<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-20946
Health Management Systems, Inc.
(Exact name of registrant as specified in its charter)
New York 13-2770433
State of Incorporation (I.R.S. Employer Identification Number)
401 Park Avenue South, New York, New York 10016
(Address of principal executive offices, zip code)
(212) 685-4545
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report.)
Indicate by check x/ whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and 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.
Class Outstanding at August 31, 1996
----- ------------------------------
Common Stock, $.01 Par Value 17,312,802 Shares
<PAGE>
HEALTH MANAGEMENT SYSTEMS, INC.
INDEX TO FORM 10-Q
QUARTER ENDED JULY 31, 1996
PART I FINANCIAL INFORMATION Page No.
Item 1 Financial Statements
Consolidated Balance Sheets as of July 31, 1996 (unaudited) 1
and October 31, 1995
Consolidated Statements of Operations (unaudited) for the 2
three month and nine month periods ended July 31, 1996 and
July 31, 1995
Consolidated Statement of Shareholders' Equity (unaudited) 3
for the nine month period ended July 31, 1996
Consolidated Statements of Cash Flows (unaudited) for the 4
three month and nine month periods ended July 31, 1996 and
July 31, 1995
Notes to Interim Consolidated Financial Statements (unaudited) 5
Item 2 Management's Discussion and Analysis of Results of Operations 6
and Financial Condition
PART II OTHER INFORMATION 11
SIGNATURES 12
EXHIBIT INDEX 13
<PAGE>
HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ In Thousands, Except Per Share Amounts)
July 31, October 31,
1996 1995
----------- -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 12,013 10,801
Short-term investments 18,041 19,287
Accounts receivable, net:
Trade 47,400 31,517
Affiliates 105 113
-------- ------
47,505 31,630
Other current assets 9,546 4,328
-------- ------
Total current assets 87,105 66,046
Property and equipment, net 7,257 5,874
Intangible assets, net 5,300 5,461
Capitalized software costs, net 1,324 865
Investments in affiliates 6,963 7,673
Other assets 844 1,465
-------- ------
Total assets $108,793 87,384
======== ======
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 18,300 14,842
Amounts payable to affiliates 2,038 0
Deferred revenue 5,045 3,941
Deferred income taxes 5,894 5,620
-------- ------
Total current liabilities 31,277 24,403
Other liabilities 2,245 1,739
Deferred income taxes 2,444 2,018
-------- ------
Total liabilities 35,966 28,160
-------- ------
Shareholders' equity:
Preferred stock - $.01 par value; 5,000,000 shares
authorized; none issued and outstanding 0 0
Common stock - $.01 par value; 45,000,000 shares
authorized; 17,309,195 shares issued and
outstanding at July 31, 1996; 16,390,762 shares
issued and outstanding at October 31, 1995 173 164
Capital in excess of par value 56,933 48,481
Retained earnings 15,369 10,115
Unrealized appreciation on short-term investments 352 464
-------- ------
Total shareholders' equity 72,827 59,224
-------- ------
Commitments and contingencies
Total liabilities and shareholders' equity $108,793 87,384
======== ======
See accompanying notes to interim consolidated financial statements.
1
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HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, Except Per Share Amounts)
Three months Nine months
ended July 31, ended July 31,
------------------ -----------------
1996 1995 1996 1995
------- ------ ------ ------
Revenue:
Trade $25,657 20,954 72,256 58,311
Affiliates 128 2,066 4,496 6,735
------- ------ ------ ------
25,785 23,020 76,752 65,046
Cost of services:
Compensation 14,076 11,381 37,325 31,575
Data processing 4,131 2,037 8,393 5,615
Occupancy 2,071 1,635 5,478 4,847
Other 7,857 3,733 16,369 9,972
------- ------ ------ ------
28,135 18,786 67,565 52,009
------- ------ ------ ------
Operating (loss) margin before
amortization of intangibles (2,350) 4,234 9,187 13,037
Amortization of intangibles 51 54 161 189
------- ------ ------ ------
Operating (loss) income (2,401) 4,180 9,026 12,848
Other income (expense):
Interest income, net 186 311 665 663
Loss on investment (927) 0 (927) 0
Merger related costs 0 (19) (489) (1,045)
Equity in (loss) earnings of
affiliate (109) 11 188 11
------- ------ ------ ------
(850) 303 (563) (371)
(Loss) income before income taxes (3,251) 4,483 8,463 12,477
Income tax benefit (expense) 1,424 (2,070) (3,209) (5,840)
------- ------ ------ ------
Net (loss) income $(1,827) 2,413 5,254 6,637
======= ====== ====== ======
Earnings per share data:
Net (loss) income per weighted
average share of common stock
outstanding $ (0.11) 0.14 0.29 0.38
======= ====== ====== ======
Weighted average shares
outstanding 17,193 17,538 18,276 17,322
======= ====== ====== ======
See accompanying notes to interim consolidated financial statements.
2
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<TABLE>
<CAPTION>
HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
($ In Thousands)
Unrealized
Common Stock Appreciation
----------------- Capital In (Depreciation) Total
Par Excess Of Retained on Short-term Shareholders'
Shares Value Par Value Earnings Investments Equity
---------- ----- ---------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1995 16,390,762 $164 48,481 10,115 464 59,224
Net income 0 0 0 5,254 0 5,254
Stock option activity 772,718 8 5,406 0 0 5,414
Employee Stock Purchase Plan activity 145,715 1 1,969 0 0 1,970
Disqualifying dispositions 0 0 1,077 0 0 1,077
Depreciation on
short-term investments 0 0 0 0 (112) (112)
---------- ---- ------ ------ ---- ------
Balance at July 31, 1996 17,309,195 $173 56,933 15,369 352 72,827
========== ==== ====== ====== ==== ======
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
Three months Nine months
ended July 31, ended July 31,
------------------ -----------------
1996 1995 1996 1995
------- ------ ------ ------
Operating activities:
Net (loss) income $(1,827) 2,413 5,254 6,637
Adjustments to reconcile net
(loss) income to net cash provided
by (used in) operating activities:
Loss on investment 927 0 927 0
Depreciation and amortization 756 645 2,267 2,026
Amortization of intangibles 51 54 161 189
Amortization of unearned
compensation 0 3 0 10
Gain on disposal of assets 0 0 0 (19)
Deferred tax expense 90 147 700 548
Equity in loss (earnings) of
affiliate 109 (11) (188) (11)
Disqualifying dispositions 297 0 1,077 0
Unrealized appreciation on
short-term investments 0 0 0 8
Other 0 0 0 (3)
Changes in assets and liabilities:
(Increase)decrease in
accounts receivable (2,459) 885 (15,875) (7,726)
(Increase)decrease in other
current assets (4,250) 535 (5,218) 278
Increase in accounts payable
and accrued expenses 6,629 2,760 3,458 2,959
Increase in amounts payable
to affiliates 2,038 236 2,038 193
Increase(decrease) in
deferred revenue 522 (834) 1,104 (833)
Increase (decrease) in other
assets and liabilities, net 170 (2) 1,127 762
------- ------ ------ ------
Total adjustments 4,880 4,418 (8,422) (1,619)
------- ------ ------ ------
Net cash provided by
(used in) operating
activities 3,053 6,831 (3,168) 5,018
------- ------ ------ ------
Investing activities:
Capital asset expenditures (1,677) (333) (3,275) (849)
Software capitalization (283) (212) (834) (656)
Investment in affiliates 28 (5,610) (29) (6,132)
Purchase of short-term investments 0 (147) 0 (5,105)
Proceeds from sale of short-term
investments 1,771 0 1,134 1,788
------- ------ ------ ------
Net cash used in
investing activities (161) (6,302) (3,004) (10,954)
------- ------ ------ ------
Financing activities:
Proceeds from issuance of
common stock 203 109 1,970 1,001
Proceeds from exercise of
stock options 2,174 198 5,414 1,011
Repayment of notes payable 0 0 0 (342)
------- ------ ------ ------
Net cash provided by
financing activities 2,377 307 7,384 1,670
------- ------ ------ ------
Net increase (decrease) in cash and
cash equivalents 5,269 836 1,212 (4,266)
Cash and cash equivalents at beginning
of period 6,744 9,233 10,801 14,082
Adjustment to cash to reflect change
in Health Care Microsystems, Inc.
fiscal year 0 0 0 253
------- ------ ------ ------
Cash and cash equivalents at end
of period $12,013 10,069 12,013 10,069
======= ====== ====== ======
See accompanying notes to interim consolidated financial statements.
4
<PAGE>
HEALTH MANAGEMENT SYSTEMS, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Interim Unaudited Financial Information
Health Management Systems, Inc. (HMS or the Company) management is
responsible for the accompanying unaudited interim consolidated financial
statements and the related information included in these notes to the interim
consolidated financial statements. In the opinion of management, the interim
consolidated financial statements reflect normal recurring adjustments,
necessary for the fair presentation of the Company's financial position and
results of operations and cash flows for the periods presented. Results of
operations of interim periods are not necessarily indicative of the results
to be expected for the entire year.
These interim consolidated financial statements should be read in conjunction
with the audited consolidated financial statements of the Company as of and
for the year ended October 31, 1995 included in the Company's current report
on Form 8-K dated April 29, 1996 as filed with the Securities and Exchange
Commission (the Commission).
2. HHL Financial Services, Inc. (HHL)
On August 21, 1996, the Company announced a one-time charge and revenue
reversal pertaining to its relationship with HHL, a major customer of HMS,
which is in default of its data processing agreement with the Company. The
Company's one-time charge relates to (i) the full reservation of prior period
accounts receivable of $2,881,000, (ii) accrual of net costs to be incurred
in excess of anticipated revenue relating to the Company's continued
contractual obligation with HHL of $3,823,000, and (iii) the write-off of its
investment in HHL of $927,000, resulting in a total one-time charge of
$7,631,000. Additionally, revenue of $2,180,000 earned and initially recorded
in the third quarter was reversed. The result of the total write-off and
revenue reversal recognized in the third quarter of $9,811,000 translates to
an after-tax impact of $5,514,000, or $0.32 per share.
As of July 31, 1996, the Company has accrued $3,823,000 for probable future
net cash expenditures related to the Company's continuing contractual
obligations with HHL. The Company anticipates that substantially all amounts
accrued as of July 31, 1996 will be paid out or otherwise satisfied by the
end of fiscal 1997.
3. Supplemental Cash Flow Disclosures
Cash paid for income taxes during the quarters ended July 31, 1996 and 1995
was $1,406,000 and $2,645,000, respectively. Cash paid for income taxes
during the nine months ended July 31, 1996 and 1995 was $5,887,000 and
$2,892,000, respectively.
4. Net Income (Loss) Per Common Share
Net income (loss) per common share has been computed by dividing net income
(loss) attributable to common shareholders by the weighted average number of
common shares outstanding during each period. Common stock equivalents
utilizing the treasury stock method are included in the computation of
weighted average number of shares outstanding for the three month period
ended July 31, 1995 and the nine month periods ended July 31, 1996 and 1995.
Common stock equivalents have not been included in the computation of
weighted average number of shares outstanding for the three month period
ended July 31, 1996, as the effect would be anti-dilutive.
5
<PAGE>
Item 2--Management's Discussion and Analysis of Results of Operations and
Financial Condition--Three Month and Nine Month Periods Ended July 31, 1996
and 1995
Operating Results
Three Months Ended July 31, 1996
Revenue for the quarter ended July 31, 1996 was $25,785,000, an increase of
$2,765,000 or 12% over the comparable period in 1995, and represented the
Company's tenth consecutive quarterly revenue increase. During the quarter ended
July 31, 1996, the Company recorded a reversal of $2,180,000 of HHL revenue
which was initially recorded in the quarter. Revenue for the third quarter
before the reversal was $27,965,000, an increase of $4,945,000 or 21% over the
comparable prior year period. The Company's proprietary services, Retroactive
Claims Reprocessing (RCR)(SM), Comprehensive Account Management Services
(CAMS)(SM), and Third Party Liability Recovery (TPLR)(SM), collectively after
the revenue reversal comprise the most significant of the Company's services,
accounting for $18,194,000 or 71% of the Company's consolidated revenue for the
third quarter of 1996, compared to $16,673,000 or 72% of consolidated revenue
for the comparable prior year quarter. Revenue from proprietary services after
the revenue reversal increased 9% over the third quarter of the prior year,
principally due to revenue generated by the Company's TPLR and RCR engagements.
The Company's Managed Care Support (MCS) services revenue, generated by the
Company's Health Care microsystems, Inc. subsidiary (HCm), was $5,294,000, an
increase of $1,081,000 or 26% over the comparable prior year period. The
Company's Electronic Data Interchange (EDI) services revenue, realized by the
Company's Quality Medi-Cal Adjudication, Inc. subsidiary (QMA), was $2,297,000
for the third quarter of 1996, an increase of $163,000 or 8% over the third
quarter of 1995.
Cost of services for the third quarter of 1996 was $28,135,000, an increase of
$9,349,000 or 50% over the comparable period in 1995. During the quarter ended
July 31, 1996, the Company recorded a one-time charge pertaining to its
relationship with HHL (see Note 2). This one-time charge increased cost of
services by $6,704,000. Thus, costs in the third quarter of 1996 are 36% over
those for the quarter ended July 31, 1995. The $6,704,000 charge was comprised
of (i) $1,362,000 of net compensation costs, and (ii) $2,199,000 of net data
processing costs associated with the continued servicing of the HHL data
processing agreement, plus (iii) $3,143,000 of other costs, including $2,881,000
of bad debt expense related to HHL receivables and $262,000 of net other
operating expenses associated with the continued servicing of the HHL data
processing agreement.
Compensation expense, the Company's largest expense component, totalled
$14,076,000, an increase of $2,695,000 or 24% over the comparable prior year
period. Compensation expense prior to the one-time charge of $1,362,000 was
$12,714,000, an increase of $1,333,000 or 12% over the comparable prior year
period. Exclusive of the effect of the one-time charge, the increase in
compensation expense reflected a 19% increase in the average number of employees
in support of business growth and expansion, offset by salary savings associated
with employee turnover.
Data processing expense for the third quarter of 1996 was $4,131,000, an
increase of $2,094,000 or 103% over the comparable period in 1995. Data
processing expense prior to the one-time charge of $2,199,000 was $1,932,000, a
decrease of $105,000 or 5%. This decrease was attributable to the Company's
ability to reallocate resources previously applied to HHL data processing to
other projects and a deferral of investments in computer equipment.
6
<PAGE>
Occupancy expense for the third quarter of 1996 was $2,071,000, an increase of
$436,000 or 27% over the comparable period in 1995. This increase was primarily
due to expansion of the Company's facilities across the Country, including the
Company's headquarters.
Other operating expense for the third quarter of 1996 was $7,857,000, an
increase of $4,124,000 or 110% over the comparable prior year period. Other
operating expense prior to the one-time charge of $3,143,000 was $4,714,000, an
increase of $981,000 or 26%. Exclusive of the effect of the one-time charge,
this increase was principally attributable to higher levels of direct project
costs, employee related expenses, and professional fees.
Operating loss before amortization of intangible assets for the quarter ended
July 31, 1996 was $2,350,000, a decrease of $6,584,000 or 156% from the
$4,234,000 of operating margin realized in the comparable period in 1995. This
represents a negative operating margin rate of 9% during the third quarter of
1996 compared to the 18% positive operating margin rate experienced in the third
quarter of 1995. Operating margin before amortization of intangibles and prior
to the one-time charge and revenue reversal was $6,534,000, an increase of
$2,300,000 or 54%. Exclusive of the effect of the one-time charge and revenue
reversal, the operating margin rate would have been 23%, an increase of 5
percentage points over the 18% realized in the comparable prior year period.
This increase is a result of revenue before the reversal increasing at a higher
rate than total operating expenses before the one-time charge.
Amortization of intangible assets for the third quarter of 1996 was $51,000, a
decrease of $3,000 or 6% from the third quarter of 1995. The decrease results
from the full amortization of one of the intangible assets.
Net interest and other income of $186,000 in the third quarter of 1996 decreased
by $125,000 from $311,000 in the third quarter of 1995, primarily as a function
of a higher interest expense related to a potential tax liability and loan
origination fees associated with the new $40,000,000 line of credit obtained by
the Company during the quarter. The Company's investment in HHL of $927,000 was
written off in the third quarter of 1996 as part of the one-time charge. Equity
in the loss of the Company's Health Information Systems Corporation affiliate
was $109,000 for the third quarter of 1996, a decrease of $120,000 from the
$11,000 of income recorded during the third quarter of 1995.
The Company's income tax benefit for the third quarter of 1996 was $1,424,000,
resulting in an effective tax rate of approximately 43.8%. This compares to
income tax expense of $2,070,000 and an effective tax rate of approximately
46.2% for the third quarter of 1995. The 169% decrease in income tax expense was
primarily the result of the HHL one-time charge and revenue reversal which
decreased pre-tax income by $9,811,000 and reduced tax expense by $4,297,000.
Income tax expense without the HHL one-time charge and revenue reversal would
have been $2,873,000, an increase of $803,000 or 39% over the comparable prior
year period. This is in line with the increase in pre-tax income before the HHL
one-time charge and revenue reversal of $2,077,000 or 46%.
As a result of the HHL one-time charge and revenue reversal, net loss and loss
per share for the three month period ended July 31, 1996 were $1,827,000 and
$0.11, a 176% and 179% decrease, respectively, from the comparable prior year
period. Net income and earnings per share prior to the one-time charge and
revenue reversal would have been $3,687,000 and $0.21, an increase of $1,274,000
and $0.07 or 53% and 50%, respectively.
7
<PAGE>
Nine Months Ended July 31, 1996
Revenue for the nine months ended July 31, 1996 was $76,752,000, an increase of
$11,706,000 or 18% over the comparable prior year period. During the nine months
ended July 31, 1996, the Company recorded a reversal of $2,180,000 of HHL
revenue recorded in the third quarter. Revenue for the nine months ended July
31, 1996 before the reversal was $78,932,000, an increase of $13,886,000 or 21%
over the comparable prior year period. Revenue from proprietary services after
the revenue reversal grew $8,801,000 or 18%, to $56,567,000, principally due to
revenue generated by the Company's TPLR and RCR engagements. Revenue from MCS
services was $13,643,000, an increase of $2,530,000 or 23% over the comparable
prior year period. Revenue from EDI services was $6,542,000, an increase of
$375,000 or 6% from last year.
Cost of services for the nine months ended July 31, 1996 was $67,565,000, an
increase of $15,556,000 or 30% over the comparable period in 1995. During the
nine months ended July 31, 1996, the Company recorded a one-time charge
pertaining to its relationship with HHL. This charge increased cost of services
by $6,704,000 or 13% over the quarter ended July 31, 1995. The $6,704,000 charge
was comprised of (i) $1,362,000 of net compensation costs, and (ii) $2,199,000
of net data processing costs associated with the continued servicing of the HHL
data processing agreement, plus (iii) $3,143,000 of other operating costs,
including $2,881,000 of bad debt expense related to HHL receivables and $262,000
of net other operating expenses associated with the continued servicing of the
HHL data processing agreement.
Compensation expense, the Company's largest component, totalled $37,325,000, an
increase of $5,750,000 or 18% over the comparable prior year period.
Compensation expense prior to the one-time charge of $1,362,000 was $35,963,000,
an increase of $4,388,000 or 14%. Exclusive of the effect of the one-time
charge, this increase reflected a 16% increase in the average number of
employees in support of business growth and expansion, offset by salary savings
associated with employee turnover.
Data processing expense was $8,393,000, an increase of $2,778,000 or 49% over
the comparable period in 1995. Data processing expense prior to the one-time
charge of $2,199,000 was $6,194,000, an increase of $579,000 or 10%. Exclusive
of the effect of the one-time charge, this increase was attributable to costs
associated with the continuing enhancement of the Company's data processing
environments.
Occupancy expense was $5,478,000, an increase of $631,000 or 13% over the
comparable period in 1995. This increase was primarily due to the expansion of
the Company's facilities, including the Company's headquarters.
Other operating expense was $16,369,000, an increase of $6,397,000 or 64% over
1995. Other operating expense prior to the one-time charge of $3,143,000 was
$13,226,000, an increase of $3,254,000 or 33%. Exclusive of the effect of the
one-time charge, this increase was principally attributable to higher levels of
direct project costs, including professional fees, employee related costs, and
professional marketing fees.
Operating margin before amortization of intangible assets for the nine months
ended July 31, 1996 was $9,187,000, a decrease of $3,850,000 or 30% from the
$13,037,000 amount realized in the comparable period in 1995. The Company's
operating margin rate before amortization of intangible assets was 12%, compared
to 20% in 1995. Operating margin before amortization of intangibles and prior to
the one-time charge and revenue reversal was $18,071,000, an increase of
$5,034,000 or 39%. Exclusive of the effect
8
<PAGE>
of the one-time charge and revenue reversal, the operating margin rate would
have been 23%, an increase of 3 percentage points over the 20% realized in the
comparable prior year period.
Amortization of intangible assets for the nine months ended July 31, 1996 was
$161,000, a decrease of $28,000 or 15% from the comparable prior year period.
The decrease results from the full amortization of one of the Company's
intangible assets.
Net interest and other income of $665,000 in the nine months ended July 31, 1996
increased by $2,000 from $663,000 in the comparable period in 1995; the increase
would have been $45,000 but for the loan origination fees associated with the
Company's securing a new line of credit with a major money center financial
institution. The Company wrote off its investment in HHL of $927,000 in the nine
months ended July 31, 1996 as part of the one-time charge. Merger related costs
of $489,000 were incurred in the nine months ended July 31, 1996 related to the
Company's merger with CDR Associates, Inc. (CDR) in April 1996. Merger related
costs of $1,045,000 were incurred in the nine months ended July 31, 1995 related
to the Company's merger with HCm in February 1995.
The Company's income tax expense for the nine months ended July 31, 1996 was
$3,209,000, resulting in an effective tax rate of approximately 37.9%. This
compares to income tax expense of $5,840,000 and an effective tax rate of
approximately 46.8% for the prior year period. The reduction in the effective
tax rate results from the non-taxability of income from CDR for the first six
months of the fiscal year due to its status as an S Corporation, and from the
decrease of non-tax deductible merger costs from the comparable prior year
period. Income tax expense without the HHL one-time charge and revenue reversal
would have been $7,506,000, an increase of $1,666,000 or 29% over the comparable
prior period.
Net income and earnings per share for the nine months ended July 31, 1996 were
$5,254,000 and $0.29, a 21% and 24% decrease, respectively, from net income of
$6,637,000 and $0.38 in earnings per share reported in the comparable prior year
period. Net income and earnings per share prior to the one-time charge, revenue
reversal, and merger costs were $11,257,000 and $0.62 year to date, an increase
of $3,575,000 and $0.18 over the same period last year, or 47% and 41%,
respectively.
Liquidity and Capital Resources
At July 31, 1996, the Company had $55,828,000 in net working capital,
$14,185,000 greater than working capital at October 31, 1995. The Company's
principal sources of liquidity at July 31, 1996 consisted of cash, cash
equivalents, and short-term investments aggregating $30,054,000 and net accounts
receivable of $47,505,000. Accounts receivable at July 31, 1996 reflected an
increase of $15,875,000 or 50% over the October 31, 1995 balance. This increase
is due to revenue growth, delays in processing payments through a government
client, and changes in the Company's product revenue mix which serve to elongate
the Company's liquidation cycle. Management does not believe that this increase
reflects adversely on the quality or collectibility of the Company's accounts
receivable.
On July 15, 1996, the Company entered into a $40,000,000 unsecured revolving
credit facility with a major money center financial institution. The credit
facility, which is fully available as of the date of this report, has a term of
three years, carries an unused commitment fee of 20 basis points, and bears
interest at the institution's prime lending rate, or LIBOR plus 5/8%, at the
Company's option. The Company has advised the bank that, as a result of the
one-time charge and revenue reversal recorded for HHL in the quarter ended July
31, 1996 the Company was not in compliance with one of the financial covenants
of the Credit Agreement. The bank has waived the Company's compliance with this
covenant for such
9
<PAGE>
quarter and amended the Credit Agreement to revise the covenant. The Company
would have been in compliance under the revised covenant.
* * * * *
This document contains forward-looking statements. Such statements by their
nature entail various risks, reflecting the dynamic, complex, and rapidly
changing nature of the health care industry. Results actually achieved may
differ materially from those currently anticipated. The various risks include
but are not necessarily limited to: (i) the continued ability of HMS to grow
internally or by acquisition, (ii) the success experienced in integrating
acquired businesses into the HMS group of companies, (iii) changing conditions
in the health care industry which could simplify the reimbursement process
and/or data management requirements associated with the health care transfer
payment process and adversely affect HMS's business, (iv) government regulatory
and political pressures which could reduce the rate of growth of health care
expenditures, (v) competitive actions by other companies, and (vi) other risks,
as noted in HMS's registration statements and periodic reports filed with the
Commission.
10
<PAGE>
HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
PART II--OTHER INFORMATION
Item 1 Legal Proceedings - No material legal proceedings are pending.
Item 2 Changes in Securities - None
Item 3 Defaults Upon Senior Securities - None
Item 4 Submission of Matters to a Vote of Security Holders - None
Item 5 Other Information - None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits--See Exhibit Index
(b) Reports on Form 8-K - None
11
<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.
Date: September 13, 1996 HEALTH MANAGEMENT SYSTEMS, INC.
(Registrant)
/s/ Phillip Siegel
Phillip Siegel
Vice President and
Chief Financial Officer
12
<PAGE>
HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.1 Credit Agreement and Guaranty Among Health Management Systems, Inc., as
Borrower, Accelerated Claims Processing, Inc., Quality Medi-Cal
Adjudication, Incorporated, Health Care microsystems, Inc. and CDR
Associates, Inc., as Guarantors, and The Chase Manhattan Bank, as Bank
(filed herewith).
10.1(i) First Amendment to Credit Agreement and Guaranty and Waiver (filed
herewith).
10.2 Lease, dated as of March 15, 1996, by and between 387 P.A.S.
Enterprises, as Landlord, and Health Management Systems, Inc., as
Tenant (filed herewith).
11 Computation of Earnings Per Share (filed herewith)
27 Financial Data Schedule, which is submitted electronically to the
Securities and Exchange Commission for informational purposes only and
not filed
13
<PAGE>
[EXECUTION COPY]
CREDIT AGREEMENT
AND GUARANTY
AMONG
HEALTH MANAGEMENT SYSTEMS, INC.,
as Borrower,
ACCELERATED CLAIMS PROCESSING, INC.,
QUALITY MEDI-CAL ADJUDICATION, INCORPORATED,
HEALTH CARE MICROSYSTEMS, INC., and
CDR ASSOCIATES, INC.,
as Guarantors
and
THE CHASE MANHATTAN BANK,
as Bank
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS . . . 1
SECTION 1.01. Defined Terms. . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms . . . . . . . . . . . 12
ARTICLE II AMOUNT AND TERMS OF THE CREDITS. . . . 13
SECTION 2.01. Loans. . . . . . . . . . . . . . . . . 13
SECTION 2.02. Reduction of Revolving Credit
Facility . . . . . . . . . . . . . . . 13
SECTION 2.03. Notice and Manner of Borrowing;
Minimum Amounts. . . . . . . . . . . . 13
SECTION 2.04. Interest Periods; Conversions;
Renewals . . . . . . . . . . . . . . . 14
SECTION 2.05. Interest . . . . . . . . . . . . . . . 15
SECTION 2.06. Note . . . . . . . . . . . . . . . . . 15
SECTION 2.07. Optional Prepayments . . . . . . . . . 15
SECTION 2.08. Fees . . . . . . . . . . . . . . . . . 16
SECTION 2.09. Method of Payment. . . . . . . . . . . 16
SECTION 2.10. Use of Proceeds. . . . . . . . . . . . 16
SECTION 2.11. Additional Costs . . . . . . . . . . . 16
SECTION 2.12. Limitation on Types of Loans . . . . . 18
SECTION 2.13. Illegality . . . . . . . . . . . . . . 18
SECTION 2.14. Treatment of Affected Loans. . . . . . 19
SECTION 2.15. Risk-Based Capital . . . . . . . . . . 19
SECTION 2.16. Certain Compensation . . . . . . . . . 20
ARTICLE III LETTERS OF CREDIT. . . . . . . . . . . 20
SECTION 3.01. Standby Letters of Credit. . . . . . . 20
SECTION 3.02. Application for Standby Letter of
Credit . . . . . . . . . . . . . . . . 21
SECTION 3.03. Standby Letter of Credit Fees and
Expenses . . . . . . . . . . . . . . . 21
SECTION 3.04. Reimbursement Obligation . . . . . . . 22
ARTICLE IV GUARANTY . . . . . . . . . . . . . . . 22
SECTION 4.01. Guaranty . . . . . . . . . . . . . . . 22
SECTION 4.02. Guarantor's Obligations
Unconditional. . . . . . . . . . . . 23
SECTION 4.03. Waivers. . . . . . . . . . . . . . . . 24
SECTION 4.04. Subrogation. . . . . . . . . . . . . . 24
ARTICLE V CONDITIONS PRECEDENT . . . . . . . . . 24
SECTION 5.01. Conditions Precedent to the Initial
Loan or Standby Letter of Credit . . . 24
SECTION 5.02. Conditions Precedent to All Loans
and All Standby Letters of Credit. . . 26
SECTION 5.03. Deemed Representation. . . . . . . . . 26
ARTICLE VI REPRESENTATIONS AND WARRANTIES . . . . 27
<PAGE>
Page
SECTION 6.01. Incorporation, Good Standing and
Due Qualification. . . . . . . . . . . 27
SECTION 6.02. Corporate Power and Authority. . . . . 27
SECTION 6.03. Legally Enforceable Agreement. . . . . 27
SECTION 6.04. Financial Statements . . . . . . . . . 28
SECTION 6.05. Labor Disputes and Acts of God . . . . 29
SECTION 6.06. Other Agreements . . . . . . . . . . . 29
SECTION 6.07. Litigation . . . . . . . . . . . . . . 29
SECTION 6.08. No Defaults on Outstanding
Judgments or Orders. . . . . . . . . . 29
SECTION 6.09. Ownership and Liens. . . . . . . . . . 29
SECTION 6.10. Subsidiaries and Ownership of Stock. . 29
SECTION 6.11. ERISA. . . . . . . . . . . . . . . . . 30
SECTION 6.12. Operation of Business. . . . . . . . . 30
SECTION 6.13. Taxes. . . . . . . . . . . . . . . . . 30
SECTION 6.14. Subscription Agreement . . . . . . . . 30
ARTICLE VII AFFIRMATIVE COVENANTS. . . . . . . . . 31
SECTION 7.01. Maintenance of Existence . . . . . . . 31
SECTION 7.02. Maintenance of Records . . . . . . . . 31
SECTION 7.03. Maintenance of Properties. . . . . . . 31
SECTION 7.04. Conduct of Business. . . . . . . . . . 31
SECTION 7.05. Maintenance of Insurance . . . . . . . 31
SECTION 7.06. Compliance With Laws . . . . . . . . . 31
SECTION 7.07. Right of Inspection. . . . . . . . . . 32
SECTION 7.08. Reporting Requirements . . . . . . . . 32
SECTION 7.09. Transactions with HHL. . . . . . . . . 34
SECTION 7.10. New Subsidiaries.. . . . . . . . . . . 34
ARTICLE VIII NEGATIVE COVENANTS . . . . . . . . . . 35
SECTION 8.01. Liens. . . . . . . . . . . . . . . . . 35
SECTION 8.02. Debt . . . . . . . . . . . . . . . . . 36
SECTION 8.03. Mergers, Etc.. . . . . . . . . . . . . 37
SECTION 8.04. Dividends. . . . . . . . . . . . . . . 37
SECTION 8.05. Sale of Assets . . . . . . . . . . . . 38
SECTION 8.06. Investments. . . . . . . . . . . . . . 38
SECTION 8.07. Guaranties, Etc. . . . . . . . . . . . 39
SECTION 8.08. Transactions With Affiliate. . . . . . 39
SECTION 8.09. Restrictions on Dividends. . . . . . . 39
SECTION 8.10. Stock of Subsidiary, Etc . . . . . . . 39
SECTION 8.11. Subscription Agreement . . . . . . . . 40
ARTICLE IX FINANCIAL COVENANTS. . . . . . . . . . 40
SECTION 9.01. Minimum Consolidated Current Ratio . . 40
SECTION 9.02. Minimum Consolidated Tangible Net
Worth. . . . . . . . . . . . . . . . . 40
SECTION 9.03. Consolidated Leverage Ratio. . . . . . 40
SECTION 9.04. Minimum Consolidated Cash Flow
Ratio. . . . . . . . . . . . . . . . . 40
SECTION 9.05. Consolidated Interest Coverage . . . . 41
ARTICLE X EVENTS OF DEFAULT. . . . . . . . . . . 41
<PAGE>
Page
SECTION 10.01. Events of Default . . . . . . . . . 41
ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . 44
SECTION 11.01. Amendments, Etc. . . . . . . . . . . 44
SECTION 11.02. Notices, Etc.. . . . . . . . . . . . 44
SECTION 11.03. No Waiver; Remedies. . . . . . . . . 44
SECTION 11.04. Assignment; Participation. . . . . . 45
SECTION 11.05. Costs, Expenses and Taxes. . . . . . 45
SECTION 11.06. Indemnification. . . . . . . . . . . 46
SECTION 11.07. Right of Setoff. . . . . . . . . . . 46
SECTION 11.08. Governing Law. . . . . . . . . . . . 47
SECTION 11.09. Severability of Provisions . . . . . 47
SECTION 11.10. Headings . . . . . . . . . . . . . . 47
SECTION 11.11. Jurisdiction; Immunities; Waiver
of Jury Trial. . . . . . . . . . . . 47
EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF OPINION OF COUNSEL TO BORROWER AND
GUARANTORS
EXHIBIT C SUBSCRIPTION AGREEMENT
<PAGE>
CREDIT AGREEMENT AND GUARANTY dated as of July 15,
1996 among HEALTH MANAGEMENT SYSTEMS, INC., a New York
corporation (the "Borrower"), ACCELERATED CLAIMS PROCESSING,
INC., a Delaware corporation ("ACP"), QUALITY MEDI-CAL
ADJUDICATION, INCORPORATED, a California corporation
("QMA"), HEALTH CARE MICROSYSTEMS, INC., a California
corporation ("HCM"), CDR ASSOCIATES, INC., a Maryland
corporation ("CDR") and THE CHASE MANHATTAN BANK (the
"Bank").
The parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Defined Terms. As used in this
Agreement, the following terms have the following meanings
(terms defined in the singular to have the same meaning when
used in the plural and vice versa):
"ACP" means Accelerated Claims Processing, Inc., a
Delaware Corporation.
"Acquisitions" means the purchase or the
commitment to purchase by the Borrower or any Guarantor of
(1) an equity interest in any Person, whether in the form of
shares of capital stock, partnership interest, membership
interest or otherwise, or (2) any assets of or the business
of another Person (other than any assets required for the
ongoing operation of the business of the Borrower or any
Guarantor, as the case may be).
"Affected Loans" shall have the meaning assigned
to such term in Section 2.14.
"Affiliate" means any Person: (1) which directly
or indirectly controls, or is controlled by, or is under
common control with the Borrower or any Guarantor; (2) which
directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of the
Borrower or any Guarantor; or (3) five percent (5%) or more
of the voting stock of which is directly or indirectly
beneficially owned or held by the Borrower or any Guarantor.
The term control means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit Agreement and
Guaranty, as amended, supplemented, or modified from time to
time.
"Applicable Lending Office" means, for each of the
Prime Rate Loans and LIBOR Loans, the Lending Office of the
Bank (or of an affiliate of the Bank) designated for the
Prime Rate Loans and LIBOR Loans, on the signature pages
<PAGE>
hereof or such other office of the Bank (or of an affiliate
of the Bank) as the Bank may from time to time specify to
the Borrower as the office by which the Prime Rate Loans or
LIBOR Loans are to be made and maintained.
"Applicable Margin" means with respect to a LIBOR
Loan five eighths of one percent (.625%).
"Application" means each application submitted by
the Borrower requesting that the Bank issue a Standby Letter
of Credit for the account of the Borrower.
"Board of Governors" means the Board of Governors
of the Federal Reserve System or any successor.
"Borrower" means Health Management Systems, Inc.,
a New York corporation.
"Borrowing Notice" has the meaning specified in
Section 2.03.
