior) of the
Building by contract or otherwise; garbage and trash removal; premiums for
fire and extended coverage insurance, special extended coverage insurance,
and other casualty insurance coverage, boiler and machinery insurance,
sprinkler, apparatus insurance, public liability and umbrella liability
insurance, property damage insurance, rent, or rental value insurance,
plate glass insurance and any other insurance which Landlord may deem
necessary or which is required by the lessor under any superior lease
and/or the holder of any superior mortgage; supplies, wages, salaries,
disability benefits, pensions, hospitalization, retirement plans, and group
insurance and other direct or indirect expenses respecting employees of the
Landlord and Landlord's contractors (where said contractors are affiliates
of Landlord) up to and including the grade of building manager; uniforms
and working clothes for such employees and the cleaning thereof; expenses
imposed on Landlord pursuant to laws, orders, rules, regulations, and other
legal requirements or pursuant to any collective bargaining agreement with
respect to such employees; worker's compensation insurance, payroll, social
security, unemployment, and other similar taxes with respect to such
employees; telephone and other Building office expenses; professional and
consulting fees, including legal and auditing fees; association fees or
dues; computer time; the expenses, including payments to attorneys, experts
and appraisers, incurred by Landlord in connection with any application,
proceeding or settlement wherein Landlord obtains or seeks to obtain
reduction or refund of Taxes; an annual fee for management of the Building
in the sum of $300,000. Said management fee shall be increased for each
Expense Year, by adding to $300,000 an amount equal to the product of
$300,000 and the percentage of increase in the Expenses for such Expense
Year over the Base Expense, both exclusive of such management fees.
Expenses shall exclude or have deducted from them, as the case may be
and as shall be appropriate:
-11-
<PAGE>
(i) leasing commissions, advertising expenditures and legal fees and any other
expenses for leasing or attempts to lease;
(ii) salaries of personnel above the grade of building manager;
(iii) expenditures for capital improvements (including those
necessitated by the ADA (as defined hereinbelow)) except (a) those
which under generally accepted accounting principles ("GAAP")
consistently applied to real estate are expenses or regarded as
deferred costs, (b) capital expenditures or expenses for equipment
designed to result in savings or reduction of Expense (e.g., energy
----
saving devices), and (c) capital expenditures required by law enacted
after the date hereof, in any of which cases the cost thereof shall be
included in Expenses for the Expense Year in which the costs are
incurred and subsequent Expense Years, on a straight line basis, to
the extent that such items are depreciated over their useful life,
with an interest factor equal to the Prime Rate at the time of
Landlord's having incurred said expenditure. If Landlord shall lease
any such item of capital equipment designed to result in savings or
reductions in Expenses, then the rentals and other costs paid pursuant
to such leasing shall be included in Expenses for the Expense Year in
which they are incurred;
(iv) cost of repairs or replacements incurred by reason of fire
or other casualty or by the exercise of the right of eminent domain,
regardless of the extent to which Landlord is compensated therefor
through proceeds of insurance or a condemnation award;
(v) advertising and promotional expenditures and all other
expenses related to the leasing of space and/or public relations;
(vi) all legal and auditing fees, other than legal and auditing
fees reasonably incurred (a) in connection with the maintenance and
operation of the Land and Building or (b) in connection with the
preparation of statements required pursuant to additional rent or
rental escalation
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provisions;
(vii) costs incurred in performing work or furnishing services to
or for individual tenants (including Tenant) other than work or
services of a kind and scope which Landlord would be obligated to
furnish Tenant without charge if such work were required in the
Demised Premises;
(viii) the cost incurred by Landlord in per-forming work or
furnishing any service to or for a tenant of space in the Building
(including Tenant) for which a separate charge is made, including
without limitation, the supply of overtime air-conditioning,
ventilation and heating at Landlord's cost and expense at any time
other than as required by this Lease regardless of the amount billed
or received by Landlord for performing such work or furnishing such
service;
(ix) Taxes;
(x) any expenses incurred in connection with any mortgage or
other financing secured by any ground or land lease on the Land or the
Building, including, without limitation, mortgage interest or
amortization, or in connection with any refinancing thereof,
including, without limitation, legal, accounting, consultant,
mortgage, brokerage or other expenses related thereto;
(xi) any expenses incurred in connection with any ground or land
lease, including without limitation, ground rent;
(xii) depreciation and other non-cash expenses except as provided
for herein;
(xiii) any leasing commissions or other brokerage obligations;
(xiv) any cost incurred in connection with the preparation of any
space in the Building for any tenant's (including Tenant's) occupancy;
(xv) capital costs (but not regular, on-going maintenance or
regulation costs) incurred
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with respect to removal or encapsulation of asbestos or any other
hazardous material as defined under present state, federal or local
laws relating to the environment;
(xvi) capital costs of placing the common areas of the Building
in compliance with the ADA;
(xvii) any cost for which Landlord is reimbursed by insurance,
tenants or any other party;
(xviii) any amounts paid to affiliates of Landlord in excess of
commercially reasonable amounts;
(xix) any amounts resulting from Landlord's failure to meet its
legal or contractual obligations (e.g., failure to pay taxes, defaults
----
under leases or agreements, etc.) except to the extent that failure to
cure a violation is inadvertent or due to Force Majeure or other
events beyond Landlord's control;
(xx) any lease payments for equipment which, if purchased, would
be excluded as a capital improvement;
(xxi) costs and charges for special or extra security or
maintenance in respect of works of art;
(xxii) dues to professional and lobbying associations (except for
the allocable dues for REBNY) or contributions to political or
charitable organizations;
(xxiii) costs of correcting defects in the design or construction
of the Building (as opposed to costs incurred for maintenance and
normal repairs);
(xxiv) costs resulting from the negligence or wilful acts of
Landlord or such party's agents, employees or representatives;
(xxv) Landlord's overhead and general and administrative expenses
above the level of
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building manager and other than the above management fees;
(xxvi) costs of works of art of the quality and nature of "fine
art" rather than decorative art work customarily found in first class
office buildings; and
(xxvii) any Expenses related exclusively to any garage space in the
Building.
If, during all or part of any Expense Year (including the Expense Base
Year), the Expenses are artificially low (as determined by Landlord in its
reasonable judgment) due to the fact the Building is less than 95% occupied
and/or leased, then, for the purposes of computing the additional rent
payable hereunder, the Expenses for such period shall be increased by an
amount equal to the Expenses which would reasonably have been incurred
during such period by Landlord as determined by Landlord in its reasonable
judgment, if at least 95% of the rentable area of the Building had been
leased.
B. (1) If the Expenses for any Expense Year shall be greater than
the Expense Base, Tenant shall pay to Landlord, as additional rent for such
Expense Year, in the manner hereinafter provided, an amount equal to Tenant's
Percentage of the excess of the Expenses for such Expense Year over the Expense
Base (such amount being hereinafter called the "Expense Payment").
(2) Landlord shall, prior to or following the commencement of each
Expense Year, but in no event in respect of any calendar year prior to 1996,
deliver to Tenant a reasonably itemized statement of Landlord's reasonable good
faith estimate of the projected Expenses for such Expense Year (which estimate
shall not exceed 10% of the immediately preceding Expense Year unless Landlord
provides Tenant with a reasonable explanation for any such estimate which
exceeds 10% of the immediately preceding Expense Year) and Tenant shall pay on
the first day of each month but no earlier than January 1, 1996 as additional
rent, together with payment of Fixed Rent, an "Estimated Expense Payment" which
shall be equal to one-twelfth (1/12th) of Tenant's Percentage of the amount by
which such projected Expenses exceed the Expense Base. At any time during any
Expense Year, Landlord may deliver a revised
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statement of projected Expenses to reflect, if Landlord can reasonably so
estimate, known increases in rates for the current Expense Year applicable to
the categories involved in computing Expenses and thereafter Tenant's monthly
Estimated Expense Payment shall be adjusted accordingly.
(3) To the extent that at the time of furnishing of any statement of
projected Expenses the aggregate monthly payments made during the preceding
months of the Expense Year in question are less than the amount which would have
been paid if the installment required pursuant to such statement had been made
for such preceding months, the deficiency shall be due and payable in full as
additional rent within twenty (20) days of Tenant's receipt of such Statement
from Landlord.
(4) Within 120 days following the expiration of each Expense Year,
Landlord shall submit to Tenant an "Expense Statement" prepared by a certified
public accountant and certified by an officer or a principal of Landlord,
setting forth the Expenses for the preceding Expense Year and the Expense
Payment, if any, due to Landlord from Tenant for such Expense Year. In the
event Tenant's Expense Payment shall be greater than or less than respectively
the aggregate of Tenant's Estimated Expense Payments for such Expense Year, then
within twenty (20) days after receipt of such Expense Statement Tenant shall
make payment of any unpaid portion of its Expense Payment as additional rent, or
any excess paid by Tenant shall be, at Landlord's option, either refunded to
Tenant or credited against the payment(s) of Estimated Expense Payment next
coming due. In either case, such payment shall be made or credited to Tenant
with interest at the Prime Rate.
(5) Until a new statement of projected Expenses is rendered, Tenant's
Estimated Expense Payment for any Expense Year shall be deemed to be one-twelfth
(1/12th) of the total Estimated Expense Payment for the preceding Expense Year,
if any.
(6) The Expense Statements (which Statements include the Expense
Statement for the Expense Base) furnished to Tenant shall constitute a final
determination as between Landlord and Tenant of the Expenses for the periods
represented thereby, unless Tenant, within 180 days after they are furnished,
shall give a notice to Landlord that it disputes the accuracy or appropriateness
of any of same, or requires further information in order to do so,
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which notice shall specify the particular respects in which the disputed
Statement is inaccurate or inappropriate, if then known. Pending the resolution
of such dispute (which shall be by arbitration under Article 25 of this Lease),
Tenant shall pay the Estimated Expense Payments to Landlord in accordance with
the statements of projected Expenses furnished by Landlord. Tenant and its
accountants, attorneys and other representatives shall have the right, during
reasonable business hours and upon not less than ten (10) business days' prior
written notice to Landlord, to examine Landlord's books and records with respect
to any Expense Statement, provided (a) such examination is commenced within 180
days following the rendition of the Expense Statement in question and (b) Tenant
delivers a confidentiality agreement to Landlord with respect to such dispute
and such examination in form and substance reasonably satisfactory to Landlord
and Tenant. In the event Landlord shall fail to render an Expense Statement for
any Expense Year within three (3) years after the expiration of such Expense
Year, then Landlord shall be deemed to have waived its right to collect any
Expenses for such Expense Year and any estimated Expense Payment made by Tenant
for such Expense Year shall be credited against the next rents otherwise due
from Tenant. Tenant shall also have the right to contest the Expense Base
provided that Tenant gives notice to Landlord within 180 days from receipt of
the Expense Statement which first sets forth the Expense Base that it disputes
the accuracy of the Expense Base which notice shall specify the particular
respects in which the disputed Statement is inaccurate or inappropriate.
Landlord shall pay the reasonable out-of-pocket costs of Tenant's examination of
its books and records if it is determined that a discrepancy of greater than 5%
exists between Landlord's Expense Statements and the actual Expenses as
determined by the review of Landlord's books.
(7) In no event shall the Fixed Rent under this Lease be reduced by
virtue of this Section (except that any increases under this Section may be
later reduced or eliminated by virtue of subsequent decreases in Expenses).
(8) If the Commencement Date is not the first day of an Expense Year
or if the date of expiration or termination of this Lease (except for
termination for Tenant's default), whether or not same is the Expiration Date or
another date prior or subsequent thereto, is not the last day of an Expense Year
then the Expense Payment
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shall be prorated based upon the number of days of the applicable Expense Year
within the Term. With respect to the year in which the term of this Lease
expires or terminates, such pro rata portion shall, within twenty (20) days
after the receipt of an Expense Statement together with the annual Statement of
Expenses for that Expense Year, become due and payable by Tenant to Landlord, if
it has not theretofore already been paid, and Landlord, as soon as reasonably
practicable, shall cause the annual statements of the Expenses for that Expense
Year to be prepared and furnished to Tenant. Landlord and Tenant thereupon shall
make appropriate adjustments of all amounts then owing.
C. (1) The annual rental rate shall be increased for each Tax Year
during the term of this Lease by Tenant's Percentage of the amount by which the
Taxes in each such Tax Year exceed the Base Tax. Landlord shall advise Tenant,
by a written statement certified by Landlord's certified public accountant or by
Landlord or its agent, of any change in Taxes and the effective date thereof,
together with a true and correct copy of the tax bill in respect of the Base Tax
Year and any subsequent Tax Year upon Tenant's request at that time (the "Tax
Statement"). The Tax Statement shall show the Tenant's new annual rental rate
subject to decrease (but only to the extent of prior increases as a result of
increased Taxes) in the event of a decrease in Taxes caused by each change and
the monthly installments shall be one twelfth 1/12 thereof, and the manner in
which the adjustment is computed, including any adjustments in real estate Tax
assessments affecting the Taxes for any Tax Year caused by each change and the
monthly installments shall be one-twelfth (1/12th) thereof, and the manner in
which the adjustment is computed, including any adjustments in real estate tax
assessments affecting the Taxes for any Tax Year. Said one-twelfth (1/12th) of
such increase shall be due and payable with monthly installments of Fixed Rent.
Notwithstanding the foregoing, if Taxes are required to be paid prior to the
expiration of the appropriate calendar half or any other applicable fiscal
period or the expiration of any Tax Year to avoid a penalty or late charge, then
Landlord may immediately elect to bill Tenant for its above specified percentage
of any increase in Taxes in excess of the Base Tax with respect to such calendar
half or any other applicable fiscal period or Tax Year, as the case may be, and
Tenant shall pay same within twenty (20) days thereafter. Any decrease in
annual rental rate
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<PAGE>
under this Paragraph C can be applied only to reduce prior increases under this
Paragraph. To the extent that the change is relevant to a period for which
Tenant has paid its monthly installments of Fixed Rent, a retroactive lump sum
payment shall be made by Tenant within twenty (20) days after being billed for
the same by Landlord.
(2) The Tax Statements furnished to Tenant shall constitute a final
determination as between Landlord and Tenant of the Taxes for the periods
represented thereby, unless Tenant, within three (3) years after they are
furnished, shall give a notice to Landlord that it disputes
the accuracy or appropriateness of any of same, which notice shall specify the
particular respects in which the disputed Tax Statement is inaccurate or
inappropriate. Pending the resolution of such dispute (which shall be by
arbitration under Article 25 of this Lease), Tenant shall pay Tenant's
Percentage of the Taxes to Landlord in accordance with the Tax Statements
furnished by Landlord. Tenant shall have the right to receive a copy of any tax
bill or statement of the applicable taxing authority upon which the disputed Tax
Statement is based within twenty (20) days after demand therefor. If Landlord
shall fail to render a Tax Statement for any Tax Year within three (3) years
after the expiration of such Tax Year, then Landlord shall be deemed to have
waived its right to collect any Taxes for such Tax Year.
ARTICLE 5
USE
5.01. Tenant shall use and occupy the Demised Premises for executive
and general offices (including such ancillary uses incidental thereto and in
connection therewith as shall be required or desired by Tenant in the operation
of its business which ancillary uses may include the following (but only for use
of Tenant and its employees and not for the general public): (i) showrooms
(which showrooms shall not consist of more than 7,500 useable square feet) in
the aggregate; (ii) hand weaving (which hand weaving shall be performed by no
more than three employees of Tenant and shall be performed in an area not to
exceed 200 usable square feet); (iii) pantries; and (iv) a day care facility
(which facility shall be operated in an area not to exceed 500 useable square
feet) and for no other purpose provided Tenant complies with all federal,
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state and local laws, orders, rules and regulations applicable thereto. Tenant
will not at any time use or occupy the Demised Premises, or permit same to be
used or occupied in violation of the certificate of occupancy for the Building.
5.02. The use of the Demised Premises for the purposes specified in
Section 5.01 shall not include:
(1) the sale to the public of any products kept in the Demised
Premises, or any demonstrations to the public, or the sale (whether by
persons or by vending machines) of alcoholic beverages, candy, cigarettes,
cigars, tobacco, narcotics or other controlled or prohibited substances,
newspapers, magazines, beverages, or similar items;
(2) the rendition of medical, psychological, or therapeutic services;
(3) the conduct of an auction;
(4) the conduct of any gambling activities, or any political
activities, or of an employment agency provided, however, that the
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prohibition of political activities is not intended to encompass Tenant's
representation and possible "lobbying" efforts (as such term is generally
understood) on behalf of Tenant or its customers clients but is intended
solely to preclude those activities generally associated with an election
campaign or other referendum, such as the conduct of public rallies, public
fund raising events and other such events;
(5) offices of a governmental agency, or government (including,
without limitation, an autonomous governmental corporation or any entity
having governmental immunity), or a diplomatic or trade mission;
(6) the operation of any school or college; or
(7) any use prohibited by the Rules and Regulations attached hereto
and made a part hereof as Exhibit D.
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5.03. Tenant shall not use, occupy, suffer or permit the Demised
Premises (or any part thereof) to be used in any manner, or suffer or permit
anything to be
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brought into or kept therein, which would make unobtainable at standard rates
from any reputable insurance company authorized to do business in New York State
any fire insurance with extended coverage or liability, elevator, boiler,
umbrella or other insurance, or, in Landlord's reasonable judgment (a) cause, or
be likely to cause, injury or damage to the Building or to any Building
equipment or to the Demised Premises, (b) constitute a public or private
nuisance, (c) violate any certificate of occupancy in the Building, (d) emit
objectionable noise, fumes, vibrations, heat, chilled air, vapors or odors into
or from the Building or the Building equipment, or (e) impair or interfere with
any of the Building services, including the furnishing of electrical energy, or
the proper and economical cleaning, heating, ventilating, air conditioning or
other servicing of the Building, Building equipment, or the Demised Premises.
5.04. If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business in (or any subtenant's business)
or occupancy of the Demised Premises, then Tenant, at its sole expense, shall
procure and thereafter maintain (or cause to be maintained) such license or
permit and submit the same to Landlord for inspection upon Landlord's request.
Tenant shall comply with the terms and conditions of each such license and/or
permit.
5.05. No licensing of desk space shall be permitted.
ARTICLE 6
SERVICES AND EQUIPMENT
6.01. So long as Tenant is not in default under any of the covenants
of this Lease, Landlord shall, at its cost and expense:
A. Provide elevator service during business hours on business days.
As used in this Lease, the term "business days" means Monday through Friday
exclusive of holidays, and the term "business hours" means 8:00 A.M. to 6:00
P.M. At all times other than during business hours on business days, only one
elevator shall be on call to the Demised Premises and to other tenants of the
Building.
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B. Maintain and keep in good order and repair the central heating,
ventilating and air-conditioning system installed by Landlord. The aforesaid
system will be operated by Landlord during business hours on business days.
C. Provide Building standard cleaning services to the Demised
Premises and public portions of the Building on business days. The Cleaning
Specifications are annexed hereto and made a part hereof as Exhibit C. If any
---------
space may, under the terms of this Lease, be used for the consumption of food,
such space will receive only Exhibit C office space cleaning specifications, and
Tenant shall have such space periodically exterminated.
D. Furnish water for ordinary and private lavatory (unless there is a
shower in such lavatory), drinking and office cleaning purposes. Landlord shall
provide only cold water for use in Tenant's pantries (including one residential-
type dishwasher) and private toilets. If Tenant requires, uses or consumes
water for any other purposes, Tenant agrees that Landlord may install a meter or
meters or other means to measure Tenant's water consumption, and Tenant further
agrees to reimburse Landlord for the cost of the meter or meters and the
installation thereof, and to pay for the maintenance of said meter equipment
and/or to pay Landlord's costs of other means of measuring such water
consumption by Tenant. Tenant shall reimburse Landlord for the cost of all
water consumed as measured by said meter or meters or as otherwise measured,
including sewer rents.
6.02. Holidays shall be deemed to mean all Federal holidays, State
holidays and Building Service Employees Union Contract holidays.
6.03. Landlord reserves the right to interrupt, curtail or suspend
the services required to be furnished by Landlord under this Article 6 when the
necessity therefor arises by reason of required maintenance, accident, labor
dispute, riot, insurrection, emergency, mechanical breakdown, Acts of God, or
when required by any law, order or regulation of any federal, state, county or
municipal authority, or for any other cause beyond the reasonable control of
Landlord. Landlord shall perform all required repairs or other necessary work
during non-business hours, except in an emergency. Landlord shall exercise good
faith to complete all required repairs or other necessary work so
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that Tenant's inconvenience resulting therefrom may be for as short a period of
time as circumstances will permit. No diminution or abatement of rent or other
compensation shall or will be claimed by Tenant as a result thereof, nor shall
this Lease or any of the obligations of Tenant be affected or reduced by reason
of such interruption, curtailment or suspension, except to the extent provided
in Section 6.07.
