UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended: December 31, 1998
or
____ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____to _____
Commission file number: 1-10932
INDIVIDUAL INVESTOR GROUP, INC.
(Exact name of registrant as specified in its Charter)
Delaware 13-3487784
(State or other jurisdiction of (IRS Employer
incorporation or organization)
Identification No.)
125 Broad Street, 14th Floor, New York, NY 10004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 742-2277
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK,$.01 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 19, 1999, the aggregate market value of the Registrant's
Common Stock (based on the closing sale price of the Common Stock on that date
on the Nasdaq National Market) held by non-affiliates of the Registrant, was
approximately $22,656,631.
As of March 19, 1999, 8,890,964 shares of the Common Stock of the
Registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1999
Annual Meeting of Stockholders (the "Proxy Statement") to be filed pursuant to
Regulation 14A of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, which is anticipated to be filed within 120
days after the end of Registrant's fiscal year ended December 31, 1998, are
incorporated by reference into Part III hereof.
Important Notice Concerning "Forward-looking Statements" in this Report
1. "Forward-looking Statements." Certain parts of this Report describe
historical information (such as 1998 operating results), and the Company
believes the descriptions to be accurate. In contrast to describing the past,
various sentences of this Report indicate that the Company believes that certain
results are likely to occur in 1999 or thereafter. These sentences typically use
words or phrases like "believes," "expects," "anticipates," "estimates," "will
continue" and similar expressions. Statements using those words or similar
expressions are intended to identify "forward-looking statements" as that term
is used in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements include, but are not limited to, projections of operating results for
1999 and beyond, either concerning a specific segment of the Company's business,
or concerning the Company as a whole. For example, projections concerning the
following are forward-looking statements: net revenues, operating expenses, net
income or loss, contribution to overhead, number of subscribers, subscription
revenues, revenues per advertising page, number of advertising pages, production
expense per copy, page views, revenues per page view, marketing expenses, sales
expenses, and general and administrative expenses. Any statement in this report
that does not describe a historical fact is deemed to be a forward-looking
statement.
2. Actual Results May Be Different than Projections. Actual results,
however, may be materially different from the results projected in the
forward-looking statements, due to a variety of risks and uncertainties. These
risks and uncertainties include those set forth in Item 1 of Part I hereof
(entitled "Business"), in Item 7 of Part II hereof (entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations"), and
in Exhibit 99 hereof and elsewhere in this Report.
3. The Company Has No Duty to Update Projections. The forward-looking
statements in this Report are current only on the date this Report is filed.
After the filing of this Report, the Company's expectations of likely results
may change, and the Company might come to believe that certain forward-looking
statements in this Report are no longer accurate. The Company shall not have any
obligation, however, to release publicly any corrections or revisions to any
forward-looking statements contained in this Report, even if the Company
believes the forward-looking statements are no longer accurate.
PART I
ITEM 1. BUSINESS
Individual Investor Group, Inc. and its subsidiaries (collectively, the
"Company") are primarily engaged in providing financial information services.
The Company provides research and analysis of investment information to
individuals and investment professionals through two business segments: Print
Publications and Online Services. The Company's Print Publications segment
publishes and markets Individual Investor magazine, Ticker(sm) magazine, and
Individual Investor's Special Situations Report, a monthly newsletter. The
Company's Online Services include Individual Investor Online (www.iionline.com)
and InsiderTrader.com (www.insidertrader.com). The Company believes that the two
forms of distribution of financial information - print and electronic - are
complementary, and the Company is committed to exploiting the synergies that the
two forms of media provide. In addition, the Company has developed the INDI
SmallCap 500(tm) index of small-cap stocks, which is listed on the American
Stock Exchange under the ticker symbol NDI. At the beginning of 1998 the Company
also engaged in investment management services, but the Company decided in April
1998 to discontinue those operations and focus exclusively on the financial
information services business.
The relative contribution of the two business segments to the Company's
operating revenue and operating profit for the three years ended December 31,
1998, and the identifiable assets of each segment at the end of each year, are
included in Note 9 to the Company's consolidated financial statements, which
Note is hereby incorporated by reference.
PRINT PUBLICATIONS
Individual Investor Magazine
The Company's flagship publication, Individual Investor magazine, is a
consumer-oriented monthly investment magazine that offers commentary and opinion
on investment ideas. Individual Investor seeks differentiation among personal
finance magazines through its focus on identifying and recommending investment
opportunities on the basis of in-house proprietary research and analysis.
Individual Investor focuses on analysis of investment opportunities in public
companies and mutual funds believed to have the potential to achieve returns
higher than those of the general market. In addition to investment ideas, the
publication seeks to provide the investor with tools and knowledge to help with
investment decisions.
Individual Investor is printed on a glossy, coated paper stock and has a
basic annual subscription rate of $22.95 ($2.99 newsstand price). Individual
Investor had a total paid subscriber and newsstand circulation of approximately
500,000 in March 1999, which is unchanged from March 1998. The Company has
intentionally stabilized its circulation and rate base in order to focus on
increasing the number of advertising pages sold and the net rate per page.
Individual Investor's revenues from advertising, circulation, list rental and
other sources aggregated $11,487,554, which is 75% of the Company's total
revenues from continuing operations for the year ended December 31, 1998.
The Company anticipates publishing a 13th issue of Individual Investor
in 1999, focused on the affluent lifestyle of readers. The Company also
anticipates offering paid seminars, commencing in January 2000, focused on
investment education. In addition to seminar fees to be collected from
attendees, the Company intends to seek revenue from sponsors.
Ticker Magazine
The Company also publishes Ticker magazine, a monthly trade publication
distributed without charge to a controlled circulation of financial brokers,
planners and advisers. During most of 1998, Ticker's circulation was
approximately 90,000. Effective with the February 1999 issue, the Company
increased the circulation to approximately 100,000, and concurrently implemented
a proportionate increase in advertising rates. Ticker focuses on providing
investment professionals with information to help increase their business,
manage their accounts more effectively, and improve results for their clients.
Ticker publishes articles on stocks, bonds, and mutual funds, and it features
interviews with selected analysts and research specialists. Ticker's revenues
from advertising, list rental and other sources aggregated $2,241,685, which is
15% of the Company's total revenues from continuing operations for the year
ended December 31, 1998.
The Company currently is testing a product entitled Ticker Daily Fax,
which the Company is distributing via facsimile. If Ticker Daily Fax is formally
launched, the Company anticipates it will sell subscriptions to the product as
well as advertising. The Company also anticipates publishing a 13th issue of
Ticker in 1999.
Individual Investor's Special Situations Report Newsletter
The Company also publishes Individual Investor's Special Situations
Report ("SSR"), a monthly 12-page report that is mailed first class to
subscribers. Each issue of SSR features one new stock investment recommendation,
including a detailed research report that discusses the featured company's
operating history, future plans, management, and specific financial projections.
In addition, each issue reports on recent company developments of previously
recommended stocks and gives buy, hold, or sell recommendations on those stocks.
The basic annual subscription price for SSR is $165. As of March 1999,
SSR had approximately 3,700 paid subscribers, compared with approximately 5,000
in March 1998. SSR's subscription levels, which have declined as a result of
changes in the timing of new and renewal promotions, are expected to increase
modestly during 1999. SSR's revenues from circulation and list rental aggregated
$482,908, which is 3% of the Company's total revenues from continuing operations
for the year ended December 31, 1998. In addition to the Company's distribution
of SSR via first class mail, the Company is considering distributing SSR through
the Internet.
Advertising
Print Publications advertising revenues are derived from Individual
Investor and Ticker magazines and accounted for 62% of the Company's total
revenues from continuing operations for the year ended December 31, 1998, as
compared to 63% for 1997. Print Publications advertising revenues for 1998 were
$9,488,241, as compared to $9,373,553 in 1997. Print Publications advertising
sales efforts are performed by the Company's employees and by outside sales
representatives located throughout the United States.
Print Publications advertising is sold primarily to four types of
advertisers: (1) financial services companies, including traditional and
electronic brokerage firms, mutual funds and companies that provide
investment-oriented products; (2) consumer advertisers, including marketers of
automobiles, computer products, clothing and accessories; (3) public companies
interested in attracting the publications' readers as investors; and (4)
business-to-business and technology advertisers.
On the basis of independent subscriber studies, the Company believes
that the subscribers of Individual Investor and Ticker typically are financially
sophisticated individuals with substantial net worth, several years of investing
experience, and significant investment portfolios. The Company believes that
those demographics are a valuable tool in marketing advertising space in
Individual Investor and Ticker.
The Company intends to increase advertising revenues by continuing to
target national consumer and financial advertisers in such industries as
automobiles, technology products, insurance, mutual funds and brokerage
companies. The Company believes that the increased circulation base for Ticker,
increased product awareness for Individual Investor through targeted public
relations and advertising, as well as the growth and development of
www.iionline.com, will continue to attract more attention to the magazines as an
advertising medium. Additionally, the Company has reorganized its sales efforts
to pursue an integrated sales strategy to promote all of the Company's
publications to advertisers. The Company anticipates that in the Fall of 1999,
Individual Investor will be measured for the first time by syndicated research
(standardized media research studies used by advertisers), which should assist
the Company's efforts to sell additional advertising pages.
Circulation and Marketing
Print Publications circulation revenues, which are derived from
Individual Investor magazine and SSR, accounted for approximately 23% of the
Company's total revenues from continuing operations for the year ended December
31, 1998, as compared to 27% for 1997. Print Publications circulation revenues
for 1998 were $3,483,706, as compared to $3,953,285 in 1997. The Company obtains
subscriptions for Individual Investor through leading subscription agencies,
such as American Family Publishers and Publishers Clearing House, and NewSub
services (subscription offers in credit card statements). The Company also
solicits subscriptions for Individual Investor through direct-mail marketing
promotions, insert cards in the magazine, and the Internet.
Individual Investor is distributed for sale on newsstands ("single-copy
sales") throughout the United States by independent parties (the largest of
which is International Circulation Distributors, a subsidiary of The Hearst
Corporation). Single copy revenues for 1998 were $754,402, as compared to
$750,321 in 1997.
Ticker is a controlled-circulation magazine distributed to brokers,
financial advisors and financial-industry professionals, whose names are
obtained from lists acquired by the Company, who must respond that they want to
continue receiving the publication in order to stay on the circulation list.
SSR is sold by subscription only. The Company uses targeted direct mail
solicitation to promote SSR and concentrates on cross-marketing this
higher-priced publication to the larger Individual Investor subscriber base. The
Company also uses independent sales agents to obtain subscriptions for SSR.
List Rental Revenue
Print Publications list rental revenues accounted for 5% of the
Company's total revenues from continuing operations for the year ended December
31, 1998, as compared with 7% in 1997. Print Publications list rental revenues
for 1998 were $796,436, as compared to $1,039,833 in 1997. The Company utilizes
the services of Rickard List Marketing, an independent list-management agent, to
promote the rental of the Company's Print Publications subscriber lists.
Competition
Many of the print publications with which the Company competes are
published by larger companies that publish multiple titles, such as Time Warner.
These companies have significantly larger resources and more extensive
relationships with advertisers than does the Company. The Company believes these
publishers have a competitive advantage because of their ability to attract
subscribers and advertisers and promote sales more extensively than the Company.
The Company's strategy is to compete on the basis of its unique editorial focus
on actionable investment ideas. The Company believes that this provides it with
a subscriber base possessing superior demographics.
Some of the publications focused on personal finance that compete with
Individual Investor are Money, Smart Money, Kiplingers and Worth. In addition,
Individual Investor competes against publications with a broader editorial
focus, including The Wall Street Journal, Barrons, Investors Business Daily,
Business Week, Forbes and Fortune. Ticker competes for advertising and
readership with other publications that target brokers, financial advisers and
financial industry managers. Those publications include Registered
Representative, Institutional Investor, Research and On Wall Street. The Company
also competes with other research reports, newsletters, and other publications
and services offered by financial investment houses and publishers.
Production and Operations
All preliminary research and analysis are done by in-house research and
editorial staff. After the editorial content of the Company's publications is
determined, the articles are assigned to either in-house writers or researchers
or to freelance columnists. In addition, Individual Investor has arrangements
with such well-known authors as Maria Bartiromo, Lawrence Kudlow, John
Rekenthaler, and Jeremy Siegel, to provide original articles for publication on
a regular basis. The financial tables included in Individual Investor are
provided by various vendors. The Company uses in-house software and hardware in
the composition and layout of its publications. The Company selects independent
printers based on their production quality and competitive costs and service.
The Company uses an outside fulfillment service to manage its subscriber
files. The service includes receiving subscription orders and payments, sending
renewal and invoice notices to subscribers, and generating the subscribers'
labels and circulation information reports each month.
ONLINE SERVICES
Individual Investor Online (www.iionline.com)
The Company's primary web site for Internet users, Individual Investor
Online (www.iionline.com), provides investment information and analysis for
individual investors. The site provides users with continuously updated
research, message boards, portfolio tracking, analytical tools, news and
financial information, which enables interaction between the Company's community
of users and analysts. In the fourth quarter of 1998 the Company completed a
major redesign of the site featuring more analysis, improved portfolio tracking
and expanded message boards. As of March 1, 1999, www.iionline.com had
approximately 155,000 registered users (registration currently only is required
to use the portfolio tools or to post messages on message boards), as compared
with 74,000 registered users in March 1998 (at which time registration was
required to access the majority of the site). In February 1999, www.iionline.com
received 3.4 million page views. Average daily page views for February 1999 were
154% higher than the average daily page views in November 1998, before the
redesign of the site. The site generated $1,110,318 in revenues, primarily from
advertising, which is 7% of the Company's total revenues from continuing
operations for the year ended December 31, 1998.
The Company's strategy is to increase page views significantly by
offering portions of its proprietary content to other heavily trafficked online
services including Yahoo!, Alta Vista, AOL's Digital City New York, Quote.Com,
Hoover's Online and Cox Interactive. These content-sharing arrangements are
accomplished at little or no cost to the Company by using existing content
(e.g., "Stock of the Day," "Industry Analysis," and "Magic 25 Week in Review")
from Individual Investor Online. In exchange for providing proprietary content
to those heavily trafficked sites, the sites provide hyperlinks to
www.iionline.com (currently the most common arrangement) or provide for
revenue-sharing arrangements with respect to page views generated by the
Company's content. Such content distribution arrangements also are designed to
create low-cost promotion of the Company's brand.
The Company seeks to increase page views significantly through the
combined effect of content distribution agreements, word of mouth and selected
use of advertising and public relations. Increased page views would allow the
Company to achieve increased sales of banner and sponsorship advertisements on
www.iionline.com. The Company also will attempt to generate revenue through
content licensing agreements in which the Company would be paid a licensing fee.
InsiderTrader.com (www.insidertrader.com)
In November 1998, the Company purchased InsiderTrader.com
(www.insidertrader.com), a web site that distributes "insider" data filed with
the Securities and Exchange Commission, and provides proprietary research based
on the data. InsiderTrader.com has three levels of services. It provides free
data, from which advertising revenues are generated, and co-brands that data
with partners such as Edgar-Online, Hoover Online, and Company Sleuth. There is
also a link to InsiderTrader.com on sites operated by Intuit, including
Excite.com and Quicken.com. In addition to free content, there are two levels of
subscription-based services, a 12-month subscription for an annual fee of $49.95
to access value-added insider data and the site's proprietary research; and a
premium service that users pay an additional fee of $17.95 per month to access
more extensive and complete insider data, along with other value-added features
that allow them to query the database in a more flexible manner. As of March 1,
1999, the site has over 1,900 subscribers who pay an annual fee of $49.95 and
277 users who pay $17.95 per month for the premium service.
The Company seeks to increase page views to InsiderTrader.com by
continuing to expand its co-branding relationships, and by promoting the service
via other means, such as radio programs, interviews in the financial press
(InsiderTrader.com's Director of Research is quoted frequently in The Wall
Street Journal as an authority on analyzing insider trading), and conventional
print advertising. The Company anticipates adding new features to all levels of
the subscription-based sections of InsiderTrader.com to both increase the base
of paying users, and retain present users. A higher-priced "Institutional-level"
of service is expected to be added in the first half of 1999, and revenues from
third-party distributors of InsiderTrader.com's proprietary research are also
expected to commence by the first half of 1999. The Company also desires to
launch at least two other premium sites during 1999 that focus on specific areas
of interest for the serious individual investor.
Marketing
The Company markets its web sites through the content-sharing
arrangements described above as well as through print and online advertisements
and public relations efforts.
Advertising
The Company currently uses an independent sales agent, DoubleClick Inc.,
to sell and deliver banner and sponsorship advertising for Individual Investor
Online and InsiderTrader.com. The Company also employs in-house sales efforts to
sell online advertising. The Company has reorganized its sales efforts to
promote all of the Company's print and online publications to potential
advertisers. Online advertising revenues typically are measured on a cost per
thousand page views, or "CPM," basis, although other arrangements, such as a
cost per click (where payment depends upon the number of times a viewer "clicks"
on the advertisement) or cost per action (where payment depends upon the number
of times a viewer takes a certain action, such as completing and returning an
online questionnaire) are also employed. CPM rates fluctuate, and may experience
industry-wide declines going forward. Also, even if industry-wide CPM rates
remain stable, the CPM that a site may obtain typically declines as the number
of page views at the site increases.
Competition
The Company competes with various online services including
TheStreet.com, Yahoo! Finance, Microsoft Investor, Motley Fool, CBS
Marketwatch.com, as well as those sponsored by publishers of certain print
magazines, including Money.com and SmartMoney.com. The Company also competes
with other online services offered by financial investment houses and
publishers. Many of the Company's online competitors have significantly higher
monthly page views and substantially greater financial resources than the
Company, which may enable such competitors to compete more effectively than the
Company for advertising revenues. The Company's competitive strategy is to offer
its users proprietary editorial content, research and analysis, together with
the other site features (e.g., news, quotes, message boards and portfolio tools)
in an appealing and easy-to-use format.
INDI SMALLCAP 500
The Company developed the INDI SmallCap 500 index of small-cap stocks,
which is listed on the American Stock Exchange under the ticker symbol NDI. The
index is comprised of companies selected primarily based upon earnings growth
and is adjusted quarterly. Companies considered for initial inclusion must have
a market capitalization between $100 million and $2 billion, show earnings
growth in excess of 50% in their most recent quarter, and have at least $.05 per
share in their most recent quarterly earnings and positive revenue comparisons.
Each quarter, the index is rebalanced to delete the bottom 50 companies in terms
of earnings growth, and replace them with 50 new companies that meet the
selection criteria. The Company believes that the INDI SmallCap 500, with its
structural focus on small-cap stocks exhibiting earnings growth, is a better
proxy for the small-cap growth sector than any competing index.
The Company intends to offer licensed use of the INDI SmallCap 500 as
the basis for unit investment trusts, mutual funds and other derivative
products, which can be offered by one or more independent issuers. The Company
will seek to earn revenues from fees primarily based on the dollars invested in
any such product. Although the Company has received indications of interest from
potential licensees, the Company cannot yet forecast the rate at which such fees
will be set or the revenues, if any, that may be generated from this product
line. The Company also is in the process of developing other indexes. If and
when such other indexes are launched, the Company anticipates offering to
license the new indexes as the basis for financial products to be offered by one
or more independent issuers. As with the INDI SmallCap 500, the Company would
seek to earn licensing revenue, but cannot estimate at this time the amount of
revenue, if any, that the Company might receive.
DISCONTINUED OPERATIONS
On April 30, 1998, the Company's Board of Directors decided to
discontinue the Company's investment management services business. The
investment management services business was principally conducted by a
wholly-owned subsidiary of the Company, WisdomTree Capital Management, Inc.
("WTCM"). WTCM serves as general partner of (and is an investor in) a domestic
private investment fund. The Company is also a limited partner in the fund. As a
result of the Board's decision to discontinue the investment management services
business, WTCM is dissolving the domestic investment fund, liquidating its
investments and distributing the net assets to all investors as promptly as
possible.
In 1998 the Company recorded a provision of $591,741 to accrue for its
share of any net operating losses of the domestic fund and related costs that
are expected to occur until the fund liquidates its investments. The Company
believes that adequate provision has been made for any remaining net operating
losses and related costs associated with these discontinued operations.
The Company, through WTCM, also provided investment management services
to an offshore private investment fund. On May 21, 1998 the sole voting
shareholder of the offshore fund, in consultation with WTCM, resolved to wind up
the fund and appointed a liquidator to distribute the assets of the fund to its
investors in accordance with Cayman Islands law. Substantially all of the fund's
assets were distributed in cash to its investors by December 31, 1998. The
Company has no investment in the offshore fund.
EMPLOYEES
As of March 1999, the Company employed 90 persons on a full-time basis:
60 employees in the Print Publications segment, 13 employees in the Online
Services segment, and 17 executive, accounting and administrative support
personnel.
INTELLECTUAL PROPERTY
The Company believes that trademarks and service marks are important to
its business and actively pursues strategies to protect and strengthen its
current marks for use in connection with its products and for future products.
The Company is somewhat dependent on the use of certain marks in its operations,
particularly the names of its two magazines and its primary web site: Individual
Investor, Ticker and Individual Investor Online, respectively.
The Company has a perpetual license for use of the trademark INDIVIDUAL
INVESTOR. To perfect its interests in this mark the Company filed suit during
1997 against The American Association of Individual Investors, which is the
licensor, and a third party, which the Company believed infringed the mark. The
litigation was resolved favorably with an agreement by the third party not to
further infringe the mark. The Company commenced negotiations with the licensor
to secure assignment of the trademark, but did not reach an agreement. The
Company will continue to monitor and seek enforcement against any perceived
infringement of the mark, and may again seek assignment of the mark, on terms
the Company may deem appropriate.
An application to register the trademark TICKER was filed in November
1996 in connection with the launch of this publication. Action on this pending
trademark application was deferred by the Patent and Trademark Office pending
the disposition of the applications for two other marks, one for Global Ticker
(which subsequently was issued as a registered trademark) and one for Snapshot
Personal Ticker (which application is still pending). The Company believes that
these marks are not confusingly similar and will pursue registration of this
mark. There can be no assurance, however, that the Company's application will be
successful.
The Company also has registered the trademarks MAGIC 25 and AMERICA'S
FASTEST GROWING COMPANIES. The Company uses these marks regularly in its
publications and previously had licensed the latter in connection with certain
other business activities.
During 1997 and 1998, the Company also undertook the development of
intellectual property rights with respect to several new marks which the Company
intends to use in connection with planned and/or potential business activities
or, alternatively, to sell to third parties.
In addition to trademarks and service marks, the Company also has
registered several Internet domain names, which the Company intends to use for
its business operations, or alternatively, to sell to third parties. The
Company's intellectual property rights also include copyrights in its print and
online publishing content.
The Company will continue to seek to derive value from the development
and exploitation of its intellectual property. There can be no assurance,
however, that the Company's intellectual property rights will be successfully
exploited or that such rights will not be challenged or invalidated in the
future.
ITEM 2. PROPERTIES
During 1998, the Company leased 28,000 square feet of office space for its
corporate office at 1633 Broadway in New York, New York. The lease runs through
March 30, 1999 and provides for an aggregate annual rent of $544,000 plus
escalation costs. The Company entered into a new lease for 35,000 square feet of
office space and relocated its corporate office at the end of March 1999 to 125
Broad Street, New York, New York. The new lease runs through March 31, 2004 and
provides for an aggregate annual rental of $997,500 plus escalation costs.
The Company also leases 10,000 square feet at its previous location,
also in New York City, which was sublet as of February 1996 to a third party.
The lease for its former office space expires March 1, 2005, and provides for an
aggregate annual rent over the term of the sublease ranging from $160,000 to
$210,000, plus escalation costs. The sublease also expires on March 1, 2005, and
provides for aggregate annual rental receipts ranging from $160,000 to $205,000
over the term of the sublease, plus escalation costs. Although the Company does
not currently anticipate that it will incur any material liability with respect
to the lease for its former office space, there exists the possibility of such
liability.
ITEM 3. LEGAL PROCEEDINGS
In July 1997 certain former limited partners of WisdomTree Associates,
L.P. ("WTA"), a domestic private investment fund of which the WTCM is the
general partner, initiated an action in the Supreme Court of the State of New
York, County of New York, captioned Richard Tarlow and Sandra Tarlow v.
WisdomTree Associates, L.P., Bob Schmidt and Jonathan Steinberg, Index No.
113819/97. Defendants moved to dismiss the action based on plaintiffs' failure
to file a complaint, and the action was dismissed without prejudice in October
1997. In October 1998, plaintiffs moved to vacate the default judgment.
Defendants opposed the motion, and the court has not yet ruled on the motion.
Plaintiffs allege that defendants did not timely process plaintiffs' request for
redemption of their interest in WTA, which delay allegedly caused plaintiffs to
suffer approximately $470,000 in damages. The Company is currently evaluating
this matter, and intends to continue conducting a vigorous defense. Due to the
inherent uncertainty of litigation, the Company is not able to reasonably
estimate the potential losses, if any, that may be incurred in relation to this
litigation.
In addition to the foregoing matter, the Company from time to time is
involved in ordinary and routine litigation incidental to its business; the
Company currently believes that there is no such pending legal proceeding that
would have a material adverse effect on the consolidated financial statements of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
On December 9, 1996 the Company's Common Stock commenced trading on The
Nasdaq National Market, which is the principal trading market for the Company's
Common Stock, under the symbol INDI. The Company's Common Stock had been quoted
on the Nasdaq SmallCap Market and the Boston Stock Exchange since the Company's
initial public offering on December 4, 1991, under the symbol INDI.
The table below sets forth for the periods indicated the high and low
sales prices on the Nasdaq National Market for the Company's Common Stock.
1998: Low ($) High ($)
----- ------- --------
First Quarter 5 1/2 7 5/8
Second Quarter 2 7/8 6 7/8
Third Quarter 3/4 5
Fourth Quarter 7/8 4 1/4
1997:
First Quarter 6 9 1/2
Second Quarter 5 3/8 8 5/8
Third Quarter 6 3/4 8 1/4
Fourth Quarter 5 7/8 7 7/8
These amounts represent quotations between dealers in securities, do not
include retail markups, markdowns or commissions and may not necessarily
represent actual transactions. On March 19, 1999, the last sale price for the
Company's Common Stock, as reported by Nasdaq, was $4.625.
Holders
On March 5, 1999, there were 50 holders of record of the Company's
Common Stock. The Company believes that there are approximately 1,300 beneficial
owners of the Company's Common Stock.
Dividends
To date, the Company has not paid any dividends on its Common Stock. The
payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements and financial condition, and other relevant factors. The Company
does not intend to declare any dividends in the foreseeable future, but instead
intends to retain any capital for use in the business.
Sales of Unregistered Securities
<TABLE>
<CAPTION>
- ------------ ----------------- -------------- ----------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
Consideration Exemption If option, warrant or
Date of Title of Number Sold received and from convertible security,
sale security description of registration terms of exercise or
underwriting or other claimed conversion
discounts to market
price afforded to
purchasers
- ------------ ----------------- -------------- ----------------------- ----------- ----------------------------
- ------------ ----------------- -------------- ----------------------- ----------- ----------------------------
11/19/98 Options to 1,479,801 Exchange of Section Vesting over a period of
purchase common previously granted 3(a)(9) up to five years from date
stock granted options for of grant, subject to
to employees cancellation; in certain conditions of
addition, exercise continued service;
price would be exercisable for a period
received upon lasting up to ten years
exercise from date of grant at an
exercise price of $1.25
per share
- ------------ ----------------- -------------- ----------------------- ----------- ----------------------------
11/30/98 Series A 10,000 $2,000,000 Section Convertible into Common
Preferred Stock 4(2) Stock at a conversion
price of $2.12 per share
- ------------ ----------------- -------------- ----------------------- ----------- ----------------------------
12/16/98 Warrants to 300,000 Financial advisory Section Vesting one year from the
purchase common services; in 4(2) date of grant as to
stock granted addition, exercise 150,000 shares, and
to consultant price would be thirteen months from the
received upon date of grant as to the
exercise other 150,000 shares,
provided that the financial
advisory services agreement
has not been terminated by
the Company; exercisable for
a period of four years from
date of grant at an exercise
priceof $2.15625 per share
- ------------ ----------------- -------------- ----------------------- ----------- ------------------------------
12/23/98 Options to 140,000 Exchange of Section Vesting over a period of
purchase common previously granted 3(a)(9) up to three years from
stock granted options for date of grant; exercisable
to non-employee cancellation; in for a period lasting up to
directors addition, exercise ten years from date of
price would be grant at an exercise price
received upon of $2.00 per share
exercise
- ------------ ----------------- -------------- ----------------------- ----------- ----------------------------
10/98 Options to 251,500 Exercise price would Section Vesting over a period of
-12/98 purchase common be received upon 4(2) up to four years from date
stock granted exercise of grant, subject to
to employees certain conditions of
continued service;
exercisable for a period
lasting up to ten years from
date of grant at exercise
prices of $1.125 to $2.625
per share
- ------------ ----------------- -------------- ----------------------- ---------- ------------------------------- -
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below is derived
from the Company's audited consolidated financial statements. The selected
consolidated financial data set forth below is qualified in its entirety by, and
should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and the notes to those statements included elsewhere herein.
<TABLE>
<CAPTION>
At, and for the years ended, December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue from continuing operations (a) $15,348,179 $14,899,741 $12,537,042 $7,485,490 $6,425,555
Operating expenses 23,382,892 20,206,774 16,073,791 10,699,299 8,128,312
-------------- --------------- -------------- -------------- ---------------
Operating loss from continuing operations (8,034,713) (5,307,033) (3,536,749) (3,213,809) (1,702,757)
Interest and other income 224,213 69,296 177,238 1,059,525 51,276
-------------- --------------- -------------- -------------- ---------------
Net loss from continuing operations (7,810,500) (5,237,737) (3,359,511) (2,154,284) (1,651,481)
(Loss) income from discontinued operations (781,370) 277,402 170,059 5,047,092 300,476
============== =============== ============== ============== ===============
Net (loss) income ($8,591,870) ($4,960,335) ($3,189,452) $2,892,808 ($1,351,005)
============== =============== ============== ============== ===============
Basic and dilutive (loss) income per common share:
Continuing operations ($0.99) ($0.81) ($0.54) ($0.45) ($0.39)
Discontinued operations (0.10) 0.04 0.03 1.05 0.07
============== =============== ============== ============== ===============
($1.09) ($0.77) ($0.51) $0.60 ($0.32)
============== =============== ============== ============== ===============
Average number of common shares used in
computing basic and dilutive (loss)
income per common share 7,876,509 6,466,168 6,198,260 4,805,427 4,277,722
Cash and cash equivalents $4,752,587 $3,533,622 $1,544,451 $6,276,987 $1,677,497
Investment in discontinued operations 282,383 4,037,432 4,947,500 6,502,729 536,880
Total assets 10,787,243 12,156,967 11,303,735 16,366,441 4,654,931
Working capital 5,931,219 7,798,415 6,715,311 11,967,921 2,302,243
Stockholders' equity $5,691,072 $6,255,099 $5,237,107 $10,468,730 $1,674,653
Current ratio 3.1 3.4 3.5 5.7 2.8
Debt/equity ratio 0% 0% 0% 0% 0%
</TABLE>
(a) On April 30, 1998, the Company's Board of Directors decided to discontinue
the Company's investment management services business. As a result, the
operating results relating to investment management services have been
segregated from continuing operations. Prior years' amounts have been restated
to conform to the current year presentation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Important Notice Concerning "Forward-looking Statements" in this Report
Please read the notice set forth before Item 1 of Part I of this
Report.
Year Ended December 31, 1998 as Compared to the Year Ended December 31, 1997
Loss from Continuing Operations
The Company's loss from continuing operations for the year ended
December 31, 1998 increased 49%, to $7,810,500, as compared to $5,237,737 in
1997. The increase is due primarily to three factors: the growing investment in
the development of the Company's Online Services; the decrease in advertising
pages and revenues for Individual Investor magazine; and high levels of
severance and hiring expenses incurred relating to changes in senior management
and key advertising sales personnel.
Print Publications operations provided a negative operating
contribution (before deducting general and administrative ("G&A,") and
depreciation and amortization expenses) of $692,731 for the year ended December
31, 1998, as compared to a positive operating contribution of $78,728 in 1997.
Individual Investor magazine provided a negative operating contribution (before
deducting G&A and depreciation and amortization expenses) of $421,385 for the
year ended December 31, 1998, as compared to a positive operating contribution
of $423,999 in 1997. This change is primarily due to a 10% decrease in
advertising revenues. Ticker magazine provided a negative operating contribution
(before deducting G&A and depreciation and amortization expenses) of $311,577
for the year ended December 31, 1998, as compared to a negative operating
contribution of $783,342 in 1997. This improvement for Ticker results primarily
from a 76% increase in revenues offset in part by a 24% increase in operating
expenses.
Online Services operations provided a negative operating contribution
(before deducting G&A and depreciation and amortization expenses) of $2,056,633
for the year ended December 31, 1998, as compared to a negative operating
contribution of $820,070 in 1997. This increase is due to higher levels of
expenses incurred for the development, redesign, and marketing of the Company's
primary website, Individual Investor Online (www.iionline.com), offset in part
by higher revenues.
The Company believes that losses from continuing operations will
decline significantly in 1999, primarily as a result of its current estimation
that Print Publications operations will produce a positive operating
contribution to overhead in 1999, as compared to a negative operating
contribution in 1998, and its current estimation that Online Services
operations' negative operating contribution to overhead will decline in 1999 as
compared to 1998. There can be no assurance, however, that the Company's current
estimations will prove to be accurate.
Operating Revenues
Total revenues from continuing operations for the year ended December
31, 1998 increased 3%, to $15,348,179, as compared to $14,899,741 in 1997.
Revenues for the Print Publications operations decreased 3%, to $14,212,147, as
compared to $14,689,721 in 1997. Revenues for the Online Services operations
increased 441%, to $1,136,032, as compared to $210,020 in 1997.
Print Publications advertising revenues for the year ended December 31,
1998 increased 1%, to $9,488,241, as compared to $9,373,553 in 1997. Ticker
advertising revenues for the year ended December 31, 1998 increased 74%, to
$2,125,464, as compared to $1,221,954 in 1997. This increase relates primarily
to twelve issues published in 1998 compared to ten in 1997, a 24% increase in
advertising pages per issue, as well as 20% circulation and rate increases
effected in February 1998. The Company believes that Ticker's advertising
revenues will increase in 1999, given an expected higher number of advertising
pages sold per issue, an 11% circulation and rate increase effected in February
1999, and the Company's anticipation of publishing a 13th issue. Individual
Investor advertising revenues for the year ended December 31, 1998 decreased
10%, to $7,362,777, as compared to $8,151,599 in 1997. As a result of the
increase in paid circulation of Individual Investor, effective November 1997,
the Company was able to increase its advertising net rate per page by 11% during
1998. However, advertising pages for Individual Investor decreased by 168 total
pages for the year ended December 31, 1998. The decrease in Individual
Investor's total ad pages occurred during a year of transition for the Company's
sales department. In addition to the appointment of a new Group Publisher in
April 1998, in May 1998 the Company replaced its West Coast outside sales
representative with two in-house sales representatives located in Los Angeles
and San Francisco. The Company believes that advertising revenues for Individual
Investor will increase in 1999, given an expected higher number of advertising
pages sold, a higher net revenue per page and the Company's anticipation of
publishing a 13th issue.
Print Publications circulation revenues for the year ended December 31,
1998 decreased 12%, to $3,483,706, as compared to $3,953,285 in 1997. Individual
Investor subscription revenues for the year ended December 31, 1998 decreased
3%, to $2,328,650, as compared to $2,406,436 in 1997. This resulted primarily
from the Company's use of subscription-generation sources that provide for
continuing numbers of new subscribers with low marketing expenses but little or
no subscription revenue. The Company believes that the reduction in subscription
revenue has stabilized and expects subscription revenues to increase in 1999.
Special Situations Report subscription revenues for the year ended December 31,
1998 decreased 50%, to $398,907, as compared to $796,528 in 1997. The decline
results from a decrease in paid subscribers to approximately 3,700 as of March
1999, as compared to approximately 5,000 as of March 1998. SSR's subscription
levels, which have declined primarily as a result of changes in the timing of
new and renewal promotions, are expected to increase modestly during 1999. The
Company distributes Ticker free of charge by controlled distribution to
financial service professionals.
Print Publications list rental and other revenues for the year ended
December 31, 1998 decreased 9%, to $1,240,200, as compared to $1,362,883 in
1997. List rental revenues for the year ended December 31, 1998 decreased 23%,
to $796,436, as compared to $1,039,833 in 1997. The decrease is primarily
attributable to reduced demand and the decrease in the number of subscribers to
Special Situations Report. Other revenues for the year ended December 31, 1998
increased by 37%, to $443,764, as compared to $323,050 in 1997. The increase in
other revenues is due primarily to an increase in the sale of reprints from
Individual Investor and Ticker magazines and increased revenues generated from
an affinity credit card agreement.
Online Services advertising revenues for the year ended December 31,
1998 increased by 443%, to $1,112,802, as compared to $205,020 in 1997. This
increase relates primarily to Individual Investor Online (www.iionline.com)
being operational and generating revenues for the full year of 1998 as compared
to four months during 1997. In addition, advertising revenue per month has
increased as a result of a growth in page views and advertising impressions in
1998 over 1997. The Company believes that Online Services advertising revenues
will increase in 1999, primarily as a result of the Company's estimation that
monthly page views will be higher in 1999 than in 1998. The Company does not
currently impose a charge for use of this online service.
Operating Expenses
Total operating expenses from continuing operations for the year ended
December 31, 1998 increased 16%, to $23,382,892, as compared to $20,206,774 in
1997. The increase is primarily due to two factors: substantially higher
expenses associated with the continued development of the Company's online
services; and increased general and administrative severance and hiring expenses
related to changes in senior management and key advertising sales personnel.
Editorial, production and distribution expenses for the year ended
December 31, 1998 increased 20%, to $11,429,496, as compared to $9,505,718 in
1997. Print Publications editorial, production and distribution expenses
increased by 7%, to $9,251,454, as compared to $8,642,206 in 1997. This increase
is primarily due to Ticker publishing twelve issues in 1998 as compared to ten
in 1997, as well as additional copies printed for a larger average subscriber
base for the year in both Individual Investor and Ticker. This increase was
offset in part by reduced manufacturing expenses from a renegotiated agreement
with the Company's printer. Additionally, Print Publications editorial costs for
the year ended December 31, 1998 increased due to higher staffing levels to aid
in the growth of the Company's print publications. Online Services production
and editorial expenses increased 152%, to $2,178,042, as compared to $863,512 in
1997. The increase is primarily related to Individual Investor Online having
operating expenses for the full year of 1998, as well as continuing development,
redesign, and maintenance of the service.
Promotion and selling expenses for the year ended December 31, 1998
increased by 9%, to $6,668,047, as compared to $6,135,365 in 1997. Print
Publications promotion and selling expenses for the year ended December 31, 1998
decreased by 5%, to $5,653,424, as compared to $5,968,787 in 1997. The decrease
is primarily the result of the costs expended to maintain a stable circulation
in 1998 being less than the costs expended to increase the subscriber base in
1997. This decrease was partially offset by increased salaries and benefits as a
result of hiring additional in-house sales personnel. Online Services promotion
and selling expenses for the year ended December 31, 1998 increased 509%, to
$1,014,623, as compared to $166,578 in 1997. This increase is primarily due to
higher commissions related to increased advertising sales and other advertising
promotion expenses.
General and administrative expenses for the year ended December 31,
1998 increased by 18%, to $4,964,069, as compared to $4,222,386 in 1997.
Substantially all of the increase resulted from incremental expenses (severance
and executive search fees) relating to changes in senior management and key
advertising sales personnel.
Depreciation and amortization expense for the year ended December 31,
1998 decreased by 6%, to $321,280, as compared to $343,305 in 1997.
Interest and Other Income
Interest and other income for the year ended December 31, 1998
increased by 224%, to $224,213, as compared to $69,296 in 1997. This is
primarily due to varying levels of cash invested by the Company, as well as
realized gains on sales of investments in 1998 of $67,452. The investments were
obtained as part of a distribution received from WisdomTree Associates, L.P. in
July 1998.
Discontinued Operations
On April 30, 1998 the Company's Board of Directors decided to
discontinue the Company's investment management services business. As a result
of the Board's decision, WisdomTree Capital Management, Inc. ("WTCM") is
dissolving the domestic and offshore investment funds, liquidating fund
investments and distributing the net assets to all investors as promptly as
possible. Accordingly, the operating results related to investment management
services have been segregated from continuing operations and reported as a
separate line item on the statement of operations.
Net loss from discontinued operations for the year ended December 31,
1998 was $781,370, as compared to net income of $277,402 for 1997. Loss on
disposal of discontinued operations was $591,741 for the year ended December 31,
1998. Under generally accepted accounting principles, loss on disposal of
discontinued operations includes actual losses from the date the Board resolved
to discontinue the investment management services business, plus a provision for
additional losses based on management's best estimate of the amount to be
realized on dissolution of the fund.
As of December 31, 1998, the fair market value of the Company's
investment in the discontinued operations was $282,383.
Net Loss
The Company's net loss for the year ended December 31, 1998 increased
73%, to $8,591,870, as compared to a net loss of $4,960,335 in 1997. No income
taxes were provided in 1998 or 1997 due to the net loss. The basic and dilutive
net loss per weighted average common share for the year ended December 31, 1998
was $1.09, as compared to $0.77 in 1997.
The Company believes that the net loss will decline significantly in
1999, primarily as a result of: its current estimation that Print Publications
operations will produce a positive operating contribution to overhead in 1999,
as compared to a negative operating contribution in 1998, and its current
estimation that Online Services operations' negative operating contribution to
overhead will decline in 1999 as compared to 1998. There can be no assurance,
however, that the Company's current estimations will prove to be accurate.
Year Ended December 31, 1997 as Compared to the Year Ended December 31, 1996
Loss from Continuing Operations
The Company's loss from continuing operations for the year ended
December 31, 1997 increased 56%, to $5,237,737, as compared to $3,359,511 in
1996. The increase in operating loss relates primarily to additional expenses in
excess of revenue gains that were incurred on Ticker and the launch and
development of the online service www.iionline.com.
Print Publications operations provided a positive operating
contribution (before deducting G&A and depreciation and amortization expenses)
of $78,728 for the year ended December 31, 1997, as compared to a positive
operating contribution of $904,397 in 1996. Individual Investor magazine
provided a positive operating contribution (before deducting G&A and
depreciation and amortization expenses) of $423,999 for the year ended December
31, 1997, as compared to a positive operating contribution of $178,680 in 1996,
primarily due to increased advertising revenues offset in part by increased
editorial, production and distribution costs. Ticker magazine incurred a
negative operating contribution (before deducting G&A and depreciation and
amortization expenses) of $783,342 for the year ended December 31, 1997, as
compared to a negative operating contribution of $151,046 in 1996. Special
Situations Report provided a positive operating contribution (before deducting
G&A and depreciation and amortization expenses) of $438,071 for the year ended
December 31, 1997, as compared to a positive operating contribution of $876,763
in 1996, due to reduced subscription revenues.
Online Services operations incurred a negative operating contribution
(before deducting G&A and depreciation and amortization expenses) of $820,070
for the year ended December 31, 1997, as compared to a negative operating
contribution of $356,839 in 1996. The increase primarily relates to increased
costs to establish the Company's primary website, Individual Investor Online
(www.iionline.com), which was launched in mid-1997.
Operating Revenues
Total revenues from continuing operations for the year ended December
31, 1997 increased 19%, to $14,899,741, as compared to $12,537,042 in 1996.
Print Publications revenues increased 17%, to $14,689,721, as compared to
$12,537,042 in 1996. Online Services revenues increased to $210,020, as compared
to $0 in 1996.
Print Publications advertising revenues for the year ended December 31,
1997 increased by 71%, to $9,373,553, as compared to $5,488,157 in 1996. Ticker
advertising revenues for the year ended December 31, 1997 increased by 259%, to
$1,221,954, as compared to $340,373 in 1996. This increase was primarily due to
ten issues published in 1997 compared to two in 1996. Individual Investor
advertising revenues for the year ended December 31, 1997 increased by 58%, to
$8,151,599, as compared to $5,147,784 in 1996. This increase was primarily due
to increased advertising rates per page. As a result of the increase in paid
circulation of Individual Investor, effective November 1997 and November 1996
the Company increased its advertising rates by approximately 18% and 40%,
respectively. The increase in advertising rates was partially offset by a
decline in advertising pages of approximately 2% in 1997. Although financial
advertising pages declined 7%, partially as a result of the above rate increase,
the category of higher margin consumer advertising pages increased by 32% in
1997.
Print Publications circulation revenues for the year ended December 31,
1997 decreased by 30%, to $3,953,285, as compared to $5,611,099 in 1996.
Individual Investor subscription revenues for the year ended December 31, 1997
decreased by 32%, to $2,406,436, as compared to $3,558,492 in 1996, while
newsstand revenues for the magazine increased by 5%, to $750,321, as compared to
$712,105 in 1996. Individual Investor had total circulation of approximately
500,000 in March 1998, comprised of paid subscribers and newsstand distribution,
as compared to total circulation of approximately 425,000 in March 1997. The
decrease in subscription revenues was a direct result of the reduction of direct
mail and television campaigns in favor of other sources for subscribers (such as
the use of subscription agencies and airline frequent flyer promotions) that
provide for continuing numbers of new subscribers with lower marketing expenses
but little or no subscription revenue. Special Situations Report subscription
revenues for the year ended December 31, 1997 decreased by 41%, to $796,528, as
compared to $1,340,502 in 1996. The decline in Special Situations Report
subscription revenues results from a decrease in paid subscribers to 5,000 as of
March 1998, as compared to 11,100 in March 1997, attributable to a reduction of
television campaign promotions.
Print Publications list rental and other revenues for the year ended
December 31, 1997 decreased by 5%, to $1,362,883, as compared to $1,437,786 in
1996. List rental revenues for the year ended December 31, 1997 decreased by
16%, to $1,039,833, as compared to $1,235,980 in 1996. The decrease in list
rental revenue was attributable to reduced demand. Other revenues for the year
ended December 31, 1997 increased by 60%, to $323,050, as compared to $201,806
in 1996. This was primarily due to an increase in the sale of reprints from
Individual Investor and Ticker magazines and revenues from an affinity credit
card agreement.
Online Services began to generate advertising revenues in September
1997 from www.iionline.com, which revenues totaled $205,020 for the year.
Operating Expenses
Total operating expenses from continuing operations for the year ended
December 31, 1997 increased 26%, to $20,206,774, as compared to $16,073,791 in
1996. The increase was primarily due to three factors: increased expenses
associated with additional copies of Individual Investor magazine, due to higher
magazine subscription and newsstand sales; additional issues of Ticker being
printed and mailed; and increased costs incurred in establishing Individual
Investor Online.
Editorial, production and distribution expenses for the year ended
December 31, 1997 increased 42%, to $9,505,718, as compared to $6,683,047 in
1996. Print Publications editorial, production and distribution expenses
increased 37%, to $8,642,206, for the year ended December 31, 1997, as compared
to $6,326,208 in 1996. Individual Investor editorial, production and
distribution expenses increased 23%, to $7,018,455, as compared to $5,714,292 in
1996. The increase was primarily due to approximately 1.7 million additional
copies printed in 1997, which reflects the increase in its subscription and
newsstand sales, and the distribution costs associated with approximately 1.4
million more copies mailed and a slight increase in postage costs. Additionally,
Individual Investor editorial costs increased due to higher personnel costs and
other expenses, including manuscript preparation, art and design costs. Ticker
editorial, production and distribution expenses increased by 311%, to
$1,445,886, for the year ended December 31, 1997, as compared to $351,775 in
1996. The increase was primarily because Ticker mailed only two issues in 1996,
compared to ten issues for the year ended December 31, 1997. Additionally, costs
increased due to the full year of staff and related expenses in 1997. Online
Services production and editorial expenses increased 142%, to $863,512, for the
year ended December 31, 1997, as compared to $356,839 in 1996, primarily for
establishing the Company's website, Individual Investor Online.
Promotion and selling expenses for the year ended December 31, 1997
increased by 16%, to $6,135,365, as compared to $5,306,437 in 1996. Print
Publications promotion and selling expenses increased 12%, to $5,968,787, as
compared to $5,306,437 in 1996. The increase was primarily due to advertising
salaries and commissions, which increased 57% as a result of higher advertising
revenues and additional sales personnel that were added. Additionally,
subscription promotion costs decreased as a result of a decrease in direct mail
and television campaigns in 1997. Online Services promotion and selling expenses
were $166,578 for the year ended December 31, 1997, compared to $0 for the prior
year.
General and administrative expenses for the year ended December 31,
1997 increased by 9%, to $4,222,386, as compared to $3,885,348 in 1996. General
and administrative salaries, payroll taxes, employee benefits, and other related
staffing costs increased 30%, to $1,900,434, for the year ended December 31,
1997, as compared to $1,466,474 in 1996. These added costs related to increases
in compensation and personnel to support the Company's growth, as well as
enhanced employee benefits. Also, as a result of hiring additional personnel,
office postage, supplies and related expenses increased. Bad debt expense for
the year ended December 31, 1997 decreased by 42%, to $120,606, as compared to
$208,088 in 1996, relating to improved collection procedures.
Depreciation and amortization expense for the year ended December 31,
1997 increased by 73%, to $343,305, as compared to $198,959 in 1996. The
increase was primarily attributable to depreciation of office furniture and
computer equipment purchased to accommodate the increase in personnel during the
year.
Interest and Other Income
Interest and other income for the year ended December 31, 1997
decreased by 61%, to $69,296, as compared to $177,238 in 1996. The decrease was
primarily due to the reduced levels of cash and cash equivalents available for
investment by the Company during 1997.
Discontinued Operations
Net income from discontinued operations, as previously defined, for the
year ended December 31, 1997 was $277,402, as compared to net income of $170,059
for 1996. As of December 31, 1997, the fair market value of the Company's
investment in the discontinued operations was $4,037,432.
Net Loss
The Company's net loss for the year ended December 31, 1997 increased
by 56%, to $4,960,335, as compared to $3,189,452 in 1996. No income taxes were
provided in 1997 or 1996 due to the net loss. The basic and dilutive net loss
per weighted average common share for the year ended December 31, 1997 was
$0.77, as compared to $0.51 in 1996.
Liquidity and Capital Resources
During 1998, the Company received $5,398,153 from the issuance of
common stock, including $5,000,000 from an affiliate of the Company's Chairman,
with the remainder from exercises of stock options. In addition, in 1998 the
Company received $2,000,000 from the issuance of convertible preferred stock to
institutional investors unrelated to the Company, and $2,818,231 of cash and
securities from the liquidation of the domestic fund. These inflows funded the
Company's net cash used in operating activities of $8,101,534 in 1998.
As of December 31, 1998, the Company had working capital of $5,931,219,
which included cash and cash equivalents totaling $4,752,587 and investments of
$877,231. Subsequent to December 31, 1998, a portion of these investments were
sold, resulting in proceeds of $337,417. As of March 5, 1999, the value of the
remaining investments was $808,739, a total increase in value of $268,925 from
year-end. The value of the Company's investments has varied significantly during
1998, and is subject to material change. In addition, in the first quarter
through March 5, 1999 the Company received approximately $1.5 million from the
exercise of stock options.
The Company's current levels of revenues are not sufficient to cover
its expenses. Under its current business plan for the year 1999, the Company
intends to control and reduce certain of its operating expenses (most
significantly, its print production costs) while continuing to invest in its
existing products. The Company anticipates losses to continue through 1999,
although the Company anticipates that losses from continuing operations in 1999
will be significantly less than in 1998. Profitability may be achieved in future
periods only if the Company can substantially increase its revenues while
controlling increases in expenses. There can be no assurance that revenues will
be substantially increased, or that the increases in expenses can be controlled
adequately to enable the Company to attain profitability.
Management expects revenues to grow significantly in 1999 as the
Company implements changes made by a new management team, including a new
President and Chief Operating Officer hired in September 1998 and a new
Publisher hired in April 1998. Advertising sales are expected to increase for
Individual Investor and Ticker magazines due to the addition of new key sales
personnel, anticipated publication of 13th issues and the effect of the
increased awareness in the marketplace for both magazines due in part to
selected public relations and advertising efforts. There can be no assurance,
however, that advertising sales will increase because higher advertising rates
may not be accepted by advertisers, advertising pages may continue to decline
for Individual Investor, circulation may drop at either or both Individual
Investor and Ticker, and the advertising mix may change. Although the Company
has recently added key advertising sales personnel and has hired a new
publisher, no assurance can be given that these changes will result in
advertising revenue increases. The Company also believes that a stock market
correction or "bear" market would affect its ability to sell advertising to the
financial advertiser categories.
The Company plans to continue investing in its online service
Individual Investor Online because it believes that this line of business offers
the greatest opportunity for generating substantial revenues and shareholder
value over the longer term. The Company expects to realize higher revenues from
operations of its online service Individual Investor Online, primarily due to
the anticipated continuation of traffic growth to the site. There can be no
assurance, however, that such traffic growth will be realized, or that, even if
realized, such traffic growth will result in higher revenues or shareholder
value.
The Company will relocate to new office space at the end of March 1999
at a significantly higher rate per square foot, which will result in additional
annual lease costs of approximately $450,000, and $1.3 million of capital
expenditures and relocation costs. The Company has already incurred significant
costs related to the relocation.
Based on the Company's business plan, the Company believes that its
working capital and its investments will be sufficient to fund its operations
and capital requirements through 1999. Thereafter, the Company would need to
raise additional capital in order to sustain operations unless the Company
achieves profitability through the generation of revenues beyond those currently
anticipated. The Company is currently exploring its ability to obtain additional
financing. No assurance can be given as to the availability of additional
financing or, if available, the terms upon which it may be obtained. Any such
additional financing may result in dilution of an investor's equity investment
in the Company. Failure to obtain additional financing on favorable terms, or at
all, would have a substantial adverse effect on the Company's future ability to
conduct operations.
Year 2000
The Company has evaluated the potential impact of the situation
commonly referred to as the "Year 2000 Issue". The Year 2000 Issue concerns the
inability of information systems, whether due to computer hardware or software,
to properly recognize and process date sensitive information relating to the
year 2000 and beyond. Many of the world's computer systems currently record
years in a two-digit format. Such computer systems may be unable to properly
interpret dates beyond the year 1999, which could lead to business disruptions
in the U.S and internationally. The potential costs and uncertainties associated
with the Year 2000 Issue will depend on a number of factors, including software,
hardware and the nature of the industry in which a company operates. The Year
2000 Issue could have a material adverse effect on the Company's results of
operations and ability to conduct business.
To attempt to ensure that the Company's computer systems (including
computer hardware and computer software) are "Year 2000 Ready" (that is, are not
disrupted by the Year 2000 Issue), the Company developed a plan to assess, and
remediate where necessary, any Year 2000 Issue with respect to the Company's
computer systems, and appointed certain employees to administer such plan. The
plan contains four phases: first, identifying all computer hardware and software
being used by the Company; second, determining whether such hardware and
software is Year 2000 Ready; third, remediating any Year 2000 Issue with respect
to any particular piece of hardware or software; and fourth, performing a final
audit and test. The Company has made significant progress toward completing the
first two phases, and currently expects to complete these phases before June
1999. The Company has made significant progress toward completing phase three
with respect to software issues, and currently expects to complete phase three,
with respect to both software and hardware, before June 1999. The Company
intends to commence phase four upon the completion of the first three phases,
and currently expects to complete phase four before October 1999.