"Broken Funding Fee" means an amount equal to the
difference between (1) the amount of interest which
otherwise would have accrued on the principal amount of the
LIBOR Loan so prepaid or unborrowed over the period equal to
the remaining portion of the applicable Interest Period and
(2) the amount of interest the Bank would earn if such
principal amount were reinvested for such remaining portion
of the applicable Interest Period in the highest quality
U.S. Treasury obligations in an amount equal to the prepaid
or unborrowed principal amount and with a maturity
approximately equal to such remaining portion of the
applicable Interest Period.
"Business Day" means: (1) any day other than a
Saturday, Sunday, or other day on which commercial banks in
New York City are authorized or required to close under the
laws of the State of New York; and (2) if the applicable day
relates to a LIBOR Loan, an Interest Period with respect to
a LIBOR Loan, or notice with respect to any LIBOR Loan, a
day on which dealings in Dollar deposits are also carried on
in the London interbank market and banks are open for
business in London.
"Cash Collateral" means a deposit by the Borrower,
made in immediately available funds, to a savings, checking
or time deposit account at the Bank or the purchase by the
Borrower of a certificate of deposit issued by the Bank and
the execution of all documents and the taking of all steps
required to give the Bank a perfected security interest in
such deposit or certificate of deposit.
"Capital Lease" means any lease which has been or
should be capitalized on the books of the lessee in
accordance with GAAP.
"CDR" means CDR Associates, Inc., a Maryland
corporation.
<PAGE>
"Closing Date" means July 15, 1996.
"Commitment" means, collectively, the Loan
Commitment and the Standby Letter of Credit Commitment.
"Consolidated Capital Expenditures" means, for any
period, the Dollar amount of gross expenditures (including
obligations under Capital Leases) made by the Borrower and
its Consolidated Subsidiaries.
"Consolidated Current Assets" means, at any time,
consolidated total current assets of the Borrower and its
Consolidated Subsidiaries less all consolidated prepaid
expenses of the Borrower and its Consolidated Subsidiaries,
all as determined in accordance with GAAP.
"Consolidated Current Liabilities" means, at any
time, consolidated total current liabilities of the Borrower
and its Consolidated Subsidiaries, all as determined in
accordance with GAAP.
"Consolidated Debt Service" means, for any period,
without duplication, the sum of: (1) all Consolidated
Interest Expense required to be paid during such period; (2)
all principal required to be paid on all outstanding Debt by
the Borrower or any of its Consolidated Subsidiaries during
such period, including but not limited to payments on
Consolidated Senior Debt, and (3) all other amounts required
to be paid during such period by the Borrower or any of its
Consolidated Subsidiaries under the Loan Documents or any
other agreement related to and governing the terms of
outstanding Debt of the Borrower or any of its Consolidated
Subsidiaries.
"Consolidated Deferred Assets" means, at any time,
consolidated deferred income taxes of the Borrower and its
Consolidated Subsidiaries, all as determined in accordance
with GAAP.
"Consolidated Deferred Liabilities" means, at any
time, both consolidated deferred income taxes and
consolidated deferred revenue of the Borrower and its
Consolidated Subsidiaries, all as determined in accordance
with GAAP.
"Consolidated Depreciation" means, at any time,
consolidated depreciation and amortization of property,
equipment and intangible assets of the Borrower and its
Consolidated Subsidiaries, all as determined in accordance
with GAAP.
"Consolidated Earnings Before Interest, Taxes and
Depreciation" means, for any period, an amount equal to the
sum of, without duplication, (1) Consolidated Net Income for
such period plus (2) Consolidated Interest Expense for such
period plus (3) Consolidated Taxes for such period plus (4)
Consolidated Depreciation for such period.
<PAGE>
"Consolidated Interest Expense" means, for any
period, consolidated interest expense of the Borrower and
its Consolidated Subsidiaries, all as determined in
accordance with GAAP.
"Consolidated Net Income" means, for any period,
the consolidated net income of the Borrower and its
Consolidated Subsidiaries, exclusive of any extraordinary
items whether gains or losses, all as determined in
accordance with GAAP.
"Consolidated Senior Debt" means, at any time, the
aggregate amount of all obligations of the Borrower or any
of its Consolidated Subsidiaries to the Bank, including but
not limited to the Loan, the face amount of all outstanding
Standby Letters of Credit Obligations and all other
obligations to the Bank under any of the Loan Documents.
"Consolidated Subsidiaries" means all Subsidiaries
of the Borrower that should be included in the Borrower's
consolidated financial statements, all as determined in
accordance with GAAP.
"Consolidated Taxes" means, for any period, the
consolidated income tax benefit (expense) of the Borrower
and its Consolidated Subsidiaries, all as determined in
accordance with GAAP.
"Consolidated Tangible Net Worth" means, at any
time, the excess of (1) Consolidated Total Tangible Assets
over (2) Consolidated Total Liabilities.
"Consolidated Total Intangible Assets" means, at
any time, the consolidated intangible assets of the Borrower
and its Consolidated Subsidiaries, all as determined in
accordance with GAAP, including but not limited to non-
compete contracts, employment contracts, deferred or prepaid
transaction costs, capitalized research and development
costs, capitalized interest, debt discount and expenses,
goodwill, patents, trademarks, copyrights, franchise,
license and other intangible assets.
"Consolidated Total Liabilities" means, at any
time, consolidated total liabilities of the Borrower and its
Consolidated Subsidiaries, all as determined in accordance
with GAAP.
"Consolidated Total Tangible Assets" means, at any
time, the excess of (1) consolidated total assets of the
Borrower and its Consolidated Subsidiaries, as determined in
accordance with GAAP, over (2) Consolidated Total Intangible
Assets.
"Debt" means: (1) indebtedness or liability for
borrowed money, or for the deferred purchase price of
property or services (including trade obligations); (2)
obligations as lessee under Capital Leases; (3) current
liabilities in respect of unfunded vested benefits under any
<PAGE>
Plan; (4) obligations under letters of credit issued for the
account of any Person; (5) all obligations arising under
bankers' or trade acceptance facilities; (6) all guarantees,
endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent
obligations to purchase any item included in this
definition, to provide funds for payment, to supply funds to
invest in any Person, or otherwise to assure a creditor
against loss; (7) all obligations secured by any Lien on
property owned by such Person, whether or not the
obligations have been assumed; and (8) all obligations under
any agreement providing for a swap, ceiling rate, ceiling
and floor rates, contingent participation or other hedging
mechanism with respect to interest or other fees payable on
any of the items described in this definition.
"Default" means any of the events specified in
Section 10.01, whether or not any requirement for the giving
of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Default Rate" means, with respect to an amount of
any Loan not paid when due, a rate per annum equal to: (1)
if such Loan is a Prime Rate Loan, a variable rate per annum
equal to two percent (2%) above the Prime Rate; or (2) if
such Loan is a LIBOR Loan, a fixed rate per annum equal to
two and five-eighths of one percent (2.625%) above the LIBOR
Interest Rate until the end of the period the LIBOR Interest
Rate applies, and thereafter, a variable rate per annum
equal to two percent (2%) above the Prime Rate.
"Dividends" means, for any period, all dividends
declared and paid by the Borrower during such period;
provided, however, dividends may only be paid by the
Borrower if permitted under the terms of this Agreement.
"Dollars" and the sign "$" mean lawful money of
the United States of America.
"Environmental Discharge" means any discharge or
release of any Hazardous Materials in violation of any
applicable Environmental Law.
"Environmental Law" means any Law relating to
pollution or the environment, including Laws relating to
noise or to emissions, discharges, releases or threatened
releases of Hazardous Materials into the workplace, the
community or the environment, or otherwise relating to the
generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
Hazardous Materials.
"Environmental Notice" means any complaint, order,
citation, letter, inquiry, notice or other written
communication from any Person (1) affecting or relating to
the Borrower's or any Subsidiary's compliance with any
Environmental Law in connection with any activity or
operations at any time conducted by the Borrower or such
<PAGE>
Subsidiary, (2) relating to the occurrence or presence of or
exposure to or possible or threatened or alleged occurrence
or presence of or exposure to Environmental Discharges or
Hazardous Materials at any of the Borrower's or any
Subsidiary's locations or facilities, including, without
limitation: (a) the existence of any contamination or
possible or threatened contamination at any such location or
facility; and (b) remediation of any Environmental Discharge
or Hazardous Materials at any such location or facility or
any part thereof, and (3) any violation or alleged violation
of any relevant Environmental Law.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the
regulations and published interpretations thereof.
"ERISA Affiliate" means any trade or business
(whether or not incorporated) which together with the
Borrower would be treated as a single employer under Section
4001 of ERISA.
"Event of Default" means any of the events
specified in Section 10.01, provided that any requirement
for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Existing Lines of Business" means the business of
providing data processing and information management,
analytical and transactional services, or facilities
management services for data processing to hospitals,
government institutions, health care providers and other
institutions and entities.
"Fiscal Year" or "fiscal year" means a period from
November 1 to October 31.
"Financial Advisory Fee" means a fee payable by
the Borrower to the Bank on the Closing Date in the amount
of Thirty-Five Thousand Dollars ($35,000).
"GAAP" means generally accepted accounting
principles in the United States used in the preparation of
the financial statements referred to in Section 6.06.
"Good Faith Contest" means the contest of an item
if: (1) the item is diligently contested in good faith by
appropriate proceedings timely instituted; (2) adequate cash
reserves are established with respect to the contested item;
(3) during the period of such contest, the enforcement of
any contested item is effectively stayed; and (4) during the
period of the contest the failure to pay or comply with the
contested item could not result in a Material Adverse
Change.
"Governmental Authority" means any nation or
government, any state or other political subdivision
thereof, and any entity exercising executive, legislative,
<PAGE>
judicial, regulatory or administrative functions of or
pertaining to government.
"Governmental Approvals" means any authorization,
consent, approval, license or exemption of, registration or
filing with or report or notice to, any governmental unit,
whether federal, state, local or foreign.
"Guarantor" means each of ACP, QMA, HCM, and CDR.
"Guarantors" means, collectively, ACP, QMA, HCM,
and CDR.
"Guaranty" has the meaning specified in Section
4.01.
"Hazardous Materials" means any pollutant,
effluents, emissions, contaminants, toxic or hazardous
wastes or substances, as any of those terms are defined from
time to time in or for the purposes of any relevant
Environmental Law, including asbestos fibers and friable
asbestos, polychlorinated biphenyls, and any petroleum or
hydrocarbon-based products or derivatives.
"HCM" means Health Care microsystems, Inc., a
California corporation.
"HHL" means HHL Financial Services, Inc., a
Delaware corporation.
"Instrument" means with respect to each Standby
Letter of Credit, each written demand for payment under such
Standby Letter of Credit, whether in the form of a draft,
receipt, acceptance, or teletransmission, including but not
limited to telex or cable.
"Interest Period" means, with respect to any LIBOR
Loan, the period commencing on the date such LIBOR Loan is
made, converted or continued and ending, as the Borrower may
select, pursuant to Section 2.04 on the numerically
corresponding day in the first, third or sixth calendar
month thereafter, except that each such Interest Period that
commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end
on the last Business Day of the appropriate subsequent
calendar month. If an Interest Period for a LIBOR Loan
would end on a day which is not a Business Day, such
Interest Period shall be extended to the next Business Day,
unless such Business Day would fall in the next calendar
month, in which event such Interest Period shall end on the
Immediately preceding Business Day. There are no Interest
Periods for Prime Rate Loans.
"Law" means any federal, state or local statute,
law, rule, regulation, ordinance, order, code, policy or
rule of common law, now or hereafter in effect, and in each
case as amended, and any judicial or administrative
<PAGE>
interpretation thereof by a Governmental Authority or
otherwise, including any judicial or administrative order,
consent, decree or judgment.
"LIBOR Interest Rate" means for any LIBOR Loan, a
rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by the Bank to be equal to
the quotient of (1) the LIBOR Base Rate for such Loan for
the Interest Period therefor divided by (2) one minus the
LIBOR Reserve Requirement for such Interest Period.
"LIBOR Loan" means any Loan when and to the extent
the interest rate therefor is determined by reference to the
LIBOR Interest Rate.
"LIBOR Base Rate" means, with respect to any LIBOR
Loan for any Interest Period therefore, the rate per annum
(rounded upward, if necessary, to the nearest 1/16 of 1%)
determined by the Bank to be the rates quoted by the
principal London branch of the Bank at approximately 11:00
a.m. London time (or as soon thereafter as practicable) on
the date two (2) Business Days prior to the first day of
such Interest Period for such LIBOR Loan for the offering to
leading banks in the London interbank market of Dollar
deposits in immediately available funds, for a period, and
in an amount, comparable to such Interest Period and
principal amount of the LIBOR Loan which shall be made,
continued or converted by the Bank and outstanding during
such Interest Period.
"LIBOR Reserve Requirement" means, for any LIBOR
Loan, the average maximum rate at which reserves (including
any marginal, supplemental or emergency reserves) are
required to be maintained during the Interest Period for
such Loan under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding One
Billion Dollars ($l,000,000,000) against "Eurocurrency
liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the LIBOR
Reserve Requirement shall also reflect any other reserves
required to be maintained by such member banks by reason of
any Regulatory Change against (1) any category of
liabilities which includes deposits by reference to which
the LIBOR Base Rate is to be determined or (2) any category
of extensions of credit or other assets which include LIBOR
Loans.
"Lien" means any mortgage, deed of trust, pledge,
security interest, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or
preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind
or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any
financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or
<PAGE>
comparable law of any jurisdiction to evidence any of the
foregoing).
"Loan" or "Loans" shall have the meaning assigned
to such terms in Section 2.01.
"Loan Commitment" has the meaning specified in
Section 2.01.
"Loan Documents" means this Agreement (including
the Guaranty), the Note and each Application.
"Material Adverse Change" means either (1) a
material adverse change in the status of the business,
results of operations, condition (financial or otherwise),
property or prospects of the Borrower or any Guarantor, or
(2) any event or occurrence of whatever nature which could
have a material adverse effect on the Borrower's or any
Guarantor's ability to perform its obligations under the
Loan Documents to which it is a party.
"Multiemployer Plan" means a Plan described in
Section 4001(a)(3) of ERISA which covers employees of
Borrower or any ERISA Affiliate.
"Note" has the meaning specified in Section 2.05.
"Obligations" has the meaning specified in Section
4.01.
"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.
"Permitted Acquisitions" means any Acquisition if
all of the following tests are satisfied: (1) the total
compensation paid and/or Debt assumed (other than accounts
payable to trade creditors for goods or services) in
connection with any such Acquisition does not exceed Twenty
Million Dollars ($20,000,000); (2) the Person or assets
acquired are engaged in, or may be used in connection with,
Existing Lines of Business; (3) at the time of and after
giving effect to such Acquisition there are and shall be no
Defaults or Events of Defaults; and (4) after giving effect
to such proposed Acquisition the total compensation paid
and/or Debt assumed (other than accounts payable to trade
creditors for goods or services) in connection with all
Acquisitions made during the fiscal year in which such
proposed Acquisition is to be made does not exceed Twenty
Million Dollars ($20,000,000).
"Person" means an individual, partnership,
corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association,
joint venture, Governmental Authority, or other entity of
whatever nature.
<PAGE>
"Plan" means any plan established, maintained, or
to which contributions have been made by Borrower or any
ERISA Affiliate.
"Prime Rate" means the rate of interest as
announced by the Bank at its Principal Office as in effect
from time to time as its prime commercial lending rate.
"Prime Rate Loan" means the portions of the Loan
when and to the extent the interest rate therefor is
determined by the Prime Rate.
"Principal Office" means Two Seventy Park Avenue,
New York, New York 10017 or such other office designated by
the Bank as its principal or head office.
"Prohibited Transaction" means any transaction set
forth in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended from time to time.
"QMA" means Quality Medi-Cal Adjudication,
Incorporated, a California corporation.
"Regulation D" means Regulation D of the Board of
Governors, as the same may be amended or supplemented from
time to time.
"Regulatory Change" means, with respect to the
Bank, any change after the date of this Agreement in United
States Federal law, state law or foreign law or regulations
(including, without limitation, Regulation D) or the
adoption or making after such date of any interpretation,
directive or request applying to a class of banks including
the Bank of or under any United States Federal law, state
law or foreign law or regulations (whether or not having the
force of law) by any court or governmental or monetary
authority charged with the interpretation or administration
thereof.
"Reportable Event" means any of the events set
forth in Section 4043 of ERISA.
"Revolving Credit Facility" means Forty Million
Dollars ($40,000,000).
"Revolving Credit Facility (Loans)" means the
Revolving Credit Facility less the Standby Letter of Credit
Obligations less the aggregate sum of all terminations of
the Revolving Credit Facility pursuant to Section 2.02.
"Revolving Credit Facility (Standby Letters of
Credit)" means the lesser of (1) Two Million Dollars
($2,000,000), or (2) the Revolving Credit Facility less the
aggregate principal amount of all outstanding Loans less the
aggregate sum of all terminations of the Revolving Credit
Facility pursuant to Section 2.02.
<PAGE>
"Revolving Credit Facility Fee" has the meaning
specified in Section 2.08.
"Revolving Credit Facility Termination Date" means
July 15, 1999.
"Standby Letter of Credit" has the meaning
specified in Section 3.01.
"Standby Letter of Credit Commitment" has the
meaning specified in Section 3.01.
"Standby Letter of Credit Fees" has the meaning
specified in Section 3.03.
"Standby Letter of Credit Obligations" means at
any time an amount equal to the sum of (1) the aggregate
undrawn face amount of all outstanding Standby Letters of
Credit, plus (2) the aggregate amount of all unreimbursed
obligations on Standby Letters of Credit, plus (3) the
aggregate amount of all overdrafts created to satisfy any of
the foregoing obligations where all reductions in overdrafts
shall first be applied to overdrafts created to satisfy
obligations other than those listed above and then to those
listed above.
"Subscription Agreement" means the Subscription
Agreement dated October 31, 1995 among Health Information
Systems Corporation, Borrower, Welsh, Carson, Anderson &
Stowe VI, L.P., WCAS Information Partners, L.P., WCAS
Healthcare Partners, L.P., Health Systems Architects, Inc.,
WCA Management Corporation and the Several Persons Named in
Schedule I thereto, as in effect on the Closing Date.
"Subsidiary" means, as to any Person, a
corporation, partnership, limited liability company, or
other business entity of which shares of stock, securities
or other ownership interest representing more than fifty
percent (50%) of the ordinary voting power or more than
fifty percent (50%) of the general partnership interest,
are, at the time of which any determination is made, owned
or controlled by such Person or one or more intermediaries,
or both, of such Person, or the management of which is
otherwise controlled, directly, or indirectly through one or
more intermediaries, or both, by such Person.
"Unused Revolving Credit Facility" means, on any
date of determination, the difference, if any, between (1)
the Revolving Credit Facility and (2) the sum of (a) the
aggregate outstanding principal amount of all Loans plus (b)
the aggregate face amount of all outstanding Standby Letters
of Credit.
SECTION 1.02. Accounting Terms. All accounting
terms not specifically defined herein shall be construed in
accordance with GAAP and all financial data submitted
pursuant to this Agreement shall be prepared in accordance
with such principles.
<PAGE>
ARTICLE II
AMOUNT AND TERMS OF THE CREDITS
SECTION 2.01. Loans. The Bank agrees, on the
terms and conditions set forth in this Agreement, to make
loans (the "Loans") to the Borrower on any Business Day
during the period from the Closing Date up to but not
including the Revolving Credit Facility Termination Date,
provided that the aggregate principal amount of all such
Loans outstanding at any time shall not exceed the Revolving
Credit Facility (Loans) ("Loan Commitment"). The Loans may
be: (1) a Prime Rate Loan; or (2) a LIBOR Loan; or (3) any
combination of the foregoing, as determined by the Borrower
and notified to the Bank in accordance with Section 2.03.
Each type of Loan shall be made and maintained at the Bank's
Applicable Lending Office for such type of Loan. Within the
limits of the Revolving Credit Facility (Loans), the
Borrower may borrow, make an optional prepayment pursuant to
Section 2.07, and reborrow under this Section 2.01.
SECTION 2.02. Reduction of Revolving Credit
Facility. The Borrower shall have the right, upon at least
one (1) Business Day's notice to the Bank, to terminate in
whole or reduce in part the unused portion of the Revolving
Credit Facility, provided that each partial reduction shall
be in the amount of not less than Five Hundred Thousand
Dollars ($500,000).
SECTION 2.03. Notice and Manner of Borrowing;
Minimum Amounts. Each LIBOR Loan and Prime Rate Loan shall
be made on notice (each a "Borrowing Notice") from the
Borrower to the Bank, which notice shall be given not later
than 11:00 a.m., New York City time, on (1) the third
Business Day prior to the making of any Loan to which the
LIBOR Interest Rate applies, and (2) the Business Day of
making of any Loan to which the Prime Rate applies. Each
Notice of Borrowing must specify: (1) the date and amount
of such Loan; (2) that the Loan will bear interest at (a)
the Prime Rate, or (b) the LIBOR Interest Rate plus the
Applicable Margin, and (3) in the case of Loans bearing
interest at the LIBOR Interest Rate, the initial Interest
Period applicable thereto. All Prime Rate Loans, and any
conversions thereof pursuant to Section 2.04 below, shall be
in the minimum amount of Five Hundred Thousand Dollars
($500,000) and in integral multiples of One Hundred Thousand
Dollars ($100,000) and all LIBOR Loans, and any Conversions
or Continuations thereof pursuant to Section 2.04 below,
shall be in the minimum amount of One Million Dollars
($1,000,000) and in integral multiples thereof. Upon
fulfillment of the applicable conditions set forth in
Article V, the Bank will make funds available to the
Borrower in immediately available funds by crediting the
amount thereof to the Borrower's account with the Bank.
SECTION 2.04. Interest Periods; Conversions;
Renewals. In the case of each LIBOR Loan, the Borrower
<PAGE>
shall select an Interest Period of any duration in
accordance with the definition of Interest Period in Section
1.01, subject to the following limitations; (1) no Interest
Period may extend beyond the Revolving Credit Facility
Termination Date; (2) no Interest Period shall have a
duration less than one month, and if any such proposed
Interest Period would otherwise be for a shorter period,
such Interest Period shall not be available; and (3) if an
Interest Period would end on a day which is not a Business
Day, such Interest Period shall be extended to the next
Business Day, unless, such Business Day would fall in the
next calendar month, in which event such Interest Period
shall end on the immediately preceding Business Day. There
is no Interest Period for a Prime Rate Loan. Unless a Loan
is accruing interest based upon the LIBOR Interest Rate plus
the Applicable Margin, such Loan will accrue interest at the
Prime Rate. To illustrate, if the Borrower does not
convert a Prime Rate Loan into a LIBOR Loan, then such Loan
will continue to be a Prime Rate Loan.
The Borrower may elect from time to time to
convert all or a part of one type of Loan into a Prime Rate
or LIBOR Loan or to renew all or part of a LIBOR Loan by
giving the Bank notice at least one (1) Business Day before
conversion into a Prime Rate Loan, and at least three (3)
Business Days before the conversion into or renewal of a
LIBOR Loan, specifying (1) the renewal or conversion date;
(2) the amount of the Loan to be converted or renewed; (3)
in the case of conversions, the type of Loan to be converted
into; and (4) in the case of renewals of or a conversion
into LIBOR Loans the duration of the Interest Period
applicable thereto; provided that LIBOR Loans can be
converted only on the last day of the Interest Period for
such Loan. All notices given under this Section 2.04 shall
be irrevocable and shall be given not later than 11:00 a.m.,
New York City time, on the day which is not less than the
number of Business Days specified above for such notice. If
the Borrower shall fail to give the Bank the notice as
specified above for the renewal or conversion of a LIBOR
Loan prior to the end of the Interest Period with respect
thereto, such LIBOR Loan shall automatically be converted
into a Prime Rate Loan on the last day of the Interest
Period for such Loan.
SECTION 2.05. Interest. The Borrower shall pay
interest to the Bank on the outstanding and unpaid principal
amount of its Loans at a rate per annum as follows: (1) for
a Prime Rate Loan at a rate equal to the Prime Rate; and (2)
for a LIBOR Loan at a rate equal to the LIBOR Interest Rate
plus the Applicable Margin. Any principal amount not paid
when due (at maturity, by acceleration or otherwise) shall
bear interest thereafter, payable on demand, at the Default
Rate.
The interest rate on each Prime Rate Loan shall
change when the Prime Rate changes. Interest on each Loan
shall not exceed the maximum amount permitted under
applicable law and shall be calculated on the basis of a
<PAGE>
year of three hundred sixty (360) days for the actual number
of days elapsed.
Accrued interest shall be due and payable in
arrears upon any payment of principal and on the first day
of each month, commencing the first such date after the
Closing Date, and interest accruing at the Default Rate
shall be due and payable on demand.
SECTION 2.06. Note. The Loans shall be evidenced
by, and repaid with interest in accordance with, a single
promissory note of the Borrower, in substantially the form
of Exhibit A hereto (the "Note") duly completed. The Note
shall (1) be in the principal amount of the Revolving Credit
Facility, (2) be dated the Closing Date, (3) be payable to
the Bank for the account of its applicable Lending Office
and (4) mature as to principal on the Revolving Credit
Facility Termination Date. The Bank is hereby authorized by
the Borrower to endorse on the schedule attached to the Note
the amount of each Loan, the type of the Loan and each
renewal, conversion, continuation and payment of principal
amount received by the Bank for the account of its
Applicable Lending Office on account of the Loans, which
endorsement shall, in the absence of manifest error, be
conclusive as to the outstanding balance of the Loans made
by the Bank; provided, however, that the failure to make
such notation with respect to any Loan or renewal,
conversion, continuation or payment shall not limit or
otherwise affect the obligations of the Borrower under this
Agreement or the Note. The Bank agrees that prior to any
assignment of the Note it will endorse the schedule attached
to the Note.
SECTION 2.07. Optional Prepayments. The Borrower
may, upon giving notice to the Bank prior to 11:00 a.m. of
the day of the prepayment in the case of Prime Rate Loans,
and at least three (3) Business Days' notice to each Bank in
the case of LIBOR Loans, prepay the Note, in whole or in
part with accrued interest to the date of such prepayment on
the amount prepaid, provided that: (1) each partial
prepayment shall be in a principal amount of not less than
One Hundred Thousand Dollars ($100,000); and (2) LIBOR Loans
may be prepaid only on the last day of the Interest Period
for such Loan, unless the Borrower pays the Bank the Broken
Funding Fee.
SECTION 2.08. Fees. The Borrower shall pay to
the Bank a commitment fee (the "Revolving Credit Facility
Fee") on the daily average amount of the Unused Revolving
Credit Facility for the period from and including the
Closing Date to but excluding the Revolving Credit Facility
Termination Date at a rate per annum equal to one-fifth of
one percent (.20%). The accrued Revolving Credit Facility
Fee shall be payable monthly in arrears on the first day of
each calendar month, commencing the first such date after
the Closing Date.
<PAGE>
SECTION 2.09. Method of Payment. The Borrower
shall make each payment under this Agreement and under the
Note not later than 11:00 A.M. (New York time) on the date
when due in Dollars to the Bank for the account of its
Applicable Lending Office. The Borrower hereby authorizes
the Bank, if and to the extent payment is not made when due
under this Agreement or under the Note, to charge from time
to time against any account it maintains with the Bank any
amount so due to the Bank. Except to the extent provided in
this Agreement, whenever any payment to be made under this
Agreement or under the Note shall be stated to be due on any
day other than a Business Day, such payment shall be made on
the next succeeding Business Day, and such extension of time
shall be included in the computation of the payment of
interest, the Revolving Credit Facility Fee and any other
fees that may be applicable hereunder.
SECTION 2.10. Use of Proceeds. The proceeds of
the Loans shall be used by the Borrower for working capital,
equipment purchases, financing the purchase of Acquisitions
and general corporate purposes; provided, however, no
proceeds will be used for Acquisitions which are not
Permitted Acquisitions. The Borrower will not, directly or
indirectly, use any part of such proceeds for the purpose of
purchasing or carrying any margin stock within the meaning
of Regulation U of the Board of Governors or to extend
credit to any Person for the purpose of purchasing of
carrying any such margin stock.
SECTION 2.11. Additional Costs. The Borrower
shall pay directly to the Bank from time to time on demand
such amounts as the Bank may determine to be necessary to
compensate it for any increased costs which the Bank
determines are attributable to its making or maintaining any
LIBOR Loan, or its obligation to convert any Prime Rate Loan
to a LIBOR Loan hereunder, or any reduction in any amount
receivable by the Bank hereunder in respect of any of such
LIBOR Loans or such obligation (such increases in costs and
reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change
which:
(1) changes the basis of taxation of any amounts
payable to the Bank under this Agreement or the Note in
respect of any of such LIBOR Loans (other than taxes
imposed on or measured by the overall net income of the
Bank or of its Applicable Lending Office for any of
such LIBOR Loans by the jurisdiction in which the Bank
has its principal office or such Applicable Lending
Office); or
(2) (other than to the extent of the LIBOR
Reserve Requirement taken into account in determining
the LIBOR Interest Rate at the commencement of the
applicable Interest Period) imposes or modifies any
reserve, special deposit, deposit insurance or
assessment, minimum capital, capital ratio or similar
requirements relating to any extensions of credit or
<PAGE>
other assets of, or any deposits with or other
liabilities of, the Bank (including any LIBOR Loans or
any deposits referred to in the definition of "LIBOR
Interest Rate" in Section 1.01 hereof), or any
commitment of the Bank; or
(3) imposes any other condition affecting this
Agreement or the Note (or any of such extensions of
credit or liabilities).
Without limiting the effect of the provisions of
the first paragraph of this Section 2.11, in the event that,
by reason of any Regulatory Change, the Bank either (1)
incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of
deposits of other liabilities of the Bank which includes
deposits by reference to which the LIBOR Interest Rate, is
determined as provided in this Agreement or a category of
extensions of credit or other assets of the Bank which
includes loans based on the LIBOR Interest Rate, or (2)
becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then,
if the Bank so elects by notice to the Borrower, the
obligation of the Bank to make or continue, or to convert
Loans into LIBOR Loans, shall be suspended until such
Regulatory Change ceases to be in effect (in which case the
provisions of Section 2.14 hereof shall be applicable).
Without limiting the effect of the foregoing
provisions of this Section 2.11 (but without duplication),
the Borrower shall pay directly to the Bank from time to
time on request such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs which it
determines are attributable to the maintenance by the Bank
(or any Applicable Lending Office), pursuant to any law or
regulation or any interpretation, directive or request
(whether or not having the force of law and whether in
effect on the date of this Agreement or thereafter) of any
court or governmental or monetary authority of capital in
respect of any Loan or the Revolving Credit Facility, such
compensation to include, without limitation, an amount equal
to any reduction of the rate of return on assets or equity
of the Bank (or any Applicable Lending Office) to a level
below that which the Bank (or any Applicable Lending Office)
could have achieved but for such law, regulation, interpre-
tation, directive or request.
Determinations and allocations by the Bank for
purposes of this Section 2.11 of the effect of any
Regulatory Change pursuant to the first or second paragraph
of this Section 2.11 or of the effect of capital maintained
pursuant to the third paragraph of this Section 2.11, on its
costs or rate of return of maintaining the Loans or on
amounts receivable by it in respect of the Loans, and the
amounts required to compensate the Bank under this
Section 2.11, shall be conclusive absent manifest error.
<PAGE>
SECTION 2.12. Limitation on Types of Loans.
Anything herein to the contrary notwithstanding, if, on or
prior to the determination of the LIBOR Interest Rate for
any Interest Period the Bank determines (which determination
shall be conclusive) that (1) the relevant rates of interest
referred to in the definition of "LIBOR Interest Rate" in
Section 1.01 hereof upon the basis of which the rate of
interest for LIBOR Loans, for such Interest Period is to be
determined do not adequately cover the cost to the Bank of
making or maintaining such LIBOR Loans for such Interest
Period; or (2) quotations of interest rates for the relevant
deposits referred to in the definition of LIBOR Interest
Rate are not being provided in the relevant amounts or for
the relevant maturities for purposes of determining the rate
of interest on a LIBOR Loan as provided in this Agreement;
then the Bank shall give the Borrower prompt notice thereof,
and so long as such condition remains in effect, the Bank
shall be under no obligation to make LIBOR Loans, convert
Loans into LIBOR Loans, or continue LIBOR Loans, and the
Borrower shall, on the last day(s) of the then current
Interest Period(s) for the outstanding LIBOR Loans either
prepay such LIBOR Loans, or convert such LIBOR Loans, into a
Prime Rate Loan.
SECTION 2.13. Illegality. Notwithstanding any
other provision of this Agreement, in the event that it
becomes unlawful for the Bank or its Applicable Lending
Office to honor its obligation to make or maintain LIBOR
Loans hereunder or convert Loans into LIBOR Loans, then the
Bank shall promptly notify the Borrower thereof and the
Bank's obligation to make or continue, or to convert Loans
into LIBOR Loans, shall be suspended until such time as the
Bank may again make and maintain LIBOR Loans (in which case
the provisions of Section 2.14 hereof shall be applicable).
SECTION 2.14. Treatment of Affected Loans. If
the obligations of the Bank to make or continue LIBOR Loans,
or to convert Loans into LIBOR Loans are suspended pursuant
to Section 2.11 or 2.13 hereof (LIBOR Loans so affected
being herein called "Affected Loans") the Bank's Affected
Loans shall be automatically converted into Prime Rate Loans
on the last day(s) of the then current Interest Period(s)
for the Affected Loans (or, in the case of a conversion
required by Section 2.11 or 2.13, on such earlier date as
the Bank may specify to the Borrower).
To the extent that the Bank's Affected Loans have
been so converted, all payments and prepayments of principal
which would otherwise be applied to the Bank's Affected
Loans shall be applied instead to its Prime Rate Loans. All
Loans which would otherwise be made or continued by the Bank
as LIBOR Loans shall be made or continued instead as Prime
Rate Loans and all Prime Rate Loans of the Bank which would
otherwise be converted into LIBOR Loans shall remain as
Prime Rate Loans.
SECTION 2.15. Risk-Based Capital. In addition to
the rights granted under any other provision of this
<PAGE>
Agreement, in the event that the Bank determines that (1)
compliance with any judicial, administrative, or other
governmental interpretation of any law or regulation or (2)
compliance by the Bank or any corporation controlling the
Bank with any guideline or request from any central bank or
other Governmental Authority (whether or not having the
force of law) has the effect of requiring an increase in the
amount of capital required or expected to be maintained by
the Bank or any corporation controlling the Bank, and the
Bank determines that such increase is based upon its
obligations hereunder, and other similar obligations, the
Borrower shall pay to the Bank, such additional amount as
shall be certified by the Bank to be the amount allocable to
the Bank's obligations to the Borrower hereunder. The Bank
will notify the Borrower of any event occurring after the
date of this Agreement that will entitle the Bank to
compensation pursuant to this Section 2.15 as promptly as
practicable after it obtains knowledge thereof and
determines to request such compensation. The Borrower
agrees to pay compensation pursuant to this Section 2.15
within thirty (30) days after the Bank notifies the Borrower
that the Bank is entitled to compensation under this Section
2.15.
Determinations by the Bank for purposes of this
Section 2.15 of the effect of any increase in the amount of
capital required to be maintained by the Bank and of the
amount allocable to the Bank's obligations to the Borrower
hereunder shall be conclusive, absent manifest error.
SECTION 2.16. Certain Compensation. The Borrower
shall pay to the Bank, upon the request of the Bank, such
amount or amounts as shall be sufficient (in the reasonable
opinion of the Bank) to compensate it for any loss, cost or
expense which the Bank determines is attributable to:
(1) any payment, prepayment, conversion or
continuation of a LIBOR Loan made by the Bank on a date
other than the last day of an Interest Period for such
Loan whether by reason of acceleration or otherwise; or
(2) any failure by the Borrower for any reason to
borrow, convert or continue a LIBOR Loan to be
borrowed, converted or continued by the Bank on the
date specified therefor in the relevant notice issued
by the Borrower.
Without limiting the foregoing, such compensation
shall include an amount equal to the Broken Funding Fee. A
determination of the Bank as to the amounts payable pursuant
to the prior paragraph of this Section 2.16 shall be
conclusive absent manifest error.
<PAGE>
ARTICLE III
LETTERS OF CREDIT
SECTION 3.01. Standby Letters of Credit. Subject
to the terms and conditions of this Agreement, the Bank
agrees to issue standby or performance letters of credit
("Standby Letters of Credit") for the account of the
Borrower from time to time during the period from the
Closing Date to the Revolving Credit Facility Termination
Date, provided that the aggregate face and principal amount
of all Standby Letter of Credit Obligations outstanding at
any time does not exceed the Revolving Credit Facility
(Standby Letter of Credit) ("Standby Letter of Credit
Commitment"). In addition, the Bank will not be required to
issue a Standby Letter of Credit with a maturity date (1)
more than three hundred sixty-five (365) days from the date
of issuance of such Standby Letter of Credit, or (2) on or
after the Revolving Credit Facility Termination Date.