6.04. Tenant shall not be required to reimburse Landlord for the cost
to Landlord of removal from the Demised Premises and the Building of any refuse
and rubbish of Tenant except extraordinary materials or amounts (e.g., more than
----
twelve (12) thirty (30) gallon bags of fabric samples discarded by Tenant on
more than forty (40) days per year), and Tenant shall pay all bills therefor
when rendered, unless such materials require special handling in which case
Tenant shall promptly reimburse Landlord for the costs of removing such
materials from the Demised Premises.
6.05. If Tenant shall require HVAC service at any time other than
during business hours on business days, Landlord shall furnish such service
(herein called "after-hours air-conditioning service") upon advance written
notice from Tenant as specified below and Tenant shall pay Landlord's then
established charges therefor on Landlord's demand as additional rent. If Tenant
shall not pay the same, Tenant shall also pay interest thereon at the then Prime
Rate. Requests for after-hours air-conditioning service shall be submitted in
writing to the Building manager, by a person designated by Tenant as authorized
to make such requests, before 2:00 P.M. on a non-holiday weekday for such
weekday and at least twenty-four (24) hours prior to a holiday or weekend.
Landlord's currently established charges for such after-hours air-conditioning
service are as follows: air conditioning -- $160 per hour and heat -- $135 per
hour.
6.06. Notwithstanding anything in this Lease to the contrary,
Landlord agrees that Tenant may install, at Tenant's own cost and expense in
accordance with, and subject to, the applicable provisions of this Lease
(including, without limitation, Article 13 hereof) an additional heating,
ventilating and air-conditioning system (hereinafter referred to as the
"Supplemental Air-Conditioning System"). Tenant shall be privileged to use the
existing valved outlets in the condenser water supply and return risers located
on the fan room on the 3rd floor.
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The costs of installation (including, without limitation, connection to any
condenser water source), maintenance and operation of the Supplemental Air-
Conditioning System shall be borne by Tenant, and Tenant shall be responsible
for the design and installation of its own condenser water pumps, capable of
delivering the required flow to Tenant's equipment. Whenever Tenant shall make a
connection to any condenser water source, Tenant shall also leave additional
valved outlets of a size to be determined by Landlord. All facilities,
equipment, machinery and ducts installed by Tenant in connection with the
Supplemental Air-Conditioning System shall (a) be subject to Landlord's prior
written approval, (b) comply with Landlord's reasonable requirements as to
installation, maintenance and operation, and (c) comply with all other terms,
covenants and conditions of this Lease applicable thereto. Landlord shall have
no liability or responsibility whatsoever for any interruption in service of the
Supplemental Air-Conditioning System (if any) for any cause whatsoever unless
due to Landlord's negligence, nor shall any such interruption be construed as an
actual or constructive eviction of Tenant, or entitle Tenant to any abatement of
Fixed Rent or additional rent, or relieve or release Tenant from any of its
obligations under this Lease. Tenant agrees to cooperate fully with Landlord and
to abide by all reasonable regulations and requirements which Landlord may
prescribe for the proper connection, functioning and protection of the
Supplemental Air-Conditioning System.
Landlord shall furnish, if required, condenser water to support 10
tons of Supplemental Air-Conditioning in the Demised Premises at a cost to
Tenant of $630.00 per ton per year. If after the date of this Lease, the cost
to Landlord of furnishing condenser water for such Supplemental Air-Conditioning
System shall be increased, then the aforesaid cost to Tenant shall be increased
to fairly reflect the amount of the actual cost incurred by Landlord.
6.07. Anything herein contained to the contrary notwithstanding, if
due to Landlord's effecting any work in the Building or the Demised Premises, or
if any utility or service is not provided to all or part of the Demised Premises
(except if such utility or service is not provided due to the failure of the
public utility company), and therefore Tenant for ten (10) consecutive business
days cannot and does not use all or any part of the Demised Premises (except on
an emergency basis) for such entire ten
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(10) day period, then Tenant shall be entitled to a pro rata abatement of the
rent, based upon the portion of the Demised Premises that Tenant cannot and does
not use (except on an emergency basis) for each day after said ten (10) day
period, until such work has been substantially completed by Landlord or until
such utility or service is restored and Tenant can use the entire Demised
Premises, provided, however, that if any utility or service is not provided to
all or part of the Demised Premises due to the failure of any public utility
company, and therefore Tenant for ten (10) consecutive business days cannot and
does not use all or any part of the Demised Premises (except on an emergency
basis) for such entire ten (10) day period, then Tenant shall be entitled to a
pro rata abatement of rent, based upon the portion of the Demised Premises that
Tenant cannot and does not use (except on an emergency basis) for each day after
said ten (10) day period for the next ten (10) days, and thereafter an abatement
of fifty percent (50%) of the rent attributable to such portion of the Demised
Premises that Tenant cannot and does not use (except on any emergency basis),
until such utility or service is restored. Notwithstanding the foregoing, Tenant
shall not be entitled to any rent abatement if any utility service for which
Tenant is a direct customer of the public utility providing such service is not
provided to all or part of the Demised Premises by said utility.
ARTICLE 7
ELECTRIC
7.01. So long as Tenant shall not be in default under this Lease,
Landlord shall furnish to the Demised Premises, through the existing
transmission facilities installed by Landlord in the Building, alternating
electric current in such reasonable quantity as may be now required for Tenant's
ordinary use of the Demised Premises for the purposes herein specified. Such
electric current shall be measured by meter or meters provided, installed and
maintained by Landlord at Landlord's expense at such location or locations in
the Building's core as Landlord shall select and the Tenant shall pay monthly to
Landlord such amounts (which shall be computed by using the Electric Rates, as
hereinafter defined), paid by Landlord plus (as an administrative fee) an
additional 5% of such computed amount as may be billed by Landlord to Tenant
therefor on
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the basis of Tenant's consumption of alternating current in the Demised
Premises. If Tenant shall fail to pay any such amount within 10 days after
receipt of the bill therefor, Tenant shall pay Landlord interest thereon at the
then Prime Rate until such bill shall be fully paid plus any of Landlord's
reasonable attorney's fees, costs and expenses paid or incurred in collecting on
such bill(s). Landlord and its agents shall be permitted access to the electric
closets and the meters. Tenant shall supply, at Tenant's cost, adequate electric
lighting and electric power to Landlord or Landlord's contractors to clean or
make repairs in the Demised Premises.
7.02. Tenant's use of electrical energy shall never exceed the
capacity of the then existing feeders to the Building or the then existing
risers or wiring installation serving the Demised Premises; in furtherance
thereof, Tenant's demand electrical load in the Demised Premises shall at no
time exceed six (6) watts (average) per usable square foot exclusive of power
required to operate the base building air conditioning serving the Demised
Premises without Landlord's prior written approval. The term "demand" shall be
defined as the demand in kilowatts as registered on the submeter which monitors
electric usage in the Demised Premises. When more than one submeter is in use,
demand shall be totalized electronically. Tenant understands that if the demand
load exceeds five (5) watts (average) per usable square foot in any area that
the HVAC system will not be able to perform within the limits specified therefor
in Exhibit E-1 attached hereto and made a part hereof. Any additional risers or
risers required by Tenant to supply Tenant's electrical requirements and all
other equipment proper and necessary in connection therewith, upon request of
Tenant, will be installed by Landlord, at Tenant's sole cost and expense, if in
Landlord's judgment, the same are necessary and will not cause or create a
hazardous condition or entail excessive or unreasonable alterations, repairs or
expense or interfere with or disturb other tenants. Rigid conduit only will be
allowed for riser work. Branch circuits and subfeeders may be run using EMT or
BX to the extent permitted by the New York City Electrical Code. In order that
personal safety and property of Landlord and the tenants and occupants of the
Demised Premises and the Building may not be imperiled by the over taxing of the
capacity of the electrical distribution system of the Demised Premises or the
Building, and to avert possible adverse effect upon the Building's electrical
system,
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Tenant shall not, without prior consent of Landlord, make or perform or permit
any changes in or alterations to wiring installations or other electrical
facilities in or serving the Demised Premises (as such installations or
facilities shall be indicated by the final electrical plans submitted by Tenant
to Landlord in connection with the initial construction of the Demised Premises)
or any additions to the electric fixtures, business machines or office equipment
or appliances (other than typewriters, personal computers, desk top laserjet
printers and similar energy consuming office machines) in the Demised Premises
which utilize electrical energy. Any such alterations or changes performed by
Tenant shall be in compliance with all codes and legal requirements. Should
Landlord grant such consent, all additional risers, wiring or other equipment
required therefor shall be provided by Landlord and the cost thereof shall be
paid by Tenant as additional rent within 10 days after being billed therefor.
Landlord's approval of any electrical alterations or changes shall not be deemed
a representation that the same comply with applicable codes or other legal
requirements. Landlord, its agents and engineers and consultants may, at
Landlord's sole cost and expense, survey the electrical fixtures, appliances and
equipment in the Demised Premises and Tenant's use of electrical energy therein
from time to time to determine whether Tenant is complying with its obligations
under this Article provided that Landlord gives Tenant at least twenty-four (24)
hours' notice of its desire to enter the Demised Premises for such purpose.
7.03. (a) Landlord shall have no liability to Tenant for any loss,
damage or expense which Tenant may sustain or incur by reason of any change,
failure, inadequacy or defect in the supply or character of the electrical
energy furnished to the Demised Premises or if the quantity or character of the
electrical energy is no longer available or suitable for Tenant's requirements,
except for any actual damage suffered by Tenant by reason of any such failure,
inadequacy or defect caused by Landlord's negligence, and then only after prior
actual notice has been given to Landlord as provided in Article 24.
(b) In addition to the foregoing, Landlord shall have the right on
five (5) days' prior written notice to Tenant (whenever possible) to "shut down"
electrical energy to the Demised Premises during non-business hours when
necessitated by the need for repairs, alterations,
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connections or reconnections, with respect to the Building electrical system
(singularly or collectively, "Electrical Work"), regardless of whether the need
for such Electrical Work arises in respect of the Demised Premises, any other
tenant space, or any Building common areas. Landlord may not, however, shut down
Tenant's electrical energy for such Electrical Work during business hours unless
such Electrical Work shall be required because of an emergency or required by
the utility company servicing the Building. Provided Landlord complies with the
terms hereof, Landlord shall have no liability to Tenant for any loss, damage,
or expense which Tenant may sustain due to such "shut down" or Electrical Work.
7.04. The term "Electric Rates" shall be deemed to mean the rates at
which Landlord purchases electrical energy from the public utility supplying
electrical service to the Building (currently SC-4II), including any surcharges
or charges incurred, or utility taxes or sale taxes or other taxes payable by or
imposed upon Landlord in connection therewith, or increase thereof by reason of
fuel adjustment or any substitutions for such Electric Rates or additions
thereto. Landlord and Tenant acknowledge that they understand that the electric
rates, charges, taxes and other costs may be changed by virtue of peak demand,
time-of-day rates, or other methods of billing, and that the foregoing reference
to changes in methods or rules of billing is intended to include any such
change.
7.05. Landlord reserves the right to terminate the furnishing of
electrical energy at any time, upon 90 days' notice (or shorter if required by
law) to Tenant. If Landlord shall so discontinue the furnishing of electrical
energy, (a) Tenant shall arrange to obtain electrical energy directly from the
public utility company furnishing electrical energy to the Building, (b)
Landlord shall permit the existing feeders, risers, wiring and other electrical
facilities serving the Demised Premises to be used by Tenant for such purpose to
the extent that they are available, suitable and safe, (c) from and after the
effective date of such discontinuance Landlord shall not be obligated to furnish
electric energy to Tenant, (d) such discontinuance shall be without liability of
Landlord to Tenant, and (e) if Landlord shall discontinue the furnishing of
electrical energy as a result of any legal requirement or insurance requirement,
Landlord shall install and maintain at locations in the Building selected by
Landlord any necessary electrical meter equipment, panel
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boards, feeders, risers, wiring and other conductors and equipment which may be
required to obtain electrical energy directly from the public utility supplying
the same the cost of which installation and maintenance shall be shared equally
by Landlord and Tenant. If Landlord discontinues the furnishing of electric
service at its own option, Landlord shall pay the costs and expenses incurred by
Tenant for the installation and maintenance of any equipment required by Tenant
to obtain electrical energy directly from the public utility supplying the same.
Landlord shall be promptly given by Tenant a copy of each electric utility bill
of Tenant if Tenant should become a direct customer of the local utility.
7.06. In the event that any tax shall be imposed upon Landlord's
receipts from the sale, use or resale of electrical energy to Tenant, the pro
rata share allocable to the electrical energy service received by Tenant shall
be passed onto, included in the bill of, and paid by Tenant if and to the extent
not prohibited by law.
7.07. Landlord may, at Tenant's option, furnish and install all
replacement lighting, tubes, lamps, starters, bulbs and ballasts required in the
Demised Premises and Tenant shall pay to Landlord (or its designated contractor)
upon demand the then established charges therefor as additional rent on demand.
Tenant may elect to effect the foregoing work on its own behalf, and in this
event Tenant shall use only the same quality of installations (including energy
savings devices) as originally provided and shall use only union labor from the
applicable trade union or its own employees.
Fans servicing the HVAC system within the Premises shall be wired into Tenant's
electric meter and Tenant shall pay the electrical charges for operating such
fans.
ARTICLE 8
ASSIGNMENT, SUBLETTING, MORTGAGING
8.01. A. Tenant or its legal representatives will not by operation
of law or otherwise, assign (in whole or in part), mortgage or encumber this
Lease, or sublet or permit the Demised Premises or any part thereof to be used
or occupied by others, without Landlord's prior written consent in each
instance. The consent by Landlord to any
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assignment or subletting, whether by Tenant or any other tenant in the Building,
shall not be a waiver of or constitute a diminution of Landlord's rights
hereunder and shall not be construed to relieve Tenant from obtaining Landlord's
express written consent to any other or further assignment or subletting. Such
reasonable attorneys' fees as may be incurred by Landlord in connection with
Tenant's request for consent to an assignment or subletting shall be paid by
Tenant, but only to the extent that such attorneys' fees involve services
rendered by an unrelated third party and not Landlord's in house counsel.
B. If Tenant or its legal representatives desires to assign this
Lease or sublet all or any portion of the Demised Premises, Tenant shall
promptly notify the then managing agent of the Building in writing of its desire
to assign or sublet. Upon obtaining a proposed assignee or subtenant upon
acceptable terms, Tenant shall submit to Landlord in writing:
(i) the name and address of the proposed assignee or sublessee;
and
(ii) the terms of the proposed assignment or sublease; and
(iii) the nature and character of the business which the proposed
assignee or subtenant will conduct in the Demised Premises;
(iv) if the proposed assignee or sublessee is a corporation other
than a public one, the names and addresses of all directors
and officers thereof and the names and addresses of each
stockholder who or which has beneficial ownership of 33% or
more of the proposed assignee or sublessee entity, setting
forth for each such stockholder his, her or its percentage of
such beneficial ownership; if a partnership, joint venture or
other business or unincorporated association, the name and
address of each general partner (and limited partner, if any),
joint venturer or member thereof, who or which has beneficial
ownership of 33% or more of the proposed assignee or sublessee
entity, setting forth for each such general partner, limited
partner, joint venturer and
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member his, her or its percentage of such beneficial ownership;
and
(v) a complete financial statement (not more than 12 months old), for
the proposed assignee or sublessee, certified by certified public
accountants regularly employed by the proposed assignee or
sublessee, together with a more current interim financial
statement for the proposed assignee or sublessee, if available;
and
(vi) in the case of a proposed subletting, a copy of the proposed
sublease; and
(viii) any other information concerning the assignment or sublease which
Landlord may reasonably request.
Landlord shall have the option to be exercised within thirty (30) days
from the submission of the aforesaid information: (i) to cancel this Lease with
respect to the space to be sublet for the duration of the proposed sublease; or
(ii) to require Tenant to execute and deliver an assignment or sublease to
Landlord (or its designee) upon the same terms as submitted by Tenant to
Landlord, except that Landlord shall have the unrestricted right to assign or
sublet and/or alter the space (provided, however, that any alterations as to
-------- -------
space which may be returned to Tenant shall not materially change their use as
general or executive office space). In the event of a proposed assignment, or of
a proposed sublease which, in the aggregate with all other subleases, demises
50% or more of the Demised Premises, Landlord shall have the further option to
be exercised within the said thirty (30) day period, to cancel and terminate
this Lease effective on the date of Tenant's proposed assignment or sublease, in
which event this Lease and the term hereof shall expire and terminate on that
date as if it were the date herein fixed for the termination and expiration of
the term of this Lease. Notwithstanding any provision of this Lease to the
contrary, fifty percent (50%) of any rentals and/or consideration paid or
payable by the subtenant or assignee in excess of the rentals (pro-rated on a
square foot basis if the sublease is for less than all of the Demised Premises)
reserved and/or payable under this Lease shall be paid by Tenant as and when
received by Tenant to Landlord as additional rent, deducting from such excess,
the
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reasonable expenses proven to have been incurred by Tenant in effecting the
sublease or assignment, appropriately pro rated (if a sublease) over the term of
--- -----
the sublease. Said reasonable expenses shall include, but not be limited to,
brokerage fees, attorneys' fees and disbursements, advertising costs, reasonable
concessions to the assignee or subtenant, including, without limitation, free
rent or work contributions to the assignee or subtenant, and the costs incurred
in connection with alterations, decorations and installations made by Tenant
pursuant to its subject assignment or sublease to prepare the space for
occupancy by the assignee or the subtenant. The provisions of all preceding
sentences of this paragraph shall not apply to any proposed subleases which (in
the aggregate) are not for more than 35% of the Demised Premises and which end
prior to the tenth anniversary of the Rent Commencement Date, although Tenant
shall still need to receive Landlord's approval as to any such sublease pursuant
to Section 8.01C. Tenant may not assign all or any part of this Lease, nor
sublet all or any part of the Demised Premises, if Tenant is in default under
this Lease.
C. If Tenant has complied with the provisions of Section 8.01B and
Landlord has not exercised either of its foregoing options within the time set
forth above, its con-sent to the proposed assignment or subletting shall not be
unreasonably withheld, and Landlord, within twenty (20) days from the submission
of the information required under Section 8.01B shall either approve such
proposed assignment or subletting or provide Tenant with the reasonable basis
for any refusal; provided, however, that the submission of the information
-------- -------
required under Section 8.01B shall be accompanied by a notice containing a
legend in bold faced type that Landlord must approve or note its objections to
the proposed assignment or sublet within the twenty (20) day time frame (which
must be specifically noted in the legend); provided, however, that it may
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withhold consent thereto if in the reasonable exercise of its judgment it
determines that:
1. The financial condition and general reputation for good character
of the proposed assignee or subtenant are insufficient or not consistent
with the obligation and responsibility undertaken by the proposed
assignment or sublease; or
2. The proposed business to be conducted in the Demised Premises is
not appropriate for the Building
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or in the keeping with the character of the existing tenancies or permitted
by this Lease, or the use is not expressly permitted by this Lease; or
3. The nature of the occupancy of the proposed assignee or subtenant
will cause a materially greater density of employees or traffic or make
materially greater demands on the Building's services or facilities than
that made by the typical tenant in the Building at that time; or
4. Tenant proposes to assign or sublet to one who at the time is a
tenant (or subsidiary or affiliate of a tenant) or to a person in
possession of premises in the Building, or at 1133 Avenue of the Americas
or 114 West 47th Street or to one with whom, identified by Landlord to
Tenant after request by Tenant, Landlord is negotiating for a lease or
sublease for space in the Building or at 1133 Avenue of the Americas or 114
West 47th Street; or
5. The assignee or subtenant shall have or enjoy diplomatic immunity;
or
6. Such proposed subletting would result in any floor of the Demised
Premises being divided into more than four (4) rental units in the
aggregate; or
7. Any combination of the foregoing conditions exist.
8.02. If this Lease shall be assigned or sublet in accordance with
this Article, such assignee or subtenant shall be permitted to further assign
this Lease or sublet in whole or in part the premises sublet to such subtenant
under the same terms and conditions as Tenant would be permitted to assign or
sublet under this Lease, as the case may be, as if such assignee or subtenant
were Tenant.