As of December 31, 1998, the Company has incurred direct costs of
approximately $15,000 relating to the development and implementation of its Year
2000 Plan. The Company currently believes that total direct costs associated
with making the Company's systems Year 2000 Ready should not exceed $30,000 and
that such costs, together with any lost revenue associated with making the
Company's systems Year 2000 Ready, should not have a material adverse effect on
the Company's operating results or financial condition. The Company does not
believe that the diversion of employee resources required to address the Year
2000 Issue will have a material effect on the Company's operating results or
financial condition. The Company does not have in place a contingency plan of
action in the event that it is not able to make its computer systems Year 2000
Ready, but will consider on an ongoing basis whether a contingency plan should
be developed.
The dates on which the Company believes it will complete its Year 2000
readiness phases, and the costs associated with such efforts, are based on the
Company's current best estimates. However, there can be no guarantee that these
estimates will be achieved, or that there will not be a delay in, or increased
costs associated with, making the Company's systems Year 2000 Ready. Specific
factors that might cause differences between the estimates and actual results
include, but are not limited to, the availability and cost of personnel trained
in these areas, the ability to locate and correct all relevant computer code and
hardware devices (such as microcontrollers), timely responses to and corrections
by third-parties and suppliers, the ability to implement interfaces between the
new systems and the systems not being replaced, and similar uncertainties. Due
to the general uncertainty inherent in the Year 2000 problem, resulting in part
from the uncertainty of the Year 2000 readiness of third-parties and the
interconnection of global businesses, the Company cannot ensure its ability to
timely and cost-effectively resolve problems associated with the Year 2000
Issue, and a failure to do so could materially adversely affect the Company's
operations and business, and expose it to third-party liability.
The Company also faces risks and uncertainties to the extent that the
third party suppliers of products, services and systems on which the Company
relies or customers do not have business systems or products that are Year 2000
Ready. The Company has initiated communications with all of its significant
suppliers to determine the extent to which the Company's systems and products
are vulnerable to those third parties' failure to remediate their own systems'
Year 2000 Issues. The Company has received assurances from certain of its
suppliers stating that such suppliers' systems are or will timely be Year 2000
Ready, but there is no guarantee that the systems or products of other companies
on which the Company relies will be timely, if at all, made Year 2000 Ready, and
such a failure by such other companies could have a material adverse effect on
the Company's systems and products. No one customer has accounted for more than
10% of the Company's revenues in the past year, and the Company has not
initiated contact with its customers concerning the status of their Year 2000
readiness. There is no guarantee that the systems of the Company's customers
will be made Year 2000 Ready, and a failure by a number of the Company's
customers to become Year 2000 Ready could have a material adverse effect on the
Company's revenues and cash flows. The Company is in the process of identifying
what actions may be needed to mitigate vulnerability to problems related to
enterprises with which the Company interacts, but does not currently have in
place a contingency plan of action in the event that the failure by one or more
third parties to make their computer systems Year 2000 Ready causes adverse
effects to be suffered by the Company. The Company will consider on an ongoing
basis the extent to which a contingency plan should be developed.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Individual Investor Group, Inc.
New York, NY
We have audited the accompanying consolidated balance sheets of Individual
Investor Group, Inc. and its subsidiaries (the "Company") as of December 31,
1998 and 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
WisdomTree Associates, L.P. (the "Partnership") for each of the two years ended
December 31, 1997. The Company's investment in the Partnership is accounted for
by the use of the equity method and is included in discontinued operations. The
Company's equity of $4,037,432 in the Partnership's net assets at December 31,
1997 and its share of net operating losses of $10,067 and $355,229 for the years
ended December 31, 1997 and 1996, respectively, are included in the accompanying
financial statements. Those statements of the Partnership were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for the Partnership for each of the two years
ended December 31, 1997, is based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Individual Investor Group, Inc. and its subsidiaries as of
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years ended December 31, 1998 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, NY
March 12, 1999
Report of Independent Auditors
The Partners of WisdomTree Associates, L.P.
We have audited the statement of financial condition, including the condensed
schedule of investments, of WisdomTree Associates, L.P. (a Limited Partnership)
(the "Partnership"), as of December 31, 1997 and the related statements of
operations, changes in partners' capital and cash flows for each of the two
years in the period then ended (not presented separately herein). These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of WisdomTree Associates, L.P. at
December 31, 1997 and the results of its operations and its cash flows for each
of the two years in the period then ended in conformity with generally accepted
accounting principles.
Ernst & Young LLP
New York, New York
February 27, 1998
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------------
ASSETS 1998 1997
--------- ----------
Current assets:
Cash and cash equivalents $4,752,587 $3,533,622
Investments 877,231 250,000
Accounts receivable (net of allowances
of $391,328 in 1998 and $533,693 in 1997) 2,356,126 2,993,299
Investment in discontinued operations (Note 2) 282,383 4,037,432
Prepaid expenses and other current assets 512,641 224,801
------------ ------------
Total current assets 8,780,968 11,039,154
Deferred subscription expense 576,237 426,826
Property and equipment - net (Note 3) 586,007 556,070
Security deposits 469,627 134,917
Other assets 374,404 -
------------ ------------
Total assets $10,787,243 $12,156,967
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,191,765 $2,093,987
Accrued expenses (Note 4) 519,887 803,502
Deferred revenue 138,097 343,250
------------ ------------
Total current liabilities 2,849,749 3,240,739
Deferred subscription revenue 2,246,422 2,661,129
------------ ------------
Total liabilities 5,096,171 5,901,868
------------ -----------
Commitments and contingencies (Note 5)
Stockholders' Equity: (Note 8)
Preferred stock, $.01 par value, authorized
2,000,000 shares, 10,000 issued and
outstanding in 1998 100 -
Common stock, $0.01 par value; authorized
18,000,000 shares; 8,490,851 issued and
outstanding in 1998 and 7,146,071 in 1997 84,909 71,461
Additional paid-in capital 27,595,151 19,514,363
Accumulated deficit (21,922,595) (13,330,725)
Accumulated other comprehensive loss (Note 8) (66,493) -
------------ ------------
Total stockholders' equity 5,691,072 6,255,099
------------ ------------
Total liabilities and stockholders' equity $10,787,243 $12,156,967
============ ============
See Notes to Consolidated Financial Statements
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Print Publications $14,212,147 $14,689,721 $12,537,042
Online Services 1,136,032 210,020 -
--------------- --------------- ---------------
Total revenues 15,348,179 14,899,741 12,537,042
--------------- --------------- ---------------
Operating expenses:
Editorial, production and distribution 11,429,496 9,505,718 6,683,047
Promotion and selling 6,668,047 6,135,365 5,306,437
General and administrative 4,964,069 4,222,386 3,885,348
Depreciation and amortization 321,280 343,305 198,959
--------------- --------------- ---------------
Total operating expenses 23,382,892 20,206,774 16,073,791
--------------- --------------- ---------------
Operating loss from continuing operations (8,034,713) (5,307,033) (3,536,749)
Interest and other income 224,213 69,296 177,238
--------------- --------------- ---------------
Net loss from continuing operations (7,810,500) (5,237,737) (3,359,511)
--------------- --------------- ---------------
Discontinued operations (Note 2)
(Loss) income from discontinued operations (189,629) 277,402 170,059
Loss on disposal of discontinued operations (591,741) - -
--------------- --------------- ---------------
(Loss) income from discontinued operations (781,370) 277,402 170,059
--------------- --------------- ---------------
Net loss ($8,591,870) ($4,960,335) ($3,189,452)
=============== =============== ===============
Basic and dilutive (loss) income per common share:
Continuing operations ($0.99) ($0.81) ($0.54)
Discontinued operations (0.10) 0.04 0.03
--------------- --------------- ---------------
Net loss per share ($1.09) ($0.77) ($0.51)
=============== =============== ===============
Average number of common shares used in computing 7,876,509 6,466,168 6,198,260
basic and dilutive (loss) income per common share
</TABLE>
See Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Note 8)
Accumulated
Preferred Stock Common Stock Additional Other
Shares Par Shares Par Paid-in Accumulated Comprehensive
Issued Value Issued Value Capital Deficit Income (Loss)
------ ----- ------ ----- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 ........... 0 0 6,335,181 $63,353 $15,586,315 ($5,180,938) 0
Exercise of options - net .......... 0 0 88,760 887 388,174 0 0
Repurchase and retirement of
common stock ...................... 0 0 (250,000) (2,500) (2,450,846) 0 0
Retirement of treasury stock ....... 0 0 (31,822) (319) 0 0 0
Net loss ........................... 0 0 0 0 0 (3,189,452) 0
Net unrealized gain on investments ...... 0 0 0 0 0 0 $22,433
Comprehensive loss ...................... 0 0 0 0 0 0 0
-------- -------- ---------- ------- ---------- ----------- ---------
Balance, December 31, 1996 .............. 0 0 6,142,119 61,421 13,523,643 (8,370,390) 22,433
Exercise of options - net ............... 0 0 153,983 1,540 749,220 0 0
Issuance of common stock ................ 0 0 849,969 8,500 5,241,500 0 0
Net loss ................................ 0 0 0 0 0 (4,960,335) 0
Net unrealized loss on investments ...... 0 0 0 0 0 0 (22,433)
Comprehensive loss ...................... 0 0 0 0 0 0 0
------ ------- ---------- ------- --------- ---------- ---------
Balance, December 31, 1997 .............. 0 0 7,146,071 71,461 19,514,363 (13,330,725) 0
Exercise of options - net ............... 0 0 84,938 850 397,303 0 0
Stock option and warrant transactions ... 0 0 0 0 696,183 0 0
Issuance of preferred stock ............. 10,000 100 0 0 1,999,900 0 0
Issuance of common stock ................ 0 0 1,259,842 12,598 4,987,402 0 0
Net loss ................................ 0 0 0 0 0 (8,591,870) 0
Net unrealized loss on investments ...... 0 0 0 0 0 0 (66,493)
Comprehensive loss . 0 0 0 0 0 0 0
------- ------- ---------- ------ ----------- ----------- ---------
Balance, December 31, 1998 .............. 10,000 $100 8,490,851 $84,909 $27,595,151 ($21,922,595) ($66,493)
========== ======== ========== ========== =========== =========== ===========
Comprehensive Treasury Stock
Loss Shares Amount Total
---- ------ ------ -----
Balance, January 1, 1996 ................ 0 31,822 0 $10,468,730
Exercise of options - net ............... 0 0 0 389,061
Repurchase and retirement of common stock 0 250,000 0 (2,453,346)
Retirement of treasury stock ............ 0 (281,822) 0 (319)
Net loss ................................ ($3,189,452) 0 0 (3,189,452)
Net unrealized gain on investments ...... 22,433(a) 0 0 22,433
----------
Comprehensive loss ...................... ($3,167,019) 0 0 0
============ ----- ----- -----------
Balance, December 31, 1996 .............. 0 0 0 5,237,107
Exercise of options - net ............... 0 0 0 750,760
Issuance of common stock ................ 0 0 0 5,250,000
Net loss ................................ ($4,960,335) 0 0 (4,960,335)
Net unrealized loss on investments ...... (22,433)(a) 0 0 (22,433)
-----------
Comprehensive loss ...................... $4,982,768) 0 0 0
============ --- ---- ----------
Balance, December 31, 1997 .............. 6,255,099
Exercise of options - net ............... 0 0 0 398,153
Stock option and warrant transactions ... 0 0 0 696,183
Issuance of preferred stock ............. 0 0 0 2,000,000
Issuance of common stock ................ 0 0 0 5,000,000
Net loss ................................ ($8,591,870) 0 0 (8,591,870)
Net unrealized loss on investments ...... (66,493)(a) 0 0 (66,493)
----------
($8,658,363) 0 0 0
Comprehensive loss ...................... ============== ---- ----- ------------
Balance, December 31, 1998 .......... 0 0 $5,691,072
====== ====== ===========
(a) Disclosure of reclassification amount:
1996 1997 1998
---- ---- ----
Unrealized holding gain (loss) arising during period $ 22,433 $(11,902) $ 959
Less: Reclassification adjustment for gain
recognized in net loss - (10,531) (67,452)
-------- ---------- ---------
Net unrealized gain (loss) on investments $ 22,433 $(22,433) $ (66,493)
========= =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
------------ ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($8,591,870) ($4,960,335) ($3,189,452)
Less:
(Loss) income from discontinued operations (781,370) 277,402 170,059
------------ ------------- ------------
Loss from continuing operations (7,810,500) (5,237,737) (3,359,511)
Reconciliation of net loss to net cash used in
operating activities:
Depreciation and amortization 321,280 343,305 198,959
Stock option and warrant transactions 159,909 - -
Loss on sale of equipment 2,671 - -
Gain on sale of investments (67,452) - -
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 637,173 (412,027) (1,091,637)
Prepaid expenses and other current assets (14,980) 155,178 (158,273)
Security deposits (334,710) 37,200 -
Other assets (39,817) (22,433) 22,433
Deferred subscription expense (149,411) 530,588 339,192
(Decrease) increase in:
Accounts payable and accrued expenses (185,837) 159,598 214,436
Deferred revenue (205,153) 93,250 -
Deferred subscription revenue (414,707) (667,608) (45,519)
------------ ------------- ------------
Net cash used in operating activities (8,101,534) (5,020,686) (3,879,920)
------------ ------------- ------------
Cash flows from investing activities:
Purchase of property and equipment (353,713) (178,372) (513,619)
Proceeds from sale of equipment 3,652 - -
Proceeds from sale of investments 223,556 - -
Purchase of InsiderTrader.com (75,000) - -
Net cash provided by discontinued operations 2,123,851 1,187,469 1,725,288
------------ ------------- ------------
Net cash provided by investing activities 1,922,346 1,009,097 1,211,669
------------ ------------- ------------
Cash flows from financing activities:
Proceeds from exercise of stock options 398,153 750,760 389,061
Proceeds from issuance of preferred stock (note 8) 2,000,000 - -
Proceeds from issuance of common stock (note 8 ) 5,000,000 5,250,000 -
Common stock repurchased (note 8) - - (2,453,346)
------------ ------------- ------------
Net cash provided by (used in) financing activities 7,398,153 6,000,760 (2,064,285)
------------ ------------- ------------
Net increase (decrease) in cash and cash equiva1ents 1,218,965 1,989,171 (4,732,536)
Cash and cash equivalents, beginning of period 3,533,622 1,544,451 6,276,987
------------ ------------- ------------
Cash and cash equivalents, end of period $4,752,587 $3,533,622 $1,544,451
============ ============= ============
See Notes to Consolidated Financial Statements
</TABLE>
INDIVIDUAL INVESTOR GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDIVIDUAL INVESTOR GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Individual Investor Group, Inc. and its subsidiaries (collectively,
the "Company") are primarily engaged in providing financial information
services. The Company's operating subsidiaries are focused on providing research
and analysis of investment information to individuals and investment
professionals through two business segments: Print Publications and Online
Services. The Company's Print Publications segment publishes and markets
Individual Investor magazine, a personal finance and investment magazine,
Ticker, a magazine for investment professionals, and Individual Investor's
Special Situations Report, a financial investment newsletter. The Company's
Online Services segment includes Individual Investor Online (www.iionline.com)
and InsiderTrader.com (www.insidertrader.com). The Company contracts with
unaffiliated suppliers for paper, printing, binding, subscription fulfillment,
and newsstand distribution and list management. See Note 9 for additional
information regarding the Company's business segments and operations.
In November 1998 the Company acquired certain assets and assumed
certain liabilities of InsiderTrader.com, a subscriptions-based web site that
distributes "insider" data filed with the Securities and Exchange Commission,
and provides proprietary research based on the data, for a cash purchase price
of $75,000, and an obligation to pay an additional $75,000 if certain conditions
concerning increased paid subscriber levels are achieved. The excess of cost
over the fair value of net assets acquired of $114,816 was allocated to goodwill
(included in "Other assets" in the accompanying financial statements) and is
being amortized on a straight-line method over a period of five years.
Principles of Consolidation - The consolidated financial statements
include the accounts of Individual Investor Group, Inc. and its subsidiaries:
Individual Investor Holdings, Inc., WisdomTree Capital Management, Inc.,
WisdomTree Administration, Inc., WisdomTree Capital Advisors, LLC, I.I.
Interactive, Inc. and I.I. Strategic Consultants, Inc.
Revenue Recognition - Print Publications advertising and circulation
revenues are recognized, net of agency commissions and estimated returns and
allowances, when publications are issued. Deferred subscription revenue, net of
agency commissions, is recorded when subscription orders are received. List
rental income is recognized, net of commission, when a list is provided. Online
Services advertising revenues, derived from the sale of banner advertisements
and sponsorships on the Company's websites, is recognized ratably in the period
the advertising is displayed. Barter transactions are recorded at the fair value
of the goods or services provided or received, whichever is more readily
determinable in the circumstances.
Deferred Subscription Expense - The Company defers direct response
advertising costs incurred to elicit subscription sales from customers who could
be shown to have responded specifically to the advertising and that resulted in
probable future economic benefits. Such deferred costs, which consist primarily
of direct mail campaign costs, are amortized over the estimated period of future
benefit, ranging from 12 to 21 months.
Property and Equipment - Property and equipment are recorded at cost.
Depreciation of property and equipment is calculated on the straight-line method
over the estimated useful lives of the respective assets, ranging from three to
seven years. Leasehold improvements are amortized over the lesser of the useful
life of the asset or the term of the lease.
Income Taxes - Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences,
and operating loss carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
may not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Financial Instruments - For financial instruments including cash and
cash equivalents, accounts receivable and payable and accruals, the carrying
amount approximated fair value because of their short maturity. As of December
31, 1998 cash equivalents consist of investments in a government fund that
invests in securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, which have average maturities of 30 days.
Investments - Investments are in equity securities and are considered
available-for-sale securities and are carried at fair market value. The
aggregate fair value of such investments was $877,231 and $250,000 at December
31, 1998 and 1997, respectively. Gross unrealized holding gains was $86,477 and
$0 at December 31, 1998 and 1997, respectively. Gross unrealized holding losses
was $152,970 and $0 at December 31, 1998 and 1997, respectively.
Stock-Based Compensation - In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation"
the Company continues to apply the measurement and recognition provisions of
Accounting Principles Board Opinion No. 25 and related interpretations in
accounting for issuance of employee stock options. The Company's policy is to
grant options with an exercise price not less than the fair market value of the
Company's stock on the date of grant. Accordingly, no compensation expense has
been recognized in the Company's statement of operations for fixed stock option
grants awarded to employees. Transactions with non-employees in which goods or
services are received by the Company for the issuance of stock options or other
equity instruments are accounted for based on fair value, which is based on the
value of the equity instruments or the consideration received, whichever is more
reliably measured.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities reported in the financial statements. Significant accounting
estimates used include estimates for sales returns and allowances, loss on
discontinued operations, and pro forma disclosures regarding the fair value of
stock options granted in 1998, 1997 and 1996. Actual results could differ from
those estimates.
Earnings Per Share - Basic net (loss) income per share is computed
using the weighted average number of shares of Common Stock outstanding during
the period. Diluted (loss) income per share is computed using the weighted
average number of outstanding shares of Common Stock and common equivalent
shares during the period. Common equivalent shares consist of the incremental
shares of Common Stock issuable upon the exercise of stock options, warrants and
other securities convertible into shares of Common Stock. The loss per common
share for 1998, 1997, and 1996 is computed based on the weighted average number
of shares of Common Stock outstanding during the period. The exercise of stock
options, warrants and other securities convertible into shares of Common Stock
were not assumed in the computation of dilutive loss per common share, as the
effect would have been antidilutive.
New Accounting Pronouncement - In 1997, SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" was issued, which is effective
for fiscal years beginning after June 15, 1999. SFAS No. 133 requires all
derivative transactions to be recorded at fair value on the balance sheet. Since
the Company does not currently trade or participate in hedging transactions
employing derivatives, management does not expect the adoption of this standard
to have a material effect on the consolidated financial statements of the
Company.
Reclassifications - Certain prior year balances have been reclassified
to conform to the current year presentation.
2. DISCONTINUED OPERATIONS
On April 30, 1998 the Company's Board of Directors decided to
discontinue the Company's investment management services business. As a result,
the operating results relating to investment management services have been
segregated from continuing operations and reported as a separate line item on
the consolidated statement of operations. The Company has restated its
consolidated financial statements for prior years to conform to the current year
presentation.
The investment management services business was principally conducted
by a wholly-owned subsidiary of the Company, WisdomTree Capital Management, Inc.
("WTCM"). WTCM serves as general partner of (and is an investor in) a domestic
private investment fund. The Company is also a limited partner in the fund. As a
result of the Board's decision to discontinue the investment management services
business, WTCM is dissolving the domestic investment fund, liquidating its
investments and distributing the net assets to all investors as promptly as
possible.
The Company, through WTCM and another wholly-owned subsidiary, also
provided investment management services to an offshore private investment fund.
On May 21, 1998 the sole voting shareholder of the offshore fund, in
consultation with WTCM, resolved to wind up the fund and appointed a liquidator
to distribute the assets of the fund to its investors in accordance with Cayman
Islands law. Substantially all of the fund assets were distributed in cash to
its investors by December 31, 1998. The Company has no investment in the
offshore fund.
Revenues and investment gains and losses associated with the
investment management services prior to April 30, 1998 were ($139,314) in 1998,
$550,409 in 1997, and $507,069 in 1996. The results for such operations prior to
April 30, 1998 was a net loss of $189,629 in 1998, and net income of $277,402 in
1997 and $170,059 in 1996.
On April 30, 1998 the Company recorded a provision of $446,450 to
accrue for its share of any net operating losses of the domestic investment fund
and related costs that are expected to occur until the fund liquidates its
investments. From May 1, 1998 to December 31, 1998, additional net operating
losses and related costs have been $145,291. Additional losses were incurred in
the third quarter as a result of changes in the market value of the fund's
investments. The Company believes that any remaining net operating losses and
related costs associated with these discontinued operations have been adequately
provided for by provisions established in 1998.
At December 31, 1998, the domestic investment fund had net assets of
approximately $2.6 million. The Company's net investment in discontinued
operations of $282,383 and $4,037,432 at December 31, 1998 and 1997,
respectively, represents its share of the net assets of the domestic investment
fund, less any costs associated with discontinuing the investment management
services. In January 1999, the domestic fund distributed cash totaling
$1,189,510 of which $139,849 was received by the Company and used to reduce its
net investment in discontinued operations.
3. PROPERTY AND EQUIPMENT
December 31,
1998 1997
----------- -----------
Equipment $965,539 $821,389
Furniture and fixtures 329,521 226,169
Leasehold improvements 244,022 164,119
----------- -----------
1,539,082 1,211,677
Less: accumulated depreciation
and amortization (953,075) (655,607)
----------- -----------
$586,007 $556,070
============ ============
4. ACCRUED EXPENSES
December 31,
1998 1997
----------- ----------
Accrued employee compensation $72,024 $211,683
Deferred rent credits 93,807 128,269
Accrued newsstand promotion expenses 132,214 113,954
Accrued professional fees 127,786 106,060
Other 94,056 243,536
----------- ----------
$519,887 $803,502
=========== ==========
5. COMMITMENTS AND CONTINGENCIES
Litigation - In July 1997 certain former limited partners of WisdomTree
Associates, L.P. ("WTA"), a domestic private investment fund of which the WTCM
is the general partner, initiated an action in the Supreme Court of the State of
New York, County of New York, captioned Richard Tarlow and Sandra Tarlow v.
WisdomTree Associates, L.P., Bob Schmidt and Jonathan Steinberg, Index No.
113819/97. Defendants moved to dismiss the action based on plaintiffs' failure
to file a complaint, and the action was dismissed without prejudice in October
1997. In October 1998, plaintiffs moved to vacate the default judgment.
Defendants opposed the motion, and the court has not yet ruled on the motion.
Plaintiffs allege that defendants did not timely process plaintiffs' request for
redemption of their interest in WTA, which delay allegedly caused plaintiffs to
suffer approximately $470,000 in damages. The Company is currently evaluating
this matter, and intends to continue conducting a vigorous defense. Due to the
inherent uncertainty of litigation, the Company is not able to reasonably
estimate the potential losses, if any, that may be incurred in relation to this
litigation.
In addition to the foregoing matter, the Company from time to time is
involved in ordinary and routine litigation incidental to its business; in the
opinion of management, there are no such pending legal proceedings that would
have a material adverse affect on the consolidated financial statements of the
Company.
Employment Agreements - The Company has employment agreements with two
officers, the terms of which expire in September 1999 and December 1999,
respectively, and an employment agreement with one employee, the terms of which
expire in April 2000. These agreements provide for minimum salary levels,
adjusted annually as determined by the Board of Directors. These agreements
provide for an aggregate commitment for future salaries of approximately
$735,000.
Profit Sharing Plan - The Company has a profit sharing plan (the
"Plan"), subject to Section 401(k) of the Internal Revenue Code. All employees
who complete at least two months of service and have attained the age of 21 are
eligible to participate. The Company can make discretionary contributions to the
Plan, but none were made in 1998, 1997, or 1996.
Lease Agreements - The Company leases office space in New York City under
an operating lease that expires on March 30, 1999. On March 29, 1999, the
Company relocated to new office space under an operating lease agreement that
expires on March 31, 2004. The Company also subleases its former office space in
New York City under an operating lease that expires March 1, 2005. Rent expense
for the years ended December 31, 1998, 1997 and 1996 was $585,764, $519,675 and
$544,915, respectively. The lease and sublease provide for escalation of lease
payments as well as real estate tax increases.
Future minimum lease payments and related sublease rentals receivable
with respect to non-cancelable operating leases are as follows:
Future Minimum Rents Receivable
Year Rental Payments Under Sublease
---------------------- --------------------
1999 $1,080,051 $165,000
2000 1,185,550 177,500
2001 1,190,050 190,000
2002 1,202,883 195,000
2003 1,209,050 200,000
Thereafter 501,558 226,667
-------------------- --------------------
Total $6,369,142 $1,154,167
==================== ====================
The Company has an outstanding letter of credit totaling $332,500
related to the security deposit for the Company's new office space.
6. INCOME TAXES
The Company has available net operating loss carryforwards ("NOL's")
totaling approximately $17,900,000. Based upon a change of ownership which
transpired in December 1991 the utilization of $2,100,000 of pre-change NOL's
are limited in accordance with Section 382 of the Internal Revenue Code, which
affects the amount and timing of when the NOL's can be offset against taxable
income. The tax effects of temporary differences from discontinuing and
continuing operations that give rise to significant portions of the deferred tax
assets and liabilities at December 31, 1998, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $8,078,000 $5,354,000 $ 4,470,000
Tax in excess of book basis
of investment in fund 996,000
Other 296,000 291,000 171,000
----------- ------------ -----------
Total 9,370,000 5,645,000 4,641,000
Deferred tax liabilities:
Book in excess of tax basis
of investment in fund - (563,000) ( 1,598,000)
------------- ------------- -------------
9,370,000 5,082,000 3,043,000
Less: valuation allowance 9,370,000 5,082,000 3,043,000
------------- ------------ -------------
Net deferred tax asset $ - $ - $ -
============= ============== =============
</TABLE>
The provision for income taxes from continuing operations for the years
ended December 31, 1998, 1997 and 1996 is different than the amount computed
using the applicable statutory Federal income tax rate with the difference
summarized below:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Hypothetical income tax benefit
at the US Federal statutory rate ($2,733,700) ($1,833,200) ($1,175,800)
State and local income taxes benefit,
less US Federal income tax benefit (809,900) (543,200) (348,400)
Net operating loss benefit not recognized 3,543,600 2,376,400 1,524,200
-------------- --------------- -------------
$ - $ - $ -
=============== ============== ===============
</TABLE>
7. STOCK OPTIONS
The Company has four stock Option plans: the 1991 Stock Option Plan, the
1993 Stock Option Plan, the 1996 Performance Equity Plan and the 1996 Management
Incentive Plan (collectively, the "Plans"). Under the Plans, the Company can
issue a maximum of 2,200,000 stock options and other stock-based awards, most of
which vest ratably over a three- to five-year period, commencing one year from
the date of grant. The options are exercisable for a period of up to 10 years
from the date of grant. Options granted pursuant to the 1991 Stock Option Plan
must be at an exercise price which is not less than the fair market value at the
date of grant; options granted pursuant to the other Plans may have, but to date
have not had, exercise prices less than the fair market value at the date of
grant.
In addition to the Plans, the Company has options outstanding that were
granted outside of the Plans. These options were granted at fair market value at
the date of grant and expire at various dates through November 6, 2008.
On November 19, 1998, the Company's Board of Directors approved an
option exchange program which allowed employees to exchange their existing
options (vested and unvested) with a per share exercise price greater than
$1.25, on a one-for-one basis for new options with a per share exercise price of
$1.25, which was above the fair market value of the Company's Common Stock on
November 19, 1998, or, alternatively, in the Company's discretion, to amend the
employee's existing options to reduce the exercise price to $1.25 per share. The
existing options of employees who chose to participate in the program were
cancelled or amended. The new options have the same vesting periods as the
exchanged options, except that, except in limited circumstances, no new options
are exercisable prior to May 19, 1999. A total of 1,479,801 options with a
weighted average exercise price of $5.34 were exchanged for new options or
amended as a result of this program. In accordance with generally accepted
accounting principles, the Company did not record compensation expense as a
result of the exchange.
On December 23, 1998, the Company's Board of Directors approved an
option exchange program which allowed non-employee directors to exchange their
existing options (vested and unvested) with a per share exercise price greater
than $2.00, on a one-for-one basis for new options with a per share exercise
price of $2.00, which was equal to the fair market value of the Company's Common
Stock on December 23, 1998. The existing options so exchanged were cancelled.
The new options have the same vesting periods as the exchanged options, except
that no new options are exercisable prior to June 23, 1999. A total of 140,000
options with a weighted average exercise price of $5.98 were exchanged for new
options as a result of this program. In accordance with generally accepted
accounting principles, the Company recorded $116,755 of expense during the year
ended December 31, 1998 relating to options issued to its non-employee
directors.
Activity in the Plans noted above is summarized in the following table.
<TABLE>
<CAPTION>
1998 1997 1996
---- ----- ------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------------ ----------- -------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
January 1 1,473,051 $6.29 1,134,601 $6.06 634,700 $4.36
Granted 1,646,301 $2.06 530,600 $6.54 642,100 $7.49
Exercised (33,438) $4.72 (84,983) $4.96 (44,260) $4.28
Canceled (1,422,329) $5.93 (107,167) $6.24 (97,939) $5.17
------------ -------------- --------------
Balance, December 31 1,663,585 $2.44 1,473,051 $6.29 1,134,601 $6.06
============ ============== ==============
</TABLE>
Options exercisable under the Plans at December 31, 1998, 1997 and 1996
were 396,285, 391,686 and 316,808, respectively, at weighted average exercise
prices of $4.99, $4.67, and $3.87, respectively. At December 31, 1998, 1997 and
1996, options available for grant under the Plans were 368,434, 592,406, and
1,015,839, respectively, while total shares of Common Stock reserved for future
issuances under the Plans were 2,032,019, 2,065,457, and 2,150,440,
respectively.
Options granted outside of the Plans are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------------- ----------- -------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
January 1 1,560,496 $5.27 1,776,163 $5.30 1,730,663 $5.23
Granted 1,422,500 $1.46 - - 130,000 $5.63
Exercised (51,500) $4.74 (69,000) $4.71 (44,500) $4.29
Canceled (969,583) $5.12 (146,667) $5.90 (40,000) $4.44
------------- -------------- -------------
Balance, December 31 1,961,913 $2.59 1,560,496 $5.27 1,776,163 $5.30
============= ============== ==============
</TABLE>
Options exercisable at December 31, 1998, 1997 and 1996 were 639,413,
1,143,414, and 835,080, respectively, at weighted average exercise prices of
$4.94, $4.84, and $4.61, respectively. In addition, on December 16, 1998 the
Company issued 300,000 warrants to purchase its Common Stock at an exercise
price of $2.15625 per share, which was equal to the fair market value of the
Company's Common Stock on December 16, 1998.
The following table summarizes information about total stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options outstanding Options Exercisable
----------------------------------------------- ----------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 12/31/98 Contractual Life Exercise Price at 12/31/98 Exercise Price
- ---------------- ----------- --------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.24 - 1.25 2,074,464 7.75 years $1.21 50,663 $0.34
$1.38 - 5.88 1,389,351 4.15 years $3.93 869,351 $4.92
$6.06 - 8.00 161,683 4.46 years $7.25 115,684 $7.27
============== ============
$0.24 - 8.00 3,625,498 $2.52 1,035,698 $4.96
============== ============
</TABLE>
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options granted under the fair value method of
SFAS No. 123. The fair value for these options was estimated at the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions for 1998, 1997 and 1996, respectively: risk-free
interest rates of 4.7%, 6.3% and 6.3%, respectively; volatility factors of the
expected market price of the Company's Common Stock of 99%, 55% and 51%,
respectively; weighted-average fair value of options granted $1.10, $3.56 and
$3.89, respectively; and a weighted-average expected life of the options of 5
years.
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net loss from continuing operations:
As reported ($7,810,500) ($5,237,737) ($3,359,511)
Pro forma ($8,937,005) ($6,423,278) ($4,223,953)
Loss from continuing operations per
weighted average common share:
As reported ($0.99) ($0.81) ($0.54)
Pro forma ($1.13) ($0.99) ($0.68)
</TABLE>
The impact of the estimated fair value of the options has no effect on
the reported loss or income from discontinued operations. The effects of
applying SFAS No. 123 in this pro forma disclosure are not indicative of future
amounts because additional stock option awards in future years are anticipated.
8. STOCKHOLDERS' EQUITY
Issuance of Preferred Stock - On December 2, 1998, the Company issued a
total of 10,000 shares of Series A Preferred Stock ("Series A Preferred Stock")
to two parties unrelated to the Company pursuant to Stock Purchase Agreements,
for an aggregate purchase price of $2 million. The Series A Preferred Stock has
a par value of $.01 per share and a liquidation preference of $200 per share.
The Series A Preferred Stock is convertible into the Company's Common Stock at a
conversion price of $2.12 per share, subject to adjustment for stock splits,
recapitalizations, and the like. Any unconverted shares will be subject to
mandatory conversion into the Company's Common Stock on December 31, 2003. The
Series A Preferred Stock will be entitled to receive a cumulative ten percent
(10%) per annum cash dividend, payable annually on December 31 of each year,
commencing December 31, 1999, or, if earlier, upon conversion of the shares of
Series A Preferred Stock. The purchasers of the Series A Preferred Stock have
"piggyback" registration rights until December 2000. These shares were sold
pursuant to an exemption from registration under the Securities Act of 1933.
Issuances of Common Stock - On June 26, 1998, the Company entered into a
Stock Purchase Agreement with Wise Partners, L.P. ("WP") providing for the sale
of 1,259,842 shares of Common Stock for an aggregate purchase price of
$5,000,000, which was based on the closing "ask" price of the Common Stock on
June 25, 1998. WP is a limited partnership of which the Chief Executive Officer
of the Company, Jonathan L. Steinberg, is the General Partner. During 1998, the
Company also received $398,153 from exercises of stock options.
On May 1, 1997, the Company entered into Stock Purchase Agreements with
two parties unrelated to the Company providing in the aggregate for the private
sale of 328,678 shares of Common Stock for a total purchase price of $2,000,000.
On June 30, 1997 and December 30, 1997, the Company entered into Stock Purchase
Agreements with WP, providing for the sale of 31,496, and 489,795 shares of
Common Stock, respectively, for an aggregate purchase price of $3,250,000. The
Company granted registration rights in respect of the shares issued to WP.
Each of the above sales of Common Stock of the Company were sold
pursuant to an exemption from registration under the Securities Act of 1933.
Repurchase of Common Stock - The Company repurchased 250,000 shares of
Common Stock on the open market, at a total cost of $2,453,346, in the second
quarter of 1996. The Company has retired these shares and 31,822 of Common Stock
previously held as treasury shares. The cost of repurchased shares in excess of
the par value of the Common Stock ($.01 per share) has been charged to
additional paid-in capital.
Comprehensive Loss - In 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 requires the disclosure of
comprehensive income (loss), defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. Comprehensive income (loss) is a more inclusive
financial reporting methodology that includes disclosure of certain financial
information that historically has not been recognized in the calculation of net
income (loss). The adoption of this standard did not have a material effect on
the consolidated financial statements of the Company.
9. SEGMENT INFORMATION
In 1998, the Company adopted SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," which changes the way the Company
reports information about its operating segments. Accordingly, prior years'
information has been restated to be consistent with the current year
presentation.
The Company's business segments are focused on providing research and
analysis of investment information to individuals and investment professionals
through two operating segments: Print Publications and Online Services. The
Company's Print Publications operations publishes and markets Individual
Investor magazine, a personal finance and investment magazine, Ticker, a
magazine for investment professionals, and Individual Investor's Special
Situations Report, a financial investment newsletter. The Company's Online
Services operations include Individual Investor Online (www.iionline.com) and
InsiderTrader.com (www.insidertrader.com). Substantially all of the Company's
operations are within the United States.
The table below presents summarized operating data for the Company's two
business segments, consistent with the way such data is utilized by Company
management in evaluating operating results. The accounting policies utilized in
the table below are the same as those described in Note 1 of the Notes to
Consolidated Financial Statements. Operating contribution represents the
difference between operating revenues less operating expenses (before general
and administrative ("G&A") expense and depreciation and amortization).
Identifiable assets by segment are those assets used in the Company's operations
in each business segment. Corporate assets are considered to be cash and cash
equivalents, investment in discontinued operations, investments, and certain
other non-operating assets.
The Online Services segment began generating revenue in September 1997
and, accordingly, the results for the Online Services segment below reflect four
months of revenue in 1997 compared to a full year for 1998.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Print Publications $14,212,147 $14,689,721 $12,537,042
Online Services 1,136,032 210,020 -
------------- -------------- -------------
$15,348,179 $14,899,741 $12,537,042
============== =============== ===============
Operating contribution (before G&A
and depreciation and amortization):
Print Publications ($692,731) $78,728 $904,397
Online Services (2,056,633) (820,070) (356,839)
--------------- --------------- ---------------
(2,749,364) (741,342) 547,558
G&A and depreciation and amortization
expense (5,285,349) (4,565,691) (4,084,307)
Interest and other income 224,213 69,296 177,238
---------------- ------------ --------------
Net loss from continuing operations ($7,810,500) ($5,237,737) ($3,359,511)
=============== =============== ===============
Identifiable assets (1):
Print Publications $3,189,296 $3,426,579
Online Services 401,887 383,726
Corporate assets 7,196,060 8,346,662
--------------- --------------
$10,787,243 $12,156,967
=============== ===============
(1) Total expenditures for long-lived assets for the years ended December 31,
1998 and 1997 were as follows: Print Publications, $235,809 and $112,054,
respectively; Online Services, $51,092 and $18,295, respectively; and
Corporate, $49,522 and $48,023, respectively.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 as to directors is incorporated
by reference to the information captioned "Election of Directors" included in
the Company's definitive proxy statement in connection with the meeting of
shareholders to be held on June 22, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference to
the information captioned "Election of Directors - Executive Compensation"
included in the Company's definitive proxy statement in connection with the
meeting of shareholders to be held on June 22, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by reference to
the information captioned "Voting Securities" included in the Company's
definitive proxy statement in connection with the meeting of shareholders to be
held on June 22, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated by reference to
the information captioned "Election of Directors - Related Transactions"
included in the Company's definitive proxy statement in connection with the
meeting of the shareholders to be held on June 22, 1999.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The following financial statements of the Registrant are filed as part of
this report:
Independent Auditors' Reports;
Consolidated Balance Sheets as of December 31, 1998 and 1997;
Consolidated Statements of Operations for the Years Ended December 31,
1998, 1997, and 1996;
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1998, 1997, and 1996;
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998, 1997, and 1996; and
Notes to Consolidated Financial Statements
(a)(3) Exhibits
Exhibit Description Method of Filing
No.
3.1 Amended and Restated Certificate Incorporated by reference
of Incorporation of Registrant, as to Exhibit 3.4 to the Form
amended through June 18, 1997 10-Q for the quarter ended
September 30, 1998 ("9/30/98
Form 10-Q")
3.2 Bylaws of Registrant Incorporated by reference to
Exhibit 3.2 to the Form S-18
4.1 Specimen Certificate for Common Incorporated by reference to
Stock of Registrant Exhibit 4.1 to the Form S-18
4.2 Stock Purchase Agreement dated as Incorporated by reference
of November 30, 1998 between to Exhibit 10.1 to the Form
Registrant and Great American 8-K filed December 14, 1998
Insurance Company ("12/14/98 Form 8-K")
4.3 Stock Purchase Agreement dated Incorporated by reference to
as of November 30, 1998 between Exhibit 10.2 to the 12/14/98
Registrant and Great American Form 8-K
Life Insurance Company
10.1+ Indemnification Agreement, dated Incorporated by reference to
August 19, 1991, between Registrant Exhibit 10.2 to the Form S-18
and Bruce L. Sokoloff
10.2+ Indemnification Agreement, dated Incorporated by reference to
August 19, 1991, between Registrant Exhibit 10.3 to the Form S-18
and Jonathan L. Steinberg
10.3+ Indemnification Agreement, dated Filed herewith
October 8, 1998, between Registrant
and Henry G. Clark
10.4+ Indemnification Agreement, dated Filed herewith
June 19, 1996, between Registrant
and Peter M. Ziemba
10.5+ Indemnification Agreement between Incorporated by reference to
Registrant and Brette Popper dated Exhibit 10.5 to the 9/30/98
September 14, 1998 Form 10-Q
10.6+ Indemnification Agreement between Incorporated by reference to
Registrant and Gregory Barton dated Exhibit 10.6 to the 9/30/98
September 14, 1998 Form 10-Q
10.7+ Agreement with Robert Schmidt dated Incorporated by reference to
May 25, 1998 Exhibit 10.1 to the Form 10-Q
for the quarter ended June 30,
1998 ("6/30/98 Form 10-Q")
10.8+ Agreement with Scot Rosenblum dated Incorporated by reference to
June 20, 1998 Exhibit 10.2 to the 6/30/98
Form 10-Q
10.9+ Agreement with Michael J. Kaplan Incorporated by reference to
dated April 1, 1998 Exhibit 10.1 to the Form 10-Q
for the quarter ended March 31,
1998
10.10 Stock Purchase Agreement, dated Incorporated by reference to
May 1 1997, for 164,339 shares Exhibit 10.1 to the Form
of the Company's Common Stock 10-QSB for the quarter ended
June 30, 1997 ("6/30/97
Form 10-QSB")
10.11 Stock Purchase Agreement, dated Incorporated by reference to
May 1, 1997, for 164,339 shares of Exhibit 10.2 to the 6/30/97
the Company's Common Stock Form 10-QSB
10.12 Stock Purchase Agreement, dated Incorporated by reference to
June 30, 1997 between Registrant Exhibit 10.3 to the 6/30/97
and Wise Partners L.P. Form 10-QSB
10.13 Stock Purchase Agreement, dated Incorporated by reference to
December 31,1997 between Registrant Exhibit 10.6 of the Schedule
and Wise Partners L.P. 13D filed on behalf of
Jonathan L. Steinberg on
January 13, 1998
10.14 Stock Purchase Agreement, dated Incorporated by reference to
June 26, 1998 between Registrant Exhibit 10.3 to the 6/30/98
and Wise Partners L.P. Form 10-Q
10.15+ Form of 1991 Stock Option Plan of Incorporated by reference to
Registrant Exhibit 10.13 to the Form
S-18
10.16+ Form of 1993 Stock Option Plan of Incorporated by reference to
Registrant Exhibit 4.2 to the
Registrant's Registration
Statement on Form S-8
(File No. 33 72266)
10.17+ Form of 1996 Performance Equity Incorporated by reference to
Plan of Registrant Exhibit 10.43 to the Form
10-KSB for the year ended
December 31, 1995 ("1995 Form
10-KSB")
10.18+ Form of 1996 Management Incentive Incorporated by reference to
Plan of Registrant Exhibit 4.10 to the
Registrant's Registration
Statement on Form S-8
(File No. 333-17697)
10.19 Trademark License Agreement dated Incorporated by reference to
June 19, 1992 between Registrant Exhibit 10.25 to the Form
and the American Association of 10-KSB for the year ended
Individual Investors, Inc. December 31, 1992 ("1992 Form
10-KSB")
10.20+ Form of Stock Option Agreement, Incorporated by reference to
dated May 9, 1997 between Registrant Exhibit 10.4 to the 6/30/97
and each of Jonathan Steinberg, Form 10-QSB
Robert Schmidt, Scot Rosenblum,
and Michael Kaplan
10.21+ Agreement dated as of November 19, Filed herewith
1998 between Jonathan Steinberg
and the Registrant
10.22+ Stock Option Agreement between Incorporated by reference to
Registrant and Brette Popper Exhibit 10.2 to the 9/30/98
dated September 14, 1998 Form 10-Q
10.23+ Stock Option Agreement between Incorporated by reference to
Registrant and Gregory Barton Exhibit 10.4 to the 9/30/98
dated September 14, 1998 Form 10-Q
10.24+ Employment Agreement between Incorporated by reference to
Registrant and Brette Popper Exhibit 10.1 to the 9/30/98
dated September 11, 1998 Form 10-Q
10.25+ Employment Agreement between Incorporated by reference to
Registrant and Gregory Barton Exhibit 10.3 to the 9/30/98
dated July 21, 1998 Form 10-Q
10.26 Form of Partnership Agreement for Incorporated by reference to
WisdomTree Associates, L.P. Exhibit 10.37 to the Form
10-KSB for the year ended
December 31, 1994 ("1994 Form
10-KSB")
10.27 WisdomTree Capital Advisors, LLC Incorporated by reference to
Agreement dated November 1, 1995 Exhibit 10.38 to the 1994
Form 10-KSB
10.28 Agreement between WisdomTree
Offshore L.T.D. and WisdomTree Incorporated by reference to
Capital Management, Inc. and Exhibit 10.39 to the 1994
WisdomTree Capital Advisors, LLC Form 10-KSB
dated December 1, 1995
10.29 Office sublease, dated December 8, Incorporated by reference to
1995, between Porter Novelli, Inc. Exhibit 10.41 to the 1995
and the Registrant Form 10-KSB
10.30 Office sublease, dated January Incorporated by reference to
1996 between VCH Publishers, Inc. Exhibit 10.42 to the 1995 Form
and the Registrant 10-KSB
10.31 Lease, dated November 30, 1998 Filed herewith
between Registrant and 125 Broad
Unit C LLC
10.32 Office Lease, Dated January 10, Incorporated by reference to
1994, between 333 7th Ave. Realty Exhibit 10.22 to the Form
Co. and the Registrant 10-KSB for the year ended
December 31, 1993
11 Computation of (Loss) Income Per Filed herewith
Share
21 Subsidiaries of the Registrant Filed herewith
23.1 Consent of Independent Auditors- Filed herewith
Deloitte & Touche LLP
23.2 Consent of Independent Auditors- Filed herewith
Ernst & Young LLP
27 Financial Data Schedule Filed only with electronic
submission on Form 10-K in
accordance with EDGAR
requirement
99 Risk Factors Filed herewith
+ Management contract or compensatory plan or arrangement required to be filed
as an Exhibit to this Form 10-K.
(b) Reports on Form 8-K
During the Registrant's fourth fiscal quarter, the Registrant filed a
Current Report on form 8-K dated December 14,1998, reporting under Item 5
the sale of shares of the Registrant's Series A Preferred Stock.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INDIVIDUAL INVESTOR GROUP, INC.
Date: March 30, 1999
By: /s/ Jonathan L. Steinberg
Jonathan L. Steinberg
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/ Jonathan L. Steinberg Chief Executive Officer March 30, 1999
- -------------------------- and Director
Jonathan L. Steinberg
/s/ Brette E. Popper President and Chief March 30, 1999
- --------------------- Operating Officer
Brette E. Popper
/s/ Henry G. Clark Vice President Finance March 30, 1999
Henry G. Clark (Principal Financial and
Accounting Officer)
/s/ S. Christopher Meigher Director March 30, 1999
- --------------------------
S. Christopher Meigher
/s/ Bruce L. Sokoloff Director March 30, 1999
- ----------------------
Bruce L. Sokoloff
/s/ Peter M. Ziemba Director March 30, 1999
--------------------
Peter M. Ziemba
EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into as of the 8th day of October,
1998 ("Agreement"), by and between Individual Investor Group, Inc., a Delaware
corporation ("Corporation"), and Henry Clark ("Indemnitee"):
WHEREAS, highly competent persons recently have become more reluctant
to serve publicly-held corporations as directors, officers, or in other
capacities, unless they are provided with better protection from the risk of
claims and actions against them arising out of their service to and activities
on behalf of such corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties related to indemnification have increased the difficulty
of attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation ("Board") has
determined that the inability to attract and retain such persons is detrimental
to the best interests of the Corporation's stockholders and that such persons
should be assured that they will have better protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Corporation
to obligate itself contractually to indemnify such persons to the fullest extent
permitted by applicable law so that such persons will serve or continue to serve
the Corporation free from undue concern that they will not be adequately
indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of
Article VIII of the By-laws of the Corporation, and Article VIII of the Amended
and Restated Certificate of Incorporation of the Corporation and any resolutions
adopted pursuant thereto and shall neither be deemed to be a substitute therefor
nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee is willing to serve and to take on additional
service for or on behalf of the Corporation on the condition that he be
indemnified according to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Corporation and Indemnitee do hereby covenant and agree as
follows:
1 Definitions.
For purposes of this Agreement:
1.1 "Change in Control" means a change in control of the Corporation
occurring after the date hereof of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated under
the Securities Exchange Act of 1934, as amended ("Act"), whether or not the
Corporation is then subject to such reporting requirement provided, however,
that, without limitation, such a Change in Control shall be deemed to have
occurred if after the date hereof (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Corporation representing 20% or more of the combined voting power of the
then outstanding securities of the Corporation without the prior approval of at
least two-thirds of the members of the Board in office immediately prior to such
person attaining such percentage interest; (ii) the Corporation is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board in office immediately
prior to such transaction or event constitute less than a majority of the Board
thereafter; or (iii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board.
1.2 "Corporate Status" means the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Corporation or of any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such person is or was serving at the request of the
Corporation.
1.3 "Disinterested Director" means a director of the Corporation who
is not and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
1.4 "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in a
Proceeding.
1.5 "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five years has been, retained to represent: (i) the Corporation or
Indemnitee in any other matter material to either such party, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Corporation or Indemnitee in an action to determine Indemnitee's rights under
this Agreement.
1.6 "Proceeding" means any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 11 of this Agreement to enforce
his rights under this Agreement.
2 Services by Indemnitee.
Indemnitee agrees to serve as an officer of the Corporation.
Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or any obligation imposed by operation of
law).
3 Indemnification - General.
The Corporation shall indemnify, and advance Expenses to, Indemnitee
as provided in this Agreement to the fullest extent permitted by applicable law
in effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement.
4 Proceedings Other Than Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section if, by reason of his Corporate Status, he is, or is threatened
to be made, a party to any threatened, pending or completed Proceeding, other
than a Proceeding by or in the right of the Corporation. Pursuant to this
Section, Indemnitee shall be indemnified against Expenses, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with any such Proceeding or any claim, issue or
matter therein, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal Proceeding, had no reasonable cause to believe his
conduct was unlawful.
5 Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section if, by reason of his Corporate Status, he is, or is threatened
to be made, a party to any threatened, pending or completed Proceeding brought
by or in the right of the Corporation to procure a judgment in its favor.
Pursuant to this Section, Indemnitee shall be indemnified against Expenses
actually and reasonably incurred by him or on his behalf in connection with any
such Proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation.
Notwithstanding the foregoing, no indemnification against such Expenses shall be
made in respect of any claim, issue or matter in any such proceeding as to which
Indemnitee shall have been adjudged to be liable to the Corporation if
applicable law prohibits such indemnification unless the Court of Chancery of
the State of Delaware, or the court in which such Proceeding shall have been
brought or is pending, shall determine that indemnification against Expenses may
nevertheless be made by the Corporation.
6 Indemnification for Expenses of Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Corporation
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. For the purposes of this Section and without limiting the
foregoing, the termination of any claim, issue or matter in any such Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
7 Indemnification for Expenses as a Witness.
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
8 Advancement of Expenses.
The Corporation shall advance all Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within twenty days after the
receipt by the Corporation of a statement or statements from Indemnitee
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses.
9 Procedure for Determination of Entitlement to Indemnification.
9.1 To obtain indemnification under this Agreement in connection with
any Proceeding, and for the duration thereof, Indemnitee shall submit to the
Corporation a written request, including therein or therewith such documentation
and information as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Corporation shall, promptly upon receipt
of any such request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
9.2 Upon written request by Indemnitee for indemnification pursuant to
Section 9.1 hereof, a determination, if required by applicable law, with respect
to Indemnitee's entitlement thereto shall be made in such case: (i) if a Change
in Control shall have occurred, by Independent Counsel (unless Indemnitee shall
request that such determination be made by the Board or the stockholders, in
which case in the manner provided for in clauses (ii) or (iii) of this Section
9.2) in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee); (ii) if a Change of Control shall not have occurred, (A) by the
Board by a majority vote of a quorum consisting of Disinterested Directors, or
(B) if a quorum of the Board consisting of Disinterested Directors is not
obtainable, or even if such quorum is obtainable, if such quorum of
Disinterested Directors so directs, either (x) by Independent Counsel in a
written opinion to the Board, a copy of which shall be delivered to Indemnitee,
or (y) by the stockholders of the Corporation, as determined by such quorum of
Disinterested Directors, or a quorum of the Board, as the case may be; or (iii)
as provided in Section 10.2 of this Agreement. If it is so determined that
Indemnitee is entitled to indemnification, payment to Indemnitee shall be made
within ten (10) days after such determination. Indemnitee shall cooperate with
the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Corporation
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
9.3 If required, Independent Counsel shall be selected as follows: (i)
if a Change of Control shall not have occurred, Independent Counsel shall be
selected by the Board, and the Corporation shall give written notice to
Indemnitee advising him of the identity of Independent Counsel so selected or
(ii) if a Change of Control shall have occurred, Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board, in which event (i) shall apply), and Indemnitee shall give
written notice to the Corporation advising it of the identity of Independent
Counsel so selected. In either event, Indemnitee or the Corporation, as the case
may be, may, within seven days after such written notice of selection shall have
been given, deliver to the Corporation or to Indemnitee, as the case may be, a
written objection to such selection. Such objection may be asserted only on the
ground that Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 1 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, Independent Counsel so selected
may not serve as Independent Counsel unless and until a court has determined
that such objection is without merit. If, within 20 days after submission by
Indemnitee of a written request for indemnification pursuant to Section 9.1
hereof, no Independent Counsel shall have been selected and not objected to,
either the Corporation or Indemnitee may petition the Court of Chancery of the
State of Delaware, or other court of competent jurisdiction, for resolution of
any objection which shall have been made by the Corporation or Indemnitee to the
other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by such court or by such other person
as such court shall designate, and the person with respect to whom an objection
is so resolved or the person so appointed shall act as Independent Counsel under
Section 9.2 hereof. The Corporation shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with its actions pursuant to this Agreement, and the Corporation
shall pay all reasonable fees and expenses incident to the procedures of this
Section 9.3, regardless of the manner in which such Independent Counsel was
selected or appointed. Upon the due commencement date of any judicial proceeding
or arbitration pursuant to Section 11.1(iii) of this Agreement, Independent
Counsel shall be discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional conduct then
prevailing).
