CONFORMED
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended February 29, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
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Commission file number 1-9480
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The Sherwood Group, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 22-2394480
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Exchange Place Centre, Jersey City, New Jersey 07302
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(Address of principal executive offices) (Zip code)
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(Former name, former address and former fiscal year, if changed
since last report)
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.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
13,115,454 shares of Common Stock, par value $.01 per share,
were outstanding on March 31, 1996.
<PAGE>
<TABLE>
THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
INDEX
<CAPTION>
PAGE
--------
<S> <C>
Part I - Financial Information
Item 1. - Financial Statements
Consolidated Statements of Financial Condition
(Unaudited) - February 29, 1996 and May 31, 1995 3
Consolidated Statements of Income (Unaudited) -
Three Months and Nine Months Ended February 29, 1996 and 1995 4
Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended February 29, 1996 and 1995 5
Notes to Consolidated Financial Statements
(Unaudited) - February 29, 1996 6
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 9
Part II - Other Information
Item 1. - Legal Proceedings 10
Item 6. - Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
February 29, May 31,
1996 1995
ASSETS (Unaudited) (Unaudited)
<S> <C> <C>
Cash $ 813,843 $ 593,473
Receivables:
Brokers and dealers 52,278,319 47,802,429
Other 421,945 224,049
Securities owned, at market value 36,707,972 41,777,895
Investment securities not readily marketable,
at fair value
401,320 401,320
Investment in partnerships 261,489 252,180
Notes receivable 596,410 642,035
Furniture, fixtures and equipment,
and leasehold improvements - at cost, net of
accumulated depreciation and amortization of
$6,630,835 at February 29, 1996 and $6,608,583
at May 31, 1995 13,209,330 3,861,992
Computer software, net of accumulated
amortization of $434,266 at February 29, 1996
and $322,048 at May 31, 1995 394,258 401,008
Identified intangible assets, net of accumulated
amortization of $1,134,229 at February 29, 1996
and $1,051,386 at May 31, 1995 3,054,051 3,386,894
Exchange memberships (market value $2,340,000 at
February 29, 1996 and $1,560,000 at May 31, 1995) 1,166,496 1,166,496
Subordinated notes receivable 3,250,000 3,250,000
Other assets 8,785,148 9,271,091
$121,340,581 $ 113,030,862
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Securities sold, not yet purchased, at
market value $ 14,988,131 $ 24,624,955
Accounts payable and accrued expenses,
including compensation payable to
officers and employees of $10,081,357
at February 29, 1996 and $8,970,821 at
May 31, 1995 20,397,818 14,471,330
Secured demand notes payable 3,250,000 3,250,000
Income taxes payable 2,909,181 1,365,856
Minority interest in Equitrade 4,354,841 3,341,220
Total liabilities 45,899,971 47,053,361
Commitments and Contingencies (Note 4)
Stockholders' equity (Note 5)
Preferred stock - $.01 par value;
authorized 1,000,000 shares, none issued - -
Class A common stock - par value $.01 per share;
authorized 50,000,000 shares; none issued - -
Common stock - $.01 par value; authorized
50,000,000 shares; issued 14,343,201 shares 143,432 143,432
Additional paid-in capital 53,699,885 58,134,052
Retained earnings 30,586,089 17,804,212
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84,429,406 76,081,696
Less: Treasury stock - at cost, 1,446,114
shares at February 29, 1996 and 2,033,490
shares at May 31, 1995 (8,988,796) (10,104,195)
Total stockholders' equity 75,440,610 65,977,501
$ 121,340,581 $ 113,030,862
</TABLE>
The accompanying notes are an integral part of these statements.
(3)
<PAGE>
<TABLE>
THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(Unaudited)
Three Months Ended February 29, Nine Months Ended February 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Firm securities transactions - net $ 37,309,944 $ 19,096,150 $ 95,314,562 $ 54,727,359
Commission income 7,855,709 3,782,006 20,856,454 9,292,014
Equity income in partnerships 26,697 1,252,845 40,309 3,548,599
Investment securities gains realized - - - 76,375
Interest income 1,448,607 936,081 4,276,140 2,277,980
Fee income 341,926 112,866 961,531 222,960
Other revenues 213,566 170,698 614,128 470,185
47,196,449 25,350,646 122,063,124 70,615,472
Expenses:
Compensation and benefits 15,249,586 7,394,684 37,939,862 21,040,328
Clearing and related charges 14,510,707 8,668,466 42,019,930 23,941,637
Communications 2,596,718 1,570,388 7,664,696 4,557,076
Other expenses 5,516,827 2,604,925 12,905,838 8,779,089
Interest expense 125,634 898 201,923 10,333
37,999,472 20,239,361 100,732,249 58,328,463
Income before minority interest and
income taxes 9,196,977 5,111,285 21,330,875 12,287,009
Income of Equitrade allocated to
minority partners (994,821) - (2,282,213) -
Income before income taxes 8,202,156 5,111,285 19,048,662 12,287,009
Income taxes:
Currently payable:
Federal 1,922,687 100,186 4,084,163 237,027
State and local 1,138,843 742,248 2,182,622 1,789,199
3,061,530 842,434 6,266,785 2,026,226
Net income $ 5,140,626 $4,268,851 12,781,877 $10,260,783
Income per common and common
equivalent share (a)<F1>(b)<F2>:
Net income $ 0.39 $ 0.31 $ 0.97 $ 0.75
Weighted average common shares
outstanding 13,227,253 13,567,444 13,238,583 13,678,448
<FN>
<F1>(a) For presentation purposes, primary and fully diluted are identical.
</FN>
<FN>
<F2>(b) The sum of the individual quarters' earnings per common share does not
equal the total amount for the nine months ended February 29, 1996 due
to the effect of averaging the number of shares of common stock and common
stock equivalents throughout the year.
</FN>
</TABLE>
The accompanying notes are an integral part of these statements.
(4)
<PAGE>
<TABLE>
THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended February 29,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,781,877 $ 10,260,783
Non-cash items included in net income:
Equity income in partnerships (40,309) (3,548,599)
Depreciation and amortization 2,407,068 1,290,768
Gain on sales of investment securities
not readily marketable - (76,375)
Income of Equitrade allocated to minority
partners 2,282,213 -
4,648,972 (2,334,206)
(Increase) decrease in operating assets:
Receivables:
Brokers and dealers (4,475,890) 17,920,536
Other (197,896) (217,689)
Marketable securities owned, at market value 5,069,923 (18,946,343)
Other assets 485,943 (5,446,970)
882,080 (6,690,466)
Increase (decrease) in operating liabilities:
Securities sold, not yet purchased,
at market value (9,636,824) 2,363,319
Accounts payable and accrued expenses 3,323,491 (1,233,428)
Income taxes payable 1,543,325 438,084
(4,770,008) 1,567,975
Net cash provided by operating activities 13,542,921 2,804,086
Cash flows from investing activities:
Proceeds from sales of investment securities
not readily marketable - 99,575
Distributions from partnerships 31,000 2,641,956
Loans made (502,948) (242,500)
Principal collected on notes receivable 548,573 1,031,652
Purchases of furniture, fixtures and
equipment, and leasehold improvements (11,309,345) (1,022,730)
Purchases of computer software (105,468) (2,595)
Principal collected on subordinated note - 1,000,000
Issuance of subordinated note - (5,000,000)
Net cash used in investing activities (11,338,188) (1,494,642)
Cash flows from financing activities:
Purchase of treasury stock (1,115,771) (1,489,436)
Proceeds from exercise of options 400,000 -
Capital withdrawals by minority interest (1,268,592) -
Net cash provided by used in financing
activities (1,984,363) (1,489,436)
Net increase (decrease) in cash 220,370 (179,992)
Cash at beginning of period 593,473 474,733
Cash at end of period $ 813,843 $ 294,741
Supplemental disclosure of non-cash financing activities:
During the period from November 1995 through February 1996,
certain executives of the Company exercised an aggregate
of 670,000 options for the purchase of 670,000 shares of the
Company's common stock with an exercise price of $1 per
share and 66,000 options for the puchase of 66,000 shares with
an exercise price of $3.625 per share. In order to pay for
the exercise price and to reimburse the Company for the income
taxes ($2,602,997) on the gain related to the transaction,
the executives remitted to the Company 394,677 shares of the
Company's common stock with a market value of $3,487,247.
</TABLE>
The accompanying notes are an integral part of these statements.
(5)
<PAGE>
THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
February 29, 1996
Note 1 - Business and organization
The Sherwood Group, Inc. and its subsidiaries (the
"Company") are primarily engaged in the securities business and
in providing related financial services. The Company has a
principal registered broker-dealer wholly owned subsidiary,
Sherwood Securities Corp. ("Sherwood Securities"). National
Discount Brokers ("NDB"), another registered broker-dealer, is a
division of the Company's wholly owned subsidiary, Triak Services
Corp. The Company has a 60% special limited partnership interest
in Equitrade Partners ("Equitrade"), which is a specialist for
securities listed on The New York Stock Exchange. In addition,
Sherwood Securities is a specialist for securities listed on the
American Stock Exchange.
Note 2 - Basis of presentation
The accompanying unaudited consolidated financial statements
do not include all of the information and notes required by
generally accepted accounting principles for complete
consolidated financial statements. In the opinion of management,
all adjustments considered necessary for a fair presentation of
consolidated financial condition and results of operations for
the periods presented have been included. All adjustments are of
a normal and recurring nature. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and the related notes included
in the Company's 1995 Annual Report on Form 10-K. Certain prior
year amounts have been reclassified to conform with the three and
nine months ended February 29, 1996 presentations.
Note 3 - Net income per common share
Net income per common share is computed using the weighted
average number of shares of common stock and common stock
equivalents outstanding. Common stock equivalents include stock
issuable under stock options. The treasury stock method of
accounting was used in computing the common stock equivalents for
the computation of earnings per common share.
Note 4 - Commitments and contingencies
The Company has been named as a defendant in lawsuits and as
a party to arbitrations that allege violations of Federal and
state securities and related laws. Management believes that the
resolution of these lawsuits is not likely to result in any
material, adverse effect on the Company's consolidated financial
position and results of operations.
Note 5 - Net capital requirements
As registered broker-dealers, Sherwood Securities, NDB and
Equitrade are subject to the Securities and Exchange Commission
Uniform Net Capital Rule 15c3-1 (the "Rule"). As of February 29,
1996, the net capital of Sherwood Securities, NDB and Equitrade
exceeded their required net capital by $31,712,000, $5,738,000
and $19,460,000, respectively.
The Rule also provides that the equity capital may not be
withdrawn or cash dividends be paid if the resulting net capital
of a broker-dealer would be less than the amount required under
the Rule. Accordingly, at February 29, 1996, the payment of
dividends and advances to the Company by Sherwood Securities, NDB
and Equitrade is limited to $31,512,000, $5,688,000 and
$19,410,000, respectively, under the most restrictive of these
requirements. The Securities and Exchange Commission ("SEC") may,
by order, restrict the withdrawal of equity capital on a net
basis if the SEC determines that such withdrawal would be
detrimental to the financial integrity of the broker-dealer or
the financial community.
(6)
<PAGE>
Item - 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The results of the Sherwood Group, Inc. and subsidiaries
(the "Company") for the three months and nine months ended
February 29, 1996 reflect primarily the activities of Sherwood
Securities Corp. ("Sherwood Securities"), National Discount
Brokers ("NDB"), a division of the Company's subsidiary, Triak
Services Corp. ("Triak") and Equitrade Partners ("Equitrade").
Sherwood Securities is primarily engaged in the securities
business as a wholesale market maker in NASDAQ/OTC securities.
NDB is a deep discount retail brokerage firm and Equitrade is a
registered specialist in equity securities on the New York Stock
Exchange. Prior to March 1, 1995, the Company's investment in
Equitrade was accounted for on an equity basis, with the
Company's share of Equitrade's net income included in equity
income in partnerships in the consolidated statements of income.
Subsequent to March 1, 1995, Equitrade's total revenue and
expenses have been consolidated with the share of Equitrade's net
income attributable to minority partners reflected in the
consolidated statements of income as income of Equitrade
allocated to minority partners.
The Company's consolidated net income for the three months
ended February 29, 1996 was $5,141,000 compared to $4,269,000 for
the three months ended February 28, 1995. For the quarter ended
February 29, 1996, the principal subsidiaries, Sherwood
Securities, Triak and Equitrade (which was not consolidated in
1995) had net income of $4,010,000, $832,000 and $2,636,000,
respectively, compared to net income of $4,021,000, $165,000 and
$1,529,000 for the quarter ended February 28, 1995, respectively.