8.03. If this Lease shall be assigned, or if the Demised Premises or
any part thereof be sublet or occupied by any person or persons other than
Tenant, Landlord may, after default by Tenant, collect rent from the assignee,
subtenant or occupant and apply the net amount collected to the rent herein
reserved, but no such assignment, subletting, occupancy or collection of rent
shall be deemed a waiver of the covenants in this Article, nor shall it be
deemed acceptance of the assignee, subtenant or occupant as
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a tenant, or a release of Tenant from the full performance by Tenant of all the
terms, conditions and covenants of this Lease.
8.04. Each permitted assignee shall assume and be deemed to have
assumed this Lease and shall be and remain liable jointly and severally with
Tenant for the payment of the Fixed Rent and additional rent and for the due
performance of all the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed for the term of this Lease. No
assignment shall be effective unless Tenant shall promptly deliver to Landlord a
duplicate original of the instrument of assignment, in form reasonably
satisfactory to Landlord, containing a covenant of assumption by the assignee of
all of the obligations aforesaid and shall obtain from Landlord the aforesaid
written consent, prior thereto.
8.05. Anything herein contained to the contrary notwithstanding:
(1) Tenant shall not advertise (but may list with brokers) its space
for assignment or subletting at a rental rate lower than the lower of the
then Building rental rate for such space or the rental rate then being paid
by Tenant to Landlord.
(2) The transfer of a majority of the issued and outstanding capital
stock of any corporate tenant or subtenant of this Lease or a majority of
the total interest in any partnership tenant or subtenant, however
accomplished, and whether in a single transaction or in a series of related
or unrelated transactions, shall be deemed an assignment of this Lease or
of such sublease. The transfer of outstanding capital stock of any
corporate tenant, for purposes of this Article, shall not include (and
shall not be deemed an assignment of this Lease or a sublease) a sale of
such stock by persons other than those deemed "insiders" within the meaning
of the Securities Exchange Act of 1934 as amended, and which sale is
effected through "over-the-counter market" or through any recognized stock
exchange.
8.06. With respect to each and every sublease or subletting
authorized by Landlord under the provisions of this Lease, it is further agreed
as follows:
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(a) no subletting shall be for a term ending later than one day prior
to the Expiration Date of this Lease;
(b) no sublease shall be valid, and no subtenant shall take
possession of the Demised Premises or any part thereof, until an executed
counterpart of such sublease has been delivered to Landlord and approved by
Landlord (where such approval is required);
(c) each sublease shall provide that it is subject and subordinate to
this Lease and to the matters to which this Lease is or shall be
subordinate, and that, in the event of termination, re-entry or dispossess
by Landlord under this Lease, Landlord may, at its option, either terminate
such sublease or take over all of the right, title and interest of Tenant,
as sublessor, under such sublease, and such subtenant shall, at Landlord's
option, attorn to Landlord pursuant to the then executory provisions of
such sublease, except that Landlord shall not (i) be liable for any
previous act or omission of Tenant under such sublease, (ii) be subject to
any offset, not expressly provided in such sublease, which theretofore
accrued to such subtenant against Tenant, or (iii) be bound by any previous
modification of such sublease or by any previous prepayment of more than
one month's rent.
8.07. Anything to the contrary in the foregoing notwithstanding,
Tenant may sublet or assign this Lease to any Subsidiary, Parent Company,
Affiliate or successor by merger or consolidation or a person to whom all or
substantially all of Tenant's assets are transferred or an entity to which all
or substantially all of Tenant's stock is transferred (such successor or person
being herein called a "Successor") without the consent of Landlord (but only if
(a) such sublet or assignment does not violate Article 5 hereof (b) the
Successor has a net worth on the date of such assignment or sublease equal to or
greater than the highest net worth of Tenant during the twelve (12) month period
immediately prior to such merger, consolidation or transfer and (c) such merger,
consolidation or transfer of assets is not effected for the primary purpose of
transferring this Lease or subleasing the Demised Premises). For purposes of
this (S) 8.07, a "Subsidiary," "Parent Company" and "Affiliate" of Tenant shall
mean the following: (i) "Subsidiary" shall mean any
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corporation not less than 50% of whose outstanding stock shall, at the time, be
owned directly or indirectly, by Tenant; (ii) "Parent Company" shall mean any
corporation which shall own, directly or indirectly, at least 50% of the
outstanding stock of Tenant at the time; and (iii) "Affiliate" shall mean any
corporation or other entity which, directly or indirectly, controls or is
controlled by, or is under common control with Tenant. For this purpose,
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities or by contract
or otherwise and/or the ownership of at least 50% of the voting stock of the
corporation. Furthermore no such assignment or sublease shall be permitted or
effective unless (x) Tenant is not then in default under this Lease, (y) Tenant
gives Landlord at least ten (10) days' written notice of such assignment or
sublease (or within 10 days after such assignment or sublease, if Tenant is
prohibited by federal or state securities laws from disclosing information
related thereto) together with a copy of the proposed assignment or sublease and
reasonably acceptable proof of the compliance of such transaction with the
conditions set forth in this (S) 8.07 and (z) Tenant gives Landlord a signed
copy of the final assignment or sublease within ten (10) days after it is
executed. No such assignment or sublease by Tenant shall be deemed to release
the Tenant from any of its obligations and liabilities hereunder and such
assignor or sublessee shall execute an agreement, in form or substance
reasonably satisfactory to Landlord, assuming all Tenant's obligations and
liabilities hereunder.
ARTICLE 9
SUBORDINATION, NON-DISTURBANCE, ESTOPPEL CERTIFICATE
9.01. Landlord's right, title and interest in and to its leasehold
estate and to the Building are derived from and under a lease or leases
(sometimes referred to collectively as the "Over Lease") described in the final
sentence of Section 9.02 of this Lease.
9.02. This Lease is and shall be subject and subordinate in all
respects to the Over Lease, and any other ground leases, overriding leases and
underlying leases of the Land and/or the Building now or hereafter
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existing and to all mortgages which may now or hereafter affect the Land and/or
the Building and/or such leases, to each and every advance made or hereafter to
be made under such mortgages and to all renewals, modifications, consolidations,
replacements and extensions of such Over Lease or leases or mortgages. This
section shall be self-operative and no further instrument of subordination shall
be required; provided, however, that Landlord (a) shall obtain from the holder
-------- -------
of any future superior mortgage and/or the lessor under any future superior
lease, and (b) shall use all reasonable efforts to obtain from the holders of
any present superior lease, a non-disturbance agreement substantially in the
form which is then customarily used by such party, with such reasonable
modifications as Tenant may request (it being agreed that such superior
mortgagee or lessor shall not be responsible for performing any of Landlord's
Work and/or for providing the Work Allowance and/or performing Landlord's
obligations under the Lease Takeover Agreement (as hereinafter defined)). As
used in this paragraph, the terms "future superior mortgage" and "future
superior lease" shall include any now-existing instrument that is renewed,
modified, consolidated, replaced or extended. Notwithstanding the foregoing, if
Landlord does not obtain from the existing holder of the superior mortgage
(i.e., Prudential Insurance Company) a non-disturbance agreement substantially
----
in the form annexed as Exhibit G within fifteen business days after Tenant signs
and delivers this Lease to Landlord, then Tenant shall have the right (as
Tenant's sole and exclusive remedy) to cancel this Lease by giving notice
thereof to Landlord within ten (10) days after the expiration of such period.
Landlord represents that the only mortgage superior to this Lease is the
mortgage described in Exhibit H attached. In confirmation of such subordination
and non-disturbance, Tenant agrees to promptly execute and deliver any
instrument that Landlord, the lessor of any such lease or the holder of any such
mortgage or any of their respective successors in interest may request to
evidence such subordination, and Tenant hereby irrevocably appoints Landlord the
attorney-in-fact of Tenant to execute and deliver such instrument on behalf of
Tenant, should Tenant refuse or fail to do so promptly after request. The leases
to which this Lease is, at the time referred to, subject and subordinate
pursuant to this Article are hereinafter sometimes called "superior leases," and
references to the lessors of superior leases are intended to include the
successors in interest of the lessors of superior leases and their successors in
interest as may be appro-
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priate. The mortgages to which this Lease is, at the time referred to, subject
and subordinate are hereinafter sometimes collectively called "superior
mortgages." Tenant agrees that if prior approval of this Lease is required by
the terms of the superior mortgage described above and such approval is not
granted within fifteen business days after Tenant signs and delivers this Lease
to Landlord, Landlord may cancel and terminate this Lease at any time within the
fifteen (15) day period following such fifteen business day period by written
notice to Tenant, provided that such approval has not been granted prior to the
issuance of such cancellation and termination notice. If such cancellation and
termination notice is so given, or if this Lease is rejected by such superior
mortgagee, this Lease shall be deemed cancelled and neither Landlord nor Tenant
shall have any further liability under this Lease. Landlord hereby represents
that no consent of the lessors under the current superior leases to this Lease
is required and that the only leases superior to this Lease are the ones
described in Exhibit H attached.
9.03. In the event of any act or omission of Landlord which would give
Tenant the right, immediately or after lapse of a period of time, to cancel or
terminate this Lease, or to claim a partial or total eviction, Tenant shall not
exercise such right (i) until it has given written notice of such act or
omission to the holder of each superior mortgage and the lessor of each superior
lease whose name and address shall previously have been furnished to Tenant in
writing, and (ii) unless such act or omission shall be one which is not capable
of being remedied by Landlord or such mortgage holder or lessor within a
reasonable period of time, until a reasonable period for remedying such act or
omission shall have elapsed following the giving of such notice and following
the time when such holder or lessor shall have become entitled under such
superior mortgage or superior lease, as the case may be, to remedy the same
(which reasonable period shall in no event be less than the period to which
Landlord would be entitled under this Lease or otherwise, after similar notice,
to effect such remedy), provided such holder or lessor shall with due diligence
give Tenant written notice of intention to, and commence and continue to, remedy
such act or omission.
9.04 In the event of a termination of the Over Lease, or if the
interests of Landlord under this Lease are transferred by reason of or assigned
in lieu of foreclosure
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or other proceedings for enforcement of any such mortgage, or if the holder of
any such mortgage acquires a lease in substitution therefor, then Tenant under
this Lease will, at the option to be exercised in writing by the lessor under
said Over Lease or such purchaser, assignee or lessee, as the case may be, (i)
attorn to it and will perform for its benefit all the terms, covenants and
conditions of this Lease on Tenant's part to be reformed with the same force and
effect as if said lessor or such purchaser, assignee or lessee, were the
landlord originally named in this Lease, or (ii) enter into a new lease with
said lessor or such purchaser, assignee or lessee, as landlord, for the
remaining term of this Lease and otherwise on the same terms and conditions and
with the same options then remaining.
9.05. In the event of a termination of the Over Lease, or if the
interests of Landlord under this Lease are transferred by reason of or assigned
in lieu of foreclosure or other proceedings for enforcement of any superior
mortgage, or if the holder of any such mortgage acquires a lease in substitution
therefor, then (a) this Lease shall not terminate or be terminable by Tenant,
(b) this Lease shall not terminate or be terminable by any subtenant or
successor thereto unless Tenant is specifically named and joined in any such
action and unless a judgment is obtained therein against Tenant, (c) Tenant
shall attorn to the lessor under the Overlease or to the purchaser at the sale
of the property encumbered by such mortgage on such foreclosure, as the case may
be, and will perform for its benefit all the terms, covenants and conditions of
this Lease on Tenant's part to be performed with the same force and effect as if
said lessor or such purchaser, assignee or lessee, were the landlord originally
named in this Lease, or at lessor's option, (d) Tenant may enter into a new
lease with said lessor or such purchaser, assignee or lessee, as landlord, for
the remaining term of this Lease and otherwise on the same terms and conditions
and with the same options then remaining.
9.06. In the event of the enforcement by the holder of any mortgage
of the remedies provided for by law or by any security instrument, Tenant will,
upon request of any person succeeding to the interest of Landlord as a result of
such enforcement, automatically become the Tenant of said successor in interest,
without change in the terms or other provisions of this Lease; provided,
however, that said successor in interest shall not be bound by (i) any
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payment of Fixed Rent or additional rent for more than one month in advance,
except prepayments in the nature of security for the performance by Tenant of
its obligations under this Lease, (ii) any amendment or modification of this
Lease made without the consent of the holder of such mortgage or such successor
in interest, or (iii) any obligation or liability of Landlord thereunder arising
prior to the date the holder of such mortgage shall succeed to the interest of
Landlord. Upon request by said successor in interest, Tenant shall execute and
deliver an instrument or instruments confirming such attornment. Anything to the
contrary in the foregoing notwithstanding, any cancellation, abridgment,
surrender, modification or amendment of this Lease, without the prior written
consent of the holder of any superior mortgage, except as may be permitted by
the provisions of any such superior mortgage or assignment of leases and rents
granted in connection with such superior mortgage shall be voidable as against
the holder of the superior mortgage, at its option.
9.07. If, in connection with obtaining financing (or condominiumizing)
for the Land and/or Building, or of any ground or underlying lease, a banking,
insurance or other recognized institutional lender shall request reasonable
modifications in this Lease as a condition to such financing (or
condominiumizing), Tenant will not unreasonably withhold, delay or defer its
consent thereto, provided that such modifications do not increase the
obligations of Tenant hereunder or decrease the rights of Tenant or materially
adversely affect the leasehold interest hereby created or Tenant's use and
enjoyment of the Demised Premises.
9.08. Each party agrees, at any time and from time to time, upon not
less than ten days' prior notice by the other party, to execute, acknowledge and
deliver to the other, a statement in writing addressed to the other certifying
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), stating the dates to which the Fixed Rent,
additional rental and other charges have been paid, and stating whether or not
to the best knowledge of the signer of such certificate, there exists any
default in the performance of any covenant, agreement, term, provision or
condition contained in the Lease, and, if so, specifying each such default of
which the signer may have knowledge, it being intended that any such statement
delivered
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pursuant hereto may be relied upon by the requesting party and by any mortgagee
or prospective mortgagee of any mortgage affecting the Building or the Building
and the Land, and by any landlord under a ground or underlying lease affecting
the Land or Building, or both.
9.09 Unless Tenant is a public company (whose financial statements
are available to the public) Tenant agrees to submit to Landlord, on Landlord's
request, a copy of the latest annual financial statements of Tenant, certified
by an independent certified public accountant reasonably satisfactory to
Landlord.
ARTICLE 10
ENTRY; RIGHT TO CHANGE
PUBLIC PORTIONS OF THE BUILDING
10.01. Tenant shall permit Landlord to erect, use and maintain pipes
and conduits in and through the Demised Premises. Provided the same does not
unreasonably interfere with Tenant's use of its showroom and other public
spaces, Landlord or its agents or designees shall have the right to enter the
Demised Premises, for the purpose of making such repairs or alterations as
Landlord shall be required or shall have the right to make by the provisions of
this Lease and, subject to the foregoing, shall also have the right during
business hours to enter the Demised Premises for the purpose of inspecting them
or exhibiting them to prospective purchasers or lessees of the Building or to
prospective mortgagees or to prospective assignees of any such mortgagees.
Landlord shall be allowed to take all material into and upon the Demised
Premises that may be required for the repairs or alterations above mentioned
without the same constituting an eviction of Tenant in whole or in part and the
rent reserved shall in no wise abate, except as otherwise provided in this
Lease, while said repairs or alterations are being made.
10.02. During the twelve (12) months prior to the expiration of the
term of this Lease, Landlord may exhibit the Demised Premises to prospective
tenants upon prior reasonable notice to Tenant and provided such exhibition does
not unreasonably interfere with Tenant's use of the Premises.
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10.03. Landlord shall have the right at any time without thereby
creating an actual or constructive eviction or incurring any liability to Tenant
therefor, to change the arrangement or location of entrances, passageways, doors
and doorways, corridors, stairs, toilets and other like public service portions
of the Building, provided the same do not affect the size, configuration,
location or dimensions of the Demised Premises (except in an immaterial way), or
render them non-contiguous or materially interfere with Tenant's means of access
to or egress from the Demised Premises.
10.04. Landlord shall have the right at any time to name the Building
for any person(s) or tenant(s) and to change any and all such names at any time
thereafter provided, however, that so long as the named Tenant herein (i.e.,
-------- ------- ----
Forstmann & Company, Inc.) is in actual occupancy of at least 70% (until the
date which is ten years from the Rent Commencement Date) or 80% (after that
date) of the Demised Premises, Landlord shall not name the Building for any of
the following entities or their corporate successors in interest: (a)
Burlington Industries Inc., (b) Cleyn & Tinker, (c) The Worster Company and (d)
Carleton Woolen Mills Inc.
ARTICLE 11
LAWS, ORDINANCES,
REQUIREMENTS OF PUBLIC AUTHORITIES
11.01. Tenant shall, at its expense, comply with all laws, orders,
ordinances and regulations of Federal, State, County and Municipal authorities
including, but not limited to, the Americans with Disabilities Act, Title III,
42 U.S.C.S. (S) 12181-12189 (the "ADA") and with any direction made pursuant to
law or any public officers which shall, with respect to the occupancy, use or
manner of use of the Demised Premises or to any abatement of nuisance, impose
any violation, order or duty upon Landlord or Tenant arising from Tenant's
occupancy, use or manner of use of the Demised Premises or any installations
made therein by or at Tenant's request or required by reason of a breach of any
of Tenant's covenants or agreements hereunder.
11.02. If Tenant receives written notice of any violation of law,
ordinance, rule, order or regulation
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applicable to the Demised Premises, it shall give prompt notice thereof to
Landlord.
11.03. Except as aforesaid, Landlord shall, at its expense comply
with or cause to be complied with, all laws, orders, ordinances and regulations
of Federal, State, County and Municipal authorities and any direction, made
pursuant to law, of any public officer or officers which shall, with respect to
the public portions of the Building, or which affect Tenant's use or enjoyment
of, or access to, the Demised Premises, impose any violation, order or duty upon
Landlord or Tenant and with respect to which Tenant is not obligated by Section
11.01 to comply. Landlord may at its expense contest the validity of any such
law, ordinance, rule, order or regulation.
ARTICLE 12
REPAIRS
12.01. Tenant shall take good care of the Demised Premises and the
fixtures and appurtenances therein and at its sole cost and expense make all
repairs thereto as and when needed to preserve them in good working order and
condition. All damage or injury to the Demised Premises, whether structural or
non-structural, and to its fixtures, glass, appurtenances and equipment or to
the Building or to its fixtures, glass, appurtenances and equipment caused by
Tenant moving property in or out of the Building or by installation or removal
of furniture, fixtures or other property, or resulting from fire, explosion,
air-conditioning unit or system, short circuits, flow or leakage of water,
steam, illuminating gas, sewer gas, sewerage or odors or by frost or by bursting
or leaking of pipes or plumbing works or gas, or from any other cause of any
other kind or nature whatsoever due to carelessness, omission, neglect, improper
conduct or other cause of Tenant, its servants, employees, agents, visitors or
licensees, shall be repaired, restored or replaced promptly by Tenant at its
sole cost and expense to the satisfaction of Landlord. All aforesaid repairs,
restorations and replacements shall be in quality and class equal to the
original work or installations and shall be done in a good and workmanlike
manner. If Tenant fails to make such repairs, restorations or replacements, same
may be made by Landlord at expense of Tenant and all sums so spent and expenses
incurred by Landlord shall be collectible as
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additional rent and shall be paid by Tenant within ten (10) days after rendition
of a bill or statement therefor.
12.02. Landlord shall, at its expense, make all repairs and
replacements, structural and otherwise, necessary or desirable in order to keep
in good order and repair the exterior of the Building and the public portions of
the Building the need for which Landlord may have knowledge (including the
public halls and stairways, plumbing, wiring and other Building equipment for
the general supply of water, heat, air-conditioning, gas and electricity) except
repairs hereinabove provided to be made by Tenant. Tenant agrees to notify
Landlord of the necessity of repairs of which Tenant may have knowledge, for
which Landlord may be responsible under the provisions of the preceding
sentence.
