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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the fiscal year ended December 31, 1997 Commission File Number 0 --
23644
INVESTMENT TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 13-3757717
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(State of incorporation) (IRS Employer Identification No.)
380 MADISON AVENUE, NEW YORK, NEW YORK (212) 588-4000
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(Address of principal executive offices) (Registrant's telephone number, including area code)
10017
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(Zip Code)
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Securities registered pursuant to Section 12(b) of
the Act:
None
Securities registered pursuant to Section 12(g) of
the Act:
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NATIONAL ASSOCIATION OF SECURITIES DEALERS
COMMON STOCK, $0.01 PAR VALUE AUTOMATED QUOTATION SYSTEM
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(Title of class) (Name of exchange on which registered)
Aggregate market value of the voting stock held Number of shares outstanding of the
by non-affiliates of the Registrant at March Registrant's
16, 1998: class of common stock at March 16, 1998:
$110,616,506 18,229,679
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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 / /
Documents incorporated by reference:
Proxy Statement relating to the 1998 Annual Meeting of Stockholders
(incorporated, in part, in Form 10-K Part III).
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1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................................... 3
Item 2. Properties.................................................................. 11
Item 3. Legal Proceedings........................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders......................... 11
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters........ 12
Item 6. Selected Financial Data..................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 14
Item 8. Financial Statements and Supplementary Data................................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................ 43
PART III
Item 10. Directors and Executive Officers of the Registrant.......................... 43
Item 11. Executive Compensation...................................................... 43
Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 43
Item 13. Certain Relationships and Related Transactions.............................. 43
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K........... 43
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FORWARD-LOOKING STATEMENTS
In addition to the historical information contained throughout this Annual
Report on Form 10-K, there are forward-looking statements that reflect
management's expectations for the future. A variety of important factors could
cause results to differ materially from such statements. These factors are noted
throughout this Annual Report on Form 10-K and include: the actions of both
current and potential new competitors, rapid changes in technology, financial
market volatility, evolving industry regulation, cash flows into or redemption
from equity funds, effects of inflation, customer trading patterns, and new
products and services.
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PART I
ITEM 1. BUSINESS
Investment Technology Group, Inc., was formed as a Delaware corporation on
March 10, 1994, and its wholly-owned subsidiaries (collectively, the "Company"),
principally ITG Inc. ("ITG"), a registered broker-dealer in securities under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), ITG Global
Trading, Inc. ("Global Trading") which is a 50% partner in the Global POSIT
joint venture, ITG Australia PTY Limited, which is a 50% partner in ITG Pacific
Holding, and ITG Ventures Inc. provide automated equity trading services and
transaction research to institutional investors and brokers. ITG, a full service
execution firm, utilizes transaction processing technology to increase the
effectiveness and lower the cost of institutional and other trading. With an
emphasis on ongoing research, ITG offers the following services:
- ITG POSIT. An electronic stock crossing system.
- ITG QuantEX. A decision-support and routing system.
- Electronic Trading Desk Services. Offers customers trading capabilities
through the ITG trading desk, which utilizes multiple sources of
liquidity.
- ITG Platform. A PC based routing system.
- ITG ISIS. A set of analytical tools for systematically lowering
transaction costs.
The Company generates substantially all of its revenue from its POSIT,
QuantEX, and Electronic Trading Desk Services.
POSIT-REGISTERED TRADEMARK-1
POSIT was introduced in 1987 as a technology-based solution to the trade
execution needs of quantitative and passive investment managers. It has since
grown to encompass a large part of the active trading community as well. In
addition to its traditional customer base of quantitative and passive investors,
POSIT's liquidity serves fundamental institutional investors, broker-dealers and
international institutional investors. The POSIT system is currently used by
approximately 460 customers, including corporate and government pension plans,
insurance companies, bank trust departments, investment advisors and mutual
funds. POSIT is an electronic stock crossing system through which customers
enter buy and sell orders to trade single stocks and portfolios of equity
securities confidentially among themselves. Orders may be placed in the system
either through direct computer links to the Company's central computer or
indirectly by communicating with the Company's trading desk, which then enters
the orders in the central computer. ITG also strategically aligns itself with
partners of other popular trading systems allowing users the flexibility to
route orders directly to POSIT from sources such as links with ESI Securities,
Bridge Information Systems and BRASS. In 1998, the Company hopes to complete a
connection through Bloomberg and Spear Leads. The system, which currently
accepts orders for approximately 14,000 different equity securities, may be
modified, as the need arises, to include additional equity securities registered
pursuant to Section 12 of the Exchange Act. Using an algorithm, which
establishes the maximum possible matching of buy and sell orders at scheduled
times, the system matches or "crosses" these orders. Unless otherwise specified
by customers, POSIT will match orders (including multiple orders) that do not
contain equal numbers of shares, resulting in partial order execution. POSIT has
been designed to allow customers trade execution flexibility. Customers may
specify constraints on the portion of a portfolio that trades, such as a
requirement that the execution of a buy order be conditioned upon the concurrent
execution of a sell order. Trades are priced at the midpoint of the best bid and
offer on the primary market for each security at the time of the cross. Price
information is provided directly to the
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1 POSIT-Registered Trademark- is a registered service mark of the POSIT Joint
Venture.
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system from a third-party data vendor. There are five scheduled crosses every
business day at approximately 10:00 a.m., 11:30 a.m., 12:30 p.m., 1:30 p.m., and
3:00 p.m. Each scheduled cross is executed within a seven minute window selected
randomly by the system.
Significant attributes of POSIT:
- POSIT's midpoint pricing saves each party an amount equivalent to half the
bid/offer spread.
- POSIT's confidentiality virtually eliminates market impact. In contrast,
participants in traditional or other open markets constantly face the risk
that disclosure of an order will unfavorably affect price conditions.
- Clients pay a low transaction fee on completed transactions, relative to
the industry average of 5 to 6 cents per share. The Company's revenue from
the operation of POSIT is derived from transaction fees charged on each
share crossed through the system.
- Immediately after each cross, customers are electronically provided with
comprehensive reports of matched and unmatched (residual) orders.
Customers can then execute residual orders by traditional means or take
advantage of the Company's Electronic Trading Desk services (described
below).
- Electronic application on client instructions for allocating trades to
specific customer accounts utilizes average prices and average
commissions.
In December 1997, the Company announced the launch of POSIT 4, a
technological enhancement to POSIT. POSIT 4 preserves all the features of the
existing system and adds two important new dimensions to POSIT: dynamic
substitution and real-time control. Dynamic substitution allows investors to
substitute another security if the preferred security is not immediately
available for a cross. Real-time control allows POSIT 4 users to control
virtually any dimension of their portfolios such as expected return as well as
risk and yield. POSIT 4 can be used to control the tracking error of a portfolio
relative to a benchmark, a critical consideration for index fund managers.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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AVERAGE DAILY POSIT SHARE VOLUME
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Year Shares Per Day
1989 642,857
1990 1,703,557
1991 2,320,158
1992 4,330,709
1993 6,142,405
1994 7,737,742
1995 9,040,978
1996 13,067,553
1997 14,527,878
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QUANTEX-REGISTERED TRADEMARK-2
ITG QuantEX is the Company's order management trading system, an advanced
tool for technologically sophisticated clients transacting medium-to-large
volumes of orders. QuantEX equips clients to manage every step in the trading
process more efficiently: from decision-making to execution to tracking of trade
list status. From a dedicated Sun workstation at their desks, users can access
fully-integrated real-time and historical data and analytics, execute electronic
order routing and perform trade management functions. To date, trading systems
have generally addressed just one or two of these functions -- a situation that
has left many users with the inefficiency of multiple unrelated systems.
QuantEX is a customized, rules-based expert system that allows traders to
quantify their decision support processes. It is designed to embody each
client's trading styles and strategies, and apply them to data on hundreds of
stocks, portfolios or industry groups at once. With QuantEX, clients can flag
precisely the same kinds of moment-to-moment opportunities they would ordinarily
want to pursue -- but do it much more efficiently and rapidly.
QuantEX analyzes lists of securities based on the individual user's trading
strategy. QuantEX enables clients to have access to sophisticated ITG research
developed pre-trade, post-trade and intra-day analytical tools including
"instant" analytics built on widely-used measures. Clients also have a direct
line to the ITG Data Center which is a comprehensive historical database that
provides a variety of derived analytics based upon the raw historical data. The
Company's support specialists translate the trading criteria developed by the
user into a set of proprietary rules for trading securities, which are then
encoded into QuantEX. QuantEX applies the customer's proprietary trading rules
to a continuous flow of current market information on the list of securities
selected by the user to generate real-time decision support. A user's rules can
be based on a wide range of quantitative models or strategies, such as liquidity
measures, technical indicators, price benchmarks, tracking to specific
industries and sectors, pairs or other long or short strategies, index
arbitrage, risk measurements and liquidity parameters for trade urgency, size or
timing.
As such, QuantEX can automate the complex trade management requirements
typical of investment strategies that trade large volumes of securities through
multiple sources of liquidity. Orders can be electronically routed to multiple
markets -- not just the New York, American, and regional Stock Exchanges, but
also POSIT, the ITG Trading Desk, OTC market-makers, AZX, and selected broker-
dealers. Trades routed through QuantEX are automatically tracked and summarized.
Each order can be monitored by source of execution, by trade list, by portfolio
or globally with all other orders placed. QuantEX's built-in trade allocation
features provides a facility for automated back-office clearance and settlement.
The Company's support specialists install the system, train users and
provide ongoing support for the use of QuantEX's order routing and analysis
capabilities. Specialists are knowledgeable about portfolio management and
trading as well as the system's hardware and software. The Company's support
team works closely with each customer to develop trading strategies and rules,
explore new trading approaches, provide system integration services, and
implement system upgrades and enhancements.
Revenue generation is realized through transaction fees attached to each
trade electronically routed through QuantEX to the many destinations available
from the application. The Company does not derive royalties from the sale or
licensing of the QuantEX software.
ELECTRONIC TRADING DESK
To supplement the automated trade execution and analysis services offered by
POSIT and QuantEX, the Company also offers customers trading capabilities
through the Company's trading desk, which is staffed with more than 30 traders.
QuantEX and Platform clients can deliver electronically lists of orders
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2 QuantEX-Registered Trademark- is a registered trademark of the Company.
5
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to the ITG Trading Desk. As orders are executed by ITG, reports are
automatically delivered to the client's terminal. Trading desk personnel are,
thereby, able to assist customers with decision support analyses generated by
QuantEX and with the execution of trades. The Trading Desk is a full-service
agency execution group that specializes in the Company's proprietary products.
Clients give traders orders to work throughout the day as well as residual
orders that remain due to order imbalances in POSIT matches.
If a customer wishes to trade a portfolio outside a scheduled POSIT cross or
fails to submit a portfolio in time for a scheduled POSIT cross, at the
customer's request, the Company will communicate with and seek interest from
other potentially interested customers and conduct an unscheduled cross.
Unmatched or residual orders may be filled by (i) keeping orders in POSIT for
future crosses which will offer different liquidity profiles, (ii) routing
trades electronically through QuantEX to multiple markets, including primary
exchanges, regional exchanges and OTC market-makers or (iii) using the Company's
trading desk to complete trades on an agency basis. The Company has also
developed pricing mechanisms that allow customers to enter orders to cross
shares before the market opens subject to prices determined by specified
formulas, such as weighted average prices throughout the trading day, or the
day's closing prices.
ITG PLATFORM
ITG Platform, introduced in the first quarter of 1996, provides seamless
connectivity to a variety of execution destinations, such as POSIT, ITG's
Electronic Trading Desk, New York Stock Exchange and American Stock Exchange via
SuperDOT and OTC market markers. The Platform requires a standard modem but does
not require a dedicated terminal because it runs on any 486 or Pentium PC in
almost any Windows environment, while allowing access to a wide range of
execution capabilities.
To enter an order, a ticker symbol (or multiple tickers) is typed in to the
system with buy/sell side and size. A list can be loaded in by using a diskette,
or from a network or copying and pasting from an Excel-Registered Trademark-3
file. Once orders have been loaded, execution instructions can be input. The
execution sources range from POSIT, ITG Electronic Trading Desk and SuperDOT, to
OTC market makers. The Platform also allows automatic rerouting of any residual
POSIT orders. For instance, a trader may designate that any "listed orders" not
crossed in POSIT which are under a certain size be rerouted to the New York
Stock Exchange via SuperDOT. The trader may also choose to reroute the orders
back to POSIT for the rest of the day's matches, or to ITG's Electronic Trading
Desk. As the orders are executed, reports are automatically delivered back to
the Platform giving the users constant feedback on their orders. The orders are
displayed in real-time and the Platform also provides a running average price
for each order. Order status is color-coded to indicate whether the order has
been filled, partially executed, or is awaiting action.
Platform users can access historical data through a direct link with the ITG
Data Center, including a wide array of analytics such as average historical
share volumes, dollar volumes, volatility, and historical spread statistics. The
Platform also allows custom tailored execution reports to fit each user's
requirements.
As of December 31, 1997, there were 138 Platform client sites, with 229
software installations.
ISIS RESEARCH
Accessed through ITG QuantEX, ISIS encompasses an equity transaction
database, pre- and post-trade analytics, a proprietary transaction-cost model, a
framework for development of trading strategies and a set of model strategies.
Together, these tools assist clients in making the most cost-effective trading
decisions by measuring the cost impacts of alternative courses of action. With
ISIS, clients can also:
- Increase the cost-effectiveness of trading strategies.
- Construct portfolios to minimize the cost of execution.
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3 Excel is a registered trademark of the Microsoft Corporation.
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- Minimize transaction costs of trading lists by targeting positions that
are especially illiquid, difficult, or costly to trade.
- Focus resources on the most consequential transactions.
- Estimate the cost of trading on a principal versus agency basis.
- Measure the cost-effectiveness of completed trades against any benchmark.
With the release of QuantEX 3.0, users can define, store and run custom pre-
and post-trade reports, selecting from a wide variety of analytics. Analytics
can also be viewed directly on the execution page and incorporated into trading
strategies. Among the available analytics are measures of momentum, price
volatility and liquidity, including an explicit estimate of market impact.
GLOBAL POSIT
The Company is pursuing the international market in a variety of ways,
joint-venturing with strategic partners and developing specially-tailored
versions of ITG services. The Company developed a global version of POSIT, which
provides U.S. and global clients with electronic trade-matching capabilities for
international equities. Besides housing the operation of Global POSIT, the
Company's Boston office offers services to foreign investors trading in the U.S.
and worldwide clientele trading non-U.S. securities.
AUSTRALIAN POSIT
In the third quarter of 1997, the Company and Burdett, Buckeridge & Young
("BBY"), finalized a 50/50 joint venture through the creation of ITG Australia
Limited ("ITG Australia"), a new international brokerage firm that will apply
ITG's cost-saving execution and transaction research technologies to Australian
equity trading. ITG Australia is the culmination of efforts commenced in 1995
when a license to POSIT was granted to BBY, one of Australia's leading brokerage
firms. Through this joint venture the Company is pursuing U.S. business from
Australian investors and providing U.S. clients with access to the Australian
marketplace.
CANADIAN QUANTEX
The Company was party to a license agreement with RBC Dominion Securities
("RBC"), under which the Company was entitled to receive royalties for licensing
the rights to the Company's QuantEX product to RBC beginning in 1991. RBC used
the QuantEX license to develop a version of QuantEX for the Canadian markets. In
conjunction with the spin-off of VERSUS Technologies, Inc. ("VERSUS") from RBC
in 1995, the Company exchanged its licensing agreement asset with RBC for a 9%
equity interest in VERSUS. VERSUS is a Canadian technology focused trade
automation firm based in Toronto. Currently, Canadian QuantEX is the only direct
electronic access to the Canadian exchanges for U.S. and Canadian institutions.
The Company is also providing Canadian investors with access to POSIT and other
ITG services.
AZX
AZX, Inc., the operators of the Arizona Stock Exchange4 ("AZX") and the
Company announced in February 1995, that the Company's wholly-owned
broker-dealer subsidiary, ITG, had been named the executing broker for all
transactions executed on AZX. AZX is the only open screen call market for equity
trading. Several new auctions were added in 1997 bringing the total to four
daily auctions at 9:15 a.m., 10:30 a.m., 4:20 p.m. and 5:00 p.m. Eastern time.
The auctions are designed to allow institutional investors
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4 The Arizona Stock Exchange, ( "AZX") operated by AZX, Inc., is not registered
with the SEC nor is it a self-regulatory organization. Due to the low volume
of trading on AZX, the SEC granted it an exemption from exchange registration.
The AZX is subject to limited oversight by the SEC.
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and broker-dealer participants to trade anonymously at true market prices and
benefit from low transaction costs. In February 1995, ITG developed the
capability to route unmatched portions of client portfolio from POSIT into AZX's
daily auction. Since ITG is the executing broker for all AZX trades, ITG clients
have the option of obtaining one combined average price for orders crossed on
both systems (i.e., the POSIT cross is combined with the previous night's AZX
auction). The Company performs this function as a courtesy to its clients. The
Company charges its direct incremental costs to AZX.
AMERICAN DEPOSITARY RECEIPTS ("ADRS")
ITG intends to add to POSIT one or more daily crossing sessions in ADRs. The
roll out of ADR matches is planned for the last half of 1998. Initially, ITG
plans to operate a daily 8:45 a.m. pre-opening matching session. Additionally,
ITG may include ADRs in its five regularly scheduled daily matches. Eligible
issues will include issuer-sponsored and unsponsored ADR programs.
REGULATION
The securities industry in the United States is subject to extensive
regulation under both federal and state laws. The Securities and Exchange
Commission ("SEC") is the federal agency responsible for the administration of
the federal securities laws. Regulation of broker-dealers has been primarily
delegated to self-regulatory organizations ("SROs"), principally the National
Association of Securities Dealers, Inc. (the "NASD") and national securities
exchanges. The NASD has been designated by the SEC as ITG's SRO. The SROs
conduct periodic examinations of member broker-dealers in accordance with rules
they have adopted and amended from time to time, subject to approval by the SEC.
Securities firms are also subject to regulation by state securities
administrators in those states in which they conduct business. ITG is a
registered broker-dealer in 49 states and the District of Columbia.
Broker-dealers are subject to regulations covering all aspects of the
securities business, including sales methods, trade practices among
broker-dealers, use and safekeeping of customers' funds and securities, capital
structure of securities firms, record-keeping and conduct of directors, officer
and employees. Additional legislation, changes in the interpretation or
enforcement of existing laws and rules may directly affect the mode of operation
and profitability of broker-dealers. The SEC, SROs and state securities
commissions may conduct administrative proceedings, which can result in censure,
fine, the issuance of cease-and-desist orders or the suspension or expulsion of
a broker-dealer, its officers or employees. The principal purpose of regulation
and discipline of broker-dealers is the protection of customers and the
securities markets, rather than the protection of creditors and stockholders of
broker-dealers.
ITG is required by law to belong to the Securities Investor Protection
Corporation ("SIPC"). In the event of a broker-dealer's insolvency, the SIPC
fund provides protection for customer accounts up to $500,000 per customer, with
a limitation of $100,000 on claims for cash balances.
NET CAPITAL REQUIREMENTS. As a registered broker-dealer, ITG is subject to
the SEC's Uniform Net Capital Rule ( the "Net Capital Rule"). This Net Capital
Rule, which specifies the minimum net capital requirements for registered
broker-dealers, is designed to measure the general integrity and liquidity of a
broker-dealer and requires that at least a minimum part of its assets be kept in
a relatively liquid form.
The Net Capital Rule provides that a broker-dealer doing business with the
public shall not permit its aggregate indebtedness to exceed 15 times its
adjusted net capital or, alternatively, that it not permit its adjusted net
capital to be less than 2% of its aggregate debit balances (primarily
receivables from customers and broker-dealers) computed in accordance with such
Net Capital Rule. ITG uses the latter method of calculation.
A change in the Rule, imposition of new rules or any unusually large charge
against capital could limit certain operations of ITG such as trading activities
that require the use of significant amounts of capital.
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As of December 31, 1997, ITG had net capital of $35.0 million which exceeded
minimum net capital requirements by $34.8 million. See note 9 of Notes to
Consolidated Financial Statements.
NO ACTION LETTER
In connection with the development of POSIT, Jefferies & Company, Inc.
("Jefferies & Co.") obtained a no action letter in which the staff of the
Securities and Exchange Commission (the "SEC" or "Commission") indicated that it
would take no action with respect to the fact that POSIT would be operated
without registration as an exchange. As a result, POSIT has not been registered
with the Commission as an exchange, although ITG is registered as a
broker-dealer and is subject to regulation as such. Material changes to POSIT
will require prior notice to the Commission under rule 17a-23. One of the stated
purposes of Rule 17a-23 is to provide the Commission with information necessary
to monitor and evaluate automated trade execution systems. There can be no
assurance that the Commission will not in the future seek to impose more
stringent regulatory requirements on the operation of automated trade execution
systems such as POSIT. In addition, certain of the securities exchanges have
actively sought to have more stringent regulatory requirements imposed upon
automated trade execution systems. There can be no assurance that Congress will
not enact legislation applicable to automated trade execution systems.
LICENSE AND RELATIONSHIP WITH BARRA
In 1987, Jefferies & Co. and BARRA Inc. ("BARRA") formed a joint venture for
the purpose of developing and marketing POSIT. In 1993, Jefferies & Co. assigned
all of its rights relating to the joint venture and the license agreement
(discussed below) to ITG.
The technology used to operate POSIT is licensed to ITG pursuant to a
perpetual license agreement between the Company and the joint venture. The
license agreement grants ITG the exclusive right to use certain proprietary
software necessary to the continued operation of POSIT and a non-exclusive
license to use proprietary software that operates in conjunction with POSIT. The
Company pays quarterly royalties to the joint venture to use other proprietary
software that operates in conjunction with POSIT equal to specified percentages
of the transaction fees charged by the Company on each share crossed through
POSIT. For the years ended December 31, 1997, 1996 and 1995, BARRA received
aggregate royalty payments from the joint venture of $9.8 million, $8.8 million,
and $6.0 million, respectively, under the license agreement. Under the terms of
the joint venture, the Company and BARRA are prohibited from competing directly
or indirectly with POSIT.
The license agreement permits BARRA on behalf of the joint venture to
terminate the agreement upon certain events of bankruptcy or insolvency or upon
an uncured breach by the Company of certain covenants, the performance of which
are all within the control of the Company. Although the Company does not believe
that it will experience difficulty in complying with its obligations under the
license agreement, any termination of the license agreement resulting from an
uncured default would have a material adverse effect on the Company's results of
operations.
Under the license agreement and the terms of the joint venture, BARRA
continues to provide certain support services to the Company in connection with
the operation of POSIT, including computer time, software updates and the
availability of experienced personnel. BARRA also provides support for the
development and maintenance of POSIT.
Under the terms of the joint venture, BARRA generally has the right to
approve any sale, transfer, assignment or encumbrance of the Company's interest
in the joint venture. The POSIT joint venture may earn a royalty from licensing
the POSIT technology to other businesses. The joint venture licensed to ITG and
BBY, the right to use the POSIT technology for crossing equity securities in
Australia.
In the third quarter of 1997, BARRA finalized a joint venture with Prebon
Yamane to market POSIT-FRA, the first computer-based system for crossing forward
rate agreements (FRAs). The POSIT joint
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venture has licensed to Prebon the POSIT-JV software. POSIT-FRA will provide a
confidential electronic environment where major financial institutions can match
specific sets of FRA contracts to offset interest rate risk, a condition which
pervades in interest rate swap portfolios.
In May 1990, Global Trading and BARRA International, Ltd., an affiliate of
BARRA, formed a joint venture for the purposes of developing Global POSIT. The
joint venture granted to Global Trading the exclusive rights to use Global
POSIT. In connection with the May 1994 initial public offering (the "Offering"),
Jefferies Group, Inc. ("Jefferies Group") contributed Global Trading and its
respective rights in Global POSIT to the Company. Any net earnings will be
divided equally between the Company and BARRA International, Ltd. Under the
terms of the joint venture, the Company and BARRA International, Ltd. are
prohibited from competing directly or indirectly with Global POSIT.
COMPETITION
The automated trade execution and analysis services offered by the Company
compete with services offered by leading brokerage firms and other information
services and transaction processing firms. Many of the Company's competitors
have substantially greater financial, research and development and other
resources than the Company. The Company believes that its services compete on
the basis of cost, timeliness of execution and probability of trade completion.
Although the Company believes that POSIT, QuantEX, the Platform and the
Electronic Trading Desk services have established certain competitive
advantages, the Company's ability to maintain these advantages will require
continued investment in the development of the Company's services, additional
marketing activities and customer support services. There can be no assurance
that the Company will have sufficient resources to continue to make this
investment, that the Company's competitors will not devote significantly more
resources to competing services or that the Company will otherwise be successful
in maintaining its current competitive advantages.
The Company also competes with various national and regional securities
exchanges for trade execution services. Some of these exchanges have made
efforts to regain transaction volume lost to automated trade execution services.
The Arizona Stock Exchange and Instinet crossing systems operate during and
after market hours. There can be no assurance that these or other exchanges will
not take further steps to regain transaction volume from POSIT or to limit its
future growth.
The Company is aware of new alternatives such as a growing number of
Electronic Commercial Networks ("ECN's") like those sponsored by Bloomberg/ESI,
among others. There are future developments that may or may not compete
directly, including the NASD's limit order book and Optimark, ECN's like
Bloomberg/ESI and alternative systems like Lattice/AutEx. The Company feels that
it is well positioned to provide clients with the technology and order routing
capabilities for clients to access and potentially take advantage of these
systems via its PC Platform, QuantEX and research provided smart trading
strategies.
RESEARCH AND PRODUCT DEVELOPMENT
The Company believes that fundamental changes in the securities industry
have increased the demand for technology-based services. The Company devotes a
significant portion of its resources to the development and improvement of these
services. Important aspects of the Company's research and development effort
include enhancements of existing software, the ongoing development of new
software and services and investment in technology to enhance the Company's
efficiency. The software programs, which are incorporated into the Company's
services, are subject, in most cases, to copyright protection. Research and
development costs were $7.1 million, $6.0 million and $4.9 million for 1997,
1996 and 1995, respectively.
In connection with such research and product development and capital
expenditures to improve other aspects of its business, the Company incurs
substantial expenses that do not vary directly, at least in the short term, with
fluctuations in securities transaction volumes and revenues. In the event of a
material
10
<PAGE>
reduction in revenues, the Company may not reduce such expenses quickly and, as
a result, the Company could experience reduced profitability or losses.
Conversely, sudden surges in transaction volumes can result in increased profit
and profit margin. To ensure that it has the capacity to process projected
increases in transaction volumes, the Company has historically made substantial
capital and operating expenditures in advance of such projected increases,
including during periods of low transaction volumes. In the event that such
growth in transaction volumes does not occur, the expenses related to such
investments could, as they have in the past, cause reduced profitability or
losses. Additionally, during recent periods of high transaction volumes and
increased revenues, the Company has also made substantial capital and operating
expenditures to enhance future growth prospects.
As of December 31, 1997, the Company employed approximately 74 personnel and
utilized the services of 2 consultants in software development, management and
implementation. The Company also works closely with BARRA on the development of
POSIT enhancements. The Company expects to continue this level of investment to
improve existing services and continue the development of new services.
The Company's operations are not subject to any known seasonal conditions.
JEFFERIES GROUP AND THE COMPANY ANNOUNCE INTENTION TO CONSIDER SEPARATING INTO
TWO INDEPENDENT COMPANIES
On March 17, 1998, Jefferies Group and the Company jointly announced that
they are considering the separation, through a spin-off and a restructuring, of
Jefferies & Co. and other Jefferies Group subsidiaries ("JEFCO") from the
Company. (See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations).
NUMBER OF PERSONS EMPLOYED
As of December 31, 1997, the Company employed 217 personnel.
ITEM 2. PROPERTIES
The Company's principal offices are located at 380 Madison Avenue in New
York City where the Company occupies the entire 4th floor or approximately
44,704 square feet of office space. In anticipation of future expansion the
Company has leased a portion of the 5th floor (approximately 12,726 square feet
of office space). This space is currently vacant and will be sub-let with an
expected commencement date of May 1, 1998. The lease payment as compared to the
rental income will have an immaterial effect upon the Company's operating
results. The fifteen year lease term for both the fourth and fifth floors expire
in 2012.
The Company also maintains a research, development and technical support
services facility in Culver City, California where the Company occupies
approximately 20,254 square feet of office space. The California facility is
leased by the Company pursuant to a ten year lease agreement which expires in
December 2005. The Company is currently negotiating leasing an additional 20,347
square feet of office space within the same building. The lease is anticipated
to commence on August 1, 1998. The additional space will be used in connection
with future research and development projects.
In April 1995, the Company completed the build-out and occupancy of a 10,588
square feet office in Boston, Massachusetts. The site is planned to be a "hot"
backup facility for the Company's operations. The site is currently used as a
regional office for Financial Engineering Research, QuantEX support and the
Global POSIT operations. The ten year lease term for this space expires in 2005.
ITEM 3. LEGAL PROCEEDINGS
The Company is not party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter ended December 31, 1997.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
COMMON STOCK DATA
The Company's common stock is quoted on The Nasdaq Stock Market National
Market System under the symbol: ITGI. At March 16, 1998, the Company believed
that its Common Stock was held by approximately 1,000 stockholders of record or
through nominee or street name accounts with brokers.
The range of the high and low closing sale prices for the Common Stock as
reported by Nasdaq for the last eight full quarterly periods were as follows:
<TABLE>
<CAPTION>
MARKET PRICE
-------------------------------
THREE MONTHS ENDED HIGH LOW END
- ------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
December 31, 1997.............................................................. 31.25 26.25 28.00
September 30, 1997............................................................. 32.00 26.31 27.25
June 30, 1997.................................................................. 26.88 17.88 26.88
March 31, 1997................................................................. 23.75 18.38 19.00
December 31, 1996.............................................................. 21.50 17.25 19.25
September 30, 1996............................................................. 18.00 12.75 17.75
June 30, 1996.................................................................. 18.25 13.00 13.50
March 31, 1996................................................................. 15.00 9.25 15.00
</TABLE>
The Company has not paid a dividend since May 4, 1994. There are no
restrictions on the Company's present ability to pay dividends on Common Stock,
other than applicable provisions of the Delaware General Corporation Law.
ITEM 6. SELECTED FINANCIAL DATA
The selected data presented below as of and for each of the years in the
five-year period ended December 31, 1997, are derived from the consolidated
financial statements of Investment Technology Group, Inc., which financial
statements have been audited by KPMG Peat Marwick LLP, independent auditors.
Earnings per share information prior to 1997 has been retroactively restated to
conform with the Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE. Such data
should be read in connection with the consolidated financial statements
contained on pages 22 through 42.
12
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994* 1993
---------- ---------- --------- ---------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues......................................... $ 137,042 $ 111,556 $ 72,381 $ 56,716 $ 49,370
Total expenses......................................... 89,782 70,555 47,493 69,106 42,944
---------- ---------- --------- ---------- ---------
Earnings (loss) before income taxes.................... 47,260 41,001 24,888 (12,390) 6,426
Income tax expense (benefit)........................... 20,343 17,666 9,983 (4,529) 3,099
---------- ---------- --------- ---------- ---------
Net earnings (loss).................................... $ 26,917 $ 23,335 $ 14,905 $ (7,861) $ 3,327
---------- ---------- --------- ---------- ---------
---------- ---------- --------- ---------- ---------
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Basic net earnings (loss) per share of common stock.... $ 1.48 $ 1.28 $ 0.81 $ (0.45)
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Diluted net earnings (loss) per share of common
stock................................................ $ 1.42 $ 1.26 $ 0.81 $ (0.45)
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Basic weighted average shares outstanding (in
millions)............................................ 18.2 18.3 18.5 17.5
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Diluted weighted average shares and common stock
equivalents outstanding (in millions)................ 18.9 18.6 18.5 17.5
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Revenues per trading day............................... $ 542 $ 439 $ 287 $ 225 $ 191
---------- ---------- --------- ---------- ---------
---------- ---------- --------- ---------- ---------
Shares executed per day (in millions).................. 27 22 15 10 9
---------- ---------- --------- ---------- ---------
---------- ---------- --------- ---------- ---------
Revenues per average number of employees............... $ 733 $ 814 $ 689 $ 675 $ 837
---------- ---------- --------- ---------- ---------
---------- ---------- --------- ---------- ---------
Average number of employees............................ 187 137 105 84 59
---------- ---------- --------- ---------- ---------
---------- ---------- --------- ---------- ---------
Number of customers:
POSIT................................................ 461 445 393 303 205
QuantEX and Platform................................. 188 91 81 58 43
---------- ---------- --------- ---------- ---------
649 536 474 361 248
---------- ---------- --------- ---------- ---------
---------- ---------- --------- ---------- ---------
Return on average stockholders' equity................. 33.9% 45.5% 39.3% (35.0)%
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Book value per share................................... $ 5.15 $ 3.68 $ 2.47 $ 1.72
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Tangible book value per share.......................... $ 5.04 $ 3.54 $ 2.27 $ 1.52
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Price to earnings ratio using diluted net earnings per
share of common stock................................ 19.7 15.3 11.4 N/A
---------- ---------- --------- ----------
---------- ---------- --------- ----------
</TABLE>
- ------------------------------
* In connection with the Company's initial public offering (the "Offering") in
May 1994, certain management employment agreements, the performance share
plans (consisting of a 12.7% phantom equity interest in ITG and an annual
profits bonus component) and non-compensatory ITG stock options (on 10% of
the outstanding shares of ITG common stock) were terminated as of May 1,
1994 in exchange for $31.1 million in cash, a portion of which was used to
purchase Jefferies Group common stock. The Company, prior to December 31,
1993, had expensed and paid to Jefferies Group an additional $9.4 million
related to the above-mentioned Performance Share Plans. Immediately prior to
the consummation of the Offering, Jefferies Group transferred its $9.4
million liability and an equivalent amount of cash to the Company to be
applied by the Company as part of the termination of the Performance Share
Plans. The total liability in connection with the above-mentioned plans was
$40.5 million. Of the non- recurring expense of $31.1 million, approximately
$900,000 was recorded in Performance Share Plans expense in the first two
quarters of 1994 under the terms of the prior agreement. The total
Performance Share Plans expense recorded for the first two quarters of 1994
was $1.5 million. The remaining $600,000 of such expense was for the annual
profits bonus component of the Performance Share Plans for January 1, 1994
through May 1, 1994 (the termination date of the above-mentioned plans).
Only the future annual profits bonus component (post Offering) of the
above-mentioned plans was determined to be a component of the $40.5 million
liability. The annual profits bonus component was earned during the period
January 1, 1994 through May 1, 1994 by the payees regardless of the
Offering. The remaining liability of $30.2 million was recorded as
termination of plans expense in the second quarter of 1994.
13
<PAGE>
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION DATA:
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total assets.............................................. $ 113,641 $ 82,798 $ 55,318 $ 38,354 $ 23,496
Total stockholders' equity................................ $ 93,763 $ 67,093 $ 45,479 $ 31,893 $ 13,844
</TABLE>
The following graph represents the number of shares ITG executed as a
percentage of the market volume in the U.S. market.5
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ITG VOLUME AS A PERCENTAGE OF MARKET VOLUME
<S> <C>
Year % of Market
1993 1.53%
1994 1.70%
1995 1.90%
1996 2.26%
1997 2.24%
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
---------- --------- --------- -----------
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
<S> <C> <C> <C> <C>
Total Assets........................................................ $ 113,641 $ 82,798 $ 30,843 37.3%
Total Liabilities................................................... $ 19,878 $ 15,705 $ 4,173 26.6%
</TABLE>
The increase in total assets is primarily due to an increase in premises and
equipment, cash and cash equivalents and other assets. Current assets made up
approximately 65% of total assets. The primary increase in premises and
equipment related to leasehold improvements constructed at the new corporate
headquarters at 380 Madison Avenue, while the cash and cash equivalents
increased as a function of the proceeds from operations. The Company's other
assets increased primarily as a result of new joint venture interests made
during 1997.
The increase in total liabilities is mostly due to an increase in accounts
payable and accrued expenses, which consisted primarily of soft dollar
liabilities of $3.1 million and rent accruals of $2.3 million.
- ------------------------
5 The percentages on the graph are total ITG shares executed divided by the
"market" volume. Total ITG shares executed includes total POSIT shares,
QuantEX shares and shares executed by the Electronic Trading Desk. Market
volume includes shares executed by and as provided by the New York Stock
Exchange and the National Association of Securities Dealers Automated
Quotation System. Market volume excludes ITG shares executed.
14
<PAGE>
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT AS NOTED)
COMPARISON OF 1997 WITH 1996
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues............................................................. $ 137.0 $ 111.6 $ 25.4 22.8%
Number of Trading Days............................................... 253 254 (1) (0.4)%
Revenues per Trading Day (Dollars in thousands)...................... $ 542 $ 439 $ 103 23.5%
</TABLE>
Increased revenues were attributed to a growing use of POSIT, QuantEX and
the Company's other electronic trading desk services. For the year ended
December 31, 1997, POSIT revenues were approximately 12% or $8.2 million above
the comparable period for 1996, while QuantEX revenues were approximately 23% or
$5.6 million above the comparable period for 1996. For the year ended December
31, 1997, other electronic trading desk services were 67% or $11.9 million above
the comparable period for 1996.
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Compensation and employee benefits expense........................... $ 30.5 $ 25.0 $ 5.5 22.0%
Number of employees at period end.................................... 217 157 60 38.2%
Revenue per employee at period end (Dollars in thousands)............ $ 631 $ 711 $ (80) (11.3)%
Compensation and employee benefits expense per employee (Dollars in
thousands)......................................................... $ 141 $ 159 $ (18 ) (11.3 )%
</TABLE>
The increase in compensation and employee benefits expense is due to an
increase in the number of employees offset by an increase in capitalized
software. Capitalized software development costs increased approximately $4.4
million over the comparable year ended December 31, 1996 primarily due to
additional projects and an increase in staff engaged in software development.
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Transaction processing expense....................................... $ 21.4 $ 15.7 $ 5.7 36.3%
Transaction processing expenses as a percentage of revenues.......... 15.6% 14.1% 1.5pts 10.6%
</TABLE>
The increase is primarily due to the expense associated with a higher volume
of transactions and shares in the year ended December 31, 1997. The increase as
a percentage of revenues increased 1.5 points primarily from a shift in the
business mix towards QuantEX and electronic trading desk services. Those
products have slightly lower margins than POSIT due to charges for floor
brokerage fees which are not incurred with the POSIT business.
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Software royalties expense........................................... $ 9.8 $ 8.8 $ 1.0 11.4%
Software royalties expenses as a percentage of POSIT revenues........ 13.0% 13.1% (0.1 pts (0.8)%
</TABLE>
Software royalties are a fixed percentage of POSIT revenue. The increase is
due to higher revenue associated with POSIT.
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Occupancy and equipment.............................................. $ 9.2 $ 6.1 $ 3.1 50.8%
</TABLE>
The increase is due primarily to the Company's relocation of its corporate
headquarters from 900 Third Avenue to 380 Madison Avenue in mid-June. Rent
expense increased accordingly as the rental square footage increased by more
than 100%. The Company also had to accelerate the write-off of the unamortized
leasehold improvements from the 900 Third Avenue location. In addition,
depreciation increased approximately $1.7 million as a result of purchases of
additional equipment associated with both the move and increased headcount.
15
<PAGE>
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Consulting expense................................................... $ 2.0 $ 2.5 $ (0.5) (20.0)%
</TABLE>
Consulting is primarily for functions which the Company currently believes
are advantageous to out-source. The decrease is due primarily to the Company
undertaking nonrecurring special projects related to contingency planning and
systems' security.
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Telecommunications and data processing services expense.............. $ 6.6 $ 4.8 $ 1.8 37.5%
</TABLE>
The increase is due primarily to communications costs incurred in 1995 and
1996 relating to the POSIT Joint Venture, which were presented for payment in
the second quarter of 1997. In addition, duplicate services were required for
900 Third Avenue and 380 Madison Avenue location in connection with the move of
the Company's headquarters.
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Other general and administrative expense............................. $ 10.2 $ 7.6 $ 2.6 34.2%
</TABLE>
The increase is largely attributable to the increase in headcount of 60
employees. Related costs, primarily services provided by Jefferies & Co.,
increased by approximately $374,000. Travel and entertainment costs increased by
approximately $1.1 million primarily from an increased effort to promote the
Company's products. Lastly, legal fees increased by approximately $510,000 as a
result of exploring several strategic initiatives and the costs associated with
outsourcing legal services pending the hiring of a new in-house general counsel.
<TABLE>
<CAPTION>
1997 1996 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Income tax expense................................................... $ 20.3 $ 17.7 $ 2.6 14.7%
</TABLE>
The increase is primarily due to an increase in pretax earnings. The
effective tax rate in 1997 and 1996 was 43.0% and 43.1%, respectively.
COMPARISON OF 1996 WITH 1995
<TABLE>
<CAPTION>
1996 1995 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues............................................................. $ 111.6 $ 72.4 $ 39.2 54.1%
Number of Trading Days............................................... 254 252 2 0.8%
Revenues per Trading Day (Dollars in thousands)...................... $ 439 $ 287 $ 152 53.0%
</TABLE>
Increased revenues is due to a growing use of POSIT, QuantEX and the
Company's other electronic trading desk services. For the year ended December
31, 1996, POSIT revenues were approximately 49% or $22.1 million above the
comparable period for 1995, while QuantEX revenues were approximately 57% or
$9.0 million above the comparable period for 1995. For the year ended December
31, 1996, other electronic trading desk services were 83% or $8.1 million above
the comparable period for 1995.
The Company currently reports revenues net of soft dollars collected. The
Company previously reported soft dollars on a "gross" basis. Soft dollars
collected were reported as revenues and, in an equal and offsetting amount, as
soft dollar expense. The historical financial statements have been reclassified
to reflect revenue net of soft dollars collected. Soft dollars are those
incremental amounts of commission dollars collected in addition to the Company's
charge for executions. These incremental amounts are used to satisfy customers'
third-party research services.
16
<PAGE>
<TABLE>
<CAPTION>
1996 1995 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Compensation and employee benefits expense........................... $ 25.0 $ 16.4 $ 8.6 52.4%
Number of employees at period end.................................... 157 118 39 33.1%
Revenue per employee at period end (Dollars in thousands)............ $ 711 $ 614 $ 97 15.8%
Compensation and employee benefits expense per employee (Dollars in
thousands)......................................................... $ 159 $ 139 $ 20 14.4%
</TABLE>
The increase in compensation and employee benefits expense is due primarily
to an increase in the number of employees and an increase in profitability based
compensation.
<TABLE>
<CAPTION>
1996 1995 CHANGE % CHANGE
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Transaction processing expense....................................... $ 15.7 $ 10.9 $ 4.8 44.0%
Transaction processing expenses as a percentage of revenues.......... 14.1% 15.1% (1.0 pts (6.6)%
</TABLE>
The increase is primarily due to the expense associated with a higher volume
of transactions in 1996. In addition, QuantEX is a larger portion of total
volume, causing higher execution charges. The Company received a $621,000
adjustment in the fourth quarter of 1996 against charges incurred in the first
three quarters of 1996 for exchange-related execution fees.
<TABLE>
<CAPTION>
1996 1995 CHANGE % CHANGE
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Software royalties expense........................................... $ 8.8 $ 6.0 $ 2.8 46.7%
Software royalties expenses as a percentage of POSIT revenues........ 13.1% 13.3% (0.2 pts (1.5)%
</TABLE>
The increase is due to higher revenue associated with POSIT.
<TABLE>
<CAPTION>
1996 1995 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Occupancy and equipment.............................................. $ 6.1 $ 3.6 $ 2.5 69.4%
</TABLE>
The increase is due primarily to depreciation of premises and equipment
acquired since the beginning of 1996 and accelerated depreciation of leasehold
improvements and furniture related to the relocation of the New York office
scheduled to occur in the second quarter of 1997.
<TABLE>
<CAPTION>
1996 1995 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Consulting expense................................................... $ 2.5 $ 1.7 $ 0.8 47.1%
</TABLE>
Consulting is primarily for functions which the Company currently believes
are advantageous to out-source. The increase is due primarily to the Company
undertaking special projects related to contingency planning and systems'
security.
<TABLE>
<CAPTION>
1996 1995 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Telecommunications and data processing services expense.............. $ 4.8 $ 2.9 $ 1.9 65.5%
</TABLE>
The increase is due primarily to an increase in quotation services and
communications charges associated with the increased number of QuantEX
installations. In addition, an increased level of activity in the existing
QuantEX business raised the semi-variable component of the quotation services
and communications charges.
17
<PAGE>
<TABLE>
<CAPTION>
1996 1995 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Other general and administrative expense............................. $ 7.6 $ 6.1 $ 1.5 24.6%
</TABLE>
The increase is largely due to an increase in amortization of capitalized
software and allowances for general legal and bad debt expenses.
<TABLE>
<CAPTION>
1996 1995 CHANGE % CHANGE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Income tax expense................................................... $ 17.7 $ 10.0 $ 7.7 77.0%
</TABLE>
The increase is primarily due to an increase in pretax earnings. The
effective tax rate in 1996 and 1995 was 43.1% and 40.1%, respectively. Income
tax expense in 1995 was favorably impacted by a lower tax rate resulting from
the recognition of research and development tax credits attributable to prior
periods.
DEPENDENCE ON MAJOR CUSTOMERS
During 1997, revenue received by the Company from its 10 largest customers
accounted for approximately 34.5% of the Company's total revenue while revenue
received from the three largest customers accounted for 8.8%, 5.9% and 3.4% of
total revenue. During 1996, revenue received by the Company from its 10 largest
customers accounted for approximately 39.6% of the company's total revenue while
revenue received from the three largest customers accounted for 9.3%, 6.8%, and
5.6% of total revenue. Customers may discontinue use of the Company's services
at any time. The loss of any significant customers could have a material adverse
effect on the Company's results of operations. In addition, the loss of
significant POSIT customers could result in lower share volumes of securities
offered through POSIT, which may adversely affect the liquidity of the system.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its business through cash flow from
operations, equity investments made by Jefferies Group and, to a lesser extent,
through operating lease agreements with Jefferies Group for premises and
equipment. Since November 1994, the Company has purchased its own equipment. The
Company's liquidity and capital resource requirements are the result of the
funding of working capital needs, primarily consisting of compensation, benefits
and transaction processing fees and software royalty fees. Historically, all
working capital requirements have been met by cash from operations and
subordinated loans and equity investments made by Jefferies Group.
In May 1994, the Company and Jefferies Group entered into an Intercompany
Borrowing Agreement which provides for aggregate borrowings under the facility
of up to $15.0 million. Amounts borrowed under the facility are not restricted
as to their use by the Company. The facility bears interest at a floating rate
equal to 1.75% above the average one month London Interbank Offered Rate.
Jefferies Group is not committed to advance funds, and the Company is not
obligated to borrow funds, under the facility. The Company may borrow funds from
other parties. The facility may be terminated by Jefferies Group in the event of
an uncured default by the Company.
The Company believes that its cash flow from operations and its existing
cash balances will be sufficient to meet its cash requirements. The Company
generally invests its excess cash in money market funds, municipal securities
and other short-term investments. At December 31, 1997 and 1996, such cash
equivalents amounted to $49.3 million and $43.9 million, respectively. Cash
equivalents are part of the cash management activities of the Company and
generally mature within 90 days. Additionally, the trade receivable from
affiliate of $2.9 million is due within 30 days.
The Company also invests a portion of its excess cash balances in cash
enhanced strategies, which the Company believes should yield higher returns
without any significant effect on risk. As of December 31, 1997, the Company had
an investment in an arbitrage fund. The fund's strategy is to invest in a hedged
portfolio of convertible securities. This strategy seeks an enhanced level of
capital appreciation by focusing
18
<PAGE>
on current income and capital appreciation. At December 31, 1997 and 1996,
investment in the limited partnership was $10.9 million and $5.2 million,
respectively.
REPORTING COMPREHENSIVE INCOME
In June of 1997, the Financial Accounting Standards Board issued SFAS No.
130 "Reporting Comprehensive Income". This SFAS requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This SFAS requires that an
enterprise (1) classify items of other comprehensive income by their nature in a
financial statements and (2) display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of a statement of financial condition. No
earnings per share disclosure of the effect comprehensive income is required
under this SFAS.
The SFAS is effective for fiscal years beginning after December 15, 1997,
although earlier application is permitted. At December 31, 1997, the Company did
not have items of Comprehensive Income.
EFFECTS OF INFLATION
The Company does not believe that the relatively moderate levels of
inflation which have been experienced in North America in recent years have had
a significant effect on its revenue or its profitability. However, high
inflation may lead to higher interest rates which might cause money to move from
equity funds to bond funds or money market funds.
THE YEAR 2000 ISSUE
OVERVIEW
Computer systems and software products were originally designed to accept
only two digit entries in the data code field. As a result, certain computer
systems and software packages will not be able to interpret dates beyond
December 31, 1999 and thus will interpret dates beginning January 1, 2000 to
represent January 1, 1900. This could potentially result in computer failure or
miscalculations, causing operating disruptions, including an inability to
process transactions, send invoices or engage in normal business operations.
Therefore, companies may have to upgrade or replace computer and software
systems in order to comply with the "Year 2000" requirements.
ITG'S STRATEGY
The Company is well aware of and is actively addressing the Year 2000 issue
and the potential problems that can arise in any computer and software system.
Planning and evaluation work began in 1997 including the identification of those
systems affected. The Company has engaged a consultant to provide advice on Year
2000 issues and to assist the Company in its efforts to meet industry standards.
The Company also is working with Jefferies & Co. as a result of the Company's
client/vendor relationship regarding clearing services.
The Company has isolated its efforts into three major areas:
i) VENDORS
ii) COMPANY PROPRIETARY PRODUCTS
iii) CLIENTS
VENDORS--The Company's ability to successfully meet the Year 2000 challenge
is also dependent on vendors. The Company has created a vendor database and
expects to send letters to all vendors by the end
19
<PAGE>
of the first quarter of 1998 to determine their plans for successfully
completing this project. The major vendors have already been contacted.
COMPANY PROPRIETARY PRODUCTS--The Company is evaluating all trading systems
and intends to examine all code. The evaluation and examinations are scheduled
to be completed by the end of the first half of 1998. Testing is scheduled to be
completed by the end of 1998. The Company plans to release Year 2000 compliant
versions of its products by the beginning of 1999.
CLIENTS--The Company has begun to contact clients in an effort to keep them
informed of the Company's Year 2000 Plans and progress. In 1999, the Company
plans to provide testing opportunities for all clients.
RISKS
The Company currently expects to implement the necessary changes to ensure
that its internal operations are Year 2000 compliant prior to December 31, 1999.
The Company also does not believe that the costs incurred to ready its systems
for the Year 2000 will have a material effect on its financial condition. Total
costs for the whole project are estimated to be between $2.5 and $3.0 million,
which includes the cost of personnel, consultants and software and hardware
costs.
The Year 2000 issue however, can affect all businesses that use computers.
Accordingly, if the Year 2000 issue adversely affects the Company's customers,
this in turn could have a material adverse effect on the Company's trading
revenues and collections. Should the Company, third party information vendors,
other third party electronic vendors, or the Company's customers fail to
adequately address this issue, the Company's business, financial condition and
results of operations could be materially adversely affected.
JEFFERIES GROUP AND THE COMPANY ANNOUNCE INTENTION TO CONSIDER SEPARATING INTO
TWO INDEPENDENT COMPANIES
On March 17, 1998, Jefferies Group and the Company jointly announced that
they are considering the separation of Jefferies & Co. and other Jefferies Group
subsidiaries from the Company through a spin-off.
If the separation is completed, Jefferies Group shareholders will own 100%
of JEFCO and approximately 82.3% of the Company. The public Company shareholders
will continue to own 17.7% of the Company. (The Company percentage ownership
interests could change slightly as a result of the Company's stock repurchases
or issuances before the transaction closing date.) The spin-off will be
accomplished by a tax-free distribution of 100% of the shares of a new company,
JEFCO, to Jefferies Group shareholders. Jefferies Group's 15 million shares of
the Company would then be its only asset. The spin-off would be followed
immediately by a tax-free merger of Jefferies Group and the Company, with the
Company's public shareholders receiving shares of Jefferies Group. Jefferies
Group would then be renamed Investment Technology Group, Inc.
The spin-off and restructuring transactions are contingent on a number of
factors, including receipt of all Board of Directors and shareholder approvals
of Jefferies Group and the Company, receipt of a favorable tax ruling from the
Internal Revenue service and other required regulatory and contractual
approvals.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL REPORTS SECTION
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Management's Responsibility for Compliance and Financial Reporting......................................... 22
Independent Auditor's Report............................................................................... 23
Consolidated Statement of Operations....................................................................... 24
Consolidated Statement of Financial Condition.............................................................. 25
Consolidated Statement of Changes in Stockholders' Equity.................................................. 26
Consolidated Statement of Cash Flows....................................................................... 27
Notes to Consolidated Financial Statements................................................................. 28
</TABLE>
21
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR COMPLIANCE AND FINANCIAL REPORTING
TO THE SHAREHOLDERS:
The management of Investment Technology Group, Inc. (the "Company") is
responsible for the integrity and objectivity of the financial information
presented in this Annual Report. Financial information appearing throughout the
Annual Report is consistent with that in the accompanying financial statements.
The financial statements have been prepared by management of the Company in
conformity with generally accepted accounting principles in the United States
and comply, in all material respects, with guidelines of the International
Accounting Standards Committee. The financial statements reflect, where
applicable, management's best judgments and estimates.
The management of the Company has established and maintains an internal
control structure and monitors that structure for compliance with established
policies and procedures. The objectives of an internal control structure are to
provide reasonable, but not absolute, assurance as to the integrity and
reliability of the financial statements, the protection of assets from
unauthorized use or disposition, and that transactions are executed in
accordance with management's authorization.
Management also recognizes its responsibility to foster and maintain a
strong ethical environment within the Company to ensure that its business
affairs are conducted with integrity and in accordance with high standards of
personal and corporate conduct. This responsibility is characterized and
reflected in the Company's Statement of Policy on Standards of Employee Conduct,
which is distributed to all employees of the Company. As part of the monitoring
system, the Company maintains Corporate Compliance Personnel, who have oversight
responsibilities for administering and coordinating the application of these
standards of conduct. Senior legal and compliance personnel have been directed
to report compliance concerns directly to the President of the Company. Ongoing
oversight of compliance activities is the responsibility of the Company's
President.
The Company's Board of Directors appoints an Audit Committee composed solely
of outside directors. The function of the Audit Committee is to oversee the
accounting, reporting, audit and internal control policies and procedures
established by the Company's management. The Committee meets regularly with
management and the internal and independent auditors. The auditors have free
access to the Audit Committee without the presence of management. The Committee
reports regularly to the Board of Directors on its activities, and such other
matters as it deems necessary. Ernst & Young LLP, independent auditors, performs
an internal audit program for the Company and reports directly to the Audit
Committee on matters of internal control.
The Company's annual consolidated financial statements have been audited by
KPMG Peat Marwick LLP, independent auditors, who were appointed by the Board of
Directors. Management has made available to KPMG Peat Marwick LLP all of the
Company's financial records and related data, as well as the minutes of
directors' meetings.
Furthermore, management believes that all its representations to KPMG Peat
Marwick LLP are valid and appropriate. In addition, KPMG Peat Marwick LLP, in
determining the nature and extent of their auditing procedures, considered the
Company's accounting procedures and policies and the effectiveness of the
related internal control structure.
Management believes that, as of December 31, 1997, the Company's internal
control structure was adequate to accomplish the objectives discussed herein.
Raymond L. Killian, Jr. Scott P. Mason John R. MacDonald
Chairman President Senior Vice President and
Chief Executive Officer Chief Financial Officer
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Investment Technology Group, Inc.:
We have audited the accompanying consolidated statement of financial
condition of Investment Technology Group, Inc. and subsidiaries as of December
31, 1997 and 1996 and the related consolidated statements of operations, changes
in stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Investment
Technology Group, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997 in conformity with generally accepted
accounting principles in the United States and International Accounting
Standards.
KPMG PEAT MARWICK LLP
Los Angeles, California
January 20, 1998, except as to note 16
to the Consolidated Financial Statements,
which is as of March 17, 1998.
23
<PAGE>
INVESTMENT TECHNOLOGY GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues..................................................................... $ 137,042 $ 111,556 $ 72,381
Expenses:
Compensation and employee benefits......................................... 30,479 25,047 16,404
Transaction processing..................................................... 21,413 15,737 10,861
Software royalties......................................................... 9,848 8,798 5,985
Occupancy and equipment.................................................... 9,204 6,111 3,606
Consulting................................................................. 2,017 2,492 1,699
Telecommunications and data processing services............................ 6,605 4,789 2,879
Other general and administrative........................................... 10,216 7,581 6,059
---------- ---------- ----------
Total Expenses........................................................... 89,782 70,555 47,493
Earnings before income tax expense......................................... 47,260 41,001 24,888
Income tax expense........................................................... 20,343 17,666 9,983
---------- ---------- ----------
Net earnings................................................................. $ 26,917 $ 23,335 $ 14,905
---------- ---------- ----------
---------- ---------- ----------
Basic net earnings per share of common stock................................. $ 1.48 $ 1.28 $ 0.81
---------- ---------- ----------
---------- ---------- ----------
Diluted net earnings per share of common stock............................... $ 1.42 $ 1.26 $ 0.81
---------- ---------- ----------
---------- ---------- ----------
Basic weighted average shares outstanding.................................... 18,178 18,284 18,473
---------- ---------- ----------
---------- ---------- ----------
Diluted weighted average shares and common stock equivalents outstanding..... 18,940 18,586 18,473
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are integral parts
of this statement.
24
<PAGE>
INVESTMENT TECHNOLOGY GROUP, INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................................................. $ 51,263 $ 43,955
Securities owned........................................................................... 358 4,808
Investment in limited partnership (at market; cost $10,000 and $5,000)..................... 10,935 5,193
Trade receivables, net of allowance for doubtful accounts of $308 and $309................. 7,071 4,806
Trade receivables from affiliate........................................................... 2,931 2,812
Due from affiliates........................................................................ 1,365 1,459
Premises and equipment..................................................................... 19,506 8,442
Capitalized software....................................................................... 5,973 3,028
Other assets............................................................................... 9,857 3,467
Goodwill................................................................................... 1,922 2,471
Deferred tax asset......................................................................... 2,460 2,357
---------- ---------
$ 113,641 $ 82,798
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses...................................................... $ 12,725 $ 8,648
Software royalties payable................................................................. 2,663 2,274
Securities sold, not yet purchased......................................................... 3 1,226
Due to affiliates.......................................................................... 2,999 1,922
Income taxes payable to affiliate.......................................................... 1,488 1,635
---------- ---------
19,878 15,705
---------- ---------
Lease commitments (note 13)
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.01; shares authorized:
5,000,000; shares issued: none........................................................... -- --
Common stock, par value $0.01; shares authorized:
30,000,000; shares issued: 18,818,468 in 1997 and 18,700,000 in 1996..................... 188 187
Additional paid-in capital................................................................. 38,554 36,055
Retained earnings.......................................................................... 61,531 34,614
Common stock held in treasury, at cost; shares:
597,500 in 1997 and 445,200 in 1996...................................................... (6,510) (3,763)
---------- ---------
Total stockholders' equity............................................................. 93,763 67,093
---------- ---------
$ 113,641 $ 82,798
---------- ---------
---------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are integral parts
of this statement.
25
<PAGE>
INVESTMENT TECHNOLOGY GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
RETAINED COMMON
ADDITIONAL EARNINGS STOCK TOTAL
PREFERRED COMMON PAID-IN (ACCUMULATED HELD IN STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT) TREASURY EQUITY
----------- ----------- ----------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994............ $ -- $ 187 $ 36,055 $ (3,626) $ (723) $ 31,893
Net earnings............................ -- -- -- 14,905 -- 14,905
Purchase of common stock for treasury
(184,500 shares)...................... -- -- -- -- (1,319) (1,319)
----- ----- ----------- ------------ --------- ------------
Balance at December 31, 1995............ -- 187 36,055 11,279 (2,042) 45,479
Net earnings............................ -- -- -- 23,335 -- 23,335
Purchase of common stock for treasury
(135,000 shares)...................... -- -- -- -- (1,721) (1,721)
----- ----- ----------- ------------ --------- ------------
Balance at December 31, 1996............ -- 187 36,055 34,614 (3,763) 67,093
Net earnings............................ -- -- -- 26,917 -- 26,917
Issuance of restricted stock (24,219
shares)............................... -- -- 630 -- -- 630
Issuance of common stock in connection
with the employee stock option plan
(92,249 shares)....................... -- 1 1,869 -- -- 1,870
Purchase of common stock for treasury
(152,300 shares)...................... -- -- -- -- (2,747) (2,747)
----- ----- ----------- ------------ --------- ------------
Balance at December 31, 1997............ $ -- $ 188 $ 38,554 $ 61,531 $ (6,510) $ 93,763
----- ----- ----------- ------------ --------- ------------
----- ----- ----------- ------------ --------- ------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are integral parts
of this statement.
26
<PAGE>
INVESTMENT TECHNOLOGY GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings.................................................................. $ 26,917 $ 23,335 $ 14,905
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Deferred income tax (benefit) expense....................................... (103) (2,027) 2,663
Depreciation and amortization............................................... 6,642 3,957 2,248
Unrealized gain on investment in limited partnership........................ (742) (193) --
Undistributed loss (income) of affiliates................................... 476 (267) (441)
Provision for doubtful accounts receivable.................................. 84 352 57
Decrease (increase) in operating assets:
Securities owned............................................................ 4,450 3,701 (8,509)
Trade receivables........................................................... (2,349) (2,676) (1,704)
Trade receivables from affiliate............................................ (119) 4,953 (2,832)
Income taxes receivable from affiliate...................................... -- -- 1,511
Due from affiliates......................................................... 94 3,541 (4,501)
Other assets................................................................ (6,967) (1,977) (609)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses....................................... 4,177 4,956 702
Software royalties payable.................................................. 389 480 723
Termination of plans expense payable........................................ - - (758)
Securities sold, not yet purchased.......................................... (1,223) 1,226 -
Due to affiliates........................................................... 1,077 (321) 813
Income taxes payable to affiliate........................................... (147) 945 690
---------- ---------- ----------
Net cash provided by operating activities................................. 32,656 39,985 4,958
---------- ---------- ----------
Cash flows from financing activities:
Purchase of common stock for treasury....................................... (2,747) (1,721) (1,319)
Issuance of common stock.................................................... 2,500 -- --
---------- ---------- ----------
Net cash used in financing activities..................................... (247) (1,721) (1,319)
---------- ---------- ----------
Cash flows from investing activities:
Purchase of premises and equipment.......................................... (15,679) (5,624) (5,003)
Investment in limited partnership........................................... (5,000) (5,000) --
Capitalization of software development costs................................ (4,422) (1,645) (2,122)
---------- ---------- ----------
Net cash used in investing activities..................................... (25,101) (12,269) (7,125)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents...................... 7,308 25,995 (3,486)
Cash and cash equivalents--beginning of year.................................. 43,955 17,960 21,446
---------- ---------- ----------
Cash and cash equivalents--end of year........................................ $ 51,263 $ 43,955 $ 17,960
---------- ---------- ----------
---------- ---------- ----------
Supplemental cash flow information:
Interest paid............................................................... $ 146 $ 223 $ 53
---------- ---------- ----------
---------- ---------- ----------
Income taxes paid to affiliate.............................................. $ 19,947 $ 18,798 $ 5,072
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are integral parts
of this statement.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Consolidated Financial Statements include the accounts of Investment
Technology Group, Inc. and its wholly-owned subsidiaries (collectively, the
"Company"), principally ITG Inc. ("ITG"), a Delaware corporation, registered as
a broker-dealer in securities under the Securities Exchange Act of 1934, ITG
Global Trading, Inc. ("Global Trading") which is a 50% partner in the Global
POSIT joint venture ITG Australia PTY Limited, which is a 50% partner in ITG
Pacific holdings, and ITG Ventures Inc. Jefferies Group, Inc. ("Jefferies
Group") owned over 80% of the Company's common stock at December 31, 1997.
All material intercompany balances and transactions have been eliminated in
consolidation. The consolidated financial statements reflect all adjustments
which are, in the opinion of management, necessary for the fair statement of
results.
BUSINESS SEGMENT
Through its wholly-owned, broker/dealer subsidiary, ITG, the Company, is a
leading provider of technology-based equity trading services and transaction
research to institutional investors and brokers. ITG services help clients to
access liquidity, execute trades more efficiently and make better trading
decisions.
GOODWILL
In May 1991, Jefferies Group acquired Integrated Analytics Corporation
("IAC") and contributed its business to ITG in 1992. IAC's principal product,
MarketMind, was used to develop the Company's QuantEX product. Goodwill, which
represents the excess of purchase price for IAC over the fair value of the IAC
net assets acquired, is amortized on a straight-line basis over ten years. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. At December 31, 1997 and 1996, goodwill amounted to $1.9 million and
$2.5 million, net of accumulated amortization of $3.4 million and $2.8 million,
respectively.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets (generally
three to five years). Leasehold improvements are amortized using the
straight-line method over the lesser of the estimated useful lives of the
related assets or the non cancelable lease term.
REVENUES
Revenues primarily consist of commission revenues. TRADE RECEIVABLE FROM
AFFILIATE consists of commissions receivable. Transactions in securities,
commission revenues and related expenses are recorded on a trade-date basis.
EXPENSES
COMPENSATION AND EMPLOYEE BENEFITS include base salaries, bonuses,
employment agency fees, part-time employees, commissions paid to Jefferies & Co.
employees (note 7), capitalized software (note 3) and fringe benefits, including
employer contributions for medical insurance, life insurance, retirement plans
and payroll taxes. TRANSACTION PROCESSING consists of floor brokerage and
clearing fees. SOFTWARE ROYALTIES are payments to BARRA, Inc., the Company's
joint venture partner in POSIT. Royalty payments are
28
<PAGE>
calculated at an effective rate of 13% of adjusted POSIT revenues. The royalty
payments related to Global Trading are calculated at an effective rate of 50% of
pretax earnings. OCCUPANCY AND EQUIPMENT includes rent, depreciation,
amortization of leasehold improvements, maintenance, utilities, occupancy taxes
and property insurance. CONSULTING is for equity research, product development
and other activities which the Company believes it is advantageous to
out-source. TELECOMMUNICATIONS AND DATA PROCESSING services include costs for
computer hardware, office automation and workstations, data center equipment,
market data services and voice, data, telex and network communications. OTHER
GENERAL AND ADMINISTRATIVE includes goodwill amortization, legal, audit, tax and
promotional expenses.
INCOME TAXES
The Company is a member of the Jefferies affiliated group ("Group") for
purposes of filing a Federal income tax return (i.e., Jefferies Group owns more
than 80% of the Company). The Company's tax liability is determined on a
"separate return" basis. That is, the Company is required to pay to Jefferies
Group its proportionate share of the consolidated tax liability plus any excess
of its "separate" tax liability (assuming a separate tax return were to be filed
by the Company) over its proportionate amount of the consolidated Group tax
liability. Alternatively, Jefferies Group is required to pay the Company an
"additional amount" to the extent the consolidated tax liability of the Group is
decreased by reason of inclusion of the Company in the Group.
Deferred tax assets and liabilities reflect the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
reverse. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Past effects of such changes in the rates were not material to the combined
financial statements.
CAPITALIZED SOFTWARE
The Company capitalizes software development costs where technological
feasibility of the product has been established. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs requires considerable judgment by
management with respect to certain external factors, including, but not limited
to, technological feasibility, anticipated future gross revenues, estimated
economic life and changes in software and hardware technologies. The Company is
amortizing capitalized software costs using the straight-line method over the
estimated economic useful life, the average life of which is under two years.
Amortization begins when the product is available for release to customers.
RESEARCH AND DEVELOPMENT
Research and development costs were $7.1 million, $6.0 million and $4.9
million for 1997, 1996 and 1995, respectively. In addition, in 1997, 1996 and
1995, $4.4 million, $1.6 million and $2.1 million, respectively, were
capitalized (note 3).
CASH AND CASH EQUIVALENTS
The Company generally invests its excess cash in money market funds and
other short-term investments that generally mature within 90 days. At December
31, 1997 and 1996, such cash equivalents amounted to $49.3 million and $43.9
million, respectively.
29
<PAGE>
INVESTMENT IN LIMITED PARTNERSHIP
Investment in limited partnership consists of an investment in TQA Arbitrage
Fund L.P. ( the "Fund"), a Delaware limited partnership. The Fund invests
primarily in convertible securities, and seeks capital appreciation from its
convertible securities portfolio through a combination of convertible securities
purchases and short sales of related stocks focusing on the current income and
capital appreciation available from such strategies with convertibles. The
Company may withdraw any or all of its investment from the Fund upon at least
thirty days notice. Investment in limited partnership is valued at market, and
unrealized gains or losses are reflected in revenues.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Substantially all of the Company's financial instruments are carried at fair
value or amounts approximating fair value.
SECURITIES OWNED
Securities owned are valued at market, and unrealized gains or losses are
reflected in revenues. Securities owned consisted of municipal securities as of
December 31, 1997 and 1996.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and expenses and the
disclosure of contingent assets, liabilities, revenues and expenses to prepare
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' amounts to
conform to the current year's presentation.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE,
which is effective for financial statements for both interim and annual periods
ending after December 15, 1997. As of December 31, 1997 the Company was required
to change the method currently used to compute earnings per share and to restate
all prior periods presented. Under the new SFAS, the Company is required to
report both basic and diluted earnings per share. Basic earnings per share is
determined by dividing earnings by the average number of shares of common stock
outstanding, while diluted earnings per share is determined by dividing earnings
by the average number of shares of common stock adjusted for the dilutive effect
of common stock equivalents. Earnings per share for 1997, 1996, and 1995 have
been restated to conform with the provisions of this statement.
DIVIDENDS
Any future payments of dividends will be at the discretion of the Company's
Board of Directors and will depend on the Company's financial condition, results
of operations, capital requirements and other factors deemed relevant. However,
the Company anticipates that, for the foreseeable future, all earnings will be
retained by the Company for working capital and that the Company will not pay
any dividends to its stockholders.
30
<PAGE>
(2) PREMISES AND EQUIPMENT
The following is a summary of premises and equipment as of December 31, 1997
and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Furniture, fixtures and equipment.................................... $ 22,120 $ 11,051
Leasehold improvements............................................... 6,257 1,647
--------- ---------
Total............................................................ 28,377 12,698
Less accumulated depreciation and amortization....................... 8,871 4,256
--------- ---------
$ 19,506 $ 8,442
--------- ---------
--------- ---------
</TABLE>
JEFFERIES GROUP PREMISES AND EQUIPMENT
Prior to November 1994, premises and equipment for the Company were
purchased by Jefferies Group. Jefferies Group owns and recorded such assets.
Jefferies Group charges the Company depreciation and amortization on such
premises and equipment on a monthly basis. The following is a summary of such of
premises and equipment as of December 31, 1997 and 1996 as recorded by Jefferies
Group:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Furniture, fixtures and equipment..................................... $ 4,803 $ 6,154
Leasehold improvements................................................ 942 942
--------- ---------
Total............................................................. 5,745 7,096
Less accumulated depreciation and amortization........................ 5,297 5,481
--------- ---------
$ 448 $ 1,615
--------- ---------
--------- ---------
</TABLE>
Most of the capital expenditures in the two schedules above are for
computer-related equipment.
Depreciation and amortization expense amounted to $4,614,000, $2,034,000 and
$788,000 in 1997, 1996 and 1995, respectively.
(3) CAPITALIZED SOFTWARE COSTS
The following is a summary of capitalized software costs as of December 31,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Capitalized software costs........................................... $ 10,210 $ 5,787
Less accumulated amortization........................................ 4,237 2,759
--------- ---------
Total............................................................ $ 5,973 $ 3,028
--------- ---------
--------- ---------
</TABLE>
Approximately $4,423,000 of software costs were capitalized in 1997
primarily for the development of new versions of POSIT and QuantEX. In addition,
approximately $5,067,000 of total capitalized software costs were not subject to
amortization as of December 31, 1997, as the ITG Platform and certain versions
of POSIT and QuantEX had not yet been released.
Capitalized software costs are being amortized over one to two years, with
an average remaining life of under two years. In 1997, 1996 and 1995, the
Company included $1,478,000, $1,374,000 and $894,000, respectively, of amortized
software costs in other expenses.
31
<PAGE>
(4) INCOME TAXES
The Company's operations are included in the consolidated Federal income tax
return of Jefferies Group. All income tax liabilities/assets are due to/from
Jefferies Group.
Total income taxes for the years ended December 31, 1997, 1996 and 1995 were
allocated as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income from operations........................................ $ 20,343 $ 17,666 $ 9,983
Stockholders' equity, for compensation expense for tax
purposes in excess of amounts recognized for financial
reporting purposes.......................................... (646) -- --
--------- --------- ---------
$ 19,697 $ 17,666 $ 9,983
--------- --------- ---------
--------- --------- ---------
</TABLE>
Income tax expense (benefit) consists of the following components:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal..................................................... $ 14,220 $ 13,722 $ 5,224
State....................................................... 6,226 5,971 2,096
--------- --------- ---------
Total......................................................... 20,446 19,693 7,320
--------- --------- ---------
Deferred
Federal..................................................... (62) (1,408) 1,430
State....................................................... (41) (619) 1,233
--------- --------- ---------
(103) (2,027) 2,663
--------- --------- ---------
Total......................................................... $ 20,343 $ 17,666 $ 9,983
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes are provided for temporary differences in reporting
certain items, principally deferred compensation. The tax effects of temporary
differences that gave rise to the deferred tax asset at December 31, 1997 and
1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred compensation................................................. $ 2,144 $ 1,560
State income tax...................................................... 870 860
Premises and equipment................................................ (970) (139)
Other................................................................. 416 76
--------- ---------
Total................................................................. $ 2,460 $ 2,357
--------- ---------
--------- ---------
</TABLE>
At December 31, 1997 and 1996, the Company had income taxes payable to
Jefferies Group of $1,488,000 and $1,635,000, respectively.