The Company's consolidated net income for the nine months ended
February 29, 1996 was $12,782,000 compared to $10,261,000 for the
nine months ended February 28, 1995. For the nine months ended
February 29, 1996, Sherwood Securities, Triak and Equitrade (not
consolidated in 1995) had net income of $8,376,000, $2,115,000
and $6,183,000, respectively, compared to net income (loss) of
$12,365,000, $(2,244,000) and $5,064,000, respectively, for the
nine months ended February 28, 1995.
Total revenue for the Company increased by approximately
$21,846,000, or 86%, for the three months ended February 29, 1996
and $51,448,000, or 73%, for the nine months ended February 29,
1996, as compared with the previous year's respective periods.
Revenue from firm securities transactions for Sherwood
Securities increased approximately $13,405,000, or 70%, and
$28,340,000, or 52%, for the three and nine month periods ended
February 29, 1996, respectively, when compared to the prior year.
Sherwood Securities' overall trading volume increased
approximately 68% and 75% for the same periods, respectively.
However, trading profits per ticket continued to decline.
Several factors contributed to this decrease in trading profits
per ticket. Regulatory changes enacted by the Securities and
Exchange Commission ("SEC") and the National Association of
Securities Dealers have caused an increase in the number of
transactions executed on an "even" basis. Tightened spreads
between "bid" and "ask" prices, increased volatility in the
marketplace, capacity constraints and increased Small Order
Execution Systems ("SOES") activity have also been factors in the
decrease in trading profits per ticket for both the three and
nine month periods ended February 29, 1995. Equitrade's revenues
from firm securities transactions, included in total revenues for
the three and nine months ended February 29, 1996, approximated
$4,809,000 and $12,248,000, respectively.
The Company's commission income, primarily generated by NDB,
increased by approximately $4,074,000, or 108%, and $11,564,000,
or 124%, for the three and nine months ended February 29, 1996,
respectively, when compared with the prior year. The increase is
due to the fact that NDB's volume of transactions increased by
132% and 166% for the three and nine months ended February 29,
1996, respectively, when compared with the previous year, which
was NDB's first full year of operations.
For periods prior to March 1, 1995, when the Company
accounted for its investment in Equitrade on an equity basis, the
primary portion of equity income in partnerships was equity
income from Equitrade. The Company's share of Equitrade's net
income of $1,529,000 and $5,064,000 for the three and nine months
ended February 28, 1995, respectively, was $1,240,000 and
$3,521,000, respectively. After March 1, 1995, of the total
Equitrade net income of $2,636,000 and $6,183,000 for the three
and nine months ended February 29, 1996, respectively,
Equitrade's net income attributed to minority partners was
$995,000 and $ 2,282,000, respectively.
(7)
<PAGE>
There were no investment securities transactions for the
three or nine months ended February 29, 1996 or for the three
months ended February 28, 1995. Gains on sales of investment
securities aggregated $76,000 for the nine months ended February
28, 1995 resulting entirely from the sale of 11,600 shares of
Network Imaging Corp., a publicly traded company, (IMGX) during
June 1994 and July 1994.
Interest income increased by approximately $513,000, or 55%,
and $1,998,000, or 88%, for the three and nine months ended
February 29, 1996, respectively, as compared to the previous
year. The increase is due to a significant rise in NDB's
customer debit and credit balances held with the Company's
clearing broker and an increase in the agreed upon rate used to
compute interest earned on such customer balances. Also
contributing to the increase were the availability of larger
amounts of cash for investment and higher average market interest
rates than in the prior year.
Fee income increased by $229,000 and $739,000 for the three
and nine months ended February 29, 1996, respectively, as
compared to the prior year. The increase is due to larger 12b-1
fees received from mutual funds as NDB's customers' balances in
those funds have increased since the prior year.
Total expenses for the three months ended February 29, 1996
increased approximately $17,760,000, or 88%, from $20,239,000 in
1995 to $37,999,000 in 1996. Total expenses for the nine months
ended February 29, 1996 increased approximately $42,404,000, or
73%, from $58,328,000 in 1995 to $100,732,000 in 1996. The
reasons for the increase in expenses are set forth below.
Compensation and benefits increased $7,855,000, or 106%, and
$16,900,000, or 80%, for the three and nine month periods ended
February 29, 1996, respectively, compared with the prior year.
The increase is due primarily to higher commissions paid to
traders and salespeople because of higher trading profits and to
an increase in office salaries and related benefits due
principally to NDB's larger staff size. Also, higher bonuses
were accrued as a result of higher overall profits of the Company
as compared to the prior year. Finally, compensation and
benefits of Equitrade included in the consolidated results for
the three and nine months ended February 29, 1996 aggregated
$950,000 and $2,928,000, respectively.
Clearing and related charges increased by approximately
$5,842,000, or 67%, and $18,078,000, or 76%, for the three month
and nine month periods ended February 29, 1996, as compared to
the prior year. The increase was principally due to the
operations of NDB for which clearance charges amounted to
approximately $3,811,000 and $10,395,000 for the three and nine
months ended February 29, 1996, respectively, compared to
$2,014,000 and $4,883,000 for the three and nine months ended
February 28, 1995. In addition, the increased volume of Sherwood
Securities' trading activity led to increases in both clearance
charges and payments made to correspondents for order flow.
Communications expense increased by $1,026,000, or 65%, and
$3,108,000, or 68%, for the three and nine months ended February
29, 1996 as compared to the previous year. The increase was
mainly due to an increase in the activities of NDB, namely
telephone and quotations expense.
Other expenses increased by approximately $2,912,000, or
112%, and $4,127,000, or 47%, for the three and nine months ended
February 29, 1996, respectively, as compared to the prior year.
The increase was due, specifically, to increases in professional
fees, occupancy costs, registration fees and depreciation and
amortization expense and, generally, to the overall increase in
the volume of business and an increase in staff size. Offsetting
these increases was a reduction of $1,499,000 in advertising
expenditures made in connection with NDB. Corresponding to the
commencement of NDB's operations, the Company ran an extensive
media campaign through September 1994 at which time the amount
and frequency of advertising lessened significantly.
Interest expense increased by approximately $125,000 and
$192,000 for the three and nine months ended February 29, 1996 as
compared to the previous year due to the operations of Equitrade.
(8)
<PAGE>
Liquidity
The Company's tangible assets are highly liquid with more
than 78% of these tangible assets consisting of cash or assets
readily convertible into cash. The Company's operations have
generally been financed by internally generated funds. In
addition, margin account borrowings are available to the Company
from its clearing brokers.
The Company's broker-dealer entities, Sherwood Securities,
NDB and Equitrade, are subject to the minimum net capital
requirement of the SEC which is designed to measure the general
financial soundness and liquidity of broker-dealers. As of
February 29, 1996, Sherwood Securities, NDB and Equitrade had
approximately $31,712,000, $5,738,000 and $19,460,000,
respectively, in excess of the required minimum net capital. The
net capital rule imposes financial restrictions upon Sherwood
Securities', NDB's and Equitrade's businesses which are more
severe than those imposed on most other businesses.
Cash flows from operations will vary on a daily basis as the
Company's portfolio of marketable securities changes. The
Company's ability to convert marketable securities owned into
cash is determined by the depth of the market and the size of the
Company's security positions in relation to the market as a
whole. The portfolio mix also affects the regulatory capital
requirements imposed on Sherwood Securities, NDB and Equitrade
which directly affects the amount of funds available for
operating, investing and financing activities.
The operations of the Company's American Stock Exchange
Specialist book continue to be funded by the income generated by
the book.
Cash flows from the Company's investment activities are
directly related to market conditions.
During the nine months ended February 29, 1996, the Company
repurchased 128,927 additional shares in connection with its
December 1992 plan to buy back up to 1,500,000 shares of the
Company's common stock from time to time in the open market or
through privately negotiated transactions. As of February 29,
1996, 910,345 shares had been acquired under this plan. The
source of funds for these purchases were internally generated.
In addition to the above purchases, during the nine months ended
February 29, 1996, the Company acquired 394,677 shares of common
stock which were tendered by executives of the Company to
exercise stock options and to pay related income taxes.
During March 1995, Triak signed a new lease agreement in New
York City for the purpose of relocating its offices and brokerage
facilities. The lease. for approximately 36,000 square feet,
commences on April 1, 1996 and expires on September 29, 2008.
Triak's obligation to pay base rent begins on April 1, 1997. The
obligation for any real estate tax and operating escalations, as
defined in the lease agreement, is effective as of January 1,
1996. Commencing April 1, 1997, base rent on the new space is
approximately $718,000 per annum.
Effects of Inflation
The Company's assets are not significantly affected by
inflation because they are primarily monetary in nature.
Management believes that replacement costs of furniture,
equipment and leasehold improvements will not materially affect
operations. However, the rate of inflation affects the Company's
principal expenses such as employee compensation, rent and
communication, which may not be readily recoverable from
increased revenues. Because of market forces and competitive
conditions in the securities industry, a broker-dealer may be
unable to unilaterally increase spreads and commissions in order
to recover increased costs related to inflation. Consequently,
the Company must rely on increased volume for this purpose.
However, the Company has significant cash balances on deposit
with its principal clearing brokers on which interest is paid
which, in the event there are higher interest rates which
normally result from inflation, would offset some of the costs.
(9)
<PAGE>
PART II - OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS
The Company reported in its Form 10-K for the year ended
May 31, 1995 that certain class action complaints, Charles Kaye
and Sulochana Dessi, et al. v. Herzog, Heine, Geduld, et al.
(United States District Court for the Southern District of New
York); Jerome Robinson v. Herzog, Heine, Geduld, et al. (United
States District Court for the Southern District of New York); and
Lawrence A. Abel, et al. v. Merrill Lynch Incorporated & Co., et
al. (Superior Court of California, County of San Diego), were
filed on May 27, 1994 against Sherwood Securities and several
other market makers on the NASDAQ exchange. Subsequent to May
27, 1994, several additional class action complaints were filed
which contained the same or similar allegations and request
similar relief.
By Order dated October 14, 1994, the Judicial Panel on
Multidistrict Litigation consolidated the above matters and any
later-filed "tag along" cases for pre-trial proceedings in the
United States District Court for the Southern District of New
York, entitled In Re NASDAQ Market-Makers Antitrust Litigation,
94 Civ. 3996 (RWS). A Second Amended Complaint was filed on
August 22, 1995. The Second Amended Consolidated Complaint
repeated most of the allegations of the various earlier filed
complaints, except that plaintiffs are no longer alleging
violations of the Securities Exchange Act of 1934, as amended.
Rather, their claims are limited to those previously alleged
under the Federal antitrust laws. Plaintiffs have also now
limited their claims to approximately 1,659 stocks traded on
NASDAQ. On December 18, 1995, Sherwood Securities filed an answer
to the Second Amended Complaint denying liability and asserting
certain affirmative defenses. The Company intends to vigorously
defend itself against these allegations.
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 10.1 - Waiver of Bonus by Arthur Kontos
Exhibit 10.2 - Sublease Agreement Between Jonson
& Higgins and Triak Services Corp.
Exhibit 11 - Computation of Earnings Per Share
(b) The Company filed no reports on Form 8-K during
the quarter ended February 29, 1996.
(10)
<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.
The Sherwood Group, Inc.
---------------------------------
Date: April 10, 1996 By: Dennis Marino
------------------------- ------------------------
Dennis Marino
(Executive Vice President
and Chief Administrative
Officer)
Date: April 10, 1996 By: Denise Isaac
------------------------- ------------------------
Denise Isaac
Chief Financial Officer
(11)
<PAGE>
EXHIBIT 10.1
WAIVER OF BONUS
WHEREAS, THE SHERWOOD GROUP, INC., a Delaware
corporation (the "Company"), and ARTHUR KONTOS (the
"Executive"), entered into an Employment Agreement dated
September 12, 1995 (the "Employment Agreement");
WHEREAS, Section 4 of the Employment Agreement provides
that the Executive shall receive a bonus (the "Bonus"), and
under Section 4.1 of the Employment Agreement the Executive
is entitled to a Bonus a portion of which is to be eighteen
(18%) percent of the Company's "Income" over $13,000,000
during the Company's fiscal year (as the term "Income" is
defined in Section 4.2 of the Employment Agreement);
WHEREAS, for good and valuable consideration the
receipt of which the Executive acknowledges, the Executive
wishes irrevocably to waive a portion of the Bonus under the
Employment Agreement to which he may be entitled for the
fiscal year of the Company to end on May 31, 1996 specified
below;
NOW, THEREFORE,
The Executive hereby irrevocably waives to the fullest
extent permitted by law the portion of the Bonus for the
fiscal year which is to end on May 31, 1996 as follows: The
portion of the Bonus calculated under Section 4.1 of the
Employment Agreement at 18% of Income over $13,000,000 shall
instead be calculated at the sum of (i) 18% of Income over
$13,000,000 but not more than $19,746,019 for the fiscal
year to end on May 31, 1996 plus (ii) 15% of Income over
$19,746,019 for the fiscal year to end on May 31, 1996.