10 Presumptions and Effects of Certain Proceedings.
10.1 If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 9.1 of this
Agreement, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
10.2 If the person, persons or entity empowered or selected under
Section 9 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after receipt
by the Corporation of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) prohibition of such indemnification under
applicable law provided, however, that such 60-day period may be extended for a
reasonable time, not to exceed an additional 30 days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith require(s) such additional time for the obtaining or evaluating of
documentation and/or information relating thereto and provided, further, that
the foregoing provisions of this Section 10.2 shall not apply (i) if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 9.2 of this Agreement and if (A) within 15 days
after receipt by the Corporation of the request for such determination the Board
has resolved to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within 75 days after such
receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within 15 days after such receipt for the purpose of
making such determination, such meeting is held for such purpose within 60 days
after having been so called and such determination is made thereat, or (ii) if
the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 9.2 of this Agreement.
10.3 The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation or, with respect to any criminal
Proceeding, that Indemnitee had reasonable cause to believe that his conduct was
unlawful.
11 Remedies of Indemnitee.
11.1 In the event that (i) a determination is made pursuant to Section
9 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) the determination of indemnification is to be
made by Independent Counsel pursuant to Section 9.2 of this Agreement and such
determination shall not have been made and delivered in a written opinion within
90 days after receipt by the Corporation of the request for indemnification,
(iv) payment of indemnification is not made pursuant to Section 7 of this
Agreement within ten days after receipt by the Corporation of a written request
therefor, or (v) payment of indemnification is not made within ten days after a
determination has been made that Indemnitee is entitled to indemnification or
such determination is deemed to have been made pursuant to Section 9 or 10 of
this Agreement, Indemnitee shall be entitled to an adjudication in an
appropriate court of the State of Delaware, or in any other court of competent
jurisdiction, of his entitlement to such indemnification or advancement of
Expenses. Alternatively, the Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association. Indemnitee shall commence such proceeding
seeking an adjudication or an award in arbitration within 180 days following the
date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 11.1. The Corporation shall not oppose Indemnitee's
right to seek any such adjudication or award in arbitration.
11.2 In the event that a determination shall have been made pursuant
to Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section shall be conducted in all respects as a de novo trial or
arbitration on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination.
11.3 If a determination shall have been made or deemed to have been
made pursuant to Section 9 or 10 of this Agreement that Indemnitee is entitled
to indemnification, the Corporation shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii)
prohibition of such indemnification under applicable law.
11.4 The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section that the procedures
and presumptions of this Agreement are not valid, binding and enforceable and
shall stipulate in any such court or before any such arbitrator that the
Corporation is bound by all the provisions of this Agreement.
11.5 In the event that Indemnitee, pursuant to this Section, seeks a
judicial adjudication of, or an award in arbitration to enforce, his rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Corporation, and shall be indemnified by the
Corporation against, any and all expenses (of the kinds described in the
definition of Expenses) actually and reasonably incurred by him in such judicial
adjudication or arbitration, but only if he prevails therein. If it shall be
determined in such judicial adjudication or arbitration that Indemnitee is
entitled to receive some but less than all of the indemnification or advancement
of expenses sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.
12 Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
12.1 The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the certificate of incorporation or by-laws of the Corporation, any
agreement, a vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or any provision hereof shall
be effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
12.2 To the extent that the Corporation maintains an insurance policy
or policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Corporation or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Corporation, Indemnitee shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director, officer,
employee, agent or fiduciary under such policy or policies.
12.3 In the event of any payment under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Corporation to bring suit to enforce such rights.
12.4 The Corporation shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
13 Duration of Agreement.
This Agreement shall continue until and terminate upon the later of:
(a) ten years after the date that Indemnitee shall have ceased to serve as an
officer of the Corporation, or (b) the final termination of all pending
Proceedings in respect of which Indemnitee is granted rights of indemnification
or advancement of Expenses hereunder and or any proceeding commenced by
Indemnitee pursuant to Section 11 of this Agreement. This Agreement shall be
binding upon the Corporation and its successors and assigns and shall inure to
the benefit of Indemnitee and his heirs, executors and administrators.
14 Severability.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
15 Exception to Right of Indemnification or Advancement of Expenses.
Except as provided in Section 11.5, Indemnitee shall not be entitled
to indemnification or advancement of Expenses under this Agreement with respect
to any Proceeding, or any claim therein, brought or made by him against the
Corporation.
16 Identical Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original but all of which
together shall constitute one and the same Agreement.
17 Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
18 Modification and Waiver.
No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
19 Notice by Indemnitee.
Indemnitee agrees promptly to notify the Corporation in writing upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating any Proceeding or matter which may be
subject to indemnification or advancement of Expenses covered hereunder.
20 Notices.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i) delivered
by hand and receipted for by the party to whom such notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
If to Indemnitee, to:
Henry Clark
277 Handsome Avenue
Sayville, NY 11782
If to the Corporation, to:
Individual Investor Group, Inc.
1633 Broadway, 38th Floor
New York, New York 10019
or to such other address or such other person as Indemnitee or the Corporation
shall designate in writing in accordance with this Section, except that notices
regarding changes in notices shall be effective only upon receipt.
21 Governing Law.
The parties agree that this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
22 Miscellaneous.
Use of the masculine pronoun shall be deemed to include usage of the
feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
INDIVIDUAL INVESTOR GROUP, INC.
By:
Jonathan L. Steinberg
Chief Executive Officer
INDEMNITEE
Henry Clark
EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into as of this 19th day of June,
1996 ("Agreement"), by and between Individual Investor Group, Inc., a Delaware
corporation ("Corporation"), and Peter M. Ziemba ("Indemnitee"):
WHEREAS, highly competent persons recently have become more reluctant
to serve publicly-held corporations as directors, officers, or in other
capacities, unless they are provided with better protection from the risk of
claims and actions against them arising out of their service to and activities
on behalf of such corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties related to indemnification have increased the difficulty
of attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation ("Board") has
determined that the inability to attract and retain such persons is detrimental
to the best interests of the Corporation's stockholders and that such persons
should be assured that they will have better protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Corporation
to obligate itself contractually to indemnify such persons to the fullest extent
permitted by applicable law so that such persons will serve or continue to serve
the Corporation free from undue concern that they will not be adequately
indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of
Article VIII of the By-laws of the Corporation, and Article VIII of the Amended
and Restated Certificate of Incorporation of the Corporation and any resolutions
adopted pursuant thereto and shall neither be deemed to be a substitute therefor
nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee is willing to serve and to take on additional
service for or on behalf of the Corporation on the condition that he be
indemnified according to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Corporation and Indemnitee do hereby covenant and agree as
follows:
1 Definitions. For purposes of this Agreement:
1.1 "Change in Control" means a change in control of the Corporation
occurring after the date hereof of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated under
the Securities Exchange Act of 1934, as amended ("Act"), whether or not the
Corporation is then subject to such reporting requirement provided, however,
that, without limitation, such a Change in Control shall be deemed to have
occurred if after the date hereof (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Corporation representing 20% or more of the combined voting power of the
then outstanding securities of the Corporation without the prior approval of at
least two-thirds of the members of the Board in office immediately prior to such
person attaining such percentage interest; (ii) the Corporation is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board in office immediately
prior to such transaction or event constitute less than a majority of the Board
thereafter; or (iii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board.
1.2 "Corporate Status" means the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Corporation or of any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such person is or was serving at the request of the
Corporation.
1.3 "Disinterested Director" means a director of the Corporation who
is not and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
1.4 "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in a
Proceeding.
1.5 "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five years has been, retained to represent: (i) the Corporation or
Indemnitee in any other matter material to either such party, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Corporation or Indemnitee in an action to determine Indemnitee's rights under
this Agreement.
1.6 "Proceeding" means any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 11 of this Agreement to enforce
his rights under this Agreement.
2 Services by Indemnitee.
Indemnitee agrees to serve as a director of the Corporation.
Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or any obligation imposed by operation of
law).
3 Indemnification - General.
The Corporation shall indemnify, and advance Expenses to, Indemnitee
as provided in this Agreement to the fullest extent permitted by applicable law
in effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement.
4 Proceedings Other Than Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section if, by reason of his Corporate Status (and not in his capacity
as a member of Graubard Mollen & Miller rendering legal services to the
Corporation for compensation), he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding, other than a Proceeding by or
in the right of the Corporation. Pursuant to this Section, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with any such Proceeding or any claim, issue or matter therein, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
5 Proceedings by or in the Right of the Corporation.
Indemnitee shall be entitled to the rights of indemnification provided
in this Section if, by reason of his Corporate Status (and not in his capacity
as a member of Graubard Mollen & Miller rendering legal services to the
Corporation for compensation), he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Corporation to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses actually and reasonably
incurred by him or on his behalf in connection with any such Proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation. Notwithstanding the foregoing,
no indemnification against such Expenses shall be made in respect of any claim,
issue or matter in any such proceeding as to which Indemnitee shall have been
adjudged to be liable to the Corporation if applicable law prohibits such
indemnification unless the Court of Chancery of the State of Delaware, or the
court in which such Proceeding shall have been brought or is pending, shall
determine that indemnification against Expenses may nevertheless be made by the
Corporation.
6 Indemnification for Expenses of Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Corporation
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. For the purposes of this Section and without limiting the
foregoing, the termination of any claim, issue or matter in any such Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
7 Indemnification for Expenses as a Witness.
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
8 Advancement of Expenses.
The Corporation shall advance all Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within twenty days after the
receipt by the Corporation of a statement or statements from Indemnitee
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses.
9 Procedure for Determination of Entitlement to Indemnification.
9.1 To obtain indemnification under this Agreement in connection with
any Proceeding, and for the duration thereof, Indemnitee shall submit to the
Corporation a written request, including therein or therewith such documentation
and information as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Corporation shall, promptly upon receipt
of any such request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
9.2 Upon written request by Indemnitee for indemnification pursuant to
Section 9.1 hereof, a determination, if required by applicable law, with respect
to Indemnitee's entitlement thereto shall be made in such case: (i) if a Change
in Control shall have occurred, by Independent Counsel (unless Indemnitee shall
request that such determination be made by the Board or the stockholders, in
which case in the manner provided for in clauses (ii) or (iii) of this Section
9.2) in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee); (ii) if a Change of Control shall not have occurred, (A) by the
Board by a majority vote of a quorum consisting of Disinterested Directors, or
(B) if a quorum of the Board consisting of Disinterested Directors is not
obtainable, or even if such quorum is obtainable, if such quorum of
Disinterested Directors so directs, either (x) by Independent Counsel in a
written opinion to the Board, a copy of which shall be delivered to Indemnitee,
or (y) by the stockholders of the Corporation, as determined by such quorum of
Disinterested Directors, or a quorum of the Board, as the case may be; or (iii)
as provided in Section 10.2 of this Agreement. If it is so determined that
Indemnitee is entitled to indemnification, payment to Indemnitee shall be made
within ten (10) days after such determination. Indemnitee shall cooperate with
the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Corporation
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
9.3 If required, Independent Counsel shall be selected as follows: (i)
if a Change of Control shall not have occurred, Independent Counsel shall be
selected by the Board, and the Corporation shall give written notice to
Indemnitee advising him of the identity of Independent Counsel so selected or
(ii) if a Change of Control shall have occurred, Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board, in which event (i) shall apply), and Indemnitee shall give
written notice to the Corporation advising it of the identity of Independent
Counsel so selected. In either event, Indemnitee or the Corporation, as the case
may be, may, within seven days after such written notice of selection shall have
been given, deliver to the Corporation or to Indemnitee, as the case may be, a
written objection to such selection. Such objection may be asserted only on the
ground that Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 1 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, Independent Counsel so selected
may not serve as Independent Counsel unless and until a court has determined
that such objection is without merit. If, within 20 days after submission by
Indemnitee of a written request for indemnification pursuant to Section 9.1
hereof, no Independent Counsel shall have been selected and not objected to,
either the Corporation or Indemnitee may petition the Court of Chancery of the
State of Delaware, or other court of competent jurisdiction, for resolution of
any objection which shall have been made by the Corporation or Indemnitee to the
other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by such court or by such other person
as such court shall designate, and the person with respect to whom an objection
is so resolved or the person so appointed shall act as Independent Counsel under
Section 9.2 hereof. The Corporation shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with its actions pursuant to this Agreement, and the Corporation
shall pay all reasonable fees and expenses incident to the procedures of this
Section 9.3, regardless of the manner in which such Independent Counsel was
selected or appointed. Upon the due commencement date of any judicial proceeding
or arbitration pursuant to Section 11.1(iii) of this Agreement, Independent
Counsel shall be discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional conduct then
prevailing).
10 Presumptions and Effects of Certain Proceedings.
10.1 If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 9.1 of this
Agreement, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
10.2 If the person, persons or entity empowered or selected under
Section 9 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after receipt
by the Corporation of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) prohibition of such indemnification under
applicable law provided, however, that such 60-day period may be extended for a
reasonable time, not to exceed an additional 30 days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith require(s) such additional time for the obtaining or evaluating of
documentation and/or information relating thereto and provided, further, that
the foregoing provisions of this Section 10.2 shall not apply (i) if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 9.2 of this Agreement and if (A) within 15 days
after receipt by the Corporation of the request for such determination the Board
has resolved to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within 75 days after such
receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within 15 days after such receipt for the purpose of
making such determination, such meeting is held for such purpose within 60 days
after having been so called and such determination is made thereat, or (ii) if
the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 9.2 of this Agreement.
10.3 The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation or, with respect to any criminal
Proceeding, that Indemnitee had reasonable cause to believe that his conduct was
unlawful.
11 Remedies of Indemnitee.
11.1 In the event that (i) a determination is made pursuant to Section
9 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) the determination of indemnification is to be
made by Independent Counsel pursuant to Section 9.2 of this Agreement and such
determination shall not have been made and delivered in a written opinion within
90 days after receipt by the Corporation of the request for indemnification,
(iv) payment of indemnification is not made pursuant to Section 7 of this
Agreement within ten days after receipt by the Corporation of a written request
therefor, or (v) payment of indemnification is not made within ten days after a
determination has been made that Indemnitee is entitled to indemnification or
such determination is deemed to have been made pursuant to Section 9 or 10 of
this Agreement, Indemnitee shall be entitled to an adjudication in an
appropriate court of the State of Delaware, or in any other court of competent
jurisdiction, of his entitlement to such indemnification or advancement of
Expenses. Alternatively, the Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association. Indemnitee shall commence such proceeding
seeking an adjudication or an award in arbitration within 180 days following the
date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 11.1. The Corporation shall not oppose Indemnitee's
right to seek any such adjudication or award in arbitration.
11.2 In the event that a determination shall have been made pursuant
to Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section shall be conducted in all respects as a de novo trial or
arbitration on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination.
11.3 If a determination shall have been made or deemed to have been
made pursuant to Section 9 or 10 of this Agreement that Indemnitee is entitled
to indemnification, the Corporation shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii)
prohibition of such indemnification under applicable law.
11.4 The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section that the procedures
and presumptions of this Agreement are not valid, binding and enforceable and
shall stipulate in any such court or before any such arbitrator that the
Corporation is bound by all the provisions of this Agreement.
11.5 In the event that Indemnitee, pursuant to this Section, seeks a
judicial adjudication of, or an award in arbitration to enforce, his rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Corporation, and shall be indemnified by the
Corporation against, any and all expenses (of the kinds described in the
definition of Expenses) actually and reasonably incurred by him in such judicial
adjudication or arbitration, but only if he prevails therein. If it shall be
determined in such judicial adjudication or arbitration that Indemnitee is
entitled to receive all of the indemnification or advancement of expenses
sought, the expenses incurred by Indemnitee in connection with such judicial
adjudication or arbitration shall be appropriately prorated.
12 Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
12.1 The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the certificate of incorporation or by-laws of the Corporation, any
agreement, a vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or any provision hereof shall
be effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
12.2 To the extent that the Corporation maintains an insurance policy
or policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Corporation or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Corporation, Indemnitee shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director, officer,
employee, agent or fiduciary under such policy or policies.
12.3 In the event of any payment under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Corporation to bring suit to enforce such rights.
12.4 The Corporation shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
13 Duration of Agreement.
This Agreement shall continue until and terminate upon the later of:
(a) ten years after the date that Indemnitee shall have ceased to serve as a
director of the Corporation, or (b) the final termination of all pending
Proceedings in respect of which Indemnitee is granted rights of indemnification
or advancement of Expenses hereunder and or any proceeding commenced by
Indemnitee pursuant to Section 11 of this Agreement. This Agreement shall be
binding upon the Corporation and its successors and assigns and shall inure to
the benefit of Indemnitee and his heirs, executors and administrators.
Severability.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
14 Exception to Right of Indemnification or Advancement of Expenses.
Except as provided in Section 11.5, Indemnitee shall not be entitled
to indemnification or advancement of Expenses under this Agreement with respect
to any Proceeding, or any claim therein, brought or made by him against the
Corporation.
15 Identical Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original but all of which
together shall constitute one and the same Agreement.
16 Headings.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
17 Modification and Waiver.
No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
18 Notice by Indemnitee.
Indemnitee agrees promptly to notify the Corporation in writing upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating any Proceeding or matter which may be
subject to indemnification or advancement of Expenses covered hereunder.
19 Notices.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i) delivered
by hand and receipted for by the party to whom such notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
If to Indemnitee, to:
Peter M. Ziemba
85 Todd Road
Katonah, New York 10536
If to the Corporation, to:
Individual Investor Group, Inc.
1633 Broadway, 38th Floor
New York, New York 10019
or to such other address or such other person as Indemnitee or the Corporation
shall designate in writing in accordance with this Section, except that notices
regarding changes in notices shall be effective only upon receipt.
20 Governing Law.
The parties agree that this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
21 Miscellaneous.
Use of the masculine pronoun shall be deemed to include usage of the
feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
INDIVIDUAL INVESTOR GROUP, INC.
By:
Jonathan L. Steinberg
Chief Executive Officer
INDEMNITEE
Peter M. Ziemba
EXHIBIT 10.21
[COMPANY LETTERHEAD]
As of November 19, 1998
Mr. Jonathan Steinberg
Dear Mr. Steinberg:
The Board of Directors of Individual Investor Group, Inc. ("Company")
has authorized the Company to amend the Stock Option Agreement, dated as of May
9, 1997, between the Company and you ("Stock Option Agreement") to reduce the
stated exercise price of all options evidenced thereunder to $1.25 per share,
conditioned upon your agreement that all options evidenced thereby shall not
become exercisable, except as otherwise provided by Section 3 of the Stock
Option Agreement, until May 19, 1999.
This letter, together with the Stock Option Agreement as hereby amended,
constitutes the entire agreement between you and the Company concerning the
subject matter hereof, and supersedes all prior undertakings and agreements,
oral or written, with respect to the subject matter hereof and may not be
contradicted by evidence of any prior or contemporaneous agreement. Except as
expressly set forth herein, the terms and provisions of the Stock Option
Agreement shall remain unchanged and continue in full force and effect.
Very truly yours,
INDIVIDUAL INVESTOR GROUP, INC.
By:
---------------------------
Gregory Barton
Vice President of Business and
Legal Affairs and General Counsel
Agreed:
- -------------------------
Jonathan Steinberg
EXHIBIT 10.31
125 BROAD UNIT C LLC
C/O THE WITKOFF GROUP LLC
220 E. 42ND STREET, 26TH FLOOR
NEW YORK, NEW YORK 10017
November 30, 1998
Individual Investor Group, Inc.
1633 Broadway
New York, New York 10019
Re: Lease dated November 30, 1998 between 125 Broad Unit C LLC ("Landlord")
and Individual Investor Group, Inc. ("Tenant") for premises known as the
entire 14th floor (the "Demised Premises") of the building located at
125 Broad Street, New York, New York
Gentlemen:
In consideration of your executing the lease referred to above (the
"Lease"), we hereby agree to assume your obligation with respect to the payment
of base rent due under the Lease ("Base Rent") due for the period commencing on
the Base Rent Commencement Date (as defined in the Lease) through and including
March 31, 1999 (the "Inducement Period").
We will pay to you an amount equal to the Base Rent for the Inducement
Period indicated above at least ten days prior to the date on which the payment
of Base Rent is payable by you pursuant to the Lease. Your obligation to pay
Base Rent pursuant to Article 4 of the Lease during the Inducement Period is
hereby expressly conditioned on your receipt of the amount due pursuant to this
Letter Agreement. To the extent that you do not receive from us the full amount
due pursuant to this Letter Agreement with respect to any month during the
Inducement Period for any reason whatsoever (including, without limitation in
the event that you are in default of any of your obligations under the Lease),
you shall have no obligations to pay the Base Rent payable by you pursuant to
the Lease with respect to such month.
Any terms used in this Letter Agreement and not otherwise defined
shall have the meanings set forth in the Lease.
While this Letter Agreement is in effect, the terms of this letter
shall be disclosed to any mortgagee.
If the foregoing correctly reflects our understanding, please sign and
return four (4) copies of this Letter Agreement to the undersigned.
Very truly yours,
125 BROAD UNIT C LLC
By:/s/Steven C. Witkoff
Name: Steven C. Witkoff
Title: Managing Member
ACCEPTED AND AGREED:
INDIVIDUAL INVESTOR GROUP, INC.
By: /s/ Henry G. Clark
Name: Henry G. Clark
Title: Vice President Finance
EXECUTION COPY
LEASE
125 BROAD UNIT C LLC
a New York
limited liability company (LANDLORD)
AND
INDIVIDUAL INVESTOR GROUP, INC.,
a Delaware corporation (TENANT)
COMMERCIAL UNIT C
THE 125 BROAD CONDOMINIUM
125 BROAD STREET
NEW YORK, NEW YORK
Table of Contents
Article Page
1. DEFINITIONS AND BASIC PROVISIONS. 3
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2. LANDLORD'S AUTHORITY; PREMISES; TERM . 11
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3. RENTABLE AREA. 11
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4. BASE RENT 12
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5. ADDITIONAL RENT -ESCALATIONS. 12
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6. LATE CHARGE. 23
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7 LANDLORD'S WORK. 24
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8 LANDLORD'S OBLIGATIONS -UTILITIES AND SERVICES. 30
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9. USE. 38
---
10. COMPLIANCE WITH LAWS. 39
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11. REPAIRS 40
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12. ALTERATIONS BY TENANT. 43
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13. INSPECTIONS 46
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14. SIGNS 46
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15. BUILDING DIRECTORY 47
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16. INSURANCE; WAIVER OF SUBROGATION 47
--------------------------------
17. TENANT'S EQUIPMENT. 49
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18. NON-LIABILITY AND INDEMNIFICATION. 50
---------------------------------
19. ASSIGNMENT AND SUBLETTING. 53
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20. SUBORDINATION AND ATTORNMENT 58
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21. ACCESS; CHANGE IN FACILITIES 60
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22. RULES AND REGULATIONS 61
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23. DAMAGE OR DESTRUCTION 62
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24. EMINENT DOMAIN 64
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25. CONDITIONS OF LIMITATION 66
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26. REMEDIES 68
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27. SURRENDER OF PREMISES 71
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28. BROKERAGE 72
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29. TENANT ESTOPPEL CERTIFICATES 72
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30. LANDLORD ESTOPPEL CERTIFICATES 72
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31. NOTICES 73
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32. JOINT AND SEVERAL LIABILITY 73
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33. PERSONAL LIABILITY 73
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34. ENVIRONMENTAL MATTERS 74
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35. ARBITRATION 76
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36. SECURITY AREA 77
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37. NO RECORDING 77
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38. INTENTIONALLY DELETED 78
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39. SECURITY DEPOSIT 78
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40. MISCELLANEOUS 79
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41. THE LOWER MANHATTAN PLAN 84
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42. ROOF RIGHTS 86
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EXHIBITS
Exhibit A Legal Description of the Land
Exhibit B Location Map of Premises
Exhibit C Building Standards
Exhibit D Building Rules and Regulations
Exhibit E Cleaning Specifications for the Premises
Exhibit F Overtime HVAC Procedure
Exhibit G Landlord's Work
Exhibit H List of Approved Contractors
Exhibit I Lower Manhattan Plan Application
Exhibit J Form of Tenant Estoppel Certificate
Exhibit K HVAC Specifications
LEASE
THIS LEASE ("LEASE") entered into as of the 30 day of November, 1998,
between 125 BROAD UNIT C LLC, a New York limited liability company, with an
office c/o The Witkoff Group LLC, 220 E. 42nd Street, New York, New York 10017
("Landlord") and INDIVIDUAL INVESTOR GROUP, INC. a Delaware corporation, with an
office from the Lease Commencement Date though but not including the Occupancy
Date at 1633 Broadway, New York, New York 10019 and from the Occupancy Date
forward at 125 Broad Street, New York, New York 10004 ("Tenant").
FUNDAMENTAL LEASE PROVISIONS
Landlord shall lease the Premises to Tenant, and Tenant shall let
the Premises from Landlord, pursuant to the following Fundamental Lease
Provisions:
Premises: The entire rentable area of the 14th
floor of the Building as shown on the
floor plan attached hereto as Exhibit B.
Rentable Area of Premises: 35,000 rentable square feet.
Lease Commencement Date: The date of execution and delivery
of this Lease from Landlord to Tenant.
Term: The period of years (or any portion
thereof) commencing on the Lease
Commencement Date and ending, unless
otherwise terminated in accordance with
the terms hereof, on the Expiration Date.
Base Rent Commencement Date: The Lease Commencement Date.
Base Rent From the Base Rent
Commencement Date through
and including the Expiration
Date, $997,500 per annum,
payable in twelve (12) equal
monthly installments
of $83,125.
Tenant's Proportionate Share: 20.399%
Tenant Improvement Allowance: $175,000 (plus $10,000 if Tenant
installs an ADA compliant bathroom on the
14th floor of the Building).
Security Deposit: Letter of credit in the amount of
$332,500, as such amount may be reduced
in accordance with Article 39 hereof.
Permitted Use: General office use and uses ancillary
thereto consistent with the Class A
nature of the Building such as a
kitchenette and a computer room.
Tenant's Notice Address/Contact: Prior to the Occupancy Date:
Individual Investor Group, Inc.
1633 Broadway
New York, New York 10019
Attn: Chief Executive Officer
Telephone: (212) 843-2777
Telecopy: (212) 843-2791
with a copy to
Battle Fowler LLP
75 East 55th Street
New York, New York
Attn: Bradley A. Kaufman, Esq.
Telephone: (212) 856-6874
Telecopy: (212) 856-7811
From the Occupancy Date forward:
Individual Investor Group, Inc.
125 Broad Street, 14th Fl.
New York, New York
Attn: Chief Executive Officer
Telephone:*
Telecopy:*
*To be delivered by Tenant to Landlord
within ten (10) days of receipt of such
numbers by Tenant.
with a copy to
Battle Fowler LLP
75 East 55th Street
New York, New York
Attn: Bradley A. Kaufman, Esq.
Telephone: (212) 856-6874
Telecopy: (212) 856-7811
Landlord's Notice Address/Contact: 125 Broad Unit C LLC
c/o The Witkoff Group LLC
220 E. 42nd Street
New York, New York 10017
Attention: Steven C. Witkoff
Telephone: (212) 672-4770
Telecopy: (212) 672-4726
with a copy to:
125 Broad Unit C LLC
The Witkoff Group LLC
220 E. 42nd Street
New York, New York 10017
Attention: James F. Stomber, Jr., Esq.
Telephone: (212) 672-4770
Telecopy: (212) 672-3434
Board of Manager's Notice
Address/Contact: Board of Managers of The Condominium
c/o Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Irvine D. Flinn
Telephone: (212) 558-3921
Telecopy: (212) 558-3006
1. DEFINITIONS AND BASIC PROVISIONS.
1.1 Fundamental Lease Provisions. The Fundamental Lease Provisions set
forth above (the "Fundamental Lease Provisions") shall be read in conjunction
with all other provisions of this Lease applicable thereto. Each reference in
this Lease to any of the Fundamental Lease Provisions shall be construed to
incorporate all of the terms provided for under such provisions. If there is any
conflict between any of the Fundamental Lease Provisions and any other
provisions of this Lease, the latter shall control. The listing in the
Fundamental Lease Provisions of monetary amounts payable by Tenant shall not be
construed to be an exhaustive list of all monetary amounts payable by Tenant
under this Lease.
1.2 Definitions. In addition to other terms defined herein, the
following terms shall have the meanings set forth herein unless the context
otherwise requires:
"AAA" shall mean the American Arbitration Association and its
successors.
"Abatement Application" shall mean Abatement Application as defined in
Section 41(H).
"Actual LMP Benefits" shall mean Actual LMP Benefits as defined in
Section 41(E).
"ADA" shall mean the Americans with Disabilities Act of 1990 as
defined in Section 7.6.
"Additional Rent" shall mean Tenant's Tax Payment and Tenant's
Operating Payment and any and all other sums other than Base Rent due and
payable by Tenant to Landlord under this Lease, including, but not limited to,
Tenant's Tax Payment and Tenant's Operating Payment.
"After-Hours HVAC" shall mean After-Hours HVAC as defined in Section
8.5.
"Alterations" shall mean Alterations as defined in Section 12.1.
"Applicable Laws" shall mean Applicable Laws as defined in Section
34.2(a).
"Approved Contractors" shall mean those contractors listed on Exhibit
H attached hereto and made a part hereof. In addition to those contractors
listed on Exhibit H, Landlord and any Landlord affiliate shall be deemed
Approved Contractors. Landlord reserves the right to amend the list of Approved
Contractors to add new contractors or remove existing contractors at any time
upon five (5) days prior written Notice to Tenant. Tenant reserves the right to
request that additional approved contractors be added to Exhibit H, subject to
the prior written approval of Landlord, not to be unreasonably withheld or
delayed.
"Bankruptcy Code" shall mean the Bankruptcy Code of 1978, as same may
be amended.
"Base Rent" shall mean the Base Rent as set forth in the Fundamental
Lease provisions.
"Base Rent Commencement Date" shall mean the Base Rent Commencement
Date as defined in the Fundamental Lease Provisions.
"Board of Managers" is defined in the Condominium Documents.
"Broker" shall mean Broker as defined in Section 28.1.
"Building" shall mean the building located on the Land and having the
street address 125 Broad Street, New York, New York.
"Building Rules and Regulations" shall mean the rules and regulations
for the Building as set forth in Exhibit D attached hereto and any other
building rules and regulations adopted from time to time by Landlord or the
Board of Managers.
"Building Standards" shall mean the Building Standards for alterations
to the Building as set forth in Exhibit C attached hereto and any other building
standards adopted from time-to-time by Landlord or the Board of Managers.
"Business Hours" shall mean Business Hours as defined in Section 8.3.
"By-Laws" shall mean the By-Laws of the Condominium, as the same may
be amended, restated, supplemented or otherwise modified from time to time in
accordance with the Declaration and the terms and provisions of this Lease.
"Calendar Year" shall mean Calendar Year as defined in Section 5.1(F).
"Common Elements" shall mean those areas and facilities in the
Building designated in the Declaration as Common Elements or Limited Common
elements, as such Common elements or Limited Common Elements may be changed from
time to time.
"Condominium" shall mean the leasehold condominium known as "The 125
Broad Condominium" established by the Declaration.
"Condominium Documents" shall mean the Declaration, the By-Laws, the
Building Rules and Regulations and the Building Standards, as each of the same
may be amended, restated, supplemented or otherwise modified from time-to-time.
"Declaration" shall mean The Declaration of Condominium dated December
23, 1994, recorded in the Office of the Register of The City of New York in New
York County (the "Register's Office") on January 10, 1995, in Reel 2171 at Page
1959, as amended by that certain First Amendment to Declaration dated as of
March 28, 1995, recorded in the Register's Office on April 6, 1995, in Reel 2197
at Page 1306, by that certain Second Amendment to Declaration dated as of
December 30, 1996, recorded in the Register's Office on February 6, 1997, in
Reel 2025 at Page 2419 and by that certain Third Amendment to Declaration dated
as of June 1, 1997, recorded in Reel 2531, Page 0375 and as the same may be
further amended, restated, supplemented or otherwise modified from time to time.
"Department" shall mean Department as defined in Section 41(C).
"Electrical Rates" shall mean Electrical Rates as defined in Section
8.6(d).
"Event of Default" shall mean an Event of Default as defined in
Section 25.1.
"Expiration Date" shall mean 11:59 p.m., New York, New York time on
March 31, ---------------- 2004.
"Force Majeure" shall mean Force Majeure as defined in Section 40.7.
"Further Benefits" shall mean Further Benefits as defined in Section
41(I).
"Further Cooperation" shall mean Further Cooperation as defined in
Section 41(I).
"General Contractor" shall mean the Approved Contractor selected by
Tenant.
"Governmental Authorities" shall mean the United States, the State of
New York, the City of New York and all political subdivisions thereof, and any
agency, department, commission, board, bureau or instrumentality of any of them,
now or hereafter having or claiming jurisdiction over the Premises.
"Ground Lease" shall mean that certain lease dated December 31, 1968,
between John P. McGrath and Sol G. Atlas, as landlord, and Two New York Plaza
Company, as tenant, a memorandum of which was recorded on May 21, 1969, in the
Register's Office, in Reel 140, Page 730, which lease affects certain real
property located in the City, County and State of New York, commonly known as
125 Broad Street, New York, New York, which lease has been amended by the
following agreements: (a) Memorandum of Agreement modifying Lease, dated as of
December 1, 1969, and recorded on March 19, 1970, in the Register's Office in
Reel 168, Page 1219; (b) Memorandum of Modification of Lease with option to
purchase, dated as of June 28,1974, and recorded on July 2, 1974, in the
Register's Office in Reel 318, Page 401; (c) Assignment of Lease to American
Express Company, dated June 28, 1974, and recorded in the Register's office in
Reel 318, Page 410; (d) Assignment of Lease to American Express Company and
American Express International Banking Company, dated March 26, 1976, and
recorded on April 19, 1976, in the Register's Office in Reel 367, Page 80; (e)
Assignment of Partial Interest in Lease to Ardmore Properties, Inc., recorded in
the Register's Office in Reel 585, Page 1881; (f) Assignment of Lease by Ardmore
Properties, Inc. to American Express Company dated June 24, 1982, and recorded
in the Register's Office on June 29, 1982, in Reel 628, Page 1067; (g) Amendment
of Lease by and between Sandra Atlas Bass, John P. McGrath and Arthur Roth, as
Executors under the Last Will and Testament of Sol G. Atlas, deceased, and John
P. McGrath, individually, as lessors, and American Express Company and American
Express International Banking Corporation, as lessees, dated July 1, 1979, and
recorded in the Register's Office on April 1, 1983, in Reel 679, Page 1277; (h)
Assignment of Lease by American Express Company and American Express
International Banking Corporation, as assignors, to Olympia & York 125 Broad
Street Company, as assignee, dated February 1, 1983, and recorded in the
Register's Office on February 3, 1983, in Reel 695, Page 1305 and (i)
Modification Agreement for Ground Lease, dated as of December 28, 1994, among
Sandra Atlas Bass and Robert Zabelle, as Executors, and Lucy McGrath, as
Executrix, as Lessors, and Sullivan & Cromwell, Johnson & Higgins, and Landlord,
as Lessee.
"Hazardous Materials" shall mean Hazardous Materials as defined in
Section 34.5.
"Holdback" shall mean Holdback as defined in Section 7.5.
"Holidays" shall mean Holidays as defined in Section 8.3.
"HVAC" shall mean HVAC as defined in Section 8.1(vi).
"Insurance Requirements" shall mean Insurance Requirements as defined
in Section 10.1.
"Land" shall mean the parcel of land more particularly described in
Exhibit A annexed hereto.
"Landlord" shall mean 125 Broad Unit C LLC, a New York limited
liability company, its successors or assigns.
"Landlord Delay" shall mean any delay that Tenant may encounter in the
prosecution of Tenant's Restoration Work caused by any act, neglect, misconduct,
failure or omission of Landlord, its agents, employees or contractors.
"Landlord Parties" shall mean Landlord Parties as defined in Section
18.1
"Landlord's Approval Criteria" shall mean Landlord's Approval Criteria
as defined in Section 7.2(c).
"Landlord's Restoration Work" shall mean Landlord's Restoration Work
as defined in Section 23.2.
"Landlord's Share" shall mean Landlord's share of the common charges
for the maintenance, repair, replacement, management, operation and use of the
Common Elements as determined in accordance with the provisions of the
Declaration.
"Landlord's Statement" shall mean Landlord's Statement as defined in
Section 5.3(b).
"Landlord's Work" shall mean Landlord's Work as defined in Section
7.1(a).
"Lease Commencement Date" shall mean the date of execution of this
Lease by Landlord and Tenant.
"Lease Year" or "Lease Years" shall mean each twelve (12) month period
beginning on the first day of the calendar month immediately following the month
in which the Base Rent Commencement Date occurs and each twelve (12) month
period thereafter beginning on the anniversary of the first day of the calendar
month immediately following the month in which the Base Rent Commencement Date
occurs provided, however, the first "Lease Year" shall include the number of
days from the Base Rent Commencement Date through the last day of the calendar
month in which the Base Rent Commencement Date occurs.
"Legal Requirements" shall mean Legal Requirements as defined in
Section 10.1.
"Lower Manhattan Plan" shall mean Lower Manhattan Plan as defined
in Section 41(A).
"LMP Abatement Benefits" shall mean LMP Abatement Benefits as defined
in Section 41(C).
"Messenger Center" shall mean the Messenger Center as defined in
Section 8.8.
"Notice" shall mean a Notice as defined in Section 31.1(b).
"Occupancy Date" shall mean the date that Tenant occupies the Premises
for the operation of its business. Tenant agrees to give Landlord Notice within
five (5) days after the Occupancy Date that the Occupancy Date has occurred.
"Operating Expenses" shall mean Operating Expenses as defined in
Section 5.1(E).
"Partnership Tenant" shall mean Partnership Tenant as defined in
Section 40.5.
"Permitted Use" shall mean Permitted Use as defined in the Fundamental
Lease Provisions.
"Premises" shall mean the Premises as defined in the Fundamental Lease
Provisions.
"Prime Rate" shall mean the Prime Rate as defined in Section 6.1.
"Related Corporation" shall mean any natural person, corporation,
partnership, joint venture, association or other business or legal entity which
directly or indirectly controls, is controlled by, or is under common control
with Tenant, but only for such period as such Related Corporation occupies the
portion of the Premises (or the entire Premises, in the case of an assignment)
for any Permitted Use and such Related Corporation continues to qualify as a
Related Corporation under the terms of this Lease. For purposes hereof,
"control" shall be deemed to mean the ability to direct the day to day affairs
of such entity.
"Rentable Area of the Premises" shall mean 35,000 rentable square
feet.
"Rent" shall include Base Rent and all Additional Rent and other sums
required to be paid by Tenant to Landlord under this Lease.
"Rent Inclusion Date" shall mean Rent Inclusion Date as defined in
Section 8.6(b).
"Request for Consent" shall mean Request for Consent as defined in
Section 19.3.
"Roof Rent" shall mean Roof Rent as defined in Section 42.
"Security Area" shall mean Security Area as defined in Section 36.1.
"Security Deposit" shall mean Security Deposit defined in the
Fundamental
Lease Provisions.
"Successor Landlord" shall mean a Successor Landlord as defined in
Section 20.2.
"Superior Landlord" shall mean a Superior Landlord as defined in
Section 20.1.
"Superior Lease" shall mean a Superior Lease as defined in Section
20.1.
"Superior Mortgage" shall mean a Superior Mortgage as defined in
Section 20.1.
"Superior Mortgagee" shall mean a Superior Mortgagee as defined in
Section 20.1.
"Taxes" shall mean Taxes as defined in Section 5.1(G).
"Tenant" shall mean Individual Investor Group, Inc., a Delaware
corporation, and to the extent permitted under this Lease, its successors or
assigns.
"Tenant's Corridor Signs" shall mean Tenant's Corridor Signs as
defined in Section 14.1.
"Tenant Delay" shall mean any delay that Landlord may encounter in the
prosecution of Landlord's Restoration Work caused by any act, neglect,
misconduct, failure or omission of Tenant, its agents, employees or contractors.
"Tenant's Electric Consumption" shall mean Tenant's Electric
Consumption as defined in Section 8.6(b).
"Tenant Improvement Allowance" shall mean Tenant Improvement Allowance
as defined in the Fundamental Lease Provisions.
"Tenant's Furnishings" shall mean Tenant's Furnishings as defined in
Section 7.4(b).
"Tenant's Modifications" shall mean Tenant's Modifications as defined
in Section 7.2(c).
"Tenant's Operating Payment" shall mean Tenant's Operating Payment as
defined in Section 5.3(a).
"Tenant's Plans" shall mean the Tenant's Plans as defined in Section
7.2(c).
"Tenant's Proportionate Share" shall mean the Tenant's Proportionate
Share as defined in the Fundamental Lease Provisions.
"Tenant's Tax Payment" shall mean Tenant's Tax Payment as defined in
Section 5.2(a).
"Tenant's Restoration Work" shall mean Tenant's Restoration Work as
defined in Section 23.3.
"Tenant's Work" shall mean Tenant's Work as defined in Section 7.2(a).
"Term" shall mean the Term as defined in the Fundamental Lease
Provisions.
"Termination Date" shall mean the Termination Date as defined in
Section 19.4.
"Unit" shall mean that certain leasehold condominium unit designated
as Commercial Unit C in the Declaration presently consisting of the C-3 level
and Floors 12 through 16 in the Building.
"Unit Common Area" or "Unit Common Areas" shall mean those areas of
the Unit, whether interior or exterior, open to the public, or all of the
tenants of the Unit and not leased to a particular tenant.
"Year-End Statement" shall mean Year-End Statement as defined in Section
5.3(c).
2. LANDLORD'S AUTHORITY; PREMISES; TERM;2. .
2.1 Landlord is the owner of the condominium unit known as Commercial
Unit C located within the Building in which the Premises sits, and Landlord
represents and warrants that it has full right and authority to lease the
Premises to Tenant and to otherwise enter into this Lease on the terms and
conditions set forth herein.
2.2 Landlord leases to Tenant, and Tenant leases from Landlord, the
Premises, together with all improvements and appurtenances attached thereto or
installed therein.
2.3 The term of this Lease shall commence on the Lease Commencement
Date and end, unless otherwise terminated pursuant to the terms hereof, on the
Expiration Date, both dates inclusive.
3. RENTABLE AREA.
3.1 For the purposes of this Lease the Premises shall consist of
35,000 rentable square feet. The parties have had an opportunity to measure the
Premises and all rentable square footages set forth in this Lease are binding
and conclusive, notwithstanding any subsequent measurement or change in
measurement methodology.
4. BASE RENT
4.1 During the period beginning on the Base Rent Commencement Date to
and including the Expiration Date, the Base Rent for the Premises shall be at
the rate set forth in the Fundamental Lease Provisions for the appropriate
period described therein. All payments of Base Rent shall be payable by Tenant,
in United States dollars, in equal monthly installments as set forth in the
Fundamental Lease Provisions, on or before the first day of each month, in
advance, payable to Landlord or Landlord's agent at the address to which Notices
to Landlord are to be sent hereunder, or such other place as Landlord may from
time to time designate by a Notice, without any prior demand therefor and
without any deductions or set-off whatsoever, except as specifically provided in
this Lease. If the Base Rent Commencement Date or the Expiration Date occurs on
a day other than the first or last day, respectively, of a calendar month, then
the Base Rent for the month in question shall be pro-rated on a per diem basis
based on the number of days in the month in question.
4.2 Tenant shall commence the payment of Base Rent on the Base Rent
Commencement Date.
5. ADDITIONAL RENT - ESCALATIONS. -----------------------------
5.1 For the purposes of this Lease, the following terms shall have the
following meanings:
(A) "Base Operating Expenses" shall mean Operating Expenses for the
1999 calendar year.
(B) "Base Tax Factor" shall mean Taxes for the average of the
1998/1999 and 1999/2000 Tax Years.
(C) "Tax Year" shall mean the twelve (12) month period commencing July
1 of each year, or such other period of twelve (12) months as the fiscal year
for real estate tax purposes in the City of New York.
(D) "Escalation Year" shall mean each calendar year which shall
include any part of the Term from and after January 1, 2000.
(E) "Operating Expenses" shall mean all expenses, costs and
disbursements which Landlord shall pay because of or in connection with the
ownership, management, operation, repair and maintenance of the Unit and, to the
extent such costs, expenses and disbursements are allocable to Landlord, of the
Building and the Common Elements, including, without limitation:
(i) Wages, salaries, disability benefits, pensions, contributions,
hospitalization, retirement plans, all fringe benefits and group insurance and
other indirect expenses respecting employees of Landlord, the Board of Managers
or their respective contractors and agents engaged in the operation, maintenance
and repair of the Unit or the Common Elements (to the extent allocable to
Landlord) up to and including the grade of building manager; uniforms and
working clothes for such parties and the cleaning thereof; expenses imposed upon
Landlord or the Board of Managers pursuant to any requirements of Governmental
Authorities or any collective bargaining agreement with respect to such
employees; worker's compensation insurance, payroll, social security,
unemployment and other similar taxes with respect to such employees;
(ii) All supplies and materials used in the operation, management,
maintenance and repair of the Unit or the Common Elements (to the extent
allocable to Landlord) and provided that Landlord is not separately reimbursed
by other tenants in the Unit for the same (other than reimbursement in the form
of payment for Operating Expenses);
(iii) Fuel expenses for heating, ventilating and air conditioning and
any other utility expenses relating to the Building (to the extent allocable to
Landlord) and the untenantable portions of the Unit;
(iv) Water and sewer rents or charges, however termed;
(v) Cost of operation, maintenance, service, repair and replacement of
the Unit and Building (to the extent allocable to Landlord) systems which
provide heating, ventilating and air conditioning to the Unit and the Building.
(vi) Cost of repairs, maintenance and replacement of heating,
ventilating and air conditioning equipment installed by Landlord or the Board of
Managers and located inside the on-floor heating, ventilating and air
conditioning machinery rooms excluding therefrom any supplemental heating,
ventilating and air conditioning equipment installed by Tenant servicing the
Premises;
(vii) Cost of all maintenance and service for the Unit Common Areas
and Common Elements (to the extent allocable to Landlord) and the equipment
therein, including but not limited to, security, metal, all Unit Common Area and
Common Element (to the extent allocable to Landlord) elevators and elevator cab
maintenance (whether or not such elevator services the Premises), lobby and
interior and exterior plaza maintenance, lobby decoration and display, removal
of snow, ice and debris, cleaning services, trash removal, Unit Common Areas and
Common Elements (to the extent allocable to Landlord) landscape maintenance and
interior and exterior window repairs, replacements and cleaning;
(viii) Fire, extended coverage, special extended coverage, owner's
protective, and other casualty coverage, boiler and machinery, sprinkler,
apparatus, public liability and umbrella liability and property damage, rent or
rental value and plate glass insurance and any other insurance which Landlord or
the Board of Managers may deem necessary or which is required by any mortgagee
of the Unit and/or the Building;
(ix) Maintenance of the exterior of the Unit and the Building (to the
extent allocable to Landlord), including interior and exterior window repairs,
replacements and cleaning, and improvements which are appropriate for the
continued operation of the Unit and the Building in a Class A manner but
excluding repairs and general maintenance paid by the proceeds of insurance or
by Tenant or other third parties;
(x) Rental (or depreciation) of equipment used in cleaning and
maintenance;
(xi) Painting and customary and seasonal decoration of non-tenant
areas;
(xii) A management fee payable to the manager of the Unit (not to
exceed three percent (3%) of all revenue received from the Unit) and management
fees for the Building (to the extent allocable to Landlord);
(xiii) Cost of maintenance, operation and inspection of any sprinkler
system and alarm system;
(xiv) Cost of extermination service administered in the Unit, the
Building and general office areas of tenants (but not any kitchen, cafeteria or
special
food preparation areas) for rodent and pest control;
(xv) The cost of any additional services not provided to the Unit and
the Building at the commencement of the Term but thereafter provided by Landlord
or the Board of Managers in order to comply with Legal Requirements;
(xvi) Electricity for the operation of elevators, Unit and Building
systems (not otherwise provided directly to or otherwise chargeable to tenants,
but including certain convenience outlets on each floor of the Unit and the
Building and any voltage loss resulting from the supply of electricity to the
Unit and the Building) and for lighting of Unit Common Areas and the Common
Elements (to the extent allocable to Landlord);
(xvii) Sales, excise and other taxes imposed upon the services,
materials or expenses enumerated herein;
(xviii) Rental charges, including base rent and additional rent, for
the office of the Unit manager, Building manager and Board of Managers (to the
extent allocable to Landlord) and their respective staffs located within the
Building and all the cost of all utilities consumed therein; and
(xiii) Such other expenses, costs and disbursements paid or incurred
by Landlord and the Board of Managers (to the extent allocable to Landlord) in
the operation, maintenance and management of the Unit and the Building in a
Class A manner.
In addition to the foregoing costs, charges and expenses, the
following shall also be deemed to be included as an Operating Expense:
(i) Cost of operation, maintenance, service, repair and replacement of
the Unit and Building systems which provide heating, ventilating and air
conditioning to the Premises during Business Hours; and
(ii) Cost of repairs, maintenance and replacement of heating,
ventilating and air conditioning equipment installed by Landlord or the Board of
Managers for the purpose of providing HVAC to the Premises during Business
Hours.
"Operating Expenses" shall be deemed not to include the following:
(i) After-Hours HVAC, the cost of which shall be Additional Rent;
(ii) Electricity provided to the Premises by Landlord, the cost of
which shall be billed directly to Tenant under Section 8.6 as Additional Rent;
(iii) Real estate brokerage and leasing commissions incurred by
Landlord in connection with the leasing of the Unit;
(iv) Wages, salaries or other compensation or benefits paid to any
persons above the grade of building manager;
(v) Expenditures for capital improvements except that Operating
Expenses shall include the cost during the Term, as amortized by Landlord over
the useful life of the capital improvement, of (x) expenditures for capital
improvements for equipment used in cleaning, maintenance and providing Unit and
Common Element (to the extent allocable to Landlord) services and for equipment
which in Landlord's (or the Board of Manager's) reasonable opinion reduces any
component cost included in Operating Expenses, and (y) expenditures for capital
improvements required by Governmental Authorities;
(vi) Costs of repairs or replacements incurred by reason of fire or
other casualty or by the exercise of the right of eminent domain, to the extent
to which Landlord is compensated therefor through proceeds of insurance or
condemnation awards or otherwise;
(vii) Advertising and promotional expenditures incurred by Landlord
for the Unit;
(viii) Legal fees incurred in negotiations or disputes with tenants of
the Unit or prospective tenants for the Unit and other legal and auditing fees,
other than legal and auditing fees incurred (x) in connection with the
maintenance, management and operation of the Unit, Land and/or Building (to the
extent allocable to Landlord) or (y) in connection with the preparation of
statements required pursuant to this Article 5 or (z) in connection with any
assessment reduction challenge, appeal or other contest by Landlord or the Board
of Managers (to the extent allocable to Landlord) to reduce Taxes or any other
component of Operating Expenses;
(ix) Depreciation and amortization of the Unit and the Building,
except that Operating Expenses shall include annual depreciation and
amortization of capital improvements (x) for equipment used in cleaning,
maintenance and providing Unit or Building services and for equipment which in
Landlord's or the Board of Managers' reasonable opinion reduces any component
cost included in Operating Expenses (provided that the amount of principal and
interest included in Operating Expenses in any Calendar Year shall not exceed
the reduction in the component cost of Operating Expenses resulting from such
capital improvements in such Calendar Year), and (y) required by Governmental
Authorities;
(x) Expenses for preparing, renovating or redecorating space to be
occupied by tenants as part of their demised premises or for tenants renewing
their leases;
(xi) Expenses incurred for services which are not provided to Tenant
but which are provided to other tenants of the Unit;
(xi) Taxes;
(xii) Debt service on any mortgage encumbering the Unit, the Land or
Building;
(xiii) All costs incurred due to violation by Landlord of the terms
and conditions of this Lease or the gross negligence or willful misconduct of
Landlord during Landlord's use and operation of the Unit (but not including the
use and operation of space within the Unit of other tenants within the Unit);
(xiv) The cost of supplies and services provided by subsidiaries and
affiliates of Landlord in excess of the costs generally charged by independent
suppliers or contractors in similar types of buildings;
(xv) Compensation or benefits provided to clerks, attendants, or other
persons in commercial concessions operated by Landlord;
(xvi) Any costs, fines, or penalties incurred due to violation by
Landlord of any governmental rule or authority;
(xvii) Any charge for Landlord's income tax, excess profit tax,
franchise tax, or like tax on Landlord's business and tax penalties incurred as
a result of Landlord's negligence, inability or unwillingness to make payments
and/or to file any income tax or informational returns when due;
(xviii) Costs incurred in the removal, encapsulation, replacement of
asbestos or PCB's (as defined by Applicable Laws in effect on the Lease
Commencement Date) in the Unit or Premises;
(xix) Costs arising from Landlord's charitable or political
contributions except for costs related to business improvement districts or
civic associations having similar activities or goals;
(xx) Cost of complying with Applicable Laws, including the ADA, in the
Unit (excluding the costs of complying with Applicable Laws in the Premises
which is covered in Section 7.6 hereof) in effect on the Lease Commencement Date
but not the costs of complying with any amendments or modifications to such laws
effective after the Lease Commencement Date; and
(xxi) All categories of costs or costs of services not included in
Base Operating Expenses, provided, that, such categories of Operating Expenses
may be added to the Operating Expenses provided that the first year such
categories or services are applicable to the Building or Unit, the cost is
included in the Base Operating Amount.
In computing Operating Expenses, Landlord shall include only those
expenses, costs and disbursements which Landlord and the Board of Managers has
paid or become obligated to pay because of or in connection with the ownership,
management, operation, repair and maintenance of the Unit, the Building and
Land, in a manner consistent with the standards of Class A office buildings, all
of which shall be subject to the foregoing exclusions from Operating Expenses
set forth in this Section 5.1(E). There shall be credited as a deduction to
Operating Expenses all amounts collected from specific tenants of the Unit and
the Building (to the extent allocable to Landlord) to the extent the amount
billed to such tenant and subsequently collected were included in Operating
Expenses. Operating Expenses shall be net only and for that purpose shall be
deemed reduced by the amount of all reimbursements, recoupments, payments,
discounts, credits, reductions, allowances or the like actually received by
Landlord in connection with Operating Expenses; provided, however, that Landlord
shall include in Operating Expenses the reasonable costs and expenses, if any,
incurred by Landlord in obtaining such reimbursements, recoupments, payments,
discounts, credits, reductions, allowances or the like; provided, further,
however, Landlord shall have no obligation to take any action to receive such
reimbursement, recoupment, payment, discount, credit, reduction, allowance or
the like.