32
<PAGE>
The provision for income tax expense differs from the expected Federal
income tax rate of 35% for 1997, 1996 and 1995 for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Computed expected income tax expense............................ $ 16,541 $ 14,350 $ 8,711
Increase in income taxes resulting from:
Amortization of goodwill...................................... 268 192 198
State income tax expense, net of Federal income taxes......... 4,020 3,479 2,163
Research and development tax credits.......................... (320) (159) (863)
Non-taxable interest income................................... (317) (473) (308)
Other......................................................... 151 277 82
--------- --------- ---------
Total income tax expense........................................ $ 20,343 $ 17,666 $ 9,983
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company believes that it is more likely than not that the deferred tax
asset will be realized pursuant to the Company's Tax Sharing Agreement with
Jefferies Group which entitles the Company to a compensating tax payment from
Jefferies Group.
(5) DEBT
The Company has an intercompany borrowing agreement with Jefferies Group
permitting the Company to borrow up to $15.0 million. Outstanding balances, if
any, will be due March 31, 1999 and will accrue interest at 1.75% above the one
month London Interbank Offering Rate. No amounts were borrowed under this
agreement in 1997 or 1996.
(6) EMPLOYEE BENEFIT PLANS
Certain employees of the Company are covered by a defined benefit pension
plan sponsored by Jefferies Group. The defined benefit pension plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974. The
Jefferies Group funding policy is to contribute to the defined benefit pension
plan at least the minimum amount that can be deducted for Federal Income Tax
purposes. The plan is designed so that no more than 60% or no less than 40% can
solely be invested in stocks or bonds individually.
The net periodic pension cost allocated to the Company was $208,000,
$151,000 and $101,000 in 1997, 1996 and 1995, respectively.
Jefferies Group incurs expenses related to various benefit plans covering
substantially all employees, including an Employee Stock Purchase Plan and a
profit sharing plan, which includes a salary reduction feature designed to
qualify under Section 401(k) of the Internal Revenue Code. Employee
contributions under the Employee Stock Purchase Plan are voluntary and are made
via payroll deduction. The employee contributions are used to purchase the
Jefferies Group common stock which is then held in an outside trust account. The
Company matches employee contributions at a rate of 15% (more, if profits exceed
targets set by the Company's Board of Directors). The Company's match vests
after two years.
Jefferies Group has a Capital Accumulation Plan (CAP) for certain officers
and key employees of Jefferies Group and ITG. Participation in the CAP is
optional, with those who elect to participate agreeing to defer graduated
percentages of their compensation. The plan allows selected employees to acquire
the Jefferies Group common stock at a 15% discount with 50% of the amount
deferred. The remaining 50% of the amount deferred is placed in a Profit-Based
Deferred Compensation Account that earns interest at a rate based on the
performance of the Company. Jefferies Group will from time to time repurchase
shares of its common stock in the open market for use in this plan. The Company
recognizes compensation cost related to the 15% discount and interest on
Profit-Based Deferred Compensation Accounts.
33
<PAGE>
For 1997, 1996 and 1995, the Company expensed and contributed to these plans
$2,096,000, $1,590,000, and $567,000, respectively.
In November 1997, the Board of Directors of the Company approved the ITG
Employee Stock Purchase Plan ("ESPP"). The ESPP allows all full-time employees
to purchase the Company's common stock at a 15% discount through automatic
payroll deductions. Employees can contribute from 1% to 10% of their respect
earnings, up to certain maximums specified in the Internal Revenue Code or
$25,000 per year, to the plan. All contributions are deducted on an after tax
basis and every six months, the contributions are used to purchase shares of ITG
common stock. The purchase price will be calculated at 85% of the higher of (i)
the mean of the closing "bid" and "ask" prices on the last day of trading of
each period or (ii) the average fair market value as of the first or last
trading day of the offering period (whichever is lower). The ESPP is qualified
as an employee stock purchase plan under Section 423 of the Internal Revenue
Code. It is not a stock bonus, pension, or profit sharing plan, and is not
subject to or considered a qualified plan under any provisions of the Employee
Retirement Income Security Act of 1974 (ERISA) or Section 401(a) of the Internal
Revenue Code. The ESPP is administered by a committee of officers of the Company
who are appointed by the Board of Directors to interpret the terms and
provisions of the plan. The ESPP is subject to amendment, modification, or
termination by the Board of Directors at anytime. The ESPP become effective
February 1, 1998, but is subject to approval by ITG's stockholders prior to the
first purchase following the initial offering period. In the event that
stockholders fail to approve the ESPP, all purchase rights granted under the
ESPP will be canceled, payroll contributions will be refunded, and the ESPP will
be terminated. As of February 1, 1998, ITG employees are prohibited from
participation in the Jefferies Employee Stock Purchase Plan.
(7) RELATED PARTY TRANSACTIONS
The Company entered into certain agreements (e.g., tax sharing agreement,
service agreements, clearing agreement, development rights agreement, revenue
sharing agreement and lease agreements) as described below:
Jefferies & Co. has provided specified administrative services to the
Company at fixed monthly costs. Services performed outside the scope of the
service agreements have been provided at jointly negotiated costs.
Administrative services include human resources, telecommunications and data
processing, legal, accounting and compliance. The costs of such services to the
Company during 1997, 1996 and 1995 were $1,162,000, $690,000 and $584,000,
respectively.
Employees of the Company have also been provided with certain employee
benefits, including medical, dental, life and disability insurance under plans
maintained by Jefferies & Co., which have been charged to the Company based on
Jefferies & Co.'s actual costs. In addition, third party expenses including
telecommunication and quotation costs, floor brokerage, legal and accounting
fees, exchange fees and other insurance costs, including fidelity bond coverage
and directors and officers liability coverage, have been provided at cost.
The Company paid to Jefferies & Co. an aggregate of $247,000, $502,000 and
$432,000 for 1997, 1996 and 1995, respectively, as compensation to Jefferies &
Co.'s account executives for introducing customers to POSIT.
In addition, Jefferies & Co. has provided substantially all clearing
services to the Company. Aggregate costs of such services to the Company were
$9.3 million, $7.3 million and $4.6 million during 1997, 1996 and 1995,
respectively, included in transaction processing expenses.
Occupancy and equipment rental expense has been partially provided to the
Company at cost by Jefferies Group.
W & D Securities, Inc. performs certain execution services at the New York
Stock Exchange and other exchanges for the Company. In order to comply with
regulatory requirements of the NYSE that generally
34
<PAGE>
prohibit NYSE members and their affiliates from executing, as principal and, in
certain cases, as agent, transactions in NYSE-listed securities off the NYSE,
Jefferies Group gave up its formal legal control of W & D, effective January 1,
1983, by exchanging all of the W & D common stock owned by it for non-voting
preferred stock of W & D. In the event that Jefferies Group were to regain
ownership of such common stock, Jefferies Group believes that the NYSE would
assert that W & D would be in violation of the NYSE's rules unless similar
arrangements satisfactory to the NYSE were made with respect to the ownership of
the common stock. While the NYSE has generally approved the above arrangements,
there can be no assurance that it will not raise objections in the future. The
Company believes that it can make satisfactory alternative arrangements for
executing transactions in listed securities on the NYSE if it were precluded
from doing so through W & D. The cost of these execution services was $10.8
million, $6.5 million and $5.4 million in 1997, 1996 and 1995, respectively, and
is included in transaction processing expenses. Included in other general and
administrative expenses are fees paid to Jefferies International Limited of
$330,000 for various broker and administrative services, of which $330,000 was
reimbursed to the Company by its affiliate Global Trading. Included in revenues
are financing costs of $415,000 paid to Jefferies & Co. Also included in
revenues, are licensing fees paid by W & D Securities, Inc. amounting to
$150,000.
Jefferies & Co. executes trades in an agency capacity for certain of its
customers using ITG's services. Transaction fees from such trades were $3.1
million, $1.7 million and $1.1 million in 1997, 1996 and 1995, respectively, and
are included in the Company's revenues.
The Company believes all the foregoing transactions were on terms
substantially no less favorable to the Company than could have been obtained
from unaffiliated parties and that all costs of doing business have been
included. Amounts due from affiliates and amounts due to affiliates are
generally settled on a monthly basis.
(8) MARKET RISK AND CONCENTRATIONS OF CREDIT RISK
In the normal course of business, the Company is involved in the execution
of various customer securities transactions. Securities transactions are subject
to the risk of counter party or customer nonperformance. However, transactions
are collateralized by the underlying security, thereby reducing the associated
risk to changes in the market value of the security through settlement date.
The settlement of these transactions is not expected to have a material
effect upon the Company's financial statements.
(9) NET CAPITAL REQUIREMENT
ITG is subject to the Securities and Exchange Commission Uniform Net Capital
Rule (Rule 15c3-1), which requires the maintenance of minimum net capital. ITG
has elected to use the alternative method permitted by Rule 15c3-1, which
requires that ITG maintain minimum net capital, as defined, equal to $250,000 or
2% of aggregate debit balances arising from customer transactions, as defined.
At December 31, 1997, ITG had net capital of $35.0 million which was $34.8
million in excess of required net capital.
(10) ITGI STOCK OPTIONS
At December 31, 1997, the Company had a non-compensatory stock option plan.
Under the 1994 Stock Option and Long-term Incentive Plan, non-compensatory
options to purchase 3,650,000 shares of the Company's Common Stock are reserved
for issuance under the plan. Except for certain options granted in conjunction
with the Offering the majority of the options will vest in one-third increments
on the first, second, and third anniversaries of the date the options were
priced. Shares of Common Stock which are attributable to awards which have
expired, terminated or been canceled or forfeited during any
35
<PAGE>
calendar year are generally available for issuance or use in connection with
future awards during such calendar year. Options that have been granted under
the 1994 Stock Option and Long-Term Incentive Plan are exercisable on dates
ranging from May 1997 to November 2007. The Plan will remain in effect until
March 31, 2007, unless sooner terminated by the Board of Directors. After this
date, no further stock options shall be granted but previously granted stock
options shall remain outstanding in accordance with their applicable terms and
conditions, as stated in the Stock Option and Long-term Incentive Plan.
In June 1995, the Board of Directors adopted, subject to stockholder
approval, the Non-Employee Directors' Plan. The Non-Employee Directors' Plan
generally provides for an annual grant to each non-employee director of an
option to purchase 2,500 shares of Common Stock. In addition, the Non-Employee
Directors' Plan provides for the automatic grant to a non-employee director, at
the time he or she is initially elected, of a stock option to purchase 10,000
shares of Common Stock. Stock options granted under the Non-Employee Directors'
Plan are non-qualified stock options having an exercise price equal to the fair
market value of the Common Stock at the date of grant. All stock options become
exercisable three months after the date of grant. Stock options granted under
the Non-Employee Directors' Plan expire five years after the date of grant. A
total of 125,000 shares of Common Stock are reserved and available for issuance
under the Non-Employee Directors' Plan.
At the time of the Company's initial public offering in May 1994, stock
options to acquire an aggregate of 2,728,000 shares of Common Stock were granted
to officers and other employees of the Company. Of these options granted,
2,442,000 shares were 100% vested on May 4, 1994. In 1995, the Compensation
Committee of the Board of Directors determined that a value-neutral repricing of
such options would serve to provide enhanced incentives to officers and
employees of the Company. Accordingly, on the recommendation of the Compensation
Committee, the Company offered a stock option repricing program pursuant to
which all holders (options granted under the Non-Employee Directors' Plan were
not eligible for repricing) of outstanding stock options with an exercise price
of $13.00 per share were permitted to elect to exchange all or a portion of such
stock options for a smaller number of stock options to acquire shares of Common
Stock at exercise price of $13.00, $11.06 and $9.13 per share. The repricing
program was offered to option holders on a value neutral basis using the Black
Scholes option valuation model. In all, approximately 66% of the outstanding
stock options eligible for repricing were repriced at the election of the
holders of such options.
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its non-compensatory stock option plans. Accordingly, no
compensation costs have been recognized for its stock option plan. Had
compensation cost for the Company's stock option plans been determined
consistent with FASB Statement No. 123, the Company's net earnings and earnings
per share would have been reduced to the pro forma amounts indicated below
(dollars in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C> <C>
Net earnings........................................... As reported $ 26,917 $ 23,335 $ 14,905
Pro forma $ 23,375 $ 20,279 $ 11,899
Basic net earnings per share of common stock........... As reported $ 1.48 $ 1.28 $ 0.81
Pro forma $ 1.29 $ 1.11 $ 0.64
Diluted earnings per share common stock................ As reported $ 1.42 $ 1.26 $ 0.81
Pro forma $ 1.23 $ 1.09 $ 0.64
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black Scholes option valuation model with the following weighted average
assumptions used for grants in 1997 and 1996, respectively: zero dividend yield
for all years; risk free interest rates of 6.6, 6.1 and 6.3 percent; expected
volatility of 54, 49 and 51 percent; and expected lives of five, four and four
years.
36
<PAGE>
A summary of the status of the Company's stock option plan as of December
31, 1997 and 1996 and changes during the years ended on those dates is presented
below:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
- ---------------------------------------------- ---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.............. 2,311,059 $ 11.96 2,271,351 $ 11.82 2,731,678 $ 13.00
Granted....................................... 1,241,904 22.29 49,877 16.96 27,500 7.71
Exercised..................................... (94,249) 13.00 -- -- -- --
Conversion:
Surrendered upon conversion................. -- -- -- -- (478,646) 13.00
Converted from.............................. -- -- -- -- (870,976) 13.00
Converted to................................ -- -- -- -- 435,493 9.13
Converted to................................ -- -- -- -- 435,483 11.06
Forfeited..................................... (498) 13.00 (10,169) 13.00 (9,181) 13.00
---------- ----------- ---------- ----------- ---------- -----------
Outstanding at end of year.................... 3,458,216 $ 15.63 2,311,059 $ 11.96 2,271,351 $ 11.82
---------- ----------- ---------- ----------- ---------- -----------
---------- ----------- ---------- ----------- ---------- -----------
Options exercisable at year-end............... 1,737,923 $ 15.25 None None
Weighted average fair value per share of
options granted during the year............. $ 10.76 $ 7.93 $ 3.48
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------- --------------------------
WEIGHTED NUMBER
NUMBER AVERAGE WEIGHTED EXERCISABLE WEIGHTED
OUTSTANDING AT REMAINING AVERAGE AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICES 1997 LIFE (YEARS) PRICE 1997 PRICE
- --------------------------------------------------- -------------- --------------- ----------- ------------- -----------
<C> <S> <C> <C> <C> <C> <C>
$ 7.33 10.00................................... 455,603 2.9 $ 9.07 9,934 $ 7.90
11.00 15.00................................... 1,728,332 1.7 12.52 1,296,008 13.01
16.00 20.00................................... 167,177 4.4 19.23 12,377 18.43
21.00 25.00................................... 1,019,604 4.1 22.21 419,604 22.25
26.00 27.80................................... 87,500 9.8 27.60 -- --
-------------- -------------
$ 7.33 27.80................................... 3,458,216 2.9 $ 15.63 1,737,923 $ 15.25
-------------- -------------
-------------- -------------
</TABLE>
Although the 1994 Plan allows for the granting of performance-based stock
options and restricted stock awards, no such options were granted during 1997,
1996 and 1995 and no such options were outstanding at December 31, 1997, 1996
and 1995.
Restricted stock of 24,219 shares was granted in 1997 as part of the
Company's settlement for its equity investment in The Long View Group. The
restriction period is for one year.
In January of 1997, the Company granted to Scott P. Mason, President and
CEO, a non-qualified stock option to acquire 1,000,000 shares of Common Stock of
the Company, having an exercise price of $22.175. On May 4, 1997, 200,000 of
these options became exercisable and an additional 200,000 shares became
exercisable on December 10, 1997. Furthermore, 200,000 shares will become
exercisable on each of December 10, 1998, 1999 and 2000, the anniversary date of
Scott P. Mason's employment contract execution. Such options granted were
approved by the Compensation Committee of the Board of Directors in March 1997.
The options expire in January 2002.
37
<PAGE>
(11) INTEREST
Included in revenues is interest income of $498,000, $571,000 and $46,000
for 1997, 1996 and 1995, respectively.
Included in other general and administrative and transaction processing
expenses is interest expense totalling $146,000, $223,000 and $53,000 for 1997,
1996 and 1995, respectively.
(12) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 1997 and 1996
consisted of the following;
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Accounts payable and accrued expenses................................. $ 4,275 $ 4,199
Accrued soft dollar expenses.......................................... 3,125 2,104
Accrued Bonus expense................................................. 2,849 1,926
Accrued rent expense.................................................. 2,276 119
Deferred revenues..................................................... 200 300
--------- ---------
Total................................................................. $ 12,725 $ 8,648
--------- ---------
--------- ---------
</TABLE>
(13) LEASE COMMITMENTS
In March 1994, the Company entered into lease and sublease agreements with
Jefferies Group, Jefferies & Co. and third parties for certain offices and
equipment, which expire at various dates through 2005. Rent expense for the
years ended December 31, 1997, 1996 and 1995 was $2.6 million, $1.9 million and
$1.2 million, respectively. Minimum future rentals under non cancelable
operating leases follow (dollars in thousands):
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1998............................................................... $ 2,569
1999............................................................... 2,577
2000............................................................... 2,592
2001............................................................... 2,631
2002............................................................... 2,631
Thereafter......................................................... 25,353
---------
Total.............................................................. $ 38,353
---------
---------
</TABLE>
38
<PAGE>
(14) EARNINGS PER SHARE
Net earnings per share of common stock is based upon an adjusted weighted
average number of shares of common stock outstanding. The average number of
outstanding shares for the years ended December 31, 1997, 1996 and 1995 were
18.2 million, 18.3 million and 18.5 million, respectively.
The following is a reconciliation of the basic and diluted earnings per
share computations for the years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net earnings for basic and diluted earnings per share.................. $ 26,917 $ 23,335 $ 14,905
--------- --------- ---------
--------- --------- ---------
Shares of common stock and common stock equivalents:
Average number of common shares...................................... 18,178 18,284 18,473
--------- --------- ---------
Average shares used in basic computation............................. 18,178 18,284 18,473
Effect of dilutive securities -- options............................. 762 302 --
--------- --------- ---------
Average shares used in diluted....................................... 18,940 18,586 18,473
--------- --------- ---------
--------- --------- ---------
Earnings per share:
Basic................................................................ $ 1.48 $ 1.28 $ 0.81
--------- --------- ---------
--------- --------- ---------
Diluted.............................................................. $ 1.42 $ 1.26 $ 0.81
--------- --------- ---------
--------- --------- ---------
</TABLE>
(15) UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION
The following tables set forth certain unaudited financial data for the
Company's quarterly operations in 1997, 1996 and 1995. The following information
has been prepared on the same basis as the annual information presented
elsewhere in this report and, in the opinion of management, includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information for the quarterly periods presented. The
operating results for any quarter are not necessarily indicative of results for
any future period.
39
<PAGE>
INVESTMENT TECHNOLOGY GROUP, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------- -------------------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenue..................... $ 36,272 $ 33,437 $ 36,679 $ 30,654 $ 29,892 $ 28,684 $ 26,313
Expenses:
Compensation and employee
benefits...................... 8,999 7,599 7,007 6,874 6,947 6,225 6,006
Transaction processing.......... 5,718 5,110 5,682 4,903 3,922 4,340 3,776
Software royalties.............. 2,579 2,306 2,581 2,382 2,283 2,272 2,022
Occupancy and equipment......... 2,814 2,521 2,010 1,859 1,928 1,899 1,257
Consulting...................... 487 585 574 371 494 452 692
Telecommunications and data
processing services........... 1,988 1,504 2,156 957 1,396 1,217 925
Other general and
administrative................ 3,039 2,486 2,744 1,947 1,614 2,072 1,783
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses.............. 25,624 22,111 22,754 19,293 18,584 18,477 16,461
----------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings before income tax
expense.......................... 10,648 11,326 13,925 11,361 11,308 10,207 9,852
Income tax expense................ 4,739 4,857 5,917 4,830 4,813 4,330 4,285
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net earnings...................... $ 5,909 $ 6,469 $ 8,008 $ 6,531 $ 6,495 $ 5,877 $ 5,567
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Basic net earnings per share of
common stock..................... $ 0.32 $ 0.36 $ 0.44 $ 0.36 $ 0.36 $ 0.32 $ 0.30
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Diluted net earnings per share of
common stock..................... $ 0.31 $ 0.34 $ 0.43 $ 0.35 $ 0.35 $ 0.32 $ 0.30
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Basic weighed average shares
outstanding...................... 18,188 18,144 18,128 18,254 18,255 18,256 18,262
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Diluted weighted average shares
and common stock equivalents
outstanding...................... 19,107 19,104 18,702 18,809 18,727 18,558 18,572
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------
FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Revenue..................... $ 26,667 $ 19,933 $ 19,405 $ 16,700 $ 16,343
Expenses:
Compensation and employee
benefits...................... 5,869 4,579 4,754 3,529 3,542
Transaction processing.......... 3,699 3,221 2,707 2,727 2,206
Software royalties.............. 2,221 1,775 1,565 1,264 1,381
Occupancy and equipment......... 1,027 992 913 883 818
Consulting...................... 854 442 298 396 563
Telecommunications and data
processing services........... 1,251 853 864 676 486
Other general and
administrative................ 2,112 1,729 1,432 1,332 1,566
----------- ----------- ----------- ----------- -----------
Total expenses.............. 17,033 13,591 12,533 10,807 10,562
----------- ----------- ----------- ----------- -----------
Earnings before income tax
expense.......................... 9,634 6,342 6,872 5,893 5,781
Income tax expense................ 4,238 2,844 1,990 2,543 2,606
----------- ----------- ----------- ----------- -----------
Net earnings...................... $ 5,396 $ 3,498 $ 4,882 $ 3,350 $ 3,175
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Basic net earnings per share of
common stock..................... $ 0.29 $ 0.19 $ 0.26 $ 0.18 $ 0.17
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Diluted net earnings per share of
common stock..................... $ 0.29 $ 0.19 $ 0.26 $ 0.18 $ 0.17
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Basic weighed average shares
outstanding...................... 18,364 18,390 18,429 18,531 18,543
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Diluted weighted average shares
and common stock equivalents
outstanding...................... 18,435 18,391 18,429 18,531 18,543
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
Earnings per share for quarterly periods are based on average common shares
outstanding in individual quarters; thus, the sum of earnings per share of the
quarters may not equal the amounts reported for the full year. Earnings per
share for prior periods have been restated to conform with Statement of
Financial Accounting Standards No. 128 EARNINGS PER SHARE.
40
<PAGE>
INVESTMENT TECHNOLOGY GROUP, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------- -------------------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- ----------- ----------- ----------- -----------
(AS A PERCENTAGE OF TOTAL REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C>
Total Revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Compensation and employee
benefits...................... 24.8 22.7 19.1 22.4 23.2 21.7 22.8
Transaction processing.......... 15.8 15.3 15.5 16.0 13.1 15.1 14.4
Software royalties.............. 7.1 6.9 7.0 7.8 7.6 7.9 7.7
Occupancy and equipment......... 7.8 7.5 5.5 6.1 6.4 6.6 4.8
Consulting...................... 1.3 1.7 1.6 1.2 1.7 1.6 2.6
Telecommunications and data
processing services........... 5.5 4.5 5.9 3.1 4.7 4.2 3.5
Other general and
administrative................ 8.4 7.4 7.5 6.4 5.4 7.2 6.8
----- ----- ----- ----- ----- ----- -----
Total expenses.............. 70.7 66.0 62.1 63.0 62.1 64.3 62.6
----- ----- ----- ----- ----- ----- -----
Earnings before income tax
expense......................... 29.3 34.0 37.9 37.0 37.9 35.7 37.4
Income tax expense................ 13.0 14.7 16.1 15.7 16.2 15.2 16.2
----- ----- ----- ----- ----- ----- -----
Net earnings...................... 16.3% 19.3% 21.8% 21.3% 21.7% 20.5% 21.2%
----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- -----
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------
FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Compensation and employee
benefits...................... 22.0 23.0 24.5 21.1 21.7
Transaction processing.......... 13.9 16.2 14.0 16.3 13.5
Software royalties.............. 8.3 8.9 8.1 7.6 8.5
Occupancy and equipment......... 3.9 5.0 4.7 5.3 5.0
Consulting...................... 3.2 2.2 1.5 2.4 3.4
Telecommunications and data
processing services........... 4.7 4.3 4.5 4.0 3.0
Other general and
administrative................ 7.9 8.7 7.4 8.0 9.6
----- ----- ----- ----- -----
Total expenses.............. 63.9 68.3 64.7 64.7 64.7
----- ----- ----- ----- -----
Earnings before income tax
expense......................... 36.1 31.7 35.3 35.3 35.3
Income tax expense................ 15.9 14.2 10.1 15.2 15.9
----- ----- ----- ----- -----
Net earnings...................... 20.2% 17.5% 25.2% 20.1% 19.4%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
41
<PAGE>
(16) JEFFERIES GROUP AND THE COMPANY ANNOUNCE INTENTION TO CONSIDER SEPARATING
INTO TWO INDEPENDENT COMPANIES
On March 17, 1998, Jefferies Group and the Company jointly announced that
they are considering the separation of Jefferies & Co. and other Jefferies Group
subsidiaries from the Company through a spin-off.
If the separation is completed, Jefferies Group shareholders will own 100%
of JEFCO and approximately 82.3% of the Company. The public Company shareholders
will continue to own 17.7% of the Company. (The Company percentage ownership
interests could change slightly as a result of the Company's stock repurchases
or issuances before the transaction closing date.) The spin-off will be
accomplished by a tax-free distribution of 100% of the shares of a new company,
JEFCO, to Jefferies Group shareholders. Jefferies Group's 15 million shares of
the Company would then be its only asset. The spin-off would be followed
immediately by a tax-free merger of Jefferies Group and the Company, with the
Company's public shareholders receiving shares of Jefferies Group. Jefferies
Group would then be renamed Investment Technology Group, Inc.
The spin-off and restructuring transactions are contingent on a number of
factors, including receipt of all Board of Directors and shareholder approvals
of Jefferies Group and the Company, receipt of a favorable tax ruling from the
Internal Revenue Service and other required regulatory and contractual
approvals.
42
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants reportable
herein.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this item will be contained in the Proxy
Statement for the 1998 Annual Meeting of Stockholders, which is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item will be contained in the Proxy
Statement for the 1998 Annual Meeting of Stockholders, which is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item will be contained in the Proxy
Statement for the 1998 Annual Meeting of Stockholders, which is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item will be contained in the Proxy
Statement for the 1998 Annual Meeting of Stockholders, which is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
Included in Part II of this report:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditor's Report........................................................... 23
Consolidated Statement of Operations................................................... 24
Consolidated Statement of Financial Condition.......................................... 25
Consolidated Statement of Changes in Stockholders' Equity.............................. 26
Consolidated Statement of Cash Flows................................................... 27
Notes to Consolidated Financial Statements............................................. 28
</TABLE>
(a)(2) SCHEDULES
Schedules are omitted because the required information either is not
applicable or is included in the financial statements or the notes thereto.
(a)(3) EXHIBITS
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit
3.1 to Registration Statement Number 33-76474 on Form S-1 as declared effective by
the Securities and Exchange Commission on May 4, 1994 (the "Registration
Statement")).
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to Registration
Statement).
4.1 Form of Certificate for Common Stock of the Company (incorporated by reference to
Exhibit 4.1 to Registration Statement).
</TABLE>
43
<PAGE>
<TABLE>
<S> <C>
10.1 Joint Venture Agreement, dated October 1, 1987, between Jefferies & Company, Inc.
and BARRA, Inc. (formerly Barr Rosenberg Associates, Inc.) (incorporated by
reference to Exhibit 10.1.1 to Registration Statement).
10.1.1 Exclusive Software License Agreement, dated October 1, 1987, between the POSIT
Joint Venture and Jefferies & Company, Inc. (incorporated by reference to Exhibit
10.1.2 to Registration Statement).
10.1.2 Amendment No. 1 to Exclusive Software License Agreement, dated August 1, 1990,
between the POSIT Joint Venture and Jefferies & Company, Inc. (incorporated by
reference to Exhibit 10.1.3 to Registration Statement).
10.1.3 Consent of BARRA, Inc. to the assignment to the Company of the interests of
Jefferies & Company, Inc. in the POSIT Joint Venture referenced in item 10.1.1 and
rights in the Software License Agreement referenced in item 10.1.2 (incorporated
by reference to Exhibit 10.1.4 to Registration Statement).
10.1.4 Joint Venture Agreement, dated May 31, 1990, between BARRA International (U.K.),
Ltd. and Jefferies Global Trading Incorporated (incorporated by reference to
Exhibit 10.1.5 to Registration Statement).
10.1.5 Exclusive Software License Agreement, dated May 31, 1990, between the Global POSIT
Joint Venture and Jefferies International Limited (incorporated by reference to
Exhibit 10.1.6 to Registration Statement).
10.1.6 Consent of BARRA International (U.K.), Ltd. to the assignment to the Company of
the interests of Jefferies Global Trading Incorporated in the Global POSIT Joint
Venture referenced in item 10.1.5 (incorporated by reference to Exhibit 10.1.7 to
Registration Statement).
10.1.7 Form of QuantEX Software and Hardware License Agreement (incorporated by reference
to Exhibit 10.3.3 to Registration Statement).
10.2 Tax Sharing Agreement, dated March 15, 1994 between Jefferies Group, Inc. and the
Company (incorporated by reference to Exhibit 10.2.1 to Registration Statement).
10.2.1 Service Agreement, dated March 15, 1994, between Jefferies & Company, Inc. and the
Company (incorporated by reference to Exhibit 10.2.2 to Registration Statement).
10.2.2 Service Agreement, dated March 15, 1994, between W & D Securities, Inc. and the
Company (incorporated by reference to Exhibit 10.2.3 to Registration Statement).
10.2.3 Fully Disclosed Clearing Agreement, dated March 15, 1994, between Jefferies &
Company, Inc. and the Company (incorporated by reference to Exhibit 10.2.4 to
Registration Statement).
10.2.4 Intercompany Borrowing Agreement between Jefferies Group, Inc. and the Company
(incorporated by reference to Exhibit 10.2.5 to Registration Statement).
10.2.5 Development Rights Agreement, dated March 15, 1994, between Jefferies Group, Inc.
and the Company (incorporated by reference to Exhibit 10.2.6 to Registration
Statement).
10.2.6 Revenue Sharing Agreement, dated March 15, 1994, between the Company and Jefferies
& Company, Inc. (incorporated by reference to Exhibit 10.2.7 to Registration
Statement).
10.2.7 Equipment Lease Agreement, dated March 15, 1994, between the Company, Jefferies &
Company, Inc. and Jefferies Group, Inc. (incorporated by reference to Exhibit
10.2.8 to Registration Statement).
10.2.8 Form of Promissory Note between the Company and Jefferies Group, Inc.
(incorporated by reference to Exhibit 10.2.9 to Registration Statement).
10.3 Employment Agreement between the Company, ITG Inc. and Raymond L. Killian, Jr.
(incorporated by reference to Exhibit 10.3.2 to Registration Statement).
</TABLE>
44
<PAGE>
<TABLE>
<S> <C>
10.3.1 Agreement to Terminate Employment Agreement and Stock Options between the Company,
Raymond L. Killian, Jr. and Jefferies Group, Inc. (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 24,
1994).
10.3.1A Amendment No. 2 to Employment Agreement between Raymond L. Killian, Jr., the
Company and ITG Inc. (incorporated by reference to Exhibit 10.3.2A to the Annual
Report on Form 10-K for the year ended December 31, 1996).
10.3.2 Employment Agreement between the Company and Scott P. Mason (incorporated by
reference to Exhibit 10.3.18 to the Annual Report on Form 10-K for the year ended
December 31, 1996).
10.3.2A Stock Option Agreement between the Company and Scott P. Mason (incorporated by
reference to Exhibit 10.3.3 to Registration Statement).
10.3.2B Agreement to Terminate Stock Option between the Company, Scott P. Mason and
Jefferies Group, Inc. (incorporated by reference to Exhibit 10.13 to the Quarterly
Report on Form 10-Q for the quarter ended June 24, 1994).
10.3.3 Employment Agreement between the Company, ITG Inc. and Dale A. Prouty
(incorporated by reference to Exhibit 10.3.3 to Registration Statement).
10.3.3A Agreement to Terminate Employment Agreement, Phantom Equity Rights and Profits
Bonus Rights between the Company, Jefferies Group, Inc., Jefferies & Company, Inc.
and Dale A. Prouty (incorporated by reference to Exhibit 10.2 to the Quarterly
Report on Form 10-Q for the quarter ended June 24, 1994).
10.3.3B Amendment No. 2 to Employment Agreement between the Company, ITG Inc. and Dale A.
Prouty (incorporated by reference to Exhibit 10.3.18 to the Annual Report on Form
10-K for the year ended December 31, 1996).
10.3.4 Form of Employment Agreement between the Company and Joshua D. Rose (incorporated
by reference to Exhibit 10.3.4 to Registration Statement).
10.3.4A Agreement to Modify Bonus Share between the Company and Joshua D. Rose
(incorporated by reference to Exhibit 10.3.13 to Registration Statement Number
33-76474 on Amendment Number 3 to Form S-1 as filed with the Securities and
Exchange Commission on April 21, 1994).
10.3.5 Employment Agreement between the Company, ITG Inc. and Yossef A. Beinart
(incorporated by reference to Exhibit 10.3.6 to Registration Statement Number
33-76474 on Amendment Number 3 to Form S-1 as filed with the Securities and
Exchange Commission on May 2, 1994).
10.3.5A Agreement to Terminate Phantom Equity Rights and Profits Bonus Rights between the
Company, Jefferies Group, Inc., Jefferies & Company, Inc. and Yossef Beinart
(incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q
for the quarter ended June 24, 1994).
10.3.6 Employment Agreement between the Company, ITG Inc. and Robert K. Laible
(incorporated by reference to Exhibit 10.3.5 to Registration Statement Number
33-76474 on Amendment Number 3 to Form S-1 as filed with the Securities and
Exchange Commission on May 2, 1994).
10.3.6A Agreement to Modify Bonus Share between the Company and Robert K. Laible
(incorporated by reference to Exhibit 10.3.12 to Registration Statement Number
33-76474 on Amendment Number 3 to Form S-1 as filed with the Securities and
Exchange Commission on April 21, 1994).
10.3.7 Amendment to Form of Employment Agreement between the Company, ITG Inc. and Senior
Vice Presidents Electing to Reprice Stock Options (incorporated by reference to
Exhibit 10.3.4A to the Annual Report on Form 10-K for the year ending December 31,
1996).
</TABLE>
45
<PAGE>
<TABLE>
<S> <C>
10.4 1994 Stock Option and Long-Term Incentive Plan of the Company (incorporated by
reference to Exhibit 10.3.1 to Registration Statement).
10.4.1A Amended and restated 1994 Stock Option and Long-Term Incentive Plan (incorporated
by reference to Exhibit 10.3.1B to the Annual Report on Form 10-K for the year
ended December 31, 1996).
10.4.1B Amended Non-Employee Directors' Stock Option Plan (incorporated by reference to
Exhibit 10.3.1A to the Annual Report on Form 10-K for the year ended December 31,
1996).
10.4.2 Capital Accumulation Plan for key employees of Jefferies Group, Inc. (incorporated
by reference to Exhibit 10.3.7 to Registration Statement).
10.4.3 Form of Stock Option Agreement between the Company and certain employees of the
Company (incorporated by reference to Exhibit 10.3.3 to Registration Statement).
10.4.4 ITG Incentive Compensation Plan (incorporated by reference to Exhibit 10.3.16 to
Registration Statement Number 33-76474 on Amendment Number 3 to Form S-1 as filed
with the Securities and Exchange Commission on April 21, 1994).
10.4.5 Phantom Equity Agreement and Profits Bonus Rights Plan (incorporated by reference
to Exhibit 10.3.17 to Registration Statement Number 33-76474 on Amendment Number 3
to Form S-1 as filed with the Securities and Exchange Commission on April 21,
1994).
10.4.6* Employee Stock Purchase Plan.
10.5 Lease, dated July 11, 1990, between AEW/LBA Acquisition Co. LLC (as successor to
400 Corporate Pointe, Ltd.) and Integrated Analytics Corporation, as assigned by
Integrated Analytics Corporation to the Company (incorporated by reference to
Exhibit 10.3.3 to Registration Statement).
10.5.1 First Amendment to Lease, dated as of June 1, 1995, between AEW/LBA Acquisition
Co. LLC (as successor to 400 Corporate Pointe, Ltd.) and the Company (incorporated
by reference to Exhibit 10.5.7 to Annual Report of Form 10-K for the year ended
December 31, 1996).
10.5.2* Second Amendment to Lease, dated as of December 5, 1996, between Arden Realty
Limited Partnership and the Company.
10.5.3* Lease, dated October 4, 1996, between Spartan Madison Corp. and the Company.
10.5.4* First Supplemental Agreement, dated as of January 29, 1997, between Spartan
Madison Corp. and the Company.
10.5.5* Second Supplemental Agreement, dated as of November 25, 1997, between Spartan
Madison Corp. and the Company.
10.5.6* Lease, dated March 10, 1995, between Boston Wharf Co. and the Company.
23* Consent of KPMG Peat Marwick LLP.
27.1* Financial Data Schedule.
27.2* Financial Data Schedule.
27.3* Financial Data Schedule.
</TABLE>
- ------------------------
* Filed herewith
(B) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K for the quarter ended December 31,
1997.
(C) INDEX TO EXHIBITS
See list of exhibits at Item 14(a)(3) above and exhibits following.
46
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
INVESTMENT TECHNOLOGY GROUP, INC.
By: /s/ RAYMOND L. KILLIAN, JR.
-----------------------------------------
Raymond L. Killian, Jr.
CHAIRMAN OF THE BOARD
</TABLE>
Dated: March 18, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ RAYMOND L. KILLIAN, JR.
- ------------------------------ Chairman of the Board and March 18, 1998
Raymond L. Killian, Jr. Director
President, Chief Executive
/s/ SCOTT P. MASON Officer and Director
- ------------------------------ (Principal Executive March 18, 1998
Scott P. Mason Officer)
Senior Vice President and
/s/ JOHN R. MACDONALD Chief Financial Officer
- ------------------------------ (Principal Financial and March 18, 1998
John R. MacDonald Accounting Officer)
/s/ FRANK E. BAXTER
- ------------------------------ Director March 18, 1998
Frank E. Baxter
/s/ RICHARD G. DOOLEY
- ------------------------------ Director March 18, 1998
Richard G. Dooley
/s/ WILLIAM I JACOBS
- ------------------------------ Director March 18, 1998
William I Jacobs
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ ROBERT L. KING
- ------------------------------ Director March 18, 1998
Robert L. King
/s/ MICHAEL L. KLOWDEN
- ------------------------------ Director March 18, 1998
Michael L. Klowden
/s/ DALE A. PROUTY
- ------------------------------ Director March 18, 1998
Dale A. Prouty
/s/ MARK A. WOLFSON
- ------------------------------ Director March 18, 1998
Mark A. Wolfson
</TABLE>
48
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to
Registration Statement Number 33-76474 on Form S-1 as declared effective by the
Securities and Exchange Commission on May 4, 1994 (the "Registration Statement")).
3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to Registration
Statement).
4.1 Form of Certificate for Common Stock of the Company (incorporated by reference to Exhibit
4.1 to Registration Statement).
10.1 Joint Venture Agreement, dated October 1, 1987, between Jefferies & Company, Inc. and
BARRA, Inc. (formerly Barr Rosenberg Associates, Inc.) (incorporated by reference to
Exhibit 10.1.1 to Registration Statement).
10.1.1 Exclusive Software License Agreement, dated October 1, 1987, between the POSIT Joint
Venture and Jefferies & Company, Inc. (incorporated by reference to Exhibit 10.1.2 to
Registration Statement).
10.1.2 Amendment No. 1 to Exclusive Software License Agreement, dated August 1, 1990, between
the POSIT Joint Venture and Jefferies & Company, Inc. (incorporated by reference to
Exhibit 10.1.3 to Registration Statement).
10.1.3 Consent of BARRA, Inc. to the assignment to the Company of the interests of Jefferies &
Company, Inc. in the POSIT Joint Venture referenced in item 10.1.1 and rights in the
Software License Agreement referenced in item 10.1.2 (incorporated by reference to
Exhibit 10.1.4 to Registration Statement).
10.1.4 Joint Venture Agreement, dated May 31, 1990, between BARRA International (U.K.), Ltd. and
Jefferies Global Trading Incorporated (incorporated by reference to Exhibit 10.1.5 to
Registration Statement).
10.1.5 Exclusive Software License Agreement, dated May 31, 1990, between the Global POSIT Joint
Venture and Jefferies International Limited (incorporated by reference to Exhibit 10.1.6
to Registration Statement).
10.1.6 Consent of BARRA International (U.K.), Ltd. to the assignment to the Company of the
interests of Jefferies Global Trading Incorporated in the Global POSIT Joint Venture
referenced in item 10.1.5 (incorporated by reference to Exhibit 10.1.7 to Registration
Statement).
10.1.7 Form of QuantEX Software and Hardware License Agreement (incorporated by reference to
Exhibit 10.3.3 to Registration Statement).
10.2 Tax Sharing Agreement, dated March 15, 1994 between Jefferies Group, Inc. and the Company
(incorporated by reference to Exhibit 10.2.1 to Registration Statement).
10.2.1 Service Agreement, dated March 15, 1994, between Jefferies & Company, Inc. and the
Company (incorporated by reference to Exhibit 10.2.2 to Registration Statement).
10.2.2 Service Agreement, dated March 15, 1994, between W & D Securities, Inc. and the Company
(incorporated by reference to Exhibit 10.2.3 to Registration Statement).
10.2.3 Fully Disclosed Clearing Agreement, dated March 15, 1994, between Jefferies & Company,
Inc. and the Company (incorporated by reference to Exhibit 10.2.4 to Registration
Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
10.2.4 Intercompany Borrowing Agreement between Jefferies Group, Inc. and the Company
(incorporated by reference to Exhibit 10.2.5 to Registration Statement).
10.2.5 Development Rights Agreement, dated March 15, 1994, between Jefferies Group, Inc. and the
Company (incorporated by reference to Exhibit 10.2.6 to Registration Statement).
10.2.6 Revenue Sharing Agreement, dated March 15, 1994, between the Company and Jefferies &
Company, Inc. (incorporated by reference to Exhibit 10.2.7 to Registration Statement).
10.2.7 Equipment Lease Agreement, dated March 15, 1994, between the Company, Jefferies &
Company, Inc. and Jefferies Group, Inc. (incorporated by reference to Exhibit 10.2.8 to
Registration Statement).
10.2.8 Form of Promissory Note between the Company and Jefferies Group, Inc. (incorporated by
reference to Exhibit 10.2.9 to Registration Statement).
10.3 Employment Agreement between the Company, ITG Inc. and Raymond L. Killian, Jr.
(incorporated by reference to Exhibit 10.3.2 to Registration Statement).
10.3.1 Agreement to Terminate Employment Agreement and Stock Options between the Company,
Raymond L. Killian, Jr. and Jefferies Group, Inc. (incorporated by reference to Exhibit
10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 24, 1994).
10.3.1A Amendment No. 2 to Employment Agreement between Raymond L. Killian, Jr., the Company and
ITG Inc. (incorporated by reference to Exhibit 10.3.2A to the Annual Report on Form 10-K
for the year ended December 31, 1996).
10.3.2 Employment Agreement between the Company and Scott P. Mason (incorporated by reference to
Exhibit 10.3.18 to the Annual Report on Form 10-K for the year ended December 31, 1996).
10.3.2A Stock Option Agreement between the Company and Scott P. Mason (incorporated by reference
to Exhibit 10.3.3 to Registration Statement).
10.3.2B Agreement to Terminate Stock Option between the Company, Scott P. Mason and Jefferies
Group, Inc. (incorporated by reference to Exhibit 10.13 to the Quarterly Report on Form
10-Q for the quarter ended June 24, 1994).
10.3.3 Employment Agreement between the Company, ITG Inc. and Dale A. Prouty (incorporated by
reference to Exhibit 10.3.3 to Registration Statement).
10.3.3A Agreement to Terminate Employment Agreement, Phantom Equity Rights and Profits Bonus
Rights between the Company, Jefferies Group, Inc., Jefferies & Company, Inc. and Dale A.
Prouty (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q
for the quarter ended June 24, 1994).
10.3.3B Amendment No. 2 to Employment Agreement between the Company, ITG Inc. and Dale A. Prouty
(incorporated by reference to Exhibit 10.3.18 to the Annual Report on Form 10-K for the
year ended December 31, 1996).
10.3.4 Form of Employment Agreement between the Company and Joshua D. Rose (incorporated by
reference to Exhibit 10.3.4 to Registration Statement).
10.3.4A Agreement to Modify Bonus Share between the Company and Joshua D. Rose (incorporated by
reference to Exhibit 10.3.13 to Registration Statement Number 33-76474 on Amendment
Number 3 to Form S-1 as filed with the Securities and Exchange Commission on April 21,
1994).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
10.3.5 Employment Agreement between the Company, ITG Inc. and Yossef A. Beinart (incorporated by
reference to Exhibit 10.3.6 to Registration Statement Number 33-76474 on Amendment Number
3 to Form S-1 as filed with the Securities and Exchange Commission on May 2, 1994).
10.3.5A Agreement to Terminate Phantom Equity Rights and Profits Bonus Rights between the
Company, Jefferies Group, Inc., Jefferies & Company, Inc. and Yossef Beinart
(incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the
quarter ended June 24, 1994).
10.3.6 Employment Agreement between the Company, ITG Inc. and Robert K. Laible (incorporated by
reference to Exhibit 10.3.5 to Registration Statement Number 33-76474 on Amendment Number
3 to Form S-1 as filed with the Securities and Exchange Commission on May 2, 1994).
10.3.6A Agreement to Modify Bonus Share between the Company and Robert K. Laible (incorporated by
reference to Exhibit 10.3.12 to Registration Statement Number 33-76474 on Amendment
Number 3 to Form S-1 as filed with the Securities and Exchange Commission on April 21,
1994).
10.3.7 Amendment to Form of Employment Agreement between the Company, ITG Inc. and Senior Vice
Presidents Electing to Reprice Stock Options (incorporated by reference to Exhibit
10.3.4A to the Annual Report on Form 10-K for the year ending December 31, 1996).
10.4 1994 Stock Option and Long-Term Incentive Plan of the Company (incorporated by reference
to Exhibit 10.3.1 to Registration Statement).
10.4.1A Amended and restated 1994 Stock Option and Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.3.1B to the Annual Report on Form 10-K for the year ended
December 31, 1996).
10.4.1B Amended Non-Employee Directors' Stock Option Plan (incorporated by reference to Exhibit
10.3.1A to the Annual Report on Form 10-K for the year ended December 31, 1996).
10.4.2 Capital Accumulation Plan for key employees of Jefferies Group, Inc. (incorporated by
reference to Exhibit 10.3.7 to Registration Statement).
10.4.3 Form of Stock Option Agreement between the Company and certain employees of the Company
(incorporated by reference to Exhibit 10.3.3 to Registration Statement).
10.4.4 ITG Incentive Compensation Plan (incorporated by reference to Exhibit 10.3.16 to
Registration Statement Number 33-76474 on Amendment Number 3 to Form S-1 as filed with
the Securities and Exchange Commission on April 21, 1994).
10.4.5 Phantom Equity Agreement and Profits Bonus Rights Plan (incorporated by reference to
Exhibit 10.3.17 to Registration Statement Number 33-76474 on Amendment Number 3 to Form
S-1 as filed with the Securities and Exchange Commission on April 21, 1994).
10.4.6* Employee Stock Purchase Plan.
10.5 Lease, dated July 11, 1990, between AEW/LBA Acquisition Co. LLC (as successor to 400
Corporate Pointe, Ltd.) and Integrated Analytics Corporation, as assigned by Integrated
Analytics Corporation to the Company (incorporated by reference to Exhibit 10.3.3 to
Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
10.5.1 First Amendment to Lease, dated as of June 1, 1995, between AEW/LBA Acquisition Co. LLC
(as successor to 400 Corporate Pointe, Ltd.) and the Company (incorporated by reference
to Exhibit 10.5.7 to Annual Report of Form 10-K for the year ended December 31, 1996).
10.5.2* Second Amendment to Lease, dated as of December 5, 1996, between Arden Realty Limited
Partnership and the Company.
10.5.3* Lease, dated October 4, 1996, between Spartan Madison Corp. and the Company.
10.5.4* First Supplemental Agreement, dated as of January 29, 1997, between Spartan Madison Corp.
and the Company.
10.5.5* Second Supplemental Agreement, dated as of November 25, 1997, between Spartan Madison
Corp. and the Company.
10.5.6* Lease, dated March 10, 1995, between Boston Wharf Co. and the Company.
23* Consent of KPMG Peat Marwick LLP.
27.1* Financial Data Schedule.
27.2* Financial Data Schedule.
27.3* Financial Data Schedule.
</TABLE>
- ------------------------
* Filed herewith
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EXHIBIT 10.4.6
INVESTMENT TECHNOLOGY GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of this Employee Stock Purchase Plan (the
"Plan") of Investment Technology Group, Inc. (the "Company") is to encourage
stock ownership by employees of the Company and its Subsidiaries and thereby
provide employees with an incentive to contribute to the profitability and
success of the Company, and to provide a benefit that will assist the Company
in competing to attract and retain employees of high quality. The Plan,
which is intended to qualify as an "employee stock purchase plan" meeting the
requirements of Section 423 of the Code, is for the exclusive benefit of
eligible employees of the Company and its Subsidiaries.
2. DEFINITIONS. For purposes of the Plan, in addition to the terms
defined in Section 1, terms are defined as set forth below:
(a) "Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of investing in Stock and
engaging in other transactions permitted under the Plan.
(b) "Administrator" means the person or persons designated to
administer the Plan under Section 3(a).
(c) "Average Offering Period Fair Market Value," unless otherwise
required by an applicable provision of the Code, for any Offering Period
means the mean of the closing bid/ask prices of the Common Stock as reported
on the Nasdaq National Market, averaged over the twelve payroll payment dates
of the Company that occur during the Offering Period; provided, however, that
at any time that the principal trading market for Common Stock is a national
securities exchange, such value shall be based on closing sales prices
averaged over such twelve trading days reported on the composite tape
covering securities listed on such exchange; and provided further that if a
payroll payment date is not a day on which the securities markets are open,
reference shall be made to the trading day immediately prior to such payroll
payment date.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code will be deemed to
include successor provisions thereto and regulations thereunder.
(f) "Custodian" means Boston EquiServe or such successor thereto
as may be appointed by the Board.
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(g) "Earnings" means that portion of a Participant's compensation
which constitutes salary, bonus or overtime pay under the payroll system of
the Company and its Subsidiaries and payable to a Participant during a given
pay period.
(h) "Enrollment Date" means the first day of each Offering Period.
(i) "Fair Market Value," unless otherwise required by an
applicable provision of the Code, as of any date means the mean of the
closing bid/ask prices of the Common Stock as reported on the Nasdaq National
Market, determined on a daily basis and averaged over the day as of which the
valuation is be made and the four trading days immediately prior thereto;
provided, however, that at any time that the principal trading market for
Common Stock is a national securities exchange, Fair Market Value shall be
based on closing sales prices over such five trading-day period reported on
the composite tape covering securities listed on such exchange.
(j) "Offering Period" means the approximately six-month period
beginning on February 1 and ending on the last trading day of July or
beginning August 1 and ending on the last trading day of January, with the
first Offering Period to begin February 1, 1998.
(k) "Participant" means an employee of the Company or a Subsidiary
who is participating in the Plan.
(l) "Purchase Date" means the last trading day of each Offering
Period.
(m) "Purchase Right" means a Participant's option to purchase
shares, which is deemed to be outstanding and exercisable during an Offering
Period in accordance with the Plan. A Purchase Right represents an "option"
as such term is used under Section 423 of the Code.
(n) "Stock" means the Common Stock, par value $.01 per share, of
the Company, and such other securities as may be substituted or resubstituted
for Stock under Section 4.
(o) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing more than 50% of the total combined voting power of all
classes of stock in one of the other corporations in the chain, including a
corporation that becomes a Subsidiary during the term of the Plan.
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3. ADMINISTRATION.
(a) ADMINISTRATOR. The Plan will be administered by an
Administrator, which shall be the Board or such Board committee, officer, or
committee of officers and employees to which the Board may delegate
administrative duties and authority (other than authority to amend the Plan).
The Administrator will have full authority to adopt, amend, suspend, waive,
and rescind such rules and regulations and appoint such agents as it may deem
necessary or advisable to administer the Plan, to correct any defect or
supply any omission or reconcile any inconsistency in the Plan and to
construe and interpret the Plan and rules and regulations thereunder, to
furnish to the Custodian such information as the Custodian may require, and
to make all other decisions and determinations under the Plan (including
determinations relating to eligibility). No person acting in connection with
the administration of the Plan will, in that capacity, participate in
deciding any matter relating to his or her participation in the Plan.
(b) THE CUSTODIAN. The Custodian will act as custodian under the
Plan, and will perform such duties as are set forth in the Plan and in any
agreement between the Company and the Custodian. The Custodian will
establish and maintain, as agent for each Participant, an Account and any
subaccounts as may be necessary or desirable for the administration of the
Plan.
(c) OTHER ADMINISTRATIVE PROVISIONS. The Company will furnish
information to the Custodian from its records as directed by the
Administrator, and such records, including as to a Participant's Earnings,
will be conclusive on all persons unless determined by the Administrator to
be incorrect. Each Participant and other person claiming benefits under the
Plan must furnish to the Company in writing an up-to-date mailing address and
any other information as the Administrator or Custodian may reasonably
request. Any communication, statement, or notice mailed with postage prepaid
to any such Participant or other person at the last mailing address filed
with the Company will be deemed sufficiently given when mailed and will be
binding upon the named recipient. The Plan will be administered on a
reasonable and nondiscriminatory basis, and Plan provisions and rules
thereunder will apply in a uniform manner to all persons similarly situated.
All Participants will have equal rights and privileges (subject to the terms
of the Plan) with respect to Purchase Rights outstanding during any given
Offering Period.
4. STOCK SUBJECT TO PLAN. Subject to adjustment as hereinafter provided,
the total number of shares of Stock reserved and available for issuance upon
exercise of Purchase Rights or otherwise under the Plan will be 250,000. Any
shares of Stock delivered by the Company under the Plan may consist, in whole or
in part, of authorized and unissued shares or treasury shares. Shares acquired
in the open market through dividend reinvestment will not count against this
limit. The number and kind of such shares of Stock subject to the Plan will be
proportionately adjusted, as determined by the Board, in the event of any
extraordinary dividend or other distribution, recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
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repurchase, or share exchange, or other similar corporate transaction or
event affecting the Stock.
5. ENROLLMENT AND CONTRIBUTIONS.
(a) ELIGIBILITY. An employee of the Company or a Subsidiary may
enroll in the Plan for any Offering Period if such employee is employed at
the Enrollment Date and was continuously so employed during the 15 days
preceding the Enrollment Date, unless:
(i) At the time of enrollment, the employee's customary employment is 20
hours or less per week or the employee's customary employment is for
not more than five months in any calendar year, or the employee
cannot legally enter into the obligations of a Participant;
(ii) Such person would upon enrollment be deemed to own, for purposes of
Section 423(b)(3) of the Code, an aggregate of five percent or more
of the total combined voting power or value of all outstanding shares
of all classes of the Company or of any parent or Subsidiary
(including in such person's ownership the maximum number of shares
that he or she could acquire under Section 6(c)); or
(iii) Such person is disqualified from participation in such Offering
Period under Section 7(b).
The Company will notify an employee of the date as of which he or she is
eligible to initially enroll in the Plan, and will make available to each
eligible employee the necessary enrollment forms.
(b) INITIAL ENROLLMENT. An employee who is or who will become
eligible on or before a given Enrollment Date under Section 5(a) may, after
receiving current information about the Plan, initially enroll in the Plan by
executing and filing with the Administrator a properly completed enrollment
form, including thereon the employee's election as to the rate of payroll
contributions for the Offering Period. To be effective for any Offering
Period, such enrollment form must be filed at least 15 days before the
Enrollment Date for the Offering Period.
(c) REENROLLMENT FOR SUBSEQUENT OFFERING PERIODS. A Participant
whose enrollment in and payroll contributions under the Plan continue throughout
an Offering Period will automatically be reenrolled in the Plan for the next
Offering Period unless (i) the Participant terminates enrollment before the
Enrollment Date for the next Offering Period in accordance with Section 7(a) or
(ii) on such Enrollment Date he or she is ineligible to participate under
Section 5(a) (including due to disqualification under Section 7(b)). The rate
of payroll contributions for a Participant who is automatically reenrolled for
an Offering Period will be the same as the rate of payroll contributions in
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effect at the end of the preceding Offering Period, unless the Participant
files a new enrollment form at least 15 days before the Enrollment Date for
the Offering Period designating a different rate of payroll contributions.
(d) PAYROLL CONTRIBUTIONS. An enrolled Participant will make
contributions under the Plan by means of payroll deductions from each payroll
period which ends during the Offering Period, at the rate elected by the
Participant in his or her enrollment form filed nearest to, but not later
than, 15 days before the Enrollment Date for the Offering Period. The rate
of payroll contributions elected by a Participant may not be more than ten
percent of the Participant's Earnings for each payroll period; PROVIDED,
HOWEVER, that the Board may specify a higher maximum rate, subject to Section
8(c) hereof. The Administrator may specify, on the enrollment form, whether
payroll contributions shall be a percentage of Earnings or a fixed dollar
amount. The foregoing and any election of a Participant notwithstanding, a
Participant's rate of payroll contributions will be adjusted downward by the
Company at any time or from time to time as necessary to ensure that the
limit on the amount of Stock purchased with respect to an Offering Period set
forth in Section 6(c) is not exceeded. A Participant may elect to increase,
decrease, or discontinue payroll contributions for future Offering Periods by
filing a new enrollment form at least 15 days before the Enrollment Date for
the Offering Period. A Participant may not elect to increase or decrease
payroll contributions during an Offering Period, except that a Participant's
payroll contributions will be automatically discontinued upon the filing of
an election to withdraw payroll contributions prior to a Purchase Date or the
filing of an election to withdraw or transfer shares if such filing occurs
less than one year after the Purchase Date on which such shares were
purchased, as specified in Sections 5(f), 7(a) and 7(b).
(e) HOLDING OF PAYROLL CONTRIBUTIONS. All payroll contributions
by a Participant under the Plan will be received and held by the Company
until the end of the Offering Period, and will represent unfunded obligations
of the Company. Such amounts are not required to be segregated and may be
used by the Company for any corporate purpose.
(f) WITHDRAWAL OF PAYROLL CONTRIBUTIONS; REFUND OF PAYROLL
CONTRIBUTIONS UPON TERMINATION OF EMPLOYMENT. A Participant may elect to
withdraw all (but not less than all) of his or her payroll contributions for
a given Offering Period by filing a notice of withdrawal with the
Administrator not later than the close of business the business day prior to
the Purchase Date for such Offering Period. In addition, if the Participant
ceases to be employed by the Company and its Subsidiaries prior to the
Purchase Date, his or her payroll contributions for that Offering Period
shall be refunded. In either case, the Company shall promptly pay to the
Participant (or his or her estate, in the event of death) the amount of such
payroll contributions. No further payroll contributions shall be made by the
Participant in that Offering Period. In addition, in the case of withdrawal
the Participant shall be subject to possible disqualification from
participation in the next Offering Period under Section 7(b).
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(g) REFUND OF UNUSED PAYROLL CONTRIBUTIONS. If any of a
Participant's payroll contributions are not applied to the purchase of shares
on the Purchase Date (for example, if the number of shares purchased is
limited under Section 6(c)), the portion of such payroll contributions not
applied to the purchase of shares shall be promptly refunded to the
Participant.
(h) NO INTEREST PAYABLE ON PAYROLL CONTRIBUTIONS. No amounts of
interest will be credited or payable by the Company on payroll contributions
pending investment in Stock, withdrawal, refund upon termination, or refund
of any unused portion, or in any other circumstance under the Plan.
6. PURCHASES OF STOCK.
(a) PURCHASE RIGHTS. Enrollment in the Plan for any Offering
Period by a Participant will constitute a grant by the Company of a Purchase
Right to such Participant for such Offering Period. Each Purchase Right will
be subject to the terms set forth in this Section 6.
(b) PURCHASE PRICE. The purchase price at which each share of
Stock will be purchased under a Purchase Right will equal 85% of the greater
of (i) Average Offering Period Fair Market Value of a share of Stock
determined during the Offering Period and (ii) the lesser of (A) Fair Market
Value of a share of Stock on the first trading day in the Offering Period and
(B) Fair Market Value of a share of Stock on the last trading day in the
Offering Period.
(c) NUMBER OF SHARES PURCHASED. The number of shares of Stock
that will be purchased upon exercise of a Participant's Purchase Right for an
Offering Period will equal the number of shares (including fractional shares)
that can be purchased at the purchase price specified in Section 6(b) with
the aggregate amount of the Participant's payroll contributions during the
Offering Period; provided, however, that the number of shares of Stock
subject to a Participant's Purchase Right and purchasable in any Offering
Period will not exceed the lesser of (i) the number derived by dividing
$12,500 by 100% of the Fair Market Value of one share of Stock determined as
of the first trading day in the Offering Period or (ii) the number of shares
such that the Participant's rights to purchase shares under all employee
stock purchase plans qualifying under Section 423 of the Code of the Company
and any parent or Subsidiary shall accrue at a rate which does not exceed
$25,000 of fair market value of stock (determined at the time each such
option is granted) as required under Section 423(b)(8) of the Code.
(d) AUTOMATIC EXERCISE AND PURCHASE. The Purchase Right will be
automatically exercised on the Purchase Date for the Offering Period. At or
as promptly as practicable after the Purchase Date for an Offering Period,
the aggregate amount of the Participant's payroll contributions for the
Offering Period will be applied by the Company to the purchase of shares of
Stock, in accordance with the terms of the Plan. Thereupon, the Company will
deliver the shares of Stock purchased to the Custodian for deposit into
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the Participant's Account. Payment for Stock purchased upon exercise of a
Purchase Right will be made only through payroll contributions in accordance
with Section 5; no optional payments will be permitted.
(e) EXPIRATION. A Participant's Purchase Right will expire on the
earlier of the Purchase Date for the Offering Period (if not exercised) or
the date on which the Participant's enrollment in the Plan terminates.
(f) DIVIDEND REINVESTMENT; OTHER DISTRIBUTIONS. Cash dividends on
any Stock credited to a Participant's Account will be automatically
reinvested in additional shares of Stock; such amounts will not be available
in the form of cash to Participants. All cash dividends paid on Stock
credited to Participants' Accounts will be paid over by the Company to the
Custodian at the dividend payment date. The Custodian will aggregate all
purchases of Stock in connection with the Plan for a given dividend payment
date. Purchases of Stock for purposes of dividend reinvestment will be made
as promptly as practicable (but not more than 30 days) after a dividend
payment date. The Custodian will make such purchases, as directed by the
Administrator, either (i) in transactions on the Nasdaq National Market, any
securities exchange upon which Stock is traded, otherwise in the
over-the-counter market, or in negotiated transactions, or (ii) directly from
the Company at 100% of the Fair Market Value of a share of Stock on the
dividend payment date. Any shares of Stock distributed as a dividend or
distribution in respect of shares of Stock or in connection with a split of
the Stock credited to a Participant's Account will be credited to such
Account. In the event of any other non-cash dividend or distribution in
respect of Stock credited to a Participant's Account, the Custodian will, if
reasonably practicable and at the direction of the Administrator, sell any
property received in such dividend or distribution as promptly as practicable
and use the proceeds to purchase additional shares of Common Stock in the
same manner as cash paid over to the Custodian for purposes of dividend
reinvestment. Shares of Stock acquired under this Section 6(f) shall be
subject to section 7(a) and 7(b) and, for such purposes, shall be deemed to
be acquired by a Participant at the same time as the Participant acquired the
underlying shares in respect of which the shares were distributed under this
Section 6(f).
(e) VOTING RIGHTS. Each Participant will be entitled to vote the
number of shares of Stock credited to his or her Account (including any
fractional shares credited to such account) on any matter as to which the
approval of the Company's stockholders is sought. If a Participant does not
vote or grant a valid proxy with respect to shares credited to his or her
Account, such shares will be voted by the Custodian in accordance with any
stock exchange or other rules governing the Custodian in the voting of shares
held for customer accounts. Similar procedures will apply in the case of any
consent solicitation of Company stockholders.
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7. WITHDRAWAL OR TRANSFER OF SHARES, DISQUALIFICATION, AND ACCOUNT
DISTRIBUTION UPON TERMINATION.
(a) STOCK WITHDRAWALS AND TRANSFERS. A Participant may elect to
withdraw shares of Stock from his or her Account in certificated form or to
transfer such shares from his or her Account to an account of the Participant
maintained with a broker-dealer or financial institution; PROVIDED, HOWEVER,
that an election to withdraw or transfer shares filed less than one year
after the Purchase Date on which such shares were purchased shall be deemed
an election to withdraw payroll contributions under Section 5(f) for the
current Offering Period and shall result in disqualification from
participation in the next Offering Period to the extent provided under
Section 7(b). If a Participant elects to withdraw shares, one or more
certificates for whole shares shall be issued in the name of, and delivered
to, the Participant, with such Participant receiving cash in lieu of
fractional shares based on the Fair Market Value of a share of Stock on the
date of withdrawal. If shares of Stock are transferred from a Participant's
Account to a broker-dealer or financial institution that maintains an account
for the Participant, only whole shares shall be transferred and cash in lieu
of any fractional share shall be paid over for the account of Participant
based on the Fair Market Value of a share of Stock on the date of transfer,
unless otherwise determined by the Administrator based on the Administrator's
determination that such broker-dealer or financial institution is capable of
crediting fractional shares. Other provisions of this Plan notwithstanding,
if the Participant is then an employee of the Company or its subsidiaries,
transfers will be made only to a broker-dealer or financial institution
through which employees are then permitted to sell Stock under the Company's
policies governing employee trading in Company securities. Participants may
not designate any other person to receive directly shares of Stock withdrawn
or transferred under the Plan, although no restrictions apply under this Plan
to shares that have been withdrawn or transferred. A Participant seeking to
withdraw or transfer shares of Stock must give instructions to the Custodian
in such manner and form as may be prescribed by the Administrator and the
Custodian, which instructions will be acted upon as promptly as practicable.
Withdrawals and transfers will be subject to any fees imposed in accordance
with Section 8(a) hereof.
(b) DISQUALIFICATION. If a Participant elects to withdraw
payroll contributions at any time under Section 5(f) or elects to withdraw or
transfer shares that were purchased at a Purchase Date less than one year
before the date of filing the election to withdraw or transfer under Section
7(a) (which is also deemed to constitute an election to withdraw payroll
contributions), the Participant's enrollment for the Offering Period in
effect at the date of such withdrawal or transfer shall cease and the
Participant shall be disqualified from participating in the next Offering
Period beginning after the filing of such election to withdraw payroll
contributions or withdraw or transfer shares. The foregoing notwithstanding,
the Administrator may permit a Participant to reenroll in the next Offering
Period if the Participant demonstrates and the Administrator finds that the
withdrawal of payroll contributions and/or the withdrawal or transfer of
shares was necessary due to an unforeseeable financial emergency or hardship
of the Participant. For
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purposes of the Plan, a Participant shall be deemed to withdraw or transfer
shares from his or her Account in the order in which the shares were acquired
(i.e., first in-first out).
(c) DISTRIBUTION OF ACCOUNT UPON TERMINATION. Upon termination of
employment of a Participant, the Custodian will continue to maintain the
Participant's Account until the earlier of such time as the Participant
withdraws or transfers all Stock in the Account or one year after the
Participant ceases to be employed by the Company and its Subsidiaries. At
the expiration of such one year period, the assets in Participant's account
shall be withdrawn or transferred as elected by the Participant or, in the
absence of such election, as determined by the Administrator. If a
Participant dies while assets remain credited to his or her Account, all
amounts payable to the Participant will be paid to his or her estate as
promptly as practicable.
8. GENERAL.
(a) COSTS. Costs and expenses incurred in the administration of
the Plan and maintenance of Accounts will be paid by the Company, including
annual fees of the Custodian and any brokerage fees and commissions for the
purchase of Stock upon reinvestment of dividends and distributions. The
foregoing notwithstanding, the Custodian may impose or pass through a
reasonable fee for the withdrawal of Stock in the form of stock certificates
(as permitted under Section 6(f)), and reasonable fees for other services
unrelated to the purchase of Stock under the Plan, to the extent approved in
writing by the Company and communicated to Participants. In no circumstance
shall the Company pay any brokerage fees and commissions for the sale of
Stock acquired under the Plan by a Participant.
(b) STATEMENTS TO PARTICIPANTS. The Custodian will reflect
payroll contributions, purchases, dividends and distributions and
reinvestment thereof, withdrawals and transfers of shares of Common Stock and
other Plan transactions by appropriate adjustments to the Participant's
Account. The Custodian will, not less frequently than semi-annually, provide
or cause to be provided a written statement to the Participant showing the
transactions in his or her Account and the date thereof, the number of shares
of Stock purchased, the aggregate purchase price paid, the purchase price per
share, the brokerage fees and commissions paid (if any), the total shares
held for the Participant's Stock Account (computed to at least three decimal
places), and other information.
(c) COMPLIANCE WITH SECTION 423. It is the intent of the Company
that this Plan comply in all respects with applicable requirements of Section
423 of the Code and regulations thereunder. Accordingly, if any provision of
this Plan does not comply with such requirements, such provision will be
construed or deemed amended to the extent necessary to conform to such
requirements.
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9. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Plan, the
granting and exercising of Purchase Rights hereunder, and the other
obligations of the Company and the Custodian under the Plan will be subject
to all applicable federal and state laws, rules, and regulations, and to such
approvals by any regulatory or governmental agency as may be required. The
Company may, in its discretion, postpone the issuance or delivery of Stock
upon exercise of Purchase Rights until completion of such registration or
qualification of such Stock or other required action under any federal or
state law, rule, or regulation, listing or other required action with respect
to any automated quotation system or stock exchange upon which the Stock or
other Company securities are designated or listed, or compliance with any
other contractual obligation of the Company, as the Company may consider
appropriate, and may require any Participant to make such representations and
furnish such information as it may consider appropriate in connection with
the issuance or delivery of Stock in compliance with applicable laws, rules,
and regulations, designation or listing requirements, or other contractual
obligations.
(b) LIMITS ON ENCUMBERING RIGHTS. No right or interest of a
Participant under the Plan, including any Purchase Right, may be pledged,
encumbered, or hypothecated to or in favor of any party, subject to any lien,
obligation, or liability of such Participant, or otherwise assigned,
transferred, or disposed of except pursuant to the laws of descent or
distribution, and any right of a Participant under the Plan will be
exercisable during the Participant's lifetime only by the Participant.
(c) NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
action taken hereunder, including the grant of a Purchase Right, will be
construed as giving any employee the right to be retained in the employ of
the Company or any of its Subsidiaries, nor will it interfere in any way with
the right of the Company or any of its Subsidiaries to terminate any
employee's employment at any time.
(d) TAXES. The Company or any Subsidiary is authorized to
withhold from any payment to be made to a Participant, including any payroll
and other payments not related to the Plan, amounts of withholding and other
taxes due in connection with any transaction under the Plan, and a
Participant's enrollment in the Plan will be deemed to constitute his or her
consent to such withholding. In addition, Participants are required to advise
the Company of sales and other dispositions of Stock acquired under the Plan
in order to permit the Company to comply with tax laws and to claim any tax
deductions to which the Company may be entitled with respect to the Plan.
(e) CHANGES TO THE PLAN. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of stockholders or
Participants, PROVIDED, HOWEVER, that any such action will be subject to the
approval of the Company's stockholders within one year after such Board
action if such stockholder approval is required by any federal or state law
or regulation or the rules of any automated quotation
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system or stock exchange on which the Stock may then be quoted or listed, or
if such stockholder approval is necessary in order for the Plan to continue
to meet the requirements of Section 423 of the Code, and the Board may
otherwise, in its discretion, determine to submit other such actions to
stockholders for approval. Upon termination of the Plan, the Board may elect
to terminate all outstanding Purchase Rights at such time as the Board may
designate; if such termination results in termination of any Purchase Right
prior to its exercise, all of a Participant's payroll contributions not
invested in Stock will be returned to the Participant (without interest) as
promptly as practicable.
(f) NO RIGHTS TO PARTICIPATE; NO STOCKHOLDER RIGHTS. No
Participant or employee will have any claim to participate in the Plan with
respect to Offering Periods that have not commenced, and the Company will
have no obligation to continue the Plan. No Purchase Right will confer on
any Participant any of the rights of a stockholder of the Company unless and
until Stock is duly issued or transferred to the Custodian and credited to
the Participant's Account.
(g) FRACTIONAL SHARES. Unless otherwise determined by the
Administrator, purchases of Stock under the Plan executed by the Custodian
may result in the crediting of fractional shares of Stock to the
Participant's Stock Account. Such fractional shares will be computed to at
least three decimal places. Fractional shares will not, however, be issued
by the Company, and certificates representing fractional shares will not be
delivered to Participants under any circumstances. If at any time fractional
shares will not be credited to Participants' Accounts, the Administrator
shall determine whether a Participant's payroll contributions remaining
after the purchase by of the greatest possible number of whole shares on a
given Purchase Date will be refunded or will be retained and applied to
purchases in the next Offering Period.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan
by the Board nor its submission to the stockholders of the Company for
approval will be construed as creating any limitations on the power of the
Board to adopt such other compensatory arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or
only in specific cases.
(i) GOVERNING LAW. The Plan and all related documents shall be
governed by, and construed in accordance with, the laws of the State of New
York (except to the extent the Delaware General Corporation Law and
provisions of federal law may be applicable), without reference to principles
of conflict of laws. If any provision hereof shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining
provisions of the Plan shall continue to be fully effective.
(k) EFFECTIVE DATE. The Plan shall become effective February 1,
1998, but shall be subject to approval by the Company's stockholders by a vote
sufficient to meet the requirements of Section 423(b)(2) of the Code within 12
months after the date
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the Plan was adopted and prior to the first Purchase Date. In the event
stockholders fail to so approve the Plan, all Purchase Rights granted under
the Plan shall be canceled, payroll contributions shall be refunded, and the
Plan shall be terminated.
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Exhibit 10.5.2
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE ("Second Amendment") is made and entered
into as of the 5th day of December, 1996, by and between ARDEN REALTY LIMITED
PARTNERSHIP, a Maryland limited partnership ("Landlord") and INVESTMENT
TECHNOLOGY GROUP, INC., a Delaware corporation ("Tenant").
