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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________ to _______________
Commission file number: 33-92810
PROGRAMMER'S PARADISE, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3136104
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)
1157 Shrewsbury Avenue, Shrewsbury, New Jersey 07702
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 389-8950
Securities registered pursuant to section 12(b) of the Act: NONE
Securities registered pursuant to section 12(g) of the Act: Common Stock, par
value $0.01 per share
(Title Of Class)
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 other information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant computed by reference to the closing sales price for the
Registrant's Common Stock on March 18, 1999, as reported on the NASDAQ National
Market, was approximately $44,140,457.
The number of shares outstanding of the Registrant's Common Stock as of
March 18,1999: 5,141,386 shares.
In determining the market value of the voting stock held by any
non-affiliates, shares of Common Stock of the Registrant beneficially owned by
directors, officers and holders of more than 10% of the outstanding shares of
Common Stock of the Registrant have been excluded. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
Documents Incorporated by Reference: Portions of the Registrant's
definitive Proxy Statement for its Annual Meeting of Stockholders scheduled to
be held on June 17, 1999 are incorporated by reference into Part III of this
Report.
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<PAGE>
PART I
ITEM 1 BUSINESS.
GENERAL
Programmer's Paradise, Inc. is a recognized international marketer of
software targeting the software development and Information Technology
professionals within enterprise organizations. The Company operates principally,
through five distribution channels in North America and Europe - internet,
catalog, direct sales, telemarketing, and wholesale distribution. Internet sales
encompass the Company's international web sites. Catalog operations include
worldwide catalog sales, advertising and publishing. Direct sales operations
include Programmer's Paradise Corporate Sales in the United States, ISP*D
International Software Partners GmbH ("ISP*D"), a wholly owned subsidiary in
Munich, Germany, ISP*F International Software Partners France SA ("ISP*F"), a
majority owned subsidiary in Paris, France, and Logicsoft Holding BV
("Logicsoft"), a wholly owned subsidiary located in Amsterdam, The Netherlands.
Telemarketing operations are presently conducted in the United States, Germany
and the United Kingdom. Wholesale operations include distribution to dealers and
large resellers through Lifeboat Distribution Inc. in the United States and
Lifeboat Associates Italia Srl ("Lifeboat Italy") in Milan, Italy, also
subsidiaries of the Company.
The Company's strategic focus is to expand its catalog and internet
activities while solidifying its position as the predominant direct sales
company for corporate desktop application software. A key element of that
strategy is to build upon its distinctive catalogs - the established
Programmer's Paradise catalog, directed at independent professional programmers,
and its Programmer's Supershop catalog, directed at Information Technology
professionals working in large corporations, and to utilize the catalogs as
banner advertising for developing its internet traffic as well as being the
initial conduit to developing its telemarketing channel. The Company's focus for
direct sales is to expand revenues and income by assisting companies manage
their IT expenditures, a value-added selling approach.
Through its multiple distribution channels, the Company now offers more
than 40,000 SKUs, consisting of technical and general business application
software and PC hardware and components from more than 2,000 publishers and
manufacturers, at prices generally discounted below manufacturers' suggested
retail prices. The Company's catalogs are full color "magalogs", and offer one
of the most complete collections of microcomputer technical software, including
programming languages, tools, utilities, libraries, development systems,
interfaces and communication products. The Company has created a niche for hard
to source technical software programs and has demonstrated an ongoing capability
to search and obtain titles requested by its customer base. The Company believes
that its catalogs are important marketing vehicles for software publishers and
manufacturers and that they provide a cost-effective and service oriented means
to market, sell and fulfill technical software products. The Company utilizes
its proprietary and brand-distinctive logo, the "Island Man" cartoon character
on its flagship Programmer's Paradise catalog. In 1998, the Company distributed
over 8.7 million catalogs and plans to increase that amount to approximately 10
million catalogs or 1.1 billion pages in 1999. Catalog operations, which have
historically had the highest gross margins of all the Company's distribution
channels, contributed 28% of its revenue and 44% of gross margin in 1998.
International expansion has been an integral part of the Company's
strategy, with its European-based operations accounting for approximately 70% of
sales in the year ended December 31,1998, and approximately 60% of gross margin
for the same period. The Company began European-based operations in the first
quarter of 1993 when it acquired a controlling interest in Lifeboat Associates
Italia Srl, a long-standing software wholesale distributor in Italy with an
orientation towards technical software. In June 1994, the Company acquired a
controlling interest in ISP*D International Software Partners GmbH, a large
software-only dealer and a leading independent supplier of Microsoft Select
licenses and other software to many large German and Austrian companies. In
January 1995, the remaining 10% interest in ISP*D was purchased by the Company.
In late 1994, the Company organized a subsidiary in the United
<PAGE>
Kingdom to engage in catalog operations and in December 1995, the Company
acquired Systematika Ltd., a leading reseller of technical software in the
United Kingdom and the publisher of the popular System Science catalog. In
January 1996, the Company formed ISP*F International Software Partners France
SA, as a full service corporate reseller of PC software, based in Paris and
majority-owned by Programmer's Paradise France SARL. In August 1997, the Company
formed Programmer's Paradise, Canada Inc. located in Mississauga, Ontario, to
serve the growing developer market in Canada. In September 1997, the Company
acquired Logicsoft Holding BV, the parent company of Logicsoft Europe BV, the
largest software-only corporate reseller of PC software in The Netherlands. The
Company estimates that it now holds the lead position in over 40% of the
European software market.
Programmer's Paradise, Inc. was incorporated under the laws of the
State of Delaware in 1982. The Company's principal executive offices are located
at 1157 Shrewsbury Avenue, Shrewsbury, New Jersey 07702 and its telephone number
is (732) 389-8950. Website addresses are www.pparadise.com and
www.supershops.com. Information contained on our web sites is not, and should
not be deemed to be, a part of this report.
INDUSTRY BACKGROUND
According to industry data published in May of 1998, worldwide software
sales reached $118.6 billion in 1997 and such sales are projected to reach
$231.7 billion in 2002, representing a compound annual growth rate of 14.3%.
Software expenditures with the Windows NT platform in 1997 accounted for 22.2%
of total software expenditures. This particular operating platform is expected
to grow to 42.6% of total expenditures by 2002. Expressed in dollars,
expenditures for software operating on the NT platform should grow from $26.5
billion in 1997 to $98.4 billion in 2002, an increase of 371% during the period.
The Company believes that it is in a position to participate heavily in this
market as most of its customers are either presently utilizing the NT operating
platform or, are contemplating conversion to it.
INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one principal industry segment across
geographically diverse marketplaces. Information regarding financial data by
geographic area and amounts of total revenue for each class of similar products
or services that represents 10 percent or more of total revenue is set forth in
Part II, Item 8 of this Form 10-K at Note 10, "Industry Segment and Geographic
Information."
PRODUCTS
The Company offers over 40,000 stock keeping units, or SKUs from more
than 2,000 publishers and manufacturers including Microsoft, Sybase, Borland,
IBM, Symantec, Blue Sky Software and NuMega Technologies, at prices generally
discounted below manufacturer's suggested retail prices. The Company screens new
products and selects products for inclusion in its catalogs based on features,
quality, sales trends, price, margins and warranties.
Software upgrades are a significant category of product offered by the
Company. The Company is authorized by most major microcomputer technical
software publishers to stock upgrades. Upgrades are revisions to previously
published software that improve or enhance certain features of the software or
correct errors found in previous versions. The Company believes it offers
several advantages to its customers in the upgrade process, including timely and
reliable service and the ability to combine upgrades with other products on the
same order. The Company has demonstrated its expertise in new product roll-outs
and product upgrades, and plans to leverage these past experiences with vendors
contemplating new or upgrade product introductions.
<PAGE>
MARKETING AND SALES
The Company operates principally through five distribution channels;
Internet, catalog, direct sales, wholesale distribution and telemarketing.
Management believes that this diversification of distribution channels is
complementary and operationally cost effective. Further, due to the volume of
purchasing by the Company, and also due to the unique magazine/catalog format of
the Company's catalogs, the Company believes it is able to obtain favorable
pricing, prompt supply of upgrades and significant marketing funds.
Telemarketing and Technical Support. The Company employs sales
representatives who assist customers in purchasing decisions, process product
orders and respond to customer inquiries on order status, product pricing and
availability. The sales representatives are trained to answer all basic
questions about products. On technical issues, there is an in-house technical
support staff, which is able to respond to most inquiries over the phone, with
the balance researched off-line. The Company has recently introduced a real-time
customer service and technical support module on its web site. This new
technology enables customers greater access to order status, frequently asked
questions and on-line technical support issues.
Customers and Backlog. No customer accounted for more than 10% of
consolidated net sales in 1998 and 1997 and no material part of the business is
dependent upon a single customer or a few customers, the loss of any one or more
of which would have a materially adverse effect on the Company. Because the
Company generally ships products within 48 hours of receipt of an order from a
customer, backlog is not material to an understanding of its business.
INTERNET
The Company conducts business via the Internet through its two domestic
websites: www.pparadise.com, and www.supershops.com, and foreign Websites. Each
of the foreign Websites is linked to each other as well as the domestic site and
each is capable of electronic commerce. The Company recently launched a newly
enhanced domestic Webstore and increased its product offerings from 3,500 SKUs
to over 40,000 SKUs including a wide selection of hardware, training and
reference products. The Company's strategy with respect to expanding its
e-commerce revenues is to capitalize on its established brand and imaging with
its proprietary "Island Man" cartoon by utilizing the depth of its catalog
distribution. In 1999, the Company plans to print and distribute more than 1.1
billion pages of product listings and ads as banner advertising for its
e-commerce sites. In addition, the Company has elected to partner with several
content-only Websites as well as several key software publishers and to
establish on-line specialty stores. As of December 31, 1998, the Company had
entered into agreements for seven specialty stores and expects to double that
amount during 1999. The Company also began electronic delivery of software in
July 1996 and presently has over 200 individual titles available for download.
The Company will continue to develop these capabilities even though the
percentage of business being conducted via this method is very low.
Electronic Services and Capabilities. The Company offers a number of
services and is, on an on-going basis, implementing new and enhanced systems to
support its customers' migration toward electronic commerce and electronic
software distribution ("ESD").
ESD takes two forms; the first is distributing software within an
organization, via a company's internal network. ESD technology within a large
organization is a means to permit an organization to reduce the total cost of
ownership of desktop computing assets. ESD can provide hardware and software
asset management, remote desktop support and automatic installation of packaged
and custom software to the desktop.
The second form of ESD is between businesses via electronic links such
as the Internet. This form of ESD supports the fast, convenient delivery of
software products. The Company is engaged in this method of distribution mainly
through Cybersource, a third party supplier.
<PAGE>
The Company's Web sites contain an on-line catalog of thousands of
products that can be purchased over the Internet. The Internet catalog provides
information about products through a comprehensive search engine, extensive
product descriptions and third-party reviews. For certain large customers, the
Company offers a customer-specific, secure catalog available over the Internet.
Each specialized electronic catalog contains specific products and pricing
unique to that customer as well as information particular to the volume license
and maintenance agreements in which that customer is enrolled.
CATALOG OPERATIONS
The Company has two primary established catalogs- Programmer's
Paradise, directed at independent programming professionals, and The
Programmer's Supershop, directed at programmers in large corporations. These
catalogs are full color "magalogs" which combine traditional catalog sales
offerings with detailed product descriptions, product announcements and contain
substantial amounts of paid and cooperative advertising. The Programmer's
Paradise catalog features the Company's distinctive "Island Man" cartoon
character and is recognized as a leading source for technical software in the
United States. In 1998, the Company distributed over 8.7 million catalogs,
typically featuring more than 1,300 SKUs in its larger catalogs.
In addition to its two flagship catalogs, the Company offers two
additional catalogs - Components Paradise, which is directed to the Visual Basic
add-on marketplace, and it's newest segmented catalog - Enterprise Supershop
(formally called NT Supershop), which is directed to the IT professional working
with the NT operating platform. In September 1997 the Company launched
Programmer's Paradise, Canada to support the growing Canadian developer market.
The Company creates its domestic catalogs in-house with its own design
team and production artists using a computer-based desktop publishing system.
The in-house preparation of the catalogs streamlines the production process,
provides greater flexibility and creativity in catalog production and results in
significant cost savings.
The Company continuously attracts new customers by selectively mailing
catalogs and other direct mail materials to prospective customers, as well as
through advertising in magazines and trade journals. The Company's domestic
mailing list currently consists of core Programmer's Paradise and Programmer's
Supershop buyer list of approximately 150,000 customers who have purchased
products from the Company within the 24 months ended December 31, 1998, plus
selected names from the Company's prospect list, lists of names provided by
publishers and list of names rented from others.
In conjunction with the Programmers Supershop and recently introduced
Enterprise Supershop catalogs, the Company has energized and supported an
outbound telemarketing program as part of its domestic catalog operations. This
telemarketing program targets mid-size to large commercial, governmental and
educational accounts in the United States.
The Company seeks to have these catalogs reach a similar status in
Europe. The Company's European catalogs ( Programmer's Paradise Italia,
Programmer's Paradise Deutschland, Software Paradise Deutschland, Programmer's
Paradise France, Programmer's Paradise U.K. and Programmer's Paradise - The
Netherlands) are offshoots of the U.S. versions. They are published in local
languages and present offerings in local currencies, while using similar but
localized cover graphics, including the Company's proprietary logo, the "Island
Man" cartoon character. The Company also distributes the popular System Science
catalog in the United Kingdom. This catalog has long been established as one of
the pre-eminent publications for programmers in the U.K. and is produced four
times per year.
Upstream Marketing to Suppliers. The Company engages in upstream
marketing to its suppliers who are software publishers by providing important
services designed to enhance such supplier's ability
<PAGE>
to market its products in the programmer and developer marketplace. The Company
believes that its advertising and other supplier-directed marketing activities
maximize the Company's marketing reach and build relationships with leading
publishers. The Company offers a menu of fee services to help its suppliers sell
products, including cooperative space advertising, banner advertising on its web
sites, trade show support, special publisher catalogs, demonstration disks,
shipment stuffers, telephone sold-on-hold advertising and a variety of custom
direct mail services. As part of these services, the Company works closely with
suppliers' personnel on the timing and nature of new product introductions and
policies, helps build product awareness, conducts marketing programs to selected
users on behalf of publishers and provides a broad range of product support.
Cooperative and Fee-Based Advertising. The Company engages in
cooperative and fee-based advertising with software publishers in accordance
with written advertising insertion order agreements. Under these agreements, the
Company places advertisements or prints catalogs that feature publisher products
at discounted prices from retail, advertising allowances and rebates.
Frequently, the Programmer's Paradise logo and telephone number are included in
the promotion of selected publishers and incoming calls are handled by Company
representatives. In addition, the Company often coordinates its catalog
distribution and other marketing initiatives to coincide with new product
releases. Many suppliers also provide funds to the Company based upon an agreed
amount of coverage given in the catalogs for their respective products, thereby
financing the cost of catalog publication and distribution. In 1998, the
Company's cooperative and fee-based advertising reimbursements totaled less than
11% of total product revenues in the Company's domestic operations, and
significantly smaller percentages in the European operations.
DIRECT SALES
Direct sales are primarily conducted in Europe through the Company's
subsidiaries. The direct sales channel offers flexible software acquisition,
volume software licensing, and maintenance options specially customized to meet
the needs of mid-size to large commercial, governmental and educational
accounts.
The Company serves as a designated services provider for volume
licensing and maintenance ("VLM") agreements between many of its European
customers and major publishers of personal computer software. VLM agreements are
typically used by customers seeking to standardize desktop software applications
and, consequently, typically involve significant quantities of unit sales for
each customer. Under VLM agreements, the Company acts as a designated service
provider to sell software licensing rights that permit customers to make copies
of a publisher's software program from a master disk and distribute this
software within a customer's organization for a fee for each copy made.
Maintenance agreements entitle customers to all upgrades of certain products
during a specified period of time, typically two years following the software
purchase. Although unit volume sales are increased by the use of VLM agreements,
generally lower gross margins are realized on such sales as compared to sales of
full-packaged software products. The Company has been designated by Microsoft as
an Authorized Reseller for its Select Licensing Program. Appointment of "Select"
status in the United States enhances the Company's ability to develop the
business to business market while servicing customers that have international
licensing needs.
The Company's experienced sales force, each member of which is assigned
a specific territory, has built relationships with corporate customers through
regular phone contact and personalized service. Account executives work directly
with procurement managers, management information system managers and computer
support managers of existing and potential customers to identify the specific
needs of each customer and to facilitate the acquisition of software within the
customer's organizational framework. The Company's licensing consultants can
assist customers in selecting the most advantageous form of licensing available
based on specific needs or constraints. They also maintain close
<PAGE>
contact with customers in order to provide them with timely communications and
assistance with any special or strategic requests.
WHOLESALE OPERATIONS
Wholesale operations include distribution to dealers and large
resellers through Lifeboat Distribution Inc. in the United States ("Lifeboat")
and Lifeboat Italy, also subsidiaries of the Company. Through Lifeboat and
Lifeboat Italy the Company concentrates on marketing and the reselling of
programming tools and other quality technical computing product lines. Lifeboat
customers consist of corporate resellers, value added resellers (VAR's),
consultants, system integrators and retailers who have an interest in servicing
the software development and other high tech communities.
The U.S. customers include corporate resellers such as Software
Spectrum, Corporate Software, ASAP Software and Software House International.
Major product lines include CompuWare-Numega, Platinum-LogicWorks, Premia, Blue
Sky Software, Apex, Sheridan, NetManage and Wolfram. In addition, Lifeboat Italy
wholesales productivity software.
TELEMARKETING
Telemarketing operations are presently conducted in the United States,
Germany, The Netherlands and the United Kingdom. The Company employs sales
representatives who assist customers in purchasing decisions, process product
orders and respond to customer inquiries on order status, product pricing and
availability. The sales representatives are trained to answer all basic
questions about products. On technical issues, there is an in-house technical
support staff, which is able to respond to most inquiries over the phone, with
the balance researched off-line. For product literature and technical fact
sheets, the Company employs its fax on demand literature service supported by a
CD-ROM-based reference library. Through the Company's domestic information
systems, a sales representative can quickly access a customer's record, which
details past purchases as well as billing information. Similar capabilities
exist in the Company's international operations.
Domestically, the Company has directed resources and expanded
infrastructure designed to expand its corporate telemarketing operations. The
Company believes that this channel is a natural outgrowth from the corporate
influence of certain of its catalogs.
PURCHASING AND FULFILLMENT
The Company's success is, in part, dependent upon the ability of its
suppliers to develop and market products that meet the changing requirements of
the marketplace. The Company believes it enjoys good relations with its vendors.
The Company and its principal vendors have cooperated frequently in product
introductions and other marketing programs. In addition, the Company typically
receives price protection should a vendor subsequently lower its price. As is
customary in the industry, the Company has no long-term supply contracts with
any of its suppliers. Substantially all the Company's contracts with its vendors
are terminable upon 30 days' notice or less.
The Company believes that effective purchasing is a key element of its
business strategy to provide technical software at competitive prices. The
Company believes that volume purchases enable it to obtain favorable and
competitive product pricing. The Company purchases products from more than 1,000
publishers. Domestically, in 1998 the Company purchased approximately 56% of its
products directly from manufacturers and publishers and the balance from two
distributors - Ingram and Merisel. Internationally, in 1998 the Company's
foreign subsidiaries purchased approximately 61% of its products directly from
manufacturers and publishers. The largest volume of purchases by the Company
from distributors was from Ingram, representing approximately 13% of worldwide
purchases in 1998. The Company believes it can purchase substantially all
products purchased from Ingram from other competing
<PAGE>
wholesalers under similar terms. Management estimates that during 1998
approximately 54% of worldwide revenues of the Company were derived from
products published by Microsoft.
The Company attempts to manage its inventory position to generate a
high number of inventory turns consistent with achieving high product
availability and order fill rates. Inventory levels may vary from period to
period, due in part to increases or decreases in sales levels, the Company's
practice of making large-volume purchases when it deems the terms of such
purchases to be attractive, and the addition of new suppliers and products.
Moreover, the Company's order fulfillment and inventory control allow the
Company to order certain products just in time for next day shipping. The
Company promotes the use of electronic data interchange ("EDI") with its
suppliers, which helps reduce overhead and the use of paper in the ordering
process. All inventory items in the U.S. are bar coded and located in computer
designated areas which are easily identified on the packing slip. All such
orders are checked with bar code scanners prior to packing to ensure that each
order is filled correctly. The Company also conducts a quarterly physical
inventory to verify its inventory levels on a timely basis.
Additionally, some suppliers or distributors will "drop ship" products
directly to the customers, which reduces physical handling by the Company. These
inventory management techniques allow the Company to offer a greater range of
products without increased inventory requirements. Generally, the Company has
been able to return unsold or obsolete inventory within specified intervals of
the purchase date to its vendors through written agreements with, or unwritten
policies of, such vendors. Domestic orders are shipped via United Parcel
Service. Upon request, at an additional charge, overnight delivery services are
available. The Company operates distribution facilities in Shrewsbury, New
Jersey; Mississauga, Canada; Munich, Germany; Milan, Italy; London, England;
Paris, France and Amsterdam, The Netherlands.
MANAGEMENT INFORMATION SYSTEMS
In the United States, the Company operates a management information
system that allows for centralized management of key functions, including
inventory and accounts receivable management, purchasing, sales and
distribution. The system allows the Company, among other things, to track direct
marketing campaign performance, to monitor sales trends, make marketing event
driven purchasing decisions, and provide product availability and order status
information. In addition to the main system, the Company has systems of
networked personal computers, which facilitates data sharing and provides an
automated office environment, as well as microcomputer-based desktop publishing
systems.
The Company's European operations use local systems, which are being
modified to allow exchange of data with the Company's U.S. operations. The
Company believes that its management information systems and planned
enhancements are sufficient to sustain its present operations and its
anticipated growth for the foreseeable future.
All Website development and maintenance is performed in-house by
qualified technicians and maintained on independent servers. The Company feels
this is a cost-effective approach and enables it to make timely adjustments to
marketing initiatives.
TRADEMARKS, INTELLECTUAL PROPERTY AND LICENSES
The Company conducts its business under the trademarks and service
marks of Programmer's Paradise, The Programmer's Supershop, The "Island Man"
cartoon character logo, Lifeboat, DEMO, demo-it!, System Science, ISP*A, ISP*D,
ISP*F, ISP*UK, ISP*Italy and Logicsoft. The Company believes that its trademarks
and service marks have significant value and are an important factor in the
marketing of its products. The Company intends to use and protect these and
related marks, as necessary. The Company does not maintain a traditional
research and development group, but works closely with software authors and
publishers and other technology developers to stay abreast of the latest
developments in microcomputer technology.
<PAGE>
ISP*D, ISP*F, Programmer's Paradise, Inc. and Logicsoft are Microsoft
Select Large Account Resellers (LAR). The Company has multiple other alliances
with publishers such as Lotus, Borland, Sybase, Attachmate, NuMega, Intersolv
and Logic Works.
EMPLOYEES
At December 31, 1998, the Company and its subsidiaries employed 261
full-time and 13 part-time persons. The Company is not a party to any collective
bargaining agreements with its employees, has experienced no work stoppages and
considers its relations with its employees to be satisfactory.
COMPETITION
The software distribution market is highly competitive. Pricing is very
aggressive, and the Company expects pricing pressure to continue. The Company
faces competition from a wide variety of sources including direct sales by
vendors, software resellers, superstores, catalogers and other direct marketers
of software products, some of which are significantly larger and have
substantially greater resources than the Company. Many of these competitors
compete principally on the basis of price, product availability, customer
service and technical support, and may have lower costs than the Company. The
market for software is characterized by rapid changes in technology and user
needs. The Company competes both in the acquisition of lists of prospects and of
new products from software authors, developers and publishers, as well as in the
marketing and sale of its existing products to its customers.
Although many of the Company's competitors have greater financial
resources than the Company, the Company believes that an ability to offer the
professional programmer a wide selection of products, at low prices, with prompt
delivery, and high customer service levels and its good relationships with its
vendors and suppliers, allow it to compete effectively. The Company competes to
gain distribution rights for new products primarily on the basis of its
reputation, the relationships which management of the Company has established
with product authors and the Company's ability to promote and market new
products successfully.
The manner in which software products are distributed and sold is also
changing, and new methods of distribution and sale may emerge or expand.