SECTION 3.02. Application for Standby Letter of
Credit. The Bank will not be required to issue a Standby
Letter of Credit unless the Borrower submits to the Bank an
Application (in the Bank's then current form for standby or
performance letters of credit) for such Standby Letter of
Credit. In addition to the other terms and provisions of
this Agreement, including but not limited to those set forth
in this Article, each Standby Letter of Credit will be
subject to the terms and provisions of the Application
submitted in connection with such Standby Letter of Credit,
provided, however, that to the extent there are any
inconsistencies between this Agreement and the Application
the terms of this Agreement apply.
SECTION 3.03. Standby Letter of Credit Fees and
Expenses. The Borrower will pay the Bank, on demand, the
Bank's issuance and administrative fees and all charges,
costs, and expenses paid or incurred by the Bank in
connection with each Standby Letter of Credit. Unless
otherwise agreed, all issuance and administrative fees
payable under this Agreement shall be at the rates
customarily charged by the Bank at that time in like
circumstances.
In addition to the items noted in the first
paragraph of this Section, the Borrower shall pay to the
Bank an annual letter of credit fee equal to one percent
(1%) of the face amount of each Standby Letter of Credit
("Standby Letter of Credit Fee"). Such Standby Letter of
Credit Fee shall accrue from the date of issuance of each
such Standby Letter of Credit and be paid quarterly, in
arrears, on each Quarterly Date after the issuance of such
Standby Letter of Credit and on the Revolving Credit
Facility Termination Date. Provided, however, the
percentage used to compute the Standby Letter of Credit Fee
will be increased by two percent (2%) during each period a
Default or Event of Default exists.
<PAGE>
In addition to the fees and amounts otherwise
payable by Borrower under this Section, the Borrower shall
pay to the Bank on demand such amounts as the Bank, in its
sole discretion, determines are necessary to compensate it
for any cost attributable to its providing or maintaining
its Standby Letter of Credit Commitment, or its issuing or
having outstanding any Standby Letter of Credit, resulting
from the application of any Law or regulation applicable to
the Bank regarding any reserve, assessment, capital adequacy
or similar requirements relating to letters of credit or the
reimbursement agreements with respect thereto or to similar
liabilities or assets of the Bank, whether existing at the
time of issuance of the Standby Letter of Credit or adopted
thereafter. The Borrower acknowledges that there are
various methods of allocating costs to the Standby Letters
of Credit and agrees that the Bank's allocation for purposes
of determining the costs referred to in this paragraph shall
be conclusive and binding upon the Borrower, provided such
allocation is made by the Bank in good faith.
SECTION 3.04. Reimbursement Obligation. The
Borrower will pay the Bank, on demand, at 1411 Broadway,
Fifth Floor, New York, New York 10018 in immediately
available funds, the amount required to reimburse the Bank
in respect of the Bank's payment of each Instrument. If not
reimbursed on the date of the Bank's payment of an
Instrument then such reimbursement shall be made with
interest at the Default Rate on Prime Rate Loans from the
date of the Bank's payment of such Instrument to the date of
the Borrower's reimbursement of the Bank.
If the Instrument is in foreign currency, such
reimbursement shall be in United States currency at the
Bank's selling rate for cable transfers to the place of
payment of the Instrument current on the date of payment or
of the Bank's settlement of its obligation, as the Bank may
require. If, for any cause, on the date of payment or
settlement, as the case may be, there is no selling rate or
other rate of exchange generally current in New York for
effecting such transfers, the Borrower will pay the Bank on
demand an amount in United States currency equivalent to the
Bank's actual cost of settlement of its obligation however
or whenever the Bank shall make such settlement, with
interest at the Prime Rate from the date of settlement to
the date of payment. The Borrower will comply with all
governmental exchange regulations now or hereafter
applicable to each Standby Letter of Credit or Instrument or
payments related thereto and will pay the Bank, on demand,
in Dollars, such amount as the Bank may be or may have been
required to expend on account of such regulations. The Bank
may debit any account or accounts maintained by the Borrower
with any office of the Bank or any of its subsidiaries or
affiliates (now or in the future) and apply the proceeds to
the payment of any and all amounts owed by the Borrower to
the Bank under this Article.
<PAGE>
ARTICLE IV
GUARANTY
SECTION 4.01. Guaranty. Each Guarantor hereby
jointly and severally irrevocably, absolutely and
unconditionally guarantees to the Bank and its successors,
endorsees, transferees and assigns the prompt and complete
payment by the Borrower, as and when due and payable
(whether at stated maturity or by required prepayment,
acceleration, demand or otherwise), of all indebtedness,
obligations and liabilities of Borrower to the Bank now
existing or hereafter incurred under or arising out of or in
connection with the Loan Documents, whether for principal,
interest, reimbursement obligations, fees, expenses or
otherwise and all other obligations of the Borrower to the
Bank including but not limited to all obligations under the
Loans and Standby Letters of Credit (all such indebtedness,
obligations, and liabilities being herein called the
"Obligations"); and agrees to pay any and all expenses
(including counsel fees and expenses) which may be paid or
incurred by the Bank in collecting any or all of the
Obligations and/or enforcing any rights under any of the
Loan Documents or under the Obligations (the "Guaranty").
SECTION 4.02. Guarantor's Obligations
Unconditional. Each Guarantor hereby guarantees that the
Obligations will be paid strictly in accordance with their
terms, including the terms of the Loan Documents, regardless
of any Law, regulation or order now or hereafter in effect
in any jurisdiction affecting any such terms or the rights
of the Bank with respect thereto. The obligations and
liabilities of each Guarantor under this Guaranty shall be
absolute and unconditional irrespective of: (1) any lack of
validity or enforceability of any of the Obligations, any
Loan Documents, or any agreement or instrument relating
thereto; (2) any change in the time, manner or place of
payment of, or in any other term in respect of, all or any
of the Obligations, or any other amendment or waiver of or
consent to any departure from any Loan Documents or any
other document related to such Obligations; (3) any exchange
or release of, or non-perfection of any Lien on or in, any
collateral, or any release or amendment or waiver of or
consent to any departure from any other guaranty, for all or
any of the Obligations; or (4) any other circumstances which
might otherwise constitute a defense available to, or a
discharge of, the Borrower or any other guarantor in respect
of the Obligations or each Guarantor in respect of this
Guaranty.
This Guaranty is a continuing guaranty and shall
remain in full force and effect until: (1) the payment in
full of all the Obligations after the Revolving Credit
Facility Termination Date, and (2) the payment of the other
expenses to be paid by the Guarantor pursuant hereto. This
Guaranty shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment,
or any part thereof, of any of the Obligations is rescinded
<PAGE>
or must otherwise be returned by the Bank upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or otherwise, all as though
such payment had not been made.
The obligations and liabilities of each Guarantor
under this Guaranty shall not be conditioned or contingent
upon the pursuit by the Bank or any other Person at any time
of any right or remedy against the Borrower or any other
Person which may be become liable in respect of all or any
part of the Obligations or against any collateral or
security or guarantee therefor or right of setoff with
respect thereto.
Each Guarantor hereby consents that, without the
necessity of any reservation of rights against any Guarantor
and without notice to or further assent by any Guarantor,
any demand for payment of any of the Obligations made by the
Bank may be rescinded by the Bank and any of the Obligations
continued after such rescission.
SECTION 4.03. Waivers. Each Guarantor hereby
waives: (1) promptness and diligence; (2) notice of or
proof of reliance by the Bank upon this Guaranty or
acceptance of this Guaranty; (3) notice of the incurrence of
any Obligations by the Borrower or the renewal, extension or
accrual of any Obligation; (4) notice of any actions taken
by the Bank or the Borrower or any other party under any
Loan Document, or any other agreement or instrument relating
thereto; (5) all other notices, demands and protests, and
all other formalities of every kind in connection with the
enforcement of the Obligations or of the obligations of each
Guarantor hereunder, the omission of or delay in which, but
for the provisions of this Section 4.03, might constitute
grounds for relieving any Guarantor of its obligations
hereunder; and (6) any requirement that the Bank protect,
secure, perfect or insure any Lien or any property subject
thereto or exhaust any right or take any action against the
Borrower or any other Person or any collateral.
SECTION 4.04. Subrogation. Each Guarantor hereby
waives any rights which it may acquire by way of subrogation
under this Guaranty, whether acquired by any payment made
hereunder, by any setoff or application of funds of the
Guarantor, by the Bank or otherwise.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to the Initial
Loan or Standby Letter of Credit. The obligation of the
Bank to enter into this Agreement and to make the initial
Loan and to issue the initial Standby Letter of Credit is
subject to the condition precedent that the Bank shall have
received on or before the Closing Date each of the following
documents, in form and substance satisfactory to the Bank
<PAGE>
and its counsel, and each of the following requirements
shall have been fulfilled:
(1) The Note. The Note duly executed by the
Borrower;
(2) Evidence of Due Organization of Borrower and
each Guarantor. Certified copies, dated the Closing
Date, of the Certificate of Incorporation and By-Laws
of the Borrower and each Guarantor and all amendments
thereto;
(3) Evidence of All Corporate Action of the
Borrower and each Guarantor. Certified copies, dated
the Closing Date, of all corporate action taken by the
Borrower and each Guarantor, including resolutions of
its Board of Directors, authorizing the execution,
delivery, and performance of the Loan Documents to
which it is a party and each document to be delivered
pursuant to this Agreement;
(4) Incumbency and Signature Certificate of the
Borrower and each Guarantor. A certificate, dated the
Closing Date, of the Secretary of the Borrower and each
Guarantor, certifying the names and true signatures of
the officers of the Borrower or each Guarantor, as the
case may be, authorized to sign the Loan Documents to
which it is a party and the other documents to be
delivered pursuant to this Agreement;
(5) Good Standing Certificates. A certificate,
dated within ten (10) days of the Closing Date, from
the Secretary of State (or other appropriate official)
of the jurisdiction of incorporation of the Borrower
and each Guarantor certifying as to the due
incorporation and good standing of the Borrower or such
Guarantor, as the case may be, and certificates, dated
within five (5) days of the Closing Date, from the
Secretary of State (or other appropriate official) of
each other jurisdiction where the Borrower and each
Guarantor is required to be qualified to conduct
business, certifying that the Borrower or such
Guarantor, as the case may be, is duly qualified to do
such business and is in good standing in such state;
(6) Opinion of Counsel. A favorable opinion of
Messrs. Coleman & Rhine, LLP counsel for the Borrower
and each Guarantor, in substantially the form of
Exhibit B and as to such other matters as the Bank may
reasonably request;
(7) Financial Advisory Fee. Payment in full of
the Financial Advisory Fee;
(8) Legal Fees. Dewey Ballantine has been paid
in full for all legal fees, costs and expenses incurred
in connection with the preparation of the Loan
Documents; and
<PAGE>
(9) Additional Documentation. The Bank shall
have received such other approvals or documents as the
Bank may reasonably request.
SECTION 5.02. Conditions Precedent to All Loans
and All Standby Letters of Credit. The obligations of the
Bank to provide each Loan (including the initial Loan) and
to issue each Standby Letter of Credit (including the
initial Standby Letter of Credit) shall be subject to the
further conditions precedent that on the date of providing
such Loan or issuing such Standby Letter of Credit, as the
case may be:
(1) The following statements shall be true:
(a) all the representations and warranties
contained in each of the Loan Documents
are correct on and as of the date of
providing such Loan or issuing such
Standby Letter of Credit, as the case
may be, as though made on and as of such
date; and
(b) no Default or Event of Default has
occurred and is continuing, or could
result from providing such Loan or
issuing such Standby Letter of Credit,
as the case may be; and
(2) The Bank shall have received such other
approvals, opinions or documents as the Bank may
reasonably request.
SECTION 5.03. Deemed Representation. Each
request for a Loan or a Standby Letter of Credit and, in the
case of a Loan, acceptance by the Borrower of any proceeds
of such Loan or in the case of a Standby Letter of Credit,
issuance of such Standby Letter of Credit shall constitute a
representation and warranty that the statements contained in
Section 5.02(1) are true and correct both on the date of
such notice and as of the date of the providing of such Loan
or issuing such Standby Letter of Credit, as the case may
be.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrower and each Guarantor represents and
warrants to the Bank that:
SECTION 6.01. Incorporation, Good Standing and
Due Qualification. The Borrower and each Guarantor is a
corporation duly incorporated, validly existing, and in good
standing under the laws of the jurisdiction of its
incorporation; has the corporate power and authority to own
its assets and to transact the business in which it is now
<PAGE>
engaged or proposed to be engaged in; and is duly qualified
as a foreign corporation and in good standing under the laws
of each other jurisdiction in which such qualification is
required.
SECTION 6.02. Corporate Power and Authority. The
execution, delivery, and performance by the Borrower and
each Guarantor of the Loan Documents to which each is a
party have been duly authorized by all necessary corporate
action, and does not and will not: (1) require any consent
or approval of the stockholders of the Borrower or any
Guarantor; (2) contravene the Borrower's or any Guarantor's
charter or bylaws; (3) violate any provision of any Law,
rule, regulation (including, without limitation, Regulation
U of the Board of Governors), order, writ, judgment,
injunction, decree, award or Governmental Approval presently
in effect having applicability to the Borrower or any
Guarantor; (4) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other
agreement, lease, or instrument to which the Borrower or any
Guarantor is a party or by which it or its properties may be
bound or affected; (5) result in, or require, the creation
or imposition of any Lien, upon or with respect to any of
the properties now owned or hereafter acquired by the
Borrower or any Guarantor other than Liens in favor of the
Bank; or (6) cause the Borrower or any Guarantor to be in
default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, award or Governmental Approval
or any such indenture or loan or credit agreement or other
agreement, lease or instrument. Except as required pursuant
to the Loan Documents no authorization, approval or other
action by, and no notice to or filing with, any Governmental
Authority or regulatory body is required for the due
execution, delivery and performance by the Borrower or any
Guarantor of the Loan Documents to which it is a party.
SECTION 6.03. Legally Enforceable Agreement.
This Agreement is, and each of the other Loan Documents when
executed and delivered under this Agreement will be, legal,
valid, and binding obligation of the Borrower or the
Guarantor, enforceable against the Borrower or the
Guarantor, as the case may be, in accordance with their
respective terms, except as such enforcement may be limited
by applicable bankruptcy, insolvency, and other similar laws
affecting creditors' rights generally on the exercise of
judicial discretion with respect to the availability of
equitable remedies.
SECTION 6.04. Financial Statements. The
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at October 31, 1995, and the
related consolidated statement of operations, consolidated
statements of shareholder's equity and consolidated
statement of cash flow, of the Borrower and its Consolidated
Subsidiaries for the fiscal year then ended, and the
accompanying footnotes, together with the report thereon,
dated November 21, 1995 (except as to note 17, which is as
of December 15, 1995 and note 1(f) which is as of May 6,
<PAGE>
1996), of KPMG Peat Marwick LLP, independent certified
public accountants, copies of which have been furnished to
the Bank, are complete and correct and fairly present the
financial condition of the Borrower and its Consolidated
Subsidiaries as at such dates and the results of the
operations of the Borrower and its Consolidated Subsidiaries
for the periods covered by such statements, all in
accordance with GAAP consistently applied, and since October
31, 1995, there has been no material adverse change in the
condition (financial or otherwise), business, or operations
of the Borrower or any Consolidated Subsidiary. The
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of January 31, 1996 (as
restated as of April 28, 1996), and the related consolidated
statement of operations, consolidated statement of
shareholder's equity and consolidated statement of cash
flow, of the Borrower and its Consolidated Subsidiaries for
the three (3) month period then ended, copies of which have
been furnished to the Bank, are complete and correct and
fairly present the financial condition of the Borrower and
the Consolidated Subsidiaries as at such dates and the
results of operations of the Borrower and its Consolidated
Subsidiary for the period covered by such statements, all in
accordance with GAAP consistently applied. There are no
liabilities of the Borrower or any Consolidated Subsidiary,
fixed or contingent, which are material but are not
reflected in the financial statements or in the notes
thereto, other than liabilities arising in the ordinary
course of business since October 31, 1995. No information,
exhibit, or report furnished by the Borrower to the Bank in
connection with the negotiation of this Agreement contained
any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements
contained therein not materially misleading.
SECTION 6.05. Labor Disputes and Acts of God.
Neither the business nor the properties of the Borrower or
any of its Subsidiary or any Guarantor are affected by any
fire, explosion, accident, strike, lockout, or other labor
dispute, drought, storm, hail, earthquake, embargo, act of
God or of the public enemy, or other casualty (whether or
not covered by insurance), materially and adversely
affecting such Business or properties on the operation of
the Borrower or any Subsidiary or any Guarantor.
SECTION 6.06. Other Agreements. Neither the
Borrower nor any of its Subsidiary nor any Guarantor is a
party to any indenture, loan, or credit agreement, or to any
lease or other agreement or instrument or subject to any
charter or corporate restriction which could result in a
Material Adverse Change. Neither the Borrower nor any of
its Subsidiaries nor any Guarantor is in default in any
material respect in the performance, observance, or
fulfillment of any of the obligations, covenants, or
conditions contained in any agreement or instrument which
could result in a Material Adverse Change.
<PAGE>
SECTION 6.07. Litigation. There is no pending or
threatened action or proceeding against or affecting the
Borrower or any of its Subsidiaries or any Guarantor before
any court, governmental agency, or arbitrator, which could
be adversely determined and if so determined could, in any
one case or in the aggregate, result in a Material Adverse
Change.
SECTION 6.08. No Defaults on Outstanding
Judgments or Orders. The Borrower and each Guarantor (1)
have satisfied all judgments, and (2) are not in default
with respect to any judgment, writ, injunction, decree,
rule, or regulation of any court, arbitrator, or federal,
state, municipal, or other Governmental Authority,
commission, board, bureau, agency, or instrumentality,
domestic or foreign.
SECTION 6.09. Ownership and Liens. The Borrower,
each of its Subsidiaries and each Guarantor, each has title
to, or valid leasehold interests in, all of its properties
and assets, real and personal, and none of the properties
and assets owned by the Borrower or any of its Subsidiary or
any Guarantor and none of their leasehold interests are
subject to any Lien, except such as may be permitted
pursuant to Section 8.01 of this Agreement.
SECTION 6.10. Subsidiaries and Ownership of
Stock. The Guarantors are the only Subsidiaries of the
Borrower. All of the outstanding capital stock of each
Guarantor has been validly issued, is entirely owned by the
Borrower, fully paid and non-assessable, and is owned by the
Borrower free and clear of all Liens.
SECTION 6.11. ERISA. The Borrower and each of
its Subsidiaries and each Guarantor is in compliance in all
respects with all applicable provisions of ERISA; neither a
Reportable Event nor a Prohibited Transaction has occurred
and is continuing with respect to any Plan; no notice of
intent to terminate a Plan has been filed nor has any Plan
been terminated; no circumstances exist which constitute
grounds under Section 4042 of ERISA on which the PBGC could
institute proceedings to terminate, or appoint a trustee to
administrate, a Plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any Guarantor nor any
ERISA Affiliate has completely or partially withdrawn under
Section 4201 or 4204 of ERISA from a Multiemployer Plan; the
Borrower, each Guarantor and each ERISA Affiliate has met
its minimum funding requirements under ERISA with respect to
all of their Plans and the present fair market value of all
Plan assets exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation
date of the Plan and in accordance with the provisions of
ERISA and the regulations thereunder for calculating the
potential liability of the Borrower or any Guarantor or any
ERISA Affiliate to the PBGC or the Plan under Title IV of
ERISA; and neither the Borrower nor any Guarantor nor any
ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
<PAGE>
SECTION 6.12. Operation of Business. The
Borrower and its Subsidiaries and each Guarantor possess all
licenses, permits, franchises, patents, copyrights,
trademarks, and trade names, or rights thereto, to conduct
their respective businesses substantially as now conducted
and as presently proposed to be conducted, and neither the
Borrower nor its Subsidiaries nor any Guarantor is in
violation of any valid rights of others with respect to any
of the foregoing.
SECTION 6.13. Taxes. The Borrower and each of
its Subsidiaries and each Guarantor have filed all tax
returns (federal, state and local) required to be filed and
have paid all federal, state, local and foreign taxes,
assessments and governmental charges and levies thereon
required to be paid through the date hereof, including
interest and penalties.
SECTION 6.14. Subscription Agreement. As of the
Closing Date, the Subscription Agreement is in the form of
Exhibit C.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as the Note remains unpaid or any Standby
Letter of Credit Obligation shall remain outstanding or the
Bank shall have any Commitment under this Agreement, or any
other amount is owing by Borrower to Bank under any Loan
Document, the Borrower will:
SECTION 7.01. Maintenance of Existence. Preserve
and maintain, and cause each of its Subsidiaries to preserve
and maintain, its corporate existence, and, good standing in
the jurisdiction of its incorporation, and qualify and
remain qualified, and cause each of its Subsidiaries to
qualify and remain qualified, as a foreign corporation, as
the case may be, in each jurisdiction in which the failure
to so qualify could result in a Material Adverse Change.
SECTION 7.02. Maintenance of Records. Keep, and
cause each of its Subsidiaries to keep, adequate records and
books of account, in which complete entries will be made in
accordance with GAAP consistently applied for all reporting
periods, reflecting all financial transactions of the
Borrower and its Subsidiaries.
SECTION 7.03. Maintenance of Properties.
Maintain, keep, and preserve and cause each of its
Subsidiaries to maintain, keep and preserve, all of its
properties (tangible and intangible) necessary or useful in
the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted.
<PAGE>
SECTION 7.04. Conduct of Business. Continue, and
cause each of its Subsidiaries to continue, to engage in
Existing Lines of Business.
SECTION 7.05. Maintenance of Insurance.
Maintain, and cause each of its Subsidiaries to maintain,
insurance policies with financially sound and reputable
insurance companies or associations in such amounts and
covering such risks as are usually carried by companies
engaged in the same or a similar business and similarly
situated and such other insurance as reasonably required by
the Bank, which insurance may provide for reasonable
deductibility from coverage thereof.
SECTION 7.06. Compliance With Laws. Comply, and
cause each of its Subsidiaries to comply, in all respects
with all applicable Laws, rules, regulations, orders and
Governmental Approvals, such compliance to include, without
limitation, paying before the same become delinquent all
taxes, assessments, and governmental charges imposed upon it
or upon its property, except to the extent such taxes,
assessments and governmental charges are the subject of a
Good Faith Contest.
Without limiting the generality of the foregoing
paragraph, comply, and cause each of its Subsidiaries to
comply, in all respects with all applicable Environmental
Laws and immediately pay or cause to be paid all costs and
expenses incurred in connection with such compliance.
SECTION 7.07. Right of Inspection. At any
reasonable time and from time to time upon reasonable
notice, permit the Bank or any agent or representative
thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties
of, the Borrower and any Subsidiary of the Borrower to
discuss the affairs, finances, and accounts of the Borrower
and any Subsidiary of the Borrower with any of their
respective officers and directors and independent
accountants.
SECTION 7.08. Reporting Requirements. Furnish to
the Bank:
(1) Borrower's Quarterly Financial Statements.
As soon as available and in any event within sixty (60)
days after the end of the first, second and third
quarterly accounting periods of each fiscal year of the
Borrower, the consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the
last day of such quarterly period and the related
consolidated statements of operations, cash flows and
changes in shareholders' equity of the Borrower and its
Consolidated Subsidiaries for each quarterly period and
(in the case of second and third quarterly periods) for
the portion of the fiscal year ending with the last day
of each quarterly period, in each case setting forth in
comparative form corresponding unaudited consolidated
<PAGE>
figures from the preceding fiscal year, all in
reasonable detail and all prepared in accordance with
GAAP consistently applied and certified by the chief
financial officer of the Borrower (subject to year-end
adjustments);
(2) Borrower's Annual Financial Statements. As
soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Borrower,
the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such fiscal
year and the related consolidated statements of
operations, cash flows and changes in shareholders'
equity of the Borrower and its Consolidated
Subsidiaries for such fiscal year and stating in
comparative form the consolidated figures for the
corresponding date and period in the previous fiscal
year, all in reasonable detail and all prepared in
accordance with GAAP consistently applied, accompanied
by an opinion on such consolidated financial statements
acceptable to the Bank by an independent certified
public accountants selected by the Borrower and
acceptable to the Bank;
(3) Management Letters. Promptly upon receipt
thereof, copies of any reports submitted to the
Borrower or any of its Consolidated Subsidiaries by
independent certified public accountants in connection
with the examination of the financial statements of the
Borrower or any of its Consolidated Subsidiaries made
by such accountants;
(4) Certificate of No Default. Within sixty
(60) days after the end of each of the first three
quarters of each fiscal year and within ninety (90)
days of the end of each fiscal year of the Borrower, a
certificate of the chief financial officer of the
Borrower (a) certifying that no Default or Event of
Default has occurred and is continuing, or if a Default
or Event of Default has occurred and is continuing a
statement as to the nature thereof and the action which
is proposed to be taken with respect thereto; and (b)
with computations demonstrating compliance with the
covenants contained in Article IX;
(5) SEC and Other Reports. Promptly upon their
becoming publicly available, a copy of each report
(including Form 8-K, 10-K, and 10-Q), proxy statement
and registration statement or prospectus relating to
securities of the Borrower filed by Borrower with or
delivered to any securities exchange, the Securities
and Exchange Commission or any successor agency;
(6) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits, and
proceedings before any court or governmental
department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the
<PAGE>
Borrower or any of its Subsidiaries which, if
determined adversely to the Borrower or any of its
Subsidiaries, could result in a Material Adverse
Change;
(7) Notice of Defaults and Events of Default. As
soon as possible and in any event within seven (7) days
after any officer of the Borrower or any of its
Subsidiaries has knowledge of the occurrence of each
Default or Event of Default, a written notice setting
forth the details of such Default or Event of Default
and the action which is proposed to be taken by the
Borrower and its Subsidiaries with respect thereto;
(8) ERISA Reports. As soon as possible and in
any event within seven (7) days after the Borrower or
any of its Subsidiaries knows or has reason to know
that any Reportable Event or Prohibited Transaction has
occurred with respect to any Plan or that the Borrower
or any of its Subsidiaries has instituted or will
institute proceedings under Title IV of ERISA to
terminate any Plan, the Borrower, will deliver to each
Bank a certificate of the chief financial officer of
the Borrower, setting forth details as to such
Reportable Event or Prohibited Transaction or Plan
termination and the action the Borrower and its
Subsidiaries proposes to take with respect thereto;
(9) Reports to Other Creditors. Promptly after
the furnishing thereof, copies of any statement or
report furnished by the Borrower or any of its
Subsidiaries to any other party pursuant to the terms
of any indenture, loan, or credit or similar agreement
and not otherwise required to be furnished to the Bank
pursuant to any other clause of this Section 7.09;
(10) Environmental. Promptly upon receipt
thereof, copies of all Environmental Notices received
by the Borrower or any of its Subsidiaries;
(11) Material Adverse Change. As soon as
possible and in any event within seven (7) days after
the occurrence of any event or circumstance which could
result in or has resulted in a Material Adverse Change,
written notice thereof;
(12) Acquisitions. As soon as possible (a)
notice of each proposed Acquisition, and (b)
information verifying that such Acquisition is a
Permitted Acquisition; and
(13) General Information. Such other
information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its
Subsidiaries as the Bank may from time to time
reasonably request.
<PAGE>
SECTION 7.09. Transactions with HHL. Conduct all
transactions, business, leases, or other financial dealings
with HHL on an arms length basis.
SECTION 7.10. New Subsidiaries. Each of the
following conditions shall be satisfied by the Borrower with
respect to each Subsidiary formed or acquired on or after
the Closing Date, except for a Subsidiary formed for the
purpose of making an Acquisition but such exception shall
only apply to such Subsidiary as long as such Subsidiary
does not own any assets used in connection with the
operation of a business:
(a) the Bank shall have received a Guaranty
Agreement in a form acceptable to the Bank in its sole
discretion duly executed by such Subsidiary pursuant to
which such Subsidiary shall agree to be bound by the
terms of this Agreement applicable to a Subsidiary and
a Guarantor;
(b) the Bank shall have received a certificate of
the Secretary or Assistant Secretary of such Subsidiary
attesting to the certificate of incorporation and
bylaws of such Subsidiary and all amendments thereto
and to all corporate action taken by such Subsidiary,
including resolutions of its Board of Directors
authorizing the execution, delivery and performance of
its Guaranty Agreement and any other documents executed
in connection therewith; and
(c) the Bank shall have received a favorable
opinion of counsel to such Subsidiary covering all of
the matters covered by (a) and (b) above, and as to
such other matters as the Bank may reasonably request.
ARTICLE VIII
NEGATIVE COVENANTS
So long as the Note remains unpaid or any Standby
Letter of Credit Obligation shall remain outstanding or the
Bank shall have any Commitment under this Agreement or any
other amount is owing by Borrower to Bank under any Loan
Document the Borrower will not:
SECTION 8.01. Liens. Create, incur, assume, or
suffer to exist, or permit any Subsidiary to create, incur,
assume, or suffer to exist, any Lien upon or with respect to
any of its properties now owned or hereafter acquired,
except:
(1) Liens for taxes or assessments or other
government charges or levies if not yet due and payable
or, if due and payable, if they are the subject of a
Good Faith Contest;
(2) Liens imposed by law, such as mechanics',
materialmen's, landlords', warehousemen's and carriers'
<PAGE>
Liens, and other similar Liens, securing obligations
incurred in the ordinary course of business which are
not past due for more than ninety (90) days;
(3) Liens under workers' compensation,
unemployment insurance, Social Security, or similar
legislation;
(4) Liens, deposits, or pledges to secure the
performance of bids, tenders, contracts (other than
contracts for the payment of money), leases (permitted
under the terms of this Agreement), public or statutory
obligations, surety, stay, appeal, indemnity,
performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;
(5) Easements, rights-of-way, restrictions, and
other similar encumbrances which, in the aggregate, do
not materially interfere with the occupation, use, and
enjoyment by the Borrower or any Subsidiary of the
Borrower of the property or assets encumbered thereby
in the normal course of its business or materially
impair the value of the property subject thereto;
(6) Purchase-money Liens on equipment hereafter
acquired or the assumption of any Lien on equipment
existing at the time of such acquisition, or a Lien
incurred in connection with any conditional sale or
other title retention agreement relating to equipment
or a Capital Lease of equipment, provided that:
(a) Any equipment subject to any of the foregoing
is acquired by the Borrower or its Subsidiary
in the ordinary course of its business and
the Lien on any such property is created
contemporaneously with such acquisition;
(b) The obligation secured by any Lien so
created, assumed, or existing shall not
exceed one hundred percent (100%) of the
lesser of cost or fair market value as of the
time of acquisition of the property covered
thereby; and
(c) Each such Lien shall attach only to the
equipment so acquired and fixed improvements
thereon.
SECTION 8.02. Debt. Create, incur, assume, or
suffer to exist, or permit any Subsidiary to create, incur,
assume, or suffer to exist, any Debt, except:
(1) Debt of the Borrower under this Agreement or
the Note;
(2) Any Debt provided by the Bank to the Borrower
or any of its Subsidiaries;
<PAGE>
(3) Accounts payable to trade creditors for goods
or services which are not aged more than one hundred
twenty (120) days from billing date and current
operating liabilities (other than for borrowed money)
which are not more than ninety (90) days past due, in
each case incurred in the ordinary course of business
and paid within the specified time, unless the subject
of a Good Faith Contest; and
(4) Debt of the Borrower secured by purchase-
money Liens permitted by Section 7.01(6).
SECTION 8.03. Mergers, Etc. Merge or consolidate
with, or sell, assign, lease, or otherwise dispose of
(whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or
hereafter acquired), to any Person, or acquire any assets of
or the business of any Person or permit any Subsidiary to do
so; except (1) that any Subsidiary may merge into and
transfer assets to the Borrower, (2) in connection with
Permitted Acquisitions and (3) the acquisition from any
Person of any assets required for the ongoing operation of
the business of the Borrower or any Subsidiary, as the case
may be.
SECTION 8.04. Dividends. In the case of the
Borrower, declare or pay any dividends; or purchase, redeem,
retire, or otherwise acquire for value any of its capital
stock or securities convertible into capital stock now or
hereafter outstanding; or make any distribution of assets to
its stockholders as such whether in cash, assets, or in
obligations; or allocate or otherwise set apart any sum for
the payment of any dividend or distribution on, or for the
purchase, redemption, or retirement of any shares of its
capital stock; or make any other distribution by reduction
of capital or otherwise in respect of any shares of its
capital stock; or permit any of its Subsidiaries to purchase
or otherwise acquire for value any stock of the Borrower or
any Subsidiary of the Borrower; except (1) the Borrower may
declare and deliver dividends and make distributions payable
solely in common stock of the Borrower, and (2) that the
Borrower may purchase, redeem, retire or otherwise acquire
for value any of its capital stock or securities convertible
into common stock provided that (a) the total compensation
paid and/or liabilities assumed in connection with all of
the foregoing actions does not exceed Ten Million Dollars
($10,000,000) in the aggregate for all such actions, and (b)
at the time of and after giving effect to such actions there
are and shall be no Defaults or Events of Default.
SECTION 8.05. Sale of Assets. Sell, lease,
assign, transfer, pledge, or otherwise dispose of, or permit
any Subsidiary to sell, lease, assign, transfer, pledge, or
otherwise dispose of, any of its now owned or hereafter
acquired assets (including, without limitation, shares of
stock and Debt of their respective Subsidiaries, receivables
and leasehold interests); except: (1) for inventory
disposed of in the ordinary course of business, (2) for the
<PAGE>
sale or other disposition of assets no longer used or useful
in the conduct of its business, and (3) that any Subsidiary
may sell, lease, assign, or otherwise transfer its assets to
the Borrower.
SECTION 8.06. Investments. Make any loan or
advance to any Person (including but not limited to any loan
to any officer, director, employee, or Affiliate of the
Borrower), or purchase or otherwise acquire any capital
stock, assets, obligations, or other securities of, make any
capital contribution to, or otherwise invest in or acquire
any interest in any Person, or permit any Subsidiary to do
so except: (1) provided that the weighted average life of
all of the following is three (3) years or less at all
times: (a) direct obligations of the United States or any
agency thereof; (b) commercial paper of a domestic issuer
rated at least "A-2" by Standard & Poor's Corporation or "P-
2" by Moody's Investors Service, Inc.; (c) certificates of
deposit issued by either (i) the Bank, or (ii) any other
commercial bank rated at least "BBB" by Standard & Poor's
Corporation or "Baa" by Moody's Investors Service, Inc.; (d)
Debt of a corporate domestic issuer with a long term debt
rating of "BBB" or better by Standard & Poor's Corporation
or "Baa" by Moody's Investors Service, Inc., (e) Debt of a
domestic Governmental Authority with a long term debt rating
of "BBB" or better by Standard & Poor's Corporation or "Baa"
or better by Moody's Investors Service Inc., and (f)
preferred stock of a domestic corporation with a long term
debt rating "BBB" or better by Standard & Poor's Corporation
or "Baa" or better by Moody's Investors Services, Inc.; (2)
for stock, obligations, or securities received in settlement
of debts (created in the ordinary course of business); (3)
any of the foregoing incurred in connection with a Permitted
Acquisition; (4) loans by the Borrower to the Guarantors;
(5) loans by the Borrower to employees of the Borrower or
its Subsidiaries provided that (a) the aggregate amount of
all such loans outstanding to a particular employee at any
time does not exceed One Hundred Thousand Dollars
($100,000), and (b) the aggregate amount of all such loans
to all employees outstanding at any time does not exceed
Five Hundred Thousand Dollars ($500,000); (6) the exercise
of the warrant to purchase up to an aggregate of nine and
one-half of one percent (9 1/2%) of the outstanding common
stock of HHL, on a fully diluted basis, provided that the
total compensation paid to exercise all such warrants shall
not exceed Five Hundred Fifty-Six Thousand Dollars
($556,000) and (7) all investments required to be made by
the Borrower under the terms of the Subscription Agreement.
SECTION 8.07. Guaranties, Etc. Assume, guaranty,
endorse, or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, an
agreement to purchase any obligation, stock, assets, goods
or services, or to supply or advance any funds, assets,
goods, or services, or to maintain or cause such Person to
maintain a minimum working capital or net worth, or
otherwise to assure the creditors of any Person against
loss) for obligations of any Person, or permit any
<PAGE>
Subsidiary to do so except (1) guaranties by endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; (2) the
Guaranty; and (3) the guaranty of the obligations of QMA to
pay rent under the Lease between QMA and Kilgore Business
Park dated March 20, 1990, under the terms of such Lease as
in effect on the Closing Date.