If during all or part of any Lease Year, (i) less than 95% of the
leasable space of the Unit)(and/or where appropriate as reasonably determined by
Landlord, the Building) is occupied by tenants or occupants and/or (ii) a tenant
or occupant of any leasable space of the Unit or the Building, in lieu of having
Landlord or the Board of Managers perform any work or service, the cost of
which, if performed by Landlord of the Board of Managers, would have been
includable in Operating Expense, itself performs the same or causes the same to
be performed, then the Operating Expenses for such Lease Year shall be increased
to reflect the Operating Expenses that would have been payable had the Unit or
the Building been 95% occupied throughout such Lease Year or had Landlord or the
Board of Managers performed such work or services, as the case may be.
(F) "Calendar Year" shall mean each calendar year, commencing with the
calendar year in which the Lease Commencement Date occurs, and each subsequent
calendar year in which any part of the Term falls, through and including the
calendar year in which the Term expires.
(G) "Taxes" shall mean all real estate taxes and/or payments in lieu
of real estate taxes, business improvement district taxes and assessments,
special or otherwise, levied or assessed upon the Taxable Property. Should the
City of New York, the State of New York, or any political subdivision thereof,
or any other Governmental Authority having jurisdiction over the Taxable
Property (i) impose a tax, assessment, charge or fee, in substitution (whether
in whole or in part) for such real estate taxes or payments in lieu of real
estate taxes, or (ii) impose an income or franchise tax or a tax on rents in
substitution (whether in whole or in part) for such real estate taxes, all such
taxes, assessments, charges or fees shall be deemed to constitute Taxes
hereunder. Taxes shall not include any inheritance, estate, succession,
transfer, gift, franchise, net income or capital stock tax imposed against
Landlord.
(H) "Taxable Property" means the Unit, the Common Elements appurtenant
thereto (but only to the extent of the Landlord's Share with respect thereto),
and other interest of Landlord as owner of the Unit in the Building and the
Land, and all rights, privileges and interests appurtenant thereto.
5.2 (a) If Taxes payable in any Tax Year falling wholly or partially
within the Term shall be in such amount as shall constitute an increase above
the Base Tax Factor, Tenant shall pay as Additional Rent for such Tax Year a sum
("Tenant's Tax Payment") equal to Tenant's Proportionate Share of such excess.
Tenant's Tax Payment for each Tax Year shall be due and payable in twelve (12)
equal monthly installments on the first day of each and every month during each
Tax Year and shall be set forth in the first instance in a Landlord's Statement
(hereinafter defined) given to Tenant. If a Landlord's Statement is furnished to
Tenant after the commencement of a Tax Year in respect of which such Landlord's
Statement is rendered, Tenant shall, within thirty (30) days thereafter, pay to
Landlord an amount equal to the amount of any underpayment of Tenant's Tax
Payment with respect to such Tax Year and, in the event of any overpayment,
Landlord shall either pay to Tenant, or, at Tenant's election, credit against
subsequent payments of Base Rent and Additional Rent under this Lease the amount
of Tenant's overpayment. If there shall be any increase in Taxes for any Tax
Year, whether during or after such Tax Year, or if there shall be any decrease
in the Taxes for any Tax Year during such Tax Year, Landlord may furnish a
revised Landlord's Statement for such Tax Year, and Tenant's Tax Payment for
such Tax Year shall be adjusted and paid or credited or refunded, as the case
may be, substantially in the same manner as provided in the preceding sentence.
If during the Term, Taxes are required to be paid (either to the appropriate
taxing authorities or as tax escrow payments to the Superior Landlord or the
Superior Mortgagee), in full or in monthly, quarterly, or other installments
(but no more frequently than monthly) on any other date or dates than as
presently required, then Tenant's Tax Payments shall be correspondingly
accelerated or revised so that said Tenant's Tax Payments are due at least
thirty (30) days prior to the date payments are due to the taxing authorities or
the Superior Landlord or the Superior Mortgagee. If Landlord makes an early
payment or prepayment of Taxes entitling Landlord to a discount and if Tenant
shall have paid Tenant's Tax Payment to Landlord with respect to such discounted
Taxes in advance of Landlord's early payment or prepayment, then Tenant shall be
entitled to Tenant's Proportionate Share of such discount. In addition, if any
tax exemption or abatement relating to all or part of the Land applies generally
to real property located in Downtown Manhattan (as opposed to resulting from a
specific exemption or abatement program related to the specific acts of Landlord
or of any tenant), then Tenant shall be entitled to Tenant's Proportionate Share
of such abatement or exemption. Otherwise, the benefit of any discount for any
early payment or prepayment of Taxes, as well as any tax exemption or abatement
relating to all or any part of the Land, shall accrue solely to the benefit of
Landlord and such discount or exemption shall not be subtracted from Taxes. (b)
If the real estate tax fiscal year of The City of New York shall be changed at
any time after the date hereof, any Taxes for such fiscal year, a part of which
is included within a particular Tax Year and a part of which is not so included,
shall be apportioned on the basis of the number of days in such fiscal year
included in the particular Tax Year for the purposes of making the computations
under this Section.
(c) If Landlord shall receive a refund of Taxes for any Tax Year,
Landlord shall, at Landlord's election, either credit Tenant's Proportionate
Share of such refund against subsequent payments of Additional Rent under this
Lease, or pay Tenant's Proportionate Share of the refund to Tenant, in either
case, after deducting from such refund the reasonable costs and expenses
incurred by Landlord in obtaining such refund. Nothing herein shall obligate
Landlord to file any application or institute any proceeding seeking a reduction
in Taxes or assessed valuation. Tenant agrees to reasonably cooperate with
Landlord in prosecuting any such reduction.
(d) Tenant's Tax Payment and any credits with respect thereto as
provided in this Section shall be made as provided in this Section regardless of
the fact that Tenant may be exempt, in whole or in part, from the payment of any
taxes by reasons of Tenant's diplomatic or other tax exempt status or for any
other reason whatsoever.
(e) In the event of a termination of this Lease, any Additional Rent
under this Section shall be paid or adjusted within thirty (30) days after
submission of Landlord's Statement. Except to the extent that overpayments made
by Tenant under this Section 5.2 may be credited against Base Rent as herein
provided, in no event shall Base Rent ever be reduced by operation of this
Section, and the rights and obligations of Landlord and Tenant under the
provisions of this Section with respect to any Additional Rent shall survive the
termination of this Lease.
(f) Each Landlord's Statement furnished by Landlord with respect to
Tenant's Tax Payment shall be accompanied by a copy of the real estate tax bill
for the Tax Year referred to therein, but Landlord shall have no obligation to
deliver more than one such copy of the real estate tax bill in respect of any
Tax Year.
5.3 (a) For each Calendar Year during the Term, Tenant shall pay a sum
equal to Tenant's Proportionate Share of the amount by which Operating Expenses
for such Calendar Year exceed Base Operating Expenses ("Tenant's Operating
Payment").
(b) Landlord shall furnish to Tenant, prior to the commencement of
each Calendar Year, a Landlord's Statement ("Landlord's Statement") setting
forth Tenant's Tax Payment and Landlord's estimate of Tenant's Operating Payment
for such Calendar Year, and the method of calculation of Tenant's Operating
Payment for such Calendar Year. Tenant shall pay to Landlord on the first day of
each month during such Calendar Year an amount equal to one-twelfth (1/12th) of
Landlord's estimate of Tenant's Operating Payment for such Calendar Year. If,
however, Landlord shall furnish any such estimate for a Calendar Year subsequent
to the commencement thereof, then (x) until the first day of the month following
the month in which such estimate is furnished to Tenant, Tenant shall pay to
Landlord on the first day of each month an amount equal to the monthly sum
payable by Tenant to Landlord under this Section in respect of the last month of
the preceding Calendar Year; (y) promptly after such estimate is furnished to
Tenant or together therewith, Landlord shall give notice to Tenant stating
whether the installments of Tenant's Operating Payment previously made for such
Calendar Year were greater or less than the installments of the Tenant's
Operating Payment to be made for such Calendar Year in accordance with such
estimate, and (i) if there shall be a deficiency Tenant shall pay the amount
thereof within thirty (30) days after demand therefor, or (ii) if there shall
have been an overpayment, Landlord shall, at Landlord's option, promptly either
refund to Tenant the amount thereof or credit the amount thereof against
subsequent payments of Additional Rent under this Lease; and (z) on the first
day of the month following the month in which such estimate is furnished to
Tenant, and monthly thereafter throughout the remainder of such Calendar Year,
Tenant shall pay to Landlord an amount equal to one-twelfth (1/12th) of Tenant's
Operating Payment shown on such estimate. Landlord may at any time or from time
to time furnish to Tenant a revised Landlord's Statement of Landlord's estimate
of Tenant's Operating Payment for such Calendar Year; and in such case, Tenant's
Operating Payment for such Calendar Year shall be adjusted and paid or refunded,
as the case may be, substantially in the same manner as provided in the
preceding sentence.
(c) Within one hundred twenty (120) days after the end of each
Calendar Year Landlord shall furnish to Tenant a statement (the "Year-End
Statement") for such Calendar Year of Tenant's Operating Payment then in effect.
Each such Year-End Statement for any Calendar Year in which Tenant's Operating
Payment is due shall be accompanied by a computation of Operating Expenses for
the Unit and the Building (to the extent allocable to Landlord) from which
Landlord shall make the computation of Operating Expenses hereunder. If the
Landlord's Statement shall show that the sums paid by Tenant under this Section
exceeded Tenant's Operating Payment for such Calendar Year, Landlord shall, at
Landlord's option, either refund to Tenant the amount of such excess within
thirty (30) days after the furnishing of the Landlord's Statement to Tenant or
credit the amount of such excess against subsequent payments of Additional Rent
under this Lease; and if the Landlord's Statement for such Calendar Year shall
show that the sums so paid by Tenant were less than Tenant's Operating Payment
for such Calendar Year, Tenant shall pay the amount of such deficiency within
thirty (30) days after demand therefor.
(d) In the event of a termination of this Lease, any Additional Rent
under this Section shall be paid or adjusted within thirty (30) days after
submission of Landlord's Statement. In no event shall Base Rent ever be reduced
by operation of this Section and the rights and obligations of Landlord and
Tenant under the provisions of this Section with respect to any Additional Rent
shall survive the termination of this Lease.
5.4 If the Commencement Date or the Expiration Date shall occur on a
date other than January 1 or December 31, respectively, any Additional Rent
under this Section for the Escalation Year in which such Commencement Date or
Expiration Date shall occur shall be apportioned in that percentage which the
number of days in the period from the Lease Commencement Date to December 31 or
from January 1 to the Expiration Date, as the case may be, both inclusive, shall
bear to the total number of days in such Escalation Year.
5.5 The computations of Additional Rent under this Article are
intended to constitute a formula for an agreed rental adjustment, may or may not
include all costs and expenses incurred by Landlord with respect to the Unit and
the Building and accordingly may or may not constitute an actual reimbursement
to Landlord for costs and expenses paid by Landlord with respect to the Unit and
the Building.
5.6 Landlord shall keep, for a period of two years (2) after any
Year-End Statement required under this Article 5 is delivered to Tenant, either
at the Building or at Landlord's offices in New York, New York, records in
reasonable detail of the Operating Expenses for the period covered by such
statement, and Landlord shall permit Tenant, at Tenant's expense, within the
aforesaid two (2) years, to examine, copy and audit such records during business
hours at reasonable times following reasonable Notice at the office where
Landlord is keeping such records. After the expiration of the aforesaid two (2)
years, Landlord shall have no obligation to retain such records.
5.7 Each Year-End Statement shall be conclusive and binding upon
Tenant unless within one (1) year after its receipt of any such statement Tenant
shall, by Notice to Landlord, dispute the correctness of said statement. If
Tenant fails to send the aforesaid Notice within one (1) year after its receipt
of the Year-End Statement, Tenant shall be conclusively deemed to have accepted
such Year-End Statement and waived any right to audit such Year-End Statement or
Landlord's records pertaining thereto. Any such Notice shall set forth in
reasonable detail the basis of such dispute. If Tenant timely delivers the
aforesaid Notice, Tenant shall be entitled to audit Landlord's books and records
pertaining to the matters indicated in the aforesaid Notice which audit shall be
conducted in accordance with the provisions of Section 5.9 hereof. Pending the
determination of any such dispute by agreement or otherwise, Tenant shall pay
Tenant's Tax Payment and Tenant's Operating Payment in accordance with the
applicable Year-End Statement, and such payment shall be without prejudice to
Tenant's position. Tenant shall pay to Landlord any unpaid amounts within thirty
(30) days after the resolution of any dispute regarding same.
5.8 Landlord shall have the right at any time within two (2) years
from the delivery of any Year-End Statement to Tenant to render revised Year-End
Statements to Tenant reflecting any adjustment in Operating Expenses, Tenant's
Operating Payment and/or Tenant's Tax Payment. Within thirty (30) days after
Tenant's receipt of any Year-End Statement, Tenant shall pay Landlord any
deficiency, or receive a credit from Landlord for any excess against any ensuing
payments hereunder, in either case, between the amount due pursuant to the
revised Year-End Statement and the Year-End Statement to which such revised
Year-End Statement pertains. Each such revised Year-End Statement shall be
conclusive and binding upon Tenant unless within one (1) year after its receipt
of any such revised statements Tenant shall, by Notice to Landlord, dispute the
correctness of said revised statement. If Tenant fails to send the aforesaid
Notice within one (1) year after its receipt of the revised Year-End Statement,
Tenant shall be conclusively deemed to have accepted such revised Year-End
Statement and waived any right to audit such revised Year-End Statement or
Landlord's records pertaining thereto. Any such Notice shall set forth in
reasonable detail the basis of such dispute. If Tenant timely delivers the
aforesaid Notice, Tenant shall be entitled to audit Landlord's books and records
pertaining to the matters indicated in the aforesaid Notice which audit shall be
conducted in accordance with the provisions of Section 5.9 hereof. Pending the
determination of any such dispute by agreement or otherwise, Tenant shall pay
Tenant's Tax Payment and Tenant's Operating Payment in accordance with the
applicable revised Year-End Statement, and such payment shall be without
prejudice to Tenant's position. Tenant shall pay to Landlord any unpaid amounts
within thirty (30) days after the resolution of any dispute regarding same.
5.9 If Tenant has timely exercised its option to conduct an audit set
forth in Section 5.7 or 5.8 above, Tenant shall have a period of ninety (90)
days in which to complete such audit. Such audit shall take place in Landlord's
offices in New York City, or in such other offices in New York City as
designated by Landlord, and must be performed by a "Big-5" accounting firm.
Landlord agrees to give Tenant in a reasonably timely fashion access to such
documents in Landlord's possession or control which are necessary to conduct the
audit including, without limitation work papers prepared by Landlord's certified
public accountants, canceled checks, invoices, and such other documents as may
be reasonably required and necessary to conduct the audit. Tenant shall have the
right to receive the documentation described above for up to the two (2)
previous years of the Term (Tenant shall not be entitled to any documentation
for the years prior to the Term) in order to have a basis for comparison of
Operating Expenses, but such two (2) years shall not be subject to audit. Any
dispute over Operating Expenses that is not settled within Tenant's aforesaid
ninety (90) day period, or such longer period as the parties may mutual agree
may, at the option of either party, be submitted to arbitration in accordance
with Article 35 of this Lease. In the event that it is ultimately determined in
accordance with the arbitration procedures set forth in Article 35 hereof or by
mutual agreement of the parties hereto, that a refund of any Additional Rent
paid by Tenant in respect of Operating Expenses exceeds five percent (5%) of the
total so paid by Tenant for such year, Landlord shall refund such overcharge to
Tenant as a credit against future installments of Base Rent and Additional Rent
in accordance with Section 5.2 hereof, and Landlord shall also pay interest on
the overcharge at the Prime Rate from the date that the Year-End Statement or
revised Year-End Statement (whichever is in dispute) was delivered to Tenant
until the date Landlord has reimbursed Tenant for such overcharge.
5.10 Each and every payment required under this Article 5, as well as
any other amounts which are owed by Tenant to Landlord under this Lease, whether
requiring lump sum payments or constituting projected monthly amounts in
addition to the Base Rent, shall for all purposes be treated and considered as
Additional Rent. The failure of Tenant to pay such Additional Rent as and when
due without demand shall have the same effect as failure to pay any installment
of Base Rent and shall afford Landlord all remedies provided in the Lease
therefor.
5.11 Both Tenant's obligation for payment of Additional Rent for any
period during the Term of the Lease and Landlord's obligation to refund excess
payments on account of Additional Rent for any period during the Term of the
Lease shall survive the expiration or any sooner termination of the Lease,
subject, however, to the provisions of Section 5.8 hereof.
5.12 Notwithstanding anything herein to the contrary, neither Tenant's
Tax Payment nor Tenant's Operating Payment shall accrue, nor shall any of the
same be due and owing to Landlord on or before January 1, 2000.
6. LATE CHARGE.
6.9 Any installment of Base Rent or Additional Rent hereunder that is
not paid within five (5) days of the date when due hereunder shall bear interest
from the due date until paid at the rate of three percent (3%) over the then
"Prime Rate" as published in The Wall Street Journal or The New York Times for
ninety (90) day unsecured loans to major corporate borrowers (unless such rate
is usurious as applied to Tenant, in which case the highest rate permitted by
law shall apply) (the "Prime Rate"). Notwithstanding the foregoing, Tenant shall
be entitled to one (1) five (5) day Notice of late payment of Base Rent or
Additional Rent in any twelve (12) month period before Landlord shall be
entitled to impose the foregoing late fee on Tenant. In the event the Prime Rate
is no longer the reference rate for ninety (90) day unsecured loans to major
corporate borrowers, the replacement or successor reference rate to the Prime
Rate shall be used in determining the interest to be paid by Tenant pursuant to
this Section.
6.10 In the event at any time during the Term of this Lease, Landlord
expends any sums on behalf of Tenant, the repayment of which are the sole
responsibility of Tenant, whether or not Tenant receives Notice of the
expenditure of such funds by Landlord, Landlord shall be entitled to receive
from Tenant, as Tenant agrees to pay, in addition to such sums, interest thereon
calculated at the Prime Rate from the date Landlord expends such sums until same
are repaid to Landlord.
7 LANDLORD'S WORK.
7.1 (a) Landlord shall have no obligation to perform any work in, or
make any alterations or improvements to, the Premises other than to deliver the
space in "as is", vacant and broom clean condition, subject to latent defects in
the Premises, except for the work set forth on Exhibit G hereto ("Landlord's
Work"). Landlord agrees to perform all Landlord's Work diligently, in a
workmanlike manner and in accordance with Applicable Law.
(b) Landlord shall complete Landlord's Work in accordance with a
schedule for completion to be mutually and reasonably agreed upon by Tenant and
Landlord. Landlord and Tenant shall simultaneously perform the work to be
completed by each and Landlord and Tenant agree to cooperate with each other in
order that each of Landlord and Tenant may complete the work to be performed by
such party in an expeditious manner. Landlord agrees to provide Tenant with Form
ACP-5 with respect to the Premises within ten (10) Business Days of receipt of
all Tenant's Plans necessary to obtain such Form ACP-5 as reasonably determined
by Landlord.
7.2 (a) For the purposes of this Lease, the term "Tenant's Work" shall
mean the work, installations, improvements and equipment described in Tenant's
Plans. Tenant shall perform, or cause to be performed, Tenant's Work subject to
the provisions of this Article 7 and substantially in accordance with Tenant's
Plans, as modified by Change Orders approved by Landlord pursuant to Article 7.
(b) Tenant shall be responsible for all fees, costs and expenses
associated with Tenant's Work including but not limited to all costs associated
with the architectural and engineering plans required for Tenant's Work. Tenant
shall also be responsible for compliance with all federal, state and local fire
safety and life safety codes as part of all Tenant's Work.
(c) Tenant may not connect into any portion of the Building located
outside of the Premises or to any pipes, shafts or conduits outside of the
Premises without the prior written consent of Landlord.
(d) Tenant, at its expense, shall prepare and submit to Landlord
complete drawings (including sprinkler, HVAC, electrical, plumbing, telephone,
reflected ceiling and partition plans) for Tenant's Work ("Tenant's Plans").
Tenant's Plans shall consist of six (6) copies, including one (1) sepia. Within
ten (10) days after receipt by Landlord of Tenant's Plans, Landlord (i) shall
give its approval thereto or (ii) if Landlord reasonably believes that Tenant's
Plans may adversely affect the structure or systems of the Building or do not
comply with all Legal Requirements, Insurance Requirements or any provision of
this Lease (the "Landlord's Approval Criteria"), Landlord shall request
revisions or modifications ("Tenant's Modifications") to Tenant's Plans in order
that same shall comply with Landlord's Approval Criteria. If Landlord fails to
respond to Tenant's request to consent to Tenant's Plans within the foregoing
ten (10) day period, then Tenant shall be required to submit an additional five
(5) day notice to Landlord stating to Landlord in bold fourteen point type that
Tenant's Plans will be deemed approved by Landlord if Landlord fails to respond
to Tenant within five (5) days of Landlord's receipt of such second notice. If
Landlord fails to respond to such the foregoing five (5) day notice, then
Tenant's Plans will be deemed approved for all purposes in this Lease as if
Landlord had originally given its consent thereto. Within seven (7) days
following Tenant receipt of the Tenant's Modifications, Tenant shall revise the
Tenant's Plans and submit Tenant's Modifications to Landlord for Landlord's
approval. Within seven (7) days following receipt by Landlord of such Tenant's
Modifications, Landlord shall give its written approval thereto or shall request
further revisions or modifications therein (but relating only to the extent that
Tenant's Modifications fail to comply with Landlord's Approval Criteria). If
Landlord fails to respond to Tenant within the foregoing seven (7) day period,
then Tenant shall be required to give Landlord an additional seven (7) day
notice stating in bold faced fourteen point type that if Landlord fails to
respond to such seven (7) day notice, then Tenant's Modifications shall be
deemed approved as if Landlord had originally given its consent thereto. If
Tenant fails to respond to such seven (7) The preceding two sentences shall be
implemented repeatedly until Landlord gives its written approval to the Tenant's
Modifications. Within seven (7) days after Landlord has given its written
approval of Tenant's Plans, as modified by Tenant's Modifications, Tenant shall
transmit to Landlord six (6) copies (and one (1) sepia) of final Tenant's Plans
which incorporate Tenant's Modifications. Without prejudice to the foregoing
approval rights of Landlord over Tenant's Plans and Tenant's Modifications,
Landlord agrees to execute and deliver to Tenant within five (5) Business Days
of request therefor all building permit applications presented by Tenant to
Landlord which are necessary to complete Tenant's Work and which are properly
completed.
(e) Tenant shall retain an Approved Contractor to construct Tenant's
Work in a good and workmanlike manner. In the event Landlord determines that the
employment of the Approved Contractor may, or during the course of Tenant's
prosecution of Tenant's Work does, interfere with construction performed by, or
cause any conflict or labor dispute with, any other contractor, subcontractor or
other party engaged in the construction, maintenance or operation of the
Building or the Premises, Landlord shall have the right to require the
replacement of the Approved Contractor with another contractor selected by
Tenant and approved by Landlord. Landlord may disapprove any contractors and
subcontractors for cause or if such contractors or subcontractors are or become
known to be a probable cause of a labor dispute relating to the Building or the
Premises or in the event any such approved contractor changes its nature or
method of operation to an extent which is reasonably deemed by Landlord to be
inconsistent with the then standards of the Building. Landlord and any Landlord
affiliate shall have the right to bid on any Tenant's Work and Tenant agrees to
timely notify Landlord of the bid process (provided, that, Tenant shall not be
obligated to accept Landlord's or Landlord's affiliate's bid).
7.3 (a) Possession of the Premises shall be delivered to Tenant on the
Base Rent Commencement Date.
7.4 (a) Commencing on the Base Rent Commencement Date, provided Tenant
has complied with the provisions of Section 7.2, Tenant shall be permitted to
enter upon the Premises and commence construction of Tenant's Work and may bring
and install into the Premises installations, furniture and equipment necessary
for Tenant's occupancy of the Premises ("Tenant's Furnishings"). Tenant shall
perform such delivery and installation in a manner as to not unreasonably
interfere with Landlord's performance and completion of any other work Landlord
is performing in the Unit (and the Board of Managers is performing in the
Building); provided, however, that at all times the performance and completion
of any work being performed by Landlord and the Board of Managers (and
Landlord's and the Board of Managers' requirements for access to the Building
and the Premises in connection with the performance and completion of such work
by Landlord and the Board of Managers) shall take precedence over the delivery
and installation of Tenant's Work and Tenant's Furnishings. Tenant shall access
the Premises for the delivery and installation of Tenant's Work and Tenant's
Furnishings by way of the Building freight elevators only, and Tenant shall not
be permitted to use the passenger elevators for the delivery to or removal from
the Premises of any Tenant's Furnishings or for any material or supplies
necessary to construct Tenant's Work. Tenant's use of the freight elevators
shall be on a non-exclusive basis and Tenant shall pay for Landlord's providing
such freight elevator service within ten (10) days after Tenant's receipt of an
invoice therefor. Subject to the procedure in the Condominium Documents relating
to freight elevator service, use of the freight elevators shall be supplied to
Tenant only upon twenty-four (24) hours Notice to Landlord and the Board of
Managers in accordance with the procedure set forth in Exhibit F, provided such
use does not interfere with the performance of any work being performed by
Landlord or the Board of Managers. Landlord and the Board of Managers reserve
the right to restrict and regulate the types and amounts of equipment and
installations which may be transported to and from the Premises by means of the
freight elevators. Any such equipment or installations which exceeds the
manufacturer's specifications for such freight elevators shall not be
transported by means of the freight elevators but shall be delivered to and
removed from the Premises by Tenant at Tenant's expense by a material hoist or
hoists maintained by Tenant in accordance with all Legal Requirements and
Insurance Requirements.
(b) Commencing on the Base Rent Commencement Date, Tenant shall pay,
as Additional Rent, the costs of any utilities supplied to the Premises, within
ten (10) days of receipt of an invoice from Landlord.
7.5 (a) Subject to the terms and conditions set forth below, Landlord
shall reimburse Tenant up to a maximum amount of the Tenant Improvement
Allowance for costs incurred by Tenant in connection with Tenant's Work. Tenant
may utilize up to ten percent (10%) of the Tenant Improvement Allowance for
furniture, fixtures and equipment installed in the Premises and for architects
and engineering fees incurred by Tenant in connection with Tenant's Work.
Landlord shall disburse in accordance with this Section 7.5 the Tenant
Improvement Allowance, or portions thereof, from time to time, but not more
often than once in any thirty (30) day period. On or before the first (1st) day
of the calendar month following commencement of Tenant's Work, and on or before
the first (1st) day of each calendar month thereafter until the Tenant
Improvement Allowance shall have been advanced in full, Tenant shall submit to
Landlord an application for payment ("Application for Payment"), on a form
reasonably satisfactory to Landlord, together with waivers of mechanic's liens
(through the date of the last payment made by Landlord to Tenant), the General
Contractor's request for payment including any supporting information therefore,
and all other documents required by Landlord setting forth in complete detail
the items set forth in this Section 7.5. In addition, for each Application for
Payment which includes materials and/or equipment stored at off-Premises storage
locations, Tenant shall furnish to Landlord evidence reasonably satisfactory to
Landlord that title to all such materials and/or equipment has vested in Tenant
free and clear of any security interest, or other encumbrances, and any other
documentation as may be reasonably required by Landlord. Without limiting the
foregoing, Tenant shall submit an affidavit from itself and each contractor
covered by the Application for Payment, in form and substance satisfactory to
Landlord, that shall include the following provisions:
(1) That the General Contractor/subcontractor set forth in the
Application for Payment has been paid in full, in accordance with the
specifications and contract obligations, for all work, labor, materials and
services supplied or performed in connection with said work to the date of the
requisition, and as of said date there are no unpaid claims for any said labor
or materials in connection with the performance of said work except as stated in
Section 7.5(a)(3).
(2) That as the date hereof no amounts are due and no claims have been
made against Tenant or any General Contractor/subcontractor for any unpaid
material or labor with the exception of the following; all of which are for
labor and/or materials provided since the date of the requisition preceding this
requisition, and as to such unpaid claims the Tenant is authorized, at its
option, on behalf of the General Contractor/subcontractor, to make direct
payment to such claimants and charge same to the General
Contractor/subcontractor, e.g.:
Name & Address Item Amount
(3) That Tenant and the General Contractor represent and warrant that
(i) the partial payment then requested to be disbursed has been incurred by
Tenant on account of the Tenant's Work or is justly due on account thereof, (ii)
the materials, supplies and equipment for which such Application for Payment is
being submitted have been installed or incorporated into the Premises or have
been stored at the Premises or at such off-Premises site storage locations as
shall have been approved in writing by Landlord, (iii) the materials, supplies
and equipment are not subject to any liens or encumbrances, (iv) no mechanic's,
laborer's, vendor's, materialman's or other liens have been filed in connection
with the Premises or any of the materials, supplies or equipment incorporated
therein or purchased in connection therewith, and (v) the work which is the
subject of such Application for Payment has been performed in accordance with
the Lease.
(ii) The Application for Payment so approved will include payment on
account of Tenant's Work performed to date, based upon the General Contractor's
application for payment, but not in excess of the amount payable pursuant to the
General Contractor's application for payment.
(iii) On or before the thirtieth (30th) day after Landlord's receipt
of any Application for Payment, together with all backup documentation that
Landlord may request, and provided that all requirements of Section 7.5(a) (and
with respect to the final advance of the Tenant Improvement Allowance, the
requirements of Section 7.5(a)(v)) have been met, the amount certified for
payment, or such lesser amount as Landlord shall have approved, less ten percent
(10%) of such amount which will be retained by Landlord until such work is
substantially completed and five percent (5%) of such amount until the work is
certified as finally completed in accordance with Section 7.5(a)(v) (the
foregoing ten percent (10%) and five percent (5%) amounts shall collectively be
known as the "Holdback"), shall be due and payable by Landlord to Tenant.
(iv) In the event that a dispute shall arise in connection with
payments to be made on any Application for Payment, except as set forth in
Section 7.7 hereof, such disputes shall be submitted to arbitration in
accordance with the procedure set forth in Article 35 of this Lease and this
Lease shall continue in full force and effect.
(v) Upon final completion of the Tenant's Work and Tenant's occupancy
of the Premises for the Permitted Use, Landlord shall not advance the final
portion of the Tenant Improvement Allowance or the Holdback until Tenant submits
a final Application for Payments along with (1) an affidavit that payrolls,
bills for materials and equipment, and other indebtedness connected with
Tenant's Work (less amounts withheld by Landlord) have been paid or otherwise
satisfied, (2) if required by Landlord, other reasonable information
establishing payment or satisfaction of obligations, such as receipts, releases
and final waiver of liens, claims security interests or encumbrances arising out
of this agreement, to the extent and in such form as may be designated by
Landlord, (3) delivery of building department filing documents, permits and
approvals and other reasonable evidence satisfactory to Landlord that the work
is in compliance with all laws, orders and regulations of all Federal, State,
municipal and local governments, departments, commissions and boards and the
orders, rules and regulations of the National Board of Fire Underwriters, and
(4) the completion of an inspection by Landlord confirming that the work set
forth in Tenant's Plans has been completed in accordance with Tenant's Plans and
strictly accordance with the provisions of this Lease. Landlord agrees to
reasonably cooperate with Tenant to assist Tenant in obtaining all licenses and
permits necessary to complete Tenant's Work and Tenant agrees to reimburse
Landlord for Landlord's actual and reasonable out-of-pocket costs incurred in
connection with such cooperation. In the event that any excess Tenant
Improvement Allowance (not including Landlord's payment of $10,000 toward the
installation of an ADA bathroom) remains after the completion of Tenant's Work
and Tenant's compliance with the terms of this Section 7.5(a)(3)(v), Tenant may
apply the excess Tenant Improvement Allowance against future installments of
Base Rent and Additional Rent due under this Lease.
7.6 The parties acknowledge that the Americans with Disabilities Act
of 1990 (42 U.S.C. ss.12101 et seq.) and regulations and guidelines promulgated
thereunder, as all of the same may be amended and supplemented from time to time
(collectively referred to herein as the "ADA") establish requirements for
business operations, accessibility and barrier removal, and that such
requirements may or may not apply to the Unit, Building or the Premises
depending on, inter alia: (i) whether Tenant's business is deemed a "public
accommodation" or "commercial facility", (ii) whether such requirements are
"readily achievable" and (iii) whether a given alteration affects a "primary
function area" or triggers "path of travel" requirements. The parties hereby
agree that: (a) Landlord and the Board of Managers shall be responsible for ADA
Title III requirements in the Unit Common Areas and Common Elements (to the
extent allocable to Landlord), except as provided below, (b) Tenant shall be
responsible for ADA Title III compliance in the Premises, including any
leasehold improvements or other work to be performed in the Premises under or in
connection with this Lease and (c) Landlord may perform, and Tenant shall be
responsible for the reasonable cost of, ADA Title III "path of travel"
requirements triggered solely by alterations performed by Tenant in the
Premises. Tenant shall be solely responsible for requirements under Title I of
the ADA relating to Tenant's employees. Notwithstanding the foregoing, Landlord
agrees to provide Tenant ten thousand dollars ($10,000) toward the installation
of an ADA compliant bathroom on the 14th floor of the Building in accordance
with the provisions of Section 7.5.
7.7 Any dispute arising out of or in connection with this Article
shall be determined by arbitration in accordance with the provisions of Article
35 except if the dispute is of such a nature that it may lead to a mechanic's
lien being filed against the Unit or the Building in which case it will be
settled by the Expedited Rules of Commercial Arbitration of the AAA.
8 LANDLORD'S OBLIGATIONS - UTILITIES AND SERVICES.
8.1 Landlord shall furnish (or exercise all of Landlord's rights under
the Condominium Documents to cause the Board of Managers to furnish) the
following services commencing on the Occupancy Date:
(i) Cleaning services for the Premises, including the exterior and
interior of the windows thereof (subject to Tenant maintaining unrestricted
access to such windows), but excluding any portions of the Premises used for the
storage, preparation, service or consumption of food or beverages, substantially
in accordance with the cleaning specifications annexed hereto as Exhibit E;
(ii) Sewer service and an adequate quantity of water for cleaning and
drinking purposes supplied to the lavatories on the floor on which the Premises
are located (Landlord will also provide Building standard supplies to such
lavatories);
(iii) Maintenance service to the Unit and the Building, so that the
same shall be kept in good order and repair and shall be kept reasonably free
from debris, snow and ice;
(iv) Passenger elevator service during Business Hours (as hereinafter
defined) through not less than four (4) passenger elevators serving the floor on
which the Premises are located and at least one (1) passenger elevator at all
other times, and loading dock service on a first-come, first-serve basis on
Business Days during Business Hours subject to the procedures in the Condominium
Documents relating to such elevator and loading dock service. Subject to the
preceding sentence, Landlord and/or the Board of Managers shall have the right
to change the operation or manner or operating any of the elevators or the
loading dock in the Building and shall have the right to discontinue,
temporarily or permanently, the use of any one or more cars in any of the banks
of elevators,.
(v) Freight elevator service in common with other tenants of the
Building during Business Hours;
(vi) Through the Building heating, air conditioning and ventilation
system (collectively "HVAC"), for distribution through Tenant's ductwork system,
heated, conditioned and outside air during Business Hours in accordance with the
HVAC specifications set forth on Exhibit B to the Declaration which are attached
hereto as Exhibit K. Tenant acknowledges that Landlord's sole obligation
hereunder shall be to bring air to the air distribution source(s) for the
Premises, and that Tenant shall be responsible for the distribution of such air
throughout the Premises by means of the ductwork system installed by Tenant as
part of Tenant's Work. Landlord and Tenant further agree to operate the HVAC
equipment in accordance with its design criteria unless a recognized energy
conservation law, program, guideline, regulation or recommendation promulgated
by any Governmental Authority shall provide for any reduction in operations
below such design criteria in which case such HVAC equipment shall be operated
so as to provide reduced service in accordance with such law, program,
guideline, regulation or recommendation. Landlord represents that, to its
knowledge, the Unit currently is in compliance with applicable Legal
Requirements relating to air quality and Landlord shall be responsible during
the Term for the compliance by the Unit with applicable Legal Requirements
relating to air quality. Notwithstanding the foregoing, however, Landlord shall
not be responsible for compliance with Legal Requirements relating to air
quality to the extent such compliance requires modifications to any Alterations
installed by Tenant (including, without limitation, any installations, air
conditioning systems or ductwork installed by Tenant as part of Tenant's Work),
nor shall Landlord be responsible therefor to the extent that Tenant's
particular manner of use of the Premises causes the Unit not be in compliance
with applicable Legal Requirements relating to air quality;
(vii) Lighting and electricity to the Unit Common Areas and Common
Elements; and
(viii) A security program with respect to ingress to and egress from
the Building; provided, that Landlord will not be required to provide such
security program, but will exercise all rights available to Landlord under the
Condominium Documents to make the Board of Managers provide such security
program. Except as specifically required herein, Landlord shall not be required
to provide any additional security for the Unit beyond what is being provided
for the Building by the Board of Managers. Landlord shall have no obligation to
provide additional security to protect Tenant's property and installations and
Tenant shall procure from Landlord, and Landlord shall supply to Tenant, any
additional security Tenant deems necessary or appropriate at Tenant's sole cost
and expense and Tenant shall pay for the same as Additional Rent within thirty
(30) days of receipt of an invoice therefor. Landlord (for itself and the Board
of Managers) reserves the right to change the operation or manner of operating
any of the security systems currently in place provided that the change does not
unreasonably prevent Tenant from conducting its usual and customary business
within the Premises.
8.2 In addition to the services to be furnished or caused to be
furnished by Landlord in accordance with Section 8.1, Landlord, at Tenant's
expense, shall furnish or cause to be furnished the following additional
services while Tenant is occupying the Premises and while Tenant is not in
default under this Lease:
(i) Cleaning services for the kitchen, cafeteria and other non-office
areas located in the Premises therein; provided, that, Landlord shall wipe-down
the counters tops in the Tenant's kitchenette(s) at no additional charge when
such areas are used for normal day-to-day business operations (as opposed to
catered events or the like for which Tenant will be charged Additional Rent in
accordance with this Section 8.2);
(ii) Removal of non-office standard (such as trash related to catered
events) and other debris from kitchen, cafeteria and other non-office areas of
the Premises at the end of Business Hours;
(iii) Extermination service administered to any kitchen, cafeteria or
special food preparation areas on a regular basis, as determined by Landlord,
for rodent and pest control or, in the event of infestation caused by or
resulting from such areas, as the same may be required, as determined by
Landlord, to eliminate such infestation;
(iv) Relamping of lighting fixtures within the Premises and
replacement of bulbs and ballasts as and when requested by Tenant;
(v) Installation and/or replacement of locks within the Premises and
the supplying of keys therefor as and when requested by Tenant; and
(vi) Subject to and in accordance with the Chilled Water Agreement (as
such term is defined in the Declaration), Landlord, at the request of Tenant,
shall provide (or use all reasonable efforts to cause the Board of Managers to
provide) an amount of up to thirty (30) tons of chilled water for the entire
Premises for use of any supplemental air conditioning units installed in the
Premises by Tenant, at Tenant's sole cost and expense, as part of Tenant's Work
or in accordance with Article 12 hereof. Landlord represents that there is a
valved outlet on the fourteenth (14th) floor of the Building which will enable
Tenant to tap in to the foregoing chilled water supply for the Premises. Tenant,
subject to all of the terms covenants and conditions of Article 12 and Section
8.6 hereof, shall be permitted to install an air-cooled supplemental air
conditioning unit in the Premises that does not require the use of Chilled
Water. During the Term, Tenant shall pay to Landlord for any chilled water
supplied to the Premises for supplemental air-conditioning an amount equal to
Landlord's then established rates for such supplemental air-conditioning. As of
the date of this Lease, Landlord charges (cent)40 per ton of chilled water per
hour of use; provided, that, Landlord reserves the right to increase the amount
charged to Tenant for chilled water so long as the rate is increased for all
other tenants in the Unit and such increases in rates are commercially
reasonable or imposed on Landlord by the Board of Managers or other outside
agency. Tenant shall pay such charges within thirty (30) days after bills are
rendered therefor. Tenant acknowledges that chilled water is presently provided
by 1 New York Plaza in accordance with the Chilled Water Agreement.
(vii) As of the date of this Lease, the Board of Managers provides a
messenger center (the "Messenger Center") in the Building which receives
packages for and on behalf of the tenants in the Building. Tenant shall be
obligated to use the Messenger Center for the receipt of all packages in the
Building and will pay to Landlord a variable monthly fee consistently applied
among all tenants in the Unit based on the number of packages processed for
Tenant in the Messenger Center.
Tenant shall be billed for the services described in sub-paragraphs
(i), (ii) and (vii) above based on invoices delivered by Landlord to Tenant on
not less than a monthly basis and Tenant shall pay, as Additional Rent, the
amount stated in such invoices within thirty (30) days after its receipt
thereof. Notwithstanding anything to the contrary herein, Landlord shall have no
obligation to provide the services described in sub-paragraphs (iii), (iv), (v),
and (vi) above unless Landlord receives a written request for such service or
services from Tenant; provided, however, in the event the Premises contain any
kitchen, cafeteria or special food preparation areas, Landlord may require
Tenant to retain Landlord to provide the services contained in sub-paragraph
(iii) above. In the event Landlord receives such written request from Tenant and
provides such service or services, Tenant shall pay, as Additional Rent, for
Landlord's furnishing of such service or services within thirty (30) days after
its receipt of an invoice therefor.
8.3 Business Hours shall be from 8 a.m. to 6 p.m. Monday through
Friday and from 8:00 a.m. to 1:00 p.m. on Saturdays, in all cases, excluding
Holidays (as hereinafter defined). "Holidays" shall mean those days designated
from time to time as holidays by Local 32B-J and Local 94 or their successor
unions providing services at the Building. Except as otherwise expressly
provided herein, Landlord shall have no obligation to provide any services on
Sundays including, but not limited to, electricity and elevator service.
8.4 Landlord shall provide (or exercise all rights available to
Landlord under the Condominium Documents to cause the Board of Managers to
provide) access to the Premises 24 hours a day, 365 (or 366) days a year.
8.5 If Tenant shall desire at any time other than during Business
Hours HVAC ("After-Hours HVAC"), loading dock or freight elevator service at any
time other than during Business Hours, such service or services shall be
supplied to Tenant only at the request of Tenant made to the Board of Managers
in accordance with Exhibit F to this Lease. Tenant shall pay to Landlord, as
Additional Rent, Landlord's then established charges for the furnishing of such
service or services within thirty (30) days after receipt of an invoice
therefor. Tenant understands that the Board of Managers imposes a minimum of
four (4) hours for freight elevators and loading dock service outside of
Business Hours. The current charge for after-hours freight elevator usage is
$100 per hour, the current charge for loading dock service is $50.00 per hour,
and the current rate for After-Hours HVAC is $200 per hour from October 1-May 31
and $175 per hour from June 1 through and including September 30; provided,
that, Landlord reserves the right to increase the freight elevator, loading dock
and After-Hours HVAC usage charge so long as the rate is increased for all other
tenants in the Unit and such increase is commercially reasonable or imposed upon
Landlord by the Board of Managers or other outside agency. Notwithstanding the
foregoing, Landlord agrees to provide to Tenant sixteen (16) free hours of
freight elevator and loading dock service to Tenant in connection with Tenant's
move-in to the Premises.
8.6 (a) Electric current will be supplied to the Premises by Landlord,
so long as legally permissible in the Building, through presently installed
electrical facilities for Tenant's use of lighting, electrical appliances, air
conditioning systems and equipment as presently exist or as Tenant may be
permitted to install in the Premises (Tenant shall be permitted without
Landlord's prior approval or consent to install equipment ordinarily and
customarily found in an office setting), subject to Landlord's consent which
will not be unreasonably withheld or delayed, except as expressly otherwise
provided in this Article, and Tenant covenants and agrees to purchase the same
from Landlord and to pay for the same as Additional Rent. Tenant's electrical
demand and consumption in the Premises shall be determined by a meter(s) or
submeter(s) installed for the purpose of measuring the same and shall measure
the electric current supplied to the Premises only. There shall be at least one
(1) meter on the floor for Tenant's use, which meter shall be installed by
Landlord at Landlord's sole cost and expense. Landlord hereby represents that
there are 6 submeters in the Premises on the Lease Commencement Date and that
the same are in full working order and condition. If Tenant requires additional
meters, Tenant shall install same at its cost. The charge to Tenant for such
supply of electric current to the Premises shall be one hundred and three
percent (103%) of the sum of: (i) the amount obtained by applying to Tenant's
measured electrical consumption an amount equal to the total of Landlord's
actual electric cost for each kilowatt hour usage for the Unit for the period in
question divided by the total number of kilowatt hours of electricity consumed
in the Unit for such period, (ii) the amount obtained by applying to Tenant's
measured electrical demand the electric rates in Service Classification No. 4-2
of the Consolidated Edison Company of New York, Inc. or any successor thereto or
the electric rates then applicable to Landlord (including any changes in
electrical rates due to deregulation actually incurred or received by Landlord)
and (iii) any surcharges or charges incurred or taxes payable by Landlord in
connection with such electricity consumption or increase or decrease thereof by
reason of fuel adjustment or any substitutions for the utility electric rates
then applicable to Landlord or additions thereto. All such additional meters or
submeters or other related equipment shall be installed by Landlord at Tenant's
sole cost and expense, and Tenant shall pay such costs and expenses as
Additional Rent within thirty (30) days after receipt of an invoice therefor.
Bills shall be rendered monthly, commencing with the first full month following
the Base Rent Commencement Date, the amounts computed from such meter readings
shall be Additional Rent and shall be due and payable, without set-off or
deduction, thirty (30) days after the rendition of such bills. If any tax is
imposed upon Landlord's receipts for the sale or resale of electrical energy to
Tenant, the pro rata share allocable to the electrical energy service received
by Tenant shall be passed on to Tenant to the extent permitted by law. In the
event that any portion of the Premises cannot be metered, Tenant's consumption
of electricity shall be determined based upon an electrical survey as more
particularly described in Section 8.6(b).
(b) Only if required by any Legal Requirement and it is not possible
to supply electricity by metering as set forth in Section 8.6(a), as reasonably
determined by Landlord, electricity may be provided to Tenant on a so-called
"rent inclusion" basis. In such event, Tenant agrees that Section 8.6(a) shall
no longer be applicable, and the Base Rent shall be increased to compensate
Landlord for supplying Tenant with electric current as an additional service as
provided in this Section 8.6(b). In the event that Landlord shall provide
electricity on a rent inclusion basis, Tenant agrees that the Base Rent shall be
increased to compensate Landlord for supplying Tenant with electric current in
the Premises as an additional service based upon the submetered charges for
Tenant's usage for the immediately preceding twelve (12) month period (or if
less than twelve (12) months of the Term shall have elapsed as of the Rent
Inclusion Date (as defined below), such shorter period extrapolated to an annual
amount) commencing on the date on which Landlord is no longer permitted to
supply electricity to the Premises on a submetered basis (such date being herein
referred to as the "Rent Inclusion Date") and continuing until such time as such
sum may be increased as hereinafter provided. Tenant agrees that an electrical
engineer or utility consultant, selected by Landlord, may, from time to time
during the Term, make a survey of the electric lighting and power load by
metering or otherwise to determine Tenant's average monthly electrical energy
consumption in the Premises ("Tenant's Electric Consumption") based upon (i) the
connected load rating of each item consuming electric energy, (ii) Tenant's
usage which shall be determined by multiplying the connected load rating of each
item by the hours of usage as determined by the consultant, and (iii) the actual
Electric Rates (as hereinafter defined) charged to Landlord by Consolidated
Edison Company of New York, Inc. or any successor thereto applicable to
Landlord, inclusive of all surcharges or taxes thereon including any sales tax
as a result of the resale of such energy to Tenant. The findings of such
engineers or consultant as to the proper Base Rent adjustment based on Tenant's
Electric Consumption shall be conclusive and binding upon the parties (subject
to Section 8.6(e) below) and shall be applied to the period after the date of
the survey and any adjustment in Base Rent shall be included in the Base Rent
payable monthly on the first day of each and every month in advance for each
month from the Rent Inclusion Date.
(c) If the Electric Rates (as defined below) on which the initial
determination of said consultant shall be increased or decreased, then the sum
included in Base Rent by reason of this Section shall be increased or decreased
by the same percentage as such change in the Electric Rates, retroactive to the
date of such increase or decrease in such Electric Rates, and the amount payable
from the effective date of such increase to the last day of the month in which
Tenant shall be billed therefor shall be paid within thirty (30) days after
Landlord furnishes Tenant with a statement thereof.
(d) The term "Electric Rates" shall be deemed to mean the rates at
which Landlord purchases electrical energy from the utility supplying electrical
service to the Unit, including any surcharges or charges incurred or taxes
payable by Landlord in connection therewith or in connection with the furnishing
of electrical energy by Landlord on a rent-inclusion basis or increase or
decrease thereof by reason of fuel adjustment or any substitutions for such
Electric Rates or otherwise.
(e) In the event Tenant shall dispute any findings under this Section
8.6 of the engineer or consultant designated by Landlord, Tenant may, within
ninety (90) days after receiving Notice of such findings, designate by Notice to
Landlord an independent engineer or utility consultant to make, at Tenant's sole
cost and expense, another determination of the increased average monthly
electrical consumption or the value to Tenant of the potential additional energy
to be made available to Tenant, as the case may be. If the electrical engineer
or utility consultant selected by Tenant shall determine that such increased
consumption or value, as the case may be, of such electrical energy is less than
as determined by Landlord's engineer or consultant and the two engineers or
consultants are unable to adjust such difference within twenty (20) days after
the determination made by Tenant's engineer or consultant is delivered to
Landlord, the dispute shall be determined by arbitration in accordance with the
provisions of Article 35 of this Lease. Pending a final determination pursuant
to such arbitration however, Tenant shall pay to Landlord for such electrical
energy based on the determination of Landlord's engineer or consultants without
prejudice to Tenant's position; and if it is determined that Tenant has
overpaid, Landlord shall reimburse Tenant for any overpayment at the conclusion
of such arbitration. If Tenant shall not dispute the findings as provided in
this Section, the determination by Landlord's engineer or consultants shall be
deemed final and conclusive.
(f) In the event that electricity is included on a rent inclusion
basis pursuant to Section 8.6(b) and Landlord elects to purchase capital
equipment or make other capital expenditures to reduce Landlord's cost of
electricity, Landlord shall receive the full benefit of such capital
expenditure, and Tenant shall continue to pay Base Rent for electricity, and
such Base Rent shall be calculated as hereinabove described, without regard to
the fact that Landlord has reduced its cost of electricity by virtue of such
capital expenditure, unless such capital expenditure is included in Operating
Expenses and Tenant pays Landlord for Tenant's Proportionate Share of such
capital expenditure pursuant to Section 5.3 hereof, in which event the Base Rent
allocable to the furnishing of electricity by Landlord on a rent inclusion basis
shall be equitably decreased to reflect such reduced cost of electricity to
Landlord.
(g) Tenant's use of electrical energy in the Premises shall never
exceed that portion of the capacity allocable to Tenant of (i) the existing
feeders to the Building or the electricity available to Tenant through then
existing risers or wiring installations to the Premises or (ii) any of the
electrical conductors, machinery and equipment in or otherwise serving the
Premises (in any event, giving due consideration to the needs of existing and
potential tenants using the same risers, wiring installations or other
equipment, as well as to Landlord's electrical needs in connection with the
operating of the Building and the provision of emergency services). Landlord
represents that such facilities shall be capable of providing up to 7 and 1/2
watts per usable square foot (connected load) of electricity to the Premises
exclusive of HVAC. No additional riser or risers or other equipment to supply
Tenant's electrical requirements shall be installed without Landlord's prior
approval, which may be withheld in Landlord's reasonable discretion. If Tenant
requires additional electrical capacity in the future, Landlord will cooperate
with Tenant in order to obtain such additional electrical capacity, at Tenant's
expense. Only conduit complying with Legal Requirements will be allowed. In
order to insure that the electrical capacity of the Building facilities is not
exceeded and to avert possible adverse effect upon the Building's electrical
system, Tenant shall not, without the prior reasonable consent of Landlord, make
or perform or permit any alteration to wiring installations or other electrical
facilities in or serving the Premises. Any additional risers, feeders, or other
equipment 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 reasonable judgment, such increase in
capacity will not interfere with Landlord's present or anticipated future
electrical needs with respect to the Building and/or existing or future tenants
of the Building or cause permanent damage or injury to the Building or entail
excessive or unreasonable alterations or interfere with or disturb other
tenants. Landlord, its agents and engineers and consultants may survey the
electrical fixtures, appliances and equipment in the Premises and Tenant's use
of electrical energy therein from time to time to determine whether Tenant is
complying with its obligations under this Section. The initial survey shall be
at Landlord's cost. The cost of all subsequent surveys shall be borne by the
person requesting such survey. Each increase in the Base Rent under this Section
shall be effective on the date such additional electrical energy is made
available to Tenant.
(h) Landlord reserves the right to terminate the furnishing of
electrical energy to Tenant at any time upon sixty (60) days' prior Notice to
Tenant if Landlord terminates furnishing electricity to all other tenants in the
Unit unless such Notice is not feasible under the circumstances, in which event
Landlord will give Tenant such reasonable notice as is possible if such
termination required by any Legal Requirement. Notwithstanding the foregoing, if
Landlord elects to discontinue providing electricity to Tenant in accordance
with the preceding sentence, Landlord, unless prohibited by any Legal
Requirements, agrees to continue to provide electricity to Tenant in accordance
with the terms of this Lease beyond the sixty (60) days specified in the
preceding sentence so as to provide Tenant a reasonable amount of time to
arrange for an alternative electricity provider to the Premises. If Landlord
shall so discontinue the furnishing of electrical energy, (i) Tenant shall
arrange to obtain electrical energy directly from the utility company furnishing
electrical energy to the Unit, (ii) Landlord shall permit the existing feeders,
risers, wiring and other electrical facilities servicing the Premises to be used
by Tenant for such purpose to the extent that they are available, suitable and
legally permissible, (iii) from and after the effective date of such
discontinuance, Landlord shall not be obligated to furnish electrical energy to
Tenant, and Tenant's obligation to pay electricity as Additional Rent pursuant
to Section 8.6(a) shall cease on such date or, if electricity is then being
provided on a rent-inclusion basis, the Base Rent payable under this Lease shall
be reduced to the amount which would have been then payable as Base Rent, as of
such date but for the adjustments for electrical energy under Section 8.6(b)
above, (iv) this Lease shall otherwise remain in full force and effect and such
discontinuance shall be without liability of Landlord to Tenant, and (v) if
Landlord shall discontinue the furnishing of electrical energy as hereinabove
provided Landlord shall, at Landlord's expense, install at locations in the Unit
selected by Landlord and maintain any and all necessary electrical meter
equipment, panel boards, feeders, risers, wiring and other conductors and
equipment which may be required to obtain electrical energy directly from the
utility supplying the same.
(i) Landlord shall incur no liability whatsoever and it shall not
constitute a termination of this Lease or an eviction (constructive or
otherwise) hereunder should electricity or any other utility become unavailable
from the utility company furnishing electrical energy to the Building, or any
public authority or any other person, firm or corporation, including Landlord,
supplying such utility or due to Force Majeure.