<PAGE>
The Company by acknowledging this Waiver covenants and
agrees that except as specifically waived by this Waiver the
provisions of the Employment Agreement remain in full force
and effect. This Waiver does not affect the Executive's Bonus
under the Employment Agreement for the Company's fiscal year
beginning on June 1, 1996 and ending on May 31, 1997.
IN WITNESS WHEREOF, the Executive has duly executed this
Waiver on this day of March, 1996.
Arthur Kontos
Acknowledged:
THE SHERWOOD GROUP, INC.
By:
James H. Lynch, Jr.
Chairman of the Board of Directors
-2-
EXHIBIT 10.2
FINAL EXECUTION COPY
SUBLEASE AGREEMENT
Between
JOHNSON & HIGGINS,
as Sublandlord,
and
TRIAK SERVICES CORP., doing business as
National Discount Brokers,
as Subtenant,
Relating to
Premises at:
7 Hanover Square,
New York, New York
Entire Fourth (4th) Floor
<TABLE>
TABLE OF CONTENTS
<CAPTION>
ARTICLE PAGE
<S> <C>
1. Demised Premises, Term and Fixed Rent 2
2. Assignment and Subletting 4
3. Incorporation of Overlease 17
4. Condition of Premises 20
5. Permitted Use 21
6. Consent of Overlandlord 22
7. Defaults 24
8. Representations by Sublandlord 26
9. Subordination 27
10. Broker 28
11. Escalations 29
12. Notices 32
13. Electricity 34
14. Alterations 37
15. Quiet Enjoyment 38
16. Partnership Subtenant 38
17. Cancellation Option 40
18. Condenser Water 41
19. Subtenant's Work Allowance 41
20. Contractors 44
21. Miscellaneous 44
Exhibit A - Floor Plan
Schedule I - Contractors, Subcontractors
Schedule II - List of Direct Competitors
SUBLEASE made as of the 1st day of March 1996, by and
between JOHNSON & HIGGINS, a New Jersey corporation, having an
office at c/o NY Broad Holdings, Inc., c/o Canadian Imperial Bank
of Commerce, 425 Lexington Avenue, New York, New York 10017
(hereinafter called "Sublandlord"), and TRIAK SERVICES CORP., a
New York corporation doing business as National Discount Brokers,
having an office at 50 Broadway, New York, New York (hereinafter
called "Subtenant").
W I T N E S S E T H
WHEREAS:
A. SEVEN HANOVER ASSOCIATES (herein called
"Overlandlord") leased to Sublandlord certain space (hereinafter
called the "Leased Space") in the building known as Seven Hanover
Square, New York, New York (hereinafter called the "Building")
pursuant to the terms of a certain lease, dated September 28,
1981 (sometimes hereinafter called the "1981 Lease"), as amended
by an Agreement made March 7, 1983 (sometimes hereinafter called
the "1983 Agreement"), letter amendments dated January 11, 1983
and March 7, 1983, respectively, a Commencement Date Agreement
and Modification of Lease dated August 5, 1983 (sometimes
hereinafter called the "Commencement Date Agreement"), an
Agreement made February 29, 1984 (sometimes hereinafter called
the ("1984 Agreement"), and an Amendment of Lease made November
11, 1985 (such Lease, as so modified is hereinafter called the
"Overlease"). A copy of the Overlease (from which certain terms
which do not relate to Subtenant's obligations hereunder have
been deleted) has been delivered to Subtenant, receipt of which
is hereby acknowledged.
B. Sublandlord and Subtenant desire to consummate a
subleasing of a portion of the Leased Space consisting of the
entire fourth (4th) floor of the Building on terms and conditions
contained in this agreement (hereinafter called the "Sublease").
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter contained, it is hereby
agreed as follows:
1. Demised Premises, Term and Fixed Rent
1.1. Sublandlord hereby leases to Subtenant and
Subtenant hereby hires from Sublandlord the entire fourth (4th)
floor of the Building (comprising a portion of the Leased Space)
shown hatched on Exhibit A annexed hereto and made a part hereof
(hereinafter called the "Premises") for a term (the "Sublease
Term") to commence on the date Overlandlord shall deliver to
Sublandlord written consent to this Sublease (hereinafter called
the "Sublease Commencement Date") and to end on September 29,
2008 (hereinafter called the "Sublease Expiration Date"), at an
annual fixed rent of Seven Hundred Eighteen Thousand Two Hundred
Twenty Dollars and 00/100 ($718,220.00) per annum to be paid by
Subtenant by check drawn on a bank which is a member of the New
York Clearing House Association in equal monthly installments in
advance, on the first day of each month during the Sublease Term
without any set-off, off-set, abatement or reduction whatsoever,
except as expressly set forth herein.
1.2. Sublandlord hereby irrevocably and unconditionally
designates and directs that all payments of fixed annual rent, as
well as all payments of additional rent and other charges herein
reserved or payable by Subtenant to Sublandlord, shall be paid to
NY Broad Holdings, Inc. ("Sublandlord's Designee") at its office
at its office c/o Canadian Imperial Bank of Commerce, 425
Lexington Avenue, New York, N.Y. 10017, Attention: Mark A. Bilbao
(or at such other place as Sublandlord's Designee may direct by
notice given to Subtenant) or to such other address or designee
as Sublandlord's Designee shall direct by notice given to
Subtenant. All fixed rent, additional rent and other charges
payable by Subtenant herein shall be paid when due by check
(subject to collection) drawn on a bank which is a member of the
New York Clearing House Association, without deduction, set-off
or abatement whatsoever, except as may hereinafter be
specifically provided. Bills for fixed annual rent and/or
additional rent and other charges payable hereunder by Subtenant
and/or any statement to be given pursuant to the Overlease may be
billed or given directly to Subtenant by Sublandlord's Designee
(or such other person or entity as Sublandlord's Designee shall
direct by notice given to Subtenant).
1.3. All costs and expenses and other charges which
Subtenant agrees to pay, pursuant to the provisions of this
Sublease, shall be deemed additional rent and in the event of non-
payment, Sublandlord shall have the rights and remedies herein
provided for in the case of non-payment of fixed annual rent.
1.4. (a) Notwithstanding the provisions of Section 1.1
hereof, the fixed annual rent provided for herein shall be fully
abated during the period commencing on the Sublease Commencement
Date and ending on the first anniversary of the Sublease
Commencement Date (the "Rent Abatement Period"). The date
immediately following the expiration of the Rent Abatement Period
is hereinafter referred to as the "Rent Commencement Date."
(b) Notwithstanding the provisions of Section
1.4(a) hereof, if (i) there is a continuing default by Subtenant
under this Sublease during the Rent Abatement Period, and
(ii) Subtenant's possessory rights in the Premises have been
terminated pursuant to a non-appealable order or judgment of a
court of competent jurisdiction, Subtenant agrees that,
thereafter the abatement of Fixed Annual Rent shall terminate
effective as of the date of such termination for the purposes of
determining the amount of damages due and owing to Sublandlord as
a result of Subtenant's default under this Sublease.
1.5. Simultaneous with the execution of this Sublease,
Subtenant is paying to Sublandlord's Designee the sum of Fifty
Nine Thousand Eight Hundred Fifty-One and 67/100 ($59,851.67)
(the "Advance Rent"), which shall be deposited in an interest-
bearing account. The Advance Rent, together with any interest
accrued thereon, shall be applied by Sublandlord's Designee to
future monthly installments of fixed annual rent next becoming
due hereunder.
1.6. [Intentionally Deleted.]
2. Assignment and Subletting
2.1. Subtenant shall not (a) assign this Sublease, nor
(b) permit this Sublease to be assigned by operation of law or
otherwise, nor (c) underlet all or any part of the Premises, nor
(d) permit the Premises or any desk space therein to be occupied
by any person(s) other than as provided in Article 10 of the
Overlease and without first obtaining in each instance:
(i) Overlandlord's written consent pursuant to
and in accordance with the Overlease, and
(ii) Sublandlord's written consent.
2.2. Notwithstanding anything to the contrary contained
in this Article 2, if Subtenant shall at any time or times during
the term of this Sublease desire to assign this Sublease or
sublet all or part of the Premises, Subtenant shall give notice
thereof to Sublandlord (and Sublandlord's Designee), which notice
shall be accompanied by (a) a copy of the proposed form of
assignment or sublease (together with a term sheet summarizing
the business terms of the proposed assignment or sublease), the
effective or commencement date of which shall be at least thirty
(30) days after the giving of such notice, (b) a statement
setting forth in reasonable detail the identity of the proposed
assignee or subtenant, the nature of its business and its
proposed use of the Premises, (c) current financial information
with respect to the proposed assignee or subtenant, including,
without limitation, its most recent financial report, and (d) a
conformed or photostatic copy of the fully-executed letter of
intent (or any other similar type agreement relating to the
proposed assignment or sublease). In the event the proposed
assignment or sublease is for a term in excess of one year, such
notice shall be deemed an offer from Subtenant to Sublandlord
whereby Sublandlord (or Sublandlord's Designee) may, at its
option, (i) sublease such space from Subtenant upon the terms and
conditions hereinafter set forth (if the proposed transaction is
a sublease of all or part of the Premises), (ii) have this
Sublease assigned to it or its designee or terminate this
Sublease (if the proposed transaction is an assignment or a
sublease of all or substantially all of the Premises or a
sublease of a portion of the Premises which, when aggregated with
other subleases then in effect, covers all or substantially all
of the Premises), or (iii) terminate this Sublease with respect
to the space covered by the proposed sublease (if the proposed
transaction is a sublease of part of the Premises). In
connection with any such notice, Subtenant shall promptly provide
to Sublandlord (and Sublandlord's Designee) such other
information as Sublandlord may reasonably request. Said option
may be exercised by Sublandlord (or Sublandlord's Designee) by
notice to Subtenant at any time within thirty (30) days after
receipt by Sublandlord and Sublandlord's Designee of such notice
from Subtenant, and Sublandlord and Sublandlord's Designee shall
have received all other information required to be furnished to
Sublandlord by Subtenant pursuant to the provisions of this
Article 2. During such 30-day period, Subtenant shall not assign
this Sublease or sublet such space to any person.
2.3. (a) If Sublandlord (or Sublandlord's Designee)
exercises its option to terminate this Sublease in the case where
Subtenant desires either to assign this Sublease or sublet all or
substantially all of the Premises, then, this Sublease shall end
and expire on the date that such assignment or sublet was to be
effective or commence, as the case may be, and the fixed annual
rent and additional rent shall be paid and apportioned to such
date.
(b) If Sublandlord exercises its option to have
this Sublease assigned to it (or its Designee) in the case where
Subtenant desires either to assign this Sublease or to sublet all
or substantially all of the Premises, then Subtenant shall assign
this Sublease to Sublandlord (or Sublandlord's Designee) by an
assignment in form and substance reasonably satisfactory to
Sublandlord or Sublandlord's Designee, as the case may be. Such
assignment shall be effective on the date the proposed assignment
was to be effective or the date the proposed sublease was to
commence, as the case may be, and Subtenant shall be released
from all obligations and liabilities under this Sublease after
such effective date, except for such obligations and liabilities
which expressly survive the termination of this Sublease.
Subtenant shall not be entitled to consideration or payment from
Sublandlord (or Sublandlord's Designee) in connection with any
such assignment. If the proposed assignee or sublessee was to
receive any consideration or concessions from Subtenant in
connection with the proposed assignment or sublease, then
Subtenant shall pay such consideration and/or grant any such
concessions to Sublandlord (or Sublandlord's Designee) on the
date Subtenant assigns this Sublease to Sublandlord (or
Sublandlord's Designee).