Software developers and publishers have sold, and may intensify their efforts to
sell, their products directly to end-users. The emergence of the Internet as a
viable platform in which to conduct business transactions has both lowered the
barriers for competition and broadened customers access to products and
information. This transition has heightened the Company's awareness to maintain
a competitive edge in this market. From time to time certain developers and
publishers have instituted programs for the direct sale of large order
quantities of software to certain major corporate accounts. These types of
programs may continue to be developed and used by various developers and
publishers. While Microsoft and other vendors currently sell their update
products directly to end users, they have not attempted to completely bypass the
reseller channel. Future efforts by such entities to bypass third-party sales
channels could materially and adversely affect the Company's operations.
In addition, resellers and publishers may attempt to increase the
volume of software products distributed electronically through downloading to
end users' microcomputers, through CD-ROM unlocking technology, through CD-ROM
based subscription services and through on-line shopping services. Any of these
competitive programs, if successful, could have a material adverse effect on the
Company's operations and financial condition.
SALES TAX AND REGULATORY MATTERS
The Company presently collects state sales tax, or other similar tax,
only on sales of products to residents of the State of New Jersey. Various
states have tried to impose on direct marketers the burden
<PAGE>
of collecting state sales taxes on the sale of products shipped to state
residents. The United States Supreme Court has affirmed its position that it is
unlawful for a state to impose state sales tax collection obligations on an
out-of-state mail order company whose only contacts with the state are the
distribution of catalogs and other advertising materials through the mail and
subsequent delivery of purchased goods by parcel post and interstate common
carriers. However, it is possible that legislation may be passed to overturn
such decision or the Supreme Court may change its position. Additionally, it is
currently uncertain as to whether electronic commerce, which will likely include
the Company's Internet sales activities, will be subject to state sales tax. The
imposition of new state sales tax collection obligations on the Company in
states to which it ships products would result in additional administrative
expenses to the Company and could result in price increases to the customer,
which could adversely affect the Company's business, financial condition and
results of operations.
The Company seeks to expand its in-house list of customers and
prospects. In the event that federal or state governments or European
governments enact privacy legislation resulting in the increased regulation of
mailing lists, the Company's ability to enhance or expand its lists could be
adversely affected. In such event, the Company could also experience increased
costs in complying with potentially burdensome regulations concerning the
solicitation of consents to keep or add customer names to its mailing lists.
The direct response business is subject to the Mail or Telephone Order
Merchandise Rule and related regulations promulgated by the Federal Trade
Commission. While the Company believes it is in compliance with such regulations
and has implemented programs and systems to assure its ongoing compliance with
such regulations, no assurance can be given that new laws or regulations will
not be enacted or adopted which might adversely affect the Company's operations.
SEASONALITY
The Company has traditionally experienced a decrease in domestic net
sales in its third quarter compared to the other quarters. This traditional
downturn in domestic net sales is exacerbated by the decline of European
commercial activity in general and software sales in particular during the
summer months.
ITEM 2 PROPERTIES.
At December 31, 1998, the Company leased 18,000 square feet of space at
1157 Shrewsbury Avenue, Shrewsbury, New Jersey for its corporate headquarters
under a ten-year lease and an additional 7,250 square feet of space at 1163
Shrewsbury avenue under a five-year lease. Total annual rent expense for these
premises is approximately $264,000. Additionally, the Company leases
approximately 3,600 square feet of office space under a three-year lease in
Mississauga, Canada. The Company's European facilities, all of which are leased
under long-term arrangements, are as follows: 21,679 square feet in Munich,
Germany; 8,600 square feet in Milan, Italy; 3,100 square feet in London,
England; 21,500 square feet in Amsterdam, The Netherlands; and 3,450 square feet
in Paris, France. Total annual rent expense for the European facilities is
approximately $750,000.
ITEM 3 LEGAL PROCEEDINGS.
There are no material legal proceedings pending against the Company or
any of its subsidiaries.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
<PAGE>
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The executive officers of the Company are as follows:
Name Age Position
- - ---- --- --------
William H. Willett 62 President, Chief Executive Officer
and Chairman of the Board
John P. Broderick 49 Senior Vice President -
North America and
Chief Financial Officer,
Vice President - Finance and Treasurer
Frans van der Helm 42 Vice President European Operations
Jeffrey Largiader 41 Vice President -Marketing
WILLIAM WILLETT has served as a director of the Company since 1996. In
July 1998, Mr. Willett was appointed to the position of Chairman, President and
Chief Executive Officer. Prior to joining the Company and since 1994, Mr.Willett
was the President and Chief Operating Officer of Colorado Prime Foods located in
New York.
JOHN P. BRODERICK has served as the Company's Chief Financial Officer
and Vice President - Finance of the Company since May 1995. In 1998, he was
appointed as the Senior Vice President responsible for North American
operations. From 1993 to 1995, he has served as an independent financial
consultant to the Company. Mr. Broderick began his career as a CPA with Price
Waterhouse LLP and has held similar positions with Waterford Glass Inc., an
importer/distributor of Irish crystal, and Olympic Limousine Corp., a
transportation conglomerate from 1979 through 1992.
FRANS VAN DER HELM has served as the Vice President and Chief Operating
Officer of the Company's operations in The Netherlands, France, the United
Kingdom and Italy since December 1998. Prior to that appointment and since 1991,
he has been the Adjunct Directeur of Logicsoft Holding BV.
JEFFREY LARGIADER has served as the Vice President - Marketing since
1989 and is responsible for catalog production, advertising sales, media
planning and marketing communications. Prior to that and since 1983, he held
various sales and product management positions with the Company and the
predecessor of Lifeboat.
<PAGE>
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock trades on the NASDAQ National Market under
the symbol "PROG." The following table sets forth, for the calendar quarters
indicated, the quarterly high and low sales prices of the Company's Common Stock
as reported on NASDAQ. The quotations listed below reflect inter-dealer prices
only, without retail markups, markdowns or commissions. Prior to July 18, 1995,
there was no established public trading market for the Company's Common Stock.
High Low
---- ---
1997
First Quarter 8 1/4 6 7/8
Second Quarter 10 1/4 6 1/4
Third Quarter 13 1/4 9
Fourth Quarter 13 3/4 7 1/4
1998
First Quarter 10 1/2 8
Second Quarter 11 1/8 8
Third Quarter 8 5/8 4 3/4
Fourth Quarter 12 5/8 5 1/8
During 1998, 157,775 shares of the Common Stock were issued to
employees, former employees and directors of the Company, pursuant to the
exercise of incentive stock options granted to them prior to such year under the
Company's stock option plans. Such shares were issued pursuant to Rule 701
promulgated under the Securities Act of 1933, at a weighted average exercise
price of $1.90.
On February 12, 1999, the Company filed a registration statement on
Form S-8 with respect to the resale of 1,344,951 shares issued or issuable upon
the exercise of options.
HOLDERS OF COMMON STOCK
On March 18, 1999, 5,141,386 shares of the Company's Common Stock were
outstanding. On such date, there were approximately 72 holders of record.
DIVIDENDS
No dividends have been paid on the Company's Common Stock. The Company
is limited in its ability to pay dividends by its domestic facility agreement,
which presently prohibits the payments of dividends. The Company does not
currently anticipate declaring or paying dividends.
<PAGE>
ITEM 6 SELECTED FINANCIAL DATA.
The following table sets forth, selected consolidated financial data for the
Company for the five years ended December 31, 1998. The selected consolidated
financial data for the five years are derived from the Company's audited
consolidated financial statements. The consolidated financial data set forth
below should be read in conjunction with the Company's Consolidated Financial
Statements and related Notes and "Management's Discussion and Analysis of
Results of Operations and Financial Condition" contained herein.
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1):
Net sales $71,334 $93,286 $127,680 $176,157 $234,429
Income from operations 1,370 2,275 2,936 6,217 5,527
Income before minority interest 1,095 4,203 2,199 3,964 3,442
Net income l,050 4,203 2,298 3,964 3,442
Basic net income per common share $0.45 $1.14 $0.48 $0.84 $0.72
Diluted net income per common share $0.35 $1.03 $0.44 $0.75 $0.66
Weighted average
common shares outstanding-basic 2,354 3,703 4,764 4,740 4,749
Weighted average
common shares outstanding-diluted 3,142 4,102 5,198 5,280 5,249
BALANCE SHEET DATA:
Working capital $ 2,731 $21,689 $12,415 $16,077 $17,686
Total assets 24,730 58,329 68,490 86,368 104,877
Short-term debt 3,489 2,469 1,135 958 674
Long-term debt -- -- 1,050 2,220 1,761
Stockholders' equity 4,597 26,989 28,845 32,213 36,241
</TABLE>
- - ----------------
(1) Comparability of the Statement of Operations is affected by acquisitions
occurring throughout the periods presented.
(2) All earnings per share amounts for all periods presented have been restated
to conform to the requirements of Statement of Financial Accounting
Standards No. 128.
ITEM 7 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The Company is a distributor of software, operating through five
distribution channels - Internet, catalogs, direct sales, telemarketing and
wholesale operations. Internet sales encompass the Company's domestic and
international web sites. Catalog operations include worldwide catalog sales,
advertising and publishing. Direct sales operations include Programmer's
Paradise Corporate Sales in the United States; ISP*D in Munich, Germany;
Logicsoft, in Amsterdam, The Netherlands; both wholly-owned subsidiaries of the
Company; and ISP*F, a majority-owned company located in Paris, France.
Telemarketing operations are conducted in the United States, the United Kingdom
and in Germany. The U.S. telemarketing operations are an offshoot of the catalog
channel targeting corporate customers for both technical software and desktop
applications. Wholesale operations include distributions to dealers and large
resellers through Lifeboat Distribution Inc. in the U.S. and Lifeboat Italy in
Milan, Italy, also subsidiaries of the Company.
<PAGE>
The Company was founded in 1982 as a wholesaler and reseller of
educational software. In June 1986, the Company acquired Lifeboat Associates, a
wholesale distributor and publisher of software founded in 1976. Later in 1986,
Programmer's Paradise was started by the Company as a catalog marketer of
technical software. In 1988, the Company acquired Corsoft Inc., a corporate
reseller founded in 1983, and combined it with the operations of the
Programmer's Paradise catalog and Lifeboat Associates, both of which were
involved in the marketing of technical software for microcomputers. In May 1995,
the Company changed its name from "Voyager Software Corp" to "Programmer's
Paradise, Inc." In July 1995, the Company completed an initial public offering
of its common stock. In June 1996, the Company acquired substantially all of the
assets of The Software Developer's Company, Inc. including The Programmer's
Supershop catalog, its largest domestic competitor at the time.
The Company began European-based operations in the first quarter of
1993, when it acquired a controlling interest in Lifeboat Italy, a long-standing
software distributor in Italy. In January and April 1994, the Company purchased
the remaining ownership interest in Lifeboat Italy. In June 1994, the Company
acquired a 90% controlling interest in ISP*D, a large software-only dealer and a
leading independent supplier of Microsoft Select licenses and other software to
many large German and Austrian companies. In January 1995, the remaining 10%
interest in ISP*D was purchased by the Company. In late 1994, the Company
organized a subsidiary in the United Kingdom to engage in catalog operations. In
December 1995, the Company acquired Systematika Ltd., a leading reseller of
technical software in the United Kingdom and the publisher of the popular System
Science catalog. In January 1996, the Company formed ISP*F International
Software Partners France SA, as a full service corporate reseller of PC
software, based in Paris and majority owned by Programmer's Paradise France
SARL. In September 1997, the Company acquired Logicsoft Holding BV, the parent
company of Logicsoft Europe BV, the predominate Large Account Reseller in the
Benelux territory. The Company is using its European-based operations as a
platform for pan-European business development, including the distribution of
local versions of its catalogs.
The Company has experienced in the past and will experience in the
future seasonal variations in net sales and net income. Factors that have
contributed to seasonal operating results include product cycles of suppliers
that are not controlled or influenced by the Company, product availability,
supplier relationships, customer licenses and contracts, the timing of catalog
mailings, catalog response rates, product mix, past and potential acquisitions,
the condition of the software industry in general, traditional softness in
summertime European commercial activity, shifts in demand for software products
and industry announcements, releases of new products and upgrades and corporate
purchasing cycles.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
financial information derived from the Company's consolidated statement of
operations expressed as a percentage of net sales:
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
% to Net Sales % Change
----------------------------------- --------------------------
1996 1997 1998 97 v 96 98 v 97
------------------------------------ ---------------------------
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0%
Cost of Sales 83.8% 85.4% 87.5%
Gross Profit 16.2% 14.6% 12.5% (1.6%) (2.1%)
Selling, general and
administrative expenses 13.5% 10.6% 9.7% (2.9%) (0.9%)
Amortization of goodwill 0.4% 0.5% 0.4% 0.1% (0.1%)
Income from operations 2.3% 3.5% 2.4% 1.2% (1.1%)
Interest (income), expense net (0.2%) (0.1%) (0.1%) (0.1%) (0.0%)
Income before taxes 2.5% 3.6% 2.5% 1.1% (1.1%)
Provision for Income tax (0.8%) (1.4%) (1.0%) 0.6% (0.4%)
Minority interest (loss) (0.1%) 0.1%
Net Income 1.8% 2.2% 1.5% 0.4% (0.7%)
</TABLE>
NET SALES
Net sales of the Company represents the gross consolidated revenue of
the Company less returns. Although net sales consist primarily of sales of
software, revenue from marketing services and advertising is also included
within net sales. Net sales of the Company increased by $58.5 million or 33%, to
$234.4 million in 1998 and by $48.5 million, or 38%, to $176.2 million in 1997
as compared to the respective preceding periods. The increase in revenues in
1998 is primarily attributable to strong growth in the direct sales channel.
Revenues within the direct sales channel increased 69% or $62.4 million in 1998,
the majority of which resulted from the acquisition of Logicsoft in September
1997. The Company also posted strong gains in the direct sales channel in both
France and Germany, which grew by 30% and 29%, respectively. Revenues within the
catalog channel declined from 1997 by approximately 5% to $66.5 million
primarily due to the Y2K issue as well as the lack of new products being
introduced into the channel. Most catalog customers are individual programmers
and developers and as such, were extensively involved in Y2K conversion projects
and therefore delaying scheduled development projects. In addition, no
significant new technical software products were introduced into the channel
during 1998 with the exception of Microsoft's introduction of their upgrades for
Visual C++ and Visual Basic in September 1998.
The growth in net sales in 1997 resulted from a combination of the
growth of the catalog channel and direct sales channels as well as growth
through acquisitions. Revenues within the catalog channel increased 19% or $11.3
million in 1997, the majority of which was incurred in the United States and
reflects the full year impact of the acquisition of The Programmer's Supershop
acquired in June 1996 as well as the introduction and development of the
Company's newest segmented catalog: NT Supershop. Domestic catalog circulation
increased by approximately 1.7 million catalog drops reflecting the growth of
the Company's five catalog offerings. Revenues within the corporate reseller
channel increased 66% in 1997 primarily resulting from a significant increase in
the amount of German and Austrian reseller customers as well as the acquisition
of Logicsoft Holding BV in September 1997. Revenues within Germany and Austria
increased by approximately 47% over 1996 while revenues in the United Kingdom
increased by 26% over 1996. The increase in revenues reflects an increase in
market share and is directly attributable to the value-added services and
pan-European capabilities being delivered by the group.
GROSS PROFIT
Gross profit represents the difference between net sales and cost of
sales. Cost of sales is composed primarily of amounts paid by the Company to
publishers and vendors plus catalog printing and mailing costs. Publisher and
vendor rebates are credited against cost of sales. Gross Profit as a percentage
of net sales decreased by 2.1% in 1998 from 14.6% to 12.5% reflecting a shift in
the mix of sales through the Company's distribution channels as a result of the
substantial increase in lower margin direct sales and Microsoft Select licensing
sales. The acquisition of Logicsoft Holding BV was a significant factor in the
overall shift of the revenue mix by increasing lower margin direct sales.
<PAGE>
In the past, gross margins have been affected by the mix of products
sold and the mix of distribution channels. Historically, the gross margins
attained in the catalog channel have been higher than either the direct sales or
distribution channels. In 1998, catalog operations contributed approximately 28%
of revenue and approximately 44% of gross margin dollars as compared with 40% of
revenue and 59% of gross margin dollars in 1997. Direct sales operations
contributed approximately 65% of revenue and approximately 49% of gross margin
dollars in 1998 and 51% of revenue and 32% of gross margin dollars in 1997. The
distribution channel contributed approximately 6% of revenue and approximately
8% of gross margin dollars in 1998 compared with 9% of revenue and 9% of margin
dollars in 1997.
The historically higher margins attained in the catalog channel are
related to both the product focus on technical software, including numerous
specialized products, and on the relatively fragmented customer base of the
catalog channel, in comparison to the direct sales channel, which primarily
serves large corporations purchasing high volumes of widely available business
applications. In the future, the Company's gross margins will be affected by
several factors, including, among others, the price of products sold, the
distribution channel used, increases in product costs, price competition and the
introduction of new products. Furthermore, revenues within the direct sales
channel could be adversely affected if Microsoft were to change the methodology
of license contracts wherein the Large Account Resellers would earn commissions
rather than take on the credit risk and record the revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses include all
corporate personnel costs (including salaries and health benefits), depreciation
and amortization, non-personnel-related marketing and administrative costs and
provision for doubtful accounts. Depreciation and amortization consists
primarily of equipment depreciation and leasehold amortization. SG&A expenses
have decreased as a percentage of revenues from 13.5% in 1996 to 10.6% in 1997
and then further declined to 9.7% of net revenues in 1998. The high SG&A expense
as a percentage of revenues in 1996 is attributable to the abnormally high
overheads incurred with the start-up of the French corporate reseller operation.
The French corporate reseller operation required mid-year restructuring which
involved the separation and payment of severance for several employees. The
decline in SG&A expense as a percentage of revenues in 1997 is attributable to
the increase in revenues in the reseller channel, which has generally lower SG&A
costs as a percentage of revenues and also the impact of the acquisition of
Logicsoft Holding BV. This is further exemplified by the percentage reduction in
SG&A as a percentage of revenues in 1998 as the full year impact of the
acquisition of Logicsoft was felt as well as certain economies of scale that
were realized. Each year SG&A has increased in absolute dollars, reflecting the
cost of operations of the Company's acquisitions such as the Programmer's
Supershop, System Science, ISP*D and most recently, Logicsoft Holding BV. The
Company does anticipate that SG&A as a percentage of revenues will continue to
decline as revenues continue to grow and cost containment directives remain in
place, however, there can be no assurances that this will occur.
AMORTIZATION
Amortization expense includes the systematic write-off of goodwill. The
Company incurred goodwill with the acquisition of both ISP*D and Lifeboat Italia
which it is amortizing over 20 years. In addition, the Company recorded goodwill
in conjunction with the acquisition of both Systematika Ltd. and ISP*F
International Software Partners France. The Company recognized approximately
$9.5 million in goodwill from the acquisition of the assets of The Software
Developer's Company, Inc. in June 1996 which is being amortized over a
fifteen-year period for both financial and tax accounting purposes. In
connection with the acquisition of Logicsoft Holding BV, the Company recognized
approximately $2.4 million in goodwill, which is being amortized over a
fifteen-year period. The purchase contract with Logicsoft Holding BV included an
"earn-out" feature based on results of operations for the fiscal year ended
December 31, 1998. As a result, the Company has recorded an additional $2.2
million as goodwill on the accompanying balance sheet.
<PAGE>
INTEREST INCOME AND EXPENSE
The Company generated net interest income of approximately $293,000,
$212,000 and $223,000 in 1998, 1997 and 1996, respectively. Net interest income
in 1998 was offset by the interest charge under the term-loan financing for the
acquisition of Logicsoft Holding BV. Overall interest income for 1996 was
negatively impacted by the utilization of cash to finance the acquisition of
ISP*F.
MINORITY INTEREST
Minority interest represents the share of the ISP*F losses related to
the 28% stock ownership, which was not owned by the Company at December 31,
1996. An additional minority equity contribution was funded in October 1996 as
part of a reorganization and adjustment in ownership percentage. Operating
losses for ISP*F are offset against minority interest. Because the operating
losses for ISP*F exceeded minority interest, the Company recognized
substantially all of the operating losses through September 30, 1996. This
amounted to approximately $775,000.
INCOME TAXES
Prior to 1995, the Company had accumulated net operating loss
carryforwards and other deductible temporary differences for income tax purposes
of approximately $10.5 million which could be used to offset taxable income
through the year 2005. The Company's initial public offering triggered an
ownership change, which imposes a limit on the use of these net operating loss
carryforwards. See Note 5 to the Consolidated Financial Statements.
Statement of Financial Accounting Standards No. 109 requires that a
valuation allowance be recorded for deferred tax assets if it is more likely
than not that some or all of the deferred tax assets will not be realized. The
ultimate realization of the deferred tax assets depends upon the existence of
future taxable income.
For the year ended December 31, 1998, the Company recorded a provision
for income taxes of approximately $2.4 million, which consists of a provision
for state and federal taxes of approximately $2.1 million and also a provision
for foreign taxes of approximately $300,000. In 1997, the Company recorded a
provision for income taxes of approximately $2.4 million, which consists of a
provision for state and federal taxes of approximately $2.35 million and also a
provision for foreign taxes of approximately $54,000. In 1996, the Company
recorded a provision for income taxes of approximately $991,000 which consists
of a provision for state and federal taxes of approximately $1.3 million offset
by a reduction in the tax valuation allowance of approximately $350,000
associated with prior period losses of the German subsidiary.
Undistributed earnings of the Company's foreign subsidiaries amounted
to approximately $3,300,000 and $2,900,000 at December 31, 1998 and 1997,
respectively. Those earnings are considered to be indefinitely reinvested and,
accordingly, no provision for U.S. federal and state income taxes has been
provided. Upon distribution of those earnings in the form of dividends, the
Company would be subject to both U.S. income taxes (subject to an adjustment for
foreign tax credits) and withholding taxes payable to various foreign countries.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital needs have been to fund the working
capital requirements created by its sales growth and to make acquisitions.
Historically, the Company's primary sources of financing have been borrowings
under its domestic and international lines of credit with financial institutions
and the issuance of common and preferred stock.
<PAGE>
Cash flows from operations were approximately $2,869,000 for the year
ended December 31, 1998 compared to $6,196,000 and $1,166,000 for 1997 and 1996,
respectively. In 1998, cash was provided primarily by the net income of the
Company and by an increase in accounts payable, reflecting the increase in
Microsoft Select business and related amounts payable but not yet due to
Microsoft, offset by an increase in accounts receivable, reflecting strong
fourth quarter sales. Cash flows from operations for 1997 and 1996 were also
provided by the net income of the Company and by similar increases in amounts
payable but not yet due to Microsoft. In addition, cash flows from operations
for 1996 were negatively impacted by the losses generated by the operations of
ISP*F, the French corporate reseller and a DSO in France that is unusually long
in comparison to other entities within the Company.
At December 31, 1998, the Company had cash and cash equivalents of
$21.1 million and net working capital of $17.7 million compared with cash and
cash equivalents of $20.6 million and net working capital of $16.1 million at
December 31, 1997. The increase in working capital at December 31, 1998 is
attributable to the earnings for the year then ended offset by the additional
liability resulting from the "earn-out" provisions of the acquisition of
Logicsoft Holding BV.
The Company's capital expenditures for 1998 and 1997 amounted to
approximately $1,388,000 and $718,000, respectively, primarily for computer
hardware and software, office furniture and leasehold improvements. In addition,
in 1997, the Company acquired approximately $187,000 of assets as part of the
acquisition of Logicsoft Holding BV.
Domestically, the Company has a committed line of credit whereby the
Company can borrow up to $7.5 million with interest at either the prime rate or
Euro-rate plus 200 basis points. The facility expires on June 30, 1999 and is
secured by all the domestic assets of the Company and 65% of the outstanding
stock of the foreign subsidiaries and contains certain covenants that require
the Company to maintain a minimum level of tangible net worth and working
capital. At December 31, 1998, there were no amounts outstanding under the line.
During 1997, the Company entered into a five-year term loan agreement
in the US $ equivalent of $3.0 million bearing interest at 6.17%. The loan is
denominated in Dutch Guilders and is secured by the assets of the Company and
65% of the stock of foreign subsidiaries. At December 31, 1998, there was
approximately $2.4 million outstanding under the note.