8.7 Landlord shall cause the Unit to be managed as a Class A office
building, consistent with the standards of other Class A office buildings
similar in size and quality in New York, New York. The Unit and the Building may
be managed by an affiliate of Landlord.
8.8 Subject to the provisions of Section 18.2 hereof, if there is a
right in the Condominium Documents for the Board of Managers to interrupt,
curtail, stop or suspend service or operation of the services to be delivered to
Tenant under this Lease, Tenant acknowledges that, notwithstanding anything in
this Lease to the contrary, the terms and provisions of the Condominium
Documents shall control with respect to such right.
9. USE.
9.1 The Premises shall be used solely for the Permitted Use set forth
in the Fundamental Lease Provisions and for no other purposes. Tenant shall not
offer, sell or market any services to other tenants in the Building which
services are in competition with services offered by Landlord to tenants in the
Building and Tenant shall not offer telecommunication services utilizing the
Building, Building systems or equipment or any conduits, or shafts, whether
located within the Premises or outside the Premises, to other tenants in the
Building.
9.2 Tenant shall not use, occupy, suffer or permit the Premises, the
Unit, the Building or any part thereof to be used in any manner, or suffer or
permit anything to be brought into or kept therein, which would (a) make
unobtainable at standard rates from any reputable insurance company authorized
to do business in the State of New York, any fire insurance with extended
coverage or liability, elevator, boiler, umbrella or other insurance, (b) cause,
or be likely to cause, injury or damage to the Unit, the Building or to any
equipment contained therein or on the Premises, (c) constitute a public or
private nuisance, (d) violate any the Condominium Documents (including, but not
limited to, Paragraph 7 of the Declaration) and any certificate of occupancy for
the Unit or the Building, (e) emit objectionable noise, fumes, vibrations, heat,
chilled air, vapors or odors into or from the Unit or Building or the equipment
contained therein, (f) impair or interfere with any of the Unit or Building
services, including the furnishing of electrical energy, or the proper and
economical cleaning, heating, ventilating, air conditioning or other services of
the Unit or Building, the equipment contained therein or the Premises or (g)
violate any Legal Requirement or Insurance Requirement. The restrictions imposed
by this Section, and the application thereof, shall not be limited or modified
by the terms of any other provision of this Lease.
9.3 Tenant or Tenant's assignees, subtenants, employees, agents,
contractors, invitees or licensees shall not do or permit anything to be done in
or about the Premises which will in any way obstruct or interfere with the
rights of other tenants or occupants of the Unit or Building or injure or annoy
them or use or allow the Premises to be used for any purpose which is unlawful,
nor shall Tenant cause, maintain or permit any nuisance in, on or about the
Premises.
9.4 Tenant shall not use or operate any machinery that, in Landlord's
reasonable opinion is, or may be, harmful to the Premises and/or the Building.
10. COMPLIANCE WITH LAWS.
10.1 Tenant, at its sole cost and expense, shall comply with all
requirements of the Ground Lease and Governmental Authorities ("Legal
Requirements") and all requirements of insurance companies providing coverage
for the Unit, Building and/or the Premises or recommendations of the National
Board of Fire Underwriters ("Insurance Requirements") and give Landlord and the
Board of Managers prompt notice of any lack of compliance, except that Tenant
shall have no obligation to pay the costs of any structural or system alteration
of the Premises, the Unit or the Building required solely by reason of a
Permitted Use unless said alteration (a) is necessitated by a condition which
has been otherwise created by, or at the instance of, Tenant, any subtenants or
any other occupant of the Premises, (b) is attributable to Tenant's particular
manner of use, other than a Permitted Use, to which Tenant, any subtenants or
any other occupant of the Premises puts the Premises or any part thereof, or
Tenant's, any subtenant's or any other occupant's of the Premises manner of use
of the Premises, (c) is required by reason of a breach of Tenant's obligations
hereunder, (d) is occasioned, in whole or in part, by any act, omission or
negligence of Tenant or any person claiming by, through or under Tenant, or any
of their assignees, subtenants, employees, agents, contractors, invitees or
licensees, or (e) is necessitated by reason of the failure of Tenant or the
Tenant's Plans to comply with any Legal Requirement, including, without
limitation, the Americans with Disabilities Act of 1990. Any such structural
alteration of the Premises or the Building required as a result of clause (a),
(b), (c), (d) or (e) of the immediately preceding sentence shall be performed by
Landlord, at Tenant's expense, and Tenant shall pay for the same, as Additional
Rent, within thirty (30) days of its receipt of an invoice therefor. Tenant
shall pay all costs, expenses, fines, penalties and damages which may be imposed
upon Landlord, the Board of Managers and/or any mortgagee of the Land and/or the
Building by reason of or arising out of Tenant's failure fully and promptly to
comply with the provisions of this Section.
10.2 Tenant, at its sole cost and expense, after Notice to Landlord
and the Board of Managers, by appropriate proceedings prosecuted diligently and
in good faith, may contest the validity or applicability of any Legal
Requirement or Insurance Requirement, provided that: (a) Landlord shall not be
subject to civil fines, quasi-criminal violations, criminal penalty or
prosecution for a crime, nor shall the Building or the Land, or any part
thereof, be subject to being condemned or vacated, by reason of non-compliance
or otherwise by reason of such contest; (b) such non-compliance or contest shall
not constitute or result in any violation of the terms of any mortgage
encumbering the Unit, Land and/or the Building, or if any such mortgage shall
condition such non-compliance or contest upon the taking of action or furnishing
of security by Landlord or affirmative title insurance coverage preserving the
priority of such mortgage notwithstanding the determination of such
non-compliance or contest, such action shall be taken and such security or such
affirmative title insurance coverage shall be furnished at the expense of
Tenant; (c) such non-compliance or contest shall not result in the termination,
suspension, cancellation, lapse or waiver of any insurance policies or coverages
maintained by Landlord or required to be maintained by Tenant under this Lease;
(d) such non-compliance or contest shall not result in the termination,
suspension, cancellation, lapse or waiver of any certificate of occupancy for
the Unit, Building or any portion thereof; and (e) Tenant shall keep Landlord
and the Board of Managers regularly advised in writing as to the status of such
proceedings and shall provide Landlord and the Board of Managers with copies of
all submissions and documents delivered or received by Tenant in connection
therewith.
10.3 Any improvements or Alterations made or work performed by or on
behalf of Tenant or any person claiming through or under Tenant pursuant to this
Article shall be made in conformity with and subject to the provisions of this
Lease, including, without limitation, Article 12.
11. REPAIRS
11.1 Tenant, at its sole cost and expense, shall take good care of,
and make all interior non-structural repairs to, the Premises, all repairs to
Tenant's equipment, and all repairs to the HVAC system(s) installed by Tenant
(unless the same affect the Building HVAC systems in which case such repairs
shall be performed by Landlord or the Board of Managers at Tenant's reasonable
expense). Tenant shall make and be responsible for (or, at Landlord's election,
Landlord shall make at Tenant's expense) all repairs, whether inside or outside
the Premises, ordinary or extraordinary, as and when needed to preserve the
Premises in good working order and condition and to keep the Premises in
compliance with all Legal Requirements as and to the extent required under
Article 10 of this Lease and Insurance Requirements and to prevent any
disruption of, or adverse effect on, the Building, the Building systems, the
quiet enjoyment of other tenants or to prevent any damage to the personal
property of other tenants, except that Tenant shall not be responsible for the
costs of any structural repairs unless the need therefor arises out of (i) the
performance of or existence of improvements made by or at the request of Tenant,
any subtenants or any other occupant of the Premises (ii) the installation, use
or operation of equipment therein by Tenant, any subtenant or any other occupant
of the Premises (iii) the moving of any such equipment in or out of the Building
or the Premises, (iv) the acts, omissions, negligence or misuse of or by (based
on a comparative negligence standard) Tenant, any subtenants or any of its or
their employees, agents, contractors, occupants, licensees or invitees or their
use or occupancy of the Premises (except fire or other casualty caused by
Tenant's negligence, if the fire or other casualty insurance policies insuring
Landlord are not invalidated and the rights of Landlord are not adversely
affected by this provision), or (v) Legal Requirements or Insurance Requirements
pursuant to the provisions of Section 10.1. Any such structural alteration of
the Premises required as a result of clause (i), (ii), (iii), (iv) or (v) of the
immediately preceding sentence shall be performed by Landlord, at Tenant's
expense, and Tenant shall pay for the same, as Additional Rent, within thirty
(30) days after its receipt of an invoice therefor. Tenant's liability for
structural repairs under subparagraph (iv) above shall be limited to the extent
(based on a comparative negligence standard) that Tenant, any subtenants or any
of its or their employees, agents, contractors, occupants, licensees or invitees
is responsible for such damage. Tenant, at its sole cost and expense, shall
promptly replace or repair scratched, damaged or broken doors and glass in and
about the Premises and shall be responsible for all repairs and maintenance of
wall and floor coverings in the Premises (including, without limitation, where
Tenant shall lease an entire floor, the walls, elevator doors and floor
coverings in the elevator lobby and the walls, wall coverings, title and
fixtures in the lavatories). Any broken window glass shall be repaired by
Landlord at Tenant's expense, and Tenant shall pay for the same, as Additional
Rent, within thirty (30) days after its receipt of an invoice therefor. Tenant,
promptly and at its sole cost and expense, shall make all non-structural repairs
in or to the Premises for which it is responsible. In the event Tenant fails to
promptly make any repair or alteration required by Tenant to be performed under
this Section 11.1, Landlord, at Tenant's sole cost and expense, shall have the
right to make such repairs or alterations and Tenant shall pay for such repairs
or alterations, as Additional Rent, within thirty (30) days after its receipt of
an invoice therefor. All repairs made by or on behalf of Tenant shall be made in
conformity with the provisions of Article 12 and shall be at least equal to the
then standards for the Building and the Unit established by Landlord.
11.2 (a) Subject to the provisions of Article 23 hereof, and Tenant's
repair obligations hereunder, Landlord shall maintain (or in the case of Common
Elements and the Building systems, shall maintain or use all reasonable efforts
to cause the Board of Managers to maintain) in good condition, order and repair
(a) the roof, shell, exterior and load bearing walls and other structural
elements of the Unit, (b) the Building systems serving the Premises and (c) all
Unit Common Areas, Common Elements, public corridors, lobbies and public areas
of the Building available for use by Tenant. Landlord shall not be responsible
for maintenance or repair of any portion, area, component or element of the
Unit, the Building or the Premises other than as expressly provided in this
Section 11.2(a). Landlord shall have no obligation to make any repair or
undertake any maintenance activity described in this Section unless and until
Landlord receives written notice from Tenant of the need for such repairs (and
Landlord, in Landlord's reasonable opinion agrees with the need for the same) or
Landlord's actual notice of the need for the same. Landlord shall be given a
commercially reasonable period of time to commence and complete all repairs
required to be performed by Landlord under this Lease. Tenant shall accept
performance by the Board of Managers (or its agents and contractors) on behalf
of Landlord of any obligation on Landlord's part of be performed under this
Lease, including repair and maintenance obligation. To the extent (based on a
comparative negligence standard) such repairs are occasioned by the acts,
omissions, negligence or misuse of or by Tenant or any of its subtenants or any
of its or their employees, agents, contractors, occupants, licensees or invitees
or their use or occupancy of the Premises shall be made by Landlord or the Board
of Managers at Tenant's expense. Landlord's repair obligations under this
Section 11.2(a) shall exclude, however, (i) repairs of Tenant's personal
property or improvements made by or at the request of Tenant (including, without
limitation, any Alterations), not occasioned by Landlord's wrongful acts or
negligence, and (ii) repairs which Tenant is obligated to make pursuant to
Section 11.1 and the other provisions of this Lease. Landlord shall perform all
maintenance of, and promptly after the receipt of a Notice from Tenant of the
necessity of repair, make all necessary repairs to, the air distribution
source(s) for the Premises and any security and life safety systems or devices
which may be installed in the Premises by Landlord. To the extent (based on a
comparative negligence standard) any repairs to the air distribution source(s)
for the Premises and any security and life safety systems or devices occasioned
by the acts or omissions or negligence of Tenant or any of its subtenants, or,
its or their employees, agents, contractors, licensees or invitees, shall be
performed by Landlord at Tenant's expense and Tenant shall pay for the same, as
Additional Rent, within thirty (30) days after its receipt of an invoice
therefor. Except for the foregoing repair obligation, Landlord shall have no
liability for the failure of any such Building system. The cost of all repairs
and maintenance by Landlord or the Board of Managers hereunder shall be included
in Operating Expenses except as may be specifically excluded by Article 5
hereof.
(b) Tenant, at its sole expense, shall operate or cause to be operated
in a first-class manner any air conditioning system and any life safety or
security system within the Premises to prevent any adverse effect on any
Building system(s). Any maintenance or repair of such air conditioning system
and any life safety or security system shall be performed by, at Tenant's
option, Landlord or an independent contractor selected by Tenant and approved by
Landlord in Landlord's reasonable discretion. Landlord reserves the right (i) to
make emergency repairs to any such Tenant's system without Notice, at Tenant's
expense, and (ii) to require changes to be made by Tenant to any such Tenant's
system if the operation thereof adversely affects, in Landlord's reasonable
opinion, the Building's systems provided such changes will not unreasonably
prevent Tenant from conducting its usual and customary business within the
Premises. Tenant shall pay Landlord for the cost of any repairs performed by
Landlord pursuant to this Section 11.2(b) within thirty (30) days of receipt of
an invoice therefor. Tenant shall have no access to Building systems unless
Landlord shall consent thereto.
(c) No liability of Landlord to Tenant shall accrue under this Section
unless and until Tenant has given Notice to Landlord of the necessity of any
specific repair for which Landlord has agreed to be responsible under this
Lease, and a sufficient time has elapsed in which to make such repair with same
not being performed. In no event shall any failure by Landlord to make any such
repairs give to Tenant any right to make such repairs or withhold payment of
Base Rent or Additional Rent or to offset any costs incurred by Tenant against
any payment of Base Rent or Additional Rent.
12. ALTERATIONS BY TENANT.
12.1 Tenant shall not make or perform or permit the making or
performance of any alterations, additions, installations or improvements to or
removals from (collectively, "Alterations") the Premises without Landlord's
prior written consent. Landlord agrees not to unreasonably withhold or delay its
consent to non-structural Alterations provided the same, in Landlord's
reasonable opinion, do not adversely affect Building systems (including, without
limitation, utility, life safety, electrical, plumbing and sewage lines and HVAC
systems) and will not result in any increase in Operating Expenses (unless
Tenant agrees in writing to pay for any such increase). Notwithstanding the
foregoing, Tenant shall be permitted to make decorative Alterations (including
painting, carpeting, wiring (within the Premises only) for computers,
telecommunication systems, and removable secretarial stations and filing
systems) without Landlord's consent so long as (i) Tenant provides Landlord at
least twenty (20) days prior Notice of such Alterations specifying the type of
Alterations to be performed (and Tenant agrees to provide all other additional
information regarding such Alterations reasonably requested by Landlord), (ii)
such Alterations will not result in any increase in Operating Expenses, (iii)
such Alterations do not affect any Building systems or the exterior of the
Building (either structurally or in appearance) and (iv) the aggregate cost of
such Alterations (in each instance) does not exceed $500,000. Tenant shall
furnish Landlord with plans and specifications for any non-structural
alterations prior to Tenant's commencement of the construction or installation
of the same. Any structural Alterations requested by Tenant and approved by
Landlord shall be performed by Landlord, at Tenant's expense, provided the same
do not materially affect Building systems (including, without limitation,
utility, life safety, electrical, plumbing and sewage lines and HVAC systems)
and will not result in any increase in Operating Expenses (unless Tenant agrees
in writing to pay for any such increase). Tenant shall request in writing
Landlord's written consent not less than thirty (30) days prior to the proposed
commencement of the construction of such structural Alterations, which written
request shall be accompanied by plans and specifications (prepared by a licensed
structural engineer reasonably acceptable to Landlord) for such structural
Alterations, which plans and specifications shall be subject to the approval of
Landlord. Landlord's granting of consent to structural Alterations may be
conditioned on a requirement that Tenant (x) deposit with Landlord, prior to
Landlord's commencement of installation of any such structural Alterations, the
cost, or a portion of the cost, of such installation, as determined by Landlord,
and (y) on or prior to the Expiration Date or earlier termination of this Lease,
arrange with Landlord for the removal, at Tenant's expense, of the structural
Alteration installed and the restoration of the Premises to its condition prior
to the construction of such structural Alteration. Tenant shall pay, as
Additional Rent, for the installation of such structural Alteration, together
with costs incurred by Landlord in its review of the plans and specifications
therefor, within ten (10) days after its receipt of an invoice therefor.
12.2 In the event that in connection with any Alteration (whether
structural or non-structural), installation of any wires, conduits, pipes or
mechanical equipment outside the Premises is required, Tenant shall request
Landlord's consent therefor not less than twenty (20) days prior to the
commencement of the construction of such Alterations, which consent shall be
accompanied by plans and specifications to be reviewed and approved by Landlord
showing the location of such wires, conduits, pipes or mechanical equipment.
Without limiting the reasons for the granting or withholding of consent by
Landlord, Landlord may withhold such consent if in Landlord's opinion such
installation will adversely affect Building systems or will cause or create a
hazardous condition or entail excessive or unreasonable alterations, repairs or
expense, or interfere with or disturb other tenants. Tenant may not connect into
any pipes, shafts or conduits without Landlord's written permission which
consent shall not be unreasonably withheld or delayed. The installation of such
wires, conduits, pipes or mechanical equipment shall be performed by Landlord at
Tenant's expense, and Tenant shall pay for the same, as Additional Rent, along
with costs incurred by Landlord in its review of the plans and specifications
therefor, within thirty (30) days after its receipt of an invoice therefor.
12.3 All non-structural Alterations performed by or on behalf of
Tenant pursuant to Section 12.1 shall be done in a good and workmanlike manner
by Approved Contractors and in accordance with all Legal Requirements and
Insurance Requirements. The Approved Contractors are hereby deemed approved by
Landlord for the performance of non-structural Alterations, provided, however,
that in the event Landlord determines that the employment of any Approved
Contractor may, or during the course of its prosecution of a non-structural
Alteration or any other work for or on behalf of Tenant (including, without
limitation, Tenant's Work) does, interfere with construction performed by, or
causes any conflict or labor dispute with, any other contractor, subcontractor
or other party engaged in the construction, maintenance or operation of the
Building, Tenant shall select another Approved Contractor and shall cause the
Approved Contractor being replaced to promptly remove its equipment and
personnel from the Building. Landlord hereby expressly reserves the right to
require the deletion of contractors and subcontractors from the list of Approved
Contractors for cause or if such contractors or subcontractors are or become
known to be a probable cause of a labor dispute relating to the Building or the
Premises or in the event any such Approved Contractor changes its nature or
method of operation to an extent which is reasonably deemed by Landlord to be
inconsistent with the then standards of the Building. Subject to the two
immediately preceding sentences, Tenant may add contractors and subcontractors
to the list of Approved Contractors with Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed. Tenant shall, at Tenant's
expense, before making any Alterations, obtain all permits, approvals and
certificates required by any Governmental Authority and (upon completion
thereof) certificates of occupancy and any other certificates of final approval
thereof and shall promptly deliver copies of such permits, approvals and
certificates to Landlord. In addition, Tenant shall provide Landlord, prior to
the commencement of any Alterations, with certificates evidencing appropriate
builder's risk, liability and worker's compensation insurance coverage during
the prosecution of any such Alterations in amounts set forth in the Building
Standards or such higher amounts reasonably deemed appropriate by Landlord.
Landlord shall, upon Tenant's request and at Tenant's expense, furnish or
execute promptly any documents, information, consents or other materials which
are necessary or desirable in connection with Tenant's efforts to obtain any
license or permit for the making of any Alterations.
12.4 Any and all Alterations made by or on behalf of Tenant in, to or
upon the Premises as well as any fixtures installed on the Premises by Tenant,
shall, upon such installation, become the property of Landlord and shall remain
upon and be surrendered with the Premises unless Landlord, by Notice to Tenant
no later than thirty (30) days prior to the Expiration Date, elects to
relinquish Landlord's right thereto and to have them removed by Tenant, in which
event the same shall be removed from the Premises by Tenant prior to the
Expiration Date, at Tenant's expense. Landlord may condition the removal of same
upon Tenant making a deposit with Landlord to insure compliance with this
Section. Nothing in this Section 12.4 shall be construed to give Landlord title
to or to prevent Tenant's removal of trade fixtures or moveable office furniture
or equipment, but upon removal of any of the same from the Premises or upon
removal of other Alterations as may be required by Landlord, Tenant shall
immediately and at its expense repair any damage to the Building or the Premises
caused by such removal, except structural damage, which shall be repaired by
Landlord at Tenant's expense. All Alterations permitted or required to be
removed by Tenant remaining in the Premises after the end of the Term shall be
deemed abandoned and may, at the election of Landlord, either be retained as
Landlord's property or removed from the Premises by Landlord, at Tenant's
expense. Notwithstanding anything herein to the contrary, Tenant shall not be
required to remove any standard office fixture in the Premises on the Expiration
Date or earlier termination of the Term of this Lease unless Landlord informs
Tenant at the time of installation (provided that, with respect to any item, the
installation of which requires Landlord's consent hereunder, Tenant has informed
Landlord of the item being so installed) of any such office fixture that such
fixture must be removed on the Expiration Date or earlier termination of the
Term; provided, that, Landlord may require Tenant to remove all non-standard
installations (including, but not limited to, raised flooring, vaults, floor
cuts and cuts in the exterior skin of the Building) in the Premises on the
Expiration Date or earlier termination of the Term of this Lease whether or not
Landlord informed Tenant that Tenant must remove such items on the Expiration
Date or earlier termination of the Term at the time of installation of such
items.
12.5 Tenant, at its expense and with reasonable diligence and
dispatch, shall procure the cancellation or discharge of all notices of
violation or lien arising from or in connection with any Alterations, or any
other work, labor, services or materials done for or supplied to Tenant, or any
person claiming by, through or under Tenant, which shall not be the result of
any act, omission or negligence of Landlord or its agents, servants, employees
or contractors. Tenant shall promptly provide Landlord with copies of
cancellation, discharge, release or satisfaction of any such notices of
violations or liens. Tenant shall have no authority to create any liens for
labor or materials on or against the Land, the Unit, the Building or the
Premises. Tenant may contest the validity of any lien filed against Landlord,
the Land, the Unit, the Building or the Premises for any work, labor, services
or materials claimed to have been performed for or furnished to Tenant or any
person or entity holding the Premises or any portion thereof by, through or
under Tenant, provided Tenant, prior to instituting such contest, (x) causes any
such lien to be discharged, bonded or removed by deposit or otherwise within
thirty (30) days after Tenant receives Notice from Landlord of the filing of the
same and (y) delivers to Landlord a copy of the bond or other evidence of the
discharge or removal.
12.6 The performance of any Alterations, whether structural or
non-structural, by or on behalf of Tenant shall be subject to the provisions of
Section 18.3.
12.7 Notwithstanding anything herein to the contrary, Landlord and any
Landlord affiliate shall have the right to bid to perform any Alterations and
Tenant agrees to timely notify Landlord of the bid process (provided, that,
Tenant shall not be obligated to accept Landlord's or Landlord's affiliate's
bid) .
12.8 Tenant's obligations under this Article shall survive the
expiration or earlier termination of this Lease.
13. INSPECTIONS
13.1 Landlord may enter the Premises during Business Hours upon twenty
four (24) hours verbal notice to Tenant to inspect the Premises to insure
compliance with the provisions of this Lease so long as Landlord is accompanied
by a representative of Tenant (except in the event of an emergency as set forth
below). In the event Landlord reasonably determines that Tenant is not in
compliance with any provision of this Lease, Landlord shall give Tenant Notice
of such noncompliance and Tenant shall, at Tenant's sole cost and expense,
promptly comply with the provisions of this Lease. In the event Tenant fails to
promptly comply with such Notice, Landlord, at Tenant's sole cost and expense,
shall have right, but not the obligation, to take such steps as necessary to
cause the Premises to comply with this Lease and Tenant shall pay the costs of
compliance, as Additional Rent, within thirty (30) days after its receipt of a
invoice therefor. Landlord shall have the additional right to enter the Premises
at any time in the event of an emergency and shall only be required to provide
Tenant with prior telephonic notice provided such notice is reasonable under the
circumstances.
13.2 In no event shall the failure of Landlord to take steps to cause
compliance give way to any liability on the part of Landlord. Tenant shall be
solely responsible for any liability arising by reason of Tenant's failure to
comply with the provisions of this Lease.
14. SIGNS
14.1 Tenant, at Tenant's sole cost and expense, shall have the right
to install or erect such interior signs as Tenant deems necessary or appropriate
in or on the Premises including the elevator lobby on the floor in which the
Premises is located, provided the same are in keeping with first-class office
signage. Tenant shall also have the right to install in the public corridor of
the floors on which the Premises are located, signs ("Tenant's Corridor Signs")
bearing Tenant's name and/or logo (provided, that, Tenant's subtenant's and
assigns must have their corridor signs pre-approved by Landlord, such consent
not to be unreasonably withheld or delayed). The location, specifications and
design of Tenant's Corridor Signs shall be subject to the prior written approval
of Landlord, which approval shall not be unreasonably withheld or delayed, and
which shall be compatible (in terms of size, quality of material and
craftsmanship) with any other tenant signs in the Building
14.2 Any signs installed or erected by or for Tenant shall remain
Tenant's property, shall be maintained by Tenant at Tenant's expense and shall
be removed by Tenant at the expiration or earlier termination of this Lease, and
Tenant shall repair any damage caused by such removal. Tenant shall procure and
pay for all governmental permits required for the installation of any sign in or
on the Premises and (and Landlord agrees to provide reasonable cooperation in
obtaining the same) provide Landlord with copies of all such permits promptly
upon Tenant's receipt of the same.
14.3 Tenant's installation, maintenance and removal of Tenant's
Corridor Signs shall be subject to the provisions of Section 18.3.
15. BUILDING DIRECTORY
15.1 Landlord shall maintain, or exercise all rights available to
Landlord under the Condominium Documents to cause the Board of Managers to
maintain, a directory (physical or computerized) board in the ground floor lobby
of the Building containing the name of Tenant. The cost of maintaining such
directory board or computerized directory shall be included in Operating
Expenses. Tenant (and Tenant's employees, as requested from time to time) shall
have the right to use the number of spaces or slots in proportion to Tenant's
pro-rata share of the Building.
16. INSURANCE; WAIVER OF SUBROGATION
16.1 Tenant shall maintain, and shall cause any of its subtenants to
maintain, for the benefit of, and name as an additional insured, Landlord, the
ground lessor under the Ground Lease, the managing agent of the Unit, the
managing agent of the Building and the Common Elements, the Board of Managers,
the owners of any other condominium units in the Building, any Superior
Landlord, any Superior Mortgagee, the Building management entity, and Tenant, as
their interests may appear, (a) public liability insurance with a broad form
commercial liability endorsement, including contractual liability insurance
covering Tenant's indemnity obligations hereunder, against claims for death,
personal injury and property damage, occurring upon, in or about the Premises;
such insurance shall be carried in a minimum amount of not less than Three
Million ($3,000,000.00) Dollars for bodily injury or death to any one person or
any number of persons or property damage in any one occurrence with an aggregate
limit of not less than Five Million ($5,000,000) Dollars; (b) insurance against
loss or damage by fire, and such other risks and hazards as are insurable under
then available standard tenant forms of fire insurance policies with "all risk"
extended coverage, to Tenant's Work, any Alterations installed by Tenant,
Tenant's Furnishings and Tenant's other personal property, for the full
replacement cost thereof; (c) during such time as Tenant shall be constructing
any Alterations, builder's risk insurance, completed value form, covering all
physical loss and other costs and expenses (including, without limitation,
architectural and engineering costs, general contractor overhead, project
management expenses and legal fees) incurred in connection therewith, in an
amount reasonably satisfactory to Landlord; (d) worker's compensation insurance
covering Tenant's employees, including employer liability with a limit of not
less than $500,000 per occurrence or such higher amount as is required by
applicable Legal Requirements and Insurance Requirements; (e) business
interruption insurance in twelve (12) month intervals in an amount sufficient to
pay Base Rent, Tenant's Tax Payment and Tenant's Operating Payment; (f) plate
glass insurance and (g) such other coverage as Landlord may reasonably require
with respect to the Premises, its use and occupancy and the conduct or operation
of business therein. Certificates of insurance, showing that such insurance is
in force and will not be cancelled without thirty (30) days' prior written
notice to Landlord and the Board of Managers shall be furnished to Landlord
prior to Tenant's entering the Premises for the purpose of installing Tenant
Work or Tenant's Furnishings. Thereafter, certificates showing renewal of, or
substitution for, policies which expire shall be furnished not less than thirty
(30) days prior to the expiration of each policy. Tenant's coverage may be
effected by blanket policies covering the Premises and other properties of
Tenant.
16.2 All insurance required to be maintained by Tenant hereunder shall
be written in form and substance reasonably satisfactory to Landlord by an
insurance company with an A.M. Best's rating of at least A- with a
capitalization of at least A-VIII licensed to do business in the State of New
York, which shall be reasonably satisfactory to Landlord. Upon failure of Tenant
to procure, maintain and pay all premiums therefor, Landlord may, at its option,
do so, and Tenant agrees to pay the cost thereof to Landlord, as Additional
Rent, within thirty (30) days after Tenant's receipt of an invoice therefor.
16.3 Neither Landlord nor Tenant shall be liable to the other or to
any insurance company (by way of subrogation or otherwise) insuring the other
party for any loss or damage to the Unit, Building, the Premises or any tangible
property of either party, or any resulting loss of income, even though such loss
or damage might have been occasioned by the negligence of such party, its
employees or agents, if any such loss or damage is covered by insurance
benefiting the party suffering such loss or damage or was required to be covered
by insurance pursuant to this Lease. Throughout the Term, each party agrees to
use its best efforts to include in each of its insurance policies required under
this Article 16 a waiver of the insurer's right of subrogation against the other
party; or if such waiver should be unobtainable or unenforceable, an express
agreement that such policy shall not be invalidated if the insured waives or has
waived before the casualty the right of recovery against any party responsible
for a casualty covered by the policy. If such waiver or agreement shall not be
obtainable without additional charge, the insured party shall so notify the
other party promptly and, if the other party shall pay the insurer's additional
charge therefor, such waiver or agreement shall be included in the policy.
16.4 So long as Landlord's fire insurance policies include the waiver
of subrogation or agreement to release liability referred to in Section 16.4,
Landlord, to the extent that such insurance is in force and is collectible,
hereby waives any right of recovery against Tenant, any of its subtenants, or
any of its employees, agents, contractors, occupants, licensees or invitees, for
any loss occasioned by fire or other casualty. In the event that at any time
Landlord's fire insurance carriers shall not include such or similar provisions
in Landlord's policies, the waiver set forth in the foregoing sentence, upon
prior Notice given by Landlord to Tenant, shall be of no further force or effect
from and after the giving of such Notice. Landlord's failure to give such Notice
shall not result in any liability of Landlord to Tenant. During any period that
the foregoing waiver of the right of recovery is in effect, Landlord shall look
solely to the proceeds of such policies to compensate Landlord for any loss
occasioned by any insured casualty.
16.5 So long as Tenant's fire insurance policies include the waiver of
subrogation or agreement or permission to release liability referred to in
Section 16.4, Tenant, to the extent that such insurance is in force and
collectible, hereby waives, and agrees to cause all other occupants of the
Premises to execute and deliver to Landlord instruments waiving, any right of
recovery against Landlord, the ground lessor under the Ground Lease, the
managing agent of the Unit, the managing agent of the Building and the Common
Elements, the Board of Managers, the owners of any other condominium units in
the Building, any Superior Landlord, any Superior Mortgagee, the Building
management entity and any of their respective employees, agents or contractors,
for any loss occasioned by fire or other insured casualty. In the event that at
any time Tenant's fire insurance carriers shall not include such waiver or
similar provisions in Tenant's policies, the waiver set forth in the foregoing
sentence, upon prior Notice given by Tenant to Landlord, shall be of no further
force or effect with respect to any insured risks under such policy from and
after the giving of such Notice, or in the case such insurer shall not be
willing to grant such waiver for all of the required parties, such waiver shall
be of no force or effect with respect only to the required parties not included
in such waiver. During any period that the foregoing waiver of right of recovery
is in effect, Tenant, or any other occupant of the Premises, shall look solely
to the proceeds of such policies to compensate Tenant or such other occupant for
any loss occasioned by an insured casualty.
16.6 Except to the extent expressly provided in Section 16.4, nothing
contained in this Lease shall relieve Tenant of any liability to Landlord or to
its insurance carriers or any other party which Tenant may have under law or
pursuant to the provisions of this Lease, by reason of any damage to the
Premises, the Unit or the Building by fire or other casualty.
17. TENANT'S EQUIPMENT.
17.1 Tenant shall not install any equipment of any kind or nature
whatsoever in the Premises which will or may necessitate any changes,
replacements or additions to, or in the electrical capacity or existing capacity
of, the water system, heating system, plumbing system, air conditioning system,
life safety system or any other system of the Premises, Unit and/or the Building
without first obtaining the prior written consent of Landlord, which consent may
be subject to, among other things Tenant's compliance with the provisions of
Section 8.6 and Articles 11 and 12 of this Lease. If Tenant installs business
machines and/or mechanical equipment which cause noise or vibration
objectionable to other tenants of the Building or which are, in Landlord's
reasonable judgment, harmful to the Premises, then Tenant, at Tenant's expense,
shall promptly install and maintain noise or vibration eliminators or other
devices sufficient to eliminate such noise and vibration. Landlord reserves the
right to inspect the Premises to insure compliance with this Section.
17.2 Landlord shall have the right to approve the weight and position
of safes and other heavy equipment or fixtures, which shall, if reasonably
considered necessary by the Landlord, stand on weight distribution platforms or
like devices approved in advance by Landlord. Landlord's approval under the
preceding sentence shall not be unreasonably withheld or delayed provided any
such safes and other heavy equipment or fixtures will not exceed the maximum
floor load of the floor in question after such weight distribution platform or
like device is installed. Any and all non-structural damage or injury to the
Premises caused by moving the property of Tenant into or out of the Premises, or
due to the same being on the Premises, shall be repaired by, and at the sole
cost of, Tenant. All structural damage or injury to the Premises caused by
moving such property into or out of the Premises, or due to the same being on
the Premises, shall be repaired by Landlord, at Tenant's expense, and Tenant
shall pay for the same, as Additional Rent, within ten (10) days after its
receipt of an invoice therefor.
17.3 No furniture, equipment or other bulky matter of any description
will be received into the Premises or carried in the passenger elevators except
as approved by Landlord, and all such furniture, equipment, and other bulky
matter shall be delivered only by way of the freight elevators during Business
Hours subject to the availability of the freight elevators. In the event Tenant
requests overtime service in accordance with the provisions of this Lease, such
overtime service shall be at Tenant's sole cost and expense in accordance with
the provisions of this Lease. All movement of furniture, equipment and other
materials outside the Premises shall be at Tenant's expense and under the direct
control and supervision of Landlord who shall, however, not be responsible for
any damage to or charges for moving the same. Tenant shall pay for Landlord's
supervision, as Additional Rent, within ten (10) days after its receipt of an
invoice therefor. Tenant shall promptly remove from the sidewalks adjacent to
the Building any of the Tenant's furniture, equipment or other material there
delivered or deposited.
18. NON-LIABILITY AND INDEMNIFICATION.
18.1 Neither Landlord, the Board of Managers, the managing agents of
the Unit, the Building and the Common Elements, any Superior Mortgagee, Superior
Landlord nor its or their respective agents, employees, contractors, officers,
directors, shareholders, members, partners, partners of such partners, and
principals (disclosed or undisclosed) and their respective mortgagees,
successors and assigns (collectively, the "Landlord Parties") shall be liable to
Tenant for, and Tenant shall save and hold the Landlord Parties harmless from
and shall indemnify such parties against, any loss, liability, claim, damage,
expense (including reasonable attorneys' fees and disbursements), penalty or
fine incurred in connection with or arising from the Premises or by reason of
Tenant's or any other occupant's use of the Premises including, without
limitation, any injury to Tenant, Tenant's agents, employees, contractors,
invitees or licensees or any other occupant of the Premises, or to any other
person or for any damage to, or loss (by theft or otherwise) of any of Tenant's
property or of the property of any other person, irrespective of the cause of
such injury, damage or loss unless due to the negligence of Landlord or
Landlord's agents, its employees, contractors, invitees or licensees. Any
Building employee to whom any property shall be entrusted by or on behalf of
Tenant shall be acting as Tenant's agent with respect to such property, and
neither Landlord, the Board of Managers, the managing agent of the Unit,
Building or Common Elements, nor their respective agents shall be liable for any
loss or damage to any such property.
18.2 Neither any (a) performance by any or all of the Landlord
Parties, Tenant or others of any repairs or improvements in or to the Land,
Building or Premises, (b) failure of any or all of the Landlord Parties or
others to make any such repairs or improvements, (c) damage to the Unit, the
Building equipment, Premises or Tenant's personal property, (d) injury to any
persons, caused by other tenants or persons in the Building, or by operations in
the construction of any private, public or quasi-public work, or by any other
cause, (e) latent defect in the Unit, the Building, Building equipment or
Premises, (f) temporary or permanent covering or bricking up of any windows of
the Premises for any reason whatsoever including, without limitation, any or all
of the Landlord Parties' own acts, any Legal Requirement or any Insurance
Requirement, nor (g) inconvenience or annoyance to Tenant or injury to or
interruption of Tenant's business by reason of any of the events or occurrences
referred to in the foregoing subdivisions (a) through (f) shall impose any
liability on any or all of the Landlord Parties to Tenant, any occupant or any
third party claiming by, through or under Tenant; provided, that, Tenant
reserves the right to demand that Landlord correct, at Landlord's sole cost and
expense, any latent defects in the Unit or the Premises to the extent the same
adversely affect Tenant's use and occupancy of the Premises for Tenant's normal
business operations. Landlord, to the extent that Landlord agrees with the need
for such repair (to the extent that Landlord disagrees with such request, the
matter shall be settled by arbitration in accordance with Article 35 hereof),
shall commence such repair or exercise all rights available to Landlord under
the Condominium Documents to cause the Board of Managers to commence such
repair, within thirty (30) days of request therefor. Landlord or the Board of
Managers, in making any repairs, alterations or improvements hereunder, shall
prosecute the same utilizing such reasonable methods in order to minimize any
disruption to Tenant's use of the Premises or the conduct of its business
therein. In no event, however, shall any or all of the Landlord Parties be
liable for injury or damage to Tenant or its property unless such injury or
damage is caused by the negligence of any or all of the Landlord Parties.
Notwithstanding anything herein to the contrary, except as set forth in Sections
23 and 24 hereof, to the extent that any disruption of Building service is
caused by parties other than Tenant or Tenant's agents, employees, contractors,
invitees or licensees, and such disruption results in the cessation of any or
all services to the Premises or a portion thereof, and Tenant is unable to
conduct its business within the Premises, or the portion thereof so affected:
(i) for five (5) consecutive Business Days or more, Tenant shall be entitled to
an abatement of Base Rent and Additional Rent for the portion of the Premises so
affected commencing on the sixth (6th) Business Day following such cessation of
services and continuing until such services are restored and (ii) for one
hundred twenty (120) consecutive calendar days, then Tenant shall have the
option to cancel and terminate this Lease. In no event, however, shall Landlord
be liable for injury or damage to Tenant or its property unless such injury or
damage is caused by the intentional acts or gross negligence of Landlord or
Landlord's agents, its employees, contractors, invitees or licensees. No
representation is made that the communications or security systems, devices or
procedures of the Unit or the Building will be effective to prevent injury to
Tenant or any other person or damage to, or loss (by theft or otherwise) of any
of Tenant's personal property or the property of any other person and in no
event shall any of the Landlord Parties be liable to Tenant for any failure of
Tenant's computer, telecommunications or data base systems. Landlord reserves
the right to discontinue or modify such communications or security systems or
procedures without liability so long as Landlord shall continue to maintain
communications or security systems comparable to those of Class A office
buildings in Downtown Manhattan.
18.3 Tenant hereby indemnifies the Landlord Parties against liability
or expense (including reasonable attorneys' fees and disbursements) in
connection with or arising from (i) (a) any default by Tenant in the performance
of any provisions of this Lease, and/or (b) the use or occupancy or manner of
use or occupancy of the Premises by Tenant or any person claiming by, through or
under Tenant, and/or (c) claims for death, personal injury or property damage
arising out of the acts, omissions or negligence of Tenant, or the contractors,
agents, employees, invitees or licensees of Tenant in connection with the
performance of any Alterations or any other work, labor, services or materials
done for or supplied to Tenant, including, without limitation, the installation,
maintenance (or failure to maintain) or removal of Tenant's Corridor Signs,
and/or (d) any acts, omissions or negligence of Tenant or any such person, or
the contractors, agents, employees, invitees or licensees of Tenant or any such
person, in or about the Premises, the Unit or the Building either prior to,
during or after the expiration of the Term, and (ii) claims arising from any
notices of violation or mechanic's liens arising from or in connection with the
performance of any Alterations or any other work, labor, services or materials
done for or supplied to Tenant, including, without limitation, the installation,
maintenance (or failure to maintain) or removal of Tenant's Corridor Signs;
provided, however, (a) Landlord agrees to give Tenant prompt written notice
after Landlord receives actual knowledge of any action, suit or proceeding based
in whole or in part on the foregoing, (b) Tenant shall have the right to control
the defense of any such action, suit or proceeding to the extent relating to
claims with respect to which Landlord may assert rights of indemnification
pursuant to this Section 18.3, without prejudice to Tenant's obligation to
remove all mechanic's liens and (c) Landlord shall provide reasonable
cooperation, at Tenant's sole cost and expense, to Tenant, as Tenant may
request, in connection with any such action or proceeding. If any action, suit
or proceeding arising from any of the foregoing is brought against Landlord,
Tenant will resist and defend such action, suit or proceeding or cause the same
to be resisted and defended by counsel designated by Tenant (which counsel shall
be reasonably satisfactory to Landlord, such counsel shall be deemed
satisfactory to Landlord if Landlord fails to object to such counsel within
fifteen (15) days after receipt of Notice thereof from Tenant), unless, due to a
conflict of interest, Landlord requires such action, suit or proceeding to be
resisted and defended by counsel of its own selection and is represented by such
counsel (in which case Tenant shall be liable for the payment of Landlord's
reasonable attorney's fee). If and to the extent that the foregoing provisions
of this Section 18.3 may be unenforceable for any reason, Tenant hereby agrees
to make the maximum contribution to payment and satisfaction of each of the
indemnified liabilities which is permissible under applicable law.
18.4 Tenant shall pay to Landlord, as Additional Rent, within ten (10)
days after written demand therefor, sums equal to all losses and other
liabilities referred to in Section 18.3. The obligations of Tenant under this
Article 18 shall survive the expiration or earlier termination of this Lease.
19. ASSIGNMENT AND SUBLETTING.
19.1 Neither this Lease nor any part hereof, nor the interest of
Tenant thereunder, shall, by operation of law or otherwise, be assigned,
mortgaged, pledged, encumbered, sublet or otherwise transferred by Tenant,
Tenant's legal representatives or successors in interest, and neither the
Premises nor any part thereof shall be encumbered in any manner by reason of any
act or omission on the part of Tenant, or anyone claiming under or through
Tenant, or shall be sublet or be used, occupied, or utilized for desk space or
for mailing privileges by anyone other than Tenant, without the prior written
consent of Landlord in each instance, which consent shall not be unreasonably
withheld or delayed as hereinafter provided. Except for a sale or transfer of
stock in a public stock market (so long as the intent of such transfer is not to
circumvent any of the terms, covenants or conditions of this Lease) or a sale or
transfer to a Related Corporation, a transfer of fifty percent (50%) or more in
interest of Tenant or a transfer of fifty percent (50%) or more in interest in
the controlling general partner, any partner holding a majority interest in
Tenant or majority stockholder of Tenant (whether such transfers are through a
single transaction or a series of transactions and whether stock, partnership
interest, or otherwise) by any party(s) in interest shall be deemed an
assignment of this Lease.
19.2 If this Lease be assigned, whether or not in violation of the
terms of this Lease, Landlord may collect rent from the assignee. If the
Premises or any part thereof be sublet or be used or occupied by anybody other
than Tenant, whether or not in violation of this Lease, Landlord may, after
default by Tenant and expiration of Tenant's time to cure such default, if any,
collect rent from the subtenant or occupant. In either event, Landlord may apply
the net amount collected to the rent herein reserved, but no assignment,
subletting, occupancy, or collection or application of rent shall be deemed a
waiver of any of the provisions of Section 19.1, or the acceptance of the
assignee, subtenant, or occupant as a tenant, or be deemed to relieve, impair,
release, or discharge Tenant of its obligations fully to perform the terms of
this Lease on Tenant's part to be performed. The consent by Landlord to an
assignment, transfer, encumbering or subletting pursuant to any provision of
this Lease shall not in any way be deemed consent to, or be deemed to relieve
Tenant from obtaining Landlord's written consent to, any other or further
assignment, transfer, encumbering or subletting. References in this Lease to use
or occupancy by anyone other than Tenant shall include, without limitation,
subtenants, licensees and others claiming under Tenant or under any subtenant,
immediately or remotely. The listing of any name other than that of Tenant on
any door of the Premises or on any directory or in any elevator in the Building,
or otherwise, shall not operate to vest in the person so named any right or
interest in this Lease or the Premises, or be deemed to constitute, or serve as
a substitute for, any consent of Landlord required under this Article, and it is
understood that any such listing shall constitute a privilege extended by
Landlord, revocable at Landlord's will by Notice to Tenant. Tenant agrees to
pay, as Additional Rent, within ten (10) days after Tenant's receipt of an
invoice therefor, Landlord attorneys' fees and disbursements incurred by
Landlord in connection with any proposed assignment or sublease, including the
costs of making investigations as to the acceptability of a proposed subtenant
or assignee.
19.3 In the event that at any time or from time to time during the
Term, Tenant shall desire to sublet all or part of the Premises, in whole or in
part, Tenant shall submit to Landlord a written request for Landlord's consent
("Request for Consent") to such subletting, which request shall contain or be
accompanied by the following information: (i) the name and address of the
proposed subtenant; (ii) a description identifying the space to be sublet; (iii)
the terms and conditions of the proposed subletting; (iv) the nature and
character of the business of the proposed subtenant and of its proposed use of
the demised premises; and (v) current financial information and any other
information as Landlord may reasonably request with respect to the proposed
subtenant.
19.4 (a) In the event that at any time during the Term Tenant desires
to assign its entire interest in this Lease, Tenant:
(i) shall submit to Landlord a Notice setting forth the name and
address of the proposed assignee and a detailed description of such person's
business, character and financial references (including its most recent balance
sheet and income statements certified by its chief financial officer or a
certified public accountant), and any other information reasonably requested by
Landlord; and
(ii) shall submit to Landlord (a) the material terms of the proposed
assignment, (c) an agreement by Tenant to indemnify Landlord against liability
resulting from any claims that in connection with the proposed assignment may be
made against Landlord by any brokers or other persons claiming a commission or
similar compensation and (c) a copy of the term sheet for such assignment and,
if same has been prepared, a copy of the proposed assignment.
(b) Tenant may at any time during the Term assign this Lease, subject
to Landlord's consent, which consent shall not be unreasonably withheld or
delayed, provided, however, Landlord's consent shall not be required if Tenant's
assignment is to a Related Corporation or as set forth in Section 19.5 hereof,
and, provided further, that under no circumstances shall any such assignment
relieve Tenant from the performance of any of Tenant's obligations under this
Lease, except as otherwise approved by Landlord in writing, and subject to the
following conditions:
(i) The proposed assignee has a sufficient financial capacity to pay
its obligations under this Lease as they are incurred, as reasonably determined
by Landlord;
(ii) The nature of the proposed assignee's business and its reputation
is in keeping with the character of the Building as a Class A office building
and its tenancies and such assignee shall not be a governmental agency,
charitable organization or a corporation or other organization whose operations
are or would be subject to environmental restrictions;
(iii) The purposes for which the proposed assignee intends to use the
Premises are uses expressly permitted by this Lease;
(iv) No Event of Default shall have occurred and be continuing
hereunder; and
(v) No assignment of this Lease by Tenant shall be valid unless,
within fifteen (15) days after the execution thereof, Tenant shall deliver to
Landlord an executed copy of such assignment in form and substance reasonably
satisfactory, duly executed by Tenant and by the assignee.
(c) Landlord shall, within twenty (20) days after receiving all of the
information under Section 19.4(a) and Section 19.4(b)(i) and (ii) which
information must be full and complete, give Notice to Tenant to permit or deny
the proposed assignment. If Landlord denies consent, it must explain the reasons
for the denial. If Landlord does not give Notice within such twenty (20) day
period, then Tenant shall be required to submit an additional ten (10) day
notice to Landlord stating to Landlord that Tenant's proposed assignment will be
deemed approved by Landlord if Landlord fails to respond to Tenant within ten
(10) days of Landlord's receipt of such second notice. If Landlord fails to
respond to such the foregoing ten (10) day notice, then Tenant may assign the
entire Premises upon the terms Tenant gave in the information under Sections
19.4(a)(i) and (ii) and Sections 19.4(b)(i) and (ii).
(d) In the event that Tenant fails to execute and deliver any
assignment within ninety (90) days after Tenant shall have delivered the Notice
described in Section 19.4(a), then Tenant shall again comply with all the
provisions and conditions of this Section 19.4 before assigning this Lease.
19.5 Notwithstanding anything herein to the contrary, Tenant shall
have the right (so long as the intent of such transfer is not to circumvent any
of the terms, covenants or conditions of this Lease), without obtaining
Landlord's consent, but with prior written Notice to Landlord:
(i) to assign this Lease or sublet all or any part of the Premises to
a parent, subsidiary, affiliate or successor (by merger, consolidation, transfer
of assets, assumption or otherwise) of Tenant;
(ii) to transfer any interest in Tenant including, without limitation,
a majority or controlling interest in Tenant;
(iii) to assign this Lease or sublet all or any part of the Premises
to any entity or entities of the Tenant created by the division of Tenant into
one or more separate corporations and/or partnerships; and
(iv) to sublet the Premises or assign this Lease in connection with
the public offering of the stock of Tenant, or any affiliated or successor
entity, on a recognized public exchange.
19.6 Intentionally deleted.
19.7 Landlord shall not unreasonably withhold its consent to the
proposed subletting, request for desk space or mailing privileges (each referred
to as a "sublet" and collectively referred to as a "subletting" for the purposes
of Section 19.7 and 19.8 hereof) referred to in Tenant's Request for Consent
provided that the following further conditions shall be fulfilled:
(a) there shall be no advertisement or public communication or any
kind whatever relating to the proposed subletting which mentions or refers to a
rental rate or to any other matter which directly or indirectly reasonably might
adversely reflect on the dignity or prestige of the Unit or the Building;
(b) no space shall be sublet to another tenant, or to a related
corporation of any other tenant or to any other occupant of the Building, if
Landlord shall then have available for rent comparable space in the Unit (or
other unit owners affiliated with Landlord with respect to any other space in
the Building);
(c) no subletting shall be to a person or entity which has a financial
standing, is of a character, is engaged in a business, or proposed to use the
sublet premises in a manner not in keeping with the standards which are
consistently applied in such respects of the other tenancies and subtenancies in
the Building;
(d) the subletting shall be expressly subject to all of the
obligations of Tenant under this Lease and, without limiting the generality of
the foregoing, the sublease shall impose at least the same restrictions and
conditions with respect to use as are contained in Article 9 and shall
specifically provide that there shall be no further subletting of the sublet
premises;
(e) that part, if any, of the term of any such sublease or any renewal
or extension thereof which shall extend beyond a date one day prior to the
expiration or earlier termination of the term shall be a nullity;
(f) any such subletting will result in there being no more than two
(2) occupants in the Premises other than the Tenant;
(g) Tenant shall pay all reasonable out-of-pocket costs that may be
incurred by Landlord in connection with said sublease, including the costs of
making investigations as to the acceptability of a proposed subtenant and the
reasonable fees of Landlord's attorneys;
(h) the proposed subtenant is not currently negotiating and shall have
not negotiated with Landlord (or with other unit owners affiliated with Landlord
to lease any other space in the Building) for the rental of any space in the
Unit within the prior six (6) months before Tenant's Request for Consent (and
comparable space in the Unit is not available to rent at the time Tenant wishes
to negotiate with such proposed subtenant);
(i) Landlord shall be furnished with a duplicate original of the
sublease within (5) Business Days after the date of its execution;
(j) Tenant shall pay to Landlord a sum equal to fifty percent (50%) of
(x) any fixed rent and additional rent or other consideration paid to Tenant by
any subtenant which is in excess of the Base Rent and Additional Rent then being
paid by Tenant to Landlord pursuant to the terms hereof, less Expenses as
hereinafter defined, and (y) any other profit or gain realized by Tenant from
any such subletting. The term "Expenses" shall mean (i) reasonable brokerage
commissions incurred by Tenant in connection with such subletting, (ii)
reasonable costs of alterations performed for the benefit of subtenant, (iii)
the book value of any fixtures sold to the subtenant as a bona fide sale, (iv)
the reasonable legal fees incurred by Tenant in connection with any such
transaction, (v) the reasonable advertising fees incurred by Tenant in
connection with such subletting and (vi) any reasonable additional concessions
granted by Tenant to subtenant in connection with such subletting. All sums
payable hereunder by Tenant shall be paid to Landlord as Additional Rent
immediately upon receipt thereof by Tenant. If only a part of the Premises is
sublet, then the Base Rent and Additional Rent paid therefor by Tenant to
Landlord shall be deemed for the purposes of this Paragraph (j) to be that
fraction thereof that the area of said sublet space bears to the entire
Premises; and
(k) there shall be no default by Tenant beyond any applicable grace
period under any of the terms, covenants and conditions of this lease at the
time that Landlord's consent to any such subletting is requested or on the date
of the commencement of the term of any such proposed sublease.
19.8 Landlord will respond to all Tenant's Requests for Consent within
twenty (20) days of receipt of Tenant's Request for Consent. If Landlord fails
to respond to Tenant's Request For Consent to Tenant's proposed subletting
within the foregoing twenty (20) day period, then Tenant shall be required to
submit an additional ten (10) day notice to Landlord stating to Landlord that
Tenant's proposed sublet will be deemed approved by Landlord if Landlord fails
to respond to Tenant within ten (10) days of Landlord's receipt of such second
notice. If Landlord fails to respond to such the foregoing ten (10) day notice,
then Tenant's proposed sublet will be deemed approved for all purposes in this
Lease as if Landlord had originally given its consent thereto.