2.4. If Sublandlord (or Sublandlord's Designee)
exercises its option to terminate this Sublease with respect to
the space covered by Subtenant's proposed sublease in any case
where Subtenant desires to sublet part of the Premises, then (a)
this Sublease shall end and expire with respect to such part of
the Premises on the date that the proposed sublease was to
commence; (b) from and after such date the fixed annual rent and
additional rent shall be adjusted, based upon the proportion that
the rentable area of the Premises remaining bears to the total
rentable area of the Premises; and (c) Subtenant shall pay to
Sublandlord (or Sublandlord's Designee, as the case may be), upon
demand, as additional rent hereunder the costs incurred by
Sublandlord (or Sublandlord's Designee) in physically separating
such part of the Premises from the balance of the Premises and in
complying with any laws and requirements of any public
authorities relating to such separation.
2.5. If Sublandlord (or Sublandlord's Designee)
exercises its option to sublet the Premises or the portion(s) of
the Premises which Subtenant desires to sublet, such sublease to
Sublandlord or Sublandlord's Designee (as subtenant) shall be at
the rentals set forth in the proposed sublease and/or the term
sheet for the proposed sublease, and shall be for the same term
as that of the proposed subletting, and
(a) The sublease shall be expressly subject to
all of the covenants, agreements, terms, provisions and
conditions of this Sublease except such as are irrelevant or
inapplicable, and except as otherwise expressly set forth to the
contrary in this section;
(b) Such sublease shall be upon the same terms
and conditions as those contained in the proposed sublease,
except such as are irrelevant or inapplicable and except as
otherwise expressly set forth to the contrary in this section;
(c) Such sublease shall give the sublessee the
unqualified and unrestricted right, without Subtenant's
permission, to assign such sublease or any interest therein
and/or to sublet the space covered by such sublease or any part
or parts of such space to any party or person (other than a
Direct Competitor) and to make any and all changes, alterations,
and improvements in the space covered by such sublease. As used
herein, "Direct Competitor" shall mean any company whose primary
business now or in the future is discount brokerage, including,
without limitation, the companies listed on Schedule II attached
hereto.
(d) Such sublease shall provide that any assignee
or further subtenant of Sublandlord or Sublandlord's Designee,
may, at the election of Sublandlord, be permitted to make
alterations, decorations and installations in such space or any
part thereof and shall also provide in substance that any such
alterations, decorations and installations in such space therein
made by any assignee or subtenant of Sublandlord or Sublandlord's
Designee may be removed, in whole or in part, by such assignee or
subtenant, at its option, prior to or upon the expiration or
other termination of such sublease provided that such assignee or
subtenant, at its expense, shall repair any damage and injury to
such space so sublet caused by such removal; and
(e) Such sublease shall also provide that (i) the
parties to such sublease expressly negate any intention that any
estate created under such sublease be merged with any other
estate held by either of said parties, (ii) any assignment or
subletting by Sublandlord or Sublandlord's Designee (as the
subtenant) may be for any purpose or purposes that Sublandlord,
in Sublandlord's uncontrolled discretion, shall deem suitable or
appropriate, (iii) Subtenant, at Subtenant's expense, shall and
will at all times provide and permit reasonably appropriate means
of ingress to and egress from such space so sublet by Subtenant
to Sublandlord or Sublandlord's Designee, (iv) Sublandlord, at
Subtenant's expense, may make such alterations as may be required
or deemed necessary by Sublandlord to physically separate the
subleased space from the balance of the Premises and to comply
with any laws and requirements of public authorities relating to
such separation, and (v) that at the expiration of the term of
such sublease, Subtenant will accept the space covered by such
sublease in its then existing condition, subject to the
obligations of the sublessee to remove any substantial
alterations to such space and to make such repairs thereto as may
be necessary to preserve the premises demised by such sublease in
good order and condition.
2.6. In the event Sublandlord does not exercise its
options pursuant to Section 2.2 hereof to so sublet the Premises
or terminate (in whole or in part) or have assigned to it or
Sublandlord's Designee this Sublease or if the proposed sublease
is for a term of one year or less, and providing that Subtenant
is not in default of any of Subtenant's obligations under this
Sublease (after notice and expiration of any applicable grace
periods), Sublandlord's consent (which must be in writing and in
form satisfactory to Sublandlord) to the proposed assignment or
sublease shall not be unreasonably withheld, provided and upon
condition that:
(a) Subtenant shall have complied with the
provisions of Section 2.2 hereof and neither Sublandlord nor
Sublandlord's Designee shall have exercised any of its options
under said Section 2.2 within the time permitted therefor;
(b) In Sublandlord's judgment the proposed
assignee. or subtenant is engaged in a business and the Premises,
or the relevant part thereof, will be used in a manner which (i)
is in keeping with the then standards of the Building, and (ii)
will not violate any negative covenant as to use contained in any
other sublease of space in the Building;
(c) The proposed assignee or subtenant is a
reputable person or entity of good character and with sufficient
financial worth considering the responsibility involved, (and
such determination is reasonably made by Sublandlord) and
Sublandlord has been furnished with reasonable proof thereof;
(d) The form of the proposed sublease shall be
reasonably satisfactory to Sublandlord and shall comply with the
applicable provisions of this Article 2;
(e) There shall not be more than two (2)
subtenants (including Sublandlord or Sublandlord's Designee) of
the Premises;
(f) In the event that Sublandlord (or
Sublandlord's Designee) is then marketing any space in the
Building and the amount of the aggregate rent to be paid by the
proposed subtenant is less than the then current market rent per
rentable square foot for the Premises as though the Premises were
vacant, Subtenant shall not have publicly advertised in any way
the availability of the premises covered by the proposed sublease
and the rental and other terms and conditions of the sublease are
the same as those contained in the proposed sublease furnished to
Sublandlord pursuant to Section 2.2 hereof;
(g) Subtenant shall reimburse Sublandlord on
demand for any reasonable costs that may be incurred by
Sublandlord (or Sublandlord's Designee) in connection with said
assignment or sublease, including, without limitation, the
reasonable costs of making investigations as to the acceptability
of the proposed assignee or subtenant, and reasonable legal costs
incurred in connection with the granting of any requested
consent; and
2.7. In the event that (a) Sublandlord (and
Sublandlord's Designee) fails to exercise any of its options
under Section 2.2 hereof, and consents to a proposed assignment
or sublease, and (b) Subtenant fails to execute and deliver the
assignment or sublease to which Sublandlord consented within
forty-five (45) days after the giving of such consent, then,
Subtenant shall again comply with all of the provisions and
conditions of Section 2.2 hereof before assigning this Sublease
or subletting all or part of the Premises.
2.8. With respect to each and every sublease or
subletting authorized by Sublandlord under the provisions of this
Sublease, it is further agreed:
(a) No subletting shall be for a term (including
any renewal or extension options contained in the sublease)
ending later than one day prior to the expiration date of this
Sublease.
(b) No sublease shall be valid, and no subtenant
shall take possession of the Premises or any part thereof, until
an executed counterpart of such sublease (and all ancillary
documents executed in connection with, with respect to or
modifying such sublease) has been delivered to Sublandlord.
(c) Each sublease shall provide that it is
subject and subordinate to this Sublease and to any matters to
which this Sublease is or shall be subordinate, and that in the
event of termination, reentry or dispossess by Sublandlord under
this Sublease Sublandlord may, at its option, take over all of
the right, title and interest of Subtenant, as sublessor, under
such sublease, and such subtenant shall, at Sublandlord's option,
attorn to Sublandlord pursuant to the then executory provisions
of such sublease, except that Sublandlord shall not be (i) liable
for any previous act or omission of Subtenant under such
sublease, (ii) subject to any credit, offset, claim,
counterclaim, demand or defense which such subtenant may have
against Subtenant, (iii) bound by any previous modification of
such sublease or by any previous prepayment of more than one (1)
month's rent, (iv) bound by any covenant of Subtenant to
undertake, complete, pay for or reimburse such subtenant for the
costs of any construction of the Premises or any portion thereof,
(v) required to account for any security deposit of the subtenant
other than any security deposit actually delivered to Sublandlord
by Subtenant, (vi) bound by any obligation to make any payment to
such subtenant or grant any credits, except for services,
repairs, maintenance and restoration provided for under the
sublease to be performed after the date of such attornment, (vii)
responsible for any monies owing by Sublandlord to the credit of
Subtenant or (viii) required to remove any person occupying the
Premises or any part thereof.
(d) Each sublease shall provide that the
subtenant may not assign its rights thereunder or further sublet
the space demised under the sublease, in whole or in part,
without Sublandlord's consent in each instance, which consent
shall be subject to the same conditions as set forth herein with
respect to the assignment of this Sublease or the sublet of all
or part of the Premises by Subtenant.
2.9. (a) If Sublandlord shall give its consent to any
assignment of this Sublease or to any sublease, Subtenant shall
in consideration therefor, pay to Sublandlord, as additional rent
hereunder an amount equal to one-half (1/2) of the Assignment
Profit (hereinafter defined) or Sublease Profit (hereinafter
defined), as the case may be.
(b) For purposes of this Section 2.9, the term
"Assignment Profit" shall mean an amount equal to all sums and
other consideration paid to Subtenant by the assignee for or by
reason of such assignment (including, but not limited to, sums
paid for the sale or rental of Subtenant's fixtures, leasehold
improvements, equipment, furniture, furnishings or other personal
property, less, in the case of a sale thereof, the then net
unamortized or undepreciated portion (determined on a straight-
line basis over the term of this Sublease) of the amount, if any,
by which the original cost thereof exceeded any amounts paid for
or contributed by Sublandlord which were applied or could have
been applied by Subtenant against such original cost pursuant to
the terms of this Sublease).
(c) For purposes of this Section 2.9, the term
"Sublease Profit" shall mean in any year of the term of this
Sublease (i) any rents, additional charges or other consideration
payable by the subtenant under the sublease to Subtenant which
are in excess of the fixed annual rent and additional rent
accruing during such year of the term of this Sublease in respect
of the subleased space (at the rate per square foot payable by
Subtenant hereunder) pursuant to the terms hereof, and (ii) all
sums paid for the sale or rental of Subtenant's fixtures,
leasehold improvements, equipment, furniture or other personal
property, less, in the case of the sale thereof, the then net
unamortized or undepreciated portion (determined on a straight-
line basis over the term of this Sublease) of the amount, if any,
by which the original cost thereof exceeded any amounts paid for
or contributed by Sublandlord which were applied or could have
been applied by Subtenant against such original cost pursuant to
the terms of this Sublease), which net unamortized amount shall
be deducted from the sums paid in connection with such sale in
equal monthly installments over the balance of the term of the
sublease (each such monthly deduction to be in an amount equal to
the quotient of the net unamortized amount, divided by the number
of months remaining in the term of this Sublease).
(d) The sums payable under this Section 2.9 shall
be paid to Sublandlord as and when paid by the assignee or
subtenant to Subtenant.
2.10. Except for any subletting by Subtenant to
Sublandlord or Sublandlord's Designee pursuant to the provisions
of this Article 2, each subletting shall be subject to all of the
covenants, agreements, terms, provisions and conditions contained
in this Sublease. Notwithstanding any such subletting to
Sublandlord or any such subletting to any other subtenant and/or
acceptance of rent or additional rent by Sublandlord from any
subtenant, Subtenant shall and will remain fully liable for the
payment of the fixed annual rent and additional rent due and to
become due hereunder and for the performance of all the
covenants, agreements, terms, provisions and conditions contained
in this Sublease on the part of Subtenant to be performed and all
acts and omissions of any licensee or subtenant or anyone
claiming under or through any subtenant which shall be in
violation of any of the obligations of this Sublease, and any
such violation shall be deemed to be a violation by Subtenant.
Subtenant further agrees that notwithstanding any such
subletting, no other and further subletting of the Premises by
Subtenant or any person claiming through or under Subtenant
(except as provided in Section 2.5 hereof) shall or will be made
except upon compliance with and subject to the provisions of this
Article 2. If Sublandlord shall decline to give its consent to
any proposed assignment or sublease, or if Sublandlord shall
exercise any of its options under Section 2.2 hereof, in each
case, in accordance with the terms and provisions of this
Sublease, Subtenant shall indemnify, defend and hold harmless
Sublandlord against and from any and all loss, liability,
damages, costs and expenses (including, but not limited to,
reasonable counsel fees) resulting from any claims that may be
made against Sublandlord by the proposed assignee or sublessee or
by any brokers or other persons claiming a commission or similar
compensation in connection with the proposed assignment or
sublease.