ARTICLE 13
ALTERATIONS; FIXTURES
13.01. Tenant shall make no alterations, decorations, installations,
additions or improvements in or to the Demised Premises or the electrical,
plumbing, mechanical or heating, ventilating and air-conditioning systems
serving the Demised Premises, including but not limited to, a water cooler, an
air-conditioning or cooling system, mechanical or electrical equipment, or any
unit or part thereof or other apparatus of like or other nature, without
Landlord's prior written consent, which shall not be unreasonably withheld and
then only by contractors or mechanics approved by Landlord. All such work,
alterations, decorations, installations, additions or improvements shall be done
at Tenant's sole expense and at such times and in such manner as Landlord may
reasonably designate and in full compliance with all governmental bodies having
jurisdiction thereover. As a condition precedent to Landlord's consent to the
making by Tenant of alterations, decorations, installations, additions or
improvements to Demised Premises (other than Tenant's initial alterations under
Article 37 or subsequent alterations costing under $250,000 in the aggregate),
Tenant agrees to obtain and deliver to Landlord (at Landlord's request) a
performance bond and a labor and materials payment bond issued by a surety
company satisfactory to Landlord and licensed to do business in the State of New
York, each in an amount equal to 150% of the cost of all work, labor, and such
services to be performed
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and materials to be furnished in connection with such work, signed by such
surety and a receipt of payment in full of the premium for such bond. Landlord
and Landlord's designees shall be obligee(s) or insured(s) under such surety
bond. Notwithstanding the foregoing, if any mechanic's lien is filed against the
Demised Premises or the Building for work claimed to have been done for or
materials claimed to have been furnished to Tenant, it shall be discharged by
Tenant within thirty (30) days there- after, at Tenant's expense, by filing the
bond required by law or payment or otherwise. In addition, Tenant shall defend,
save and hold Landlord harmless from any such mechanic's lien or claim,
including, without limitation, Landlord's reasonable attorneys' fees, costs and
expenses. Landlord shall not be liable for any failure of any Building
facilities or services including, but not limited to, the heating, ventilating
and air-conditioning installations, and/or additions by Tenant and Tenant shall
correct any such faulty installation. Upon Tenant's failure to correct same,
Landlord may make such correction and charge Tenant for the cost thereof. Such
sum due Landlord shall be deemed additional rent and shall be paid by Tenant
promptly upon being billed therefor and unless so paid, Tenant shall also pay
Landlord the then Prime Rate on such additional rent.
13.02. Prior to commencing any work pursuant to the provisions of
Section 13.01, Tenant shall furnish to Landlord:
A. Copies of all governmental permits and authorizations which may be
required in connection with such work.
B. A certificate evidencing that Tenant (or Tenant's contractors) has
(have) procured workmen's compensation insurance in statutory limits
covering all persons employed in connection with the work who might assert
claims for death or bodily injury against the holder of the Over-Lease,
Landlord, Tenant or the Building.
C. Such additional personal injury and property damage insurance
(over and above the insurance required to be carried by Tenant pursuant to
the provision of Section 16.03 of Article 16) and general liability
insurance (with completed operations endorsement) for any occurrence in or
about the
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Building, in such limits as Landlord may reasonably require
because of the nature of the work to be done by Tenant and with insurers
satisfactory to Landlord.
13.03. All alterations, installations, additions or improvements upon
the Demised Premises, made by either party, including all paneling, decoration,
non-removable partitions, railing, mezzanine floors, galleries and the like,
affixed to the realty so that they cannot be removed without material damage, or
for which Tenant has received a credit, shall become the property of Landlord
and shall remain upon, and be surrendered with, the Demised Premises, as a part
thereof, at the end of the term or renewal terms, as the case may be. In the
event Landlord shall elect otherwise (but which election Landlord may make only
with respect to Uncommon Alterations, as defined hereinbelow), then Landlord
shall notify Tenant at least ninety (90) days prior to the expiration of the
term of this Lease of the estimated costs to remove such Uncommon Alterations
made by Tenant upon the Demised Premises, as Landlord shall select. Tenant
shall have thirty (30) days from the receipt of such notice from Landlord to pay
to Landlord the estimated costs of removal and Landlord shall remove such
Uncommon Alterations after the expiration of the term of this Lease. As used
herein, the term "Uncommon Alterations" shall mean alterations of a nature which
are not typically a part of a basic executive office build-out (i.e., internal
----
staircases; floor openings [whether for such staircases or other installations
between floors]; reinforced flooring above the floor slab; vaults; auditoriums;
kitchens; lunchrooms; executive or additional washrooms, showers or toilets;
alterations affecting the facade of the Building or its windows; special or
supplemental systems [including HVAC units]; marble installations on floors
which have been raised; raised computer room (floor and other unusual
installations). All movable property, furniture, furnishings and trade
fixtures, not affixed to the realty so that they can be removed without material
damage shall remain the property of Tenant, shall be removed by Tenant on or
before the expiration of the term or sooner termination thereof and, in case of
damage by reason of their removal, Tenant shall repair any damage and restore
the Demised Premises to good order and condition, reasonable wear and tear
excepted. In case Tenant shall decide not to remove any part of such property,
it shall notify Landlord in writing not less than sixty (60) days prior to the
expiration of the term of this Lease specifying the items of property which it
has decided not to remove. If within
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thirty (30) days after the service of such notice Landlord shall request Tenant
to remove any of the said Tenant's property, and/or if Landlord shall elect, not
less than 30 days prior to the expiration of this Lease, to require the removal
of any alterations, decorations, installations, additions or improvements
referred to above, Tenant shall at its expense, at or before the expiration of
the term of this Lease, remove said property, and in case of damage by reason of
such removal, restore the Demised Premises to good order and condition.
13.04. A. Before proceeding with any alteration and/or addition,
Tenant shall submit to Landlord three copies of detailed plans and
specifications therefor, for Landlord's review and approval. In the event,
however, that Landlord shall have failed to respond to Tenant's request for
approval of such plans and specifications within ten (10) business days of
receipt thereof, then Landlord shall be deemed to have given its approval
thereof, provided, however, that the submission of such plans and specification
-------- -------
shall be accompanied by a notice to Landlord containing a legend in bold faced
type that the failure by Landlord to approve or note its objections to the plans
and specifications within the ten (10) business day time frame (which must be
specifically noted in the legend), shall result in a "deemed approval" by
Landlord of the plans and specifications. Landlord shall sign any forms required
by the Building Department in order for Tenant to construct the staircase
between the 3rd and 4th floors of the Building after Landlord has reviewed and
approved the structural plans prepared by The Office of Irwin Cantor. With
respect to any other work to be performed by Tenant in the Demised Premises,
Landlord will sign any forms required by the Building Department after Landlord
has reviewed and approved the preliminary plans and specifications submitted by
Tenant, provided, however, Tenant shall submit to Landlord, for Landlord's
review and approval, final plans for any such work and agrees that such final
plans and specifications shall be revised in accordance with Landlord's comments
thereto regardless of Landlord's comments (or lack of comments) to the
preliminary plans and specifications. In no event by reason thereof shall
Tenant's connected electrical load exceed the capacity of the distribution
system in and to the Demised Premises.
B. Tenant shall (other than with respect to Tenant's initial
alterations under Article 37) promptly
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reimburse Landlord for out-of-pocket expenses paid by Landlord in connection
with (i) its decision as to whether to approve the proposed alterations and/or
additions and (ii) inspecting the alterations and/or additions to determine
whether the same are being or have been performed in accordance with the
approved plans and specifications therefor and with all legal requirements and
insurance requirements, including the fees and expenses of any attorney,
architect or engineer employed for such purpose. Landlord represents that the
only consent to alterations required under the current superior lease and
superior mortgage is to structural alterations under the superior mortgage.
C. Tenant shall not be permitted to install and make part of the
Demised Premises any materials, fixtures or articles which are subject to liens,
chattel mortgages or security interests (as such term is defined in the Uniform
Commercial Code as then in effect in New York) but Tenant shall be permitted to
lease normal office equipment, e.g., built-in furniture, typewriter, computers,
----
photocopy machines and telex machines, which are not to be built into the
Demised Premises.
D. No alterations and/or additions shall be undertaken (i) except
under the supervision of a licensed architect or licensed professional engineer
satisfactory to Landlord (which approval shall not be unreasonably withheld) and
(ii) except after at least 30 days' prior notice to Landlord.
E. All alterations and/or additions shall at all times comply with
all legal requirements and insurance re-quirements and all rules and regulations
including any Landlord may adopt with respect to the making of any improvements
and shall be made at such times and in such manner as Landlord reasonably may
direct provided Tenant has received written notice from Landlord of any rules
and regulations adopted by Landlord with respect to the making of improvements.
Tenant, at its expense, shall (a) obtain all necessary municipal and other
governmental permits, authorizations, approvals and certificates for the
commencement and prosecution of such alterations and/or improvements and for
final approval thereof upon completions, (b) deliver three copies to Landlord
and (c) cause all alterations and/or improvements to be performed in a good and
first class workmanlike manner, using new materials and equipment at least equal
in quality to the
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installations of the Building or the then standards for the Building established
by Landlord and in accordance with the standards set forth in Exhibit E-1. All
alterations and/or additions shall be promptly commenced and completed and shall
be performed in such manner so as not to interfere with the occupancy of any
other tenant (unless Tenant obtains the prior approval of Landlord and any
tenants which may be affected thereby) nor delay or impose any additional
expense upon Landlord in the maintenance, cleaning, repair, safety, management,
or security of the Building (or the Building's equipment) or in the performance
of any improvements. If any additional expense is incurred, Landlord shall
notify Tenant of such expenditures. Landlord may collect such expenses as
additional rent from Tenant and Tenant's failure to promptly pay the same when
billed shall entitle Landlord to treat the non-payment thereof as a non-payment
of rent under this Lease and until paid to Landlord such additional rent shall
bear interest at the then Prime Rate. Upon completion of Tenant's improvements,
if there have been material field changes to the work shown in Tenant's approved
plans or if any such changes affect any of the Building systems, Tenant shall
deliver a complete set of "As Built" drawings and plans to Landlord. No
improvements shall involve the removal of any fixtures, equipment or other
property in the Demised Premises which are not Tenant's sole and exclusive
property without Landlord's prior written consent and unless they shall be
promptly replaced, at Tenant's expense, with fixtures, equipment or other
property, of like utility and at least equal value (which thereupon shall become
the property of Landlord).
F. Tenant, at its sole expense, promptly shall procure the
cancellation or discharge of all notices of violation arising from or otherwise
connected with its alterations and/or additions which shall be issued by any
public authority having or asserting jurisdiction.
G. Only Landlord or persons first approved by Landlord (including but
not limited to those listed on Exhibit E) shall be permitted to act as
contractor for any work to be performed in accordance with this Article.
Landlord reserves the right to exclude from the Building any person attempting
to act as construction contractor in violation of this Article. In the event
Tenant shall employ any contractor permitted in this Article, such contractor or
any subcontractor may have use of the Building facilities subject to the
provisions of this Lease
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and the Rules and Regulations governing construction. Tenant will advise
Landlord of the names of any such contractor and subcontractor Tenant proposes
to use in the Demised Premises at least 30 days prior to the beginning of work
by such contractor or subcontractor.
H. Tenant agrees that it will not at any time prior to or during the
term of this Lease, either directly or indirectly employ or permit the
employment of any contractor, mechanic or laborer, or permit any materials in
the Demised Premises, if the use of such contractor, mechanic or laborer or such
materials would, in Landlord's sole and exclusive opinion, create any
difficulty, work slowdown, sabotage, wild-cat strike, strike or jurisdictional
dispute with other contractors, mechanics and/or laborers engaged by Tenant or
Landlord or others, or would in any way disturb the peaceful and harmonious
construction, maintenance, cleaning, repair, management, security or operation
of the Building or any part thereof or in any other building owned by Landlord
(or an affiliate of Landlord or co-venturer of Landlord). In the event of any
interference or conflict, or perceived interference or conflict,Tenant, upon
demand of Landlord, shall cause all contractors, mechanics or laborers, or all
materials causing, in Landlord's sole and exclusive opinion, such interference,
difficulty or conflict, to leave or be removed from the Building immediately and
Tenant does hereby agree to defend, save and hold Landlord harmless from any and
all loss arising thereby, including, without limitation, any attorney's fees and
any claims made by contractors, mechanics and/or laborers so precluded from
having access to the Building.
I. No approval of any plans or specifications by Landlord or consent
by Landlord allowing Tenant to make any improvements or any inspection of
improvements made by or for Landlord shall in any way be deemed to be an
agreement by Landlord that the contemplated improvements comply with any legal
requirements or insurance requirements or the certificate of occupancy for the
Building nor shall it be deemed to be a waiver by Landlord of the compliance by
Tenant of any provision of this Lease.
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ARTICLE 14
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
14.01. If Tenant shall default in the observance or performance of
any term or covenant on its part to be observed or performed under or by virtue
of any of the terms or provisions in any Article of this Lease, Landlord,
without being under any obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the expense of Tenant.
If Landlord makes any expenditures or incurs any obligations for the payment of
money in connection therewith, including, but not limited to, attorney's fees in
instituting, prosecuting or defending any action or proceeding, such sums paid
or obligations incurred with interest and costs shall be deemed to be additional
rent hereunder and shall be paid to it by Tenant on demand.
ARTICLE 15
NO LIABILITY OF LANDLORD
15.01. Landlord or Landlord's agents have made no representations or
promises with respect to the Building, the Land or the Demised Premises except
herein expressly set forth and no rights, easements or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provision of this Lease. The taking possession of the Demised Premises by
Tenant shall be conclusive evidence, as against Tenant, that Tenant accepts said
premises and the Building and that same were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects.
15.02. This Lease and the obligation of Tenant to pay rent hereunder
and perform all of the other covenants and agreements hereunder on the part of
Tenant to be performed shall in no way be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease or is
unable to supply or is to make or is delayed in making any repairs, additions,
alterations or decorations or is unable to supply or is delayed in supplying any
equipment or fixtures, if, and only to the extent, Landlord is prevented or
delayed from so doing by reason of strike or labor trouble or any other cause
outside of Landlord's control including, but not
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limited to, governmental pre-emption in connection with a national emergency or
by reason of any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency declared as
such by a governmental agency or body.
15.03. Landlord and its agents shall not be liable for any damage to
property of Tenant or of others entrusted to employees of the Building, nor for
the loss of or damage to any property of Tenant by theft or otherwise. Landlord
and its agents shall not be liable for any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain or snow leaks from any part of the Building or from the
pipes, appliances or plumbing works or from the roof, street or sub-surface or
from any other place or by dampness or by any other cause of whatsoever nature,
unless caused by or due to the negligence of Landlord, its agents, servants or
employees; nor shall Landlord and its agents be liable for any such damage
caused by other tenants or persons in the Building or caused by operations in
construction of any private, public or quasi-public work; nor shall Landlord be
liable for any patent defect in the Demised Premises or in the Building. If at
any time any windows of the Demised Premises (except for the windows located on
the west side of the Building or on the side of the Building which is adjacent
to the Belasco Theater) are temporarily or permanently closed, darkened or
bricked up in order to comply with a legal requirement as to which Landlord has
no choice (as compared with a zoning rights trade-off, for example), Landlord
shall not be liable for any damage Tenant may sustain thereby and Tenant shall
not be entitled to any compensation therefor nor abatement of rent nor shall the
same release Tenant from its obligations hereunder nor constitute an eviction;
provided, however, that if the windows (except of the west side of the Building
- -------- -------
or on the side of the Building which is adjacent to the Belasco Theater) are
permanently closed, darkened or bricked up, Tenant shall have the right to
cancel this Lease by notice to Landlord given within sixty (60) days of such
event or (if Tenant does not so cancel) to an equitable adjustment of the Fixed
Rent. Tenant shall reimburse and compensate Landlord as additional rent within
fifteen (15) days after rendition of a statement for all expenditures made by or
damages or fines sustained or incurred by Landlord due to non-performance or
non-compliance
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with or breach or failure to observe any term, covenant or condition of this
Lease upon Tenant's part to be kept, observed, performed or complied with. If
Tenant shall fail to make such payment within said fifteen (15) days, Tenant
shall also be liable for interest on such additional rent at the then Prime Rate
until Landlord shall be fully reimbursed. Tenant shall give immediate notice to
Landlord in case of fire or accidents in the Demised Premises or in the Building
or of defects therein or in any fixtures or equipment.
15.04. No recourse shall be had on any of Landlord's obligations
under this Lease or for any claim based thereon or otherwise in respect thereof
against any incorporator of Landlord, subscriber to Landlord's capital stock,
shareholder, employee, agent, officer or director, past, present or future, of
any corporation, or any partner or joint venturer of any partnership or joint
venture which shall be Landlord hereunder or included in the term "Landlord" or
of any successor of any such corporation, or against any principal, disclosed or
undisclosed, or any such corporation, or against any principal, disclosed or
undisclosed, or any affiliate of any party which shall be Landlord or included
in the term "Landlord," whether directly or through Landlord or through any
receiver, assignee, agent, trustee in bankruptcy or through any other person,
firm or corporation, whether by virtue of any constitution, statute or rule of
law or by enforcement of any assessment or penalty or otherwise, all such
liability being expressly waived and released by Tenant.
15.05. Tenant shall look only and solely to Landlord's leasehold
estate and interest in and to the Building and the rents and profits therefrom
for the satisfaction of any right of Tenant arising out of this Lease or for the
collection of judgment or other judicial process or arbitration award requiring
the payment of money by Landlord and no other property or assets of Landlord,
Landlord's agents, incorporators, shareholders, employees, officers, directors,
partners, agents, principal (disclosed or undisclosed), joint venturers, or
affiliates shall be subject to levy, lien, execution, attachment, or other en-
forcement procedure for the satisfaction of Tenant's rights and remedies under
or with respect to this Lease, the relationship of Landlord and Tenant hereunder
or under law, or Tenant's use and occupancy of the Demised Premises or any other
liability of Landlord to Tenant.
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ARTICLE 16
INSURANCE
16.01. Tenant shall not do or permit to be done any act or thing in
or upon the Demised Premises which will invalidate or be in conflict with the
Certificate of Occupancy or the terms of the New York State standard form of
fire, boiler, sprinkler, water damage or other insurance policies covering the
Building and the fixtures and property therein; and Tenant shall, at its own
expense, comply with all rules, orders, regulations or requirements of the New
York Board of Fire Underwriters or any other similar body having jurisdiction,
and shall not knowingly do or permit anything to be done in or upon the Demised
Premises or bring or keep anything therein or use the Demised Premises in a
manner which increases the rate of fire insurance upon the Building or on any
property or equipment located therein over the rate in effect at the
commencement of the term of this Lease.
16.02. If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the rate of fire, boiler, sprinkler, water damage or
other insurance (with extended coverage) on the Building or on the property and
equipment of Landlord or any other tenant or subtenant in the Building shall be
higher than it otherwise would be, Tenant shall reimburse Landlord and the other
tenants in the Building for that part of the fire, boiler, sprinkler, water
damage or other insurance premiums thereafter paid by Landlord which shall have
been charged because of such failure by Tenant and Tenant shall make the
reimbursement on the first day of the month following such payment by Landlord.
If Tenant shall fail to make such reimbursement when billed for the same,
Landlord may treat the same as a default in the payment of rental and shall also
be entitled to interest on the unpaid sum at the then Prime Rate until such sum
shall be fully paid to Landlord. In any action or proceeding wherein Landlord
and Tenant are parties, a schedule or "make up" of rates for the Building or
Demised Premises issued by the New York Fire Insurance Exchange or other body
making fire insurance rates for said premises, shall be conclusive evidence of
the facts therein stated and of the several items and charges in the fire
insurance rate then applicable to said Building or Demised Premises.
16.03. Tenant shall obtain and keep in full force and effect during
the term, at its own cost and
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expense, to protect Tenant as the insured party and Landlord and any Landlord's
agents, any superior lessor, superior mortgagee of which Landlord so advises
Tenant as additional insureds (a) public liability insurance to afford
protection against any and all claims for personal injury, death or property
damage occurring in, upon, adjacent to or connected with the Demised Premises,
or any part thereof in an amount of not less than $5,000,000 for injury or death
arising out of any one occurrence, and $500,000 for damage to property in
respect of one occurrence or in any increased amount reasonably required by
Landlord; and (b) insurance against loss or damage by fire, and such other risks
and hazards as are insurable under then available standard forms of fire
insurance policies with extended coverage, to Tenant's property for the full
insurable value thereof. During such time as Tenant shall be constructing any
improvements, alterations and/or additions to the Demised Premises, Tenant shall
carry builder's risk insurance, completed value form, covering all physical
loss, in an amount reasonably satisfactory to and to specifically protect the
Landlord and any superior lessor.