The Company maintains a secured, demand revolving line of credit for
its German subsidiary, pursuant to which it may borrow in Deutschmarks up to DM
1,500,000 (the equivalent of approximately $900,000 at December 31, 1998), based
upon its eligible accounts receivable and eligible inventory, and the creditor
is entitled to the benefit of a limited guarantee by the Company of up to DM
300,000 (the equivalent of approximately $180,000 at December 31, 1998). The
line bears interest at 8.25%. At December 31, 1998, there were no amounts
outstanding under the line.
In Italy, Lifeboat Italy has banking arrangements with several Italian
banks, pursuant to which it may borrow in lire on an unsecured, demand basis to
finance working capital requirements, through credit and overdrafting
privileges, as well as receivables-based advances. The aggregate credit and
overdraft limits of such arrangements at December 31, 1998 were approximately
Lit 2,800,000,000 (the equivalent of approximately $1.6 million at December 31,
1998). The unsecured borrowings bear interest at market rates ranging from 6.25%
to 9.00%. At December 31, 1998 there were no amounts outstanding under this
line.
The Company's subsidiary in The Netherlands, Logicsoft Europe, BV,
maintains a demand revolving line of credit pursuant to which it may borrow in
guilders up to DFL 2.5 million (the equivalent of approximately $1.3 million at
December 31, 1998), and is secured by its accounts receivable and inventory. The
line bears interest at 5.875%. There were no amounts outstanding under the line
at December 31, 1998.
<PAGE>
In France, ISP*F maintains a demand revolving line of credit pursuant
to which it may borrow up to FRF 3.0 million (the equivalent of approximately
$500,000 at December 31, 1998), and is secured by its accounts receivable and
inventory and a FRF 3.0 million letter of credit. At December 31, 1998, there
were no amounts outstanding under the line.
FOREIGN EXCHANGE
The Company's shipments to foreign subsidiaries are invoiced in U.S.
dollars. As a result, the Company believes its foreign exchange exposure caused
by these shipments is insignificant. The Company is, however, exposed to
exchange conversion differences in translating foreign results of operations to
U.S. dollars. Depending upon the strengthening or weakening of the U.S. dollar,
these conversion differences could be significant.
Sales to the customers in European countries and borrowings by the
Company's European subsidiaries are denominated in local currencies. The Company
does not hedge its net asset exposure to fluctuations in the U.S. Dollar against
any such local currency exchange rates. Although the Company does maintain bank
accounts in local currencies to reduce currency exchange fluctuations, the
Company is, nevertheless, subject to risks associated with such fluctuations.
CERTAIN FACTORS AFFECTING OPERATING RESULTS
Certain statements contained in, or incorporated by reference in, this
Form 10-K are forward-looking in nature. Such statements can be identified by
the use of forward-looking terminology such as "believes", "expects", "may",
"will", "should" or "anticipates" or the negative thereof or comparable
terminology, or by discussions of strategy. The Company wishes to ensure that
such statements are accompanied by meaningful cautionary statements, so as to
ensure to the fullest extent possible the protections of the safe harbor
established in the Private Securities Litigation Reform Act of 1995.
Accordingly, such statements are qualified in their entirety by reference to and
are accompanied by the following discussion of certain important factors that
could cause actual results to differ materially from those projected in such
forward-looking statements. The Company cautions the reader that this list of
factors may not be exhaustive. The Company operates in a rapidly changing
business, and new risk factors emerge from time to time. Management cannot
predict every risk factor, nor can it assess the impact, if any, of all such
risk factors on the Company's business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
projected in any forward-looking statements. Accordingly, forward-looking
statements should not be relied upon as a prediction of actual results.
Competition. The direct marketing industry and the computer software
distribution business, in particular, are highly competitive. The Company
competes with consumer electronic and computer retail stores, including
superstores, and other direct marketers of software and computer related
products. Certain software vendors are selling their products directly through
their own catalogs and over the Internet. Certain competitors of the Company
have financial, marketing and other resources greater than those of the Company.
There can be no assurance that the Company can continue to compete effectively
against existing competitors or new competitors that may enter the market. In
addition, price is an important competitive factor in the personal computer
software market and there can be no assurance that the Company will not be
subject to increased price competition. An increase in the amount of competition
faced by the Company or its failure to compete effectively against its
competitors could have a material adverse effect on the Company's business,
financial condition and results of operations.
Quarterly Fluctuations and Seasonality. The Company's sales and results
of operations have fluctuated and are expected to continue to fluctuate on a
quarterly basis as a result of a number of factors, including: the condition of
the software industry in general; shifts in demand for software products;
industry shipments of new software products or upgrades; the timing of new
merchandise and catalog
<PAGE>
offerings; fluctuations in response rates; fluctuations in postage, paper,
shipping and printing costs and in merchandise returns; adverse weather
conditions that affect response, distribution or shipping; shifts in the timing
of holidays; and changes in the Company's product offerings. The Company's
operating expenditures are based on sales forecasts. If revenues do not meet
expectations in any given quarter, operating results may be materially adversely
affected.
The Company has traditionally experienced a decrease in domestic net
sales in its third quarter compared to other quarters. This traditional downturn
in domestic net sales is exacerbated by the decline of European commercial
activity in general and software sales in particular during the summer months.
Foreign Operations. In addition to its activities in the United States,
70% of the Company's 1998 sales were generated internationally. Foreign
operations are subject to general risks attendant to the conduct of business in
each foreign country, including economic uncertainties and each foreign
government's regulations. In addition, the Company's international business may
be affected by changes in demand or pricing resulting from fluctuations in
currency exchange rates or other factors.
Privacy Concerns With Respect To List Development And Maintenance. The
Company mails catalogs and sends electronic messages to names in its proprietary
customer database and to potential customers whose names are obtained from
rented or exchanged mailing lists. There has been increasing world-wide public
concern regarding right to privacy issues involved with the rental and use of
customer mailing lists and other customer information. Any domestic or foreign
legislation enacted limiting or prohibiting these practices could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Management Information Systems. The Company's success is dependent on
the accuracy and proper utilization of its management information systems,
including its telephone system. The Company's ability to manage its inventory
and accounts receivable collections; to purchase, sell and ship its products
efficiently and on a timely basis; and to maintain its operations is dependent
upon the quality and effective utilization of the information generated by its
management information systems. The Company recognizes the need to continually
upgrade its management information systems to most effectively manage its
operations and customer data base. In that regard, the Company anticipates that
it will, from time to time, require software and hardware upgrades for its
present management information systems.
Increases In Postage, Shipping And Paper Costs. Increases in postal or
shipping rates and paper costs could have a significant impact on the cost of
production and mailing of the Company's catalogs and the shipment of customer
orders. Postage prices and shipping rates increase periodically, and the Company
has no control over increases that may occur in the future. The United States
Postal Service has recently increased postal rates. Paper prices historically
have been cyclical and significant increases have been experienced by the
Company in the past. Significant increases in postal or shipping rates and paper
costs could have a material adverse effect on the Company's business, financial
condition and result of operations, particularly to the extent the Company is
unable to pass on such increases directly to its customers or offset such
increases by reducing other costs. In addition, strikes or other service
interruptions by the postal service or third party couriers could adversely
affect the Company's ability to deliver products on a timely basis.
Additionally, the Company's operating results could be adversely
affected by a delay in the introduction of a major new software product or
upgrading of more specialized products. Purchasers of software may delay the
ordering of new software applications in the period immediately preceding such
introduction for fear of technological obsolescence. The Company believes that
software publishers often delay the release of related software products so as
to coordinate with the release of these major new products or delay development
of new products until after the importance of these new products can be
evaluated. Delayed introductions of these new products could result in the delay
or reduction of sales because the unreleased product cannot be delivered and
could also adversely affect sales in that the
<PAGE>
Company, which often coordinates new catalog drops and marketing initiatives
with such introductions and product upgrades, would be focusing catalog
marketing on such unreleased products.
Changing Methods Of Software Distribution. The software distribution
industry is undergoing significant change and consolidation. Software
distributors are consolidating operations and acquiring or merging with other
distributors or retailers to achieve economies of scale and increased
efficiency. The current consolidation trend could cause the industry to become
even more competitive and make it more difficult for the Company to maintain its
operating margins. The manner in which software products are distributed and
sold is also changing, and new methods of distribution and sale may emerge or
expand. Software developers and publishers have sold, and may intensify their
efforts to sell, their products directly to end users. The emergence of the
Internet as a viable platform in which to conduct business transactions has both
lowered the barriers for competition and broadened customers' access to products
and information. This transition has heightened the Company's awareness to
maintain a competitive edge in this market. From time to time certain developers
and publishers have instituted programs for the direct sale of large order
quantities of software to certain major corporate accounts. These types of
programs may continue to be developed and used by various developers and
publishers. While Microsoft and other vendors currently sell their products
directly to end users, they have not attempted to completely bypass the reseller
channel. Future efforts by such entities to bypass third-party sales channels
could materially and adversely affect the Company's operations.
In addition, certain major publishers, including Microsoft, have
implemented programs for the master copy distribution or site licensing of
software. These programs generally grant an organization the right to make a
number of copies of software for distribution within the organization provided
that the organization pays a fee to the developer for each copy made. Also,
resellers and publishers may attempt to increase the volume of software products
distributed electronically through down-loading to end users' microcomputers,
through CD-ROM unlocking technology, through CD-ROM-based subscription services
and through on-line shopping services. Any of these competitive programs, if
successful, could have a material adverse effect on the Company's operations and
financial condition.
Dependence Upon Vendors. As is customary in the industry, the Company
has no long-term supply contracts with any of its suppliers. Substantially all
the Company's contracts with its vendors are terminable upon 30 days' notice or
less. Termination or interruption of the Company's relationships with its
suppliers or modification of the terms of or discontinuance of their agreements
with the Company could adversely affect the Company's operating results.
Certain of the products offered by the Company may be subject to
manufacturer allocations, which limit the number of units of manufacturers'
products available to resellers, including the Company. The Company's business
may be adversely affected if certain products become unavailable to the Company
or if the number of units allocated to the Company becomes limited, whether such
unavailability or limitation is due to the loss of authorized dealer status,
allocation limitations or other conditions. Many key vendors finance portions of
the cost of catalog publication and distribution based upon the amount of
coverage given in the catalogs to their respective products. A reduction in or
discontinuation of this practice could have a material adverse effect on the
Company.
Rapid Changes In Software Products And Risk Of Inventory Obsolescence.
The software products industry is characterized by rapid technological change
and the frequent introduction of new products and product enhancements. The
Company's success depends in large part on its ability to identify and obtain
the right to market products that will meet the changing requirements of the
marketplace. The Company has sought to minimize its inventory exposure through a
variety of inventory control procedures and policies, including formal and
informal vendor price protection programs. In order to satisfy customer demand
and to obtain greater purchasing discounts, the Company expects to carry
increased inventory levels of certain products in the future. In addition, large
software firms continue to develop products that include the features of utility
and subroutine products published and/or sold by the Company in their software
languages, thus rendering certain of such products unnecessary.
<PAGE>
Additionally, if the growth rate of the personal computer market were to
decrease, with a corresponding decrease in demand for computer software, the
Company's operating results could be adversely affected. There can be no
assurance that the Company will be able to identify and offer products necessary
to remain competitive or avoid losses related to obsolete inventory, or that
unexpected new product introductions will not have a material adverse effect on
the demand for the Company's inventory.
Stock Volatility. The technology sector of the United States stock
markets has experienced substantial volatility in recent periods. Numerous
conditions which impact the technology sector or the stock market in general or
the Company in particular, whether or not such events relate to or reflect upon
the Company's operating performance, could adversely affect the market price of
the Company's Common Stock. Furthermore, fluctuations in the Company's operating
results, announcements regarding litigation, the loss of a significant vendor,
increased competition, reduced vendor incentives and trade credit, higher
postage and operating expenses, and other developments, could have a significant
impact on the market price of the Company's Common Stock.
Acquisitions Strategy. The Company plans to continue to pursue
acquisitions of complementary businesses. However, there can be no assurance
that suitable acquisitions will be available to the Company on acceptable terms,
that financing for future acquisitions will be available on acceptable terms,
that future acquisitions will be advantageous to the Company or that anticipated
benefits of such acquisitions will be realized. The pursuit, timing and
integration of possible future acquisitions may cause substantial fluctuations
in operating results.
State Sales Tax Collection. The Company presently collects state sales
tax, or other similar tax, only on sales of products to residents of the State
of New Jersey. Various states have tried to impose on direct marketers the
burden of collecting state sales taxes on the sale of products shipped to state
residents. The United States Supreme Court has affirmed its position that it is
unlawful for a state to impose state sales tax collection obligations on an
out-of-state mail order company whose only contacts with the state are the
distribution of catalogs and other advertising materials through the mail and
subsequent delivery of purchased goods by parcel post and interstate common
carriers. However, it is possible that legislation may be passed to overturn
such decision or the Supreme Court may change its position. Additionally, it is
currently uncertain as to whether electronic commerce, which will likely include
the Company's Internet sales activities, will be subject to state sales tax. The
imposition of new state sales tax collection obligations on the Company in
states to which it ships products would result in additional administrative
expenses to the Company and could result in price increases to the customer,
which could adversely affect the Company's business, financial condition and
results of operations.
Year 2000 Compliance. The Company believes that its present IT system
is Year 2000 compliant. The Company has also conducted an investigation and
received certification from its major suppliers that they will be fully Y2K
compliant by April 1999.
The Company is continuing to conduct a review of key publishers to
determine whether their software products meet Year 2000 requirements. The
Company has continued to post updated information on Y2K compliancy on its
website. In the event that the Company's key publishers cannot provide the
Company with software products that meet Year 2000 requirements on a timely
basis, or if customers delay or forego software purchases based upon Year 2000
related issues, the Company's operating results could be materially adversely
affected. In general, as a reseller of software products, the Company only
passes through to its customers the applicable vendor's warranties. The
Company's operating results could be materially adversely affected, however, if
it were held liable for the failure of software products resold by the Company
to be Year 2000 compliant despite its disclaimer of software product warranties.
<PAGE>
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding quantitative and qualitative disclosures about
market risk is set forth in Part I, Item 7 of this Form 10-K at "Foreign
Operations."
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Consolidated Financial Statements at Item 14(a).
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Not applicable.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
This information (other than the information regarding executive
officers of the Company called for by Item 401 of Regulation S-K which is
included in Part I hereof as Item 4A in accordance with General Instruction
G(3)) will be contained in the Company's definitive Proxy Statement with respect
to the Company's Annual Meeting of Stockholders, to be filed with the Securities
and Exchange Commission within 120 days following the end of the Company's
fiscal year, and is hereby incorporated by reference thereto.
ITEM 11 EXECUTIVE COMPENSATION.
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
<PAGE>
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report:
1. CONSOLIDATED FINANCIAL STATEMENTS:
Index to Consolidated Financial Statements and Schedules
Report of Independent Auditors
Consolidated Balance Sheets - as of
December 31, 1997 and 1998
Consolidated Statements of Income - Years
ended December 31, 1996, 1997 and 1998
Consolidated Statement of Stockholders' Equity-Years ended
December 31, 1996, 1997 and, 1998
Consolidated Statements of Cash Flows - Years
ended December 31, 1996, 1997 and
1998
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULE:
Schedule II Valuation and Qualifying Accounts
All other schedules are omitted for the reason that the
information is included in the financial statements or the notes
thereto or that they are not required or are not applicable.
3. EXHIBITS:
Exhibit
Number Description of Exhibits.
------ ------------------------
3.1 Form of Amended and Restated Certificate of Incorporation of the
Company.*
3.2 Form of Amended and Restated By-Laws of the Company.*
4.1 Specimen of Common Stock Certificate.*
10.2 Amended and Restated Revolving Loan and Security Agreement, dated as of
March 4, 1993, between Midlantic National Bank and the Company together
with Revolving Loan Note; First Amendment to Amended and Restated
Revolving Loan and Security Agreement, dated as of March 4, 1993,
between Midlantic National Bank and the Company, Corsoft, Inc. and
Lifeboat together with First Allonge to Revolving Loan Note; Consent of
Midlantic National Bank.*
10.3 ISP*D Loan Agreements.*
10.4 Lifeboat Italy Loan Agreement.*
10.5 Lease, dated as of August 27, 1987, by and between Robert C. Baker,
Robert C. Baker, Trustee under Trust Agreement dated March 15, 1984 for
the Benefit of Ashley S. Baker, Gerald H. Baker, Harvey B. Oshins, Baker
1985 Family Partnership, Gregory J. Stepic and John G. Orrico
("Landlord") and Computer Library, Inc., and First Modification of
Lease, dated as of April 24, 1991, between Landlord and the Company.*
10.6 ISP*D Office Lease.*
<PAGE>
10.7 Lifeboat Italy Office Lease.*
10.8 Agreement dated as of December 29, 1994, between Lifeboat Publishing and
Software Garden, Inc.; License for Trademark "Dan Bricklin", dated as of
December 29, 1994, between the Company and Daniel Bricklin; First
Amendment to Software License Agreement and Trademark License Agreement
dated March 30, 1995.*
10.9 Employment Letter with Roger Paradis dated as of May 24, 1995.*
10.11 Employment Letter with Joseph V. Popolo dated as of December 16, 1994.*
10.12 Employment Letter with John P. Broderick dated as of May 10, 1995.*
10.13 Employment Letter with Massimo Freschi dated as of June 18, 1992.*
10.14 Employment Letter with Frederick W. Schmidt dated as of January 19,
1994.*
10.15 Form of Confidentiality and Non-Compete Agreement.*
10.16 Employment Agreement dated as of May 26, 1994, between Peter Lorenz,
ISP*D and the Company.*
10.17 1986 Stock Option Plan and Form of Employee Stock Option Agreement.*
10.18 1995 Stock Plan.*
10.19 1995 Non-Employee Director Plan.*
10.20 Form of Officer and Director Indemnification Agreement.*
10.21 Registration Rights Agreement dated as of May , 1988.*
10.22 Agreement, dated December 19, 1995, by and between Programmer's Paradise
(UK) Limited and the former shareholders of Systematika Limited, as
supplemented by a letter agreement dated December 19, 1995 between Peter
Lindsey and Programmer's Paradise (UK) Limited.+
10.23 Employment Agreement dated December 19, 1995 between Peter Lindsey and
Systematika Limited.+
10.24 Share Sale Agreement dated December 29, 1995 between Raphael and Rosario
Perez and Programmer's Paradise France relating to Logiciels &
Applications SA. ++
10.25 Shareholders' Agreement dated December 29, 1995 between Raphael Perez,
Softway, Inc., Selsid and Programmer's Paradise France relating to
Logiciels & Applications SA. ++
10.26 Warranty Agreement dated January 18, 1996 by and among Raphael Perez,
Rosario Perez and Programmer's Paradise France relating to Logiciels &
Applications SA. ++
10.27 Share Sale Agreement Amendment Agreement dated January 18, 1996 Relating
to Logiciels & Applications by and among Raphael Perez, Rosario Perez
and Programmer's Paradise France. ++
10.28 Call Option Agreement dated January 18, 1996 between Raphael Perez and
Programmer's Paradise France. ++
<PAGE>
10.29 Side Agreement dated January 18, 1996 to Call Option Agreement dated
January 18, 1996 between Raphael Perez and Programmer's Paradise France.
++
10.30 Call Option Agreement dated January 18, 1996 by and among Softway, Inc.,
Selsid and Programmer's Paradise France. ++
10.31 Employment Agreement dated January 22, 1996 between Raphael Perez and
Logiciels Et Applications. ++
10.32 Agreement of Purchase and Sales of Assets, dated as of May 16, 1996,
between the Registrant and the Selling Parties, and the exhibits
thereto. **
10.33 Bill of Sale, dated as of June 28, 1996, executed by the Selling
Parties.**
10.34 Facilities and Employee Use Agreement, dated as of June 28, 1996,
between the Registrant and SDC.**
10.35 Closing Statement, dated as of June 28, 1996, between the Registrant and
the Selling Parties**
10.36 Letter Agreement regarding the Acquisition of Stock of SDEV Germany,
dated as of June 28, 1996, between the Registrant and the Selling
Parties.**
10.37 Stock Acquisition Escrow Agreement, dated as of June 28, 1996, between
the Registrant, the Selling Parties and Golenbock, Eiseman, Assor &
Bell, as escrow agent.**
10.38 Employment Agreement dated July 14, 1998 between William Willett and the
Company
10.39 Employment Agreement dated June 9, 1998 between John P. Broderick and
the Company
10.40 Employment Agreement dated December 29, 1998 between Peter Lorenz and
the Company
10.41 Employment Agreement dated January 2, 1999 between Frans van der Helm
and the Company
10.42 Lease dated as of May 14, 1997 between Robert C. Baker, et al as
Landlord and the Company
21.1 Subsidiaries of the Registrant.*
23.1 Consent of Ernst & Young LLP
24.1 Powers of Attorney.*
27 Financial data schedule
- - --------
* Incorporated by reference to exhibits of the same number filed with the
Registrant's Registration Statement on Form S-1 or amendments thereto (File
No. 33-92810).
+ Incorporated by reference to the Registrant's Report on Form 8-K dated
January 2, 1996 or amendments thereto.
++ Incorporated by reference to exhibits of the same number filed with the
Registrant's Report on Form 10-K dated March 28, 1996.
** Incorporated by reference to the Registrant's Report on Form 8-K dated July
19, 1996 or amendments thereto.
<PAGE>
(b) Reports on Form 8-K.
No reports were filed on Form 8-K during the last quarter of
the fiscal year covered by this Report.
<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, in Shrewsbury, New
Jersey, on March 29, 1999.
PROGRAMMER'S PARADISE, INC.
By:
--------------------------------
William H. Willett, President
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 in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Chief Executive Officer March 29, 1999
and Chairman of the Board of Directors
- - ------------------------------------
William H. Willett
Chief Financial and March 29, 1999
Accounting Officer
- - -------------------------------------
John P. Broderick
Director March 29, 1999
- - -------------------------------------
Edwin H. Morgens
Director March 29, 1999
- - -------------------------------------
Allan Weingarten
- - ------------------------------------- Director March 29, 1999
F. Duffield Meyercord
</TABLE>
<PAGE>
PROGRAMMER'S PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
Schedule II - Valuation and Qualifying Accounts F-22
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Programmer's Paradise, Inc.
We have audited the accompanying consolidated balance sheets of Programmer's
Paradise, Inc. and subsidiaries as of December 31, 1997 and 1998, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1998. Our audits
also included the financial statement schedule listed in the Index of Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Programmer's
Paradise, Inc. and subsidiaries at December 31, 1997 and 1998 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information set forth herein.