R E C I T A L S :
A. 400 Corporate Pointe, Ltd., a California general partnership ("400
CORPORATE") and Integrated Analytics Corporation, a California corporation
("IAC") entered into that certain Standard Form Office Lease dated as of July
11, 1990 ("ORIGINAL LEASE"), whereby 400 Corporate leased to IAC and IAC
leased from 400 Corporate certain office space located in that certain
building located and addressed at 400 Corporate Pointe, Culver City,
California 90230 (the "BUILDING"). The Original Lease was subsequently
amended by that certain First Amendment to Lease dated June 1, 1995, by and
between AEW/LBA Acquisition Co. LLC, a California limited liability company
("AEW") as successor-in-interest to 400 Corporate, and Tenant, as
successor-in-interest to IAC (the "FIRST AMENDMENT"). Landlord is
successor-in-interest to AEW. The Original Lease, as amended by the First
Amendment, is referred to herein as the "Lease". Pursuant to the Lease,
Tenant currently occupies 13,696 rentable square feet located on the eighth
(8th) floor of the Building and known as Suite 855 (the "EXISTING PREMISES").
B. By this Second Amendment, Landlord and Tenant desire to add certain
additional space on the seventh (7th) floor of the Building to the Existing
Premises, and to otherwise modify the Lease as provided herein.
C. Unless otherwise defined herein, capitalized terms as used herein
shall have the same meaning as given thereto in the Lease.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
A G R E E M E N T :
1. EXPANSION OF EXISTING PREMISES. Effective as of the Additional
Space Effective Date (as defined below) and continuing until the expiration
of the Lease Term, the Existing Premises shall be modified to add that
certain space consisting of approximately 5,295 rentable square feet located
on the seventh (7th) floor of the Building known as Suite 750 and outlined on
the floor plan attached to this Second Amendment as Exhibit "A" and
incorporated herein by this reference ("ADDITIONAL SPACE"). Accordingly,
effective as of the Additional Space Effective Date, Tenant shall lease an
aggregate of approximately 18,991 rentable square feet of space in the
Building consisting of the Existing Premises and the Additional Space, which
shall be referred to collectively as the "PREMISES." The term "ADDITIONAL
SPACE EFFECTIVE DATE" shall mean the earlier to occur of (a) the first Monday
following the date the Additional Space is Ready for Occupancy (as defined in
Section 5 of the Tenant Work Letter attached to this Second Amendment as
Exhibit "B"), or (b) March 1, 1997. Tenant's lease of the Additional Space
shall expire co-terminously with Tenant's lease of the Existing Premises on
December 31, 2005. Landlord and Tenant hereby acknowledge that when the Must
Take Space is added to the Premises pursuant to Section 8 of this Second
Amendment, Tenant shall lease an aggregate of approximately 20,254 rentable
square feet in the Building consisting of the Existing Premises, the
Additional Space and the Must Take Space. Following the Must Take Space
Effective Date, as defined in Section 8 of this Second Amendment, the term
"Premises" as used in the Lease as amended by this Second Amendment shall
refer to the Existing Premises, the Additional Space and the Must Take Space.
2. BASE RENT FOR THE ADDITIONAL SPACE. Effective as of the Additional
Space Effective Date and continuing until the expiration of the Lease Term,
Tenant shall pay, in accordance with the provisions of this Section 2, Base
Rent for the Additional Space as follows:
<PAGE>
<TABLE>
<CAPTION>
Monthly Installment of Basic Monthly Basic Rent Per
Month Rent Rentable Square Foot
----- ---- --------------------
<S> <C> <C>
Additional Space $6,512.85 $1.23
Effective Date -
December 31, 2000
January 1, 2001 - $7,942.50 $1.50
December 31, 2005
</TABLE>
Concurrently with Tenant's execution of this Second Amendment, Tenant
shall pay to Landlord an amount equal to Basic Rent for the first full month
of Tenant's lease of the Additional Space.
3. TENANT'S PERCENTAGE OF TOTAL RENTABLE AREA. Commencing as of the
Additional Space Effective Date, Tenant's Percentage of Total Rentable Area
with regard to the Additional Space shall be 3.30%, and the Base Year (as
defined in Section 1.7 of the First Amendment) with regard to the Additional
Space shall be calendar year 1997.
4. IMPROVEMENTS TO ADDITIONAL SPACE. Tenant shall construct the
tenant improvements to the Additional Space pursuant to the terms and
conditions of the Tenant Work Letter attached hereto as Exhibit "B," and the
initial construction of such tenant improvements shall be governed by the
Tenant Work Letter rather than by the provisions of Article 14 of the
Original Lease. Except as specifically set forth in the Tenant Work Letter,
Tenant hereby acknowledges that Landlord shall not be obligated to provide or
pay for any improvement work or services related to the improvement of the
Additional Space. Tenant also acknowledges that Landlord has made no
representation or warranty regarding the condition of the Additional Space.
5. PARKING. Landlord and Tenant hereby acknowledge and agree that
pursuant to Section 1(w) of the Original Lease, Tenant is entitled to lease
parking spaces at a ratio of four (4) parking spaces per one thousand (1000)
rentable square feet contained within the Premises from time to time.
Therefore, in addition to the parking spaces currently rented by Tenant
pursuant to Section 1.10 of the First Amendment, commencing as of the
Additional Space Effective Date, Tenant shall be entitled to the use and
rental of an allocation of up to twenty-one (21) additional parking spaces
(some of which may, at Tenant's election, be reserved spaces, subject to the
percentage limitation set forth in Paragraph 56 of the Original Lease)
(collectively, the "ADDITIONAL SPACES") located in the Building's on-site
parking facilities. Tenant shall pay to Landlord for such Additional Spaces
an amount determined in accordance with Sections 1.10(b)(i) and (ii) of the
First Amendment. In addition, Tenant may lease additional unreserved parking
spaces on a month-to-month basis, subject to availability, at the prevailing
market rate charged for such spaces from time to time.
6. SECURITY DEPOSIT. Concurrently with Tenant's execution of this
Second Amendment, Tenant shall deliver to Landlord an additional Security
Deposit in the amount of $6,512.85 which shall increase the total Security
Deposit held by Landlord with regard to the Lease, as amended by this Second
Amendment. The Security Deposit, as increased hereby, shall be held by
Landlord in accordance with the terms and conditions of Article 7 of the
Original Lease.
7. BROKERS. Each party represents and warrants to the other that no
broker, agent or finder negotiated or was instrumental in negotiating or
consummating this Second Amendment other than CB Commercial Real Estate
Group, Inc., who shall be compensated by Landlord pursuant to a separate
agreement. Each party further agrees to defend, indemnify and hold harmless
the other party from and against any claim for commission or finder's fee by
any entity who claims or alleges that they were retained or engaged by the
first party or at the request of such party.
8. MUST TAKE SPACE. Tenant hereby agrees to add to the Premises
approximately 1,263 additional rentable square feet of space located on the
seventh (7th) floor of the Building known as Suite 725 ("MUST TAKE SPACE"),
as delineated on Exhibit "A". The Must Take Space shall be delivered to
Tenant on a date selected by Landlord which date is scheduled to be either
May 1, 1997, or January 1, 1998, depending upon whether the current tenant in
the Must Take Space elects to extend its lease term. Notwithstanding the
foregoing, in the event Landlord does not deliver the Must Take Space to
Tenant on or before June 30, 1998, this Section 8 shall be void and of no
further force or effect and Landlord shall have no further obligation to
deliver the Must Take Space to Tenant and Tenant shall have no further
obligation to lease the Must Take Space from Landlord. The "MUST TAKE SPACE
EFFECTIVE DATE" shall be the earlier to occur of (a) the first Monday
following the date the Must Take Space is Ready for Occupancy (as defined in
Section 5 of the Tenant Work Letter attached to this Second Amendment as
Exhibit "B"), or (b) ninety (90) days following delivery of the Must Take
Space to Tenant. Tenant's lease of the Must Take Space shall be on the same
terms and conditions as affect the Premises throughout the Lease Term,
including, without limitation, the payment of Basic Rent as follows:
-2-
<PAGE>
<TABLE>
<CAPTION>
Monthly Installment of Basic Monthly Basic Rent Per
Month Rent Rentable Square Foot
----- ---- --------------------
<S> <C> <C>
Must Take Space $1,553.49 $1.23
Effective Date -
December 31, 2000
January 1, 2001 - $1,894.50 $1.50
December 31, 2005
</TABLE>
Upon the Must Take Space Effective Date, (i) Tenant's Percentage Share
shall be increased to take into account the additional number of rentable
square feet of the Must Take Space, (ii) the Base Year (as defined in Section
1.7 of the First Amendment) with regard to the Must Take Space shall be
either (A) the calendar year in which Landlord delivers the Must Take Space
to Tenant, if Landlord delivers the Must Take Space on or before July 1 of
such calendar year, or (B) the calendar year following the calendar year of
delivery of the Must Take Space to Tenant, if Landlord delivers the Must Take
Space after July 1 of such calendar year, and (iii) the Must Take Space shall
be leased to Tenant in its then "as is" condition (I.E., Landlord shall not
be required to construct any improvements in, or contribute any improvement
allowance for, the Must Take Space), provided Tenant shall construct the
tenant improvements in the Must Take Space pursuant to the terms and
conditions of the Tenant Work Letter attached hereto as Exhibit "B."
Landlord shall provide written notice ("MUST TAKE NOTICE") to Tenant setting
forth the anticipated delivery date of the Must Take Space at least three (3)
months prior to the date of delivery of the Must Take Space. The Lease Term
for the Must Take Space and Tenant's obligation to pay Rent with respect to
the Must Take Space shall commence upon the Must Take Space Effective Date
and shall expire co-terminously with the Renewal Term (as defined in Section
1.5(a) of the First Amendment) for the Premises. Landlord shall not be
liable to Tenant or otherwise be in default hereunder in the event that
Landlord is unable to deliver the Must Take Space to Tenant on the projected
delivery date thereof due to the failure of any other tenant to timely vacate
and surrender to Landlord such Must Take Space, or any portion thereof;
provided, however, Landlord agrees to use its commercially reasonable efforts
to enforce its right to possession of such Must Take Space against such other
tenant. Promptly after the Must Take Space Effective Date, Landlord and
Tenant shall execute a confirmation of Lease Term Dates in a form similar to
Exhibit "C" attached hereto.
9. OPTION TO CANCEL. Section 1.11 of the First Amendment is hereby
amended as follows:
(a) the reference to "June 1, 2000," contained in the eighth line
of Section 1.11 is hereby deleted and a reference to "March 1, 2002" is
substituted in lieu thereof;
(b) the reference to "June 1, 2001," contained in the ninth line
of Section 1.11 is hereby deleted and a reference to "March 1, 2003" is
substituted in lieu thereof;
(c) the following shall be added at the end of Section 1.11:
Notwithstanding the foregoing, Tenant shall be entitled to
exercise its Cancellation Option with regard to either the
entire Premises, or as to only all of the space leased by
Tenant on one floor of the Premises. If Tenant elects to
exercise its Cancellation Option with regard to the eighth
(8th) floor only, Tenant shall be obligated to pay a
cancellation fee calculated pursuant to this Section 1.11,
above (the "EIGHTH FLOOR CANCELLATION FEE"). In the event
Tenant elects to exercise its Cancellation Option with regard
to that portion of the Premises located on the seventh (7th)
floor of the Building (comprised of the Additional Space and
the Must-Take Space), Tenant shall be obligated to pay a
cancellation fee equal to the unamortized balance of leasing
commissions paid by Landlord in connection with the Additional
Space and the Must Take Space, which amortization shall be
calculated on a straight line basis over a period from the
Additional Space Effective Date through the end of the Renewal
Term, with regard to the Additional Space, and over a period
from the Must Take Space Effective Date through the end of the
Renewal Term, with regard to the Must-Take Space (collectively
the "SEVENTH FLOOR CANCELLATION FEE"). Within thirty (30) days
following the Must Take Space Effective Date, Landlord shall
deliver to Tenant a statement setting forth the cost incurred
by Landlord for leasing commissions in connection with the
Additional Space and the Must Take Space. In the event Tenant
elects to exercise its Cancellation Option with regard to the
entire Premises, Tenant shall be obligated to pay the Eighth
Floor Cancellation Fee and the
-3-
<PAGE>
Seventh Floor Cancellation Fee in connection with such
cancellation. Notwithstanding the foregoing provisions of this
Section 1.11, in the event that Tenant elects to exercise its
Second Offer Right to expand into the entire eighth (8th)
floor, in lieu of the Cancellation Option, Tenant shall have
the right to terminate its lease of that portion of the
Premises located on the seventh (7th) floor, upon notice to
Landlord delivered concurrently with Tenant's notice of its
intent to expand into the entire eighth (8th) floor. Such
termination shall be effective concurrently with the effective
date of Tenant's expansion onto the entire eighth (8th) floor.
In the case of such termination, Tenant shall not be
obligated to pay the Seventh Floor Cancellation Fee.
10. RIGHT OF SECOND OFFER. Section 1.21 of the First Amendment is
hereby modified as follows:
(a) the reference to "the eighth (8th) floor of the Building (the
"SECOND RIGHT AREA")" contained in the ninth and tenth lines of Section
1.21(a) is hereby deleted in its entirety and a reference to "the fifth
(5th), seventh (7th) and eighth (8th) floors of the Building (provided with
regard to the fifth (5th) and seventh (7th) floors, such Second Offer Right
shall only apply to the remaining space not subject to Tenant's First Right
of First Offer contained in Paragraph 14 of Rider #1 to the Original Lease)
(collectively, the "SECOND RIGHT AREA")" is hereby substituted in lieu
thereof;
(b) the last sentence of Section 1.21(c) is hereby deleted in its
entirety and the following is hereby substituted in lieu thereof:
Notwithstanding any provision of this Section 1.21 to the
contrary, Tenant's Second Offer Right with respect to the
Second Right Space shall be subject to whatever the rights are
of other tenants in the Building, including, without
limitation, all rights of Sacks, Rivera & Zolonz
(collectively, the "PRIOR TENANTS") that exist, and are in
effect, (i) with regard to that portion of the Second Right
Space located on the eighth (8th) floor, as of the date of the
First Amendment, and (ii) with regard to that portion of the
Second Right Space located on the fifth (5th) and seventh
(7th) floors, as of the date of the Second Amendment.
11. OPTION TO RENEW. The phrase "for the Premises or any portion
thereof" contained in the second and third lines of Section 1.12(a) of the
First Amendment is hereby deleted in its entirety and the phrase "for a
minimum of 5,000 rentable square feet of the Premises (subject to Landlord's
prior reasonable approval, which approval right shall be limited to the issue
of whether the remaining space in the Premises is in a configuration which is
leasable to a third party)" is hereby substituted in lieu thereof.
12. STAIRWELL ACCESS. Landlord agrees to allow Tenant access to the
stairwells between the seventh (7th) and eighth (8th) floors of the Building
during normal business hours. In connection therewith, Tenant hereby
acknowledges that Tenant shall be required to install and maintain a time
clock and associated locking device at each of the two (2) stairwell doors on
the seventh (7th) floor, and at each of the two (2) stairwell doors on the
eighth (8th) floor of the Building. Such time clocks and associated locking
devices shall be installed by the Building-designated locksmith as a
component of the Tenant Improvements to be constructed by Tenant pursuant to
the Tenant Work Letter.
-4-
<PAGE>
13. MARBLE REPLACEMENT. Landlord agrees, at Landlord's sole cost and
expense, to repair the marble in the entry of the Existing Premises within
thirty (30) days after full execution and delivery of this Second Amendment.
14. NO FURTHER MODIFICATION. Except as set forth in this Second
Amendment, all of the terms and provisions of the Lease shall apply to the
Additional Space and shall remain unmodified and in full force and effect.
From and after the date of this Second Amendment, all references in the Lease
to the "Premises" shall refer to the Existing Premises and the Additional
Space.
IN WITNESS WHEREOF, this Second Amendment has been executed as of the
day and year first above written.
"Landlord":
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: ARDEN REALTY, INC.,
a Maryland corporation
Its sole general partner
By: Victor J. Coleman
VICTOR J. COLEMAN
Its: President and COO
By:
---------------------------------------
Its:
---------------------------------
"Tenant":
INVESTMENT TECHNOLOGY GROUP, INC., a Delaware
corporation
By: John R. MacDonald
Its: Chief Financial Officer
By: Raymond L. Killian, Jr.
Its: President
-5-
<PAGE>
EXHIBIT "A"
FLOOR PLAN OF ADDITIONAL SPACE AND MUST-TAKE SPACE
[To Be Provided]
EXHIBIT "A"
<PAGE>
EXHIBIT "B"
TENANT WORK LETTER
This Tenant Work Letter shall set forth the terms and conditions
relating to the construction of the Additional Space and the Must Take Space.
This Tenant Work Letter is essentially organized chronologically and
addresses the issues of the construction of the Additional Space and the Must
Take Space, in sequence, as such issues will arise during the actual
construction of the Additional Space and the Must Take Space. The Additional
Space and the Must Take Space may be collectively referred to as the
"IMPROVED SPACE." All references in this Tenant Work Letter to Articles or
Sections of "this Second Amendment" shall mean the relevant portions of
Articles 1 through 13 of this Second Amendment to Lease to which this Tenant
Work Letter is attached as Exhibit B, and all references in this Tenant Work
Letter to Sections of "this Tenant Work Letter" shall mean the relevant
portions of Sections 1 through 5 of this Tenant Work Letter.
SECTION 1
DELIVERY OF THE IMPROVED SPACE
1.1 "AS IS" CONDITION. Upon the full execution and delivery of this
Second Amendment by Landlord and Tenant, Landlord shall deliver the
Additional Space to Tenant, and Tenant shall accept the Additional Space from
Landlord in its presently existing, "as-is" condition. Landlord shall
deliver the Must Take Space to Tenant in its "as is" condition in accordance
with the provisions of Section 8 of this Second Amendment.
1.2 LANDLORD WORK. Landlord shall, at Landlord's sole cost and
expense, ensure that the Building systems, including the HVAC and electrical
systems are in good working order and condition prior to the Additional Space
Effective Date and the Must Take Space Effective Date, respectively
(collectively, the "LANDLORD WORK").
SECTION 2
TENANT IMPROVEMENTS
Landlord has established specifications (the "SPECIFICATIONS") for the
Building standard components to be used in the construction of the Tenant
Improvements in the Improved Space (collectively, the "STANDARD IMPROVEMENT
PACKAGE"). The quality of Tenant Improvements shall be equal to or of
greater quality than the quality of the Specifications, provided that the
Tenant Improvements shall comply with certain Specifications as designated by
Landlord. Landlord may make changes to the Specifications for the Standard
Improvement Package from time to time.
SECTION 3
CONSTRUCTION DRAWINGS
3.1 SELECTION OF ARCHITECT/CONSTRUCTION DRAWINGS. Tenant shall retain
an architect/space planner reasonably approved by Landlord (the "ARCHITECT")
to prepare the "Construction Drawings," as that term is defined in this
Section 3.1. Tenant shall retain the engineering consultants designated by
Landlord (the "ENGINEERS") to prepare all plans and engineering working
drawings relating to the structural, mechanical, electrical, plumbing, HVAC
and lifesafety work in the Improved Space, which work is not part of the
Landlord Work. The plans and drawings to be prepared by Architect and the
Engineers hereunder shall be known collectively as the "CONSTRUCTION
DRAWINGS." All Construction Drawings shall comply with the drawing format
and specifications determined by Landlord, and shall be subject to Landlord's
approval. Tenant and Architect shall verify, in the field, the dimensions
and conditions as shown on the relevant portions of the base building plans,
and Tenant and Architect shall be solely responsible for the same, and
Landlord shall have no responsibility in connection therewith. Landlord's
review of the Construction Drawings as set forth in this Section 3, shall be
for its sole purpose and shall not imply Landlord's review of the same, or
obligate Landlord to review the same, for quality, design, Code compliance or
other like matters. Accordingly, notwithstanding that any Construction
Drawings are reviewed by Landlord or its space planner, architect, engineers
and consultants, and notwithstanding any advice or assistance which may be
rendered to Tenant by Landlord or Landlord's space planner, architect,
engineers, and consultants, Landlord shall have no liability whatsoever in
connection therewith and shall not be responsible for any omissions or errors
contained in the Construction Drawings, and Tenant's waiver and indemnity set
forth in Section 10.1 of this Lease shall specifically apply to the
Construction Drawings.
3.2 FINAL SPACE PLAN. Tenant shall supply Landlord with two (2) copies
signed by Tenant of its final space plan for the Improved Space before any
architectural working drawings or engineering drawings have been commenced.
The final space plan (the "FINAL SPACE PLAN") shall include a layout and
designation of all offices, rooms and other partitioning, their intended use,
and equipment to be contained therein. Landlord may request clarification or
more specific drawings for special use items not included in the Final Space
Plan. Landlord shall advise Tenant within five (5) business days after
Landlord's receipt of the Final Space Plan for the Improved Space
EXHIBIT "B" - Page 1
<PAGE>
if the same is unsatisfactory or incomplete in any respect. If Tenant is so
advised, Tenant shall promptly cause the Final Space Plan to be revised to
correct any deficiencies or other matters Landlord may reasonably require.
3.3 FINAL WORKING DRAWINGS. After the Final Space Plan has been
approved by Landlord, Tenant shall supply the Engineers with a complete
listing of standard and non-standard equipment and specifications, including,
without limitation, B.T.U. calculations, electrical requirements and special
electrical receptacle requirements for the Improved Space, to enable the
Engineers and the Architect to complete the "Final Working Drawings" (as that
term is defined below) in the manner as set forth below. Upon the approval
of the Final Space Plan by Landlord and Tenant, Tenant shall promptly cause
the Architect and the Engineers to complete the architectural and engineering
drawings for the Improved Space, and Architect shall compile a fully
coordinated set of architectural, structural, mechanical, electrical and
plumbing working drawings in a form which is complete to allow subcontractors
to bid on the work and to obtain all applicable permits (collectively, the
"FINAL WORKING DRAWINGS") and shall submit the same to Landlord for
Landlord's approval. Tenant shall supply Landlord with two (2) copies signed
by Tenant of such Final Working Drawings. Landlord shall advise Tenant
within five (5) business days after Landlord's receipt of the Final Working
Drawings for the Improved Space if the same is unsatisfactory or incomplete
in any respect. If Tenant is so advised, Tenant shall immediately revise the
Final Working Drawings in accordance with such review and any disapproval of
Landlord in connection therewith.
3.4 APPROVED WORKING DRAWINGS. The Final Working Drawings shall be
approved by Landlord (the "APPROVED WORKING DRAWINGS") prior to the
commencement of construction of the Improved Space by Tenant. After approval
by Landlord of the Final Working Drawings, Tenant may submit the same to the
appropriate municipality for all applicable building permits. Tenant hereby
agrees that neither Landlord nor Landlord's consultants shall be responsible
for obtaining any building permit or certificate of occupancy for the
Improved Space and that obtaining the same shall be Tenant's responsibility;
provided, however, that Landlord shall cooperate with Tenant in executing
permit applications and performing other ministerial acts reasonably
necessary to enable Tenant to obtain any such permit or certificate of
occupancy. No changes, modifications or alterations in the Approved Working
Drawings may be made without the prior written consent of Landlord, which
consent may not be unreasonably withheld.
SECTION 4
CONSTRUCTION OF THE TENANT IMPROVEMENTS
4.1 TENANT'S SELECTION OF CONTRACTORS.
4.1.1 THE CONTRACTOR. A general contractor shall be retained
by Tenant to construct the Tenant Improvements. Such general contractor
("CONTRACTOR") shall be selected by Tenant from a list of general contractors
supplied by Landlord, and Tenant shall deliver to Landlord notice of its
selection of the Contractor upon such selection.
4.1.2 TENANT'S AGENTS. All subcontractors, laborers,
materialmen, and suppliers used by Tenant (such subcontractors, laborers,
materialmen, and suppliers, and the Contractor to be known collectively as
"TENANT'S AGENTS") must be approved in writing by Landlord, which approval
shall not be unreasonably withheld or delayed. If Landlord does not approve
any of Tenant's proposed subcontractors, laborers, materialmen or suppliers,
Tenant shall submit other proposed subcontractors, laborers, materialmen or
suppliers for Landlord's written approval.
4.2 CONSTRUCTION OF TENANT IMPROVEMENTS BY TENANT'S AGENTS.
4.2.1 CONSTRUCTION CONTRACT; COST BUDGET. Prior to Tenant's
execution of the construction contract and general conditions with Contractor
(the "CONTRACT"), Tenant shall submit the Contract to Landlord for its
approval, which approval shall not be unreasonably withheld or delayed.
Prior to the commencement of the construction of the Tenant Improvements, and
after Tenant has accepted all bids for the Tenant Improvements, Tenant shall
provide Landlord with a detailed breakdown, by trade, of the final costs to
be incurred or which have been incurred in connection with the design and
construction of the Tenant Improvements to be performed by or at the
direction of Tenant or the Contractor, which costs form a basis for the
amount of the Contract (the "FINAL COSTS").
4.2.2 TENANT'S AGENTS.
4.2.2.1 LANDLORD'S GENERAL CONDITIONS FOR TENANT'S
AGENTS AND TENANT IMPROVEMENT WORK. Tenant's and Tenant's Agent's
construction of the Tenant Improvements shall comply with the following: (i)
the Tenant Improvements shall be constructed in strict accordance with the
Approved Working Drawings; (ii) Tenant's Agents shall submit schedules of all
work relating to the Tenant's Improvements to Contractor and Contractor
shall, within five (5) business days of receipt thereof, inform Tenant's
Agents of any changes which are necessary thereto, and Tenant's Agents shall
adhere to such corrected schedule; and (iii) Tenant shall abide by all rules
made by Landlord's Building manager (including specifically the "Contractor's
Rules and Regulations" for Pepperdine University Plaza) with respect to the
use of freight, loading dock and service elevators, storage of
EXHIBIT "B" - Page 2
<PAGE>
materials, coordination of work with the contractors of other tenants, and
any other matter in connection with this Tenant Work Letter, including,
without limitation, the construction of the Tenant Improvements.
4.2.2.2 INDEMNITY. Tenant's indemnity of Landlord as set
forth in Section 10.1 of this Lease shall also apply with respect to any and
all costs, losses, damages, injuries and liabilities related in any way to
any act or omission of Tenant or Tenant's Agents, or anyone directly or
indirectly employed by any of them, or in connection with Tenant's
non-payment of any amount arising out of the Tenant Improvements and/or
Tenant's disapproval of all or any portion of any request for payment. Such
indemnity by Tenant, as set forth in Section 10.1 of this Lease, shall also
apply with respect to any and all costs, losses, damages, injuries and
liabilities related in any way to Landlord's performance of any ministerial
acts reasonably necessary (i) to permit Tenant to complete the Tenant
Improvements, and (ii) to enable Tenant to obtain any building permit or
certificate of occupancy for the Improved Space.
4.2.2.3 REQUIREMENTS OF TENANT'S AGENTS. Each of Tenant's
Agents shall guarantee to Tenant and for the benefit of Landlord that the
portion of the Tenant Improvements for which it is responsible shall be free
from any defects in workmanship and materials for a period of not less than
one (1) year from the date of completion thereof. Each of Tenant's Agents
shall be responsible for the replacement or repair, without additional
charge, of all work done or furnished in accordance with its contract that
shall become defective within one (1) year after the later to occur of (i)
completion of the work performed by such contractor or subcontractors and
(ii) the Lease Commencement Date. The correction of such work shall include,
without additional charge, all additional expenses and damages incurred in
connection with such removal or replacement of all or any part of the Tenant
Improvements, and/or the Building and/or common areas that may be damaged or
disturbed thereby. All such warranties or guarantees as to materials or
workmanship of or with respect to the Tenant Improvements shall be contained
in the Contract or subcontract and shall be written such that such guarantees
or warranties shall inure to the benefit of both Landlord and Tenant, as
their respective interests may appear, and can be directly enforced by
either. Tenant covenants to give to Landlord any assignment or other
assurances which may be necessary to effect such right of direct enforcement.
4.2.2.4 INSURANCE REQUIREMENTS.
4.2.2.4.1 GENERAL COVERAGES. All of Tenant's Agents
shall carry worker's compensation insurance covering all of their respective
employees, and shall also carry public liability insurance, including
property damage, all with limits, in form and with companies as are required
to be carried by Tenant as set forth in Article 10 of this Lease.
4.2.2.4.2 SPECIAL COVERAGES. Tenant shall carry
"Builder's All Risk" insurance in an amount approved by Landlord covering the
construction of the Tenant Improvements, and such other insurance as Landlord
may require, it being understood and agreed that the Tenant Improvements
shall be insured by Tenant pursuant to Article 10 of this Lease immediately
upon completion thereof. Such insurance shall be in amounts and shall
include such extended coverage endorsements as may be reasonably required by
Landlord including, but not limited to, the requirement that all of Tenant's
Agents shall carry excess liability and Products and Completed Operation
Coverage insurance, each in amounts not less than $500,000 per incident,
$1,000,000 in aggregate, and in form and with companies as are required to be
carried by Tenant as set forth in Article 10 of this Lease.
4.2.2.4.3 GENERAL TERMS. Certificates for all insurance
carried pursuant to this Section 4.2.2.4 shall be delivered to Landlord
before the commencement of construction of the Tenant Improvements and before
the Contractor's equipment is moved onto the site. All such policies of
insurance must contain a provision that the company writing said policy will
give Landlord thirty (30) days prior written notice of any cancellation or
lapse of the effective date or any reduction in the amounts of such
insurance. In the event that the Tenant Improvements are damaged by any
cause during the course of the construction thereof, Tenant shall immediately
repair the same at Tenant's sole cost and expense. Tenant's Agents shall
maintain all of the foregoing insurance coverage in force until the Tenant
Improvements are fully completed and accepted by Landlord, except for any
Products and Completed Operation Coverage insurance required by Landlord,
which is to be maintained for ten (10) years following completion of the work
and acceptance by Landlord and Tenant. All policies carried under this
Section 4.2.2.4 shall insure Landlord and Tenant, as their interests may
appear, as well as Contractor and Tenant's Agents. All insurance, except
Workers' Compensation, maintained by Tenant's Agents shall preclude
subrogation claims by the insurer against anyone insured thereunder and shall
name Landlord and its sole general partner, Arden Realty, Inc., as additional
insureds. Such insurance shall provide that it is primary insurance as
respects the owner and that any other insurance maintained by owner is excess
and noncontributing with the insurance required hereunder. The requirements
for the foregoing insurance shall not derogate from the provisions for
indemnification of Landlord by Tenant under Section 4.2.2.2 of this Tenant
Work Letter. Landlord may, in its discretion, require Tenant to obtain a
lien and completion bond or some alternate form of security satisfactory to
Landlord in an amount sufficient to ensure the lien-free completion of the
Tenant Improvements and naming Landlord as a co-obligee.
4.2.3 GOVERNMENTAL COMPLIANCE. The Tenant Improvements shall
comply in all respects with the following: (i) all applicable codes and other
state, federal, city or quasi-governmental laws, codes, ordinances and
regulations, as each may apply according to the rulings of the controlling
public official, agent or other person;
EXHIBIT "B" - Page 3
<PAGE>
(ii) applicable standards of the American Insurance Association (formerly,
the National Board of Fire Underwriters) and the National Electrical Code;
and (iii) building material manufacturer's specifications.
4.2.4 INSPECTION BY LANDLORD. Landlord shall have the right to
inspect the Tenant Improvements at all times, provided however, that
Landlord's failure to inspect the Tenant Improvements shall in no event
constitute a waiver of any of Landlord's rights hereunder nor shall
Landlord's inspection of the Tenant Improvements constitute Landlord's
approval of the same. Should Landlord disapprove any portion of the Tenant
Improvements, Landlord shall notify Tenant in writing of such disapproval and
shall specify the items disapproved. Any defects or deviations in, and/or
disapproval by Landlord of, the Tenant Improvements shall be rectified by
Tenant at no expense to Landlord, provided however, that in the event
Landlord determines that a defect or deviation exists or disapproves of any
matter in connection with any portion of the Tenant Improvements and such
defect, deviation or matter might adversely affect the mechanical,
electrical, plumbing, heating, ventilating and air conditioning or
life-safety systems of the Building, the structure or exterior appearance of
the Building or any other tenant's use of such other tenant's leased
premises, Landlord may take such action as Landlord deems necessary, at
Tenant's expense and without incurring any liability on Landlord's part, to
correct any such defect, deviation and/or matter, including, without
limitation, causing the cessation of performance of the construction of the
Tenant Improvements until such time as the defect, deviation and/or matter is
corrected to Landlord's satisfaction.
4.2.5 MEETINGS. Commencing upon the execution of this Lease,
Tenant shall hold weekly meetings at a reasonable time, with the Architect
and the Contractor regarding the progress of the preparation of Construction
Drawings and the construction of the Tenant Improvements, which meetings
shall be held at a location designated by Landlord, and Landlord and/or its
agents shall receive prior notice of, and shall have the right to attend, all
such meetings, and, upon Landlord's request, certain of Tenant's Agents shall
attend such meetings. In addition, minutes shall be taken at all such
meetings, a copy of which minutes shall be promptly delivered to Landlord.
One such meeting each month shall include the review of Contractor's current
request for payment.
4.3 NOTICE OF COMPLETION; COPY OF RECORD SET OF PLANS. Within ten (10)
days after completion of construction of the Tenant Improvements, Tenant
shall cause a Notice of Completion to be recorded in the office of the
Recorder of the appropriate County in accordance with Section 3093 of the
Civil Code of the State of California or any successor statute, and shall
furnish a copy thereof to Landlord upon such recordation. If Tenant fails to
do so, Landlord may execute and file the same on behalf of Tenant as Tenant's
agent for such purpose, at Tenant's sole cost and expense. At the conclusion
of construction, (i) Tenant shall cause the Architect and Contractor (A) to
update the Approved Working Drawings as necessary to reflect all changes made
to the Approved Working Drawings during the course of construction, (B) to
certify to the best of their knowledge that the "record-set" of as-built
drawings are true and correct, which certification shall survive the
expiration or termination of this Lease, and (C) to deliver to Landlord two
(2) sets of copies of such record set of drawings within ninety (90) days
following issuance of a certificate of occupancy for the Improved Space, and
(ii) Tenant shall deliver to Landlord a copy of all warranties, guaranties,
and operating manuals and information relating to the improvements,
equipment, and systems in the Improved Space.
SECTION 5
MISCELLANEOUS
5.1 READY FOR OCCUPANCY. For purposes of this Second Amendment, the
Improved Space shall be deemed "READY FOR OCCUPANCY" on the Substantial
Completion of the Improved Space. For purposes of this Second Amendment,
"SUBSTANTIAL COMPLETION" of the Improved Space shall occur upon the
completion of construction of the Tenant Improvements in the Improved Space
pursuant to the Approved Working Drawings, with the exception of any punch
list items.
5.2 TENANT'S REPRESENTATIVE. Tenant has designated Mark Wright as its
sole representative with respect to the matters set forth in this Tenant Work
Letter, who shall have full authority and responsibility to act on behalf of
the Tenant as required in this Tenant Work Letter.
5.3 LANDLORD'S REPRESENTATIVE. Landlord has designated Herbert Porter
and Kimberly Harris as its sole representatives with respect to the matters
set forth in this Tenant Work Letter, who, until further notice to Tenant,
shall have full authority and responsibility to act on behalf of the Landlord
as required in this Tenant Work Letter.
5.4 TIME OF THE ESSENCE IN THIS TENANT WORK LETTER. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer
to calendar days. If any item requiring approval is timely disapproved by
Landlord, the procedure for preparation of the document and approval thereof
shall be repeated until the document is approved by Landlord.
5.5 TENANT'S LEASE DEFAULT. Notwithstanding any provision to the
contrary contained in this Lease, if an event of default as described in
Section 25(a) of the Lease or this Tenant Work Letter has occurred at any
time on or before the Substantial Completion of the Improved Space, then (i)
in addition to all other rights and remedies granted to Landlord pursuant to
this Lease, Landlord may cause Contractor to cease the construction of the
Improved Space (in which case, Tenant shall be responsible for any delay in
the substantial completion of the
EXHIBIT "B" - Page 4
<PAGE>
Improved Space caused by such work stoppage), and (ii) all other obligations
of Landlord under the terms of this Tenant Work Letter shall be forgiven
until such time as such default is cured pursuant to the terms of the Lease,
as amended by this Second Amendment (in which case, Tenant shall be
responsible for any delay in the substantial completion of the Improved Space
caused by such inaction by Landlord).
EXHIBIT "B" - Page 5
<PAGE>
EXHIBIT "C"
NOTICE OF LEASE TERM DATES
AND TENANT'S PROPORTIONATE SHARE
TO:
---------------------------------- DATE:
---------------------------------- ----------------------------
----------------------------------
RE: Second Amendment to Lease dated November _____, 1996, between ARDEN REALTY
LIMITED PARTNERSHIP, a Maryland limited partnership ("LANDLORD"), and
INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation ("TENANT"),
concerning Suite 725 (the "Must Take Space"), located at 400 Corporate
Pointe, Culver City, California.
Ladies and Gentlemen:
In accordance with the Second Amendment, Landlord wishes to advise
and/or confirm the following:
1. That the Must Take Space has been accepted herewith by the
Tenant as being substantially complete in accordance with the Lease and that
there is no deficiency in construction.
2. That the Tenant has taken possession of the Must Take Space
and acknowledges that under the provisions of the Lease the Term of said
Lease shall commence as of ____________ for a term of ________________________
ending on ________________________.
3. That in accordance with the Second Amendment, Basic Rental
commenced to accrue on ________________________.
4. If the Must Take Space Effective Date is other than the first
day of the month, the first billing will contain a prorata adjustment. Each
billing thereafter shall be for the full amount of the monthly installment as
provided for in said Lease.
5. Rent is due and payable in advance on the first day of each
and every month during the Term of said Lease. Your rent checks should be
made payable to ________________________ at ___________________________________.
6. The exact number of rentable square feet within the Must Take
Space is __________ square feet.
7. Tenant's Proportionate Share, as adjusted based upon the exact
number of rentable square feet within the Must Take Space is _______%.
AGREED AND ACCEPTED:
TENANT:
,
- ---------------------------------------
a
-------------------------------------
By:
-----------------------------------
Its:
------------------------------
EXHIBIT "C" - Page 1
<PAGE>
EXHIBIT 10.5.3
AGREEMENT OF LEASE made as of this 4th day of October, 1996,
between SPARTAN MADISON CORP., a Delaware corporation, having an address c/o
HRO International Ltd., Tower 56, 126 East 56th Street, New York, New York
10022, Attention: Tenant Services (hereinafter referred to as "Landlord")
and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation, having an
address at 900 Third Avenue, New York, New York (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
The parties hereby covenant and agree as follows:
ARTICLE 1
RENT
1.01. (a) Landlord hereby leases and Tenant hereby rents from
Landlord the entire fourth (4th) floor of the Building as shown on the plan
annexed hereto as Schedule A (hereinafter referred to as the "DEMISED
PREMISES") in the building (hereinafter referred to as the "BUILDING")
located on the land (hereinafter referred to as the "LAND") described in
Schedule B annexed hereto (the Land and the Building being hereinafter
referred to as the "PROPERTY") together with the non-exclusive right for
Tenant and its subtenants, employees, agents, licensees and invitees to use
the customary appurtenances to the demised premises (e.g., the Building
entrance, the lobby, elevators, corridors, loading docks and berths, toilets
on the 4th floor of the Building and other public and service areas), for a
term (hereinafter referred to as the "TERM") commencing on the "COMMENCEMENT
DATE" and ending on the "EXPIRATION DATE" (as said terms are defined in
Article 2 hereof) unless the Term shall sooner cease and terminate as
hereinafter provided.
(b) Subject to the provisions of Section 1.05 hereof,
Tenant agrees to pay to Landlord a fixed annual rent (hereinafter referred to
as the "fixed annual rent") at the following rates:
<PAGE>
(i) ONE MILLION SIX HUNDRED FIFTY-FOUR THOUSAND
FORTY-EIGHT and no/l00 ($1,654,048.00) DOLLARS per annum
for the period beginning on the Rent Commencement Date
and ending on the last day of the month immediately
preceding the month in which occurs the fifth (5th)
anniversary of the Rent Commencement Date;
(ii) ONE MILLION SEVEN HUNDRED EIGHTY-EIGHT THOUSAND ONE
HUNDRED SIXTY and no/l00 ($l,788,160.00) DOLLARS per
annum for the period beginning on the first (lst) day of
the month in which occurs the fifth (5th) anniversary of
the Rent Commencement Date and ending on the last day of
the month immediately preceding the month in which occurs
the tenth (10th) anniversary of the Rent Commencement
Date; and
(iii) ONE MILLION NINE HUNDRED TWENTY-TWO THOUSAND TWO
HUNDRED SEVENTY-TWO AND no/100 ($1,922,272.00) DOLLARS
per annum for the period beginning on the first day of
the month in which occurs the tenth (10th) anniversary of
the Rent Commencement Date and ending on the Expiration
Date.
Such fixed annual rent shall be due and payable in equal monthly installments
in advance on the first day of each calendar month during the Term, at the
office of Landlord or such other place as Landlord may designate, without any
setoff or deduction whatsoever, except such setoffs or deductions as are
specifically referred to in this Lease. The first full month's installment
of fixed annual rent shall be paid by Tenant to Landlord upon the execution
of this Lease. The first full month's installment of fixed annual rent shall
be deposited in a segregated money market interest bearing account, selected
by Landlord in its sole discretion, and such interest shall be refunded to
Tenant within ten (l0) days after the Rent Commencement Date. Should the
Rent Commencement Date fall on any day other than the first day of a month,
then the fixed annual rent for such month shall be prorated on a per diem
basis.
1.02. Tenant shall pay the fixed annual rent and all additional
rent payable hereunder promptly when due without notice or demand therefor
and without any abatement, deduction or setoff for any reason whatsoever,
except as may be expressly provided in this Lease. Fixed annual rent and
Tenant's Tax Payments and Tenant's Expense Payments, as defined in Article 3
hereof and all other additional rent, shall be paid by wire transfer of
immediately available federal funds to Landlord or its designee or shall be
paid by good and sufficient check (subject to collection) drawn on a major
money center bank (e.g., Citibank, N.A., Bank of America, Ameritrust
(Cleveland, Ohio)). Tenant shall be permitted to make such foregoing
payments on First Interstate Bank of L.A. or Wells Fargo provided that Tenant
shall submit such payments sufficiently in advance so that they shall clear
(i.e., funds shall be available to Landlord) no later than a check from a
major money center bank would clear. All sums, other than fixed annual rent,
payable by Tenant hereunder shall be deemed additional rent and shall be
payable within twenty (20) days following demand unless other payment dates
are hereinafter provided. Landlord shall have the same rights and remedies
(including, without limitation, the right to commence a summary proceeding)
for a default in the payment of additional rent following any required notice
and the expiration of applicable cure periods as for a default in the payment
of fixed annual rent notwithstanding the fact that Tenant may not then also
be in default in the payment of fixed annual rent.
1.03. (a) If Tenant shall fail to pay when due (i) any
installment of fixed annual rent or (ii) any additional rent (including,
without limitation, any installment of Tenant's Tax Payment or Expense
Payment, as such terms are defined in Article 3 hereof) when due and such
failure shall continue for five (5) Business Days, Tenant shall pay interest
on such amounts at the Interest Rate (as such term is defined in Article 22
hereof), from the last day of such five-Business Day period to the date the
same is paid to Landlord, and such interest shall be deemed additional rent.
With respect to the first two (2) failures to make such payments during such
5 Business Day period within any l2-month period during the Term, such
interest payment shall not be due unless Landlord shall have given Tenant a
notice of such failure to pay (which notice may be given by personal
delivery) and Tenant shall continue to fail
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<PAGE>
to make the payment in question to Landlord within three (3) days after the
giving of such notice.
(b) The provisions of this Section 1.03 are in addition to
other remedies available to Landlord for non-payment of fixed annual rent or
additional rent.
1.04. If any of the fixed annual rent or additional rent payable
under this Lease shall be or become uncollectible, reduced or required to be
refunded because of any Legal Requirement (as such term is defined in Article
22 hereof), Tenant shall enter into such agreement(s) and take such other
legally permissible steps as Landlord may reasonably request to permit
Landlord to collect the maximum rents which from time to time during the
continuance of such Legal Requirement may be legally permissible and not in
excess of the amounts reserved therefor under this Lease. Upon the
termination of such Legal Requirement, (a) the rents hereunder shall be
payable in the amounts reserved herein for the periods following such
termination and (b) Tenant shall pay to Landlord, to the maximum extent
legally permissible, an amount equal to (i) the rents which would have been
paid pursuant to this Lease but for such Legal Requirement less (ii) the
rents, if any, paid by Tenant during the period such Legal Requirement was in
effect.
1.05. The fixed annual rent payable pursuant to Section 1.01(b)
hereof shall be abated for the period (the "Rent Abatement Period") beginning
on the Commencement Date and ending on December 31, 1997. The day following
the expiration of the Rent Abatement Period is hereinafter called the "Rent
Commencement Date."
ARTICLE 2
COMMENCEMENT OF TERM
2.01. (a) The "Commencement Date" of the Term shall be October 1,
1996.
(b) The "Expiration Date" of the Term shall be the last
day of the month in which occurs the fifteenth (15th) anniversary of the Rent
Commencement Date.
2.02. (a) Tenant has examined the demised premises and agrees to
accept same in the condition and state of repair existing as of the date
hereof subject to normal wear and tear and understands and agrees that
Landlord shall not be required to perform any work, supply any materials or
incur any expense to prepare the demised premises for Tenant's occupancy,
subject to the provisions of Article 43 hereof. Landlord shall, at Landlord's
cost, use best efforts to complete the punchlist work set forth on Schedule Q
annexed hereto ("Punchlist Work") on or before November 15, 1996 (subject to
delays for Force Majeure Causes and Tenant's Delay). If Landlord shall fail
to complete the Punchlist Work on or before November 15, 1996, subject to
extensions by reason of Force Majeure Causes and Tenant's Delay, and such
failure shall actually delay the commencement or performance of Tenant's
Work, then the Rent Commencement Date shall be extended on a day-for-day
basis for each day of actual delay in the performance or commencement of
Tenant's Work caused by such failure. For purposes hereof, "Landlord's Work"
shall mean the Base Building work in the demised premises as shown on the
plans and drawings specified on Schedule N annexed hereto and the delivery
to Tenant of Form ACP-5 with respect to asbestos removal in the demised
premises.
2.03. If the completion of the Punchlist Work shall be delayed by
reason of any Tenant's Delay, as hereinafter defined, then the Punchlist Work
shall be deemed substantially completed on the date when Punchlist Work would
have been so substantially completed but for such Tenant's Delay.
If a delay in the substantial completion of the Punchlist Work or
any substantial portion of such delay is the result of Force Majeure Causes,
and such delay would not have occurred but for Tenant's Delay, such delay
shall be deemed to be Tenant's Delay.
3
<PAGE>
For purposes hereof, "TENANT'S DELAY" shall mean any delay in the
substantial completion of Punchlist Work caused by any of: (i) any request
by Tenant that Landlord delay the completion of the Punchlist Work, (ii) any
negligent or wrongful act of Tenant or its officers, agents, representatives,
servants or contractors, or (iii) any other act or omission of Tenant, which
actually causes a delay in the substantial completion of the Punchlist Work.
Landlord shall provide written notice to Tenant of any circumstances
constituting Tenant's Delay within two (2) Business Days after Landlord
becomes aware of same and the number of days of Tenant Delay expected to
result therefrom, to the extent such time period can reasonably be estimated
in advance (and if Landlord fails to give such notice within such two (2)
Business Day period, such circumstances shall not constitute Tenant's Delay
until from and after the date Landlord so notifies Tenant).
2.04 Landlord represents that, to the best of its knowledge, there
are no asbestos containing materials contained in the tenant areas of the
demised premises which would be in violation of any currently existing
Federal, state or local laws, regulations or ordinances, or which would
prevent or delay Tenant from commencing Tenant's Work or any future
alterations in the demised premises; provided, however, to the extent that
there are any asbestos containing materials contained in the tenant areas of
the demised premises which would be in violation of any currently existing
federal, state or local laws, regulations or ordinances, or which would
prevent or delay Tenant from commencing Tenant's Work or any future
alterations in the demised premises, then Tenant shall give notice thereof to
Landlord, and as Tenant's sole remedy, Landlord shall remove, encapsulate or
abate such asbestos containing materials in accordance with applicable Legal
Requirements. For each day that Tenant is prevented from commencing or is
delayed in completing Tenant's Work or any future alterations in the demised
premises by reason of such removal, encapsulation or abatement by Landlord,
then Tenant shall receive a per diem credit against the fixed annual rent
next due hereunder.
2.05. Landlord represents that Landlord's Work and the Punchlist
Work (i) shall be and has been performed in a good and workerlike manner in
accordance with the plans annexed hereto as Schedule N hereof, (ii) complies
with all Legal Requirements, and (iii) shall be and has been paid for in full
by Landlord so that no lien or other encumbrance shall be filed against the
demised premises on account thereof. In addition Landlord guarantees
Landlord's Work and the Punchlist Work for a period of one (1) year from the
Commencement Date against defective workmanship and materials.
ARTICLE 3
ADJUSTMENTS OF RENT
3.01. A. For purposes hereof, the following definitions shall apply:
(a) The term "Base Tax" shall mean one-half of the sum
of the Taxes for the Tax Years commencing July l, l996 and July 1, 1997.
(b) The term "Tax Year" shall mean each period of
twelve months which includes any part of the Term which now or hereafter is
or may be duly adopted as the fiscal year for real estate tax purposes of the
City of New York.
(c) The term "Taxes" shall mean (i) all real estate
taxes, assessments, governmental levies, municipal taxes, county taxes or
(provided same are in the nature of real estate taxes and are imposed on
building owners by virtue of their ownership of real property) any other
governmental charge, general or special, ordinary or extraordinary,
unforeseen as well as foreseen, of any kind or nature whatsoever including,
without limitation, the Grand Central Partnership Business Improvement
District Assessment (but excluding penalty charges or interest charges which
are imposed by reason of late payment [as distinguished from interest charges
which are imposed where certain taxes may be paid in installments]), which are
or may be assessed, levied or imposed upon all or any part of the Property and
the sidewalks, plazas or streets adjacent thereto (other than any occupancy or
rent tax payable by Tenant pursuant to Section 3.03), and levied against
Landlord and/or the Property under the laws of the United States, the City or
State of New York, or any
4
<PAGE>
political subdivision thereof, but excluding any franchise, income,
succession, capital levy, gross receipt, transit, profit, gift, transfer,
capital stock, foreign ownership or control, mortgage recording, inheritance
or estate taxes payable by Landlord or Landlord's estate, except to the
extent set forth in the next sentence of this subsection 3.0l A(c) or any
taxes or fees payable on air or development rights, excess zoning rights or
similar rights acquired by Landlord after the date hereof; and (ii) any
customary expenses incurred by Landlord, including payments to unaffiliated
attorneys, accountants and appraisers, in contesting any of the items set
forth in clause (i) of this sentence, or the assessed valuations of all or
any part of the Property, to the extent such expenses are customarily
incurred in connection with such contests but excluding any abatements,
refunds or rebates made thereof. If due to a future change in the method of
taxation or in the taxing authority, a new or additional real estate tax, or
a franchise, income, transit, profit, or other tax or governmental
imposition, however designated, including, without limitation any tax, excise
or fee measured by or payable with respect to any rent, shall be levied
against Landlord, and/or the Property, in substitution in whole or in part
for any tax which would constitute "Taxes", such tax or imposition shall be
deemed for the purposes hereof to be included within the term "Taxes",
provided that any such "Taxes" imposed on rents or income from the Property
shall be calculated as if the Property were the only asset of Landlord and
Landlord's only income were from the Property. If any general or special
assessments are imposed or levied and it shall be permissible to pay same in
installments, then for purposes of inclusion within Taxes under this Lease,
same shall be deemed to be included in the greatest number of such
installments permitted by law and Tenant shall be responsible only for
Tenant's Tax Share of those installments becoming due and payable during the
Term. If Tenant shall dispute the propriety of including any item in Taxes,
Tenant shall give Landlord notice thereof and if Landlord and Tenant are
unable to resolve such dispute within thirty (30) days thereafter, either
party may submit same to arbitration pursuant to the provisions of Article 37
hereof. Pending the determination of such dispute, Tenant shall pay Tenant's
Tax Payment in accordance with the Escalation Statement that Tenant is
disputing, without prejudice to Tenant's position.
(d) The term "Tenant's Tax Share" shall mean 6.2252%,
calculated as a fraction, the numerator of which is 44,704, reflecting the
number of rentable square feet which Landlord and Tenant agree comprises the
demised premises and 718,110, reflecting the number of rentable square feet
which Landlord and Tenant agree comprises the rentable square footage of the
office and retail area of the Building. If the physical size of the rentable
area of the Building shall increase, Tenant's Tax Share shall be
appropriately recalculated.
(e) The term "Escalation Statement" shall mean a
statement setting forth the amount payable by Tenant for a specified Tax Year
or Operating Year (as defined in Section 3.02 hereof), as the case may be, or
for some portion thereof pursuant to this Article 3.
B. Tenant shall pay to Landlord as additional rent for
each Tax Year from and after the Tax Year commencing July 1, 1997 a sum equal
to Tenant's Tax Share of the amount by which the Taxes for such Tax Year
exceed the Base Tax (hereinafter referred to as "Tenant's Tax Payment").
Landlord shall furnish to Tenant an annual Escalation Statement (subject to
revision as hereinafter provided) for each Tax Year setting forth Tenant's
Tax Payment for such Tax Year. Upon Tenant's written request therefor,
Landlord shall submit to Tenant a copy of the applicable tax bill from the
taxing authorities, if then available and any other information pertaining to
any sums included in Taxes. Tenant's Tax Payment shall be due and payable in
two (2) equal installments, in advance, on the first day of each June and
December of each Tax Year based upon the Escalation Statement furnished with
respect to such Tax Year, until such time as a new Escalation Statement for a
subsequent Tax Year shall become effective. If an annual Escalation
Statement is furnished to the Tenant after the commencement of the Tax Year
to which it relates, then Tenant shall, within thirty (30) days after such
annual Escalation Statement is furnished to Tenant, pay to Landlord an amount
equal to any underpayment of Tenant's Tax Payment theretofore paid by Tenant
for such Tax Year and, in the event of an overpayment by Tenant, Landlord
shall, at Tenant's option, permit Tenant to credit against subsequent rental
payments under this Lease the amount of such overpayment or make payment of
same to Tenant by good and sufficient check (subject to collection) within
thirty (30) days of demand by Tenant. If there shall be any increase or
decrease in Taxes for any Tax Year, whether
5
<PAGE>
during or after such Tax Year, Landlord shall furnish a revised Escalation
Statement for such Tax Year to Tenant, and Tenant's Tax Payment for such Tax
Year shall be adjusted and paid or credited, as appropriate, 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 holder of a Superior Instrument (as defined in Section
25.01 hereof) in full or in monthly, quarterly, or other installments, on any
other date or dates than as presently required, then at Landlord's option,
Tenant's Tax Payments shall be correspondingly accelerated or revised so that
said Tenant's Tax Payments are due no more than thirty (30) days prior to the
date payments are due to the taxing authorities or the superior mortgagee or
ground lessor (provided, however, such payment shall be required only if such
holder is not an Affiliate of Landlord and only if such requirement is not
imposed by such holder as a result of a default by Landlord under such
Superior Instrument). Landlord represents that as of the date hereof, there
is no such requirement to currently pay to the holder of a Superior
Instrument such tax payments. As used in this Section 3.02(B), the term
"Affiliate" means an entity which controls, is controlled by or is under
common control with Landlord. The benefit of any discount for any early
payment or prepayment of Taxes shall accrue solely to the benefit of Landlord
and such discount shall not be subtracted from Taxes; provided, however, that
such discount shall be subtracted from Taxes, if, at Landlord's request,
Tenant's Tax Payments are made prior to the above due dates to enable
Landlord to obtain such discount. Landlord shall pay Taxes for any Tax Year
on or before the date on which the Taxes in question shall be due and payable
and all applicable grace periods have expired and all Landlord's rights to
commence or continue any protest, contest or dispute of same prior to payment
shall have expired, or if Landlord shall have commenced such protest, contest
or dispute, then all Landlord's rights of appeal prior to payment shall have
lapsed or been waived.
C. If Landlord shall receive a refund of Taxes for any Tax
Year, Landlord shall notify Tenant of such refund and, at Tenant's option,
permit Tenant to credit against subsequent rental payments under this Lease,
Tenant's Tax Share of the refund, but not in excess of Tenant's Tax Payment
paid for such Tax Year, or make payment by good and sufficient check (subject
to collection) to Tenant within twenty (20) days of demand by Tenant.
D. Nothing contained in this Lease shall obligate Landlord
to bring any application or proceeding seeking a reduction in Taxes or
assessed valuation. Landlord shall use its good faith business judgment to
monitor and, if appropriate in the reasonable business judgment of Landlord,
dispute the amount of Taxes with respect to any Tax Year during the Term,
including bringing an application or proceeding seeking a reduction in Taxes
or the assessed valuation of the Building. Tenant, for itself and its
immediate and remote subtenants and successors in interest hereunder, hereby
waives, to the extent permitted by law, any right Tenant may now or in the
future have to protest or contest any Taxes or to bring any application or
proceeding seeking a reduction in Taxes or assessed valuation or otherwise
challenging the determination thereof.
E. Deleted Prior to Execution.
F. Subject to the provisions of this subsection 3.01(F),
if at any time during the term of this Lease, the assessment of the Property
for real estate tax purposes shall be increased by reason of a "sale" (as
such term is hereinafter defined), and as a consequence of such increased
assessment, real estate taxes are increased over the amount that such real
estate taxes would have otherwise been increased but for such sale, then for
such part of the Term hereof as shall then remain, the portion of any Tax
Payment attributable to the increase in the assessment of the Property that
results as a consequence of such sale (multiplied by the tax rate from time
to time applicable to such increase in assessment) shall be abated (herein
called the "Tax Escalation Abatement"). For purposes hereof, the term "sale"
shall mean: only a voluntary or involuntary sale, exchange or other transfer
of an equity interest in the Land or Building or a lease of the entire Land
and/or Building, or an option or agreement so to do, provided, however, with
respect to the foregoing events, only on condition that the Taxing Authority
(as hereinafter defined) regards same to constitute a sufficient transfer of
a nature which may cause an increase in the actual assessment (appearing on
the assessment roles of the City of New York for the Land
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and/or Building, as finally determined) pursuant to the laws, rules and
regulations or practices of the Taxing Authority then in effect; provided,
however, that any such transaction shall be a sale only if (and to the extent
that) such transaction is treated as a sale or transfer for real estate
purposes which by any law, rule, regulation or practice by the Taxing
Authority then in effect, may give rise to an increase in the subject
property's real estate tax assessment by the Tax Commission of the City of
New York (or any successor agency or department thereto which has the power
to fix or review assessed evaluations) (herein called the "Taxing
Authority"). Notwithstanding anything to the contrary contained herein, in
no event shall a sale be deemed to have occurred unless a New York City Real
Property Transfer Tax Return, a New York State Documentary Stamp Tax filing,
or other similar transfer document shall be required to be filed in the
office where any of the foregoing is filed (or any successor office thereto).
Landlord and Tenant expressly agree that in no event shall the Tax Escalation
Abatement be deemed to include increases in real estate taxes for any other
reason whatsoever, including, without limitation increases of same
attributable in whole or in part to changes in the market value generally for
properties comparable or approximate to the Property or due to changes in the
tax rate or due to any other circumstances or factors other than a sale. To
the extent that all or a portion of any increase in real estate taxes after a
sale may be attributable to such other circumstances or factors, then an
allocation as to the portion attributable to the sale shall be made by
Landlord for the purposes of establishing the Tax Escalation Abatement in
connection therewith. Any dispute regarding such allocation shall, if not
resolved within thirty (30) days after Tenant gives Landlord notice thereof,
be resolved by arbitration pursuant to Article 37 hereof.
3.02. A. For purposes hereof, the following definitions shall apply:
(a) The term "Expense Base Factor" shall mean an amount
equal to the Expenses for the Operating Year 1997.
(b) The term "Operating Year" shall mean each calendar
year which includes any part of the Term, and the term "Base Operating Year"
shall mean the calendar year 1997.
(c) The term "Tenant's Expense Share" shall mean
6.4501% calculated as a fraction, the numerator of which is 44,704,
reflecting the number of rentable square feet which Landlord and Tenant agree
comprises the demised premises and the denominator of which is 693,076,
reflecting the number of rentable square feet which Landlord and Tenant agree
comprises the rentable square footage of the office area of the Building. If
the physical size of the rentable area of the Building shall increase,
Tenant's Expense Share shall be appropriately recalculated.
(d) The term "Expenses" shall mean all expenses
actually incurred by Landlord in accordance with sound management practices
to the extent properly allocable to the Property for the period in question
in accordance with sound accounting principles consistently applied in the
real estate industry with respect to first-class office buildings in midtown
Manhattan in respect of the repair, replacement, maintenance, operation
and/or security of the Property (hereinafter defined), including, without
limitation, (i) salaries, wages, medical, surgical, insurance (including,
without limitation, group life and disability insurance), union and general
welfare benefits, pension benefits, severance and sick day payments, and
other fringe benefits of employees of Landlord, Landlord's affiliates or
agents and their respective contractors (up to and including the senior
building manager, which position Landlord represents does not constitute an
executive position) engaged in such repair, replacement, maintenance,
operation and/or security (excluding, however, unfunded pension or other
benefits accruing prior to any period during which Tenant is required to pay
rent); (ii) payroll taxes, worker's compensation, uniforms and related
expenses (whether direct or indirect) for such employees; (iii) the cost of
fuel, gas, steam, electricity (for areas other than those leased or leasable
to tenants), heat, ventilation, air-conditioning, chilled and condenser
water, water, sewer and other utilities, together with any taxes and
surcharges on, and fees paid to suppliers thereof in connection with the
calculation and billing of, such utilities; (iv) the cost of painting and/or
decorating all areas of the Property, excluding, however, (y) fine arts (as
distinguished from decorative arts), and (z) such costs attributable to any
space contained therein which is demised or available for demise to tenant(s)
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(other than core bathrooms, mechanical rooms and core closets); (v) the cost
of casualty, liability, fidelity, rent and all other insurance regarding the
Property and/or any property on, below or above the Property, and the repair,
replacement, maintenance, operation and/or security thereof provided same is
customarily carried for comparable first-class office buildings in the
midtown area of the Borough of Manhattan; (vi) the cost of all supplies,
tools, materials and, subject to the qualifications in subsections (x) and
(xi), equipment, whether by purchase or rental, used in the repair,
replacement, maintenance, operation and/or security of the Property, and any
sales and other taxes thereon; (vii) intentionally omitted; (viii) the cost
of cleaning, janitorial and security services, including, without limitation,
glass cleaning, snow and ice removal and garbage and waste collection and/or
disposal; (ix) the cost and maintenance of all interior and exterior
landscaping and all temporary exhibitions (other than fine arts) located at
or within the common areas of the Property; (x) the cost of alterations and
improvements made or installed after the Base Operating Year by reason of
Legal Requirements or the requirements of nationally recognized insurance
bodies and all tools and equipment related thereto; (xi) the cost of all
other alterations, repairs, replacements and/or improvements after the Base
Operating Year by Landlord or Landlord's affiliates, at their respective
expense, whether structural or non-structural, and whether or not required by
this Lease, and all tools and equipment related thereto; provided, however,
that if under generally accepted accounting principles consistently applied,
any of the costs referred to in clauses (vi), (x) or this clause (xi) are
required to be capitalized, then such capitalized costs, shall be included in
Expenses only in the following cases ("Permitted Capital Costs"): costs for
items under clause (x) hereof or costs for items which have the effect of
reducing the expenses which otherwise would be included in Expenses, and such
Permitted Capital Costs together with interest thereon at the Prime Rate (as
defined in Section 22.03 hereof) in effect as of December 31 of the year in
which such expenditure is made, shall be amortized or depreciated, as the
case may be, over a period of time which shall be the shorter of: (A) the
useful life of the item in question, as reasonably determined by Landlord; or
(B) ten (10) years; provided, however, that with respect to any capital
improvement and/or any machinery or equipment which is made or becomes
operational, as the case may be, after the Base Operating Year, and which has
the effect of reducing the expenses which otherwise would be included in
Expenses, the amount included in Expenses in any Operating Year until such
improvement and/or machinery or equipment has been fully amortized or
depreciated, as the case may be, shall be the amount of savings, as
reasonably estimated by Landlord, resulting from the installation and
operation of such improvement and/or machinery or equipment; (xii) management
fees; provided, however, that if Landlord or an affiliate of Landlord is the
managing agent of the Building or if no managing agent is employed by
Landlord, then the annual management fee shall be a sum which is not in
excess of the then prevailing rates for management fees in the Borough of
Manhattan for first-class office buildings similar to the Building under
comparable circumstances; (xiii) intentionally omitted; (xiv) all reasonable
costs and expenses of legal, bookkeeping, accounting and other professional
services; and (xv) reasonable fees, dues and other contributions paid by or
on behalf of Landlord or Landlord's affiliates to real estate organizations
such as the Real Estate Board and BOMA (and their successors) to the extent
generally that landlords of first class office buildings in the midtown area
of Manhattan are members thereof or contributors thereto, but same shall, if
paid on behalf of Landlord and Landlord's affiliates, be prorated among the
Building and other buildings owned by Landlord or its affiliates. Subject to
the specific exclusions from "Expenses" set forth in this Section 3.02A, with
respect to any fees, costs, charges or expenses for services or items which
are not expressly included in the foregoing clauses (i) through (xv), same
shall be includible in Expenses if same are properly allocable to the repair,
replacement, maintenance, operation and/or security of the Property, in
accordance with then prevailing customs and practices of the real estate
industry in the midtown area of the Borough of Manhattan, City of New York.
The term "Expenses", as used and defined under this subsection (d),
shall not, however, include the following items: (1) depreciation and
amortization (except as provided above in this subsection); (2) interest on
and amortization of debts; (3) the cost of tenant improvements made for
tenant(s) of the Building; (4) brokerage commissions and/or other leasing
costs; (5) financing and/or refinancing costs; (6) the cost of any work or
services performed for any tenant(s) of the Building (including Tenant),
whether at the expense of Landlord or Landlord's affiliates or such
tenant(s), to the extent that such work or services are in excess of the work
or
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services which Landlord or Landlord's affiliates are required to furnish
Tenant under this Lease at the expense of Landlord or Landlord's affiliates;
(7) the cost of any electricity consumed in the Premises or any other space
in the Building demised or available for demise to tenant(s); (8) Taxes and
any amounts specifically excluded from Taxes set forth in this Lease; (9) the
cost of any capital improvements other than Permitted Capital Costs; (l0)
salaries, fringe benefits, and all other compensation for Landlord's, or
Landlord's affiliate's or their respective agent's, employees above the grade
of senior building manager and compensation paid to persons in commercial
concessions operated by Landlord or Landlord's affiliates; (ll) cost of
repairs or replacements incurred by reason of fire or other casualty or
condemnation, except to the extent that the cost thereof is less than the
"deductible" in force under Landlord's insurance policy provided such
deductibles are not substantially higher than the deductibles customarily
carried by landlords of first-class office buildings comparable to the
Building; (l2) advertising and promotional expenditures; (l3) the cost of any
judgment, settlement or arbitration award resulting from any tort liability
of Landlord or its affiliates, agents, contractors or employees and any
attorneys' fees incurred in connection with same; provided, however, that any
portion of any such judgment, settlement or arbitration award which by its
nature would otherwise be an Expense (e.g., the cost of repairs or
maintenance) shall, notwithstanding the foregoing, be included as an Expense;
(l4) any rents or additional rents under superior leases (as described in
Section 25.0l hereof); (l5) any payments under air rights transfers; (l6)
legal fees or expenses incurred in connection with the negotiation of leases
for space in the Building, or of renewals, amendments, financings,
refinancings, or sales or in connection with enforcing the provisions of any
tenant's lease, other than a tenant who is disturbing other tenants in the
Building by reason of such tenant's breach of its lease; (l7) any fee or
other expenditure paid to any corporation or entity related to or affiliated
with Landlord in excess of the amount which would be paid in the absence of
such relationship; (l8) amounts received by Landlord through proceeds of
insurance to the extent the proceeds are compensation for expenses which are
previously included in Expenses hereunder; (19) costs for acquiring or
renting works of fine art (as distinguished from decorative items) displayed
in the public areas of the Building; (20) the cost of any goods or services
furnished to tenants (including Tenant), including any goods and services
hereinabove referred to in this subsection 3.02A(d), to the extent the same
is reimbursed to Landlord other than by reason of escalation-type clauses
similar to this Article 3; (2l) interest or penalties for late payment of any
Expenses or Taxes paid by Landlord including interest and penalties on any
Taxes or surcharges for late payment for fuel, gas, steam, electricity,
water, sewer or other utilities except where such interest or penalties shall
result from a bona fide dispute between Landlord and a vendor or other
creditor; (22) the cost of any workers' services performed or other expenses
incurred in connection with installing, operating and maintaining any
specialty service or facility other than common Building facilities (e.g., a
sky deck, broadcasting facility or any luncheon, athletic or recreational
club); (23) costs incurred in the removal, containment, encapsulation, or
disposal of asbestos or other substances installed by Landlord or Landlord's
predecessors in the Building which prior to the date of this Lease were
deemed by any applicable Federal, State or Municipal law, order, rule or
regulation to be hazardous to health or the environment; (24) costs incurred
in connection with the transfer or disposition of all or any part of the
Building or Land or in any interest therein or in Landlord or any entity
comprising Landlord; (25) the cost of any capital improvements to the
Building which physically increase the usable square foot area thereof except
to the extent same are required to be performed pursuant to Legal
Requirements; (26) any other expenditure which would otherwise be an Expense
to the extent Landlord is reimbursed therefor by condemnation award or
insurance proceeds or by refund, credit, warranty, service contract or
otherwise (other than reimbursement by reason of escalation type clauses in
tenant's leases comparable to this Article 3); (27) any expenses for repairs
or maintenance which are or would have been covered by warranties and service
contracts for the benefit of Landlord; (28) the cost (and taxes thereon) for
hookup, connection, or service for all existing utilities; (29) Landlord's
contribution of any funds or money given to other tenants in cash, by rent
concession, offset or otherwise, or work done for other tenants in connection
with leasing of space in the Building; (30) any expenses which are unique to
the retail space in the Building; and (31) any expenses which are not
includable in Expenses pursuant to the final sentence of the first paragraph
of subsection 3.02A(d) hereof.
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If any of the foregoing costs and expenses are incurred with
respect to any other property or building in addition to the Building, then
same shall be reasonably allocated.
In determining the amount of Operating Expenses for any Operating
Year (including the Base Operating Year), if less than ninety-five percent
(95%) of the Building rentable area shall have been occupied by tenant(s) at
any time during any such Operating Year, or if Landlord is not furnishing any
particular work or service (the cost of which if performed by Landlord would
constitute an Operating Expense) to a tenant, Expenses shall be determined
for such Operating Year to be an amount equal to the expenses which would
normally be expected to be incurred had ninety-five percent (95%) of the
Building rentable area been occupied throughout such Operating Year or had
Landlord furnished such particular work or service to ninety-five percent
(95%) of the tenants in the Building.
Landlord represents that, as of the date hereof, no lease for
another tenant in the Building contains a definition of Expenses which is
substantially more tenant-favorable than is the foregoing definition.
B. If the Expenses for any Operating Year exceed the
Expense Base Factor, Tenant shall pay to Landlord as additional rent for such
Operating Year an amount equal to Tenant's Expense Share of the excess of the
Expenses for such Operating Year over the Expense Base Factor (hereinafter
referred to as "Tenant's Expense Payment").
C. Landlord shall furnish to Tenant for each Operating
Year an Escalation Statement (subject to revision as hereinafter provided)
setting forth Landlord's reasonable estimate of Tenant's Expense Payment for
such Operating Year. Tenant shall pay to Landlord on the first day of each
month during such Operating Year an amount equal to one-twelfth (1/12) of
Landlord's estimate of Tenant's Expense Payment for such Operating Year. If
Landlord shall furnish such estimate for an Operating Year after the
commencement thereof, then (a) 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 Paragraph C for the last month of
the preceding Operating Year; (b) Landlord shall notify Tenant in the
Escalation Statement containing such estimate whether the installments of
Tenant's Expense Payment previously paid for such Operating Year were more or
less than the installments which should have been paid for such Operating
Year pursuant to such estimate and (i) if there shall be an underpayment,
Tenant shall pay the amount thereof within thirty (30) days after being
furnished with such Escalation Statement or (ii) if there shall be an
overpayment, Tenant shall, at its option, be entitled to either a credit in
the amount thereof against subsequent rental payments under this Lease or to
have Landlord make payment to Tenant in the amount of such overpayment by
good and sufficient check (subject to collection) within thirty (30) days of
being furnished with such Escalation Statement; and (c) on the first day of
the month following the month in which such estimate is furnished to Tenant
and monthly thereafter for the balance of such Operating Year, Tenant shall
pay to Landlord an amount equal to one-twelfth (1/12) of Tenant's Expense
Payment as shown on such estimate. Landlord may at any time and from time to
time (but not more often than twice in any Operating Year) furnish to Tenant
an Escalation Statement setting forth Landlord's revised estimate of Tenant's
Expense Payment for a particular Operating Year and Tenant's Expense Payment
for such Operating Year shall be adjusted and paid or credited, as
applicable, in the same manner as provided in the preceding sentence.
D. After the end of each Operating Year Landlord shall
submit to Tenant an annual Escalation Statement prepared by Landlord setting
forth the Expenses for the preceding Operating Year and the balance of
Tenant's Expense Payment, if any, due to Landlord from Tenant for such
Operating Year. If such annual Escalation Statement shall show that the sums
paid by Tenant under subparagraph 3.02(C) above exceeded Tenant's Expense
Payment for such Operating Year, Tenant shall at its option be entitled to
either a credit in the amount of such excess (plus, in the event the amount
of such overpayments exceed 7 l/2% of the actual Tenant's Expense Payment,
interest at the Prime Rate on the amount which exceeds such actual Tenant's
Expense Payment) against subsequent rental payments under this Lease or to
have Landlord make payment to Tenant in the amount of such excess (together
with interest
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at the Prime Rate as aforesaid) by good and sufficient check (subject to
collection) within thirty (30) days of delivery of such statement. If such
annual Escalation Statement shall show that the sums so paid by Tenant were
less than Tenant's Expense Payment for such Operating Year, Tenant shall pay
the amount of such deficiency to the Landlord (plus, in the event the amount
of such deficiency exceeds 7 1/2% of the actual Tenant's Expense Payment,
interest at the Prime Rate on the amount which exceeds such actual Tenant's
Expense Payment), within thirty (30) days after being furnished with such
annual Escalation Statement. Notwithstanding the foregoing, in the event
Landlord fails to deliver the annual Escalation Statement referred to in this
subparagraph (D) within six (6) months after the end of any Operating Year,
then, if Tenant shall be entitled to a credit or refund for overpayment as
hereinabove provided, such credit or refund shall include interest at the
Prime Rate on the entire amount of the overpayment.