2.11. Notwithstanding anything to the contrary
contained in this Sublease, if Subtenant shall be a corporation,
Subtenant shall have the privilege, without the consent of
Sublandlord, to assign its interest in this Sublease (a) to any
corporation which is a successor to Subtenant either by merger or
consolidation, (b) to a purchaser of all or substantially all of
Subtenant's assets (provided such purchaser shall have also
assumed substantially all of Subtenant's liabilities, or (c) to a
corporation or other entity (an "Affiliate") which shall (i)
control, (i) be under the control of, or (iii) be under common
control with, Subtenant (the term "control" as used herein shall
be deemed to mean ownership of more than 50% of the outstanding
voting stock of a corporation, or other majority equity and
control interest if Subtenant is not a corporation). Subtenant
may also sublease all or any portion of the Premises to any
entity described in clause (c) without the consent of
Sublandlord. In the event of any assignment or subletting
described above, (x) any such assignee or subtenant shall
continue to use the Premises for the conduct of the same business
as Subtenant was conducting prior to such assignment or
subtenancy, (y) the principal purpose of such assignment or
sublease shall not be the acquisition of Subtenant's interest in
this Sublease (except if such assignment or sublease is made
pursuant to clause (c) and is made for a valid intracorporate
business purpose), and (z) any such assignee or subtenant shall
have a net worth and annual income and cash flow, determined in
accordance with generally accepted accounting principles,
consistently applied, after giving effect to such assignment,
equal to or greater than Subtenant's net worth and annual income
and cash flow, as so determined, on the date of such assignment.
Subtenant shall, within ten (10) business days after execution
thereof, deliver to Sublandlord (A) a duplicate original
instrument of assignment in form and substance reasonably
satisfactory to Sublandlord, duly executed by Subtenant, and (B)
an instrument in form and substance reasonably satisfactory to
Sublandlord, duly executed by the assignee, in which such
assignee shall assume observance and performance of, and agree to
be personally bound by, all of the terms, covenants and
conditions of this Sublease on Subtenant's part to be observed
and performed. Except as set forth above, either a transfer of a
controlling interest in the shares of Subtenant (if Subtenant is
a corporation or trust) or a transfer of a majority of the total
interest in Subtenant (if Subtenant is a partnership) at any one
time or over a period of time through a series of transfers,
shall be deemed an assignment of this Sublease and shall be
subject to all of the provisions of this Article 2, including,
without limitation, the requirement that Subtenant obtain
Sublandlord's prior consent thereto. The transfer of shares of
Subtenant (if Subtenant is a corporation or trust) for purposes
of this Section 2.11 shall not include the sale of shares by
persons other than those deemed "insiders" within the meaning of
the Securities Exchange Act of 1934, as amended, which sale is
effected through the "over-the-counter market" or through any
recognized stock exchange.
3. Incorporation of Overlease
3.1. Except as herein otherwise expressly provided and
except for the obligation to pay rent and additional rent under
the Overlease, all of the terms, covenants, conditions and
provisions in the Overlease are hereby incorporated in, and made
a part of this Sublease, and such rights and obligations as are
contained in the Overlease are hereby imposed upon the respective
parties hereto; the Sublandlord herein being substituted for the
Landlord in the Overlease, and the Subtenant herein being
substituted for the Tenant named in the Overlease; provided,
however, that the Sublandlord herein shall not be liable for any
defaults by Overlandlord and/or, if Overlandlord is not the fee
owner, the owner in fee of the land and Building of which the
Premises are a part. Sublandlord (and Sublandlord's Designee)
each agrees that it shall neither act, nor omit to act, in such a
manner as to result in a default under the Overlease.
Notwithstanding the generality of the foregoing, in no event
shall Subtenant be responsible for acts and omissions of
Sublandlord (and/or Sublandlord's Designee) or the agents,
employees or contractors of Sublandlord (and/or Sublandlord's
Designee). Subtenant agrees that it shall neither act, nor omit
to act, in such a manner as to result in a default under the
Overlease. Notwithstanding the generality of the foregoing, in
no event shall Sublandlord be responsible for acts and omissions
of Subtenant or Subtenant's agents, employees or contractors.
Upon the occurrence of any default by Overlandlord. Sublandlord
(and Sublandlord's Designee) shall use commercially reasonable
efforts to cause Overlandlord to cure such default. If, in
connection with any default by Overlandlord which materially
interferes with Subtenant's ability to operate its business,
Subtenant is not satisfied with Overlandlord's response to such
actions by Sublandlord, as Subtenant's sole remedy Sublandlord
shall permit Subtenant to pursue Sublandlord's rights under the
Overlease, and Sublandlord agrees to cooperate reasonably in
connection therewith. If the Overlease shall be terminated for
any reason during the term hereof, then and in that event this
Sublease shall thereupon automatically terminate and Sublandlord
shall have no liability to Subtenant by reason thereof. Upon the
termination of this Sublease, whether by forfeiture, lapse of
time or otherwise, or upon the termination of Subtenant's right
to possession, Subtenant will at once surrender and deliver up
the Premises in substantially the same condition and repair that
exists as of the date hereof, except for reasonable wear and
tear, damage cause by fire or other casualty (unless such fire or
other casualty was caused by or resulted from the negligence or
willful misconduct of Subtenant), and any alterations or other
improvements made by Subtenant, but only to the extent that such
alterations and/or additions were made in accordance with the
Sublease. Notwithstanding any language to the contrary contained
in this Sublease, Subtenant agrees that Sublandlord may at any
time after the date hereof surrender the Overlease and the
premises demised thereunder to Overlandlord, provided
Overlandlord shall deliver a written agreement to Subtenant
providing that notwithstanding such surrender Overlandlord shall
not disturb Subtenant's occupancy of the Premises so long as
Subtenant is not in default hereunder if Subtenant shall at
Overlandlord's election either (i) attorn to Overlandlord as if
Overlandlord were the Sublandlord hereunder or (ii) enter into a
lease with Overlandlord for the remaining term of the Sublease on
the same terms and conditions contained herein.
3.2. For the purpose of this Sublease, the following
portions of the Overlease shall not be deemed incorporated in or
made a part of this Sublease:
(a) all provisions of the 1983 Agreement;
(b) all provisions of the Commencement Date
Agreement;
(c) all provisions of the 1984 Agreement;
(d) the following portions of the 1981 Overlease:
(i) Articles 2, 10, 21, 28, 29, 34, 35, 36,
40 and 41;
(ii) Sections 3.01 and 3.02;
(iii) The second paragraph of Section
1.02;
(iv) Sections 18.01(d)(2) and (3);
(v) The proviso clause of the first sentence
of Section 22.01;
(vi) The last sentence of
Section 27;
(vii) The words "a
full floor or more of" in clause (iv) of
Section 38.01;
(viii) The definitions
of the following terms set forth in
Section 1.01 of the 1981 Overlease:
"Demised Premises"; "Term"; Fixed
Minimum Rent"; "Tenant's Pro Rata
Share"; and "Designated Broker";
(ix) Exhibits A, B, C, F and G; and
(e) those provisions of the Overlease which,
pursuant to any other provision hereof, are not incorporated
herein.
3.3. Subtenant shall be responsible for the cost of all
compliance with the Americans with Disabilities Act of 1990,
Public Law 101-336, 42.U.S.C. Section 12101 et seq. (the "Act") within
the Premises. Subtenant shall be responsible for the cost of
compliance with the Act, whether such compliance shall require
the making of alterations within or outside the Premises, to the
extent that the requirement for such compliance shall arise as a
result of (a) the performance of any alteration or installation
made by or on behalf of Subtenant within or outside the Premises,
or (b) the designation of Subtenant or any successor, assignee or
undertenant of Subtenant as a "public accommodation" within the
meaning of the Act.
4. Condition of Premises
4.1. Subtenant has examined the Premises, is aware of
the physical condition thereof, and agrees to take the same "as
is," with the understanding that there shall be no obligation on
the part of Sublandlord to perform any work or to incur any
expense whatsoever in connection with the preparation of the
Premises for Subtenant's occupancy thereof other than
Sublandlord's Work (as hereinafter defined). Sublandlord shall,
at Sublandlord's sole cost and expense and as soon as practicable
after the date hereof, commence work in the Premises either (i)
to restore the concrete slab over the interconnecting internal
stairway on the fourth (4th) floor of the Building or (ii) to
"box in" such stairway area (the "Sublandlord's Work"). In the
event Sublandlord elects to "box in" the stairway area,
Sublandlord shall make an appropriate adjustment to the rentable
square footage of the Premises directly caused by such
Sublandlord's Work and the fixed annual rent, Subtenant's pro-
rata share for purposes of determining Article 19 Rent and the
Work Allowance shall, in each case, be appropriately reduced.
The taking of occupancy of the whole or any part of the Premises
by Subtenant shall be conclusive evidence, as against Subtenant,
that (i) the Premises were substantially as shown on Exhibit A,
(ii) Subtenant accepts possession of the same, and (iii) the
Premises and the Building were in good and satisfactory condition
at the time such occupancy was so taken.
5. Permitted Use
5.1. Subtenant agrees that the Premises shall be
occupied only as executive, administrative and general offices
for Subtenant's business, and for incidental uses in connection
therewith, provided that such incidental use is reasonable in a
modern, first-class, Manhattan office building, and does not
create unusual traffic (persons or freight) in the Building and
provided further that such incidental use does not violate the
terms of the Overlease.
5.2. Subtenant shall be permitted to use all of the
equipment (the "Equipment") presently located in the Premises and
owned by Sublandlord; it being understood that Sublandlord and
Sublandlord's agents have made no representations, warranties or
promises whatsoever with respect to the Equipment, and
Sublandlord shall be under no obligation to repair or replace any
Equipment.
6. Consent of Overlandlord
6.1. This Sublease is conditioned upon the consent
thereto by Overlandlord which consent shall be evidenced by
Overlandlord's signature appended hereto or a separate consent in
the form utilized by Overlandlord for such purposes. In the
event that Overlandlord shall not have given such consent on or
before the date occurring thirty (30) days after the date that
Sublandlord shall deliver to Subtenant a fully executed
counterpart of this Sublease (herein called the "Outside Date"),
then in such event either party shall have the right to terminate
this Sublease by notice thereof given to the other party on or
before the date occurring forty (40) days after the date that
Sublandlord shall deliver to Subtenant a fully executed
counterpart of this Sublease, provided that the Overlandlord
shall still not have given its consent on or before the date
occurring ten (10) days after the giving of such termination
notice; then in such event (a) this Sublease shall terminate as
of the expiration of such tenth (10th) day and neither party
thereafter shall have any further liability hereunder to the
other party and (b) Sublandlord shall return to Subtenant any
prepaid rent or security deposit actually paid or deposited by
Subtenant in connection with this Sublease. Sublandlord shall
make a written request for Overlandlord's consent to this
Sublease within five (5) business days after the date that
Sublandlord shall deliver to Subtenant a fully executed
counterpart of this Sublease, and Sublandlord shall use all
reasonable efforts to diligently pursue obtaining Overlandlord's
consent; provided that Sublandlord is under no obligation or duty
to expend any monies in connection with obtaining such consent.
6.2. Sublandlord makes no representation with respect
to obtaining Overlandlord's approval of this Sublease and, in the
event that Overlandlord notifies Sublandlord that Overlandlord
will not give such approval, Sublandlord will so notify Subtenant
and, upon receipt of such notification by Sublandlord of the
disapproval by Overlandlord, this Sublease shall be deemed to be
null and void and without force or effect, and Sublandlord and
Subtenant shall have no further obligations or liabilities to the
other with respect to this Sublease.
6.3. Except as otherwise specifically provided herein,
wherever in this Sublease Subtenant is required to obtain
Sublandlord's consent or approval, Subtenant understands that
Sublandlord may be required to first obtain the consent or
approval of Overlandlord. If Overlandlord should refuse such
consent or approval, Sublandlord shall be released of any
obligation to grant its consent or approval whether or not
Overlandlord's refusal, in Subtenant's opinion, is arbitrary or
unreasonable. Subtenant agrees that Sublandlord shall not be
required to dispute any determinations or other assertions or
claims of Overlandlord regarding the obligations of Sublandlord
under the Overlease for which Subtenant is or may be responsible
under the terms of this Sublease. Should Sublandlord elect not
to dispute any such determinations, assertions or claims by
Overlandlord, Sublandlord hereby grants Subtenant the right to
dispute the same in its own name without Sublandlord's consent
and the right to resolve such disputes to its own satisfaction,
provided that (a) Subtenant shall bear any and all costs and
expenses of any such dispute and/or settlement, (b) Sublandlord
shall not be bound without its consent by any settlement,
agreement, or resolution reached by Subtenant and Overlandlord in
regard to any such dispute, or by any decree, judgment or penalty
resulting therefrom, and (c) Subtenant shall indemnify and save
Sublandlord harmless against liability in connection with or
arising from any acts, omissions or negligence of Subtenant or
Sublandlord in connection with any of the foregoing. This
indemnity shall include indemnity from and against any and all
liability, fines, suits, demands, costs, and expenses (including,
without limitation, reasonable attorneys' fees and disbursements)
incurred in or in connection with any such liability. The
provisions of this Section shall survive the expiration or
earlier termination of this Sublease.