/s/ Ernst & Young LLP
MetroPark, New Jersey
January 27, 1999
F-2
<PAGE>
Programmer's Paradise, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
DECEMBER 31
1997 1998
-------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $20,571 $21,167
Accounts receivable, net of allowances of $950 and
$1,180 in 1997 and 1998, respectively 38,517 53,002
Inventory 4,627 5,335
Prepaid expenses and other current assets 2,561 2,925
Deferred income taxes 1,619 1,988
-------------------------------------
Total current assets 67,895 84,417
Equipment and leasehold improvements, net 1,862 2,317
Goodwill, net of accumulated amortization of $1,600
and $2,579 in 1997 and 1998, respectively 14,185 15,595
Other assets 707 1,286
Deferred income taxes 1,719 1,262
=====================================
$86,368 $104,877
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $46,979 $58,064
Notes payable to banks 958 674
Other current liabilities 3,881 7,993
-------------------------------------
Total current liabilities 51,818 66,731
Other liabilities 117 144
Notes payable - Long-term 2,220 1,761
Stockholders' equity:
Common Stock $.01 par value: Authorized, 10,000,000 shares, issued
4,793,295 and 4,951,070 in 1997 and 1998, respectively 48 50
Additional paid-in capital 33,633 33,952
Treasury stock, at cost, 59,500 and 41,000 shares in 1997 and 1998,
respectively (343) (219)
Retained Earnings (Deficit) (256) 3,186
Accumulated other comprehensive loss (869) (728)
-------------------------------------
Total stockholders' equity 32,213 36,241
-------------------------------------
$86,368 $104,877
=====================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
Programmer's Paradise, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1997 1998
-----------------------------------------
<S> <C> <C> <C>
Net sales $127,680 $176,157 $ 234,429
Cost of sales 107,041 150,452 205,241
-------------------------------------
Gross profit 20,639 25,705 29,188
Selling, general and administrative expenses 17,230 18,574 22,682
Amortization of goodwill 473 914 979
-------------------------------------
Income from operations 2,936 6,217 5,527
Other (expense) income:
Interest expense (373) (326) (250)
Interest income 596 538 544
Unrealized foreign exchange (loss) gain 31 (58) 62
-------------------------------------
Income before income taxes and minority interest 3,190 6,371 5,883
Income tax provision 991 2,407 2,441
-------------------------------------
Income before minority interest 2,199 3,964 3,442
Minority interest in net income of subsidiary 99
-------------------------------------
Net income $ 2,298 $ 3,964 $ 3,442
=====================================
Basic net income per common share $ .48 $ .84 $ .72
=====================================
Diluted net income per common share $ .44 $ .75 $ .66
=====================================
Weighted average common shares outstanding-Basic 4,764 4,740 4,797
=====================================
Weighted average common shares outstanding-Diluted 5,198 5,280 5,249
=====================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
Programmer's Paradise, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID-IN
SHARES AMOUNT CAPITAL
---------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1996 4,678,245 $ 47 $33,405
Net income
Other comprehensive income:
Translation adjustment
Comprehensive income
Exercise of stock options, including
$86,000 in income tax benefits
83,975 1 104
Purchase of 65,000 treasury stock shares
---------------------------------------
Balance at December 31, 1996 4,762,220 48 33,509
Net income
Other comprehensive income:
Translation adjustment
Comprehensive income
Exercise of stock options, including
$65,000 in income tax benefits 31,075 124
---------------------------------------
Balance at December 31, 1997 4,793,295 48 33,633
Net income
Other comprehensive income:
Translation adjustment
Comprehensive income
Exercise of stock options, including
$372,000 in income tax benefits 157,775 2 319
Purchase of 102,500 treasury stock shares
=======================================
Balance at December 31, 1998 4,951,070 $50 $33,952
=======================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RETAINED ACCUMULATED OTHER
TREASURY EARNINGS/ COMPREHENSIVE
STOCK (DEFICIT) INCOME TOTAL
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1996 $(6,518) $ 55 $ 26,989
Net income 2,298 2,298
Other comprehensive income:
Translation adjustment $ (172) (172)
---------------
Comprehensive income 2,126
Exercise of stock options, including
$86,000 in income tax benefits 105
Purchase of 65,000 treasury stock shares $(375) (375)
---------------------------------------------------------------
Balance at December 31, 1996 (375) (4,220) (117) 28,845
Net income 3,964 3,964
Other comprehensive income:
Translation adjustment (752) (752)
---------------
Comprehensive income 3,212
Exercise of stock options, including
$65,000 in income tax benefits 32 156
---------------------------------------------------------------
Balance at December 31, 1997 (343) (256) (869) 32,213
Net income 3,442 3,442
Other comprehensive income:
Translation adjustment 141 141
---------------
Comprehensive income 3,583
Exercise of stock options, including
$372,000 in income tax benefits 669 990
Purchase of 102,500 treasury stock shares (545) (545)
===============================================================
Balance at December 31, 1998 $(219) $3,186 $(728) $36,241
===============================================================
</TABLE>
See accompanying notes
F-5
<PAGE>
Programmer's Paradise, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1997 1998
------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,298 $ 3,964 $ 3,442
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest in net income of subsidiary (99)
Depreciation expense 701 736 934
Amortization expense 621 1,019 1,114
Changes in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable (6,103) (8,167) (14,486)
Inventory 2,279 173 (708)
Prepaid expenses and other current assets 708 (85) (364)
Accounts payable and accrued expenses 1,176 7,708 11,085
Deferred tax asset 49 (22) 88
Net change in other operating assets and liabilities (464) 870 1,764
----------------------------------------
Net cash provided by operating activities 1,166 6,196 2,869
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment, leasehold improvements and other (620) (788) (1,975)
Purchases of businesses, net of cash acquired (11,236) (2,268)
----------------------------------------
Net cash used in investing activities (11,856) (3,056) (1,975)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments under lines of credit (461) (1,818) (743)
Borrowings under long term debt 2,962
Repayments under long term debt (150)
Purchase of treasury stock (375) (545)
Net proceeds from issuance of common stock 105 156 990
----------------------------------------
Net cash provided by (used in) financing activities (731) 1,150 (298)
----------------------------------------
Net increase (decrease) in cash and cash equivalents (11,421) 4,290 596
Cash and cash equivalents at beginning of year 27,702 16,281 20,571
----------------------------------------
Cash and cash equivalents at end of year $ 16,281 $ 20,571 $ 21,167
========================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
Programmer's Paradise, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND OPERATIONS
The consolidated financial statements include the accounts of Programmer's
Paradise, Inc., its wholly-owned subsidiaries and, its majority-owned
subsidiaries (the "Company"). Programmer's Paradise, Inc. is a recognized
international marketer of software targeting the software development
professional and Information Technology professional within enterprise
organizations. The Company operates principally, through five distribution
channels in North America and Europe- Internet, catalog, direct sales,
telemarketing, and wholesale distribution. All intercompany balances and
transactions have been eliminated in consolidation.
The Company's accounts receivable are potentially exposed to concentrations of
credit risk. These receivables reflect a broad customer base, which is dispersed
across many different industries and geographies. Credit limits, periodic credit
evaluations and account monitoring procedures are utilized to minimize the risk
of loss. Collateral is generally not required. Credit losses related to accounts
receivable have been consistent with management's expectations and,
historically, have not been material. The carrying value of accounts receivable
and notes payable to banks approximate fair value.
MAJOR CUSTOMER AND SUPPLIER
No customer accounted for more than 10% of consolidated net sales in 1998, 1997
and 1996 and no material part of the business is dependent upon a single
customer or a few customers, the loss of any one or more which would have a
materially adverse effect on the Company.
The Company has authorized dealership or distribution agreements with various
suppliers. Products of one of these suppliers accounted for approximately 47%,
55% and 54% of Company revenues for 1996, 1997 and 1998, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments with original
maturities of 90 days or less to be cash equivalents.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the foreign subsidiaries, all of which are located in
Europe, have been translated at current exchange rates, and related revenues and
expenses have been translated at average rates of exchange in effect during the
year. Resulting cumulative translation adjustments have been recorded within
other comprehensive income in accordance with FASB Statement No. 130, "Reporting
Comprehensive Income".
F-7
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
INVENTORY
Inventory, consisting primarily of finished products held for resale, is stated
at the lower of cost (weighted average) or market.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are stated at cost. Depreciation and
amortization are calculated using the straight-line method over three to five
years.
ACCOUNTING FOR LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets used in operations
when events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. No such events have occurred since
adoption at January 1, 1995.
GOODWILL
Goodwill represents the excess of costs over fair values of net assets acquired
and is being amortized on a straight-line basis substantially over fifteen
years.
STOCK-BASED COMPENSATION
As permitted by FASB Statement No. 123 "Accounting for Stock-Based Compensation"
(FASB 123), the Company has elected to follow Accounting Principal Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock option plans. Under APB 25,
no compensation expense is recognized at the time of option grant because the
exercise price of the Company's employee stock option equals the fair market
value of the underlying common stock on the date of grant.
F-8
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company recognizes revenue from the sale of software for microcomputers,
servers and networking upon shipment.
ADVERTISING COSTS
The Company capitalizes the advertising costs associated with producing its
catalogs. The costs of these catalogs are amortized over the estimated shelf
life of the catalogs, generally 3-5 months. The unamortized balance of
non-reimbursed advertising costs at any period end are minimal. Advertising
costs for 1996, 1997, and 1998 amounted to approximately $5,571,000, $5,725,000
and $6,159,000, respectively.
NET INCOME PER COMMON SHARE
Basic and diluted earnings per share are calculated in accordance with Financial
Accounting Standards Board Statement No. 128, "Earnings Per Share". All earnings
per share amounts for all periods have been presented, and where appropriate,
restated to conform to the Statement No. 128 requirements.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities." This Statement requires companies to record derivatives
on the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. SFAS 133 will be effective for the Company's fiscal year
ending December 31, 2000. Management believes that this Statement will not have
a significant impact on the Company.
2. ACQUISITIONS
In January 1996, the Company's wholly-owned French subsidiary, Programmer's
Paradise France SARL, acquired a majority-owned interest in ISP*F International
Software Partners SA (ISP*F), a newly formed full service corporate reseller of
PC software, based in Paris. The Company's capital contribution in connection
with the acquisition of ISP*F is approximately $1,214,000.
In June 1996, the Company acquired substantially all of the assets and business
of The Software Developer's Company, Inc. (SDC) for cash at a cost of
approximately $11,000,000. SDC had been the Company's largest direct mail
competitor, offering a similar array of technical software.
F-9
<PAGE>
2. ACQUISITIONS (CONTINUED)
In September 1997, the Company acquired 100% of the outstanding stock of
Logicsoft Holding BV ("Logicsoft"), which operates Logicsoft Europe BV, located
in Amsterdam, The Netherlands, at a cost of approximately $3,300,000 plus a
contingent earn-out payment, based upon increases in achievement's earnings in
1998 over a base amount. The earn-out amount of approximately $ 2.38 million was
accrued and recorded as goodwill in 1998. Logicsoft is a direct sales Company of
PC software in The Netherlands.
The Company accounted for the above acquisitions as purchases. Accordingly, the
acquired assets and liabilities assumed have been recorded at the estimated fair
values at the dates of acquisition. The results of operations of the acquired
businesses are included in the accompanying consolidated statements of income
from their respective dates of acquisition.
The following table presents the unaudited pro forma consolidated results of
operations for the year ended December 31, 1997 as if the above acquisitions had
occurred on January 1, 1997 (dollars in thousands):
1997
-------
Sales $192,351
Net income 4,011
Basic net income per common share $.85
Diluted net income per common share $.76
The pro forma amounts reflect amortization of the excess of purchase price over
the net assets acquired, the reduction in operating expenses as a result of
combining the operations, the reduction in interest income as a result of the
utilization of cash and the related tax effect of these items. The pro forma
results are not necessarily indicative of the results of operations that would
have occurred had the acquisitions taken place at the beginning of the periods
presented nor are they intended to be indicative of results that may occur in
the future.
3. NOTES PAYABLE TO BANKS
Notes payable to banks mainly represents the outstanding balance under a
five-year term loan discussed below.
In connection with the Logicsoft acquisition (see Note 2), the Company secured a
five year term loan in the US $ equivalent of approximately $3,000,000. The term
loan bears interest at 6.17% and principal and interest are payable quarterly.
The loan is payable in Netherland guilders and had an outstanding balance at
December 31, 1998 of $2,401,399 (DFL 4,500,000), of which $638,094 (DFL
1,200,000) is classified as current in the accompanying consolidated balance
sheet. The term loan is secured by all assets of the Company and 65% of the
outstanding stock of the foreign subsidiaries.
F-10
<PAGE>
3. NOTES PAYABLE TO BANKS (CONTINUED)
Maturities under the term loan are as follows:
1999 638,094 (DFL 1,200,000)
2000 638,094 (DFL 1,200,000)
2001 638,094 (DFL 1,200,000)
2002 487,117 (DFL 900,000)
The Company can borrow up to $7,500,000 under a committed line of credit with
interest at either the prime rate or Euro-rate plus 200 basis points. The
facility expires on June 30, 1999 and is secured by all the domestic assets of
the Company and 65% of the outstanding stock of the foreign subsidiaries and
contains certain covenants that require the Company to maintain a minimum level
of tangible net worth and working capital. The bank's prime rate was 7.75 % at
December 31, 1998. There were no amounts outstanding under the line at December
31, 1998.
The Company maintains a secured, demand revolving line of credit for its German
subsidiary, pursuant to which it may borrow in deutschmarks up to DM 1,500,000
(the equivalent of approximately $900,000 at December 31,1998), based upon its
eligible accounts receivable and inventory, and a limited guarantee by the
Company of up to DM 300,000 (the equivalent of approximately $180,000 at
December 31, 1998). The line bears interest at 8.25%. At December 31, 1998 there
were no amounts outstanding under the line.
In Italy, Lifeboat Italy has banking arrangements with several Italian banks,
pursuant to which it may borrow in lire on an unsecured, demand basis to finance
working capital requirements, through credit and overdrafting privileges, as
well as receivables-based advances. The aggregate credit and overdrafting limits
of such arrangements at December 31, 1998 was approximately Lit 2,800,000,000
(the equivalent of approximately $1,600,000 at December 31, 1998). The unsecured
borrowings bear interest at market rates ranging from 6.25% to 9.00%. At
December 31, 1998, there were no amounts outstanding under the line.
The Company's subsidiary in The Netherlands, Logicsoft Europe, BV, maintains a
demand revolving line of credit pursuant to which it may borrow in guilders up
to DFL 2,500,000 (the equivalent of approximately $1,300,000 at December 31,
1998), and is secured by its accounts receivable and inventory. The line bears
interest at 5.875%. At December 31, 1998, there were no amounts outstanding
under the line.
F-11
<PAGE>
3. NOTES PAYABLE TO BANKS (CONTINUED)
In France, ISP*F, maintains an overdraft demand revolving line of credit
pursuant to which it may borrow up to FRF 3,000,000 (the equivalent of
approximately $500,000 at December 31, 1998), and is secured by its accounts
receivable and inventory and a FRF 3,000,000 letter of credit. Such letter of
credit does not impact the availability under the Company's other facilities.
The line bears interest at 7%. At December 31, 1998, there were no amounts
outstanding under the line.
The weighted average interest rate for notes payable to banks was 10 %, 8% and
6% at December 31, 1996, 1997 and 1998, respectively.
Interest paid was approximately $343,000, $260,000 and $316,000 for the years
ended December 31, 1996, 1997 and 1998, respectively.
4. BALANCE SHEET DETAILS
Equipment and leasehold improvements consists of the following (dollars in
thousands):
1997 1998
-------------------------
Equipment $ 3,576 $ 4,727
Leasehold improvements 337 486
-------------------------
3,913 5,213
Less accumulated depreciation and amortization (2,051) (2,896)
-------------------------
$ 1,862 $ 2,317
=========================
Accounts payable and accrued expenses consists of the following (dollars in
thousands):
1997 1998
-------------------------
Trade accounts payable $11,937 $19,492
Accrued licensing costs 30,810 38,040
Other accrued expenses 4,232 532
-------------------------
$46,979 $58,064
=========================
F-12
<PAGE>
5. INCOME TAXES
The provision for income taxes consisted of the following (dollars in
thousands):
YEAR ENDED DECEMBER 31
1996 1997 1998
-------------------------------------------------
Current:
Federal $ 502 $ 984 $ 332
State 275 386 77
Foreign 165 1,058 1,944
-------------------------------------------------
942 2,428 2,353
Deferred:
Federal 473 76 225
State 30 (54) (7)
Foreign (454) (43) (130)
-------------------------------------------------
49 (21) 88
=================================================
$ 991 $ 2,407 $ 2,441
=================================================
The reasons for the difference between total tax expense and the amount computed
by applying the U.S. statutory federal income tax rate to income before income
taxes are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1997 1998
----------------------------------------
<S> <C> <C> <C>
Statutory rate applied to pretax income $ 1,084 $ 2,166 $ 2,000
Amortization of goodwill 39 40 69
State income taxes, net of benefit
of federal income taxes 211 219 46
Foreign income taxes (benefit) over U.S.
statutory rate (350) 54 326
Other items 7 (72) -
----------------------------------------
Income tax (benefit) expense $ 991 $ 2,407 $ 2,441
========================================
</TABLE>
F-13
<PAGE>
5. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets are as follows
(dollars in thousands):
YEAR ENDED DECEMBER 31
1996 1997 1998
---------------------------------------
Fixed assets $ 4 $ 4 $ 633
Accruals and reserves 328 546 534
Net operating loss carryforwards 3,936 2,772 2,051
Credit carryforwards 25 16 32
---------------------------------------
Gross deferred tax assets 4,293 3,338 3,250
Valuation allowance (976)
---------------------------------------
Net deferred tax asset $ 3,317 $ 3,338 $ 3,250
=======================================
The Company has recorded a U.S. deferred tax asset at December 31, 1998 of
$1,755,000 reflecting the benefit of $5,160,000 in federal tax loss
carryforwards, which expire in varying amounts between 2001 and 2005.
Realization is dependent on generating sufficient taxable income prior to
expiration of the loss carryforwards. Although realization is not assured,
management believes it is more likely than not that all of the net deferred tax
asset will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced. The Company's ability
to utilize the net operating loss carryforwards is restricted to approximately
$1.5 million per year, as a result of an ownership change pursuant to Section
382 of the Internal Revenue Code.
For financial reporting purposes, income before income taxes and minority
interest includes the following components (dollars in thousands):
YEAR ENDED DECEMBER 31
1996 1997 1998
-------------------------------------------
United States $3,010 $3,543 $1,504
Foreign 180 2,828 4,379
-------------------------------------------
$3,190 $6,371 $5,883
===========================================
F-14
<PAGE>
5. INCOME TAXES (CONTINUED)
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $3,300,000 at December 31, 1998. Those earnings are considered to
be indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided thereon.
During the years ended December 31, 1996, 1997 and 1998, the Company paid
approximately $483,000, $1,492,000 and $1,956,000, respectively, in income
taxes.
6. STOCK OPTION PLANS
The Company's 1986 Employee Stock Option Plan, as amended on June 15, 1994,
provides for the grant of options to purchase up to 698,133 shares of the
Company's common stock to employees, officers and directors of the Company. The
terms of the options are for a maximum of ten years from date of grant and
generally are exercisable at an exercise price equal to but not less than the
fair market value of the common stock on the date that the option is granted.
The options generally vest in equal annual installments over five years. There
are no additional options available for grant under the Company's 1986 Employee
Stock Option Plan.
On April 21, 1995, the Board of Directors adopted the Company's 1995 Employee
Stock Plan ("1995 Plan"). The 1995 Plan, as amended on June 11, 1996, provides
for the grant of options to purchase up to 462,500 shares of the Company's
common stock to officers, directors, employees and consultants of the Company.
The 1995 Plan requires that each option shall expire on the date specified by
the Compensation Committee, but not more than ten years from its date of grant
in the case of ISO's and Non-Qualified Options. Options granted under the plan
are exercisable at an exercise price equal to but not less than the fair market
value of the common stock on the grant date. ISO's generally vest in equal
annual installments over five years.
On April 21, 1995, the Board of Directors adopted the Company's 1995
Non-Employee Director Plan ("1995 Director Plan"). The 1995 Director Plan
provides for the grant of options to purchase up to 112,500 shares of the
Company's common stock to persons who are members of the Company's Board of
Directors and not employees or officers of the Company. The 1995 Director Plan
requires that options granted thereunder will expire ten years from the date of
grant. Each option granted under the 1995 Director Plan becomes exercisable over
a five year period, and vests in an installment of 20% of the total option grant
upon the expiration of one year from the date of the option grant, and
thereafter vests in equal quarterly installments of 5%.
F-15
<PAGE>
6. STOCK OPTION PLANS (CONTINUED)
FASB 123 requires pro forma information regarding net income and earnings per
share as if the Company had accounted for its employee stock options under the
fair value method of that Statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions for 1996, 1997 and 1998,
respectively: risk free interest rates of 6.28%, 5.49% and 5.49%, dividend
yields of 0% in all three periods, volatility factors of the expected market
price of the Company's common stock of .61, .60 and .65, and a weighted-average
expected life of the option of 9 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands, except per share amounts):
1996 1997 1998
---- ---- ----
Net income as reported $2,298 $3,964 $3,442
Net income pro forma 1,902 3,395 2,649
Basic net income per share, as reported $.48 $.84 $.72
Basic net income per share, pro forma $.40 $.72 $.55
Diluted net income per share, as reported $.44 $.75 $.66
Diluted net income per share, pro forma $.38 $.67 $.52
The weighted average fair value of options granted during 1996, 1997 and 1998 is
$3.51, $6.09 and $6.54, respectively.
F-16
<PAGE>
6. STOCK OPTION PLANS (CONTINUED)
Changes during 1996, 1997 and 1998 in options outstanding for the combined plans
were as follows:
WEIGHTED
NUMBER AVERAGE
OF EXERCISE
OPTIONS PRICE
----------------------------
Outstanding at January 1, 1996 724,135 1.95
Granted in 1996 188,701 5.99
Canceled in 1996 (35,097) 5.80
Exercised in 1996 (83,975) .36
--------------
Outstanding at December 31, 1996 793,764 2.91
Granted in 1997 264,400 8.08
Canceled in 1997 (27,550) 5.13
Exercised in 1997 (31,075) 1.60
--------------
Outstanding at December 31, 1997 999,539 4.30
Granted in 1998 349,150 6.51
Canceled in 1998 (34,035) 5.94
Exercised in 1998 (157,775) 1.90
--------------
Outstanding at December 31, 1998 1,156,879 5.25
==============
Exercisable at December 31, 1998 616,182 4.24
==============
Stock options outstanding at December 31, 1998 are summarized as follows:
WEIGHTED
OUTSTANDING AVERAGE
RANGE OF EXERCISE OPTIONS AT REMAINING WEIGHTED AVERAGE
PRICES DECEMBER 31, 1998 CONTRACTUAL LIFE EXERCISE PRICE
- - -----------------------------------------------------------------------------
$0.24 57,213 2.7 .24
.67 - 1.00 187,100 5.3 .80
4.00 - 6.00 268,526 6.5 4.65
6.25 - 8.63 577,900 9.4 6.68
9.00 - 12.94 66,140 8.6 12.08
----------
1,156,879
===========
Under the various plans, options that are cancelled can be reissued. At December
31, 1998 1,656,784 shares were reserved for future issuance.
F-17
<PAGE>
7. DEFINED CONTRIBUTION PLAN
Effective January 1, 1992, the Company initiated a defined contribution plan
covering substantially all domestic employees. Participating employees may make
contributions to the plan, through payroll deductions. Matching contributions
are made by the Company equal to 50% of the employee's contribution to the
extent such employee contribution did not exceed 6% of their compensation.
During the years ended December 31, 1996, 1997 and 1998, the Company expensed
approximately $59,000, $82,000 and $79,000 respectively, related to this plan.
8. NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
per share (dollars and shares in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
--------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income for basic and diluted net income
per share $ 2,298 $ 3,964 $ 3,442
--------------------------------------------
Denominator:
Denominator for basic net income per share -
weighted average common shares 4,764 4,740 4,797
Effect of dilutive securities:
Employee stock options 434 540 452
--------------------------------------------
Denominator for diluted net income per share -
adjusted weighted average common
shares and assumed conversion 5,198 5,280 5,249
============================================
Basic net income per common share $ .48 $ .84 $ .72
============================================
Diluted net income per common share $ .44 $ .75 $ .66
============================================
</TABLE>
For additional disclosures regarding the employee stock options and related
stock option plans, see Note 6.
F-18
<PAGE>
9. COMMITMENTS
The Company leases the space used for its operations and certain equipment under
long-term operating leases. Future minimum rental payments over the remaining
terms of these leases are as follows (dollars in thousands):
1999 $1,296
2000 993
2001 826
2002 541
2003 426
2004 and thereafter 1,689
=============
$ 5,771
=============
Rent expense for the years ended December 31, 1996, 1997 and 1998 was
approximately $752,000, $1,075,000 and $1,050,000, respectively.
The Company has royalty agreements, which require payments based on sale of
certain products. Royalty expense for the years ended December 31, 1996, 1997
and 1998 was approximately $265,000, $157,000 and $141,000, respectively.
10. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company's single business segment is the marketing of technical software for
microcomputers, servers and networking across geographically diverse
marketplaces.
F-19
<PAGE>
Geographic financial information is as follows (dollars in thousands):
-----------------------------------
1996 1997 1998
-----------------------------------
Sales to Unaffiliated Customers:
North America $56,719 $69,751 $70,922
Europe 70,961 106,406 163,507
-----------------------------------
Total 127,680 176,157 234,429
===================================
Income from operations by Geographic Areas:
North America $2,708 $3,685 $1,638
Europe 228 2,532 3,889
-----------------------------------
Total 2,936 6,217 5,527
===================================
Identifiable Assets by Geographic Areas:
North America $30,320 $30,250 $35,854
Europe 38,170 56,118 69,023
-----------------------------------
Total 68,490 86,368 104,877
===================================
"North America" is comprised of the United States and Canada. "Europe" is
comprised of Austria, France, Germany, Italy, the Netherlands and the United
Kingdom.
11. STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURES
The Company has made acquisitions, which are more fully described in Note 2. The
purchase prices are allocated to the assets acquired and liabilities assumed
based on their fair market values as follows (dollars in thousands):
1996 1997 1998
------------------------------------
Fair value of assets acquired:
Current assets excluding cash $ 7,207 $ 4,108
$ -
Fixed assets 676 187 -
Other assets, principally goodwill 10,778 2,202 -
Less liabilities assumed:
Current liabilities 7,248 4,229 -
Notes payable 177 - -
Payable to seller - - -
Common stock issued to seller - - -
------------------------------------
Net cash paid $ 11,236 $ 2,268 $ -
====================================
F-20
<PAGE>
12. QUARTERLY RESULTS OF OPERATIONS
The following table presents summarized quarterly results for 1998 (in
thousands, except per share data).
(UNAUDITED)
-------------------------------------------------
FIRST SECOND THIRD FOURTH
-------------------------------------------------
Revenues $53,193 $50,780 $54,461 $75,995
Gross profit 6,514 6,506 6,707 9,461
Net earnings 760 338 680 1,665
Diluted net earnings
per share $0.14 $0.06 $0.13 $0.32
The following table presents summarized quarterly results for 1997 (in
thousands, except per share data).
(UNAUDITED)
-------------------------------------------------
FIRST SECOND THIRD FOURTH
-------------------------------------------------
Revenues $38,940 $39,099 $36,882 $61,236
Gross profit 5,903 6,202 5,422 8,179
Net earnings 885 936 763 1,381
Diluted net earnings
per share $0.17 $0.18 $0.14 $0.26
F-21
<PAGE>
Programmer's Paradise, Inc. and Subsidiaries
Schedule II--Valuation and Qualifying Accounts
(In Thousands)
<TABLE>
<CAPTION>
CHARGED TO CHARGED IN
BEGINNING COST AND OTHER ENDING
DESCRIPTION BALANCE EXPENSE ACCOUNTS DEDUCTIONS BALANCE
----------- ------- ------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowances for accounts receivable $777 223 441 (1) 417 $1,024
Reserve for Obsolescence $623 28 294 (1) 481 $464
Year ended December 31, 1997:
Allowances for accounts receivable $1,024 326 32 (1) 432 $950
Reserve for Obsolescence $464 220 130 (1) 62 $752
Year ended December 31, 1998:
Allowances for accounts receivable $950 674 444 $1,180
Reserve for Obsolescence $752 311 585 $478
</TABLE>
- - ------------
(1) Arose from acquisitions.
F-22
EXHIBIT 10.38
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 14, 1998, by and between
Programmer's Paradise, Inc., a Delaware corporation with offices at 1163
Shrewsbury Avenue, Shrewsbury, New Jersey 077002-4321 (the"Corporation"), and
William H. Willett, an individual residing at 137 Rose Hill Road, Southport,
Connecticut 06490 (the "Executive").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties hereto hereby agree as follows:
1. Employment. The Corporation hereby agrees to employ the Executive in an
executive capacity, and the Executive hereby accepts and agrees to such
employment, commencing as of the date hereof, upon the terms and conditions
hereinafter set forth.
2. Term. The term of the Executive's employment under this Agreement shall
commence as of the date hereof and shall continue until the close of business on
January 15, 2000, and shall automatically be renewed for twelve (12) months
thereafter unless either party gives the other at least three (3) months prior
written notice of termination, unless sooner terminated as provided elsewhere in
this Agreement (the "Term").
3. Duties and Services. The Executive agrees to serve the Corporation as
Chairman of the Board, President and Chief Executive Officer of the Corporation
and shall also serve such of its subsidiaries and affiliated companies as may be
designated by the Corporation, faithfully, diligently and to the best of his
ability, subject to and under the direction and control of the Board of
Directors of the Corporation, devoting his entire business time, energy and
skill to such employment, and to perform from time to time such executive
services, advisory or otherwise, as the Board of Directors shall request, and to
act in such capacities or other offices for the Corporation and for any of its
subsidiary or affiliated companies as the Board of Directors shall request
without further compensation other than that for which provision is made in this
Agreement.
4. Compensation. (a) The Corporation agrees to pay to the Executive, and
the Executive agrees to accept, a basic salary for all his services (the
"Salary") at the rate of $225,000 per annum, payable in accordance with the
Corporation's standard payroll policies from time to time.
(b) On the morning of July 24, 1998, the Executive shall be granted
options to purchase 200,000 shares of Common Stock of the Corporation under the
Corporation's 1995 Stock Plan, at an exercise price equal to the fair market
value on the date of grant ("FMV"), 100,000 of which shall vest (subject to
continued employment) in twelve (12) equal tranches on the first day of each
month beginning on the first day of the first month after the date hereof, and
an additional 100,000 of which shall vest (subject to continued employment) in
six (6) equal tranches
<PAGE>
on the first day of each month beginning with the month after the expiration of
such twelve-month period, and shall be subject to acceleration in the event of a
Change of Control (as hereinafter defined), and shall also be subject to the
terms and conditions of the applicable option grant agreement and of the 1995
Stock Plan.
(c) If there shall be a Change or Control prior to the termination of
the employment period, the Corporation agrees to pay to the Executive a bonus
equal to the amount, if any, by which (x) the product of the value per share
received by shareholders of the Corporation in connection with such Change of
Control, times 50,000, exceeds (y) the FMV (as defined above) of 50,000 shares
of Common Stock of the Corporation as of July 24, 1998.
(d) For purposes hereof, a "Change of Control" shall be deemed to have
occurred in the event of any of the following (i) any person or entity makes a
tender or exchange offer for shares of the Corporation's Common Stock pursuant
to which such person or entity acquires a majority of the issued and outstanding
shares of the Corporation's Common Stock, (ii) the Corporation merges or
consolidates with or into another corporation or corporations, unless
immediately after such merger or consolidation those persons and entities who
immediately prior to such transaction were stockholders of the Corporation are
entitled to vote in the election of directors, or otherwise have the right to
elect, a majority of the directors of the surviving Corporation, (iii) the
Corporation sells, transfers or otherwise disposes of all of substantially all
of its assets, other than to a direct or indirect subsidiary, (iv) any person or
entity acquires a majority of the Corporation's issued and outstanding voting
securities and shall be entitled to vote in the election of directors, or
otherwise have the right to elect, a majority of the directors of the
Corporation, or (v) pursuant to paragraph 13(b) of the Corporation's 1995 Stock
Plan, the date of exercise of options granted thereunder shall be accelerated.
(e) If the Executive shall be employed by the Corporation on January
15, 2000, then, within thirty (30) days after such date, the Corporation agrees
to pay to the Executive a performance bonus equal to the amount, if any, of the
product of (x) 50,000 and (y) the amount, if any, by which (1) the FMV of a
share of Common of the Corporation on January 15, 2000 exceeds the FMV of a
share of Common Stock of the Corporation on July 24, 1998.
5. Employee Benefits. (a) The Corporation shall reimburse the Executive for
the reasonable business expenses incurred by him for or on behalf of the
Corporation in furtherance of the performance of his duties hereunder. Such
reimbursement shall be subject to receipt by the Corporation from the Executive
of such an expense statements and such vouchers and other reasonable
verifications as the Corporation shall require to satisfactorily evidence such
expenses, and shall also be subject to such policies as the Corporation shall
establish from time to time.
(b) The Executive shall be entitled to participate, in accordance with
the terms thereof, in employee benefit plans and programs maintained for the
executives of the Corporation, including, without limitation, any health,
hospitalization and medical insurance programs and in any pension or retirement
or other similar plans or programs. The foregoing shall not be construed to
require the Corporation to establish any such plans or programs, or to prevent
the Corporation from modifying or terminating any such plans or programs once
established.
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<PAGE>
(c) The Executive shall be entitled to six (6) weeks of vacation each
employment year during the term of this Agreement, taken consecutively or in
segments, subject to the effective discharge of the duties of the Executive
hereunder.
(d) During the term of the Executive's employment hereunder, the
Corporation shall afford the Executive the use of a [full-size] automobile,
chosen by the Executive and reasonably satisfactory to the Corporation, and a
cellular telephone. The Corporation shall bear the cost of maintaining the
automobile in good and efficient working order and repair, shall be responsible
for normal upkeep thereof and shall bear the cost of incidental operating
expenditures such as gasoline, oil and tires. The Corporation further agrees to
secure and pay for insurance of such type and in such amounts as the Corporation
may deem appropriate, such insurance coverage to include liability coverage for
the benefit of the Executive. The Corporation shall also bear the cost of a
service contract for the cellular telephone, as well as all monthly charges and
charges in respect of calls incident to the performance of the duties of the
Executive and tax and related charges.
(e) The Executive shall be entitled to use the Corporation's New
Jersey apartment as his residence, unless and until the Executive moves to a
location within a reasonable commuting distance from the offices of the
Corporation; provided that the Executive shall not be required to so relocate.
6. Termination of Benefits. (a) Notwithstanding anything to the contrary
contained herein, the Executive's employment with the Corporation, as well as
the Executive's right to any compensation which thereafter otherwise would
accrue to him hereunder or in connection therewith, shall terminate upon the
earliest to occur of the following events:
(i) the death or disability (as defined below) of the Executive,
(ii) the expiration of the Term of this Agreement,
(iii) the Executive's termination of such employment, or
(iv) upon delivery of written notice, with or without "cause" (as
defined below), to the Executive from the Corporation of such termination.
(b) For the purpose of this Section 6, (i) the term "cause" is defined
as (A) the commission by the Executive of a felony or an offense involving moral
turpitude, the Executive's engaging in theft, embezzlement, fraud, obtaining
funds or property under false pretenses, or similar acts of misconduct with
respect to the property of the Corporation or its employees, stockholders,
affiliates, customers, licensees, licensors or suppliers, (B) the repeated
failure by the Executive to perform his duties hereunder or comply with
reasonable policies or directives of the Board of Directors of the Corporation,
or (C) the breach of this Agreement or the Conditions of Employment by the
Executive in any material respect, and (ii) the Executive shall be deemed
"disabled" if, at the Corporation's option, it gives notice to the Executive or
his representative that due to a disabling mental or physical condition, he has
been prevented, for a continuous period of 90 days during the
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<PAGE>
Term or for an aggregate of 120 days during any six month period during the
Term, from substantially performing those duties which he was required to
perform pursuant to the provisions of this Agreement prior to incurring such
disability.
(c) In the event of and upon the termination by the Corporation of the
employment of the Executive under this Agreement without "cause" or the giving
by the Corporation of notice of non-renewal of this Agreement pursuant to
Section 2, in addition to the Salary and other compensation (including cash and
stock bonuses, incentive and performance compensation) earned hereunder and
unpaid or not delivered through the date of termination and any benefits
referred to in Section 5(b) hereof in which the Executive has a vested right
under the terms and conditions of the plan or program pursuant to which such
benefits were granted (without regard to such termination), (i) the Corporation
shall pay the Executive a cash payment (the "Severance Payment") equal to
$112,500, (ii) all stock options and stock awards shall vest and become
exercisable immediately prior to termination and remain exercisable through
their original terms with all rights, (iii) the Corporation shall pay the
Executive, within thirty (30) days after the date of termination of such
employment, the performance bonus contemplated by Section 4(e) above, based on
the difference between the FMV of shares of Common Stock of the Corporation as
of the date of such termination and as of July 24, 1998 and (iv) the Executive
shall be entitled to purchase the automobile used by him, as contemplated by
Section 5(d) hereof, at the "buy-out" price of any lease of the Corporation with
respect to such automobile, or if such automobile shall be owned by the
Corporation, at the fair market value of such automobile as of the date of
payment. In the event of termination of this Agreement by the Corporation by
reason of the death or disability of the Executive, the Corporation shall not be
obligated to make the Severance Payment to the Executive if the Corporation
provided the Executive with life insurance or disability insurance, as the case
may be, payable to one or more beneficiaries designated by the Executive at the
time of his death or disability in an amount providing to the Executive a
benefit at least equal thereto. After termination of employment for any reason
other than death of the Executive, the Corporation shall continue to provide all
benefits subject to COBRA at its expense for the maximum required COBRA period.
The Severance Payment shall be paid to the Executive or his estate in [six (6 )
consecutive, equal monthly installments, on the fifteenth day of each calendar
month commencing during the month next following the month in which the
Executive is no longer employed by the Corporation], and shall be in lieu of any
other claim to severance or similar payments or benefits which the Executive may
otherwise have or make. Without limiting any other rights or remedies which the
Corporation may have, it is understood that the Corporation shall be under no
further obligation to make any such severance payments and shall be entitled to
be reimbursed therefor by the Executive or his estate if the Executive violates
any of the covenants set forth in the Conditions of Employment attached as
Exhibit A hereto. In the event that the Severance Payment shall become payable
to the Executive, the Executive shall not be required, either in mitigation of
damages or by the terms of any provisions of this Agreement or otherwise, to
seek or accept other employment, and if the Executive does accept other
employment, any benefits or payments under this Agreement shall not be reduced
by any compensation earned or other benefits received as a result of such
employment.
7. Deductions and Withholding. The Executive agrees that the Corporation
shall withhold from any and all payments required to be made to the Executive
pursuant to this Agreement
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<PAGE>
(including the travel allowance) all federal, state, local and/or other taxes
which are required to be withheld in accordance with applicable statutes and/or
regulations from time to time in effect.
8. Non-Solicitation, Restrictive Covenants, Confidentiality and Injunctive
Relief. (a) The Executive shall execute and deliver to and for the benefit of
the Corporation, the Conditions of Employment attached as Exhibit A hereto,
pertaining, among other matters, to proprietary information, confidentiality
obligations, and non-competition obligations, the provisions of which shall be
deemed incorporated herein by reference as if set forth herein (the "Conditions
of Employment").
(b) The provisions of this Section 8 shall survive the termination or
expiration of this Agreement, irrespective of the reason therefor, including
under circumstances in which the Executive continues thereafter in the employ of
the Corporation.
9. Warranty. The Executive warrants and represents that he is not a party
to any agreement, contract or understanding, whether of employment or otherwise,
which would in any way restrict or prohibit him from undertaking his position as
an executive of the Corporation and complying with his obligations in accordance
with the terms and conditions of this Agreement and the Conditions of
Employment.
10. Insurance. The Executive agrees that the Corporation may from time to
time and for the Corporation's own benefit apply for and take out life insurance
covering the Executive, either independently or together with others, in any
amount and form which the Corporation may deem to be in its best interests. The
Corporation shall own all rights in such insurance and in the cash values and
proceeds thereof and the Executive shall not have any right, title or interest
therein. The Executive agrees to assist the Corporation, at the Corporation's
expense, in obtaining any such insurance by, among things, submitting to
customary examinations and correctly preparing, signing and delivering such
applications and other documents as reasonably may be required. Nothing
contained in this Section 10 shall be construed as a limitation on the
Executive's right to procure any life insurance for his own personal needs.
11. Notices. All notices shall be in writing and shall be deemed to have
been duly given to a party hereto on the date of such delivery, if delivered
personally, or on the third day after being deposited in the mail if mailed via
registered or certified mail, return receipt requested, postage prepaid, or on
the next business day after being sent by recognized national overnight courier
service, in the case of the Executive at his current address as set forth in the
Corporation's records, and in the case of the Corporation, at it address set
forth above.
12. Assignability and Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the heirs, executors, administrators,
successors and legal representatives of the Executive, and shall inure to the
benefit of and be binding upon the Corporation and its successors and assigns.
The Executive may not assign, transfer, pledge, encumber, hypothecate or
otherwise dispose of this Agreement, or any of his rights or obligations
hereunder, and any such attempted delegation or disposition shall be null and
void and without effect.
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<PAGE>
13. Severability. In the event that any provisions of this Agreement would
be held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason (including, but not limited to, any provisions which would be held to be
unenforceable because of the scope, duration or area of its applicability),
unless narrowed by construction, this Agreement shall, as to such jurisdiction
only, be construed as if such invalid, prohibited or unenforceable provision had
been more narrowly drawn so as not to be invalid, prohibited or unenforceable
(or if such language cannot be drawn narrowly enough, the court making any such
determination shall have the power to modify such scope, duration or area or all
of them, but only to the extent necessary to make such provision or provisions
enforceable in such jurisdiction, and such provision shall then be applicable in
such modified form). If, notwithstanding the foregoing, any provision of this
Agreement would be held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision shall be ineffective to the extent of such
invalidity, prohibition or unenforceability, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey, without regard to
principles of conflict of laws and regardless of where actually executed,
delivered or performed.
15. Complete Understanding; Counterparts. This Agreement constitutes the
complete understanding and supersedes any and all prior agreements and
understandings between the parties with respect to its subject matter, and no
statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein. This Agreement shall
not be altered, modified, amended or terminated except by written instrument
signed by each of the parties hereto. The Section and paragraph headings
contained herein are for convenience only, and are not part of and are not
intended to define or limit the contents of said Sections and paragraphs. This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which, when taken together, shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PROGRAMMER'S PARADISE, INC.
By:
--------------------------
-----------------------------
William H. Willett
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<PAGE>
Exhibit A
---------
PROGRAMMER'S PARADISE, INC.
CONDITIONS OF EMPLOYMENT
------------------------
As an inducement to Programmer's Paradise, Inc. (the "Corporation") to
employ (the "Employee"), and in consideration of the employment and continued
employment of the Employee by the Corporation and the compensation and other
benefits paid or to be paid to the Employee and the stock options to be issued
to the Employee, it is understood and agreed as follows:
1. The Employee acknowledges and agrees that Employee's employment
with the Corporation will necessarily involve the Employee's understanding of
and access to trade secrets and confidential or other proprietary information of
or pertaining to the organization, business and affairs of, or developed or
acquired for or by, the Corporation and/or its Affiliates (as hereinafter
defined) or their clients, licensees and distributors, including without
limitation, information relating to computer software and programs, policies,
operational methods, research, data, marketing plans and opportunities,
procedures, strategies, mailing lists, data bases, client lists, notations of
clients (in or as part of a rolodex, mailing list or in any other form) and
forecasts of the Corporation and/or its Affiliates or any client of the
Corporation and/or its Affiliates ("Proprietary Information"), and understands
that the Employee will enjoy a special position of trust and confidence with the
Corporation. Accordingly, the Employee agrees that the Employee will keep secret
all Proprietary Information and will not, directly or indirectly, either during
the term of the Employee's employment by the Corporation or at any time
thereafter, disclose or disseminate to any person or entity not expressly
approved by the President of the Corporation as an authorized recipient thereof,
or make use of, for any purpose whatsoever, any Proprietary Information of the
Corporation and/or its Affiliates or any client of the Corporation and/or its
Affiliates. AS IT IS SOMETIMES DIFFICULT TO SEPARATE PROPRIETARY INFORMATION
FROM THAT WHICH IS NOT, THE EMPLOYEE WILL REGARD ALL INFORMATION GAINED AS A
RESULT OF THE EMPLOYEE'S ASSOCIATION WITH THE CORPORATION AS PROPRIETARY
INFORMATION.
The preceding paragraph, however, shall not apply to disclosure of
information (i) which at the time of disclosure to the Employee was in the
public domain, or (ii) which at the time of disclosure to the Employee the
Employee proves was already known to the Employee from other sources and capable
of being used or disclosed by the Employee, as the case may be, free of any
other agreements or restrictions. For purposes hereof, the term "Affiliates"
shall include all entities or persons controlling, controlled by, or under
common control with, the Corporation.
The Employee agrees that the Corporation may from time to time adopt rules
and regulations regarding the manner in which Proprietary Information is
treated. In such event, the Employee will comply with all such rules and
regulations in addition to, but not in limitation of, the Employee's obligations
hereunder.
2. Title to all documentation containing any Proprietary Information,
whether or not developed or produced by the Employee (including the ideas and
concepts contained therein), is and
<PAGE>
shall remain vested in the Corporation and its Affiliates. Without limiting the
generality of the foregoing, the Employee shall not make any copies of and/or
remove from the premises of the Corporation any such documentation without
specific authorization. The Employee will not leave any such documentation
accessible to unauthorized persons at any time, and shall take all reasonable
steps to prevent documentation (including the ideas and concepts contained
therein) from being used by or disclosed to anyone who is not authorized to use
or receive same. The Employee will deliver promptly to the Corporation on
termination of the Employee's employment by the Corporation, or at any sooner
time it may request, all such documentation and all other assets and materials
which belong to the Corporation or its Affiliates, which the Employee then
possesses or has under the Employee's control.
3. The Employee will promptly and fully disclose to the President of
the Corporation all opportunities and/or information which is or may be useful
or relate to the Corporation and/or its Affiliates or any aspect of their
business that the Employee (individually or jointly with others) may discover,
conceive of, make, invent, develop, suggest, assemble, reduce to practice or
acquire during the period of or in connection with the Employee's employment by
the Corporation (collectively "Information"), all of which shall be the sole,
exclusive and absolute property of the Corporation. The Employee agrees and
acknowledges that all Information shall constitute Proprietary Information.
4. The Employee shall have no authority to make any representation,
warranty, guarantee, agreement or promise concerning the Corporation or its
Affiliates, or the business of the Corporation or its Affiliates, unless
specifically approved by the President of the Corporation, and any such
unapproved representation, warranty, guarantee, agreement or promise shall not
be valid or binding on the Corporation or its Affiliates. The Employee shall at
all times comply with all relevant laws, including, without limitation, all
foreign, federal and state laws, and all policies and procedures of the
Corporation.
5. During any period that the Employee is employed by the Corporation
and thereafter, (i) for a period of [two (2) years] in the event that Executive
shall terminate his employment or the Executive's employment shall be terminated
by the Corporation for "cause" (as defined in the Executive's employment
agreement), or (ii) for a period of [one (1) year] in the event that the
Corporation shall terminate the Executive's employment without "cause", the
Employee will not directly or indirectly under any circumstance whatsoever:
(a) solicit, raid, entice or induce any person or entity which
presently is, or at any time during the period of the Employee's employment has
been or shall be, or has been or shall be solicited or contacted by the
Corporation and/or its Affiliates to become, a client, customer, distributor or
licensee of the Corporation and/or its Affiliates, to become a client, customer,
distributor or licensee of any person or entity (other than the Corporation and
its Affiliates) with respect to any business, product or services of the type,
or competitive with those, provided, sold, licensed or offered by the
Corporation and/or its Affiliates at any time during the period of the
Employee's employment with the Corporation, or attempt in any manner to persuade
any such person
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<PAGE>
or entity to cease to do business or to reduce the amount of business which such
person or entity has customarily done or contemplates doing with the Corporation
and/or its Affiliates;
(b) compete, engage or participate in, or become employed by, or
render any services in connection with, any business that competes, in any
manner with the business of the Corporation, in any of the geographical markets
served by the Corporation, operated or managed or then proposed to be acquired,
operated or managed by the Corporation or any of its Affiliates during the term
of the Employee's employment with the Corporation or directly or indirectly have
any interest in, as owner, stockholder, partner, director, officer, member,
employee, consultant or otherwise, any business which is competitive with, or
sells, provides or licenses products or services of the type competitive with
those sold, provided and licensed by the Corporation during the term of
Employee's employment with the Corporation; provided, however, that the Employee
may hold not more than 5% of the outstanding securities of any such corporation
listed on a national securities exchange;
(c) make any disparaging statement concerning the Corporation or
its Affiliates, or the management, the Board of Directors, management decisions,
operating policies or Board decisions or actions of the Corporation or its
Affiliates, whether or not libelous or defamatory;
(d) wilfully interfere with or otherwise jeopardize any
relationship of the Corporation and/or its Affiliates with any client,
distributor, licensee or licensor; or
(e) employ, attempt to employ or arrange to have any other person
or entity employ, any person, who is or was, during the two-year period ending
on the date of termination of the Employee's employment, in the employ of the
Corporation or its Affiliates, or induce any such person to leave the employ of
the Corporation or its Affiliates.
6. The Employee represents and warrants that the Employee is not a
party to any agreement, contract or understanding, whether of employment,
consultancy or otherwise, in conflict with these Conditions of Employment or
which would in any way restrict or prohibit the Employee from undertaking or
performing services for the Corporation. The Employee hereby acknowledges that
he has not foregone any other opportunity, financial or otherwise, in connection
with commencing or rendering his services to the Corporation. The Employee
hereby authorizes the Corporation and/or its Affiliates to make known the terms
of these Conditions of Employment and the fact of the Employee's responsibility
under these Conditions of Employment to any person or entity, including, without
limitation, clients of the Corporation and/or its Affiliates and the Employee's
future employers.