E. The annual Escalation Statements with respect to Expenses to
be furnished by Landlord as provided above shall be in reasonable detail and
certified by an officer of Landlord as true and complete. Landlord may use
reasonable operating cost allocations and estimates if such allocations or
estimates are required for this Section 3.02.
F. Tenant, upon no less than five (5) days prior notice, may
elect to have Tenant's designated representative who shall be a certified public
accountant, an officer of Tenant, or a real estate professional with substantial
experience in the financial aspects of first-class office building operation in
Manhattan (herein called "Tenant's Audit Representative") examine such of
Landlord's books and records (collectively, "Records") as are relevant to the
Escalation Statement in question and those Escalation Statements for the
preceding Operating Year and any prior Operating Year relevant to the
computation in question and the subsequent Operating Year to the extent same are
relevant, provided any such examination shall be commenced within six (6) months
after Tenant's receipt of an annual Escalation Statement and concluded within
sixty (60) days after the commencement of such examination. In making such
examination, Tenant agrees, and shall cause its Audit Representative to agree,
to keep confidential any and all information contained in the Records except as
disclosed in connection with any arbitration, action, proceeding, or legal
process. In the event that it is determined that the Expenses were overstated
by 10% or more, Landlord shall pay the reasonable cost of the audit by Tenant.
In the event that it is determined that the Expenses were overstated by 5% or
more, then the credit or repayment of such excess to Tenant shall bear interest
at the Prime Rate from the date paid to the date so credited or repaid.
3.03. Tenant shall pay to Landlord, within thirty (30) days after
demand, as additional rent, any occupancy tax or rent tax hereafter enacted,
which Landlord is hereafter required to pay with respect to the demised premises
or this Lease which is in lieu of, or constitutes a modification of, the current
New York City commercial rent tax payable by tenants; provided, however, that
(a) Landlord provides Tenant with written notice of the amount of tax and (b)
Tenant shall not be required to make any such payments to Landlord prior to
thirty (30) days before the same are due and payable to such taxing authorities.
3.04. If the Commencement Date shall be other than the first day
of a Tax Year or an Operating Year or if the date of the expiration or other
termination of this Lease shall be a day other than the last day of a Tax Year
or an Operating Year, then Tenant's Tax Payment and/or Tenant's Expense Payment
for such partial year shall be equitably adjusted taking into consideration the
portion of such Tax Year or Operating Year falling within the Term. Landlord
shall, as soon as reasonably practicable, cause an Escalation Statement with
respect to Taxes for the Tax Year and/or Expenses for the Operating Year in
which the Term expires to be prepared and furnished to Tenant. Such Escalation
Statement shall be prepared as of the expiration date of the Term if such date
is December 31, and if not, as of the first to occur of June 30 or December 31
after the expiration date of the Term. Landlord and Tenant shall thereupon make
appropriate adjustments of amounts then owing.
3.05. In no event shall the fixed annual rent ever be reduced by
operation of this Article 3, but Tenant shall be entitled to the credits against
fixed annual rent and additional rent as specifically provided in this
Article 3. The
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rights and obligations of Landlord and Tenant under the provisions of
this Article 3 shall survive the termination of this Lease, and payments shall
be made pursuant to this Article 3 notwithstanding the fact that an Escalation
Statement is furnished to Tenant after the expiration or other termination of
the Term, subject to Section 3.06 hereof.
3.06. Landlord's failure to render an Escalation Statement with
respect to any Tax Year or Operating Year shall not prejudice Landlord's right
to thereafter render an Escalation Statement with respect thereto or with
respect to any subsequent Tax Year or Operating Year. Notwithstanding the
foregoing, as to any Tax Year for which Landlord has delivered to Tenant an
Escalation Statement pursuant to Section 3.01B hereof or any Operating Year as
to which Landlord has delivered to Tenant an Escalation Statement pursuant to
Section 3.02D hereof, Tenant shall not be required to pay additional Tenant's
Tax Payment or additional Tenant's Expense Payment, as the case may be, (i.e.,
over and above the amount set forth on such original Escalation Statement) by
reason of Landlord delivering a revised Escalation Statement for such period
unless Landlord delivers such revised Escalation Statement within twelve (12)
months after the end of the Tax Year or Operating Year, as the case may be, as
to which such original Escalation Statement related.
3.07. Each Escalation Statement shall be conclusive and binding
upon Tenant unless within six (6) months after receipt of such Escalation
Statement Tenant shall notify Landlord that it disputes the correctness of such
Escalation Statement, specifying the particular respects in which such
Escalation Statement is claimed to be incorrect. Any dispute relating to any
Escalation Statement, not resolved within 60 days after the giving of such
notice by Tenant, may be submitted to arbitration by either party pursuant to
Article 37 hereof with such arbitration to await the results of Tenant's
examination of Landlord's Records pursuant to subsection 3.02F hereof. Pending
the determination of such dispute, Tenant shall pay additional rent in
accordance with the Escalation Statement that Tenant is disputing, without
prejudice to Tenant's position.
ARTICLE 4
ELECTRICITY
4.01. Landlord agrees that prior to the Commencement Date all
risers, feeders and wiring to furnish electrical service to the demised premises
in accordance with the provisions of the specifications for such electrical
service set forth in Section 4.07 hereof and other conductors and electrical
equipment necessary will be installed in the Building by Landlord to the
electric closet serving the demised premises. After the Commencement Date any
additional risers, feeders or other equipment or service proper or necessary to
supply Tenant's electrical and communication requirements (in excess of the
electrical load set forth in such specifications), upon written request of
Tenant, will be installed by Landlord at the sole cost and expense of Tenant, if
(i) the same will not in Landlord's good faith judgment cause permanent damage
or injury to the Building or the demised premises or cause or create a dangerous
or hazardous condition, repairs or expense or interfere with or disturb other
tenants or occupants, (ii) such installation is practicable in Landlord's
reasonable judgment, taking into consideration the current and future potential
needs for electric service of current and future tenants of the Building other
than Tenant, and (iii) Landlord shall not be obligated to make available to
Tenant more than Tenant's Expense Share of surplus space in the vertical
penetrations of the Building which are used for electrical conduit and risers.
4.02. (a) For the period commencing on the Commencement Date,
Tenant covenants and agrees to contract directly with and to pay directly to
the utility company supplying electric current for the demised premises the
amounts due for such electric current consumed as indicated by meters
installed by Landlord at Landlord's expense, measuring Tenant's consumption
thereof and no other tenant's consumption of electricity.
(b) If permitted by Legal Requirements, Tenant shall have
the right to contract for an alternate power source provided that Tenant shall
notify Landlord at least thirty (30) Business Days in advance of its intention
to contract
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for same. In the event that Tenant contracts for an alternate power source,
Landlord shall cooperate with Tenant and the alternate power source provider
(at no cost to Landlord unless Tenant agrees to pay any such actual cost
without profit or markup to Landlord), and shall allow Tenant and the
alternate power source provider reasonable access, at no cost to either of
said parties, to the Building's electrical lines, feeders, risers and wiring,
in order to provide the alternate power source, provided and on condition
that such access to the Building's electrical lines, feeders, risers and
wiring shall not in any way diminish electrical service in the Building,
except to a de minimis extent.
4.03. (a) If Tenant leases additional space in the Building and
if, as a result thereof, one meter measures the consumption of electric current
by Tenant and another lessee of space in the Building (i.e., more than two
tenants on a floor), or if there is no meter measuring Tenant's consumption of
electric current for any purpose, including without limitation, base building
air conditioning, ventilating and heating (e.g., more than one tenant on a floor
with respect to base building air conditioning and ventilating) (it being
understood that the foregoing shall not be deemed to permit Landlord to
unilaterally remove Tenant's electrical meter), Tenant agrees to pay to Landlord
or Landlord's designated agent charges for electric current consumed by Tenant
as determined by Landlord's electric consultant in accordance with Section 4.08
hereof. Bills therefor, at the rate charged to Landlord for such electric
current, plus the amount of sales tax imposed thereon by any Governmental
Authority, plus two and one-half percent (2 1/2%) of the total amount thereof
for administration and processing, shall be rendered at such times as Landlord
may elect based upon estimates of Landlord's electric consultant which may be
made from time to time as Landlord deems necessary. Until such time as
Landlord's electrical consultant first makes its estimate as aforesaid (which in
no event shall occur later than ninety (90) days after Landlord recaptures a
portion of the demised premises), Tenant shall pay as its electricity charge
hereunder (exclusive of Common Area Electric (as hereinafter defined)) the sum
of $2.00 per square foot multiplied by the rentable square footage of the
demised premises (the "BASE CHARGE") which shall be payable in equal monthly
installments together with the Tenant's payments of fixed annual rent hereunder
on the first day of each calendar month. In the event Landlord's consultant
shall determine that Tenant's electricity charge should differ from the Base
Charge, Tenant's Base Charge shall be adjusted retroactively at such time as
Landlord's electrical consultant's determination is made. Any deficiency for
such prior period shall be payable within thirty (30) days of demand. Any
excess for such prior period shall be, at Tenant's option, credited in the
amount of such excess against subsequent rental payments under this Lease or
paid to Tenant by good and sufficient check (subject to collection) within
thirty (30) days after such consultant's determination. Tenant shall permit
Landlord's electrical consultant to make surveys in the demised premises from
time to time (but not more than two surveys per year unless Landlord has
reasonable evidence that Tenant has increased its electrical load in the demised
premises) during normal business hours regarding the electrical equipment and
fixtures and the use of electric current therein; provided, however, that such
consultant will endeavor to minimize the disruption of Tenant's business.
Tenant shall have the right to cause Tenant's electrical consultant to make up
to two (2) surveys in the demised premises per year provided Tenant shall
promptly submit a copy of such survey to Landlord. Such surveys by Tenant's
electrical consultant shall be subject to Landlord's right to give a Dispute
Notice in accordance with Section 4.08 hereof. In the event the Tenant occupies
a portion of a floor, with respect to the electric current used (i) to run the
core air conditioning, heating and ventilating system on Tenant's floor,
including without limitation, for purposes of "early morning warm-up" and (ii)
for the lighting of the common areas on Tenant's floor (herein collectively
called "COMMON AREA ELECTRIC"), Landlord shall charge Tenant its proportionate
share of such charge plus sales tax and the two and one-half (2 1/2%) percent
administrative fee referred to above based upon the proportion which the
rentable area of the demised premises bears to the rentable area of the floor.
If Tenant desires to install a submeter to measure electric consumption rather
than by survey as provided for in this subsection 4.03(a), Tenant shall give
Landlord notice to such effect requesting such submeter, and Landlord agrees not
to unreasonably withhold its consent for such submeter provided that (x) Tenant
pays all costs for the installation of such submeter and associated equipment
and lines and (y) Tenant enters into a supplemental agreement reasonably
satisfactory to Tenant providing for the payment of such electricity on a
submetered basis.
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(b) If Tenant pays for electric current consumed pursuant
to subsection (a) above, Landlord reserves the right to discontinue furnishing
electric energy to Tenant at any time that electric service may be obtained by
Tenant in the demised premises directly from any public utility company or
alternative power source servicing the Building upon sixty (60) days' prior
written notice to Tenant, and from and after the effective date of such
termination, Landlord shall no longer be obligated to furnish Tenant with
electric energy, provided, however that such termination date shall be extended
for such time as is reasonably necessary for Tenant to make arrangements to
obtain electric service directly. If Landlord exercises such right of
termination, this Lease shall remain unaffected thereby (except Tenant will no
longer be required to pay Landlord any charge for electricity pursuant to this
Section 4.03) and shall continue in full force and effect; and thereafter Tenant
shall diligently arrange to obtain electric service directly from the public
utility company or alternative power source servicing the Building, and may
utilize the then existing electric feeders, risers and wiring serving the
demised premises to the extent available and safely capable of being used for
such purpose and only to the extent of Tenant's then authorized connected load.
Landlord shall not be obligated to pay any part of the cost incurred in Tenant's
obtaining direct electric service.
4.04. Tenant's use of electric current in the demised premises
shall not at any time exceed the capacity of any of the electrical conductors
and equipment in or otherwise serving the demised premises as described in
Section 4.07 hereof. Tenant shall not make or perform, or permit the making of
or performing of, any alterations to wiring, installations or other electrical
facilities in or serving the demised premises without the prior consent of
Landlord in each instance, such consent to be granted or denied as provided in
Article 6 hereof. Should Landlord grant any such consent, then all additional
risers or other equipment required therefor shall be installed by Landlord and
the commercially reasonable cost thereof shall be paid by Tenant within thirty
(30) days after receipt of Landlord's written demand therefor, together with any
and all appropriate invoices for such work, or, at Landlord's election, Tenant
shall perform such installation using an electrician approved by Landlord for
work in the Building.
4.05. (a) Subject to the provisions of subsection 34.02 hereof,
to the extent permitted by applicable law, Landlord shall not be liable in any
way to Tenant for any failure or defect in the supply or character of electric
energy furnished to the demised premises by reason of any requirement, act or
omission of the public utility providing the Building with electricity or for
any other reason whatsoever except Landlord's negligence or wilful misconduct;
provided, however, that in no event shall Landlord be liable for consequential
damages arising therefrom.
(b) Except in cases of emergency, Landlord shall notify
Tenant by reasonable advance notice of any required scheduled stoppage of
electricity in the Building. Landlord shall use reasonable efforts to
coordinate any such stoppage with Tenant so as to minimize interference with the
conduct of Tenant's business in the demised premises, but Landlord shall not be
obligated to employ overtime or premium labor therefor except as provided in
Section 7.04 hereof.
4.06. At Tenant's option, Tenant may purchase from Landlord or
Landlord's agent all lighting tubes, lamps, bulbs and ballasts used in the
demised premises and Tenant shall pay Landlord's commercially reasonable charges
for providing and installing same within twenty (20) days after demand as
additional rent.
4.07. Landlord covenants and agrees that 265/460 service of 19.5
watts of electricity connected load per usable square foot (inclusive of
electric energy used in connection with providing base building air conditioning
service to the demised premises and domestic hot water to the common areas of
the floor) shall be available in the electric closet servicing the demised
premises for Tenant's distribution, such distribution to be at Tenant's expense,
in the demised premises. Panels and transformers sufficient to service base
Building HVAC and hot water equipment and core bathrooms and closets, shall be
available but all additional panels and transformers for Tenant's distribution
shall be installed as part of Tenant's Work. In addition, upon prior notice to
Landlord, Tenant may access additional power of up to an additional 19.5 watts
per usable square foot connected load of electricity in accordance with the
provisions of this Lease including without limitation Article 6
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hereof. Tenant shall not be liable for any Building access or use charge for
such additional power, but Tenant shall be liable for all costs of actual
connection to the Building electric supply, of tying into Tenant's Con Edison
meter, of installing any other additional equipment required for such
additional power and any other actual cost necessary for Tenant to access
such additional power. Tenant covenants and agrees that at no time will the
connected electrical load in the demised premises exceed the foregoing
specifications.
4.08. Any determinations with respect to charges for electricity
on floors occupied by more than one tenant or otherwise which must be made
pursuant to the terms of this Lease shall be made by a reputable, independent
electrical consultant selected by Landlord ("LANDLORD'S ELECTRICAL CONSULTANT").
Any determination made by Landlord's electrical consultant pursuant to or in
connection with this Lease shall be binding and conclusive on Landlord and on
Tenant unless Tenant disputes such determination as hereinafter provided.
Tenant shall have the right to give a notice (the "DISPUTE NOTICE") to Landlord
within ninety (90) days after the date it is notified of any determination by
Landlord's electrical consultant that Tenant has engaged its own electrical
consultant ("TENANT'S ELECTRICAL CONSULTANT") to verify the determination of
Landlord's electrical consultant. If Tenant's electrical consultant and
Landlord's electrical consultant cannot agree within thirty (30) days after the
Dispute Notice, if any, is given on what an appropriate resolution of their
dispute should be, then either party, upon notice to the other, may submit the
issue to arbitration in accordance with the provisions of Article 37 of this
Lease. While such dispute is being resolved, Tenant shall pay such charges and
payments as would be due hereunder if Landlord's electrical consultant's
determination were correct without prejudice to Tenant's position. In the event
it is finally determined that there has been an overpayment by Tenant, such
overpayment shall be credited against future rent payments due from Tenant under
the Lease (or, in the event there are no such future rent payments due
hereunder, such overpayment shall be refunded to Tenant) and in the event of an
underpayment, the amount of such underpayment by Tenant shall be paid by Tenant
to Landlord within thirty (30) days after such determination is made.
ARTICLE 5
USE
5.01. The demised premises shall be used solely as and for
executive and general offices by Tenant and "Tenant's Affiliates" as defined in
Article 11 hereof, and for no other purpose.
5.02. Tenant shall not use or permit the use of the demised
premises or any part thereof in any way which would violate any of the terms and
conditions of this Lease or for any unlawful purposes or in any unlawful manner
or in violation of the Certificate of Occupancy for the demised premises or the
Building, and Tenant shall not permit the demised premises or any part thereof
to be used in any manner or anything to be done, brought into or kept therein
which, in Landlord's reasonable judgment shall impair or adversely affect (i)
the character, reputation or appearance of the Building as a first-class office
building, (ii) any of the Building services or the proper and economic heating,
cleaning, air conditioning or other servicing of the Building or the demised
premises, or (iii) the use of any of the other areas of the Building by, or
occasion discomfort, inconvenience or annoyance to, any of the other tenants or
occupants of the Building which is in excess of that which is customary and
usual in first-class office buildings similar to the Building located in the
midtown area of the Borough of Manhattan.
5.03. If any governmental license or permit (other than a
Certificate of Occupancy for the entire Building or for the demised premises for
use as general and executive offices in a customary manner) shall be required
for the proper and lawful conduct of Tenant's business in the demised premises
or any part thereof, Tenant, at its expense, shall duly procure and thereafter
maintain such license or permit and submit the same to Landlord for inspection.
Tenant shall at all times comply with the terms and conditions of each such
license or permit. Additionally, should Tenant's alterations or Tenant's use of
the demised premises require any modification or amendment of any Certificate of
Occupancy for the Building, Tenant shall, at its
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expense, take all actions reasonably requested by Landlord in order to
procure any such modification or amendment and shall reimburse Landlord (as
additional rent) for all reasonable costs and expenses Landlord incurs in
effecting said modifications or amendments. The foregoing provisions are not
intended to be deemed Landlord's consent to any alterations or to a use of
the demised premises not otherwise permitted hereunder nor to require
Landlord to effect such modifications or amendments of any Certificate of
Occupancy.
5.04. Tenant shall not use, or suffer or permit anyone to use, the
demised premises or any part thereof, for (a) retail banking, trust company, or
safe deposit business servicing the general public, (b) a savings bank, a
savings and loan association, or a loan company servicing the general public,
(c) the sale of travelers' checks and/or foreign exchange other than incidental
to Tenant's business, (d) a stock brokerage office or for stock brokerage
purposes, in either case as a retail, off-the-street operation which would
substantially increase the traffic flow to and from the demised premises over
customary office-use traffic flow, (e) a restaurant and/or bar and/or the sale
of confectionery and/or soda and/or beverages and/or sandwiches and/or ice cream
and/or baked goods (except if expressly provided otherwise elsewhere in this
Lease and except that the foregoing shall not be deemed to prohibit the
installation and maintenance of vending machines for the sale of food and
beverages to Tenant's employees and visitors provided that the provisions of
Section 21.06(c) of this Lease shall apply with respect thereto), (f) the
business of photographic reproductions and/or offset printing (except that
Tenant may use part of the demised premises for photographic reproductions
and/or offset printing in connection with, either directly or indirectly, its
own business and/or activities), (g) an employment or travel agency, (h) a
school or classroom (other than for training of Tenant's employees), (i) medical
or psychiatric offices, (j) conduct of an auction other than an electronic
auction, (k) gambling activities or (1) the conduct of obscene, pornographic or
similar disreputable activities. Nothing contained in this Section 5.04 will
prohibit Tenant from using, or permitting the use of, the demised premises for
executive, administrative or general offices of the businesses set forth in
clauses (a), (b), (c) or (d) of this Section 5.04. Further, the demised
premises may not be used by (i) an agency, department or bureau of the United
States Government, any state or municipality within the United States or any
foreign government, or any political subdivision of any of them, (ii) any
charitable, religious, union or other not-for-profit organization (other than
not-for-profit corporations of a nature comparable to the Ford Foundation or the
Rockefeller Foundation), or (iii) any tax exempt entity within the meaning of
Section 168(j)(4)(A) of the Internal Revenue Code of 1986, as amended, or any
successor or substitute statute, or rule or regulation applicable thereto (as
same may be amended).
5.05. Landlord represents that the Certificate of Occupancy for
the Building will permit the use of the demised premises for general and
executive offices. Landlord will make no changes in the Building which would
result in a change in the Certificate of Occupancy so as to prevent Tenant from
using the demised premises for general and executive office purposes.
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ARTICLE 6
ALTERATIONS AND INSTALLATIONS
6.01. To the extent the provisions of Article 42 to this Lease
conflict with the provisions of this Article 6, then, with respect to Tenant's
Work, the provisions of Article 42 hereto shall govern.
Tenant shall make no alterations, installations, additions or
improvements in or to the demised premises (other than purely decorative work in
the nature of interior wall covering, moveable partitions, carpeting and picture
hanging) without Landlord's prior written consent and then only by contractors
or mechanics approved by Landlord which approval shall not be unreasonably
withheld or delayed, provided however, Tenant shall use the contractor
recommended by Landlord with respect to the life-safety and the BMS systems of
the Building, provided such contractor provides its services promptly and at a
commercially reasonable cost. Landlord hereby approves the contractors and
subcontractors listed on Schedule R annexed hereto for the performance of
Tenant's Work provided they shall use only union labor therefor. If Landlord
shall disapprove any contractor or subcontractor proposed by Tenant to perform
work in the demised premises, Landlord shall notify Tenant in writing of such
disapproval specifying the reasonable grounds which are the basis for Landlord's
disapproval which shall be limited to a previous adverse experience between such
contractor or subcontractor and Landlord or Landlord's agents. All such work,
alterations, installations, additions and improvements shall be done at Tenant's
sole expense and at such times and in such manner as Landlord may from time to
time designate in its reasonable judgment except as otherwise set forth in the
applicable Building standard specification governing the performance of Tenant's
improvement work in the Building.
All work in the demised premises except for so-called decorative work
(i.e., wall covering, carpeting, moveable partitions and picture hanging) shall
be done solely in accordance with plans and specifications first approved in
writing by Landlord. To the extent that pursuant to the provisions of this
Lease Landlord's consent to such work shall not be unreasonably withheld or
delayed, then such approval of such plans and specifications shall not be
unreasonably withheld or delayed. If Landlord shall not approve or disapprove
(noting any disapproval with particularity) Tenant's plans and specifications
within ten (10) Business Days after receipt of Tenant's written request for
approval therefor (which ten (10) Business Day period shall be extended by five
(5) Business Days with respect to any review by Landlord's outside consultants),
then Landlord's approval shall be deemed given. Tenant shall pay to Landlord
upon demand, as additional rent, Landlord's reasonable actual out-of-pocket
costs and expenses (including, without limitation, the fees of any architect or
engineer employed by Landlord for such purpose and Tenant agrees to (A) pay
Cosentini Associates' reasonable fee for its review work, and (B) pay Severud
Associates' reasonable fee for its review work) for (i) reviewing said plans and
specifications and (ii) inspecting the alterations to determine whether the same
are being performed in accordance with the approved plans and specifications,
the provisions of any Superior Instruments and all laws and requirements of
public authorities. The foregoing review fees of Cosentini Associates and
Severud Associates shall not be payable by Tenant if in connection with any
alterations in the demised premises Tenant shall employ the services of such
engineering firms to prepare Tenant's engineering drawings. Except to the
extent herein expressly set forth, Landlord shall not impose or be entitled to
any fees, charges or other amounts in connection with Tenant's alterations for
(i) indirect costs, field inspections, coordination or supervision, or (ii) use
of the freight elevator during normal business hours. Tenant agrees that the
mere review or approval by Landlord of any plans and/or specifications with
respect to any alterations is solely for Landlord's benefit, and without any
representation or warranty whatsoever to Tenant with respect to the adequacy,
correctness or efficiency thereof or otherwise; nor shall Landlord incur any
liability, obligation or responsibility to Tenant or any third party by reason
of such review and approval.
Landlord will not unreasonably withhold or delay its consent to
requests for nonstructural alterations, additions and improvements provided they
will not (i) adversely interfere with the operation of the Building; (ii) affect
the exterior or the exterior appearance of the Building; (iii) affect the
structural elements or
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strength of the Building; or (iv) affect the proper functioning of the
electrical, HVAC, plumbing or mechanical systems of the Building.
In connection with the installation of Tenant's communications and
electrical wiring, Tenant shall have the right to use, on a non-exclusive basis,
its pro rata share of the amount of space in the vertical shafts and risers of
the Building available for such purposes, such proration to be calculated on the
basis of the ratio of the rentable square footage of the demised premises to the
total rentable square footage of the tenantable area serviced by such shafts and
risers.
Any such approved alterations and improvements shall be performed in
accordance with the foregoing and the following provisions of this Article 6:
1. All work shall be done in a good and workmanlike manner.
2. (a) Alterations shall be performed by contractors first
approved by Landlord, subject to the first sentence of Section 6.01
hereof.
(b) Any contractor employed by Tenant to perform any work
permitted by this Lease, and all of its subcontractors, shall agree to
employ only such labor as will not result in jurisdictional disputes
or strikes or cause disruptive disharmony and interference with other
workers employed at the Building. Tenant will inform Landlord in
writing of the names of any contractor or subcontractors Tenant
proposes to use in the demised premises at least five (5) business
days prior to the beginning of work by such contractor or
subcontractors.
(c) Tenant covenants and agrees to pay to the contractor,
as the work progresses, the entire cost of supplying the materials and
performing the work shown on Tenant's approved plans and
specifications, subject only to (i) customary retentions and (ii)
amounts being disputed in good faith, provided that Tenant complies
with its obligations under clause 4 below.
3. All such alterations shall be performed in compliance with
all Legal Requirements (as defined in Article 22 hereof).
4. Tenant shall keep the Building and the demised premises free
and clear of all liens for any work or material claimed to have been
furnished to Tenant or to the demised premises on Tenant's behalf, and
all work to be performed by Tenant shall be done in a manner which
will not unreasonably interfere with or unreasonably disturb other
tenants or occupants of the Building.
5. During the progress of the work to be done by Tenant, said
work shall be subject to inspection by representatives of Landlord who
shall be permitted access and the opportunity to inspect, at all
reasonable times upon reasonable prior notice which may be oral
(provided such inspections shall not unreasonably interfere with such
work), but this provision shall not in any way whatsoever create any
obligation on Landlord to conduct such an inspection or constitute
approval by Landlord of such work or subject Landlord to liability for
the manner of performance.
6. Intentionally Omitted.
7. Prior to commencement of any work costing more than $25,000,
Tenant shall furnish to Landlord certificates evidencing the existence
of:
(a) Worker's compensation insurance covering all persons
employed for such work with statutorily required limits;
(b) Employer's liability coverage including bodily injury
caused by disease with limits of not less than $100,000 per employee;
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(c) Commercial general liability insurance including but
not limited to completed operations coverage, products liability
coverage, contractual coverage, broad form property damage,
independent contractor's coverage and personal injury coverage naming
(i) Landlord as well as such representatives and consultants of
Landlord as Landlord shall reasonably specify (collectively
"LANDLORD'S CONSULTANTS"), including, but not limited to, as of the
date hereof HRO International, Ltd., as well as Tenant, as additional
insureds, with coverage of not less than $3,000,000 combined single
limit coverage (or such higher limits as Landlord may from time to
time impose in its reasonable judgment); and
(d) Tenant shall require all contractors engaged or
employed by the Tenant to indemnify and hold Tenant, Landlord, and
Landlord's Consultants, including but not limited to, as of the date
hereof HRO International, Ltd., harmless in accordance with the
following clauses or similar clauses of substantially similar import
(with such modifications therein as may be reasonably required from
time to time by reason of a change in the parties constituting
Landlord's Consultants):
"The contractor hereby agrees to the fullest extent permitted by
law to assume the entire responsibility and liability for and
defense of and to pay and indemnify the Landlord, Tenant and HRO
International, Ltd., against any loss, cost, expense, liability
or damage and will hold each of them harmless from and pay any
loss, cost, expense, liability or damage (including, without
limitation, judgments, reasonable attorney's fees, court costs,
and the cost of appellate proceedings), which Landlord and/or
Tenant and/or HRO International, Ltd., incurs because of injury
to or death of any person or on account of damage to property,
including loss of use thereof, or any other claim arising out of,
in connection with, or as a consequence of the performance of the
work by the contractor and/or any acts or omissions of the
contractor or any of its officers, directors, employees, agents,
sub-contractors or anyone directly or indirectly employed by the
contractor or anyone for whose acts the contractor may be liable
as it relates to the scope of this Contract, whether such
injuries to person or damage to property are due or claimed to be
due to any negligence of the Landlord and/or Tenant and/or HRO
International, Ltd., its or their employees or agents or any
other person."
The contractor's insurance shall specifically insure the foregoing
hold harmless provision or any such substantially similar provision.
(e) Such insurance shall be placed with solvent and responsible
companies reasonably satisfactory to the Landlord and licensed or
authorized to do business in the State of New York, and the policies
shall provide that they may not be cancelled without 30 days' prior
notice in writing to the Landlord.
8. Movement of all workers and materials shall only be done at
the direction, the times and in the manner designated by Landlord in
its reasonable judgment consistently applied in accordance with the
Building's alteration procedures. Landlord agrees that it shall
enforce such alteration procedures in a non-discriminatory manner as
against Tenant.
9. If drawings were required by Landlord to perform an
alteration, Tenant will promptly upon the completion of an alteration
deliver to Landlord final complete and updated architectural drawings
of any alterations Tenant has performed or caused to be performed in
the demised premises, and (a) if any alterations by Tenant are then
proposed or in progress, Tenant's drawings and specifications, if any,
for such alterations and (b) if any alterations by Landlord for Tenant
were performed or are then proposed or in progress, the record
drawings
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(together with drawings showing changes thereto made by Tenant) if
any, or the drawings and specifications, if any, as the case may be,
for such alterations, in Tenant's possession.
6.02. Notice is hereby given that Landlord shall not be liable for
any labor or materials furnished or to be furnished to Tenant upon credit, and
that no mechanic's or other lien for any such labor or materials shall attach to
or affect the reversion or other estate or interest of Landlord in and to the
demised premises. Any mechanic's lien, filed against the demised premises or
the Building for work claimed to have been done for or materials claimed to have
been furnished to Tenant shall be discharged by Tenant at its expense within
thirty (30) days after notice of such filing, by payment, filing of the bond
required by law or otherwise.
6.03. All alterations, installations, additions and improvements
made and installed by Landlord, at its expense, or by Tenant at Landlord's
expense, including, without limitation, all work referred to in Article 42
hereof, shall be the property of Landlord and shall remain upon and be
surrendered with the demised premises as a part thereof at the end of the Term;
provided, however, that Tenant shall have the right to remove such items during
the term of this Lease if such removal is in connection with alterations to the
demised premises which are approved by Landlord pursuant to the terms of this
Article 6.
6.04. (i) All alterations, installations, additions and
improvements made and installed by Tenant, or at Tenant's expense, upon or in
the demised premises which are of a permanent nature and which cannot be removed
without damage to the demised premises or Building including, without
limitation, "TENANT'S WORK", as defined in Article 42 hereof, (ii) any so-called
"RAISED FLOORING" and (iii) any supplementary air conditioning units, including
any distribution system associated therewith, shall become the property of
Landlord at the end of the Term, and shall remain upon and be surrendered with
the demised premises as a part thereof at the end of the Term (and shall not be
removed prior thereto without Landlord's written consent), except that Landlord
shall have the right to serve notice (the "Removal Notice") upon Tenant given at
the time that Landlord provides consent to the plans and specifications for the
alteration in question, that any of such alterations, installations, additions
and improvements, which constitute "SPECIALTY ALTERATIONS," as such term is
hereinafter defined, shall be removed and, in the event of service of such
notice, Tenant will, at Tenant's own cost and expense, remove the same in
accordance with such request, and restore the demised premises to its original
condition, ordinary wear and tear and casualty excepted, and repair any damage
to the demised premises or the Building due to such removal. Landlord shall
have waived its right to give the Removal Notice with respect to such alteration
if Landlord fails to give same together with Landlord's consent to such
alteration. For purposes hereof, "SPECIALTY ALTERATIONS" shall mean
improvements, installations, alterations or additions which, in Landlord's
reasonable judgment, are not standard for general and executive office tenants
in a first class office building, such as, for example, interior elevators,
vaults, atriums, auditoriums, but expressly excluding staircases and the slab
cuts therefor, raised flooring, kitchens and related food preparation and
storage areas, and private dining rooms, cafeterias or bathrooms.
Notwithstanding anything to the contrary contained in this Section 6.04, in no
event shall Tenant be obligated to remove any items which would otherwise
constitute Specialty Alterations and which are located in the demised premises
as of the date of this Lease.
6.05. Where furnished by or at the expense of Tenant all
furniture, furnishings and trade fixtures (exclusive of raised flooring), but
including, without limitation, murals, business machines and equipment,
counters, screens, grille work, cages, partitions, metal railings, closets, free
standing lighting fixtures and equipment, drinking fountains, and any other
moveable property not connected to the demised premises or the Building's
systems and removable without damage to the Building shall remain the property
of Tenant which may at its option remove all or any part thereof at any time
prior to the expiration of the Term. In case Tenant shall decide not to remove
any part of such property, Tenant shall notify Landlord in writing not less than
three (3) months prior to the expiration of the Term, specifying the items of
property which it has decided not to remove. If, within thirty (30) days after
the service of such notice, Landlord shall request Tenant to remove any of the
said property, Tenant shall at its expense remove the same. As to such property
which Landlord does not request Tenant to remove, the same shall be, if left by
Tenant,
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deemed abandoned by Tenant and thereupon the same shall become the property
of Landlord. Notwithstanding the foregoing, Landlord shall not require
Tenant to remove, or require Tenant to restore the demised premises to its
condition prior to the making of, any improvements constituting an ordinary
office installation which is normal and customary in layout, design and size,
provided Tenant has maintained the same in good order and repair, subject to
ordinary wear and tear.
6.06. If any alterations, installations, additions, improvements
or other property which Tenant shall have the right to remove or be requested by
Landlord to remove as provided in Sections 6.04 hereof (herein in this Section
6.06 called the "PROPERTY") are not removed on or prior to the expiration of the
Term, Landlord shall have the right to remove the property and to dispose of the
same without accountability to Tenant and at the sole cost and expense of
Tenant. In case of any damage to the demised premises or the Building resulting
from the removal of the property (which damage is not caused by Landlord's
negligence or willful misconduct, or the negligence or willful misconduct of
Landlord's agents, employees or servants and provided Landlord acts in a
reasonably prudent fashion in removing any such property) Tenant shall repair
such damage or, in default thereof, shall reimburse Landlord for Landlord's
reasonable cost in repairing such damage. This obligation shall survive any
termination of this Lease.
6.07. Tenant shall keep records of Tenant's alterations,
installations, additions and improvements costing in excess of $25,000, and of
the cost thereof for a period of three (3) years. Tenant shall, within
forty-five (45) days after demand by Landlord, furnish to Landlord copies of
such records if Landlord shall require same in connection with any proceeding to
reduce the assessed valuation of the Building, or in connection with any
proceeding instituted pursuant to Article 14 hereof.
ARTICLE 7
REPAIRS
7.01. Tenant shall, at its sole cost and expense, make such
repairs to the demised premises and the fixtures and appurtenances therein as
are necessitated by the act, omission (where this Lease imposes a duty to act),
occupancy in violation of the terms, provisions or conditions of this Lease, or
negligence of Tenant or by the use of the demised premises in a manner contrary
to the purposes for which same are leased to Tenant, as and when needed to
preserve them in good working order and condition. Notwithstanding the
foregoing to the contrary, Tenant shall be required to make structural repairs
to the demised premises only to the extent that the need for such repairs is
necessitated by the negligence of Tenant or its contractors, agents, or
employees or invitees or by the use of the demised premises in violation of this
Lease or in a manner contrary to the purposes for which same are leased to
Tenant. Except as otherwise provided in Section 9.05 hereof, all damage or
injury to the demised premises and to its fixtures, appurtenances and equipment
caused by Tenant moving property in or out of the Building or by installation or
removal of furniture, fixtures or other property, shall be repaired, restored or
replaced promptly by Tenant at its sole cost and expense, which repairs,
restorations and replacements shall be in quality and class equal to the
original work or installations. Any repairs to the Building structure, portions
of the Building outside the demised premises and the facilities and systems of
the Building for which Tenant is responsible shall be performed by Landlord at
Tenant's commercially reasonable expense. If Tenant fails to make such repairs,
restoration or replacements, same may be made by Landlord at the commercially
reasonable expense of Tenant and such expense shall be collectible as additional
rent and shall be paid by Tenant within thirty (30) days after rendition of a
bill therefor.
The exterior walls of the Building, the portions of any window sills
outside the windows and the windows are not part of the premises demised by this
Lease and Landlord reserves all rights to such parts of the Building (without
limitation to its existing obligations).
7.02. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot of area which such floor was
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designed to carry as set forth below. The floors of the Building are designed
for the following superimposed loading:
Live Load 50 pounds per square foot
Partitions 12 pounds per square foot
Suspended Ceiling
& Mechanical 13 pounds per square foot
-------------------------
Total Tenant Load 75 pounds per square foot
Landlord agrees that Tenant may reinforce floor loads in the demised premises
provided that same is performed in accordance with the terms of this Lease
including without limitation Article 6 hereof and provided further that such
reinforcement of floors within the demised premises is deemed reasonably
necessary by Tenant's engineers or architect and such reinforcement remains
within the cubic area of the demised premises.
7.03. Business machines and mechanical equipment used by Tenant
which cause vibration, noise, cold or heat that may be transmitted to the
Building structure or to any leased space to such a degree as to be
objectionable to Landlord or to any other tenant in the Building, in their
reasonable judgment, shall be placed and maintained by Tenant at its expense in
settings of cork, rubber or spring type vibration eliminators sufficient to
absorb and prevent such objectionable vibration or noise, or prevent
transmission of such objectionable cold or heat. The parties hereto recognize
that the operation of elevators, air conditioning and heating equipment will
cause some vibration, noise, heat or cold which may be transmitted to other
parts of the Building and demised premises. Landlord shall be under no
obligation to endeavor to reduce such vibration, noise, heat or cold beyond what
is customary in current good building practice for buildings of the same
first-class nature as the Building in the midtown area of the Borough of
Manhattan.
7.04. Except as otherwise specifically provided in this Lease,
there shall be no allowance to Tenant for a diminution of rental value and no
liability on the part of Landlord by reason of inconvenience, annoyance or
injury to business arising from the making of any repairs, alterations,
additions or improvements in or to any portion of the Building or the demised
premises or in or to fixtures, appurtenances or equipment thereof. Landlord
shall exercise reasonable diligence so as to minimize any interference with
Tenant's business operations, but shall not be required to perform the same on
an overtime or premium pay basis, unless Tenant is willing to reimburse Landlord
for the difference between the normal, full-time pay basis and overtime or
premium pay basis and the performance of same on such overtime or premium pay
basis is available and reasonably practicable, provided, however, that (i) in
cases where there is work of a disruptive nature such as demolition, core
drilling and similar work lasting for more than an insignificant period of time
or a material interference with Tenant's business or the health or safety of the
occupants of the demised premises are adversely affected or (ii) if an owner of
a first-class office building in Manhattan would customarily perform the nature
of the work involved on an overtime or premium pay basis, then Tenant will not
be obligated to pay for such work on an overtime or premium pay basis if Tenant
requested such work to be performed on an overtime or premium pay basis (unless
such work was necessitated by an improper act or omission of Tenant). The
provisions of the proviso clause in the immediately preceding sentence are
hereinafter called the "OVERTIME PROVISO". All repairs made by Landlord in the
demised premises pursuant to the provisions of this Article 7 shall be performed
in a good and workmanlike manner and all replacements made by Landlord in the
demised premises pursuant to the provisions of this Article 7 shall be at least
equal in quality and class to the original work or installation.
7.05. Landlord will operate the Building in such a manner as is
consistent with the maintenance and repair standards of first-class office
buildings with retail space similar to the Building and located in the midtown
area of the Borough of Manhattan. To the extent that same shall affect Tenant's
use and enjoyment of the demised premises and/or the Building as a first-class
office building in midtown Manhattan, Landlord, at Landlord's cost and expense
subject to recoupment as part of Expenses, shall maintain in good order and
repair the common Building facilities, the roof, the structural components and
exterior of the Building and the
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structural components of the demised premises, as well as the mechanical,
plumbing, electrical and HVAC systems to the point of entry to the demised
premises in a manner which is consistent with the maintenance standard for
other first-class buildings in the midtown area of the Borough of Manhattan
similar to the Building and Landlord shall make all repairs and replacements
to the Building (as opposed to the demised premises) necessary to Tenant's
use of the demised premises, except to the extent that same are the
obligation of Tenant under this Lease. Landlord shall promptly remove
accumulations of snow and ice from the exterior areas of the Building.
ARTICLE 8
REQUIREMENTS OF LAW
8.01. (a) Tenant shall comply with all Legal Requirements which
shall impose any violation, order or duty upon Landlord or Tenant with respect
to the demised premises, or the use or occupation thereof; provided, however,
the same relates to the demised premises (but only insofar as it relates to the
demised premises and arises out of Tenant's specific manner of use of the
demised premises), or if it relates to another portion of the Building, arises
out of the specific manner of use and occupancy of the demised premises by
Tenant. Notwithstanding the foregoing, Tenant shall not be responsible to
comply with any Legal Requirements to the extent that such compliance is
required (i) as a result of conditions which exist in the demised premises on
the Commencement Date and which then constitute violations of Legal Requirements
to the extent such Legal Requirements are in effect on the Commencement Date or
(ii) as a result of the presence on the Commencement Date of materials in the
Building which as of the Commencement Date are deemed hazardous and which as of
the Commencement Date are required to be removed under Legal Requirements except
to the extent that Tenant shall have installed any such materials in the
Building. To the best of Landlord's knowledge, as of the date hereof, there are
in the demised premises no current violations of Legal Requirements applicable
to the existing condition of the demised premises as of the date hereof which
would adversely affect the commencement or prosecution of Tenant's Work in the
demised premises. Tenant shall pay all the costs, expenses, fines, penalties
and damages which may be imposed upon Landlord by reason of or arising out of
Tenant's failure to fully and promptly comply with and observe the provisions of
this Section. Without limiting the generality of the foregoing, Tenant, at
Tenant's expense, shall cause the demised premises to be fully sprinklered in
accordance with the requirements of the Building Code of The City of New York
and all applicable rules and regulations pertaining thereto and Landlord shall
connect same to the Building system. Landlord shall be responsible, at
Landlord's expense, which shall be includable in Expenses unless specifically
stated otherwise, for compliance with all other Legal Requirements with respect
to the demised premises and the Building common areas to the extent that failure
to comply affects Tenant's use of the demised premises.
(b) Tenant shall be obligated to perform structural work in
the demised premises or work on Building HVAC, plumbing, electrical or
mechanical systems, which, in either case, is required by Legal Requirements,
only if such work:
(A) is required by reason of a condition which has been
created by or at the instance of Tenant,
(B) is attributable to the specific use or manner of
use to which Tenant puts the demised premises other than ordinary office use in
a customary manner, or
(C) is required by a reason of a breach of any of
Tenant's covenants and agreements under this Lease, which remains uncured after
notice by Landlord and the expiration of the applicable cure period.
In all other circumstances Landlord shall perform such structural work, and the
cost thereof shall be included within Expenses pursuant to the provisions of
Article 3 hereof.
(c) For purposes of this Section 8.01 the phrase "TENANT'S
MANNER OF USE" or "THE SPECIFIC USE" or "MANNER OF USE TO WHICH TENANT PUTS
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THE DEMISED PREMISES", or any other phrase of substantially similar import
shall be construed to include use of the premises as a "PUBLIC ACCOMMODATION"
under the Disabilities Act, as such term is defined in Section 22.04 hereof.
8.02. Notwithstanding the provisions of Section 8.01 hereof,
Tenant, at its own cost and expense, in its name and/or (whenever necessary)
Landlord's name, may contest, in any manner permitted by law (including appeals
to a court, or governmental department or authority having jurisdiction in the
matter), the validity or the enforcement of any Legal Requirements with which
Tenant is required to comply pursuant to this Lease, and may defer compliance
therewith provided that:
(a) such non-compliance shall not subject Landlord or the
holder of any Superior Instrument to criminal prosecution or subject the
Property to unbonded lien or sale (without limiting the application of the
above, Landlord or the holder of any Superior Instrument shall be deemed subject
to prosecution for a crime if Landlord (or the holder of any Superior
Instrument), or its managing agent, or any officer, director, partner,
shareholder or employee of Landlord or its managing agent or the holder of any
Superior Instrument as an individual, is charged with a crime of any kind or
degree whatever, whether by summons or otherwise);
(b) such non-compliance shall not be in violation of any
Superior Instrument. Landlord represents that the existing Superior Instruments
do not prohibit contests in accordance with this Section 8.02;
(c) Tenant shall first deliver to Landlord a surety bond
issued by a surety company of recognized responsibility, or other security
reasonably satisfactory to Landlord, indemnifying and protecting Landlord
against any loss or injury by reason of such non-compliance provided that the
foregoing provisions of this clause (c) shall not bind the Tenant named herein
unless the holder of a Superior Instrument shall require Tenant to provide
security reasonably satisfactory to such holder; and
(d) Tenant shall promptly, diligently and continuously
prosecute such contest.
Landlord, without expense or liability to it, shall cooperate with
Tenant and execute any documents or pleadings required for such purpose,
provided that Landlord shall reasonably be satisfied that the facts set forth in
any such documents or pleadings are accurate.
ARTICLE 9
INSURANCE, LOSS, REIMBURSEMENT, LIABILITY
9.01. Tenant shall not do or permit to be done any act or thing
upon or about the demised premises, which will (i) constitute an exception to
the coverage of which Tenant has received notice provided under Landlord's
applicable insurance policies, (ii) invalidate, or (iii) be in conflict with the
policies covering the Building, and fixtures and property therein, or which
would increase the rate of fire insurance applicable to the Building to an
amount higher than it otherwise would be; and Tenant shall neither do nor permit
to be done any act or thing upon the demised premises which shall or might
subject Landlord to any liability or responsibility for injury to any person or
persons or to property; but nothing in this Section 9.01 shall prevent Tenant's
use of the demised premises for the purposes stated in Article 5 hereof.
Notwithstanding anything contained in this Section 9.01 to the contrary, Tenant
shall not incur any liability for any act or thing done upon or about the
demised premises which may invalidate or be in conflict with or result in the
assertion of any defense by the Landlord's or the Building's insurer if such act
or thing done would not have resulted in the same under a customary form of
commercial insurance policy which, pursuant to custom and practice, is generally
maintained in first-class buildings similar to the Building in the midtown area
of the Borough of Manhattan.
9.02. If, as a result of any act or omission by or on the part of
Tenant or violation of this Lease, whether or not Landlord has consented to the
same, the
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rate of "ALL RISK" or other type of insurance maintained by Landlord on the
Building and fixtures and property therein, shall be increased to an amount
higher than it otherwise would be, Tenant shall reimburse Landlord for all
increases of such insurance premiums so caused; such reimbursement to be
additional rent payable within twenty (20) days after demand therefor by
Landlord. If such increase shall have resulted from any act or omission or
breach of lease by another tenant or tenants of the Building which is
comparable to Tenant's act or omission, then the amount of such increase
shall be apportioned among Tenant and all such other tenants. In any action
or proceeding wherein Landlord and Tenant are parties, a schedule or
"MAKE-UP" of rates for the Building or demised premises issued by the body
making fire insurance rates or established by insurance carrier providing
coverage for the Building or demised premises, shall be conclusive evidence
of the facts stated therein including the items and charges taken into
consideration in fixing the "ALL RISK" insurance rate then applicable to the
Building or demised premises.
9.03. Landlord, HRO International, Ltd. or their agents, servants
or employees shall not be liable for any injury or damage to persons or property
resulting from fire, explosion, falling plaster, steam, gas, electricity, water,
rain or snow or leaks from any part of the Building, or from the pipes,
appliances or plumbing works or from the roof, street or subsurface or from any
other place or resulting from dampness or resulting from any other cause of
whatsoever nature, unless (but only to the extent) any of the foregoing shall be
caused by or due to the negligence or wilful misconduct of Landlord, HRO
International, Ltd., or their respective agents, servants or employees.
Notwithstanding the preceding provisions of this Section 9.03, Tenant covenants
and agrees that (i) any rights of Tenant to make a claim against Landlord, HRO
International Ltd. or their agents, servants or employees as contemplated
herein shall be subject to the waiver of subrogation provisions set forth in
Article 9.08 of this Lease, and (ii) in no event shall Tenant be entitled to
make a claim for consequential damages or indirect or special damages in the
nature of consequential damages pursuant to this Section 9.03.
9.04. Intentionally omitted.
9.05. Tenant shall reimburse Landlord and HRO International, Ltd.
for all expenses, damages or fines incurred or suffered by Landlord or HRO
International Ltd. by reason of any breach, violation or non-performance by
Tenant, or its agents, servants or employees, of any covenant or provision of
this Lease, or by reason of damage to persons or property caused by moving
property of or for Tenant in or out of the Building, or by the installation or
removal of furniture or other property of or for Tenant, or by reason of or
arising out of the carelessness, negligence or improper conduct of Tenant, or
its agents, servants or employees, in the use or occupancy of the demised
premises. Tenant's liability for such expenses, damages or fines shall be
limited to those caused by any of the reasons set forth in the immediately
preceding sentence, and Tenant shall not be liable hereunder for any
consequential, indirect or special damages. Nothing contained in this Section
9.05 shall be deemed a waiver of Landlord's rights to claim against Tenant for
damages of any nature that Landlord shall prove at law as a result of Tenant's
holding over in the demised premises beyond the Expiration Date or any earlier
cancellation or termination of this Lease except as specifically provided to the
contrary herein. Tenant shall have the right, at Tenant's own cost and expense,
to defend any action or proceeding brought against Landlord or HRO
International, Ltd. and negotiate for settlement thereof and settle any such
action or proceeding if, pursuant to this Section 9.05, Tenant would be
obligated to reimburse Landlord or HRO International, Ltd. for expenses, damages
or fines incurred or suffered by Landlord or HRO International, Ltd. Landlord
and Tenant agree to cooperate in connection with the defense and settlement of
any such action or proceeding. Landlord agrees that it will not settle any such
action or proceeding for which Tenant is obligated to reimburse expenses,
damages or fines hereunder without the prior written consent of Tenant;
provided, however, that in the event Tenant shall not consent to any settlement,
Tenant shall furnish such assurances as Landlord or Landlord's insurer may
reasonably require as to Tenant's financial ability to satisfy any potential
liability in the amount of, or larger than, the amount of such settlement.
9.06. Tenant shall give Landlord notice in case of fire or
accidents in the demised premises promptly after Tenant is aware of such event.
Landlord shall, to
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the extent that Landlord shall have knowledge of same, give Tenant notice in
case of any fire or accident in the demised premises.
9.07. (a) No recourse shall be had on any of Landlord's
obligations hereunder or for any claim based thereon or otherwise in respect
thereof against any incorporator, subscriber to the capital stock, shareholder,
officer or director, past, present or future, of any corporation or any partner
or joint venturer which shall be a partner or joint venturer in Landlord
hereunder or included in the term "LANDLORD" or of any successor of any such
corporation, or against any principal, disclosed or undisclosed, or any
affiliate of any party which shall be a partner of joint venturer in Landlord or
included in the term "LANDLORD," whether directly or through Landlord or through
any receiver, assignee, trustee in bankruptcy or through any other person, firm
or corporation, whether by virtue of any constitution, statute or rule of law or
by enforcement of any assessment or penalty or otherwise, all such liability
being expressly waived and released by Tenant.
(b) Subject to the provisions of Section 22.01 hereof,
Tenant shall look solely to Landlord's estate and interest in the Building
(including, without limitation, (i) Landlord's entire right, title and interest
in the Property; (ii) the rents, issues and profits derived from the Property;
(iii) all consideration received by Landlord from the sale or other disposition
of all or any part of Landlord's right, title and interest in the Property,
provided that Tenant shall have given Landlord notice of Tenant's claim thereto
within ninety (90) days after Tenant shall have received notice of such sale or
disposition; (iv) proceeds of sale received upon execution of any judgment
obtained by Tenant and levy upon the Property; and (v) any available
condemnation awards and insurance proceeds not used or intended to be used for
the restoration of the Property) for the satisfaction of any right of Tenant for
the collection of a judgment or other judicial process or arbitration award
requiring the payment of money by Landlord, and no other property or assets of
Landlord, Landlord's agents, incorporators, shareholders, officers, directors,
partners, principals (disclosed or undisclosed) or affiliates shall be subject
to levy, lien, execution, attachment, or other enforcement procedure for the
satisfaction of Tenant's rights and remedies under or with respect to this
Lease, the relationship of Landlord and Tenant hereunder or under law, or
Tenant's use and occupancy of the demised premises, or any other liability of
Landlord to Tenant hereunder.
9.08. Each party agrees to have included in each of its property
insurance policies (insuring the Building in case of Landlord, and insuring the
property described in clause (y) of Section 9.09 in the case of Tenant, against
loss, damage or destruction by fire or other casualty) a waiver of the insurer's
right of subrogation against the other party during the term of this lease (and
subject to the payment by the other party of any additional premium levied by
the insurance company for such waiver) or, if such waiver should be unobtainable
or unenforceable, (i) an express agreement that such policy shall not be
invalidated if the assured waives the right of recovery against any party
responsible for a casualty covered by the policy before the casualty or (ii) any
other form of permission for the release of the other party. If such waiver,
agreement or permission shall not be, or shall cease to be, obtainable from
either party's then current insurance company, the insured party shall so notify
the other party promptly after learning thereof, and shall use its reasonable
efforts to obtain the same from another insurance company described in Section
9.09 hereof. Each party hereby releases the other party, with respect to any
claim (including a claim for negligence) which it might otherwise have against
the other party, for loss, damage or destruction with respect to its property
occurring during the term of this lease to the extent to which it is, or is
required to be, insured under a policy or policies containing a waiver of
subrogation or permission to release liability, as provided in this Section
9.08. Nothing contained in this Section 9.08 shall be deemed to relieve either
party of any duty imposed elsewhere in this lease to repair, restore or rebuild
or to nullify any abatement of rents provided for elsewhere in this lease.
9.09. Tenant covenants and agrees to provide at its expense on or
before the Commencement Date and to keep in force during the Term naming Tenant
as insured and Landlord and its Agent, HRO International, Ltd., and the "GROUND
LESSOR", as defined in subsection 25.05(b), or any successor in interest
thereto, as additional insureds, (x) a commercial general liability insurance
policy or such successor comparable
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form of coverage in the broadest form then available (hereinafter referred to as
a "LIABILITY POLICY") written on "AN OCCURRENCE BASIS", including, without
limitation, blanket contractual liability coverage, broad form property damage,
independent contractor's coverage and personal injury coverage protecting
Landlord, HRO International, Ltd. and Tenant against any liability whatsoever,
occasioned by any occurrence on or about the demised premises or any
appurtenances thereto and (y) a fire and other casualty policy (a "FIRE POLICY")
insuring the full replacement value of all of the furniture, trade fixtures and
other personal property of Tenant located in the demised premises against loss
or damage by fire, theft and such other risks or hazards as are insurable under
present and future forms of "ALL RISK" insurance policies, and (z) policy of
insurance against loss or damage to the major components of the air conditioning
and/or heating system, flywheels, steam pipes, steam turbines, steam engines,
steam boilers, other pressure vessels, high pressure piping and machinery, if
any, such as are installed by or on behalf of Tenant in the demised premises.
Such policies shall also insure against physical damage to the demised premises
arising out of an accident covered thereunder; such policies are to be written
by good and solvent insurance companies licensed or authorized to do business in
the State of New York reasonably satisfactory to Landlord, and rated by Best's
Insurance Reports or any successor publication of comparable standing and
carrying a rating of A VIII or better or the then-equivalent of such rating and
such policies shall be in such limits and with such maximum deductibles as
Landlord may reasonably require. As of the date of this Lease, Landlord
reasonably requires limits of liability under (x) the Liability Policy of
$5,000,000 combined single limit per occurrence for bodily or personal injury
(including death) and property damage combined; (y) under the Fire Policy equal
to the value of Tenant's furniture, trade fixtures and other personal property
with a deductible of no more than $5,000.00; provided, however, that Tenant
agrees to waive any rights of recovery against Landlord with respect to losses
payable in an amount equal to the foregoing deductible; and (z) under machinery
insurance for full replacement cost of equipment with a deductible of no more
than $5,000.00; provided, however, that Tenant agrees to waive any rights of
recovery against Landlord with respect to losses payable in an amount equal to
the foregoing deductible. Tenant will furnish Landlord with such information as
Landlord may reasonably request from time to time as to the value of the items
specified in clause (y) above within thirty (30) days after request therefor.
Such insurance may be carried under a blanket policy covering the demised
premises and other locations of Tenant, if any, provided that each such policy
shall in all respects comply with this Article and shall specify (i) that the
portion of the total coverage of such policy that is allocated to the demised
premises is in the amounts required pursuant to this Section 9.09 and (ii) any
sublimits in such blanket policy and such policy shall specify, or Tenant shall
furnish Landlord a written statement from the insurer under such policy that the
protection afforded Tenant under any such blanket policy shall be no less than
that which would have been afforded under a separate policy relating only to the
demised premises. Prior to the time such insurance is first required to be
carried by Tenant and thereafter, at least fifteen (15) days prior to the
expiration date of any such policy, Tenant agrees to deliver to Landlord a
certificate evidencing such insurance. Said certificate shall contain an
endorsement that such insurance may not be cancelled or materially changed
except upon thirty (30) days' prior written notice to Landlord. Tenant's
failure to provide and keep in force the aforementioned insurance shall be
regarded as a material default hereunder entitling Landlord to exercise any or
all of the remedies provided in this Lease in the event of Tenant's default.
Notwithstanding anything to the contrary contained in this Lease, the carrying
of insurance by Tenant in compliance with this Section shall not modify, reduce,
limit or impair Tenant's obligations and liability under Article 38 hereof.
9.10. Landlord shall maintain in respect of the Building during
the term of this Lease property insurance covering the Building in amounts of
coverage required by the first mortgagee of Landlord's interest on the leasehold
estate in the Property, or, in the event that there is no such first mortgagee
of such interest, then in amounts comparable to the amounts generally required
by institutional fee mortgagees on first class office buildings, comparable to
the Building.
ARTICLE 10
DAMAGE BY FIRE OR OTHER CAUSE
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10.01. If the Building or the demised premises shall be partially
or totally damaged or destroyed by fire or other casualty (and if this Lease
shall not have been terminated as in this Article 10 hereinafter provided),
Landlord shall, with reasonable dispatch after notice to it of the damage or
destruction repair the damage and restore and rebuild the Building and/or the
demised premises.
10.02. If the Building or the demised premises shall be damaged or
destroyed by fire or other casualty, then the rents payable hereunder shall be
abated to the extent that the demised premises shall have been rendered
untenantable (which shall be deemed to include lack of reasonable access to the
demised premises) for the period from the date of such damage or destruction to
the date the damage shall be substantially repaired or restored; provided,
however, that if in Landlord's reasonable judgment such repairs would have been
substantially completed at an earlier date but for Tenant's having failed to
reasonably cooperate with Landlord in effecting such repair (and Landlord shall
have given notice to such effect to Tenant within a reasonable period of time
after Landlord shall have obtained knowledge of such situation), then the
demised premises shall be deemed to have been repaired substantially on such
earlier date and any reduction or abatement shall cease; and provided further,
however, that should Tenant reoccupy a portion of the demised premises during
the period the restoration work is taking place and prior to the date that the
whole of said demised premises are made tenantable, fixed annual rent and
additional rents allocable to such portion shall be payable by Tenant from the
date of such occupancy; provided further, however, that Tenant shall not be
deemed to be occupying the demised premises if Tenant occupies the demised
premises for the purpose of installing and/or testing its equipment, including,
without limitation, its telephone, telecommunications systems, computers and
supplemental HVAC units.
10.03. (a) If the Building shall be so damaged or destroyed by
fire or other casualty (whether or not the demised premises are damaged or
destroyed) as to require a reasonably estimated expenditure made by Landlord or
a reputable contractor designated by Landlord of more than thirty-five percent
(35%) of the full insurable value of the Building immediately prior to the
casualty, then Landlord may terminate this Lease by giving Tenant notice to such
effect within ninety (90) days after the date of the casualty; provided,
however, that Landlord cancels no less than seventy-five percent (75%) of the
other leases then in effect for office space in the Building. Any determination
as to the estimated value of any expenditure necessary to repair the Building or
any portion thereof damaged by fire or other casualty shall be made by a duly
qualified and licensed engineer or architect selected by Landlord, and such
determination shall be subject to arbitration as provided in Article 37 hereof.
In case of any damage or destruction to the demised premises mentioned in this
Article 10 which Landlord is required to repair and restore, Tenant may
terminate this Lease by notice to Landlord if Landlord has not substantially
completed the making of such required repairs and restorations within twelve
(12) months after the date of such damage or destruction, or within such period
after such date (not exceeding three (3) months) as shall equal the aggregate
period Landlord may have been delayed in doing so by Force Majeure Causes (as
defined in Article 34 hereof). If, in the last two years of the term of the
Lease, there is material damage and destruction so that more than thirty-five
(35%) percent of the demised premises is destroyed, and Landlord shall not have
substantially completed the repair and restoration of same within sixty (60)
days after the date of such fire or casualty, then either party shall have the
right to terminate this Lease by notice to the other given within fifteen (15)
days after the expiration of such sixty (60) day period, provided, however that
if Landlord shall have given to Tenant a notice that in the judgment of a
reputable contractor or architect designated by Landlord the damage or
destruction to the demised premises cannot reasonably be repaired within such
sixty (60) day period, then Tenant may terminate this Lease by giving notice to
Landlord within thirty (30) days after receipt of such notice from Landlord (if
such thirty (30) day period shall expire earlier than the foregoing fifteen (15)
day period). If in the last two years of the term of this Lease there is
material damage and destruction so that more than thirty-five (35%) percent of
the Building is destroyed and Landlord shall not have substantially completed
the repair and restoration of same within one hundred twenty (120) days after
the date of such fire or casualty and such destruction shall continue for an
unreasonable period of time to have a material adverse effect on Tenant's use of
the demised premises, then Tenant shall have the right to terminate this Lease
by notice to Landlord given within fifteen (15) days after the expiration of
such 120-day period.
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(b) Within sixty (60) days after the occurrence of any damage or
destruction of the demised premises or access thereto, Landlord shall give
Tenant notice of the date that, in the judgment of a reputable contractor or
architect designated by Landlord, it estimates Landlord shall be able to
substantially complete the required repairs and restorations (the "Anticipated
Completion Date") subject to delays for Force Majeure Causes. If the
Anticipated Completion Date shall be after the date which is twelve (12) months
after the date of such damage or destruction, then Tenant shall have the right,
within thirty (30) days after the notice of the Anticipated Completion Date is
given, to terminate this Lease by giving ten (10) business days' notice of such
termination to Landlord, and on the date occurring ten (10) business days after
the giving of such notice, this Lease will terminate as if such date were the
Expiration Date specified herein. If Tenant does not give such termination
notice within said thirty-day period, then the expiration of the twelve (12)
month restoration and repair period provided for in Section 10.03(a) hereof
shall automatically be deemed extended to the Anticipated Completion Date. In
the event Landlord has performed its obligations but the restoration is not
completed on the Anticipated Completion Date (as extended for Force Majeure
Causes but not exceeding three (3) months), Tenant's sole remedy shall be the
termination right provided in Section 10.03(a) hereof; provided, however, that
if the "Anticipated Completion Date" (as such term is hereinafter defined) shall
be a date occurring after the expiration of such twelve (12) month restoration
and repair period and Tenant shall not have exercised its termination rights set
forth in Section l0.03(b) hereof, then such twelve (12) month restoration and
repair period shall be extended until the occurrence of the Anticipated
Completion Date in accordance with the provisions of Section l0.03(b).
10.04. No damages, compensation or claim shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the demised premises or of the Building
pursuant to this Article 10.
10.05. Landlord will not carry separate insurance of any kind on
Tenant's property (including, without limitation, any property of the Tenant
which shall become the property of Landlord as provided in Article 6 hereof),
and, except as provided by law or this Lease, Landlord shall not be obligated to
repair any damage thereto or replace or clean the same, or any other
decorations, installations, equipment or fixtures installed by or for Tenant at
Tenant's expense. Tenant shall maintain such fire and casualty insurance as it
deems advisable, but not less than the limits provided in clause (y) of Section
9.09 hereof. If Tenant shall fail to maintain such insurance after two (2)
Business Days notice from Landlord, Landlord shall have the right (but in no way
shall Landlord be obligated or in any way be adversely affected if Landlord
fails or elects not to do so) to obtain insurance on Tenant's property and the
cost thereof shall be additional rent under this Lease and payable by Tenant to
Landlord on demand.
10.06. The provisions of this Article 10 shall be considered an
express agreement governing any case of damage or destruction of the demised
premises by fire or other casualty, and Section 227 of the Real Property Law of
the State of New York, providing for such a contingency in the absence of an
express agreement, and any other law of like import, now or hereafter in force,
shall have no application in such case.
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ARTICLE 11
ASSIGNMENT, MORTGAGING, SUBLETTING, ETC.
11.01. Except as otherwise expressly provided in this Article 11,
Tenant shall not without, in each instance, obtaining the prior consent of
Landlord, (a) assign or otherwise transfer this Lease or the term and estate
hereby granted, (b) sublet all or part of the demised premises or allow the same
to be used or occupied by others or in violation of Article 5, or (c) mortgage,
pledge or encumber this Lease or all or part of the demised premises in any
manner by reason of any act or omission on the part of Tenant. For purposes of
this Article 11, (i) the transfer of a majority of the issued and outstanding
capital stock of any corporate tenant or subtenant, or the transfer of a
majority of the total interest in any other entity (partnership or otherwise)
which is a tenant or subtenant, however accomplished, whether in a single
transaction or in a series of related or unrelated transactions, for the
principal purpose of transferring the leasehold estate of the Tenant hereunder
or of such subtenant shall be deemed an assignment of this Lease, or of such
sublease, as the case may be, (ii) any person or legal representative of Tenant,
to whom Tenant's interest under this Lease passes by operation of law, or
otherwise, shall be bound by the provisions of this Article 11, and (iii) a
material modification, amendment or extension without Landlord's prior written
consent of a sublease previously consented to by Landlord (other than
modifications consisting of changes in mere ministerial or administrative
provisions of such sublease) shall be deemed a new sublease. Tenant agrees to
furnish to Landlord upon demand at any time and from time to time such
information and assurances as Landlord may reasonably request that neither
Tenant, nor any subtenant, shall have violated the provisions of this Section
11.01. The consent of Landlord shall not be required to the use and occupancy
of the demised premises by the Affiliates of the named Tenant or by one or more
other Affiliates of the named Tenant herein simultaneously with the use and
occupancy of the demised premises by the named Tenant, provided that (i) Tenant
shall notify Landlord in writing of any such other Affiliates who intend to
occupy the demised premises at least ten (10) Business Days prior to the
commencement of such occupancy, and, within ten (10) Business Days after written
request from Landlord, Tenant shall furnish Landlord with reasonable evidence of
such other Affiliate relationship, and (ii) such permission with respect to any
such Affiliates shall cease (and the provisions of this Article 11 shall become
applicable) upon the earlier to occur of (X) the date such Affiliate
relationship shall cease, or (Y) the date the named Tenant ceases to occupy the
demised premises. If the provisions of this Article 11 shall become applicable
to any such occupancy by an Affiliate of Tenant described in the immediately
preceding sentence by reason of the cessation of the Affiliate relationship,
then Landlord agrees not to unreasonably withhold its consent to a subletting of
a portion of the demised premises to such party provided such subletting
complies with all of the provisions of Section 11.05 hereof (and such party
shall be deemed to have satisfied the requirement in subsection 11.05(c) hereof
that the nature and character of the proposed subtenant or assignee be
reputable). Landlord hereby consents to a sublease of a portion of the demised
premises not exceeding 5,000 rentable square feet to W&D Securities, Inc.
11.02. The provisions of clauses (a) and (b) of Section 11.01
hereof shall not apply to transactions entered into by Tenant with a corporation
or partnership into or with which Tenant is merged or consolidated or with an
entity to which substantially all of Tenant's assets (and partnership interests
if a partnership), are transferred, or with any corporation or partnership
(hereinafter called "TENANT'S AFFILIATE") which controls, is controlled by or is
under common control with, the Tenant named herein or if Tenant is a
partnership, with a successor partnership, provided (a) such merger,
consolidation or transfer of assets or other transaction is for a good business
purpose and not principally for the purpose of transferring the leasehold estate
created hereby, and (b) the assignee or successor entity has a net worth
computed in accordance with generally accepted accounting principles,
consistently applied, at least equal to or in excess of twenty (20) times the
then-current fixed annual rent under this Lease, which shall be evidenced by
written documentation reasonably satisfactory to Landlord (hereinafter called
the "NET WORTH DOCUMENTATION"). For purposes of this Section 11.02, the term
"CONTROL" shall mean, in the case of a corporation, ownership or voting control,
directly or indirectly, of at least fifty percent (50%) of all the voting stock,
and in case of a joint venture or partnership or similar entity, ownership,
directly or indirectly, of
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at least fifty percent (50%) of all the general or other partnership (or
similar) interests therein.
11.03. Any assignment or transfer, whether made with Landlord's
consent as required by Section 11.01 or without Landlord's consent pursuant
to Section 11.02, shall not be effective unless and until (a) the assignee
shall execute, acknowledge and deliver to Landlord a recordable agreement, in
form and substance reasonably satisfactory to Landlord, whereby the assignee
shall (i) assume the obligations and performance of this Lease and agree to
be personally bound by all of the covenants, agreements, terms, provisions
and conditions hereof on the part of Tenant to be performed or observed on
and after the effective date of any such assignment and (ii) agree that the
provisions of this Article 11 shall, notwithstanding such assignment or
transfer, continue to be binding upon it in the future, and (b) in the case
of an assignment or transfer pursuant to Section 11.02 Tenant or its
successor shall have delivered to Landlord Net Worth Documentation evidencing
the net worth to be at least equal to or in excess of twenty (20) times the
then-current fixed annual rent due hereunder as computed in accordance with
generally accepted accounting principles consistently applied. Tenant
covenants that, notwithstanding any assignment or transfer, whether or not in
violation of the provisions of this Lease, and notwithstanding the acceptance
of fixed annual rent by Landlord from an assignee or transferee or any other
party, Tenant shall remain fully and primarily and jointly and severally
liable for the payment of the fixed annual rent and all additional rent due
and to become due under this Lease and for the performance and observance of
all of the covenants, agreements, terms, provisions and conditions of this
Lease on the part of Tenant to be performed or observed.
11.04. The liability of Tenant, and the due performance by
Tenant of the obligations on its part to be performed under this Lease, shall
not be discharged, released or impaired in any respect by an agreement or
stipulation made by Landlord or any grantee or assignee of Landlord, by way
of mortgage, or otherwise, extending the time of, or modifying any of the
obligations contained in this Lease, or by any waiver or failure of Landlord
to enforce any of the obligations on Tenant's part to be performed under this
Lease, and Tenant shall continue liable hereunder. If any such agreement or
modification operates to increase the obligations of a tenant under this
Lease, the liability under this Lease of the tenant named in the Lease or any
of its successors in interest (unless such party shall have expressly
consented in writing to such agreement or modification) shall continue to be
no greater than if such agreement or modification had not been made.