7. Defaults
7.1. Subtenant acknowledges that the services to be
rendered to the Premises are to be rendered by Overlandlord.
Anything in this Sublease to the contrary notwithstanding, if
there exists a breach by Sublandlord of any of its obligations
under this Sublease and, concurrently, a corresponding breach by
Overlandlord under the Overlease of its obligations under the
Overlease exists, then and in such event, Subtenant's sole remedy
against Sublandlord in the event of any breach of obligations
under this Sublease shall be the right to pursue a claim in the
name of Sublandlord against Overlandlord, and Sublandlord agrees
that it will, at Subtenant's expense, reasonably cooperate with
Subtenant in the pursuit of such claim, and Sublandlord and
Subtenant agree that any recovery shall be allocated equitably
between Sublandlord and Subtenant based on the pro-rata share of
the portion of the Premises and Leased Space affected, the term
of this Sublease and Overlease, and any other relevant factor,
such allocation to be determined solely by Sublandlord in the
exercise of its reasonable discretion.
7.2. Anything contained in any provisions of this
Sublease to the contrary notwithstanding, Subtenant agrees, with
respect to the Premises, to comply with and remedy any default
claimed by Overlandlord and caused by Subtenant, within the
period allowed to Sublandlord as tenant under the Overlease less
three (3) days, even though such time period is shorter than the
period otherwise allowed in the Overlease, due to the fact that
notice of default from Sublandlord to Subtenant is given after
the corresponding notice of default from Overlandlord.
Sublandlord agrees to forward to Subtenant (and Sublandlord's
Designee), upon receipt thereof by Sublandlord, a copy of each
notice of default and any other material notices with respect to
the Premises or the common areas of the Building, in each case,
to the extent such notices are received by Sublandlord in its
capacity as tenant under the Overlease. Subtenant agrees to
forward to Sublandlord (and Sublandlord's Designee), upon receipt
thereof, copies of any notices received by Subtenant with respect
to the Premises from Overlandlord or from any governmental
authorities.
7.3. Any default of Subtenant hereunder or under the
provisions of the Overlease which is not cured at least three (3)
days prior to the time provided for the curing thereof under the
Overlease, shall be deemed a default hereunder, and Sublandlord
may, but shall not be obligated to, cure any such default for the
account of and at the expense of Subtenant, and the amount of any
costs, payments or expenses incurred by Sublandlord shall be
deemed additional rent and payable by Subtenant on demand. In
the event of a default under the Overlease or under this
Sublease, Sublandlord shall have the same rights and remedies
against Subtenant under this Sublease as are available to
Overlandlord against Sublandlord in its capacity as tenant under
the Overlease.
8. Representations by Sublandlord
8.1 Sublandlord represents (a) that it is the holder
of the interest of the tenant under the Overlease, and (b) that
the Overlease is in full force and effect.
8.2 Sublandlord represents to Subtenant that, to the
best of its knowledge, the permitted use set forth in Article 5
is not prohibited by any covenant, easement or restriction to
which the Leased Premises or the Building is subject.
8.3 Sublandlord is a corporation duly organized,
validly existing and in good standing under the laws of the State
of New York with full corporate power and authority to carry out
its obligations under this Sublease.
8.4 The execution and delivery of this Sublease by
Sublandlord has been duly and validly authorized by all necessary
corporate action of Sublandlord, has been duly executed and
validly delivered by Sublandlord and is the legal valid and
binding obligation of Sublandlord enforceable in accordance with
its terms.
8.5 Sublandlord is the tenant under the Overlease, the
Overlease is in full force and effect, no notices of default or
termination are outstanding with respect to the Overlease, to the
best of Sublandlord's knowledge there are no defaults under the
Overlease by Sublandlord or Overlandlord, and the Commencement
Date of the Overlease (as such term is defined therein) is July
15, 1983.
8.6 Sublandlord has not assigned the Overlease or any
interest therein and has not subleased the Premises or any part
thereof to any other person or entity or granted to any other
person or entity any other options or rights with respect to the
Premises.
8.7 Sublandlord has delivered to Subtenant true,
correct and complete copies of the instruments and documents
comprising the Overlease with portions not relevant to Subtenant
blacked out and there are no other amendments or agreements of
any kind forming part of or modifying the Overlease.
8.8 All consents or approvals necessary for
Sublandlord's execution and delivery of this Sublease have been
obtained subject to obtaining the Consent described in Section 6.
9. Subordination
9.1. This Sublease is subject to, and Subtenant accepts
this Sublease subject to, any amendments and supplements to the
Overlease hereafter made between Overlandlord and Sublandlord,
provided that any such amendment or supplement to the Overlease
will not prevent or adversely affect the use by Subtenant of the
Premises in accordance with the terms of this Sublease, increase
the obligations of Subtenant or decrease its rights under this
Sublease or in any other way adversely affect Subtenant.
Subtenant covenants and agrees: (a) to perform and to observe all
of the terms, covenants, conditions and agreements of the
Overlease on Sublandlord's part to be performed and observed as
tenant thereunder (other than the payment of the fixed annual
rent and additional rent therein set forth and those Sections and
Articles expressly excluded from the provisions of this Sublease)
to the extent the same apply to the Premises and to the extent
that the same are not modified or amended by this Sublease; (b)
that Subtenant will not do or cause to be done or suffer or
permit any act or thing to be done which would or might cause the
Overlease or the rights of Sublandlord as tenant thereunder to be
cancelled, terminated or forfeited or which would make
Sublandlord liable for any damages, claims or penalties; and (c)
to indemnify and hold harmless Sublandlord and Sublandlord's
Designee from and against any and all liability, loss, damage,
suits, penalties, claims and demands of every kind or nature
(including, without being limited thereto, reasonable attorney's
fees and expenses of defense) by reason of Subtenant's failure to
comply with the foregoing or arising from the use, occupancy or
management of the Premises or of any business conducted therein,
or from any work or thing whatsoever done or any condition
created by or any other act or omission of Subtenant, its
assignees or subtenants, or their respective employees, agents,
contractors, visitors or licensees, in or about the Premises or
any other part of the Building; and Subtenant shall pay to
Sublandlord on demand, as additional rent, any and all sums which
Sublandlord may be required to pay by reason of any of the
foregoing.
9.2. This Sublease is subject and subordinate to the
Overlease and to all ground or underlying leases and to all
mortgages which may now or hereafter affect such leases or the
real property of which the Premises are a part and all renewals,
modifications, replacements and extensions of any of the
foregoing. This Section 9.2 shall be self-operative and no
further instrument of subordination shall be required. To
confirm such subordination, Subtenant shall execute promptly any
certificate that Sublandlord may request.
10. Broker
10.1 Subtenant and Sublandlord covenant, represent and
warrant to each other that neither of them has had any dealings
or communications with any broker or agent in connection with the
consummation of this Sublease other than Cushman & Wakefield,
Inc., Edward S. Gordon Company, Inc. and Wharton Property
Advisors (collectively, the "Brokers"). Subtenant covenants and
agrees to pay, hold harmless and indemnify Sublandlord and
Sublandlord's Designee from and against any and all cost, expense
(including reasonable attorneys' fees and disbursements) or
liability for any compensation, commissions or charges claimed by
any broker or agent other than the Brokers with respect to this
Sublease or the negotiation thereof. Sublandlord covenants and
agrees to pay, hold harmless and indemnify Subtenant from and
against any and all cost, expense (including reasonable
attorneys' fees and disbursements) or liability for any
compensation, commissions or charges claimed by any broker or
agent other than the Brokers with respect to this Sublease or the
negotiations thereof.
11. Escalations
11.1 Subtenant stipulates that it is familiar with the
provisions of Article 19 of the Overlease. In the event of any
payment of additional rent by Sublandlord to Overlandlord during
the term of this Sublease which payment is attributable to the
provisions of Article 19 of the Overlease (such additional rent
payable by Sublandlord pursuant to Article 19 of the Overlease
being hereinafter called "Article 19 Rent") then Subtenant shall
pay as additional rent pursuant to this Sublease an amount equal
to nine and nine hundred eighteen thousandths percent (9.918%) of
the amount of Article 19 Rent actually payable by Sublandlord to
Overlandlord during the Sublease Term (a) with respect to Article
19 Rent payable pursuant to Section 19.04 of the Overlease in
connection with the escalation of Operating Costs, which is in
excess of the Operating Costs for the calendar year 1996 during
the Sublease Term, and (b) with respect to Article 19 Rent
payable pursuant to Section 19.03 of the Overlease in connection
with the escalation of Taxes, which is in excess of the sum of
(x) one half of the Taxes for the Tax Year as defined in Section
19.02 of the Overlease commencing July 1, 1995 and (y) one half
of the Taxes for the Tax Year commencing July 1, 1996 during the
Sublease Term. At such time as the Article 19 Rent payable by
Sublandlord is adjusted by reason of any change in the rentable
area of the Leased Space, the percentage thereof payable by
Subtenant to Sublandlord shall be similarly adjusted. At any
time after payment by Sublandlord to Overlandlord of any Article
19 Rent, Sublandlord may deliver to Subtenant a statement with
respect to the payment of the Article 19 Rent and, within ten
(10) days after delivery of such statement, Subtenant shall pay
to Sublandlord additional rent determined as aforesaid in this
Section 11.1. Additional rent payable pursuant to this Section
11.1 shall be based solely upon actual payments made by
Sublandlord pursuant to the provisions of Article 19 of the
Overlease. Sublandlord agrees that it will, upon reasonable
prior written request from Subtenant, exercise on Subtenant's
behalf, and at Subtenant's sole cost and expense, any rights of
Sublandlord under the Overlease to contest such Article 19 Rent,
to review and inspect records and otherwise obtain information
from Overlandlord. Except as expressly set forth in the
preceding sentence, Subtenant shall not have the right to
question the propriety of or the basis for any such payment and
Sublandlord shall be under no obligation to contest any such
payment. Sublandlord shall, however, at the written request of
Subtenant, furnish to Subtenant evidence of such payment.
Sublandlord shall notify Subtenant of any credit or refund it
receives under the Overlease but only to the extent that such
credit or refund is attributable to an overpayment of, or a
reduction in, Taxes or Article 19 Rent. During the term of this
Sublease, Sublandlord and Subtenant agree that Subtenant shall
receive its proportionate share of any such credit or refund
based on such factors as the term of the Sublease, the base year
affected, and any other relevant factor, such amount to be
determined solely by Sublandlord in the exercise of its
reasonable discretion.
11.2. Subtenant shall also pay to Sublandlord any
"Tenant Surcharges" (as that term is hereinafter defined).
"Tenant Surcharges" shall mean any and all amounts other than
fixed annual rent and Article 19 Rent which, by the terms of the
Overlease, become due and payable by Sublandlord to Overlandlord
(and are actually paid by Sublandlord to Overlandlord) as
additional rent or otherwise and which would not have become due
and payable but for the acts, requests for services, and/or
failures to act of Subtenant, its agents, officers,
representatives, employees, servants, contractors, invitees,
licensees or visitors under this Sublease, including, but not
limited to: (a) any increases in Overlandlord's fire, rent or
other insurance premiums, as provided in Article 19 of the
Overlease, resulting from any act or omission of Subtenant, (b)
any additional charges to Sublandlord on account of Subtenant's
use of heating or ventilation after hours, (c) any charges which
may be imposed on Sublandlord pursuant to the Overlease, to the
extent that such charges are attributable to the Premises or the
use thereof or services or utilities provided thereto, and (d)
any additional charges to Subtenant on account of Subtenant's use
of elevator services after hours. Within a reasonable time after
receipt by Sublandlord of any statement or written demand from
Overlandlord including any Tenant Surcharges, Sublandlord will
furnish Subtenant with a copy of such statement or demand,
together with Sublandlord's statement of the amount of any such
Tenant Surcharges, and Subtenant shall pay to Sublandlord the
amount of such Tenant Surcharges within seven (7) days after
Subtenant's receipt of such statement or demand; provided,
however, that in any instance in which Subtenant shall receive
any such statement or demand directly from Overlandlord,
Subtenant may pay the amount of the same directly to
Overlandlord. Sublandlord agrees that it will, upon reasonable
written request from Subtenant, exercise on Subtenant's behalf,
and at Subtenant's sole cost and expense, any rights of
Sublandlord under the Overlease to contest such Tenant
Surcharges, to review and inspect records and otherwise obtain
information from Overlandlord. Payments shall be made pursuant
to this Section 11.2 notwithstanding the fact that (a) Subtenant
is contesting such charge pursuant to the immediately preceding
sentence and (b) the statement to be provided by Sublandlord is
furnished to Subtenant after the expiration of the term of this
Sublease and notwithstanding the fact that by its terms this
Sublease shall have expired or have been cancelled or terminated.