7. (a) By reason of the fact that irreparable harm would be sustained
by the Corporation and/or its Affiliates in the event that there is a breach by
the Employee of any of the terms, covenants and agreements set forth herein, in
addition to any other rights that the Corporation and/or its Affiliates may
otherwise have, the Corporation and/or its Affiliates shall be entitled to apply
to any court of competent jurisdiction and obtain specific performance and/or
injunctive relief against the Employee, without making a showing that monetary
damages would be inadequate and
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<PAGE>
without the requirement of posting any bond or other security whatsoever, in
order to enforce or prevent any breach or threatened breach of any of the terms,
covenants and agreements set forth herein, and the Employee will not object
thereto.
(b) Nothing contained in these Conditions of Employment shall be
construed as a contract of employment or engagement by or with the Corporation
or any Affiliate nor shall anything contained in these Conditions of Employment
impose any obligation upon the Corporation or any Affiliate to continue the
Employee's employment or engagement to pay the Employee any compensation. Each
of the obligations of the Employee under this agreement shall survive the
termination of the Employee's employment by the Corporation for any reason
whatsoever.
(c) The Employee acknowledges that: (i) the enforcement of any of
the restrictions on the Employee or any other provisions contained in these
Conditions of Employment (the "Restrictive Covenants") against the Employee
would not impose any undue burden upon the Employee; and (ii) none of the
Restrictive Covenants is unreasonable as to duration or scope. If
notwithstanding the foregoing, any provision herein would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason (including, but
not limited to, any provision which may be held unenforceable because of the
scope, duration or area of its applicability), unless narrowed by construction,
such Restrictive Covenant shall, as to such jurisdiction, be construed as if
such invalid, prohibited or unenforceable provision had been more narrowly drawn
so as not to be invalid, prohibited or unenforceable (and the court making any
such determination as to any provision shall have the power to modify such
scope, duration or area or all of them, and such provision shall then be
applicable in such modified form in such jurisdiction only). If, notwithstanding
the foregoing, any provision herein would be held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, such provision, as to such
jurisdiction, shall be ineffective to the extent of such invalidity, prohibition
or unenforceability, without invalidating the remaining provisions of this
agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
(d) These Conditions of Employment shall inure to the benefit of
the Corporation and its Affiliates, and their respective successors and assigns
and shall be binding upon the Employee and the Employee's heirs, executors,
administrators and other legal representatives and successors. These Conditions
of Employment shall be governed by and construed in accordance with the internal
laws of the State of New Jersey applicable to contracts made and to be entirely
performed in New Jersey (without giving effect to contrary rules as to conflict
of laws). These Conditions of Employment (and any written employment agreement
executed and delivered by the Corporation) sets forth the parties' entire
agreement with respect to its subject matter. No provisions of this agreement
may be changed, terminated, or waived, or addenda or other provisions added
except by a writing signed by each of the parties hereto. No waiver of any
provision in one instance shall be a waiver of such provision in other instances
or a waiver of any other provision. Wherever the context so requires, the
masculine includes the feminine and the neuter genders, and the singular
includes the plural, and vice versa.
Accepted and Agreed:
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<PAGE>
Date: ____________________________, 1998
------------------------------
Name:
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EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("Agreement") is made as of the 9th day of June,
1998, by and between Programmer's Paradise, Inc., a Delaware corporation having
its principal place of business at 1163 Shrewsbury Avenue, Shrewsbury, New
Jersey (the "Company") and John Broderick, a resident of Brielle, New Jersey
("Executive").
WHEREAS, the Company desires to continue to employ Executive and Executive
desires to continue to be employed by the Company, and the Board of Directors of
the Company (the "Board of Directors") has determined that it is in the best
interests of the Company and its shareholders to formalize the employment
relationship pursuant to this Agreement; and
WHEREAS, the Board of Directors has further determined that it is in the
best interests of the Company and its shareholders to assure that the Company
will have the continued dedication and focus of Executive throughout any changes
the Company may make, and to make certain provisions therefor to assure
continued stability to both the Company and Executive.
NOW, THEREFORE, in consideration of the mutual premises contained herein,
the Company and the Executive mutually agree as follows:
1. Employment. The Company agrees to continue Executive's employment and
Executive agrees to serve the Company faithfully, diligently and to the best of
his ability as Senior Vice President and Chief Financial OFFICER, pursuant to
the primary responsibilities and goals set forth in the position description
attached to this Agreement as Exhibit A. Executive agrees to assume other roles
and responsibilities as mutually agreed to from time to time in writing by the
Company and Executive. Executive agrees to devote his full business time,
energy, attention and skill to such employment and agrees not to, directly or
indirectly, engage or participate in, or become employed by, or become a
director, officer, or partner of, or provide services for compensation to or in
connection with, any business activity other than that of the Company, except as
may be specifically permitted in writing by the President of the Company.
2. Employment At-Will. Executive's employment with the Company (the
"Employment Period") is at-will; the Company may terminate Executive's
employment at any time and for any reason, with other terms and provisions of
termination to be in accordance with this Agreement.
3. Salary. During the Employment Period, the Company will pay Executive a base
salary of $12,917 per month, payable twice a month in accordance with the
regular payroll practices of the Company, and subject to any increases as may be
determined by the Board of Directors.
<PAGE>
4. Bonus Plan. During the Employment Period, Executive will be a participant
in the Company management bonus program which will be funded and paid at the
discretion of the Board of Directors upon the Company and management employees
meeting such goals, including net income goals, as are set forth by the
Compensation Committee of the Board of Directors, and Executive will also be
entitled to receive such other bonuses in such amounts and on such terms as may
be determined by the Board of Directors.
5. Stock Options. Executive has been previously granted stock options for
shares of common stock of the Company, all of which shall continue according to
their terms. Nothing in this Agreement shall be construed to affect such stock
option grants in any way, and nothing in this Agreement shall be construed to
impose any obligation upon the Company with respect to Company stock or options
therefor.
6. Benefit Plans. During the Employment Period, Executive will be entitled to
participate in the Company's benefit plans and programs applicable generally to
other employees or executives similarly situated with the Company, including
medical and health care plans, life insurance, disability and a 401(k) plan,
consistent with the terms of such plans and programs.
7. Vacation. Executive shall be entitled to four (4) weeks annual vacation, to
be accrued and taken in accordance with the vacation policy of the Company for
similarly situated employees or executives.
8. Expenses. The Company will reimburse Executive for all reasonable business
expenses incurred by Executive in the performance of Executive's duties for the
Company, upon Executive's presentation to the Company of expense statements,
vouchers or other supporting information, in accordance with Company practices.
9. Confidentiality and Non-Competition. Executive has previously executed an
agreement entitled "Conditions of Employment," a copy of which is attached
hereto as Exhibit B, which contains express provisions regarding confidentiality
and non-competition (the "Confidentiality Agreement"). As further consideration
for this Agreement, and as a further inducement to the Company to enter into
this Agreement, Executive and the Company hereby acknowledge and reaffirm the
Confidentiality Agreement, and agree that the Confidentiality Agreement and all
terms, provisions and conditions of the Confidentiality Agreement shall continue
in full force and effect according to their terms.
10. Termination of Employment. Executive's employment shall terminate (a) upon
the discretion of the Company on not less than thirty (30) days prior written
notice, unless the Company terminates Executive for Cause, as defined in
Paragraph 11; (b) upon the death or permanent disability of Executive; or (c)
upon not less than sixty (60) days prior written notice to the Company by
Executive.
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<PAGE>
a. General Severance. If Executive's employment is terminated solely upon
the discretion of the Company pursuant to (a), for any reason other
than for Cause, as defined in Paragraph 11, and except as provided in
Paragraph 12 in the event of a Change of Control, Executive will be
entitled to all amounts payable through the date of termination,
including pro-rated salary and accrued vacation earned but not yet
paid and any earned but unpaid bonus, the availability and pro rate
calculation of which shall be as determinated at the discretion of the
Board of Directors, plus severance according to the following formula:
(i) A base severance of twelve (12) months.
(ii) Executive also shall be entitled to continue his participation
in the Company's group medical plan and other benefit plans of
the Company, provided that, to the extent that, and as long as
continued participation is permitted under the terms and
provisions of such plans, until either the end of the total
severance term per 10.a.(i) above or until Executive becomes
eligible to participate in another employer's group medical,
insurance and retirement plan benefits, whichever is sooner.
(iii) All severance payments will be made prospectively on usual
Company paydays twice monthly at usual salary rates until the
entire severance is paid or until alternative employment is
achieved, whichever is sooner. During this severance period,
Executive agrees to pursue aggressively alternative full-time
employment opportunities.
b. Death or Voluntary Resignation. In the event of Executive's death
during the Employment Period, or Executive's voluntary resignation,
Executive or Executive's legal representative(s) will be entitled to
all amounts payable through the last date of employment, including
pro-rated salary earned but not yet paid and any earned bu unpaid
bonus, the availability and pro rate calculation of which shall be as
determined at the discretion of the Board of Directors.
11. Termination for "Cause." "Cause" shall mean the willful neglect of
Executive's duties which remains uncured for thirty (30) days after Executive
receives written notice thereof; Executive's conviction of a felony involving
moral turpitude; or any act of fraud or embezzlement by Executive involving the
Company. The Company may terminate Executive's employment for Cause at any time,
without prior written notice. If the Company terminates Executive's employment
for Cause, it shall have no further obligations to Executive under this
Agreement.
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<PAGE>
12. Change of Control. Notwithstanding any provision in this Agreement to the
contrary, in the event that (a) any person or entity makes a tender or exchange
offer for shares of the Company's common stock pursuant to which such person or
entity acquires 25% or more of the issued and outstanding shares of the
Company's common stock, (b) the Company merges or consolidates with or into
another corporation or corporations, (c) the Company sells, transfers or
otherwise disposes of all or substantially all of its assets, or (d) any person
or entity acquires more than 25% of the Company's issued and outstanding voting
securities (any of which events shall constitute a "Change of Control" under
this Agreement), and employment is terminated thereafter, Executive shall
receive pro-rated salary earned but not yet paid and any earned but unpaid
bonus, the availability and pro rata calculation of which shall be as determined
at the discretion of the Board of Directors, plus severance according to the
following:
a. If during the first six months following Change of Control,
Executive's employment is terminated solely upon the discretion of the
Company pursuant to any reason other than for Cause, Executive will be
entitled to all amounts payable through the date of termination,
including pro-rated salary earned but not yet paid, accrued vacation,
and any earned but unpaid bonus plus a lump sum payment equal to
twelve months of severance plus benefits coverage per paragraph
10.(ii) above.
b. If Executive elects, for any reason, to terminate employment with the
Company within the first six (6) months upon Change of Control and on
at least thirty (30) days prior written notice, a total severance of
six (6) months base salary will be due.
c. If Executive elects, for any reason, to terminate employment with the
Company or its successor at any time no earlier than six (6) months
and no later than twelve (12) months after a Change of Control upon at
least sixty (60) days prior written notice, a total severance of nine
(9) months base salary will be due. Severance payments will be made
prospectively on usual Company paydays twice monthly at usual salary
rates until the entire severance is paid or until alternative
employment is achieved, whichever is sooner. During any severance
period, Executive agrees to pursue aggressively alternative full-time
employment opportunities. Executive also shall be entitled to continue
his participation in the Company's group medical plan and other
benefit plans of the Company during the above severance periods,
provided that, to the extent that, and as long as continued
participation is permitted under the terms and provisions of such
plans, until Executive becomes eligible to participate in another
employer's group medical, insurance and retirement plan benefits,
whichever is sooner.
d. If the Company or its successor terminates Executive's employment for
Cause pursuant to Paragraph 11 of this Agreement, there shall be no
further obligations to Executive under this Agreement.
13. Binding Effect; Successors. This Agreement is binding upon and shall inure
to the
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benefit of the parties hereto, and their respective heirs, legal
representatives, successors and assigns, subject to the following:
a. This Agreement is personal to Executive and shall not be assigned by
him.
b. The Company will require any successor in a Change of Control to
assume expressly and agree to perform this Agreement.
14. Notice. All notices required or permitted to be given under this Agreement
shall be given in writing and shall be deemed sufficiently given if delivered by
hand or mailed by registered mail, return receipt requested, to Executive's
respective address and the principal offices of the Company, both listed above.
By giving notice to the other party in accordance with this Paragraph, each
party may change the address at which it is to receive notices hereunder.
15. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
16. Arbitration. Except for any rights the Company may have to apply to a court
of competent jurisdiction for specific performance or injunctive relief,
including but not limited to enforcement of the Confidentiality Agreement, any
other dispute arising or relating to the interpretation, validity, or
performance of this Agreement and any other dispute arising out of this
Agreement which cannot be resolved by the parties shall, upon thirty (30) days'
written notice by either party, be settled upon application of any such party by
arbitration in the County of Monmouth, New Jersey, or in reasonably close
proximity thereto, in accordance with the prevailing National Rules for the
Resolution of Employment Disputes of the American Arbitration Association (AAA),
and judgment upon the award rendered by the arbitrator may be entered in any
court of competent jurisdiction. The arbitration filing fee shall be advanced by
the initiating party and all other AAA administrative fees under this Paragraph
shall be shared equally by the parties to such a dispute, subject to
apportionment by the arbitrator in the award.
17. Independent Advice. Executive acknowledges that Executive has had the
opportunity to evaluate this Agreement independently and with Executive's own
professional advisors, and has not received and is not relying upon legal, tax
or other professional advice from or on behalf of the Company in connection with
entering into this Agreement.
18. Paragraph Headings. All paragraph headings are included herein for
convenience and are not intended to affect in any way the meaning or
interpretation of this Agreement.
19. Severability. In the event any provision of this Agreement is found to be
invalid or unenforceable, such provision shall be severable from the Agreement
and shall not affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
20. Entire Agreement. This Agreement constitutes the entire agreement between
the parties as to employment by the Company of Executive and may only be changed
by a written document
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signed by both parties. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement.
21. Prior Agreements. This Agreement hereby revokes, replaces and supersedes
any prior Employment Agreement between the Company and Executive.
In witness whereof, the parties have executed this Agreement, the Company
acting herein by its duly authorized officer.
PROGRAMMER'S PARADISE, INC.
BY:
---------------------------------
Roger Paradis
President
JOHN BRODERICK
---------------------------------
John Broderick
6
EXHIBIT 10.40
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of _____ ___, 1998, by and between
Programmer's Paradise, Inc., a Delaware corporation with offices at 1163
Shrewsbury Avenue, Shrewsbury, New Jersey 07702-4321 (the"Corporation"), and
Peter Lorenz, an individual residing at 16540 Southwest 84th Avenue, Miami,
Florida 33157 (the "Executive").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties hereto hereby agree as follows:
1. Employment. The Corporation hereby agrees to employ the Executive in an
executive capacity, and the Executive hereby accepts and agrees to such
employment, upon the terms and conditions hereinafter set forth.
2. Term. The term of the Executive's employment under this Agreement shall
commence as of December 1, 1998 (the "Effective Date") and shall continue until
the close of business on December 31, 1999, and shall automatically be renewed
on the same terms and conditions for successive additional terms of twelve (12)
months unless terminated by either party upon written notice to the other not
less than thirty (30) days prior to the expiration of the initial twelve-month
term or of any twelve-month renewal term thereafter (the initial term and, if
the period of employment is so renewed, such additional period or periods of
employment are collectively referred as the "Term"), unless sooner terminated as
provided elsewhere in this Agreement.
3. Duties and Services. (a) The Executive agrees to serve the Corporation
as an Executive Vice President of the Corporation and shall also serve such of
its subsidiaries and affiliated companies as may be designated by the
Corporation, faithfully, diligently and to the best of his ability, subject to
and under the direction and control of the Board of Directors of the
Corporation, the President of the Corporation and their authorized designees,
devoting his entire business time, energy and skill to such employment, and to
perform from time to time such executive services, advisory or otherwise, as the
Board of Directors, the President of the Corporation or their authorized
designee shall request, and to act in such capacities or other offices for the
Corporation and for any of its subsidiary or affiliated companies as the Board
of Directors, the President of the Corporation or their authorized designee
shall request without further compensation other than that for which provision
is made in this Agreement. The Executive shall be primarily responsible for
German operations and all corporate sales in the United States.
(b) The principal place of employment of the Executive shall be at the
corporate offices of the Corporation in Shrewsbury, New Jersey, or such other
new offices of the Corporation as shall be determined by the Board of Directors,
provided that any such new office will not be located at a place which would
significantly extend the commuting or travelling time of the
<PAGE>
Executive beyond a reasonable amount of time unless the Corporation shall
relocate the Executive and his wife. Any such relocation shall be at the expense
of the Corporation. The Executive's responsibilities to the Corporation shall
require the Executive to spend at least four days a week at such corporate
offices. It is understood, however, that in connection with his duties under
this Agreement, the Executive may be required to travel to and perform services
at other locations on a more temporary basis.
(c) The Executive shall relocate from Europe to Miami, Florida, and
shall rent housing in New Jersey within a reasonable commuting distance from the
corporate offices of the Corporation.
4. Compensation. (a) The Corporation agrees to pay to the Executive, and
the Executive agrees to accept, a basic salary for all his services (the
"Salary") at the rate of $190,000 per annum, payable from the U.S. corporate
office of the Corporation in accordance with the Corporation's standard payroll
policies from time to time.
(b) The Corporation agrees to pay the Executive from the U.S.
corporate offices of the Corporation a bonus in accordance with the bonus
program set forth on Schedule A hereto, with a base bonus of $50,000.
5. Employee Benefits. (a) The Corporation shall reimburse the Executive for
the reasonable business expenses incurred by him for or on behalf of the
Corporation in furtherance of the performance of his duties hereunder. Such
reimbursement shall be subject to receipt by the Corporation from the Executive
of such an expense statements and such vouchers and other reasonable
verifications as the Corporation shall require to satisfactorily evidence such
expenses, and shall also be subject to such policies as the Corporation shall
establish from time to time (except that international air travel by the
Executive may be by business class).
(b) The Executive shall be entitled to participate, in accordance with
the terms thereof, in employee benefit plans and programs maintained for the
U.S. executives of the Corporation, including, without limitation, any health,
hospitalization and medical insurance programs and in any pension or retirement
or other similar plans or programs. The foregoing shall not be construed to
require the Corporation to establish any such plans or programs, or to prevent
the Corporation from modifying or terminating any such plans or programs once
established. Without limiting the foregoing, the Executive shall resign from the
health plans maintained by International Software Partners GmbH and enroll in a
U.S. health care plan maintained by the Corporation.
(c) The Executive shall be entitled to six (6) weeks of vacation each
employment year during the term of this Agreement, taken consecutively or in
segments, subject to the effective discharge of the duties of the Executive
hereunder.
(d) During the term of the Executive's employment hereunder, the
Corporation shall afford the Executive the use of a Mercedes 300 or similar
automobile, chosen by the Executive and reasonably satisfactory to the
Corporation.
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(e) In connection with the relocation of the Executive from Europe to
Miami, Florida, and the maintenance by the Executive of local housing in New
Jersey, it is agreed as follows:
(i) the Corporation shall pay or reimburse the Executive for up
to 50% of the cost of moving the Executive's household goods and personal
effects from his current residence in Europe to his new residence in Miami,
Florida, up to a maximum of $10,000;
(ii) the Corporation shall provide the Executive, for use in his
new home in Miami, Florida, with a telephone and fax machine (which may be
combined), and miscellaneous office supplies, it being understood that the
Corporation shall not absorb the cost of a full home office, and that all of
such equipment and supplies provided or paid for by the Corporation shall remain
the property of the Corporation;
(iii) the Corporation shall provide or reimburse the Executive
for regular round-trip air fare or tickets between New York and Miami airports
on a weekly basis, so as to enable the Executive to be at his Miami residence
the balance of each work week; it being understood that the expenses of ground
transportation to and from such airports shall be the responsibility of the
Executive;
(iv) the Corporation shall pay or reimburse the Executive for the
rent expense for the Executive's local housing in New Jersey, which is to be in
the range of $1,000 to $1,500 per month; and
(v) the Corporation shall pay or reimburse the Executive for the
fees and expenses of counsel satisfactory to the Corporation in connection with
the Executive obtaining the requisite work permit (L-1), up to a maximum of
$5,000.
6. Termination. (a) Notwithstanding anything to the contrary contained
herein, the Executive's employment with the Corporation, as well as the
Executive's right to any compensation which thereafter otherwise would accrue to
him hereunder or in connection therewith, shall terminate upon the earliest to
occur of the following events:
(i) the death or disability (as defined below) of the Executive,
(ii) the expiration of the Term of this Agreement,
(iii) the Executive's termination of such employment, or
(iv) upon delivery of written notice, with or without "cause" (as
defined below), to the Executive from the Corporation of such termination.
(b) For the purpose of this Section 6, (i) the term "cause" is defined
as (A) the commission by the Executive of a felony or an offense involving moral
turpitude, the Executive's engaging in theft, embezzlement, fraud, obtaining
funds or property under false pretenses, or similar
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<PAGE>
acts of misconduct with respect to the property of the Corporation or its
employees, stockholders, affiliates, customers, licensees, licensors or
suppliers, (B) the repeated failure by the Executive to perform his duties
hereunder or comply with reasonable policies or directives of the Board of
Directors or President of the Corporation, or (C) the breach of this Agreement
or the Conditions of Employment by the Executive in any material respect, and
(ii) the Executive shall be deemed "disabled" if, at the Corporation's option,
it gives notice to the Executive or his representative that due to a disabling
mental or physical condition, he has been prevented, for a continuous period of
90 days during the Term or for an aggregate of 120 days during any six-month
period during the Term, from substantially performing those duties which he was
required to perform pursuant to the provisions of this Agreement prior to
incurring such disability.
(c) In the event of the termination by the Corporation of the
employment of the Executive under this Agreement without "cause" in accordance
with Section 6(a)(iv) above, the giving by the Corporation of notice of
non-renewal of this Agreement pursuant to Section 2 or the voluntary resignation
or retirement of the Executive, in addition to the Salary and other compensation
(including cash bonuses) earned hereunder and unpaid or not delivered through
the date of termination and any benefits referred to in Section 5(b) hereof in
which the Executive has a vested right under the terms and conditions of the
plan or program pursuant to which such benefits were granted (without regard to
such termination), the Corporation shall pay the Executive severance
("Severance") in an amount equal to his monthly Salary for nine (9) months from
the date of termination. The Severance shall be paid to the Executive or his
estate in nine consecutive, equal monthly installments of $15,833.33 each
(subject to withholding), on the fifteenth day of each calendar month commencing
during the month next following the month in which the Executive is no longer
employed by the Corporation, and shall be in lieu of any other claim to
severance or similar payments or benefits which the Executive may otherwise have
or make. Without limiting any other rights or remedies which the Corporation may
have, it is understood that the Corporation shall be under no further obligation
to make any such Severance payments and shall be entitled to be reimbursed
therefor by the Executive or his estate if the Executive violates any of the
covenants set forth in the Conditions of Employment attached as Exhibit A
hereto. In the event that the Severance shall become payable to the Executive,
the Executive shall not be required, either in mitigation of damages or by the
terms of any provisions of this Agreement or otherwise, to seek or accept other
employment, and if the Executive does accept other employment, any benefits or
payments under this Agreement shall not be reduced by any compensation earned or
other benefits received as a result of such employment.
7. Deductions and Withholding. The Executive agrees that the Corporation
shall withhold from any and all payments required to be made to the Executive
pursuant to this Agreement all federal, state, local and/or other taxes which
are required to be withheld in accordance with applicable statutes and/or
regulations from time to time in effect.
8. Non-Solicitation, Restrictive Covenants, Confidentiality and Injunctive
Relief. (a) The Executive shall execute and deliver to and for the benefit of
the Corporation, the Conditions of Employment attached as Exhibit A hereto,
pertaining, among other matters, to proprietary information, confidentiality
obligations, and non-competition obligations, the provisions
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<PAGE>
of which shall be deemed incorporated herein by reference as if set forth herein
(the "Conditions of Employment").
(b) The provisions of this Section 8 shall survive the termination or
expiration of this Agreement, irrespective of the reason therefor, including
under circumstances in which the Executive continues thereafter in the employ of
the Corporation.
9. Warranty. The Executive warrants and represents that he is not a party
to any agreement, contract or understanding, whether of employment or otherwise,
which would in any way restrict or prohibit him from undertaking his position as
an executive of the Corporation and complying with his obligations in accordance
with the terms and conditions of this Agreement and the Conditions of
Employment.