11.05. In the event Landlord does not exercise its options
pursuant to Section 11.06 hereof to terminate this lease and provided that
Tenant is not then in default of any of Tenant's obligations under this Lease
beyond any applicable notice and opportunity to cure period, if any,
Landlord's consent (which must be in writing) to the proposed assignment or
sublease shall not be unreasonably withheld or delayed, provided and upon
condition that the following conditions are substantially complied with:
(a) Tenant shall furnish Landlord with the name and
business address of the proposed subtenant or assignee, information with
respect to the nature and character of the proposed subtenant's or assignee's
business, or activities, such references and current financial information
with respect to net worth, credit and financial responsibility as are
reasonably required by Landlord (i.e., audited financial statements prepared
by a certified public accountant for the last full prior fiscal year and
unaudited interim statements for the then-current fiscal year) and the
proposed term of the sublease or assignment agreement (provided that Tenant
shall submit an executed counterpart of such sublease or assignment agreement
within five (5) business days after the effective date thereof);
(b) The proposed subtenant or assignee is a reputable
party whose financial net worth, credit and financial responsibility is
reasonably sufficient to fulfill its financial and other obligations under
the sublease or assignment, as the case may be, considering the
responsibilities involved;
(c) The business or activities of the proposed subtenant
or assignee and its intended use of the demised premises are permitted by
Article 5 of this Lease;
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(d) If Landlord then has, or will have within four (4)
months after the Effective Date, as defined in Section 11.06 hereof,
comparable space for a comparable term available for leasing in the Building,
the proposed subtenant or assignee (or any person which, directly or
indirectly, controls, is controlled by, or is under common control with, the
proposed assignee or subtenant if such transaction with such affiliated
entity shall be for the purpose of circumventing the rights of Landlord under
this subsection 11.05(d)), is not then an occupant of any part of the
Building or a party who was engaged in active negotiations with Landlord or
Landlord's agent (directly or through a broker) with respect to space in the
Building at any time during the four (4) months immediately preceding
Tenant's request for Landlord's consent;
(e) All costs incurred with respect to providing
reasonably appropriate means of ingress and egress from the sublet space or
to separate the sublet space from the remainder of the demised premises
shall, subject to the provisions of Article 6 with respect to alterations,
installations, additions or improvements, be borne by Tenant (or such
assignee or subtenant);
(f) Each assignment or sublease shall specifically state
that (i) it is subject to all of the terms, covenants, agreements,
provisions, and conditions of this Lease, (ii) the subtenant or assignee of
the Tenant named herein, as the case may be (and the assignee or undertenant
of such assignee or subtenant), may have the right to further assign or
sublet all or part of the demised premises only in accordance with the terms,
covenants and conditions of this Lease, including, without limitation, this
Article 11, and such subtenant or assignee shall be bound by the obligations
of Tenant under this Article 11, and be subject to the rights of Landlord
under this Article 11, as if such subtenant or assignee were the Tenant
hereunder, and any further assignee or undertenant shall not have the right
to further assign or sublet all or a part of the demised premises, (iii) a
consent by Landlord thereto shall not be deemed or construed to modify, amend
or affect the terms and provisions of this Lease, or Tenant's obligations
hereunder, which shall continue to apply to the premises involved, and the
occupants thereof, as if the sublease or assignment had not been made, (iv)
if Tenant defaults in the payment of any rent, Landlord is authorized to
collect any rents due or accruing from any assignee, subtenant or other
occupant of the demised premises and to apply the net amounts collected to
the fixed annual rent and additional rent due hereunder; and (v) the receipt
by Landlord of any amounts from an assignee or subtenant, or other occupant
of any part of the demised premises shall not be deemed or construed as
releasing Tenant from Tenant's obligations hereunder or the acceptance of
that party as a direct tenant:
(g) Tenant shall together with requesting Landlord's
consent hereunder have paid Landlord any reasonable out-of-pocket costs
incurred by Landlord to review the requested consent including any reasonable
attorney's fees so incurred by Landlord;
(h) The proposed subtenant or assignee is not (i) a
retail bank or trust company, safe deposit business, savings and loan
association or loan company servicing the general public; (ii) employment or
recruitment agency; (iii) school, college, university or educational
institution whether or not for profit; or (iv) a government or any
subdivision or agency thereof;
(i) In the case of a subletting of a portion of the
demised premises, the portion so sublet shall be reasonable and suitable for
renting purposes;
(j) Tenant shall not advertise such assignment or
subletting at a rental rate which is below the effective rental rate then
being charged by Landlord at the time for similar space then available in the
Building (after considering all Landlord concessions and free rent periods),
but nothing herein shall prevent Tenant from consummating such assignment or
subletting at such lower rental rate;
(k) The proposed assignment or sublease shall provide
that it is subject to the Landlord's rights under Section 11.06 hereof.
Tenant shall
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have complied with the provisions of said Section 11.06 and Landlord shall
not have made any of the elections provided for therein; and
(l) In the case of a proposed assignment or a subletting
of all or substantially all of the demised premises, the aggregate financial
value to Tenant of the financial components of such proposed assignment or
such proposed sublease shall be equal to at least 95% of the Proposed
Assignment Components or the Proposed Rent Rate, as the case may be, set
forth in Tenant's First Offer Notice, as such terms are defined in Section
11.06 hereof. If the provisions of this clause (l) are not satisfied, then
Tenant's request for consent hereunder shall be deemed an offer from Tenant
to Landlord as to which Landlord shall again have all the rights set forth in
Section 11.06 hereof.
11.06. Should Tenant desire to assign this Lease or to sublet
all or substantially all of the demised premises for a term ending within the
"RECAPTURE PERIOD", as hereinafter defined (other than by an assignment or
sublease permitted by Section 11.02 hereof), Tenant shall, no later than
thirty (30) days prior to the proposed effective date thereof (hereinafter
called the "EFFECTIVE DATE") deliver to Landlord notice thereof (herein
called "TENANT'S FIRST OFFER NOTICE") which notice shall set forth the
Effective Date and in the case of a proposed subletting of all or
substantially all of the demised premises, the following items: the rents,
work contributions, if any, periods of rent free occupancy, if any, the
purchase price of Tenant's fixtures, furniture and equipment and all other
financial terms pursuant to which Tenant is willing to enter into a sublease
with a third party. The amount of such rents less (1) the monetary value of
any such work contributions, periods of free rent and other tenant
concessions and (2) the amount of "TENANT'S COSTS", as hereinafter defined,
which are, or are reasonably anticipated to be, incurred in connection with
such proposed assignment is hereinafter called the "PROPOSED RENT RATE". In
the case of an assignment, Tenant's First Offer Notice shall set forth
Tenant's intention to assign this Lease in whole and all financial and other
material terms of the assignment, including deduction of the amount of
"TENANT'S COSTS", as hereinafter defined, which are, or are reasonably
anticipated to be, incurred in connection with such proposed assignment
(herein collectively called the "PROPOSED ASSIGNMENT COMPONENTS"). For
purposes hereof, the "RECAPTURE PERIOD" shall mean the eighteen (18) month
period immediately preceding the Expiration Date. Landlord shall then have
the right to elect by notice to Tenant given within ten (10) business days
after delivery of Tenant's First Offer Notice to terminate this Lease as of
the Effective Date as if it were the Expiration Date set forth herein, with
respect to a proposed assignment of this Lease or with respect to a proposed
subletting of substantially the entire demised premises. In the event that
Landlord fails to exercise its option under this Section 11.06 and Tenant
fails to execute and deliver an assignment or sublease within two hundred
forty (240) days after Tenant's submission of Tenant's First Offer Notice to
Landlord under this Section 11.06, then in such event Tenant shall again
comply with all the provisions of this Section 11.06 before assigning this
Lease or subletting all or substantially all of the demised premises.
11.07. In connection with any assignment of this Lease or
to any sublease, Tenant shall in consideration therefor pay to Landlord, as
additional rent, 50% of the following amounts:
(a) in the case of an assignment, an amount (herein
called "ASSIGNMENT PROFIT") equal to all sums and other considerations paid
to Tenant by the assignee for or by reason of such assignment (including, but
not limited to, sums paid for the sale of Tenant's fixtures, leasehold
improvements, equipment, furniture, furnishings or other personal property,
less, in the case of a sale thereof, the then net unamortized or
undepreciated cost thereof determined on the basis of Tenant's federal income
tax returns); after deducting therefrom the amount of "TENANT'S COST," as
hereinafter defined; and
(b) in the case of a sublease, an amount (herein called
"SUBLEASE PROFIT") equal to any rents, additional charges or other
consideration paid under the sublease to Tenant by the subtenant which is in
excess of the fixed annual rent and additional rent and other consideration
accruing during the term of the sublease in respect of the subleased space
pursuant to the terms hereof (including, but not limited to, sums paid for
the sale or rental of Tenant's fixtures, leasehold
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improvements, equipment, furniture or furnishings, or other personal
property, less, in the case of the sale thereof, the then net unamortized or
undepreciated cost thereof determined on the basis of Tenant's federal income
tax returns, which net unamortized amount shall be deducted from the sums
paid in connection with such sale in equal monthly installments over the
balance of the term of the sublease [each such monthly deduction to be in an
amount equal to the quotient of the net unamortized amount, divided by the
number of months remaining in the term of this lease]); after deducting
therefrom the amount of "TENANT'S COST," as hereinafter defined.
(c) For purposes of this Section 11.07, the term
"TENANT'S COST" shall mean the reasonable expenses actually incurred by
Tenant in connection with the assignment and subletting in question for gains
and transfer taxes, brokerage commissions, advertising expenses, attorneys'
fees, any commercially reasonable rent credit or concession or work allowance
and any tenant work performed by Tenant at its expense in connection with
such assignment or subletting, any reasonable lease takeover obligations, any
payments made to Landlord pursuant to Section 11.05 hereof, and any
reasonable promotional expenses incurred by Tenant in connection with such
sublease or assignment based on bills, receipts or other evidence of such
costs reasonably satisfactory to Landlord.
(d) The sums payable under this Section 11.07 shall be
paid to Landlord as and when paid by the assignee or subtenant to Tenant.
11.08. In the case of a proposed assignment of this Lease or a
proposed subletting as to which Landlord shall exercise its termination right
pursuant to Section 11.06 hereof, Landlord shall pay to Tenant, as and when
Tenant would have received same but for Landlord's exercise of its option,
one-half of the amount equal to 95% of any Assignment Profit or Sublease
Profit which Tenant would have received if the transaction set forth in
Tenant's First Offer Notice had been consummated.
ARTICLE 12
PARTNERSHIP TENANT
12.01. If Tenant is a partnership (or is comprised of two (2) or
more persons, individually and/or as co-partners of a partnership) or if
Tenant's interest in this Lease shall be assigned to a partnership (or to two
(2) or more persons, individually and/or as co-partners of a partnership)
pursuant to this article (any such Partnership and such persons are referred
to in this section as "PARTNERSHIP TENANT"), the following provisions of this
Section shall apply to such Partnership Tenant: (a) the liability of each of
the general partners comprising Partnership Tenant shall be joint and
several, (b) each of the general partners comprising Partnership Tenant
hereby consents in advance to, and agrees to be bound by, any written
instrument which may hereafter be executed, changing, modifying or
discharging this Lease, in whole or in part, or surrendering all or any part
of the demised premises to Landlord or renewing or extending this Lease and
by any notices, demands, requests or other communications which may hereafter
be given, by Partnership Tenant or by any of the general partners comprising
Partnership Tenant, (c) any bills, statements, notices, demands, requests or
other communications given or rendered to Partnership Tenant pursuant to the
provisions of this Lease shall be binding upon Partnership Tenant and all
such general partners, (d) if Partnership Tenant shall admit new general
partners, all of such new partners 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 (e) upon request from Landlord, Partnership Tenant shall deliver to
Landlord a list of all partners together with their current addresses.
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ARTICLE 13
ADJACENT EXCAVATION - SHORING
13.01. If an excavation or other substructure work shall be made
upon land adjacent to the demised premises, or shall be authorized to be
made, Tenant shall afford to the person causing or authorized to cause such
excavation, license to enter upon the demised premises upon reasonable prior
notice for the purpose of doing such work as shall be necessary to preserve
the wall of or the Building of which the demised premises form a part from
injury or damage and to support the same by proper foundations without any
claim for damages or indemnity against Landlord, or diminution or abatement
of rent, provided (i) neither Tenant's access to the demised premises nor the
services required to be furnished to Tenant are permanently and adversely
affected thereby, and (ii) the person causing or authorized to cause such
excavation shall use reasonable efforts to conduct any entry into the demised
premises permitted under this Section 13.01 and any work performed by such
person under this Section 13.01 in a manner so as to minimize, to the extent
such person is reasonably able, interference with the reasonable operations
of Tenant's business.
ARTICLE 14
CONDEMNATION
14.01. In the event that the whole of the demised premises shall
be lawfully condemned or taken in any manner for any public or quasi-public
use, this Lease and the term and estate hereby granted shall forthwith cease
and terminate as of the date of vesting of title. In the event that only a
part of the demised premises shall be so condemned or taken, then, effective
as of the date of vesting of title, the fixed annual rent under Article 1
hereof and additional rents under Article 3 hereof shall be reduced by the
amounts allocable to the part of the demised premises so taken or condemned.
In the event that only a part of the Building shall be so condemned or taken
and provided the part so taken constitutes thirty-five (35%) percent or more
of the Building and Landlord cancels no less than 75% of other leases then in
effect for office space in the Building, then (a) Landlord (whether or not
the demised premises be affected) may, at Landlord's option, terminate this
Lease and the term and estate hereby granted as of the date of such vesting
of title by notifying Tenant in writing of such termination within sixty (60)
days following the date on which Landlord shall have received notice of
vesting of title, or (b) if such condemnation or taking shall be of a
substantial part of the demised premises (twenty-five percent (25%) or more)
or shall not leave a reasonable means of access thereto, Tenant may, at
Tenant's option, by delivery of notice in writing to Landlord within thirty
(30) days following the date on which Tenant shall have received notice of
vesting of title, terminate this Lease and the term and estate hereby granted
as of the date of vesting of title, or (c) if neither Landlord nor Tenant
elects to terminate this Lease, as aforesaid, this Lease shall be and remain
unaffected by such condemnation or taking, except that the fixed annual rent
payable under Article 1 and additional rents payable under Article 3 shall be
abated to the extent hereinbefore provided in this Article 14.
14.02. In the event of termination of this Lease in any of the
cases hereinbefore provided, this Lease and the term and estate hereby
granted shall expire as of the date of such termination with the same effect
as if that were the Expiration Date, and the fixed annual rent and additional
rents payable hereunder shall be apportioned as of such date and any prepaid
rent or additional rent shall be refunded.
14.03. Except as provided in Section 14.06, in the event of any
condemnation or taking of all or a part of the Building, Landlord shall be
entitled to receive the entire award in the condemnation proceeding,
including any award made for the value of the estate vested by this Lease in
Tenant. Tenant hereby expressly assigns to Landlord any and all right, title
and interest of Tenant now or hereafter arising in or to any such award or
any part thereof, and agrees that it shall not be entitled to receive any
part of such award; provided, however, that Tenant shall be entitled to make
a separate claim for its trade fixtures, furniture and moving expenses.
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14.04. Subject to Section 14.05 hereof, in the event of any
taking of less than the whole of the Building which does not result in a
termination of this Lease, Landlord, at its expense, shall proceed with
reasonable diligence to repair, alter and restore the remaining parts of the
Building and the demised premises to substantially their former condition to
the extent that the same may be feasible and so as to constitute a complete
and tenantable Building and demised premises.
14.05. In the event any part of the demised premises be taken to
effect compliance with any law or requirement of public authority other than
in the manner hereinabove provided in this Article 14, then, (i) if such
compliance is the obligation of Tenant under this Lease, Tenant shall not be
entitled to any diminution or abatement of rent or other compensation from
Landlord therefor, but (ii) if such compliance is the obligation of Landlord
under this Lease, the fixed annual rent hereunder shall be reduced and
additional rents under Article 3 shall be adjusted in the same manner as is
provided in Section 14.01 according to the reduction in rentable area of the
demised premises resulting from such taking.
14.06. If the whole or any part of the demised premises shall be
taken in condemnation proceedings or by any right of eminent domain for
temporary use or occupancy, the foregoing provisions of this Article shall
not apply and Tenant shall continue to pay, in the manner and at the times
herein specified, the full amounts of fixed annual rent and all additional
rent and other charges payable by Tenant hereunder, and, except only to the
extent that Tenant may be prevented from so doing pursuant to the terms of
the order of the condemning authority, Tenant shall perform and observe all
of the other terms, covenants, conditions and obligations hereof upon the
part of Tenant to be performed and observed, as though such taking had not
occurred. Tenant shall be entitled to receive the entire amount of the
condemnation proceeds (after deducting Landlord's reasonable costs and
expenses, if any, in obtaining same as contemplated herein) (the "NET
PROCEEDS") made for such temporary taking, whether paid by way of damages,
rent or otherwise, unless such period of temporary use or occupancy shall
extend beyond the termination of this Lease, in which case the net proceeds
shall be apportioned between Landlord and Tenant upon receipt thereof as of
the date of termination of this Lease. Tenant shall, upon expiration of any
such period of temporary use or occupancy during the term of this Lease,
restore the demised premises, as nearly as may be reasonably practicable, to
the condition in which the same were immediately prior to such taking. Any
portion of the net condemnation proceeds received by Tenant as compensation
for the cost of restoration of the demised premises shall, if such period of
temporary use or occupancy shall extend beyond the Term, be paid to Landlord
on the date of termination of this Lease to the extent not theretofore
disbursed by Tenant in connection with restoration of the demised premises.
If such temporary condemnation lasts for a period greater than eighteen (18)
months, Tenant shall have the option to terminate this Lease by notice to
Landlord, which termination shall be effective upon such notice.
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ARTICLE 15
ACCESS TO DEMISED PREMISES; CHANGES
15.01. Tenant shall permit Landlord to erect, use and maintain
pipes, ducts and conduits in and through the demised premises, provided the
same are installed adjacent to or concealed behind walls and ceilings of the
demised premises; provided, further, that if installed adjacent thereto, they
shall be completely furred at points immediately adjacent to partitioning,
columns or ceiling, and that when the installation of such pipes, ducts or
conduits shall be completed, such pipes, ducts or conduits shall not reduce
the usable area of the demised premises except to an insignificant degree.
Landlord shall, to the extent practicable, install such pipes, ducts and
conduits by such methods and at such locations as will not interfere with or
impair Tenant's layout or use of the demised premises, except to an
insignificant degree. Landlord or its agents or designees shall have the
right, but only upon reasonable notice (which may be oral) to Tenant or any
authorized employee of Tenant at the demised premises (except in emergency
circumstances), to enter the demised premises, during business hours, (a) for
the making of such repairs or alterations as Landlord may reasonably deem
necessary for the Building or which Landlord shall be required to or shall
have the right to make by the provisions of this Lease or any other lease in
the Building and Landlord shall endeavor to give at least 24-hour advance
notice thereof, if practicable under the circumstances, and (b) for the
purpose of inspecting them or exhibiting them to existing or prospective
purchasers, mortgagees or lessees of all of the Land, Building or Property or
to prospective assignees, agents or designees of any such parties; provided,
however, that if Tenant has any specific reasonable security requirements,
Landlord shall be required to abide by them (including the designation of a
"SECURITY ZONE" with limited access provided that Tenant shall have given
Landlord prior written notice of such requirements and further subject to the
provisions of Section 15.06 hereof). Landlord shall be allowed to take all
material into and upon the demised premises that may be required for the
repairs or alterations above mentioned and shall remove the same at the end
of the day or store same in the demised premises for a period not in excess
of 24 hours, in the event that such 24-hour storage shall not unreasonably
interfere with the conduct of Tenant's business in the demised premises
without the same constituting an actual or constructive eviction of Tenant in
whole or in part, and the rent reserved hereunder shall not abate while said
repairs or alterations are being made by reason of loss or interruption of
the business of Tenant because of the prosecution of any such work. Landlord
shall exercise reasonable diligence so as to minimize the disturbance to
Tenant but nothing contained herein shall be deemed to require Landlord to
perform the same on an overtime or premium pay basis, unless Tenant is
willing to reimburse Landlord for the difference between the normal full-time
pay basis and overtime or premium pay basis and the performance of same on
such overtime or premium pay basis is available and reasonably practicable,
subject to the Overtime Proviso.
15.02. Landlord reserves the right, without the same
constituting an actual or constructive eviction and without incurring
liability to Tenant therefor, to change the arrangement and/or location of
public entrances, passageways, doors, doorways, corridors, elevators,
stairways, toilets and other public parts of the Building; provided, however,
that access to the Building or the demised premises shall not be materially
adversely affected and that there shall be no unreasonable obstruction of
access to the demised premises or unreasonable interference with the use or
enjoyment thereof.
15.03. Landlord may, during the twelve (12) months prior to
expiration of the Term, exhibit the demised premises to prospective tenants
upon reasonable prior notice to Tenant which need not be in writing.
15.04. If Tenant shall not be personally present to open and
permit an entry into the demised premises at any time when for any reason an
entry therein shall be urgently necessary by reason of fire or emergency,
Landlord or Landlord's agents may forcibly enter the same without rendering
Landlord or such agents liable therefor (if during such entry Landlord or
Landlord's agents shall accord reasonable care to the demised premises and
Tenant's property) and without in any manner affecting the obligations and
covenants of this Lease. Landlord will take reasonable steps to secure the
demised premises after any such entry and to promptly notify Tenant of the
same.
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15.05. Landlord, HRO International, Ltd. or their agents shall
not be liable for any damage which Tenant may sustain, if at any time any
window of the demised premises is (i) broken, or (ii) temporarily closed,
darkened or bricked-up for any reasonable purpose, except only Landlord's
arbitrary acts or (iii) permanently closed, darkened or bricked-up if
required by any Legal Requirement and Tenant shall not be entitled to any
compensation therefor or abatement of rent or to any release from any of
Tenant's obligations under this Lease, nor shall the same constitute an
eviction or constructive eviction.
15.06. Landlord acknowledges that by virtue of the nature of
Tenant's business, Tenant may, by reason of certain security and
confidentiality requirements, designate certain portions of the demised
premises to be locked and inaccessible to persons unauthorized by Tenant
("SECURED AREAS"). Landlord therefore agrees that except in cases of
emergency and for routine maintenance normally performed on a scheduled basis
with reasonable advance notice to Tenant (which may be oral), Landlord shall,
notwithstanding anything to the contrary contained herein, have no right of
access to the Secured Areas, provided that (i) Tenant shall deliver floor
plans of the demised premises designating the Secured Areas, (ii) such
designation shall be reasonable in light of Tenant's business and shall be
subject to Landlord's prior written approval, not to be unreasonably withheld
or delayed, and (iii) Landlord shall have no liability for providing cleaning
services to the Secured Areas or any other service that requires access to
the Secured Areas unless Tenant shall provide Landlord with such access to
the Secured Areas for purposes of providing cleaning services at those times
that Landlord shall reasonably designate in accordance with Landlord's
ordinary cleaning schedule.
ARTICLE 16
CONDITIONS OF LIMITATION
16.01. This Lease and the term and estate hereby granted are
subject to the limitation that whenever Tenant shall make an assignment of
the property of Tenant for the benefit of creditors, or if a petition shall
be filed by or against Tenant under any provisions of the United States
Bankruptcy Act or under the provisions of any other bankruptcy or insolvency
law or any law of like import, or whenever a permanent receiver of Tenant or
of or for the property of Tenant shall be appointed, then, Landlord may, (a)
at any time after receipt of notice of the occurrence of any such event, or
(b) if such event occurs without the acquiescence of Tenant, at any time
after the event continues for thirty (30) days (provided such period shall be
extended an additional 120 days if (i) Tenant is current on all rent
obligations and (ii) Tenant is diligently and continuously contesting same),
give Tenant a notice of intention to end the Term of this Lease at the
expiration of five (5) days from the date of service of such notice of
intention, and upon the expiration of said five (5) day period this Lease and
the Term and estate hereby granted, whether or not the Term shall theretofore
have commenced, shall terminate with the same effect as if that day were the
Expiration Date, but Tenant shall remain liable for damages as provided in
Article 18.
16.02. This Lease and the term and estate hereby granted are
subject to the limitation that:
(a) whenever Tenant shall fail to pay any installment of
fixed annual rent or any additional rent or any other charge payable by
Tenant to Landlord, on the day the same is due and payable pursuant to the
terms hereof, and such default shall continue for ten (10) days after
Landlord shall have given Tenant a notice specifying such default, or
(b) whenever Tenant shall do or permit anything to be
done, whether by action or inaction, contrary to any of Tenant's obligations
hereunder, and if such situation shall continue and shall not be remedied by
Tenant within fifteen (15) days after Landlord shall have given to Tenant a
notice specifying the same, or, in the case of a happening or default which
cannot with due diligence be cured within a period of fifteen (15) days and
the continuation of the period required for cure will not subject Landlord to
the risk of criminal liability (as more
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particularly described in Article 8 hereof) or termination of any superior
lease or foreclosure of any superior mortgage, if Tenant shall not, (i)
within said fifteen (15) day period advise Landlord of Tenant's intention to
duly institute all steps necessary to remedy such situation, (ii) duly
institute within said fifteen (15) day period, and thereafter diligently and
continuously prosecute to completion all steps necessary to remedy the same
and (iii) complete such remedy within such time after the date of the giving
of said notice of Landlord as shall reasonably be necessary, or
(c) whenever any event shall occur or any contingency
shall arise whereby this Lease or the estate hereby granted or the unexpired
balance of the Term hereof would, by operation of law or otherwise, devolve
upon or pass to any person, firm or corporation other than Tenant, except as
expressly permitted by Article 11, or
(d) whenever Tenant shall abandon the demised premises
(unless as a result of a casualty), or
(e) whenever in case any other lease in the Building
held by Tenant from Landlord shall expire and terminate (whether or not the
term thereof shall then have commenced) as a result of the default of Tenant
thereunder, or
(f) whenever Tenant shall default in the due keeping,
observing or performance of any covenant, agreement, provision or condition
of Sections 5.01, 5.02 or 5.04 hereof on the part of Tenant to be kept,
observed or performed and if such default shall continue and shall not be
remedied by Tenant within three (3) Business Days after Landlord shall have
given Tenant a notice specifying the same, or in the case of such a default,
the cure of which requires affirmative action and not simply the ceasing of
the objectionable activity, and such cure by affirmative action cannot be
completed within such three (3) Business Day period and the continuation of
the period required for such cure will not subject Landlord to the risk of
criminal liability (as more particularly described in Article 8 hereof) or
termination of any superior lease or foreclosure of any superior mortgage, if
Tenant shall not, (i) within said three (3) Business Day period advise
Landlord of Tenant's intention to duly institute all steps necessary to
remedy such situation, (ii) duly institute within said three (3) Business Day
period, and thereafter diligently and continuously prosecute to completion
all steps necessary to remedy the same and (iii) complete such remedy within
such time after the date of the giving of said notice to Landlord as shall
reasonably be necessary, then in any of said cases set forth in the foregoing
subsections (a), (b), (c), (d), (e) and (f), Landlord may give to Tenant a
notice of intention to end the Term at the expiration of five (5) days from
the date of the service of such notice of intention, and upon the expiration
of said five (5) days this Lease and the Term and estate hereby granted,
whether or not the Term shall theretofore have commenced, shall terminate
with the same effect as if that day were the Expiration Date, but Tenant
shall remain liable for damages as provided in Article 18.
16.03. (a) If Tenant shall have assigned its interest in this
Lease, and this Lease shall thereafter be disaffirmed or rejected in any
proceeding under the United States Bankruptcy Code or under the provisions of
any Federal, state or foreign law of like import, or in the event of
termination of this Lease by reason of any such proceeding, the assignor or
any of its predecessors in interest under this Lease, upon request of
Landlord given within thirty (30) days after such disaffirmance or rejection
shall (a) pay to Landlord all fixed annual rent and additional rent then due
and payable to Landlord under this Lease to and including the date of such
disaffirmance or rejection and (b) enter into a new Lease as lessee with
Landlord of the demised premises for a term commencing on the effective date
of such disaffirmance or rejection and ending on the Expiration Date, unless
sooner terminated as in such Lease provided, at the same fixed annual rent
and additional rent and upon the then-executory terms, covenants and
conditions as are contained in this Lease, except that (i) the rights of the
lessee under the new Lease, shall be subject to any possessory rights of the
assignee in question under this Lease and any rights of persons claiming
through or under such assignee, (ii) such new Lease shall require all
defaults existing under this Lease to be cured by the lessee with reasonable
diligence, and (iii) such new Lease shall require the lessee to pay all
additional rent which, had this Lease not been disaffirmed or rejected, would
have become due
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after the effective date of such disaffirmance or rejection with respect to
any prior period. If the lessee shall fail or refuse to enter into the new
Lease within ten (10) days after Landlord's request to do so, then in
addition to all other rights and remedies by reason of such default, under
this Lease, at law or in equity, Landlord shall have the same rights and
remedies against the lessee as if the lessee had entered into such new Lease
and such new Lease had thereafter been terminated at the beginning of its
term by reason of the default of the lessee thereunder.
(b) If pursuant to the Bankruptcy Code Tenant is
permitted to assign this Lease in disregard of the restrictions contained in
Article 11 hereof (or if this Lease shall be assumed by a trustee), the
trustee or assignee shall cure any default under this Lease and shall provide
adequate assurance of future performance by the trustee or assignee including
(a) of the source of payment of rent and performance of other obligations
under this Lease (for which adequate assurance shall mean the deposit of cash
security with Landlord in an amount equal to the sum of one (1) year's fixed
annual rent then reserved hereunder, plus an amount equal to all additional
rent payable under Article 3 for the calendar year preceding the year in
which such assignment is intended to become effective, which deposit shall be
held by Landlord, with interest, for the balance of the term as security for
the full and faithful performance of all of the obligations under this Lease
on the part of Tenant yet to be performed) and that any such assignee of this
Lease shall have a net worth exclusive of good will, computed in accordance
with generally accepted accounting principles, equal to at least ten (10)
times the aggregate of the fixed annual rent reserved hereunder, plus all
additional rent for the preceding calendar year as aforesaid and (b) that the
use of the demised premises shall in no way diminish the reputation of the
Building as a first-class office building or impose any additional burden
upon the Building or increase the services to be provided by Landlord. If
all defaults are not cured and such adequate assurance is not provided within
sixty (60) days after there has been an order for relief under the Bankruptcy
Code, then this Lease shall be deemed rejected, Tenant or any other person in
possession shall vacate the demised premises, and Landlord shall be entitled
to retain any rent or security deposit previously received from Tenant and
shall have no further liability to Tenant or any person claiming through
Tenant or any trustee. If Tenant receives or is to receive any valuable
consideration for such an assignment of this Lease, such consideration, after
deducting therefrom (a) the brokerage commissions, if any, and other expenses
reasonably incurred by Tenant for such assignment and (b) any portion of such
consideration reasonably designed by the assignee as paid for the purchase of
Tenant's property in the demised premises, and (c) gains and transfer taxes
shall be and become the sole exclusive property of Landlord and shall be paid
over to Landlord directly by such assignee. If Tenant's trustee, Tenant or
Tenant as debtor-in-possession assumes this Lease and proposes to assign the
same (pursuant to Title 11 U.S.C. Section 365, as the same may be amended)
to any person, including, without limitation, any individual, partnership or
corporate entity, who shall have made a bona fide offer to accept an
assignment of this Lease on terms acceptable to the trustee, Tenant or Tenant
as debtor-in-possession, then notice of such proposed assignment, setting
forth (x) the name and address of such person, (y) all of the terms and
conditions of such offer, and (z) the adequate assurance to be provided
Landlord to assure such person's future performance under this Lease,
including, without limitation, the assurances referred to in Title 11 U.S.C.
Section 365(b)(3) (as the same may be amended), shall be given to Landlord by
the trustee, Tenant or Tenant as debtor-in-possession no later than twenty
(20) days after receipt by the trustee, Tenant or Tenant as
debtor-in-possession of such offer, but in any event no later than ten (10)
days prior to the date that the trustee, Tenant or Tenant as
debtor-in-possession shall make application to a court of competent
jurisdiction for authority and approval to enter into such assignment and
assumption, and Landlord shall thereupon have the prior right and option, to
be exercised by notice to the trustee, Tenant or Tenant as
debtor-in-possession, given at any time prior to the effective date of such
proposed assignment, to accept an assignment of this Lease upon the same
terms and conditions and for the same consideration, if any, as the bona fide
offer made by such person, less any brokerage commissions which may be
payable out of the consideration to be paid by such person for the assignment
of this Lease.
16.04. If at any time Tenant shall have paid, within the
applicable grace periods contained in this Lease, any sum of money claimed by
Landlord to be due from Tenant hereunder and shall have accompanied such
payment with a written reservation of rights under this Section 16.04 with
respect thereto together with a brief statement
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of the reason for such reservation, Tenant, provided it does so within thirty
(30) days after so paying any such sum, shall have the right (i) to give
notice to Landlord of any dispute Tenant shall have with respect to the sum
so paid which notice shall set forth the particulars of such dispute and (ii)
if such dispute shall not have been resolved within sixty (60) days after
such notice, to institute an appropriate judicial action or proceeding (or an
arbitration proceeding, in any instance where arbitration is expressly
provided for by the express provisions of this Lease) for the recovery of
such disputed sum, or any part thereof which Tenant shall have paid. If it
shall be finally judicially determined by judicial decision from which the
time to appeal shall have expired (or by final determination of the
arbitrator, as the case may be) that there shall have been no obligation on
the part of Tenant to pay such disputed sum, or any part thereof, Landlord
shall promptly repay to Tenant any such sum or so much thereof as Tenant
shall not have been required to pay under the provisions of this Lease.
ARTICLE 17
RE-ENTRY BY LANDLORD; INJUNCTION
17.01. If Tenant shall fail to pay any installment of fixed
annual rent, or of any additional rent, or any other charge payable by Tenant
to Landlord on the date the same is due and payable, and if such default
shall continue for ten (10) days after Landlord shall have given to Tenant a
notice specifying such default, or if this Lease shall terminate as in
Article 16 provided, Landlord or Landlord's agents and employees may
immediately or at any time thereafter re-enter the demised premises, or any
part thereof, either by summary dispossess proceedings or by any suitable
action or proceeding at law, without being liable to indictment, prosecution
or damages therefrom. The word re-enter, as herein used, is not restricted
to its technical legal meaning.
17.02. In the event of a breach or threatened breach by Landlord
or Tenant of any of its obligations under this Lease, Landlord or Tenant
shall also have the right of injunction. The special remedies to which
Landlord may resort hereunder are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which Landlord may
lawfully be entitled at any time and Landlord may invoke any remedy allowed
at law or in equity as if specific remedies were not provided for herein.
17.03. If this Lease shall terminate under the provisions of
Article 16, or if Landlord shall re-enter the demised premises under the
provisions of this Article 17, or in the event of the termination of this
Lease, or of re-entry by or under any summary dispossess or other proceeding
or action or any provision of law by reason of default hereunder on the part
of Tenant, then (a) Tenant shall thereupon pay to Landlord the fixed annual
rent and additional rent payable by Tenant to Landlord up to the time of such
termination of this Lease, or of such recovery of possession of the demised
premises by Landlord, as the case may be, and shall also pay to Landlord
damages as provided in Article 18, and (b) Landlord shall be entitled to
retain all moneys, if any, paid by Tenant to Landlord, whether as advance
rent, security or otherwise, but such moneys shall be credited by Landlord
against any fixed annual rent or additional rent due from Tenant at the time
of such termination or re-entry or, at Landlord's option against any damages
payable by Tenant under Articles 16 and 18 or pursuant to law.
17.04. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of
Tenant being evicted or dispossessed for any cause, or in the event of
Landlord obtaining possession of the demised premises, by reason of the
violation by Tenant of any of the covenants and conditions of this Lease or
otherwise.
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ARTICLE 18
DAMAGES
18.01. If this Lease is terminated under the provisions of
Article 16, or if Landlord shall re-enter the demised premises under the
provisions of Article 17, or in the event of the termination of this Lease,
or of re-entry by or under any summary dispossess or other proceeding or
action or any provision of law by reason of default hereunder on the part of
Tenant, Tenant shall pay to Landlord as liquidated damages, at the election
of Landlord, either
(a) a sum which at the time of such termination of this
Lease or at the time of any such re-entry by Landlord, as the case may be,
represents the then value of the excess, if any, of the amount computed under
clause (l) below in excess of the amount computed under clause (2) below
discounted to the then present value using a discount rate of the then
current Federal five (5) year Treasury Note:
(1) the aggregate of the fixed annual rent and the additional
rent payable hereunder which would have been payable by Tenant
(conclusively presuming the additional rent to be the same as was
payable for the year immediately preceding such termination except
that additional rent on account of increases in Real Estate Taxes and
Expenses shall be presumed to increase at the average of the rates of
increase thereof previously experienced by Landlord during the period
(not to exceed three (3) years) prior to such termination) for the
period commencing with such earlier termination of this Lease or the
date of any such re-entry, as the case may be, and ending with the
Expiration Date, had this Lease not so terminated or had Landlord not
so re-entered the demised premises, over
(2) the aggregate rental value of the demised premises for the
same period, or
(b) sums equal to the fixed annual rent and the
additional rent payable hereunder which would have been payable by Tenant had
this Lease not so terminated, or had Landlord not so re-entered the demised
premises, payable upon the due dates therefor specified herein following such
termination or such re-entry and until the Expiration Date; provided,
however, that if Landlord shall re-let the demised premises during said
period, Landlord shall credit Tenant with the net rents received by Landlord
from such re-letting, such net rents to be determined by first deducting from
the gross rents as and when received by Landlord from such re-letting, the
reasonable expenses incurred or paid by Landlord in terminating this Lease or
in re-entering the demised premises and in securing possession thereof, as
well as the reasonable and customary expenses of re-letting, including
altering and preparing the demised premises for new tenants, reasonable
brokers' commissions, reasonable legal fees, and all other reasonable
expenses properly chargeable against the demised premises and the rental
thereof; it being understood that any such re-letting may be for a period
shorter or longer than the remaining term of this Lease. In no event shall
Tenant be entitled to receive any excess of such net rents over the sums
payable by Tenant to Landlord hereunder for the period of such re-letting, or
shall Tenant be entitled in any suit for the collection of damages pursuant
to this subsection to a credit in respect of any net rents from a re-letting,
except to the extent that such net rents are actually received by Landlord.
If the demised premises or any part thereof should be re-let in combination
with other space, then proper apportionment on a square foot basis shall be
made of the rent received from such re-letting and of the expenses of
re-letting. If the demised premises or any part thereof be re-let by
Landlord for the unexpired portion of the term of this Lease, or any part
thereof, before presentation of proof of such damages to any court,
commission or tribunal, the amount of rent payable pursuant to such
re-letting shall, prima facie, be the fair and reasonable rental value for
the demised premises, or part thereof, so re-let during the term of the
re-letting.
18.02. Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the Term would have expired if it had not been
so terminated under
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the provisions of Article 16, or under any provision of law, or had Landlord
not re-entered the demised premises. Nothing herein contained shall be
construed to limit or preclude recovery by Landlord against Tenant of any
sums or damages to which, in addition to the damages particularly provided
above, Landlord may lawfully be entitled by reason of any default hereunder
on the part of Tenant.
18.03. In the event of the termination of this Lease, for
purposes of computing damages hereunder, damages shall be increased to
include the pro rata portion of the initial abatement of rentals as provided
in Section l.05 hereof allocable to the remaining balance of the Term
prorated over the Term.
18.04. In addition, if this Lease is terminated under the
provisions of Article 16 hereof, or if Landlord shall, reenter the demised
premises under the provisions of Article 17 hereof, Tenant agrees that within
thirty (30) days following such re-entry:
(a) the demised premises then shall be in the condition
in which Tenant has agreed to surrender the same to Landlord at the
expiration of the term hereof;
(b) Tenant shall have performed prior to any such
termination any covenant of Tenant contained in this Lease for the making of
any alterations or for restoring or rebuilding the demised premises or the
Building, or any part thereof; and
(c) for the breach of any covenant of Tenant set forth
above in this Section 18.04, Landlord shall be entitled immediately, without
notice or other action by Landlord, to recover, and Tenant shall pay, as and
for liquidated damages therefor, the cost of performing such covenant (as
reasonably estimated by an independent contractor selected by Landlord).
ARTICLE 19
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
19.01. If Tenant shall default in the observance or performance
of any term or covenant on Tenant's part to be observed or performed under
any of the terms or provisions of this Lease, (a) Landlord may remedy such
default for the account of Tenant, immediately and without notice in case of
emergency, or in any other case if Tenant shall fail to remedy such default
with all reasonable dispatch after Landlord shall have notified Tenant in
writing of such default and the applicable grace period for curing such
default shall have expired; and (b) if Landlord makes any reasonable
expenditures or incurs any obligations (reasonable where voluntarily
incurred) for the payment of money in connection with such default including,
but not limited to, reasonable attorneys' fees in instituting, prosecuting or
defending any action or proceeding, such sums paid or obligations incurred,
with interest at the Interest Rate, shall be deemed to be additional rent
hereunder and shall be paid by Tenant to Landlord within five (5) days after
rendition of a bill to Tenant therefor. The provisions of this Article 19
shall survive the expiration or other termination of this Lease.
19.02 In the event Landlord shall default in the performance of
any obligation of Landlord under this Lease to perform any service to or make
any repair or alteration in the demised premises and such default shall continue
for a period in excess of thirty (30) days following the giving of written
notice by Tenant to Landlord (or, (A) if such default is of a nature that it
cannot reasonably be cured within such 30-day period, if Landlord shall fail to
commence the cure within such 30-day period and thereafter diligently pursue
such cure to completion or (B) if such default is of an emergency nature, then
such thirty (30) day period shall be reduced to a reasonable period given the
circumstances of the default), and if such default shall materially impair
Tenant's ability to use the demised premises for the conduct of its business,
then, to the extent (and only to the extent) that such default can be cured by
the performance of work entirely within the demised premises which is of a scope
that the performance of such work by Tenant would not affect the structural
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elements of the Building or any portion of any Building system outside the
demised premises, Tenant may perform such work on Landlord's behalf on
condition that Tenant shall have given Landlord at least ten (10) days prior
notice (which may be incorporated into Tenant's original thirty (30) day
notice) of its intent to do so and Landlord's failure thereafter to cure or
initiate the cure of such default provided, however, that if such default is
of an emergency nature, then such ten (10) day notice period shall be reduced
to a reasonable period given the circumstances of the default. Any such work
performed by Tenant shall be performed in accordance with and subject to all
of the terms, covenants and conditions of this Lease except that Landlord's
consent to Tenant's plans and specifications for such work and to the
contractors performing such work shall be deemed given if Landlord shall not
have responded to Tenant's request therefor within three (3) business days
after receipt of such request. In addition, Tenant shall perform any such
work in a prudent and economical manner. Landlord shall reimburse Tenant,
within thirty (30) days after delivery of an invoice therefor, for the actual
out-of-pocket expenses reasonably incurred by Tenant in performing such work.
ARTICLE 20
QUIET ENJOYMENT
20.01. Landlord covenants and agrees that subject to the terms and
provisions of this Lease, if, and so long as, Tenant shall not be in default
under this Lease after notice and the expiration of any applicable grace period
of any covenant, agreement, term, provision and condition herein contained on
the part or on behalf of Tenant to be kept or performed, then Tenant (and any
person claiming by, through or under Tenant only during periods when this Lease
is in full force and effect) may quietly enjoy the demised premises during the
Term without hindrance by Landlord or any person claiming through or under
Landlord subject however, to: (i) the obligations of this Lease, and (ii) the
provisions of Article 25 hereof with respect to Superior Instruments which
affect this Lease. This covenant shall be construed as a covenant running with
the Land, and is not, nor shall it be construed as, a personal covenant of
Landlord, except to the extent of Landlord's interest in the Property and only
so long as such interest shall continue, and thereafter Landlord shall be
relieved of all liability hereunder and this covenant shall be binding only upon
subsequent successors in interest of Landlord's interest in the Property, to the
extent of their respective interests, as and when they shall acquire the same,
and so long as they shall retain such interest.
ARTICLE 21
SERVICES AND EQUIPMENT
21.01. Subject to the provisions of Section 21.05, so long as this
Lease remains in effect, Landlord shall:
(a) Provide passenger elevator facilities on business days
from 8:00 a.m. to 6:00 p.m. and shall have at least one passenger elevator
servicing the demised premises subject to call at all other times in sufficient
amounts to transport traffic to and from the demised premises in a reasonably
timely manner. At Landlord's option, the elevators shall be operated by
automatic control or by manual control, or by a combination of both of such
methods. Landlord shall provide freight elevator service to the demised
premises at no charge on a first-come first-served basis (i.e., no advance
scheduling) during Business Hours of Business Days. Freight elevator service
shall also be provided to the demised premises on a reserved basis at all other
times, upon the payment of Landlord's then established customary charges
therefor which shall be additional rent hereunder. As of the date hereof, the
established charge for after-hours or weekend freight elevator use is $90 per
hour plus the overtime charge for supervisory labor, subject to increases from
time to time based on actual increases in Landlord's costs. The use of all
elevators shall be on a non-exclusive basis and shall be subject to the Rules
and Regulations. In connection with Tenant's use of the freight elevators,
Tenant shall have non-exclusive access to the loading bays, docks and hallways
servicing the freight elevators in accordance with the Rules and Regulations.
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(b) Maintain in good repair the Base Building air
conditioning, heating and ventilating systems including without limitation the
Base Building interior air-conditioning units and the fan coil units in the
peripheral system serving the demised premises. Such air conditioning, heating
and ventilation systems will function when seasonably required (subject to the
design criteria, including occupancy and connected electric load design
criteria) in accordance with the specifications annexed hereto as Schedule 0
hereof. The Base Building interior air-conditioning units shall be activated by
use of a telephone dial access number which Landlord shall provide and may be
activated by Tenant as required on a 24-hour, 7-day per week basis, and Tenant
shall not incur additional charges in respect of the operation thereof (i)
except as set forth in Article 4 hereof with respect to the electricity consumed
to operate same, and (ii) except to the extent the costs of operation thereof
are included within Expenses. The fan coil units in the peripheral system
serving the demised premises shall be operated by Landlord when seasonably
required on Business Days from 7:00AM to 6:00PM.
Landlord has informed Tenant that the windows of the demised
premises and the Building are sealed, and that the demised premises may become
uninhabitable and the air therein may become unbreathable during the hours or
days when the aforesaid systems do not function automatically as described
herein or when Tenant does not activate the core air conditioning system or
request overtime service for the perimeter zone. Any use or occupancy of the
demised premises under the conditions set forth in the immediately preceding
sentence shall be at the sole risk, responsibility and hazard of Tenant, and
Landlord shall have no responsibility or liability therefor. Such condition of
the demised premises shall not constitute nor be deemed to be a breach or a
violation of this Lease or of any provision thereof, nor shall it be deemed an
actual or constructive eviction nor shall Tenant claim or be entitled to claim
any abatement of rent nor make any claim for any damages or compensation by
reason of such condition of the demised premises. Tenant shall cause and keep
entirely unobstructed all the vents, intakes, outlets and grilles, at all times
and shall comply with and observe all regulations and requirements prescribed by
Landlord for the proper functioning of the heating, ventilating and
air-conditioning systems. Nothing contained herein shall be deemed to require
Landlord to furnish at Landlord's expense such electric energy as is required to
operate the air conditioning, heating and ventilating systems serving the
demised premises and on the floor of the demised premises and subject to the
provisions of Article 4 hereof, all such electric energy shall be furnished to
Tenant at Tenant's cost and expense; provided however that electric to operate
the perimeter fan coil system is not serviced through Tenant's direct electric
meter but rather through the Building common area electric meter. If Tenant
shall require air-conditioning from the Base Building interior air-conditioning
units during the hours or days when the core system does not function
automatically as described herein, Tenant shall have the responsibility of
activating the core air-conditioning system by use of the core air-conditioning
telephone system (which will be activated by use of a telephone dial access
number which Landlord shall provide). If Tenant shall require overtime heating
or air-conditioning service through the perimeter fan coil system at times when
same is not furnished by Landlord as hereinabove set forth, the Tenant shall
give Landlord reasonable advance notice thereof and Tenant shall pay therefor
Landlord's then standard charge as additional rent hereunder, which is $350 per
hour, as of the date hereof, subject to increases from time to time. Such charge
shall be prorated among Tenant and any other tenants of the Building which shall
request such overtime service during any time that Tenant shall also have
requested such service.
Landlord will at Tenant's request and at no cost to Tenant, supply
condenser water sufficient to operate the supplemental air-conditioning units
shown on Tenant's plans for Tenant's Work to be installed and connected to the
Building system in the demised premises in accordance with the provisions of
this Lease. After the completion of Tenant's Work, Tenant shall be entitled to
receive additional condenser water in an amount not to exceed Tenant's Expense
Share of the surplus Building condenser water allocated for tenant usage. In the
event Tenant installs supplementary air-conditioning units serving the demised
premises, Tenant covenants and agrees, at its sole cost and expense, to maintain
in full force and effect for so long as such air-conditioning unit remains in
the Building, a maintenance agreement for the periodic maintenance of such unit
on customary terms with a contractor reasonably acceptable to Landlord and to
furnish a copy of said contract and all
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extensions thereof to Landlord within ten (10) days after demand. Landlord
shall perform routine testing and maintenance of such Building condenser
water tower and shall give Tenant reasonable prior notice of such testing.
Landlord shall cooperate with Tenant in order to schedule such testing so as
to minimize material interference with the conduct of Tenant's business. In
addition, Landlord shall permit Tenant to penetrate the facade of the
Building for the purposes of installing louvers for supplemental air-cooled
air-conditioning units installed in the demised premises provided and on
condition that:
(i) Tenant shall elect only one (l) of the two lites of glass on the north
side of the Building designated on Schedule P annexed hereto to be replaced
for the installation of such louvers, i.e., the easternmost or westernmost
lite, and
(ii) such installation shall be performed in accordance with the
provisions of this Lease, including without limitation, Articles 6 and 42
hereof.
(c) (i) Provide the cleaning and janitorial services
described on Schedule F annexed hereto on business days. Tenant shall pay to
Landlord within twenty (20) days after demand the costs commercially reasonably
incurred by Landlord for (x) extra cleaning work in the demised premises
required because of (i) carelessness, misuse or neglect on the part of Tenant or
its subtenants or its or their employees or visitors, (ii) interior glass
partitions or unusual quantity of interior glass surfaces and (iii) non-building
standard materials or finishes installed by Tenant or at its request requiring
above-Building standard cleaning standards or methods, and, (y) removal from the
demised premises and the Building of any refuse and rubbish of Tenant in excess
of that ordinarily accumulated in business office occupancy, including, without
limitation, kitchen refuse, or at times other than Landlord's standard cleaning
times, and (z) the use of the demised premises by Tenant other than during
Business Hours on Business Days to the extent such use results in excess costs.
Landlord shall only be required to provide Building-standard office cleaning
services to any portions of the demised premises used for preparation, serving
or consumption of food or beverages, training rooms, data processing or
reproducing operations, private lavatories or toilets or other special purposes
requiring greater or more difficult cleaning work than office areas and Tenant
agrees (subject to the following sentence), at Tenant's expense, to retain
Landlord's cleaning contractor to perform such above-Building standard office
cleaning services cleaning. With respect only to those supplemental cleaning
services described on Schedule I annexed hereto, Tenant shall be permitted to
engage a contractor selected by Tenant as may be approved by Landlord, such
approval not to be unreasonably withheld or delayed (hereinafter called
"TENANT'S CONTRACTOR") to perform said cleaning service, provided, however, that
prior to engaging any Tenant's Cleaning Contractor, Tenant shall notify Landlord
in writing of its intention to do so, which notice shall include Tenant's
Cleaning Contractor's estimated charge (hereinafter called "TENANT'S BID") to
Tenant for performing such service. Landlord shall, within ten (10) days after
receipt of Tenant's notice, notify Tenant either that (x) Landlord elects to
require Tenant to use, at Tenant's sole cost and expense, a cleaning contractor
designated by Landlord to perform such service, in which event Tenant shall not
be permitted to engage Tenant's Cleaning Contractor for such purpose, or (y)
that Landlord consents to Tenant's use of Tenant's Cleaning Contractor for such
purpose, provided, however, that Landlord shall not be permitted to proceed
under clause (x) above unless the reasonable estimate of the cost to Tenant of
performing such work by Landlord's contractor is less than 105% of Tenant's Bid
and unless Landlord's contractor can perform such cleaning service substantially
within the time period and in substantially the same manner as would Tenant's
Cleaning Contractor. Landlord shall have no liability to Tenant for any
security or theft problems which may arise in the demised premises as a result
of the presence of Tenant's Cleaning Contractor;
(ii) Landlord, its cleaning contractor and their
respective employees shall have access to the demised premises after 6:00 p.m.
and before 8:00 a.m. and shall have the right to use, without charge therefor,
all light, power and water in the demised premises reasonably required to clean
the demised premises as required under this subsection 21.01(c).
(iii) Tenant shall not clean, nor require,
permit, suffer or allow any windows in the demised premises to be cleaned, from
the outside in violation of Section 202 of the Labor Law, or any other
applicable law.
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(d) Furnish adequate hot water for lavatory purposes and
adequate cold water for drinking, pantry and office cleaning purposes and for
the functioning of the sprinkler system ("CUSTOMARY WATER"). If Tenant
requires, uses or consumes water for any other purposes, Tenant agrees that
Landlord may install a meter or meters or other means to measure Tenant's water
consumption, and Tenant further agrees to reimburse Landlord for the reasonable
cost of the meter or meters and the installation thereof, and to pay for the
reasonably necessary maintenance of said meter equipment and/or to pay
Landlord's reasonable cost of other means of measuring such water consumption by
Tenant. Tenant shall reimburse Landlord for the cost of all water consumed in
excess of Customary Water, as measured by said meter or meters or as otherwise
measured, including sewer rents.
21.02. Landlord reserves the right, except as otherwise set forth
in the Lease, without any liability whatsoever, or abatement of fixed annual
rent, or additional rent, to stop the heating, air conditioning, elevator,
plumbing, electric and other systems when necessary by reason of accident or
emergency or for repairs, or alterations, replacements or improvements, provided
that except in case of emergency, Landlord will notify Tenant in advance, if
possible, of any such stoppage and, if ascertainable , its estimated duration,
and will proceed diligently with the work necessary to resume such service as
promptly as possible and in a manner so as to minimize interference with the
Tenant's use and enjoyment of the demised premises, but Landlord shall not be
obligated to employ overtime or premium labor therefor, unless Tenant is willing
to reimburse Landlord for the difference between the normal full-time pay basis
and overtime or premium pay basis and the performance of same on such overtime
or premium pay basis is available and reasonably practicable, provided, however,
that Landlord agrees that if an owner of a first-class office building in
Manhattan would customarily perform the nature of the work involved on an
overtime or premium pay basis, then Tenant will not be obligated to pay for such
work on an overtime or premium pay basis if Tenant requested such work to be
performed on an overtime or premium pay basis (unless such work was necessitated
by an act or omission of Tenant), and further subject to the Overtime Proviso.
21.03. Tenant agrees to employ such office maintenance contractor
as Landlord may from time to time designate, for all waxing, polishing, lamp
replacement, cleaning (other than those cleaning services Landlord is obligated
to furnish) and maintenance work in the demised premises, provided that, with
respect to Landlord's designated contractor, the quality thereof and the charges
therefor are reasonably comparable to that of other similar contractors. Tenant
shall not employ any other contractor without Landlord's prior written consent
which consent shall not be unreasonably withheld or delayed.
21.04. Landlord will not be required to furnish any other services,
except as otherwise provided in this Lease.
21.05. In addition to any remedies which Landlord may have under
this Lease, and without reducing or adversely affecting any of Landlord's rights
and remedies contained elsewhere in this Lease, if, after the earlier of: (i)
the expiration of the Rent Abatement Period or (ii) the substantial completion
of Tenant's Work, there shall be a monetary default hereunder by Tenant which
shall not have been remedied within the applicable grace period, Landlord shall
not be obligated to furnish to Tenant or the demised premises any services
outside of Business Hours on Business Days unless Tenant shall prepay Landlord
for same; and the discontinuance of any one or more such services shall be
without liability by Landlord to Tenant and shall not reduce, diminish or
otherwise affect any of Tenant's covenants and obligations under this Lease.
21.06. Landlord shall not unreasonably withhold its consent to the
installation in the demised premises by Tenant at Tenant's sole cost and expense
of one or more Dwyer Units or other forms of warming pantry (which may include a
microwave and refrigerator) together with a lunchroom unit provided that:
(a) the use thereof shall be confined to Tenant's
officers, Tenant's employees and business invitees;
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(b) the operation thereof shall not involve the
installation of any flues or other ventilation equipment or facilities, and
shall not cause any food, cooking or other odors to emanate from the demised
premises to other parts of the Building; and
(c) Tenant shall from time to time engage such
extermination services as shall be necessary to maintain the demised premises
free of rats, mice, roaches and other insects or vermin.
2l.07. Tenant shall have 24-hour access to the demised premises,
seven (7) days per week, subject to Force Majeure Causes and the reasonable
maintenance and security procedures of Landlord at the Building. Landlord shall
continue to provide concierge services in the Building substantially in the
manner currently provided on business days during business hours. The Building
shall be manned 24 hours per day, seven (7) days per week by such concierge or a
Building security guard.
21.08. Tenant shall be entitled to as many listings as it desires
in the list of tenants of the Building retained by the Building concierge.
ARTICLE 22
DEFINITIONS
22.01. The term "LANDLORD" as used in this Lease means only the
owner, or the mortgagee in possession, for the time being of the Land and
Building (or the holder of the tenant's interest in a lease of the Building or
of the Land and Building), so that in the event of any transfer of title to said
Land and Building or said lease, or in the event of a lease of the Building, or
of the Land and Building, upon notification to Tenant of such transfer or lease
the said transferor landlord shall be and hereby is entirely freed and relieved
of all future covenants, obligations and liabilities of Landlord hereunder, and
it shall be deemed and construed as a covenant running with the land without
further agreement between the parties or their successors in interest, or
between the parties and the transferee of title to said Land and Building or
said lease, or the said lessee of the Building or of the Land and Building, that
the transferee or the lessee, as applicable, has assumed and agreed to carry out
any and all such covenants, obligations and liabilities of Landlord hereunder.
22.02. The term "BUSINESS DAYS" or "BUSINESS DAYS" as used in this
Lease shall exclude Saturdays, Sundays and all days observed as legal holidays
and defined as Public Holidays in the Official Directory of the City of New York
as well as all other days recognized as holidays under applicable union
contracts.
22.03. "INTEREST RATE" shall mean a rate per annum equal to the
lesser of (a) two percent (2%) above the so-called "PRIME RATE" of Republic
National Bank (herein called the "PRIME RATE"), as publicly announced from time
to time or if Republic National Bank shall cease to exist or cease to announce
such rate, any similar rate designated by Landlord which is publicly announced
from time to time by any other bank in the City of New York having combined
capital and surplus in excess of ONE HUNDRED MILLION and 00/l00 ($100,000,000)
DOLLARS or (b) the maximum rate of interest, if any, which Tenant may legally
contract to pay.
22.04. "LEGAL REQUIREMENTS" shall mean laws, statutes and
ordinances including building codes and zoning regulations and ordinances and
the orders, rules, regulations, directives and requirements of all federal,
state, county, city and borough departments, bureaus, boards, agencies, offices,
commissions and other subdivisions thereof, or of any official thereof, or of
any other governmental, public or quasi-public authority, whether now or
hereafter in force, which are applicable to the Land or Building or the demised
premises or any part thereof, or the sidewalks, curbs or areas adjacent thereto
including, without limitation, The Americans with Disabilities Act, Public Law
101-336, 42 U.S.C. Sections 12101 et seq. (herein called the "DISABILITIES
ACT"), and all requirements, obligations and conditions of all instruments of
record on the date of this Lease, subject, with respect to Superior Instruments,
to the provisions of Article 25 hereof.
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ARTICLE 23
INVALIDITY OF ANY PROVISION
23.01. If any term, covenant, condition or provision of this Lease
or the application thereof to any circumstance or to any person, firm or
corporation shall be invalid or unenforceable to any extent, the remaining
terms, covenants, conditions and provisions of this Lease shall not be affected
thereby and each remaining term, covenant, condition and provision of this Lease
shall be valid and shall be enforceable to the fullest extent permitted by law.
ARTICLE 24
BROKERAGE
24.01. Tenant covenants, represents and warrants that Tenant has
had no dealings or negotiations with any broker or agent other than Landlord's
leasing agent, if any, and Newmark & Company Real Estate Inc., in connection
with the consummation of this Lease. Landlord and Tenant covenant and agree to
pay, hold harmless and indemnify each other from and against any and all cost,
expense (including reasonable attorneys' fees and court costs), loss and
liability for any compensation, commissions or charges claimed by any broker or
agent, other than the brokers specifically set forth in this Section 24.01, with
respect to this Lease or the negotiation thereof if such claim or claims by any
such broker or agent are based in whole or in part on dealing with the
indemnifying party or its representatives. Landlord agrees to pay to Landlord's
leasing agent and Newmark & Company Real Estate Inc. such compensation,
commissions or charges to which they are entitled pursuant to a separate
agreement between said broker and Landlord.
ARTICLE 25
SUBORDINATION
25.01. This Lease is and shall be subject and subordinate to all
ground or underlying leases which may now or hereafter affect the Land or the
Building and to all mortgages which may now or hereafter affect such leases, the
Land or the Building, and to all renewals, refinancings, modifications,
replacements and extensions thereof (hereinafter called "SUPERIOR INSTRUMENTS").
The subordination set forth in the immediately preceding sentence shall be
effective with respect to future Superior Instruments (other than Superior
Interests affecting the fee interest in the Property) only on condition that the
holder of such future Superior Instrument shall agree in writing with Tenant
that so long as this Lease is in full force and effect and Tenant shall not be
in default after the giving of any required notice and the lapse of any required
grace period, such holder shall not cut off Tenant's rights under this Lease or
at law or disturb Tenant's possession of the demised premises or disturb the
right of possession of any persons claiming through or under Tenant during any
period when this Lease is in full force and effect. Each party agrees to
execute and deliver to the other party an agreement confirming same in the form
customarily used by such holder within fifteen (l5) business days after request
to do so provided that such form shall not contain provisions which are more
onerous to Tenant than the provisions of Schedules G and H hereof. Tenant
agrees that the form of Schedules G and H annexed hereto are acceptable to
Tenant. If Tenant shall fail to so execute, acknowledge and return such
non-disturbance agreement as above provided, then such future Superior
Instrument shall be deemed to be superior to this Lease notwithstanding the fact
that the holder and Tenant have not executed and exchanged a non-disturbance
agreement. The provisions of this Section 25.01 shall be self-operative and no
further instrument of subordination shall be required, except as expressly
provided herein.
25.02. In the event of a termination of any ground or underlying
lease, or if the interests of Landlord under this Lease are transferred by
reason of, or assigned in lieu of, foreclosure or other proceedings for
enforcement of any mortgage, or if the holder of any mortgage acquires a lease
in substitution therefor, then Tenant under this Lease will, at the option to be
exercised in writing by the holder
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of any such Superior Instrument to which this Lease is subject and
subordinate or any superior purchaser, assignee or lessee, as the case may
be, either (i) attorn to it and will perform for its benefit all the terms,
covenants and conditions of this Lease on Tenant's part to be performed with
the same force and effect as if it were the landlord originally named in this
Lease, or (ii) enter into a new lease with it for the remaining term of this
Lease and otherwise on the same terms and conditions and with the same
options, if any, then remaining, including, without limitation the Rent
Abatement Period. The foregoing provisions of clause (i) of this Section
25.02 shall enure to the benefit of such holder of a Superior Instrument,
purchaser, assignee or lessee, shall be self-operative upon the exercise of
such option, and no further instrument shall be required to give effect to
such option, and no further instrument shall be required to give effect to
said provisions. Tenant, however, upon demand of any such holder of a
Superior Instrument, purchaser, assignee or lessee agrees to execute, from
time to time, instruments in confirmation of the foregoing provisions of this
Section 25.02, reasonably satisfactory to any such holder of a Superior
Instrument, purchaser, assignee or lessee, acknowledging such attornment and
setting forth the terms and conditions of its tenancy.
25.03. Anything herein contained to the contrary notwithstanding,
under no circumstances shall any such holder of a Superior Instrument,
purchaser, assignee or lessee, as the case may be (who is not an affiliate of
Landlord) whether or not it shall have succeeded to the interests of the
landlord under this Lease, be
(a) liable for any act, omission or default of any prior
landlord; provided, however that the foregoing provisions of this clause (a)
shall not be deemed to exculpate any successor to the interests of Landlord from
the obligation to cure any conditions in the Building which continue to give
rise to default after the date such successor acquired its interest; or
(b) subject to any offsets, claims or defenses which the
Tenant might have against any prior landlord which accrued prior to the date
that it acquired its interest; or
(c) bound by any rent or additional rent which Tenant might
have paid to any prior landlord for more than one month in advance (other than
the first month's rent and additional rent paid pursuant to the escalation
provisions of the Lease); or
(d) bound by any modification, amendment or abridgment of
the Lease, or any cancellation or surrender of the same, made after it acquired
its interest without its prior written approval except for any of same to be
entered into pursuant to the terms of this Lease; or
(e) obligated to do or complete any work in the demised
premises pursuant to Article 2 and the Work Agreement of this Lease or otherwise
be obligated to prepare the demised premises for occupancy in accordance with
the provisions of this Lease.
25.04. If, in connection with the financing of the Building, the
holder of any mortgage shall request reasonable modifications in this Lease as a
condition of approval thereof, Tenant will not unreasonably withhold, delay or
defer making such modifications provided the same do not (i) increase the fixed
annual rent or additional rents payable by Tenant, (ii) reduce the term hereof,
(iii) extend the term hereof or (iv) otherwise adversely affect the rights or
increase the obligations of Tenant hereunder in any material respect.
25.05. (a) Landlord shall request that the "MORTGAGEE", as such
term is defined in Article 39 hereof, enter into a non-disturbance agreement
substantially in the form annexed hereto as Exhibit G, and Tenant agrees to
execute such non-disturbance agreement concurrently with the execution of this
Lease. Landlord shall use reasonable efforts to obtain such a non-disturbance
agreement. If the Mortgagee shall fail to enter into such non-disturbance
agreement within ten (10) Business Days after the date hereof, then Tenant may
elect by written notice to Landlord given within fifteen (15) Business Days
after the expiration of such ten (10) Business Day period, to cancel this Lease,
and if the Mortgagee shall not enter into
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such non-disturbance agreement within ten (10) days after the giving of such
notice, then this Lease shall terminate as of the expiration of such 10-day
period.
(b) Landlord shall request that Bank of New York,
successor in interest to the Irving Trust Company, Trustee under the Last
Will and Testament of Harold D. Uris, Deceased, for the benefit of Ruth Uris
(hereinafter called the "GROUND LESSOR"), as landlord under that certain
lease dated January 26, l989 with Landlord as tenant, enter into a
non-disturbance agreement substantially in the form annexed hereto as Exhibit
H, and Tenant agrees to execute such non-disturbance agreement concurrently
with the execution of this Lease. Landlord shall use reasonable efforts to
obtain such a non-disturbance agreement. If the Ground Lessor shall fail to
enter into such non-disturbance agreement within ten (10) Business Days after
the date hereof, then Tenant may elect by written notice to Landlord given
within fifteen (l5) Business Days after the expiration of such ten (10)
Business Day period, to cancel this Lease, and if the Ground Lessor shall not
enter into such non-disturbance agreement within ten (l0) days after the
giving of such notice, then this Lease shall terminate as of the expiration
of such ten (l0) day period.
25.06 (a) Landlord represents that as of the date hereof the
following is a comprehensive list of all Superior Instruments:
(i) a certain mortgage, as modified by a certain Mortgage
Modification Agreement, dated as of June 20, 1991 between Mortgagee
and Landlord's predecessor in interest and a further Project Loan
Agreement, dated December 20, 1991 between Mortgagee and Landlord,
(ii) a certain ground lease dated January 26, 1989 between
Ground Lessor and Landlord's predecessor in interest,
(iii) a certain Consolidation, Extension and Modification of
Mortgages, dated as of September 9, 1986 between the Comptroller of
the State of New York as Trustee of the New York State Common
Retirement Fund and Ground Lessor.
(b) Landlord represents that as of the date hereof all the
Superior Instruments are in full force and effect and Landlord has received no
notices of defaults thereunder which have remained uncured beyond the applicable
grace period set forth in the applicable Superior Instrument.
ARTICLE 26
CERTIFICATE OF TENANT
26.01. (a) Tenant shall, without charge, at any time and from time
to time, within twenty (20) days after request by Landlord or the holder of a
Superior Instrument, as the case may be, execute, acknowledge and deliver to
Landlord, the holder of a Superior Instrument or any other person, firm or
corporation specified by Landlord, a written instrument (an "ESTOPPEL
CERTIFICATE") substantially in the form attached hereto as Schedule D-1 or such
other form as may be reasonably required by the holder of any Superior
Instrument with such changes therein as may be required in order not to make the
same misleading in any material respect. Prior to taking occupancy of the
demised premises, and as a condition precedent thereto, Tenant shall execute,
acknowledge and deliver such an estoppel certificate to Landlord.
(b) Landlord agrees upon request to provide Tenant with a
statement in the form annexed hereto as Schedule D-2 certifying that this Lease
is unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), certifying the Commencement Date, Expiration Date and the dates
to which the fixed annual rent and additional rent as billed, have been paid,
stating whether or not, to the best knowledge of Landlord, Tenant is in default
in performance of any of its obligations under this Lease; provided, however,
that Landlord shall be required to deliver an Estoppel Certificate to Tenant not
more than once per l2-month period and only if such Estoppel Certificate is
required in connection with a bona fide business
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purpose, such as a corporate reorganization or a sale of Tenant's assets or
in connection with a permitted sublease or assignment, where, in any such
event, estoppel certificates are customarily required from landlords by third
parties having an interest in such transaction.
26.02. Tenant agrees that, except for the first month's rent
hereunder, it will pay no rent under this Lease more than thirty (30) days in
advance of its due date, if so restricted by any existing or future Superior
Instrument or by an assignment of this Lease to the holder of such Superior
Instrument, and, in the event of any act or omission by Landlord which would
give Tenant the right to terminate this Lease (other than the right to terminate
this Lease pursuant to Articles 43, 44 or 45 hereof), Tenant will not exercise
such right until Tenant shall have first given written notice of such act or
omission to the holder of any Superior Instrument who shall have furnished such
holder's last address to Tenant, and until a reasonable period for remedying
such act or omission shall have elapsed following the giving of such notices
(which reasonable period shall in no event be less than the period to which
Landlord would be entitled under this Lease or otherwise, after similar notice,
to effect such remedy), during which time such holder shall have the right, but
shall not be obligated, to remedy or cause to be remedied such act or omission.
Tenant further agrees not to exercise any such right (other than the right to
terminate this Lease pursuant to Article 43, 44 or 45 hereof) if the holder of
any such Superior Instrument commences to cure such act or omission within a
reasonable time after having received notice thereof and diligently prosecutes
such cure thereafter.
ARTICLE 27
LEGAL PROCEEDINGS; WAIVER OF JURY TRIAL
27.01. Landlord and Tenant hereby waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way in
connection with this Lease, the relationship of Landlord and Tenant, Tenant's
use or occupancy of the demised premises, and/or any other claims (except claims
for personal injury or property damage), and any emergency statutory or any
other statutory remedy. It is further mutually agreed that in the event
Landlord commences any summary proceeding for non-payment of rent, Tenant will
not interpose and does hereby waive the right to interpose any counterclaim of
whatever nature or description in any such proceeding unless failure to
interpose the counterclaim would result in a waiver thereof, and failure to
interpose any other such counterclaim shall not be deemed a waiver thereof.
With respect to "NON-PAYMENT PROCEEDINGS" (as hereinafter defined), Tenant shall
reimburse Landlord upon demand for all reasonable costs and expenses (including
reasonable attorneys' fees and disbursements and court costs) incurred by
Landlord in connection with such Non-Payment Proceedings (other than costs and
expenses incurred by Landlord in defending any counterclaim which Tenant is
permitted hereunder to raise therein as to which the provisions of the
penultimate sentence of this Section 27.01 shall govern). All such amounts
shall be deemed to be additional rent and shall be collectible in the same
manner as provided in Section 1.02 hereof. With respect to any legal
proceedings or actions other than Non-Payment Proceedings which shall be
commenced by either Landlord or Tenant as a result of a breach by the other
party of its covenants under this Lease, the party which shall prevail in any
such proceeding or action, shall be entitled to collect from the non-prevailing
party, reasonable attorneys' fees incurred by the prevailing party in any such
action or proceeding. For the purposes of this Article 27, the term
"NON-PAYMENT PROCEEDINGS" shall mean a summary proceeding commenced by Landlord
against Tenant for non-payment of fixed annual rent or Tenant's Tax Payments or
Tenant's Expense Payments.
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ARTICLE 28
SURRENDER OF PREMISES
28.01. Upon the expiration or other termination of the Term, Tenant
shall quit and surrender to Landlord the demised premises, broom clean, in good
order and condition, ordinary wear and tear and damage by fire, the elements or
other casualty and conditions which Landlord is obligated to repair excepted,
and Tenant shall remove all of its property as herein provided. Tenant's
obligation to observe or perform this covenant shall survive the expiration or
other termination of the Term.
28.02. If Tenant shall, without the written consent of Landlord,
hold over after the expiration of the Term, and if Landlord shall then not
proceed to remove Tenant from the demised premises in the manner permitted by
law, such tenancy shall be deemed a month-to-month tenancy, which tenancy may be
terminated as provided by applicable law. During such tenancy, Tenant agrees to
(a) pay to Landlord, each month, the greater of the fair market rental value for
the demised premises or one hundred twenty (120%) percent of the fixed annual
rent payable by Tenant for the last month of the Term and (b) be bound by all of
the terms, covenants and conditions herein specified.
ARTICLE 29
RULES AND REGULATIONS
29.01. Tenant and Tenant's servants, employees and agents shall
observe faithfully and comply strictly with the Rules and Regulations set forth
in Schedule E attached hereto and made part hereof entitled "RULES AND
REGULATIONS" and such other and further reasonable Rules and Regulations as
Landlord or Landlord's agents may from time to time adopt provided, however,
that in case of any conflict or inconsistency between the provisions of this
Lease and of any of the Rules and Regulations as originally or as hereafter
adopted, the provisions of this Lease shall control. Reasonable written notice
of any additional Rules and Regulations shall be given to Tenant in writing.
Nothing in this Lease contained shall be construed to impose upon
Landlord any duty or obligation to enforce the Rules and Regulations or the
terms, covenants or conditions in any other lease, against any other tenant of
the Building, and Landlord shall not be liable to Tenant for violation of the
same by any other tenant, its servants, employees, agents, visitors or
licensees. Except in cases of emergency or where required by Legal
Requirements, no new rule or regulation shall be binding on Tenant until
Landlord gives Tenant at least ten (l0) days prior written notice thereof.
Landlord agrees not to enforce any Rule or Regulation against Tenant which it is
not enforcing generally vis-a-vis the tenants of the Building.
ARTICLE 30
CONSENTS AND APPROVALS
30.01. (a) Wherever in this Lease Landlord's consent or approval
is required, if Landlord shall delay or refuse such consent or approval, Tenant
in no event shall be entitled to make, nor shall Tenant make, any claim, and
Tenant hereby waives any claim, for money damages (nor shall Tenant claim any
money damages by way of set-off, counterclaim or defense) based upon any claim
or assertion by Tenant that Landlord unreasonably withheld or unreasonably
delayed its consent or approval unless it is determined in a court of competent
jurisdiction by a final, unappealable determination that Landlord has acted in
bad faith or with malicious intent. Except as aforesaid, Tenant's sole remedy
shall be an action or proceeding to enforce any such provision, for specific
performance, injunction or declaratory judgment, and such remedy shall be
available only in those cases where Landlord has expressly agreed in writing not
to unreasonably withhold its consent or where as a matter of law Landlord may
not unreasonably withhold its consent.