20. SUBORDINATION AND ATTORNMENT
20.1 This Lease and all rights of Tenant hereunder are subject and
subordinate in all respects to (a) all present and future ground leases,
operating leases, superior leases, overriding leases and underlying leases and
grants of term of the Land and the Building or any portion thereof including,
but not limited to, the Condominium Documents and the Ground Lease
(collectively, including the applicable items set forth in subdivision (d) of
this Section 20.1, the "Superior Lease") whether or not the Superior Lease shall
also cover other lands or buildings, (b) all mortgages and building loan
agreements, including leasehold mortgages and spreader and consolidation
agreements, which may now or hereafter affect the Unit, Land or Building
(collectively, including the applicable items set forth in subdivisions (c) and
(d) of this Section 20.1, the "Superior Mortgage"), whether or not the Superior
Mortgage shall also cover other lands or buildings or leases, (c) each advance
made or to be made under the Superior Mortgage, and (d) all renewals,
modifications, replacements, substitutions and extensions of the Superior Lease
and the Superior Mortgage. The provisions of this Section shall be
self-operative and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant shall promptly execute and deliver,
at its own cost and expense, any instrument, in recordable form, that Landlord,
the Board of Managers, the landlord under any Superior Lease (the "Superior
Landlord") or the holder of any Superior Mortgage (the "Superior Mortgagee") may
reasonably request to evidence such subordination; and if Tenant fails to
execute, acknowledge and deliver any such instrument within thirty (30) days
after request therefor. Any Superior Mortgagee may elect that this Lease shall
have priority over such Superior Mortgage and, upon notification thereof by such
Superior Mortgagee to Tenant, this Lease shall be deemed to have priority over
such Superior Mortgage, whether this Lease is dated prior to or subsequent to
the date of such Superior Mortgage. If Landlord, the Board of Managers, any
Superior Mortgagee or Superior Landlord requires any modification of this Lease,
Tenant shall, at Landlord's request, promptly execute, acknowledge and deliver
to Landlord instruments in form reasonably satisfactory to Landlord effecting
such modification Tenant; provided that such modifications do not increase the
Base Rent or Additional Rent payable by Tenant hereunder increase the
obligations of Tenant hereunder beyond a de minimis amount or affect Tenant's
rights hereunder beyond a de minimis amount. If any act or omission of Landlord
would give Tenant the right, immediately or after the giving of notice and/or a
lapse of time, to cancel or terminate this Lease, or to claim a partial or total
eviction, Tenant shall not exercise such right until: (i) it has given written
notice of the act or omission to Landlord, the Board of Managers and each
Superior Landlord and Superior Mortgagee whose name and address has been
furnished to Tenant and shall describe Landlord's default with reasonable
detail, specifying the section of this Lease as to which Landlord is in default,
and (ii) either (A) a reasonable period for remedying the act or omission shall
have elapsed following the giving of such notice and no remedy shall have been
commenced or (B) a cure having been timely commenced ceases to be prosecuted
with diligence and continuity. If within such reasonable period, the Board of
Managers or such Superior Landlord or Superior Mortgagee gives Tenant notice of
its intention to remedy the act or omission and promptly thereafter commences
and diligently prosecutes the required remedial action to completion within the
prescribed time period, Tenant shall have no right to terminate this Lease on
account of the act or omission. Landlord agrees to use reasonable efforts to
obtain a subordination, non-disturbance and attornment agreement from any
Superior Landlord and Superior Mortgagee existing on the date of this Lease.
20.2 For purposes of this Section 20.2, the term "Successor Landlord"
shall mean and include (i) any person, including but not limited to any Superior
Landlord or Superior Mortgagee, who, prior to the termination of this Lease,
acquires or succeeds to the interest of Landlord under this Lease through
summary proceedings, foreclosure action, assignment, deed in lieu of foreclosure
or otherwise, and (ii) the successors and assigns of any person referred to in
clause (i) of this sentence. Upon any Successor Landlord's so acquiring, or so
succeeding to, the interest of Landlord under this Lease, Tenant shall, at the
election and upon the request of the Successor Landlord, and without further
instruments of attornment, fully attorn to and recognize such Successor Landlord
as Tenant's landlord under this Lease upon the then executory terms of this
Lease. No Successor Landlord shall be bound by any prepayment of rent or
additional rent for more than one month in advance or any amendment or
modification of this Lease made without the consent of such Successor Landlord.
Tenant waives the provisions of any statute or rule of law now or hereafter in
effect which may give or purport to give Tenant any right of election to
terminate this Lease or to surrender possession of the Premises in the event any
Superior Lease is terminated. The foregoing provisions of this Section shall
inure to the benefit of any such Successor Landlord, shall be self-operative,
and no further instrument shall be required to give effect to said provisions.
Upon demand of any such Successor Landlord, Tenant agrees to execute instruments
to evidence and confirm the foregoing provisions of this Section reasonably
satisfactory to any such Successor Landlord. Nothing contained in this Section
shall be construed to impair any right otherwise exercisable by any such owner,
holder or lessee.
20.3 This Lease shall be subject and subordinate to the Condominium
Documents and the Ground Lease, as now or hereafter amended, and Tenant
covenants and agrees to comply with the terms of the Condominium Documents and
the Ground Lease, as now or hereafter amended, for so long as the same shall be
in effect.
21. ACCESS; CHANGE IN FACILITIES
21.1 All parts (except non-glass surfaces facing the interior of the
Premises) of all walls, windows and doors bounding the Premises, all balconies,
stairs, landings and roofs adjacent to the Premises, all space in or adjacent to
the Premises used for columns, shafts, stacks, stairways, risers, elevator
shafts and machinery, conduits, air conditioning rooms, telephone rooms, fan
rooms, heating, ventilating, air conditioning, plumbing, electrical and other
mechanical facilities, service closets and other Building equipment, and the use
thereof, as well as access thereto through the Premises for the purposes of
operation, decoration, cleaning, maintenance, safety, security, alteration and
repair, are hereby exclusively reserved to Landlord and the Board of Managers.
Landlord and the Board of Managers reserve the right, at any time, without
incurring any liability to Tenant therefor, to make such changes in or to the
Building and the Building equipment, as well as in the entrances, doors,
lobbies, interior and exterior plaza areas, corridors, elevators, Building
stairs, landings, toilets and other public parts of the Building, as it may deem
necessary or desirable, provided any such change or alterations do not prevent
Tenant from conducting its usual and customary business within the Premises.
21.2 Landlord and the Board of Managers may install, use, control and
maintain pipes, fans, ducts, wires and conduits within or through the Premises,
or through the walls, columns and ceilings therein, provided that the
installation work and resulting construction will not prevent Tenant from
conducting its usual and customary business within the Premises. Landlord agrees
to use (or exercise all rights available to Landlord under the Condominium
Documents to cause the Board of Managers to use) reasonable efforts to conceal
all pipes, fans, ducts, wires and conduits installed by Landlord and the Board
of Managers in the Premises after the date of this Lease within the walls,
columns and ceilings of the Premises. Tenant hereby grants Landlord and the
Board of Managers access through the Premises in connection with Landlord's or
the Board of Manager's installation, use, control and maintenance of such pipes,
fans, ducts, wires and conduits; provided, that, Landlord or the Board of
Managers, whomever gained access to the Premises by virtue of this Section 21.2,
shall be liable to Tenant for all damage to the Premises and Tenant's personalty
within the Premises due to (based on a comparative negligence standard) the
gross negligence or willful misconduct of Landlord or the Board of Managers, as
applicable, during such party's activities in the Premises. Where access doors
are required by Landlord or the Board of Managers in or adjacent to the Premises
for mechanical trades, Landlord or the Board of Managers shall furnish them and
have all keys to such access doors. Tenant shall reasonably cooperate with
Landlord and the Board of Managers in the location of Landlord's or the Board of
Managers' access doors for such facilities.
21.3 Landlord and the Board of Managers shall have the right to take
all reasonable measures as Landlord or the Board of Managers may deem advisable
for the security of the Building and its occupants, including, without
limitation, the search of all persons entering or leaving the Building, the
evacuation of the Building for cause, suspected cause or for drill purposes.
21.4 Landlord, the Board of Managers and their respective agents shall
have the right to enter the Premises at all reasonable times, whether or not
during Business Hours, upon reasonable prior notice to Tenant and with a
representative of Tenant present for any of the purposes specified in this
Article and (a) to examine the Premises or for the purpose of performing any
obligation of Landlord or the Board of Managers or exercising any right reserved
to Landlord or the Board of Managers in this Lease (or to the Superior Landlord
in any Superior Lease); (b) to exhibit the Premises to prospective mortgagees or
purchasers of the Unit or Building; (c) to exhibit the Premises to prospective
tenants, but only within the last twelve (12) months of the Term; (d) to make or
cause to be made such repairs or improvements, or to perform such maintenance,
including the maintenance of Unit or Building equipment, as Landlord may deem
necessary or desirable or required by any Governmental Authority, Legal
Requirement or Insurance Requirement; and (e) to take into and temporarily
store, during the course of such repairs, improvements or maintenance, upon the
Premises all materials that may be required in connection therewith. If, after
receipt of the Notice set forth above, Tenant, its agents or employees shall not
be present or shall not permit an entry into the Premises at any time when such
entry shall be permissible, Landlord and the Board of Managers may use a master
key or forcibly enter the Premises without any liability therefor (unless
Landlord or the Board of Managers shall be grossly negligent or act with willful
misconduct during their presence in the Premises); provided, that, Landlord and
the Board of Managers may only forcibly enter the Premises in order to respond
to an emergency situation.
21.5 The exercise of any rights retained by Landlord and the Board of
Managers pursuant to this Article 21 shall be without liability to Tenant or any
person claiming through Tenant for damage or injury to property, person or
business and without effecting an eviction, constructive or actual, or
disturbance of Tenant's use of possession or giving rise to any claim for
set-off or abatement of Base Rent or Additional Rent so long as Landlord's and
the Board of Manager's exercise of their rights does not prevent Tenant from
conducting its usual and customary business within the Premises.
22. RULES AND REGULATIONS
22.1 Tenant and Tenant's agents, employees, licensees and invitees
will fully and promptly comply with all requirements of the Building Standards
and the Building Rules and Regulations as set forth in Exhibit C and Exhibit D
respectively (collectively, the "Rules and Regulations"). Landlord agrees to
enforce the Rules and Regulations in a reasonable and non-discriminatory manner
compared to other tenants of similar size in the Unit. Landlord and the Board of
Managers shall at all times have the right to change such Rules and Regulations
and/or Building services or to promulgate other Rules and Regulations and/or
Building services in such manner as may be deemed advisable for safety, care, or
cleanliness of the Building and related facilities or premises, and for
preservation of good order therein, all of which rules and regulations and/or
Building services, changes and amendments will be forwarded to Tenant in writing
and shall be carried out and observed by Tenant. Tenant shall further be
responsible for the compliance with such Rules and Regulations and/or Building
services by the employees, servants, agents, visitors, licensees and invitees of
Tenant. In the event of any conflict between the provisions of this Lease and
the provisions of the Rules and Regulations (or conflicts within the Rules and
Regulations), then the most restrictive term, provision, rule and/or regulation
shall apply. Landlord shall not be responsible or liable to Tenant for
violations of the Rules and Regulations by other tenants and occupants of the
Building so long as Landlord enforces the Rules and Regulations in a reasonable
and non-discriminatory manner compared to other tenants of similar size in the
Unit to Tenant.
23. DAMAGE OR DESTRUCTION
23.1 If the Premises or any part thereof shall be damaged or rendered
untenantable by fire or other casualty and this Lease is not terminated pursuant
to any provision of this Article, Landlord, at Landlord's expense, shall perform
or shall exercise all rights available to Landlord under the Condominium
Documents to cause the Board of Managers to perform, Landlord's Restoration Work
(as hereinafter defined), subject to Legal Requirements (including, without
limitation, applicable zoning codes) then in effect and to the extent of
available insurance proceeds, and Tenant, at Tenant's expense, shall perform
Tenant's Restoration Work (as hereinafter defined), with reasonable dispatch and
continuity. Except as provided in Section 23.8, Base Rent and Additional Rent
shall be equitably abated to the extent that the Premises shall have been
rendered untenantable, such abatement shall commence on the date of such damage,
provided Tenant has given prompt Notice of such damage to Landlord, and shall
continue until the date the Premises shall no longer be untenantable or, in the
event of Tenant Delay or any delay in Tenant's performance of Tenant's
Restoration Work (other than a delay caused by a Landlord Delay), until the date
the Premises would have been tenantable but for such Tenant Delay or other delay
in Tenant's performance of Tenant's Restoration Work (other than a delay caused
by a Landlord Delay); provided, however, should Tenant occupy a portion of the
Premises for the conduct of its business during the period the repair work is
taking place and prior to the date the Premises are no longer untenantable, the
Base Rent and Additional Rent allocable to such occupied portion, based upon the
proportion which the occupied portion of the Premises bears to the total area of
the Premises, shall be payable by Tenant from the date of such occupancy.
23.2 "Landlord's Restoration Work" shall include all of the work
necessary to repair, restore, replace and rebuild Landlord's Work to
substantially the same condition as that in which it was immediately prior to
the occurrence of the fire or other casualty; provided, however, that Landlord's
Restoration Work shall not include the repair, restoration, replacement or the
rebuilding of (i) Tenant's Work or Tenant's Furnishings, (ii) any Alteration
made or installed by or on behalf of Tenant pursuant to Article 12 hereof or
(iii) any part of the furniture, business equipment or other personal property
which may have been placed by Tenant within the Premises.
23.3 "Tenant's Restoration Work" shall include all of the work (other
than Landlord's Work) necessary to repair, restore, replace and rebuild the
Premises (including Tenant's Work) to substantially the same condition as that
in which it was in immediately prior to the occurrence of the fire or other
casualty.
23.4 If the Premises shall be totally damaged or rendered wholly
untenantable by fire or other casualty, Landlord has not terminated this Lease
pursuant to Section 23.5 and Landlord has not substantially completed Landlord's
Restoration Work within fifteen (15) months (subject to (i) Tenant Delay or (ii)
delays in Tenant's performance of Tenant's Restoration Work (other than a delay
caused by a Landlord Delay) which result in delays in the performance of
Landlord's Restoration Work or (iii) Force Majeure) from the date Landlord, and
the Board of Managers (to the extent the Board of Managers is performing any
Landlord's Restoration Work) receives (i) final adjustment of all insurance
claims relating to the casualty, (ii) all permits and approvals necessary to
perform Landlord's Restoration Work, and all such permits and approvals are
final and nonappealable (or the time for appeal has expired), and (iii) written
confirmation from the Superior Mortgagee that the Superior Mortgagee has agreed
to advance insurance proceeds to Landlord for the performance of Landlord's
Restoration Work, Tenant may serve Notice on Landlord of its intention to
terminate this Lease, and if within forty five (45) days after Landlord's
receipt of such Notice, subject to (i) Tenant Delay or (ii) delays in Tenant's
performance of Tenant's Restoration Work (other than a delay caused by a
Landlord Delay) which result in delays in the performance of Landlord's Work or
(iii) Force Majeure, Landlord or the Board of Managers shall not have completed
Landlord's Restoration Work, this Lease shall terminate on the expiration of
such forty five (45) day period as if such termination date were the Expiration
Date, without prejudice to Landlord's and Tenant's rights under this Lease in
effect prior to such termination. Upon Landlord's or the Board of Managers'
completion of Landlord's Restoration Work, Tenant shall have no further right to
terminate this Lease pursuant to this Section 23.4.
23.5 If the Premises shall be totally damaged or rendered wholly
untenantable by fire or other casualty or if the Building or Unit shall be so
damaged by fire or other casualty that alteration or reconstruction of more than
forty percent (40%) of the rentable area of the Building or the Unit, in
Landlord's reasonable opinion, shall be required (whether or not the Premises
shall have been so damaged) or if the Superior Mortgagee refuses to advance
insurance proceeds to Landlord for the performance of Landlord's Restoration
Work, then Landlord, at its option, may terminate this Lease, by giving Tenant
thirty (30) days' Notice of such termination, within ninety (90) days after the
date of such fire or other casualty. In the event that such Notice of
termination shall be given, this Lease shall terminate as of the date provided
in such notice of termination with the same effect as if that date were the
Expiration Date, without prejudice to Landlord's and Tenant's rights under this
Lease in effect prior to such termination.
23.6 Landlord and the Board of Managers shall not be liable for any
inconvenience to Tenant or injury to the business of Tenant resulting in any way
from any such damage by fire or other casualty, or the repair thereof (except if
Landlord or the Board of Managers performs such repairs with gross negligence or
willful misconduct, and then to the extent such damage was caused by Landlord or
the Board of Managers, based upon a comparative negligence standard). Landlord
and the Board of Managers will not carry insurance of any kind on Tenant's Work,
any Alterations or any personal property of Tenant, and Landlord and the Board
of Managers shall not be obligated to repair any damage thereto, or replace the
same, or bear any of the risk of loss with respect thereto.
23.7 The provisions of this Article shall be considered an express
agreement governing any case of damage to or destruction of the Building, the
Unit or the Premises or any part of either by fire or other casualty, and Tenant
hereby waives the provisions of Section 227 of the Real Property Law and agrees
that the provisions of this Article shall govern and control in lieu thereof.
23.8 Notwithstanding any of the foregoing provisions of this Article,
if, by reason of some action or inaction on the part of Tenant or any of its
subtenants or their employees, agents, licensees or contractors, Landlord or the
Board of Managers shall be unable to collect all of the insurance proceeds
applicable to damage or destruction including, but not limited to, rental
interruption or business interruption insurance, then, without prejudice to any
other remedy which may be available against Tenant, the abatement of Base Rent
and Additional Rent provided for in this Article shall not be effective.
23.9 In the event of a conflict between the provisions of this Article
23 and those of Section 18.2, the provisions of this Article 23 shall prevail.
24. EMINENT DOMAIN
24.1 In the event that all of the Land, the Building, the Unit or the
Premises shall be acquired or condemned by eminent domain, this Lease shall
terminate as of the date of the vesting of title in the condemning authority as
if said date were the Expiration Date. If only a part of the Premises shall be
so acquired or condemned then, except as otherwise provided in this Article,
this Lease shall continue in full force and effect, but from and after the date
of the vesting of title, the Base Rent shall be reduced by an amount equal to
the product obtained by multiplying (i) the Base Rent in effect immediately
prior to such condemnation by (ii) a fraction, the numerator of which is the
number of rentable square feet of the Premises taken and the denominator of
which is the number of rentable square feet of the Premises immediately prior to
the condemnation. Tenant's Proportionate Share shall also be reduced to equal a
fraction, the numerator of which is the number of rentable square feet of the
Premises after the taking and the denominator of which is the number of rentable
square feet of the Unit after the taking. The aforesaid calculations shall be
reasonably determined by Landlord, and if Tenant disputes such calculations,
such calculations shall be settled by arbitration in accordance with the
procedure set forth in Article 35 hereof.
24.2 If such a part of the Land, Unit or the Building shall be so
acquired or condemned so that continued operation of the remaining portion of
the Unit or Building shall be impracticable or uneconomical as reasonably
determined by Landlord or the Board of Managers, then (i) whether or not the
Premises shall be affected, Landlord may, within ninety (90) days following the
date of vesting of title, give Tenant thirty (30) days' Notice of termination of
this Lease or (ii) if more than twenty-five percent (25%) of the total area of
the then Premises is acquired or condemned, and the taking of such portion of
the Premises renders the balance of the Premises significantly unusable by
Tenant for the Permitted Use, Tenant may, within ninety (90) days following the
date upon which Tenant shall have received Notice of vesting of title, give to
Landlord thirty (30) days' Notice of termination of this Lease. In the event any
such thirty (30) day Notice of termination is given by Landlord or Tenant, this
Lease shall terminate upon the expiration of said thirty (30) days with the same
effect as if that date were the Expiration Date, without prejudice to Landlord's
or Tenant's rights under this Lease in effect prior to such termination, and
Rent shall be apportioned as of such date or sooner termination.
24.3 In the event of any such acquisition or condemnation of all or
any part of the Land, Unit or the Building, Landlord shall receive the entire
award for any such acquisition or condemnation. Tenant shall have no claim
against Landlord or the condemning authority for the value of any unexpired
portion of the Term and agrees not to join in any claim made by Landlord and to
execute all further documents that may be required in order to facilitate the
collection of the award by Landlord. Tenant shall, however, retain the right to
make a separate claim for (i) the value of any personal property taken, and (ii)
its moving expenses, provided same does not diminish or delay the award
otherwise obtainable by Landlord.
24.4 Upon Landlord's receipt of the condemnation award referred to in
Section 24.3, and provided that this Lease has not been terminated pursuant to
the provisions of Section 24.1 or Section 24.2, Landlord shall promptly perform,
or use reasonable efforts to cause the Board of Managers to perform, Landlord's
Restoration Work to the extent such condemnation award is sufficient for such
purpose, the Superior Mortgagee has agreed in writing to advance the
condemnation award to Landlord (or the Board of Managers to the extent that they
are performing Landlord's Restoration Work) for the performance of Landlord's
Restoration Work and provided Landlord receives all permits and approvals
necessary to perform Landlord's Restoration Work and all such permits and
approvals are final and nonappealable (or the time for appeal has expired).
Tenant shall perform Tenant's Restoration Work whether or not Tenant's award is
sufficient for such purpose.
24.5 If the temporary use or occupancy of all or part of the Premises
shall be condemned or taken, this Lease shall remain unaffected by such
condemnation or taking and Tenant shall continue to be responsible for all of
its obligations hereunder (except to the extent prevented from so doing by
reason of such condemnation or taking) and it shall continue to pay the Base
Rent and Additional Rent as provided hereunder. Tenant shall have the right to
claim, prove and receive so much of any award for such condemnation or taking
for temporary use or occupancy as represents compensation for the use and
occupancy of the Premises and, if so awarded, for the loss of value or utility
of Tenant's personal property, Tenant's Work and any Alterations and Tenant's
moving expenses, up to and including the Expiration Date or the date of
termination of the condemnation or taking for temporary use or occupancy,
whichever is earlier, and Landlord shall be entitled to claim, prove and receive
the balance of any such award. Notwithstanding the foregoing, however, the
rights and interests of Landlord and Tenant to any award received or receivable
with respect to a condemnation or taking for temporary use or occupancy shall be
in all other respects governed by the applicable provisions of the Superior
Lease and/or the Superior Mortgage.
24.6 If the grade of any street upon which the Land is situated or
abuts shall be changed, this Lease shall nevertheless continue in full force and
effect, and Landlord shall be entitled to collect and keep the entire award that
may be made. Tenant hereby assigns to Landlord all of its right in and to every
such award or any part thereof.
24.7 The terms "condemnation" and "acquisition" as used herein shall
include any agreement in lieu of or in anticipation of the exercise of the power
of eminent domain between Landlord and any Governmental Authority authorized to
exercise the power of eminent domain.
25. CONDITIONS OF LIMITATION
25.1 This Lease and the Term and estate hereby granted are subject to
the limitations that:
(a) if Tenant shall file a voluntary petition in bankruptcy or
insolvency, or commence an action under the Bankruptcy Code, or shall be
adjudicated a debtor, or insolvent, or shall file any petition or answer seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the Bankruptcy Code or any other present or
any future federal bankruptcy act or any other present or future applicable
federal, state or other statute or law (foreign or domestic), or shall make an
assignment for the benefit of creditors or shall seek or consent or acquiesce in
the appointment of any trustee, receiver or liquidator of Tenant or of all or
any part of Tenant's property; or
(b) if, within ninety (90) days after the commencement of any
proceeding and/or action against Tenant, whether by the filing of a petition or
otherwise, seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the Bankruptcy Code or any
other present or future federal bankruptcy act or any other present or future
applicable federal, state or other statute or law (foreign or domestic), such
proceeding shall not have been dismissed, or if, within ninety (90) days after
the appointment of any trustee, custodian, receiver or liquidator of Tenant or
of all or any part of Tenant's property, without the consent or acquiescence of
Tenant, such appointment shall not have been vacated or otherwise discharged, or
if any execution or attachment shall be issued against Tenant or any of Tenant's
property pursuant to which the Premises shall be taken or occupied or attempted
to be taken or occupied; or
(c) if Tenant shall default in the payment when due of any Base Rent
or Additional Rent for a period of five (5) days after receipt from Landlord of
notice thereof; or
(d) if Tenant shall default in the performance of any term of this
Lease on Tenant's part to be performed (other than the payment of Base Rent and
Additional Rent) and Tenant shall fail to remedy such default within thirty (30)
days after Notice of such default, or if such default is of such a nature that
it cannot be completely remedied within said period of thirty (30) days if
Tenant shall not (x) promptly upon the giving by Landlord of such Notice, advise
Landlord of Tenant's intention to institute all steps necessary to remedy such
situation, (y) promptly institute and thereafter diligently prosecute to
completion all steps necessary to remedy the same, and (z) complete such remedy
within a reasonable time after the date of the giving of said Notice by Landlord
and in any event prior to such time as would either (i) subject Landlord,
Landlord's agents, any Superior Landlord or Superior Mortgagee to criminal
prosecution or civil liability, including, without limitation, the imposition or
threatened imposition of an order to vacate or revocation or suspension of the
certificate of occupancy for the Unit, the Building or the Premises, or (ii)
cause a default under any Superior Lease or any Superior Mortgage; or
(e) if any event shall occur or any contingency shall arise whereby
this Lease or the estate hereby granted or the unexpired balance of the Term
would, by operation of law or otherwise, devolve upon or pass to any person
other than Tenant except as is expressly permitted under Article 19;
then in any of said events an event of default ("Event of Default") shall be
deemed to exist.
26. REMEDIES
If an Event of Default shall exist, the following provisions shall
apply and Landlord shall have the rights and remedies set forth therein which
rights and remedies may be exercised upon or at any time following the
occurrence of an Event of Default:
26.1 (a) By Notice to Tenant, Landlord shall have the right to
accelerate all Base Rent and any other sums due hereunder and otherwise payable
in installments over the remainder of the Term, and, at Landlord's option, any
other Additional Rent to the extent that such Additional Rent can be determined
and calculated to a fixed sum; and the amount of accelerated rent, without
further Notice or demand for payment, shall be due and payable by Tenant within
five (5) days after Landlord has so notified Tenant. Additional Rent which has
not been included, in whole or in part, in accelerated rent, shall be due and
payable by Tenant during the remainder of the Term, in the amounts and at the
times otherwise provided for in this Lease.
(b) Notwithstanding the foregoing or the application of any rule of
law based on election of remedies or otherwise, if Tenant fails to pay the
accelerated rent in full when due, Landlord thereafter shall have the right by
Notice to Tenant, (i) to terminate Tenant's further right to possession of the
Premises, or (ii) to terminate this Lease under Section 26.2 below, and to
recover by an action at law all Base Rent and Additional Rent; and if Tenant
shall have paid part but not all of the accelerated rent, the portion thereof
attributable to the period equivalent to the part of the Term remaining after
Landlord's termination of possession or termination of this Lease shall be
applied by Landlord against Tenant's obligations owing to Landlord as determined
by the applicable provisions of Sections 26.3 and 26.4 below.
26.2 (a) By Notice to Tenant, Landlord shall have the right to
terminate the Lease as of a date specified in the Notice of termination and in
such case, Tenant's rights, including any based on any option to renew, and to
the possession and use of the Premises shall end absolutely as of the
termination date; and this Lease shall also terminate in all respects except for
the provisions hereof regarding Landlord's damages and Tenant's liabilities
arising prior to, out of and following the Event of Default and the ensuing
termination, including the payment of Base Rent and Additional Rent.
(b) Following such termination (as well as upon any other termination
of this Lease by expiration of the Term or otherwise) Landlord immediately shall
have the right to recover possession of the Premises; and to that end, Landlord
may enter the Premises and take possession, without the necessity of giving
Tenant any Notice to quit or any other further Notice, with or without legal
process or proceedings, and in so doing Landlord may remove Tenant's property
(including any Alterations to the Premises made by Tenant), as well as the
property of others as may be in the Premises, and make disposition thereof in
such a manner as Landlord may deem to be commercially reasonable and necessary
under the circumstances.
26.3 (a) Unless and until Landlord shall have terminated this Lease
under Section 26.2 above, Tenant shall remain fully liable and responsible to
perform all of the covenants and to observe all the conditions of this Lease
throughout the remainder of the Term; and, in addition, Tenant shall pay to
Landlord, upon demand and as Additional Rent, the total sum of all costs, losses
and expenses, including reasonable counsel fees, as Landlord incurs, directly or
indirectly, because of any Event of Default having occurred. The termination of
this Lease shall not relieve Tenant of its obligations to pay any Base Rent or
Additional Rent which may be due, included any accelerated Base Rent or
Additional Rent.
(b) If Landlord either terminates Tenant's right to possession without
terminating this Lease or terminates this Lease and Tenant's leasehold estate as
above provided, Landlord shall have the unrestricted right to relet the Premises
or any part(s) thereof to such tenant(s) on such terms and for such period(s) as
Landlord may deem appropriate. The failure of Landlord to relet the Premises or
any part(s) thereof shall not release or affect Tenant's liability for damages
hereunder. Landlord shall in no event be liable in any way whatsoever for
failure to relet the Premises, or in the event the Premises are relet, for
failure to collect the rent thereof under such reletting, and in no event shall
Tenant be entitled to receive the excess, if any, of the net rents collected by
Landlord over the sums payable by Tenant hereunder.
26.4 (a) The damages which Landlord shall be entitled to recover from
Tenant shall be the sum of:
(1) all Base Rent and Additional Rent accrued and unpaid as of the
termination date; and
(2) (i) all costs and expenses incurred by Landlord in recovering
possession of the Premises, including counsel fees and the cost of removal and
storage of Tenant's property, improvements and Alterations therefrom, (ii) the
costs and expenses of restoring the Premises to the condition in which the same
were to have been surrendered by Tenant as of the expiration of the Term, or, in
lieu thereof, the costs and expenses of remodeling or altering the Premises or
any part for reletting the same and (iii) the costs of reletting (exclusive of
those covered by the foregoing (ii)) including brokerage fees and counsel fees;
and
(3) the present value of all Base Rent and Additional Rent (to the
extent that the amount(s) of Additional Rent has been then determined) otherwise
payable by Tenant over the remainder of the Term discounted at a discount rate
equal to the current yield rate on the U.S. Treasury note maturing closest in
time to the Expiration Date as such yield is reported in The Wall Street
Journal, or similar publication, on the date of termination of this Lease.
Less (deducting from the total determined under sub-paragraphs (1)(2)
and (3)) all rent and all other additional rent to the extent determinable as
aforesaid (to the extent that like charges would have been payable by Tenant)
which Landlord receives from other tenant(s) by reason of the reletting of the
Premises or any part thereof during or attributable to any period falling within
the otherwise remainder of the Term.
(b) The damage sums payable by Tenant under the preceding provisions
of this Section 26.4 shall be payable on demand from time to time as the amounts
are determined.
26.5 Landlord shall have all rights and remedies now or hereafter
existing at law with respect to the enforcement of Tenant's obligations
hereunder and the recovery of the Premises. No right or remedy herein conferred
upon or reserved to Landlord or Tenant shall be exclusive of any other right or
remedy, but shall be cumulative and in addition to all other rights and remedies
given hereunder or now or hereafter existing at law. Landlord and Tenant shall
be entitled to injunctive relief in case of the violation, or attempted or
threatened violation, of any covenant, agreement, condition or provision of this
Lease, or to a decree compelling performance of any covenant, agreement,
condition or provision of this Lease.
26.6 Nothing herein contained shall limit or prejudice the right of
Landlord to exercise any or all rights and remedies available to Landlord by
reason of default or to prove for and obtain in proceedings under any bankruptcy
or insolvency laws, an amount equal to the maximum allowed by any law in effect
at the time when, and governing the proceedings in which, the damages are to be
proved, whether or not the amount be greater, equal to or less than the amount
of the loss or damage referred to above.
26.7 No delay or forbearance by Landlord in exercising any right or
remedy hereunder, or Landlord's undertaking or performing any act or matter
which is not expressly required to be undertaken by Landlord shall be construed,
respectively, to be a waiver of Landlord's rights or to represent any agreement
by Landlord to undertake or perform such act or matter thereafter. Waiver by
Landlord of any breach by Tenant of any covenant or condition herein contained
(which waiver shall be effective only if so expressed in writing by Landlord) or
failure by the Landlord to exercise any right or remedy in respect of any such
breach shall not constitute a waiver or relinquishment for the future of
Landlord's right to have any such covenant or condition duly performed or
observed by Tenant, or of Landlord's rights arising because of any subsequent
breach of any such covenant or condition nor bar any right or remedy of Landlord
in respect of such breach or any subsequent breach. Landlord's receipt and
acceptance of any payment from Tenant which is tendered not in conformity with
the provisions of this Lease or following an Event of Default (regardless of any
endorsement or notation on any check or any statement in any letter accompanying
any payment) shall not operate as an accord and satisfaction or a waiver of the
right of Landlord to recover any payments then owing by Tenant which are not
paid in full, or act as a bar to the termination of the Lease and the recovery
of the Premises because of Tenant's previous default.
27. SURRENDER OF PREMISES
27.1 No act or thing done by Landlord or its agents during the Term
shall be deemed an acceptance of a surrender of the Premises, and no agreement
to accept a surrender of the Premises shall be valid unless the same be made in
writing and signed by Landlord.
27.2 On the Expiration Date or upon the sooner termination of this
Lease or upon any re-entry by Landlord upon the Premises, all of Tenant's right,
title and interest, if any, in the Premises, Tenant's Work, Alterations, the
Unit or the Building, shall cease, and Tenant shall, at its sole cost and
expense, quit, surrender, vacate and deliver the Premises to Landlord "broom
clean" and in reasonable order, condition and repair except for ordinary wear,
tear and damage by fire or other insured casualty, together with all
improvements which have been made upon the Premises (except as otherwise
provided for in this Lease and subject to the provisions of Articles 11 and 12).
Tenant shall remove from the Premises, the Unit and Building all of Tenant's
personal property and personal effects of all persons claiming through or under
Tenant, and shall promptly pay Landlord the cost to repair all damage to the
Premises, the Unit and the Building occasioned by such removal.
27.3 If the Expiration Date or the date of sooner termination of this
Lease shall fall on a day which is not a Business Day, then Tenant's obligations
under Section 27.2 shall be performed on or prior to the immediately preceding
Business Day.
27.4 Any Alterations or any personal property of Tenant which shall
remain in the Premises after the termination of this Lease shall be deemed to
have been abandoned and either may be retained by Landlord as its property or
may be disposed of, at Tenant's expense, in such manner as Landlord may
determine.
27.5 If the Premises are not surrendered within ninety (90) days after
the termination of this Lease, Tenant hereby indemnifies Landlord and the Board
of Managers and holds them harmless against any loss, cost, expense and/or
liability (including attorney's fees) resulting from or incurred by Landlord in
connection with any delay by Tenant in so surrendering the Premises including,
without limitation, any claims by any succeeding tenant or prospective tenant
founded upon such delay, or any loss of a prospective tenancy relating to such
delay.
27.6 In the event Tenant remains in possession of the Premises after
the termination of this Lease without the consent of Landlord, Tenant, at the
option of Landlord and without waiving the liability of Tenant, shall be deemed
to be occupying the Premises as a tenant from month-to-month, at a monthly
rental equal to two (2) times (1.5 times during the first two (2) months of such
holdover) the Base Rent and Additional Rent payable during the last month of the
Term, as liquidated damages for such holdover, subject to the provisions of
Section 27.5 above and subject to all of the other terms of this Lease, insofar
as the same are applicable to a month-to-month tenancy.
27.7 Tenant's obligations under this Article shall survive the
expiration or earlier termination of this Lease.
28. BROKERAGE
28.1 Tenant represents to Landlord, and Landlord represents to Tenant,
that Newmark &Co., Williams Real Estate Company and Insignia/ESG, Inc.
(collectively, the "Broker") are the only brokers or agents with whom each such
party has had any conversations or negotiations concerning the Premises or this
Lease. Each party hereto hereby agrees to indemnify and hold the other party
harmless from and against (a) any claim for a brokerage commission made by any
party other than Broker and (b) any expenses incurred by such party in
connection with such claim, to the extent such claim arises out of the
misrepresentation by such other party. Landlord shall pay any commission due to
Broker pursuant to a separate written agreement.
29. TENANT ESTOPPEL CERTIFICATES
29.1 Tenant agrees to execute and return within ten (10) Business Days
after request therefor by Landlord in connection with any sale or financing of
the Unit or for any reason if requested by the holder of any Superior Mortgage
(or thirty (30) days for any other reason), a certificate prepared by Landlord
and signed by Tenant (i) substantially in the form annexed hereto as Exhibit J,
which certificate may also set forth such further information with respect to
the Lease or the Premises as Landlord or any Superior Mortgagee may reasonably
request. Any such certificate delivered by Tenant pursuant hereto shall be
binding upon Tenant and may be relied upon by Landlord, any Superior Mortgagee
or prospective mortgagee, or any prospective purchaser of the Land, Unit and/or
the Building or any part thereof or any interest therein. Tenant shall, as soon
as possible but in any event within ten (10) Business Days following receipt of
said proposed certificate from Landlord, return a fully executed, dated and
notarized copy of said certificate to Landlord. In the event Tenant shall fail
to return a fully executed copy of such certificate (or a fully executed copy of
a modified certificate acceptable to Landlord) to Landlord within the foregoing
ten (10) Business Day period, then Tenant shall be deemed to have approved and
confirmed all of the terms, certifications and representations contained in such
certificate.
30. LANDLORD ESTOPPEL CERTIFICATES.
30.1 Landlord agrees to furnish within thirty (30) days after request
by Tenant (or within ten (10) Business Days if the reason for any such request
is to comply with the requirements of any securities law) a certificate signed
by Landlord stating the date to which Base Rent and Additional Rent has been
paid by Tenant and confirming the absence or existence of defaults hereunder of
which Landlord has knowledge and anything else reasonably requested by Tenant
relating to the terms of this Lease.
31. NOTICES
31.1 Each provision of this Lease, or of any applicable governmental
laws, ordinances, regulations, and other requirements with reference to the
sending, mailing or delivery of any notice, or with reference to the making of
any payment by Tenant to Landlord, shall be deemed to be complied with when and
if the following steps are taken:
(a) All Base Rent, Additional Rent and other payments required to be
made by Tenant to Landlord hereunder shall be payable to Landlord at the address
set forth in the Fundamental Lease Provisions or at such other address as
Landlord may specify from time to time by written notice delivered in accordance
herewith.
(b) All notices, requests, demands or other communications (each, a
"Notice") with respect to this Lease, whether or not herein expressly provided
for, shall be in writing and shall be given by hand delivery or by United States
certified mail, postage prepaid, return receipt requested, or by express mail or
overnight courier, or by telecopier (with a requirement of electronic
confirmation of receipt if a Notice is sent by telecopier) to the parties at
their respective addresses or telecopy numbers as set forth in the Fundamental
Lease Provisions. Any such addresses for the giving of Notice may be changed by
either party by giving Notice thereof to the other. Notices shall be deemed
given upon the date of first attempted delivery.
32. JOINT AND SEVERAL LIABILITY
32.1 If there be a guarantor of Tenant's obligations hereunder, the
obligations hereunder imposed upon Tenant shall be the joint and several
obligations of Tenant and such guarantor. Landlord need not first proceed
against Tenant before proceeding against such guarantor nor shall any such
guarantor be released from its guaranty for any reason whatsoever, including,
without limitation, in case of any amendments hereto, waivers hereof or failure
to give such guarantor any notices hereunder. Any guarantee shall be a guarantee
of payment and not a guarantee of collection.
33. PERSONAL LIABILITY
33.1 The liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease shall be limited to the interest of Landlord in
the Unit and, to the extent proceeds and income from the Unit are actually held
by Landlord at the time of the entry of judgement against Landlord, such
proceeds and income, and in no event shall Tenant make any claim against the
members, shareholders, officers, directors, individuals, partners or joint
venturers of Landlord, or any partners of such partners or joint venturers, for
any deficiency nor shall any such members, shareholders, officers, directors,
individuals, partners or joint venturers, or any partners of such partners or
joint venturers, have or be subject to any personal liability and the assets of
such parties shall not be subject to levy, attachment or other enforcement of a
remedy sought by Tenant or anyone claiming by, through or under Tenant for any
breach or claim hereunder. This clause shall not be deemed to limit or deny any
remedies which Tenant may have in the event of default by Landlord hereunder
which do not involve the personal liability of Landlord.
33.2 Subject to the provisions of Section 18.2 hereof, notwithstanding
anything herein to the contrary, except in the event of a casualty in accordance
with the terms of Article 23 hereof, in the event that the Board of Managers
fails to perform any of its obligations under this Lease, or if the Board of
Managers, through the performance of any of its obligations hereunder or any
other act or omission of the Board of Managers in the Premises, the Unit or the
Building, the Board of Managers damages or injures the Premises, Tenant or any
of Tenant's employees, affiliates, subtenants or assigns or any of the property
owned by any of the foregoing, Tenant covenants and agrees to look only to the
Board of Managers for any claim with regard to such act or omission and shall
not in any way look to Landlord to satisfy any such claim or otherwise abate its
payment of Base Rent or Additional Rent or terminate this Lease.
34. ENVIRONMENTAL MATTERS
34.1 Tenant shall not engage in operations at the Premises or Building
which involve the generation, manufacture, refining, transportation, treatment,
storage, handling or disposal of Hazardous Materials (as hereinafter defined);
provided, however, that Tenant shall not be precluded from transporting, storing
or utilizing limited quantities of substances typically used and reasonably
necessary for the ordinary operation and maintenance of the Building or
Premises, so long as such substances are used, transported, stored and handled
in accordance with all Applicable Laws (as hereinafter defined). Tenant further
covenants that it will not cause or permit to exist, as a result of an
intentional or unintentional action or omission on Tenant's part, the releasing,
spilling, leaking, pumping, pouring, emitting, emptying or dumping from, on or
about the Premises or Building of any Hazardous Materials.
34.2 (a) Except to the extent such compliance is specifically
identified as Landlord's or the Board of Manager's obligation hereunder, Tenant,
its agents, officers, partners, subtenants', employees, on-site contractors, and
invitees, shall be in compliance with all applicable state, federal, and local
environmental and safety laws and regulations, shall obtain and maintain all
permits, licenses, and authorizations required for Tenant's business, equipment,
and operations on and in connection with the Premises or Building, shall comply
with all terms and conditions of such permits, licenses, and authorizations, and
shall comply with all applicable laws, statutes, rules, regulations,
requirements, orders, and directives of Governmental Authorities including,
without limitation, the Resource Conservation and Recovery Act (42 U.S.C.,
Section 6901 et seq.); the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C., Section 9601 et seq.); the New York Environmental
Conservation Law; all applicable fire and municipal building codes, and any
amendments thereto and any applicable guidelines or regulations promulgated
thereunder (collectively, the "Applicable Laws").
(b) Tenant shall certify to Landlord, on request, that (i) Tenant, its
agents, officers, partners, subtenants, employees, on-site contractors, and
invitees, are in compliance with the requirements of all Applicable Laws, (ii)
no disposal of Hazardous Materials has occurred on, in, under or about the
Premises or Building for which Tenant is responsible, and (iii) no release of
Hazardous Materials has occurred on, in, under or about the Premises or Building
for which Tenant is responsible.
(c) Tenant shall indemnify, defend, and hold all Landlord Parties
harmless from and against any and all claims, judgments, damages, penalties,
fines, liabilities, losses, and costs and expenses (including reasonable
attorney's fees and court costs) which arise at any time during or after the
Term as a result of or in connection with (i) Tenant's breach of any prohibition
or requirements set forth in this Section, and (ii) any Hazardous Materials
present or occurring in the Premises or Building as a result of Tenant's, its
agents, officers, partners, subtenants, employees, on-site contractors, or
invitees, activities or omissions on or in connection with the Premises or
Building. Tenant shall promptly notify Landlord of any actual or threatened
losses hereunder. This obligation by Tenant to indemnify, defend, and hold
harmless Landlord includes, without limitation, costs incurred in connection
with any investigation of site conditions, preparation of any remedial or
cleanup plan, or any cleanup, remedial, removal, or restoration work required by
Landlord or any Governmental Authority because of any Hazardous Materials
occurring or present in, on, under, or about the Premises or Building,
diminution in value of the Premises or Building, damages for the loss or amenity
of the Premises or Building, and sums paid in settlement of claims, penalties,
attorneys' fees, court costs, consultant and laboratory fees, and expert's fees
as a result of Tenant's, its agents', officers', partners', subtenants',
employees', on-site contractors' or invitees' activities or omissions on or in
connection with the Premises or Building. Without limiting the foregoing, if any
Hazardous Materials attributable to Tenant, its agents', officers', partners',
subtenants', employees', on-site contractors', or invitees', or the activities
of any of them, are found on, under or about the Premises or Building, Tenant
shall promptly take all actions, at its sole expense, necessary to return the
Premises or Building or surrounding area to the condition existing prior to the
introduction of Hazardous Materials to the Premises or Building or surrounding
area in accordance with Applicable Laws; provided (i) that, except in emergency
situations (in which case Notice shall be given to Landlord as soon as
practicable), Landlord's approval of such actions shall first be obtained, which
approval shall not be unreasonably withheld or delayed, and (ii) if it is
impossible to return the Premises or Building to such condition, as determined
by Landlord in its reasonable judgment, then Tenant may substitute an
alternative action which will achieve and maintain the safe condition of the
Premises or Building or is reasonably necessary to protect its occupants and is
in compliance with Applicable Laws, if such alternative is acceptable to
Landlord in its sole discretion.
34.3 In the event of Tenant's failure to comply in full with this
Article 34, Landlord or the Board of Managers may, at Landlord's or the Board of
Managers' option, perform any and all of Tenant's obligations as aforesaid and
all costs and expenses incurred by Landlord in the exercise of this right shall
be deemed to be Additional Rent payable on demand and with interest until
payment at the rate provided in Section 6.1. Landlord shall have the right, but
not the obligation, to inspect the Premises and/or to conduct or cause to have
conducted environmental audits from time to time to ascertain Tenant's
compliance with the terms herein.
34.4 As used herein, the term "Hazardous Materials" means any
hazardous, toxic, flammable, or explosive substance, material, or waste which is
or becomes regulated by any Governmental Authority. The term "Hazardous
Materials" includes, without limitation, any material or substance which is (i)
petroleum, (ii) asbestos, (iii) designated as a "hazardous substance" pursuant
to Section 311 of the Federal Water Pollution Control Act (33 U.S.C., Section
1317), (iv) defined as "hazardous waste" pursuant to Section 1004 of the Federal
Resource Conservation and Recovery Act, 42 U.S.C., Section 6901 et seq., (v)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C., Section 9601
et seq., (vi) defined as a "hazardous substance" or "hazardous waste" under the
New York Environmental Conservation Law, or (vii) defined as a "hazardous" or
"toxic" substance in any law similar to or in any amendment of any of the
foregoing laws.
34.5 Notwithstanding anything in this Section to the contrary,
Landlord shall be responsible for removing any Hazardous Materials existing in
the Unit or Premises as of the Lease Commencement Date to the extent required by
Applicable Laws. Landlord shall, subject to Section 34.2 hereof, be responsible
for removing any Hazardous Materials that exist in the Unit Common Areas as of
Lease Commencement Date to the extent required by Applicable Laws.
34.6 This Article 34 shall survive the expiration or sooner
termination of this Lease.
35. ARBITRATION
35.1 Any controversy or claim between Tenant and Landlord arising out
of or relating to this Lease and specifically made subject to this Article 35
shall be determined by arbitration in New York, New York in accordance with the
Commercial Arbitration Rules then pertaining of the AAA, subject, however, to
the following provisions:
(i) The AAA shall provide the parties with an identical list of names
of persons selected from its panel of arbitrators having not less than ten (10)
years experience in the area of the dispute from which a single neutral
arbitrator mutually acceptable to the parties will be appointed within ten (10)
days of receipt of such list;
(ii) If the AAA shall be unable to appoint an arbitrator mutually
acceptable to the parties, or if the parties can not agree upon an acceptable
arbitrators within the ten (10) days of the receipt of a list of the
arbitrators, it shall appoint a single neutral arbitrator having not less than
ten (10) years experience in the area of the dispute;
(iii) The hearings shall occur on consecutive weekdays and shall
commence not later than thirty (30) days after the appointment of the
arbitrator, unless the parties shall agree otherwise in writing;
(iv) All fees and expenses of the arbitrator and the AAA shall be
borne equally by Landlord and Tenant; and
(v) Within thirty (30) days after the close of hearings, the
arbitrator shall render a written decision on each issue presented, setting
forth specifically the reasons therefor.
36. SECURITY AREA
36.1 Notwithstanding anything to the contrary contained in this Lease,
in the event that at any time during the Term Tenant shall give a Notice to
Landlord designating an area of the Premises which is used by Tenant for the
storage of money, securities or valuable or confidential documents as the
"Security Area", then from and after the date designated in such Notice, which
shall be not less than five (5) days after the date of Landlord's receipt of
Tenant's Notice, except in the event of an emergency (in which case Landlord
shall provide Tenant with reasonable prior telephonic notice) Landlord and its
agents shall not exercise any right to enter the Security Area, unless Landlord
is accompanied by an employee of Tenant, provided that Tenant shall make an
employee available to accompany Landlord or its agents during such entry at any
time during Business Hours. The location, installation and maintenance of the
Security Area by Tenant shall comply with all requirements of Article 12,
Insurance Requirements and Legal Requirements.
37. NO RECORDING
37.1 Neither party shall have the right to record this Lease and same
shall not be recorded. Any recording or attempted recording of this Lease by
Tenant shall constitute an Event of Default.
38. Intentionally Deleted.
39. SECURITY DEPOSIT
39.1 Tenant shall deposit with Landlord on the signing of this Lease
the Security Deposit as security for the faithful performance and observance by
Tenant of the terms, conditions and provisions of this Lease, including without
limitation, the surrender of possession of the Premises to Landlord as herein
provided. The Security Deposit shall be in the form of a letter of credit issued
on the account of Tenant by a New York Clearinghouse member bank. The letter of
credit and the issuer bank must be in all respects reasonably acceptable to
Landlord and the letter of credit must provide for partial draws and that the
same may be drawn upon by Landlord pursuant to the provisions of this Section.
In the event Tenant defaults in respect of any of the terms, provisions and
conditions of this Lease, including, but not limited to, the payment of Base
Rent or Additional Rent, Landlord may, after the expiration of the applicable
notice or cure period, apply or retain the whole or any part of the Security
Deposit so deposited to the extent required for the payment of any Base Rent and
Additional Rent or any other sum as to which Tenant is in default or for any sum
which Landlord may expend or may be required to expend, as provided in this
Lease, by reason of Tenant's default in respect of any of the terms, covenants
and conditions of this Lease. If the bank issuing the letter of credit notifies
Landlord that it wishes to terminate the letter of credit, Tenant shall have up
to thirty (30) days prior to the expiration of such letter of credit in which to
obtain a replacement letter of credit under the same terms and conditions as the
prior letter of credit. If Tenant does not obtain such substitute letter of
credit and deliver the same to Landlord at least thirty (30) days prior to the
expiration of the original letter of credit, Landlord shall be entitled to draw
down the remaining balance of the letter of credit and hold the same as the
Security Deposit. Tenant shall be required to obtain a substitute letter of
credit on the same terms and conditions of the original letter of credit within
thirty (30) days of Landlord drawing down on the remaining balance of the
original letter of credit. If Landlord applies or retains any part of the
Security Deposit so deposited, Tenant, upon demand, shall deposit with Landlord
the amount so applied or retained so that Landlord shall have the full Security
Deposit on hand at all times during the Term. If Tenant shall fully and
faithfully comply with all of the terms, provisions, covenants and conditions of
this Lease, the security shall be returned to Tenant within ten (10) days after
the Expiration Date and after delivery of the entire possession of the Premises
to Landlord. In the event of a sale of the Unit or leasing of the Unit, Landlord
shall have the right to transfer the Security Deposit to the vendee or lessee,
and, if such vendee or lessee agrees to assume such Security Deposit, Landlord
shall be released by Tenant from all liability for the return of the Security
Deposit; and Tenant agrees to look solely to the new landlord for the return of
the Security Deposit; and it is agreed that the provisions hereof shall apply to
every transfer or assignment made of the Security Deposit to a new landlord.
Tenant further covenants that it will not assign or encumber or attempt to
assign or encumber the Security Deposit and that neither Landlord nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
39.2 Notwithstanding anything herein to the contrary, Tenant shall be
entitled to reduce its letter of credit by an amount equal to $83,125 on the
third (3rd) anniversary of the Base Rent Commencement Date, (i) so long as
Tenant has not been given Notice of any default under any of the terms,
covenants or conditions of this Lease (and such default remains uncured) and
(ii) to the extent that Landlord has drawn down on all or any portion of the
Security Deposit in accordance with Section 39.1 hereof, Tenant has replaced the
amount applied or retained by Landlord. In the event that Tenant is refunded a
portion of the Security Deposit in accordance with the preceding sentence, the
Security Deposit shall be deemed to be reduced by such amount for all purposes
under this Lease.
40. MISCELLANEOUS
40.1 Neither Landlord nor Landlord's agents or brokers have made any
representations or promises with respect to the Premises, the Unit or the
Building 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 in the provisions of this Lease.
40.2 The submission of this Lease to Tenant shall not be construed as
an offer, nor shall Tenant have any rights with respect thereto unless and until
Landlord and Tenant shall execute a copy of this Lease and Landlord delivers a
fully executed copy to Tenant.
40.3 Any approval by Landlord or Landlord's architects and/or
engineers of any of Tenant's drawings, plans and specifications which are
prepared in connection with Tenant's Work, any Alterations or construction of
other improvements in the Premises shall not in any way be construed or operate
to bind Landlord or to constitute a representation or warranty of Landlord as to
the adequacy or sufficiency of such drawings, plans and specifications, or the
improvements to which they relate, for any use, purpose, or condition, but such
approval shall merely be the consent of Landlord as may be required hereunder in
connection with Tenant's Work, any Alterations or the construction of other
improvements in the Premises in accordance with such drawings, plans and
specifications.
40.4 If Tenant signs as a corporation, each of the persons executing
this Lease on behalf of Tenant does hereby covenant and warrant that Tenant is a
duly authorized and existing corporation, qualified to do business in New York,
that the corporation has full right and authority to enter into this Lease, and
that each of the persons signing on behalf of the corporation were authorized to
do so.
40.5 If Tenant's interest in this Lease shall be assigned to a
partnership (or to 2 or more persons, individually, or as joint venturers or as
co-partners of a partnership) pursuant to Article 19 (any such partnership and
such persons are referred to in this Article as "Partnership Tenant"), the
following provisions of this Section shall apply to such Partnership Tenant: (i)
the liability of each of the parties comprising Partnership Tenant (other than
limited partners) shall be joint and several, (ii) each of the parties
comprising Partnership Tenant hereby consents in advance to, and agrees to be
bound by, any modifications, termination, discharge or surrender of this Lease
which may hereafter be made and by any Notices, demands, requests or other
communications which may hereafter be given, by Partnership Tenant or by an of
the parties comprising Partnership Tenant, (iii) any bills, statements, Notices,
demands, requests or other communications given or rendered to Partnership
Tenant or to any of the parties comprising Partnership Tenant shall be deemed
given or rendered to Partnership Tenant and to all such parties and shall be
binding upon Partnership Tenant and all parties, (iv) if Partnership Tenant
shall admit new partners all such new partners or members shall, by their
admission to Partnership Tenant, be deemed to have assumed performance of all of
the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed, and (v) Partnership Tenant shall give prompt Notice to
Landlord of the admission of any such new partners or members, and upon demand
of Landlord, shall cause each such new partner or member to execute and deliver
to Landlord an agreement in form satisfactory to Landlord, wherein each such new
partner or member shall assume performance of all of the terms, covenants and
conditions of this Lease on Tenant's part to be observed and performed but
neither Landlord's failure to request any such agreement nor the failure of any
such new partner or member to execute or deliver any such agreement nor the
failure of any such new partner or member to execute or deliver any such
agreement to Landlord shall vitiate the provisions of subdivision (iv) of this
Section 40.5.