All such insurance shall be written in form and substance reasonably
satisfactory to Landlord by an insurance company of recognized responsibility
licensed to do business in New York State. Upon failure of Tenant to procure,
maintain and pay all premiums therefor, Landlord may, at its option do so, and
Tenant agrees to pay the cost thereof to Landlord upon demand as additional
rent, together with interest thereon at the then Prime Rate. Tenant shall cause
to be included in all such insurance policies a provision to the effect that the
same will be noncancellable and not permitted to lapse or be modified except
upon 30 days' prior notice to Landlord. On the Commencement Date the original
insurance policies or appropriate endorsements thereto shall also be deposited.
16.04. Tenant shall indemnify and hold Landlord harmless from and
against all claims or damage (including attorneys' fees) to person or property
occurring in or about the Demised Premises or arising from, related to or in
connection with the use or occupancy of the Demised Premises or the conduct of
Tenant's business therein or therefrom.
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ARTICLE 17
DAMAGE BY FIRE OR OTHER CAUSE
17.01. If the Demised Premises shall be partially damaged by fire or
other cause without the default or neglect of Tenant, Tenant's servants,
employees, agents, visitors or licensees, or if such damage to other parts of
the Building materially interferes with Tenant's access to or normal use of the
Demised Premises, the damages shall be repaired by and at the expense of
Landlord and until such repairs shall be completed the Fixed Rent shall be
apportioned according to the part of the Demised Premises which is usable by
Tenant. But if partial damage is due to the fault or neglect of Tenant, Tenant's
servants, employees, agents, visitors or licensees, without prejudice to any
other rights and remedies of Landlord and without prejudice to the rights of
subrogation of Landlord's insurer, the damages shall be repaired by Landlord but
there shall be no apportionment or abatement of rent. No penalty shall accrue
for reasonable delay which may arise by reason of adjustment of insurance on the
part of the Landlord, or for reasonable delay on account of "labor troubles," or
for Acts of God, or any other cause beyond Landlord's control, or any
combination thereof. If the Demised Premises are totally or substantially
damaged or are rendered wholly or substantially untenantable by fire or other
cause, or if such damage to other parts of the Building materially interferes
with Tenant's access to or normal use of the Demised Premises, then the rent
shall be proportionately paid up to the time of the casualty and thenceforth
shall cease until the date when the Demised Premises shall have been repaired
and restored by Landlord, or access to and normal use of the Demised Premises
has been restored, subject to Landlord's right to elect not to restore the same
as hereinafter provided. If the Demised Premises are rendered wholly unusable or
(whether or not the Demised Premises are damaged in whole or in part) if the
Building shall be so damaged that Landlord shall decide to demolish it or to
rebuild it, then or in any of such events Landlord may, within ninety (90) days
after such fire or other cause, give Tenant a notice in writing of such
decision, which notice shall be given as in Article 24 hereof provided, and
thereupon the term of this Lease shall expire by lapse of time upon the third
day after such notice is given, and Tenant shall vacate the Demised Premises and
surrender the same to Landlord. If Tenant shall not be in default under this
Lease then upon the
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termination of this Lease under the conditions provided for in the sentence
immediately preceding, Tenant's liability for rent shall cease as of the day
following the casualty. Tenant hereby expressly waives the provision of Section
227 of the Real Property Law and agrees that the foregoing provision of this
Article shall govern and control in lieu thereof, this Article being an express
agreement. If the damage or destruction be due to the fault or neglect of
Tenant the debris shall be removed by, and at the expense of Tenant.
17.02. No damage, compensation or claims shall be payable by Landlord
for inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Demised Premises or of the Building. Landlord
shall use its reasonable efforts (which reasonable efforts shall in no event
obligate Landlord to pay overtime pay or other premium rates) to effect such
repairs promptly and in such a manner as not unreasonably to interfere with
Tenant's occupancy.
17.03. The parties hereto shall each procure and maintain in force
and effect an appropriate clause in, or endorsement on, any fire or extended
coverage insurance covering the Demised Premises and the Building and the
personal property, fixtures and equipment located therein or thereon, pursuant
to which, the insurance companies waive subrogation, provided such waiver is
procurable without additional premium, and having obtained such clause or
endorsement of waiver of subrogation, each party hereby agrees that it will not
make any claims against or seek to recover from the other for any loss or damage
to its property or the property of the other, covered by such fire and extended
coverage insurance; provided, however, that the release, discharge, exoneration
and covenant not to sue herein contained shall be limited by the terms and
provisions of the waiver of subrogation clause and/or endorsements and shall be
co-extensive therewith. If such waiver of subrogation shall be procurable only
by payment of an additional premium therefor, notice of such requirements shall
be furnished to the other party, and if such other party fails to pay such
additional premium, or if such waiver of subrogation shall no longer be
obtainable, then the provisions hereof shall not be applicable to such other
party. Tenant acknowledges that Landlord will not carry insurance on Tenant's
furniture, equipment, improvements, furnishings or other Tenant appurtenances
removable by Tenant, and Tenant agrees that Landlord will not be obli
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gated to repair any damage thereto or to replace the same. Tenant agrees to
carry and maintain insurance on all of its property equal to 100% of the full
insurable value thereof.
17.04. If more than 15% of the Demised Premises or a substantial
portion of the Building shall be damaged by fire or other casualty during the
last two (2) years of the terms of this Lease, Landlord or Tenant may, upon 90
days written notice to the other, cancel and terminate this Lease as of the date
set forth in such notice, as if such date were the stated Expiration Date of
this Lease, and in the event of such cancellation, Landlord shall have no duty
to repair and/or restore the Demised Premises.
ARTICLE 18
CONDEMNATION
18.01. In the event that the whole of the Demised Premises shall be
condemned or taken in any manner for any public or quasi-public use, this Lease
and the term and estate hereby granted shall forthwith cease and terminate as of
the date of vesting of title. In the event that only a part of the Demised
Premises shall be so condemned or taken, then, effective as of the date of
vesting of title, the rent hereunder for such part shall be equitably abated and
this Lease shall continue as to such part not so taken. In the event that only a
part of the Building shall be so condemned or taken, then (a) if substantial
structural alteration or reconstruction of the Building shall, in the reasonable
opinion of Landlord, be necessary or appropriate as a result of such
condemnation or taking (whether or not the Demised Premises be affected),
Landlord may, at its option, terminate this Lease and the term and estate hereby
granted as of the date of such vesting of title by notifying Tenant in writing
of such termination within 60 days following the date on which Landlord shall
have received notice of vesting of title, or (b) if Landlord does not elect to
terminate this Lease, as aforesaid, this Lease shall be and remain unaffected by
such condemnation or taking, except that the rent shall be abated to the extent,
if any, hereinbefore provided. In the event that only a part of the Demised
Premises shall be so condemned or taken and this Lease and the terms and estate
hereby granted are not terminated as hereinbefore provided, Landlord will, at
its expense, restore with reasonable diligence the remaining structural portions
of
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the Demised Premises as nearly as practicable to the same condition as it was in
prior to such condemnation or taking.
18.02. In the event of termination in any of the cases hereinabove
provided, this Lease and the term and estate hereby granted shall expire as of
the date of such termination with the same effect as if that were the date
hereinbefore set for the expiration of the term of this Lease, and the rent
hereunder shall be apportioned as of such date.
18.03. In the event of any condemnation or taking hereinabove
mentioned of all or a part of the Building, Landlord shall be entitled to
receive the entire award in the condemnation proceeding, including any award
made for the value of the estate vested by this Lease in Tenant, and Tenant
hereby expressly assigns to Landlord any and all right, title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof, and
Tenant shall be entitled to receive no part of such award. Tenant shall have no
claim for the value of any unexpired term of this Lease. Notwithstanding the
foregoing, Tenant shall have the right to make a separate claim in any such
eminent domain proceeding for the value of all improvements, alterations and
additions made to the Demised Premises by Tenant, at Tenant's sole expense, and
which were not in replacement of any improvements, alterations or additions
previously existing in the Demised Premises or for which Landlord gave Tenant
any credits or allowances, and for the value of Tenant's furniture, fixtures,
machinery and equipment contained in the Demised Premises and for expenses
(including, but not limited to, moving expenses and attorneys' fees) incurred by
Tenant as a result of any such proceeding and Tenant's moving expenses to a
different site, provided no such award to Tenant shall reduce any award to
Landlord.
18.04. If more than 15% of the Demised Premises shall be taken in
condemnation during the last two (2) years of the term of this Lease, Landlord
or Tenant may give the other a 90 day notice terminating and cancelling this
Lease as if the date set forth in the notice were the Expiration Date hereof.
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ARTICLE 19
BANKRUPTCY
19.01. If at the date fixed as the Commencement Date or if at any
time during the term hereby demised there shall be filed by or against Tenant in
any court pursuant to any statute either of the United States or of any State a
petition in bankruptcy, or there shall be commenced a case by or against Tenant
under the United States Bankruptcy Code, as amended, or a petition filed in
insolvency or for reorganization or for the appointment of a receiver or trustee
of all or a portion of Tenant's property, and within sixty (60) days thereafter
Tenant fails to secure a discharge thereof, or if Tenant makes an assignment for
the benefit of creditors or petitions for or enters into an arrangement with its
creditors, this Lease, at the option of Landlord, exercised within a reasonable
time after notice of the happening of any one or more of such events, may be
cancelled and terminated if so ordered by the bankruptcy court, in which event
neither Tenant nor any person claiming through or under Tenant by virtue of any
statute or of an order of any court shall be entitled to possession or to remain
in possession of the Demised Premises but shall forthwith quit and surrender the
Demised Premises, and Landlord, in addition to the other rights and remedies
Landlord has by virtue of any other provision herein or elsewhere in this Lease
contained or by virtue of any statute or rule of law, may retain as liquidated
damages any rent, security, deposit or monies received by it from Tenant or
others on behalf of Tenant.
19.02. It is stipulated and agreed that in the event of the
termination of this Lease pursuant to this Section, Landlord shall forthwith,
notwithstanding any other provisions of this Lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term demised and the then fair and reasonable rental value of the Demised
Premises for the same period. In the computation of such damages the difference
between any installment of rent becoming due hereunder after the date of
termination and the fair and reasonable rental value of the Demised Premises for
the period for which such installment was payable shall be discounted to the
date of termination at the rate of six per cent (6%) annum. If such premises or
any part thereof be re-let by the Landlord for the
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unexpired term of this Lease, or any part thereof, before presentation of proof
of such liquidated damages to any court, commission or tribunal, the amount of
rent reserved upon such reletting shall be deemed prima facie to be the fair and
reasonable rental value for the part or the whole of the premises so re-let
during the term of the re-letting. Nothing herein contained shall limit or
prejudice the right of the Landlord to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to or less than the amount of the difference referred to
above.
19.03. Without limiting any of the foregoing provisions of this
Article, if pursuant to the Bankruptcy Code, as the same may be amended, Tenant
is permitted to assign or otherwise transfer this Lease (whether in whole or in
part in disregard of the restrictions contained in this Article and/or Article
8), Tenant agrees that adequate assurance of future performance by the assignee
or transferee permitted under such Code shall mean the deposit of cash security
with Landlord in an amount equal to the sum of six months' Fixed Rent then
reserved hereunder plus an amount equal to one-half of all additional rent
payable under Articles 4, 6, 7 or other provisions of this Lease for the
calendar year preceding the year in which such assignment is intended to become
effective, which deposit shall be held by Landlord, with interest, for the
balance of the term as a security for the full and faithful performance of all
of the obligations under this Lease on the part of Tenant yet to be performed.
If Tenant receives or is to receive any valuable consideration for such an
assignment or transfer (in part or in whole) of this Lease, 50% of such
considerations, after deducting therefrom any portion of such consideration
reasonably designated by the assignee or transferee as paid for the purchase of
Tenant's personal property in the Demised Premises, shall be and become the sole
exclusive property of Landlord and shall be paid over to Landlord directly by
such assignee or transferee. Any such assignee or transferee may only use the
Demised Premises as executive offices for such assignee or transferee and such
occupancy may not materially increase the number of individuals occupying the
Demised Premises compared to one year before the time a petition for bankruptcy
(or reorganization) is filed by or against Tenant. In addition, adequate
assurance shall mean that
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any such assignee or transferee of this Lease shall have a net worth (exclusive
of good will) equal to at least ten (10) times the aggregate of the annual Fixed
Rent reserved hereunder plus all additional rent for the preceding calendar year
as aforesaid. Such assignee or transferee shall expressly assume this Lease by
an agreement in recordable form.
ARTICLE 20
DEFAULTS AND REMEDIES; WAIVER OF REDEMPTION
20.01. A. If Tenant defaults in fulfilling any of the covenants of
this Lease, other than the covenants for the payment of Fixed Rent or additional
rent, or if the Demised Premises become vacant or deserted, or if the Demised
Premises are damaged by reason of negligence or carelessness of Tenant, its
agents, employees or invitees, then, in any one or more of such events, upon
Landlord serving a written fifteen (15) days' notice upon Tenant specifying the
nature of said default, and upon the expiration of said fifteen (15) days, if
Tenant shall have failed to comply with or remedy such default, or if the said
default or omission complained of shall be of such a nature that the same cannot
be completely cured or remedied within said fifteen (15) day period, and if
Tenant shall not have diligently commenced curing such default within such
fifteen (15) day period, and shall not thereafter with reasonable diligence and
in good faith proceed to remedy or cure such default or, if Tenant shall default
in the performance of any term or condition of this Lease (other than the
payment of Fixed Rent or additional rent) more than three times in any period of
nine months, or, with respect to the payment of any item of Fixed Rent or
additional rent, more than two times in any period of six months, and
notwithstanding that such defaults shall have each been cured within the
applicable period, as above provided, if any further similar default shall
occur, then Landlord may serve a written ten (10) day notice of cancellation of
this Lease upon Tenant, and upon the expiration of said ten (10) days, this
Lease and the term hereunder shall end and expire as fully and completely as if
the date of expiration of such ten (10) day period were the day herein
definitely fixed for the end and expiration of this Lease and the term thereof
and Tenant shall then quit and surrender the Demised Premises to Landlord but
Tenant shall remain liable as hereinafter provided.
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B. If the notice provided for in A hereof shall have been given, and
the term shall expire as aforesaid; or (1) if Tenant shall make default in the
payment of the Fixed Rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein provided;
or (2) if any execution or attachment shall be issued against Tenant or any of
Tenant's property whereupon the Demised Premises shall be taken or occupied or
attempted to be taken or occupied by someone other than Tenant; or (3) if Tenant
shall make default with respect to any other lease between Landlord and Tenant;
or (4) if Tenant shall fail to take possession of the Demised Premises within
fifteen (15) days after commencement of the term of the Lease; then and in any
of such events Landlord may without notice, re-enter the Demised Premises either
by force or otherwise, and dispossess Tenant by summary proceedings or
otherwise, and the legal representative of Tenant or other occupant of the
Demised Premises and remove their effects and hold the Demised Premises as if
this Lease had not been made but Tenant shall remain liable hereunder as
hereinafter provided, and Tenant hereby waives the service of notice of
intention to re-enter or to institute legal proceedings to that end. If Tenant
shall make default hereunder prior to the date fixed as the commencement of any
renewal or extension of this Lease, Landlord may cancel and terminate such
renewal or extension agreement by written notice, but Tenant shall remain liable
as hereinafter provided.
20.02. In the case of any such default, re-entry, expiration and/or
dispossession by summary proceedings or otherwise, (a) the Fixed Rent and
additional rent shall become due thereupon and be paid to the time of such re-
entry, dispossession and/or expiration, together with such expenses as Landlord
may incur for legal expenses, attorneys' fees, brokerage, and/or putting the
Demised Premises in good order, or for preparing the same for re-rental; (b)
Landlord may re-let the Demised Premises or any part or parts thereof, either in
the name of Landlord or otherwise, for a term or terms, which may at Landlord's
option be less than or exceed the period which would otherwise have constituted
the balance of the term of this Lease and may grant concessions or free rent;
and/or (c) Tenant or the legal representative of Tenant shall also pay Landlord
as liquidated damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between the rent and
additional rents hereby reserved and/or covenanted to be
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paid and the net amount, if any, of the rents collected or to be collected on
account of the lease or leases of the Demised Premises for each month of the
period which would otherwise have constituted the balance of the term of this
Lease. The failure or refusal of Landlord to re-let the Demised Premises or any
part or parts thereof shall not release or affect Tenant's liability for
damages. In computing such damages there shall be added to the said deficiency
such expenses as Landlord may incur in connection with re-letting, such as legal
expenses, attorneys' fees, brokerage and for keeping the Demised Premises in
good order or for preparing the same for re-letting. Any such damages shall be
paid in monthly installments by Tenant on the rent days specified in this Lease
and any suit brought to collect the amount of the deficiency for any month or
months shall not prejudice in any way the rights of Landlord to collect the
deficiency for any subsequent month or months by a similar proceeding. In lieu
thereof, Landlord may immediately accelerate such deficiency for the entire
balance of the term, discounted in the same manner as specified in Section
19.03. Landlord at Landlord' s option may make such alterations, repairs,
replacements and/or decorations in the Demised Premises as Landlord in
Landlord's sole judgement considers advisable and necessary for the purpose of
re-letting the Demised Premises; and the making of such alterations and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Landlord shall in no event be liable in any way
whatsoever for failure to re-let the Demised Premises, or in the event that the
Demised Premises are re-let, for failure to collect the rent thereof under such
re-letting. Any such action may be an action for the full amount of all rents
and damages suffered or to be suffered by Landlord. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof,
Landlord shall have the right of injunction and the right to invoke any remedy
allowed at law or in equity as if re-entry, summary proceedings and other
remedies were not herein provided for. Mention in this Lease of any particular
remedy, shall not preclude Landlord from any other remedy, in law or in equity.
The foregoing remedies and rights of Landlord are cumulative. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of Tenant's being evicted or dispossessed
for any cause, or in the event of Landlord's obtaining possession of the Demised
Premises by reason of
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the violation by Tenant of the covenants and conditions of this Lease, or
otherwise.
ARTICLE 21
COVENANT OF QUIET ENJOYMENT
Landlord covenants and agrees with Tenant that upon Tenant's paying
the rent and additional rent and observing and performing all the terms,
covenants and conditions on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this Lease (including, but not
limited to, Article 23 hereof) and the Over Lease, ground leases, underlying
leases and mortgages hereinbefore and hereinafter mentioned.
ARTICLE 22
SURRENDER OF PREMISES
22.01 Upon the expiration or other termination of the term of this
Lease, Tenant shall quit and surrender the Demised Premises in good order and
condition, ordinary wear and tear and damage by fire or other casualty, the
elements and any cause beyond Tenant's control excepted, and shall remove all
its property therefrom, except as otherwise provided in this Lease. Tenant's
obligation to observe or perform this covenant shall survive the expiration or
other termination of the term of this Lease.
22.02 Tenant acknowledges that possession of the Demised Premises
must be surrendered to Landlord at the expiration or sooner termination of the
term hereof. The parties recognize and agree that the damage to Landlord
resulting from any failure by Tenant timely to surrender possession of the
Demised Premises as aforesaid will be substantial, will exceed the amount of
annual Fixed Rent and additional rent theretofore payable hereunder, and will be
impossible accurately to measure. Tenant therefore agrees that if possession of
the Demised Premises is not surrendered to Landlord upon the expiration or
sooner termination of the term of this Lease, then notwithstanding anything to
the contrary contained in this Lease, Tenant
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shall pay to Landlord for each month and for each portion of any month during
which Tenant holds over in the Demised Premises after the expiration or sooner
termination of the term hereof, for use and occupancy, the aggregate sum of (i)
one and one-quarter times the amount of the installment of the annual Fixed Rent
that was payable under this Lease for the last month of the term hereof with
respect to the first two (2) months after the expiration of the term of this
Lease and one and one-half times the amount of the installment of the annual
Fixed Rent that was payable under this Lease for the last month of the term
hereof, with respect to each month thereafter, plus (ii) one-twelfth of all
items of annual additional rent which would have been payable monthly pursuant
to this Lease had its term not expired or been terminated, plus (iii) those
items of additional rent (not annual additional rent) which would have been
payable monthly pursuant to this Lease had its term not expired or been
terminated, which aggregate sum Tenant agrees to pay to Landlord upon demand, in
full without setoff, and no extension or renewal of this Lease shall be deemed
to have occurred by such holding over, nor shall Landlord be precluded by
accepting such aggregate sum for use and occupancy from exercising all rights
and remedies available to it to obtain possession of the Demised Premises.