10. Insurance. The Executive agrees that the Corporation may from time to
time and for the Corporation's own benefit apply for and take out life insurance
covering the Executive, either independently or together with others, in any
amount and form which the Corporation may deem to be in its best interests. The
Corporation shall own all rights in such insurance and in the cash values and
proceeds thereof and the Executive shall not have any right, title or interest
therein. The Executive agrees to assist the Corporation, at the Corporation's
expense, in obtaining any such insurance by, among things, submitting to
customary examinations and correctly preparing, signing and delivering such
applications and other documents as reasonably may be required. Nothing
contained in this Section 10 shall be construed as a limitation on the
Executive's right to procure any life insurance for his own personal needs.
11. Notices. All notices shall be in writing and shall be deemed to have
been duly given to a party hereto on the date of such delivery, if delivered
personally, or on the third day after being deposited in the mail if mailed via
registered or certified mail, return receipt requested, postage prepaid, or on
the next business day after being sent by recognized national overnight courier
service, in the case of the Executive at his current address as set forth in the
Corporation's records, and in the case of the Corporation, at it address set
forth above.
12. Assignability and Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the heirs, executors, administrators,
successors and legal representatives of the Executive, and shall inure to the
benefit of and be binding upon the Corporation and its successors and assigns.
The Executive may not assign, transfer, pledge, encumber, hypothecate or
otherwise dispose of this Agreement, or any of his rights or obligations
hereunder, and any such attempted delegation or disposition shall be null and
void and without effect.
13. Severability. In the event that any provisions of this Agreement would
be held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason (including, but not limited to, any provisions which would be held to be
unenforceable because of the scope, duration or area of its applicability),
unless narrowed by construction, this Agreement shall, as to such jurisdiction
only, be construed as if such invalid, prohibited or unenforceable provision had
been more narrowly drawn so as not to be invalid, prohibited or unenforceable
(or if such language cannot be drawn narrowly enough, the court making any such
determination shall have the power to modify
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<PAGE>
such scope, duration or area or all of them, but only to the extent necessary to
make such provision or provisions enforceable in such jurisdiction, and such
provision shall then be applicable in such modified form). If, notwithstanding
the foregoing, any provision of this Agreement would be held to be invalid,
prohibited or unenforceable in any jurisdiction, such provision shall be
ineffective to the extent of such invalidity, prohibition or unenforceability,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey, without regard to
principles of conflict of laws and regardless of where actually executed,
delivered or performed.
15. Complete Understanding; Counterparts. This Agreement constitutes the
complete understanding and supersedes any and all prior agreements and
understandings between the parties with respect to its subject matter, and no
statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein. This Agreement shall
not be altered, modified, amended or terminated except by written instrument
signed by each of the parties hereto. The Section and paragraph headings
contained herein are for convenience only, and are not part of and are not
intended to define or limit the contents of said Sections and paragraphs. This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which, when taken together, shall constitute one and the
same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PROGRAMMER'S PARADISE, INC.
By:
--------------------------
-----------------------------
Peter Lorenz
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EXHIBIT 10.41
EMPLOYMENT AGREEMENT
THE UNDERSIGNED:
1. LOGICSOFT HOLDING BV, a closed company with limited liability under the
laws of the Netherlands, with its corporate seat in Amsterdam, hereinafter
referred to as: "EMPLOYER";
and
2. MR FRANS H.M. VAN DER HELM, residing in the Netherlands at De Wickelaan 35,
2265 DG Leidschendam, hereinafter referred to as: "EMPLOYEE";
TAKING INTO CONSIDERATION THAT:
a. Since January 21, 1991, Employee is employed by Logicsoft Europe B.V., a
subsidiary of Employer, originally in the function of Office Manager and
most recently in the function of Deputy Director.
b. Employer intends to appoint Employee as its Vice President and Chief
Operating Officer for the Netherlands, France, the United Kingdom and
Italy, as a consequence of which Employee shall leave the employment of
Logicsoft Europe B.V. as of December 14, 1998, and enter into the
Employment of Employer as of the same day.
c. Employer and Employee want to formalise their contractual relationship in
this employment agreement.
HAVE AGREED AS FOLLOWS:
1. TASKS AND DUTIES
1.1. Employer hereby employs Employee as Vice President and Chief Operating
Officer of Employer for The Netherlands, France, the United Kingdom and
Italy. Employee
<PAGE>
2
hereby accepts such employment, upon the terms and conditions as set forth
in this agreement.
1.2 Employee agrees to devote his best efforts, attention and abilities to the
business and the affairs of Employer. Employee shall, at all times, observe
the best interests of Employer and its affiliates.
1.3 Except with the express prior written consent of the Board of Directors of
Employer, Employee shall not undertake any other paid or unpaid duties or
activities for or on behalf of third parties, or perform these duties or
activities on his own behalf.
2. DURATION OF THE AGREEMENT AND TERMINATION
2.1. This agreement shall be in force for a period of two years. The effective
date of this agreement is December 14, 1998. During the course of this
agreement, both Employer and Employee may terminate this agreement at four
months' written notice against the end of any calendar month.
2.2 Not later than September 14, 2000, Employer and Employee will discuss the
possibilities and conditions of an extension of the employment relationship
after December 14, 2000.
2.3 Employee is entitled to a severance payment of 50% of the gross salary per
year mentioned in article 3.1, if (a) Employer terminates this agreement
during its course or against the end of the period mentioned in article
2.1, unless such termination takes place for an "urgent reason" in the
sense of article 7:677 Dutch Civil Code; or (b) Employer substantially
changes the tasks and duties of Employee, as a consequence of which
relationship Employee wishes to terminate the employment relationship.
3. SALARY
3.1. The gross salary per year to which Employee shall be entitled is the
equivalent in Dutch guilders of U.S. $ 160.000,-, to be accounted on the
basis of the exchange rate on the date of this agreement. The salary will
be paid in 12 equal parts at the end of each
<PAGE>
3
calender month.
3.2 Employee is not entitled to a holiday allowance.
3.3 The salary as mentioned in article 3.1 includes expenses concerning the
leasing and maintenance of a car. Employer is willing to pay part of the
salary mentioned in article 3.1 in the form of fixed cost reimbursements
and contributions to pension arrangements, in as far as this is permissible
under applicable (tax) law.
3.4 Without prejudice to the second sentence of article 3.3, the salary
payments mentioned in 3.1 shall be subject to normal statutory
withholdings, such as tax and social security premiums.
3.5 The payments mentioned in this article, shall be made to a Dutch bank or
giroaccount to be indicated by Employee.
4. BONUS
4.1. Employee is entitled to a yearly bonus of U.S. $ 20.000,- if he realizes
the income from operations target of that year. The income from operations
target of every year shall be set by Employer after consultation with
Employee before the beginning of each respective year. Employee is entitled
to a bonus of U.S. $ 40.000,- if the income from operations target of that
year is exceeded by at least 30%.
4.2. The bonus referred to in article 4.1 shall be paid by Employer to Employee
within 6 weeks after the annual accounts of Employer will be adopted (and -
in as far as necessary - approved) by the competent bodies of Employer.
4.3. Employee is not entitled to a bonus as referred to in article 4.1 in a year
in which he was ill during a (computed) period of four months or in which
he was suspended for any period or unable to perform his duties as a result
of disablement.
5. EXPENSES
<PAGE>
4
5.1 Any reasonable expenses properly incurred by Employee in the performance of
his function - including costs for fuel for the car - in as far as not
covered by any fixed monthly reimbursement, shall be reimbursed by
Employer, in accordance with the standard procedure within the organization
of Employer. An account of such expenses, accompanied by supporting
receipts and other appropriate evidence, shall be rendered by Employee to
Employer from time to time.
6. WORKING HOURS OVERTIME
6.1 Employee shall put in such overtime, without being entitled to any
additional payments (in money or in free time), as may be reasonably
required from him in order to properly carry out his obligations under the
agreement.
7. HOLIDAYS
7.1 Employee shall be entitled to 24 holidays a year. He is entitled to enjoy
holidays after consultation and permission of the chairman of the Board of
Directors of Employer.
7.2 Employee shall not be entitled to short time ("arbeidstijdverkorting") .
8. ILLNESS OR DISABILITY
8.1 In case of illness or disability of Employee, Employer is obliged to pay
100% of the gross salary as referred to article 3.1 during the first 52
weeks of illness or disability. The above applies, however, only if and to
the extent that pursuant to the requirements of article 7:629 section 3 up
to and including 7, and section 9, of the Dutch Civil Code, Employer is
under the obligation to pay in accordance with article 7:629 section 1
Dutch Civil Code.
9. INSURANCE
9.1. Employee will participate in the collective insurance policy concluded by
Logicsoft Europe B.V. with regard to loss of income as a result of
disablement (WAO-
<PAGE>
5
gatverzekering).
10. CONFIDENTIALITY AND DELIVERY OF DOCUMENTS
10.1 Employee shall not at any time, whether during or after the termination of
this employment agreement, except at the express request or with the prior
written consent of Employer, use, disclose or permit others to disclose to
any person, firm, partnership, company or third party any information
related to the business of Employer, any company of the group to which
Employer belongs, or any other details relating thereto, which he knows, or
reasonably can assume to be secret or confidential unless and to the extent
disclosure is necessary for the adequate performance of Employee's duties
under applicable law.
10.2 Employee shall treat all items of the employer, such as books, documents,
computer floppy disks, other information carriers, resolutions, drawings,
reports and notes as property of Employer, and he shall keep such materials
and documents, as well as copies thereof, as much as reasonable possible
locked away. Employee shall not use any item in another way, or keep any
item any longer, than necessary for the adequate performance of his duties.
Employee shall upon request, at any time, and without request at the moment
of termination of this agreement, and at the moment upon which he is
suspended for any period or unable to work as a consequence of illness for
a period longer than two months, deliver all items to Employer.
10.3 To the extent the information as mentioned in this article, is put in a
computer system of Employee or in another way is put in a form which
Employee does not have to deliver to Employer according to article 9.2,
Employee shall not keep such information any longer than necessary for the
adequate performance of his duties. Employee shall upon request, at any
time, delete and destroy such information and confirm in writing to
Employer that he has deleted and destroyed the same.
11. GIFTS
11.1 Employee is in the performance of his duties not allowed to accept or to
bargain for any direct or indirect gifts however defined without the prior
written consent of Employer.
<PAGE>
6
11.2 Article 11.1 is not applicable to customary non valuable promotional gifts.
12. NON-COMPETITION
12.1 Without prejudice to the Share Purchase Agreement of September 30, 1997
(the "SHARE PURCHASE Agreement") between Programmers' Paradise, Inc. and -
among others - Employee, Employee shall, both throughout the duration of
this agreement and for a period of one year after this agreement has
terminated, not alone or jointly, directly or indirectly:
(a) engage in and or be concerned with activities which are similar or in
any way whatsoever competitive with the activities or the products of
Employer, Programmer's Paradise Inc. ("PPI") or any of their
subsidiaries or affiliated companies or seek to obtain orders from or
do business with customers relating to software or the distribution
thereof. (For the purpose of this clause "customers" shall mean:
companies or persons that purchase any goods or services from
Employer, PPI or any of their subsidiaries or affiliated companies or
have done so at any time during the period of one year prior to the
termination of this agreement);
(b) canvass or solicit orders for software or other goods of similar type
to those being manufactured or dealt in or for services similar to
those being provided by any of Employer, PPI or affiliated companies
from any person who is at the termination of this agreement or has
been at any time within one year prior thereto a supplier or customer
of any of Employer, PPI or any of their subsidiaries or affiliated
companies;
(c) engage, employ, solicit or contact with a view to hiring or engaging
employees of Employer, PPI or any of their subsidiaries or affiliated
companies (For the purpose of this clause "employees" shall mean:
persons employed by Employer, PPI or any of their subsidiaries or
affiliated companies or persons whose employment with Employer, PPI or
any of their subsidiaries or affiliated companies ended less than a
year before the termination of this agreement);
<PAGE>
7
12.2 The restrictions in this article 12 shall not prohibit the Employee for
seeking to obtain orders from or do business with customers of Employer,
PPI, and/or their subsidiaries or affiliated companies after termination of
this agreement, so long as not including or concerned with any software or
software products and provided that PPI shall give its prior written
consent, which consent shall not unreasonably be withheld with respect to
such items or business that are not software or software products (it being
understood that such prohibition shall include and such consent feature
shall not be applicable to orders or business including software or
software products).
12.3 The obligations pursuant to this article apply solely to any work
activities or involvement of the Employee within the countries in Western
Europe (including Italy) where Employer, PPI or any of their subsidiaries
or affiliated companies are active or on the date hereof any of them
reasonably contemplate to be active.
12.4 For purposes hereof, each of the following shall be deemed competitive with
the activities of Employer, PPI or their subsidiaries or affiliated
companies (1) the sale or distribution of software and/or related
documentation in any and all languages, platforms, versions or releases,
and in any and all media and advertising and promotional services in each
case through catalogues and other direct mail publications, web site,
Internet, Intranet and other on-line or electronic communications or
distribution, and corporate reseller and wholesale operations, in-bound and
out-bound telemarketing or otherwise, (2) software consulting, systems
integration, software implementation and help desk services, (3) electronic
commerce related to software and (4) license management and tracking.
12.5 The Employee acknowledges that the provisions of this article are not
more extensive than is reasonable to protect Employer, PPI and/or their
subsidiaries or affiliated companies.
13. PENALTY
13.1 Should Employee not observe any of the obligations as mentioned in article
10 and /or 11 and/or 12 , Employer shall, without prior written notice or
court action being required, be entitled to an immediately payable penalty
of NLG 25,000 for every
<PAGE>
8
breach, to be increased by NLG 5,000 for every day such breach continues,
without prejudice to any other rights or claims Employer shall have,
including the right to claim fulfilment of the obligations laid down in
article 10 and/or 11 and/or 12 by Employee in the future. Employer has the
right to claim full costs and damages instead of these penalties. The
parties hereto acknowledge that the above-mentioned penalty amounts
represent a genuine and reasonable pre-estimate of the minimum damage
likely to be suffered by the Company or its subsidiaries or affiliated
companies if the Employee breaches any of its duties pursuant to article
10, 11 and 12.
13.2 In the event that there is breach of the duties of the Employee pursuant to
article 10 or 12 of this agreement, any penalties for such breach may, to
avoid collecting double penalties, only be collected either under the Share
Purchase Agreement or under this agreement.
13.3 Each of the restrictions in article 10, 11 and 12 shall be enforceable by
Employer independently.
14. APPLICABLE LAW
14.1 This agreement is governed by the laws of The Netherlands.
15. PRECEDING AGREEMENTS AND MODIFICATIONS
15.1 This agreement supersedes the employment agreement of December 14, 1990
(including the addendum of September 30, 1997), and other possible
modifications and employment agreements between on the one hand Employer,
PPI, their subsidiaries and affiliates and on the other hand Employee.
This agreement is signed in twofold on 1998
<PAGE>
9
- - --------------------- ----------------------
Logicsoft Holding B.V. F.H.M. van der Helm
by:
function:
EXHIBIT 10.42
================================================================================
L E A S E
LANDLORD: ROBERT C. BAKER, ET AL.
TENANT: PROGRAMMER'S PARADISE, INC.
PREMISES: 18,000 sf BUILD TO SUIT BUILDING
SHREWSBURY AVENUE
SHREWSBURY, NJ
DATE OF LEASE: MAY 14, 1997
================================================================================
<PAGE>
INDEX
PAGE
----
ARTICLE 1. DEMISED PREMISES AND TERM.....................................
ARTICLE 2. USE AND OPERATION.............................................
ARTICLE 2. RENT..........................................................
ARTICLE 4. SUBORDINATION.................................................
ARTICLE 5. CONSTRUCTION..................................................
ARTICLE 6. ALTERATIONS AND REPAIRS.......................................
ARTICLE 7. INDEMNITY AND INSURANCE.......................................
ARTICLE 8. FIRE DAMAGE...................................................
ARTICLE 9. WAIVER OF SUBROGATION.........................................
ARTICLE 10. CONDEMNATION..................................................
ARTICLE 11. ASSIGNMENT AND SUBLETTING.....................................
ARTICLE 12. COMMON AREA MAINTENANCE.......................................
ARTICLE 13. UTILITIES.....................................................
ARTICLE 14. TAXES.........................................................
ARTICLE 15. REMEDIES OF LANDLORD..........................................
ARTICLE 16. WAIVER OF TRIAL BY JURY.......................................
ARTICLE 17. ACCESS TO PREMISES............................................
ARTICLE 18. NO WAIVER.....................................................
ARTICLE 19. REQUIREMENTS OF LAW;
INSURANCE REQUIREMENTS........................................
ARTICLE 20. SIGNS.........................................................
ARTICLE 21. TENANT'S ADDITIONAL COVENANTS.................................
ARTICLE 22. EASEMENTS FOR UTILITIES.......................................
ARTICLE 23. CONSENTS AND APPROVALS........................................
ARTICLE 24. THERE IS NO ARTICLE 24
IN THIS LEASE.................................................
ARTICLE 25. END OF TERM HOLDOVER..........................................
ARTICLE 26. AUTHORITY TO EXECUTE..........................................
ARTICLE 27. NOTICES.......................................................
ARTICLE 28. BROKER........................................................
ARTICLE 29. MEMORANDUM OF LEASE...........................................
ARTICLE 30. AIR AND WATER POLLUTION.......................................
<PAGE>
ARTICLE 31. METHOD OF CALCULATION.........................................
ARTICLE 32. THERE IS NO ARTICLE 32 IN THIS LEASE..........................
ARTICLE 33. THERE IS NO ARTICLE 33 IN THIS LEASE..........................
ARTICLE 34. RELATIONSHIP OF PARTIES.......................................
ARTICLE 35. CAPTIONS......................................................
ARTICLE 36. DEFINITIONS...................................................
ARTICLE 37. ENTIRE AGREEMENT..............................................
ARTICLE 38. SUCCESSORS IN INTEREST........................................
ARTICLE 39. EXTENSION OPTION..............................................
ARTICLE 40. APPROVALS.....................................................
EXHIBITS
A SITE PLAN - DEMISED PREMISES
B WORK LETTER
2
<PAGE>
THIS LEASE, made as of the 14th day of May, 1997, by and between ROBERT C.
BAKER; GERALD H. BAKER; BAKER FAMILY PARTNERSHIP; ROBERT C. BAKER, TRUSTEE, AND
MARTIN S. BERGER, TRUSTEE, UNDER TRUST AGREEMENT DATED MARCH 15, 1984 FOR THE
BENEFIT OF ASHLEY S. BAKER; JOHN ORRICO; ALAN M. OSHINS, TRUSTEE UNDER TRUST
ESTABLISHED UNDER ARTICLE IV OF THE LAST WILL AND TESTAMENT OF HARVEY B. OSHINS;
AND KAREN SPIEGEL, each as to an undivided interest, as tenants-in-common,
having their office and P.O. Address c/o National Realty & Development Corp., 3
Manhattanville Road, Purchase, New York 10577 (hereinafter referred to as
"Landlord") and PROGRAMMER'S PARADISE, INC., a Delaware corporation, having its
principal office at 1163 Shrewsbury Avenue, Shrewsbury, New Jersey 07702
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, the Landlord is constructing a building (hereinafter referred to
as "Building") for the purposes of office and processing operations for
distribution in conjunction with the business being conducted in the office
portion of the Building, to be known as _____ Shrewsbury Avenue to be located
within the area designated as Lot No. 3/1 (hereinafter referred to as "Lot No.
3/1") on the attached plot plan (hereinafter referred to as "Plot Plan") which
is annexed hereto as Exhibit "A" and made a part hereof; and
WHEREAS, Landlord has constructed other buildings on Lot No. 3/1 commonly
known as 1151 Shrewsbury Avenue and 1163 Shrewsbury Avenue (such other buildings
and the Building to be constructed by Landlord pursuant to the terms hereof are
hereinafter collectively referred to as the "Shrewsbury Business Center") or the
"Center"); and
WHEREAS, Tenant is desirous of leasing from Landlord and Landlord is
desirous of leasing to Tenant the premises hereinafter described, upon and
subject to the provisions, agreements, covenants and conditions set forth
herein;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE 1. DEMISED PREMISES AND TERM
Section 1.01. (a) In consideration of the rents and additional rents
hereinafter reserved and all of the provisions, agreements, covenants and
conditions hereinafter contained, Landlord hereby leases and demises to Tenant,
and Tenant hereby hires, leases and takes from Landlord approximately 18,000
square feet of floor space ("Floor Space"), being the entire Building, more
particularly indicated and described by cross-hatching on the Plot Plan (the
Building being hereinafter referred to as the "Demised Premises") located on Lot
No. 3/1 in the Center located in the BOROUGH OF SHREWSBURY, COUNTY OF MONMOUTH
and STATE OF NEW JERSEY, together with all improvements to be constructed
thereon by the Landlord for the use of the Tenant, and all easements, tenements
and appurtenances thereto, including without limitation, and the use of the
parking spaces outlined in red on Exhibit A which shall be reserved for use by
Tenant (the aforesaid parking spaces and the drive aisles between said spaces
are hereinafter referred to as "Tenant's Parking Area"), it being understood
that Landlord shall not be responsible for enforcing the exclusivity of the
parking space except with respect to Landlord's employees, agents and
contractors, provided, however, that Landlord shall place and maintain signs
and/or other markings designating such spaces (as Landlord shall determine as
appropriate in Landlord's reasonable discretion) as Tenant's exclusive spaces
and shall fully
<PAGE>
cooperate with Tenant in Tenant's efforts to enforce the exclusivity of such
spaces.
Section 1.01. (b) The parties acknowledge that the Landlord may, at
Landlord's sole option, erect and has erected other buildings on Lot No. 3/1
(which may be different in design and construction from the Building). Landlord
shall have sole control and discretion in connection with the scope, design and
aesthetics of any such additional construction.
Section 1.01. (c)The Demised Premises are demised and let subject to (i)
the existing state of the title thereof; (ii) any state of facts which an
accurate survey or physical inspection thereof might disclose; (iii) all zoning
regulations, restrictions, rules and ordinances now in effect or hereafter
adopted by any governmental authority having jurisdiction; and (iv) any utility,
sewer or drainage easements or agreements and the installations made pursuant
thereto now existing or hereafter granted or installed; all without
representation or warranty by Landlord, except as expressly set forth herein.
Section 1.02. As long as Tenant occupies the Demised Premises, Tenant,
together with its employees, customers, invitees and business guests, shall have
the right to use, in common with Landlord, its successors, assigns, tenants,
subtenants, designees, concessionaires, licensees and any of their customers,
invitees, and business guests, all of the Common Areas (as such term is defined
in Section 12.01 hereof) at any time and from time to time existing within Lot
No. 3/1, except for areas reserved for the exclusive use of other tenants,
occupants, or designees and except for periods of time during which the Common
Areas are being repaired, altered or reconstructed. Neither Landlord nor Tenant
nor anyone holding under or through either of them shall make any charge for the
use of the Common Areas to the other or to the customers, invitees or business
guests of Landlord or Tenant or of anyone else hereinbefore granted the right to
use the Common Areas, except as provided in Article 12 of this Lease.
Section 1.03. The term ("Term") of this Lease shall be TEN (10) YEARS AND
ONE (1) MONTH from and after the commencement date ("Commencement Date"), which
date shall be the date upon which the Demised Premises shall be duly certified
by Landlord or Landlord's agent as being substantially complete in accordance
with the Plans and Specifications, except for those items, the completion of
which will not unreasonably interfere with Tenant's use and occupancy of the
Demised Premises, and Landlord has delivered to Tenant a Certificate of
Occupancy or its equivalent evidencing that the Demised Premises may be occupied
for uses set forth in Section 2.01, and shall expire on the date which is TEN
(10) YEARS AND ONE (1) MONTH following the last day of the calendar month in
which said Commencement Date shall occur ("Expiration Date").
Section 1.04. The parties shall, within ten (10) days following request of
the other, execute a written document, in recordable form, expressing the
Commencement Date and Expiration Date of the Term hereof, as such have been
determined in accordance with the provisions of this Lease.
ARTICLE 2. USE AND OPERATION
Section 2.01. Subject to the other provisions of this Lease, Tenant shall
occupy and use the Demised Premises solely for office and processing operations
and distribution in conjunction with the business being conducted in the office
portion of the
2
<PAGE>
Demised Premises, and for no other use. Tenant hereby covenants and agrees that
it, its successors and assigns, or anyone holding by, through or under them,
shall not use, nor permit the use of the Demised Premises for any other use or
purpose. Immediately following certification under Section 1.03 above, Tenant
shall fixture, furnish and equip the Demised Premises for Tenant's intended
business purpose and upon the Commencement Date, Tenant shall occupy and open
for business in the Demised Premises.