40.6 Although this Lease was drawn by Landlord, both Landlord and
Tenant have had significant comment with respect to the terms and provisions
contained therein. Accordingly, this Lease shall not be construed either for or
against Landlord or Tenant, but shall be construed simply according to its fair
meaning.
40.7 Whenever a period of time is herein prescribed for action to be
taken by Landlord or Tenant, Landlord or Tenant, as applicable, shall not be
liable or responsible for, and there shall be excluded from the computation for
any such period of time, any delays caused by or attributable to acts of God,
unusual weather conditions, strikes, lockouts, labor disputes, inability to
obtain an adequate supply of materials, fuel, water, electricity, or other
supplies, casualty, governmental action, accidents, breakage, repairs or any
other causes of any kind whatsoever which are beyond the reasonable control of
Landlord or Tenant, as applicable (collectively "Force Majeure").
40.8 If any clause or provision of this Lease is illegal, invalid, or
unenforceable under present or future laws effective during the Term, then and
in that event, the remainder of this Lease shall not be affected thereby. In
lieu of each clause or provision of this Lease that is illegal, invalid or
unenforceable, there shall be added as a part of this Lease a clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible and legal, valid and enforceable.
40.9 This Lease may not be altered, changed or amended, except by
instrument in writing signed by both parties hereto. No provision of this Lease
shall be deemed to have been waived by Landlord or Tenant unless such waiver be
in writing signed by Landlord or Tenant, as applicable, and addressed to Tenant
or Landlord, as applicable, nor shall any custom or practice which may evolve
between the parties in the administration of the terms hereof be construed to
waive or lessen the right of Landlord or Tenant to insist upon the performance
by Tenant or Landlord, as applicable, in strict accordance with the terms
hereof.
40.10 Provided this Lease has not been terminated in accordance with
the provisions of this Lease, Tenant shall peaceably and quietly hold and enjoy
the Premises for the Term, without hindrance from Landlord or anyone claiming
through Landlord, subject to the terms and conditions of this Lease.
40.11 Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
40.12 The captions contained in this Lease are for the convenience of
reference only, and in no way limit or enlarge the terms and conditions of this
Lease.
40.13 Nothing contained in this Lease shall be deemed or construed to
create a partnership or joint venture of or between Landlord and Tenant, or to
create any other relationship between the parties hereto other than that of
Landlord and Tenant.
40.14 The term "Landlord" as used in this Lease shall mean only the
owner, or the mortgagee in possession, for the time being, of the Unit, or the
owner of a lease of the Unit, so that in the event Landlord shall sell or convey
the Unit to any party, such party shall be deemed to have assumed the
obligations of Landlord arising from and after the date of such sale, all
liabilities and obligations on the part of the Landlord under this Lease
accruing thereafter shall terminate, and thereupon all such liabilities and
obligations shall be binding on the new landlord, and it shall be so deemed and
construed without further agreement between Landlord and its successors in
interest.
40.15 The provisions of this Lease shall be binding upon, and shall
inure to the benefit of, the parties hereto with respect to the matters set
forth herein and to the extent permitted under this Lease to each of their
respective representatives, successors and assigns.
40.16 This Lease, together with the Exhibits attached hereto, contains
and embodies the entire agreement of the parties hereto, and no representations,
inducements or agreements, oral or otherwise, between the parties not contained
in this Lease, and the Exhibits annexed hereto, shall be of any force or effect.
40.17 This Lease and the rights and obligations of both parties hereto
hereunder shall be governed by the laws of the State of New York.
40.18 If the Base Rent or any Additional Rent shall be or become
uncollectible by virtue of any law, governmental order or regulation, or
direction of any public officer or body, Tenant shall enter into such agreement
or agreements and take such other action (without additional expense to Tenant)
as Landlord may request, and as may be legally permissible, to permit Landlord
to collect the maximum Base Rent and Additional Rent which may, from time to
time during the continuance of such legal rent restriction be legally
permissible, but not in excess of the amounts of Base Rent and Additional Rent
payable under this Lease. Upon the termination of such legal rent restriction,
(A) the Base Rent and Additional Rent, after such termination, shall become
payable under this Lease in the amount of the Base Rent and Additional Rent set
forth in this Lease for the period following such termination, and (B) Tenant
shall pay to Landlord, if legally permissible, an amount equal to (i) the Base
Rent and Additional Rent which would have been paid pursuant to this Lease, but
for such rent restriction, less (ii) the Base Rent and Additional Rent paid by
Tenant to Landlord during the period that such rent restriction was in effect.
40.19 If any excavation or other construction shall be made on any
premises adjoining or above or below the Unit or the Building, Tenant shall
permit Landlord, the Board of Managers or the adjoining owner, and their
respective agents, employees, licensees and contractors to enter upon the
Premises and to shore the walls thereof and to erect scaffolding and/or
protective barricades around the Building and to do any act or thing necessary
for the safety or preservation of the Unit or the Building. Tenant's obligations
under this Lease shall not be affected by any such construction or excavation
work, shoring-up, scaffolding or barricading provided that the activities of
Landlord and the Board of Managers or the adjoining owner, as applicable, in the
Premises do not prevent Tenant from conducting its usual and customary business
within the Premises. Neither Landlord nor the Board of Managers shall be liable
for any inconvenience, disturbance or loss or business or any other annoyance
arising from such construction, excavation, shoring-up, scaffolding or
barricades provided Landlord or the Board of Managers, as applicable, is not
grossly negligent in the performance of such work or perform such work with
willful misconduct.
40.20 If the Building shall no longer be owned in a condominium form
of ownership, this Lease shall remain in full force and effect, Tenant shall
continue to pay Base Rent and Additional Rent and Landlord and Tenant shall
perform their respective obligations hereunder. If either party reasonably
believes that it is necessary to clarify the terms of this Lease as a result of
such conversion in the form of ownership, then Landlord and Tenant shall
promptly execute an agreement clarifying their respective obligations under this
Lease; provided, however, neither party shall be required to execute any such
instrument which would diminish or detract from the rights of such party or
expand or enhance the obligations of such party under this Lease.
40.21 In the event that Landlords interest in the Unit or the Unit's
share of the Building changes as a result of any sale, acquisition, transfer,
assignment or disposition of any portion of the Unit (other than the Premises)
to any other party (other than an affiliate of Landlord), Landlord and Tenant
agree to recalculate "Tenant's Proportionate Share", in a fair and equitable
manner to reflect such sale, acquisition, transfer, assignment or disposition,
it being understood that such recalculation shall be on such terms and in such
manner as shall be mutually agreeable to Landlord and Tenant. When Tenant's
Proportionate Share has been recalculated (in accordance with this paragraph),
Landlord and Tenant shall execute and deliver an agreement setting forth such
recalculation and confirming Tenant's Proportionate Share. Any dispute with
regard to this Section 40.21 shall be settled by arbitration in accordance with
the procedures set forth in Article 35 hereof.
40.22 Tenant irrevocably waives any and all right(s) it may have in
connection with any zoning lot merger or subdivision or transfer of development
rights with respect to the Unit, the Building or the Land, including, but not
limited to, any rights it may have to be a party to or to execute or to contest
any Declaration of Restrictions (as such term is defined in Section 12-10 of the
Zoning Resolution of the City of New York effective December 15, 1961, as
amended) with respect to the Unit, the Building or the Landlord that would cause
the Premises to be merged with or unmerged from any other zoning lot pursuant to
such Zoning Resolution or to any document of a similar nature and purpose. This
Lease shall be subject and subordinate to any Declaration of Restrictions or any
other document of similar nature and purpose now or hereafter affecting the
Unit, the Building or the Land provided same does not increase Tenant's Base
Rent or Additional Rent hereunder and does not materially adversely affect any
of Tenant's rights hereunder or materially increase any of Tenant's obligations
or decrease any of Tenant's remedies under this Lease. In confirmation of such
subordination and waiver, Tenant shall execute and delivery promptly any waiver
document or other certificate or instrument that Landlord may reasonably
request.
40.23 Tenant covenants and agrees that if by reason of a default under
the Ground Lease (including any underlying lease through which Landlord derives
its leasehold estate in the Premises), such Ground Lease and/or underlying lease
and the leasehold estate of the Landlord in the Premises is terminated, Tenant
will attorn to the then holder of the reversionary interest in the Premises
demised by this Lease and will recognize such holder as Tenant's landlord under
this Lease, unless the lessor under such Ground Lease and underlying lease
shall, in any proceeding to terminate such Ground Lease or underlying lease,
elect to terminate this Lease and the right of the Tenant hereunder. Tenant
agrees to execute and delivery, at any time and from time to time, upon the
request of the Landlord or of the lessor under the Ground Lease, any instrument
which may be necessary or appropriate to evidence such attornment. Tenant
further waives the provision of any statute or rule of law now or hereafter in
effect which may give or purport to give Tenant any right of election to
terminate this Lease or to surrender possession of the Premises in the event any
proceeding is brought by the lessor under such Ground Lease and/or underlying
lease to terminate the same, and agrees that unless and until any such lessor,
in connection with any such proceeding shall elect to terminate this Lease and
the rights of the Tenant hereunder, this Lease shall not be affected in any way
whatsoever by any such proceeding.
41. THE LOWER MANHATTAN PLAN
41.1 Landlord hereby represents that tenants of the Unit are eligible
for the benefits of Title 4 of Article 4 of the New York Real Property Tax Law
(the "Lower Manhattan Plan").
41.2 A. For purposes of this Article 41, unless otherwise defined in
this Lease, all terms used herein shall have the meanings ascribed to them in
the Lower Manhattan Plan.
B. For purposes of the Lower Manhattan Plan, Tenant's Percentage Share
shall mean Tenant's Proportionate Share.
C. For so long as Tenant continues to be eligible for the real estate
tax abatement of the Lower Manhattan Plan (herein called the "LMP Abatement
Benefits") with respect to the Premises, Landlord agrees to comply with the
provisions and requirements of the Lower Manhattan Plan and the rules
promulgated thereunder as the same relate to the Premises and to Landlord (in
connection with Tenant's eligibility for the LMP Abatement Benefits).
D. (i) Tenant shall indemnify and hold harmless all Landlord Parties
from and against any and all claims arising from or in connection with Tenant's
failure to fully and faithfully comply with the terms covenants and conditions
of the Lower Manhattan Plan and the application filed by or on behalf of Tenant
(to the extent that Tenant is obligated to comply with the terms, covenants and
conditions of The Lower Manhattan Plan or application, as the case may be), a
form of which is attached hereto as Exhibit I, together with all reasonable
costs, expenses and liabilities incurred in connection with each such claim or
action or proceeding brought thereon, including, without limitation, all
attorneys' fees and expenses.
(ii) Landlord shall indemnify and hold harmless Tenant from and
against any and all claims arising from or in connection with Landlord's failure
to fully and faithfully comply with the terms, covenants and conditions of the
Lower Manhattan Plan and the application filed by or on behalf of Tenant (to the
extent that Landlord is obligated to comply with the terms, covenants and
conditions of The Lower Manhattan Plan or application, as the case may be), a
form of which is attached hereto as Exhibit I, together with all reasonable
costs, expenses and liabilities incurred in connection with each such claim or
action or proceeding brought thereon, including, without limitation, all
attorneys' fees and expenses.
E. In accordance with the Lower Manhattan Plan and notwithstanding
anything to the contrary contained in this Lease, Landlord agrees to allow
Tenant against the Base Rent and Additional Rent payable by Tenant hereunder in
an amount that, in the aggregate, equals the full amount of any abatement of
Real Estate Taxes granted for the Premises pursuant to the Lower Manhattan Plan
and actually received by Landlord (herein called the "Actual LMP Benefits").
Landlord shall, within thirty (30) days after its receipt of the Actual LMP
Benefits, credit the full amount thereof (less the amounts accrued or expended
by Landlord in obtaining the same including, but not limited to, any charges or
fees imposed by the New York City Department of Finance (the "Department"), any
legal fees incurred in processing the application for Actual LMP Benefits and
the costs of providing any Further Cooperation, as set forth below) against the
next installment(s) of Base Rent and or Additional Rent becoming due hereunder.
F. In accordance with Section 499-c(5) of the Lower Manhattan Plan,
Landlord agrees and informs Tenant that:
(1) an application for abatement of real property taxes pursuant to
Title 4 of Article 4 of the New York Real Property Tax Law will be
made for the Premises.
(2) the rent, including amounts payable by Tenant for real
property taxes, will accurately reflect any abatement of real
property taxes granted pursuant to Title 4 of Article 4 of
the New York Property Tax Law for the Premises.
(3) at least five dollars ($5.00) or thirty five dollars ($35.00) per
square foot (depending on the number of Tenant's employees working
at the Premises and the term of this Lease) must be spent on
improvements to the Premises and the common areas.
(4) all abatements granted with respect to the Unit pursuant to Title 4
of Article 4 of the New York Real Property Law will be revoked if,
during the Benefit Period, real estate taxes or water or sewer
charges or other lienable charges are unpaid for more than one
year, unless such delinquent amounts are paid as provided in
subdivision four of section four hundred ninety-nine-f of Title 4
of the New York Real Property Law.
G. Nothing contained herein shall be construed to impose any
obligation on Landlord to perform any improvements to the Premises and/or the
common areas to establish Tenant's eligibility for the LMP Abatement Benefits.
H. (i) Landlord, upon not less than thirty (30) days advance written
notice from Tenant, agrees to cooperate with Tenant to execute, deliver and
file, together with the Abatement Application (as hereinafter defined), the
affidavit required by Section 499-C(7) of the Lower Manhattan Plan.
(ii) Landlord, upon not less than thirty (30) days advance written
notice from Tenant, agrees to cooperate with Tenant to execute, deliver and
promptly file not later than one hundred eighty (180) days after the Lease
Commencement Date, an application (the "Abatement Application") for a
certificate of abatement in accordance with Section 499-D of the Lower Manhattan
Plan. Landlord further agrees to provide all other information required by the
Department pursuant to Section 499-D of the Lower Manhattan Plan and to
otherwise comply with the provisions of said Section 499-D.
(iii) For so long as Tenant continues to be eligible for the LMP
Abatement Benefits with respect to the Premises, Landlord, upon not less than
thirty (30) Business Days advance written notice from Tenant, agrees to
cooperate with Tenant to annually execute, deliver and file a certificate of
continuing eligibility in accordance with Section 499-F of the Lower Manhattan
Plan.
I. Landlord agrees to provide Tenant with such further cooperation
("Further Cooperation") as may reasonably be requested by Tenant to assist
Tenant in obtaining any incentives, subsidies, refunds or payments ("Further
Benefits") made available to Tenant by (i) any modification to or amendment of
the Lower Manhattan Plan, (ii) any program of the New York City Industrial
Development Agency or any other governmental agency or (iii) any public utility.
J. In the event that Tenant is denied the Lower Manhattan Plan tax
abatement as a result of Landlord's failure to pay any real estate taxes, water
or sewer charges or other lienable charges against the Unit, then in such event,
Tenant will receive a credit against Base Rent and other charges due under the
Lease an amount equal to the tax abatement Tenant would have been eligible for
had the tax abatement been granted. Tenant shall not be entitled to the
foregoing Base Rent credit if the failure to obtain the Lower Manhattan Plan tax
abatement is as a result of the Board of Managers failure to pay any real estate
taxes, water or sewer charges or other lienable charges against the Building.
42. ROOF RIGHTS.
42.1 Subject to all of the terms, covenants and conditions of this
Article 42, Tenant shall have the right to have Landlord provide Tenant with
roof space to install a Communications Dish, as hereinafter defined. Within
thirty (30) days of Landlord's receipt of Tenant's Notice that Tenant desires to
install a Communications Dish on the roof of the Building, Landlord shall
respond to such request stating the amount that Landlord will charge Tenant for
renting the roof space necessary to install such Communications Dish ("Roof
Rent"). Landlord will charge Tenant a commercially reasonable rate for Roof
Rent. If Landlord and Tenant agree on a Roof Rent, then Tenant shall pay to
Landlord Roof Rent upon installation of the Communications Dish. If Landlord and
Tenant cannot agree on the Roof Rent, within thirty (30) days after Tenant
delivers to Landlord Notice of Tenant's desire to install a Communications Dish,
then both parties shall promptly choose an arbitrator to determine the fair
market value of the Roof Rent, which, in accordance with the following
procedure, will be the Roof Rent for the roof space provided by Landlord to
Tenant. Each party shall choose an arbitrator who is a senior officer of a
recognized New York leasing, brokerage or real estate consulting firm who shall
have at least ten (10) years experience in (i) the leasing of office space in
the Downtown Manhattan Area or (ii) the appraisal of first class office
buildings in Downtown Manhattan. The two arbitrators shall then determine the
fair market value of the Roof Rent within sixty (60) days after the appointment
of each arbitrator, and if the two arbitrators are unable to agree upon the fair
market value of the Roof Rent within such sixty (60) day period, then a third
arbitrator with the same qualifications as the first two arbitrators shall be
selected by the two arbitrators (or if they are unable to agree, then the
selection shall be made by the AAA or any organization successor thereto), and
the third arbitrator shall determine the fair market value of the Roof Rent
within thirty (30) days thereafter in accordance with the following procedures:
the arbitrator selected by Landlord and the arbitrator selected by Tenant shall
each make a separate determination of the fair market value of the Roof Rent.
The determination made by Landlord's arbitrator is hereinafter referred to as
Landlord's Determination and the determination made by Tenant's arbitrator is
hereinafter referred to as Tenant's Determination. Each arbitrator shall deliver
a copy of its determination to the third arbitrator and to the other arbitrator.
Each of the two arbitrators may, within five (5) days following a receipt of the
other's determination change its determination and deliver a copy of such
changed determination to the third arbitrator and to the other of the two
arbitrators. No further changes in the determination will be allowed. The
determination of Roof Rent by the third arbitrator shall be either the amount
set forth in Landlord's determination or the amount set forth in Tenant's
determination. The third arbitrator may not select any other amount as the Roof
Rent. The Roof Rent as so determined by the third arbitrator shall be binding
upon the parties. Each party shall be responsible for the fees and expenses of
the third (3rd) arbitrator and of the AAA.
42.2 To the extent that (i) Landlord and Tenant agree to allow Tenant
to install a Communications Dish on the roof of the Building in accordance with
Section 42.1, (ii) the construction and operation of a Communications Dish (as
hereinafter defined) will not interfere with the then existing use of other
antennae, communications dishes or other equipment on the roof by others, in
each case as reasonably determined by Landlord and (iii) Landlord receives all
necessary consents, including, but not limited to, the consent of the Board of
Managers to such installation, Tenant shall be permitted, at Tenant's sole cost
and expense, to install, maintain and operate one satellite communications dish
which transmits or receives signals to or from other Tenant communication
installations located off-site (hereinafter called a "Communications Dish")
thereon, and to run such lines and cables necessary for the operation of the
Communications Dish from the roof to the Premises, provided and upon condition
that: (i) the Communications Dish occupies roof space not to exceed three (3)
square feet in diameter, (ii) such installations shall be deemed Alterations
within the meaning and subject to the provisions of Articles 12 hereof
(including, without limitation, obtaining all required operating permits and
approvals from the Federal Communications Commission), except that the manner of
installation and location of the Communications Dish and of all lines and cables
shall in all instances be reasonably directed by Landlord, (iii) Tenant promptly
repairs any damage caused to the roof by reason of such installation,
maintenance, operation, removal and replacement, (iv) Tenant removes such
installations, cables, wiring and lines, and repairs any resulting damage to the
Building and restores the roof and the Building to the condition which existed
prior to any such installation, wear and tear and damage by casualty excepted,
all at or prior to the Expiration Date or sooner termination of the Term of this
Lease, and (v) Tenant, at its sole cost and expense, pays for the installation
of any mounting, shoring and related equipment necessary to allow placement of
the Communications Dish above the floor level of the roof, and Tenant agrees to
remove such mounting, shoring and related equipment and repairs any resulting
damage to the Building and restores the roof and the Building to the condition
which existed prior to any such installations, wear and tear and damage by
casualty excepted, all at or prior to the expiration or sooner termination of
this lease . The parties agree that Tenant's use of the roof of the Building is
a non-exclusive use and Landlord or the Board of Managers may permit the use of
any other portion of the roof to any other person for any use including
installation of other antenna, dishes and similar equipment.
42.3 Landlord shall have the right, at Landlord's expense, on not less
than twenty (20) days' prior written notice to Tenant, to relocate the
Communications Dish of Tenant, such expense to include the removal of the
existing Communications Dish, the purchasing of materials and equipment
necessary for the relocation thereof and reinstallation of the Communications
Dish (and any necessary relocation and/or removal of conduit and cable
connecting the Premises to such rooftop installations) at such other location as
designated by Landlord on the roof of the Building; provided that such new
location of the Communication Dish will not prevent Tenant from operating the
Communication Dish in substantially the same manner as existed prior to
Landlord's relocation of such Communication Dish Tenant shall cooperate with
Landlord in any such relocation (but at no expense to Tenant).
42.4 The Communications Dish is for the sole use of Tenant (or any
permitted subtenant and/or assignee of Tenant) and for no other parties. Tenant
shall not resell in any form the use of the Communications Dish, including,
without limitation, the granting of any licensing or other rights.
Notwithstanding the foregoing, Tenant shall not permit the use of the
Communications Dish by any subtenant (in the event of a sublease) or assignee
who or which is engaged directly or indirectly in the business of
telecommunications at the Building and is using the Communications Dish for that
purpose.
42.5 The rights granted in this Article 42 are given in connection
with, and as part of the rights created under, this Lease and are not separately
transferable or assignable other than in connection with an assignment or
subletting as permitted by this Lease.
42.6 The Communications Dish shall be considered Tenant's property and
Tenant shall maintain adequate insurance coverage as may from time to time be
reasonably required by Landlord.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
LANDLORD: 125 BROAD UNIT C LLC
By: /s/ Steven C. Witkoff
Name: Steven C. Witkoff
Title: Managing Member
TENANT: INDIVIDUAL INVESTOR GROUP, INC.
By: /s/ Henry G. Clark
Name: Henry G. Clark
Title: Vice President Finance
Exhibit A
Legal Description of the Land
SCHEDULE A
The Unit (the "Unit") known as Commercial Unit C in the 125 Broad Condominium
(the "Condominium"), said Unit being designated and described as Unit C in the
declaration (the "Declaration) establishing a plan for condominium ownership
under Article 9-B of the Real Property Law of the State of New York (the "New
York Condominium Act") (the "Premises") known by the street number 125 Broad
Street (formerly known as 2 New York Plaza), Borough of Manhattan, City, County
and State of New York, which Declaration is dated as of December 23, 1994 and
recorded in the New York County Office of the Register of the City of New York
(the "City Register's Office) on January 10,1995 in Reel 2171 page 1959 as
amended by First Amendment to Declaration, dated as of March 28, 1995 recorded
April 6, 1995 in Reel 2197 page 1306, as further amended by Second Amendment to
Declaration, dated as of December 30, 1996 recorded February 6, 1997 in Reel
2419 page 2025, as further arnended by Third Amendment to Declaration, dated as
of June 1, 1997 recorded January 13, 1998 in Reel 2531 page 375, as further
amended by Fourth Amendment to Declaration dated as of June 17, 1998 and
recorded June 25, 1998 in Reel 2601, Page 1393, the Unit is also designated as
Tax Lot 1003 in Block 5 of Section 1 of the Borough of Manhattan on the Tax Map
of the Real Property Assessment Division of the City of New York, and the Floor
Plans of said building, certified by Butler Rogers Baskett, on December 23, 1994
and filed in the Real Property Assessment Division of the City of New York on
January 4,1995 as Condominium Plan No. 898, and also filed in the City
Register's Office on January 10,1995 as Map No. 5294 (all capitalized terms
herein which are not separately defined herein shall have the respective
meanings ascribed to them In the Declaration or in the By-Laws (the "By-Laws" of
The 125 Broad Condominium);
TOGETHER with an undivided 14.224% interest in the Common Elements.
The land upon which the unit is located is more particularly described as
follows:
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 easterly side of Broad
Street and the northerly side of South Street, as said streets are shown on Map
No. 29884, dated April 19, 1966 and adopted by the Board of Estimate of the City
of New York on June 23, 1966; and
RUNNING THENCE Northerly along the said easterly side of Broad Street, as so
mapped 197 feet 10-1/2 inches;
THENCE Easterly at right angles to the last mentioned course 295 feet 1-3/4
inches to the easterly side of a street (now closed and eliminated) formerly
known as Coenties Slip West;
SCHEDULE A - cont. Page 2
THENCE Southerly along a line forming an interior angle with the last mentioned
course of 89 degrees 52 minutes 34 seconds and along the westerly side of
property of The City of New York commonly known as Jeannette Park, 166 feet
10-1/4 inches to the northerly side of South Street;
THENCE Westerly along the said northerly side of South Street, 60 feet 6-1/2
inches;
THENCE Westerly and still along the said northerly side of South Street 235 feet
10-7/8 inches to the corner formed by the intersection of the said northerly
side of South Street with the easterly side of Broad Street, the point or place
of BEGINNING.
Exhibit B
Location Map of Premises
[MAP NOT SUSCEPTIBLE TO EDGAR FILING FORMAT]
Exhibit C
Building Standards
Landlord's Building Rules and Regulations
BUILDING RULES
&
REGULATIONS
125 BROAD STREET
TO THE EXTENT OF ANY CONFLICT BETWEEN THE TERMS OF
THESE RULES AND REGULATIONS AND THE TERMS OF THE LEASE,
THE TERMS OF THE LEASE SHALL PREVAIL
REQUIREMENTS FOR MAJOR ALTERATIONS
IT IS AGREED AND UNDERSTOOD THAT IT SHALL BE THE OCCUPANT'S SOLE RESPONSIBILITY
TO SEE THAT ALL EMPLOYEES AND INDEPENDENT CONTRACTORS OF THE OCCUPANT INCLUDING
BUT NOT LIMITED TO THE OCCUPANT'S ARCHITECT, GENERAL CONTRACTOR AND
SUBCONTRACTOR SHALL COMPLY WITH ALL RULES, REGULATIONS AND REQUESTS AS STATED
HEREIN. OCCUPANT WILL MAKE NO ALTERATIONS, DECORATIONS, INSTALLATIONS, REPAIRS,
ADDITIONS, IMPROVEMENTS OR REPLACEMENT IN, TO OR ABOUT THE PREMISES WITHOUT
BUILDING MANAGEMENT'S PRIOR REVIEW AND APPROVAL (10 business day turnaround) AND
THEN ONLY BY CONTRACTORS OR MECHANICS APPROVED BY BUILDING MANAGEMENT. ANY COSTS
OR EXPENSE RESULTING FROM OCCUPANT OR OCCUPANT'S EMPLOYEES OR INDEPENDENT
CONTRACTOR'S FAILURE TO COMPLY WITH ANY OF THE FOLLOWING RULES, REGULATIONS AND
REQUESTS SHALL BE BORNE BY THE OCCUPANT.
1. Submit to Building Management scaled architectural and engineering drawings
including, but not limited to, demolition, construction, HVAC, mechanical,
plumbing and structural, reflected ceiling, electric, telephone, finish and
furniture plan. Submit one (1) set of sepias and four (4) sets of prints. Prior
to start of project a review of the site and final approval must come from
Building Management. This submission of drawings will be concurrent with the
Filing of drawings with New York City Buildings Department.
2. In the event of major alterations to the original approved Occupant drawings,
Occupant is to submit plans for review to Building Management as indicated in
item one.
3. Name, address, telephone number and representative or architect/designer and
engineering firm responsible for Occupant alteration must be submitted to
Building Management.
4. A list of general contractors and sub-contractors being considered for the
construction project must be submitted to the Building Management in writing. It
shall be the occupant's sole responsibility to submit to the above listed
contractors a copy of the rules and regulations as outlined, prior to bidding
for the job.
5. After Building Management's review of contractors, submit name, address,
telephone number and representative of contractor selected to perform the work.
Any licensed architect or engineer can file, however, it is preferred that the
Occupant use the approved building filing agent. Notwithstanding the foregoing,
Tenant shall be permitted to use Milrose Consulting Inc. as its expeditor.
7. FireQuench is the buildings class "E" vendor and must be used for all the
work relating to the fire command station.
- -----------------
Definitions: Occupant - References the individual owners and tenants in the
same Agreement. In regards to an owner this reflects the condominium agreement.
In regards to the tenant this reflects the lease.
8. Building Management will require a copy of insurance for all contractors,
covering the following.
a) Workmen's Compensations
b) Public Liability insurance in the amount of $3,000,000.00
c) Bodily injury in the amount of $1,000,000.00 per person, $3,000,000.00
per occurrence.
d) Property damage in the amount of $3,000,000.00
e) The insurance policy shall include a hold harmless clause for the owner's
benefit
(see Exhibit "A")
Special Clause
Thirty days prior notice of Certificate of Insurance cancellation,
non-renewal or material change to 125 Broad Condominium and managing agent by
certified mail.
a. The failure of any contractor of subcontractor to keep the required
insurance policies in force during the performance of the work covered by these
Rules and Regulations, any extension thereof of any extra or additional work
contracted to be performed by such contractor or subcontractor, shall be a
breach of this agreement, and in such event, Building Management shall have the
right, in addition to any other rights, to immediately halt work being performed
on the premises without further cost to the Condominium and Managing Agent.
b.The coverage and amounts set forth herein shall not be deemed to
limit contractor's or any subcontractor's liability in tort or with respect to
any work contracted for or performed during the term of this agreement.
c. The contractor's contract shall contain the Indemnity Agreement set
forth below and compliance with the foregoing requirements as to insurance shall
not be deemed to relieve contractor of liability thereunder.
9. Submit Building permit Applications for Building Management's
signature.
10. A copy of the Building Department permit is to be submitted to
Building Management prior to commencement of work. Permit is to be posted on the
job site in conspicuous location prior to commencement of construction. Occupant
shall be responsible for keeping current all permits.
11. All work and materials shall comply with all governmental codes
and New York City Building Department regulations.
12. Contractor's construction supervisor must contact the Property
Manager prior to commencement of construction to arrange a preliminary meeting.
13. During any new alteration, Occupant shall be responsible to comply
with all provisions of all current local and state laws, ADA and all
appurtenances necessary to comply with same.
14. Compliance with Local Law 16/84 in which Occupant is required to
install a source of emergency lighting which includes, but is not limited to,
exit signs, corridors, hallways and access facilities. The fixture (s) must be
compatible with the building's system. All alterations requiring partition
changes shall comply with compartmentation space requirements for the portion of
the Building being altered, in accordance with Section C26-504.1 of the City of
New York Administrative Code, as amended from time to time. All partitions that
create division, separation or segregation between either occupancy, demised and
public areas and/or compartmented spaces shall be of 2 hour fire rated
construction inclusive or properly rated and labeled doors.
15. The New York State Lighting Standards shall be complied with. In
order to maintain this requirement, we recommend that during a major renovation,
the installation of an energy conservation light fixture (s) and its inner
components (ballasts, bulbs, etc.) Specifications of same are to be submitted
along with architectural plans. During a small renovation, fixtures may be
reused. Notwithstanding the foregoing, Tenant may reuse the existing light
fixtures and their individual components during the performance of Tenant's
Work.
16. All cabling shall comply with Bulletin 126-1976 and Article 5 of
the City of New York Electrical code.
17. Occupant or Occupant's general contractor (with Occupants written
approval) is to contact the property manager 24 hours in advance for the
scheduling and coordination of freight elevators for deliveries, rubbish removal
and rules unique to the building. Requesting the elevator must be put in
writing. Please note: Due to the fact that the building is equipped with only 2
freight elevators, the reservation of freight cars is not on a first come first
serve basis. If more then one tenant reserves the freight elevator for the same
time period they will have to share the elevator. Freight elevators charges will
be sundryed to the tenant. All rubbish removal shall be before 8:00 am and after
6:00 pm. Elevators can be reserved before 8:00 am and after 6:00 pm . No
material or equipment shall be carried under or on top of any elevator.
Construction material is expressly prohibited from the passenger elevators. An
owners/tenant general contractor can not monopolize the freight elevator. It is
Building Management's responsibility to coordinate scheduling of the elevators.
At no time shall contractor offer cash/gift for special consideration regarding
freight elevator service.
18. Repair and/or replace all materials adjacent to work affected
areas outside the occupant's space to the satisfaction of Building Management.
19. Upon completion of the work, Occupant is to submit one complete
set of the Building Department approved plans, the HVAC balancing report, and
the Building Department sign-off to the Building Management office.
20. All connections to the buildings electric service must be done by
the building's approved electrical contractors. A certificate of filing prior to
installations will be required with final sign-off or approval when applicable.
21. Occupant shall reimburse Building Management for all fees incurred
for outside professional review of plans and specifications. (ie. - Structural
Engineer, Mechanical Engineer)
22. No equipment is to be suspended from reinforcing rods.
23. Equipment shall be suspended with power house clips or steel beams
depending on load.
24. All floor loading and steel work shall be subject to review by an
approved Building structural engineer. All approvals shall be obtained by the
Occupant at Occupant's expense. Occupant shall also be responsible for the costs
of all controlled inspections.
25. Welding to building steel is permitted with the following
conditions. Proposed weld areas must be approved by the Building Engineer. All
welding shall be performed by licensed welders meeting requirements of the
Building Code and work under the supervision of a licensed inspection agency.
Inspection agency to submit progress reports, difficulties, acceptance or
rejection of the work, and file a certificate with the Building Department
authorities attesting to the proper execution of the work.
26. If, as a result of the work, any changes are required to be made
to the Class E communication system (e.g., speaker relocation, addition,
type/style, etc.) as presently filed, approved and installed, and a subsequent
inspection by the New York City Fire Department and/or Building Department
indicates their disapproval thereof, Occupant shall correct same at Occupant's
sole cost and expense. As previously stated on page 2, all work pertaining to
the Class "E" System shall be performed by the buildings Class "E" vendor,
FireQuench.
27. Any alteration affecting, directly or indirectly, any areas that
contains hazardous material, e.g. asbestos, shall be performed at Occupants sole
cost and expense, in compliance with the rules, regulations, procedures and
guidelines, as amended or adopted from time to time, of New York City Local Law
76/85 and amended by Local Law 80/86, of the Environmental Protection Agency
(EPA), Occupational Safety and Health Act (OSHA), National Institute for
Occupational Safety (NIOSHA) and the New York City Board of Education, with
respect to standards for work causing, effecting or involving hazardous
material; repair, containment, removal, disposal and/or cleaning operations. A
consultant/Certified Hazardous Waste Inspector, will survey and approve the
proposed abatement plan and also monitor the air quality testing and method of
removal and submit to building management. The cost for this service will be at
Occupant's expense. Occupant will relocate any personnel from the area where
this type of alteration is being performed. Occupant agrees to cause such rules,
regulations, procedures and guidelines to be complied with. Occupant shall
absolve and hold harmless 125 Broad Condominium and Managing Agent and any other
party owning an interest in the property in which the work is being performed,
their employees and agents, from any and all liability with respect to any
failure to comply with any and all rules, regulations, procedures and/or
guidelines, as amended or adopted from time to time.
28. Occupant shall obtain from Occupant's general contractor and all
sub-contractors an agreement in form and substance satisfactory to Building
Management protecting and indemnifying 125 Broad Condominium against any claims,
damages, liabilities, costs or expenses including attorney fees in connection
with any work or any portion of work affecting the premises demised to any other
Occupant or services to be rendered to any other Occupant.
29. Any mechanic's lien, filed against the demised premises of the
building for the work claimed to have been done for or materials claimed to have
been furnished to Occupant shall be discharged by Occupant at its expense within
ten (10) days after such filing, by payment or filing of the bond required by
law or otherwise. Proof of such discharge shall be forwarded to the Building
Office immediately thereafter.
30. All work, if performed by a contractor's subcontractor, shall be
subject to reasonable supervision and inspection by Building Management. If an
outside consultant is required to review, such supervision and inspection shall
be at Occupant's sole expense.
31. All costs and expenses incurred with respect to this agreement,
either directly or indirectly, including amounts so incurred by Managing Agent,
shall be borne by Occupant and all payments thereof shall be made by Occupant
promptly as and when they become due, and evidence of such payments shall be
furnished to Building Management upon request. All such costs and expenses
incurred by Building Management's (Managing Agent), and all amounts payable to
Managing Agent pursuant to this agreement and will be sundryed to the occupant.
125 Broad Condominium & the Managing Agent shall have no
responsibility for or in connection with the work and Occupant shall, at
Occupants sole cost and expense, remedy and be responsible for any and all
defects in such work that may appear at any time, whether the same shall affect
the premises in particular or any part of the Building in general.
Occupant hereby indemnifies and agrees to defend and hold 125 Broad
Condominium and Managing Agent, their employees and agents harmless from and
against any and all suits, claims, actions, losses, costs, damages or expenses
(including claims for workmen's compensation) based on personal injury or
property damage caused in the performance of this work by Occupant, Occupant's
employees, agents, servants or contractors engaged by Occupant; and at the
Condominium's or Managing Agent's election, Occupant shall repair, replace or
reimburse the Managing Agent for the cost and expense of repairing or replacing,
any portion of the Building, item or equipment of Condominium's real or personal
property so damaged, lost or destroyed to or destruction of machinery, tools,
equipment and property of similar nature belonging to the Occupant, contractor,
and subcontractors including personal property of the Occupant, its employees,
and employees of the contractor and sub-contractors.
Nothing herein contained shall be deemed to (a) constitute any one
individual as the Condominium's agent or (b) waive any of the Condominium's
right pursuant to the terms of provisions of any specific agreement.
Nothing herein contained shall be deemed to supersede and/or
contradict any article, provision and/or amendment to the officially executed
agreement in effect upon inception of these alterations.
SUMMARY OF THE WORK
Final Cleaning
All induction units shall be thoroughly cleaned. If a contractor is
working on a multi - tenanted floor, all toilet facilities must be kept in a
clean and neat condition subject to Building Management's approval.
General Notes
Standards shown apply, except where any applicable governing codes or
regulations are more restrictive, in which case such codes and regulations shall
govern. It shall be the Occupants full responsibility to make all arrangements
and pay the building charges for hoisting, material moving, use of elevators and
any labor in connection with the foregoing and any shutdown, and all allowable
building working hours plus overtime hours.
Demolition
Building Management must be notified in writing prior to the start of
any demolition project. At which time Building Management or their contractors
shall have access to the space for inspection purposes. Demolition work must be
performed by an approved 125 Broad Street Contractor.
Precautions
Provide, erect and maintain lights, barriers, weather protection and
all other items as required for the proper protection of the workmen engaged in
demolition operation, public and adjacent construction. Provide and maintain
weather protection at exterior openings so as to fully protect the interior
premises against all damages from the elements. Provide and maintain temporary
protection of the existing structure designated to remain where demolition and
removal work is being done, connections made, materials handled, or equipment
removed. Provide and maintain a temporary loop around the core floor so that the
floor has water coverage during construction. If contractor chooses to install a
loop, piping needs to be threaded and 2" in diameter. If contractor chooses not
to install a temporary loop, the contractor shall provide a building certified
firewatch at those times when the floor is unprotected by sprinkler coverage.
Building Management recommends utilization of the Building Engineers for the
Firewatch Patrols.
Occupant is responsible for any damage to the existing structure or
contents by reason of the insufficiency of protection provided.
All base building items specifically designated for re-use but damaged
in the course of work performed under the general contract, or otherwise
unusable shall be replaced by items of equal quality and appearance at no
expense to the owner. The scheduling of all work and the removals of all debris
shall be in full compliance with the building rules and regulations, including
protection of floors and walls.
Demolition may be done at all times provided that if Building
Management receives complaints from other Occupants in the building and advises
Occupant thereof, Occupant will perform all such demolition thereafter either
before or after office hours.
Contractor shall use all means necessary to control dust if such dust
is caused by operations during performance of work. Contractors shall thoroughly
moisten all surfaces as required to prevent dust being a nuisance to other
Occupants, public areas and also provide dust proof barriers between work and
other areas. All public areas effected must be kept clean each day.
GENERAL CONSTRUCTION
1) Partitions between Occupants on multiple tenancy floors and between
Occupants and public corridors shall be constructed of 2 1/2" metal studs 16" on
center with two (2) layer fire rated sheet rock, both sides from slab to
underside of slab above with full thickness fiberglass aluminum backed
insulation in accordance with applicable building codes. Gypsum wall board to be
taped and spackled a minimum of three (3) coats.
2) Building standard partitions within Occupant's Demised Premises
shall consist of at a minimum of 2 1/2" steel studs 24" on center to arch with
one (1) layer of 5/8" fire rated sheet rock on each side. All wall butting
mullions shall have a proper channel to receive the Gypsum wall board. Tenant
shall be permitted to install drywall up to the existing ceiling height or 6"
above existing ceiling height.
3) If Occupant's partition layout interferes with existing fan coil
units, the relocation of these units will be at Occupant's sole cost and expense
including the material and labor overtime for the necessary drain down and
refilling of system.
4) Entrance doors to be a 2 hour fireproof self-closing type with
welded frame. All wood entrance doors shall have a fire label. All hollow metal
doors shall be properly fire rated if they are located in rated partitions with
visible label.
5) All woodwork shall be fireproofed and a New York City affidavit of
certification must be furnished.
6) All locks shall be keyed and mastered to building setup. Keys must
be supplied to the building manager. All hardware shall be ADA compliant. (Lever
type)
7) Any contractor engaged by Occupant to perform the work shall make
available fire extinguishers based on the following:
Alterations up to 3,000 sq. ft. - one fire extinguisher
Alterations over 3,000 sq. ft. - one fire extinguisher for every
additional 3,000 sq.
ft.
Said fire extinguishers shall be 25 lb. type approved for type A, B, C
fires and shall be kept and maintained on the premises by Occupants contractor
for the duration of the work and be placed and identified in a conspicuous
manner so as to be readily available if required.
8) All common areas shall meet Departments of Buildings' requirements
or requirements of other agencies having jurisdiction.
ELECTRICAL SPECIFICATIONS
1. All base building electrical work and tie-ins to be performed solely by the
building's approved electrical contractors.
2. All wiring shall meet requirements of the Department of Water Supply, Gas and
Electric and of Underwriter's Laboratory. All electrical devices are to meet New
York City code.
3. All wiring to meet New York City code.
4. Sealite to be used for final connection to motors. Prewired flexible conduit
to be used for recessed fixtures.
5. All wire to be minimum 12 gauge copper THWN.
6. All fixtures that are removed and reinstalled shall be cleaned and re-lamped
and ballast changed to energy efficient types as approved by Con Edison(Except
when matching to existing)
7. Building Management requests that any fixtures being removed and not
reinstalled be turned over to Building Management.
8. All coring, chopping, chasing of concrete and work which results in noise
shall be accomplished before 8 A.M. or after 5:30 P.M. during normal working
days.
9. All open floor outlets shall be capped with appropriate blanking plate.
10. Conduits larger than 2" shall be rigid aluminum.
11. All branch circuit and feeder wiring shall be tagged at each box or panel.
Tags shall indicate circuit number and phase. All panels cover troughs, switch
covers and trim to be restored to its proper place. Panel directory shall be
updated to reflect changes.
12. All existing or new wiring for switching, fixtures, devices, ceiling and
related elements, outlets on approved shop drawings located with the demised
area, shall not carry over control to or controlled by any devices or adjacent
space.
13. Home runs shall be indicated on plans. Rigid conduit, BX or thin wall tubing
shall be used throughout. 1/4" minimum size.
14. Light fixtures shall be Con Edison energy efficient.
15. All conduit shall be supported by standoffs, not wired to ceiling supports.
16. All electrical boxes shall meet code requirements.
17. If excessive electrical power is required, it is to be taken from the main
distribution board and not from existing Building panels.
18. Plans with requirements shall be submitted to Building Management to
determine riser capacity.
19 Building Mechanic or Engineer shall supervise all riser shutdowns.
SPECIFICATIONS FOR AIR CONDITIONING
1. Occupant shall be responsible for alternations to existing air conditioning
duct work or systems and for insuring that such work is properly integrated into
existing Building systems with no adverse effects on the Building system.
Building Management shall not be responsible for the proper HVAC design or
balancing within the area of any Occupant Alteration. The system shall be
balanced at the completion of the job.
2. All air conditioning components should be passed by Building Management for
review.
Additional outside louvers are not permitted, unless the need therefore is
firmly established. The location of such louvers shall be subject to Owner's
Representatives/Building Management's approval. Detailed sketches of all louvers
shall be submitted for Building Management's approval.
4. All shut off valves shall be accessible at all times, and tagged.
5. All unused equipment, such as air handling units and air conditioning units
shall be removed. This provision shall not apply to construction performed in
connection with Tenant's Work.
6. Exhaust fan system must discharge to the atmosphere based on usage, not in
ceiling or existing Building return air systems.
7. All condensate lines must be insulated with an approved material.
8. Supplementary A/C units to be installed with the proper isolators so as not
to disturb the quiet enjoyment of adjoining premises.
9. It is to be understood that periodic maintenance of auxiliary A/C units is
the occupants responsibility and expense. All filing and inspection requirements
are occupants responsibility.
10. All supplementary units connected to the building supplemental plant shall
be metered by approved meters at the individual owners cost. Location is at the
review of Building Management and the occupant will be billed monthly for usage
as per their agreement with 125 Condominium. All installation is at occupants
cost.
11. Occupant shall furnish design balancing figures to Building office.
PLUMBING RULES AND REGULATIONS FOR ALTERATIONS
1. All water supply to a floor shall originate on the same floor from nearest
wet column with proper access for maintenance. Pipes supplying such fixtures
shall be insulated.
2. All piping, fitting, valves, etc. shall be properly insulated to prevent pipe
condensation and/or heat loss.
3. Cooper tube must be used to all supply service connections.
4. All waste lines shall be properly pitched and piped to insure total drainage
as not to create nor form traps (except as may be required, e.g. made by means
of long turn or 45 degree "Y" fittings) and shall maintain existing clean-out
connections and shall further provide clean-out connections at fittings.
5. All piping shall conform to the Plumbing Code, Dept. of Buildings, City of
New York.
6. All core drilling, chopping chasing of concrete and work which results in
noise shall be accomplished before 8 A.M. or after 5:30 P.M. during normal
working days.
7. All piping runs in the Occupant areas to be accessible.
8. No water risers shall be shut down during Building office hours. A Building
mechanic shall supervise all riser shutdowns.
9. No plastic pipe will be permitted.
10. Sweat joint must be made with a silver based alloy solder.
11. All unused fixtures and piping shall be capped at its respective riser.
12. All run outs from risers shall be brass pipe.
VENETIAN BLINDS AND CURTAINS
1. No curtain rods are to be installed in venetian blind pockets.
2. Curtain rods shall not be supported by any part of the acoustical tile. Rods
shall be supported by headers attached to the ceiling's mechanical supports of
black iron.
3. If curtains are to be installed by any Occupant, such curtains shall be flame
proof and shall not interfere with the proper functioning of the peripheral HVAC
system. A Certificate of Flammability must be sent to the Building Office.
CEILINGS
1. All ceilings shall meet all requirements of New York City Department of
Buildings.
2. All ceilings are to be supported independently and not from duct work.
Ceiling installation shall be approved by building management for accessibility.
Tenant shall not be responsible for ceiling conditions caused by previous
tenants in the Premises.
SPECIFICATIONS FOR TELEPHONE INSTALLATION AND LOW VOLTAGE WIRING
A) All wall wiring is to comply with New York City code.
B) No more than 6' of cable or wire can be run exposed along any wall.
No exposed wiring to run along the floor. All such wiring must be properly
covered.
C) When applicable no excess wire or panels may be left inside the
peripheral induction unit and enclosed.
D) Ceiling tiles and light fixtures are to be replaced by qualified
personnel. Subject to Landlord's requirement to install all missing ceiling
tiles as of the Lease Commencement Date at Landlord's sole cost and expense, if
the building personnel are required to reinstall fixtures and tiles, charges to
the occupant will result.
E) Prior to any new installations, all old or obsolete wiring must be
removed. All new exposed cabling that is run in the ceiling must be individually
hung and supported and not be dependent upon support of building hung ceiling.
F) Open communication cables may be run in spaces used as return air
plenum provided they are jacketed conductors with Teflon insulation, silicon
rubber insulated with glass tape, or other conductors approved for this type of
application. All other types cable must be installed in a raceway, pipe, thin
wall or conduit. All piping and conduit must comply with New York City
Electrical Code. In ceilings which do not convey environmental air, open
communication wiring of any type may be installed.
Contingencies:
This consent shall be no force and effect unless and until it is signed
by you and returned to Building Management within ten (10) days of the date of
this letter, acknowledging your consent to the foregoing.
Very Truly Yours,
The Witkoff Group
as agent for 125 Broad Condominium
125 Broad Street
Building Management
By:___________________
ACCEPTED AND AGREED:
Occupant:
By: __________________________
Date: ________________________
EXHIBIT A
THE WITKOFF GROUP LLC
INDEMNITY CLAUSE
FOR CERTIFICATE OF INSURANCE
To the fullest extent permitted by law, the Contractor hereby agrees to
indemnify and hold harmless 125 Broad Condominium, The Witkoff Group LLC and any
of their respective agents, employees, partners, officers, directors and
principals (disclosed or undisclosed) (collectively, the "Indemnities") from and
against all claims, losses damages, costs, expenses and other liabilities
(including, without limitation, attorney's fees and disbursements and liability,
if any, for the payment of worker's compensation or disability benefits) arising
out of or resulting from the performance of the services called for under this
contract Requirements and Specifications, to the extent that any such claim,
loss, damage cost, expense or other liability is attributable (i) to personal
injury, sickness, disease or death, or (ii) to injury to or destruction of
property, including, but not limited to the loss of use resulting therefrom, and
is caused, whole or in part, by the acts or omissions of the Contractor or its
subcontractors or their respective agents or employees including, without
limitation, the Contractor's or its subcontractors' failure to comply with all
laws, ordinances, rules, regulations and requirements or any governmental
authorities having jurisdiction over the services hereunder, including those
governing the removal and disposal of toxic or hazardous waste. The Contractor
shall defend any action brought against the indemnities which is based on any
claim, loss, damage, cost, expense or liability referred to herein. Such
obligations shall not be construed to negate, abridge, or otherwise reduce any
other right or obligation of indemnity which would otherwise exist for the
benefit of any indemnitee.
If any and all claims against the indemnitees by any of the Contractor's
employees, anyone directly or indirectly employed by the Contractor or anyone
for whose acts the Contractor may be liable, the indemnification obligation
hereunder shall not be limited in any way or any limitation on the amount of
type of damages, compensation or other benefits payable by or for the Contractor
under worker's or workman's compensations acts, disability acts or other
employee benefit acts.
OCCUPANT RULES AND REGULATIONS
1. The rights of Occupants in the entrances, corridors, elevators and escalators
of the Building are limited to ingress to and egress from the Occupant's
premises for the Occupant's and their employees, licensees and invitees, and no
Occupant shall use, or permit the use of, the entrances, corridors, escalators
or elevators for any other purpose. All deliveries and shipments of goods and
packages shall be through the freight elevators, and not the passenger
elevators. The building has implemented a centralized messenger center for its
owners and tenants to eliminate traffic in the building. All occupants are
required to use this service and will be sundried on a monthly basis for its
use. The cost per month will be determined on the percentage of incoming and
outgoing packages each occupant uses. All food deliveries will be directed to
the messenger center where the occupants employee(s) will be directed to come
down and pick up their order. No Occupant shall invite to the Occupant'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 plazas,
entrances, corridors, escalators, elevators and other facilities of the Building
by other Occupants without notice to the Building Management office. Fire exits
and stairways are for emergency use only, and they shall not be used for any
other purposes by the Occupants, their employees, licensees or invitees. No
Occupant shall encumber or obstruct, or permit the encumbrance or obstruction of
any of the lobbies, sidewalks, plazas, entrances, corridors, escalators,
elevators, fire exits, stairways or other public portions of the Building. The
Owners representatives and Building Management reserve 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 occupants, in such manner as
it reasonably deems best for the benefit of the occupants generally.
2. Building Management may refuse admission to the Building outside of ordinary
business hours to any person not known to the watchman in charge or not having a
pass issued by occupant or not properly identified, and may require all persons
admitted to or leaving the Building outside of ordinary business hours to
register. Occupant's employees, agents and visitors shall be permitted to enter
and leave the Building whenever appropriate arrangements have been previously
made between the owners representative and the occupant with respect thereto.
Each occupant shall be responsible for all persons for whom he requests such
permission and shall be liable to 125 Broad Condominium for all acts of such
persons. Any person whose presence in the Building at any time shall, in the
reasonable judgment of Building Management, be prejudicial to the safety of the
Building or its occupants may be denied access to the Building or may be ejected
therefrom. In case of invasion, riot, or civil disorder Building Management may
prevent all access to the Building during the continuance of the same, by
closing the doors or otherwise, for the safety of the occupants and protection
of property in the Building. Building Management may require any person leaving
the Building with any bulky package or other bulky object to exhibit a pass from
the occupant from whose premises the package or object is being removed, but the
establishment and enforcement of such requirement shall not impose any
responsibility on Building Management for the protection of any occupant against
the removal of property from the premises of the occupant. 125 Broad Condominium
shall, in no way, be liable to any occupant for damages or loss arising from the
admission, exclusion or ejection of any person to or from the occupant's
premises or the Building under the provisions of this rule.
3. No occupant shall obtain or accept for use in its premises ice, towel,
barbering, boot blacking, door polishing, lighting maintenance, cleaning or
other similar services from any persons not authorized by Building Management in
writing to furnish such services, provided that there are a reasonable number of
sources available to occupant (consistent with proper Building operation and
security), and the charges for such services by persons authorized by Building
Management are not excessive. Such services shall be furnished only at such
hours, in such places within the occupant's premises and under such regulations
as may be fixed by Building Management.
4. No awnings or other projections over or around the windows which shall be
visible from the exterior (with the blinds down) shall be installed by any
occupant.
5. There shall not be used in any space, or in the public halls of the Building,
either by the Occupant or by jobbers or others, in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and side
guards. All deliveries of this type will be directed to use the freight
elevator.
6. Entrance doors on multiple occupancy floors shall not be left open at any
time. All blinds and or drapes therein above the ground floor shall be lowered
and kept drawn 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 Occupant's premises. Occupant's failure to comply with the
requirements of the previous sentence may result in an inadequacy of performance
of the Building air-conditioning and ventilating system.
7. No noise, including the playing of any musical instruments, radio or
television, which, in the judgment of Building Management, might disturb other
Occupants in the Building shall be made or permitted by any Occupant. Nothing
shall be done or permitted in any Occupant's premises, and nothing shall be
brought into or kept in any Occupant's premises, which would 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 occupant of any other premises, nor shall there be installed by any
Occupant any ventilating, air conditioning, electrical or other equipment of any
kind which, in the judgment of Building Management, might cause any such
impairment or interference. No dangerous, inflammable, combustible or explosive
object or material shall be brought into the Building by any occupant or with
the permission of any occupant except for usual office.