SECTION 8.08. Transactions With Affiliate. Enter
into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of
any service, with any Affiliate, including, without
limitation, the purchase, sale or exchange of property or
the rendering of any service, except in the ordinary course
of and pursuant to the reasonable requirements of its
business and upon fair and reasonable terms no less
favorable to it than it could obtain in a comparable arm's-
length transaction with a Person not an Affiliate.
SECTION 8.09. Restrictions on Dividends. The
Borrower shall not permit any of its Subsidiaries to enter
into any agreement, other than this Agreement, prohibiting
or restricting the declaration or payment of cash dividends
or other payments by such Subsidiary in respect of
securities of such Subsidiary or loans, advances to, or
other investments by such Subsidiary in, the Borrower or any
Guarantor.
SECTION 8.10. Stock of Subsidiary, Etc. Sell or
otherwise dispose of any shares of capital stock of any
Subsidiary, except in connection with a transaction
permitted under Section 6.03, or permit any Subsidiary to
issue any additional shares of its capital stock when after
giving effect to such issuance the Person owning all of the
stock of such Subsidiary on the date of this Agreement would
own eighty percent (80%) or less of the stock of such
Subsidiary.
SECTION 8.11. Subscription Agreement. Change any
of the terms or provisions of the Subscription Agreement.
ARTICLE IX
FINANCIAL COVENANTS
So long as the Note remains unpaid or any Standby
Letters of Credit Obligation shall remain outstanding or the
Bank shall have any Commitment under this Agreement or any
other amount is owing by Borrower to Bank under any Loan
Document:
SECTION 9.01. Minimum Consolidated Current Ratio.
The Borrower and its Consolidated Subsidiaries will have as
of the last day of each fiscal quarter of each fiscal year
of the Borrower a ratio of (1) Consolidated Current Assets
less Consolidated Deferred Assets to (2) Consolidated
<PAGE>
Current Liabilities less Consolidated Deferred Liabilities
of not less 2.0 to 1.
SECTION 9.02. Minimum Consolidated Tangible Net
Worth. The Borrower and its Consolidated Subsidiaries will,
as of the last day of each fiscal quarter of each fiscal
year of the Borrower, commencing with the fiscal quarter
ended January 31, 1996, have a Consolidated Tangible Net
Worth of not less than the amount specified for such date:
All Fiscal Quarters Ending Minimum Consolidated
On the Last Day Of Each Month Tangible Net Worth
April 1996, July 1996 $55,000,000
October 1996, January 1997,
April 1997, July 1997 $60,000,000
October 1997, January 1998,
April 1998, July 1998 $65,000,000
October 1998, January 1999,
April 1999 $70,000,000
SECTION 9.03. Consolidated Leverage Ratio. The
Borrower and its Consolidated Subsidiaries will have as of
the last day of each fiscal quarter of each fiscal year of
the Borrower, commencing with the fiscal quarter ended
January 31, 1996, a ratio of (1) Consolidated Total
Liabilities less Consolidated Deferred Liabilities to (2)
Consolidated Tangible Net Worth of not more than .75 to 1.
SECTION 9.04. Minimum Consolidated Cash Flow
Ratio. The Borrower and its Consolidated Subsidiaries will,
as of the last day of each fiscal year, commencing with
fiscal year ended October 31, 1996, have a ratio of the
following for the prior twelve month period (1) Consolidated
Earnings Before Interest, Taxes and Depreciation, minus
Consolidated Capital Expenditures to (2) Consolidated Debt
Service plus Dividends of not less than 4.0 to 1.
SECTION 9.05. Consolidated Interest Coverage.
The Borrower and its Consolidated Subsidiaries will, as of
the last day of each fiscal quarter in each fiscal year,
commencing with the fiscal quarter ended January 31, 1996,
have a ratio of the following for such fiscal quarters (1)
Consolidated Earnings Before Interest, Taxes and
Depreciation, to (2) Consolidated Interest Expense of not
less than 5.0 to 1.
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.01. Events of Default. If any of the
following events ("Events of Default") shall occur:
<PAGE>
(1) The Borrower shall fail to pay the principal
of the Note when due and payable, or shall fail to pay
interest on the Note when due and payable, or shall
fail to reimburse the Bank on a Standby Letter of
Credit when due and payable or shall fail to pay any
other obligations owing to the Bank under this
Agreement or any other Loan Document when due and
payable;
(2) Any representation or warranty made or
deemed made by the Borrower or any Guarantor in any
Loan Document to which it is a party or which is
contained in any certificate, document, opinion, or
financial or other statement furnished at any time
under or in connection with any Loan Document shall
prove to have been incorrect in any material respect on
or as of the date made or deemed made;
(3) The Borrower or any Guarantor shall fail to
perform or observe any term, covenant, or agreement
contained in Section 7.05 or Section 7.08 or Article
VIII or Article IX on its part to be performed or
observed; or Borrower or any Guarantor shall fail to
perform or observe any term, covenant or agreement
contained in Article VII (other than Section 7.05 and
7.08) or otherwise contained in this Agreement or any
Loan Document (other than the Note) to which it is a
party on its part to be performed or observed and such
failure shall remain unremedied for thirty (30)
consecutive calendar days after such occurrence;
(4) The Borrower or any of its Subsidiaries or
any Guarantor shall: (a) fail to pay any Debt (other
than the Note) of the Borrower or such Subsidiary or
the Guarantor, as the case may be, or any interest or
premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or
otherwise); or (b) any such Debt shall be declared to
be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment),
prior to the stated maturity thereof;
(5) The Borrower or any of its Subsidiaries or
the Guarantor: (a) shall generally not, or shall be
unable to, or shall admit in writing its inability to
pay its debts as such debts become due; or (b) shall
make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment
of a custodian, receiver, or trustee for its or a
substantial part of its assets; or (c) shall commence
any proceeding under any bankruptcy, reorganization,
arrangements, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or (d) shall have any such
petition or application filed or any such proceeding
commenced against it, in which an order for relief is
entered or adjudication or appointment is made and
which remains undismissed for a period of sixty (60)
<PAGE>
days or more; or (e) by any act or omission shall
indicate its consent to, approval of, or acquiescence
in any such petition, application, or proceeding, or
order for relief, or the appointment of a custodian,
receiver, or trustee for all or any substantial part of
its properties; or (f) shall suffer any such
custodianship, receivership, or trusteeship to continue
undischarged for a period of sixty (60) days or more;
(6) One or more judgments, decrees, or orders for
the payment of money in excess of One Hundred Thousand
Dollars ($100,000) in the aggregate shall be rendered
against any Borrower or any of its Subsidiaries or the
Guarantor and such judgments, decrees, or orders shall
continue unsatisfied and in effect for a period of
thirty (30) consecutive days without being vacated,
discharged, satisfied, or stayed or bonded pending
appeal;
(7) The Guaranty shall any time after its
execution and delivery and for any reason cease to be
in full force and effect or shall be declared null and
void, or the validity or enforceability thereof shall
be contested by any Guarantor, or any Guarantor shall
deny it has any further liability or obligation under
the Guaranty, or any Guarantor shall fail to perform
any of its obligations under the Guaranty;
(8) Any of the following events occur or exist
with respect to the Borrower or any ERISA Affiliate:
(a) any Prohibited Transaction involving any Plan; (b)
any Reportable Event with Respect to any Plan; (c) the
filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any
Plan; (d) any event or circumstance that might
constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to
administer, any Plan, or the institution by the PBGC of
any such proceedings; (e) complete or partial
withdrawal under Section 4201 or 4202 of ERISA from a
Multiemployer Plan or the reorganization, insolvency,
or termination of any Multiemployer Plan; and in each
case above, such event or condition, together with all
other events or conditions, if any, could in the
opinion of the Bank subject the Borrower to any tax,
penalty, or other liability to a Plan, a Multiemployer
Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate exceed or may exceed
One Hundred Thousand Dollars ($100,000);
(9) if any Acquisition is made under the terms of
the Subscription Agreement and the Person acquired is
not engaged in a business similar to or related to any
Existing Line of Business;
then, and in any such event (other than Section
10.01(5)), the Bank may, by notice to the Borrower, (1)
<PAGE>
declare the Commitments to be terminated, whereupon the same
shall forthwith terminate, (2) declare the outstanding Note,
all interest thereon, and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon
the Note, all such interest, and all such amounts shall
become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind,
all of which are hereby expressly waived by the Borrower;
(3) require Borrower to provide Cash Collateral in the
aggregate amount of all outstanding Standby Letters of
Credit; and (4) exercise any of the remedies provided in
this Agreement and any of the other Loan Documents;
provided, however, that upon the occurrence of an Event of
Default referred to in Section 10.01(5), the Commitments
shall automatically terminate and the outstanding Note, all
interest thereon, and all Standby Letter of Credit
Obligations and any other amounts payable under this
Agreement or any of the other Loan Documents, shall be
forthwith due and payable without presentment, demand,
protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. No amendment,
modification, termination, or waiver of any provision of any
Loan Document to which the Borrower or a Guarantor is a
party, nor consent to any departure by the Borrower or a
Guarantor from any Loan Document shall in any event be
effective unless the same shall be in writing and signed by
the Bank, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose
for which given.
SECTION 11.02. Notices, Etc. All notices and
other communications provided for under this Agreement and
under the other Loan Documents to which the Borrower is a
party shall be in writing (including telegraphic
communication) and mailed or delivered by messenger or sent
by facsimile, if to the Borrower or the Guarantors, at the
Borrower's address at 401 Park Avenue South, New York, New
York 10016, Attention: Phillip Siegel, with a copy to
Coleman & Rhine, LLP, 1120 Avenue of the Americas, New York,
New York 10036, Attention: Kenneth S. Goodwin, if to the
Bank, at its address at the Manhattan Middle Market
Division, 1411 Broadway, Fifth Floor, New York, New York,
10018, Attention: Maria Florez, with a copy to Dewey
Ballantine, 1301 Avenue of the Americas, New York, New York
10019, Attention: Rodger Tighe or, as to each party, at
such other address as shall be designated by such party in a
written notice to the other party complying as to delivery
with the terms of this Section. All such notices and
communications shall, when mailed or telegraphed or sent by
facsimile, be effective when deposited in the mails,
delivered by facsimile or sent to the telegraph company,
<PAGE>
respectively addressed as aforesaid, except that notices to
the Bank pursuant to the provisions of Article II shall not
be effective until received by the Bank.
SECTION 11.03. No Waiver; Remedies. No failure
on the part of the Bank to exercise and no delay in
exercising, any right, power, or remedy under any Loan
Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any Loan
Documents preclude any other or further exercise thereof or
the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
SECTION 11.04. Assignment; Participation. This
Agreement shall be binding upon, and shall inure to the
benefit of, the Borrower, each Guarantor, the Bank and their
respective successors and assigns, except that neither the
Borrower nor any Guarantor may assign or transfer its rights
or obligations hereunder. The Bank may assign its rights
and obligations hereunder, without the consent of the
Borrower, and any assignee hereunder shall have, to the
extent of such assignment (unless otherwise provided
therein), the same rights, benefits and obligations as it
would have if it were the Bank hereunder. The Bank may sell
participations in, all or any part of any Loan to another
bank or other Person and the participant shall have no
rights under the Loan Documents and all amounts payable by
the Borrower under the Loan Documents shall be determined as
if the Bank had not sold such participation. The agreement
executed by the Bank in favor of the participant shall not
give the participant the right to require the Bank to take
or omit to take any action hereunder except action directly
relating to (1) the increase in the Revolving Credit
Facility, (2) extension of the Revolving Credit Facility
Termination Date, or (3) the reduction of the Revolving
Credit Facility Fee or the rate of interest payable on the
Loans or the Standby Letter of Credit Fee to a fee or rate,
as the case may be, below that which the participant is
entitled to receive under its agreement with the Bank. The
Bank may furnish any information concerning the Borrower and
the Guarantors in the possession of the Bank from time to
time to assignees and participants (including prospective
assignees and participants).
SECTION 11.05. Costs, Expenses and Taxes. The
Borrower and each Guarantor agree to pay on demand all costs
and expenses in connection with the preparation, execution,
delivery, filing, recording, and administration of any of
the Loan Documents, including, without limitation, the fees
and out-of-pocket expenses of counsel for the Bank, and any
local counsel who may be retained by said counsel, with
respect thereto and with respect to advising the Bank as to
its rights and responsibilities under any of the Loan
Documents, and all costs and expenses, if any, in connection
with the enforcement of any of the Loan Documents. In
addition, the Borrower and each Guarantor shall be obligated
to pay any and all stamp and other taxes and fees payable or
<PAGE>
determined to be payable in connection with the execution,
delivery, filing, and recording of any of the Loan Documents
and the other documents to be delivered under any such Loan
Documents, and agrees to save the Bank harmless from and
against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and
fees.
SECTION 11.06. Indemnification. The Borrower
agrees to indemnify the Bank and its respective directors,
officers, employees, agents and controlling persons (each on
"Indemnified Party") from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages or
liabilities incurred by any of them arising out of or by
reason of any investigation, litigation or other proceedings
(including any threatened investigation, litigation or other
proceedings) relating to or arising in connection with this
Agreement, any other Loan Document or the transactions
contemplated hereby or thereby (but excluding any such
losses, liabilities, claims, damages or liabilities incurred
by reason of the gross negligence or willful misconduct of
the Person to be indemnified). The Borrower also agrees to
reimburse any Indemnified Person for all expenses incurred
in connection with any such investigation, litigation or
other proceedings (whether actual or threatened), including,
without limitation, the fees and disbursements of counsel
incurred in connection with any such investigation,
litigation or other proceedings.
The obligations of the Borrower under this Section
shall survive the repayment of the Loans and all amounts due
under or in connection with any of the Loan Documents and
the termination of the Revolving Credit Facility.
SECTION 11.07. Right of Setoff. Upon the
occurrence and during the continuance of any Event of
Default, the Bank is hereby authorized at any time and from
time to time, without notice to the Borrower or any
Guarantor (any such notice being expressly waived by the
Borrower and each Guarantor), to set off and apply any and
all deposits (general or special, time or demand,
provisional or final) at any time held and other
indebtedness at any time owing by the Bank to or for the
credit or the account of the Borrower or any Guarantor
against any and all of the obligations of the Borrower or
any Guarantor now or hereafter existing under this Agreement
or the Note or any Standby Letter of Credit or any other
Loan Document, irrespective of whether or not the Bank shall
have made any demand under this Agreement or the Note or any
Standby Letter of Credit or such other Loan Document and
although such obligations may be unmatured. The Bank agrees
promptly to notify the Borrower or the applicable Guarantor,
as the case may be, after any such setoff and application,
provided that the failure to give such notice shall not
affect the validity of such setoff and application. The
rights of the Bank under this Section are in addition to
other rights and remedies (including, without limitation,
other rights of setoff) which the Bank may have.
<PAGE>
SECTION 11.08. Governing Law. This Agreement and
the Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
SECTION 11.09. Severability of Provisions. Any
provision of any Loan Document which is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions of such Loan Document or affecting the
validity or enforceability of such provision in any other
jurisdiction.
SECTION 11.10. Headings. Article and Section
headings in the Loan Documents are included in such Loan
Documents for the convenience of reference only and shall
not constitute a part of the applicable Loan Documents for
any other purpose.
SECTION 11.11. Jurisdiction; Immunities; Waiver
of Jury Trial. The Borrower and each Guarantor hereby
irrevocably submit to the jurisdiction of any New York State
or United States Federal court sitting in the Southern
District of New York over any action or proceeding arising
out of or relating to any of the Loan Documents, and the
Borrower and each Guarantor hereby irrevocably agree that
all claims in respect of such action or proceeding may be
heard and determined in such New York State or Federal
court. The Borrower and each Guarantor irrevocably consent
to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to the
Borrower or the applicable Guarantor, as the case may be, at
its address specified in Section 11.02 by registered mail,
return receipt requested. The Borrower and each Guarantor
agree that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in any jurisdictions
by suit on the judgment or in any other manner provided by
law. The Borrower and each Guarantor further waive any
objection to venue in such State on the basis of forum non
convenience. The Borrower and each Guarantor further agree
that any action or proceeding brought against the Bank shall
be brought only in New York State or United States Federal
court sitting in the Southern District of New York.
Nothing in this Section 11.11 shall affect the
right of the Bank to serve legal process in any other manner
permitted by law or affect the right of the Bank to bring
any action or proceeding against the Borrower or any
Guarantor or their respective property in the courts of any
other jurisdictions.
To the extent that the Borrower or any Guarantor
has or hereafter may acquire any immunity from jurisdiction
of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment
in aid of execution, execution or otherwise) with respect to
itself or its property, the Borrower and each Guarantor
<PAGE>
hereby irrevocably waive such immunity in respect of their
respective obligations under the Loan Documents.
THE BORROWER AND EACH GUARANTOR HEREBY WAIVES ITS
RESPECTIVE RIGHT TO A JURY TRIAL.
[INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above
written.
HEALTH MANAGEMENT SYSTEMS, INC.
By
Name: Phillip Siegel
Title: Vice President & Chief
Financial Officer
ACCELERATED CLAIMS PROCESSING, INC.
By
Name: Paul J. Kerz
Title: Secretary
QUALITY MEDI-CAL ADJUDICATION,
INCORPORATED
By
Name: Paul J. Kerz
Title: Secretary
HEALTH CARE MICROSYSTEMS, INC.
By
Name:
Title:
CDR ASSOCIATES, INC.
By
Name: Paul J. Kerz
Title: Secretary
THE CHASE MANHATTAN BANK
By
Name: Maria B. Florez
Title: Vice President
LENDING OFFICE FOR PRIME RATE AND
LIBOR RATE LOANS:
<PAGE>
THE CHASE MANHATTAN BANK
1411 Broadway
Fifth Floor
New York, New York 10018
Telephone: (212) 391-7652
Facsimile: (212) 391-7117
<PAGE>
[EXECUTION COPY]
FIRST AMENDMENT TO CREDIT AGREEMENT AND GUARANTY
AND WAIVER
FIRST AMENDMENT TO CREDIT AGREEMENT AND GUARANTY
AND WAIVER dated as of September 9, 1996 (the "First
Amendment") among HEALTH MANAGEMENT SYSTEMS, INC. (the
"Borrower"), ACCELERATED CLAIMS PROCESSING, INC. ("ACP"),
QUALITY MEDI-CAL ADJUDICATION, INCORPORATED ("QMA"), HEALTH
CARE MICROSYSTEMS, INC. ("HCM"), CDR ASSOCIATES INC.
("CDR"), and THE CHASE MANHATTAN BANK (the "Bank").
PRELIMINARY STATEMENT. The Borrower, ACP, QMA,
HCM, CDR and the Bank have entered into a Credit Agreement
and Guaranty dated as of July 1, 1996 (the "Credit
Agreement"). Any term used herein and not otherwise defined
herein shall have the meaning assigned to such term in the
Credit Agreement.
The Borrower, ACP, QMA, HCM, CDR and the Bank have
agreed to amend the Credit Agreement as hereinafter set
forth.
SECTION 1. Amendments to Credit Agreement. The
Credit Agreement is, effective as of the date hereof and
subject to the satisfaction of the conditions precedent set
forth in Section 3 hereof, hereby amended as follows:
(a) Section 9.05, Consolidated Interest Coverage,
is amended in its entirety to read as follows:
Section 9.05. Consolidation Interest
Coverage. The Borrower and its Consolidated
Subsidiaries will, as of the last day of each
fiscal quarter in each fiscal year, commencing
with the fiscal quarter ended October 30, 1996,
have a ratio of the following for each twelve (12)
month period (taken together as a whole) ending on
the end of each such fiscal quarter (1)
Consolidated Earnings Before Interest, Taxes and
Depreciation, to (2) Consolidated Interest Expense
of not less than 5.0 to 1.
SECTION 2. Waiver. The Borrower has advised the
Bank that the Borrower was not in compliance with Section
9.05 "Consolidation Interest Coverage" for its third fiscal
quarter ended July 31, 1996. Such noncompliance constitutes
an Event of Default under the Credit Agreement which the
Borrower has asked the Bank to waive.
<PAGE>
The Bank waives the Borrower's compliance with
Section 9.05 "Consolidated Interest Coverage" for its third
fiscal quarter ended July 31, 1996. The Bank, however, does
not waive any noncompliance by the Borrower with respect to
Section 9.05 "Consolidated Interest Coverage" for any other
period or any present or future noncompliance by the
Borrower with respect to any other provision of the Credit
Agreement.
SECTION 3. Condition of Effectiveness. This
First Amendment shall become effective as of the date on
which each of the following conditions have been fulfilled:
(1) First Amendment. The Borrower, ACP, QMA,
HCM, CDR and the Bank shall each have executed and delivered
this First Amendment;
(2) Consent of Guarantors. Each of the
Guarantors must consent to this First Amendment and each
Guarantor agrees that its execution of this First Amendment
constitutes its consent to such First Amendment.
(3) Officer's Certificate. The following
statements shall be true and the Bank shall have received a
certificate signed by a duly authorized officer of the
Borrower dated the date hereof stating that, after giving
effect to this First Amendment:
(a) The representations and warranties contained
in each of the Loan Documents are correct on
and as of the date hereof as though made on
and as of such date; and
(b) No Default or Event of Default has occurred
and is continuing.
(4) Legal Bills. Dewey Ballantine shall have
been paid in full for all legal fees, costs and expenses in
connection with the preparation of this First Amendment and
any and all other documents delivered pursuant hereto or in
connection herewith.
(5) Other Documents. The Bank shall have
received such other approvals, opinions or documents as the
Bank may reasonably request.
SECTION 3. Reference to and Effect on the Loan
Documents. (a) Upon the effectiveness of Section 1 hereof,
on and after the date hereof each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in the
2
<PAGE>
other Loan Documents to the Credit Agreement, shall mean and
be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the
Credit Agreement and all other Loan Documents shall remain
in full force and effect and are hereby ratified and
confirmed.
(c) The execution, delivery and effectiveness of
this First Amendment shall not operate as a waiver of any
right, power or remedy of the Bank under any of the Loan
Documents, nor constitute a waiver of any provision of any
of the Loan Documents, and, except as specifically provided
herein, the Credit Agreement and each other Loan Document
shall remain in full force and effect and are hereby
ratified and confirmed.
SECTION 4. Costs, Expenses and Taxes. The
Borrower agrees to reimburse the Bank on demand for all out-
of-pocket costs, expenses and charges (including, without
limitation, all fees and charges of legal counsel for the
Bank) incurred by the Bank in connection with the
preparation, reproduction, execution and delivery of this
First Amendment and any other instruments and documents to
be delivered hereunder. In addition, the Borrower shall pay
any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution
and delivery, filing or recording of this First Amendment
and the other instruments and documents to be delivered
hereunder, and agrees to save the Bank harmless from and
against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes or
fees.
SECTION 5. Governing Law. This First Amendment
shall be governed by and construed in accordance with the
laws of the State of New York.
SECTION 6. Headings. Section headings in this
First Amendment are included herein for convenience of
reference only and shall not constitute a part of this First
Amendment for any other purpose.
SECTION 7. Counterparts. This First Amendment
may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument,
and any party hereto may execute this First Amendment by
signing any such counterpart.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this First Amendment to be duly executed as of the day and
year first above written.
HEALTH MANAGEMENT SYSTEMS, INC.
By
Name:
Title:
ACCELERATED CLAIMS PROCESSING,
INC.
By
Name:
Title:
QUALITY MEDI-CAL ADJUDICATION,
INCORPORATED
By
Name:
Title:
HEALTH CARE MICROSYSTEMS, INC.
By
Name:
Title:
CDR ASSOCIATES, INC.
By
Name:
Title:
THE CHASE MANHATTAN BANK
By
Name:
Title:
4
<PAGE>
EXECUTION
- --------------------------------------------------------------------------------
387 P.A.S. ENTERPRISES,
Landlord
TO
HEALTH MANAGEMENT SYSTEMS, INC.,
Tenant
----------------
LEASE
----------------
387 Park Avenue South
New York, New York
The Land affected by the within Instrument
lies in Section 3, Block 883, on the Land
Map of the County of
New York (Tax Lot 1).
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS............................................................................................ vi
ARTICLE 1 Demised Premises; Term; Rents........................................................ 1
ARTICLE 2 Use.................................................................................. 4
ARTICLE 3 Tenant's Occupancy of the Demised Premises........................................... 4
ARTICLE 4 Delivery of Possession; Right to Terminate for
Failure to Deliver Fourth Floor Premises............................................. 6
ARTICLE 5 Adjustments of Rent.................................................................. 6
ARTICLE 6 Subordination; Notice to Lessors and Mortgagees...................................... 8
ARTICLE 7 Quiet Enjoyment...................................................................... 10
ARTICLE 8 Assignment and Subletting............................................................ 10
ARTICLE 9 Compliance With Laws and Requirements of
Public Authorities................................................................... 16
ARTICLE 10 Insurance............................................................................ 18
ARTICLE 11 Rules and Regulations................................................................ 21
ARTICLE 12 Tenant's Changes..................................................................... 21
ARTICLE 13 Tenant's Property.................................................................... 25
ARTICLE 14 Repairs and Maintenance.............................................................. 26
ARTICLE 15 Electricity.......................................................................... 27
ARTICLE 16 Heat, Ventilation and Air-Conditioning............................................... 28
ARTICLE 17 Other Services....................................................................... 29
ARTICLE 18 Access; Changes in Building Facilities; Name......................................... 30
ARTICLE 19 Notice of Accidents.................................................................. 31
ARTICLE 20 Non-Liability and Indemnification.................................................... 31
ARTICLE 21 Destruction or Damage................................................................ 32
ARTICLE 22 Eminent Domain....................................................................... 34
ARTICLE 23 Surrender............................................................................ 36
ARTICLE 24 Conditions of Limitation............................................................. 37
ARTICLE 25 Remedies and Damages................................................................. 38
ARTICLE 26 Waivers.............................................................................. 41
ARTICLE 27 No Other Waivers or Modifications.................................................... 42
ARTICLE 28 Curing Tenant's Defaults; Additional Rent; Reimbursement of Costs.................... 43
ARTICLE 29 Broker............................................................................... 44
ARTICLE 30 Notices.............................................................................. 44
ARTICLE 31 Estoppel Certificate; Memorandum..................................................... 45
ARTICLE 32 Arbitration.......................................................................... 46
ARTICLE 33 No Other Representations; Construction; Governing Law; Consents...................... 46
ARTICLE 34 Parties Bound........................................................................ 47
<PAGE>
ARTICLE 35 Certain Definitions and Construction................................................. 48
ARTICLE 36 Adjacent Excavation; Shoring......................................................... 51
ARTICLE 37 Tenant's Option to Renew............................................................. 51
ARTICLE 38 onnection to the 401 Premises........................................................ 53
Exhibit A DESCRIPTION.......................................................................... 58
Exhibit B WORKLETTER........................................................................... 59
Exhibit C RULES AND REGULATIONS................................................................ 62
<PAGE>
LEASE
Lease, dated as of the ___ day of March, 1996 (this
"Lease"), by and between 387 P.A.S. ENTERPRISES, a New York partnership having
an office at 387 Park Avenue South, New York, New York 10016 ("Landlord") and
HEALTH MANAGEMENT SYSTEMS, INC., a New York corporation having corporate
headquarters at 401 Park Avenue South, New York, New York 10022 ("Tenant").
WITNESSETH:
ARTICLE 1
Demised Premises; Term; Rents
1.01 Landlord hereby leases to Tenant, and Tenant hereby
hires from Landlord, the premises hereinafter described, in the building
located at 387 Park Avenue South, in the Borough of Manhattan, City, County
and State of New York (the "Building"), on the parcel of land more
particularly described in Exhibit A (the "Land"), for the term hereinafter
stated, for the rents hereinafter reserved and upon, and subject to, the
conditions (including limitations, restrictions and reservations) and
covenants hereinafter provided. Each party hereby expressly covenants and
agrees to observe and perform all of the conditions and covenants herein
contained on its part to be observed and performed.
1.02 The premises hereby leased to Tenant are the entire
third (3rd) floor (the "Third Floor Premises") and the entire fourth (4th)
floor (the "Fourth Floor Premises") of the Building consisting of
approximately 33,320 square feet in the aggregate. Each of the Third Floor
Premises and the Fourth Floor Premises, together with all fixtures and
equipment that, at the commencement or during the term of this Lease, are
thereto attached (except items removable by Tenant as provided in Article 13),
constitute and are hereinafter collectively called the "Demised Premises".
1.03 The term of this Lease (the "Term"), shall commence on
the date on which Landlord delivers possession to Tenant of the Third Floor
Premises (the "Commencement Date"), and shall expire at noon on the last day
of the month in which occurs the day immediately preceding the tenth (10th)
anniversary of the date (the "Fourth Floor Delivery Date") on which Landlord
delivers possession to Tenant of the Fourth Floor Premises (the "Fixed
Expiration Date"; the Fixed Expiration Date or such earlier or later date upon
which said Term may expire or be cancelled or terminated pursuant to any of
the conditions or covenants of this Lease or pursuant to law is hereinafter
referred to as the "Expiration Date").
-1-
<PAGE>
1.04 The rents reserved under this Lease for the Term
shall be and consist of:
(a) "Base Rent," payable in advance to Landlord on the first
day of each and every calendar month during the Term, as follows:
(i) For the period commencing on the Commencement
Date through and including the last day of the month in
which the day immediately preceding the first (1st)
anniversary of the Rent Commencement Date occurs, in the
amount of Six Hundred Seventy-Four Thousand Seven Hundred
Thirty Dollars ($674,730) per annum, which shall be payable
in equal monthly installments of $56,227.50;
(ii) For the period commencing on the first (1st)
anniversary of the Rent Commencement Date through and
including the last day of the month in which the day
immediately preceding the second (2nd) anniversary of the
Rent Commencement Date occurs, in the amount of Seven
Hundred One Thousand Seven Hundred Nineteen Dollars
($701,719) per annum, which shall be payable in equal
monthly installments of $58,476.58;
(iii) For the period commencing on the second (2nd)
anniversary of the Rent Commencement Date through and
including the last day of the month in which the day
immediately preceding the third (3rd) anniversary of the
Rent Commencement Date occurs, in the amount of Seven
Hundred Twenty-Nine Thousand Seven Hundred Eighty-Eight
Dollars ($729,788) per annum, which shall be payable in
equal monthly installments of $60,815.67;
(iv) For the period commencing on the third (3rd)
anniversary of the Rent Commencement Date through and
including the last day of the month in which the day
immediately preceding the fourth (4th) anniversary of the
Rent Commencement Date occurs, in the amount of Seven
Hundred Fifty-Eight Thousand Nine Hundred Seventy-Nine
Dollars ($758,979) per annum, which shall be payable in
equal monthly installments of $63,248.25;
(v) For the period commencing on the fourth (4th)
anniversary of the Rent Commencement Date through and
including the last day of the month in which the day
immediately preceding the fifth (5th) anniversary of the
Rent Commencement Date occurs, in the amount of Seven
Hundred Eighty Nine Thousand Three Hundred Thirty-Nine
Dollars ($789,339) per annum, which shall be payable in
equal monthly installments of $65,778.25;
(vi) For the period commencing on the fifth (5th)
anniversary of the Rent Commencement Date through and
including the last day of the month in which the day
immediately preceding the sixth (6) anniversary of the Rent
Commencement
-2-
<PAGE>
Date occurs, in the amount of Eight Hundred Twenty
Thousand Nine Hundred Twelve Dollars ($820,912) per annum,
which shall be payable in equal monthly installments
of $68,409.33;
(vii) For the period commencing on the sixth (6th)
anniversary of the Rent Commencement Date through and
including the last day of the month in which the day
immediately preceding the seventh (7th) anniversary of the
Rent Commencement Date occurs, in the amount of Eight
Hundred Fifty-Three Thousand Seven Hundred Forty-Nine
Dollars ($853,749) per annum, which shall be payable in
equal monthly installments of $71,145.75;
(viii) For the period commencing on the seventh
(7th) anniversary of the Rent Commencement Date through and
including the last day of the month in which the day
immediately preceding the eighth (8th) anniversary of the
Rent Commencement Date occurs, in the amount of Eight
Hundred Eighty-Seven Thousand Eight Hundred Ninety-Nine
Dollars ($887,899) per annum, which shall be payable in
equal monthly installments of $73,991.58;
(ix) For the period commencing on the eighth (8th)
anniversary of the Rent Commencement Date through and
including the last day of the month in which the day
immediately preceding the ninth (9th) anniversary of the
Rent Commencement Date occurs, in the amount of Nine Hundred
Twenty-Three Thousand Four Hundred Fifteen Dollars
($923,415) per annum, which shall be payable in equal
monthly installments of $76,951.25;
(x) For the period commencing on the ninth (9th)
anniversary of the Rent Commencement Date through and
including the Fixed Expiration Date, in the amount of Nine
Hundred Sixty Thousand Three Hundred Fifty-One Dollars
($960,351) per annum, so much of which shall be applicable
pro rata to the foregoing period shall be payable in equal
monthly installments of $80,029.25; and
(b) "Additional Rent" consisting of all such other sums of
money as shall become due from and payable by Tenant to Landlord hereunder,
all to be paid to Landlord at its office, or at such other place, or to such
agent and at such place, as Landlord may designate from time to time by notice
to Tenant, in lawful money of the United States of America. All Base Rent,
Additional Rent and other items of rent payable under this Lease by Tenant to
Landlord are collectively hereinafter referred to as "Rental".
1.05 Notwithstanding the foregoing, provided no Event of
Default has occurred and is continuing hereunder, Tenant shall not be required
to pay Base Rent for the period commencing on the Commencement Date and ending
on the 150th day following the Fourth Floor Delivery Date, both dates
inclusive (the "Initial Period"; the first day following the expiration of
-3-
<PAGE>
the Initial Period is hereinafter referred to as the "Rent Commencement Date").
All of the other terms, provisions and conditions of this Lease shall apply with
full force and effect during the Initial Period.
1.06 Tenant shall pay Base Rent and Additional Rent herein
reserved promptly as and when the same shall become due and payable, without
demand therefor and without any abatement, deduction, or setoff whatsoever.
1.07 If the Rent Commencement Date falls on a day other than
the first day of a calendar month, then, on the Rent Commencement Date, Tenant
shall pay to Landlord a sum equal to $1,874.25 multiplied by the number of
days in the period from the Rent Commencement Date to the last day of the
calendar month in which the Rent Commencement Date occurs, both dates
inclusive.
1.08 Notwithstanding the provisions of Section 1.05, during
the Initial Period, Tenant shall pay all items of Rental otherwise due and
payable hereunder except Base Rent.
ARTICLE 2
Use
2.01 Tenant shall use and occupy the Demised Premises for
executive offices, general offices and uses incidental thereto, including,
without limitation, computer rooms for use by Tenant and its employees, and
for no other purpose. Neither the Demised Premises nor any part thereof shall
be used: (i) as a restaurant, luncheonette, or otherwise for the preparation
and/or sale of food for on or off premises consumption; (ii) as a discount
store; (iii) as a multiple tenancy store; (iv) by a foreign or domestic
governmental agency; (v) as a betting parlor or gambling casino; or (vi) by a
utility company.
2.02 If any governmental license or permit, other than a
Certificate of Occupancy, shall be required for the proper and lawful conduct
of Tenant's business in the Demised Premises or any part thereof, Tenant, at
its expense, shall duly procure, and thereafter maintain, such license or
permit and submit the same for inspection by Landlord. Tenant shall, at all
times, comply with the terms and conditions of any such license or permit.
2.03 Tenant shall not, at any time, use or occupy, or suffer
or permit anyone to use or occupy, the Demised Premises, or do or permit
anything to be done in the Demised Premises, in violation of the Certificate
of Occupancy for the Demised Premises or for the Building.
-4-
<PAGE>
ARTICLE 3
Tenant's Occupancy of the Demised Premises
3.01 Subject to the provisions of Article 4, the Demised
Premises shall be completed and prepared for Tenant's occupancy as provided in
Exhibit B attached hereto and made a part hereof. The work to be performed in
the Demised Premises by Landlord at Landlord's sole cost and expense in
accordance with Exhibit B is hereinafter called "Landlord's Work". Any Change
undertaken by Tenant to prepare the Demised Premises for Tenant's occupancy in
accordance with Exhibit B is hereinafter called "Tenant's Work." Tenant's Work
shall be performed in accordance with all provisions of Article 12 hereof as if
such work comprised a Change (as such term is defined in Article 12).