Further, Tenant shall be liable to Landlord for all losses and damages which
Landlord may reasonably incur or sustain by reason of such holding over,
including, but not limited to, damages incurred or sustained by reason of
Landlord's inability to timely place a new tenant in possession of the Demised
Premises.
ARTICLE 23
DEFINITION OF LANDLORD
The term "Landlord" wherever used in this Lease shall be limited to
mean and include only the owner or owners at the time in question of the
Building or the tenant under the ground lease or under the Over Lease affecting
the Land and the Building or the Building, to whom this Lease may be assigned,
or a mortgagee in possession, so that in the event of any sale, assignment or
transfer of the Building, or Landlord's interest as a lessee under the Over
Lease, or of such ground or underlying lease, such owner, tenant under the
ground or Over Lease or mortgagee in possession shall thereupon be released and
discharged from all covenants, conditions and agreements of Landlord
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hereunder; but such covenants, conditions and agreements shall be binding upon
each new owner, tenant under the ground or underlying lease, or Over Lease, or
mortgagee in possession for the time being of the Building, until sold, assigned
or transferred.
ARTICLE 24
NOTICES
Any notice, request or demand permitted or required to be given by the
terms and provisions of this Lease, or by any law or governmental regulation,
either by Landlord to Tenant or by Tenant to Landlord, shall be in writing.
Unless otherwise required by such law or regulation such notice, request or
demand shall be given, and shall be deemed to have been served and given by
Landlord and received by Tenant, three (3) business days after Landlord shall
have deposited such notice, request or demand by certified or registered mail,
return receipt requested, enclosed in a securely closed postpaid wrapper, in a
United States Government general or branch post office, addressed to Tenant at
the Demised Premises, and until Tenant has moved its offices to the Demised
Premises, shall have deposited such notice, request or demand by certified or
registered mail, enclosed in a securely closed postpaid wrapper in such a post
office addressed to Tenant at its address as stated on the first page of this
Lease. Such notice, request or demand shall be given, and shall be deemed to
have been served and given by Tenant and received by Landlord, three (3)
business days after Tenant shall have deposited such notice, request or demand
by certified or registered mail, return receipt requested, enclosed in a
securely closed postpaid wrapper in such a post office addressed to Landlord at
1133 Avenue of the Americas, New York, N.Y. 10036, with a copy to White & Case,
1155 Avenue of the Americas, New York, New York 10036, Attention: Robert M.
Safron, Esq., or to such other or further address or addresses as Landlord may
designate for such purpose by like notice. Either party may, by notice as
aforesaid designate a different address or addresses for notices, requests or
demands to it.
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ARTICLE 25
ARBITRATION
25.01. Whenever in this Lease, it is provided that a dispute shall be
determined by arbitration, the arbitration shall be conducted as provided in
this Article. The party desiring such arbitration shall give written notice to
that effect to the other, specifying the dispute to be arbitrated and the name
and address of the person designated to act as the arbitrator in its behalf.
Within ten days after said notice is given, the other party shall give written
notice to the first party, specifying the name and address of the person
designated to act as arbitrator on its behalf. If the second party fails to
notify the first party of the appointment of its arbitrator as aforesaid by the
time above specified, then the appointment of the second arbitrator shall be
made in the same manner as hereinafter provided for the appointment of a third
arbitrator. The arbitrators so chosen shall meet within ten days after the
second arbitrator is appointed and within thirty days thereafter shall decide
the dispute. If within said period they cannot agree upon their decision, they
shall appoint a third arbitrator and if they cannot agree upon said appointment,
then the third arbitrator shall be appointed upon their application or upon the
application of either party, by the American Arbitration Association in the City
of New York. The three arbitrators shall meet and decide the dispute. A decision
in which two of the three arbitrators concur shall be binding and conclusive
upon the parties. In designating arbitrators and in deciding the dispute, the
arbitrators shall act in accordance with the rules then in force of the American
Arbitration Association, subject, however, to such limitations as may be placed
upon them by the provisions of this Lease. Judgment may be had on the decision
and award of the arbitrators so rendered in any court.
25.02. The obligation of Landlord and Tenant to submit a dispute to
arbitration is limited to disputes arising under those Articles of this Lease
which specifically provide for arbitration.
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ARTICLE 26
RULES AND REGULATIONS
26.01. Tenant, its servants, employees, agents, visitors and
licensees shall observe faithfully and comply strictly with the Rules and
Regulations attached hereto and incorporated herein as Exhibit D. Landlord
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shall have the right from time to time during the term of this Lease to make
reasonable changes in and additions to the said Rules and Regulations with the
same force and effect as if they were originally attached hereto and
incorporated herein.
26.02. Any failure by Landlord to enforce any Rules and Regulations
now or hereafter in effect, either against Tenant or any other tenant in the
Building, shall not constitute a waiver of the enforceability of any such Rules
and Regulations. Landlord shall not, however, enforce any Rule against Tenant if
that same Rule is not being enforced against all other tenants.
ARTICLE 27
BROKER
Each of Landlord and Tenant warrants and represents that the sole
broker in this transaction is CB Commercial Real Estate Group, Inc. (the
"Broker"). Each of Landlord and Tenant agrees to defend, save and hold the
other harmless from any claims for fees and commissions and against any
liability (including reasonable attorneys' fees and disbursements) arising out
of any conversations or negotiations had by the indemnifying party with any
broker or party acting as such other than the Broker. Landlord shall be
responsible for payment of any commission or other fee earned by the Broker
pursuant to separate agreement between them only if, as and when this Lease is
fully and unconditionally executed and delivered by Landlord and Tenant and all
conditions to its effectiveness and validity have been satisfied or waived.
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ARTICLE 28
ZONING RIGHTS
28.01. During the Term of this Lease, Landlord shall have the right,
and Tenant shall not have the right, (i) to cause all or any part of the Demised
Premises and/or the zoning lot upon which the Building is located in whole or in
part (hereinafter referred to solely for purposes of this Article as the "Land")
and/or the Building, to be combined with any other land or premises so as to
constitute the combined premises into a single zoning "lot" or "development" or
"enlargement" as those terms are now, or may hereafter be, defined in the Zoning
Resolution of The City of New York (the "Zoning Resolution"), (ii) to cause any
lot, development or enlargement at any time constituting or including all or any
part of the Demised Premises, the Land or the Building to be subdivided into two
or more lots, developments or enlargements, (iii) to cause development rights
(whether from the Land or other premises) to be transferred to any such lot,
development or enlargement, (iv) to cause other combinations, subdivisions and
transfers to be effected, whether similar or dissimilar to those now permitted
by law or (v) to exploit, sell, convey, lease or otherwise transfer any so
called "air rights," "air space," "zoning rights" or "development rights" above
or appurtenant to the Land or the Building. Tenant hereby acknowledges that it
is not a "party in interest" as defined in the Zoning Resolution, and shall not
and cannot become a "party in interest" under any circumstances by virtue of its
leasehold interest hereunder. Tenant further acknowledges that neither Tenant
nor the estate or interest of Tenant hereunder would be "adversely affected"
(within the meaning of the Zoning Resolution) by any development of the Land or
the Building or any such combined premises nor by the filing of any declaration
combining all or a part of the Land or the Building with any other premises and
that Tenant's estate and interest hereunder are not and would not be superior to
any such declaration.
28.02. Notwithstanding the provisions of Section 28.01, above, in the
event that Tenant is deemed to have any of the rights disclaimed in Section
28.01, above, or is deemed to be a party in interest, Tenant hereby transfers
such rights and any rights as a party in interest to Landlord. In furtherance
thereof, Tenant will within three (3) days after written request by Landlord
execute and deliver to Landlord a waiver of its right to join in a Declaration
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of Restrictions pursuant to Section 12-10 of the Zoning Resolution (a "Waiver").
Upon each assignment of this Lease by Tenant (no consent thereto being implied
hereby) the assignee shall execute, acknowledge and deliver to Landlord, and at
any time or times, within three (3) days after written request of Landlord,
Tenant and each assignee shall execute, acknowledge and deliver to Landlord, (i)
any further Waiver, and (ii) if requested by Landlord, any Declaration of
Restrictions pursuant to said Section 12-10 (or any successor provision
thereto), and (iii) any other instrument in form and substance satisfactory to
the parties intended to evidence the fact that Tenant (or such assignee) has no
right and asserts no claim, and/or has transferred to Landlord any such right or
claim, to participate in any way in the matters reserved to Landlord pursuant to
Section 28.01, above. If Tenant (or such assignee) fails to so execute any such
instrument within ten (10) days after Landlord's written request therefor,
Tenant (or such assignee) hereby irrevocably appoints Landlord its agent and
attorney-in-fact, coupled with an interest, to execute and deliver the same in
its name.
ARTICLE 29
SECURITY DEPOSIT
29.01. Tenant shall deposit with Landlord, within five (5) business
days from the execution of this Lease, $2,067,040 (the "Security Deposit") as
security for the full, faithful and punctual performance by Tenant of all of the
terms of this Lease. In the event Tenant defaults in the performance of any of
the terms of this Lease, including the payment of rent, Landlord may use, apply
or retain the whole or any part of the Security Deposit to the extent required
for the payment of any rent or for any sum which Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms
of this Lease, including any damages or deficiency in the re-letting of the
Demised Premises, whether accruing before or after summary proceedings or other
re-entry by Landlord. In the case of every such use, application or retention,
Tenant shall, on demand, pay to Landlord the sum so used, applied or retained
which shall be added to the Security Deposit so that the same shall be
replenished to its former amount. If Tenant shall fully and punctually comply
with all of the terms of this Lease, the Security Deposit, without interest,
shall be returned
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to Tenant after the termination of this Lease and delivery of exclusive
possession of the Demised Premises to Landlord. In the event of a sale or lease
of the Building, Landlord shall have the obligation to transfer the Security
Deposit to the vendee or lessee and Landlord shall immediately be released by
Tenant from all liability for the return of the Security Deposit; and Tenant
agrees to look solely to the new owner or landlord for the return of the
Security Deposit; and it is agreed that the provisions hereof shall apply to
every transfer or assignment made of the Security Deposit to a new owner or
landlord. Tenant shall not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and neither Landlord nor its successors
or assigns shall be bound by any such assignment, encumbrance, attempted
assignment or encumbrance.
29.02. In lieu of a cash deposit, Tenant may deliver to Landlord in
accordance with the terms and conditions of this Article 29, one or more Letters
of Credit in an amount equal to the Security Deposit.
29.03. A. Provided Tenant is not then in default under this Lease,
the first $1,000,000 of the Security Deposit or the Letters of Credit shall be
reduced in accordance with the following provisions of this Section if Tenant
satsifies the following conditions: (x) Forstmann has a Net Worth (exclusive of
good will) equal to at least fifty million dollars ($50,000,000) and a Total
Liabilities to Net Worth Ratio of not greater than 4 to 1 as of January 1, 2000,
and (y) Forstmann's Net Worth has not, at any time from the execution of this
Lease to December 31, 1999, dropped more than ten percent (10%) below
Forstmann's Net Worth as set forth in the Forstmann Financial Statements. For
purposes of this Article 29, (i) the term "Forstmann" shall mean Forstmann &
Company, Inc., (ii) the term "Forstmann Financial Statements" shall mean the
financial statements of Forstmann for the period ending October 30, 1994 to be
prepared and audited by Deloitte & Touche, (iii) the term "Net Worth" shall mean
(a) Total Assets less (b) Total Liabilities, in each case determined in
conformity with GAAP and as shown on the financial statements for Forstmann's
most recent fiscal year prepared and audited by Deloitte & Touche LLP, any
nationally recognized "big six" accounting firm or another certified public
accountant reasonably acceptable to Landlord, (iv) the term "Total Assets" shall
mean the total of all assets of Forstmann (excluding the value of this Lease and
any
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good will), (v) the term "Total Liabilities" shall mean the total of all
liabilities of Forstmann (excluding the first $4,000,000 of any preferred stock
of Forstmann), and (vi) the Total Liabilities to Net Worth Ratio shall be equal
to Total Liabilities divided by Net Worth. If Tenant satisfies the foregoing
conditions and is not then in default under this Lease, the Security Deposit or
the Letters of Credit shall be reduced on each of the following dates to the
following respective amounts:
<TABLE>
<CAPTION>
Security Deposit or
Date Letter of Credit Requirement
---- ----------------------------
<S> <C>
1/1/00 $500,000
1/1/01 $436,812
1/1/02 $373,624
1/1/03 $310,435
</TABLE>
B. In addition to the foregoing, provided Tenant is not then in
default under this Lease, the first $1,000,000 of the Security Deposit or the
Letters of Credit shall be reduced in accordance with the following provisions
of this Section if Tenant satsifies the following conditions: (x) if Tenant
achieves a Net Worth (exclusive of good will) equal to at least seventy-five
million dollars ($75,000,000) and a Total Liabilities to Net Worth Ratio of not
greater than 3 to 1 as a result of a non-operating change in financial position
(i.e.,----acquisition, merger, equity offering, debt restructuring or similar
non-operating change) and (y) Forstmann's Net Worth has not, at any time from
the execution of this Lease to December 31, 1999, dropped more than ten percent
(10%) below Forstmann's Net Worth as set forth in the Forstmann Financial
Statements. If Tenant satisfies the foregoing conditions and is not then in
default under this Lease, the Security Deposit or the Letters of Credit shall be
reduced on the January 1 following the year in which Forstmann satisfies the
foregoing conditions (the "First Reduction Date") (and each subsequent
anniversary thereof) to the following respective amounts:
<TABLE>
<CAPTION>
Security Deposit or
Date Letter of Credit Requirement
---- ----------------------------
<S> <C>
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
First Reduction Date $500,000
First Anniversary of
First Reduction Date $436,812
Second Anniversary of
First Reduction Date $373,624
Third Anniversary of
First Reduction Date $310,435
</TABLE>
29.04. If the Security Deposit or Letters of Credit have not been
reduced pursuant to Section 29.03, and provided, further, that Tenant is not
then in default under the Lease, the first $1,000,000 of the Security Deposit or
the Letters of Credit shall be reduced by twenty percent (20%) of the original
amount thereof effective on January 1, 2001 and each subsequent anniversary
thereof, provided, however, that in no event, and notwithstanding the provisions
-------- -------
of Section 29.05, shall the Security Deposit or the Letter of Credit be reduced
below $310,435.
29.05. Provided Tenant is not then in default of this Lease, the
remaining $1,067,040 of the Security Deposit or Letters of Credit shall be
reduced on each of the following dates to the following respective amounts:
<TABLE>
<CAPTION>
Date
----
Security Deposit or
Letter of Credit Requirement
----------------------------
<S> <C>
1/1/97 $949,659
1/1/98 $838,501
1/1/99 $715,704
1/1/00 $580,048
</TABLE>
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<TABLE>
<S> <C>
1/1/01 $430,187
1/1/02 $264,634
1/1/03 $ 81,746
1/1/04 $ 0.
</TABLE>
29.06. Notwithstanding the provisions of Sections 29.03, 29.04, and
29.05 to the contrary, provided Tenant is not then in default under this Lease,
Security Deposit or Letters of Credit shall be reduced in accordance with the
following provisions if Tenant satisfies the following conditions: (i) has a Net
Worth of at least one hundred million dollars ($100,000,000) and a Total
Liabilities to Net Worth Ratio of not greater than 2 to 1 and (ii) Forstmann's
Net Worth has not, at any time from the execution of this Lease to December 31,
1999, dropped more than ten percent (10%) below Forstmann's Net Worth as set
forth in the Forstmann Financial Statements. If Tenant satisfies the foregoing
conditions and is not then in default under this Lease, the Security Deposit or
the Letters of Credit shall be reduced to $310,345 on the January 1 following
the year in which Forstmann satisfies the foregoing conditions (the "Second
Reduction Date").
29.07. In the event that Tenant, in lieu of a cash deposit, delivers
to Landlord one or more clean, irrevocable and unconditional Letters of Credit,
such Letters of Credit shall be issued by and drawn upon Norwest Bank
International, a United States branch office of ABN AMRO Bank N.V. or any
commercial bank which is a member of the New York Clearing House Association
(hereinafter referred to as the "Issuing Bank") with offices for banking
purposes in the City of New York and having a net worth of not less than One
Billion and 00/100 ($1,000,000,000.00) Dollars, which Letters of Credit shall
have a term of not less than one year, be in the form annexed hereto as Exhibit
F, be for the account of Landlord and be in the amount of the Security Deposit.
Each of the Letters of Credit shall provide that:
(i) The Issuing Bank shall pay to Landlord or its duly authorized
representative an amount up to the
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face amount of the Letter of Credit upon presentation of the Letter of
Credit and a sight draft in the amount to be drawn, together with a written
statement by an officer of Landlord made under penalty of perjury,
specifying the nature of Tenant's default, the date written notice thereof
was given (a copy of such notice to be attached) and the fact that such
default was not cured within the applicable cure period;
(ii) The Letter of Credit shall be deemed to be automatically renewed,
without amendment, for consecutive periods of one year each during the term
of this Lease, unless the Issuing Bank sends written notice (hereinafter
referred to as the "Non-Renewal Notice") to Landlord by certified or
registered mail, return receipt requested, not less than thirty (30) days
next preceding the then expiration date of the Letter of Credit, that it
elects not to have such Letter of Credit renewed;
(iii) Landlord, within twenty (20) days of its receipt of the Non-
Renewal Notice, shall have the right, exercisable by a sight draft, to
receive the monies represented by the Letter of Credit (which monies shall
be held by Landlord as a cash deposit pursuant to the terms of this Article
29 pending the replacement of such Letter of Credit or Tenant's default
after notice and the expiration of any applicable cure period hereunder);
and
(iv) Upon Landlord's sale of Landlord's interest in the land and the
Building, the Letter of Credit shall be transferable, without charge, by
Landlord, as provided in Section 29.08 hereof.
If the Letter of Credit does not contain the provisions of clauses (ii) and
(iii) above, then Tenant shall renew or replace the Letter of Credit for a term
of at least one year at least 30 days prior to the stated expiration date in
such expiring Letter of Credit. If Tenant fails to renew or replace such Letter
of Credit prior to such 30-day period, Landlord shall have the right,
exercisable by a sight draft, to receive the monies represented by the Letter of
Credit (which monies shall be held by Landlord as a cash deposit pursuant to the
terms of this Article 29 pending the renewal or replacement of such Letter
of Credit
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or Tenant's default after notice and the expiration of any applicable cure
period hereunder).
29.08. In the event of a sale of Landlord's interest in the land and
the Building, Landlord shall have the obligation to transfer (at no expense to
Landlord) the cash security or Letters of Credit, as the case may be, deposited
hereunder to the vendee or lessee, and Landlord shall, after notice to Tenant of
such transfer, sent by certified mail, return receipt requested, including the
name and address of the transferee, be released by Tenant from all liability for
the return of such cash security or Letters of Credit. In such event, Tenant
agrees to look solely to the new landlord for the return of said cash security
or Letters of Credit. It is agreed that the provisions hereof shall apply to
every transfer or assignment made of said cash security or Letters of Credit to
a new landlord.
29.09. Tenant covenants that it will not assign or encumber, or
attempt to assign or encumber, the monies or Letters of Credit deposited
hereunder as security, and that neither Landlord nor its successors or assigns
shall be bound by any such assignment, encumbrance, attempted assignment, or
attempted encumbrance.
29.10. Landlord agrees that it will not draw down the proceeds of the
Letters of Credit except in the event of a default, after notice and the
expiration of any applicable cure period, by Tenant hereunder or the non-renewal
of such Letters of Credit by the Issuing Bank.