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(b) If Tenant disputes the reasonableness of Landlord's
decision to refuse to consent or approve any item for which Landlord has agreed
expressly in this Lease not to unreasonably withhold or delay its consent or
approval in accordance with provisions of this Lease, then such dispute shall be
settled and finally determined by arbitration in the City of New York in
accordance with the following provisions hereof. Within five (5) Business Days
next following the giving of any notice by Tenant to Landlord stating that it
wishes such dispute to be so determined, Landlord and Tenant shall each give
notice to the other setting forth the name and address of an arbitrator
designated by the party giving such notice. If either party shall fail to give
notice of such designation within said five (5) Business Days, then the
arbitrator to be chosen by such party shall be chosen in the same manner as
hereinafter provided for the appointment of the third arbitrator in the case
where the two arbitrators chosen hereunder are unable to agree upon such
appointment. The two arbitrators shall designate a third arbitrator. If the
two arbitrators shall fail to agree upon the designation of a third arbitrator
within five (5) Business Days after the designation of the second arbitrator,
then either party may apply to the American Arbitration Association or any
successor organization thereto ("AAA") for the designation of such arbitrator;
provided, however, nothing contained herein shall be construed to require
submission of any dispute to the AAA. All arbitrators shall be persons who
shall have had at least ten (10) years experience in the business of appraising
or managing real estate or acting as real estate agents or brokers in the
Borough of Manhattan and shall be related to neither Landlord nor Tenant. The
three arbitrators shall conduct such hearings as they deem appropriate, making
their determination in writing and give notice to Landlord and Tenant of their
determination within seven (7) Business Days, if at all possible, after the
designation of the third arbitrator; the concurrence of any two of said
arbitrators shall be binding upon Landlord and Tenant. Any award of the
arbitrators shall be limited to a determination as to whether Landlord acted
reasonably in withholding any such consent or approval. Judgment upon any award
rendered in any arbitration held pursuant to this subsection 30.01(b) may be
entered in any court having jurisdiction. However, the determination in any
arbitration held pursuant to this subsection 30.01(b) shall be final and binding
upon Landlord and Tenant, whether or not a judgment shall be entered in any
court. Each party shall pay its own counsel fees and expenses, if any, in
connection with any arbitration under this subsection 30.01(b), each party shall
pay the fees and expenses of the one of the two original arbitrators appointed
by or for such party and the fees and expenses of the third arbitrator shall be
borne by the parties equally.
ARTICLE 31
NOTICES
31.01. Any notice or demand, consent, approval or disapproval, or
statement (collectively called "NOTICES") required or permitted to be given by
the terms and provisions of this Lease, or by any law or governmental
regulation, either by Landlord to Tenant or by Tenant to Landlord, shall be in
writing and unless otherwise required by such law or regulation, shall be sent
by (i) United States mail postage prepaid as registered or certified mail,
return receipt requested, (ii) by nationally recognized overnight courier
service (such as Federal Express) with receipt requested, or (iii) personally
delivered with written receipt. Any Notice shall be addressed to Landlord and
Tenant, as follows:
If to Landlord
Spartan Madison Corp.
c/o HRO International Ltd.
Tower 56
l26 East 56th Street
New York, New York l0022
Attention: Larry Jay Wyman
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<PAGE>
and if to Tenant as follows:
Investment Technology Group, Inc.
900 Third Avenue
New York, New York 10022
Attention: James Lynch, General Counsel
with a copy to:
Morgan, Lewis & Bockius
101 Park Avenue
New York, New York 10178
Attention: Chester P. Lee, Esq.
(except that after Tenant shall occupy the demised premises, Tenant's address,
unless Tenant shall give notice to the contrary, shall be the Building). By
giving the other party at least ten days prior written notice, either party may,
by Notice given as above provided, designate a different address or addresses
for Notices.
Notwithstanding anything herein to the contrary, Notices from Tenant
to Landlord regarding overtime services may be given by telephone with hand
delivered written confirmation to follow within a reasonable period of time.
31.02. Any Notice shall be deemed given upon receipt or in the case
of refusal to receive, as of the date of such refusal.
31.03. In addition to the foregoing, either Landlord or Tenant may,
from time to time, request in writing that the other party serve a copy of any
Notice on one other person or entity designated in such request, such service to
be effected as provided in Section 31.01 hereof.
ARTICLE 32
NO WAIVER
32.01. No agreement to accept a surrender of this Lease shall be
valid unless in writing signed by Landlord. No employee of Landlord or of
Landlord's agents shall have any power to accept the keys of the demised
premises prior to the termination of this Lease. The delivery of keys to any
employee of Landlord or of Landlord's agent shall not operate as a termination
of this Lease or a surrender of the demised premises. In the event of Tenant
at any time desiring to have Landlord sublet the premises for Tenant's account,
Landlord or Landlord's agents are authorized to receive said keys for such
purpose without releasing Tenant from any of the obligations under this Lease.
The failure of either Landlord or Tenant to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease
or any of the Rules and Regulations set forth herein, or hereafter adopted by
Landlord, shall not prevent a subsequent act, which would have originally
constituted a violation, from having all the force and effect of an original
violation. The receipt by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. The failure
of Landlord to enforce any of the Rules and Regulations set forth herein, or
hereafter adopted, against Tenant and/or any other tenant in the Building shall
not be deemed a waiver of any such Rules and Regulations. 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. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly rent herein stipulated
shall be deemed to be other than on the account of the earliest stipulated rent,
nor shall any endorsement or statement on any check or any letter accompanying
any check or payment of rent be deemed an accord and satisfaction, and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance of such rent or pursue any other remedy in this Lease
provided.
32.02. This Lease contains the entire agreement between the
parties, and any executory agreement hereafter made shall be ineffective to
change, modify, discharge or effect an abandonment of it in whole or in part
unless such executory
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<PAGE>
agreement is in writing and signed by the party against whom enforcement of
the change, modification, discharge or abandonment is sought.
ARTICLE 33
CAPTIONS
33.01. The captions are inserted only as a matter of convenience
and for reference, and in no way define, limit or describe the scope of this
Lease nor the intent of any provision thereof.
ARTICLE 34
INABILITY TO PERFORM
34.01. If, by reason of (1) strike, (2) labor troubles, (3)
governmental pre-emption in connection with a national emergency, (4) any rule,
order or regulation of any governmental agency, (5) conditions of supply or
demand which are affected by war or other national, state or municipal
emergency, or any other cause, (6) fire or other casualty subject to the
provisions of Article 10 hereof, (7) adjustment of insurance claims subject to
the provisions of Article 10 hereof, (8) acts of God, or (9) any other cause
beyond Landlord's reasonable control (it being agreed, however, that lack of
funds shall not be deemed a cause beyond Landlord's reasonable control)
(collectively hereinafter referred to as "FORCE MAJEURE CAUSES"), Landlord shall
be unable to fulfill its obligations under this Lease or shall be unable to
supply any service which Landlord is obligated to supply, this Lease and
Tenant's obligation to pay rent hereunder shall in no wise be affected, impaired
or excused. Landlord will use reasonable efforts in order to alleviate such
condition promptly, but shall not be required to employ any overtime or premium
time labor in order to do so unless Tenant is willing to reimburse Landlord for
the difference between the normal full-time pay basis and overtime or premium
pay basis, and the performance of such work on an overtime or premium pay basis
is available and reasonably practicable. If Tenant has ceased conducting
business in the demised premises because of such condition, then Landlord shall
use best efforts to alleviate such condition promptly.
34.02. Notwithstanding anything to the contrary contained in
Section 34.01 above, but subject to any additional limitations elsewhere imposed
in this Lease, to the extent that Tenant is precluded from using the demised
premises for a period in excess of fifteen (15) consecutive days in any one
instance because Landlord is not fulfilling its obligations under this Lease or
is not supplying any service which Landlord is obligated to supply hereunder and
provided Tenant does not occupy all or substantially all such space for the
ordinary conduct of business during such period (the presence in the demised
premises of a skeleton crew for purposes solely of computer functioning shall
not be deemed to be occupancy for such purposes), and provided further that such
failure shall not have resulted from the negligence or wilful acts of Tenant or
its officers, contractors, licensees, agents, employees, guests or visitors, or
from Force Majeure Causes, the fixed annual rent payable hereunder and
additional rent payable under Article 3 hereof shall be abated for the period of
time commencing on the 1st day following the date Tenant was precluded from
using the demised premises by reason of such failure until the earlier of such
time as Tenant reoccupies the demised premises or such time as such obligation
is fulfilled or service restored.
If the conditions set forth in the immediately preceding
sentence shall continue for three hundred sixty-five (365) consecutive days,
then Tenant may, at Tenant's option, terminate this Lease by giving thirty (30)
days' prior notice thereof within ten (10) Business Days after the expiration of
such three hundred sixty five (365) day period and if Tenant shall give such
notice, then this Lease shall terminate upon the expiration of such thirty (30)
day period, unless Tenant reoccupies the demised premises or such obligations
fulfilled or service restored during such thirty (30) day period. If such
conditions shall continue for sixty (60) consecutive days, then Tenant shall
have the right to request in writing from Landlord the date that Landlord
reasonably estimates that Landlord is capable of fulfilling such obligation or
restoring such service. Landlord shall reasonably
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promptly give Tenant written notice of such estimated date. If such
estimated date shall not fall within the aforesaid three hundred sixty five
(365) day period, then Tenant may terminate this Lease by written notice
given to Landlord within ten (10) business days after receipt of Landlord's
estimated date, and this Lease shall terminate on the date occurring thirty
(30) days after the giving of Tenant's notice, unless Landlord shall have
fulfilled such obligation or restored such service within such thirty (30)
day period.
34.03. If by reason of Force Majeure Causes, Tenant shall be unable
to fulfill its obligations under this Lease, other than obligations to pay rent
or additional rent hereunder, then to the extent that such inability shall
continue by reason of such Force Majeure Causes, Tenant shall not be deemed to
be in default of this Lease; and this Lease and Landlord's obligations hereunder
shall in no wise be affected, impaired or excused. In no event shall the
inability to pay any sum of money be deemed a Force Majeure Cause, and for the
purposes of the application for Tenant's benefit, Force Majeure Causes shall
include, in lieu of clause (9) set forth in Section 34.01 hereof, any cause, in
addition to the causes set forth in clauses (1) through (8) of Section 34.01
hereof, beyond Tenant's reasonable control.
ARTICLE 35
NO REPRESENTATIONS BY LANDLORD
35.01. Landlord or Landlord's agents have made no representations
or promises with respect to the Building or demised premises except as herein
expressly set forth.
ARTICLE 36
NAME OF BUILDING
36.01. Landlord shall have the full right at any time to name and
change the name of the Building and to change the designated address of the
Building. The Building may be named after any person, firm, or otherwise,
whether or not such name is, or resembles, the name of a tenant of the Building.
Landlord shall provide Tenant with no less than thirty (30) days advance written
notice of any change in the designated name or address of the Building, and
Landlord shall reimburse Tenant for any reasonable costs incurred by Tenant in
amending its business stationery by reason of such change.
ARTICLE 37
ARBITRATION
37.01. In each case specified in this Lease in which resort to
arbitration shall be required, such arbitration (unless otherwise specifically
provided in other Sections of this Lease) shall be in New York County, New York
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association (or its successor) and the provisions of this Lease. The decision
and award of the arbitrators shall be in writing, shall be final and conclusive
on the parties, and counterpart copies thereof shall be delivered to each of the
parties. In rendering such decision and awards, the arbitrators shall not add
to, subtract from or otherwise modify the provisions of this Lease. Judgment
may be had on the decision and award of the arbitrators so rendered in any court
of competent jurisdiction.
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ARTICLE 38
INDEMNITY
38.01. (a) Subject to the terms of Article 9 hereof, relating to
waivers of subrogation, Tenant shall indemnify and defend Landlord (including
Landlord's shareholders, officers, directors, partners, joint venturers and
agents) and save it harmless from and against any and all liability, damages,
costs or expenses, including reasonable attorneys' fees, (i) arising from any
improper act, omission (where this Lease imposes a duty to act), or negligence
of Tenant or its officers, contractors, licensees, agents, employees, guests,
invitees, or visitors in or about the demised premises or the Building, or
(ii) arising from any accident, injury, or damage, howsoever and by whomsoever
caused, to any person or property, occurring within the demised premises.
Tenant's liability for such expenses, damages or fines shall be limited to those
caused by any of the reasons set forth in the immediately preceding sentence,
and Tenant shall not be liable hereunder for any consequential, special or
indirect damages. Nothing contained in this Section 38(a) shall be deemed a
waiver of Landlord's rights to claim against Tenant for damages of any nature
that Landlord shall prove at law as a result of Tenant's holding over in the
demised premises beyond the Expiration Date or any earlier cancellation or
termination of this Lease except as specifically provided to the contrary
herein. This provision shall not be construed to make Tenant responsible for
loss, damage, liability or expense resulting from any accident, injury, or
damage, howsoever and by whomsoever caused, to any person or property, occurring
within the demised premises if (but only to the extent) caused by the negligence
or wilful act of Landlord, or its officers, contractors, licensees, agents,
employees, or invitees.
(b) Subject to the terms of Article 9 hereof relating to
waivers of subrogation, Landlord shall indemnify and defend Tenant (including
Tenant's shareholders, officers, directors, partners, joint venturers and
agents) and save Tenant harmless from and against any and all liability,
damages, costs or expenses (including reasonable attorneys' fees and expenses)
arising from any negligence or willful misconduct of Landlord or its officers,
employees or agents; provided, however, that this indemnity shall in no event
cover liability for consequential damages or for special or indirect damages in
the nature of consequential damages.
ARTICLE 39
APPROVAL OF MORTGAGEE
39.01. This Lease is conditioned on Landlord obtaining the approval
of this Lease (hereinafter referred to as "Approval") by the holder of the
mortgage dated as of June 20,1991 between The First National Bank of Boston, as
mortgagee and Landlord as mortgagor (hereinafter called the "Mortgagee").
Landlord will use reasonable efforts to obtain the Approval.
39.02. In the event Landlord has not obtained the Approval within
ten (10) Business Days after the date hereof, Landlord or Tenant shall have the
right to terminate this Lease within fifteen (l5) business days after the
expiration of such ten (10) Business Day period, upon written notice given to
the other party within such fifteen (l5) business day period, time being of the
essence with respect to the giving of such notice, and this Lease shall
terminate upon the expiration of ten (10) days after the date of such notice
unless prior to the expiration of said ten (10) day period, said approval shall
have been obtained; in which such event such notice shall be deemed null and
void and of no force or effect.
39.03. In the event the Mortgagee notifies Landlord that it will
not give the Approval, then Landlord, shall promptly notify Tenant and upon the
giving of such notice, this Lease shall terminate.
39.04. In the event of the termination of this Lease pursuant to
Sections 39.02 or 39.03 hereof, and upon such termination, all further
obligations of the parties hereunder shall end and neither Landlord nor Tenant
shall have any liability to the other, except Landlord shall refund any pre-paid
rent and/or security deposit to Tenant.
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ARTICLE 40
RIGHT OF FIRST OFFERING
40.01. (a) For purposes of this Lease, the "First Offering Space"
shall mean the three portions of the fifth (5th) floor of the Building,
delineated as Portions A, B and C and shown on the floor plan annexed hereto as
Schedule M. Tenant acknowledges that Portion A of the First Offering Space,
which Landlord and Tenant hereby agree shall be deemed to contain 12,726
rentable square feet, is currently occupied by Josephthal, Lyon & Ross, Inc.
(hereinafter called "Josephthal") pursuant to a lease with Landlord of which the
date set forth therein for the expiration of such lease is July 31, 1998, that
Portion B of the First Offering Space, which Landlord and Tenant hereby agree
shall be deemed to contain 15,524 rentable square feet, is currently occupied by
Fox-Pitt, Kelton, Inc. (hereinafter called "Fox-Pitt") pursuant to a lease with
Landlord of which the date set forth therein for the expiration of such lease is
June 30, 2003, and that Portion C of the First Offering Space, which Landlord
and Tenant hereby agree shall be deemed to contain 16,230 rentable square feet,
is currently occupied by LDDS Communications, Inc. (hereinafter called "LDDS")
pursuant to a lease with Landlord of which the date set forth therein for the
expiration of such lease is August 31, 2008. Each of the foregoing leases
contains an option on the part of the tenant thereof to extend the term of the
lease for an additional five year term from the current expiration date. Each of
the foregoing tenants is required to give written notice to Landlord exercising
its option prior to the current expiration date of its lease on or before the
following deadline dates: Josephthal, six (6) months prior to 7/31/98; Fox-Pitt:
twelve (12) months prior to 6/30/03 and LDDS: twelve (12) months prior to
8/31/08. Josephthal, Fox-Pitt and LDDS and their respective successors, assigns
and affiliates are hereinafter sometimes collectively called the "Existing
Tenants".
(b) Provided Tenant is not in default under the terms and
conditions of this Lease either as of the date of the giving of "Tenant's First
Notice" or the "First Offering Space Inclusion Date" (as such terms are
hereinafter defined), if at any time during the term of this lease Portion A
and/or Portion B and/or Portion C of the First Offering Space shall become, or
are anticipated to become, available for leasing, then Landlord, before offering
such First Offering Space to anyone, shall offer to Tenant the right to include
such First Offering Space within the demised premises upon all the terms and
conditions of this lease (other than the provisions of Sections 1.05 and
Articles 2 and 43 hereof), except that:
(A) the fixed annual rent with respect to such First
Offering Space shall be the fair market rent for such First
Offering Space (assuming base years and base factors as set forth
in Article 3 hereof) which shall be determined by Landlord and
shall be set forth in a written notice to Tenant.
(B) Effective as of the First Offering Space Inclusion Date
applicable to such First Offering Space for purposes of
calculating Tenant's Tax Payment and Tenant's Expense Payment
allocable to the First Offering Space, Tenant's Tax Share and
Tenant's Expense Share attributable to the First Offering Space
shall be as follows:
<TABLE>
<CAPTION>
Tenant's Tenant's
Tax Share Expense
Share
<S> <C> <C>
Portion A 1.7721% 1.8362%
Portion B 2.1618% 2.2400%
Portion C 2.289% 2.372%
</TABLE>
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Such offer shall be made by Landlord to Tenant in a written notice
(hereinafter called the "First Offer Notice") which offer shall designate the
space being offered and shall contain Landlord's estimate of the date that such
First Offering Space shall become available for Tenant's occupancy (the
"Anticipated Inclusion Date"). The First Offer Notice may not be given by
Landlord earlier than twelve (12) months prior to the Anticipated Inclusion
Date. Landlord shall specify in the First Offer Notice the fixed annual rent
payable with respect to such First Offering Space as determined by Landlord in
accordance with the provisions of Section 40.01(b) hereof.
40.02. (a) Tenant may accept the offer set forth in the First
Offer Notice by delivering to Landlord an unconditional acceptance (hereinafter
called "Tenant's First Notice") of such offer within thirty (30) days after
delivery by Landlord of the First Offer Notice to Tenant. Such First Offering
Space shall be added to and included in the demised premises on the date such
First Offering Space shall actually become available for Tenant's possession
(herein called the "First Offering Space Inclusion Date"), or on the date that
Tenant gives Tenant's First Notice, if such First Offering Space is then
available. Time shall be of the essence with respect to the giving of Tenant's
First Notice.
(b) If Tenant does not accept (or fails to timely
accept) an offer made by Landlord pursuant to the provisions of this Article
40 with respect to the First Offering Space designated in the First Offer
Notice, Landlord shall be under no further obligation with respect to such
space by reason of this Article 40 but Tenant's rights with respect to any
other First Offering Space shall not be affected), and Tenant shall have
forever waived and relinquished its right to such First Offering Space, and
Landlord shall at any and all times thereafter be entitled to lease such
First Offering Space to others at such rental and upon such terms and
conditions as Landlord in its sole discretion may desire whether such rental
terms, provisions and conditions are the same as those offered to Tenant or
more or less favorable, and Tenant shall, within twenty (20) days after
Landlord's request therefor, deliver an instrument in form reasonably
satisfactory to Landlord confirming the aforesaid waiver, but no such
instrument shall be necessary to make the provisions hereof effective.
40.03. If any First Offering Space shall not be available for
Tenant's occupancy on the Anticipated Inclusion Date for any reason including
the holding over of the prior tenant, then Landlord and Tenant agree that the
failure to have such First Offering Space available for occupancy by Tenant
shall in no way affect the validity of this Lease or the inclusion of such First
Offering Space in the demised premises or the obligations of Landlord or Tenant
hereunder, nor shall the same be construed in any way to extend the term of this
Lease, and for the purpose of this Article 40 the First Offering Space Inclusion
Date shall be deferred to and shall be the date such First Offering Space is
available for Tenant's occupancy unleased and free of tenants or other
occupants. The provisions of this Section 40.03 are intended to constitute "an
express provision to the contrary" within the meaning of Section 223-a of the
New York Real Property Law. Notwithstanding the provisions of this Section
40.03 to the contrary, if any First Offering Space shall not be available for
Tenant's occupancy on the Anticipated Inclusion Date because of the holding over
of the prior tenant, than Landlord shall, within ninety (90) days of the
commencement of such holdover, commence a holdover proceeding against such
tenant and if Landlord shall not have delivered such First Offering Space to
Tenant on or before the date occurring six (6) months after the commencement of
such holdover, then if Tenant shall give thirty (30) days prior written notice
to Landlord within ten (10) Business Days after the expiration of such six (6)
month period, then Tenant's First Notice as to such First Offering Space shall
be deemed rescinded and of no further force or effect on the thirtieth (30th)
day after the giving of such notice unless Landlord shall deliver such First
Offering Space to Tenant within such thirty (30) day notice period.
40.04. (a) In the event that Tenant disputes the amount of the
fair market rent as determined by Landlord and specified in Landlord's notice
thereof to Tenant, then at any time on or before the date occurring thirty (30)
days after Tenant has received such notice thereof from Landlord provided that
Tenant shall have given Tenant's First Notice, Tenant may initiate the
arbitration process provided for in Section Article 46 of this Lease, and such
provisions shall apply to the determination of fair market rent for the First
Offering Space. If Tenant fails to initiate the
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arbitration process within the aforesaid thirty (30) day period, time being
of the essence, then Landlord's determination of the fixed annual rent set
forth in Landlord's notice thereof shall be conclusive.
(b) In the event Tenant initiates the aforesaid arbitration
process and as of the First Offering Space Inclusion Date the amount of the fair
market rent has not been determined, Tenant shall pay the amount determined by
Landlord to be the fair market rent for the demised premises and when the
determination has actually been made, an appropriate retroactive adjustment
shall be made as of the First Offering Space Inclusion Date. In the event that
such determination shall result in an overpayment by Tenant of any fixed annual
rent, such overpayment shall be paid by Landlord to Tenant promptly after such
determination.
40.05. The provisions of this Article 40 shall be effective only
if, upon both the First Offering Space Determination Date and the date on which
Tenant accepts possession of the First Offering Space the Tenant named herein
(or any successors thereto by merger, consolidation or sale) and only such
Tenant is in actual occupancy of eighty (80%) percent of the demised premises
(other than the First Offering Space in question).
40.06. Tenant agrees to accept the First Offering Space in its
condition and state of repair existing as of the First Offering Space Inclusion
Date and understands and agrees that Landlord shall not be required to perform
any work, supply any materials or incur any expense to prepare such space for
Tenant's occupancy. Landlord agrees to be responsible for repairing any damage
to such First Offering Space caused by the vacating therefrom by the prior
tenant thereof.
40.07. The termination of this Lease during the original term of
this Lease shall also terminate and render void all of Tenant's options or
elections under this Article 40 whether or not the same shall have been
exercised; and nothing contained in this Article shall prevent Landlord from
exercising any right or action granted to or reserved by Landlord in this Lease
to terminate this Lease. None of Tenant's options or elections set forth in
this Article 40 may be severed from this Lease or separately sold, assigned or
transferred.
40.08. Notwithstanding any language to the contrary contained in
this Article 40, the rights granted to Tenant hereunder shall be at all times
subject to the election of any Existing Tenant of the First Offering Space to
extend the term of its lease with respect thereto, regardless of whether such
election is made pursuant to any provision included within said lease.
ARTICLE 41
MISCELLANEOUS
41.01. Irrespective of the place of execution or performance, this
Lease shall be governed by and construed in accordance with the laws of the
State of New York.
41.02. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted.
41.03. Except as otherwise expressly provided in this Lease, each
covenant, agreement, obligation or other provision of this Lease on Tenant's
part to be performed shall be deemed and construed as a separate and independent
covenant of Tenant, not dependent on any other provision of this Lease.
41.04. All terms and words used in this Lease, regardless of the
number or gender in which they are used, shall be deemed to include any other
number and any other gender as the context may require.
41.05. Time shall be of the essence with respect to the exercise of
any option on the part of Tenant to extend the term of this Lease.
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41.06. Except as otherwise provided herein whenever payment of
interest is required by the terms hereof it shall be at the Interest Rate.
41.07. Intentionally deleted.
41.08. In the event that Tenant is in arrears in payment of fixed
annual rent or additional rent hereunder, Tenant waives Tenant's right, if any,
to designate the items against which any payments made by Tenant are to be
credited, and Tenant agrees that Landlord may apply any payments made by Tenant
to any items it sees fit, irrespective of and notwithstanding any designation or
request by Tenant as to the items against which any such payments shall be
credited.
41.09. All Schedules referred to in this Lease are hereby
incorporated in this Lease by reference.
41.10. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this Lease, their assigns.
41.11. No remedy or election hereunder shall be deemed exclusive
but shall, whenever possible, be cumulative with all other remedies at law or in
equity.
41.12. Under no circumstances shall Tenant record a copy of this
Lease or a memorandum of this Lease without Landlord's prior written consent.
41.13. It is understood and agreed that this Lease is submitted to
Tenant on the understanding that it shall not be considered an offer and shall
not bind Landlord in any way whatsoever until (i) Tenant has duly executed and
delivered duplicate originals to Landlord, and (ii) Landlord has executed and
delivered one of said fully executed originals to Tenant.
41.14. With respect to any equipment which Tenant shall be
permitted to install and operate in the demised premises including, without
limitation, supplemental air conditioning equipment, Tenant shall at Tenant's
expense, obtain and maintain all permits, licenses and other authorizations
which are required by Legal Requirements in order to install, maintain and
operate such equipment in the demised premises.
41.15. Tenant acknowledges that it has no rights to any development
rights, "AIR RIGHTS" or comparable rights appurtenant to the Property, and
consents, without further consideration, to any utilization of such rights by
Landlord and agrees to promptly execute and deliver any instruments which may be
requested by Landlord, including instruments merging zoning lots, evidencing
such acknowledgment and consent, provided same does not prevent occupancy of the
demised premises by Tenant. The provisions of this Section 41.15 shall be
deemed to be and shall be construed as an express waiver by Tenant of any
interest Tenant may have as a "PARTY IN INTEREST" (as such quoted term is
defined in Section 12-10 Zoning Lot of the Zoning Resolution of the City of New
York) in the Land.
41.16. Tenant and Landlord each represents and warrants that this
Lease has been duly authorized, executed and delivered by the representing party
and constitutes the legal, valid and binding obligation of such party with
customary exception to such representation as to enforceability of this Lease
for unanticipated bankruptcy.
41.17. This Lease may be executed in any number of counterparts,
each of which shall, when executed, be deemed to be an original and all of which
shall be deemed to be one and the same instrument.
ARTICLE 42
LAYOUT AND FINISH
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42.01. Tenant hereby covenants and agrees that Tenant will, at Tenant's
own cost and expense, and in a good and workmanlike manner, make and complete
the work and installations in and to the demised premises set forth below in
such manner so that the demised premises will be executive and general offices
of a standard consistent with the nature and quality of the Building.
Tenant, at Tenant's expense, shall prepare a final plan or final set
of plans and specifications (which said final plan or final set of plans, as the
case may be, and specifications are hereinafter called the "final plan"), and in
accordance with the final plan, Tenant, at Tenant's expense, will make and
complete in and to the demised premises the work and installations (hereinafter
called "Tenant's Work") specified in the final plan. Tenant shall perform
Tenant's Work in accordance with the provisions of Article 6 hereof and with the
applicable Building-standard specifications governing the performance of tenant
improvement work in the Building, a copy of which has been previously delivered
to Tenant. The final plan shall be submitted by Tenant to Landlord for
Landlord's written approval, which approval shall not be unreasonably withheld
or delayed. Tenant shall promptly reimburse Landlord upon demand for any
reasonable out-of-pocket costs and expenses incurred by Landlord in connection
with Landlord's review of Tenant's final plan. If Landlord shall disapprove the
final plan, Landlord shall set forth its reasons for such disapproval and
itemize those portions of the final plan so disapproved. Landlord shall not be
deemed unreasonable in withholding its consent to the extent that the final plan
prepared by Tenant pursuant hereto involves the performance of work or the
installation in the demised premises of materials or equipment which do not
equal or exceed the standard of quality adopted by Landlord for the Building.
In the event Landlord shall fail to initially respond to Tenant's request for
approval of Tenant's final plan within ten (10) business days after receipt
thereof then Landlord shall be deemed to have given its approval. After
Landlord shall have approved Tenant's final plans and Tenant shall resubmit any
portion of the final plans for Landlord's approval after making non-material
modifications thereof, the 10 business day period set forth in the preceding
sentence shall be reduced to five (5) business days.
Tenant agrees that Tenant's Work will be performed with the least
possible disturbance to the occupants of other parts of the Building and to the
structural and mechanical parts of the Building and Tenant will, at its own cost
and expense leave all structural and mechanical parts of the Building which
shall or may be affected by Tenant's Work in good and workmanlike operating
condition. Without limiting the generality of the foregoing provisions of this
paragraph, if Tenant shall request consent to reinforce the flooring of the
demised premises and Landlord shall consent thereto, such consent shall be
conditioned on Tenant's performance of such reinforcement work in accordance
with Landlord's reasonable rules, regulations and procedures with respect
thereto, including, without limitation, reasonable procedures to prevent
interference with the use and occupancy of the Building by the tenants occupying
space below the demised premises, such as advance notice, use of overtime labor,
sufficient insurance and other reasonable procedures.
42.02. The following conditions shall also apply to Tenant's Work:
(a) all Tenant's Work shall be of material, manufacture, design and
capacity at least equal to the standard adopted by Landlord for the Building
(hereinafter called "Building Standard");
(b) Tenant, at Tenant's expense shall (i) file all required
architectural, mechanical and electrical drawings and obtain all necessary
permits, including, without limitation, BN Approvals and (prior to occupancy)
the Form TR-1 sign-off and the required sprinkler sign-offs from the New York
City Department of Buildings, and (ii) furnish and perform all engineering and
engineering drawings in connection with Tenant's Work. Landlord agrees to sign
Tenant's BN Application promptly upon receipt thereof and prior to reviewing
Tenant's final plans for approval provided and on condition that it is expressly
understood and agreed by Tenant that such signing of Tenant's BN Application is
being done purely as an accommodation for Tenant in order to expedite the
commencement of Tenant's Work, and shall not in any way whatsoever constitute
nor shall same be construed as Landlord's approval of Tenant's final plans as to
which Landlord shall reserve its review rights in accordance with the following
sentence, and furthermore Tenant agrees that if Landlord shall disapprove
Tenant's final plans in any respect, Tenant shall file a modified BN
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Application reflecting the changed conditions on the final plans required in
order to obtain Landlord's approval thereof. Tenant shall obtain Landlord's
approval of the final set of drawings referred to in (i) and (ii) hereof,
which approval shall not be unreasonably withheld, and Landlord agrees to
respond to such request for approval within ten (10) Business Days after
receipt thereof.
(c) Notwithstanding anything to the contrary set forth in this Lease
or the Building specifications governing the performance of tenant improvement
work in the Building, Tenant shall be permitted to use engineering firms for
mechanical and electrical engineering with respect to the preparation of
Tenant's engineering drawings in connection with Tenant's Work, who are approved
in writing by Landlord, such approval not to be unreasonably withheld or
delayed, provided that such engineering drawings are reviewed and approved by
the firm of Cosentini Associates (in the case of mechanical and electrical
engineering) and Severud Associates (in the case of structural engineering).
Tenant shall pay all reasonable out-of-pocket costs incurred in connection with
such engineering, including, without limitation, the fees and expenses of the
aforementioned firms for review of engineering drawings.
(d) All contractors and subcontractors used by Tenant to perform
Tenant's Work shall be approved in writing by Landlord in advance pursuant to
the provisions of Article 6 hereof; provided, however, that:
(i) Tie-ins to the Building's BMS system will be performed by
the currently designated BMS contractor for the Building, and all
class E system tie-ins will be performed by the current Building
electrician, provided such contractors' rates are commercially
reasonable.
(ii) In connection with the performance of Tenant's Work, Tenant
shall request that Lehr Construction submit a bid for general
contractor.
(e) All Tenant-installed piping, conduit and cabling in the Building
communications closet, electrical closet and MER room will be color coded per
the Building coding plan. Such color coding may be effected by enamel painting
in accordance with Landlord's Building Standard procedures therefor. All blinds
are to be Building Standard only, furnished at Tenant's expense.
42.03. It is understood that of the services to be furnished by Landlord
referred to in Article 21 hereof, Landlord shall not furnish any cleaning
services until Tenant commences occupancy of the demised premises for the
conduct of its business. Tenant shall be responsible for removal of Tenant's
refuse and rubbish during the period that Tenant's Work is in progress in the
demised premises. Landlord agrees that a functioning wet column shall be
available in the demised premises during the performance of Tenant's Work.
42.04. Landlord shall, at Tenant's written request, cooperate in all
reasonable respects with Tenant in the performance by Tenant of Tenant's Work in
preparing the demised premises for Tenant's occupancy including, without
limitation, signing forms and applications, where necessary for filing, and
Landlord shall instruct its employees and contractors to render such assistance
and to cooperate with Tenant's employees, representatives and contractors
provided that to the extent that Landlord shall incur any reasonable expense in
so cooperating or in rendering such assistance, Tenant shall reimburse Landlord
for such reasonable expense as additional rent hereunder. Landlord shall also
cooperate, at no expense to Landlord, in making the Building architect, Cooke &
Associates, available for consultation with Tenant and its representatives, at
Tenant's sole cost and expense.
42.05. Landlord agrees that in connection with the plumbing for Tenant's
pantry in the demised premises, Tenant shall be provided a path for required
plumbing under the slab to an existing drain on the 4th floor, selected by
Landlord, and the condition of such path shall not require the removal or
encapsulation of asbestos under Legal Requirements prior to the commencement of
Tenant's plumbing work under such slab.
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ARTICLE 43
TENANT'S CREDIT
43.01. (a) Landlord shall allow Tenant an allowance in the amount of
Two Million Eleven Thousand Six Hundred Eighty and 00/100 ($2,011,680) Dollars
(herein called the "Work Credit"), which Work Credit shall be applied against
the cost and expense of the construction work performed by Tenant in connection
with Tenant's Work in the demised premises and Tenant's actual and reasonable
out-of-pocket expenses incurred for architectural, engineering, design and other
professional fees and relocation costs. In the event that the cost and expense
of Tenant's Work shall exceed the amount of the Work Credit, Tenant shall be
entirely responsible for such excess. In the event that the cost and expense of
Tenant's Work shall be less than the amount of the Work Credit, then Tenant
shall be permitted to credit the amount of such difference against installments
of fixed annual rent next becoming due hereunder, provided, however, that in no
event shall the amount of such credit against fixed annual rent exceed $670,560
(i.e., $15.00 prsf). The Work Credit shall be payable by Landlord to Tenant
upon written requisition to Landlord in installments as Tenant's Work
progresses, but no more frequently than monthly. The amount of each such
installment shall be an amount equal to the product obtained by multiplying 90%
of the Work Credit by a fraction, the numerator of which is equal to the actual
costs paid by Tenant for completed portions of Tenant's Work referenced in such
requisition (as evidenced by paid or incurred invoices delivered to Landlord in
accordance with the next sentence) and the denominator of which is the total
estimated cost of Tenant's Work, which estimate shall be made, and certified to,
by Tenant's architect in good faith based on the final plan. Prior to the
payment of any such installment of the Work Credit, Tenant shall deliver to
Landlord a written request for such disbursement which shall be accompanied by:
(i) invoices for Tenant's Work performed since the last disbursement, (ii) a
certificate signed by Tenant's architect and an officer of Tenant certifying
that Tenant's Work represented by the aforesaid invoices has been satisfactorily
completed in accordance with the final plans, and (iii) partial lien waivers
from the contractors or subcontractors who shall have performed any such work
releasing Tenant from all liability for same. The 10% balance of the amount of
the Work Credit shall be payable to Tenant after the completion of Tenant's Work
upon submission of all Buildings Department signoffs, inspection certificates
and any permits required to be issued by any governmental entities having
jurisdiction thereover. Such payment shall be due ten (10) Business Days after
Tenant submits its requisition with accompanying documentation as hereinbefore
set forth in the preceding sentences.
(b) At any and all times during the progress of Tenant's Work,
representatives of Landlord shall have the right of access to the demised
premises and inspection thereof and shall have the right to withhold all or any
portion of the Work Credit as shall equal the cost of correcting any portions of
Tenant's Work which shall not have been performed in a manner reasonably
satisfactory to Landlord; provided, however, that Landlord shall incur no
liability, obligation or responsibility to Tenant or any third party by reason
of such access and inspection and provided further that Landlord's inspection
shall not interfere with the performance of Tenant's Work except to a de minimis
extent.
ARTICLE 44
EMERGENCY GENERATOR
44.01. Subject to the terms, provisions and conditions of this
Lease, Tenant shall have the right at Tenant's sole cost and expense but without
additional charge by way of increased rent to tie into the Building tenant
emergency generator to supply emergency electricity to the demised premises not
to exceed one hundred fifty (150) kilovolt amperes (KVA) of such emergency
generator's capacity. Landlord shall perform routine testing and maintenance of
such generator and shall give Tenant reasonable prior notice of such testing.
Landlord shall cooperate with Tenant in order to schedule such testing and
maintenance so as to minimize material interference with the conduct of Tenant's
business.
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ARTICLE 45
TENANT'S ANTENNA
45.01. Landlord agrees that, subject to all laws, ordinances,
statutes, rules and regulations of all governmental authorities having
jurisdiction thereof, and further subject to the conditions and limitations
hereinafter stipulated, during the term of this Lease, Tenant, at Tenant's sole
cost and expense, may install on a portion of the rooftop of the Building of
approximately fifty (50) square feet, and thereafter maintain, repair, and
operate one or more satellite antenna or other communications devices
(hereinafter collectively referred to as the "ANTENNA"), provided and on
condition that: (i) the size and dimensions of the antenna and any reasonably
required support structures as well as the location of the portion of the
rooftop for such installation shall be subject to Landlord's prior consent
(which shall not be unreasonably withheld provided the size thereof shall not
exceed fifty (50) feet); (ii) no such equipment shall extend higher than the
parapet of the roof of the Building; (iii) the installation and position of such
antenna and reasonably required support structures shall comply with Legal
Requirements; (iv) the installation of any electrical or communications lines
(hereinafter referred to as "WIRING") and related equipment in connection with
the installation and operation of the antenna, as well as the manner and
location (i.e., routing) of all Wiring and related equipment in connection
therewith shall (A) be at Tenant's sole cost and expense, (B) be subject to
Landlord's prior consent, and (C) comply with Legal Requirements; and (v) the
antenna, reasonably required support structures, Wiring and related equipment
shall be maintained and kept in repair by Tenant, at Tenant's sole cost and
expense. The parties agree that Tenant's use of the rooftop of the Building is
a nonexclusive use and Landlord may permit the use of any other portion of the
roof to any other person, firm or corporation for any use including the
installation of other antennas and support equipment. Tenant shall not be
obligated to pay any additional fixed rental on account of Tenant's use of the
roof of the Building pursuant to this Article 45. Tenant shall also have the
right to use not more than its proportionate share of any designated shaftway
utilized by the Building for running lines to the roof to connect the antenna to
the demised premises.
45.02. For the purpose of installing, servicing or repairing the
antenna and related equipment, Tenant shall have access to the rooftop of the
Building upon prior reasonable request of Landlord. All access by Tenant to the
roof of the Building shall be subject to the supervision and control of Landlord
and to Landlord's reasonable safeguards for the security and protection of the
Building, the Building equipment and installations and equipment of other
tenants of the Building as may be located on the roof of the Building. Landlord
shall have the right to assign a Building representative to be present during
the duration of Tenant's access to the rooftop and Tenant shall pay the
Landlord's customary charges therefor as additional rent.
45.03. Tenant, at Tenant's sole cost and expense, agrees to
promptly and faithfully obey, observe and comply with all laws, ordinances,
regulations, requirements and rules of all duly constituted public authorities
in any manner affecting or relating to Tenant's use of said roof as to the
installation, repair, maintenance and operation of any support structures and
antenna and related equipment erected or installed by Tenant pursuant to the
provisions of this Article 45. Tenant, at Tenant's sole cost and expense, shall
secure and thereafter maintain all permits and licenses required for the
installation and operation of the antenna and any support structures and related
equipment erected or installed by Tenant pursuant to the provisions of this
Article 45, including, without limitation, any approval, license or permit
required from the Federal Communications Commission. In no event shall the
maximum level of microwave emissions from the antennas exceed an amount equal to
Tenant's proportionate share of the total microwave emissions allowable for the
Building as determined by the governmental authorities having jurisdiction
thereof.
45.04. Tenant agrees that Tenant will pay for all electrical
service required for Tenant's use of the antenna and related equipment erected
or installed by Tenant pursuant to the provisions of this Article 45 in
accordance with Article 4 of this Lease and Tenant further agrees that such
electric service shall feed off the
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supply of electrical energy furnished to the demised premises as provided in
Article 4 of this Lease.
45.05. The antenna, support structures and related equipment
installed by Tenant, pursuant to the provisions of this Article 45 shall be
Tenant's personal property, and, upon the expiration of the term of this Lease,
or upon its earlier termination in any manner, shall be removed by Tenant at
Tenant's sole cost and expense. All Wiring and related electrical equipment
installed by Tenant in connection with the installation and operation of the
antenna shall be Tenant's personal property. Upon the expiration of the Term of
this Lease or upon its earlier termination in any manner, if Landlord so directs
by written notice to Tenant, Tenant shall promptly remove the Wiring and
electrical equipment as designated in such notice, at Tenant's sole cost and
expense. Tenant, at Tenant's sole cost and expense, shall promptly repair any
and all damage to the rooftop of the Building and to any other part of the
Building caused by or resulting from the installation, maintenance and repair,
operation or removal of the antenna, support structures, Wiring and related
equipment erected or installed by Tenant pursuant to the provisions of this
Article 45 and restore said affected areas to their condition as existed prior
to the installation of the antenna and related equipment.
45.06. Tenant agrees that Landlord shall not be required to provide
any services whatsoever to the rooftop of the Building.
45.07. Tenant covenants and agrees that all installations made by
Tenant on the rooftop of the Building or in any other part of the Building
pursuant to the provisions of this Article 45 shall be at the sole risk of
Tenant, and neither Landlord nor Landlord's agent or employees shall be liable
for any damage or injury thereto caused in any manner, unless the same shall
proximately result from the gross negligence or willful misconduct of Landlord,
its agents and employees.
45.08. Tenant will, and does hereby, indemnify and save harmless
Landlord from and against: (i) any and all claims, counsel fees, demands,
damages, expenses or losses by reason of any liens, orders, claims or charges
resulting from any work done, or materials or supplies furnished, in connection
with the fabrication, erection, installation, maintenance and operation of the
antenna, support structures, Wiring and any related equipment installed by
Tenant pursuant to the provisions of this Article 45; and (ii) any and all
claims, costs, demands, expenses, fees or suits arising out of accidents,
damage, injury or loss to any and all persons and property, or either,
whomsoever or whatsoever resulting from or arising in connection with the
erection, installation, maintenance and operation and repair of the antenna,
support structures, Wiring and related equipment installed by Tenant pursuant to
the provisions of this Article 45; except to the extent caused by the negligence
or willful misconduct of Landlord, or its agents or employees. Tenant shall
obtain and thereafter maintain during the Term of this Lease insurance coverage
for the benefit of Landlord and its managing agent (presently HRO International
Ltd.) in such amount and of such type as Landlord may reasonably require. If
any installations referred to in this Article 45 should revoke, negate or in any
manner impair or limit any roof warranty or guaranty obtained by Landlord, then
Tenant shall reimburse Landlord for any loss or damage sustained or costs or
expenses incurred by Landlord as a result thereof.
45.09. All plans and specifications of Tenant's Work and
installations to be done and made by Tenant pursuant to the provisions of this
Article 45 shall be subject to the prior approval of Landlord, such approval not
to be unreasonably withheld or delayed, and shall be further subject to
inspection and reasonable supervision by Landlord.
45.10. Tenant covenants and agrees that the antenna, support
structures, Wiring and related electrical equipment to be installed by Tenant
shall not interfere with or adversely affect any equipment, installations, lines
or machinery of the Building or any other tenant of the Building, including,
without limitation, any other communications equipment in, on top of or
otherwise outside the Building, or access thereto for maintenance, repair or
removal.
45.11. Tenant acknowledges being advised by Landlord that Landlord
has, and shall be, granting to third parties, various rights and licenses to
utilize various portions of the Building and rooftop thereof for the
installation of microwave
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dishes, satellite communications equipment, whip antennae and other
communications equipment and related equipment (hereinafter all of the
foregoing are collectively referred to as "OTHER COMMUNICATIONS EQUIPMENT")
and that, inasmuch as Landlord's ability to facilitate the installation and
operation of such Other Communications Equipment will be of paramount
importance to Landlord, Landlord shall have the right, at any time and from
time to time, during the Term of this Lease, upon thirty (30) days' prior
written notice to Tenant, to relocate the Tenant's antenna, support
structures and related equipment to other areas of the Building and rooftop
thereof equally suitable for transmission and reception of signals, as
Landlord in its sole discretion may determine so as to accommodate such Other
Communications Equipment on the roof of the Building and so as to eliminate,
or not to create, problems of interference with respect to or between Other
Communications Equipment now, or in the future, installed on the roof or
other areas of the Building. Such relocation shall, to the extent
practicable, be performed during hours other than Tenant's regular business
hours so as to minimize any disruption of Tenant's normal business activities
and except for such downtime such relocation shall not prevent Tenant from
using its antenna for its original intended purpose. Tenant shall cooperate
with Landlord to effectuate the relocation of Tenant's antenna, support
structures and related equipment, as shall be required by Landlord. All
costs involved in such relocation shall be borne by Landlord.
45.12. Tenant shall not be permitted to assign or transfer all or
any portion of the rights granted to Tenant pursuant to this Article 45 unless
Tenant assigns this Lease to the party to whom such rights are assigned or
transferred.
ARTICLE 46
FAIR MARKET RENT REVIEW
46.01. In the event that the fair market rental for the demised
premises or any portion thereof shall be required to be determined pursuant to
the terms of this Lease as of a particular date (hereinafter called a "Review
Date"), the fair market rent for the demised premises shall be determined in the
manner hereinafter provided.
46.02. If a fair market rental is to be determined pursuant to the
provisions of this Lease and the parties have not agreed on what that fair
market rental shall be, either party (hereinafter called the "Initiating Party")
shall give the other party (hereinafter called the "Responding Party") a notice
designating the name and address of the arbitrator (which arbitrator shall not
have an interest in or be related to the parties hereto) designated by the
Initiating Party to act on its behalf in the arbitration process herein
described (hereinafter called a "Review Notice" or a "Rent Review Notice").
46.03. (a) If the Initiating Party gives a Review Notice, then
within twenty (20) Business Days after the giving of such Review Notice, the
Responding Party shall give notice to the Initiating Party specifying in such
notice the name and address of the arbitrator designated by the Responding Party
to act on its behalf. In the event the Responding Party shall fail to give such
notice within such twenty (20) Business Day period, the fair market rental of
the demised premises shall conclusively be deemed to be the fair market rental
therefor as determined by the Initiating Party's arbitrator, and the Initiating
Party shall promptly send a copy of such determination to the Responding Party.
Upon the giving of such notice by the Responding Party, the two arbitrators so
chosen shall meet at a mutually agreeable time within twenty (20) Business Days
after the second arbitrator is appointed at the office of the Initiating Party's
arbitrator in the Borough of Manhattan (unless they are able to mutually agree
to an earlier time or a different location); provided, however, in the event of
extenuating circumstances, such as death, casualty, etc., each arbitrator shall
have the right to postpone such meeting for up to five (5) Business Days; and
shall exchange sealed envelopes each containing such arbitrator's written
determination of the fair market rental of the space in question based on the
criteria set forth in Section 47.03(c) hereof. The fair market rental specified
by the Initiating Party's arbitrator shall hereinafter be called the "Initiating
Party's Submitted Value" and the fair market rental specified by the Responding
Party's arbitrator shall hereinafter be called the "Responding Party's Submitted
Value."
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Copies of such written determinations shall promptly be sent to both the
Initiating Party and the Responding Party. Any failure of either of such
arbitrators (hereinafter called the "Non-Meeting Arbitrator") to meet and
exchange such determination, which failure continues for a period in excess
of ten (10) Business Days after a second written notice given by the party
represented by the other arbitrator (hereinafter called the "Meeting
Arbitrator") to the party represented by the Non-Meeting Arbitrator and to
the Non-Meeting Arbitrator, shall be deemed acceptance of the Meeting
Arbitrator's determination as to fair market rental. During the ten (10)
Business Day period referred to in the immediately preceding sentence, the
party represented by the Non-Meeting Party may, at its election, appoint a
substitute arbitrator, provided such substitute arbitrator meets the
requirements contained in this Section 46.03 and such substitution shall not
extend any time periods provided for herein. Within twenty (20) days after
the second arbitrator is appointed, they shall together appoint an impartial
third arbitrator, which third arbitrator shall not have an interest in, or be
related to, the parties hereto. If said two arbitrators cannot agree upon the
appointment of a third arbitrator within such twenty (20) day period, then
either party, on behalf of both, and on notice to the other may request such
appointment by the American Arbitration Association (or any successor
organization) in accordance with its then prevailing rules; provided,
however, that nothing contained herein shall be construed to require
submission of any dispute to the American Arbitration Association. If the
American Arbitration Association shall fail to appoint said third arbitrator
within thirty (30) days after such request is made, then either party may
apply, on notice to the other, to the Chairman of the Committee on Real
Property of the Bar Association of the City of New York (hereinafter called
the "Chairman") for the appointment of such third arbitrator, provided that
neither the Chairman nor his firm (nor any prior firm with which he was
affiliated) has represented either Landlord or Tenant (or any Affiliate of
Landlord or Tenant). In the event the Chairman or his firm has represented
either Landlord or Tenant (or any Affiliate of Landlord or Tenant), then such
application shall be made to the Chief Administrative Judge for New York
County of the Supreme Court of the State of New York.
Within twenty (20) Business Days after the appointment of such third
arbitrator, the first arbitrator and second arbitrator shall submit to such
third arbitrator their respective determinations of the fair market rental as
described in the immediately preceding paragraph. Such third arbitrator shall,
within twenty (20) Business Days after the end of such 15-Business Day period,
hold hearings, solicit and receive reports from each party (copies of which
shall be provided to the other party), and determine whether the fair market
rental specified by the first arbitrator or second arbitrator in such
submissions was closer to the determination by such third arbitrator of the fair
market rental of the demised premises and the fair market rental specified by
the first arbitrator or the second arbitrator which is closer to the
determination by such third arbitrator shall conclusively be deemed to be the
fair market rental of the demised premises. In no event shall either party have
any communications on an EX PARTE basis with the third arbitrator during the
course of any such arbitration.
(b) Each of the arbitrators selected as herein provided shall
have at least ten (10) years' experience in the leasing or management of office
space in the "Midtown" office market in the Borough of Manhattan or in the
business of appraising or managing commercial real estate or acting as a
commercial real estate agent or broker in the Borough of Manhattan. Each party
shall pay the fees and expenses of the arbitrator selected by it. The fees and
expenses of the third arbitrator and all other expenses (not including the
attorneys' fees, witness fees and similar expenses of the parties which shall be
borne separately by each of the parties) of the arbitration shall be borne
equally by the parties hereto.
(c) In rendering any determination of fair market rent of the
demised premises, the arbitrators shall assume or take into consideration as
appropriate all then-relevant factors, including, as appropriate, all of the
following: (i) Landlord and prospective tenant are typically motivated;
(ii) Landlord and prospective tenant are well informed and well advised and each
is acting in what it considers its own best interest; (iii) a reasonable time
under then-existing market conditions is allowed for exposure of the demised
premises on the open market; (iv) in the event the demised premises have been
destroyed or damaged by fire or other casualty, same shall have been deemed
fully restored; (v) the demised premises are to
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be let in as-is condition (but without Tenant's removable furniture,
furnishings and business equipment) with vacant possession and as a single
unit or multiple units or in combination with other space and for a term
which, under then prevailing market conditions, is calculated to obtain the
highest rental; provided, however, that no rent concession or work allowance
is actually being given; (vi) market rents then being charged and work
allowances and rent concessions being granted for comparable space in
comparable buildings; and (vii) charges for Tenant's electrical consumption
will be paid directly to the public utility furnishing electric service to
the Building as provided in Article 4. In rendering such decision and award,
the arbitrators shall not modify the provisions of this Lease except for the
fixed annual rent as herein provided in this Article. The decision and award
of the arbitrators shall be in writing and be final and conclusive on all
parties and counterpart copies thereof shall be delivered to each of said
parties. Judgment may be had on the decision and award of the arbitrators so
rendered in any court of competent jurisdiction.
ARTICLE 47
STORAGE SPACE
47.01. If, within eighteen (18) months from the date hereof, Tenant
shall request that Landlord lease to Tenant a portion of the basement area and,
at the time of such request, there shall be basement space unencumbered and
available for leasing to Tenant, then from and after the date that Landlord
shall deliver such basement space to Tenant the provisions of this Article 47
shall apply to the leasing of such basement space. Landlord shall lease to
Tenant and Tenant shall hire from Landlord, upon the terms and subject to the
conditions of this Lease and to such additional terms and conditions as are
hereinafter set forth, storage space located in the basement of the Building to
be delineated by Landlord, in its sole discretion (the "Storage Space"). The
fixed annual rent payable hereunder shall be increased without abatement as
provided in Section 1.05 or otherwise by the following amounts:
(i) At the annual rate of $17.50 per rentable square foot per
annum for the period beginning on the Commencement Date and
ending on the last day of the month immediately preceding the
month in which occurs the fifth (5th) anniversary of the
Commencement Date;
(ii) At the annual rate of $20.00 per square foot per annum
for the period beginning on the first (lst) day of the month
in which occurs the fifth (5th) anniversary of the
Commencement Date and ending on the last day of the month
immediately preceding the month in which occurs the tenth
(10th) anniversary of the Commencement Date; and
(iii) At the annual rate of $22.50 per rentable square foot
per annum for the period beginning on the first day of the
month in which occurs the tenth (10th) anniversary of the
Commencement Date and ending on the Expiration Date.
47.02. Notwithstanding anything to the contrary contained in this Lease,
Tenant agrees that Tenant's occupancy of the Storage Space shall be subject to
the following additional terms and conditions:
(a) Landlord shall not be obligated to perform any work or
incur any expense to prepare the Storage Space for Tenant's use, except that
Landlord shall: (i) erect such walls as are necessary to demise the Storage
Space; (ii) furnish and install therein Building Standard lighting and such
wiring as is necessary to operate the same;
(b) Tenant shall make no alterations, installations,
additions, or improvement in or to the Storage Space without Landlord's prior
written consent;
(c) Tenant shall use the Storage Space only for the purposes
of office storage;
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(d) Tenant may not assign its rights with respect to the Storage
Space (except in connection with an assignment of this Lease pursuant to
Article 11 hereof) or sublease the same or allow the same to be used by
others without the prior written consent of Landlord; and
(e) Except as hereinabove provided, Landlord shall not be
responsible for the rendition or delivery of any services or utilities to the
Storage Space whatsoever, including without limitation, water, heating,
ventilation, air-conditioning, or cleaning.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed
this Lease as of the day and year first above written.
Witness: SPARTAN MADISON CORP., Landlord
By: Charles R. Klotz, President
---------------------------
Charles R. Klotz, President
INVESTMENT TECHNOLOGY GROUP, INC., Tenant
By: James Lynch
-----------
Name: James Lynch
Title: Vice President and
General Counsel
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 27th day of September, 1996 before me personally came James
Lynch, to me known, who, being duly sworn by me, did depose and say that he
resides in* that he is the V.P. of INVESTMENT TECHNOLOGY GROUP, INC., the
corporation described in and which executed the above instrument and that he
signed his name thereto by order of the board of directors of said
corporation.
* 306 West 100th St, NY NY
Andrea Hicks
-------------------------------------
Andrea Hicks
Notary Public, State of New York
No. 5025097
Qualified in Kings County
Commission Expires march 21, 1998
COMMONWEALTH OF MASSECHUSETTS )
: ss.:
COUNTY OF SUFFOLK )
On this 30th day of September, 1996, before me personally came C.R.
Klotz, to me known, who, being by me duly sworn, did depose and say that he
resides in Wellesley; that he is the President of SPARTAN MADISON CORP. the
corporation described in and which executed the above instrument; and that he
signed his name by authority of the board of directors of such corporation.
C. Paula Barretto
Notary Public
C. Paula Barretto
Notary Public
My Commission Expires Oct. 20, 2000
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SCHEDULE A
FLOOR PLAN
[To be inserted]
SCHEDULE B
DESCRIPTION OF LAND
ALL that certain plot, piece or parcel of land, with the buildings
and improvements thereon erected, 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 Westerly
side of Madison Avenue with the southerly side of 47th Street; running thence
Westerly along the Southerly side of 47th Street, 140 feet;
thence Southerly parallel with Madison Avenue, 100 feet 5 inches to the
center of the block;
thence Westerly along the corner line of the block and parallel with 46th
Street, 100 feet;
thence Southerly and parallel with Madison Avenue, 100 feet 5 inches to the
Northerly side of 46th Street;
thence Easterly along the Northerly side of 46th Street, 240 feet to the
corner formed by the intersection of the said northerly side of 46th Street
with the westerly side of Madison Avenue, thence Northerly along the Westerly
side of Madison Avenue 200 feet 10 inches to the corner, point or place of
BEGINNING.
SCHEDULE C
Intentionally Omitted
SCHEDULE D-1
FORM OF ESTOPPEL CERTIFICATE
TENANT ESTOPPEL CERTIFICATE
_____________________________ undersigned ("Tenant"), in consideration
of One Dollar ($1.00) and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, hereby certifies to Spartan Madison
Corp. ("Landlord"), the holder of any mortgage covering the property or any
leasehold interest therein (the "Mortgagee") and the vendee under any contract
of sale with respect to the Property (the "Purchaser") as follows:
1. Tenant executed and exchanged with Landlord a certain lease (the
"Lease"), dated _______________, covering the ________________________ floors
(the "demised premises") in the building located in the Borough of Manhattan, in
the City,
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County, and State of New York, known as 380 Madison Avenue, New York, New
York (the "Property"), for a term to commence (or which commenced) on the
"Commencement Date" (as such term is defined in Section 2.01 of the Lease),
and to expire on _________________.
2. The Lease is in full force and effect and has not been
modified, changed, altered or amended in any respect.
3. Tenant has accepted and is now in possession of the demised
premises and is paying the rental under the Lease pursuant to the provisions
of the Lease.
4. The fixed minimum annual rent payable under this Lease is set
forth in Section 1.02 of the Lease. The fixed minimum annual rent and all
additional rent and other charges required to be paid under the Lease have
been paid for the period up to and including the date thereof.
5. No rent under the Lease has been paid for more than thirty
(30) days in advance of its due date.
6. All work required under the Lease to be performed by Landlord
has been completed to the full satisfaction of Tenant.
7. To Tenant's knowledge there are no defaults to our knowledge
existing under the Lease on the part of Landlord.
8. To Tenant's knowledge there is no existing basis for Tenant to
cancel or terminate the Lease.
9. To Tenant's knowledge as of the date hereof, there exist no
valid defenses, offsets, credits, deductions in rent or claims against the
enforcement of any of the agreements, terms, covenants or conditions of the
Lease.
10. There are no actions, whether voluntary or otherwise, pending
against the Tenant under the Bankruptcy Laws of the United States or any
state thereof.
11. This certification is made to induce Purchaser to consummate a
purchase of the Property and/or to induce Mortgagee to make and maintain a
mortgage loan secured by the Property, or any leasehold interest therein, as
the case may be, knowing that said Purchaser and/or Mortgagee as applicable,
rely upon the truth of this certification in making and/or maintaining such
purchase or mortgage, as applicable.
Date: _______________, 199_
--------------------------
By:
-----------------------
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this _____ day of ________________, 199_, before me personally came
__________________________, to me known, who, being by me duly sworn, did depose
and say that he resides in __________________________________________; that he
is the ________________________________, the corporation described in and which
executed the above instrument and that he signed his name thereto by order of
the board of directors of said corporation.
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------------------------------------
SCHEDULE D-2
FORM OF LANDLORD'S ESTOPPEL CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. The undersigned is the Landlord under that certain Lease, dated __________
by and between __________________________ as Lessor ("Landlord"), and
________________, as Lessee ("Tenant"), covering those certain premises
known and designated as ___________ of the building known as
__________________, New York, New York (the "Lease").
2. The Lease has not been modified, changed, altered or amended in any way
(except as indicated in this sentence), and this is the only lease or
agreement, written or otherwise, between the undersigned and Tenant
affecting said premises.
3. Tenant has accepted the premises and is occupying same. The term of the
Lease began __________, all Fixed Rent, Tenant's Tax and Tenant's Expense
Payments, as billed, pursuant to the Lease has been paid to and including
____________. The fixed minimum rent paid is currently $___________ per
month. The expiration date of the Lease is __________________.
4. To the best of the undersigned's knowledge, (i) the Lease is in full force
and effect and (ii) there are no defaults thereunder, as of the date
hereof, and (iii) there exists no condition which gives rise to Landlord's
right to terminate the Lease.
5. To the best of the undersigned's knowledge, no actions, whether voluntary
or otherwise, are pending against the undersigned under the bankruptcy or
insolvency laws of the United States or any state thereof.
6. The amount of any security deposit deposited with Landlord pursuant to the
terms of the Lease is $__________.
7. As of the date hereof, to the best of the undersigned's knowledge, there
exists no valid defenses, offsets, credits, deductions in rent or claims
against the enforcement of any of the agreements, terms, covenants or
conditions of the Lease.
8. This certification is made to induce _____________ to ____________ knowing
that __________ relies upon the truth of the certification.
------------------------------
Landlord
Dated: , 199
-------------- --
SCHEDULE E
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors, elevators
of the Building are limited to ingress to and egress from the tenants'
premises for the tenants and their employees, licensees and invitees, and no
tenant shall use, or permit the use of, the entrances, corridors, or
elevators for any other purpose. No tenant shall invite to the tenant's
premises, or permit the visit of, persons in such numbers or under such
conditions as to interfere with the use and enjoyment of any of the,
entrances, corridors, elevators and other facilities of the Building by other
tenants except to a de minimis extent. Fire exits and stairways are for
emergency use only, and they shall not be used for any other purposes by the
tenants, their
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employees, licensees or invitees. No tenant shall encumber or obstruct, or
permit the encumbrance or obstruction of any of the sidewalks, entrances,
corridors, elevators, fire exits or stairways of the Building. The Landlord
reserves the right to control and operate the public portions of the Building
and the public facilities, as well as facilities furnished for the common use
of the tenants, in such manner as it reasonably deems best for the benefit of
the tenants generally.
2. The cost of repairing any damage to the public portions of the
building or the public facilities or to any facilities used in common with
other tenants, caused by a tenant or the employees, licensees or invitees of
the tenant, shall be paid by such tenant.
3. The Landlord 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 the Landlord or not properly identified, and may
require all persons admitted to or leaving the Building outside of ordinary
business hours to register. Tenant's employees, agents and visitors shall be
permitted to enter and leave the building whenever appropriate arrangements
have been previously made between the Landlord and the Tenant with respect
thereto. Each tenant shall be responsible for all persons for whom such
person requests such permission and shall be liable to the Landlord for all
acts of such persons. Any person whose presence in the Building at any time
shall, in the reasonable judgment of the Landlord, be prejudicial to the
safety, character, reputation and interests of the Building or its tenants
may be denied access to the Building or may be ejected therefrom. In case of
invasion, riot, public excitement or other commotion, the Landlord may
prevent all access to the Building during the continuance of the same, by
closing the doors or otherwise, for the safety of the tenants and protection
of property in the Building. The Landlord may require any person leaving the
Building with any package or other object to exhibit a pass from the tenant
from whose premises the package or object is being removed, but the
establishment and enforcement of such requirements shall not impose any
responsibility on the Landlord for the protection of any tenant against the
removal of property from the premises of the tenant. The Landlord shall in
no way be liable to any tenant for injury or loss arising from the admission,
exclusion or ejection of any person to or from the tenant's premises or the
Building under the provisions of this rule.
4. No tenant shall obtain or accept or use in its premises ice,
drinking water, food, beverage, towel, barbering, boot blacking, floor
polishing, lighting maintenance, cleaning or other similar services from any
persons not authorized by the Landlord in writing to furnish such services,
provided always that charges for such services by persons authorized by the
Landlord are not excessive. Such services shall be furnished only at such
hours, in such places within the tenant's premises and under such regulations
as may be fixed by the Landlord.
5. No awnings or other projections over or around the windows
shall be installed by any tenant and only such window blinds as are supplied
or permitted by the Landlord shall be used in a tenant's premises.
6. There shall not be used in any space, or in the public halls
of the Building, either by the Tenant or by jobbers or others, in the
delivery or receipt of merchandise or mail any hand trucks, except those
equipped with rubber tires and side guards. All deliveries to tenants,
except mail and food, shall be made to such place as Landlord shall designate
and shall be distributed to tenants only during the hours from 7:00 A.M. to
12:00 noon and 1:00 P.M. to 4:00 P.M., Monday through Friday.
7. All entrance doors in each tenant's premises shall be left
locked when the tenant's premises are not in use. Entrance doors shall not
be left open at any time. All windows in each tenant's premises shall be
kept closed at all times and all blinds or drapes therein above the ground
floor shall be lowered or closed when and as reasonably required because of
the position of the sun, during the operation of the Building air
conditioning system to cool or ventilate the tenant's premises. Tenant shall
not tamper with or adjust tamperproof or covered thermostats which have been
preset by Landlord to control the operation of the air conditioning system.
All such adjustments shall be made only by Landlord.
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8. No noise, including the playing of any musical instruments,
radio or television, which, in the reasonable judgment of the Landlord, might
disturb other tenants in the Building shall be made or permitted by any
tenant and no cooking shall be done in the Tenant's premises except as
expressly approved by the Landlord. Nothing shall be done or permitted in
any tenant's premises, and nothing shall be brought into or kept in any
tenant's premises 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 tenant of
any other premises, nor shall there be installed by any tenant any
ventilating, air conditioning, electrical or other equipment of any kind
which, in the reasonable judgment of the Landlord, might cause any such
impairment or interference. No dangerous, inflammable, combustible or
explosive object or material shall be brought into the Building by any tenant
or with the permission of any tenant.
9. Tenant shall not permit any cooking or food odors emanating
from the demised premises to seep into other portions of the Building.
10. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the
Building which may damage them. The water and wash closets and other
plumbing fixtures in or serving any tenant's premises shall not be used for
any purpose other than the 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 tenant who, or whose servants,
employees, agents, visitors or licensees, shall have caused the same.
11. Tenant shall not display any sign, graphics, notice, picture,
or poster, or any advertising matter whatsoever, anywhere in or about the
demised premises or the Building at places visible from anywhere outside or
at the entrance to the demised premises without first obtaining Landlord's
written consent thereto, such consent to be at Landlord's sole discretion.
Any such consent by Landlord shall be upon the understanding and condition
that Tenant will remove the same at the expiration or sooner termination of
this Lease and Tenant shall repair any damage to the demised premises or the
Building caused thereby.
In the event of the violation of the foregoing by any tenant,
Landlord may remove the same without any liability, and may charge the
expense incurred by such removal to the tenant or tenants violating this
rule. Interior signs, signs and lettering on doors shall be inscribed,
painted, or affixed for each by Landlord at the expense of such tenant, and
shall be of a size, color and style acceptable to Landlord. Landlord shall
have the right to prohibit any advertising by any tenant which impairs the
reputation of the Building or its desirability as a building for offices, and
upon written notice from Landlord, Tenant shall refrain from or discontinue
such advertising.
12. No additional locks or bolts of any kind shall be placed upon
any of the doors or windows in any tenant's premises and no lock on any door
therein shall be changed or altered in any respect. Duplicate keys for a
tenant's premises and toilet rooms shall be procured only from the Landlord,
which may make a reasonable charge therefor. Upon the termination of a
tenant's lease, all keys to the tenant's premises and toilet rooms shall be
delivered to the Landlord.
13. No tenant shall mark, paint, drill into, or in any way deface
any part of the Building or the premises demised to such tenant. No boring,
cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct or as permitted under
the Lease. No tenant shall install any resilient tile or similar floor
covering in the premises demised to such tenant except in a manner approved
by Landlord.
14. No tenant or occupant shall engage or pay any employees in the
Building, except those actually working for such tenant or occupant in the
Building, or advertise for laborers giving an address at the Building.
15. No premises shall be used, or permitted to be used, at any
time, as a store for the sale or display of goods or merchandise of any kind,
or as a restaurant, shop, booth, bootblack or other stand, or for the conduct
of any business
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or occupation which involves direct patronage of the general public in the
premises demised to such tenant, or for manufacturing or for other similar
purposes.
16. The requirements of tenants will be attended to only upon
application at the office of the building. Employees of Landlord shall not
perform any work or do anything outside of the regular duties, unless under
special instructions from the office of the Landlord.
17. Each tenant shall, at its expense, provide artificial light in
the premises demised to such tenant for Landlord's agents, contractors and
employees while performing janitorial or other cleaning services and making
repairs or alterations in said premises.
18. The Tenant's employees shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the building used in
common by the occupants thereof.
19. Tenant, at its sole cost and expense, shall cause its premises
to be exterminated, from time to time, to the reasonable satisfaction of
Landlord, and shall employ such exterminators therefor as shall be approved
by Landlord.
20. Any cuspidors or similar containers or receptacles used in any
tenant's premises shall be cared for and cleaned by and at the expense of
Tenant.
21. Tenant shall use only the service elevator for deliveries and
only at hours prescribed by Landlord. Bulky materials, as reasonably
determined by Landlord, may not be delivered during usual business hours but
only thereafter. Tenant agrees to pay for use of the service elevator at
rates set forth in the Lease.
22. Tenant shall have no right of access to the roof of the
demised premises or the Building and shall not install, repair or replace any
aerial, fan, air conditioner or other device on the roof of the demised
premises or the Building without the prior written consent of Landlord,
except as provided in the Lease. Any aerial, fan, air conditioner or device
installed without such written consent shall be subject to removal, at
Tenant's expense, without notice, at any time.
23. There will be no building directory. The concierge of the
Building retains a listing of tenants of the Building and their employees.
24. At Landlord's election, all messenger deliveries shall be made
through the designated messenger entrance on 47th Street subject to such
reasonable procedures as Landlord may adopt.
SCHEDULE F
CLEANING SPECIFICATIONS
1. GENERAL OFFICE AREAS
A. Nightly
1. All stone, ceramic, tile, marble, terrazzo and other unwaxed
flooring to be mopped nightly, using approved dust-down
preparations; wash flooring weekly, scrubbed when necessary.
All unwaxed flooring used as corridors adjacent to the core
shall be cleaned and wet mopped nightly.
2. All linoleum, vinyl, rubber, asphalt tile and other similar
types of flooring (that may be waxed) to be swept nightly
using approved dust-down preparation. Waxing, if any, shall
be done at tenant's expense.
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Mop up and wash floors for spills, smears and foot tracks
throughout, including tenant's space, as needed and wash
floor in general as required.
3. All carpeting and rugs to be vacuumed nightly.
4. Hand dust with treated cloth and wipe clean all furniture,
fixtures, and window enclosures nightly.
5. Empty and clean all waste receptacles nightly and remove
from the demised premises wastepaper to designated areas.
6. Empty and clean all ash trays and screen all sand urns
nightly and replace sand.
7. Dust interior of all waste disposal cans and baskets
nightly; damp-dust as necessary.
8. Wash clean all water fountains and coolers nightly.
9. Dust all door and other ventilating louvers within reach;
damp wipe as necessary.
10. Dust all telephones nightly and wash monthly.
11. Keep locker rooms and telephone and electric closets in a
neat and orderly condition at all times.
12. Wipe clean all brass, if necessary; and other bright work
nightly.
13. Sweep, vacuum or wash all private staircases nightly.
14. Metal doors of elevator cars to be properly maintained
daily.
15. Remove all gum and foreign matter on sight.
16. Clean all glass furniture tops.
17. Collect and remove wastepaper, cardboard boxes (which
Contractor will flatten) and waste material to a designated
area in the premises. Waste and/or rubbish (heavy duty
plastic) bags shall be furnished by Contractor and shall be
adequate to hold contents without breaking. Owner shall
have the right to approve trash removal containers and
janitorial carts.
18. Dust, wash and vacuum closet and coat room shelving, coat
racks and flooring nightly.
B. PERIODIC CLEANING - (To be performed as needed unless otherwise
specified but not less than once each week or as hereinafter
provided);
1. Vacuum all furniture fabric and drapes not less than once
each week.
2. Wash and remove all finger marks, ink stains, smudges, scuff
marks and other marks from metal partitions, sills, all
vertical surfaces (doors, walls, window sills), including
elevator doors, and other surfaces, as necessary. Clean and
sweep any vacant areas.
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3. Dust and clean electric fixtures, all baseboards and other
fixtures or fittings as necessary, but not less than once
each quarter.
C. HIGH DUSTING
1. Do all high dusting every three (3) months, unless otherwise
specified, including, but not limited to, the following:
a. Vacuum and dust all pictures, frames, charts, graphs
and similar wall hangings not reached in nightly
cleaning. Damp dust as required.
b. Vacuum and dust all vertical surfaces such as walls,
partitions, doors, bucks and ventilating louvers,
grills, high moldings, and other surfaces not reached
in nightly cleaning.
c. Dust all overhead pipes, sprinklers, ventilating and
air conditioning louvres, ducts, high moldings and
other high areas not reached in nightly cleaning.
d. Dust all venetian blinds, with a Masslin treated dust
control cloth, every three months. Dust all window
frames.
e. Dust exterior and interior of lighting fixtures.
f. Wash all furniture glass as needed.
g. Vacuum and dust ceiling tiles around ventilators and
clean and wash air conditioning diffusers as required.
2. ELEVATOR LOBBY AND PUBLIC CORRIDORS (MULTI-TENANT FLOORS)
A. Vacuum floors nightly and machine scrub or shampoo floors
monthly. Wax, buff, apply sealer and finishes as required.