3.02 Landlord and Landlord's agents and representatives have
made no representations or promises with respect to the Building, the Land or
the Demised Premises except as herein expressly set forth, and no rights,
easements or licenses are acquired by Tenant by implication or otherwise
except as expressly set forth herein. Tenant shall accept possession of the
Demised Premises in the condition which shall exist on the Commencement Date
"as is", and Landlord shall have no obligation to perform any work or make any
installations in the Demised Premises except for the items of Landlord's Work
set forth on Exhibit B.
3.03 (a) Landlord shall give Tenant written notice at least
ten (10) days in advance of the date when Landlord expects to deliver to
Tenant possession of each portion of the Demised Premises.
(b) Tenant expressly acknowledges that, in accordance
with good construction practice and scheduling, Landlord's Work will be
performed by Landlord prior to, or simultaneously with, the performance by
Tenant of Tenant's Work (or portions thereof). Landlord and Tenant agree to
cooperate with each other (including, without limitation, coordination of
scheduling between the contractors performing Landlord's Work and the
contractors performing Tenant's Work) to permit Landlord's Work to be performed
when required, in accordance with good construction practice and scheduling
simultaneously with Tenant's Work. As used in this Lease, "substantially
complete," "substantial completion" or other words of like import shall mean
completion other than (i) minor or insubstantial details of construction or
demolition and/or mechanical adjustment and/or decorative items, which remain to
be performed and (ii) any long lead work which remains to be performed.
(c) Landlord shall not be liable in any way to Tenant
for any damages or losses arising by reason of the performance of Landlord's
Work and the same shall not constitute an actual or constructive eviction, in
whole or in part, or entitle Tenant to any abatement or diminution of Rental, or
relieve Tenant from any of its obligations under this Lease, or impose any
liability upon Landlord or its agents by reason of inconvenience or annoyance
to Tenant, or
-5-
<PAGE>
injury to or interruption of Tenant's business or otherwise. Tenant shall
cooperate fully with Landlord so as to not interfere with the completion of
any Landlord's Work.
ARTICLE 4
Delivery of Possession; Right to Terminate for Failure
to Deliver Fourth Floor Premises
4.01 Landlord shall deliver possession to Tenant of the
Third Floor Premises on the Commencement Date and the Fourth Floor Premises on
the Fourth Floor Delivery Date.
4.02 If Landlord shall be unable to deliver possession to
Tenant of the Fourth Floor Premises on or before the date which is nine (9)
months following the date hereof ( the "Outside Date"), either Landlord or
Tenant, by delivering notice (the "Termination Notice") to the other within
thirty (30) days after the Outside Date, may terminate this Lease. Upon the
giving of such notice, this Lease shall terminate on the date set forth in the
Termination Notice, but not sooner than the tenth (10th) day nor later than
the thirtieth (30th) day after such notice is given, and Tenant shall vacate
the Third Floor Premises and surrender the same to Landlord in accordance with
the provisions of Article 23 hereof.
ARTICLE 5
Adjustments of Rent
5.01 Tax Escalation. For purposes of Sections 5.01 to
5.05:
(a) "Taxes" shall mean the aggregate amount of real estate
taxes, assessments and special assessments imposed upon the Building and the
Land. If, at any time during the term of this Lease, the methods of taxation
prevailing on the Commencement Date shall be altered so that, in lieu of, as
an addition to, or as a substitute for the whole or any part of the taxes,
assessments, levies, impositions, or charges now levied, assessed, or imposed
on real estate and the improvements thereon, there shall be levied, assessed,
or imposed (i) a tax, assessment, levy, imposition, or charge wholly or
partially as a capital levy or otherwise on the rents received therefrom, (ii)
a tax, assessment, levy, imposition, or charge measured by, or based in whole
or in part upon, the Demised Premises and imposed upon Landlord, or (iii) a
license fee measured by the rents payable by Tenant to Landlord, then all such
taxes, assessments, levies, impositions, or charges, or the part thereof so
measured or based, shall be deemed to be included within the term Taxes for
the purposes hereof. With respect to any Tax Year, all expenses, including
reasonable attorney's fees and disbursements, experts' and other witnesses'
fees, incurred in
-6-
<PAGE>
contesting the validity or amount of any Taxes or in obtaining a refund of Taxes
shall be considered as part of the Taxes for such Tax Year.
(b) "Tax Year" shall mean the fiscal year commencing July 1
and ending on the next succeeding June 30 for which Taxes are levied by the
governmental authority.
(c) "Base Taxes" shall mean the average of (i) the Taxes
payable for the Tax Year commencing July 1, 1995 and ending June 30, 1996 and
(ii) the Taxes payable for the Tax Year commencing July 1, 1996 and ending
June 30, 1997.
(d) "Tenant's Proportionate Share" shall mean, for purposes
of this Lease and all calculations in connection herewith, 16.67%, which
percentage is based on a measurement, for purposes of this Article 5 only, of
16,660 square feet for each floor comprising the Demised Premises.
(e) "Tenant's Proportionate Share of Tax Increase" shall
mean Tenant's Proportionate Share multiplied by the amount by which the Taxes
for the subject Tax Year exceed the Base Taxes, as finally determined.
(f) "Tenant's Monthly Share of Tax Increase" shall mean
one-twelfth (1/12th) of Tenant's Proportionate Share of Tax Increase.
5.02 If the Taxes payable for any Tax Year (any part or all
of which falls within the Term and after the Rent Commencement Date) shall
represent an increase above the Base Taxes, then, within sixty (60) days after
Landlord shall receive its tax bill for such Tax Year, Landlord shall furnish
Tenant with a written statement setting forth Tenant's Proportionate Share of
Tax Increase and Tenant's Monthly Share of Tax Increase for such Tax Year,
which statement shall be sent to Tenant together with a copy of the tax bill
received by Landlord. Each statement furnished under this Section 5.02 is
hereinafter called a "Tax Statement." On the later to occur of (i) the first
day of the month following the furnishing to Tenant of a Tax Statement and
(ii) ten (10) days following the furnishing to Tenant of a Tax Statement,
Tenant shall pay to Landlord Tenant's Monthly Share of Tax Increase and shall
continue to make such payments until the first day of the month following the
month in which Landlord shall deliver to Tenant a new Tax Statement. If
Landlord furnishes a Tax Statement for a new Tax Year subsequent to the
commencement thereof, promptly after the new Tax Statement is furnished to
Tenant, Landlord shall give notice to Tenant stating whether the amount
previously paid by Tenant to Landlord for the current Tax Year was greater or
less than the installments of the Tax Payment for the current tax year in
accordance with the Tax Statement, and (a) if there shall be a deficiency,
Tenant shall pay the amount thereof within ten (10) days after demand
therefor, or (b) if there shall have been an overpayment, Landlord shall
credit the amount thereof against the next monthly installments of the Fixed
Rent payable under this Lease. Tax Payments shall be collectible by Landlord
in the same manner as Fixed Rent. Landlord's failure to render a Tax Statement
shall not prejudice
-7-
<PAGE>
Landlord's right to render a Tax Statement during or with respect to any
subsequent Tax Year, and shall not eliminate or reduce Tenant's obligation to
make Tax Payments for such Tax Year.
5.03 Every Tax Statement furnished by Landlord shall be
conclusive and binding upon Tenant, unless Tenant shall notify Landlord within
thirty (30) days after the receipt of such statement that it disputes the
correctness of the computations made thereon, specifying the particular
respects in which such computations are claimed to be incorrect. Pending the
resolution of such dispute, Tenant shall, within thirty (30) days after
receipt of such disputed Tax Statement, pay any Additional Rent due in
accordance therewith, but such payment shall be without prejudice to Tenant's
position. If the dispute shall be resolved in Tenant's favor, Landlord shall,
on demand, pay Tenant the amount of Tenant's overpayment of rents, if any,
resulting from compliance with the disputed Tax Statement.
5.04 Notwithstanding the fact that the aforesaid increase in
rent is measured by an increase in Taxes over the Base Taxes, such increase is
Additional Rent and shall be paid by Tenant as herein provided regardless of
the fact that Tenant may be exempt, in whole or in part, from the payment of
any taxes by reason of Tenant's diplomatic or other tax exempt status or for
any other reason whatsoever.
5.05 (a) Only Landlord shall be eligible to institute tax
reduction or other proceedings to reduce the assessed valuation of the Land
and the Building. Should Landlord be successful in any such reduction
proceedings and obtain a rebate for periods as to which Tenant has paid its
share of increases, Landlord shall, after deducting its expenses (including
reasonable attorneys' fees and disbursements in connection therewith), return
Tenant's Proportionate Share of such rebate to Tenant or, at Landlord's
option, credit Tenant's Proportionate Share of such rebate against Tenant's
payment of Base Rent next becoming due.
(b) In the event that, after a Tax Statement has been
sent to Tenant, the assessed valuation of the Land and the Building which had
been utilized in computing the Base Taxes is reduced (as a result of
settlement, final determination of legal proceedings or otherwise) then, and
in such event: (i) the Base Taxes shall be retroactively adjusted to reflect
such reduction, and (ii) all retroactive payments of Tenant's Proportionate
Share of Tax Increase resulting from such retroactive adjustment shall be due
and payable when billed by Landlord. Landlord promptly shall send to Tenant a
statement setting forth the basis for such retroactive adjustment and payments
of Tenant's Proportionate Share of Tax Increase.
5.06 Tenant's liability for the amounts due under this
Article 5 shall survive the expiration of the term hereof, and any amount due
for a partial period between the expiration of a Tax Year, calendar year, or
lease year and the Expiration Date shall be prorated.
ARTICLE 6
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Subordination; Notice to Lessors and
Mortgagees
6.01 This Lease, and all rights of Tenant hereunder, are and
shall be subject and subordinate in all respects to: (a) all ground leases,
overriding leases and underlying leases of the Land and/or the Building now or
hereafter existing (collectively, the "Superior Leases"); (b) that certain
mortgage (the "Existing Mortgage") between Landlord and Chemical Bank, and all
other mortgages that may now or hereafter affect the Land and/or the Building
and/or any of the Superior Leases, whether or not the Existing Mortgage or any
such mortgages shall also cover other land and/or buildings (the "Other
Mortgages" and, together with the Existing Mortgage, the "Superior Mortgage");
(c) each and every advance made, or hereafter to be made, under the Superior
Mortgages; (d) all renewals, modifications, replacements and extensions of such
Superior Leases and/or Superior Mortgages; and (e) all spreaders and
consolidations of the Superior Mortgages. This Section 6.01 shall be
self-operative, and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant shall, within ten (10) days after
receipt thereof, execute and deliver any instrument that Landlord, the Lessor of
any Superior Lease (each, a "Superior Lessor"), the holder of any Superior
Mortgage (each, a "Superior Mortgagee") or any of their respective successors in
interest may reasonably request to evidence such subordination.
6.02 In the event of any act or omission of Landlord that
would give Tenant the right, immediately or after lapse of a period of time,
to cancel or terminate this Lease, or to claim a partial or total eviction,
Tenant shall not exercise such right (a) until it has given written notice of
such act or omission to any Superior Mortgagee and any Superior Lessor whose
name and address shall previously have been furnished to Tenant in writing by
Landlord and (b) unless such act or omission shall be one that is not capable
of being remedied by Landlord or such Superior Mortgagee or Superior Lessor
within a reasonable period of time, until a reasonable period for remedying
such act or omission shall have elapsed following the giving of such notice
and following the time when such Superior Mortgagee or Superior Lessor shall
have become entitled under such Superior Mortgage or Superior Lease, as the
case may be, to remedy the same (which reasonable period shall in no event be
less than the period to which Landlord would be entitled under this Lease or
otherwise, after similar notice, to effect such remedy), provided that such
Superior Mortgagee or Superior Lessor shall give Tenant written notice of its
intention to remedy such act or omission and shall, with due diligence,
commence and continue to do so.
6.03 If any Superior Mortgagee or Superior Lessor shall
succeed to the rights of Landlord under this Lease, whether through possession
or foreclosure action or delivery of a new lease or deed, then, at the request
of the party so succeeding to Landlord's rights (herein sometimes called the
"Successor Landlord") and upon such Successor Landlord's written agreement to
accept Tenant's attornment, Tenant shall attorn to and recognize such
Successor Landlord as Tenant's landlord under this Lease, and shall promptly
execute and deliver any instrument that such Successor Landlord may reasonably
request to evidence such attornment.
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Upon such attornment, this Lease shall continue in full force and effect as, or
as if it were, a direct lease between the Successor Landlord and Tenant, upon
all of the terms, conditions and covenants as are set forth in this Lease and as
shall be applicable after such attornment, except that the Successor Landlord
shall not:
(a) be liable for any previous act or omission of any
prior landlord (including Landlord) under this Lease;
(b) be subject to any offset, not expressly provided for
in this Lease, that shall have theretofore accrued to Tenant against Landlord;
or
(c) be bound by any previous modification of this Lease not
expressly provided for in this Lease or by any previous prepayment of more
than one month's Base Rent or any Additional Rent then due, unless such
modification or prepayment shall have been expressly approved in writing by
such Superior Lessor or Superior Mortgagee, as the case may be.
6.04 Landlord agrees that it will use reasonable efforts to
obtain from the holder of the Existing Mortgage, and from any other Superior
Mortgagee and/or Superior Lessor, a non-disturbance agreement or a recognition
agreement, as the case may be (each, a "Non-Disturbance Agreement"), for the
benefit of Tenant, to the effect that as long as Tenant is not in default in
the payment of Rental or of any of the other covenants and conditions of this
Lease beyond any applicable grace period, and provided Tenant shall agree to
attorn to and recognize any such Superior Mortgagee and/or Superior Lessor, as
a Successor Landlord under this Lease and shall promptly execute and deliver
any instrument that such Successor Landlord may reasonably request to evidence
such attornment, that its rights as Tenant hereunder shall not be terminated
and the possession of Tenant shall not be disturbed by any such Superior
Mortgagee or Superior Lessor, and that any sale at foreclosure will be subject
to this Lease. The inability of Landlord to obtain such Non-Disturbance
Agreement, despite reasonable efforts on its part, shall not be deemed a
default on Landlord's part of its obligations hereunder, or impose any claim
in favor of Tenant against Landlord by reason thereof or affect the validity
of this Lease in any manner whatsoever. Landlord's agreement to use reasonable
efforts shall not impose any obligation upon Landlord to incur any cost or
expense or to institute any legal or other proceeding in connection with
obtaining such Non-Disturbance Agreement.
ARTICLE 7
Quiet Enjoyment
For so long as Tenant pays all of the Rental due hereunder and
performs all of Tenant's other obligations hereunder, Tenant shall peaceably
and quietly have, hold and enjoy the Demised
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Premises, subject, nevertheless, to the obligations of this Lease and, as
provided in Article 6, to the Superior Leases and the Superior Mortgages.
ARTICLE 8
Assignment and Subletting
8.01 Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage, or encumber this Lease or any of
its rights or its estate hereunder or any part thereof, sublet the Demised
Premises or any part thereof, or suffer or permit the Demised Premises, or any
part thereof, to be used or occupied by others, without the prior written
consent of Landlord in each instance. If this Lease be assigned in whole or in
part, or if the Demised Premises or any part thereof be sublet or occupied by
anybody other than Tenant, Landlord may, after default by Tenant, collect rent
from the assignee, subtenant, or occupant, and apply the net amount collected to
the Rental herein reserved, but no assignment, subletting, occupancy, or
collection shall be deemed a waiver of the provisions hereof, the acceptance of
the assignee, subtenant, or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. Landlord's consent to an assignment or subletting shall not, in any
way, be construed to relieve Tenant from obtaining Landlord's express written
consent to any further assignment or subletting. Except as otherwise set forth
in Section 8.05 hereof, in no event shall any permitted sublessee assign or
encumber its sublease, further sublet all or any portion of its sublet space, or
otherwise suffer or permit the sublet space, or any part thereof, to be used or
occupied by others, without Landlord's prior written consent in each instance.
8.02 If Tenant shall, at any time or times during the Term,
desire to assign this Lease in whole or in part, or sublet all or part of the
Demised Premises, Tenant shall give notice thereof to Landlord, which notice
shall be accompanied by: (a) a copy of the proposed assignment or sublease,
the effective or commencement date of which shall be not less than sixty (60)
nor more than one hundred and eighty (180) 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 Demised Premises; and (c) current financial information
with respect to the proposed assignee or subtenant, including its most recent
financial report. Such notice shall be deemed an offer from Tenant to Landlord
whereby Landlord (or Landlord's designee) may, at its option: (i) terminate
this Lease (if the proposed transaction is an assignment of this Lease or a
sublease of all or substantially all of the Demised Premises); or (ii)
terminate this Lease with respect to such space (the "Leaseback Space") (if
the proposed transaction is a sublease of part of the Demised Premises for the
remaining portion of the Term). Said options may be exercised by Landlord by
notice to Tenant at any time within thirty (30) days after such notice has
been given by Tenant to Landlord; and during such thirty (30) day period,
Tenant shall not assign this Lease or sublet such space to any person. If
Landlord shall fail to notify Tenant
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within such thirty (30) day period of Landlord's intention to exercise any of
its options under this Section 8.02, Landlord shall be deemed to have consented
to the proposed assignment or subletting in accordance with the provisions of
Section 8.06.
8.03 If Landlord exercises its option to terminate this
Lease in the event that Tenant desires either to assign this Lease or to
sublet all or substantially all of the Demised Premises, then this Lease shall
end and expire upon the date that such assignment or subletting was to be
effective or to commence, as the case may be, and the Base Rent and Additional
Rent shall be apportioned and paid to such date.
8.04 If Landlord exercises its option to terminate this
Lease with respect to the Leaseback Space in the event that Tenant desires to
sublet the Leaseback Space for the remainder of the Term, then (a) this Lease
shall end and expire, with respect to such part of the Demised Premises, on
the date upon which the proposed sublease was to commence; (b) from and after
such date, the Base Rent and Additional Rent shall be adjusted, based upon the
proportion that the rentable area of the Demised Premises remaining bears to
the total rentable area of the Demised Premises; and (c) Tenant shall pay to
Landlord, upon demand, the costs (which shall be commercially reasonable)
incurred by Landlord in physically separating such part of the Demised
Premises and in complying with any laws and requirements of any public
authorities relating to such separation.
8.05 In the event that Tenant complies with the provisions
of Section 8.02 and Landlord does not exercise an option provided to it
thereunder within the time provided therefor, and provided that Tenant is not
in default of any of Tenant's obligations under this Lease after notice and
the expiration of any applicable grace period, subject to the provisions of
Section 8.02, Landlord's consent to the proposed assignment or sublease shall
not be unreasonably withheld or delayed, provided and upon condition that:
(a) in Landlord's sole judgment, the proposed assignee or
subtenant is engaged in such a business, and the Demised Premises, or the
relevant part thereof, will be used in such a manner, that: (i) is in keeping
with the then standards of the Building; (ii) is limited to the use expressly
permitted under this Lease; and (iii) will not violate any restrictive
covenant as to use contained in any other lease of space in the Building;
(b) the proposed assignee or subtenant is a reputable person
of good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with proof thereof
acceptable to Landlord in its sole discretion;
(c) neither (i) the proposed assignee or sublessee nor (ii)
any person that, directly or indirectly, controls, is controlled by, or is
under common control with, the proposed assignee or sublessee, or any person
who controls the proposed assignee or sublessee, is then an occupant of any
part of the Building;
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(d) the proposed assignee or sublessee is not a person with
whom Landlord is then negotiating, or has negotiated within the past six (6)
months, to lease space in the Building, provided that at the time of any such
proposal to assign or sublet, Landlord has sufficient available space to let
in the Building to such proposed assignee or subleasee other than the Demised
Premises or that portion of the Demised Premises proposed to be sublet by
Tenant;
(e) the proposed sublease shall be in form reasonably
satisfactory to Landlord and shall comply with the applicable provisions of this
Article;
(f) there shall not be more than one (1) subtenant per
floor of the Demised Premises;
(g) the amount of the aggregate rent to be paid by the
proposed subtenant is not less than the then current market rent per rentable
square foot for the Demised Premises as though the Demised Premises were
vacant, and the rental and other terms and conditions of the sublease are the
same as those contained in the proposed sublease furnished to Landlord pursuant
to Section 8.02;
(h) Tenant shall reimburse Landlord on demand for any
reasonable costs that may be incurred by Landlord in connection with said
assignment or sublease, including the costs of making investigations as to the
acceptability of the proposed assignee or subtenant and legal costs incurred
in connection with the granting of any requested consent;
(i) Tenant shall not have: (i) advertised or publicized in
any way the availability of the Demised Premises without prior notice to, and
approval by, Landlord, which approval shall not be unreasonably withheld or
delayed, nor shall any advertisement state the name (as distinguished from the
address) of the Building or the proposed rental or (ii) listed the Demised
Premises for subletting or assignment with a broker, agent or representative,
other than the then managing agent of the Building or other agent designated
by Landlord or approved by Landlord in advance in writing, or at a rental rate
less than the greater of (x) the Base Rent and Additional Rent then payable
hereunder for such space and (y) the prevailing rental rate at which Landlord
is then offering to lease other comparable space in the Building;
(j) the sublease shall not allow use of the Demised Premises
or any part thereof for purposes other than those set forth in Article 2;
(k) the sublease shall not provide for an option on behalf
of the subtenant thereunder to extend or renew the term of such sublease
beyond noon of the day immediately prior to the Expiration Date.
8.06 If, after receipt of Tenant's notice delivered in
accordance with the provisions of Section 8.02, Landlord shall fail to notify
Tenant within thirty (30) days of
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Landlord's intention to exercise its rights pursuant to Section 8.02 or of
Landlord's consent to or disapproval of the proposed assignment or subletting
pursuant to the provisions of Section 8.05, or if Landlord shall have consented
to such subletting as provided in Section 8.05 hereof, Tenant shall have the
right to assign or sublease, as the case may be, all or part of the Demised
Premises to the proposed assignee or subtenant on the same terms and conditions
set forth in the proposed assignment or sublease, as the case may be, and in
Section 8.05, subject to the terms and conditions of this Lease. In the event
that (a) Landlord fails to exercise any of its options under Section 8.02 and
consents or is deemed to have consented to a proposed assignment or sublease and
(b) Tenant fails to execute and deliver the assignment or sublease to which
Landlord consented, or was deemed to have consented, within ninety (90) days
after the giving or deemed giving of such consent, then Tenant shall again
comply with all of the provisions and conditions of Section 8.02 before
assigning this Lease in whole or in part or subletting all or part of the
Demised Premises.
8.07 Each subletting pursuant to this Article 8 shall be
subject to all of the covenants, agreements, terms, provisions and conditions
contained in this Lease. In the event of any subletting to any subtenant
and/or acceptance of rent or additional rent by Landlord from any subtenant,
Tenant shall and will remain fully liable for the payment of the Base Rent and
Additional Rent due, and to become due, hereunder, for the performance of all of
the covenants, agreements, terms, provisions and conditions contained in this
Lease on the part of Tenant to be performed and for all acts and omissions of
any subtenant or any other person claiming under or through any subtenant that
shall be in violation of any of the obligations of this Lease, and any such
violation shall be deemed to be a violation by Tenant. Tenant further agrees
that, not-withstanding any such subletting, no other and further subletting of
the Demised Premises by Tenant, or any person claiming through or under Tenant,
shall, or will be, made, except upon compliance with, and subject to, the
provisions of this Article 8. If Landlord shall decline to give its consent to
any proposed assignment or sublease, or if Landlord shall exercise any of its
options under Section 8.02, Tenant shall indemnify, defend and hold Landlord
harmless from and against any and all losses, liabilities, damages, costs and
expenses (including reasonable counsel fees) resulting from any claims that may
be made against Landlord by the assignee or subtenant or by any brokers or other
persons claiming a commission or similar compensation in connection with the
proposed assignment or sublease.
8.08 With respect to each and every sublease or subletting,
whether made with Landlord's consent pursuant to Section 8.01 or without
Landlord's consent pursuant to Section 8.11, it is further agreed that:
(a) no subletting shall be for a term ending later than
one (1) day prior to the Expiration Date;
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(b) no sublease shall be valid, and no subtenant shall take
possession of the Demised Premises or any part thereof, until an executed
counterpart of such sublease has been delivered to Landlord; and
(c) each sublease shall provide that it is subject and
subordinate to this Lease and to the matters to which this Lease is or shall
be subordinate, and that, in the event of termination, reentry, or
dispossession by Landlord under this Lease, Landlord may, at its option, take
over all of the right, title and interest of Tenant as sublandlord under such
sublease, and such subtenant shall, at Landlord's option, attorn to Landlord
pursuant to the then executory provisions of this Lease, except that Landlord
shall not: (i) be liable for any previous act or omission of Tenant under such
sublease; (ii) be subject to any offset, not expressly provided in such
sublease, that theretofore accrued to such subtenant against Tenant; or (iii)
be bound by any previous modification of such sublease which was not consented
to in writing by Landlord or by any previous prepayment of more than one
month's Base Rent or any Additional Rent then due.
8.09 Any assignment or transfer, whether made with
Landlord's consent pursuant to Section 8.01 or without Landlord's consent
pursuant to Section 8.11 (b), shall be made only if, and shall not be
effective until, the assignee shall execute, acknowledge and deliver to
Landlord an agreement, in form and substance satisfactory to Landlord, whereby
the assignee shall assume all of the obligations of this Lease on the part of
Tenant to be performed and observed and whereby the assignee shall agree that
the provisions contained in Section 8.01 shall, notwithstanding such assignment
or transfer, continue to be binding upon it in respect of all future assignments
and transfers. The original named Tenant covenants that, notwithstanding any
assignment or transfer, whether or not in violation of the provisions of this
Lease, and notwithstanding the acceptance of Base Rent and/or Additional Rent by
Landlord from an assignee, transferee, or any other party, the original named
Tenant shall remain fully liable for the payment of the Base Rent and Additional
Rent and for the other obligations of this Lease on the part of Tenant to be
performed or observed.
8.10 If Landlord shall give its consent to any assignment of
this Lease or to any sublease, Tenant shall, in consideration therefor, pay to
Landlord, as Additional Rent:
(a) in the case of an assignment, an amount equal to fifty
(50%) percent of (x) all sums and other consideration paid to Tenant by the
assignee for, or by reason of, such assignment (including all sums paid for
the sale of Tenant's fixtures, leasehold improvements, equipment, furniture,
furnishings, or other personal property, less the then net unamortized or
undepreciated cost thereof determined on the basis of Tenant's federal income
tax returns) less (y) the sum of (i) the amounts paid by Tenant for brokerage
and legal fees with respect to such assignment provided such fees are
reasonable and Landlord receives satisfactory verification of the payment of
same, and (ii) the amounts paid by Tenant expressly and solely for the purpose
of preparing the Demised Premises for such assignee's occupancy as determined
by Tenant's federal income tax returns, provided Landlord receives
satisfactory verification of payment of same; and
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(b) in the case of a sublease, fifty (50%) percent of any
rents, additional charges, or other cost or consideration payable under the
sublease by the subtenant to Tenant that are in excess of the Base Rent and
Additional Rent accruing during the term of the sublease in respect of the
subleased space (at the rate per square foot payable by Tenant hereunder)
pursuant to the terms hereof (including all sums paid for the sale or rental
of Tenant's fixtures, leasehold improvements, equipment, furniture, or other
personal property, less, in the case of the sale thereof, the then net
unamortized or undepreciated cost thereof determined on the basis of Tenant's
federal income tax returns) less (i) the amounts paid by Tenant for brokerage
and legal fees with respect to such sublease provided such fees are reasonable
and Landlord receives satisfactory verification of the payment of same, and
(ii) the amounts paid by Tenant expressly and solely for the purpose of
preparing the Demised Premises or portion thereof for such sublessee's
occupancy if not used by Tenant subsequent to the expiration of the term of
the sublease, provided Landlord receives satisfactory verification of payment
of same;
The sums payable under subsections (a) and (b) above shall be paid to Landlord
as and when payable by the assignee or subtenant, as the case may be, to
Tenant.
8.11 (a) Either a transfer (including the issuance of
treasury stock or the creation and issuance of new stock or a new class of
stock) of a controlling interest in the shares of Tenant (if Tenant is a
corporation or trust) or a transfer of a majority of the total interest in
Tenant (if Tenant is a partnership or other entity) at any one time or over a
period of time through a series of transfers, shall be deemed an assignment of
this Lease and shall be subject to all of the provisions of this Article 8,
including, without limitation, the requirement that Tenant obtain Landlord's
prior consent thereto. The transfer of shares of Tenant (if Tenant is a
corporation or trust) for purposes of this Section 8.11 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.
(b) As long as Health Management Systems, Inc. is
Tenant, Tenant shall have the privilege, subject to the terms and conditions
hereinafter set forth, without the consent of Landlord and without Landlord
having the right granted in Section 8.02(i) hereof to recapture, to assign its
interest in this Lease (i) to any corporation which is a successor to Tenant
either by merger or consolidation, (ii) to a purchaser of all or substantially
all of Tenant's assets (pro-vided such purchaser shall have also assumed
substantially all of Tenant's liabilities) or (iii) to a Person which shall
(1) Control, (2) be under the Control of, or (3) be under common Control with
Tenant. Notwithstanding anything to the contrary in this Article 8, if the
provisions of this Section 8.11(b)(i), (ii) or (iii) shall be applicable to
any assignment of this Lease, then the provisions of Section 8.10(a) and (b)
shall not be applicable.
8.12 The joint and several liability of Tenant and any
immediate or remote successor in interest to Tenant, and the due performance
of the obligations of this Lease on
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Tenant's part to be performed and observed, shall not be discharged, released,
or impaired in any respect by any agreement or stipulation made by Landlord
extending the time of, or modifying any of the obligations of, this Lease, or by
any waiver or failure of Landlord to enforce any of the obligations of this
Lease.
8.13 The listing of the name of a person or entity other
than that of Tenant, whether on the doors of the Demised Premises, on the
Building directory, or otherwise, shall not operate to vest any right or
interest in this Lease or in the Demised Premises in such person or entity,
nor shall it be deemed to be an indication that Landlord has consented to any
assignment or transfer of this Lease, to any sublease of the Demised Premises,
or to the use or occupancy thereof by others.
ARTICLE 9
Compliance With Laws and Requirements of
Public Authorities
9.01 (a) Tenant shall give prompt notice to Landlord of any
notice it receives of the violation of any Requirement (hereinafter defined)
and, at Tenant's sole cost and expense, Tenant shall comply with all
Requirements that shall, with respect to the Demised Premises, the use and
occupancy thereof, or the abatement of any nuisance, impose any violation,
order, or duty on Landlord or Tenant, arising from: (i) Tenant's use of the
Demised Premises; (ii) the manner of conduct of Tenant's business or operation
of its installations, equipment, or other property therein; (iii) any cause or
condition created by or at the instance of Tenant, including, without
limitation, Tenant's Changes performed by or on behalf of Tenant; or (iv) the
breach of any of Tenant's obligations hereunder. However, Tenant shall not be so
required to make any structural or other substantial change in the Demised
Premises unless the requirement arises from a cause or condition referred to in
subsection (ii), (iii), or (iv) above. Furthermore, Tenant need not comply with
any such Requirement for so long as Tenant shall be contesting the validity
thereof, or the applicability thereof to the Demised Premises, in accordance
with Section 9.02. Landlord, at its expense, shall comply with all Requirements
applicable to the Demised Premises and the Building other than those
Requirements with which Tenant or other tenants of the Building are required to
comply subject to Landlord's right to contest the legality or applicability of
same.
(b) As used herein, "Requirements" shall mean all present
and future laws, rules, orders, ordinances, regulations, statutes,
requirements, codes and executive orders, extraordinary as well as ordinary,
of all Governmental Authorities now existing or hereafter created, and of any
and all of their departments and bureaus, and of any applicable fire rating
bureau, or other body exercising similar functions, affecting the Land, the
Building or any portion thereof, or any street, avenue or sidewalk comprising
a part of or in front thereof or any vault in
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or under the same, or requiring removal of any encroachment, or affecting the
main-tenance, use or occupation of the Land, the Building or any portion
thereof.
(c) As used herein, "Governmental Authority (Authorities)"
shall mean the United States of America, the State of New York, the City of
New York, any political subdivision thereof and any agency, department,
commission, board, bureau or instrumentality of any of the foregoing, or any
quasi-governmental authority, now existing or hereafter created, having
jurisdiction over the Land, the Building or any portion thereof.
9.02 Tenant, at its sole cost and expense and after notice
to Landlord, may contest by appropriate proceedings prosecuted diligently and
in good faith, the legality or applicability of any Requirement affecting the
Demised Premises, provided that (a) Landlord (or any Indemnitee [hereinafter
defined]) shall not be subject to criminal penalty, imprisonment or to
prosecution for a crime, nor shall the Land, the Building or any part thereof
be subject to being condemned or vacated, nor shall the certificate of
occupancy for the Demised Premises or the Building be suspended or threatened
to be suspended by reason of non-compliance or by reason of such contest; (b)
before the commencement of such contest, if Landlord or any Indemnitee may be
subject to any civil fines or penalties or if Landlord may be liable to any
independent third party as a result of such noncompliance, Tenant shall
furnish to Landlord either (i) a bond of a surety company satisfactory to
Landlord, in form and substance reasonably satisfactory to Landlord, and in an
amount equal to one hundred twenty percent (120%) of the sum of (A) the cost
of such compliance, (B) the civil penalties or fines that may accrue by reason
of such non-compliance (as reasonably estimated by Landlord), and (C) the
amount of such liability to independent third parties (as reasonably estimated
by Landlord), and shall indemnify Landlord (and any Indemnitee) against the cost
of such compliance and liability resulting from or incurred in connection with
such contest or non-compliance (except that Tenant shall not be required to
furnish such bond to Landlord if it has otherwise furnished any similar bond
required by law to the appropriate Governmental Authority and has named Landlord
as a beneficiary thereunder) or (ii) other security reasonably satisfactory in
all respects to Landlord; (c) such non-compliance or contest shall not
constitute or result in a violation (either with the giving of notice or the
passage of time or both) of the terms of any Superior Mortgage or Superior
Lease, or if such Superior Lease or Superior Mortgage shall condition such
non-compliance or contest upon the taking of action or furnishing of security by
Landlord, such action shall be taken or such security shall be furnished at the
expense of Tenant; and (d) Tenant shall keep Landlord regularly advised as to
the status of such proceedings. Without limiting the applicability of the
foregoing, Landlord (or any Indemnitee) shall be deemed subject to prosecution
for a crime if Landlord (or any Indemnitee), a Superior Lessor, a Superior
Mortgagee, or any of their officers, directors, partners, shareholders, agents
or employees is charged with a crime of any kind or degree whatsoever, whether
by service of a summons or otherwise, unless such charges are withdrawn ten (10)
days before Landlord (or any Indemnitee), such Superior Lessor or Superior
Mortgagee or such officer, director, partner, shareholder, agent or employee, as
the case may be, is required to plead or answer thereto.
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ARTICLE 10
Insurance
10.01 Tenant shall not violate, or permit the violation of,
any condition imposed by the standard fire insurance policy then issued for
office buildings in the Borough of Manhattan, City of New York, and shall not
do, permit anything to be done, keep, or permit anything to be kept, in the
Demised Premises that would: (a) subject Landlord to any liability or
responsibility for personal injury, death, or property damage; (b) increase
the fire or other casualty insurance rate on the Building or the property
therein over the rate that would otherwise then be in effect (unless Tenant
pays the resulting premium as provided in Section 10. 07); or (c) result in
insurance companies of good standing refusing to insure the Building or any of
such property in amounts satisfactory to Landlord.
10.02 Tenant covenants to provide, on or before the
Commencement Date, and to keep in force during the term hereof, the following
insurance coverage:
(a) for the benefit of Landlord and Tenant, a comprehensive
policy of liability insurance protecting Landlord and Tenant against any
liability whatsoever occasioned by accident on or about the Demised Premises
or any appurtenances thereto. Such policy is to be written by good and solvent
insurance companies authorized to do business in the State of New York, and
the limits of liability thereunder shall not be less than the respective
amounts of Three Million ($3,000,000.00) Dollars of combined single limit
coverage on a per occurrence basis in respect of personal injury or death and
Five Hundred Thousand ($500,000.00) Dollars in respect of property damage. Such
insurance may be carried under a blanket policy or policies covering the Demised
Premises and other locations of Tenant, if any; and
(b) fire and extended coverage in an amount adequate to
cover the cost of replacement of all personal property, fixtures, furnishing
and equipment, including Tenant's work, located in the Demised Premises. Such
policy shall be written by good and solvent insurance companies authorized to
do business in the State of New York and rated in Best's Insurance Guide, or
any successor thereto (or if there be none, an organization having a national
reputation) as having a general policyholder rating of "A" and a financial
rating of at least "XIII."