29.11 In the event that at any time during the term of this lease,
Landlord, in Landlord's reasonable opinion, believes (a) that the net worth of
the Issuing Bank shall be less than the minimum amount specified in Section
29.07 hereof, or (b) that circumstances have occurred indicating that the
Issuing Bank may be incapable of, unable to, or prohibited from honoring the
then existing Letters of Credit (hereinafter referred to as the "Existing L/C")
in accordance with the terms thereof, then, upon the happening of either of the
foregoing, Landlord may send written notice to Tenant (hereinafter referred to
as the "Replacement Notice") requiring Tenant within ten (10) days to replace
the Existing L/C with new letters of credit (hereinafter referred to as the
"Replacement L/C") from an Issuing Bank meeting the qualifications described in
Section 29.07 hereof. Upon receipt of a Replacement L/C
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meeting the qualifications of Section 29.07 hereof, Landlord shall forthwith
return the Existing L/C to Tenant. In the event that (i) a Replacement L/C
meeting the qualifications of Section 29.07 hereof is not received by Landlord
within the time specified, or (ii) Landlord reasonably believes that the Issuing
Bank is likely to fail or be incapable or unwilling to honor the Letters of
Credit, then in either event, the Existing L/C may be presented for payment by
Landlord and the proceeds thereof shall be held by Landlord in accordance with
Section 29.02 or Section 29.03 hereof, as the case may be, subject, however, to
Tenant's right, at any time thereafter prior to a Tenant's default hereunder, to
replace such cash security with new letters of credit meeting the qualifications
of Section 29.07 hereof.
ARTICLE 30
WINDOW CLEANING
30.01. Tenant will not clean any window in the Premises from the
outside (within the meaning of Section 202 of the New York Labor Law or any
successor statute thereto). In addition, unless the equipment and safety
devices required by all legal requirements including Section 202 of the New York
Labor Law or any successor statute thereto are provided and used, Tenant will
not require, permit, suffer or allow the cleaning of any window in the Premises
from the outside (within the meaning of said Section). Tenant hereby
indemnifies Landlord against liability as a result of any violation of the
foregoing.
ARTICLE 31
CONSENTS
31.01. Tenant hereby waives any claim against Landlord which it may
have based upon any assertion that Landlord has unreasonably withheld or
unreasonably delayed any such consent or approval, and Tenant agrees that its
sole remedy shall be an action or proceeding to enforce any such provision or
for specific performance, injunction or declaratory judgment. In the event of a
determination favorable to Tenant, the requested consent or approval shall be
deemed to have been granted; however, Landlord shall have no personal or other
liability to Tenant for its
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refusal to give such consent or approval. The sole remedy for Landlord's
unreasonably withholding or delaying of consent or approval shall be as set
forth in this Section, provided, however, that if it shall be
-------- -------
determined that Landlord acted capriciously and in bad faith, then the
limitation on Tenant's damages and remedies provided for in this Section 31.01
shall have no further application with respect to such act.
31.02. Notwithstanding anything to the contrary provided in this
Lease, in any instance where the consent or approval of the over lessor and/or
the superior mortgagee is required, Landlord shall not be required to give its
consent or approval until and unless such over lessor and/or such superior
mortgagee has given its consent or approval. Landlord shall make a written
request for such consent within three business days of its receipt of Tenant's
request for same, and shall provide Tenant with a copy of Landlord's request
promptly thereafter. If such consent is not received within ten days, Landlord
agrees to reasonably cooperate with Tenant in trying to obtain such consent by
contacting such over lessor or mortgagee by phone or, at Tenant's request, at a
meeting with all parties provided that such cooperation is at no cost or expense
to Landlord.
ARTICLE 32
MISCELLANEOUS
32.01. Tenant shall not move any safe, heavy equipment or bulky
matter in or out of the Building without Landlord's written consent, which
consent Landlord agrees not to withhold or delay unreasonably. If the movement
of such items requires special handling, Tenant agrees to employ only persons
holding a Master's Rigger's License to do said work and all such work shall be
done in full compliance with the Administrative Code of the City of New York and
other municipal requirements. All such movements shall be made during hours
which will least interfere with the normal operations of the Building, and all
damage caused by such movement shall be promptly repaired by Tenant at Tenant's
expense. Tenant shall not place a load upon any floor of the Demised Premises
which exceeds the load per square foot which such floor was designated to carry
and which is allowed by law unless modifications are designed by a licensed
engineer and approved by Landlord.
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32.02. Business machines and mechanical equipment belonging to Tenant
which may cause noise, vibration or any other nuisance that may be transmitted
to the structure or other portions of the Building or to the Demised Premises to
such a degree as to be objectionable to Landlord or which may interfere with the
use or enjoyment by other tenants of their premises or the public portions of
the Building, shall be placed and maintained by Tenant at Tenant's cost and
expense, in settings of cord, rubber or spring type vibration eliminators
sufficient to eliminate noise or vibration.
32.03. In the event that an excavation or any construction should be
made for building or other purposes upon land adjacent to the Building, or
should be authorized to be made, Tenant shall, if necessary, afford to the
person or persons causing or authorized to cause such excavation or construction
or other purpose, the right, for reasonable periods of time and in a manner so
as to avoid material interference with Tenant's business, to enter upon the
Demised Premises for the purpose of doing such work as shall reasonably be
necessary to protect or preserve the wall or walls of the Building, or the
Building, from injury or damage and to support them by proper foundations,
pinning and/or underpinning, or otherwise.
32.04. Tenant waives the right to trial by jury in any summary
proceeding that may hereafter be instituted against it or in any action that may
be brought hereunder, provided such waiver is not prohibited by law. Tenant
shall not interpose any counterclaim in any summary proceeding.
32.05. The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease, or any of the Rules and Regulations attached hereto or hereafter adopted
by Landlord, shall not prevent a subsequent act, which would have originally
constituted a violation, from having all the force and effect of an original
violation. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys of the Demised Premises prior to the termination of this
Lease. The delivery of keys to any employee of Landlord or of Landlord's agent
shall not operate as a termination of this Lease or a surrender of the Demised
Premises. In the event of Tenant at any time desiring to have Landlord sublet
the Demised Premises, Landlord or Landlord's agents are authorized to receive
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said keys for such purpose without releasing Tenant from any of the obligations
under this Lease. The receipt or acceptance by Landlord of rent with knowledge
of the breach of any covenant of this Lease shall not be deemed a waiver of such
breach. No provision of this Lease shall be deemed to have been waived by
Landlord or Tenant, unless such waiver be in writing signed by such party. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
rent required to be paid shall be deemed to be other than on account of the
earliest such rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
in this Lease provided.
32.06. This Lease with its schedules and annexes contain the entire
agreement between Landlord and Tenant and any executory agreement hereafter made
between Landlord and Tenant shall be ineffective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease, in whole
or in part, unless such executory agreement is signed by the party to be
charged. This Lease may not be orally waived, terminated, changed or modified.
32.07. The captions of Articles in this Lease and its Table of
Contents and Index are inserted only as a convenience and for reference and they
in no way define, limit or describe the scope of this Lease or the intent of any
provision thereof. References to Articles and Sections are to those in this
Lease unless otherwise noted.
32.08. If any term, covenant, condition or provision of this Lease or
the application thereof to any circumstance or to any person, firm or
corporation shall be invalid or unenforceable to any extent, the remaining
terms, covenants, conditions and provisions of this Lease or the application
thereof to any circumstances or to any person, firm or corporation other than
those as to which any term, covenant, condition or provision is held invalid or
unenforceable, shall not be affected thereby and each remaining term, covenant,
condition and provision of this Lease shall be valid and shall be enforceable to
the fullest extent permitted by law.
32.09. If any term, covenant, condition or provision of this Lease is
found invalid or unenforceable
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to any extent, by a final judgment or award which shall not be subject to change
by any appeal, then, either party to this Lease may initiate an arbitration in
accordance with the provisions of Article 25, which arbitration shall be by
three (3) arbitrators each of which shall have at least ten (10) years'
experience in the supervision of the operation and management of major office
buildings in Manhattan. Said arbitrators shall devise a valid and enforceable
substitute term, covenant, condition or provision for this Lease which shall as
nearly as possible carry out the intention of the parties with respect to the
terms, covenant, condition or provisions theretofore found invalid or
unenforceable. Such substitute term, covenant, condition or provision, as
determined by the arbitrators, shall thereupon be deemed a part of this Lease.
32.10. Landlord shall have the right from time to time, to substitute
for the basement space, if any, then occupied by Tenant, comparable space in the
basement, provided Landlord shall give at least thirty (30) days' prior written
notice to Tenant of its intention so to do. No vault or basement space not
within the property line of the Building is leased hereunder, anything to the
contrary indicated elsewhere in this Lease notwithstanding. Any vault or
basement space not within the property line of the Building, which Tenant may be
permitted to use or occupy, shall be used or occupied under revocable license
and if the amount of such space be diminished or required by any governmental
authority having jurisdiction, Landlord shall not be subject to any liability
nor shall Tenant be entitled to abatement of rent, nor shall such diminution or
abatement be deemed a constructive or actual eviction. Any fee or license charge
or tax of municipal authorities for such vault or basement space shall be paid
by Tenant to Landlord as additional rent within five (5) days after written
demand therefor. In such fee, tax or charge shall be for vault or basement space
greater in area than that occupied by Tenant, the charge to Tenant shall be pro-
rated.
32.11. This Lease is submitted to Tenant on the understanding that it
shall not be considered an offer and shall not bind Landlord in any way until
(i) Tenant has duly executed and delivered duplicate originals to Landlord, (ii)
Landlord has executed and unconditionally delivered one of said originals to
Tenant and the mortgagee (if required) and lessor of the Over Lease (if
required) shall consent thereto in writing. If Landlord and Tenant
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do not execute this Lease simultaneously, Tenant shall have the right to cancel
this Lease if Landlord does not deliver to Tenant an executed original within
five (5) days of Landlord's receipt of an executed original from Tenant.
ARTICLE 33
SUCCESSORS AND ASSIGNS
33.01. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and, except as otherwise
provided herein, their assigns.
ARTICLE 34
HAZARDOUS MATERIALS
34.01 Neither Landlord nor Tenant shall cause or permit "Hazardous
Materials" (as defined below) to be used, transported, stored, released,
handled, produced or installed in, on or from, the Demised Premises or the
Building. The term "Hazardous Materials" shall, for the purposes hereof, mean
any flammable, explosive or radioactive materials; hazardous wastes; hazardous
and toxic substances or related materials; asbestos or any material containing
asbestos; or any other such substance or material; as defined by any federal,
state or local law, ordinance, rule or regulation, including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended, the Hazardous Materials Transportation Act, as amended,
the Resource Conservation and Recovery Act, as amended, and in the regulations
adopted and publications promulgated pursuant to each of the foregoing. In the
event of a breach of the provisions of this Article 34, each party shall, in
addition to all of its rights and remedies under this Lease and pursuant to law,
require the defaulting party to remove any such Hazardous Materials from the
Demised Premises or the Building in the manner prescribed for such removal by
all requirements of law. The provisions of this Article 34 shall survive the
expiration or sooner termination of this Lease.
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ARTICLE 35
PARTNERSHIP TENANT
If Tenant is a partnership or a professional corporation (or is
comprised of two (2) or more persons, individually or as co-partners of a
partnership or shareholders of a professional corporation) or if Tenant's
interest in this Lease shall be assigned to a partnership or a professional
corporation (or to two (2) or more persons, individually or as co-partners of a
partnership or shareholders of a professional corporation) pursuant to Article 8
hereof (any such partnership, professional corporation and such persons are
referred to in this Article 35 as "Partnership Tenant"), the following
provisions shall apply to such Partnership Tenant: (a) the liability of each of
the parties comprising Partnership Tenant for the observance and performance of
all the terms, covenants and conditions of this Lease shall be joint and
several; (b) each of the parties comprising Partnership Tenant hereby consents
in advance to, and agrees to be bound by (x) any written instrument which may
hereafter be executed by Partnership Tenant or any successor entity, changing,
modifying, extending or discharging this Lease, in whole or in part, or
surrendering all or any part of the Premises to Landlord, and (y) any notices,
demands, requests or other communications which may hereafter be given by
Partnership Tenant or by any of the parties comprising Partnership Tenant; (c)
any bills, statements, notices, demands, requests or other communications given
or rendered to Partnership Tenant or to any of such parties shall be binding
upon Partnership Tenant and all such parties; (d) if Partnership Tenant shall
admit new partners or shareholders, as the case may be, all of such new partners
or shareholders, as the case may be, shall, by their admission to Partnership
Tenant, be deemed to have assumed joint and several liability for the
performance of all of the terms, covenants and conditions of this Lease on
Tenant's part to be observed and performed; and (e) Partnership Tenant shall
give prompt notice to Landlord of the admission of any such new partners or
shareholders, as the case by be, and upon demand of Landlord, shall cause each
such new partner or shareholder, as the case may be, to execute and deliver to
Landlord an agreement in form satisfactory to Landlord, wherein each such new
partner or shareholder, as the case may be, shall assume joint and several
liability for the observance and performance of all the terms, covenants and
conditions of this Lease on
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Tenant's part to be observed and performed (but neither Landlord's failure to
request any such agreement nor the failure of any such new partner or
shareholder, as the case may be, to execute or deliver any such agreement to
Landlord shall vitiate the provisions of clause (d) of this Article 35).
ARTICLE 36
SUBMISSION TO JURISDICTION
Tenant hereby (a) irrevocably consents and submits to the jurisdiction
of any Federal, state, county or municipal court sitting in the State of New
York in respect to any action or proceeding brought therein by Landlord against
Tenant concerning any matters arising out of or in any way relating to this
Lease; (b) irrevocably waives all objections as to venue and any and all rights
it may have to seek a change of venue with respect to any such action or
proceedings; (c) agrees that the laws of the State of New York shall govern in
any such action or proceeding and waives any defense to any action or proceeding
granted by the laws of any other country or jurisdiction unless such defense is
also allowed by the laws of the State of New York; and (d) agrees that any final
non-appealable judgment rendered against it in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. Tenant further agrees that any
action or proceeding by Tenant against Landlord in respect to any matters
arising out of or in any way relating to this Lease shall be brought only in the
State of New York, County of New York. In furtherance of the foregoing, Tenant
hereby agrees that its address for notices by Landlord and service of process
under this Lease shall be the Premises. Notwithstanding the foregoing
provisions of this Article 36, Tenant may, by written notice to Landlord, change
the designated agent for acceptance of service of process to any other law firm
located in the City, County and State of New York.
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ARTICLE 37
PREPARATION OF DEMISED PREMISES
37.01. Tenant will submit, on or prior to March 1, 1995, for
Landlord's approval complete dimension architectural plans and complete
engineering plans including heating, ventilating, air-conditioning, electrical,
plumbing, sprinkler and if required, structural plans which Tenant's architect
shall file with and cause to be approved by the governmental authorities having
jurisdiction. Landlord shall review Tenant's plans and notify Tenant of
Landlord's approval or disapproval within ten (10) business days of Landlord's
receipt of such plans. In the event, however, that Landlord shall have failed to
respond to Tenant's request for approval of such plans and specifications within
ten (10) business days of receipt thereof, then Landlord shall be deemed to have
given its approval thereof, provided, however, that the submission of such plans
-------- -------
and specifications shall be accompanied by a notice to Landlord containing a
legend in bold faced type that the failure by Landlord to approve or note its
objections to the plans and specifications within the ten (10) business day time
frame (which must be specifically noted in the legend), shall result in a
"deemed approval" by Landlord of the plans and specifications.
37.02. In consideration of Tenant's having entered into this Lease,
Landlord agrees to pay to Tenant the sum of $1,855,575 (the "Work Allowance"),
such Work Allowance to be disbursed to Tenant as hereinafter provided; provided,
--------
however,that no portion of the work Tenant until such time as Tenant has first
- -------
expended (and given to Landlord reasonable evidence of such expenditure) the sum
of $1,668,295 on account of those costs for which the Work Allowance is to be
disbursed.
37.03. Tenant agrees that only those contractors listed on Exhibit E
----------
are eligible to perform Tenant's work with respect to the initial preparation of
the Demised Premises for occupancy. With respect to subsequent alterations
performed by Tenant in accordance with Article 13 of this Lease, Tenant shall
employ only those contractors approved by Landlord pursuant to said Article 13.
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If any other general contractor, who has been approved by Landlord, is
awarded the contract to perform the work, the Work Allowance shall be disbursed
by Landlord to Tenant upon Tenant's delivery of the following: (a) a requisition
specifying the work, materials and services for which payment is requested
together with bills from the general contractor and sub-contractors, suppliers
and consultants for such work, materials and services, (b) the written
certification of Tenant's architect to the effect that the amounts requisitioned
are proper in all material respects and that the work and materials represented
thereby have been installed substantially in accordance with the approved plans,
(c) a written approval by Tenant of its general contractor's request for payment
and (d) partial or full releases of lien from the general contractor and any
subcontractors hired to furnish, install or supply material for any such
construction.
37.04. Payments by Landlord to Tenant will be for 90% of the approved
requisitioned amount, made once each month within twenty (20) business days
after Tenant's requisition package has been received by Landlord. In the event
any mechanic's lien shall have been filed relating to any work that has been
performed by or for Tenant, the additional amount thereof may be withheld from
payment until such lien has been removed by bond or otherwise; provided,
--------
however, that Landlord shall promptly disburse the amount withheld upon the
- -------
bonding or other removal of such lien.
37.05. Upon the completion of Tenant's work, Tenant shall provide to
Landlord (a) the certificate of Tenant's architect stating that the work has
been completed substantially in accordance with Tenant's plans, (b) an affidavit
from the Tenant's general contractor that all sub-contractors, laborers,
material suppliers for Tenant's work have been paid in full and that all liens
therefor that have been filed have been bonded, discharged of record or waived,
(c) certificates and approvals required to be obtained by Tenant or Tenant's
architect with respect to the work, that may be required by any Governmental
Authority, have been obtained and copies given to Landlord, (d) releases of lien
with respect to the payment being requested from the general contractor and any
contractors or sub-contractors hired by Tenant to supervise or perform any work
within the Demised Premises and (e) such other documentation as Landlord may
reasonably require. At such time as Tenant shall have provided to Landlord all
of the
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items referenced in clauses (a) through (e), Landlord shall release to Tenant
the portion of the Work Allowance withheld pursuant to the preceding paragraph.
37.06. Tenant agrees that it will pay all amounts necessary to fully
complete all of Tenant's work to the extent the cost thereof exceeds the Work
Allowance. The Work Allowance may be used only for the payment of architectural,
engineering, construction management and other consultant's fees as well as for
all "hard costs" which hard costs shall include all forms of construction,
alterations and decoration work permanently included in the Demised Premises
provided, however, that no more than an aggregate maximum of 15% of the Work
Allowance may be used for any of the costs characterized in this Section 37.06
as other than "hard costs."
Tenant, at its own cost and expense (subject to its right to receive
payment for same from the Work Allowance), shall file its plans with the
Governmental Authorities having jurisdiction and shall pay all required fees and
obtain all permits and approvals required; provided, however, Landlord agrees to
-------- -------
cooperate with Tenant in connection therewith. No work shall commence unless a
permit has been issued. Copies of all approved plans, permits, applications,
final approvals and sign-offs shall be submitted to Landlord.
37.07. Tenant shall cause its general contractor and each sub-
contractor to carry personal injury and property damage and general liability
insurance for any occurrence in or about the Building in a combined single limit
of not less than $5,000,000. Before commencing any work or delivering material
to the Building, each sub-contractor and the general contractor shall deliver
certificates evidencing such insurance to the Landlord and naming the Landlord
as an insured party under the policy. The general contractor and each sub-
contractor shall also carry workmen's compensation insurance in statutory limits
covering all persons employed in connection with the work for death or injury.
37.08. Landlord shall afford Tenant the opportunity to use the
freight elevator, for the delivery and removal of construction material and
personnel, on the same terms and conditions as other Tenants in the Building.
All deliveries and removals shall first be scheduled with the Building Manager
who will act promptly. The charge for
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the overtime use of the freight elevator and operator shall be $75.00 per hour.
37.09. Tenant, its general contractor and all sub-contractors shall
comply promptly with the procedures and regulations uniformly and reasonably
prescribed and enforced by Landlord for the use of the freight elevator, the
loading dock and other public areas of the Building.
All work shall at least conform to the construction standards of the
Building a copy of which is attached and marked Exhibit E-1.
-----------
37.10. Tenant agrees to accept the Demised Premises in its "as is"
condition subject, however, to the Landlord's providing on the Commencement Date
an ACP-5 certificate with respect to the Demised Premises.
ARTICLE 38
RENEWAL OPTION
38.01. Provided this Lease is in full force and effect and Tenant is
not in default hereunder beyond any applicable grace period, Tenant shall have
the following option to renew the term of this Lease (the "Renewal Option"):
(i) Tenant shall have the option to renew the term of this Lease for
an additional five (5) year term (the "Renewal Term") commencing on the day
after the Expiration Date, at an annual Fixed Rent equal to the then fair
market rental value of the Demised Premises, which option shall be
exercised by written notice to Landlord delivered no earlier than eighteen
(18) months and no later than twelve (12) months prior to such Expiration
Date. In the event of the exercise of the Renewal Option under this
clause, the fair market rental value of the Demised Premises shall be
determined as of the date of the first day of the Renewal Term.