12. Notices
12.1. Any notice, statement, demand, consent,
approval or other communication required or permitted to be
given, rendered or made by either party to this lease or pursuant
to any applicable law or requirement of public authority
(collectively, "notices") shall be in writing (whether or not so
stated elsewhere in this lease) and shall be deemed to have been
properly given, rendered or made only if (a) personally
delivered, or (b) sent by registered or certified mail, return
receipt requested, posted in a United States post office station
or letter box in the continental United States, addressed to the
other party as follows:
If to Sublandlord:
Johnson & Higgins
125 Broad Street
New York, New York 10004
Attention: James Delaney, Vice President
with copies to:
NY Broad Holdings, Inc.
c/o Canadian Imperial Bank of Commerce
425 Lexington Avenue
New York, New York 10017
Attention: Managing Attorney
and
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attention: Alan S. Weil, Esq.
and if to Subtenant as follows:
Until Subtenant opens for business
at the Premises:
National Discount Brokers
50 Broadway
New York, New York 10004
Attention: John Holman
and
After Subtenant opens for business
at the Premises, notice shall be
to Subtenant at the Premises, to
the attention of John Holman
and shall be deemed to have been given, rendered or made on
second (2nd) business day after the day so mailed, unless mailed
outside of the State of New York, in which case it shall be
deemed to have been given, rendered or made on the third (3rd)
business day after the day so mailed. Either party may, by
notice as aforesaid, designate a different address or addresses
for notices intended for it. Subtenant agrees to provide notice
to the other parties as aforesaid, confirming when Subtenant has
opened for business at the Premises.
12.2. Notices hereunder from Sublandlord may be
given by Sublandlord's managing agent, if one exists, or by
Sublandlord's attorney.
12.3. In addition to the foregoing, either
Sublandlord or Subtenant may, from time to time, request in
writing that the other party serve a copy of any notice on one
other person or entity designated in such request, such service
to be effected as provided in Section 12.1 or 12.2 hereof.
Copies of all notices, consents, approvals and other
communications given shall be similarly and simultaneously sent
to Sublandlord's Designee at its address set forth in Paragraph
1.3 hereof or to such other address or designee as Sublandlord's
Designee may specify by notice similarly given.
13. Electricity
13.1. Except as otherwise provided in Sections 13.2
through 13.6 hereof, Article 20 of the Overlease (as amended by
the Amendment of Lease made November 11, 1985) is incorporated
herein.
13.2. Subtenant covenants and agrees to pay to
Sublandlord's Designee, as additional rent under this Sublease an
amount for Subtenant's electricity usage in the Premises (based
on a portion of the amount which Overlandlord shall bill
Sublandlord under Section 20.1 of the Overlease for electricity
usage in the Leased Space during the Sublease Term pursuant to
Article 20 of the Overlease) equal to (x) Landlord's Cost Rate
(as that term is defined in the Overlease) per kilowatt hour
multiplied by (y) Subtenant's submetered electricity usage in the
Premises (hereinafter called "Subtenant's Electric Usage"),
multiplied by (z) one hundred five (105%) percent (such total
amount being herein called the "Electric Charge"). Sublandlord's
Designee shall, from time to time give Subtenant notice and
copies of all such bills for such electricity usage from
Overlandlord and, within ten (10) days after the receipt thereof,
Subtenant shall pay to Sublandlord's Designee a portion thereof
equal to the Electric Charge. The Electric Charge (based upon
the Landlord's Cost Rate per kilowatt hour shown on such bills
for electricity usage from Overlandlord to Sublandlord, with a
mark-up of five (5%) percent), if accurately applied by
Sublandlord to Subtenant's Electric Usage, shall be conclusive
upon Subtenant. Sublandlord represents to Subtenant that (a)
Sublandlord will not be imposing on Subtenant any other surcharge
or charge (other than the Electric Charge) for, or making any
profit on, Subtenant's Electric Usage in the Premises and (b)
Sublandlord is imposing on Subtenant less than the actual cost to
Sublandlord of Subtenant's Electric Usage as charged by the
Overlandlord to Sublandlord under the Overlease.
13.3. The submeters measuring electricity usage in
the Premises shall be installed by Sublandlord, at Sublandlord's
cost and expense, reasonably promptly after the Sublease
Commencement Date. During the period from and after the Sublease
Commencement Date until the installation of such submeters,
Subtenant will pay to Sublandlord on the first day of each
calendar month as additional rent hereunder a flat charge for
electricity at the rate of $2.00 per rentable square foot per
annum.
13.4. Subtenant's use of electric energy in the
Premises shall not at any time exceed 582 kilowatts per usable
square foot load, which is the capacity of the electrical
conductors and equipment in or otherwise serving the Premises,
which capacity shall not be diminished or adversely affected by
Sublandlord during the Sublease Term unless Overlandlord elects
to discontinue furnishing electrical power pursuant to Section
20.04 of the Overlease. In order to insure that such capacity is
not exceeded and to avert possible adverse effect upon the
Building's distribution of electricity via the Building's
electric system, Subtenant shall not, without Sublandlord's prior
consent in each instance (which shall not be unreasonably
withheld) connect any fixtures, appliances or equipment (other
than normal business machines which do not materially increase
Subtenant's electrical consumption) to the Building's electric
system, or make any alterations or additions to the electric
system of the Premises existing on the Sublease Commencement
Date.
13.5. Sublandlord reserves the right to discontinue
furnishing electric energy to Subtenant in the Premises at any
time upon not less than 60 days' notice to Subtenant. If
Sublandlord exercises such right, this Sublease shall continue in
full force and effect and shall be unaffected thereby, except
that from and after the effective date of such termination
Sublandlord shall not be obligated to furnish electric energy to
Subtenant. Notwithstanding the foregoing sentence, in the event
Sublandlord so discontinues furnishing electric energy to
Subtenant in the Premises because of Tenant's Misuse (as such
term is defined in the Overlease) by Sublandlord or due to any
act of any party or person other than Subtenant (or an agent,
invitee or guest of Subtenant), Sublandlord shall use reasonable
efforts to furnish an alternative source of electric energy to
Subtenant, at Sublandlord's sole cost and expense. Otherwise,
Subtenant shall arrange, at its sole cost and expense, to obtain
electric energy directly from the public utility company
furnishing electric energy to the Building. Such alternate
source of electric energy may be furnished to Subtenant by means
of the then existing Leased Space system feeders, risers and
wiring to the extent that the same are available, suitable and
safe for such purpose, subject to Overlandlord's consent thereto
(but only to the extent such consent is required under the
Overlease). All meters and additional panel boards, feeders,
risers, wiring and other conductors and equipment which may be
required to obtain electric energy directly from such public
utility company shall, subject to obtaining Overlandlord's
consent thereto (but only to the extent such consent is required
under the Overlease) be furnished and installed by the party
responsible for arranging such alternate source of electric
energy, at such party's expense, but, in the event that Subtenant
is responsible for arranging such alternate source of electric
energy, Sublandlord may, at its option, before Subtenant
commences any such work or at any time thereafter, require
Subtenant to furnish to Sublandlord such security in form
(including, without limitation, a bond issued by a corporate
surety licensed to do business in New York) and amount as
Sublandlord shall deem necessary to assure the payment for such
work by Subtenant. Subtenant shall pay the costs incurred in
order for Subtenant to obtain electric energy directly to the
extent that Sublandlord is required to pay such costs allocated
to the Premises, under Section 20.04 of the Overlease.
Sublandlord will not exercise any right which it might otherwise
have under this Paragraph 13.5 or Section 20.04 of the Overlease
as (as amended by an Amendment of Lease made November 11, 1985
and incorporated in the Sublease) to discontinue furnishing
electric power to the Premises so long as Overlandlord does not
elect to discontinue furnishing electric power to the Leased
Space pursuant to Section 20.04 of the Overlease.
13.6. Sublandlord shall not in any way be liable
or responsible to Subtenant for any loss, damage or expense which
Subtenant may sustain or incur if (a) the supply of electric
energy to the Premises is temporarily interrupted or (b) the
quantity or character of electric service is changed or is no
longer available or suitable for Subtenant's requirements, except
to the extent resulting from Sublandlord's willful misconduct or
gross negligence.
14. Alterations
14.1. Subtenant may make no structural or other
material changes, alterations, additions, improvements or
decorations in, to or about the Premises without Sublandlord's
prior written consent in each instance, which consent shall not
be unreasonably withheld, and except in accordance with the
provisions of Article 5 of the Overlease. For the purpose of
this Section 14.1, a change, alteration, addition, improvement or
decoration shall be considered "material" if such change,
alteration, addition, improvement or decoration involves
structural, mechanical, HVAC, electrical, life safety, plumbing
or any other building system or costs in excess of $25,000.
Without limiting the generality of the foregoing, Subtenant shall
not commence any Subtenant Work (as hereafter defined) without
first obtaining the prior written consent of Sublandlord, which
consent shall not be unreasonably withheld; provided Subtenant
submits detailed plans and specifications (together with such
other information as Sublandlord may reasonably request) to
Edward S. Gordon, 111 Broadway, New York, New York, Attention:
Bill Brodsky, at least ten (10) days prior to the date Subtenant
desires to commence such Subtenant Work.
15. Quiet Enjoyment
15.1. So long as Subtenant pays all of the rent and
additional rent due under this Sublease and performs all of
Subtenant's other obligations hereunder, Subtenant shall
peacefully and quietly have, hold and enjoy the Premises subject,
however, to the terms, provisions and obligations of this
Sublease and the Overlease.
16. Partnership Subtenant
16.1. If Subtenant is a partnership (or is
comprised of two (2) or more persons, individually and/or as co-
partners of a partnership) or if Subtenant's interest in this
Sublease shall be assigned to a partnership (or to two (2) or
more persons, individually and/or as co-partners of a
partnership) pursuant to paragraph 2.1 (any such partnership and
such persons are referred to in this section as "Partnership
Subtenant"), the following provisions of this Article shall apply
to such Partnership Subtenant: (a) the liability of each of the
parties comprising the general partners of the Partnership
Subtenant shall be joint and several, (b) each of the parties
comprising Partnership Subtenant hereby consents in advance to,
and agrees to be bound by, any written instrument which may
hereafter be executed, changing, modifying or discharging this
Sublease, in whole or in part, or surrendering all or any part of
the Premises to Sublandlord or renewing or extending this
Sublease and by any notices, demands, requests or other
communications which may hereafter be given, by Partnership
Subtenant or by any of the parties comprising Partnership
Subtenant, (c) any bills, statements, notices, demands, requests
or other communications given or rendered to Partnership
Subtenant or to any of the parties comprising Partnership
Subtenant shall be deemed given or rendered to Partnership
Subtenant and to all such parties and shall be binding upon
Partnership Subtenant and all such parties, (d) if Partnership
Subtenant shall admit new general partners, all of such new
general partners shall, by their admission to Partnership
Subtenant, be deemed to have assumed performance of all of the
terms, covenants and conditions of this Sublease on Subtenant's
part to be observed and performed, (e) Partnership Subtenant
shall give prompt notice to Sublandlord of the admission of any
general partner or general partners, and upon demand of
Sublandlord, shall cause each such general partner to execute and
deliver to Sublandlord an agreement in form satisfactory to
Sublandlord, wherein each such new general partner shall assume
performance of all of the terms, covenants and conditions of this
Sublease on Subtenant's part to be observed and performed (but
neither Sublandlord's failure to request any such agreement nor
the failure of any such new partner to execute or deliver any
such agreement to Sublandlord shall vitiate the provisions of
subdivision (d) of this Article) and (f) on each anniversary of
the Sublease Commencement Date, Partnership Subtenant shall
deliver to Sublandlord a list of all partners together with their
current residential addresses.