Prior to the time that such insurance is first required to be carried by
Tenant, and, thereafter, at least fifteen (15) days prior to the expiration of
any such policies, Tenant agrees to deliver to Landlord certificates
evidencing such insurance, provided that said certificates contain an
endorsement that such insurance may not be modified or cancelled except upon
fifteen (15) days' notice to Landlord, together with evidence of payment of
same. Tenant's failure to provide and keep in force the aforementioned
insurance shall be regarded as a material default hereunder,
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entitling Landlord to exercise any or all of the remedies as provided in this
Lease in the event of Tenant's default.
10.03 Landlord and Tenant shall each endeavor to secure an
appropriate clause in, or an endorsement upon, each fire or extended coverage
policy obtained by it and covering their respective interests in the Building,
the Demised Premises, or the personal property, fixtures and equipment located
therein or thereon, pursuant to which the respective insurance companies waive
subrogation or permit the insured, prior to any loss, to agree with a third
party to waive any claim it might have against said third party. The waiver of
subrogation or permission for waiver of any claim hereinbefore referred to
shall extend to the agents of each party and its employees and, in the case of
Tenant, shall also extend to all other persons and entities occupying or using
the Demised Premises in accordance with the terms of this Lease. If, and to
the extent that, such waiver or permission can be obtained only upon payment
of an additional charge, then, except as provided in Sections 10.04 and 10.05,
the party benefitting from the waiver or permission shall pay such charge upon
demand, or shall be deemed to have agreed that the party obtaining the
insurance coverage in question shall be free of any further obligations under
the provisions hereof relating to such waiver or permission.
10.04 In the event that Landlord shall be unable at any time
to obtain one of the provisions referred to in Section 10.03 in any of its
insurance policies, Landlord shall, at Tenant's option, cause Tenant to be
named in such policy or policies as one of the assureds, but if any additional
premium shall be imposed for the inclusion of Tenant as such an assured,
Tenant shall pay such additional premium upon demand. In the event that Tenant
shall have been named as one of the assureds in any of Landlord's policies in
accordance with the foregoing, Tenant shall endorse promptly to the order of
Landlord, without recourse, any check, draft, or order for the payment of
money representing the proceeds of any such policy, or any other payment growing
out of or connected with said policy, and Tenant hereby irrevocably waives any
and all rights in and to such proceeds and payments.
10.05 In the event that Tenant shall be unable at any time
to obtain one of the provisions referred to in Section 10.03 in any of its
insurance policies, Tenant shall cause Landlord to be named in such policy or
policies as one of the assureds, but if any additional premium shall be
imposed for the inclusion of Landlord as such an assured, Landlord shall pay
such additional premium upon demand or Tenant shall be excused from its
obligations under Section 10.03 with respect to the insurance policy or
policies for which such additional premiums would be imposed. In the event
that Landlord shall have been named as one of the assureds in any of Tenant's
policies in accordance with the foregoing, Landlord shall endorse promptly to
the order to Tenant, without recourse, any check, draft, or order for the
payment of money representing the proceeds of any such policy, or any other
payment growing out of or connected with said policy, and Landlord hereby
irrevocably waives any and all rights in and to such proceeds and payments.
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10.06 Subject to the provisions of Sections 10.03, 10.04 and
10.05, and insofar as may be permitted by the terms of the insurance policies
carried by it, each party hereby releases the other with respect to any claim
(including a claim for negligence) that it might otherwise have against the
other party for loss, damages, or destruction with respect to its property by
fire or other casualty (including rental value or business interruption, as
the case may be) occurring during the term of this Lease.
10.07 If, by reason of failure of Tenant to comply with the
provisions of Section 9.01 or Section 10.01, the rate of fire insurance with
extended coverage on the Building or equipment or other property of Landlord
shall be higher than it otherwise would be, Tenant shall reimburse Landlord,
on demand, for that part of the premiums for fire insurance and extended
coverage paid by Landlord because of such failure on the part of Tenant.
10.08 If any dispute shall arise between Landlord and Tenant
with respect to the incurrence or amount of any additional insurance premium
referred to in Section 10.07, the dispute shall be determined by arbitration.
10.09 A schedule or make up of rates for the Building or the
Demised Premises, as the case may be, issued by the New York Fire Insurance
Rating Organization or other similar body making rates for fire insurance and
extended coverage for the premises concerned, shall be conclusive evidence of
the facts therein stated and of the several items and charges in the fire
insurance rate with extended coverage then applicable to such premises.
ARTICLE 11
Rules and Regulations
11.01 Tenant and its employees and agents shall faithfully
observe and comply with the Rules and Regulations annexed hereto as Exhibit C
and with such reasonable changes thereto (whether by modification,
elimination, or addition) as Landlord, at any time or times hereafter, may
make and communicate in writing to Tenant, provided that such changes do not
unreasonably affect the conduct of Tenant's business in the Demised Premises
(except with respect to any such changes that are required by any governmental
law, rule, regulation, ordinance, or similar decree). In the event, however,
that there is any conflict or inconsistency between the provisions of this
Lease and any of the Rules and Regulations, as originally promulgated or as
changed, the provisions of this Lease shall prevail.
11.02 Nothing in this Lease contained shall be construed to
impose upon Landlord any duty or obligation to Tenant to enforce the Rules and
Regulations, or the terms, covenants, or conditions contained in any other
lease, against any other tenant, and Landlord shall not be liable to Tenant
for violation of the same by any other tenant or such tenant's employees,
agents,
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or visitors. However, Landlord shall not enforce any of the Rules and
Regulations in such a manner as to discriminate against Tenant or any person
claiming under or through Tenant. Landlord shall not enforce any rule or
regulation against Tenant if Tenant establishes that Landlord is not generally
enforcing such rule or regulation in the Building.
ARTICLE 12
Tenant's Changes
12.01 Tenant may, from time to time during the Term and at
its sole expense, make such alterations, additions, installations,
substitutions, improvements and decorations (collectively, "Changes") in and
to the Demised Premises, excluding structural Tenant's Changes, as Tenant may
reasonably consider necessary for the conduct of its business therein, on the
following conditions:
(a) the outside appearance or strength of the Building, or
of any of its structural parts, shall not be affected;
(b) except as may be expressly permitted by the provisions
of Article 38, no part of the Building outside of the Demised Premises shall
be physically affected;
(c) the proper functioning of any of the Building Systems
shall not be adversely affected, and the usage of such Building Systems by
Tenant shall not be materially increased;
(d) in performing the work involved in making such Tenant's
Changes, Tenant shall observe, and be bound by, all of the conditions and
covenants contained in this Article 12; and
(e) before proceeding with any Change costing in excess of
$25,000 (exclusive of the costs of decorating work and items constituting
Tenant's Property, as defined in Article 13, and of any architect's and
engineer's fees), or any Change to the Building Systems, Tenant shall submit
to Landlord, for Landlord's approval, which approval shall not be unreasonably
withheld or delayed provided the remaining conditions of this Section 12.01
have been satisfied, plans and specifications for the work to be done.
Landlord may, as a condition of its consent, require Tenant to make revisions
in and to the plans and specifications with respect to any Tenant's Change.
12.02 Tenant shall, at its expense, obtain all necessary
governmental permits and certificates for the commencement and prosecution of
Tenant's Changes, and, upon completion, for final approval thereof, and shall
cause Tenant's Changes to be performed in compliance
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therewith, as well as with all applicable Requirements, in a good and
workmanlike manner, using new materials and equipment of a quality and class at
least equal to the installations in the Building existing on the Commencement
Date. Tenant's Changes shall be performed in such a manner as not to
unreasonably interfere with or delay, and (unless Tenant shall indemnify
Landlord therefor to the latter's reasonable satisfaction) as not to impose any
additional expense upon Landlord in the maintenance or operation of the
Building. Throughout the performance of Tenant's Changes, Tenant shall, at its
expense, carry, or cause to be carried, workers' com-pensation insurance in
statutory limits and general liability insurance for any occurrence in or about
the Building as set forth in Section 10.02 hereof. All such insurance policies
shall name Landlord and its agents as additional insureds, be in such limits as
Landlord may reasonably prescribe and be placed with insurers reasonably
satisfactory to Landlord. Tenant shall furnish Landlord with satisfactory
evidence that such insurance is in effect at or before the commencement of
Tenant's Changes and, on request, at reasonable intervals thereafter during the
continuance of Tenant's Changes. If any of Tenant's Changes shall involve the
removal of any fixtures, equipment, or other property in the Demised Premises
that are not Tenant's Property, such fixtures, equipment, or other property
shall be promptly replaced, at Tenant's expense, with new fixtures, equipment,
or other property (as the case may be) of like utility and at least equal value
unless Landlord shall otherwise expressly consent in writing, and Tenant shall,
upon Landlord's request, store and preserve, at Tenant's sole cost and expense,
any such fixtures, equipment, or property so removed and shall return same to
Landlord in good condition, subject to reasonable wear and tear, upon the
expiration or sooner termination of this Lease. All electrical and plumbing work
in connection with Tenant's Changes shall be per-formed by contractors or
subcontractors licensed therefor by all governmental agencies having or
asserting jurisdiction and acceptable to Landlord.
12.03 Tenant shall, at its expense and with diligence and
dispatch, procure the cancellation or discharge of all notices of violation
arising from, or otherwise connected with, Tenant's Changes that shall be issued
by the Department of Buildings or any other public or quasi-public authority
having or asserting jurisdiction on or before the date that shall be thirty (30)
days after Tenant receives notice of such violation. Tenant shall defend,
indemnify and save Landlord harmless from and against any and all mechanic's and
other liens filed in connection with Tenant's Changes, including the liens of
any security interest in, conditional sales of, or chattel mortgages upon, any
materials, fixtures, or articles so installed in and constituting part of the
Demised Premises, and against all costs, expense and liabilities incurred in
connection with any such lien, security interest, conditional sale, or chattel
mortgage or any action or proceeding brought thereon. Subject to the provisions
of the succeeding sentence, Tenant, at its expense, shall procure the
satisfaction or discharge of all such liens within twenty (20) days after the
earlier to occur of (i) the date on which Tenant receives notice of such lien
and (ii) the date Landlord makes written demand therefor. However, nothing
herein contained shall prevent Tenant from contesting, in good faith and at its
own expense, any such notice of violation, provided that Tenant shall comply
with the provisions of Section 9.02.
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12.04 Tenant agrees that the exercise of its rights pursuant
to the provisions of this Article 12 shall not be done in a manner that would:
(a) create any work stoppage, picketing, labor disruption, or dispute; (b)
violate Landlord's union contracts affecting the Land and/or Building; or (c)
interfere with the business of Landlord or any tenant or occupant of the
Building. In the event of the occurrence of any condition described above
arising from Tenant's exercise of any of its rights pursuant to the provisions
of this Article 12, Tenant shall, immediately, upon notice from Landlord,
cease the manner of exercise of such right giving rise to such condition. In
the event that Tenant fails to cease such manner of exercise of its rights as
aforesaid, Landlord, in addition to any rights available to it under this
Lease and pursuant to law, shall have the right to injunction without notice.
With respect to Tenant's Changes, Tenant shall make all arrangements for, and
pay all expenses incurred in connection with, use of the freight elevators
servicing the Demised Premises.
12.05 (a) Landlord shall contribute an amount not to exceed
Five Hundred Ninety-Nine Thousand Seven Hundred Sixty Dollars ($599,760) in
the aggregate (the "Tenant Fund") toward the cost of (i) Tenant's Work in
accordance with the provisions of Section 12.05(b) and (c) and (ii) other
Tenant Changes throughout the Term in accordance with the provisions of
Section 12.05(d) and (e).
(b) Landlord shall disburse a portion of the Tenant
Fund to Tenant from time to time, within thirty (30) Business Days
after receipt of the items set forth in Section 12.05(c) hereof,
provided that on the date of a request and on the date of disbursement
from the Tenant Fund no Event of Default shall have occurred and be
continuing. Disbursements from the Tenant Fund shall not be made
more frequently than monthly, and shall be in an amount equal to the
aggregate amounts theretofore paid or payable (as certified by an officer of
Tenant and Tenant's independent, licensed architect) to Tenant's contractors,
subcontractors and materialmen which have not been the subject of a previous
disbursement from the Tenant Fund multiplied by a fraction, the numerator of
which is 599,760 and the denominator of which is the total cost of Tenant's
Work as estimated by Tenant's independent licensed architect and as
approved by Landlord (which approval shall not be unreasonably withheld or
delayed), which fraction shall be subject to readjustment as provided by
Section 12.05(c) hereof (but in no event shall such fraction be greater than
one (1)).
(c) Landlord's obligation to make disbursements
from the Tenant Fund shall be subject to Landlord's verification of the total
cost of Tenant's Work as estimated by Tenant's independent licensed architect
and receipt of: (a) a request for such disbursement from Tenant signed by an
officer of Tenant, together with the certification required by Section 12.05(b)
hereof, (b) copies of all receipts, invoices and bills for the work completed
and materials furnished in connection with Tenant's Work and incorporated in the
Demised Premises which are to be paid from the requested disbursement or which
have been paid by Tenant and for which Tenant is seeking reimbursement, (c)
copies of all contracts, work orders, change orders and other materials relating
to the work or materials which are the subject of the requested disbursement or
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reimbursement, (d) if requested by Landlord, waivers of lien from all
contractors, subcontractors and materialmen involved in the performance of
Tenant's Work relating to the portion of Tenant's Work theretofore performed and
materials theretofore provided and for which previous disbursements and/or the
requested disbursement has been or is to be made (except to the extent such
waivers of lien were previously furnished to Landlord upon a prior request), and
(e) a certificate of Tenant's independent licensed architect stating (i) that,
in his opinion, the portion of Tenant's Work theretofore completed and for which
the disbursement is requested was performed in a good and workerlike manner and
substantially in accordance with the final detailed plans and specifications for
such Tenant's Work, as approved by Landlord, (ii) the percentage of completion
of Tenant's Work as of the date of such certificate, and (iii) the revised
estimated total cost to complete Tenant's Work. If the revised estimated total
cost of Tenant's Work increases above the original estimated total cost of
Tenant's Work by more than five percent (5%), then the denominator of the
fraction referred to in Section 12.05(b) hereof shall be adjusted appropriately.
(d) In no event shall the aggregate amount paid by
Landlord to Tenant under this Section 12.05 exceed the amount of the Tenant
Fund. Upon the completion of Ten-ant's Work and satisfaction of the conditions
set forth in Section 12.05(e) hereof, any amount of the Tenant Fund which has
not been previously disbursed (the "Tenant Fund Balance") may be disbursed by
Landlord toward the cost of Tenant's Changes during the Term in accordance with
the provisions of Section 12.05(b) and (c). Notwithstanding the foregoing, (i)
the provision of Section 12.05(b) requiring that the aggregate amount of a
requested disbursement be multiplied by a fraction to determine the portion of
the disbursement to be paid and (ii) clauses (ii) and (iii) and the last
sentence of Section 12.05(c) shall not be deemed to apply to any requested
disbursement from the Tenant Fund Balance with respect to a Tenant Change which
is not part of Tenant's Work. Upon the disbursement of the entire Tenant Fund,
Landlord shall have no further obligation or liability whatsoever to Tenant for
further disbursement of any portion of the Tenant Fund to Tenant. It is
expressly understood and agreed that, provided no Event of Default shall have
occurred and be continuing, Tenant shall complete, at its sole cost and expense,
Tenant's Work, whether or not the Tenant Fund Balance is sufficient to fund such
completion. Any costs to complete Tenant's Work in excess of the Tenant Fund
shall be the sole responsibility and obligation of Tenant. It is further
expressly understood and agreed that, provided no Event of Default shall have
occurred and be continuing, Tenant may assign its right, title and interest in
and to the Tenant Fund Balance to any assignee under an assignment or any
sublessee under a sublease, provided such assignment or sublease has been
entered into by Tenant in accordance with the provisions of Article 8.
(e) Within thirty (30) days after completion of
Tenant's Work and any Tenant Change which is not part of Tenant's Work and for
which Tenant has requested a disbursement from the Tenant Fund in accordance
with the provisions of this Section 12.05, Tenant shall deliver to Landlord
general releases and waivers of lien from all contractors, subcontractors and
materialmen involved in the performance of Tenant's Work or such Tenant's
Change, as the case may be, and the materials furnished in connection therewith
(unless same
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previously were furnished pursuant to Section 12.05(c) hereof), and a
certificate from Tenant's independent licensed architect certifying that (i) in
his opinion Tenant's Work or such Tenant's Change, has been performed in a good
and workerlike manner and completed in accordance with the final detailed plans
and specifications for such Tenant's Work or Tenant's Change, as approved by
Landlord and (ii) all contractors, subcontractors and materialmen have been paid
for Tenant's Work or such Tenant's Change, and materials furnished through such
date.
ARTICLE 13
Tenant's Property
13.01 All improvements and installations constituting
Landlord's Work, and all other fixtures, improvements and appurtenances
attached to or built into the Demised Premises on the Commencement Date or
during the term of this Lease, whether or not by or at the expense of Tenant,
shall be and remain a part of the Demised Premises, shall be deemed the
property of Landlord and shall not be removed by Tenant, except as hereinafter
in this Article 13 expressly provided.
13.02 Provided the same are not, or were not, included in
Landlord's Work, all paneling, movable partitions, lighting fixtures, special
cabinet work, other business and trade fixtures, machinery and equipment,
communications equipment and office equipment, whether or not attached to or
built into the Demised Premises, which are installed in the Demised Premises
by or for the account of Tenant, without expense to Landlord, and which can be
removed without permanent structural damage to the Building, all furniture,
furnishings and other articles of movable personal property owned by Tenant
and located in the Demised Premises (collectively, "Tenant's Property"), shall
be and shall remain the property of Tenant and may be removed by it at any
time during the term of this Lease, provided that if any of Tenant's Property
is removed, Tenant or any party or person entitled to remove same shall repair
or pay the cost of repairing any damage to the Demised Premises or to the
Building resulting from such removal. Except as expressly provided to the
contrary herein, any equipment or other property for which Landlord shall have
granted any allowance or credit to Tenant, or that has replaced such items
originally provided by Landlord at Landlord's expense, shall not be deemed to
have been installed by or for the account of Tenant without expense to Landlord,
and shall not be considered Tenant's Property.
13.03 At or before the Expiration Date, or as promptly as
practicable after the Expiration Date (if same occurs earlier than the Fixed
Expiration Date), Tenant, at its expense, shall remove from the Demised
Premises all of Tenant's Property, except such items thereof as Tenant shall
have expressly agreed in writing with Landlord were to remain and to become
the property of Landlord, and shall fully repair any damage to the Demised
Premises or the Building resulting from such removal. Tenant's obligation
herein shall survive the expiration or earlier termination of this Lease.
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13.04 Any other items of Tenant's Property (except money,
securities and other like valuables) that shall remain in the Demised Premises
after the Expiration Date or after a period of fifteen (15) days following an
earlier termination date, may, at the option of Landlord, be deemed to have
been abandoned, and, in such event, either may be retained by Landlord as its
property or may be disposed of, without accountability, at Tenant's expense
and in such manner as Landlord may see fit.
ARTICLE 14
Repairs and Maintenance
14.01 Tenant shall take good care of the Demised Premises.
Tenant, at its expense, shall promptly make all repairs, ordinary or
extraordinary, interior or exterior, structural or otherwise, in and about the
Demised Premises and the Building, as shall be required by reason of: (a) the
performance or existence of Tenant's Work or Tenant's Changes; (b) the
installation, use, or operation of Tenant's Property in the Demised Premises;
(c) the moving of Tenant's Property into or out of the Building; or (d) the
misuse or neglect of Tenant or any of its employees, agents, or contractors.
However, Tenant shall not be responsible for any of such repairs that are
required by reason of Landlord's neglect or other fault in the manner of
performing any of Tenant's Work or Tenant's Changes that may be undertaken by
Landlord for Tenant's account or that are otherwise required by reason of
neglect or other fault of Landlord or its employees, agents, or contractors.
Except if required by the neglect or other fault of Landlord or its employees,
agents, or contractors, Tenant, at its expense, shall: (i) repair or replace
all scratched, damaged, or broken doors or other glass in or about the Demised
Premises; (ii) repair, maintain and replace all wall and floor coverings in
the Demised Premises; (iii) repair and maintain all lighting fixtures therein;
and (iv) cause the Demised Premises to be exterminated from time to time to
the satisfaction of Landlord. Tenant will not clean nor require, permit,
suffer or allow any window in the Demised Premises to be cleaned from the
outside in violation of Section 202 of the New York State Labor Law or any
other applicable law or of the Rules of the Board of Standards and Appeals, or
of any other Board or body having or asserting jurisdiction.
14.02 Landlord shall operate, maintain and make all
necessary repairs (both structural and non-structural) to the part of Building
Systems which provide service to the Demised Premises (including the
distribution portions of such Building Systems located within the Demised
Premises) and the public portions of the Building, both exterior and interior,
in conformance with the standards applicable to non-institutional office
buildings in Manhattan, except for those repairs for which Tenant is
responsible pursuant to any other provisions of this Lease.
14.03 Except as expressly otherwise provided in this Lease,
Landlord shall have no liability to Tenant by reason of any inconvenience,
annoyance, interruption, or injury to
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business arising from Landlord's making any repairs or Changes that Landlord is
required or permitted by this Lease, or required by law, to make in or to any
portion of the Building or the Demised Premises, or in or to the fixtures,
equipment, or appurtenances of the Building or the Demised Premises, provided
that Landlord shall use due diligence with respect thereto and shall perform
such work, except in case of emergency, at times reasonably convenient to Tenant
and otherwise in such a manner as will not materially interfere with Tenant's
use of the Demised Premises. Notwithstanding the foregoing, Landlord shall have
no obligation to employ contractors or labor at so-called overtime or other
premium pay rates or to incur any other overtime costs or expenses whatsoever.
ARTICLE 15
Electricity
15.01 Tenant shall obtain and pay for Tenant's entire
separate supply of electric current by direct application to and arrangement
with the public utility company servicing the Building. Landlord will permit
its electric feeders, risers and wiring serving the Demised Premises to be
used by Tenant to the extent available and safely capable of being used for
such purpose.
15.02 Any additional risers, feeders or other equipment or
service proper or necessary to supply Tenant's electrical requirements, upon
written request of Tenant, will be installed by Landlord, at the sole cost and
expense of Tenant, if, in Landlord's sole judgment, the same are necessary and
will not cause permanent damage or injury to the Building or the Demised
Premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense or interfere with or
disturb other tenants or occupants. Rigid conduit only will be allowed.
15.03 Landlord shall not in any way be liable or responsible
to Tenant for any loss or damage or expense which Tenant may sustain or incur
if either the quantity or character of electric service is changed or is no
longer available or suitable for Tenant's requirements.
15.04 Tenant agrees not to connect any electrical equipment
of any type to the Building electric distribution system, beyond that shown on
Tenant's approved plans for initial occupancy, other than lamps, typewriters
and other small business machines which consume comparable amounts of
electricity, without Landlord's prior written consent which consent shall not
be unreasonably withheld or delayed. In no event shall Tenant use or install
any fixtures, equipment or machines the use of which in conjunction with other
fixtures, equipment and machines in the Demised Premises would result in an
overload of the electrical circuits servicing the Demised Premises.
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15.05 Tenant covenants and agrees that at all times its use
of electric current shall never exceed the capacity of the then existing
feeders to the Building or the risers or wiring installation. Tenant shall
furnish, install and replace, as required, all lighting tubes, lamps, bulbs
and ballasts required in the Demised Premises, at Tenant's sole cost and
expense. All lighting tubes, lamps, bulbs and ballasts so installed shall
become Landlord's property upon the expiration or sooner termination of this
Lease.
ARTICLE 16
Heat, Ventilation and Air-Conditioning
16.01 Any use of the Demised Premises, or any part thereof,
or rearrangement of partitioning in a manner that interferes with normal
operation of the heat, ventilation and air-conditioning systems servicing the
same, may require Changes in such systems. Such Changes, so occasioned, shall
be made by Tenant, at its expense, as Tenant's Changes pursuant to Article 12.
16.02 Landlord shall maintain and operate the heat system
servicing the Demised Premises including the radiators presently existing in
the Demised Premises and shall, subject to the design specifications of the
system and to energy conservation requirements of, and voluntary energy
conservation programs sponsored by, governmental authorities, furnish heat
("HV Service") in the Demised Premises. HV Service shall be provided, as may
be required for comfortable occupancy of the Demised Premises, during "Regular
Hours" (which shall mean between the hours of 8:00 a.m. and 6:00 p.m.) of
"Business Days" (which shall mean all days except Sundays, those days that are
observed by the state or federal government as legal holidays and those days
designated as holidays by the applicable building service union employees'
contract) throughout the year. If Tenant shall require HV Service during hours
other than Regular Hours or on days other than Business Days ("After Hours
Service"), Landlord shall furnish such After Hours Service to the Demised
Premises upon reasonable advance notice from Tenant, and Tenant shall pay, on
demand, Landlord's cost therefor plus five (5%) percent. In the event
additional tenant(s) of the Building request After Hours Service during the
same periods of time for which Tenant has requested such service, Landlord
shall allocate the foregoing charges for After Hours Service among Tenant and
such additional tenant(s).
16.03 Tenant shall, to the extent same exist or if Tenant
installs same pursuant to this Section 16.03, maintain and operate, at its
sole cost, any air-conditioning unit(s) (the "Units") located in the Demised
Premises. Landlord shall, at its sole cost and expense, provide chilled water
to the Units. All electricity used in connection with the Units shall be
arranged for by Tenant in accordance with and upon, and subject to, all of the
terms, covenants and conditions contained in Article 15 hereof. Tenant shall
perform, at its sole cost and expense, any and all necessary repairs thereto
and replacements thereof. All of the Units (and any replacements
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thereof) installed by Landlord pursuant to Exhibit B hereof or otherwise
pursuant to the terms of this Lease shall, upon the expiration or sooner
termination of this Lease, be surrendered to Landlord in good working order and
condition. Any Units (or replacements thereof) not required to be surrendered to
Landlord may, at Tenant's sole cost and expense, be removed from the Demised
Premises at the expiration or sooner termination of this Lease provided Tenant
repairs any damage caused by such removal. Landlord shall (i) deliver the Units
presently located in the Demised Premises to Tenant in good working order and
(ii) assign to Tenant at the commencement of the term of this Lease any
warranties with respect to the Units which Landlord has obtained.
ARTICLE 17
Other Services
17.01 Landlord, at its expense, shall provide public
elevator service, passenger and freight, by elevators serving the floors on
which the Demised Premises are situated during Regular Hours on Business Days,
and shall have at least one passenger elevator subject to call at all other
times. Notwithstanding anything to the contrary in this Article 12, Landlord
agrees that, subject to the rights of other tenants, there shall be no charge
to Tenant for the use of the freight elevators servicing the Demised Premises
during Regular Hours of Business Days during the Term.
17.02 Tenant shall, at Tenant's sole cost and expense, keep
the Demised Premises clean and in order, to the reasonable satisfaction of
Landlord and, for that purpose, may (i) hire a cleaning contractor approved in
writing by Landlord, such approval not to be unreasonably withheld or (ii)
engage its own employees, provided such employees shall enter and exit the
Demised Premises through the 401 Building. Tenant shall remove Tenant's refuse
and rubbish from the Demised Premises in closed plastic bags or other closed
disposal receptacles reasonably satisfactory to Landlord and shall deliver
such containerized refuse and rubbish to a location on the floors upon which
the Demised Premises are situated designated by Landlord. Such delivery shall
be accomplished during such hours of the day and in accordance with such rules
and regulations as, in the reasonable judgment of Landlord, are necessary for
the proper operation of the Building. Landlord shall, at its sole cost and
expense, arrange with a carting company for the removal of such containerized
refuse and rubbish from the aforesaid locations.
17.03 Landlord, at its expense, shall furnish adequate hot
and cold water to the Demised Premises for drinking, lavatory and cleaning
purposes to the extent piping and fixtures at present exist therein. If Tenant
uses water for any other purpose, Landlord, at Tenant's expense, shall install
meters to measure Tenant's consumption of cold water and/or hot water and/or
steam for such other purposes, as the case may be. Tenant shall pay for the
quantities of
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cold water and hot water shown on such meters, at Landlord's cost therefor, on
the rendition of Landlord's bills therefor.
17.04 Landlord reserves the right, without any liability to
Tenant (except as otherwise expressly provided in this Lease), to stop
operating any of the heating, ventilation, air-conditioning, electric,
sanitary, elevator or other Building Systems serving the Demised Premises, and
to stop the rendition of any of the other services required of Landlord under
this Lease, whenever and for so long as may be necessary by reason of
accidents, emergencies, strikes, or the making of repairs or Changes that
Landlord is required by this Lease or by law to make or in good faith deems
necessary, by reason of difficulty in securing proper supplies of fuel, steam,
water, electricity, labor, or supplies, or by reason of any other cause beyond
Landlord's reasonable control.
ARTICLE 18
Access; Changes in Building Facilities; Name
18.01 Excepting the inside surfaces of all walls, windows
and doors bounding the Demised Premises (including exterior Building walls,
core corridor walls and doors and any core corridor entrances) all areas in
the Building including, without limitation, any space in or adjacent to the
Demised Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts,
electric or other utilities, sinks, or other Building facilities, and the use
thereof, as well as access thereto through the Demised Premises for the
purpose of operation, maintenance, decoration and repair, are reserved to
Landlord.
18.02 Tenant shall permit Landlord access to the Demised
Premises (subject to the provisions of Section 18.03) to install, use, replace
and maintain pipes, ducts and conduits within the demising walls, load-bearing
columns and ceilings of the Demised Premises.
18.03 Landlord or Landlord's agent shall have the right,
upon reasonable advance notice (except in the case of an emergency where no
such notice shall be required), to enter and/or pass through the Demised
Premises or any part thereof, at reasonable times during reasonable hours
except in an emergency when it can be at any time (a) to examine the Demised
Premises and to show them to Superior Lessors, Superior Mortgagees, or
prospective purchasers, mortgagees, or lessees of the Building as an entirety
and (b) for the purpose of making such repairs or Changes in or to the Demised
Premises, or in or to its facilities as may be provided for by this Lease, as
may be mutually agreed upon by the parties, or as Landlord may be required to
make by law or in order to repair and maintain the Building or its fixtures
or facilities. Landlord shall be allowed to take all materials into and upon
the Demised Premises that may be required for such repairs, Changes, or
maintenance, without liability to Tenant, but Landlord shall use reasonable
efforts not to unreasonably interfere with Tenant's business operations. No
damages,
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compensation or claim shall be payable by Landlord for inconvenience, loss of
business or annoyance arising from any repair or restoration of any portion of
the Demised Premises or of the Building pursuant to this Section 18.03
18.04 Subject to the provisions of Section 18.03, during the
period of nine (9) months prior to the Expiration Date, Landlord may exhibit
the Demised Premises to prospective tenants.
18.05 Landlord reserves the right, at any time and without
incurring any liability to Tenant therefor, to redesign or to make such
Changes in or to the Building and the fixtures and equipment thereof, as well
as in or to the street entrances, halls, passages, elevators, escalators and
stairways thereof, as it may deem necessary or desirable, provided that Tenant
shall at all times have access to the Demised Premises.
18.06 Landlord may adopt any name for the Building.
Landlord reserves the right to change the name or address of the Building
at any time.
18.07 For the purposes of this Article 18, the term Landlord
shall include Superior Lessors and Superior Mortgagees.
ARTICLE 19
Notice of Accidents
Tenant shall give notice to Landlord, promptly after Tenant
learns thereof, of: (a) any accident in or about the Demised Premises for
which Landlord might be liable; (b) all fires in the Demised Premises; (c) all
damage to, or defects in, the Demised Premises, including the fixtures,
equipment and appurtenances thereof, for the repair of which Landlord might be
responsible; and (d) all damage to, or defects in, any parts or appurtenances
of the Building Systems located in or passing through the Demised Premises or
any part thereof.
ARTICLE 20
Non-Liability and Indemnification
20.01 Neither Landlord nor any of the partners comprising
Landlord and its and their partners, shareholders, officers, directors,
employees, agents and contractors, lessors and mortgagees (collectively,
"Indemnitees") shall be liable to Tenant for any injury or damage to
Tenant or to any other person, or for any damage to, or loss (by theft or
otherwise) of, any
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property of Tenant or of any other person, regardless of the cause of such
injury, damage, or loss, unless caused by or due to the negligence of Landlord,
its agents or employees, occurring within the scope of their respective
employments. It is expressly understood that no property, other than such as
might normally be brought upon or kept in the Demised Premises as an incident to
the reasonable use of the Demised Premises for the purpose herein permitted,
will be brought upon or be kept in the Demised Premises.
20.02 Tenant shall indemnify and save Indemnitees harmless
from and against (a) any and all claims arising from (i) the conduct or
management of the Demised Premises or of any business therein, (ii) any work
or thing whatsoever done or any condition created (other than by Landlord for
Landlord's or Tenant's account) in or about the Demised Premises during the
term of this Lease or during any period of time prior to the Commencement Date
during which Tenant may have been given access to the Demised Premises or
(iii) any negligent or otherwise wrongful act or omission of Tenant, of any of
its subtenants or licensees, or of its or their employees, agents, or
contractors, and (b) all costs, expenses and liabilities (including reasonable
attorneys' fees and disbursements) incurred in, or in connection with, each
such claim, action or proceeding brought thereon. In case any action or
proceeding is brought against Landlord by reason of any such claim, Tenant,
upon notice from Landlord, shall resist and defend such action or proceeding
by counsel selected by Landlord.
20.03 Except as otherwise expressly provided in this Lease,
this Lease and the obligations of Tenant hereunder shall be in no way
affected, impaired, or excused because Landlord is unable to fulfill, or is
delayed in fulfilling, any of its obligations under this Lease by reason of
strike or other labor trouble, governmental pre-emption, priorities, or other
controls in connection with a national or other public emergency, shortages of
fuel, supplies, or labor resulting therefrom, act of God, or other like cause
beyond Landlord's reasonable control.
ARTICLE 21
Destruction or Damage
21.01 If the Building or the Demised Premises shall be
partially or totally damaged or destroyed by fire or other cause, then,
whether or not the damage or destruction shall have resulted from the fault or
neglect of Tenant or its employees, agents or visitors (and if this Lease
shall not have been terminated as in this Article hereinafter provided),
Landlord shall repair the damage and restore and rebuild the Building and/or
the Demised Premises, at its expense, with reasonable dispatch after notice to
it of the damage or destruction; provided, however, that Landlord shall not be
required to repair or replace any of Tenant's Property or to restore any of
Tenant's Work.
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21.02 If the Building or the Demised Premises shall be
partially damaged or partially destroyed by fire or other cause, the rents
payable hereunder shall be abated to the extent that the Demised Premises shall
have been rendered untenantable (as a result of damage to the Demised Premises
or to the Building) and for the period from the date of such damage or
destruction to the date the damage shall be repaired or restored by Landlord. If
the Demised Premises or a major part thereof shall be totally (which shall be
deemed to include substantially totally) damaged or destroyed or rendered
completely (which shall be deemed to include substantially completely)
untenantable on account of fire or other cause, the rents shall abate as of the
date of the damage or destruction and until Landlord shall repair, restore and
rebuild the Building and the Demised Premises, provided, however, that, should
Tenant reoccupy a portion of the Demised Premises for the conduct of its
business during the period in which the restoration work is taking place and
prior to the date that the same are made completely tenantable, rents allocable
to such portion shall be payable by Tenant from the date of such occupancy.
21.03 If the Building or the Demised Premises shall be
totally damaged or destroyed by fire or other cause, or if the Building shall
be so damaged or destroyed by fire or other cause (whether or not the Demised
Premises are damaged or destroyed) as to require a reasonably estimated
expenditure of more than forty percent (40%) of the full insurable value of
the Building immediately prior to the casualty, then, in either such event,
Landlord may terminate this Lease by giving Tenant notice to such effect
within ninety (90) days after the date of the casualty. In case of any damage
or destruction mentioned in this Article, Tenant may terminate this Lease by
notice to Landlord if such damage or destruction has occurred during the last
year of the term of this Lease or if Landlord has not completed the making of
the required repairs and restored and rebuilt the Building and the Demised
Premises within two hundred ten (210) days from the date of such damage or
destruction, or within such period after such date (not exceeding one hundred
twenty (120) days as shall equal the aggregate period during which Landlord
may have been delayed in doing so by reason of adjustment of insurance, labor
trouble, governmental controls, act of God, or any other cause beyond
Landlord's reasonable control.