38.02. Notwithstanding anything to the contrary contained in this
Lease, the foregoing Renewal Option may not be exercised by Tenant unless the
named Tenant herein (i.e., Forstmann & Company, Inc.) is, at the time of
----
delivery of any Election Notice (as hereinafter defined)
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and on the effective date of any such Renewal Term, actually occupying (i.e.,
----
exclusive of any subtenants) 80% of the Demised Premises.
38.03. This Lease, as so extended during the Renewal Term, shall be
upon the same terms and conditions as contained in this Lease except that (i)
the annual Fixed Rent for the Renewal Term shall be a sum equal to 95% of the
then fair market rental value of the Demised Premises determined as of the date
set forth in Section 38.01 provided, in no event shall such annual Fixed Rent
--------
for the Renewal Term be less than the sum of (a) the annual Fixed Rent for the
final Lease Year of the initial term of this Lease and (b) the additional rent
payable by Tenant pursuant to Article 4 of this Lease for such final Lease Year;
(ii) the Demised Premises shall be delivered in its then "AS IS" condition;
(iii) Landlord shall not be required to do any work to the Demised Premises or
to provide any work allowance or free rent period or concession; (iv) the
respective Base Tax and Expense Base during the Renewal Term shall be those
respective calendar years in which occur the date as of which the fair market
rental value is determined; and (v) this Lease, as extended, shall not contain
the Renewal Option provided in this Article.
38.04. The exercise of the Renewal Option shall only be effective
upon, and in strict compliance with, the following terms and conditions:
(a) Any Renewal Option must be exercised by written notice (the
"Election Notice") given no earlier, or no later, than the respective
outside dates set forth in Section 38.01 or shall be deemed waived. Time
shall be of the essence in connection with the exercise of any Election
Notice of Tenant hereunder.
(b) Landlord and Tenant shall seek to agree as to the amount of such
fair market rental value for the Demised Premises, taking into
consideration the fair market rental value of untenanted space of similar
size and similar condition in comparable midtown Manhattan office buildings
(including the Building) available for a comparable term and that reflects
adjustments for a lack of the necessity of Tenant to relocate and do
additional work, the new Base Tax and Expense Base established under
Section 38.03(iv)
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above, any free rent, work allowance or other economic terms that would be
granted in such a lease, and the lack of the necessity of Landlord to do
any work or pay a broker's commission in connection with a new lease for
the Demised Premises (except that the parties shall also consider the fact
that Landlord shall be required to pay a commission to Broker upon Tenant's
exercise of its Renewal Option under this Article 38). If they shall not
agree as to such value by the date which is three (3) months after the
Election Notice is given, then each of Landlord and Tenant, by no later
than four (4) months after the Election Notice is given, shall give a
notice to the other party setting forth in such notice the annual fair
market rental value that such person believes is the basis for the Fixed
Rent which should be paid by Tenant hereunder and in such event said annual
fair market rental value shall be determined by arbitration as hereinafter
in this Article provided.
38.05. If Landlord and Tenant shall be unable to agree as to the
annual fair market rental value by the date which is four (4) months after the
giving of the Election Notice, then and in such event said annual fair market
rental value for the Demised Premises shall be determined by arbitration in
accordance with the provisions of Article 25 except that the arbitrators so
specified in such notices shall be licensed real estate brokers or appraisers
doing business in the Borough of Manhattan, City and State of New York, and
having not less than ten (10) years' active experience as real estate brokers or
appraisers of said Borough. In making their determinations, the arbitrators
shall consider the criteria set forth in Section 38.04(b) and follow the
directions set forth in this Article. The arbitrators shall be required to
select either the annual fair market rental value proposed by Landlord or the
annual fair market rental value proposed by Tenant as the actual annual fair
market rental of the Demised Premises.
38.06. A. If at the commencement date of the Renewal Term, the
amount of the Fixed Rent payable during that Renewal Term in accordance with the
foregoing paragraphs of this Article shall not have been determined, then,
pending such determination, Tenant shall pay Fixed Rent at the rate proposed by
Landlord for that Renewal Term (the "Temporary Rate"). After the determination
by arbitration of the annual fair market rental value of the Demised Premises,
if such rental value is greater or less
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than the "Temporary Rate" Landlord shall promptly pay to Tenant the excess of
the Temporary Rate over (or Tenant shall promptly pay to Landlord the shortfall
of the Temporary Rate below) the rental value determined by the arbitration,
together with interest at the Prime Rate on the amount so paid; and the Fixed
Rent so determined by the arbitration (subject to the provisions of Section
38.03(i) above) shall be payable during that Renewal Term.
B. Upon determination of the Fixed Rent for the Renewal Term,
Landlord and Tenant shall execute, acknowledge and deliver to each other an
agreement specifying the amount of the Fixed Rent for such Renewal Term (but any
failure to execute such an agreement shall not affect -Tenant's obligation to
pay and Landlord's right to receive such Fixed Rent).
ARTICLE 39
LEASE TAKEOVER AGREEMENT
39.01 Simultaneously herewith, Landlord and Tenant have entered into
a Lease Takeover Agreement with respect to Tenant's existing lease of space at
1185 Avenue of the Americas, New York, New York. The performance of Landlord's
and Tenant's obligations under that Agreement shall be deemed obligations of
Landlord and Tenant under this Lease, except that the provisions of that
Agreement are not binding on any superior mortgagee as described in this Lease.
ARTICLE 40
CANCELLATION OPTION
40.01. Tenant shall have the one-time option to cancel this Lease
effective on December 31, 2010 (the "Cancellation Date"), provided, however,
-------- -------
that such cancellation shall only be effective upon strict compliance with the
following terms and conditions:
A. Tenant shall give Landlord at least twelve (12) months' prior
written notice of its election to cancel (the "Cancellation Notice"). Any
such Cancellation Notice shall be irrevocable upon delivery and time shall
be of the essence in connection with the exercise of any election to cancel
hereunder.
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B. Simultaneously with the delivery of the aforesaid Cancellation
Notice, Tenant shall pay to Landlord by good certified or bank check drawn
on Norwest Bank International, ABN Amro Bank N.V. or a bank which is a
member of the New York Clearing House Association, as consideration for
said privilege of cancellation, $1,200,207 plus an amount equal to the sum
of (i) three (3) months' Fixed Rent calculated as of the Cancellation Date
and (ii) three months additional rent under Article 4 and Article 7
computed as of the date the Cancellation Notice is given by Tenant, which
amount shall be recomputed as of the month prior to the Cancellation Date
and any adjustment thereof shall be made fifteen (15) days prior to the
Cancellation Date (the "Cancellation Payment"). The Cancellation Payment
shall be due and payable upon Tenant's delivery of the Cancellation Notice.
In lieu of a cash payment, Tenant may deliver to Landlord in accordance
with the terms and conditions of Section 29.07 hereof a Letter of Credit in
an amount equal to the Cancellation Payment. If Tenant delivers such Letter
of Credit to Landlord in lieu of a cash payment, Tenant shall pay to
Landlord one month prior to the Cancellation Date by good certified or bank
check drawn on Norwest Bank International, ABN Amro Bank N.V. or a bank
which is a member of the New York Clearing House Association, the
Cancellation Payment, at which time Landlord shall return to Tenant the
Letter of Credit delivered to Landlord pursuant to this Section 40.01.
C. Notwithstanding any such cancellation by Tenant hereunder, Tenant
shall remain liable to pay all Fixed Rent and additional rent through the
Cancellation Date and to cure any default under any of the terms, covenants
and conditions of this Lease existing on the Cancellation Date. Such
defaults shall be cured within the periods provided herein, and such
liability of Tenant shall survive any such cancellation.
D. On or prior to the Cancellation Date, Tenant shall vacate the
Demised Premises and surrender possession thereof to Landlord in accordance
with the provisions of this Lease, as if said Cancellation Date were the
original Expiration Date hereof.
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E. Upon cancellation of this Lease, Landlord and Tenant shall be
relieved of any obligations under this Lease, other than those accruing
prior to the Cancellation Date and except as provided above in this Article
40, and Landlord and Tenant shall execute an agreement in recordable form,
hereafter referred to as the "Lease Cancellation Agreement" stating among
other things, the Cancellation Date and that the parties shall be relieved
of any obligations under this Lease other than those accruing prior to the
Cancellation Date, and except as otherwise provided in this Article 40.
40.02. Time shall be of the essence with respect to all notices given
by Tenant under this Article, and the time periods for the giving of such
notices shall not be extended for any reason whatsoever. If Tenant shall fail
to duly exercise said termination option set forth in this Article, then all of
Tenant's rights with respect thereto shall wholly cease, terminate and expire.
In the event Tenant shall fail to notify Landlord of its election within the
applicable time period as provided herein, Tenant shall be conclusively deemed
to have not exercised said termination option, and Tenant agrees upon request of
Landlord to confirm such non-exercise in writing, but failure to do so by Tenant
shall not operate to revive any rights of Tenant under this Article.
40.03. Landlord and Tenant shall execute, acknowledge and deliver any
transfer tax questionnaires or returns, transfer gains tax questionnaires or
returns, affidavits or other documents then required by any applicable
governmental authorities to effectuate the cancellation of the Lease under this
Article 40 and/or to record the Lease Cancellation Agreement. If any transfer
taxes, transfer gains taxes or other taxes are then payable on account of such
cancellation or such recordation, Tenant shall be responsible for, and shall
pay, any such taxes and shall indemnify and hold Landlord harmless from any such
obligation or payment (and any penalties or interest thereon), such obligation
and indemnity to survive the cancellation of this Lease.
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IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this Lease as of the date first above written.
1155 AVAMER REALTY CORP.,
Landlord
By__________________________
Name:
Title:
FORSTMANN & COMPANY, INC.,
Tenant
By__________________________
Name:
Title:
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ACKNOWLEDGMENT
--------------
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 he resides at ________________________________________; that he is the
______________ of Forstmann & Company, Inc., the corporation described in and
which executed the foregoing instrument as Tenant; and that he signed his name
thereto by order of the board of directors of said 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 HE RESIDES AT ____________________________________; THAT HE IS THE
______________ OF 1155 AVAMER REALTY CORP., THE CORPORATION DESCRIBED IN AND
WHICH EXECUTED THE FOREGOING INSTRUMENT AS LANDLORD; AND THAT HE SIGNED HIS NAME
THERETO BY ORDER OF THE BOARD OF DIRECTORS OF SAID CORPORATION.
______________________________
NOTARY PUBLIC
<PAGE>
EXHIBIT 10.1(b)
LEASE TAKEOVER AGREEMENT
------------------------
AGREEMENT, dated as of this ___ day of January, 1995 by and between
Forstmann & Company, Inc., a Georgia corporation, with offices at 1185 Avenue of
the Americas, New York, New York 10036 ("Tenant") and 1155 Avamer Realty Corp.,
a New York corporation, with offices at 1133 Avenue of the Americas, New York,
New York 10036 ("Avamer").
Avamer and Tenant have entered into a lease (the "1155 Lease"), of
even date herewith, covering the entire third and fourth floors in the building
known as 1155 Avenue of the Americas, New York, New York (the "1155 Space").
Tenant is currently the tenant under a lease dated as of July 21, 1986
between Tenant and 1185 Avenue of the Americas Associates ("1185") which was
amended by that certain Lease Modification Agreement dated as of December 5,
1991 (as amended, the "1185 Lease"), covering certain space described in the
1185 Lease on the fourth floor in the building known as 1185 Avenue of the
Americas (the "1185 Space") and expiring on October 31, 1996 (the "Expiration
Date").
In consideration of the mutual agreements herein contained, the
parties hereto do agree as follows:
<PAGE>
1. Terms not otherwise defined herein shall have the following
meanings:
1.1 "Effective Date" means the date (but not before August 1, 1995)
upon which Tenant vacates the 1185 Space in accordance with the terms of the
1185 Lease (other than as to use and possession) and delivers the 1185
Assignment and possession of the 1185 Space to Avamer in accordance with the
terms of this Agreement.
1.2 "1185 Assignment" means that Assignment and Assumption of Lease
(the form of which is attached hereto as Exhibit A) pursuant to which Tenant
assigns to Avamer, and Avamer assumes, the 1185 Lease.
2. Tenant hereby represents, warrants and agrees that (a) Tenant is
the current tenant under the 1185 Lease, (b) there have been no amendments to
the 1185 Lease except as set forth above, (c) a true, complete and accurate copy
of the 1185 Lease has been delivered to Avamer and is attached hereto as Exhibit
B, (d) no other agreements, oral or written, exist between Tenant and 1185, (e)
the term of the 1185 Lease expires on the Expiration Date, (f) the 1185 Space
consists only of certain space on the fourth floor in the building known as 1185
Avenue of the Americas, (g) Tenant is the sole occupant of the 1185 Space, (h)
Tenant has received no notice of any default under the 1185 Lease and, to the
best of its knowledge, Tenant is not presently in default under the 1185 Lease,
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(i) the 1185 Lease provides for the payment of fixed rent at the rate of
$956,300 per annum and (to the best of Tenant's knowledge) annual additional
rent for real estate taxes of $50,460, for porters' wages of $15,114.47 and for
electricity of $9,996.42 and (j) attached as Exhibit C is a true copy of the
latest rent bill received by Tenant under the 1185 Lease.
3. Provided Tenant is not then in default under the 1155 Lease or
under the 1185 Lease, on the Effective Date, Tenant and Avamer shall execute and
deliver the 1185 Assignment and Avamer shall take over the obligation of Tenant
to pay fixed rent and additional rent accruing under the 1185 Lease for the
period from and after the Effective Date through and including the Expiration
Date, provided, however, that (a) Avamer shall not be responsible for any rents
or other charges accruing under the 1185 Lease prior to the Effective Date or
after the Expiration Date nor for any damages or claims made under the 1185
Lease by reason of the acts or omissions of Tenant nor for any restoration of
the 1185 Space upon the expiration or termination of the 1185 Lease; (b) Tenant
shall indemnify, defend and save Avamer harmless from and against any cost,
claim, liability, damage or expense arising from any breach by Tenant of the
1185 Lease prior to the Effective Date or by reason of the items set forth in
the preceding clause (a); and (c) Avamer shall indemnify, defend and save Tenant
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harmless from and against any cost, claim, liability, damage or expense (except
those arising under the preceding clauses (a)-(b) above or by virtue of any
other breach of this Agreement by Tenant) arising as a result of any claims by
1185 that Tenant has violated the 1185 Lease by reason of its execution of this
Agreement or the 1185 Assignment.
4. From and after the date hereof, Avamer may (but is under no
obligation to) negotiate (a) directly with 1185 for an agreement to effectuate
the cancellation, assignment, subletting or modification of the 1185 Lease
effective on or after the Effective Date and (b) with any party (including, but
not limited to, Goldstein, Golub, Kessler & Company P.C. ["GGK"]) in respect of
a sublease of the 1185 Space or an assignment of the 1185 Lease, which sublease
or assignment may take effect on or after the Effective Date. Avamer may enter
into such agreement(s) on its own behalf and Tenant shall cooperate with Avamer
as may be reasonably necessary to effectuate any of the foregoing. No notice of
this Agreement or of the 1185 Assignment shall be given by Tenant to 1185
without Avamer's prior written consent.
5. Tenant shall not hereafter (a) make altera tions, changes or
additions to the 1185 Space, (b) agree to any amendments, modifications or
changes to the 1185 Lease, or (c) sublet, underlet, or license all or any part
of the 1185 Space, without the prior written consent of Avamer.
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<PAGE>
6. Avamer's obligations set forth in the 1185 Assignment and in this
Agreement shall immediately cease upon (a) any breach or default by Tenant under
this Agreement or under the 1155 Lease beyond any applicable grace period or (b)
any termination of the 1155 Lease because of the failure of the holder of the
existing mortgage of Avamer's interest in the Building encumbered by the 1155
Lease to consent to the 1155 Lease or to deliver a subordination, non-
disturbance and attornment agreement under Section 9.02 of the 1155 Lease. A
default by Tenant under this Agreement shall be deemed a default by Tenant under
the 1155 Lease.
7. Neither this Agreement nor any memorandum hereof shall be
recorded.
8. This Agreement and Tenant's rights hereunder are enforceable only
against Avamer and shall be subject and subordinate to any and all superior
mortgages (as defined in the 1155 Lease) made by Avamer covering the land and
building at 1155 Avenue of the Americas and shall not be binding upon any
superior mortgagee or successor to such mortgagee or purchaser from such
mortgagee (whether by foreclosure, deed in lieu of foreclosure or otherwise).
9. This Agreement shall be deemed made in, and governed by the laws
of, the State of New York.
10. Any notice given under this Agreement shall be in writing and
shall be deemed effective when delivered
-5-
<PAGE>
to the other party at the same address and in the same manner as set forth in
the 1155 Lease. Tenant shall furnish Avamer with a copy of each notice or
demand received by Tenant from 1185, promptly upon receipt by Tenant of such
notice, specifically including, without limitation, any default notice.
11. This Agreement shall survive the execution and delivery of the
1185 Assignment and shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise provided herein.
12. This Agreement may not be assigned by any of the parties hereto
without the prior consent of all parties.
13. This Agreement may not be modified orally but only by a writing
signed by the party or parties against whom enforcement is sought.
1155 AVAMER REALTY CORP.
By:___________________________
Name:
Title:
FORSTMANN & COMPANY, INC.
By:___________________________
Name:
Title:
-6-
<PAGE>
EXHIBIT 15.1
INDEPENDENT ACCOUNTANTS' REPORT
Forstmann & Company, Inc.:
We have made a review of the accompanying condensed balance sheet of Forstmann &
Company, Inc. as of January 29, 1995 and January 30, 1994 and the statement of
changes in shareholders' equity for the thirteen weeks ended January 29, 1995 in
accordance with standards established by the American Institute of Certified
Public Accountants. These financial statements are the responsibility of the
Company's management.
A review of interim financial information consists principally of applying
analytical procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Forstmann & Company, Inc. as of October 30, 1994
and the related statements of operations, shareholders' equity, and cash flows
for the fifty-two weeks then ended (not presented herein); and in our report
dated December 8, 1994 (January 23, 1995 as to paragraph 2 of Note 7), we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying condensed balance sheet as of
October 30, 1994 is fairly stated in all material respects in relation to the
balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP
March 13, 1995
Atlanta Georgia
<PAGE>
EXHIBIT 23.1
March 14, 1995
Forstmann & Company, Inc.
1185 Avenue of the Americas
New York, NY 10036
Dear Sirs:
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Forstmann & Company, Inc. for the periods ended January 29, 1995
and January 30, 1994, as indicated in our report dated March 13, 1995; because
we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which was included in your
Quarterly Report on Form 10-Q for the quarter ended January 29, 1995, is
incorporated by reference in Registration Statement No. 33-57643 on Form S-8 and
Registration Statement No. 33-56367 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act, is not considered a part of the Registration Statement
prepared or certified by an accountant or a report prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.
Yours truly,
/s/Deloitte & Touche LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Forstmann & Company Inc.'s condensed financial statements for the thirteen
weeks ended January 29,1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-29-1995
<PERIOD-START> OCT-31-1994
<PERIOD-END> JAN-29-1995
<CASH> 46
<SECURITIES> 0
<RECEIVABLES> 48,924
<ALLOWANCES> 2,318
<INVENTORY> 94,495
<CURRENT-ASSETS> 150,489
<PP&E> 80,831
<DEPRECIATION> 23,002
<TOTAL-ASSETS> 240,359
<CURRENT-LIABILITIES> 42,647
<BONDS> 155,347
<COMMON> 6
2,489
0
<OTHER-SE> 33,842
<TOTAL-LIABILITY-AND-EQUITY> 240,359
<SALES> 43,527
<TOTAL-REVENUES> 43,527
<CGS> 36,624
<TOTAL-COSTS> 36,624
<OTHER-EXPENSES> 5,196
<LOSS-PROVISION> 226
<INTEREST-EXPENSE> 4,598
<INCOME-PRETAX> (3,117)
<INCOME-TAX> (1,231)
<INCOME-CONTINUING> (1,886)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,886)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