17. Cancellation Option
17.1. Provided Subtenant is not then in default
hereunder beyond the expiration of applicable grace and cure
periods at the time of the exercise of the termination option and
on the effective date of termination, Subtenant shall have the
one-time option to terminate this Sublease with respect to the
entire Premises only effective upon the date immediately
preceding the fifth (5th) anniversary of the Rent Commencement
Date; provided Subtenant provides Sublandlord with irrevocable
written notice of such election to terminate this Sublease no
less than twelve (12) months prior to the effective date of such
termination; and provided further that Subtenant pays to
Sublandlord the Cancellation Fee, such Cancellation Fee to be due
and payable upon the giving of such notice of termination. In
the event Subtenant terminates this Sublease as provided herein,
Sublandlord will surrender occupancy of the Premises to
Sublandlord on or prior to the effective date of termination in
accordance with the provisions of this Sublease, as if the
termination date were the Sublease Expiration Date of this
Sublease. Upon written request by the Sublandlord, Subtenant
shall execute and deliver to Sublandlord a surrender agreement in
form and substance satisfactory to Sublandlord confirming the
exercise of Subtenant's option to terminate this Sublease.
17.2. Sublandlord and Subtenant agree that the fee
required to be paid by Subtenant for terminating this Sublease
pursuant to this Section 18.1 (the "Cancellation Fee") shall be
equal to the net unamortized amount (determined on a straight
line basis) of the sum of (i) the amount of all real estate
brokerage commissions paid in connection with this Sublease, (ii)
the amount of fixed annual rent abated during the Rent Abatement
Period, (iii) the Work Allowance, (iv) the cost of Sublandlord's
Work, and (v) all other incidental costs associated with the
execution and delivery of this Sublease.
18. Condenser Water
18.1. Subtenant shall be entitled to use no more
than eighty (80) tons of condenser water, which is the amount of
condenser water currently available to the Premises. Sublandlord
shall not diminish or adversely affect the availability of
eighty (80) tons of condenser water to the Premises.
19. Subtenant's Work Allowance
19.1. Provided that Subtenant is not in default
under this Sublease (after the expiration of any applicable grace
and cure periods), Sublandlord shall allow Subtenant an allowance
in the amount of up to Seven Hundred Fifty Four Thousand One
Hundred Thirty One and 00/100 Dollars ($754,131.00) (herein
called the "Work Allowance"), which Work Allowance shall be
applied solely against the cost and expense of the construction
work performed by Subtenant in the Premises in order to prepare
or alter the same for Subtenant's initial occupancy (herein
called "Subtenant's Work"). In the event that the cost and
expense of the Subtenant's Work shall exceed the sum of the Work
Allowance, Subtenant shall be entirely responsible to pay such
excess. If Subtenant does not use all or any part of the Work
Allowance for Subtenant's Work, then Subtenant may credit the
amount of the unused portion of the Work Allowance against future
installments of fixed annual rent next becoming due hereunder.
19.2. (a) Prior to commencing Subtenant's Work,
Subtenant shall submit to Sublandlord a written statement of the
total cost of Subtenant's Work (which shall include the amount of
any overtime charges projected as necessary to substantially
complete Subtenant's Work ("Cost of Subtenant's Work"), and such
statement shall indicate the percentage of the total Cost of
Subtenant's Work to be paid by Sublandlord and Subtenant,
respectively, as Subtenant's Work progresses and Subtenant's
contractors submit requisitions or invoices for Subtenant's Work
actually in place. Sublandlord's percentage shall be computed on
the basis of a fraction, the numerator of which is the Work
Allowance and the denominator of which is the total Cost of
Subtenant's Work ("Sublandlord's Percentage"), and Tenant's
percentage shall be a fraction, the numerator of which shall be
(the total Cost of Landlord's Work less Sublandlord's Percentage)
and the denominator of which shall be the total Cost of
Subtenant's Work ("Subtenant's Percentage"). During the progress
of Subtenant's Work, and no less then once a calendar month,
Sublandlord and Subtenant shall each pay their respective
Percentage of the requisitions or invoices submitted by
Subtenant's contractors; provided that Subtenant shall deliver to
Sublandlord a written request for disbursement (at least once a
month) which shall be accompanied by (a) invoices for the
Subtenant's Work,and (b) such other information and/or affidavits
as Sublandlord shall reasonably request. In no event shall
Sublandlord be required to pay more than the Work Allowance.
(b) Provided that (i) Subtenant has fully complied
with the provisions of this Section and is otherwise entitled to
payment of any portion of the Work Allowance and (ii) Sublandlord
fails to pay the Work Allowance when due (after seven business
days' prior written notice) Subtenant shall have the right to
offset the amount of such unpaid Work Allowance (together with
five percent (5%) per annum interest on the amount of such unpaid
Work Allowance) against any amount due and owing to Sublandlord
under this Sublease, provided that in no event shall such offset
exceed in the aggregate the amount of the Work Allowance then due
and owing to Subtenant.
(c) Upon the completion of Tenant's Work, Subtenant
shall deliver to Sublandlord (i) a certificate signed by
Subtenant's architect and an officer of subtenant certifying that
the Subtenant's Work represented by the aforesaid invoices has
been satisfactorily completed in accordance with the final plans
and specifications for such work previously approved in
accordance with this Sublease, (ii) lien waivers from the
contractors or subcontractors who shall have performed any such
work releasing Subtenant from all liability for the same, and
(iii) all Building Department sign-offs, inspection certificates
and any permits required to be issued by any governmental
entities (including, without limitation, the Building Department)
having jurisdiction with respect thereto, as well as "as-built"
drawings.
19.3. At any and all times during the progress of
Subtenant's Work, representatives of Sublandlord shall have the
right of access to the Premises and inspection thereof (provided,
however, that such representatives use reasonable efforts to
minimize interference with the performance of Subtenant's Work),
and Sublandlord shall have the right to withhold payment of any
portion of the Work Allowance representing the reasonably
estimated cost of any such work not being performed in conformity
with Subtenant's final approved plans and specifications.
Sublandlord shall incur no liability, obligation or
responsibility to Subtenant or any third party by reason of the
access and inspection provided in this subsection 19.3.
19.4. The Work Allowance is being made available
for the benefit of Subtenant only. No third party shall be
permitted to make any claims against Sublandlord or Subtenant
with respect to any portion of the Work Allowance.
20. Contractors
20.1. Prior to commencing Subtenant's Work,
Subtenant shall submit to Sublandlord for its approval (which
shall not be unreasonably withheld or delayed) a list of the
contractors and subcontractors (categorized by trade) which
Subtenant proposes to use or from which Subtenant proposes to
solicit bids in connection therewith. If Sublandlord shall fail
within 15 business days to approve Subtenant's proposed
contractors or subcontractors, then for all purposes of this
Sublease Sublandlord shall be deemed to have approved the same.
If, prior to or after commencement of Subtenant's Work, there is
a change in the contractors or subcontractors, Subtenant shall
submit a new or supplemental list and the foregoing provisions of
this Section 20.1 shall be applicable thereto.
20.2. Notwithstanding anything to the contrary
herein, connections to, and disconnections from the fire safety
system, the sprinkler system, and the condenser or chilled water
system shall be performed by contractors selected solely by
Sublandlord and in accordance with the Overlease.
20.3. Sublandlord agrees that the contractors,
engineers and subcontractors listed on Schedule I attached hereto
are approved for Subtenant's Work.
21. Miscellaneous
21.1. This Sublease may not be changed or
terminated orally, but only by an agreement in writing signed by
the party against whom enforcement of any waiver, change,
modification, termination or discharge is sought.
21.2. This Sublease shall not be binding upon
Sublandlord unless and until it is signed by Sublandlord and
delivered to Subtenant. This Section 21.2 shall not be deemed to
modify the provisions of Article 6 hereof.
21.3. This Sublease constitutes the entire
agreement between the parties and all representations and
understandings have been merged herein.
21.4 This Sublease shall inure to the benefit of all of
the parties hereto, their successors and (subject to the
provisions hereof) their assigns.
IN WITNESS WHEREOF, the parties have hereunto set their
hands and seals as of the day and year first above written.
ATTEST: JOHNSON & HIGGINS,
Sublandlord
________________________ ____________________________
Name:
Title:
ATTEST: TRIAK SERVICES CORP.,
doing business as National Discount Brokers, Subtenant
________________________ _____________________________
Name:
Title:
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the _____ day of March, in the year 1996, 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 JOHNSON & HIGGINS, the corporation described in and which
executed the above instrument; and that he signed his name
thereto by order of the board of directors of said corporation.
___________________________
Notary Public
STATE OF )
: ss.:
COUNTY OF )
On the _____ day of March, in the year 1996, 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 TRIAK SERVICES CORP., doing business as National Discount
Brokers, the corporation described in and which executed the
above instrument; and that he signed his name thereto by order of
the board of directors of said corporation.
___________________________
Notary Public
EXHIBIT A
Floor Plan
Schedule I
List of Approved Contractors, Subcontractors, etc.
Schedule II
Direct Competitors
1. Accutrade
2. K. Aufhauser & Co.
3. Brown & Company
4. Bull & Bear Securities, Inc.
5. Ceres Securities, Inc.
6. E&Trade Securities, Inc.
7. Fidelity Investments
8. PC Financial Network (PCFN)
9. Quick & Reilly Group, Inc.
10. R.J. Forbes Group, Inc.
11. Regal Discount Brokers
12. Charles Schwab & Co.
13. Jack White & Co.
14. J.B. Oxford & Co.
15. Kennedy Cabot & Co.
16. Lombard Institutional Brokers
17. Olde Discount Corp.
18. Pacific Brokerage Services Inc.
19. Muriel Siebert & Co., Inc.
20. Waterhouse Securities Inc.
21. Washington Discount Brokerage Corp.
</TABLE>
<TABLE>
THE SHERWOOD GROUP, INC. AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF NET INCOME PER COMMON SHARE
<CAPTION>
Three Months Ended February 29,
1996 1995
<S> <C> <C>
Common stock and common stock equivalents:
Average common stock outstanding 12,728,616 12,492,537
Average common stock equivalents
issuable under stock options 498,637 1,074,907
---------- -----------
Total average common stock and common stock
equivalents used for earnings per share
computation 13,227,253 13,567,444
========== ==========
Income:
Net income $ 5,140,626 $ 4,268,851
============ ============
Income per common and common
equivalent share (a)<F1>:
Net income $ 0.39 $ 0.31
============ ============
<FN>
<F1>(a) For presentation purposes, primary and fully diluted are identical.
</FN>
</TABLE>
<TABLE>
<CAPTION> Nine Months Ended February 29,
1996 1995
<S> <C> <C>
Common stock and common stock equivalents:
Average common stock outstanding 12,577,903 12,581,903
Average common stock equivalents
issuable under stock options 660,680 1,096,545
----------- -----------
Total average common stock and common stock
equivalents used for earnings per share
computation 13,238,583 13,678,448
========== ==========
Income:
Net income $ 12,781,877 $ 10,260,783
============= =============
Income per common and common
equivalent share (a)<F1>(b)<F2>:
Net income $ 0.97 $ 0.75
=========== ===========
<FN>
<F1>(a) For presentation purposes, primary and fully diluted are identical.
</FN>
<FN>
<F2>(b) The sum of the individual quarters' earnings per common
share does not equal the total amount for the nine months
ended February 29, 1996 due to the effect of averaging
the number of shares of common stock and common stock
equivalents throughout the year.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<CIK> 0000811917
<NAME> THE SHERWOOD GROUP INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> FEB-29-1996
<CASH> 813843
<RECEIVABLES> 56546674
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 36707972
<PP&E> 13209330
<TOTAL-ASSETS> 121340581
<SHORT-TERM> 0
<PAYABLES> 26556999
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 14988131
<LONG-TERM> 0
0
0
<COMMON> 143432
<OTHER-SE> 75297178
<TOTAL-LIABILITY-AND-EQUITY> 121340581
<TRADING-REVENUE> 95314562
<INTEREST-DIVIDENDS> 4276140
<COMMISSIONS> 20856454
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 961531
<INTEREST-EXPENSE> 201923
<COMPENSATION> 37939862
<INCOME-PRETAX> 19048662
<INCOME-PRE-EXTRAORDINARY> 19048662
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12781877
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.97
</TABLE>