8. Occupant shall not permit any cooking within the Demised Premises unless
filed with the New York City Buildings Department and approved by Building
Management and shall not permit any food odors emanating within the Demised
Premises to seep into other portions of the Building.
9. No acids, vapors or other materials shall be discharged or permitted to be
discharged into the waste lines, vents or flues of the Building which may damage
them. The water and wash closets and other plumbing fixtures in or serving any
Occupant's premises shall not be used for any purpose other than the purpose for
which they were designed or constructed, and no sweepings, rubbish, rags, acids
or other foreign substances shall be deposited therein.
All damages resulting from any misuse of the fixtures shall be borne by the
Occupant who, or whose servants, employees, agents, visitors or licensees, shall
have caused the same.
10. Except as expressly authorized in accordance with the Occupant's Agreement,
no signs, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by Occupant, which is visible from outside of the
Demised Premise without the prior written consent of Building Management which
shall not be unreasonably withheld. In the event of the violation of the
foregoing by tenant, Building Management may remove the same without any
liability, and may charge the expense incurred by such removal to the Occupant
or Occupants violating this rule. Signs or lettering in public areas of the
Building, shall be of a size, color and style acceptable to Owner's
representatives and Building Management. Building Management shall have the
right to prohibit any advertising by any Occupant which refers to or identifies
the Building and which impairs the reputation of the Building or its
desirability as a building for offices, and upon written notice from Building
Management, Occupant shall refrain from or discontinue such advertising. If a
floor is leased out to more than one tenant, the signage placed in the corridor
is to be approved by Building Management.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows in any occupant's premises and no lock on any door therein
shall be changed or altered in any respect, unless all are master-keyed and
occupant shall furnish key to Building Management. Upon the termination of an
Occupant's Agreement, all keys of the Occupant's premises and toilet rooms shall
be delivered to Building Management.
12. No Occupant shall use or occupy, or permit any portion of the premises
demised to such Occupant to be used or occupied, as an office for a public
stenographer or typist, or as a barber or manicure shop or as an employment
bureau (except to employ personnel for Occupant) or for any mail order business.
No Occupant or occupancy shall engage or pay any employees in the Building,
except those actually working for such Occupant or Occupant in the building, nor
advertise for laborers giving an address at the Building. No premises shall be
used, or permitted to be used, at any time, as a store for the sale or display
of goods, wares or merchandise of any kind (except as otherwise permitted in
your agreement), or as a shop, booth, bootblack or other stand, or for the
conduct of any business or occupation which predominantly involves direct
patronage of the general public in the premises demised to such Occupant, or for
manufacturing or for other similar purposes.
13. The requirements of Occupant will be attended to only upon application at
the office of the Building. Employees of the building shall not perform any work
or do anything outside of the regular duties, unless under special instructions
from the Building Office.
14. Each Occupant shall, at its expense, provide artificial light in the
premises demised to such Occupant for persons performing janitorial or other
cleaning services and making repairs or alterations in said premises, during the
performance thereof.
15. The Occupant's employees shall not gather in the hallways, stairways,
elevators, front, roof or any other part of the Building used in common by the
occupants thereof.
16. If the premises demised to any occupant become infested with vermin, such
Occupant, at its sole cost and expense, shall cause its premises to be
exterminated, from time to time, and shall employ such exterminators therefor as
shall be cleared by Building Management.
17. Occupant shall not place a load upon any floor of the Demised Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law.
18. Business machines and mechanical equipment belonging to Occupant which cause
noise, vibration or any other nuisance that may be transmitted to the structure
or other portions of the Building outside of the Demised Premises, to such a
degree as to be objectionable to Building Management or which interfere with the
use or enjoyment by other occupants of their premises or the public portions of
the Building, shall be placed and maintained by Occupant at Occupant's cost and
expense, in settings of cork, rubber or spring type vibration to the reasonable
satisfaction of Building Management.
19. Building Management will, at the request of Occupant, maintain listings on
the Building directory of the name of Occupant and of any other person, firm,
association or corporation lawfully in possession of the premises or any part
thereof. The number of listings for Occupant shall not exceed the same
proportion of the directory capacity as Occupant's Pro Rata Share. The listing
of any name other than that of Occupant, whether on the doors of the premises,
on the Building directory, or otherwise, shall not operate to vest any right or
interest in this agreement or in the premises or be deemed to be the written
consent of Building Management, it being expressly understood that any such
listing is a privilege extended by 125 Broad Condominium.
20. Occupant shall not move any safe, heavy equipment or bulky matter in or out
of the Building without coordinating with building Management. If the movement
of such items require special handling, Occupant agrees to employ only persons
holding a Master Rigger's License to do said work and all such work shall be
done in full compliance with the Administrative Code of the City of New York and
other municipal requirements. All such movements shall be made during hours
which will least interfere with the normal operations of the Building, and all
damage caused by such movement shall be promptly repaired by Occupant at
Occupant's expense. All moving, shipping and receiving of Occupant's products,
samples and supplies shall be through the freight or service elevator(s) and
shall be subject to the Occupant's Agreement.
21. No Occupant shall suffer or permit the Demised Premises or any part thereof
to be used in any manner or anything to be brought into or kept therein, which
would in any way (i) violate any Laws or Ordinances, (ii) cause structural
injury to the Building or any part thereof, (iii) constitute a public or private
nuisance, (iv) impair the appearance, character or reputation of the Building,
(v) discharge objectionable fumes, vapors or odors into the Building heating,
ventilating and air conditioning system or into Building flues or vents not
designed to receive them or otherwise in such manner as may offend other
occupants, or (vi) violate any of tenant's other obligations under its
agreement.
22. If Occupant's use of the freight elevator is after regular hours, or in such
a manner that reasonably requires the supervision of Building Management's
employees, Occupant shall pay to 125 Broad Condominium, the Building Standard
cost of furnishing such after hours service and/or supervision.
Exhibit D
Building Standards
Landlord's Building
Rules and Regulations
1. The sidewalks, areas, entrances, vestibules, Passages, corridors,
halls, elevators and stairways shall not be encumbered nor obstructed by any of
the tenants, their agents, clerks, servants or visitors, or be used by them for
any other purpose than for ingress and egress to and from their respective
Premises. Landlord reserves the right to restrict and regulate the use of
aforementioned public areas of the Unit by the tenants, their employees, guests,
contractors and customers and by persons making deliveries to tenants, including
but not limited to the right to allocate certain elevators for delivery service,
and the right to designate which Building entrances shall be used by persons
making deliveries in the Building.
2. The doors, skylights, and windows that reflect or admit fight into
passageways or into any place in the Budding shall not be covered obstructed by
any tenant.
3. The water-closets, wash-closets, urinals and other water apparatus
shall not be used for any purposes other than those for which they were
constructed and no sweepings, rubbish, rags, ashes, chemicals, refuse from
electric batteries, or other substances shall be thrown therein. No tenant shall
lay linoleum or other similar floor covering; so that the same shall come in
direct contact with the floor covering of the Premises, and if linoleum or other
similar floor covering is desired to be used, an interlining of builder's
deadening Felt shall be first affixed to the floor by a paste, or other
material, which may easily be removed with water, the use of cement or other
similar adhesive material being expressly prohibited.
4. No tenant shall mark, paint, drill into, drive nails into, or in
any way damage, mutilate or deface any walls, ceilings, partitions, floors,
wood, stone or iron work of the Unit or the Building, except in connection with
Alterations.
5. No sign, advertisement or notice shall be inscribed, painted,
affixed or displayed on any of the windows or doors or on any other part of the
outside or the inside of the Budding, without the prior consent in writing of
Landlord; provided that, with respect to signs, advertisements or notices
inscribed, painted, affixed or displayed on the doors or on any other part of
the inside of the Building, Landlord shall not withhold its consent if such
signs or notices are inscribed, painted, affixed or displayed in a first-class
manner consistent with Comparable Buildings.
6. No tenant shall do anything or Permit anything to be done, in its
Premises, or bring or keep anything therein or in the Building that will in any
way obstruct or interfere with the fights of other tenants, or in any way injure
or annoy them, or those having business with them. Tenants, their agents,
clerks, servants or visitors, shall not make or cause any improper noises in the
Building, or interfere in any way with other tenants, or those having business
with them.
7. No freight furniture, or bulky matter of any description will be
received into the Building, or carried up or down, except during hours (which
will include reasonable times during Business Hours) and in the manner
designated by Landlord, which may involve overtime work for Landlord's
employees, agents or contractors or for the employees, agents or contractors of
the Board of Managers. The moving of safes shall occur at such times as Landlord
shall designate upon previous notice to Landlord or Landlord's agent; and the
persons employed to move the safes in and out of the Premises must be acceptable
to Landlord. No tenant shall use the passenger elevators for the hauling and
removal of materials or debris and the same shall be done only after Business
Hours and only via the freight elevator.
8. Tenants shall not install any locks or bolts on any doors nor make
any changes in existing locks unless Tenant promptly provides Landlord with a
key or combination thereto. All keys shall be keyed to the building master. Each
tenant must, upon the termination of the tenancy, restore to Landlord all the
keys (or other similar access devices) of offices, rooms and toilet-rooms which
shall have been furnished to Tenant or that Tenant shall have had made, and in
the event of loss of any keys so furnished shall pay Landlord therefor.
9. Tenant shall not use the Premises for the manufacturing or storage
of merchandise or for lodging.
10. Nothing shall be swept or thrown by the tenants or by their
agents, clerks, servants or visitors into the corridors, halls, stairways,
elevators, or light shafts, or upon the skylights of the Building, or into or
upon any heating or ventilating registers, or plumbing apparatus in the
Building, or upon adjoining buildings or upon the street. No awnings or other
projections shall be attached to the outside walls of the Building without the
prior written consent of Landlord. 4
11. No animals or birds shall be kept in or about the Premises.
12. Tenants shall not bring into the Building or keep to use in the
Building any gasoline, kerosene, camphene, burning fluid, other inflammable,
combustible or explosive fluid, chemical or substance, or any Substance
designated as hazardous under any applicable law.
13. No tenant shall cause or permit any unusual or objectionable odors
arising to a nuisance to emanate from the Premises. No tenant shall permit the
delivery of any food or beverage to the Premises, except by persons reasonably
approved by Landlord and only under reasonable regulations fixed by Landlord. No
food or beverages shall be carried in the public halls and elevators of the
Building except in closed containers or as otherwise be customary in Comparable
Buildings.
14. Tenants shall not obtain any towel supply service or ice service
except from Persons approved by Landlord, nor obtain drinking water for delivery
on the Premises from any source not approved by Landlord. Canvassing, peddling
and soliciting are prohibited in the Building and Tenant shall cooperate to
prevent the same.
15. Telegraph, telephone and other wires and instruments shall not be
introduced by Tenant without previous notice to Landlord and with its reasonable
approval. Notwithstanding the foregoing, Tenant shall only be required to obtain
Landlord's prior approval with respect to the installation of the foregoing to
the extent the same is installed outside of the Premises, affects the Building
systems or require connection with any wires or equipment in the Building
risers.
16. Landlord reserves the right to exclude from the Budding between
the hours of 6:00 o'clock p.m. and 8:00 o'clock a.m. on weekdays, on Saturdays,
Sundays and legal holidays, all Persons who do not present a pass to the Budding
signed by Landlord or Landlord's agent. Landlord or its agent will furnish
passes to Persons for whom any tenant requests same in writing. Each tenant
shall be responsible for all Persons for whom he requests such pass and shall be
liable to Landlord for all acts of such Persons. Landlord may require all such
Persons to sign a register on entering and leaving the Building.
17. Landlord shall use all reasonable efforts (or, if the enforcement
of such Rules and Regulations is the responsibility of the Board of Managers,
Landlord shall use all reasonable efforts to cause the Board of Managers) to
enforce the Rules and Regulations against occupants of the Unit in a uniform and
non-discriminatory manner.
18. Landlord may from time to time adopt additional systems and
procedures to improve the security or safety of the Unit, any persons occupying,
using or entering the same, or any equipment, finishings or contents thereof,
and Tenant shall comply with Landlord's reasonable requirements relative
thereto.
19. Tenant shall conduct all aspects of its operations so as to
preserve labor harmony and to insure that the security and operations of the
Budding shall not be disrupted.
20. Landlord reserves the right to rescind, alter, waive or add, as to
one or more or all tenants, any rule or regulation at any time prescribed for
- -the Building or the Unit when, in the judgment of Landlord, Landlord deems it
necessary or desirable for the reputation, safety, character, security, care,
appearance or interests of the Building, the Unit or the Premises, the
preservation of good order therein, the operation or maintenance of the Budding
or the Unit, the equipment thereof, or the comfort of Tenants or others in the
Budding or the Unit so long as such rescission, alteration, waiver or addition
is done in a uniform and non-discriminatory manner. No rescission, alteration,
waiver or addition of any rule or regulation in respect of one tenant shall
operate as a rescission, alteration or waiver in respect of any other tenant.
21. Tenant shall not place a load upon any floor of the Premises that
exceeds the lesser of (a) 50 pounds live load per square foot (except in
locations expressly indicated by Landlord in writing to have been reinforced to
bear greater live loads) or (b) that is allowed by Law. Business machines and
mechanical equipment.used in the Premises that cause vibrations or noise that
may be transmitted to any other space in the Budding to such a degree as to be
reasonably objectionable to Landlord or to any tenants or occupants of the
Budding shall be placed and maintained by Tenant, at its expense, in settings of
cork, rubber or spring-type vibration eliminators sufficient, in Landlord's
judgment, to eliminate such vibrations or noise.
22. Tenant shall not clean nor require, -permit, suffer or allow any
window in the Premises to be cleaned from the outside in violation of Section
202 of the Labor Law of the State of New York (or its successor or any law of
similar import), any other applicable Law, the rules of the Board of Standards
and Appeals (or any successor body), or of any other agency, bureau, board or
other body having or asserting jurisdiction.
23. Tenant shall neither contract for, nor employ, any labor in
connection with the maintenance or cleaning of, or providing of any other
servic4s to, the Premises (but excluding Tenant's Property) without the prior
consent of Landlord which consent shall not be unreasonably withheld. It shall
be reasonable for Landlord to withhold any such consent on the ground that use
of such service provider would disturb labor harmony in the Building.
Tenant agrees that in the event of any inconsistency or conflict
between the terms, provisions, rules and/or regulations contained in Exhibit C
and in Exhibit D as the case may be, the more restrictive, term, provision, rule
and/or regulation shall apply.
Exhibit E
Cleaning Specifications for the Premises
Cleaning Specifications for the Premises
GENERAL CLEANING
NIGHTLY - BUSINESS DAYS
General offices:
I. All hard surfaced flooring to be swept using an approved chemically
treated dust mop.
2. Carpet sweep all carpets file cabinets, 'four (4) nights per week,
moving only light furniture ( desks,
etc. not to be moved).
3. Hand dust and wipe clean with chemically treated cloth all
furniture, fixtures and window sills.
4. Empty and wipe clean all ash trays and screen all sand urns.
5. Dust all telephones.
6. Dust all chairs, rails and trims.
7. Empty all standard size office waste paper baskets.
8. Wipe clean all water fountains.
Lavatories: (Public Only)
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and enameled
surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls, dispensers and
receptacles.
6. Supply and service sanitary napkin dispensing machines and sanitary
napkins. All proceeds to be retained by owner.
7. Paper towel and sanitary receptacles emptied and cleaned
8. Fill soap, paper towels and toilet tissue dispensers.
9. Machine scrub floors quarterly.
WEEKLY
1. Vacuum clean all carpeting and rugs.
2. Dust all door and ventilating louvres within a persons reach.
3. Wipe clean all interior metal and remove fingermarks.
QUARTERLY
High dust premises completely, including the following:
1. Dust all pictures, frames, charts graphs and similar wall hangings
not reached in nightly cleaning.
2. Dust clean all vertical surfaces, such as walls, partitions, doors,
bucks and other surfaces not reached in nightly cleaning.
3. Dust pipes, louvres, ducts, moldings and other high areas not
reached in nightly cleaning.
4. Dust all venetian blinds.
WASH ALL WINDOWS (periodically, weather permitting)
Exhibit F
Overtime HVAC/Freight Elevator/Loading Dock Procedure
All request for service at times other than Business Hours must be
submitted in writing via telecopier or mail on the Tenant's letterhead to the
Building superintendent (or such other person designated by Landlord or the
Board of Managers, by a person authorized by Tenant to make such requests:
twenty four (24) hours prior to when the freight elevator or loading dock is
needed and (ii) by 2:00 p.m. on the same Business Day After-Hours HVAC is
required, or 2:00 p.m. on the preceding Business Day if After-Hours HVAC is
required on a weekend or Holiday.
In the event of emergency, service may be obtained by calling the
Building superintendent (or such other person designated by Landlord) in
sufficient time to enable the superintendent to follow up with a written request
to confirm and to provide the service requested.
Exhibit G
Landlord's Work
1. Clean and vacuum the induction units in the Premises.
2. Connect Tenant distribution system with Building Class E system.
3. Install ADA hardware (levered sets) to all existing doors in the Premises
that are missing lock sets on the Lease Commencemen Date in accordance with
Applicable Law.
4. Replace ceiling tiles in the Premises to the extent the same were missing on
the Lease Commencement Date.
5. Balance the air conditioning system serving the Premises.
Exhibit H
List of Approved Contractors
T H E
WITKOFF ,
G R 0 U p
220 East 42nd Street Tel (2 12 ) 672 ~4700
www.witkoff.com
New York, NY 10017 Fax (212) 672,4726
APPROVED GENERAL CONTRACTORS
Structure Tone Inc. CGC Interiors
15 East 26 th Street 200 West 56th Street
New York, NY 100 10 New York, NY 10019
Attn: Mr. James Donaghy Attn: Mr. Vincent Bagnoli Jr.
Telephone: 212-251-9284 Telephone: 212-707-5505
Turner Construction Tishman Construction Corporation
375 Hudson Street 666 Fifth Avenue
New York, NY 10014 New York, NY 10 103
Attn: Mr. Rory DeJohn Attn: Mr. Kenneth M. Champion
Telephone: 212-229-6215 Telephone: 212-708-6757
Lehrer McGovern Bovis CMA Enterprises
200 Park Avenue 156 Fifth Avenue
New York, NY 10166 New York, NY 10010
Attn: Mr. Thomas McCloskey Attn: Mr. Jay Koff
Telephone 212-592-6837 Telephone: 212-924-7353
ADDITIONAL APPROVED CONTRACTORS:
1. ACC Construction Corp.
Rick Scuderi
24-64 45th Street
Long Island City, NY 11103
Telephone: 718-545-4141
2. Rocky Meli Executive Managing Director National Construction Group, Ltd. 20
West 20th Street - Suite 904 New York, NY 10011 Telephone: 212-691-7166
Exhibit I
Lower Manhattan Plan Application
NEW YORK CITY DEPARTMENT OF FINANCE PROPERTY DIVISION
COMMERCIAL REVITALIZATION
PROGRAM APPLICATION
FOR REAL ESTATE TAX ABATEMENT AND/OR
COMMERCIAL RENT TAX SPECIAL REDUCTION
[NYC FORM REV 10/95 NOT SUSCEPTIBLE TO EDGAR FILING FORMAT]
Exhibit J
Form of Tenant Estoppel Certificate
[Landlord]
and
[Lender]
Dear [Tenant]:
[Date]
Re: Lease dated __________ between [Landlord] and ("Tenant') for space
in Unit C in the building located at 125 Broad Street, New York, New York (the
"Unit")
The undersigned, as the Tenant, has been advised that [Lender] is
negotiating with Landlord for the refinancing of the underlying mortgage debt on
the Unit. In connection therewith, Landlord and Lender have required this
certificate.
Where no information has been inserted on any blank hereof, the blank
shall be deemed to read "NONE".
With the knowledge and understanding that Landlord and Tenant will be
relying on the statements contained herein, the Tenant hereby certifies as
follows:
1. Tenant presently leases the space set forth on Exhibit "A" within
the Unit (the "Leased Premises") and the Leased Premises are the only premises
leased by Tenant within the Unit.
2. The documents constituting Tenant's lease, together with all
amendments, modifications, assignments, subleases, renewals, extensions and
other agreements relating to such lease (collectively, the "Lease"; definitional
terms are used herein as defined in the Lease unless otherwise specifically
stated herein) are listed on Exhibit "A" attached hereto and incorporated herein
by this reference. The Lease constitutes the entire agreement between Landlord
and Tenant with respect to the Leased Premises and is valid and is presently in
full force and effect. Except as listed on Exhibit A, no other agreement or
representation, oral or written, has been made regarding the Leased Premises or
the Unit and the Lease has not been modified canceled, pledged, mortgaged,
assigned, subleased, extended renewed or amended. Tenant has not exercised any
termination option, if any, which exists under the Lease.
3. There are no guaranties or sureties with respect to the Lease other
than as identified on the attached Exhibit "A" and each such guaranty or surety
is in full force and effect.
4. The Rental Commencement Date of the Lease is ______ and the
Expiration Date of the Lease is_______.
5. Rent and other charges required under the Lease has commenced to
accrue. Fixed rent has been paid through ________ and additional rent has been
paid through __________.
6. A security deposit in the amount of __________ has been paid by
Tenant to Landlord with respect to the Leased Premises.
7.No rent or other charges payable under the Lease have been paid more
than thirty (30) days in advance of its due date other than:
8. Tenant has accepted the Leased Premises (including all improvements
required by the Lease) as being in full compliance with the Lease and is in full
occupancy and possession thereof. All tenant improvement work has been completed
(subject to latent defects, if any) and all required contributions by the
Landlord to the Tenant on account of such work, if any, have been received by
the Tenant, except as follows:
9. To Tenant's knowledge, there are no defaults under the Lease by
Landlord or Tenant nor has any event occurred which, by the giving of notice or
passage of time, or both would constitute an event of default by either Landlord
or Tenant thereunder.
10.To Tenant's knowledge, there are no disputes, defenses or
counterclaims to the full enforcement of the Lease by Landlord. There are not
construction allowance which have not been paid to Tenant and there are no other
sums currently owed to Tenant by Landlord, except as follows:
11.Tenant is not entitled to any offsets, abatements, rent concessions
or recapture against rent or any other charges whatsoever under the Lease,
except as expressly provided in the Lease.
12. The notice for the Tenant is as follows (if a new address is not
inserted in this paragraph 12, the address of the Tenant is as set forth in the
Lease):
13. Tenant has not been granted any purchase option or right of first
offer or first refusal with respect to the acquisition of the Unit. Tenant has
not been granted any expansion option or any other option for addition space
except as set forth in "Exhibit A".
This Estoppel Certificate is being provided by the undersigned, as
Tenant, to Landlord and Lender and the Tenant agrees that the information and
representations contained herein may be relied upon by Purchaser and Lender
and/or any of their respective present or future partners, members, shareholders
or other affiliates, the present and future mortgagees of the Unit and any
prospective purchasers of the Unit or any interest therein; and all such persons
shall be entitled to rely on and to have the benefit of the assurances to
matters set forth in this certification.
The person executing this certification on behalf of the undersigned
is duly authorized to execute this certification on behalf of the undersigned,
and this certification is and shall be binding on the undersigned, its
successors and assigns.
Dated:_______________________
[Tenant]
By:__________________________
Name:
Title:
Exhibit K
HVAC Specifications
C:\My Documents\Exhibit K.doc
Heating, Ventilation and Air Conditioning
Air Conditioning System - Design and Performance Criteria
The building air conditioning system shall be designed to maintain
temperatures as specified below throughout the each Unit, either by use of
varying amounts of outside air or be mechanical refrigeration, provided that:
1) Outside temperatures are not less than zero degrees Fahrenheit, or
more than 95 degrees Fahrenheit dry bulb.
2) Outside wet bulb temperature does not exceed 75 degrees Fahrenheit,
when outside dry bulb temperature is 95 degrees Fahrenheit.
3) The source of heat within each Unit does not exceed one person per
100 square feet of occupied floor area and 6 watts of electrical consumption for
all purposes (including lighting and power) per square foot of occupied floor
area.
4) The system shall be designed to be capable of maintaining within
reasonable tolerance (which in the case of inside temperature shall be plus or
minus 2 degrees) the following inside conditions when the outside conditions are
as follows:
Outside Conditions Inside Temperature
Dry Bulb Dry Bulb
Temperature Temperature
In Degrees Relative in Degrees
Fahrenheit Humidity Fahrenheit
0 - 65 80% - 65% 72+/-2
66 - 82 65% - 45% 73+/-2
83 - 90 45% - 40% 74+/-2
91 - 95 43% - 40% 76+/-2
Inside relative humidity shall, when outside temperature is 0 - 65 db.
be limited to that which will not cause condensation on the windows.
5) The system shall also be capable of being operated on a 24-hour
basis and capable of furnishing cooling during the winter season, either by
refrigeration or by varying amounts of outside air.
<TABLE>
<CAPTION>
EXHIBIT 11
Computation of (Loss) Income Per Share
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net loss from continuing operations (a) ($7,810,500) ($5,237,737) ($3,359,511)
(Loss) income from discontinued operations (781,370) 277,402 170,059
=============== =============== ===============
Net loss ($8,591,870) ($4,960,335) ($3,189,452)
=============== =============== ===============
Basic and dilutive (loss) income per common share:
Continuing operations ($0.99) ($0.81) ($0.54)
Discontinued operations (0.10) 0.04 0.03
=============== =============== ===============
($1.09) ($0.77) ($0.51)
=============== =============== ===============
Weighted average number of common shares used
in computing basic and dilutive (loss) income
per common share 7,876,509 6,466,168 6,198,260
=============== =============== ===============
(a) On April 30, 1998, the Company's Board of Directors decided to discontinue
the Company's investment management services business. As a result, the
operating results relating to investment management services have been
segregated from continuing operations. Prior years' amounts have been
restated to conform to the current year presentation.
</TABLE>
EXHIBIT 21
SUBSIDIARIES
OF
INDIVIDUAL INVESTOR GROUP, INC.
Subsidiary State of Organization
Individual Investor Holdings, Inc. Delaware
WisdomTree Capital Management, Inc. New York
I.I. Strategic Consultants, Inc. Delaware
WisdomTree Administration, Inc. Delaware
I.I. Interactive, Inc. Delaware
Advanced Marketing Ventures, Inc. (inactive) Delaware
WisdomTree Capital Advisors, LLC New York
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of
Individual Investor Group, Inc.
We consent to the incorporation by reference in Registration Statement No.
33-74846 on Form S-3 and Registration Statements Nos. 33-72266, 33-85910 and
333-17697 on Form S-8 of Individual Investor Group, Inc. and subsidiaries of our
report dated March 12, 1999, appearing in the Annual Report on Form 10-K of
Individual Investor Group, Inc. and subsidiaries for the year ended December 31,
1998.
DELOITTE & TOUCHE LLP
March 30, 1999
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statements (Form S-3 No. 33-74846 and Forms S-8 No. 33-72266, No. 33-85910, and
No. 333-17697) pertaining to Individual Investor Group, Inc. of our report dated
February 27, 1998 with respect to the financial statements of WisdomTree
Associates, L.P. for the year ended December 31, 1997 included in the Annual
Report (Form 10-K) of Individual Investor Group, Inc.
Ernst & Young LLP
New York, New York
March 24, 1999
EXHIBIT 99
RISK FACTORS
Dated: March 30, 1999
You should carefully consider the following risks, as well as those
described in our most recent Form 10-K, Form 10-Q and Form 8-K filings, before
making an investment decision. The risks described below are not the only risks
we face. Additional risks may also impair our business operations. If any of the
following risks occur, our business, results of operations or financial
condition could be materially adversely affected. If that happens, the trading
price of our common stock could decline, and you may lose all or part of your
investment. In the risk factors below, when we use the word "web," we are
referring to the portion of the Internet commonly referred to as the "world wide
web."
We have a history of losses and we anticipate that our losses will continue in
the future. As of December 31, 1998, we had an accumulated deficit of $21.9
million. In the past ten years, the only calendar year we were profitable was
1995. We expect to continue to incur net losses in 1999 and in subsequent fiscal
periods. We expect to continue to incur significant operating expenses and, as a
result, will need to generate significant revenues to achieve profitability,
which may not occur. Even if we do achieve profitability, we may be unable to
sustain or increase profitability on a quarterly or annual basis in the future.
We will need to raise additional capital in the future. Based on our current
business plan, we believe that our working capital and investments will be
sufficient to fund our operations and capital requirements through 1999. Due to
unforeseen events and circumstances that may arise as discussed in the other
risks identified in this Exhibit 99 and in the accompanying report, our working
capital and investments in fact might not be sufficient to fund our operations
and capital requirements through 1999. In any event, we believe we will need to
raise additional capital in order to sustain our operations after 1999 unless we
generate revenues beyond the amounts we currently anticipate. Such additional
financing may not be available to us, or, if available, the terms upon which it
may be obtained may be unfavorable to us and may result in dilution of an
investor's equity investment in us. Our failure to obtain additional financing
on favorable terms, or at all, would have a substantial adverse effect on our
future ability to conduct operations.
Our online services business has a limited operating history. We commenced our
online services operations in May 1997. Accordingly, we have only a limited
operating history upon which you can evaluate this business segment and its
prospects. An investor in our common stock must consider the risks, expenses and
difficulties frequently encountered by early stage businesses in new and rapidly
evolving markets, including web-based financial news and information companies.
The market value of our common stock may not appreciate as much as the stock of
Internet companies because we have two business segments. Our company has two
distinct segments. One is print publications and the other is online services
operations. We believe these business activities are complementary and each will
benefit the other. However, the stock prices of many companies whose only
business Internet-related recently have gone up much more than the stock prices
of companies that have multiple lines of business that are not all
Internet-related. Because our company is not a pure Internet company - and in
fact the large majority of our total revenues are from our print publications -
our common stock may not be valued by investors in the stock market as highly as
the common stock of pure Internet companies.
Our quarterly financial results are subject to significant fluctuations. Our
quarterly operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside our control. For
example, in our print publications business, our revenues tend to reflect
seasonal patterns, with certain calendar quarters tending to be stronger than
others. Similar seasonal patterns may develop in the online services business as
well.
We believe that quarter-to-quarter comparisons of our operating results
may not be a good indication of our future performance, nor would our operating
results for any particular quarter be indicative of future operating results. In
some future quarters our operating results may be below the expectations of
public market analysts and investors. If that happens, the price of our common
stock may fall, perhaps dramatically.
We face intense competition in both of our businesses. An increasing number of
financial news and information sources compete for consumers' and advertisers'
attention and spending. We expect this competition to continue and to increase.
We compete for advertisers, readers, staff and outside contributors with many
types of companies. These competitors include:
- -- online services or web sites focused on business, finance and
investing, such as CBS MarketWatch.com; The Wall Street Journal
Interactive Edition; TheStreet.com; The Motley Fool; Yahoo! Finance;
Silicon Investor; Microsoft Investor; SmartMoney.com; Money.com and
Multex.com;
- -- publishers and distributors of traditional print media, such as The
Wall Street Journal; Barron's; Investors Business Daily; Business
Week; Fortune; Forbes; Money; Kiplinger's; Smart Money; Worth;
Registered Representative; Institutional Investor; Research and On
Wall Street;
- -- publishers and distributors of radio and television programs focused
on business, finance and investing, such as Bloomberg Business Radio
and CNBC;
- -- web "portal" companies, such as Yahoo!; Excite; Lycos; Snap!; Go
Network; and America Online; and
- -- online brokerage firms, many of which provide financial and investment
news and information, such as Charles Schwab and E*TRADE.
Our ability to compete depends on many factors, including the
originality, timeliness, comprehensiveness and trustworthiness of our content
and that of our competitors, the ease of use of services developed either by us
or our competitors and the effectiveness of our sales and marketing efforts.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to devote greater resources than we
can to the development and promotion of their services and products. These
competitors may also engage in more extensive research and development,
undertake more far-reaching marketing campaigns, adopt more aggressive pricing
policies to attract advertisers and make more attractive offers to existing and
potential employees, outside contributors, strategic partners and advertisers.
Our competitors may develop content that is equal or superior to ours or that
achieves greater market acceptance than ours. It is also possible that new
competitors may emerge and rapidly acquire significant market share. We may not
be able to compete successfully for advertisers, readers, staff or outside
contributors. Increased competition could result in price reductions, reduced
margins or loss of our market share. Any of these could materially adversely
affect our business, results of operations and financial condition.
Because our editorial is focused on the financial markets, a prolonged "bear
market" may cause our businesses to suffer. Our editorial is highly focused on
the financial markets. If the markets suffer a prolonged downturn or "bear
market," it is possible that our businesses might suffer materially for two
reasons. First, during a bear market, people may become less interested in
buying and selling securities, and thus less interested in our research and
analysis of securities. Less people might be interested in subscribing to our
print publications, and less people might be interested in using our online
services. Second, advertisers particularly the financial services advertisers
that are our most important source of advertising revenue - might decide to
reduce their advertising budgets. Either of these developments could cause our
operations to suffer materially.
Because our editorial is focused on research and analysis of specific stocks,
our businesses could suffer if our recommendations are poor. Our editorial is
focused on research and analysis of specific stocks. We frequently state that a
particular company's stock is undervalued or overvalued at the current prices.
We believe that our research and analysis is of a high quality, and we are proud
to take a stand and be held accountable for our opinions. We believe our readers
appreciate this editorial courage, and find it to be of greater value than
stories on such topics as "the best cities in which to live" and the like. But
because we give these specific opinions, the wisdom of our conclusions can be
measured: did the stocks we say were undervalued go up, and did the stocks we
say were undervalued go down. If our opinions turn out to be incorrect - and
some of our opinions certainly will be - people may become less interested in
learning these opinions. They may be less interested in subscribing to our print
publications and less interested in using our online services. If interest in
our opinions declines, our operations could suffer materially.
Our company may not be able to attract and retain qualified employees for our
print publications business. Many of our competitors in the print publications
business are larger than we are, and have a number of print titles (we only have
two magazines and one newsletter). There is a general perception in the
employment market that larger publishers are more prestigious or offer more
varied career opportunities (for instance, the ability to move from one title to
another). Although we believe our company offers an attractive work environment
and employment opportunity in our print publications business, we may be
perceived by many people as a less attractive employer than a larger publisher.
If we are unable to attract and retain qualified employees for our print
publications business, that business could suffer materially.
Our company may not be able to attract and retain qualified employees for our
online service business. There is a general perception in the employment market
that pure Internet companies offer a more attractive work environment for a
youthful workforce. This is based on the belief that the Internet is a new and
growing industry that offers a great future. In addition, employees in the
Internet industry seek and often receive significant portions of their
compensation through stock options. The stock prices of many pure Internet
companies recently have increased dramatically. Although we believe our company
offers an attractive work environment and employment opportunity in our online
services business, we may be perceived by many people as a less attractive
employer than a pure Internet company. If we are unable to attract and retain
qualified employees for our online services business, that business could suffer
materially.
We depend on our editorial staff and outside contributors. Our success depends
substantially upon the efforts of our editorial staff and outside contributors
to produce original, timely, comprehensive and trustworthy content. Our writers
are not bound by employment agreements. Competition for financial journalists is
intense, and we may not be able to retain existing or attract additional
qualified writers in the future. If we lose the services of a significant number
of our editorial staff and outside contributors or are unable to attract
additional writers with appropriate qualifications, our business, results of
operations and financial condition could be materially adversely affected.
We depend on key management personnel. Our future success depends upon the
continued service of key management personnel. The loss of one or more of our
key management personnel could materially adversely affect our business, results
of operations and financial condition. Moreover, the costs that may arise in
connection with executive departures and replacements can be significant, as
they were during 1998.
We depend on certain advertisers and on independent advertising agents, to
generate revenue. In 1998, the majority of our print publications advertising
revenue came from financial services companies, followed by consumer advertisers
and others. We were not dependent upon any particular advertiser for our print
publications revenues. In 1998, approximately two-thirds of the online services
advertising revenue came from six brokerage firms offering online trading. We
expect that the majority of advertising revenues derived from our online
services operations will come from online brokerage firms. In the event that
online brokerage firms choose to scale back on their advertising (on the
Internet in general or on our web sites in particular), our online services
business, results of operations and financial condition could be materially
adversely affected.
If we do not continue to increase our revenue from financial services
advertisers or attract advertisers from non-financial industries, our business,
results of operations and financial condition could be materially adversely
affected. With respect to our online services in particular, advertising rates
are frequently measured on a "cost per thousand" clicks, or "CPM," basis. CPM
rates have fluctuated in the past and we expect CPM rates to continue to
fluctuate. CPM rates may experience industry-wide declines in the future, as the
supply of desirable online advertising space may be increasing at a rate greater
than the demand for that space by advertisers. We believe that we charge
advertising rates that are among the highest of financial web sites. However, we
cannot guarantee that we will be able to command premium rates in the future.
In selling print advertising, we depend both on our internal
advertising sales department and on outside sales representative to maintain and
increase our advertising sales. In selling online advertising, we depend
primarily upon our outside sales agent. The success of our advertising sales
efforts is subject to a number of risks, including the competition we face from
other companies in hiring and retaining sales personnel and effective outside
sales representatives, and the length of time it takes new sales personnel to
become productive. Our business, results of operations and financial condition
could be materially adversely affected if we do not maintain an effective
advertising sales department.
Additional risks associated with online advertising. No standards have been
widely accepted to measure the effectiveness of web advertising. If standards do
not develop, existing advertisers may not continue or increase their levels of
web advertising. If standards develop and we are unable to meet those standards,
advertisers may not continue advertising on our site. Furthermore, advertisers
that have traditionally relied upon other advertising media may be reluctant to
advertise on the web. If advertisers perceive the Internet or our web site to be
a limited or an ineffective advertising medium, they may be reluctant to devote
a portion of their advertising budget to Internet advertising or to advertising
on our web site. Our business, results of operations and financial condition
could be materially adversely affected if the market for web advertising
declines or develops more slowly than expected.
Different pricing models are used to sell advertising on the web. It is
difficult to predict which, if any, will emerge as the industry standard. This
uncertainty makes it difficult to project our future advertising rates and
revenues. We cannot assure you that we will be successful under alternative
pricing models that may emerge. Moreover, "filter" software programs that limit
or prevent advertising from being delivered to a web user's computer are
available. Widespread adoption of this software could materially adversely
affect the commercial viability of web advertising, which could materially
adversely affect our advertising revenues.
Risks associated with our list rental revenue. The ability to earn revenue from
list rental depends in large degree upon three factors: first, the number of
subscribers on this list; second, the demographic characteristics of the
subscribers on the list (such as age, income and wealth); and third, the degree
to which previous rentals of the list have produced favorable results for the
renter. This last factor is affected by the manner in which the subscribers have
been added. For example, new subscribers from direct-to-publisher sources (such
as direct mail and insert cards in the magazine) typically are more valuable
than subscribers obtained from subscription agencies by means of reduced
introductory rates or use airline frequent flyer miles. Our list rental revenue
has been declining in the recent past, and we cannot assure you that our list
rental revenue will not continue to decline.
We use an independent party, Rickard List Marketing, to promote the
rental of our subscriber lists. The revenue we earn from list rentals thus also
depends in part upon the efforts our agent makes.
We depend on independent parties to publish our print publications. We depend
upon an independent party, Quebecor, to print our print publications and to
deliver the printed copies to the United States Post Office for mailing to our
subscribers. If our printer's business is disrupted for any reason, such as fire
or other natural disaster, labor strife, supply shortages, or machinery
problems, we might not be able to distribute our publications in a timely
manner. Since magazines typically are printed only shortly before the time they
are to be mailed to subscribers, any disruption at our printer could prevent our
magazines from being distributed in a timely manner. If we don't distribute our
magazines on time, our subscribers may become dissatisfied and cancel their
subscriptions. If a disruption at our printer delays our ability to distribute
Individual Investor magazine to newsstands, we may lose newsstand sales. In the
event of a disruption, our insurance may not cover all of our losses. Any of
these developments may cause our operating results to suffer materially.
We depend on independent parties to distribute Individual Investor magazine to
newsstands. We depend upon an independent parties (the largest of which is
International Circulation Distributors, a subsidiary of The Hearst Corporation)
to distribute Individual Investor magazine to newsstands. If the business of our
distributors is disrupted for any reason, such as labor strife or natural
disaster, we might not be able to distribute Individual Investor magazine to
newsstands in a timely manner. Since our distributors typically pick up
Individual Investor magazine for newsstand distribution only shortly before the
time the magazine is to be delivered, any disruption at our distributors could
prevent the magazine from being distributed to newsstands in a timely manner. If
a disruption at our distributors delays our ability to deliver Individual
Investor magazine to newsstands, we may lose newsstand sales. Any of these
developments may cause our operating results to suffer materially.
We depend on independent parties to obtain the majority of the subscribers to
Individual Investor magazine. We depend upon independent parties to obtain the
majority of the subscribers to Individual Investor magazine. These agencies
include American Family Publishers, Publishers Clearing House and NewSub
services. These agencies obtain subscribers primarily through use of direct mail
campaigns. If the positive response to the promotion of Individual Investor
magazine by these agencies is not great enough, or if the agencies believe that
we may fail to fulfill a subscription, they may stop promoting our magazine.
This could cause our subscriber base to shrink, which would lower our
subscription revenue and reduce our advertising rate base, which would lead to
lower advertising revenue. Also, many publications compete for services of
subscription agencies, and one or more of these subscription agencies may choose
not to continue to market Individual Investor in order to better serve a one of
our competitors. Any of those developments could cause our operating results to
suffer materially.
We may incorrectly forecast our success in obtaining and renewing subscriptions.
We attempt to accurately forecast the number of subscribers to our print
publications. We run the risk that our forecasts will be incorrect, either too
high or too low. Our forecast could be too high if the number of new subscribers
that we obtain is less than the amount we projected. Our forecast also could be
too high if we get less renewal orders from existing subscribers. If our
subscriber base is less than our projections, we will earn less subscription
revenue and our advertising rate base will be lower, which would lead to lower
advertising revenue. This could cause our operating results to suffer
materially.
Our forecast could be too low if we obtain more new subscribers than
projected, or if we receive more renewal orders than projected from existing
subscribers. If our subscriber base is higher than we projected, we would earn
more subscription revenue than projected, but have higher than expected
production and distribution costs. We might not be able to increase our
advertising rate base immediately. This could lead to our operating results
being worse than projected.
We depend on independent parties to manage our subscriber files. We depend upon
an independent party to manage our subscriber files. This party receives
subscription orders and payments for our print publications, sends renewal and
invoice notices to subscribers and generates subscribers' labels and circulation
reports for us. If the business of this party is disrupted, we may become unable
to process subscription requests, or send out renewal notices or invoices, or
deliver our print publications. If this were to happen, our insurance might not
cover all of our losses. Any of those developments could cause our operating
results to suffer materially.
We need to manage our growth. Although our print publications business has not
experienced rapid growth in the recent past, our online services, which
commenced in May 1997, have experienced rapid growth. This growth has placed a
strain on our managerial, operational and financial resources. We expect this
strain to increase with anticipated future growth in both print publications and
online services. To manage our growth, we must continue to implement and improve
our managerial controls and procedures and our operational and financial
systems. In addition, our future success will depend on our ability to expand,
train and manage our workforce, in particular our editorial, advertising sales
and business development staff. We cannot assure you that we have made adequate
allowances for the costs and risks associated with this expansion, that our
systems, procedures or controls will be adequate to support our operations, or
that our management will be able to successfully offer and expand our services.
If we are unable to manage our growth effectively, our business, results of
operations and financial condition could be materially adversely affected.
We need to establish and maintain relationships with other web sites to promote
the growth of our online services business. For us to maintain and increase the
traffic to our web sites, it is important for us to establish and maintain
content distribution relationships with high-traffic web sites operated by other
companies. There is intense competition for relationships with these sites.
Although we have not paid any material sum with respect to our relationships to
date, it is possible that, in the future, we might be required to pay fees in
order to establish or maintain relationships with these sites. (It is possible,
however, that we may be able to charge fees in connection with these
relationships in the future.) Additionally, many of these sites compete with our
web sites as providers of financial information, and these sites may become less
willing to establish or maintain strategic relationships with us in the future.
We may be unable to enter into relationships with these sites on commercially
reasonable terms or at all. Even if we enter into such relationships, they may
not attract significant numbers of viewers to our web sites.
Increased traffic to our web sites may strain our systems and impair our online
services business. On occasion, we have experienced significant spikes in
traffic on our web site. In addition, the number of our readers has continued to
increase over time and we are seeking to increase our reader base further.
Accordingly, our web site must accommodate a high volume of traffic, often at
unexpected times. Our web site has in the past, and may in the future,
experience slower response times than usual or other problems for a variety of
reasons. These occurrences could cause our readers to perceive our web site as
not functioning properly and, therefore, cause them to use other methods to
obtain their financial news and information. In such a case, our business,
results of operations and financial condition could be materially adversely
affected.
We face a risk of system failure for our online services business. Our ability
to provide timely information and continuous news updates depends on the
efficient and uninterrupted operation of our computer and communications
hardware and software systems. Similarly, our ability to track, measure and
report the delivery of advertisements on our site depends on the efficient and
uninterrupted operation of a third-party system maintained by DoubleClick. These
systems and operations are vulnerable to damage or interruption from human
error, natural disasters, telecommunication failures, break-ins, sabotage,
computer viruses, intentional acts of vandalism and similar events. We do not
have a formal disaster recovery plan for the event of such damage or
interruption. Any system failure that causes an interruption in our service or a
decrease in responsiveness of our web site could result in reduced traffic,
reduced revenue and harm to our reputation, brand and our relations with our
advertisers. Our insurance policies may not adequately compensate us for any
losses that we may incur because of any failures in our system or interruptions
in our delivery of content. Our business, results of operations and financial
condition could be materially adversely affected by any event, damage or failure
that interrupts or delays our operations.
We may not successfully develop new and enhanced services and features for our
online services to the satisfaction of our customers. We intend to introduce
additional and enhanced services in order to retain the current users of our
online services and to attract new users. If we introduce a service that is not
favorably received, our current users may choose a competitive service over
ours. We may also experience difficulties that could delay or prevent us from
introducing new services. Furthermore, the new services we may introduce could
contain errors that are discovered after the services are introduced. If that
happens, we may need to significantly modify the design or implementation of the
services on our web sites to correct these errors. Our business, results of
operations and financial condition could be materially adversely affected if we
experience difficulties in introducing new services or if these new services are
not accepted by our users.
We depend on the continued growth in use and efficient operation of the web. The
web-based information market is new and rapidly evolving. Our business would be
materially adversely affected if web usage does not continue to grow or grows
slowly. Web usage may be inhibited for a number of reasons, such as:
-- inadequate network infrastructure;
-- security concerns;
-- inconsistent quality of service; and
-- unavailability of cost-effective, high-speed access to the Internet.
The users of our online services depend on Internet service providers,
online service providers and other web site operators for access to our web
site. Many of these services have experienced significant service outages in the
past and could experience service outages, delays and other difficulties due to
system failures unrelated to our systems. These occurrences could cause our
readers to perceive the web in general or our web site in particular as an
unreliable medium and, therefore, cause them to use other media to obtain their
financial news and information. We also depend on certain information providers
to deliver information and data feeds to us on a timely basis. Our web site
could experience disruptions or interruptions in service due to the failure or
delay in the transmission or receipt of this information, which could have a
material adverse effect on our business, results of operations and financial
condition.
Government regulation and legal uncertainties relating to the web. Certain
existing laws or regulations specifically regulate communications or commerce on
the web. Further, laws and regulations that address issues such as user privacy,
pricing, online content regulation, taxation and the characteristics and quality
of online products and services are under consideration by federal, state, local
and foreign governments and agencies. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet service
providers and online services providers in a manner similar to the regulation of
long distance telephone carriers and to impose access fees on such companies.
That regulation, if imposed, could increase the cost of transmitting data over
the web. Moreover, it may take years to determine the extent to which existing
laws relating to issues such as intellectual property ownership and
infringement, libel, obscenity and personal privacy are applicable to the web.
The Federal Trade Commission and government agencies in certain states have been
investigating certain Internet companies regarding their use of personal
information. We could incur additional expenses if any new regulations regarding
the use of personal information are introduced or if these agencies chose to
investigate our privacy practices. Any new laws or regulations relating to the
web, or certain application or interpretation of existing laws, could decrease
the growth in the use of the web, decrease the demand for our web site or
otherwise materially adversely affect our business.
Web security concerns could hinder internet commerce. Concern about the
transmission of confidential information over the Internet has been a
significant barrier to electronic commerce and communications over the web. Any
well-publicized compromise of security could deter more people from using the
web or from using it to conduct transactions that involve the transmission of
confidential information, such as signing up for a paid subscription, executing
stock trades or purchasing goods or services. Because many of our advertisers
seek to advertise on our web site to encourage people to use the web to purchase
goods or services, our business, results of operations and financial condition
could be materially adversely affected if Internet users significantly reduce
their use of the web because of security concerns. We may also incur significant
costs to protect ourselves against the threat of security breaches or to
alleviate problems caused by such breaches.
Our efforts to build positive brand recognition may not be successful. We
believe that maintaining and growing awareness about our brands (including
Individual Investor, Individual Investor Online, Ticker and the INDI SmallCap
500) is an important aspect of our efforts to continue to attract subscribers
and readers. The importance of positive brand recognition will increase in the
future because of the growing number of providers of financial information. We
cannot assure you that our efforts to build positive brand recognition will be
successful.
In order to build positive brand recognition, it is very important that
we maintain our reputation as a trustworthy source of investment ideas,
research, analysis and news. The occurrence of certain events, including our
misreporting a news story or the non-disclosure of a financial interest by one
or more of our employees in a security that we write about, could harm our
reputation for trustworthiness. These events could result in a significant
reduction in the number of our readers, which could materially adversely affect
our business, results of operations and financial condition.
Control of the Company by Principal Stockholders. At the present time, Jonathan
Steinberg, Wise Partners, L.P. (a partnership controlled by Jonathan Steinberg),
Saul Steinberg (who is Jonathan's father) and Reliance Financial Services
Corporation (a substantial portion of the common stock of Reliance Financial
Services Corporation's parent, Reliance Group Holdings, Inc., is beneficially
owned by Saul Steinberg, members of his family and affiliated trust), own
approximately 44.7% of the outstanding shares of common stock of our Company. As
a result of their ownership of common stock, they will be able to significantly
influence all matters requiring approval by our stockholders, including the
election of our directors. Because it would be very difficult for another
company to acquire our company without the approval of the Steinbergs, other
companies might not view our company as an attractive takeover candidate. Our
stockholders therefore may have less of a chance to benefit from any possible
takeover of our company, than they would if the Steinbergs did not have as much
influence.
We rely on our intellectual property. To protect our rights to our intellectual
property, we rely on a combination of trademark and copyright law, trade secret
protection, confidentiality agreements and other contractual arrangements with
our employees, affiliates, clients, strategic partners and others. The
protective steps we have taken may be inadequate to deter misappropriation of
our proprietary information. We may be unable to detect the unauthorized use of,
or take appropriate steps to enforce, our intellectual property rights. We have
registered certain of our trademarks in the United States and we have pending
U.S. applications for other trademarks. Effective trademark, copyright and trade
secret protection may not be available in every country in which we offer or
intend to offer our services.
We are somewhat dependent upon the use of certain trademarks in our
operation, including the marks Individual Investor, Individual Investor Online,
Ticker and the INDI SmallCap 500. We have a perpetual license for use of the
trademark Individual Investor. To perfect our interests in the mark, however, we
filed suit in 1997 against the licensor and a third party whom we believed to be
infringing the mark. The litigation was resolved favorably to us, with an
agreement by the third party not to further infringe the mark. We commenced
negotiations with the licensor to obtain assignment of the mark, but did not
reach an agreement. Although we will continuously monitor and seek enforcement
against any perceived infringement of the mark, we cannot assure you that our
efforts will be successful.
Additionally, we are somewhat dependent upon the ability to protect our
proprietary content through the laws of copyright, unfair competition and other
law. We cannot assure you, however, that the laws will give us meaningful
protection.
We may be liable for information published in our print publications or on our
online services. We may be subject to claims for defamation, libel, copyright or
trademark infringement or based on other theories relating to the information we
publish in our print publications or through our online services. We could also
be subject to claims based upon the content that is accessible from our web site
through links to other web sites. Our insurance may not adequately protect us
against these claims.
Year 2000 risks. We have evaluated the potential impact of the situation
commonly referred to as the "Year 2000 Issue". The Year 2000 Issue concerns the
inability of information systems, whether due to computer hardware or software,
to properly recognize and process date sensitive information relating to the
year 2000 and beyond. To attempt to ensure that our computer systems will not be
disrupted by the Year 2000 Issue, we developed a plan to assess, and to fix
where necessary, any Year 2000 Issue with respect to our computer systems. We
have made significant progress toward determining whether our computer systems
will be disrupted by the Year 2000 Issue and currently expect to complete this
determination before June 1999. We are also fixing any Year 2000 Issue we find
in our systems and currently expect to complete our repair efforts before June
1999. We intend to test our systems before October 1999.
We currently believe that additional direct costs associated with
making our systems Year 2000 Ready should not exceed $30,000. We do not believe
that the diversion of employee resources required to address the Year 2000 Issue
will have a material effect on our operating results or financial condition. We
do not currently have in place a contingency plan of action in the event that we
are not able to make our computer systems Year 2000 Ready, but will consider on
an ongoing basis whether such a contingency plan should be developed.
The dates on which we believe we will complete our Year 2000 plan, and
the costs associated with the efforts, are based on our current best estimates.
However, we cannot guarantee that these estimates will be achieved, or that
there will not be a delay in, or increased costs associated with, making our
systems Year 2000 Ready. Specific factors that might cause differences between
the estimates and actual results include the following: the availability and
cost of personnel trained in these areas; the ability to locate and correct all
relevant computer code and hardware devices (such as microcontrollers); timely
responses to and corrections by third-parties and suppliers; the ability to
implement interfaces between the new systems and the systems not being replaced;
and similar uncertainties. Due to the general uncertainty inherent in the Year
2000 problem, resulting in part from the uncertainty of the Year 2000 readiness
of third parties and the interconnection of global businesses, we cannot
guarantee that will be able to resolve, in a timely or cost-effective fashion,
any problems associated with the Year 2000 Issue. If we fail to resolve, in a
timely and cost-effective fashion, any problems associated with the Year 2000
issue, our operations and business could be materially adversely affected. If
that happens, we also could incur liabilities to third parties.
We also face risks and uncertainties to the extent that the independent
suppliers of products, services and systems on which we rely do not have
business systems or products that are Year 2000 Ready. We have started
communicating with all of our significant suppliers and customers to determine
the extent to which our systems and products are vulnerable to those third
parties' failure to fix their own systems' Year 2000 Issues. The systems or
products of other companies on which we rely might not be made Year 2000 Ready
in time to prevent disruption. If the systems of any of those third parties are
disrupted, our operations and business could be materially adversely affected.
We are in the process of identifying what actions may be needed to reduce our
vulnerability to problems related to the companies with which we interact, but
we do not currently have in place a contingency plan of action in the event that
the failure by one or more third parties to make their computer systems Year
2000 Ready causes us to suffer material adverse effects. We will consider on an
ongoing basis whether such a contingency plan should be developed.
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