21.04 No damages, compensation, or claim shall be payable by
Landlord for inconvenience, loss of business, or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of the
Building pursuant to this Article 21. Landlord shall use reasonable efforts to
effect such repair or restoration promptly and in such a manner as to not
unreasonably interfere with Tenant's use and occupancy.
21.05 Notwithstanding any of the foregoing provisions of
this Article 21, if Landlord or any Superior Lessor or Superior Mortgagee
shall be unable to collect all of the insurance proceeds applicable to damage
or destruction of the Demised Premises or the Building by fire or other cause,
by reason of some action or inaction on the part of Tenant or any of its
employees, agents, or contractors, then, without prejudice to any other
remedies that may be available against Tenant, there shall be no abatement of
Tenant's rents, but the total amount of
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such rents not abated (which would otherwise have been abated) shall not exceed
the amount of the uncollected insurance proceeds.
21.06 Landlord will not carry insurance of any kind on
Tenant's Property or Tenant's Work, and, except as provided by law or by
reason of its fault or its breach of any of its obligations hereunder, shall
not be obligated to repair any damage thereto or to replace the same.
21.07 The provisions of this Article 21 shall be considered
an express agreement of the parties governing in the event of any damage to,
or destruction of, the Demised Premises by fire or other casualty, and Section
227 of the Real Property Law of the State of New York, providing for such a
contingency in the absence of an express agreement, and any other law of like
import, now or hereafter in force, shall have no application thereto.
ARTICLE 22
Eminent Domain
22.01 If the whole of the Building shall be lawfully
acquired or condemned by eminent domain or in any other manner for any public
or quasi-public use or purpose, this Lease and the term and estate hereby
granted shall forthwith terminate as of the date of vesting of title in such
taking (the "Date of Taking"), and the rents shall be prorated and adjusted as
of such date.
22.02 If only a part of the Building shall be so taken, this
Lease shall be unaffected by such taking, except that Tenant may elect to
terminate this Lease in the event of a partial taking if the remaining area of
the Demised Premises shall not be reasonably sufficient for Tenant to continue
feasible operation of its business. Tenant shall give notice of such election
to Landlord not later than thirty (30) days after (a) notice of such taking is
given by Landlord to Tenant or (b) the Date of Taking, whichever occurs
sooner. Upon the giving of such notice by Tenant, this Lease shall terminate
on the Date of Taking, and the rents shall be prorated as of such termination
date. In the event, however, that this Lease shall continue in force after
such partial taking as to any portion of the Demised Premises, then the rents
then payable hereunder shall be apportioned between the portions of the
Demised Premises taken and remaining, on the basis of the rentable areas of
the same. The portion of such rents attributable to the portion taken shall be
prorated and adjusted as of the Date of Taking, and the portion of such rents
attributable to the portion remaining, as the same may thereafter be increased
or decreased pursuant to the terms of this Lease, shall continue to be paid by
Tenant to Landlord as provided in Article 1.
22.03 Landlord shall be entitled to receive the entire award
in any proceeding with respect to any taking provided for in this Article 22
without deduction therefrom for any estate vested in Tenant by this Lease, and
Tenant shall receive no part of such award, except as
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hereinafter expressly provided in this Article 22. Tenant hereby expressly
assigns to Landlord all of its right, title and interest in or to every such
award. Notwithstanding anything herein to the contrary, Tenant may, at its sole
cost and expense, make a claim with the condemning authority for Tenant's moving
expenses and for the value of Tenant's Property or Tenant's Changes that do not
become part of the Building or the property of Landlord, provided, however, that
Landlord's award is not thereby reduced or otherwise adversely affected.
22.04 If the temporary use or occupancy of all or any part
of the Demised Premises (each, a "Temporary Taking") shall be lawfully
acquired or condemned by eminent domain or in any other manner for any public
or quasi-public use or purpose during the term of this Lease, Tenant shall be
entitled, except as hereinafter set forth, to receive that portion of the
award for such taking that represents compensation for the use and occupancy
of the Demised Premises and, if so awarded, for the taking of Tenant's
Property and for moving expenses, and Landlord shall be entitled to receive
that portion that represents reimbursement for the cost of restoration of the
Demised Premises. This Lease shall be and remain unaffected by such taking,
and Tenant shall continue to be responsible for all of its obligations
hereunder insofar as such obligations are not affected by such taking and
shall continue to pay in full the Base Rent and Additional Rent when due. If
the period of temporary use or occupancy shall extend beyond the Expiration
Date, that part of the award that represents compensation for the use or
occupancy of the Demised Premises (or a part thereof) shall be divided between
Landlord and Tenant so that Tenant shall receive so much thereof as represents
the period prior to the Expiration Date and Landlord shall receive so much
thereof as represents the period subsequent to the Expiration Date. All monies
received by Tenant as, or as part of, an award for temporary use and occupancy
for a period beyond the date to which the rents hereunder have been paid by
Tenant shall be received, held and applied by Tenant as a trust fund for
payment of the rents falling due hereunder. Notwithstanding anything to the
contrary set forth in this Section 22.04, if any Temporary Taking shall
continue for a period in excess of 150 days, Tenant may terminate this Lease
by delivery of notice to Landlord on or after the date which shall be 150 days
after the Date of Taking but in no event later than 210 days after the Date of
Taking (the "Temporary Taking Termination Date"). Upon the giving of such
notice by Tenant, this Lease shall terminate on the Temporary Taking
Termination Date, and the rents shall be prorated as of such date. If Tenant
shall fail to timely give such notice, Tenant's right to terminate this Lease
pursuant to this Section 22.04 shall be deemed waived and this Lease shall
continue in full force and effect.
22.05 In the event of any taking of less than the whole of
the Building that does not result in a termination of this Lease, or in the
event of a taking for a temporary use or occupancy of all or any part of the
Demised Premises that does not extend beyond the Expiration Date, Landlord
shall, at its expense (but only to the extent that any award or awards granted
for consequential damage to the portion of the Building that is not taken
shall be sufficient for such purpose), proceed with reasonable diligence to
repair, alter and restore the remaining parts of the Building and the Demised
Premises to substantially a building standard condition (to the extent
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that the same may be feasible) and so as to constitute a complete and tenantable
Building and Demised Premises.
22.06 Should any part of the Demised Premises be taken to
effect compliance with any law or requirement of public authority other than
in the manner hereinabove provided in this Article 22, then (a) if such
compliance is the obligation of Tenant under this Lease, Tenant shall not be
entitled to any diminution or abatement of rent or other compensation from
Landlord therefor, but (b) if such compliance is the obligation of Landlord
under this Lease, the rents hereunder shall be apportioned, and, as so
apportioned, prorated, adjusted and remain payable, as provided in Section
22.02.
22.07 Any dispute that may arise between the parties with
respect to the meaning or application of any of the provisions of this Article
22 shall be determined by arbitration in the manner provided in Article 32.
ARTICLE 23
Surrender
(a) On the Expiration Date or upon any re-entry by Landlord
upon the Demised Premises in accordance with the provisions of this Lease,
Tenant shall quit and surrender the Demised Premises to Landlord broom clean,
in good order, condition and repair, including, without limitation, restoring
Demised Premises to close the Openings (hereinafter defined), if any, except
for ordinary wear and tear and for those repairs which are the obligation of
Landlord hereunder, and Tenant shall remove all of Tenant's Property therefrom
except as otherwise expressly provided in this Lease and shall restore the
Demised Premises wherever such removal results in damage thereto. Tenant's
obligation to observe or perform this covenant shall survive the expiration or
other termination of this Lease.
(b) Through and including the sixth month anniversay of the
Fourth Floor Delivery Date, Tenant expressly waives, for itself and for any
person claiming through or under Tenant, any rights which Tenant or any such
person may have under the provisions of Section 2201 of the New York Civil
Practice Law and Rules and of any successor law of like import then in force
in connection with any holdover summary proceedings which Landlord may
institute to enforce the foregoing provisions of this Article 23. Thereafter
throughout the remainder of the Term, Tenant expressly waives, for itself and
for any person claiming through or under Tenant, any rights which Tenant or
any such person may have under the provisions of Section 2201 of the New York
Civil Practice Law and Rules and of any successor law of like import then in
force in connection with any holdover summary proceedings which Landlord may
institute to enforce the foregoing provisions of this Article 23, arising out
of an Event of Default under Section 24.02(a). Tenant acknowledges that
possession of the Demised Premises must be surrendered to Landlord on the
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Expiration Date. Tenant agrees to indemnify and save Landlord harmless from
and against all claims, losses, damages, liabilities, costs and expenses
(including, without limitation, attorneys' fees and disbursements) resulting
from delay by Tenant in so surrendering the Demised Premises, including,
without limitation, any claims made by any succeeding tenant founded on such
delay. The parties recognize and agree that the damage to Landlord resulting
from any failure by Tenant to timely surrender possession of the Demised
Premises as aforesaid will be extremely substantial, will exceed the amount of
the monthly installments of the Base Rent and Rental theretofore payable
hereunder, and will be impossible to accurately measure. Tenant therefore agrees
that if possession of the Demised Premises is not surrendered to Landlord within
twenty-four (24) hours after the Expiration Date, in addition to any other
rights or remedies Landlord may have hereunder or at law, and without in any
manner limiting Landlord's right to demonstrate and collect any damages suffered
by Landlord and arising from Tenant's failure to surrender the Demised Premises
as provided herein, Tenant shall pay to Landlord on account of use and occupancy
of the Demised Premises for each month and for each portion of any month during
which Tenant holds over in the Demised Premises after the Expiration Date, a sum
equal to the greater of (i) one and one half (1.5) times the aggregate of that
portion of the Base Rent, and Rental which was payable under this Lease during
the last month of the Term, and (ii) the then fair market rental value for the
Demised Premises. Nothing herein contained shall be deemed to permit Tenant to
retain possession of the Demised Premises after the Expiration Date or to limit
in any manner Landlord's right to regain possession of the Demised Premises
through summary proceedings, or otherwise, and no acceptance by Landlord of
payments from Tenant after the Expiration Date shall be deemed to be other than
on account of the amount to be paid by Tenant in accordance with the provisions
of this Article 23. The provisions of this Article 23 shall survive the
Expiration Date.
ARTICLE 24
Conditions of Limitation
24.01 To the extent permitted by applicable law, this Lease,
and the term and estate hereby granted, are subject to the limitation that,
whenever Tenant shall be unable to pay its debts generally as they become due,
or shall make an assignment of the property of Tenant for the benefit of
creditors, or shall consent to, or acquiesce in, the appointment of a
liquidator, receiver, trustee, or other custodian of itself or the whole or
any part of its properties or assets, or shall commence a voluntary case for
relief under the United States Code or file a petition or take advantage of
any bankruptcy or insolvency act or applicable law of like import, or whenever
an involuntary case under the United States Bankruptcy Code shall be commenced
against Tenant, or if a petition shall be filed against it seeking similar
relief under any bankruptcy or insolvency or other applicable law of like
import, or whenever a receiver, liquidator, trustee, or other custodian of
Tenant, or of, or for, substantially all of the property of Tenant, shall be
appointed without Tenant's consent or acquiescence, then, Landlord (a) at any
time after receipt of notice
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of the occurrence of any such event, or (b) if such event occurs without the
acquiescence of Tenant, at any time after the event continues for sixty (60)
days, may give Tenant a notice of intention to end the term of this Lease at the
expiration of five (5) days from the date of service of such notice of
intention, and, upon the expiration of said five (5) day period, this Lease and
the term and estate hereby granted shall terminate with the same effect as if
that day were the Expiration Date, but Tenant shall remain liable for damages as
pro-vided in Article 25. As used in this Section 24.01 the term "Tenant" shall
mean the then owner and holder of the interest and estate of the tenant under
this Lease.
24.02 This Lease, and the term and estate hereby granted,
are subject to the further limitation that:
(a) whenever Tenant shall default in the payment of any item
of Rental on any day upon which the same ought to be paid, and such default
shall continue for ten (10) Business Days after Landlord shall have given
Tenant a notice specifying such default;
(b) whenever Tenant shall do or permit anything to be done,
whether by action or inaction, contrary to any of Tenant's obligations
hereunder, and if such situation shall continue and shall not, subject to
delays beyond Tenant's reasonable control, be remedied by Tenant within thirty
(30) days after Landlord shall have given to Tenant a notice specifying the
same, or, in the case of a happening or default that cannot, with due
diligence, be cured within a period of thirty (30) days and the continuance of
which for the period required for cure will not subject Landlord to the risk
of criminal liability (as more particularly described in Section 9.02) or
termination of any Superior Lease or foreclosure of any Superior Mortgage, if
Tenant shall not (i) advise Landlord, within the said thirty (30) day period
of Tenant's intention to duly institute all steps necessary to remedy such
situation, (ii) duly institute, within the said thirty (30) day period, and,
thereafter, diligently prosecute to completion, all steps necessary to remedy
the same and (iii) complete such remedy within such time after the date of the
giving of said notice by Landlord as shall reasonably be necessary;
(c) whenever any event shall occur, or any contingency shall
arise, whereby this Lease, the estate hereby granted, or the unexpired balance
of the term hereof would, by operation of law or otherwise, devolve upon or
pass to any person other than Tenant, except as expressly permitted by Article
8;
(d) whenever Tenant shall abandon the Demised Premises; or
(e) whenever Tenant shall default in the performance or
observance of any of the terms, covenants, or conditions on its part to be
observed or performed pursuant to the terms of (i) any other lease of space in
the Building, whether now in existence or hereafter entered into, or (ii)
after construction of any Opening, the 401 Lease, and shall fail, after the
giving of any
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notice provided for therein, to cure the same within any applicable grace period
provided for therein,
then, in any of said cases set forth in the foregoing subsections (a), (b),
(c), (d) and (e), Landlord may give to Tenant a notice of intention to end the
term of this Lease at the expiration of five (5) days from the date of the
service of such notice of intention, and, upon the expiration of said five (5)
days, this Lease and the term and estate hereby granted, whether or not the
term shall theretofore have commenced, shall terminate with the same effect as
if that day were the Expiration Date, but Tenant shall remain liable for
damages as provided in Article 25. Each of the conditions of limitation
described in Section 24.01 and in this Section 24.02 shall be an "Event of
Default."
ARTICLE 25
Remedies and Damages
25.01 (a) If there shall occur any Event of Default, and
this Lease and the term thereof shall expire and come to an end as provided in
Article 24 hereof:
(1) Tenant shall quit and peacefully surrender the
Demised Premises to Landlord, and Landlord and its agents may immediately, or
at any time after such default or after the date upon which this Lease and the
term thereof shall expire and come to an end, re-enter the Demised Premises or
any part thereof, without notice, either by summary proceedings, or by any
other applicable action or proceeding, or by force or otherwise (without being
liable to indictment, prosecution or damages therefor), and may repossess the
Demised Premises and dispossess Tenant and any other persons from the Demised
Premises and remove any and all of their property and effects from the Demised
Premises; and
(2) Landlord, at Landlord's option, may relet
the whole or any portion or portions of the Demised Premises from time to time,
either in the name of Landlord or otherwise, to such tenant or tenants, for such
term or terms ending before, on or after the Expiration Date, at such rental or
rentals and upon such other conditions, which may include concessions and free
rent periods, as Landlord, in its sole discretion, may determine; provided,
however, that Landlord shall have no obligation to relet the Demised Premises or
any part thereof and shall in no event be liable for refusal or failure to relet
the Demised Premises or any part thereof, or, in the event of any such
reletting, for refusal or failure to collect any rent due upon any such
reletting, and no such refusal or failure shall operate to relieve Tenant of any
liability under this Lease or otherwise affect any such liability, and Landlord,
at Landlord's option, may make such repairs, replacements, alterations,
additions, improvements, decorations and other physical changes in and to the
Demised Premises as Landlord, in its sole discretion, considers advisable or
necessary in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this Lease or otherwise affecting any
such liability.
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(b) Tenant hereby waives the service of any
notice of intention to re-enter or to institute legal proceedings to that end
which may otherwise be required to be given under any present or future law.
Tenant, on its own behalf and on behalf of all persons claiming through or under
Tenant, including all creditors, does further hereby waive any and all rights
which Tenant and all such persons might otherwise have under any present or
future law to redeem the Demised Premises, or to re-enter or repossess the
Demised Premises, or to restore the operation of this Lease, after (i) Tenant
shall have been dispossessed by a judgment or by warrant of any court or judge,
or (ii) any re-entry by Landlord, or (iii) any expiration or termination of this
Lease and the term thereof, whether such dispossess, re-entry, expiration or
termination shall be by operation of law or pursuant to the provisions of this
Lease. The words "re-enter," "re-entry" and "re-entered" as used in this Lease
shall not be deemed to be restricted to their technical legal meanings and the
right to invoke any other remedy allowed by law or in equity as if re-entry,
summary proceedings and other special remedies were not provided in this Lease
for such breach. The right to invoke the remedies hereinbefore set forth are
cumulative and shall not preclude Landlord from invoking any other remedy
allowed at law or in equity.
25.02 (a) If this Lease and the term thereof shall expire
and come to an end as provided in Article 24 hereof, or by or under any
summary proceeding or any other action or proceeding, or if Landlord shall
re-enter the Demised Premises as provided in Section 25.01, or by or under any
summary proceeding or any other action or proceeding, then, in any of said
events:
(1) Tenant shall pay to Landlord all Rental to the
date upon which this Lease and the term thereof shall have expired and come
to an end or to the date of re-entry upon the Demised Premises by Landlord, as
the case may be;
(2) Tenant also shall be liable for and shall pay
to Landlord, as damages, any deficiency ("Deficiency") between the Rental for
the period which otherwise would have constituted the unexpired portion of the
term of this Lease and the net amount, if any, of rents collected under any
reletting effected pursuant to the provisions of clause (2) of Section 25.01(a)
for any part of such period (first deducting from the rents collected under any
such reletting all of Landlord's expenses in connection with the termination of
this Lease, Landlord's re-entry upon the Demised Premises and with such
reletting, including, but not limited to, all repossession costs, brokerage
commissions, legal expenses, attorneys' fees and disbursements, alteration
costs, contribution to work and other expenses of preparing the Demised
Premises for such reletting); any such Deficiency shall be paid in monthly
installments by Tenant on the days specified in this Lease for payment of
installments of Base Rent; Landlord shall be entitled to recover from Tenant
each monthly Deficiency as the same shall arise, and no suit to collect the
amount of the Deficiency for any month shall prejudice Landlord's right to
collect the Deficiency for any subsequent month by a similar proceeding; and
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(3) whether or not Landlord shall have collected any
monthly Deficiency as aforesaid, Landlord shall be entitled to recover from
Tenant, and Tenant shall pay to Landlord, on demand, in lieu of any further
Deficiency as and for liquidated and agreed final damages, a sum equal to the
amount by which the Rental for the period which otherwise would have
constituted the unexpired portion of the term of this Lease (commencing on the
date immediately succeeding the last date with respect to which a Deficiency,
if any, was collected) exceeds the then fair and reasonable rental value of the
Demised Premises for the same period, both discounted to present worth at the
rate of interest publicly announced from time to time by The Chase Manhattan
Bank, N.A., or its successor, as its "prime lending rate" (or such other term
as may be used by The Chase Manhattan Bank, N.A., from time to time, for the
rate presently referred to as its "prime lending rate").
(b) If the Demised Premises, or any part thereof,
shall be relet together with other space in the Building, the rents collected
or reserved under any such reletting and the expenses of any such reletting
shall be equitably apportioned for the purposes of this Section 25.02. Tenant
shall in no event be entitled to any rents collected or payable under any
reletting, whether or not such rents shall exceed the Base Rent reserved in
this Lease. Nothing contained in Article 24 hereof or this Article 25 shall be
deemed to limit or preclude the recovery by Landlord from Tenant of the
maximum amount allowed to be obtained as damages by any statute or rule of
law, or of any sums or damages to which Landlord may be entitled in addition
to the damages set forth in this Section 25.02.
ARTICLE 26
Waivers
26.01 Tenant, for Tenant, and on behalf of any and all
persons claiming through or under Tenant, including creditors of all kinds,
does hereby waive and surrender all right and privilege, that they, or any of
them, might have under, or by reason of, any present or future law, to redeem
the Demised Premises or to have a continuance of this Lease for the term
hereby demised after being dispossessed or ejected therefrom by process of
law, under the terms of this Lease, or after the termination of this Lease as
herein provided.
26.02 In the event that Tenant is in arrears in the payment
of Base Rent or Additional Rent hereunder, Tenant waives Tenant's right, if
any, to designate the item(s) against which any payments made by Tenant are to
be credited, and Tenant hereby agrees that Landlord may apply any payments
made by Tenant to any item(s) Landlord sees fit, regardless of, and
notwithstanding any, designation or request by Tenant as to the terms against
which any such payments shall be credited.
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26.03 Landlord and Tenant each hereby waive trial by jury in
any action, proceeding, or counterclaim brought by either against the other on
any matter whatsoever arising out of, or in any way connected with, this
Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of
the Demised Premises, including any claim of injury or damage, or any
emergency or other statutory remedy with respect thereto. If Landlord
commences any summary proceeding against Tenant, Tenant will not interpose any
counterclaim of whatever nature or description in any such proceeding (unless
failure to impose such counterclaim would preclude Tenant from asserting in a
separate action the claim which is the subject of such counterclaim), and will
not seek to consolidate such proceeding with any other action which may have
been or will be brought in any other court by Tenant.
26.04 The provisions of Articles 16 and 17 shall be
considered express agreements governing the services to be furnished by
Landlord, and Tenant agrees that any laws and/or requirements of public
authorities, now or hereafter in force, shall have no application in
connection with any enlargement of Landlord's obligations with respect to such
services unless Tenant agrees, in writing, to pay to Landlord, as Additional
Rent, Landlord's reasonable charges for any additional services provided.
ARTICLE 27
No Other Waivers or Modifications
27.01 The failure of either party to insist, in any one or
more instances, upon the strict performance of any one or more of the
obligations of this Lease, or to exercise any election herein contained, shall
not be construed as a waiver or relinquishment of the future performance of
such one or more obligations of this Lease, or of the right to exercise such
election, but the same shall continue and remain in full force and effect with
respect to any subsequent breach, act, or omission. No executory agreement
hereafter made between Landlord and Tenant shall be effective to change,
modify, waive, release, discharge, terminate, or effect an abandonment of this
Lease, in whole or in part, unless such executory agreement is in writing,
refers expressly to this Lease and is signed by the party against whom
enforcement of the change, modification, waiver, release, discharge,
termination, or effectuation of the abandonment is sought.
27.02 The following specific provisions of this Section
27.02 shall not be deemed to limit the generality of any of the provisions of
Section 27.01:
(a) no act or thing done by Landlord or Landlord's agents
during the term of this Lease shall be deemed an acceptance of a surrender of
the Demised Premises, and no agreement to accept a surrender of all or any
part of the Demised Premises shall be valid, unless in writing and signed by
Landlord. The delivery of keys to an employee of Landlord or of its agent
shall not operate as a termination of this Lease or a surrender of the Demised
Premises. If
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Tenant shall, at any time, request Landlord to sublet the Demised Premises for
Tenant's account, Landlord or its agent is authorized to receive said keys for
such purpose without releasing Tenant from any of its obligations under this
Lease, and Tenant hereby releases Landlord from any liability for loss or damage
to any of Tenant's property in connection with such subletting;
(b) the receipt by Landlord of rent with knowledge of breach
of any obligation of this Lease shall not be deemed a waiver of such
breach; and
(c) no payment by Tenant, or receipt by Landlord, of a
lesser amount than the correct Base Rent or Additional Rent due hereunder
shall be deemed to be other than a payment on account, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment be deemed an accord and satisfaction, and Landlord may accept such
check or payment without prejudice to Landlord's right to recover the balance
or pursue any other remedy in this Lease or at law provided.
ARTICLE 28
Curing Tenant's Defaults; Additional Rent;
Reimbursement of Costs
28.01 If Tenant shall default in the performance of any of
Tenant's obligations under this Lease, Landlord, without thereby waiving such
default, may (but shall not be obligated to) perform the same for the account
and at the expense of Tenant, without notice, in a case of emergency, and in
any other case, only if such default continues after the expiration of (a)
five (5) Business Days from the date upon which Landlord gives Tenant notice
of intention to do so or (b) the applicable grace period provided in Section
24.02 or elsewhere in this Lease for cure of such default, whichever occurs
later.
28.02 If Tenant is late in making any payment due to
Landlord under this Lease for ten (10) or more days, then interest shall
become due and owing to Landlord on such payment from the date upon which it
was due, which interest shall be computed at the following rates:
(a) for an individual or partnership tenant, computed at
the maximum lawful rate of interest;
(b) for a corporate tenant, computed at the greater of (i)
one and 25/100 percent (1.25%) per month or (ii) two percent (2%) per annum
over the then prime rate of The Chase Manhattan Bank, N.A., but in no event in
excess of the maximum lawful rate of interest chargeable to corporations in
the State of New York.
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28.03 Bills for any expenses incurred by Landlord in
connection with any performance by it for the account of Tenant, and bills for
all costs, expenses and disbursements of every kind and nature whatsoever,
including reasonable counsel fees, involved in collecting successfully the
Base Rent or Additional Rent or any part thereof or enforcing any rights
against Tenant, under or in connection with this Lease, or pursuant to law,
including any such cost, expense and disbursement involved in instituting and
prosecuting summary proceedings, as well as bills for any property, material,
labor, or services provided, furnished, or rendered, by Landlord or at its
instance to Tenant, together with a reasonably detailed description of such
expenses, may be sent by Landlord to Tenant monthly, or immediately, at
Landlord's option, and shall be due and payable in accordance with the terms
of such bills promptly upon receipt by Tenant.
ARTICLE 29
Broker
Tenant covenants, warrants and represents to Landlord that
Tenant has not dealt with any broker or finder with respect to this Lease, and
that no conversations or negotiations were had by Tenant with any broker or
finder concerning the renting of the Demised Premises to Tenant. Tenant hereby
agrees to indemnify and hold Landlord harmless from any and all losses, costs,
damages or defenses (including, without limitation, attorneys' fees and
disbursements) incurred by Landlord by reason of any claim of or liability to
any broker or finder who claims to have dealt with Tenant in connection with
this Lease.
ARTICLE 30
Notices
Any notice, statement, demand, or other communication
required or permitted to be given, rendered, or made by either party to the
other, pursuant to this Lease or pursuant to any applicable law or requirement
of public authority, 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 if sent by registered or certified mail, return receipt requested,
addressed to the other party at the address set forth below, and shall be
deemed to have been given, rendered, or made on the day so mailed. Either
party may, by notice as aforesaid, designate a different address or addresses
for notices, statements, demands, or other communications intended for it.
If to Landlord:
387 P.A.S. Enterprises
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387 Park Avenue South
New York, New York 10022
Attention: John Fletcher, III
with a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Richard L. Chadakoff, Esq.
If to Tenant:
Health Management Systems, Inc.
401 Park Avenue South
New York, New York 10022
Attention: Vincent C. Hartley, II
with a copy to:
Coleman & Rhine
1120 Avenue of the Americas, 19th floor
New York, N.Y. 10036
Attention: Bruce Coleman, Esq.
ARTICLE 31
Estoppel Certificate; Memorandum
31.01 Each party agrees, at any time and from time to time
without cost or charge, as requested by the other party, upon not less than
ten (10) days' prior notice, to execute and deliver to the other a statement
(a) certifying that this Lease is unmodified and in full force and effect (or,
if there have been modifications, that the same is in full force and effect as
modified and stating the modifications) and whether any options granted to
Tenant pursuant to the provisions of this Lease have been exercised; (b)
certifying the dates to which the Base Rent and Additional Rent have been paid
and the amounts thereof; (c) stating whether or not, to the best knowledge of
the signer, the other party is in default in performance of any of its
obligations under this Lease, and, if so, specifying each such default of
which the signer may have knowledge; and (d) setting forth any additional
information which the other party may reasonably request.
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31.02 It is agreed by the parties that the certificate
referenced in Section 31.01 may be relied upon by anyone with whom the party
requesting such certificate may be dealing.
31.03 At the request of Landlord, Tenant shall promptly
execute, acknowledge and deliver to Landlord a memorandum with respect to this
Lease sufficient for recording. Such memorandum shall not in any circumstances
be deemed to change or otherwise affect any of the obligations or provisions
of this Lease.
ARTICLE 32
Arbitration
32.01 Either party may request arbitration of any matter in
dispute with respect to which arbitration is expressly provided in this Lease
as the appropriate remedy. The party requesting arbitration shall do so by
giving notice to that effect to the other party, and both parties shall
promptly thereafter jointly apply to the American Arbitration Association (or
any organization successor thereto) in the City and County of New York for the
appointment of a single arbitrator.
32.02 The arbitration shall be conducted in accordance with
the then prevailing rules of the American Arbitration Association (or any
organization successor thereto) in the City and County of New York and,
subject to the terms of the immediately succeeding sentence, judgment on the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. In rendering such decision and award, the arbitrator
shall not add to, subtract from, or otherwise modify the provisions of this
Lease.
32.03 If, for any reason whatsoever, a written decision and
award of the arbitrator shall not be rendered within sixty (60) days after the
appointment of such arbitrator, then, at any time thereafter before such
decision and award shall have been rendered, either party may apply to the
Supreme Court of the State of New York or to any other court having
jurisdiction and exercising the functions similar to those now exercised by
such court, by action, proceeding, or otherwise (but not by a new arbitration
proceeding), as may be proper to determine the question in dispute consistent
with the provisions of the lease.
32.04 All the expenses of the arbitration relating to the
fees of the American Arbitration Association and/or arbitration fees shall be
borne by the parties equally; all other expenses shall be borne by the party
incurring same.,
ARTICLE 33
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No Other Representations; Construction;
Governing Law; Consents
33.01 Tenant expressly acknowledges and agrees that Landlord
has not made and is not making, and Tenant, in executing and delivering this
Lease, is not relying upon, any warranties, representations, promises, or
statements, except to the extent that the same are expressly set forth in this
Lease. It is understood and agreed that all understandings and agreements
heretofore had between the parties are merged in this Lease, which alone fully
and completely expresses their agreements, and that the same is entered into
after full investigation, neither party relying upon any statement or
representation not embodied in this Lease, made by the other.
33.02 If any of the provisions of this Lease, or the
application thereof to any person or circumstances, shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision or provisions to persons or circumstances other than those as
to whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Lease shall be valid and enforceable to
the fullest extent permitted by law.
33.03 This Lease shall be governed in all respects by the
laws of the State of New York.
33.04 If Tenant shall request Landlord's consent or approval
pursuant to any of the provisions of this Lease or otherwise, and Landlord
shall fail or refuse to give, or shall delay beyond a reasonable period of
time in giving, such consent or approval, Tenant shall in no event make, or be
entitled to make, any claim for damages (nor shall Tenant assert, or be
entitled to assert, any such claim, by way of defense, set-off, or
counterclaim) based upon any claim or assertion by Tenant that Landlord
unreasonably withheld or delayed its consent or approval, and Tenant hereby
waives any and all rights that it may have, from whatever source derived, to
make or assert any such claim. Tenant's sole remedy for any such failure,
refusal, or delay shall be an action for a declaratory judgment, specific
performance, or injunction, and such remedies shall be available only in those
instances where Landlord has expressly agreed in writing not to unreasonably
withhold or delay its consent or approval or where, as a matter of law,
Landlord may not unreasonably withhold or delay the same.
ARTICLE 34
Parties Bound
34.01 The obligations of this Lease shall bind and benefit
the successors and assigns of the parties, with the same effect as if
mentioned in each instance where a party is named or referred to, except that
(a) no violation of the provisions of Article 8 shall operate to vest any
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rights in any successor or assignee of Tenant and (b) the provisions of this
Article 34 shall not be construed as modifying the conditions of limitation
contained in Article 24. However, the obligations of Landlord under this Lease
shall not be binding upon Landlord herein named with respect to any period
subsequent to the transfer of its interest in the Building as owner or lessee
thereof, and, in event of such transfer, said obligations shall thereafter be
binding upon each transferee of the interest of Landlord herein named as such
owner or lessee of the Building, but only with respect to the period ending
with a subsequent transfer within the meaning of this Article 34.
34.02 Tenant shall look only to Landlord's equity in the
estate and property in the Building (or the proceeds thereof) and, where
expressly so provided in this Lease, to offset against the rents payable under
this Lease, for the satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by
Landlord in the event of any default by Landlord hereunder, and no other
property or assets of Landlord or any partner, member, officer, or director
thereof, disclosed or undisclosed, shall be subject to levy, execution, or other
enforcement procedure for the satisfaction of Tenant's remedies under or with
respect to this Lease, the relationship of Landlord and Tenant hereunder, or
Tenant's use or occupancy of the Demised Premises.
34.03 If there shall be more than one person named as tenant
herein, than all such persons shall be deemed to be joint tenants in the
leasehold estate demised hereby, with joint and several liability hereunder.
ARTICLE 35
Certain Definitions and Construction
35.01 For the purposes of this Lease and all agreements
supplemental to this Lease, the definitions set forth in herein shall be
utilized unless the context shall otherwise require.
35.02 Terms contained in quotation marks and defined in
other Articles of this Lease, or that are so defined in Exhibits annexed
hereto, shall have the meanings specified in such other Articles and such
Exhibits for all purposes of this Lease and all agreements supplemental
thereto, unless the context shall otherwise require.
35.03 This Lease is offered for signature by Tenant and it
is understood that this Lease shall not be binding upon Landlord or Tenant
unless and until Landlord and Tenant shall have executed and unconditionally
delivered a fully executed copy of this Lease to each other.
35.04 Notwithstanding anything contained in this Lease to
the contrary, all amounts payable by Tenant to or on behalf of Landlord under
this Lease, whether or not expressly
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denominated Base Rent or Additional Rent, shall constitute rent for the purposes
of Section 502(b)(7) of the Bankruptcy Code.
35.05 Tenant's liability for all items of Rental shall
survive the Expiration Date.
35.06 (a) The term "mortgage" shall include an indenture of
mortgage and deed of trust to a trustee to secure an issue of bonds, and the
term "mortgagee" shall include such a trustee.
(b) The terms "include," "including" and "such as" shall
each be construed as if followed by the phrase "without being limited to."
(c) The term "obligations of this Lease," and words of like
import, shall mean the covenants to pay Rental under this Lease and all of the
other covenants and conditions contained in this Lease. Any provision in this
Lease that one party or the other, or both, shall do, or not do, or shall cause
or permit, or not cause or permit, a particular act, condition, or circumstance
shall be deemed to mean that such party so covenants or both parties so
covenant, as the case may be.
(d) The term "Tenant's obligations hereunder," and words of
like import, and the term Landlord's obligations hereunder, and words of like
import, shall mean the obligations of this Lease that are to be performed or
observed by Tenant, or by Landlord, as the case may be. Reference to
"performance" of either party's obligations under this Lease shall be
construed as "performance and observance."
(e) Reference to Tenant being or not being "in default
hereunder," or words of like import, shall mean that Tenant is in default in
the performance of one or more of Tenant's obligations hereunder, or that
Tenant is not in default in the performance of any of Tenant's obligations
hereunder, or that a condition of the character described in Section 24.01 has
occurred and continues or has not occurred or does not continue, as the case
may be.
(f) References to Landlord as "having no liability to
Tenant" or being "without liability to Tenant," shall mean that Tenant is not
entitled to terminate this Lease, or to claim actual or constructive eviction,
partial or total, or to receive any abatement or diminution of rent, or to be
relieved in any manner of any of its other obligations hereunder, or to be
compensated for loss or injury suffered or to enforce any other kind of
liability whatsoever against Landlord under or with respect to this Lease or
with respect to Tenant's use or occupancy of the Demised Premises except as
otherwise expressley provided herein.
(g) The term "laws and/or requirements of public
authorities" and words of like import shall mean laws and ordinances of any or
all of the Federal, state, city, county and borough governments and rules,
regulations, orders and/or directives of any or all departments,
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subdivisions, bureaus, agencies or offices thereof, or of any other
governmental, public or quasi-public authorities, having jurisdiction in the
premises, and/or the direction of any public officer pursuant to law.
(h) The term "requirements of insurance bodies" and words of
like import shall mean rules, regulations, orders and other requirements of
the New York Board of Fire Underwriters and/or the New York Fire Insurance
Rating Organization and/or any other similar body performing the same or
similar functions and having jurisdiction or cognizance of the Building and/or
the Demised Premises.
(i) The term "repair" shall be deemed to include restoration
and replacement as may be necessary to achieve and/or maintain good working
order and condition.