B. Wipe down all metal surfaces in lobby nightly, and polish
monthly.
C. High dust and wash if necessary all electrical and air
conditioning ceiling fixtures at least once per month.
D. Dust walls nightly and wash monthly.
E. Clean cigarette urns, screen sand and supply sand as necessary.
F. Burned out lamps shall be replaced promptly with lamps supplied
by Contractor.
G. Clean saddles daily and polish saddles monthly.
3. ELEVATORS
A. Clean saddles and frames on floors above lobby once per week and
vacuum dirt from door tracks nightly. Polish saddles monthly.
B. Dust elevator doors daily.
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C. Clean floors twice daily and polish weekly by machine.
4. LAVATORIES IN BASE BUILDING CORE AREAS ON FLOOR
A. Nightly
1. Scour, wash and disinfect all toilet seats (both sides),
basins, bowls, urinals and tile walls near urinals,
throughout.
2. Sweep and wash all lavatory floors using proper
disinfectants.
3. Wash and polish all mirrors, powder shelves, bright work and
enameled surfaces in all lavatories.
Contractor shall use only non-abrasive material to avoid
damage and deterioration to chrome fixtures.
4. Hand dust and clean, washing where necessary, all
partitions, dispensers and receptacles in all lavatories and
rest rooms.
5. Service sanitary napkin dispensers. (Napkins supplied by
Contractor.)
6. Empty paper towel and sanitary napkin disposal receptacles
and remove paper to designated areas.
7. Fill all toilet tissue holders, soap dispensers, towel
dispensers and sanitary napkin vending dispensers.
(Materials to be supplied by Contractor as approved by
Landlord.)
8. Empty and clean sanitary disposal receptacles.
9. Clean and wash all receptacles and dispensers.
10. Remove finger marks from painted surfaces.
11. Clean all slop sinks on all floors nightly and keep in a
neat, orderly and clean condition at all times.
B. Periodic
1. Clean and wash all partitions once every week.
2. Scrub floors as necessary, but not less than once each week.
3. Hand dust, clean and wash all tile walls and ceilings
including washable acoustical tile, once each week, more if
necessary.
4. High dusting shall be done once each month which will
include lights, walls and grills.
5. Wash all lighting fixtures as necessary.
SCHEDULE G
SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
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THIS AGREEMENT made as of the _____ day of September, 1996 between
THE FIRST NATIONAL BANK OF BOSTON, a national banking association, having an
office at 100 Federal Street, Boston, Massachusetts 02110 ("Mortgagee") and
INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation, having an address
at 900 Third Avenue, New York, New York ("Tenant").
W I T N E S S E T H :
WHEREAS, Tenant has entered into a lease dated as of September __,
1996 between Spartan Madison Corp. ("Landlord"), as landlord, and Tenant, as
tenant, with respect to certain space (the "Demised Premises") in the
building located at 380 Madison Avenue, New York, New York (the "Building")
located on the land (the "Land") as more particularly described in Exhibit A
annexed hereto and made part hereof (said lease, as heretofore or hereafter
amended and supplemented, is hereinafter called the "Lease"); and
WHEREAS, Mortgagee is the holder of certain mortgage, as modified
by a certain Mortgage Modification Agreement, dated as of June 20, 1991,
between Mortgagee and Landlord's predecessor-in-interest (collectively, as so
modified, the "June Mortgage"), which Mortgage encumbers, among other things,
Tenant's interest in the Demised Premises and the Building; and
WHEREAS, Landlord and Mortgagee have entered into a certain Project
Loan Agreement dated December 20, 1991 pursuant to which Mortgagee shall make
certain loans to Landlord in the aggregate amount of $11,200,000 subject to
the terms and conditions set forth in such Project Loan Agreement, and, in
order to secure such loans, Landlord shall deliver to Mortgagees certain
Project Loan Mortgages (as defined in the Project Loan Agreement), by
Landlord to Mortgagee covering Landlord's interest in the Building (the
"PROJECT LOAN MORTGAGES"). The June Mortgage and the Project Loan Mortgages
are herein collectively called the "Mortgage"; and
WHEREAS, Mortgagee and Tenant desire to enter into this Agreement
upon the terms, covenants and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the agreements
of the parties contained herein, the parties agree as follows:
1. The Lease and all of Tenant's rights thereunder are and shall
be at all times and in all respects subject and subordinate to the Mortgage,
and to all advances made and/or hereafter to be made under the Mortgage and
all renewals, modifications, consolidations, replacements, substitutions,
additions and extensions of the Mortgage and to any subsequent mortgages with
which the Mortgage may be spread and/or consolidated.
2. Provided Tenant shall not be in default under the Lease beyond
the applicable period of grace, if any, provided therein with respect to the
default in question as of the date Mortgagee commences a foreclosure action,
(i) Tenant shall not be named a party in any action or proceeding to enforce
the Mortgage, unless such joinder shall be required under applicable law, and
in which case Mortgagee shall not seek affirmative relief from Tenant in such
action or proceeding, nor shall the Lease be cut off or terminated nor
Tenant's possession thereunder be disturbed in any such action or proceeding,
and (ii) subject to the provisions of Section 4 of this Agreement, Mortgagee
will recognize the Lease and Tenant's rights thereunder.
3. Upon any foreclosure of the Mortgage or other acquisition of
the property encumbered thereby, Tenant shall attorn to Mortgagee or any
other party acquiring said property or so succeeding to Landlord's rights
(collectively, the "Successor Landlord") and shall recognize the Successor
Landlord as its landlord under the Lease and Tenant shall promptly execute
and deliver any instrument that the Successor Landlord may reasonably request
to evidence further said attornment, which instrument shall be reasonably
satisfactory to Tenant's counsel.
4. Upon such attornment or other acquisition of said property,
the Lease shall continue as a direct lease between the Successor Landlord and
Tenant
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upon all terms, covenants and conditions thereof as are then applicable under
the Lease except that the Successor Landlord shall not be (a) liable for any
previous act or omission of Landlord under the Lease, (b) subject to any
offsets, defenses or counterclaims that Tenant may have against Landlord,
except to the extent expressly set forth in the Lease (c) bound by any
covenant to perform or complete any initial construction in connection with
the Building or the Demised Premises or to pay any sums to Tenant in
connection therewith, (d) bound by any prepayment of more than one (1)
month's rent or other charges under the Lease or prepayment of more than
three (3) months' rent where such payments are payable at intervals of more
than one (1) month, unless such payment shall have been expressly approved in
writing by Mortgagee, or (e) bound by any amendment, modification, extension
or expansion of the Lease unless approved in writing by Mortgagee.
5. Tenant shall not, without obtaining the prior written consent
of Mortgagee (a) prepay installments of base rent due under the Lease for
more than one month in advance, except in connection with the first month's
rent and additional rent paid in advance pursuant to the provisions of the
Lease or (b) modify the Lease so as to (1) reduce the rents payable
thereunder or (2) reduce the term of the Lease, or (c) terminate, cancel or
voluntarily surrender the Demised Premises unless for cause, other than
pursuant to Tenant's option to terminate contained in Article 43 of the Lease
or (d) assign the Lease or sublet the Demised Premises or any part thereof
other than pursuant to the provisions of the Lease. Any such amendment,
modification, termination, prepayment, voluntary surrender, assignment or
subletting (other than an assignment or subletting pursuant to the Lease),
without Mortgagee's prior consent, shall not be binding upon Mortgagee.
6. Tenant from and after the date hereof shall send a copy of any
notice of default or notice in connection with the commencement of any action
to terminate the Lease or similar statement under the Lease to Mortgagee at
the same time such notice or statement is sent to Landlord under the Lease.
Such notices shall be delivered to Mortgagee pursuant to Paragraph 8 hereof
at the following address:
The First National Bank of Boston
l00 Federal Street
Boston, Massachusetts 02110
Attention: Ian Harvey, London Branch
with a copy to:
Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
Attention: James F. Monahan, Esq.
With respect to the commencement by Tenant of any action to terminate the
Lease, Mortgagee shall have the right to cure any default on the part of
Landlord which is the basis for such action within a reasonable time after
receipt of the notice from Tenant with respect to such action. All notices,
demands or requests to Tenant, if any, shall be in writing and addressed to
Tenant at its address set forth in the Lease.
7. Tenant acknowledges that it has notice that Landlord's
interest under the Lease and the rent and all other sums due thereunder have
been assigned to Mortgagee, as part of the security for the note secured by
the Mortgage. In the event that Mortgagee notifies Tenant of a default under
the Mortgage and demands that Tenant pay its rent and all other sums due
under the Lease to Mortgagee, Tenant agrees that it shall pay its rent and
all other sums due under the Lease to Mortgagee. Landlord joins in the
execution hereof for the purpose of consenting to the provisions of this
Section.
8. Any and all notices, elections, demands, requests and
responses hereto permitted or required to be given under this Agreement shall
be in writing, signed by or on behalf of the party giving the same and shall
be deemed to have been properly given and shall be deemed effective upon
receipt after delivery by a national overnight courier service (E.G., Federal
Express), or upon receipt after
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being deposited in the United States mail, postage prepaid, certified with
return receipt requested, to the other party at the address of such other
party set forth below or at such other address within the continental United
States as such other party may designate by notice specifically designated as
a notice of change of address and given in accordance herewith. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall constitute receipt. Any such notice,
election, demand, request or response, if given to Mortgagee, shall be
addressed as follows:
The First National Bank of Boston
l00 Federal Street
Boston, Massachusetts 02110
Attention: Ian Harvey, London Branch
with a copy to:
Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
Attention: James F. Monahan, Esq.
and, if given to Tenant, shall be addressed as follows:
Investment Technology Group, Inc.
900 Third Avenue
New York, New York 10022
Attention: James Lynch, General Counsel
with a copy to:
Morgan, Lewis & Bockius
101 Park Avenue
New York, New York 10178
Attention: Chester P. Lee, Esq.
9. This Agreement may not be modified, amended or terminated
unless in writing and duly executed by the party against whom the same is
sought to be asserted and constitutes the entire agreement between the
parties with respect to this subject matter hereof.
10. This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
MORTGAGEE:
THE FIRST NATIONAL BANK OF BOSTON
By:
----------------------------
Name:
Title:
TENANT:
INVESTMENT TECHNOLOGY GROUP, INC.
By: James Lynch
----------------------------
Name: James Lynch
Title: Vice President and
General Counsel
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LANDLORD:
SPARTAN MADISON CORP.
By:
----------------------------
Name:
Title:
STATE OF MISSOURI )
: ss.:
COUNTY OF JACKSON )
On this ____ day of ____________, 1996, before me personally came
, to me known, who, being duly sworn by me, did depose and say that
he is _________ the _________ of _______________________________________,
the limited partnership described in and which executed the above instrument
and that he signed his name thereto by authority given on behalf of the
partnership.
----------------------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ____ day of ____________, 1996, before me personally came
__________, to me known, who, being by me duly sworn, did depose and say that
he resides in _________________; that he is the ______________________ of
SPARTAN MADISON CORP. the corporation described in and which executed the
above instrument; and that he signed his name by authority of the board of
directors of such corporation.
----------------------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ____ day of ____________, 1996, before me personally came
_________________, to me known, who, being duly sworn by me, did depose and
say that he resides in ______________________________ that he is the
President of _______________________, the corporation described in and which
executed the above instrument and that he signed his name thereto by order of
the board of directors of said corporation.
----------------------------------
Notary Public
SCHEDULE B
DESCRIPTION OF LAND
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`<PAGE>
ALL that certain plot, piece or parcel of land, with the buildings
and improvements thereon erected, 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 Westerly
side of Madison Avenue with the southerly side of 47th Street; running thence
Westerly along the Southerly side of 47th Street, 140 feet;
thence Southerly parallel with Madison Avenue, 100 feet 5 inches to the
center of the block;
thence Westerly along the corner line of the block and parallel with 46th
Street, 100 feet;
thence Southerly and parallel with Madison Avenue, 100 feet 5 inches to the
Northerly side of 46th Street;
thence Easterly along the Northerly side of 46th Street, 240 feet to the
corner formed by the intersection of the said northerly side of 46th Street
with the westerly side of Madison Avenue, thence Northerly along the Westerly
side of Madison Avenue 200 feet 10 inches to the corner, point or place of
BEGINNING.
SCHEDULE H
FORM OF
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made this _____ day of 1996, among the 380 MADISON
AVENUE,LLC as successor-in-interest to IRVING TRUST COMPANY, TRUSTEE UNDER
THE LAST WILL AND TESTAMENT OF HAROLD D. URIS, DECEASED, FOR THE BENEFIT OF
RUTH URIS, having an address at One Wall Street, New York, New York 10015
("Owner"), SPARTAN MADISON CORP., a Delaware corporation, having an address
at c/o HRO International Ltd., 126 East 56th Street, New York, New York 10022
("Sublessor"), and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation,
having an address at 900 Third Avenue, New York, New York("Sublessee").
W I T N E S S E T H:
WHEREAS, Owner and Sublessor's predecessor in interest have entered
into a certain ground lease, dated January 26, 1989 ("Lease"), covering the
land and improvements located at 380 Madison Avenue, New York, New York
("Premises");
WHEREAS, Sublessee has entered into a certain sublease, dated as of
September __, 1996, with Sublessor ("Sublease") covering space in the
Premises on the entire fourth (4th) floor as more particularly described in
the Sublease ("Space") for a term, including renewal options, expiring on the
Expiration Date, as such term is defined in the Sublease; and
WHEREAS, Owner has agreed to assure Sublessee of Sublessee's
continued occupancy of the Space under the terms of the Sublease.
NOW, THEREFORE, for and in consideration of the mutual covenants
herein contained, the sum of Ten Dollars ($10.00)@ and @ other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and
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notwithstanding anything in the Lease or the Sublease to the contrary, it is
hereby agreed as follows:
1. Provided Sublessee is not in default under the terms of the
Sublease beyond any applicable notice and grace period (a) the right
of possession of Sublessee to the Space shall not be affected or
disturbed by Owner in the exercise of any of Owner's rights under the
Lease and (b) Sublessee shall not be named as a party in any summary
dispossess proceeding or in any other similar action under the Lease
unless required by law in which case Sublessee may be named only for
the purpose of complying with said law (but not for the purpose of
dispossessing Sublessee).
2. Sublessee agrees that if Owner shall become the lessor of
the Space by reason of the dispossession of Sublessor from the
Premises or due to any other similar proceeding and Sublessee is not
then in default under the terms of its Sublease beyond any applicable
notice and grace period, the Sublease shall become a direct Sublease
between Owner and Sublessee, Sublessee shall attorn to Owner, the
Sublease shall continue in accordance with its terms between Sublessor
and Owner and Sublessee shall continue to perform its obligations
under the Sublease, provided, however, (a) Owner shall not be liable
for any accrued obligation, or any act or omission of Sublessor
accruing prior to the date upon which Owner shall become the lessor of
the Space, (b) Owner shall not be subject to any offsets, defenses or
counterclaims other than those expressly set forth in the Sublease
which shall have accrued to Sublessee against Sublessor prior to the
date upon which Owner shall become the lessor of the Space, (c) Owner
shall not be bound by any base rent or additional rent which Sublessee
might have prepaid for more than one month to Sublessor (other than
the first month's rent and additional rent paid in advance pursuant to
the provisions of the Sublease), (d) Owner shall be entirely freed and
relieved of all covenants, obligations and liabilities of Owner under
the Sublease accruing from and after the date Owner transfers title to
the Premises to a third party, and (e) Owner shall have no liability
to Sublessee for any take over lease obligation or for any initial
work to be done in Sublessee's Space.
3. Sublessee shall not, without obtaining the prior written
consent of Owner, (a) prepay installments of base rent due under the
Sublease for more than one month in advance, except in connection with
the first month's rent and additional rent paid in advance pursuant to
the provisions of the Sublease or (b) modify the Sublease so as to
(1) reduce the rents payable thereunder or (2) reduce the term of the
Sublease, or (c) terminate, cancel or voluntarily surrender the Space
unless for cause, or (d) assign the Sublease or sublet the Space or
any part thereof other than pursuant to the provisions of the
Sublease. Any such amendment, modification, termination, prepayment,
voluntary surrender, assignment or subletting (other than an
assignment or subletting pursuant to the Sublease), without Owner's
prior consent, shall not be binding upon Owner. If Owner consents to
any amendment or modification of the existing Sublease, or to any new
Sublease, this Agreement shall apply to such amendment, modification
or new Sublease.
4. The Sublease with all rights, options, liens and charges
created thereby is and shall be subject and subordinate in all
respects to the Lease and to all the terms, conditions and provisions
thereof, and to any renewals, extensions, modifications or
replacements thereof, including any supplements thereto.
5. The foregoing provisions shall be self-operative, however,
Sublessee agrees to execute and deliver to Owner or to any person to
whom Sublessee herein agrees to attorn such other
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<PAGE>
instrument as either shall reasonably request in order to effectuate
said provisions.
6. Sublessee will notify Owner (at the last address of Owner
provided to Sublessee of any default of Sublessor which would entitle
Sublessee to cancel the Sublease and agrees that notwithstanding any
provision of the Sublease to the contrary, no notice of cancellation
thereof shall be effective unless Owner has received the notice
aforesaid and has failed within thirty (30) days of the date thereof
to cure.
7. Any and all notices, elections, demands, requests and
responses hereto permitted or required to be given under this
Agreement shall be in writing, signed by or on behalf of the party
giving the same and shall be deemed to have been properly given and
shall be deemed effective upon receipt
after delivery by a national overnight courier service (E.G., Federal
Express), or upon receipt after being deposited in the United States
mail, postage prepaid, certified with return receipt requested, to the
other party at the address of such other party set forth below or at
such other address within the continental United States as such other
party may designate by notice specifically designated as a notice of
change of address and given in accordance herewith. Rejection or
other refusal to accept or inability to deliver because of changed
address of which no notice has been received shall constitute receipt.
Any such notice, election, demand, request or response, if given to
Owner, shall be addressed as follows:
Bank of New York
Trust Properties Department
48 Wall Street - 9th Floor
New York, New York 10286
Attn: Roy Weydig
with a copy to: Donald A. Bettex, Esq.
Wien Malkin & Bettex
60 East 42nd Street
New York, New York 10165
and, if given to Sublessor, shall be addressed as follows:
Spartan Madison Corp.
126 East 56th Street
New York, New York 10022
Attn: Mr. Howard P. Ronson
with a copy to: Chadbourne & Parke
30 Rockefeller Plaza
New York, New York 10122
Attention: H. Hedley Stothers, Esq.
and, if given to Sublessee, shall be addressed as follows:
Investment Technology Group, Inc.
900 Third Avenue
New York, New York 10022
Attention: General Counsel
with a copy to:
Morgan, Lewis & Bockius
101 Park Avenue
New York, New York 10178
Attention: Chester P. Lee, Esq.
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<PAGE>
This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, legal representatives,
successors, successors-in-title and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
380 MADISON AVENUE, LLC
By:
------------------------------
Name:
Title: Manager
SPARTAN MADISON CORP.
By:
------------------------------
Name:
Title:
INVESTMENT TECHNOLOGY GROUP, INC.
By: James Lynch
------------------------------
Name: James Lynch
Title: Vice President and
General Counsel
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ____ day of ____________, ____, before me personally came
_______________, to me known, who, being duly sworn by me, did depose and say
that he is the ________________ of ______________________, the business
entity described in and which executed the above instrument and that he
signed his name thereto on behalf of the partnership.
------------------------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ____ day of October, 1996, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and
say that he resides in ________________; that he is the President of SPARTAN
MADISON CORP. the corporation described in and which executed the above
instrument; and that he signed his name by authority of the board of
directors of such corporation.
------------------------------------
Notary Public
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<PAGE>
SCHEDULE I
Tenant's Supplemental Cleaning
Rug Shampooing
Glass Cleaning
SCHEDULE J
Intentionally Omitted
SCHEDULE K
Intentionally Omitted
SCHEDULE L
Intentionally Omitted
SCHEDULE M
Floor Plans -- First Offering Space
SCHEDULE N
Landlord's Work
E-1 Lighting & Power Plan Revised 7/18/96
E-2 Riser Diagram & Schedules Revised 7/18/96
E-3 Electrical Specifications Dated 4/9/96
M-1 HVAC Plan Revised 7/15/96
M-2 Specifications & Details Revised 7/15/96
RCP-1 Reflected Ceiling Plan at
Accessible Women's
and Men's Room Issued 7/31/96
RCP-2 Reflected Ceiling Plan at
Men's Rooms Issued 7/31/96
SCHEDULE O
HVAC Specifications
A. The system is designed to operate within the requirements of the
New York State Energy Conservation Code and is capable of maintaining inside
conditions of approximately 74DEG. F and 50% relative humidity when the summer
outside conditions are not more than 95DEG. F dry bulb and 78DEG. F wet bulb and
approximately 74DEG. F when the outside winter temperature is 10DEG. F.
B. The design capabilities of the system are based upon and limited
to the following conditions:
(i) The occupancy does not exceed one (1) person for each 100
usable square feet of area.
(ii) A total demand electrical load of 5.00 watts per usable square
foot.
(iii) Proper use of blinds to control sun load.
SCHEDULE P
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Louver Location Plan
SCHEDULE Q
Punchlist Work
1. Patch spray-on fireproofing on columns
where columns meet beams.
2. Fill in or align gaps in blind's pockets.
SCHEDULE R
Approved Contractors
AGREEMENT OF LEASE
between
SPARTAN MADISON CORP., Landlord
and
INVESTMENT TECHNOLOGY GROUP, INC., Tenant
Dated: September __, 1996
PROPERTY
380 Madison Avenue
New York, New York
Entire 4th Floor
TABLE OF CONTENTS
Page
----
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EXHIBIT 10.5.4
FIRST SUPPLEMENTAL AGREEMENT
FIRST SUPPLEMENTAL AGREEMENT (hereinafter called the "Agreement"),
dated the 29th day of January, 1997, between SPARTAN MADISON CORP., a Delaware
corporation, having an address c/o HRO International Ltd., Tower 56, 126 East
56th Street, New York, New York 10022, Attention: Tenant Services (hereinafter
referred to as "Landlord"), and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware
corporation, having an address at 380 Madison Avenue, New York, New York 10017
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS:
A. Landlord and Tenant heretofore entered into a certain lease dated
October 4, 1996 (such lease, as same has hereinbefore, and may be hereinafter,
amended, is hereinafter called the "Lease") with respect to the entire fourth
(4th) floor (hereinafter called the "Demised Premises") in the building known as
380 Madison Avenue, New York, New York (hereinafter called the "Building"), for
a term commencing and ending as set forth in the Lease.
B. The parties hereto desire to modify the Lease upon such terms,
provisions and conditions as are more particularly hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. All terms contained in this Agreement and not otherwise defined
herein shall, for the purposes hereof, have the same meaning ascribed to them in
the Lease.
2. The first sentence of Section 44.01 of the Lease is hereby
deleted and the following provisions shall apply with respect to the Lease:
Subject to the terms, provisions and conditions of this
Lease, Tenant shall have the right at Tenant's sole cost and
expense but without additional charge by way of increased
rent to tie into the Building tenant emergency
-1-
<PAGE>
generator (hereinafter called the "Generator") to supply
emergency electricity to the demised premises not to exceed
three hundred fifty (350) kilovolt amperes (KVA) of the
Generator's capacity. All work to be performed to connect
to the Generator shall be done at Tenant's sole cost and
expense and solely in accordance with plans and
specifications first approved in writing by Landlord as
provided herein, provided, however, that it shall not be
unreasonable for Landlord to withhold its consent in the
event that Tenant's proposed method of connection to the
Generator could potentially, in Landlord's good faith
judgment, prevent or impair the ability of Landlord or other
occupants or tenants of the Building to connect to the
Generator in the future.
3. In consideration of Landlord modifying the Lease as set forth in
Section 2 hereof, Tenant is simultaneously herewith paying the sum of TWO
HUNDRED THOUSAND ($200,000.00) DOLLARS, and Landlord hereby acknowledges receipt
of same.
4. Tenant covenants, represents and warrants that Tenant has had no
dealings or negotiations with any broker or agent in connection with the
consummation of this Agreement. Landlord and Tenant covenant and agree to pay,
hold harmless and indemnify each other from and against any and all cost,
expense (including, without limitation, reasonable attorneys' fees and
disbursements), loss and liability for any compensation, commissions or charges
claimed by any broker or agent with respect to this Lease or the negotiation
thereof if such claim or claims by any such broker or agent are based in whole
or in part on dealing with the indemnifying party or its representatives.
5. Except as modified by this Agreement, the Lease and all
covenants, agreements, terms and conditions thereof shall remain in full force
and effect and are hereby in all respects ratified and confirmed.
6. In the event of any conflict between the provisions of this
Agreement and the original provisions of the Lease, the provisions of this
Agreement shall govern.
7. The covenants, agreements, terms and conditions contained in this
Agreement shall bind and inure to the benefit of the parties hereto and except
as otherwise provided in the Lease as hereby supplemented, their respective
legal successors and assigns.
8. This Agreement may not be changed or terminated orally but only
by a writing signed by the party against whom enforcement thereof is sought.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Witness: SPARTAN MADISON CORP., Landlord
Brenda Sullivan By: C.R. Klotz/ President
- ----------------- ----------------------------------------
Witness: INVESTMENT TECHNOLOGY GROUP, INC., Tenant
Teresa Pang By: Scott P. Mason
- ----------------- ----------------------------------------
-3-
<PAGE>
COMMON WEALTH OF MASSACHUSETTS )
: ss.:
COUNTY OF SUFFOLK )
On this 29th day of January, 1997, before me personally came C. R.
Klotz, to be known, who, being duly sworn by me, did depose and say that he
resides in Wellesley; that he is the President of SPARTAN MADISON CORP., the
corporation described in and which executed the above instrument; and that he
signed his name thereto by order of the board of directors of said corporation.
C. Paula Barretto
-------------------------------
Notary Public
C. Paula Barretto
Notary Public
My Commission Expires Oct. 20, 2000
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 29th day of January, 1997, before me personally came Scott
Mason, to be known, who, being duly sworn by me, did depose and say that he
resides in 46 Glen Rd, Wellesley, MA 02121; that he is the President of
INVESTMENT TECHNOLOGY GROUP, INC., the corporation described in and which
executed the above instrument; and that he signed his name thereto by order of
the board of directors of said corporation.
Teresa Pang
-------------------------------
Notary Public
Teresa Pang
Notary Public, State of New York
No. 01PA5035228
Qualified in Queens County
Commission Expires October 31, 1998
-4-
<PAGE>
EXHIBIT 10.5.5
SECOND SUPPLEMENTAL AGREEMENT
SECOND SUPPLEMENTAL AGREEMENT (hereinafter called this
"Agreement"), dated as of the 25th day of November, 1997, between SPARTAN
MADISON CORP., a Delaware corporation, having an address c/o HRO
International Ltd., Tower 56, 126 East 56th Street, New York, New York 10022
(hereinafter referred to as "Landlord"), and INVESTMENT TECHNOLOGY GROUP,
INC., a Delaware corporation, having an address at 380 Madison Avenue, New
York, New York 10017 (hereinafter called "Tenant").
W I T N E S S E T H:
WHEREAS:
A. Landlord and Tenant heretofore entered into a certain lease
dated as of October 4, 1996, as amended by that certain First Supplemental
Agreement dated January 29, 1997 and Added Space Agreement dated as of
September 4, 1997 (such lease, as the same has been and may hereafter be
amended, is hereinafter called the "Lease") with respect to the entire fourth
(4th) floor and a portion of the basement (hereinafter called the "demised
premises") in the building known as 380 Madison Avenue, New York, New York
(hereinafter called the "Building"), for a term ending on January 31, 2013,
or on such earlier date upon which said term may expire or be terminated
pursuant to any conditions of limitation or other provisions of the Lease or
pursuant to law; and
B. The parties hereto desire to modify the Lease to provide for
the inclusion therein of additional space, upon the terms, provisions and
conditions as are more particularly hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual
covenants hereinafter contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree to modify said Lease as follows:
1. All capitalized terms contained in this Agreement shall, for
the purposes hereof, have the same meanings ascribed to them in the Lease
unless otherwise defined herein.
2. Effective as of January 1, 1998 (hereinafter called the
"Adjustment Date"), and for the remainder of the term of the Lease, there
shall be added to and included in the demised premises, the following
additional space in the Building, to wit:
1
<PAGE>
The portion of the fifth (5th) floor of the Building substantially as
shown unhatched on the floor plan annexed hereto as Exhibit A
(hereinafter called the "First Additional Space"), which the parties
hereto agree for purposes of this Agreement shall be deemed to contain
approximately 12,726 rentable square feet.
Landlord does hereby lease to Tenant and Tenant does hereby hire from
Landlord, the First Additional Space subject and subordinate to all superior
leases and superior mortgages as provided in the Lease and upon and subject
to all the covenants, agreements, terms and conditions of the Lease, as
supplemented by this Agreement, other than the provisions of Sections 1.05,
2.02, 2.03, 2.05, 25.06 and Articles 24, 42, 43 of the Lease and Schedules N
and Q which shall be deemed inapplicable to the First Additional Space. The
parties agree that the First Additional Space constitutes Portion A of the
First Offering Space as defined in Article 40 of the Lease.
3. Effective during the period commencing on the Adjustment Date
and ending on the Expiration Date:
(a) The fixed annual rent payable by Tenant to Landlord pursuant
to Section 1.01(b) of the Lease shall be increased on account of the
inclusion of the First Additional Space, by the following amounts during the
following periods:
(i) FOUR HUNDRED SEVENTY THOUSAND EIGHT HUNDRED SIXTY-TWO AND 00/100
($470,862.00) DOLLARS per annum during the period beginning on
the Adjustment Date and ending on December 31, 2002;
(ii) FIVE HUNDRED NINE THOUSAND FORTY AND 00/100 ($509,040.00) DOLLARS
per annum during the period beginning on January 1, 2003 and
ending on December 31, 2007; and (iii) FIVE HUNDRED FORTY
SEVEN THOUSAND TWO HUNDRED EIGHTEEN AND 00/100 ($547,218.00)
DOLLARS per annum during the period beginning on January 1, 2008
and ending on the Expiration Date.
(b) With respect to the adjustments of rent set forth in Article 3
of the Lease (hereinafter called the "Basic Escalations") there shall be
computed, in addition to the Basic Escalations, adjustments of rent with
respect to increases of Taxes and Expenses attributable to the First
Additional Space. Adjustments of rent with respect to Taxes and Expenses with
respect to the First Additional Space will be computed in the same manner as
adjustments of rent with respect to Taxes and Expenses for the purpose of the
Basic Escalations under the Lease, except that for the purpose of such
computations with respect to the First Additional Space only:
(i) The term "Base Tax" (as defined in subsection 3.01.A(a) of the
Lease) with respect to the First Additional Space shall mean the Taxes for
the Tax Year commencing July 1, 1998;
(ii) The term "Tenant's Tax Share" (as defined in subsection
3.01.A(d) of the Lease) with respect to the First Additional Space shall
mean 1.7721 %, calculated as a fraction, the numerator of which is 12,726,
reflecting the number of rentable square feet which Landlord and Tenant
agree comprises the First Additional Space and the denominator of which is
718,110, reflecting the number of rentable square feet which Landlord and
Tenant
2
<PAGE>
agree comprises the rentable square footage of the office and retail
area of the Building. If the physical size of the rentable area of the
Building shall increase, Tenant's Tax Share shall be appropriately
recalculated;
(iii) The term "Expense Base Factor" (as defined in subsection
3.02.A(a) of the Lease) with respect to the First Additional Space shall
mean the Expenses for the Operating Year 1998;
(iv) The term "Tenant's Expense Share" (as defined in subsection
3.02.A(c) of the Lease) with respect to the First Additional Space shall
mean 1.8362 %, calculated as a fraction, the numerator of which is 12,726,
reflecting the number of rentable square feet which Landlord and Tenant
agree comprises the First Additional Space and the denominator of which is
693,076, reflecting the number of rentable square feet which Landlord and
Tenant agree comprises the rentable square footage of the office and retail
area of the Building. If the physical size of the rentable area of the
Building shall increase, Tenant's Expense Share shall be appropriately
recalculated;
(v) The date "July 1, 1997" set forth in the third line of
subsection 3.01.B of the Lease shall be changed to "July 1, 1999" with
respect only to the First Additional Space; and
(vi) The term "Base Operating Year" (as defined in subsection
3.02.A(b) of the Lease) with respect only to the First Additional Space shall
mean the calendar year 1998.
(vii) Landlord confirms that the representation with respect to
the definition of Expenses set forth in the final paragraph of Section 3.02A
of the Lease is true and accurate as of the date hereof.
(c) The provisions of Article 4 of the Lease shall apply with
respect to the furnishing of electricity to the First Additional Space,
including, without limitation, the provisions of Section 4.07 thereof with
respect to the electrical capacity of the First Additional Space, provided
that in accordance with Section 4.03(a) thereof, Landlord shall charge Tenant
its proportionate share of the charges for Common Area Electric with respect
to the fifth (5th) floor of the Building, plus any sales tax and the
administrative fee referred to therein.
(d) For purposes of this Agreement, subsection 21.01(b) of the
Lease shall not apply with respect to HVAC service to the First Additional
Space and in lieu thereof, the following provisions shall apply with respect
thereto:
"Maintain in good repair the air conditioning, heating and ventilating
systems installed by Landlord. Air conditioning, heating and ventilation
systems will function when seasonably required (subject to the design
criteria, including occupancy and connected electric load design criteria,
set forth on Schedule O of the Lease) on Business Days from 7:00 a.m. to
6:00 p.m. in compliance with, and subject to the conditions of, the
specifications set forth in Schedule O of the Lease. Landlord has
informed Tenant that windows of the First Additional Space and the Building
are sealed, and that the First Additional Space may become uninhabitable
and the air therein may become unbreathable during the hours or days when
the aforesaid systems do not function automatically as described herein.
Any use or occupancy of the First Additional Space under the conditions set
forth in the immediately preceding sentence shall be at the sole risk,
responsibility and hazard of Tenant, and Landlord shall have no
responsibility or liability therefor.
3
<PAGE>
Such condition of the First Additional Space shall not constitute nor be
deemed to be a breach or a violation of this Lease or of any provision
thereof, nor shall it be deemed an actual or constructive eviction nor
shall Tenant claim or be entitled to claim any abatement of rent nor make
any claim for any damages or compensation by reason of such condition of
the First Additional Space. Tenant shall cause and keep entirely
unobstructed all the vents, intakes, outlets and grilles, at all times
and shall comply with and observe all regulations and requirements
prescribed by Landlord for the proper functioning of the heating,
ventilating and air-conditioning systems serving the First Additional
Space. Nothing contained herein shall be deemed to require Landlord to
furnish at Landlord's expense such electric energy as is required to
operate the air conditioning, heating and ventilating systems serving the
First Additional Space. Subject to the provisions of Article 4 of this
Lease, all such electric energy for the systems (to the extent they serve
the First Additional Space) shall be furnished to Tenant at Tenant's cost
and expense. In the event that Tenant shall require air conditioning
from the core system during the hours or days when the core system does
not function automatically as described herein, Tenant shall give Landlord
reasonable advance notice of such requirement and Landlord shall provide
same and Tenant shall pay the Landlord's then standard charges therefor as
additional rent hereunder, which is $350 per hour, as of the date hereof,
subject to increases from time to time. Such charge shall be prorated
among Tenant and any other tenants of the Building which shall request
such overtime service during any time that Tenant shall also have
requested such service.
At Tenant's request, Landlord will permit Tenant to tap into the Building
condenser water system, without charge to Tenant (except that the initial
hook-up shall be performed by Tenant at Tenant's expense) for up to thirty
(30) additional tons of condenser water to operate supplemental
air-conditioning units installed by Tenant in or serving the First
Additional Space. Such units shall be installed in accordance with the
provisions of this Lease. In the event Tenant installs supplementary
air-conditioning units serving the First Additional Space, Tenant covenants
and agrees, at its sole cost and expense, to maintain in full force and
effect for so long as such air-conditioning unit remains in the Building, a
maintenance agreement for the periodic maintenance of such unit on
customary terms with a contractor reasonably acceptable to Landlord and to
furnish a copy of said contract and all extensions thereof to Landlord
within ten (10) days after demand. Landlord shall perform routine testing
and maintenance of such Building condenser water tower and shall give
Tenant reasonable prior notice of such testing. Landlord shall cooperate
with Tenant in order to schedule such testing so as to minimize material
interference with the conduct of Tenant's business.
In addition, Landlord shall permit Tenant to penetrate the facade of
the Building for the purposes of installing louvers for supplemental
air-cooled air-conditioning units installed in the First Additional Space
provided and on condition that such louvers shall be installed in the same
locations on the fifth (5th) floor facade as those installed by Tenant on
the fourth (4th) floor facade of the Building in accordance with Schedule P
of the Lease, and such installation shall be performed in accordance with
the provisions of the Lease."
(e) Section 25.06 of the Lease shall be deemed inapplicable to the
First Additional Space and shall be replaced by the following:
"25.06. (a) Landlord represents that as of the date hereof the
following is a comprehensive list of all Superior Instruments:
(i) a certain mortgage, as modified by a certain Mortgage
Modification Agreement, dated as of June 20, 1991 between Mortgagee
and Landlord's predecessor in interest and a further Project Loan
Agreement, dated December 20, 1991 between Mortgagee and Landlord,
(ii) a certain ground lease dated January 26, 1989 between
ComMet 380, Inc. ("Ground Lessor"), as ground lessor and Landlord's
predecessor in interest, as ground lessee,
(iii) a certain Agreement of Consolidation, Extension and
Modification of Mortgages, dated as of July 1, 1997 between GMAC
Commercial Mortgage Corporation and Ground Lessor."
(b) Landlord represents that as of the date hereof all the
Superior Instruments are in full force and effect and Landlord has received
no notices of defaults thereunder which have remained uncured beyond the
applicable grace period set forth in the applicable Superior Instrument."
4
<PAGE>
(f) Pursuant to Section 44.01 of the Lease (as modified by
Paragraph 2 of the First Supplemental Agreement), Tenant shall be entitled to
an additional thirty (30) kilovolt amperes (KVA) of the Generator's capacity
on account of the inclusion of the First Additional Space from the generator
to which Tenant's equipment is currently connected, provided that any work to
provide such increased capacity to the Generator shall be performed by Tenant
at Tenant's sole cost and expense, in accordance with the terms of the Lease
including without limitation Paragraph 2 of the First Supplemental Agreement.
(g) Notwithstanding anything to the contrary contained in the
Lease, including without limitation Section 8.01 thereof, (i) Landlord shall
have no liability for, and Tenant shall be solely responsible for compliance
with, the Disabilities Act in the First Additional Space to the extent that
the requirement for such compliance arises from a condition existing in the
First Additional Space as of the date hereof and/or to the extent that Tenant
shall make any alterations or improvements in the First Additional Space, and
(b) the provisions of the third sentence of such Section 8.01 shall not apply
to the First Additional Space, but, as of the date hereof, Landlord
represents that Landlord has received no notice of any violation of Legal
Requirements in the First Additional Space which remains uncured.
(h) Tenant, at Tenant's cost and expense, shall have the right to
furnish and install in the demised premises a private stairway connecting the
4th and 5th floor portions of the demised premises, provided, however, that
the location, style, design and quality of said stairway (to be shown on
final working drawings and final field sketches to be submitted by Tenant to
Landlord) and the field procedures shall, except to the extent otherwise
provided in the Lease, be subject to the prior written approval of Landlord,
which approval will not be unreasonably withheld. Tenant covenants and
agrees that said stairway shall be removed by Tenant from the Building, at
Tenant's cost and expense, prior to the expiration or other termination of
the term of this Lease, and Tenant, at Tenant's cost and expense, shall
promptly seal up and restore the floor slab to a finished level condition and
repair any and all damage to the demised premises and the Building resulting
from such removal of said stairway. Prior to any such removal and
restoration, Tenant, at Tenant's cost and expense, shall submit to Landlord,
for Landlord's approval which shall not be unreasonably withheld or delayed,
working drawings, field sketches and field procedures for such removal and
restoration. Any such removal of such stairway and restoration shall be done
in a good and workmanlike manner and in accordance with said working
drawings, fixed sketches and filed procedures, as so approved by Landlord,
and in such manner as shall be reasonably satisfactory to Landlord. Tenant
shall not be entitled to any diminution, abatement of rent or other
compensation under this Lease by reason of discomfort, inconvenience,
annoyance, injury or damage to business or property incidental to or
connected with any such removal of said stairway or restoration.
5
<PAGE>
(i) Landlord shall not unreasonably withhold or delay its consent
to a request from Tenant to soundproof the MER room which is located adjacent
to (*) the First Additional Space provided and on condition that (1) in
Landlord's reasonable judgment, such soundproofing shall be reasonably
necessary and shall not interfere with the operation of the Building or
require any alterations to other parts of the Building (unless Tenant shall
agree to be liable for the cost of such alterations), (2) such soundproofing
(and any ancillary alterations) shall be performed in accordance with the
provisions of the Lease governing the making of alterations by Tenant
including, without limitation, Article 6 of the Lease, and (3) all costs and
expenses of such soundproofing shall be borne by Tenant.
4. Tenant agrees to accept the First Additional Space on the
Adjustment Date in the "as is" condition in which it exists on the date
hereof (except that the existing tenant shall remove its property prior to
the Adjustment Date or Landlord will remove such property promptly after the
Adjustment Date) and understands and agrees that Landlord is not obligated to
perform any work, supply any materials or incur any expense in connection
with preparing the First Additional Space for Tenant's occupancy. Landlord
shall deliver the First Additional Space to Tenant in broom clean condition.
5. Tenant covenants, represents and warrants that Tenant has had
no dealings or communications with any broker or agent other than Landlord's
leasing agent, if any, and Newmark & Company Real Estate, Inc. (hereinafter
called the "Broker") in connection with the consummation of this Agreement.
Landlord and Tenant covenant and agree to pay, hold harmless and indemnify
each other from and against any and all cost, expense (including reasonable
attorneys' fees and court costs), loss and liability for any compensation,
commissions or charges claimed by any broker or agent, other than the brokers
specifically set forth in this Paragraph, with respect to this Agreement or
the negotiation thereof if such claim or claims by any such broker or agent
are based in whole or in part on dealing with the indemnifying party or its
representatives. Landlord agrees to pay to Landlord's leasing agent and the
Broker such compensation, commissions or charges to which they are entitled
pursuant to a separate agreement between said broker and Landlord.
6. Except as modified by this Agreement, the Lease and all
covenants, agreements, terms and conditions thereof shall remain in full
force and effect and are hereby in all respects ratified and confirmed.
7. The covenants, agreements, terms and conditions contained in
this Agreement shall bind and inure to the benefit of the parties hereto and
except as otherwise provided in the Lease as hereby supplemented, their
respective legal successors and assigns.
- -------------
* To be confirmed.
6
<PAGE>
8. This Agreement may not be changed or terminated orally but
only by a writing signed by the party against whom enforcement thereof is
sought.
9. This Agreement shall not be binding upon Landlord unless and
until it is signed by Landlord and a fully executed counterpart thereof is
delivered to Tenant.
10. (a) Tenant is executing and delivering this Agreement subject
to and conditioned upon the approval of this Agreement (hereinafter
collectively referred to as the "APPROVALS") from (i) the Mortgagee, and (ii)
ComMet 380, Inc., which Landlord represents is the successor-in-interest to
the Ground Lessor, as defined in Section 25.05(b) of the Lease. Promptly
after this Agreement shall have been executed by Landlord and Tenant and
delivered in escrow to the escrow agent to be held pursuant to that certain
Escrow Agreement dated of even date herewith among Landlord, Tenant and
Bachner, Tally, Polevoy & Misher LLP, as escrow agent, Landlord shall make
written request for the Approvals. If Landlord has not obtained both
Approvals on or before December 31, 1997, then this Agreement shall terminate
as of December 31, 1997 unless Tenant shall, on or before December 23, 1997,
have given Landlord written notice that Tenant waives the condition set forth
in the first sentence of this subparagraph 10(a) (the "Waiver Notice").
(b) In the event of the termination of this Agreement pursuant to
subparagraph 10(a) hereof, and upon such termination, all obligations of the
parties under this Agreement shall end with respect to the First Additional
Space; and the Lease shall continue in full force and effect with respect to
the Demised Premises as originally demised and neither Landlord nor Tenant
shall have any liability to the other with respect to the First Additional
Space.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
Witness: SPARTAN MADISON CORP., Landlord
By: C. R. Klotz
- ----------------------- ----------------------------
Name: C.R. Klotz
Title: President
Witness: INVESTMENT TECHNOLOGY GROUP, INC.,
Tenant
John R. MacDonald By: Timothy H. Hosking
- ----------------------- ----------------------------
Name: Timothy H. Hosking
Title: Senior Vice President, General
Counsel and Secretary
7
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 25th day of November, 1997, before me personally came
Timothy H. Hosking, to be known, who, being duly sworn by me, did depose and
say that he resides at171 East 84th Street, New York NY; that he is the
Senior V.P. and General Counsel and Secretary of INVESTMENT TECHNOLOGY GROUP,
INC., the corporation described in and which executed the above instrument;
and that he signed his name thereto by order of the board of directors of
said corporation.
Teresa Pang
-----------
Notary Public
Teresa Pang
Notary Public - State of New York
No. 01PA5035228
Qualified in Queens County
Commission Expires October 31, 1998
COMMONWEALTH OF MASSACHUSETTS )
: ss.:
COUNTY OF SUFFOK )
On this 9th day of December, 1997, before me personally came C.R.
Klotz, to be known, who, being duly sworn by me, did depose and say that he
resides at Wellesley; that he is the President of SPARTAN MADISON CORP., the
corporation described in and which executed the above instrument; and that he
signed his name thereto by order of the board of directors of said
corporation.
Nancy H. Mailboux
Notary Public
My commission Expires march 25, 1999
EXHIBIT A
Floor Plan of First Additional Space
8
<PAGE>
LEASE
BETWEEN
BOSTON WHARF CO.
Landlord
AND
INVESTMENT TECHNOLOGY GROUP, INC.
Tenant
44 Farnsworth Street
Boston, Massachusetts
<PAGE>
AGREEMENT OF LEASE
AGREEMENT OF LEASE made as of the ______ day of March, 1995, by and between
BOSTON WHARF CO., a Massachusetts general partnership (hereinafter referred to
as "Landlord") and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord the
entire ninth (9th) floor, as shown on Exhibit A attached hereto and made a part
hereof (hereinafter referred to as the "Premises" or the "Demised Premises")
contained in the building known and numbered as 44 Farnsworth Street, Boston,
Suffolk County, Massachusetts (hereinafter referred to as the "Building").
1. REFERENCE DATA
Each reference in this Lease to any of the terms and titles contained in
this Article shall be deemed and construed to incorporate the data stated
following that term or title in this Article.
1) Additional Rent: Sums or other charges payable by Tenant to
Landlord under this Lease, other than Yearly Fixed
Rent.
2) Broker: Thompson, Doyle & Company, Inc. and
The Codman Company, Inc.
3) Business Day: All days except Saturdays, Sundays, days defined
as "legal holidays" for the entire state under the
laws of the Commonwealth of Massachusetts, and
such other days as Tenant presently or in the
future recognizes as holidays for Tenant's general
staff.
4) Land: The parcel of land on which the Building is
situated.
5) Landlord's Address: 253 Summer Street
Boston, Massachusetts 02210
6) Landlord's Architect: Any licensed architect designated by Landlord.
7) Landlord's Construction
Contribution: As defined in Section 4.1.
<PAGE>
8) Landlord's Additional
Allowance: As defined in Section 4.1.
9) Lease Year: A twelve (12) month period beginning on the Term
Commencement Date and each succeeding twelve (12)
month period during the Term of this Lease, except
that if the Term Commencement Date shall be other
than the first day of a calendar month, the first
Lease Year shall include the partial calendar
month in which the Term Commencement Date occurs
as well as the succeeding twelve (12) full
calendar months.
10) Mortgage: A mortgage, deed of trust, trust indenture, or
other security instrument of record creating an
interest in or affecting title to the Property or
any part thereof or interest therein, and any and
all renewals, modifications, consolidations or
extensions of any such instrument.
11) Mortgagee: The holder of any Mortgage.
12) Property: The Land and Building.
13) Rent: Yearly Fixed Rent and Additional Rent.
14) Rentable Area: 10,588 square feet.
15) Tenant's Address: 900 Third Avenue, New York, New York 10022
16) Term Commencement Date: As defined in Section 3.2.
17) Term of this Lease: As defined in Section 3.1.
18) Termination Date: As defined in Section 3.1.
19) Use of Demised Premises: General office purposes
-2-
<PAGE>
20) Yearly Fixed Rent:
With respect to the
following Lease Years: Yearly Fixed Rent shall be:
---------------------- ---------------------------
First through Third $201,172.08
Fourth and Fifth $227,642.04
Sixth through Tenth $248,818.08
2. DESCRIPTION OF DEMISED PREMISES
2.1 DEMISED PREMISES. The Demised Premises are that portion of the
Building as described above (as the same may from time to time be constituted
after changes therein, additions thereto and eliminations therefrom pursuant to
rights of Landlord hereinafter expressly reserved in Articles 8 and 18 and
Section 15.2).
2.2 APPURTENANT RIGHTS. Tenant shall have, as appurtenant to the Demised
Premises, rights to use in common with others entitled thereto, those common
roadways, walkways, elevators, hallways and stairways necessary for access to
that portion of the Building occupied by the Demised Premises.
2.3 RESERVATIONS. All the perimeter walls of the Demised Premises except
the inner surfaces thereof, any space in or adjacent to the Demised Premises
used for servicing other portions of the Building exclusively or in common with
the Demised Premises, including without limitation (where applicable) shafts,
stacks, pipes, conduits, wires and appurtenant fixtures, fan rooms, ducts,
electric or other utilities, sinks or other Building facilities, and the use
thereof, as well as the right of access through the Demised Premises for the
purpose of operation, maintenance, decoration and repair, are expressly reserved
to Landlord.
3. TERM OF LEASE
3.1 TERM. The Term of this Lease is ten (10) years (or until such Term
shall sooner cease or expire) commencing on the Term Commencement Date and
ending on the day immediately prior to the tenth (10th) anniversary thereof,
except that if the Term Commencement Date is other than the first day of a
calendar month, the Term of this Lease shall end on the last day of the calendar
month in which said tenth (10th) anniversary occurs. The date on which the Term
of this Lease is scheduled to expire is hereinafter referred to as the
"Termination Date".
3.2 TERM COMMENCEMENT DATE. The Term Commencement Date shall be the
earlier of (a) the date on which Tenant undertakes Use of the Demised Premises
or any part thereof for the purpose set forth in Article 1, or (b) April 15,
1995.
3.3 OPTION TO EXTEND. So long as this Lease remains in
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full force and effect without any default by Tenant beyond the applicable
grace period, Tenant may extend the Term of this Lease for five (5) years by
giving notice of such election to Landlord at least twelve (12) months prior
to the originally-scheduled Termination Date. Such extension shall be on the
same terms and conditions set forth herein, subject to the provisions of
Section 6.1, except that Tenant shall have no further option to extend said
Term.
4. CONDITION OF DEMISED PREMISES
4.1 TENANT'S WORK. Tenant shall accept the Demised Premises "as is" on
the date hereof and Landlord shall have no obligation whatsoever to prepare the
Demised Premises for occupancy by Tenant. Any such work performed by Tenant
shall be subject to the provisions of this Lease, including without limitation
Articles 10 and 11. Landlord shall pay to Tenant, upon written request from
time to time (but not more frequently than monthly) and pro rata as such work
progresses, an amount equal to the cost thereof not in excess of $317,640
(hereinafter referred to as "Landlord's Construction Contribution"). Any unused
balance of Landlord's Contribution plus an additional allowance in the amount of
$21,176 (hereinafter referred to as "Landlord's Additional Allowance") may be
applied to any other costs (including without limitation architectural,
engineering, space planning and moving expenses) incurred by Tenant in
relocating its business operations to the Demised Premises. The disbursement of
any portion of Landlord's Construction Contribution or Landlord's Additional
Allowance shall be made within fifteen (15) days following the receipt by
Landlord of invoices, receipts and other documentation evidencing to Landlord's
reasonable satisfaction the costs on account of which such disbursement has been
requested, as well as releases and waivers of any mechanic's and other liens for
any labor or materials furnished as part of such work. Any portion of
Landlord's Construction Contribution or Landlord's Additional Allowance not paid
within fifteen (15) days from the date when due in accordance with the foregoing
provisions shall bear interest thereafter at a rate equal to one percent in
excess of the so-called "prime rate" charged from time to time by the First
National Bank of Boston, and may be deducted from installments of Yearly Fixed
Rent next becoming due hereunder.
4.2 ENTRY BY TENANT; INTERFERENCE WITH CONSTRUCTION. Tenant may enter the
Demised Premises prior to the Term Commencement Date to undertake such work as
is to be performed by Tenant pursuant to this Lease in order to prepare the
Demised Premises for Tenant's occupancy. Such entry shall be deemed to be
pursuant to a license from Landlord to Tenant and shall be at the risk of
Tenant. In no event shall Tenant interfere with any construction work being
performed by or on behalf of Landlord in or around the Building; without
limiting the generality of the foregoing, Tenant shall comply with all
instructions issued by Landlord's contractors relative to the moving of Tenant's
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equipment and other property into the Demised Premises and shall pay any fees or
costs imposed in connection therewith.
5. USE OF PREMISES
5.1 PERMITTED USE. Tenant shall during the Term of this Lease occupy and
use the Demised Premises for the permitted Use set forth in Article 1 and for no
other purpose. Service and utility areas (whether or not a part of the Demised
Premises) shall be used only for the particular purpose for which they are
designated.
5.2 PROHIBITED USES. Tenant shall not use, or suffer or permit the use
of, or suffer or permit anything to be done in or anything to be brought into or
kept in, the Demised Premises or any part thereof (i) which would violate any of
the covenants, agreements, terms, provisions and conditions of this Lease,
(ii) for any unlawful purposes or in any unlawful manner, or (iii) which, in the
reasonable judgment of Landlord shall in any way (a) impair or tend to impair
the appearance or reputation of the Building, (b) impair or interfere with or
tend to impair or interfere with any of the Building services or the proper and
economic heating, cleaning, air conditioning or other servicing of the Building
or with the use of any of the other areas of the Building, or (c) occasion
discomfort, inconvenience or annoyance to any of the other tenants or occupants
of the Building, whether through the transmission of noise or odors or
otherwise. Without limiting the generality of the foregoing, no food shall be
prepared or served for consumption by the general public on or about the Demised
Premises; no intoxicating liquors or alcoholic beverages shall be sold or
otherwise served for consumption by the general public on or about the Demised
Premises; no lottery tickets (even where the sale of such tickets is not
illegal) shall be sold and no gambling, betting or wagering shall otherwise be
permitted on or about the Demised Premises; no machinery shall be operated in
the Demised Premises if such operation involves vibratory motion of any kind
perceptible outside the Demised Premises; no loitering shall be permitted on or
about the Demised Premises; and no loading or unloading of supplies or other
material to or from the Demised Premises shall be permitted on the Land except
at times and in locations to be designated by Landlord. The Demised Premises
shall be maintained in a sanitary condition, and kept free of rodents and
vermin. All trash and rubbish shall be suitably stored in the Demised Premises
or other locations designated by Landlord from time to time.
5.3 LICENSES AND PERMITS. If any governmental license or permit shall be
required for the proper and lawful conduct of Tenant's business, and if the
failure to secure such license or permit would in any way affect Landlord,
Tenant, at Tenant's expense, shall duly procure and thereafter maintain such
license or permit and submit the same to inspection by Landlord. Tenant, at
Tenant's expense, shall at all times comply with the terms and
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conditions of each such license or permit.
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6. RENT
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6.1 YEARLY FIXED RENT. Tenant shall pay to Landlord, without any set-off
or deduction (except as otherwise expressly provided herein), at Landlord's
office, or to such other person or at such other place as Landlord may designate
by notice to Tenant, the Yearly Fixed Rent set forth in Article 1, provided
however that, if Tenant duly exercises its option pursuant to Section 3.3 to
extend the Term hereof, the Yearly Fixed Rent shall be increased effective as of
the commencement of such extension period to reflect 95% of the fair market
rental value of the Demised Premises for the balance of the Term of this Lease,
taking into account (among other relevant criteria) rents charged for comparable
office building space and Tenant's obligations to pay Additional Rent and all
other provisions of this Lease. In no event shall said fair market rental value
take into account any improvements made by Tenant to the Demised Premises
(except to the extent funded by Landlord's Construction Contribution), nor the
fact that Landlord has no obligation to refurbish or renovate the Demised
Premises at any time prior to or during such extension period. Said fair market
rental value shall be as determined in a notice given by Landlord to Tenant at
least six (6) months prior to the commencement of such extension period,
provided however that if Tenant notifies Landlord of its objection to said
determination within ten (10) days after the giving of such notice by Landlord,
and if Landlord and Tenant cannot mutually agree upon the same within
seventy-five (75) days following receipt of Tenant's objection, then in such
event said fair market rental value shall be determined by appraisers, one to be
chosen by Landlord, one to be chosen by Tenant, and a third to be selected by
the two first chosen. All appraisers chosen or selected hereunder shall be
independent of the parties, shall have received the M.A.I. (Member, Appraisal
Institute) designation from the American Institute of Real Estate Appraisers and
shall have had at least five (5) years of experience in appraising office space
in the downtown section of the City of Boston. The unanimous written decision
of the first two chosen, without selection and participation of a third
appraiser, or otherwise the written decision of a majority of three appraisers
chosen and selected as aforesaid, shall be conclusive and binding upon Landlord
and Tenant. Landlord and Tenant shall each notify the other of its chosen
appraiser within ten (10) days following expiration of the aforesaid
seventy-five (75) day period and, unless such two appraisers shall have reached
a unanimous decision within thirty (30) days after having been chosen, they
shall within a further ten (10) days elect a third appraiser and notify Landlord
and Tenant thereof. Each party shall bear the expense of the appraiser chosen
by such party pursuant to this Section, and the parties shall equally share the
expense of the third appraiser (if any). If either party fails to notify the
other of its chosen appraiser within thirty (30) days following expiration of
the aforesaid seventy-five (75) day period, the other party's determination of
the Yearly Fixed Rent for such extension period shall be binding and conclusive
for purposes hereof, and no further appraisal proceedings shall be required. If
the Yearly Fixed Rent for such extension period shall not have
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been determined prior to the commencement thereof, Tenant shall continue to
pay Yearly Fixed Rent at the rate most recently in effect, subject to
retroactive adjustment once the Yearly Fixed Rent for such period has in fact
been determined. In no event shall the foregoing provision be construed so
as to result in any reduction in the Yearly Fixed Rent payable by Tenant
below $248,818.08. Yearly Fixed Rent shall be paid in equal monthly
installments in advance on or before the first Business Day of each calendar
month during the Term of this Lease and shall be apportioned for any fraction
of a month in which Yearly Fixed Rent first becomes payable or in which the
last day of the Term of this Lease may fall.
6.2 TAXES. Tenant shall pay to Landlord as Additional Rent a
proportionate share (as defined in Section 6.4) of all real estate taxes
(including without limitation all betterment assessments, all fire service
availability fees and similar charges for customary governmental services, all
other charges in lieu of such taxes and any tax on any fixture installed in the
Building, even if taxed as personal property) imposed against the Building and
the Land, in excess of $230,685 (or, if higher, the amount of such taxes payable
with respect to the calendar year ending December 31, 1995), pro-rated with
respect to any portion of a fiscal year in which the Term of this Lease begins
or ends. Such payments shall be due and payable in installments corresponding
to those in which such taxes are payable by Landlord, and within twenty (20)
days after Tenant shall have received a copy of the relevant tax bills. If
Landlord shall receive any refund of real estate taxes of which Tenant has paid
a portion pursuant to this Section, then, out of any balance remaining after
deducting Landlord's reasonable expenses incurred in obtaining such refund,
Landlord shall pay to Tenant the same proportionate share of said balance,
prorated as set forth above. Tenant shall, if as and when demanded by Landlord
and with each monthly installment of Yearly Fixed Rent, make tax fund payments
to Landlord. "Tax fund payments" refer to such payments as Landlord shall
determine to be sufficient to provide in the aggregate a fund adequate to pay,
when they become due and payable, all payments required from Tenant under this
Section. In the event that said tax fund payments are so demanded, and if the
aggregate of said tax fund payments is not adequate to pay Tenant's share of
such taxes, Tenant shall pay to Landlord the amount by which such aggregate is
less than the amount of said share, such payment to be due and payable at the
time set forth above. Any surplus tax fund payments shall be accounted for to
Tenant after payment by Landlord of the taxes on account of which they were
made, and may be credited by Landlord against future Rent payments or promptly
refunded to Tenant at Landlord's option.
6.3 OPERATING EXPENSES. Tenant shall pay to Landlord as Additional Rent a
proportionate share (as defined in Section 6.4) of all annual costs and expenses
incurred by Landlord in the operation and maintenance of the Building and the
Land in excess
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of $369,096 (or, if higher, the amount of such costs and expenses incurred
with respect to the calendar year ending December 31, 1995), including,
without limiting the generality of the foregoing, all such costs and expenses
in connection with (1) insurance, sprinkler service, license fees, security,
trash and rubbish removal, janitorial service, landscaping, and snow removal,
(2) wages, salaries, management fees not in excess of those generally paid by
the owners of comparable properties to unaffiliated third parties, employee
benefits, payroll taxes, administrative and auditing expenses, and equipment
and materials for the operation, management and maintenance of the Property,
(3) any capital expenditure (amortized, with interest, in accordance with
generally-accepted accounting principles on a so-called "useful life" basis)
made by Landlord for the purpose of reducing other operating expenses or
complying with any governmental requirement imposed after the date of this
Lease, (4) the furnishing of heat, air conditioning, water and other
utilities, (5) the operation and servicing of any computer system installed
to regulate Building equipment, (6) the furnishing of the repairs and
services referred to in Section 7.4, excluding expenditures incurred prior to
the first anniversary of the Term Commencement Date on account of any such
repair to the roof (including the existing skylight), structural components
or common systems of the Building, (7) a reasonable reserve account and (8)
unless operating expenses for a particular year include management fees, a
supervisory and overhead fee which shall be in an amount equal to ten percent
(10%) of all other such costs and expenses (the foregoing being hereinafter
referred to as "operating expenses"). Notwithstanding the foregoing,
operating expenses shall not include the cost of any special work or service
(including without limitation the furnishing of electricity for the operation
of air conditioning equipment) provided to a particular tenant, unless
likewise provided to Tenant hereunder. If, during any portion of a fiscal
year for which operating expenses are being computed pursuant to this
Section, less than the entire rentable area of the Building is occupied or
Landlord is not supplying all occupants with the same services being supplied
hereunder, such costs and expenses shall be reasonably extrapolated in order
to take into account the costs and expenses which would have been incurred
had the entire rentable area of the Building been occupied and had such
services been supplied to all occupants. As soon as Tenant's share of
operating expenses with respect to any fiscal year established from time to
time by Landlord can be determined, the same will be certified by Landlord to
Tenant and will become payable to Landlord within thirty (30) days following
such certification, subject to proration with respect to any portion of a
fiscal year in which the Term of this Lease begins or ends or in the event
that Landlord designates a different fiscal year. Tenant shall, if as and
when demanded by Landlord and with each monthly installment of Yearly Fixed
Rent, make operating fund payments to Landlord. "Operating fund payments"
refer to such payments as Landlord shall determine to be sufficient to
provide in the aggregate a fund adequate to pay, when they become due and
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payable, all payments required from Tenant under this Section. In the event
that operating fund payments are so demanded, and if the aggregate of said
operating fund payments is not adequate to pay Tenant's share of operating
expenses, Tenant shall pay to Landlord the amount by which such aggregate is
less than the amount of said share, such payment to be due and payable at the
time set forth above. Any surplus operating fund payments shall be accounted
for to Tenant after such surplus has been determined, and may be credited by
Landlord against future Rent payments or promptly refunded to Tenant at
Landlord's option. Tenant may, at its expense and following reasonable
advance notice to Landlord, inspect Landlord's books and records relative to
the computation of operating expenses and operating fund payments hereunder.
In the event that Current Operating Expenses exceed Prior Operating Expenses
by more than the Threshold Amount, Tenant may, by notice given to Landlord no
later than sixty (60) days following Landlord's certification of such Current
Operating Expenses pursuant to this Section, request a reduction of Tenant's
proportionate share thereof. If Landlord does not allow such reduction in an
amount satisfactory to Tenant within sixty (60) days following such notice,
either party may, within thirty (30) days following said sixty (60) day
period, refer the matter to arbitration in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association by a
single arbitrator in Boston, Massachusetts, who shall, within thirty (30)
days after his or her appointment, determine whether such Current Operating
Expenses are unreasonable, taking into account costs and expenditures
incurred for operating comparable office buildings. A judgment upon the
award rendered by such arbitrator may be entered in any court of competent
jurisdiction. All direct and reasonable costs of such arbitration, including
the expense of the arbitrator but excluding any compensation paid to
attorneys, agents, employees or witnesses of either party, shall be shared
equally by Landlord and Tenant. Any award to Tenant as a result of such
arbitration shall be no greater than Tenant's proportionate share of the
amount by which Current Operating Expenses exceed the sum of Prior Operating
Expenses and the Threshold Amount. Landlord shall pay interest to Tenant on
such award, at a rate equal to two percent (2%) in excess of the prime
commercial lending rate from time to time established by The First National
Bank of Boston, for the period from the date when Tenant paid the amount in
question to Landlord until the date when said amount was refunded by Landlord
in accordance with such award. As used herein, the following terms shall be
defined as hereinafter set forth:
(a) "Current Operating Expenses" shall mean operating expenses
incurred with respect to 1996 or any subsequent calendar year
(hereinafter referred to as the "Current Year");
(b) "Prior Operating Expenses" shall mean
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operating expenses incurred with respect to the calendar year
immediately preceding the Current Year, provided however that
Prior Operating Expenses shall in no event be less than $369,096;
(c) "Threshold Amount" shall mean the amount calculated by
multiplying Prior Operating Expenses times a percentage equal to
two percent (2%) plus the percentage increase in the Price Index
during the course of the Current Year; and
(d) "Price Index" shall mean the Consumer Price Index for All Urban
Consumers, Boston, Mass., All Items (1982-84 = 100), as published
by the Bureau of Labor Statistics of the United States Department
of Labor or, if the publication of said Index shall be
discontinued, any similar statistical index which is designated
by Landlord and may be used for the purpose of measuring the cost
of living in the Boston urban area.
6.4 TENANT'S PROPORTIONATE SHARE. Tenant's proportionate share of taxes
and operating expenses pursuant to Sections 6.2 and 6.3 shall be computed
according to the ratio (i.e., 11.475%) between the Rentable Area of the Demised
Premises (as defined in Article 1) and the total rentable area of all space in
the Building (agreed to be 92,274 square feet). Computations of rentable area
other than in the Demised Premises shall be made by Landlord's Architect, whose
good faith determination shall be conclusive and binding on Tenant.
6.5 PAYMENT TO MORTGAGEE. Landlord reserves the right to provide in any
Mortgage given by it of the Property that some or all rents, issues, and profits
and all other amounts of every kind payable to the Landlord under this Lease
shall be paid directly to the Mortgagee for Landlord's account and Tenant
covenants and agrees that it will, after receipt by it of notice from Landlord
designating such Mortgagee to whom payments are to be made by Tenant, pay such
amounts thereafter becoming due directly to such Mortgagee until excused
therefrom by notice from such Mortgagee.
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7. UTILITIES AND LANDLORD'S SERVICES
7.1 ELECTRICITY. Tenant shall purchase the electrical energy that
Tenant requires for operation of the lighting fixtures, appliances and
equipment (including without limitation all air conditioning equipment)
servicing the Demised Premises. The costs of initially installing any
required meter shall be paid by Landlord, but Tenant shall keep said meter
and installation equipment in good working order and repair. Landlord shall
not be liable in any way to Tenant for any failure or defect in the supply or
character of electrical energy furnished to the Demised Premises by reason of
any requirement, act or omission of the public utility serving the Building
with electricity unless due to the act or omission of Landlord. Tenant's use
of electrical energy in the Demised Premises shall not at any time exceed the
capacity (agreed to be 16.5 watts per square foot) of any of the electrical
conductors and equipment in or otherwise serving the Demised Premises. In
order to insure that such capacity is not exceeded and to avert possible
adverse effect upon the Building electrical services Tenant shall give notice
to Landlord and obtain Landlord's prior written consent whenever Tenant shall
connect to the Building electrical distribution system any fixtures,
appliances or equipment other than lamps, typewriters and similar small
machines. Any additional feeders or risers to supply Tenant's electrical
requirements in addition to those originally installed and all other
equipment proper and necessary in connection with such feeders or risers,
shall be installed by Tenant at the sole cost and expense of Tenant, provided
that such additional feeders and risers are permissible under applicable laws
and insurance regulations and the installation of such feeders or risers has
been approved in writing by Landlord in advance thereof and will not cause
permanent damage or injury to the Building or cause or create a dangerous
condition or unreasonably interfere with other tenants of the Building.
Tenant agrees that it will not make any alteration or material addition to
the electrical equipment and/or appliances in the Demised Premises without
the prior written consent of Landlord in each instance first obtained, which
consent will not be unreasonably withheld, and will promptly advise Landlord
of any alteration or addition to such electrical equipment and/or appliances.
Tenant, at Tenant's expense, shall purchase, install and replace all light
fixtures, bulbs, tubes, lamps, lenses, globes, ballasts and switches used in
the Demised Premises.
7.2 WATER CHARGES. Landlord shall furnish hot and cold water for ordinary
cleaning, toilet, kitchen, lavatory and drinking purposes to the extent required
to service facilities approved by Landlord pursuant to Article 10. If Tenant
requires, uses or consumes water for any purpose other than for such purposes,
Landlord may (i) assess a reasonable charge for the additional water so used or
consumed by Tenant or (ii) install a water meter and thereby measure Tenant's
water consumption for
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all purposes. In the latter event, Tenant shall pay the cost of the meter
and the cost of installing any equipment required in connection therewith,
and shall keep said meter and installation equipment in good working order
and repair, and shall pay for water consumed, as shown on said meter,
together with the sewer charge based on said meter charges, as and when bills
are rendered.
7.3 HEAT AND AIR CONDITIONING.
(a) Landlord shall, through the equipment of the Building, furnish to
and distribute in the Demised Premises heat as normal seasonal changes may
require on Business Days from 8:00 a.m. to 6:00 p.m. and on Saturdays (excluding
holidays) from 8:00 a.m. until Noon when reasonably required for the comfortable
occupancy of all portions of the Demised Premises by Tenant. Tenant agrees to
cooperate fully with Landlord with regard to and abide by all regulations and
requirements which Landlord may prescribe for the proper functioning and
protection of the heating system.
(b) Landlord's only obligation under this Lease with respect to the
air conditioning of the Demised Premises is to maintain, repair and (when
necessary) replace the Building equipment servicing the Demised Premises and to
furnish chilled water therefor. The distribution of air conditioning within the
Demised Premises utilizes, as part of said equipment, handlers which are
operated electrically at Tenant's expense pursuant to Section 7.1.
(c) Landlord will, upon reasonable advance written notice from Tenant
of its requirements, furnish additional heat or air conditioning service to the
Demised Premises on days and at times other than as provided in this Article.
Tenant will pay to Landlord a reasonable charge (which shall be standard for all
Building tenants and is currently calculated at an hourly rate per floor of
$25.00 in the case of heat and $30.00 in the case of air conditioning) for any
such additional heat or air conditioning service required by Tenant.
7.4 REPAIRS AND OTHER SERVICES. Except as otherwise provided in
Articles 16 and 18, and subject to Tenant's obligations in Article 12 and
elsewhere in this Lease, Landlord shall (a) keep and maintain the roof
(including the existing skylight), exterior walls, structural floor slabs and
columns of the Building in good condition and repair, reasonable use and wear
excepted, and maintain in good and workable condition the vertical buss ducts
referenced in Section 27.9 as well as the common sanitary, electrical, heating,
air conditioning and other systems of the Building, (b) provide cleaning
services according to the cleaning standards set forth in Exhibit B attached
hereto and made a part hereof, (c) keep all roadways, walkways and parking areas
on the Property clean and remove all snow and ice therefrom, (d) replace windows
whenever broken other than as a
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result of the act, omission, fault, negligence or misconduct of Tenant or
Tenant's agents, contractors, employees or invitees, (e) employ a guard to be
stationed at the main entrance of the Building from 4:30 p.m. until Midnight
on Business Days and (f) arrange for the extermination of vermin in the
common areas of the Building. In addition, Landlord shall complete the
ongoing installation of a card system to regulate access to the main entrance
and elevators of the Building no later than April 15, 1995 (in the case of
said main entrance) and February 28, 1995 (in the case of said elevators).
7.5 INTERRUPTION OR CURTAILMENT OF SERVICES. Landlord reserves the right
temporarily to interrupt, curtail, stop or suspend the furnishing of services
and the operation of any Building system, when necessary by reason of accident
or emergency, or of repairs, alterations, replacements or improvements in the
reasonable judgment of Landlord desirable or necessary to be made, or of
difficulty or inability in securing supplies or labor, or of strikes, or of any
other cause beyond the reasonable control of Landlord, whether such other cause
be similar or dissimilar to those hereinabove specifically mentioned, until said
cause has been removed. Landlord shall have no responsibility or liability for
any such interruption, curtailment, stoppage, or suspension of services or
systems, except that Landlord shall exercise reasonable diligence to eliminate
the cause of same.
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8. CHANGES OR ALTERATIONS BY LANDLORD
Landlord reserves the right, exercisable by itself or its nominee, at any
time and from time to time without the same constituting an actual or
constructive eviction and without incurring any liability to Tenant therefor or
otherwise affecting Tenant's obligations under this Lease, but subject to the
applicable provisions of Section 15.2, to make such changes, alterations,
additions, improvements, repairs or replacements in or to the Building (provided
however that Landlord may not materially alter the approved layout of the
Demised Premises) and the fixtures and equipment thereof, as well as in or to
the street entrances, halls, passages, elevators, and stairways thereof, as it
may deem necessary or desirable, and to change the arrangement and/or location
of entrances or passageways, doors and doorways, and corridors, elevators,
stairs, toilets, or other public parts of the Building, provided, however, that
there be no unreasonable obstruction of the right of access to, or unreasonable
interference with the use and enjoyment of, the Demised Premises by Tenant,
except that Landlord shall not (except in case of emergency) be obligated to
employ labor at so-called "over-time" or other premium pay rates. Nothing
contained in this Article shall be deemed to relieve Tenant of any duty,
obligation or liability which Tenant may have with respect to making or causing
to be made any repair, replacement or improvement or complying with any law,
order or requirement of any governmental or other authority. Landlord reserves
the right to from time to time change the address of the Building, in which
case Landlord shall reimburse all reasonable costs incurred by Tenant as a
result of such change in order to replace stationery, business cards and the
like and to notify clients of such change.