(j) Reference to "termination of this Lease" includes
expiration or earlier termination of the term of this Lease or cancellation of
this Lease pursuant to any of the provisions of this Lease or by law. Upon a
termination of this Lease, the term and estate granted by this Lease shall end
at noon of the date of termination as if such date were the Expiration Date and
neither party shall have any further obligation or liability to the other after
such termination (i) except as shall be expressly provided for in this Lease, or
(ii) except for such obligation as by its nature or under the circumstances can
only be, or by the provisions of this Lease, may be, performed after such
termination, and, in any event, unless expressly otherwise provided in this
Lease, any liability for a payment that shall have accrued to or with respect to
any period ending at the time of termination shall survive the termination of
this Lease.
(k) The term in "full force and effect," when herein used in
reference to this Lease as a condition to the existence or exercise of a right
on the part of Tenant, shall be construed in each instance as including the
further condition that, at the time in question, no default on the part of
Tenant exists, and no event has occurred that has continued to exist for such
period of time (after the notice, if any, required by this Lease), as would
entitle Landlord to terminate this Lease or to dispossess Tenant.
(l) The term "Tenant" shall mean Tenant herein named or any
assignee or other successor in interest (immediate or remote) of Tenant herein
named, while such Tenant or such assignee or other successor in interest, as
the case may be, is in possession of the Demised Premises as owner of the
Tenant's estate and interest granted by this Lease and also, if Tenant is not
an individual or a corporation, all of the persons, firms and corporations
then comprising Tenant.
(m) The term "person," or words of like import, shall mean a
natural person, partnership, corporation, trust, estate, fiduciary,
unincorporated association, syndicate, joint venture, organization, or any
other manner of entity.
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(n) Words and phrases used in the singular shall be deemed
to include the plural and vice versa, and nouns and pronouns used in any
particular gender shall be deemed to include any other gender.
(o) A general statement following or referable to an
enumeration of specific matters shall not be limited to matters similar to the
matters specifically mentioned.
(p) All references in this Lease to numbered Articles,
numbered Sections and lettered Exhibits are references to Articles and
Sections of this Lease, and Exhibits annexed to (and thereby made part of)
this Lease, as the case may be, unless expressly otherwise designated in the
context.
(q) Any contradiction between the terms contained in the
body of this Lease and the Rules and Regulations attached hereto as Exhibit C
shall be resolved in favor of the terms contained in the body of this Lease.
ARTICLE 36
Adjacent Excavation; Shoring
If an excavation or other substructure work shall be made
upon land adjacent to the Demised Premises, or shall be authorized to be made,
Tenant shall afford to the person causing or authorized to cause such
excavation license to enter upon the Demised Premises for the purpose of doing
such work as shall be necessary to preserve the wall of or the Building from
injury or damage and to support the same by proper foundations without any
claim for damages or indemnity against Landlord, or diminution or abatement of
rent.
ARTICLE 37
Tenant's Option to Renew
37.01 Tenant shall have an option to extend the term of this
Lease for one (1) additional term of five (5) years (the "Renewal Term")
commencing on the first day next succeeding the Expiration Date (the "Renewal
Term Commencement Date") , and expiring at 12 noon on the day immediately
preceding the fifth (5th) anniversary of the Renewal Term Commencement Date,
unless terminated at an earlier date pursuant to the terms and conditions of
this Lease or by applicable law. Tenant shall notify Landlord of its intention
to exercise its option at least one (1) year prior to the Expiration Date,
time being of the essence as to Tenant's obligation to so notify Landlord.
Upon Tenant's notification to Landlord of its intention to exercise its
option, this Lease shall be deemed extended without the requirement of further
action
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<PAGE>
by either of the parties hereto and all of the terms and conditions of
this Lease (excluding, however, this Article 37) shall govern the tenancy
during the Renewal Term including the obligation of Tenant to pay Additional
Rent, except that the Base Rent for the Renewal Term shall be equal to the
greater of (a) the annual Base Rent payable by Tenant for the twelve (12)
months prior to the Expiration Date or (b) the fair market rent of the Demised
Premises as of the Expiration Date, determined as hereinafter provided. If
Tenant shall not give Landlord the aforesaid notice within the time period
indicated, the right to such Renewal Term shall terminate and shall be deemed
to have been waived by Tenant.
37.02 Within thirty (30) days after receipt by Landlord of
Tenant's notification referred to in Section 37.01 hereof, and if in
Landlord's opinion an increase in the Base Rent for the Renewal Term is
warranted because the fair market rent for the Demised Premises has increased,
Landlord shall send Tenant a notice (the "Revised Rent Notice") stating the
amount which, in Landlord's good faith opinion, shall constitute the fair
market rent for the Demised Premises as of the Expiration Date. The increased
Base Rent set forth in the Revised Rent Notice shall be effective as of the
Renewal Term Commencement Date.
37.03 (a) If Landlord gives a Revised Rent Notice, then at
any time within thirty (30) days after the giving of such Revised Rent Notice,
Tenant may dispute the fair market rent of the Demised Premises as determined by
Landlord by giving notice to Landlord that it is initiating the appraisal
process provided for herein and specifying in such notice the name and address
of the arbitrator designated by Tenant to act on its behalf. If Tenant does not
give Landlord the aforesaid notice within the time period above specified, the
rent set forth in the Revised Rent Notice shall be binding and conclusive on
both parties. Within fifteen (15) days after the designation of Tenant's
arbitrator, Landlord shall give notice to Tenant specifying the name and address
of Landlord's arbitrator. The two arbitrators so chosen shall meet within ten
(10) days after the second arbitrator is appointed and if, within twenty (20)
days after the second arbitrator is appointed, the two arbitrators shall not
agree upon a determination in accordance with Paragraph (c) of this Section
37.03 they shall together appoint a third arbitrator. If said two arbitrators
cannot agree upon the appointment of a third arbitrator within ten (10) days
after the expiration of such twenty (20) day period, then either party, on
behalf of both, and on notice to the other, may request such appointment by the
American Arbitration Association (or any successor organization) in accordance
with its then prevailing rules. If the American Arbitration Association shall
fail to appoint said third arbitrator within ten (10) days after such request is
made, then either party may apply, on notice to the other, to the Supreme Court,
New York County, New York (or any other court having jurisdiction and exercising
functions similar to those now exercised by the foregoing court) for the
appointment of such third arbitrator.
(b) Each of the arbitrators selected as herein provided
shall have at least five years experience in the leasing or management of
office space in the Borough of Manhattan and the third arbitrator shall have
no business relationship with either party. Each party shall pay the fees and
expenses of the arbitrator selected by it. The fees and expenses of the third
arbitrator and
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<PAGE>
all other expenses (not including the attorneys' fees, witness fees and similar
expenses of the parties which shall be borne separately by each of the parties)
of the arbitration shall be borne equally by the parties hereto.
(c) The majority of the arbitrators shall determine the fair
market rent of the Demised Premises as of the Expiration Date and render a
decision and award as to their determination to both Landlord and Tenant
within twenty (20) days after the appointment of the third arbitrator. In
rendering such decision and award, the arbitrators shall assume or take into
consideration as appropriate the following: (i) Landlord and Tenant are
typically motivated; (ii) Landlord and Tenant are well-informed and
well-advised and each is acting in what it considers its own best interest;
(iii) the rent is unaffected by concessions, special financing amounts and/or
terms, or unusual services, fees, costs or credits in connection with the
leasing transaction; (iv) the Demised Premises are fit for immediate occupancy
and use "as is", and require no additional work by Landlord, and no work has
been carried out therein by Tenant, its subtenant, or their predecessors in
interest during the term of this Lease which has diminished the rental value
of the Demised Premises; (v) in the event the Demised Premises have been
destroyed or damaged by fire or other casualty, the same have been fully
restored; (vi) the Demised Premises are to be let subject to the provisions of
this Lease for a five-year term; and (vii) the rent is to be determined in
accordance with market rents then being charged for comparable space in
similar office buildings in the same area. In rendering such decision and
award, the arbitrators shall not modify the provisions of this Lease. The
decision and award of the arbitrators shall be in writing and be final and
conclusive on all parties and counterpart copies thereof shall be delivered to
each of said parties. Judgment may be had on the decision and award of the
arbitrators so rendered in any court of competent jurisdiction.
(d) Prior to the determination of the arbitrators, Tenant
shall pay as the Base Rent it is obligated to pay under this Lease the amount
set forth in the Revised Rent Notice and in the event the arbitrators
determine that the Base Rent payable pursuant to this Article 37 is greater
than that set forth in the Revised Rent Notice, then Tenant shall promptly pay
to Landlord the amount of its underpayment of Base Rent for the period
commencing on the Renewal Term Commencement Date; or, if the arbitrators
determine that the fixed annual rent payable pursuant to this Article is less
than that set forth in the Revised Rent Notice, then Tenant shall be entitled
to a credit in the amount of its overpayment for the period commencing on the
Renewal Term Commencement Date against subsequent payments of Base Rent due
hereunder.
37.04 Notwithstanding the foregoing provisions of this
Article 37, if on the date that Tenant exercises its option by notification to
Landlord, or if on any subsequent date up to and including the Expiration
Date, Tenant is in default in the performance of any of the terms, conditions
or provisions of this Lease and such default has continued beyond any
applicable grace period, then Tenant's exercise of its option and the
extension of the term of this Lease contemplated thereby shall, at the option
of Landlord exercised by notice to Tenant, be rendered
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<PAGE>
null and void and shall be of no further force and effect and Tenant shall have
no further or additional right to exercise the option set forth in this Article
37.
37.05 From and after the Renewal Term Commencement Date the
term "Expiration Date" shall mean the day immediately preceding the fifth
(5th) anniversary of the Renewal Term Commencement Date.
ARTICLE 38
Connection to the 401 Premises
38.01 (a) Reference is made to that certain lease agreement,
dated as of September 24, 1981, as amended by Amendment of Lease, dated
October 9, 1981, as further amended by Amendment of Lease, dated September 24,
1982, as further amended by Second Amendment of Lease, dated January 6, 1986
and as further amended by Third Amendment of Lease, dated February 28, 1990
and as same may thereafter be amended (collectively, the "401 Lease"), between
Tenant, as tenant, and 401 Park Avenue South Associates as landlord (the "401
Landlord"), pursuant to which Tenant leased a certain part of the fourth (4th)
floor of the building commonly known as 401 Park Avenue South, New York, New
York (the "401 Building") and located immediately adjacent to the Building.
(b) Landlord hereby agrees that, in connection with the
performance of Tenant's Work, Tenant may construct an opening connecting the
fourth (4th) floor of the Demised Premises to the fourth (4th) floor of the 401
Premises in accordance with the Plans (as finally approved by Landlord), at
Tenant's sole cost and expense and under the supervision and direction of
consultants and engineers designated and paid for by Tenant and approved by
Landlord. Landlord hereby approves: Irwin Associates as engineers; Structural
Engineers and Practical Design Associates, Inc. as structural engineer and
Robert Levine, P.C. as architect. Furthermore, provided that this Lease shall be
in full force and effect at the time Tenant occupies any portion of the third
(3rd) floor of the 401 Premises and provided no default shall have occurred and
be continuing at such time under this Lease or the 401 Lease, Landlord hereby
agrees that Tenant may construct an opening connecting the third (3rd) floor of
the Demised Premises to the third (3rd) floor of the 401 Premises (each such
opening, an "Opening") in accordance with plans and specifications to be
delivered to and approved by Landlord in accordance with the provisions of
Article 12 hereof, at Tenant's sole cost and expense and under the supervision
and direction of consultants and engineers designated by Landlord and paid for
by Tenant, provided:
1) Prior to the Expiration Date, Tenant at its sole
cost and expense shall restore the Demised Premises by sealing each Opening
and repairing any damage to the Demised Premises caused thereby in a manner
satisfactory to Landlord;
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<PAGE>
2) In addition to the indemnity set forth in
Article 20 hereof, Tenant agrees to and hereby does indemnify, defend and hold
harmless Landlord and the Indemnitees from and against any and all
liabilities, claims, costs and expenses whatsoever (including, without
limitation, reasonable attorneys' fees and disbursements) arising out of or
otherwise in connection with (i) Tenant's construction, use and subsequent
restoration of the Openings and (ii) Tenant's use and occupancy of the Demised
Premises and the 401 Premises as contiguous spaces;
3) Landlord's insurance carrier will continue to
insure the Building, without increased premium to Landlord, notwithstanding
the construction and use of the Opening(s);
4) The holder of any Superior Mortgage and any
lessor under a Superior Lease shall have consented to the construction and
use of such Opening;
5) Tenant shall deliver to Landlord, no later than
the date which is ten (10) Business Days prior to commencement of construction
of an Opening, the following documents in form and substance satisfactory to
Landlord and its counsel and executed by the parties thereto:
(i) a certificate of insurance addressed
to Landlord from Tenant's insurance agent stating that all
coverage provided by such carrier with respect to the
Demised Premises in accordance with Article 10 hereof shall
continue in full force and effect notwithstanding the
construction and existence of such Opening and the use
and occupancy by Tenant of the Demised Premises and
the 401 Premises as contiguous spaces;
(ii) a letter addressed to Landlord from
each of (a) the ground lessor under that certain ground
lease, dated September 14, 1979 between the 401 Landlord, as
the ground lessee, and such ground lessor, and (b) the
holder of each mortgage on the 401 Building, whereby each
such holder of a superior interest consents to the
construction and use of such Opening and the use and
occupancy by Tenant of the 401 Premises connected to the
Demised Premises as contemplated in this Article 38; and
(iii) to the extent Landlord and/or its
counsel deems it necessary or desirable, an agreement among
Landlord, Tenant and the 401 Landlord setting forth the
respective rights, liabilities and obligations, consistent
with this Article 38, of the parties with respect to the
construction and use of the Openings, including, without
limitation, the obligation of the 401 Landlord to deliver
notice of any default by Tenant under the 401 Lease to
Landlord concurrently with its delivery of any such notice
to Tenant.
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<PAGE>
6) Upon the expiration or sooner termination of the
401 Lease for any reason, including as a result of a casualty to or
condemnation of all or any part of the 401 Premises, if one or both of the
Openings have been constructed, Tenant shall close up such Opening(s) in
accordance with the provisions of Section 38.01(b). From and after the date on
which Tenant commences construction of an Opening, a default by Tenant beyond
applicable notice and cure periods under the 401 Lease shall give Landlord,
upon ten (10) days' notice to Tenant, the right to require Tenant to close up
such Opening(s) in accordance with the provisions of Section 38.01(b).
(c) Tenant acknowledges and agrees that Landlord shall have the right, from
and after the commencement of construction of any Opening, to enter upon the
401 Premises in order to inspect the construction and/or the restoration of
any Opening, and to insure that neither the Demised Premises nor the Building
is being adversely affected by the use by Tenant of the Opening.
(d) Nothing contained herein shall be deemed to grant to Tenant or any other
occupant of the Demised Premises or the 401 Premises an easement or other real
property interest in, on or over an Opening constructed pursuant to the
provisions of this Article. The rights granted to Tenant pursuant to this
Article 38 constitute a mere license to construct the Openings in accordance
with the terms hereof and to use the same as a means of ingress and egress to
and from the 401 Premises from and to the Demised Premises, which license
shall be revocable by Landlord at any time. Notwithstanding the foregoing,
Landlord agrees that, for so long as no default shall have occurred and be
continuing under this Lease or the 401 Lease, and for so long as the
construction and use of the Opening(s) are not contrary to any applicable
Requirements, Landlord shall not revoke the license granted to Tenant hereby.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
as of the day and year first above written.
387 P.A.S. ENTERPRISES
By: Twenty-Seventh and Park, Inc., a General
Partner
By:_____________________________________
John Fletcher, Vice President
HEALTH MANAGEMENT SYSTEMS, INC.
By:_____________________________________
Name:
Title:
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of March, 1996, before me personally came
John Fletcher, to me known, who being by me duly sworn, did depose and say
that he resides at 641 Lexington Avenue, New York, New York; that he is the
Vice President of TWENTY-SEVENTH AND PARK, INC., a General Partner of 387
P.A.S. ENTERPRISES, the partnership described in and that, by said
corporation, executed the within instrument as a general partner; and that he
signed his name thereto by order of the Board of Directors of such corporation
and on behalf of the partnership.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of March, 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
HEALTH MANAGEMENT SYSTEMS, INC., the corporation described in and that
executed the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of such corporation.
------------------------------
Notary Public
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<PAGE>
Exhibit A
DESCRIPTION
ALL that certain lot, piece or parcel of land, situate,
lying and being in the Borough of Manhattan, City, County and State of New
York, bounded and described as follows:
BEGINNING at the corner formed by the intersection of the
northerly side of 27th Street with the easterly side of Fourth Avenue:
Running THENCE northerly, along the easterly side of Fourth
Avenue, 98 feet 9 inches to the centre line of the block between 27th and 28th
Streets;
THENCE easterly, along said centre line 166 feet 8 inches;
THENCE southerly, parallel with Fourth Avenue, 98 feet 9
inches to the northerly side of 27th Street;
THENCE westerly, along the northerly side of 27th Street,
166 feet 8 inches to the point or place of BEGINNING.
Fourth Avenue above is now known as Park Avenue South.
<PAGE>
Exhibit B
WORKLETTER
1. Commencing on the Commencement Date, Landlord shall
perform the following work ("Landlord's Work") in the Demised Premises:
A. Demolition of existing interior installation in
accordance with the Plans and as directed by Tenant.
B. Landlord shall remove from the Third Floor Premises
the stairway connecting the second floor and
restore the floor of the third floor to a floor
load level equal to or greater than the presently
existing floor load on the third floor.
C. Tenant shall perform Tenant's Work in accordance with
the Plans to be submitted by Tenant to Landlord in
accordance with this Exhibit B.
D. Landlord shall deliver to Tenant five (5) copies of
an ACP-5 for the Third Floor Premises on or before
the Commencement Date and five (5) copies of an
ACP-5 for the Fourth Floor Premises on or before
the Fourth Floor Delivery Date.
2. Tenant shall submit to Landlord for Landlord's approval
(which approval shall not be unreasonably withheld), on or before March 15,
1996, complete architectural and engineering drawings and specifications
(hereinafter, as the same may be revised from time to time, the "Plans")
showing the proposed subdivision, layout and finish of the Demised Premises,
including the proposed Openings connecting (a) the third (3rd) floor of the
Demised Premises to the third floor of the 401 Premises and (b) the fourth
(4th) floor of the Demised Premises to the fourth (4th) floor of 401 Premises,
which Plans shall be consistent with the design, construction and equipment of
the Building and in conformity with its standards, all in such form and detail
as may be reasonably required by Landlord. The Plans shall be prepared by an
architect reasonably satisfactory to Landlord who shall be engaged by Tenant
and who, at Tenant's expense, shall assist Tenant in securing such approvals
which, because of the nature of the work shown on the Plans, may be required
by the Department of Buildings of the City of New York and any other
governmental authority.
3. If Landlord shall not approve the Plans as submitted by
Tenant, Landlord shall notify Tenant thereof, and of the particulars of such
revisions as are reasonably required by
<PAGE>
Landlord for the purpose of obtaining its approval, within seven (7) days of
receipt of the Plans and, within seven (7) days after being so informed by
Landlord, Tenant shall submit to Landlord, for Landlord's approval (which
approval shall not be unreasonably withheld), revised Plans, incorporating such
revisions or incorporating such modifications as are suggested by Tenant and
approved by Landlord. Any such approval by Landlord shall not be deemed to be a
representation or warranty that the same is properly designed to perform the
function for which it is intended or complies with any applicable law,
ordinance, rule, order or regulation of any governmental authority or insurance
body, but only that the work required thereby will not interfere with the
Building Systems and is compatible with the design and structure of the
Building.
4. Upon final approval of the Plans, Landlord, through
Landlord's contractor or contractors, shall proceed with due diligence,
subject to delay for causes beyond its reasonable control and Tenant Delays to
perform Landlord's Work during regular working hours.
5. If Landlord shall be delayed in substantially completing
Landlord's Work as a result of any act, neglect, failure or omission of
Tenant, its agents, servants, architects, or employees, including without
limitation any of the following, such delay shall be deemed to be a "Tenant
Delay":
(a) Tenant's failure to furnish the Plans in accordance
with Paragraphs 2 and 3 of this Exhibit B; or
(b) Tenant's changes in or substitutions to the Plans,
the number of days of such delay to be determined
by the contractor, upon request therefor by Tenant,
and communicated in advance of such change or
substitution to Landlord in writing, but if such
determination by the contractor with respect to the
delay caused by such change or substitution is not
submitted to Landlord in advance of commencement of
construction of same, the resulting delay, if any,
shall be determined by Landlord; or
(c) the performance or delays in completion of work by
a person, firm or corporation employed by Tenant.
Failure by Landlord to obtain any certification
required by Local Law No. 76 of the City of New
York, Laws of 1985, and the regulations pertaining
thereto, with respect to the presence or absence of
asbestos in the Demised Premises shall not be a
Tenant Delay.
6. There shall be no charge to Tenant for use of the freight
elevator in the Building during the performance of Landlord's Work or for
Tenant's move-in at the commencement of the term of this Lease, provided
Tenant's move-in occurs during Regular Hours of Business Days, as set forth in
Section 16.02 hereof.
<PAGE>
7. Landlord shall permit Tenant and its agents to enter upon
the Demised Premises prior to the completion of Landlord's Work in order that
Tenant may perform through its architect and contractors such other work for
installation and decoration which Tenant may desire at the same time as
Landlord's contractors are working therein, but only at such time or times as
Landlord shall reasonably deem feasible in the circumstances. This right to
enter before completion of Landlord's Work is conditioned upon Tenant's
architect, workmen, mechanics, and contractors working in harmony and without
interference with the workmen, mechanics and contractors of Landlord and in
accordance with applicable insurance requirements. In case disharmony or
interference occurs, or insurance requirements are violated, this right may be
temporarily revoked by Landlord upon twenty-four (24) hours' written notice to
Tenant.
<PAGE>
Exhibit C
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors and
elevators of the Building are limited to ingress to and egress from the
tenants' premises for the tenants and their employees, licensees and invitees,
and no tenant shall use, or permit the use of, the entrances, corridors, or
elevators for any other purpose. No tenant shall invite to the tenant's
premises, or permit the visit of, persons in such numbers or under such
conditions as to interfere with the use and enjoyment of any of the entrances,
corridors, elevators and other facilities of the Building by other tenants.
Fire exits and stairways are for emergency use only, and they shall not be
used for any other purpose by the tenants, their employees, licensees, or
invitees. No tenant shall encumber or obstruct, or permit the encumbrance or
obstruction of, any of the sidewalks, entrances, corridors, elevators, fire
exits or stairways of the Building. Landlord reserves the right to control and
operate the public portions of the Building and the public facilities, as well
as facilities furnished for the common use of the tenants, in such manner as
it deems best for the benefit of the tenants generally.
2. Landlord may refuse admission to the Building, outside of
ordinary business hours, to any person not known to the watchman in charge,
not having a pass issued by the Landlord or the tenant whose premises are to
be entered, or not otherwise properly identi-fied, and may require all persons
admitted to or leaving the Building outside of ordinary business hours to
register. Any person whose presence in the Building at any time shall, in the
judgment of Landlord, be prejudicial to the safety, character, reputation and
interests of the Building or of its tenants may be denied access to the
Building or may be ejected therefrom. In case of invasion, riot, public
excitement, or other commotion, Landlord may prevent all access to the
Building during the continuance of the same, by closing the doors or
otherwise, for the safety of the tenants and protection of property in the
Building. Landlord may require any person leaving the Building with any
package or other object to exhibit a pass from the tenant from whose premises
the package or object is being removed, but the establishment and enforcement
of such requirement shall not impose any responsibility on the Landlord for
the protection of any tenant against the removal of property from the premises
of the tenant. Landlord shall, in no way, be liable to any tenant for damages
or loss arising from the admission, exclusion, or ejec-tion of any person to
or from the tenant's premises or the Building under the provisions of this
rule. Canvassing, soliciting or peddling in the Building is prohibited, and
every tenant shall cooperate to prevent the same.
3. No tenant shall obtain, or accept for use in its
premises, ice, drinking water, food, beverage, towel, barbering, boot
blacking, floor polishing, lighting maintenance, cleaning or other similar
services from any persons reasonably disapproved by Landlord in writing. Such
<PAGE>
services shall be furnished only at such hours, in such places within the
tenant's premises and under such reasonable regulations as may be fixed by
Landlord.
4. The cost of repairing any damage to the public portions
of the Building or the public facilities or to any facilities used in common
with other tenants, caused by a tenant, or the employees, licensees, or
invitees of a tenant, shall be paid by such tenant.
5. No lettering, sign, advertisement, notice, or object
shall be displayed in or on the windows or doors, or on the outside of any
tenant's premises, or at any point inside any tenant's premises where the same
might be visible outside of such premises, except that the name of the tenant
may be displayed on the entrance door of the tenant's premises, and in the
elevator lobbies of the floors which are occupied entirely by such tenant,
subject to the approval of Landlord as to the size, color and style of such
display, such approval not to be unreasonably withheld. The inscription of the
name of the tenant on the door of the tenant's premises shall be done by
Landlord at the expense of the tenant. Listing of the name of the tenant on
the directory board in the Building shall be done by Landlord at its expense;
any other listings shall be in the discretion of Landlord.
6. No awnings or other projections over or around the
windows shall be installed by any tenant, and only such window blinds as are
supplied or permitted by Landlord shall be used in a tenant's premises.
Linoleum, tile, or other floor covering shall be laid in a tenant's premises
only in a manner approved by Landlord.
7. Landlord shall have the right, not to be unreasonably
exercised, to prescribe the weight and position of safes and other objects of
excessive weight, and no safe or other object whose weight exceeds the lawful
load for the area upon which it would stand shall be brought into or kept upon
a tenant's premises. If, in the judgment of Landlord, it is necessary to
distribute the concentrated weight of any heavy object, the work involved in
such distribution shall be done at the expense of the tenant and in such
manner as Landlord shall determine. The moving of safes and other heavy
objects shall take place only outside of ordinary business hours upon previous
notice to Landlord, and the persons employed to move the same in and out of
the Building shall be reasonably acceptable to Landlord and, if so required by
law, shall hold a Master Rigger's license. Freight, furniture, business
equipment, merchandise and bulky matter of any description shall be delivered
to and removed from the premises only in the freight elevators and through the
service entrances and corridors, and only during hours and in a manner
approved by Landlord. Arrangements will be made by landlord with any tenant
for moving large quantities of furniture and equipment into or out of the
Building.
8. No machines or mechanical equipment of any kind, other
than typewriters and other ordinary portable business machines, may be
installed or operated in any tenant's premises without Landlord's prior
written consent, such consent not to be unreasonably withheld, and in no case
(even where the same are of a type so excepted or as so consented to by
landlord)
<PAGE>
shall any machines or mechanical equipment be so placed or operated as to
disturb other tenants, but machines and mechanical equipment that may be
permitted to be installed and used in a tenant's premises shall be so equipped,
installed and maintained by such tenant as to prevent any disturbing noise,
vibration, or electrical or other interference from being transmitted from such
premises to any other area of the Building.
9. No noise, including the playing of any musical
instruments, radio or television, that, in the judgment of Landlord, might
disturb other tenants in the Building, shall be made or permitted by any
tenant, and no cooking, except for microwave ovens and coffee units, shall be
done in the tenant's premises, except as expressly approved by Landlord.
Nothing shall be done or permitted in any tenant's premises, and nothing shall
be brought into or kept in any tenant's premises, that would materially impair
or interfere with any of the Building services or the proper and economic
heating, cleaning, or other servicing of the Building or the premises, or the
use or enjoyment by any other tenant of any other premises, nor shall there be
installed by any tenant any ventilating, air conditioning, electrical, or
other equipment of any kind that, in the reasonable judgment of Landlord,
might cause any such impairment or interference. No dangerous, inflammable,
combustible, or explosive object or material shall be brought into the
Building by any tenant or with the permission of any tenant. Any cuspidors or
similar containers or receptacles used in any tenant's premises shall be cared
for and cleaned by and at the expense of the tenant.
10. No acids, vapors or other materials shall be discharged,
or permitted to be discharged, into the waste lines, vents, or flues of the
Building if the same may damage them. The water and wash closets and other
plumbing fixtures in or serving any tenant's premises shall not be used for
any purpose other than the purposes for which they were designed or
constructed, and no sweepings, rubbish, rags, acids, or other foreign
substances shall be deposited therein.
11. No additional locks or bolts of any kind shall be placed
upon any of the doors or windows in any tenant's premises, and no lock on any
door therein shall be changed or altered in any respect, except upon the prior
written approval of Landlord, such approval not to be unreasonably withheld.
Additional keys for a tenant's premises and toilet rooms shall be procured
only from Landlord, and a reasonable charge may be levied therefor. Upon the
termination of a tenant's lease, all keys of the tenant's premises and toilet
rooms shall be delivered to Landlord.
12. All entrance doors in each tenant's premises shall be
left locked, and all windows shall be left closed by the tenant, when the
tenant's premises are not in use. Entrance doors shall not be left open at
any time.
13. Hand trucks not equipped with rubber tires and side
guards shall not be used within the Building.
<PAGE>
14. All windows in each tenant's premises shall be kept
closed, and all blinds therein, if any, above the ground floor shall be lowered
when and as reasonably required because of the position of the sun, during the
operation of the Building air-conditioning system to cool or ventilate the
tenant's premises.
15. Landlord reserves the right to rescind, alter or waive
any rule or regulation at any time prescribed for the Building when, in its
judgment, it deems it necessary, desirable, or proper for its best interest
and for the best interests of the tenants, and no alteration or waiver of any
rule or regulation in favor of one tenant shall operate as an alteration or
waiver in favor of any other tenant. Landlord shall not be responsible to any
tenant for the non-observance or violation by any other tenant of any of the
rules and regulations at any time prescribed for the Building.
<PAGE>
DEFINITIONS
"401 Building" has the meaning assigned in Section 38.01.
"401 Ground Lessor" has the meaning assigned in Section 38.01.
"401 Landlord" has the meaning assigned in Section 38.01.
"401 Lease" has the meaning assigned in Section 38.01.
"Additional Rent" has the meaning assigned in Section 1.04.
"After Hours Service" has the meaning assigned in Section 16.02.
"Base Rent" has the meaning assigned in Section 1.04.
"Base Tax Year" has the meaning assigned in Section 5.01.
"Building" has the meaning assigned in Section 1.01.
"Building Systems" means the mechanical, electrical (to the point of the
junction box within the Demised Premises), sanitary, heating, elevator,
plumbing, life-safety and other service systems of the Building.
"Business Days" has the meaning assigned in Section 16.02.
"Changes" has the meaning assigned in Section 12.01.
"Commencement Date" has the meaning assigned in Section 1.03.
"Control" or "control" means ownership of more than thirty-nine percent (39%)
of the outstanding voting stock of a corporation or other majority equity and
control interest if not a corporation and the possession of power to direct or
cause the direction of the management and policy of such corporation or other
entity, whether through the ownership of voting securities, by statute or
according to the provisions of a contract.
"Date of Taking" has the meaning assigned in Section 22.01.
"Deficiency" has the meaning assigned in Section 25.02.
"Demised Premises" has the meaning assigned in Section 1.02.
<PAGE>
"Event of Default" has the meaning assigned in Section 24.02.
"Existing Mortgage" has the meaning assigned in Section 6.01.
"Expiration Date" has the meaning assigned in Section 1.03.
"Fixed Expiration Date" has the meaning assigned in Section 1.03.
"Fourth Floor Delivery Date" has the meaning assigned in Section 1.03.
"Fourth Floor Premises" has the meaning assigned in Section 1.02.
"Governmental Authority (Authorities)" has the meaning assigned in Section 9.01.
"HV Service" has the meaning assigned in Section 16.02.
"Indemnitees" has the meaning assigned in Section 20.01.
"Initial Period" has the meaning assigned in Section 1.05.
"Land" has the meaning assigned in Section 1.01.
"Landlord's Work" has the meaning assigned in Section 3.01.
"Lease" has the meaning assigned in the preamble.
"Leaseback Space" has the meaning assigned in Section 8.02.
"Lessor" has the meaning assigned in Section 6.01.
"Non-Disturbance Agreement" has the meaning assigned in Section 6.04.
"Opening" has the meaning assigned in Section 38.01.
"Other Mortgages" has the meaning assigned in Section 6.01.
"Outside Date" has the meaning assigned in Section 4.02.
"Person(s) or person(s)" means any natural person or persons, a partnership, a
corporation and any other form of business or legal association or entity.
"Regular Hours" has the meaning assigned in Section 16.02.
<PAGE>
"Renewal Term Commencement Date" has the meaning assigned in Section 37.01.
"Renewal Term" has the meaning assigned in Section 37.01.
"Rental" has the meaning assigned in Section 1.04.
"Rent Commencement Date" has the meaning assigned in Section 1.05.
"Requirements" has the meaning assigned in Section 9.01.
"Revised Rent Notice" has the meaning assigned in Section 37.02.
"Successor Landlord" has the meaning assigned in Section 6.03.
"Superior Leases" has the meaning assigned in Section 6.01.
"Superior Lessor" has the meaning assigned in Section 6.01.
"Superior Mortgages" has the meaning assigned in Section 6.01.
"Superior Mortgagee" has the meaning assigned in Section 6.01.
"Tax Statement" has the meaning assigned in Section 5.02.
"Tax Year" has the meaning assigned in Section 5.01.
"Taxes" has the meaning assigned in Section 5.01.
"Temporary Taking" has the meaning assigned in Section 22.04.
"Temporary Taking Termination Date" has the meaning assigned in Section 22.04.
"Tenant Fund" has the meaning assigned in Section 12.05.
"Tenant Fund Balance" has the meaning assigned in Section 12.05.
"Tenant's Monthly Share of Tax Increase" has the meaning assigned in Section 5.01.
"Tenant's Property" has the meaning assigned in Section 13.02.
"Tenant's Proportionate Share of Tax Increase" has the meaning assigned in Section 5.01.
<PAGE>
"Tenant's Proportionate Share" has the meaning assigned in Section 5.01.
"Tenant's Work" has the meaning assigned in Section 3.01.
"Term" has the meaning assigned in Section 1.03.
"Termination Notice" has the meaning assigned in Section 4.02.
"Third Floor Premises" has the meaning assigned in Section 1.02.
"Units" has the meaning assigned in Section 16.03.
</TABLE>
<PAGE>
HEALTH MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
EXHIBIT 11--Computations of Earnings Per Share
(In Thousands, Except Per Share Amounts)
Three months Nine months
ended July 31, ended July 31,
------------------ -----------------
1996 1995 1996 1995
------- ------ ------ ------
Primary Earnings Per Share:
Earnings data:
Net (loss) income $(1,827) 2,413 5,254 6,637
======= ====== ====== ======
Weighted average shares outstanding:
Average shares of common stock
outstanding 17,193 16,318 16,806 16,227
Net effect of dilutive stock
options--based on the treasury
stock method using average market
price -- 1,220 1,390 1,095
------- ------ ------ ------
Weighted average shares outstanding 17,193 17,538 18,276 17,322
======= ====== ====== ======
Earnings per common share:
Net (loss) income $(0.11) 0.14 0.29 0.38
====== ==== ==== ====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets at July 31, 1996 (unaudited) and 1995 (unaudited)
and the Consolidated Statement of Operations for the nine months ended July 31,
1996 (unaudited) and 1995 (unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000861179
<NAME> Health Management Systems, Inc.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> OCT-31-1996 OCT-31-1995
<PERIOD-START> NOV-01-1995 NOV-01-1994
<PERIOD-END> JUL-31-1996 JUL-31-1995
<CASH> 12,013 10,069
<SECURITIES> 18,041 16,985
<RECEIVABLES> 47,400 29,857
<ALLOWANCES> (3,452) (286)
<INVENTORY> 0 0
<CURRENT-ASSETS> 87,105 59,071
<PP&E> 18,445 14,515
<DEPRECIATION> (11,188) (8,739)
<TOTAL-ASSETS> 108,793 79,451
<CURRENT-LIABILITIES> 31,277 19,418
<BONDS> 0 0
0 0
0 0
<COMMON> 173 110
<OTHER-SE> 72,654 55,350
<TOTAL-LIABILITY-AND-EQUITY> 108,793 79,451
<SALES> 76,752 65,046
<TOTAL-REVENUES> 76,752 65,046
<CGS> 67,565 52,009
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 3,219 373
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 8,463 12,477
<INCOME-TAX> 3,209 5,840
<INCOME-CONTINUING> 9,026 12,848
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,254 6,637
<EPS-PRIMARY> 0.29 0.38
<EPS-DILUTED> 0.29 0.38
</TABLE>