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9. FIXTURES, EQUIPMENT AND IMPROVEMENTS - REMOVAL BY TENANT
All fixtures, equipment, improvements and appurtenances attached to or
built into the Demised Premises prior to or during the Term, whether by Landlord
at its expense or at the expense of Tenant (either or both) or by Tenant shall
be and remain part of the Demised Premises and shall not be removed by Tenant at
the end of the Term unless otherwise expressly provided in this Lease. Where
not built into the Demised Premises, and if furnished and installed by and at
the sole expense of Tenant, all removable electric fixtures, air conditioning,
drinking or tap water facilities, furniture, filing cabinets or trade fixtures
or business equipment (hereinafter referred to as "Tenant's Removable Property")
shall not be deemed to be included in such fixtures, equipment, improvements and
appurtenances and may be, and upon the request of Landlord will be, removed by
Tenant upon the condition that such removal shall not materially damage the
Demised Premises or the Building and that the cost of repairing any damage to
the Demised Premises or the Building arising from such removal shall be paid by
Tenant, provided, however, that any of such items toward which Landlord shall
have granted any allowance or credit to Tenant shall be deemed not to have been
furnished and installed in the Demised Premises by or at the sole expense of
Tenant.
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10. ALTERATIONS AND IMPROVEMENTS BY TENANT
Tenant shall make no alterations, decorations, installations, removals,
additions or improvements in or to the Demised Premises without Landlord's prior
written consent and then only by contractors approved by Landlord (including
without limitation those contractors identified in Exhibit D attached hereto and
made a part hereof). No installations or other such work shall be undertaken or
begun by Tenant until Landlord has approved written plans and specifications
therefor; and no amendments or additions to such plans and specifications shall
be made without prior written consent of Landlord. Any such alterations,
decorations, installations, removals, additions and improvements shall be done
at the sole expense of Tenant and at such times and in such manner as Landlord
may from time to time reasonably designate. Any consent or approval required
under this Article shall not be unreasonably withheld or delayed in the case of
any proposed work of a non-structural nature which does not affect the common
areas or facilities of the Property. Pursuant to the foregoing provisions, but
subject to the receipt of reasonably acceptable engineering data, Landlord
hereby consents to the work described in the plans and specifications referenced
in Exhibit E attached hereto and made a part hereof (hereinafter referred to as
"Tenant's Initial Work"). If Tenant shall make any alterations, decorations,
installations, removals, additions or improvements, then Landlord may elect, at
the time of consenting thereto, to require Tenant at the expiration of this
Lease to restore the Demised Premises to substantially the same condition as
existed at the Term Commencement Date. Landlord acknowledges that Landlord has
not made such election with respect to any portion of Tenant's Initial Work
other than Tenant's Removable Property.
11. TENANT'S CONTRACTORS - MECHANICS' AND OTHER LIENS -
STANDARD OF TENANT'S PERFORMANCE - COMPLIANCE WITH LAWS
Whenever Tenant shall make any alterations, decorations, installations,
removals, additions or improvements or do any other work in or to the Demised
Premises, Tenant will strictly observe the following covenants and agreements:
(a) In no event shall any material or equipment be incorporated in or
added to the Demised Premises in connection with any such alteration,
decoration, installation, addition or improvement which is subject to any lien,
charge, mortgage or other encumbrance of any kind whatsoever or is subject to
any security interest or any form of title retention agreement. Any mechanic's
lien filed against the Demised Premises or the Building for work claimed to have
been done for, or materials claimed to have been furnished to Tenant shall be
discharged by Tenant within ten (10) days after notice thereof, at the expense
of Tenant, by filing the bond required by law or otherwise. If Tenant fails so
to discharge any lien, Landlord may do so at
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Tenant's expense and Tenant shall reimburse Landlord for any expense or cost
incurred by Landlord in so doing within fifteen (15) days after rendition of
a bill therefor.
(b) All installations or work done by Tenant under this or any other
Article of this Lease shall be at its own expense (unless expressly otherwise
provided) and shall at all times comply with (i) laws, rules, orders and
regulations of governmental authorities having jurisdiction thereof;
(ii) orders, rules and regulations of any Board of Fire Underwriters, or any
other body hereafter constituted exercising similar functions, and governing
insurance rating bureaus; and (iii) plans and specifications prepared by and at
the expense of Tenant theretofore submitted to Landlord for its prior written
approval in accordance with the provisions of Article 10.
(c) Tenant shall procure all necessary permits before undertaking any
work in the Demised Premises; do all such work in a good and workmanlike manner,
employing materials of good quality and complying with all governmental
requirements, and defend, save harmless, exonerate and indemnify Landlord from
all injury, loss or damage to any person or property occasioned by or growing
out of such work.
12. REPAIRS AND SECURITY BY TENANT
Subject to Landlord's repair obligations hereunder, Tenant shall keep or
cause to be kept all and singular the Demised Premises in good repair, order and
condition, damage by fire or other casualty excepted. Without limiting the
generality of the foregoing, Tenant shall replace all windows and other glass,
whenever broken as a result of the act, omission, fault, negligence or
misconduct of Tenant or Tenant's agents, contractors, employees or invitees,
with glass of the same quality.
Tenant shall make, as and when needed as a result of misuse by, or neglect
or improper conduct (including without limitation the placement of any equipment
exceeding the floor load or causing vibrations perceptible outside the Demised
Premises) of Tenant or Tenant's servants, employees, agents, invitees or
licensees or otherwise, all repairs in and about the Demised Premises necessary
to preserve them in such repair, order and condition.
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13. INSURANCE, INDEMNIFICATION, EXONERATION AND EXCULPATION
13.1 INSURANCE. Tenant shall procure, keep in force and pay for (a)
Comprehensive Public Liability Insurance indemnifying Landlord, any managing
agent designated by Landlord, Tenant and (whenever Landlord shall so request)
any Mortgagee against all claims and demands for injury to or death of
persons or damage to property which may be claimed to have occurred upon the
Demised Premises in the amounts which shall at the time Tenant and/or its
contractors enter the Demised Premises in accordance with Article 4 of this
Lease be not less than One Hundred Thousand Dollars ($100,000) for property
damage and Two Million Dollars ($2,000,000) for injury or death of one person
or more than one person in a single accident, and from time to time
thereafter shall be not less than such higher amounts, if procurable, as may
be reasonably required by Landlord and are customarily carried by responsible
office tenants in the Greater Boston area (provided however that Landlord may
not require any such increase more than once during any thirty-six (36) month
period) and (b) so-called contents and improvements insurance adequately
insuring all property belonging to or removable by Tenant and situated in the
Demised Premises.
13.2 CERTIFICATES OF INSURANCE. Such insurance shall be effected with
insurers authorized to do business in Massachusetts under valid and
enforceable policies, and such policies shall name Landlord and Tenant and
any additional parties designated by Landlord pursuant to Section 13.1 as the
insureds, as their respective interests appear. Such insurance shall provide
that it shall not be cancelled without at least ten (10) days' prior written
notice to each insured named therein. Prior to entry by Tenant and/or its
contractors into the Demised Premises in accordance with Article 4 of this
Lease, and thereafter not less than fifteen (15) days prior to the expiration
date of each expiring policy, original copies of the policies provided for in
Section 13.1 issued by the respective insurers, or certificates of such
policies setting forth in full the provisions thereof and issued by such
insurers together with evidence satisfactory to Landlord of the payment of
all premiums for such policies, shall be delivered by Tenant to Landlord and
certificates as aforesaid of such policies shall upon request of Landlord be
delivered by Tenant to any additional parties designated by Landlord pursuant
to Section 13.1 as the insureds.
13.3 GENERAL. Tenant will save Landlord harmless, and will exonerate
and indemnify Landlord, from and against any and all claims, liabilities or
penalties asserted by or on behalf of any person, firm, corporation or public
authority:
(a) On account of or based upon any injury to person, or loss of
or damage to property sustained or occurring on the Demised Premises on
account of or based upon the act, omission, fault, negligence or misconduct
of any person whomsoever (other
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than Landlord or its agents, contractors or employees);
(b) On account of or based upon any injury to person or loss of or
damage to property, sustained or occurring elsewhere (other than on the
Demised Premises) in or about the Building (and, in particular, without
limiting the generality of the foregoing on or about the elevators,
stairways, public corridors, sidewalks or other appurtenances and facilities
used in connection with the Building or Demised Premises) arising out of the
use or occupancy of the Building or Demised Premises by Tenant, or any person
claiming by, through or under Tenant;
(c) On account of or based upon (including moneys due on account
of) any work or thing whatsoever done (other than by Landlord or its
contractors, or agents or employees of either) in the Demised Premises; and
(d) On account of or resulting from the failure of Tenant to
perform and discharge any of its covenants and obligations under this Lease;
and, in respect of any of the foregoing items (a)-(d), from and against all
costs, expenses (including without limitation reasonable attorneys' fees),
and liabilities incurred in or in connection with any such claim, or any
action or proceeding brought thereon; and in case any action or proceeding be
brought against Landlord by reason of any such claim, Tenant upon notice from
Landlord shall at Tenant's expense resist or defend such action or proceeding
and employ counsel therefor reasonably satisfactory to Landlord, it being
agreed that such counsel as may act for insurance underwriters of Tenant
engaged in such defense shall be deemed satisfactory.
13.4 PROPERTY OF TENANT. In addition to and not in limitation of the
foregoing, and subject only to the provisions of applicable law, Tenant
covenants and agrees that all merchandise, furniture, fixtures and property
of every kind, nature and description which may be in or upon the Demised
Premises or the Building or the Land during the Term of this Lease shall be
at the sole risk and hazard of Tenant, and that if the whole or any part
thereof shall be damaged, destroyed, stolen or removed from any cause or
reason whatsoever other than the negligence or misconduct of Landlord or its
agents, contractors or employees, no part of said damage or loss shall be
charged to, or borne by Landlord.
13.5 BURSTING OF PIPES, ETC. Landlord shall not be liable for any
injury or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, electrical disturbance, water, rain
or snow or leaks from any part of the Building or from the pipes, appliances
or plumbing works or from the roof, street or sub-surface or from any other
place or caused by any other cause of whatever nature, unless caused by or
due to the negligence of Landlord, its agents,
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contractors or employees, and then only after (i) notice to Landlord of the
condition claimed to constitute negligence and (ii) the expiration of a
reasonable time after such notice has been received by Landlord without such
condition having been cured or corrected; nor shall Landlord or its agents be
liable for any such damage caused by other tenants or persons in the Building
or caused by operations in construction of any private, public or
quasi-public work; nor shall Landlord be liable (subject only to its repair
obligations hereunder) for any latent defect in the Demised Premises or in
the Building.
13.6 LANDLORD'S LIABILITY INSURANCE. Landlord shall keep in force
liability insurance for its own benefit without any obligation to include
Tenant as a named or additional insured party and without in any way limiting
Tenant's obligations pursuant to Section 13.1. Any insurance maintained by
Tenant pursuant to said Section shall be primary and non-contributing with
respect to any policies carried by Landlord.
14. ASSIGNMENT, MORTGAGING, SUBLETTING, ETC.
Tenant covenants and agrees that neither this Lease nor the term and
estate hereby granted nor any interest herein or therein, will be assigned,
mortgaged, pledged, encumbered or otherwise transferred (whether voluntarily
or by operation of law), and that neither the Demised Premises, nor any part
thereof, will be encumbered in any manner by reason of any act or omission on
the part of Tenant, or used or occupied, or permitted to be used or occupied,
or utilized for any reason whatsoever, by anyone other than Tenant, or for
any use or purpose other than as stated in Article 1, or be sublet, without
the prior written consent of Landlord in every case. Such consent shall not,
in the case of a proposed subletting, be unreasonably withheld or delayed.
In connection with any request by Tenant for such consent, Tenant shall
submit to Landlord, in writing, a statement containing all of the terms and
provisions upon which the proposed transaction is to occur. If the rent
received by Tenant on account of a proposed assignment or sublease requiring
such consent exceeds the Yearly Fixed Rent and Additional Rent, allocated to
the space subject to the assignment or sublease in the proportion of the area
of such space to the area of the entire Demised Premises, plus actual
out-of-pocket expenses incurred by Tenant in connection therewith, including
brokerage commissions, marketing expenses and the cost of preparing such
space for occupancy, Tenant shall pay to Landlord one hundred (100) percent
of such excess, as received by Tenant. Notwithstanding the foregoing
provisions of this paragraph and except as otherwise hereinafter set forth,
in the event Tenant proposes to assign this Lease or enter into a sublease
such that all or substantially all of the Demised Premises will have been
sublet, Landlord, at Landlord's option, may give to Tenant, within thirty
(30) days after the submission by Tenant to
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Landlord of such proposal, a notice terminating this Lease on the date
(referred to as the "Earlier Termination Date") immediately prior to the
effective date of the proposed assignment or the proposed commencement date
of the term of the proposed subletting, as set forth in such proposal, and,
in the event such notice is given, this Lease and the Term shall come to an
end and expire on the Earlier Termination Date with the same effect as if it
were the date originally fixed in this Lease for the end of the Term of this
Lease, and the Rent shall be apportioned as of said Earlier Termination Date
and any prepaid portion of Rent for any period after such date shall be
refunded by Landlord to Tenant.
The failure by Landlord to exercise its option under this Article with
respect to any assignment or subletting shall not be deemed a waiver of such
option with respect to any extension of such sublease or any subsequent
assignment or subletting. Tenant shall reimburse Landlord promptly, as
Additional Rent, for reasonable legal and other expense incurred by Landlord
in connection with any request by Tenant for any consent required under the
provisions of this Article.
Notwithstanding the foregoing, Tenant may, following notice to Landlord
but without the requirement of obtaining Landlord's consent or affording
Landlord an opportunity to terminate this Lease, and so long as Tenant is not
in default beyond the applicable grace or cure period at the time of such
notice or at any time thereafter until the effective date of the assignment
or the commencement date of the term of the subletting (as the case may be),
assign this Lease or sublease all or any portion of the Demised Premises to
any entity which is a parent, subsidiary or affiliate of Tenant or assign
this Lease to any entity with which Tenant may merge or consolidate or which
results from any such merger or consolidation or to which Tenant may sell all
or substantially all of its assets as a going concern (such entity with which
Tenant may merge or consolidate or which results from any such merger or
consolidation or to which Tenant may sell all or substantially all of its
assets as aforesaid being hereinafter referred to as a "Successor"), provided
however that, forthwith upon any assignment allowed pursuant to this
paragraph, Tenant shall deliver to Landlord an agreement in form and
substance reasonably satisfactory to Landlord which contains an appropriate
covenant of assumption by such assignee, and provided further that in the
case of any such assignment to a Successor, such Successor shall have
financial resources and a general business reputation comparable to those of
Tenant as of the time of such assignment.
The listing of any name other than that of Tenant, whether on the doors
of the Demised Premises or on the Building directory, or otherwise, shall not
operate to vest any right or interest in this Lease or in the Demised
Premises or be deemed to be the written consent of Landlord mentioned in this
Article, it being expressly understood that any such listing is a privilege
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extended by Landlord revocable at will by written notice to Tenant.
If this Lease be assigned, or if the Demised Premises or any part
thereof be sublet or occupied by anybody other than Tenant, Landlord may at
any time and from time to time following any default by Tenant hereunder
beyond the applicable grace period, collect rent and other charges from the
assignee, subtenant or occupant, and apply the net amount collected to the
Rent and other charges herein reserved, but no such collection shall be
deemed a waiver of this covenant, or the acceptance of the assignee,
subtenant or occupant as a tenant, or a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant herein contained.
The consent by Landlord to an assignment or subletting or occupancy shall not
in any way be construed to relieve Tenant from obtaining the express consent
in writing of Landlord to any further assignment or subletting or occupancy.
15. MISCELLANEOUS COVENANTS
15.1 RULES AND REGULATIONS. Tenant and Tenant's servants, employees,
agents, visitors and licensees will faithfully observe such Rules and
Regulations as are attached hereto as Exhibit C and made a part hereof or as
Landlord hereafter at any time or from time to time may make and may
communicate in writing to Tenant and which in the reasonable judgment of
Landlord shall be necessary for the reputation, safety, care or appearance of
the Property, or the preservation of good order therein, or the operation or
maintenance of the Property, or the equipment thereof, or the comfort of
tenants or others in the Building, provided, however, that in the case of any
conflict between the provisions of this Lease and any such Rules and
Regulations, the provisions of this Lease shall control. Such Rules and
Regulations shall be applied in a non-discriminatory manner so as to be
generally applicable to other tenants of the Building whose permitted
business activities are comparable to those of Tenant hereunder, provided
however that nothing contained in this Lease shall be construed to impose
upon Landlord any duty or obligation to enforce such Rules and Regulations or
the terms, covenants or conditions in any other lease as against any other
tenant and Landlord shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors, invitees or
licensees. Notwithstanding any conflicting provisions of Exhibit C or any
other Rules and Regulations, Tenant be entitled within the Demised Premises
to make use of microwave ovens and other food preparation equipment not
requiring exterior venting.
15.2 ACCESS TO PREMISES - SHORING. Tenant shall: (i) permit Landlord
to erect, use and maintain pipes, ducts and conduits in and through the
Demised Premises, provided the same do not materially reduce the floor area
or materially adversely affect the appearance thereof and are concealed
wherever
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practicable below floors, above finished ceilings or beyond finished walls;
(ii) permit the Landlord and any Mortgagee to have free and unrestricted
access to and to enter upon the Demised Premises at all reasonable hours upon
prior oral or written notice (except in case of emergency) for the purposes
of inspection or of making repairs, replacements or improvements in or to the
Demised Premises or the Building or equipment (including, without limitation,
sanitary, electrical, heating, air conditioning or other systems) or of
complying with all laws, orders and requirements of governmental or other
authority or of exercising any right reserved to Landlord by this Lease
(including the right during the progress of any such repairs, replacements or
improvements or while performing work and furnishing materials in connection
with compliance with any such laws, orders or requirements to take upon or
through, or to keep and store within, the Demised Premises all necessary
materials, tools and equipment); and (iii) permit Landlord, at reasonable
times upon prior oral or written notice, to show the Demised Premises during
ordinary business hours to any Mortgagee, prospective purchaser of any
interest of Landlord in the Property, prospective Mortgagee, or prospective
assignee of any Mortgage, and during the period of twelve months next
preceding the Termination Date to any person contemplating the leasing of the
Demised Premises or any part thereof. If Tenant shall not be personally
present to open and permit any entry into the Demised Premises at any time
when for any reason an entry therein shall be necessary or permissible
following notice (to the extent hereinabove required), Landlord or Landlord's
agents must nevertheless be able to gain such entry by contacting a
responsible representative of Tenant, whose name, address and telephone
number shall be furnished by Tenant, or (at Landlord's election) by using
keys to the Demised Premises in Landlord's possession. Locks serving the
Demised Premises shall not be altered or replaced, nor shall new locks be
added by Tenant without the prior written consent of Landlord in every case
(which consent shall not be unreasonably withheld or delayed). Provided that
Landlord shall (except in case of emergency) incur no additional expense
thereby, Landlord shall exercise its rights of access to the Demised Premises
permitted under any of the terms and provisions of this Lease (including
Landlord's right to keep and store materials, tools and equipment therein as
hereinabove set forth) in such manner as to minimize to the extent
practicable interference with Tenant's use and occupation of the Demised
Premises. If an excavation shall be made upon land adjacent to the Demised
Premises or shall be authorized to be made, Tenant shall afford, to the
person causing or authorized to cause such excavation (subject to the same
provisions applicable hereunder in the case of work to be performed by
Landlord), license to enter upon the Demised Premises for the purpose of
doing such work as said person shall deem necessary to preserve the Building
from injury or damage and to support the same by proper foundations without
any claim for damage or indemnity against Landlord, or diminution or
abatement of Rent.
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15.3 ACCIDENTS TO SANITARY AND OTHER SYSTEMS. Tenant shall give to
Landlord prompt notice of any fire or accident in the Demised Premises or in
the Building and of any damage to, or defective condition in, any part or
appurtenance of the Building's systems located in, or passing through, the
Demised Premises.
15.4 SIGNS, BLINDS AND DRAPES. Tenant shall not place any signs on the
exterior of the Building or on or in any window, public corridor or door
visible from the exterior of the Demised Premises. Landlord shall include
Tenant's name (together with the names of up to seven (7) authorized
subtenants and/or individuals having offices in the Demised Premises) in any
standard Building directory maintained by Landlord and shall affix, or permit
Tenant to affix, signage outside the main entryway of the Demised Premises
identifying Tenant as an occupant thereof, provided however that the exact
size, design and location of any such sign shall be subject to Landlord's
prior approval. No blinds may be put on or in any window nor may any
Building drapes or blinds be removed by Tenant. Tenant may hang its own
drapes, provided that they shall not, without the prior written approval of
Landlord, in any way interfere with any Building drapery or blinds or be
visible from the exterior of the Building.
15.5 ESTOPPEL CERTIFICATE. Tenant shall at any time and from time to
time upon not less than ten (10) days' prior notice by Landlord to Tenant,
execute, acknowledge and deliver to Landlord a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), and the dates to which Rent has been
paid in advance, if any, and stating whether or not to the best knowledge of
the signer of such certificate Landlord is in default in performance of any
covenant, agreement, term, provisions or condition contained in this Lease
and, if so, specifying each such default of which the signer may have
knowledge, it being intended that any such statement delivered pursuant
hereto may be relied upon by any prospective purchaser of any interest of
Landlord in the Property, any Mortgagee or prospective Mortgagee, any
prospective assignee of any Mortgage, or any other party reasonably
designated by Landlord.
15.6 PROHIBITED ITEMS. Tenant shall not bring or permit to be brought
or kept in or on the Demised Premises or elsewhere in the Building any
hazardous, inflammable, combustible or explosive fluid, material, chemical or
substance (except such as are related to Tenant's use of the Demised
Premises, provided that the same are stored and handled in a proper fashion
consistent with applicable legal standards).
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15.7 REQUIREMENTS OF LAW - FINES AND PENALTIES. Tenant at its sole
expense shall comply with all laws, rules, orders and regulations of Federal,
State, County and Municipal Authorities and with any direction of any public
officer or officers, pursuant to law, which shall impose any duty upon
Landlord or Tenant with respect to and arising out of Tenant's use or
occupancy of the Demised Premises, provided however that Landlord shall be
responsible for compliance therewith to the extent necessary to allow the
continued use of the Demised Premises for general office purposes. In
particular, Tenant shall be responsible for compliance with requirements
imposed by the Americans with Disabilities Act relative to the layout of the
Demised Premises and any work performed by Tenant therein, including without
limitation all such requirements applicable to removing barriers, furnishing
auxiliary aids and insuring that, whenever alterations are made, the affected
portions of the Demised Premises are readily accessible to and usable by
individuals with disabilities. Notwithstanding the foregoing, Landlord shall
be responsible for compliance with any requirements imposed by said Act
relative to the entryways, elevators and other common areas of the Property.
If Tenant receives notice of any violation of law, ordinance, order or
regulation applicable to the Demised Premises, it shall give prompt notice
thereof to Landlord.
15.8 TENANT'S ACTS - EFFECT ON INSURANCE. Tenant shall not do or permit
to be done any act or thing upon the Demised Premises or elsewhere in the
Building which will invalidate or be in conflict with any insurance policies
covering the Building and the fixtures and property therein and shall not do,
or permit to be done, any act or thing upon the Demised Premises which shall
subject Landlord to any liability or responsibility for injury to any person
or persons or to property by reason of any business or operation being
conducted on the Demised Premises or for any other reason. Tenant at its own
expense shall comply with all rules, orders, regulations or requirements of
the Board of Fire Underwriters or any other similar body having jurisdiction,
and shall not (i) do, or permit anything to be done, in or upon the Demised
Premises, or bring or keep anything therein, except as now or hereafter
permitted by the Fire Department, Board of Underwriters, Fire Insurance
Rating Organization, or other authority having jurisdiction, and then only in
such quantity and manner of storage as will not increase the rate for any
insurance applicable to the Building, or (ii) use the Demised Premises in a
manner which shall increase such insurance rates on the Building or on
property located therein, over that applicable when Tenant first took
occupancy of the Demised Premises hereunder (unless Tenant pays such
increase). If by reason of failure of Tenant to comply with the provisions
hereof the insurance rate applicable to any policy of insurance shall at any
time thereafter be higher than it otherwise would be, then Tenant shall
reimburse Landlord for that part of any insurance premiums thereafter paid by
Landlord, which shall have been charged because of such failure by Tenant.
Landlord acknowledges that the installation and use
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of a generator in accordance with Section 27.9 will not violate the
provisions of this Section or require Tenant to pay any increased insurance
premiums hereunder.
15.9 MISCELLANEOUS. Tenant shall not suffer or permit the Demised
Premises or any fixtures, equipment or utilities therein or serving the same,
to be overloaded, damaged or defaced.
16. DAMAGE BY FIRE, ETC.
Landlord shall keep in force casualty insurance with respect to the
Building in an amount approximately equal to the full replacement cost
thereof. Such insurance shall afford protection against fire and the other
perils customarily covered by a so-called "all risk" policy.
In the event of loss of, or damage to, the Demised Premises or the
Building by fire or other casualty, the rights and obligations of the parties
hereto shall be as follows:
(a) If the Demised Premises, or any part thereof, shall be damaged
by fire or other casualty, Tenant shall give prompt notice thereof to
Landlord, and Landlord, upon receiving such notice, shall proceed promptly
and with due diligence, subject to unavoidable delays, to repair, or cause to
be repaired, such damage. If the Demised Premises or any part thereof shall
be rendered untenantable by reason of such damage, whether to the Demised
Premises or to the Building, Yearly Fixed Rent and Additional Rent payable
pursuant to Sections 6.2 and 6.3 shall proportionately abate for the period
from the date of such damage to the date when such damage shall have been
repaired.
(b) If, as a result of fire or other casualty, the whole or a
substantial portion of the Building or the Demised Premises is rendered
untenantable, Landlord, within ninety (90) days from the date of such fire or
casualty, may terminate this Lease by notice to Tenant, specifying a date not
less than twenty (20) nor more than forty (40) days after the giving of such
notice on which the Term of this Lease shall terminate. If Landlord does not so
elect to terminate this Lease, then Landlord shall proceed with diligence to
repair the damage to the Demised Premises and all facilities serving the same,
if any, which shall have occurred, and the Yearly Fixed Rent and Additional Rent
payable pursuant to Sections 6.2 and 6.3 shall meanwhile proportionately abate,
all as provided in Paragraph (a) of this Section. However, if such damage is
not repaired and the Demised Premises restored to substantially the same
condition as they were prior to such damage within six (6) months from the date
of such damage, Tenant within thirty (30) days from the expiration of such six
(6) month period or from the expiration of any extension thereof by reason of
unavoidable delays as hereinafter provided, may terminate this Lease by notice
to Landlord, specifying a date not more than sixty (60) days after the giving of
such notice on which the Term of this Lease shall terminate.
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The period within which the required repairs may be accomplished shall be
extended by the number of days, not to exceed ninety (90) days, lost as a
result of unavoidable delays, which term shall be defined to include all
delays referred to in Article 24.
(c) If the Demised Premises shall be rendered untenantable by fire
or other casualty during the last year of the Term of this Lease, either
party may terminate this Lease effective as of the date of such fire or other
casualty upon notice to the other given within thirty (30) days after such
fire or other casualty.
(d) Landlord shall not be required to repair or replace any of
Tenant's business machinery, equipment, cabinet work, furniture, personal
property or other installations made by Tenant (all of which shall, however,
be restored by Tenant within a reasonable time after Landlord shall have
completed any repair or restoration required under the terms of this
Article), and no damages, compensation or claim shall be payable by Landlord
for inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Demised Premises or of the Building. Any
insurance proceeds received by Tenant in connection with such loss or damage
shall be applied by Tenant to such repair or restoration to the extent
reasonably necessary to accomplish the same.
(e) The provisions of this Article shall be considered an express
agreement governing any instance of damage or destruction of the Building or
the Demised Premises by fire or other casualty, and any law now or hereafter
in force providing for such a contingency in the absence of express agreement
shall have no application.
(f) In the event of any termination of this Lease pursuant to this
Article, the Term of this Lease shall expire as of the effective termination
date as fully and completely as if such date were the date herein originally
scheduled as the Termination Date.
(g) Landlord's Architect's certificate, given in good faith, shall
be deemed conclusive of the statements therein contained and binding upon
Tenant with respect to the performance and completion of any repair or
restoration work undertaken by Landlord pursuant to this Article or Article 18.
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17. WAIVER OF SUBROGATION
In any case in which Tenant shall be obligated under any provision of
this Lease to pay to Landlord any loss, cost, damage, liability, or expense
suffered or incurred by Landlord, Landlord shall allow to Tenant as an offset
against the amount thereof (i) the net proceeds of any insurance collected by
Landlord for or on account of such loss, cost, damage, liability or expense,
provided that the allowance of such offset does not invalidate or prejudice
the policy or policies under which such proceeds were payable and (ii) if
such loss, cost, damage, liability or expense shall have been caused by a
peril against which Landlord has agreed to procure insurance coverage under
the terms of this Lease, the amount of such insurance coverage, if not
actually procured by Landlord.
In any case in which Landlord shall be obligated under any provision of
this Lease to pay to Tenant any loss, cost, damage, liability or expense
suffered or incurred by Tenant, Tenant shall allow to Landlord as an offset
against the amount thereof (i) the net proceeds of any insurance collected by
Tenant for or on account of such loss, cost, damage, liability, or expense,
provided that the allowance of such offset does not invalidate the policy or
policies under which such proceeds were payable and (ii) if such loss, cost,
damage, liability or expense shall have been caused by a peril against which
Tenant has agreed to procure insurance coverage under the terms of this
Lease, the amount of such insurance coverage, if not actually procured by
Tenant.
The parties hereto shall each endeavor to procure an appropriate clause
in, or endorsement on, any fire or extended coverage insurance policy
covering the Demised Premises and the Building and personal property,
fixtures and equipment located thereon or therein, pursuant to which the
insurance companies waive subrogation or consent to a waiver of right of
recovery, and having obtained such clauses and/or endorsements of waiver of
subrogation or consent to a waiver of right of recovery each party hereby
agrees that it will not make any claim against or seek to recover from the
other for any loss or damage to its property or the property of others
resulting from fire or other perils covered by such fire and extended
coverage insurance; provided, however, that the release, discharge,
exoneration and covenant not to sue herein contained shall be limited by the
terms and provisions of the waiver of subrogation clauses and/or endorsements
or clauses and/or endorsements consenting to a waiver of right of recovery
and shall be co-extensive therewith. If either party may obtain such clause
or endorsement only upon payment of an additional premium, such party shall
promptly so advise the other party and shall be under no obligation to obtain
such clause or endorsement unless such other party pays the premium.
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18. CONDEMNATION - EMINENT DOMAIN
In the event that the whole or any part of the Building shall be taken
or appropriated by eminent domain or shall be condemned for any public or
quasi-public use, or (by virtue of any such taking, appropriation or
condemnation) shall suffer any damage (direct, indirect or consequential) for
which Landlord or Tenant shall be entitled to compensation then (and in any
such event) this Lease and the Term hereof may be terminated at the election
of Landlord by a notice in writing of its election so to terminate which
shall be given by the Landlord to Tenant within sixty (60) days following the
date on which Landlord shall have received notice of such taking,
appropriation or condemnation. In the event that a substantial part of the
Demised Premises or of the means of access thereto within the perimeter of
the Property shall be so taken, appropriated or condemned, then (and in any
such event) this Lease and the Term hereof may be terminated at the election
of Tenant by a notice in writing of its election so to terminate which shall
be given by Tenant to Landlord within sixty (60) days following the date on
which Tenant shall have received notice of such taking, appropriation or
condemnation.
Upon the giving of any such notice of termination (either by Landlord or
Tenant) this Lease and the Term hereof shall terminate on or retroactively as
of the date on which Tenant shall be required to vacate any part of the
Demised Premises or shall be deprived of a substantial part of the means of
access thereto, provided, however, that Landlord may in Landlord's notice
elect to terminate this Lease and the Term hereof retroactively as of the
date on which such taking, appropriation or condemnation became legally
effective. In the event of any such termination, this Lease and the Term
hereof shall expire as of the effective termination date as fully and
completely as if such date were the date herein originally scheduled as the
Termination Date. If neither party (having the right so to do) elects to
terminate Landlord will, with reasonable diligence and at Landlord's expense,
restore the remainder of the Demised Premises, or the remainder of the means
of access, as nearly as practicably may be to the same condition as obtained
prior to such taking, appropriation or condemnation in which event (i) a just
proportion of the Yearly Fixed Rent and Additional Rent payable pursuant to
Sections 6.2 and 6.3, according to the nature and extent of the taking,
appropriation or condemnation and the resulting permanent injury to the
Demised Premises and the means of access thereto, shall be permanently
abated, and (ii) a just proportion of the remainder of the Yearly Fixed Rent
and Additional Rent payable pursuant to Sections 6.2 and 6.3, according to
the nature and extent of the taking, appropriation or condemnation and the
resultant injury sustained by the Demised Premises and the means of access
thereto, shall be abated until what remains of the Demised Premises and the
means of access thereto shall have been restored as fully as may be for
permanent
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use and occupation by Tenant hereunder. Except for any award specifically
reimbursing Tenant for moving or relocation expenses, there are expressly
reserved to Landlord all rights to compensation and damages created, accrued
or accruing by reason of any such taking, appropriation or condemnation, in
implementation and in confirmation of which Tenant does hereby acknowledge
that Landlord shall be entitled to receive and retain all such compensation
and damages, grants to Landlord all and whatever rights (if any) Tenant may
have to such compensation and damages, and agrees to execute and deliver all
and whatever further instruments of assignment as Landlord may from time to
time request. In the event of any taking of the Demised Premises or any part
thereof for temporary use, (i) this Lease shall be and remain unaffected
thereby, and (ii) Tenant shall be entitled to receive for itself any award
made for such use, provided, that if any taking is for a period extending
beyond the Term of this Lease, such award shall be apportioned between
Landlord and Tenant as of the Termination Date.
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19. DEFAULT
19.1 CONDITIONS OF LIMITATION - RE-ENTRY - TERMINATION. This Lease and
the herein term and estate are upon the condition that if (a) Tenant shall
neglect or fail to perform or observe any of the Tenant's covenants herein,
including (without limitation) the covenants with regard to the payment when
due of Rent; or (b) Tenant shall be involved in financial difficulties as
evidenced by an admission in writing by Tenant of Tenant's inability to pay
its debts generally as they become due, or by the making or offering to make
a composition of its debts with its creditors; or (c) Tenant shall make an
assignment or trust mortgage, or other conveyance or transfer of like nature,
of all or a substantial part of its property for the benefit of its
creditors; or (d) the leasehold hereby created shall be taken on execution or
by other process of law and shall not be revested in Tenant within sixty (60)
days thereafter; or (e) a receiver, sequester, trustee or similar officer
shall be appointed by a court of competent jurisdiction to take charge of all
or a substantial part of Tenant's property and such appointment shall not be
vacated within sixty (60) days; or (f) any proceeding shall be instituted by
or against Tenant pursuant to any of the provisions of any Act of Congress or
State law relating to bankruptcy, reorganization, arrangements, compositions
or other relief from creditors, and, in the case of any such proceeding
instituted against it, if Tenant shall fail to have such proceeding dismissed
within thirty (30) days or if Tenant is adjudged bankrupt or insolvent as a
result of any such proceeding; or (g) any event shall occur or any
contingency shall arise whereby this Lease, or the term and estate thereby
created, would (by operation of law or otherwise) devolve upon or pass to any
person, firm or corporation other than Tenant, except as expressly permitted
under Article 14 hereof - then, and in any such event (except as hereinafter
in Article 19.2 otherwise provided) Landlord may, in a manner consistent with
applicable law, immediately or at any time thereafter declare this Lease
terminated by notice to Tenant, in which case (and without prejudice to any
remedies which might otherwise be available for arrears of Rent or preceding
breach of covenant and without prejudice to Tenant's liability for damages as
hereinafter stated), this Lease shall terminate. As used in items (b), (c),
(e) and (f) of this Section, the term "Tenant" shall also be deemed to refer
to any guarantor of Tenant's obligations hereunder.
19.2 DAMAGES - ASSIGNMENT FOR BENEFIT OF CREDITORS.
[Intentionally Omitted]
19.3 DAMAGES - TERMINATION. Upon the termination of this Lease under
the provisions of this Article, then except as hereinabove in Section 19.2
otherwise provided, Tenant shall pay to Landlord the Rent payable by Tenant
to Landlord up to the time of such termination, shall continue to be liable
for any
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preceding breach of covenant, and in addition, shall pay to Landlord as
damages, at the election of Landlord
either:
(x) the amount by which, at the time of the termination of this
Lease (or at any time thereafter if Landlord shall have initially elected
damages under Subparagraph (y), below), (i) the aggregate of the Rent
projected over the period commencing with such time and ending on the
originally-scheduled Termination Date as stated in Article 1 exceeds (ii) the
aggregate projected rental value of the Demised Premises for such period,
or,
(y) amounts equal to the Rent which would have been payable by
Tenant had this Lease not been so terminated, payable upon the due dates
therefor specified herein following such termination and until the
originally-scheduled Termination Date as specified in Article 1, provided,
however, if Landlord shall re-let the Demised Premises during such period,
that Landlord shall credit Tenant with the net rents received by Landlord
from such re-letting, such net rents to be determined by first deducting from
the gross rents as and when received by Landlord from such re-letting the
expenses incurred or paid by Landlord in terminating this Lease, as well as
the expenses of re-letting, including altering and preparing the Demised
Premises for new tenants, brokers' commissions, and all other similar and
dissimilar expenses properly chargeable against the Demised Premises and the
rental therefrom, it being understood that any such re-letting may be for a
period equal to or shorter or longer than the remaining term of this Lease;
and provided, further, that (i) in no event shall Tenant be entitled to
receive any excess of such net rents over the sums payable by Tenant to
Landlord hereunder and (ii) in no event shall Tenant be entitled in any suit
for the collection of damages pursuant to this Subparagraph (y) to a credit
in respect of any net rents from a re-letting except to the extent that such
net rents are actually received by Landlord. If the Demised Premises or any
part thereof should be re-let in combination with other space, then proper
apportionment on a square foot area basis shall be made of the rent received
from such re-letting and of the expenses of re-letting. Landlord shall
endeavor in good faith to mitigate damages payable pursuant to the provisions
of this subparagraph.
Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord from time to time at its election, and
nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when the term of this Lease would have expired if it had not
been terminated hereunder.
Nothing herein contained shall be construed as limiting or precluding
the recovery by Landlord against Tenant of any sums or damages to which, in
addition to the damages particularly provided above, Landlord may lawfully be
entitled by reason of
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any default hereunder on the part of Tenant.
19.4 FEES AND EXPENSES. If Tenant shall default in the performance of
any covenant on Tenant's part to be performed as in this Lease contained,
Landlord may immediately, or at any time thereafter, subject (except in case
of emergency) to notice and expiration of the applicable grace period,
perform the same for the account of Tenant. If Landlord at any time is
compelled to pay or elects to pay any sum of money, or do any act which will
require the payment of any sum of money, by reason of the failure of Tenant
to comply with any provision hereof, or if Landlord is compelled to or does
incur any expense, including without limitation reasonable attorneys' fees,
in instituting, prosecuting and/or defending any action or proceeding arising
by reason of any default of Tenant hereunder, Tenant shall on demand pay to
Landlord by way of reimbursement the sum or sums so paid by Landlord.
Without limiting the generality of the foregoing, in the event that any Rent
is more than ten (10) days in arrears, Tenant shall pay, as Additional Rent,
a delinquency charge equal to two and one-half percent (2-1/2%) of the
arrearage for each calendar month (or fraction thereof) during which it
remains unpaid.
19.5 LANDLORD'S REMEDIES NOT EXCLUSIVE. The specified remedies to which
Landlord may resort hereunder are cumulative and are not intended to be
exclusive of any remedies or means of redress to which Landlord may at any
time be lawfully entitled, and Landlord may invoke any remedy (including
without limitation the remedy of specific performance) allowed at law or in
equity as if specific remedies were not herein provided for.
19.6 GRACE PERIOD. Notwithstanding anything to the contrary in this
Article contained, Landlord agrees that this Lease will not terminate and
that Landlord will not take any action to terminate this Lease (a) for
default by Tenant in the payment when due of Rent, if Tenant shall cure such
default within ten (10) days after written notice thereof given by Landlord
to Tenant, or (b) for default by Tenant in the performance of any other
covenant, if Tenant shall cure such default within a period of thirty (30)
days after written notice thereof given by Landlord to Tenant (except where
the nature of the default is such that remedial action should appropriately
take place sooner, as indicated in such written notice), or with respect to
covenants other than to pay a sum of money within such additional period as
may reasonably be required to cure such default if (because of governmental
restrictions or any other cause beyond the reasonable control of Tenant) the
default is of such a nature that it cannot be cured within such thirty
(30)-day period, provided, however, (1) that there shall be no extension of
time beyond such thirty (30)-day period for the curing of any such default
unless, not more than twenty-five (25) days after the receipt of the notice
of default, Tenant in writing (i) shall specify the cause on account of which
the default cannot be cured during such period and shall advise Landlord of
its intention
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duly to institute all steps necessary to cure the default and (ii) shall as
soon as may be reasonable duly institute and thereafter diligently prosecute
to completion all steps necessary to cure such default and, (2) that no
notice of the opportunity to cure a default need be given, and no grace
period whatsoever shall be allowed to Tenant, if the covenant or condition
the breach of which gave rise to the default had, by reason of a breach on a
prior occasion during the preceding twelve (12) month period, been the
subject of a notice hereunder to cure such default.
20. END OF TERM - ABANDONED PROPERTY
Upon the expiration or other termination of the Term of this Lease,
Tenant shall peaceably quit and surrender to Landlord the Demised Premises
and all alterations and additions thereto which Tenant is not entitled or
required to remove under the provisions of this Lease, broom clean in good
order, repair and condition excepting only reasonable use and wear and damage
by fire or other casualty for which, under other provisions of this Lease,
Tenant has no responsibility of repair or restoration. Tenant's obligation
to observe or perform this covenant shall survive the expiration or other
termination of the Term of this Lease. If the last day of the Term of this
Lease or any renewal thereof falls on a day other than a Business Day, this
Lease shall expire on the Business Day immediately preceding.
Any personal property in which Tenant has an interest which shall remain
in the Building or on the Demised Premises after the expiration or
termination of the Term of this Lease shall be conclusively deemed to have
been abandoned, and may be disposed of in such manner as Landlord may see
fit; provided, however, notwithstanding the foregoing, that Tenant will, upon
request of Landlord made not later than thirty (30) days after the expiration
or termination of the Term hereof, promptly remove from the Building any such
personal property or, if any part thereof shall be sold, that Landlord may
receive and retain the proceeds of such sale and apply the same, at its
option, against the expenses of the sale, the cost of moving and storage, any
arrears of Rent payable hereunder by Tenant to Landlord and any damages to
which Landlord may be entitled under Article 19 hereof or pursuant to law,
with the balance if any, to be paid to Tenant.
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21. RIGHTS OF MORTGAGEES
21.1 SUPERIORITY OF LEASE. Except to the extent that it may be provided
otherwise by written agreement between Tenant and a Mortgagee, this Lease
shall be superior, and shall not be subordinated, to a Mortgage or to any
other voluntary lien or encumbrance affecting the Land or Building or any
part thereof and hereafter granted by Landlord. Any Mortgagee shall have the
right, at its option, to subordinate its Mortgage to this Lease, in whole or
in part, by recording a unilateral declaration to such effect.
21.2 ENTRY AND POSSESSION. Upon entry and taking possession of the
Property by a Mortgagee, for the purpose of foreclosure or otherwise, such
Mortgagee shall have all the rights of Landlord, and shall be liable to
perform all the obligations of Landlord arising during the period of such
possession, provided, however, that upon the return of possession to Landlord
by such Mortgagee, such rights and obligations of Mortgagee shall cease until
a subsequent entry.
21.3 RIGHT TO CURE. No act or failure to act on the part of Landlord
which would entitle Tenant under the terms of this Lease, or by law, to be
relieved of Tenant's obligations hereunder or to terminate this Lease, shall
result in a release or termination of such obligations or a termination of
this Lease unless (i) Tenant shall have first given written notice of
Landlord's act or failure to act to first Mortgagees of record, if any, and
to any other Mortgagees of whom Tenant has been given written notice,
specifying the act or failure to act on the part of Landlord which could or
would give basis to Tenant's rights; and (ii) such Mortgagees, after receipt
of such notice, have failed or refused to correct or cure the condition
complained of within a reasonable time thereafter, but nothing contained in
this paragraph shall be deemed to impose any obligation on any such
Mortgagees to correct or cure any such condition. "Reasonable time" as used
above means and includes a reasonable time to obtain possession of the Land
and Building if any such Mortgagee elects to do so and a reasonable time to
correct or cure the condition if such condition is determined to exist,
provided that such Mortgagee shall investigate the condition complained of
within thirty (30) days after notice thereof and thereafter pursue any
required corrective action with all due diligence.
21.4 PREPAID RENT. No Rent shall be paid more than thirty (30) days
prior to the due dates thereof and, as to a first Mortgagee of record and any
other Mortgagees of whom Tenant has been given written notice, payments made
in violation of this provision shall (except to the extent that such rents
are actually received by such Mortgagee) be a nullity as against such
Mortgagee and Tenant shall be liable for the amount of such payments to such
Mortgagee.
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21.5 CONTINUING OFFER. The covenants and agreements contained in this
Lease with respect to the rights, powers and benefits of a Mortgagee
(particularly, without limitation thereby, the covenants and agreements
contained in this Article) constitute a continuing offer to any person,
corporation or other entity, which by accepting or requiring an assignment of
this Lease or by entry or foreclosure assumes the obligations herein set
forth with respect to such Mortgagee; every such Mortgagee is hereby
constituted a party to this Lease as an obligee hereunder to the same extent
as though its name was written hereon as such; and such Mortgagee shall be
entitled to enforce such provisions in its own name.
21.6 SUBORDINATION. Notwithstanding the foregoing provisions of this
Article, Tenant agrees, at Landlord's request, to execute and deliver
promptly any certificate or other instrument which Landlord may request
subordinating this Lease and all rights of Tenant hereunder to any Mortgage,
and to all advances made under such Mortgage and/or agreeing to attorn to
such Mortgagee in the event that it succeeds to Landlord's interest in the
Property, provided that (i) the holder of any such Mortgage shall execute and
deliver to Tenant a non-disturbance agreement to the effect that, in the
event of any foreclosure of such Mortgage, such holder will not name Tenant
as a party defendant to such foreclosure nor disturb its possession under the
Lease and will otherwise recognize Tenant's rights hereunder, or (ii) any
such Mortgage shall contain provisions substantially to the same effect as
those contained in such a non-disturbance agreement. Landlord warrants and
represents that the Property is not presently subject to any Mortgage
21.7 LIMITATIONS ON LIABILITY. Nothing contained in the foregoing
Section 21.6 or in any such non-disturbance agreement or non-disturbance
provision shall however, affect the prior rights of the holder of any
Mortgage with respect to the proceeds of any award in condemnation or of any
fire insurance policies affecting the Building, or impose upon any such
holder any liability (i) for the erection or completion of the Building, or
(ii) in the event of damage or destruction to the Building or the Demised
Premises by fire or other casualty, for any repairs, replacements, rebuilding
or restoration except such repairs, replacements, rebuilding or restoration
as can reasonably be accomplished from the net proceeds of insurance actually
received by, or made available to, such holder, or (iii) for any default by
Landlord under the Lease occurring prior to any date upon which such holder
shall become Tenant's landlord, or (iv) for any credits, offsets or claims
against the Rent as a result of any acts or omissions of Landlord committed
or omitted prior to such date, or (v) for return of any security deposit or
other funds unless the same shall have been received by such holder, and any
such agreement or provision may so state.
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22. QUIET ENJOYMENT
Landlord covenants that if, and so long as, Tenant keeps and performs
each and every covenant, agreement, term, provision and condition herein
contained on the part and on behalf of Tenant to be kept and performed,
Tenant shall quietly enjoy the Demised Premises from and against the claims
of all persons claiming by, through or under Landlord subject, nevertheless,
to the covenants, agreements, terms, provisions and conditions of this Lease
and to all Mortgages to which this Lease is subject and subordinate.
Without incurring any liability to Tenant, Landlord may permit access to
the Demised Premises and open the same, whether or not Tenant shall be
present, upon any demand of any sheriff, marshall or court officer entitled
to, or reasonably purporting to be entitled to, such access for any lawful
purpose (but this provision and any action by Landlord hereunder shall not be
deemed a recognition by Landlord that the person or official making such
demand has any right or interest in or to this Lease, or in or to the Demised
Premises), or upon demand of any representative of the fire, police,
building, sanitation or other department of the city, county, state or
federal governments. Landlord shall endeavor to give Tenant prior oral or
written notice of any access to the Demised Premises hereunder unless
prohibited from doing so by the person making such demand.
23. ENTIRE AGREEMENT - WAIVER - SURRENDER
23.1 ENTIRE AGREEMENT. This Lease and the Exhibits made a part hereof
contain the entire and only agreement between the parties and any and all
statements and representations, written and oral, including previous
correspondence and agreements between the parties hereto, are merged herein.
Tenant acknowledges that all representations and statements upon which it
relied in executing this Lease are contained herein and that Tenant in no way
relied upon any other statements or representations, written or oral. Any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of this Lease in whole or in part unless
such executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
Nothing herein shall prevent the parties from agreeing to amend this Lease
and the Exhibits made a part hereof as long as such amendment shall be in
writing and shall be duly signed by both parties.
23.2 WAIVER. The failure of either party to seek redress for violation,
or to insist upon the strict performance, of any covenant or condition of
this Lease, or (in the case of Landlord) any of the Rules and Regulations
promulgated hereunder, shall not prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of
an original
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violation. The receipt by Landlord of Rent with knowledge of the breach of
any covenant of this Lease shall not be deemed a waiver of such breach. The
failure of Landlord to enforce any of such Rules and Regulations against
Tenant and/or any other tenant or subtenant in the Building shall not be
deemed a waiver of any such Rules and Regulations. No provisions of this
Lease shall be deemed to have been waived by either party unless such waiver
be in writing signed by such party. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly rent herein stipulated shall be
deemed to be other than on account of the stipulated rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy in this Lease provided.
23.3 SURRENDER. No act or thing done by Landlord during the term hereby
demised shall be deemed an acceptance of a surrender of the Demised Premises,
and no agreement to accept such surrender shall be valid, unless in writing
signed by Landlord. No employee of Landlord or of Landlord's agents shall
have any power to accept the keys of the Demised Premises prior to the
termination of this Lease. The delivery of keys to any employee of Landlord
or of Landlord's agents shall not operate as a termination of the Lease or a
surrender of the Demised Premises.
24. INABILITY TO PERFORM - EXCULPATORY CLAUSE
Except as otherwise expressly provided in this Lease, this Lease and the
obligations of Tenant to pay Rent hereunder and perform all other covenants,
agreements, terms, provisions and conditions hereunder on the part of Tenant
to be performed shall in no way be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease or is
unable to supply or is delayed in supplying any service expressly or
impliedly to be supplied or is unable to make or is delayed in making any
repairs, replacements, additions, alterations, improvements or decorations or
is unable to supply or is delayed in supplying any equipment or fixtures if
Landlord is prevented or delayed from doing so by reason of strikes or labor
troubles or any other similar or dissimilar cause whatsoever beyond
Landlord's reasonable control, including but not limited to, governmental
preemption in connection with a national emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any
governmental agency or by reason of the conditions of supply and demand which
have been or are affected by war, hostilities or other similar or dissimilar
emergency. In each such instance of inability of Landlord to perform,
Landlord shall exercise reasonable diligence to eliminate the cause of such
inability to perform.
Tenant shall neither assert nor seek to enforce any claim for breach of
this Lease against any of Landlord's assets other
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than Landlord's interest in the Property and in the rents, issues and profits
thereof, and Tenant agrees to look solely to such interest for the
satisfaction of any liability of Landlord under this Lease, it being
specifically agreed that in no event shall Landlord (which term shall
include, without limitation any of the officers, trustees, directors,
partners, beneficiaries, joint venturers, members, stockholders or other
principals or representatives, disclosed or undisclosed, of Landlord or any
managing agent) ever be personally liable for any such liability. This
paragraph shall not limit any right that Tenant might otherwise have to
obtain injunctive relief against Landlord or to take any other action which
shall not involve the personal liability of Landlord to respond in monetary
damages from Landlord's assets other than the Landlord's interest in said
real estate, as aforesaid. In no event shall Landlord ever be liable for
consequential damages.
25. BILLS AND NOTICES
Any notice, consent, request, bill, demand or statement hereunder by
either party to the other party shall (except as otherwise herein specified)
be in writing and either delivered or served personally or sent by certified
or registered mail, return receipt requested, in a postpaid envelope,
deposited in the United States mails addressed to the respective party at its
Address as stated in Article 1, or if any Address for notices shall have been
duly changed as hereinafter provided, if mailed as aforesaid to the party at
such changed Address. Either party may at any time change the Address for
such notices, consents, requests, bills, demands or statements by delivering
or mailing, as aforesaid, to the other party a notice stating the change and
setting forth the changed Address, provided such changed address is within
the United States. Any such notice, consent, request, bill, demand or
statement shall be effective when received or refused.
All bills and statements for reimbursement or other payments or charges
due from Tenant to Landlord hereunder shall be due and payable in full thirty
(30) days, unless herein otherwise provided, after submission thereof by
Landlord to Tenant. Tenant's failure to make timely payment of any amounts
indicated by such bills and statements, whether for work done by Landlord at
Tenant's request, reimbursement provided for by this Lease or for any other
sums properly owing by Tenant to Landlord, shall be treated as a default in
the payment of Rent, in which event Landlord shall have all rights and
remedies provided in this Lease for the nonpayment of Rent.
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26. PARTIES BOUND - SEIZIN OF TITLE
The covenants, agreements, terms, provisions and conditions of this
Lease shall bind and benefit the successors and assigns of the parties hereto
with the same effect as if mentioned in each instance where a party hereto is
named or referred to, except that no violation of the provisions of Article
14 hereof shall operate to vest any rights in any successor or assignee of
Tenant and that the provisions of this Article shall not be construed as
modifying the conditions of limitation contained in Article 19 hereof.
If in connection with or as a consequence of the sale, transfer or other
disposition of the real estate (Land and/or Building, either or both, as the
case may be) of which the Demised Premises are a part Landlord ceases to be
the owner of the reversionary interest in the Demised Premises, Landlord
shall be entirely freed and relieved from the performance and observance
thereafter of all covenants and obligations hereunder accruing thereafter on
the part of Landlord to be performed and observed, it being understood and
agreed in such event (and it shall be deemed and construed as a covenant
running with the land) that the person succeeding to Landlord's ownership of
said reversionary interest shall thereupon and thereafter assume, and perform
and observe, any and all of such covenants and obligations of Landlord.
Landlord shall, upon any such sale, transfer or other disposition, remit to
Landlord's successor the security deposit referenced in Section 27.7.
27. MISCELLANEOUS
27.1 SEPARABILITY. If any provision of this Lease or portion of such
provision or the application thereof to any person or circumstance is for any
reason held invalid or unenforceable, the remainder of the Lease (or the
remainder of such provision) and the application thereof to other persons or
circumstances shall not be affected thereby.
27.2 CAPTIONS. The captions are inserted only as a matter of
convenience and for reference, and in no way define, limit or describe the
scope of this Lease nor the intent of any provisions thereof.
27.3 BROKER. Each party represents and warrants that it has not
directly or indirectly dealt, with respect to the leasing of space in the
Building, with any broker or had its attention called to the Demised Premises
or other space to let in the Building, by any broker other than the Broker
listed in Article 1 whose commission shall be the responsibility of Landlord.
Each party agrees to exonerate and save harmless and indemnify the other
against any claims for a commission by any other broker, person or firm, with
whom such party has dealt in connection with the execution and delivery of
this Lease or out of negotiations
-42-
<PAGE>
between Landlord and Tenant with respect to the leasing of other space in the
Building.
27.4 GOVERNING LAW. This Lease is made pursuant to, and shall be
governed by, and construed in accordance with, the laws of the Commonwealth
of Massachusetts.
27.5 ASSIGNMENT OF LEASE AND/OR RENT. With reference to any assignment
by Landlord of its interest in this Lease and/or the Rent payable hereunder,
conditional in nature or otherwise, which assignment is made to or held by a
bank, trust company, insurance company or other institutional lender holding
a Mortgage on the Building, Landlord and Tenant agree:
(a) that the execution thereof by Landlord and acceptance thereof
by such Mortgagee shall never be deemed an assumption by such Mortgagee of
any of the obligations of the Landlord hereunder, unless such Mortgagee
shall, by written notice sent to the Tenant, specifically otherwise elect; and
(b) that, except as aforesaid, such Mortgagee shall be treated as
having assumed the Landlord's obligations hereunder only upon foreclosure of
such Mortgagee's Mortgage and the taking of possession of the Demised
Premises after having given notice of its intention to succeed to the
interest of the Landlord under this Lease.
27.6 NOTICE OF LEASE. Neither party shall record this Lease in any
Registry of Deeds or Registry District, provided however that either party
shall at the request of the other, execute and deliver a recordable Notice of
this Lease in the form prescribed by Chapter 183, Section 4 of the
Massachusetts General Laws.
27.7 SECURITY DEPOSIT. Landlord acknowledges receipt from Tenant of a
deposit in the amount of $16,764.34 to be held by Landlord during the Term of
this Lease as security for the full, faithful and punctual performance by
Tenant of all the covenants of this Lease on Tenant's part to be performed,
it being understood that said deposit is not to be considered prepaid rent,
nor shall damages be limited to the amount of said deposit, nor shall
Landlord be required, because of said deposit, to waive its right under
Article 19 to terminate this Lease in the event of default. Said deposit
shall be refunded to Tenant, without interest, subject to any deductions
necessary on account of Tenant's failure to satisfactorily comply with its
covenants hereunder, following the fifth (5th) anniversary of the Term
Commencement Date, so long as Tenant has not prior thereto been in default
hereunder beyond the applicable grace or cure period, or otherwise following
the termination of the Term of this Lease.
27.8 PARKING. So long as this Lease remains in full force and
effect, Landlord shall allocate to Tenant three (3) unreserved parking spaces
in the garage owned by Landlord at 17 Farnsworth Street, Boston,
Massachusetts. Tenant shall comply
-43-
<PAGE>
with all regulations imposed by Landlord or the operator of any parking
facility used by Tenant hereunder, including without limitation payment of
such fees (currently $170 per space on a monthly basis) as may be generally
applicable from time to time. To the fullest extent permitted by law,
Landlord shall have no responsibility for securing any such parking facility,
nor shall Landlord be liable for any theft, injury or damage occurring
therein.
27.9 EXTERIOR FACILITIES. Landlord will allow Tenant, at Tenant's sole
cost and expense, to the extent permitted by law, and subject in all respects
to the provisions of this Lease, to install, maintain and connect to the
Demised Premises (a) an emergency electrical generator to be placed in the
location shown on Exhibit F attached hereto and made a part hereof and
connected to the Demised Premises through a separate electrical riser
extending from said generator to the electrical room on the first floor of
the Building and thence vertically within the Building's electrical closets
and (b) various heating, ventilating and air conditioning units to be placed
in locations acceptable to Landlord on the roof of the Building and connected
therefrom through said roof to the Demised Premises (said generator and units
being hereinafter collectively referred to as the "Facilities"). All terms
and conditions of this Lease governing alterations, installations, additions
and improvements within the Demised Premises shall be deemed to apply to the
Facilities (including for purposes hereof all equipment related thereto).
Without limiting the generality of the foregoing, (a) Tenant shall keep the
Facilities in good order and condition and make all repairs and replacements
to the Building as may be necessitated in whole or in part by the
installation, maintenance or operation thereof; (b) Tenant shall comply with
all laws, rules, orders, regulations and directions imposed by law with
respect to the Facilities; (c) Landlord shall have the right to approve the
exact design, size, materials and method of installation of the Facilities
(which approval shall not be unreasonably withheld or delayed); (d) Tenant
shall remove the Facilities at the end of the Term of this Lease and repair
any damage to the Property arising from such removal; and (e) Tenant shall
purchase the energy required for operation of the Facilities.
-44-
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this instrument to
be executed under seal, all as of the day and year first above written.
LANDLORD:
BOSTON WHARF CO.
By
--------------------------------------------
On behalf of P & O Properties Boston Inc. and
Summer St. Properties Inc., its sole General
Partners
TENANT:
INVESTMENT TECHNOLOGY GROUP, INC.
By
--------------------------------------------
Its
-------------------------------------------
(duly-authorized) title
-45-
<PAGE>
EXHIBIT A
[PLAN OF DEMISED PREMISES]
<PAGE>
EXHIBIT B
SCHEDULE OF CLEANING SERVICES
NIGHTLY
Empty wastebaskets and replace plastic liners as needed (liners to be paid
for by tenant).
Empty and damp wipe ashtrays.
Dust furniture and fixtures, office equipment, ledges, windowsills,
telephones and bookshelves.
Spot clean walls around door frames and light switches. Clean and sanitize
drinking fountains. Damp wipe desk and table tops.
Vacuum carpeting.
Spot clean carpeting.
Dry mop composition floors using chemically treated dry mops.
Spot mop composition floors.
Vacuum and/or sweep and dust stairways.
LOBBY
Damp wipe elevator doors and walls.
Dust elevator doors and walls.
Clean elevator tracks.
Vacuum elevator rugs.
Wash entrance door glass.
CAFETERIA
Wash table tops in cafeteria.
Wipe down chairs in cafeteria.
<PAGE>
COMPUTER ROOM
Special care in cleaning of computer room.
LAVATORIES
Wash and disinfect sinks, commodes and urinals. Wash and polish mirrors and
bright work. Empty receptacles and remove to central area. Dust partitions,
dispensers and receptacles.
Replenish toilet tissue, paper towel and hand soap dispensers (supplies to be
furnished by Landlord).
Sweep, wash and disinfect floors.
Wash and polish all marble.
WEEKLY
Dust bottoms of chairs, typewriter tables, etc.
Remove fingerprints and smudges from doors, door frames, and partitions.
Wash composition floors.
Spray buff composition floors.
Wash stairs.
MONTHLY
Dust venetian blinds.
Wash and redress composition floors.
QUARTERLY
Dust ceiling diffusers.
Machine strip and refinish composition floors.
WINDOW CLEANING
Wash and clean interior and exterior windows including all metal mullions and
sashes, which shall be wiped clean during the window cleaning operation once
every three (3) months.
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
.1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls of the Building shall not be obstructed or
encumbered or used for any purpose other than ingress and egress to and from
the premises demised to any tenant or occupant.
.2. No awnings or other projections shall be attached to the outside
walls or windows of the Building without the prior consent of Landlord. No
curtains, blinds, shades, or screens shall be attached or hung in, or used in
connection with, any window or door of the premises demised to any tenant or
occupant, without the prior consent of Landlord. Such awnings, projections,
curtains, blinds, shades, screens, or other fixtures must be of a quality
type, design and color, and attached in a manner, approved by Landlord.
.3. No sign, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or inside
of the premises demised to any tenant or occupant or of the Building without
the prior consent of Landlord. Interior signs on doors and directory tables,
if any, shall be of a size, color and style approved by Landlord.
.4. The sashes, sash doors, skylights, windows, and doors that reflect
or admit light and air into the halls, passageways or other public places in
the Building shall not be covered or obstructed, nor shall any bottles,
parcels, or other articles be placed on any window sills.
.5. No show cases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the halls,
corridors, vestibules or other parts of the Building.
.6. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and
no sweepings, rubbish, rags, or other substances shall be thrown therein.
.7. No tenant or occupant shall mark, paint, drill into, or in any way
deface any part of the Building or the premises demised to such tenant or
occupant. No boring, cutting or stringing of wires shall be permitted,
except with the prior consent of the Landlord, and as Landlord may direct.
No tenant or occupant shall install any carpeting in the premises demised to
such tenant or occupant except in manner approved by Landlord and in
accordance with the following minimum specifications:
Padding - 40 ounces in weight per square yard
Carpeting - 25 ounces in face weight per square yard
<PAGE>
.8. No bicycles, vehicles or animals of any kind shall be brought into
or kept in or about the premises demised to any tenant. Bicycles may be
stored in racks, if any, furnished for such purpose by Landlord in a common
area of the Property. No cooking shall be done or permitted in the Building
by any tenant without the approval of Landlord. No tenant shall cause or
permit any unusual or objectionable odors to emanate from the premises
demised to such tenant.
.9. Without the prior consent of Landlord, no space in the Building
shall be used for manufacturing, or for the sale of merchandise, goods or
property of any kind at auction.
.10. No tenant shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with other tenants or occupants of
the Building or neighboring buildings or premises whether by the use of any
musical instrument, radio, television set or other audio device, unmusical
noise, whistling, singing, or in any other way. Nothing shall be thrown out
of any doors or windows.
.11. Each tenant must, upon the termination of its tenancy, restore to
Landlord all keys of stores, storage areas, offices and toilet rooms, either
furnished to, or otherwise procured by, such tenant.
.12. All removals from the Building, or the carrying in or out of the
Building or the premises demised to any tenant, of any safes, freight,
furniture, or bulky matter of any description must take place at such time
and in such manner as Landlord or its agents may determine, from time to
time. Landlord reserves the right to inspect all freight to be brought into
the Building and to exclude from the Building all freight which violates any
of the Building Rules or the provisions of such tenant's lease.
.13. No tenant shall use or occupy, or permit any portion of the
premises demised to such tenant 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. No tenant or occupant shall engage or pay any employees
in the Building, except those actually working for such tenant or occupant in
the Building, nor advertise for laborers giving an address at the Building.
.14. No tenant or occupant shall purchase spring water, ice, food,
beverage, lighting maintenance, cleaning towels or other like service, from
any company or person not approved by Landlord, such approval not
unreasonably to be withheld.
.15. Landlord shall have the right to prohibit any advertising by any
tenant or occupant which, in Landlord's opinion, tends to impair the
reputation of the Building or its
<PAGE>
desirability as a building for offices, and upon notice from Landlord, such
tenant or occupant shall refrain from or discontinue such advertising.
.16. Landlord reserves the right to exclude from the Building, between
the hours of 6:00 p.m. and 8:00 a.m. on Business Days and otherwise at all
hours, all unauthorized persons.
.17. Each tenant, before closing and leaving the premises demised to
such tenant at any time, shall see that all entrance doors are locked and
windows closed.
.18. No premises shall be used, or permitted to be used, for lodging or
sleeping, or for any immoral or illegal purpose.
.19. There shall not be used in the Building, either by any tenant or
occupant or by their agents or contractors, in the delivery or receipt of
merchandise, freight or other matter, any hand trucks or other means of
conveyance except those equipped with rubber tires, rubber side guards and
such other safeguards as Landlord may require.
.20. Canvassing, soliciting and peddling in the Building are prohibited
and each tenant and occupant shall cooperate in seeking their prevention.
.21. If the premises demised to any tenant become infested with vermin,
such tenant, at its sole cost and expense, shall cause its premises to be
exterminated from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefor as shall be approved by Landlord.
.22. No tenant shall move, or permit to be moved, into or out of the
Building or the premises demised to such tenant, any heavy or bulky matter,
without the specific approval of Landlord. If any such matter requires
special handling, only a person holding a Master Rigger's license shall be
employed to perform such special handling. No tenant shall place, or permit
to be placed, on any part of the floor or floors of the premises demised to
such tenant, a load exceeding the floor load per square foot which such floor
was designed to carry and which is allowed by law. Landlord reserves the
right to prescribe the weight and position of safes and other heavy matter,
which must be placed so as to distribute the weight. Whenever any passenger
elevator is used for the transport of freight, protective padding furnished
by Landlord shall be attached to the side and rear walls of said elevator
during such use.
.23. The requirements of tenants will be attended to only upon
application at the office of the building. Building employees shall not be
required to perform, and shall not be
<PAGE>
requested by any tenant or occupant to perform, any work outside of their
regular duties, unless under specific instructions from the office of the
managing agent of the building.
.24. The possession of any lighted cigarette, cigar, pipe or other
smoking articles shall be prohibited throughout the Building and the
sidewalks adjoining the Building.
<PAGE>
EXHIBIT D
APPROVED CONTRACTORS
<PAGE>
EXHIBIT E
PLANS AND SPECIFICATIONS FOR TENANT'S INITIAL WORK
<PAGE>
EXHIBIT F
PLAN SHOWING GENERATOR LOCATION
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Investment Technology Group, Inc.:
We consent to incorporation by reference in the registration statement No.
333-42725 dated December 19, 1997 on Form S-8 of Investment Technology Group,
Inc. of our report dated January 20, 1998, except as to note 16 to the
consolidated financial statements which is as of March 17, 1998, relating to the
consolidated statement of financial condition of Investment Technology Group,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1997,
which report is included in the December 31, 1997 annual report on Form 10-K of
Investment Technology Group, Inc.
KPMG Peat Marwick LLP
Los Angeles, California
March 18, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AND THE CONSOLIDATED STATEMENT
OF OPERATIONS AS OF DECEMBER 31, 1997 AND FOR THE YEAR THEN ENDED AND THE
NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS FILED IN THE 1997 INVESTMENT TECHNOLOGY GROUP, INC.
ANNUAL 10-K FILING.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 51,263
<RECEIVABLES> 11,367
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 11,293
<PP&E> 19,506
<TOTAL-ASSETS> 113,641
<SHORT-TERM> 0
<PAYABLES> 15,388
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 3
<LONG-TERM> 0
0
0
<COMMON> 188
<OTHER-SE> 93,575
<TOTAL-LIABILITY-AND-EQUITY> 113,641
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 2,659
<COMMISSIONS> 134,383
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 146
<COMPENSATION> 30,479
<INCOME-PRETAX> 47,260
<INCOME-PRE-EXTRAORDINARY> 47,260
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,917
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.42
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE YEARS ENDED
DECEMBER 31, 1996 AND 1995, AND FOR THE FIRST THREE FISCAL QUARTERS OF 1996 FOR
INVESTMENT TECHNOLOGY GROUP, INC.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 12-MOS 12-MOS 3-MOS 6-MOS
9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996
DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1996 JAN-01-1996
JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996 MAR-29-1996 JUN-28-1996
SEP-27-1996
<CASH> 17,960 43,955 24,859 36,555
39,986
<RECEIVABLES> 15,249 9,077 10,472 8,086
7,572
<SECURITIES-RESALE> 0 0 0 0
0
<SECURITIES-BORROWED> 0 0 0 0
0
<INSTRUMENTS-OWNED> 8,509 10,001 8,417 6,031
6,858
<PP&E> 4,852 8,442 5,684 6,679
6,922
<TOTAL-ASSETS> 55,318 82,798 62,905 67,659
76,752
<SHORT-TERM> 0 0 0 0
0
<PAYABLES> 6,906 10,922 9,385 9,862
12,037
<REPOS-SOLD> 0 0 0 0
0
<SECURITIES-LOANED> 0 0 0 0
0
<INSTRUMENTS-SOLD> 0 1,226 1,452 63
1,189
<LONG-TERM> 0 0 0 0
0
0 0 0 0
0
0 0 0 0
0
<COMMON> 187 187 187 187
187
<OTHER-SE> 45,292 66,906 49,340 54,606
60,409
<TOTAL-LIABILITY-AND-EQUITY> 55,318 82,798 62,905 54,793
76,752
<TRADING-REVENUE> 0 0 0 0
0
<INTEREST-DIVIDENDS> 997 1,750 322 671
1,111
<COMMISSIONS> 71,384 109,806 26,345 52,309
80,553
<INVESTMENT-BANKING-REVENUES> 0 0 0 0
0
<FEE-REVENUE> 0 0 0 0
0
<INTEREST-EXPENSE> 53 223 12 54
87
<COMPENSATION> 16,404 25,047 5,869 12,021
18,246
<INCOME-PRETAX> 24,888 41,001 9,634 19,486
29,693
<INCOME-PRE-EXTRAORDINARY> 24,888 41,001 9,634 19,486
29,693
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 14,905 23,335 5,396 10,963
16,840
<EPS-PRIMARY> $0.81 $1.28 $0.29 $0.60
$0.92
<EPS-DILUTED> $0.81 $1.26 $0.29 $0.59
$0.91
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS QUARTERLY FINANCIAL INFORMATION FOR THE FIRST THREE
QUARTERLY 10-Q FILINGS DURING FISCAL 1997 FOR INVESTMENT TECHNOLOGY GROUP, INC.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-28-1997 JUN-27-1997 SEP-26-1997
<CASH> 46,834 48,974 41,845
<RECEIVABLES> 9,763 12,174 11,483
<SECURITIES-RESALE> 0 0 0
<SECURITIES-BORROWED> 0 0 0
<INSTRUMENTS-OWNED> 10,697 10,071 13,729
<PP&E> 11,854 16,904 18,740
<TOTAL-ASSETS> 90,125 100,149 107,066
<SHORT-TERM> 0 0 0
<PAYABLES> 12,093 16,333 15,438
<REPOS-SOLD> 0 0 0
<SECURITIES-LOANED> 0 0 0
<INSTRUMENTS-SOLD> 46 79 83
<LONG-TERM> 0 0 0
0 0 0
0 0 0
<COMMON> 187 187 188
<OTHER-SE> 73,373 78,764 86,482
<TOTAL-LIABILITY-AND-EQUITY> 90,125 100,149 107,066
<TRADING-REVENUE> 0 0 0
<INTEREST-DIVIDENDS> 552 1,307 2,019
<COMMISSIONS> 30,102 66,026 98,751
<INVESTMENT-BANKING-REVENUES> 0 0 0
<FEE-REVENUE> 0 0 0
<INTEREST-EXPENSE> 17 100 107
<COMPENSATION> 6,873 13,880 21,479
<INCOME-PRETAX> 11,361 25,286 36,612
<INCOME-PRE-EXTRAORDINARY> 11,361 25,286 36,612
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 6,531 14,539 21,008
<EPS-PRIMARY> $0.36 $0.80 $1.16
<EPS-DILUTED> $0.35 $0.78 $1.11
</TABLE>