ARTICLE 3. RENT
Section 3.01. The annual minimum rental during the Term shall be as
follows:
(A) During the First through Fifth Years of the Term of this Lease: ONE
HUNDRED EIGHTY THOUSAND AND 00/100 ($180,000.00) DOLLARS per annum -
FIFTEEN THOUSAND AND 00/100 ($15,000.00) DOLLARS per month; and
(B) During the balance of the Term of this Lease: TWO HUNDRED TWENTY FIVE
THOUSAND AND 00/100 ($225,000.00) DOLLARS per annum - EIGHTEEN THOUSAND
SEVEN HUNDRED FIFTY AND 00/100 ($18,750.00) DOLLARS per month.
Notwithstanding anything to the contrary set forth herein, Tenant's
obligation to pay annual minimum rent shall commence thirty (30) days following
the Commencement Date. Tenant shall have the right, within thirty (30) days
following the Commencement Date, to have a licensed independent architect,
mutually acceptable to Landlord and Tenant, measure the Demised Premises for the
purpose of determining the actual square footage of the Demised Premises. In the
event that the actual square footage of the Demised Premises varies by more than
250 square feet from the square footage referenced in Section 1.01(a) of the
Lease, the annual minimum rental shall be increased or decreased, as the case
may be, so that the annual minimum rental payable during the initial Term shall
be at the rate of $10.00 per square foot during the First through the Fifth
years of the initial Term and $12.50 per square foot during the balance of the
initial Term, based upon the total actual square footage of the Demised
Premises.
Tenant agrees to pay to Landlord the annual minimum rent specified above in
lawful money of the United States in equal monthly installments, in advance, on
the first day of each calendar month during the Term hereof at the office of
Landlord or such other place or to such other person or party as Landlord may
designate, without prior demand therefor and without any setoff or deduction
whatsoever, except as herein provided. Unless and until Landlord otherwise
designates in writing all annual minimum rent and additional rent accruing
hereunder shall be paid to National Realty & Development Corp. at 3
Manhattanville Road, Purchase, New York 10577. Annual minimum rent and
additional rent shall be prorated for a fraction of a month, if any, based on
the number of days within such fractional month.
Section 3.02. All taxes, charges, costs and expenses which Tenant assumes
or agrees to pay under any provision of this Lease, together with any and all
other sums which may become due, by reason of any default of Tenant or failure
on Tenant's part to comply with the provisions, covenants and conditions of this
Lease on Tenant's part to be performed, and each or any of them, shall be
collectible and recoverable as additional rent, and, in the event of nonpayment
thereof, Landlord shall have all the rights and
3
<PAGE>
remedies herein provided as in the case of nonpayment of annual minimum rent.
ARTICLE 4. SUBORDINATION
Section 4.01. This Lease and all rights of Tenant hereunder are, and shall
be, subject and subordinate to any mortgages, deeds of trust (including blanket
mortgages or deeds of trust covering the Demised Premises and/or the Center
and/or other properties) or any other security interest which has been or which
hereinafter may affect the Demised Premises, and to any ground or underlying
leases of all or part of the Center, and to any renewals, modifications,
consolidations, replacements and extensions thereof (hereinafter collectively
referred to as "Landlord's Financing"). Tenant acknowledges that the interest of
Landlord under this Lease may be assigned by Landlord as collateral security to
any of the foregoing parties holding interests to which this Lease is subject
and subordinate. In the event of foreclosure of any such interest, or
termination of any such ground or underlying lease, or in the event of any
exercise of the power of sale under any mortgage or other security interest made
by Landlord covering the premises of which the Demised Premises forms a part,
Tenant shall, at the sole option and direction of any such party, recognize the
rights of any such party under and pursuant to the provisions of such collateral
assignment and Tenant shall be deemed to have automatically attorned to and
acknowledged the purchaser or purchasers upon any foreclosure or sale and
recognized such purchaser or purchasers as the Landlord under this Lease.
Notwithstanding anything to the contrary set forth herein, this Lease shall not
be subordinate to Landlord's Financing unless and until the Landlord has
provided Tenant from the holder of Landlord's Financing, a non-disturbance
agreement providing that Tenant's occupancy will not be disturbed and that the
holder of Landlord's financing will recognize all of Tenant's rights under the
lease, provided Tenant is not in default beyond any applicable grace periods.
Such non-disturbance agreement may also contain subordination, attornment and
such other provisions as are typically requested by commercial lenders in
connection with mortgage loans made on properties similar to the Building. It is
acknowledged and agreed that this Lease is subject to Landlord obtaining a
non-disturbance agreement as described above for the benefit of Tenant from the
holder of any mortgage affecting the Demised Premises as of the date of the
execution and delivery of this Lease. In the event that such non-disturbance has
not been obtained on or before that date which is sixty (60) days following the
execution and delivery hereof, Tenant shall have the right to terminate this
Lease upon notice to Landlord within said sixty (60) day period otherwise Tenant
shall be deemed to have waived the foregoing requirement that Landlord obtain
such non-disturbance agreement.
Section 4.02. Tenant shall, at any time and from time to time, upon not
less than ten (10) days prior notice, 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 the rent and other charges have been paid in advance, if any, and
stating whether or not Landlord is in default in the performance of any
provision, covenant or condition contained in this Lease, and if so, specifying
each such default, and containing any other statements or certifications
required by a mortgagee, and/or ground lessor and/or other secured party, it
being intended that any statement or certification delivered
4
<PAGE>
pursuant to this Section may be relied upon by any party to whom it may be
delivered by Landlord.
Section 4.03. If Tenant shall fail or neglect to execute, acknowledge and
deliver any documents required by this Article, Landlord, in addition to any
other remedies, may, as agent or attorney-in-fact of Tenant, execute,
acknowledge and deliver same on behalf of Tenant, and Tenant hereby irrevocably
nominates, constitutes and appoints Landlord as Tenant's proper and legal
attorney-in-fact for such purpose, hereby ratifying all such acts that Landlord
may do as attorney-in-fact of Tenant.
ARTICLE 5. CONSTRUCTION
Section 5.01. Landlord, at Landlord's sole cost and expense, shall
construct the Demised Premises for Tenant at the approximate location as
indicated on the Plot Plan and having the approximate dimensions shown thereon.
The plans ("Plans") for the Demised Premises shall be prepared by architects and
engineers selected by Landlord, substantially in accordance with the Work Letter
specifications annexed hereto and made a part hereof as Exhibit B and the
interior space plan for the Demised Premises received and approved by Landlord
and which plan is annexed to this Lease as Exhibit B-1 (the work to be performed
by Landlord in the Demised Premises is hereinafter sometimes referred to as
"Landlord's Work" and Exhibits B and B-1 are herein sometimes referred to as the
"Work Letter"). Landlord shall reimburse Tenant the amount of $3,000.00, within
thirty (30) days after submission of a bill therefor, for the costs of providing
such interior space plan. Following the execution and delivery of this Lease,
Landlord agrees to prepare and furnish to Tenant a set of plans and
specifications for the Landlord's Work. The plans and specifications shall be
prepared by a licensed architect retained by Landlord. To the extent such Plans
are in compliance with said Work Letter, the Plans shall be deemed approved by
Tenant. Tenant agrees to review the plans and specifications and in each case to
approve same or to state what reasonable changes, if any, Tenant requires
therein within ten (10) days after receipt thereof. Any changes requested by
Tenant shall not be deemed reasonable in the event that same is not in
compliance with the Work Letter unless Tenant agrees to pay for any additional
work not in compliance with the Work Letter as a "Tenant extra" in accordance
with the terms of Exhibit B. If Tenant requires any reasonable changes, Landlord
shall cause the plans and specifications to be revised in accordance with any
reasonable requirements of Tenant and to resubmit same to Tenant for Tenant's
review within ten (10) days after receipt of Tenant's changes. The revisions and
resubmissions shall continue until Tenant shall have approved the plans and
specifications (said approved plans and specifications being hereinafter called
the "Plans"). The Plans shall be final and shall not be changed by Landlord or
Tenant without the prior consent of the parties. In the event that Landlord and
Tenant are unable to agree on the plans and specifications within forty-five
(45) days from the date the initial submission of the plans and specifications
by Landlord to Tenant, Landlord and Tenant agree to settle any such dispute by
arbitration using the procedure set forth in Article 39 of this Lease for the
selection of an arbitrator (except that the arbitrator shall be an "AIA member
architect").
Section 5.02. Landlord or Landlord's contractor shall give Tenant notice
when the Demised Premises are complete to the extent that it is practicable for
Tenant to enter therein for the performance of work by Tenant necessary to
occupy the Demised Premises and open for business, and if such notice shall be
given,
5
<PAGE>
Tenant shall promptly thereafter commence all work that is necessary to open the
Demised Premises for business. Subject to the foregoing provisions of this
Section, Tenant shall have the right to install its fixtures and equipment
during construction, provided Tenant does not interfere with the construction of
the Demised Premises or Building, and all work is performed in such manner and
with such labor as shall not interfere with the performance of Landlord's Work,
and, further, provided, that insurance meeting the requirements of Section 7.02
is furnished to Landlord prior to any such entry. Such entry into the Demised
Premises by Tenant prior to the Commencement Date is and shall be at the
Tenant's sole cost and risk, and the provisions of Section 7.01 and Section 7.02
shall be applicable during any such period prior to the Commencement Date. All
fixturing and/or other work to be performed by or on behalf of Tenant (other
than Landlord's Work hereunder) shall be done in accordance with plans and
specifications therefor submitted to and approved by Landlord prior to the
commencement of such fixturing and/or other work, which approval shall not be
unreasonably withheld, and in accordance with and subject to the provisions of
Article 19 hereof. No changes shall be made in said plans and specifications nor
shall there be any deviation in the prosecution of the work in accordance with
said plans and specifications without Landlord's prior written approval.
Section 5.03. If Tenant claims that some or all of the construction
requirements imposed upon Landlord pursuant to the provisions of this Lease have
not been complied with by Landlord upon delivery of notice of substantial
completion of Landlord's work, as provided herein, Tenant shall, within forth
five (45) days of said date, submit to Landlord a written list of the work
Tenant claims remains to be performed by Landlord, and Landlord shall have
ninety (90) days thereafter to complete such work. If Landlord fails to complete
such work, the sole remedy of Tenant shall be to complete such work and Tenant
shall have the right to set off the cost thereof from the rent due Landlord in
order to reimburse Tenant for the cost and expense of completion of the work.
Upon written request of Landlord, Tenant will, within five (5) days following
request (but not sooner than the date required by the first sentence of the
Section), furnish to Landlord a written statement that the construction of the
Demised Premises has been completed in accordance with Landlord's obligations or
in lieu thereof, a list of the work Tenant claims to be incomplete.
Section 5.04. Promptly following the Approvals Date (as hereinafter
defined), Landlord shall proceed with all due diligence to substantially
complete the construction of the Demised Premises. In the event that Landlord
has not commenced construction of the Demised Premises within ninety (90) days
following the Approvals Date, Tenant shall have the right, upon written notice
given to Landlord prior to the start of construction, to terminate this Lease,
and in such event, Landlord and Tenant shall be released from any and all rights
and obligations hereunder, excepting those, if any, accruing prior to the date
of termination. In the event that the building to be constructed on the Demised
Premises is not fully enclosed and/or the utility services for such building are
not in place at such building on or prior to that date which is fifteen (15)
months following the Approvals Date, then, in such event, Tenant shall have the
right, upon written notice given to Landlord prior to the substantial completion
of such work, to terminate this Lease, and in such event, Landlord and Tenant
shall be released from any and all rights and obligations hereunder, excepting
those, if any, accruing prior to the date of termination. Notwithstanding
anything to the contrary set forth herein, if Tenant has not elected to
terminate the Lease pursuant to the
6
<PAGE>
provisions hereinabove set forth in this Section 5.04, and possession of the
Demised Premises with Landlord's Work substantially completed shall not be
delivered to Tenant on or prior to that date which is fifteen (15) months from
the Approvals Date, the sole remedy of Tenant shall be to complete the
Landlord's Work and Tenant shall have the right to set off the costs thereof
from the rent due Landlord in order to reimburse Tenant for the cost and expense
of completion of the Landlord's Work.
If the substantial completion of the Landlord's Work and/or delivery of the
Demised Premises to Tenant is delayed by reason of: (i) any act or omission of
Tenant or any of its employees, agents or contractors; or (ii) any failure (not
due to any act or omission of Landlord or any of its employees, agents or
contractors) to plan or execute Tenant's work necessary for Tenant's occupancy
of the Demised Premises with reasonable speed and diligence, or (iii) any
changes by Tenant in the plans or specifications for the construction of the
Demised Premises or any changes or substitutions requested by Tenant; or (iv)
Tenant's failure to furnish plans and specifications required to be furnished by
Tenant, or subsequent changes thereto; or (v) Tenant's request for materials,
finishes or installations other than as provided for in the approved plans and
specifications; or (vi) the performance or incompletion of work by a party
employed or retained by Tenant; then the Demised Premises shall be deemed
substantially completed on the date when the same would have been substantially
completed but for such delay and, in addition, Tenant shall pay to Landlord all
costs and damages which Landlord may sustain by reason of such delay. As used in
this Lease, "substantial completion" shall be deemed to mean the completion of
the Landlord's Work except for those items the completion of which will not
unreasonably interfere with Tenant's use and occupancy of the Demised Premises.
Section 5.05. If there shall be a delay in the construction, repair or
restoration of the Demised Premises or Center or any portion thereof caused by
strikes, riots, acts of God, shortages of labor or materials beyond the
reasonable control of Landlord, national emergency, governmental restrictions,
laws or regulations, the act or failure to act of Tenant, including without
limitation, delays in delivering construction criteria and plan approval, or for
any other cause or causes beyond Landlord's control, at Landlord's option such
delay shall not be a violation of this Lease, and the time periods set forth in
this Lease for any such work shall, at Landlord's option, be extended for a
period of time equal to the period of delay.
Section 5.06. The Plot Plan shows the approximate location of existing
buildings, buildings under construction, proposed buildings and certain areas
reserved for related site improvements and future construction at the option of
Landlord. Landlord shall have the right to develop the Center in the manner it
sees fit and in the sole and absolute discretion of Landlord: to construct or
not construct any buildings other than the Building, to change the nature of
identity of the occupants of any such buildings, and to vary the floor areas,
stories and heights, sizes, shapes and design of any such buildings and the
divisions or portions thereof.
ARTICLE 6. ALTERATIONS AND REPAIRS
Section 6.01. No alterations or additions shall at any time be made by or
at the instance of Tenant without Landlord's prior written consent.
Notwithstanding the foregoing, Tenant shall have the right, without Landlord's
consent, to make interior
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alterations, installations and improvements which are normal and customary in an
office building, and which do not (i) affect the exterior or load bearing
portions of the Building or the building systems serving the Building or (ii)
void any guaranty or warranty which Landlord has received in connection with the
Demised Premises or Building, but subject to Landlord's receipt of the plans
therefor (prior to commencement of the alterations), and Landlord's receipt of
as-built and as-filed plans therefor promptly following completion of the
alterations. All such work, alterations, installations, additions and
improvements shall be done at Tenant's sole risk and expense. All work, repairs,
and/or alterations made by or at the instance of Tenant shall be done in a good
and workmanlike manner, with first class new materials, in compliance with any
applicable governmental rules and regulations, and subject to Article 19 hereof,
and the cost thereof shall be paid by Tenant in cash or its equivalent, so that
the Demised Premises shall at all times be free of liens for labor materials
supplied or claimed to have been supplied to the Demised Premises. Any
alterations, installations, repairs, additions or improvements (inclusive of
paneling and other wall coverings), except Tenant's trade fixtures, shall, at
the option of Landlord, become the property of Landlord and shall remain upon
and be surrendered with the Demised Premises, as part thereof, at the expiration
or sooner termination of the term of this Lease. If Tenant is in default
hereunder or is dispossessed, and fails to remove any property, equipment and
fixtures within ten (10) days following notice by Landlord, then and in that
event, the said property, equipment and fixtures shall be deemed, at the option
of Landlord , to be abandoned; or in lieu thereof, at the Landlord's option,
Landlord may remove and store or dispose of such property and charge the cost
and expense of removal, storage and disposal to Tenant. Trade fixtures shall be
defined as fixtures and equipment used by Tenant in the operation of its
business, but not including any fixtures and equipment which are part of the
operation of the Demised Premises or the Building.
Section 6.02. Anything to the contrary contained herein notwithstanding, it
is expressly understood and agreed that Tenant may install, connect and operate
such machinery, fixtures and equipment as may be deemed necessary by the Tenant
for its business, subject to compliance with applicable rules and regulations of
governmental bodies and bureaus having jurisdiction thereover. Subject to the
terms and conditions of this Lease, the machinery, fixtures and equipment
belonging to Tenant shall, at all times, be considered and intended to be
personal property of Tenant, and not part of the realty, and subject to removal
by Tenant, provided, at the time of such removal, that Tenant is not in default
pursuant to any of the terms, covenants, provisions or conditions of this Lease.
Tenant, at its own cost and expense, shall pay for any damage to the Demised
Premises or Building caused by the installation thereof or such removal, and
this obligation shall survive the expiration or sooner termination of the term
of this Lease.
Section 6.03. (a) Landlord shall, following reasonable notice from Tenant,
make all necessary repairs and replacements to (i) the Landlord's Work the need
for which arises prior to first anniversary of the Commencement Date (provided
Tenant shall have performed its maintenance and repair obligations as set forth
herein) and (ii) the structural portions of the Demised Premises, which shall
include, without limitation, the roof, roof deck, exterior walls (including
maintaining the water tight integrity of the walls and all openings therein) and
the floor slab and foundations thereof, provided, however, in no event shall
Landlord be required to make any repairs or replacements caused by any act,
omission, or negligence of Tenant, any subtenant, or
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concessionaire, or their respective employees, agents, invitees, licensees or
contractors (other than repairs or replacements necessitated by reason of fire
or other casualty which shall be made in accordance with the provisions of
Article 8 hereof). Tenant shall make all other repairs and replacements to the
Demised Premises. Tenant shall maintain throughout the term of this Lease,
including any extension term hereof, a protective service maintenance contract
with a contractor approved by Landlord, which approval shall not be unreasonably
withheld, providing for periodic maintenance of the H.V.A.C. system serving the
Demised Premises, including without limitation periodic changing of any and all
filters, changing of belts, lubricating of equipment and maintenance of
operating levels of freon in accordance with manufacturers specifications. Said
contract shall provide for maintenance inspection and service not less than
three (3) times per year. A copy of any such maintenance contract shall be
delivered to Landlord on a yearly basis or more often if required by Landlord.
Tenant shall keep all glass clean and in good condition, and Tenant shall
replace any glass which may be damaged or broken with glass of the same quality.
Tenant shall keep the sidewalk, if any, adjacent to the Demised Premises free
and clear of trash, litter and rubbish.
Section 6.03.(b) Notwithstanding anything to the contrary hereinabove set
forth, Landlord agrees to make partial reimbursement to Tenant for the
replacement of the HVAC system serving the Demised Premises which occur during
the term hereof, which reimbursement shall be based upon the formula set forth
below and shall only be made if: (a) the need for such necessary replacement is
not caused by any act, omission, or negligence of Tenant, any subtenant, or
concessionaire, or their respective employees, agents, invites, licensees or
contractors; and (b) Tenant is not in default under the terms and conditions of
this Lease, including, but not limited to, Tenant's obligations as set forth in
this Section 6.03. Subject to the foregoing, Landlord shall reimburse Tenant,
within thirty (30) days after receipt by Landlord of proof of Tenant's full
payment for such necessary replacement, in an amount equal to the cost of such
necessary replacement less an amount determined by multiplying such cost by a
fraction the numerator of which shall be the number of months remaining prior to
the expiration date of the Lease and the denominator of which shall be 120. In
the event that Tenant exercises its option for an extension term(s) after
reimbursement has been made as provided for herein, then the amount of
Landlord's reimbursement to Tenant shall be re-computed based upon the above
formula and taking into account the remaining number of months as of the date
such replacement cost was incurred, as if the extension term(s) had then been in
effect. Tenant shall reimburse Landlord, within thirty (30) days after receipt
of an invoice therefor, for the difference between the initial reimbursement
amount and any such adjusted reimbursement amount.
Section 6.04. Nothing contained in this Lease shall authorize Tenant to do
any act which may create or be the foundation for any lien, mortgage or other
encumbrance upon the reversion or other estate of Landlord, or of any interest
of Landlord in the Demised Premises, or upon or in the Building or Center of
which the same form a part; it being agreed that should Tenant cause any
alterations, changes, additions, installations, improvements or repairs to be
made to the Demised Premises, or cause materials to be furnished or labor to be
performed therein or thereon, neither Landlord nor the Demised Premises shall,
under any circumstances, be liable for the payment of any expense incurred or
for the value of any work done or materials furnished to the Demised Premises or
any part thereof. Tenant shall, upon request
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of Landlord, deliver such documents as may be required by this paragraph and
Section 6.01 hereof. All such alterations, changes, additions, improvements,
repairs, materials and labor shall be at Tenant's sole expense and Tenant shall
be solely and wholly responsible to contractors, subcontractors, laborers and
materialmen furnishing labor and material to the Demised Premises and Building
or any part thereof. If, because of any act or omission of Tenant, any
mechanic's or other lien or order for the payment of money shall be filed
against the Demised Premises or the Building or improvements thereon or therein,
or upon the Center, or against Landlord (whether or not such lien or order is
valid or enforceable as such), Tenant shall, at Tenant's own cost and expense,
within ten (10) days after notice of the filing thereof, cause the same to be
canceled and discharged of record, or furnish Landlord with a surety bond issued
by a surety company reasonably satisfactory to Landlord, protecting Landlord
from any loss because of nonpayment of such lien or claim, and Tenant hereby
indemnifies and saves harmless Landlord from and against any and all costs,
expenses, claims, losses or damages, including reasonable counsel fees,
resulting therefrom or by reason thereof.
Section 6.05. Except for the repair obligations of Landlord under Section
6.03 above and the restoration obligations of Landlord under and as set forth in
Articles 8 and 10 hereof, the Tenant shall take good care of the Demised
Premises and, at its cost and expense, keep and maintain in good repair the
interior and exterior of the Demised Premises, including, but not limited to the
air conditioning and heating plant, the plumbing pipes and fixtures belonging
thereto; and shall repair or replace all mechanical and working parts used in
connection with the air conditioning, electrical, heating and plumbing plants,
fixtures and systems; and shall keep the water and sewer pipes and connections;
and shall generally maintain and repair the interior and exterior of the Demised
Premises and shall, at the end of the expiration of the Term (Extension Term,
whichever is applicable) deliver up the Demised Premises in good order and
condition, damages by the elements, ordinary wear and tear excepted. Tenant
covenants and agrees that it shall not cause or permit any waste (other than
reasonable wear and tear), damage or disfigurement to the Demised Premises, or
any overloading of the floors of the Building.
ARTICLE 7. INDEMNITY AND INSURANCE
Section 7.01. (a) To the extent not covered by the insurance required to be
maintained by Landlord hereunder, and subject to the provisions of Article 9
(Waiver of Subrogation), Tenant hereby indemnifies and saves harmless Landlord
from and against any claims and all loss, cost, liability, damage and/or
expense, including, but not limited to reasonable counsel fees, penalties and
fines, incurred in connection with or arising from (i) any default by Tenant in
the observance or performance of any of the provisions, covenants or conditions
of this Lease on Tenant's part to be observed or performed, (ii) the use or
occupancy or manner of use or occupancy of the Demised Premises by Tenant or any
person claiming through or under Tenant, or (iii) any acts, omissions, or
negligence of Tenant or any such person, or any contractor, agent, servant,
employee, visitor or licensee of Tenant, in or about the Demised Premises. If
any action or proceeding shall be brought against Landlord based upon any such
claim, Tenant, upon notice from Landlord, shall cause such action or proceeding
to be defended, at Tenant's expense, by counsel acting for Tenant's insurance
carriers in connection with such defense or by other counsel reasonably
satisfactory to Landlord.
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Section 7.01. (b) To the extent not covered by the insurance required to be
maintained by Tenant hereunder, and subject to the provisions of Article 9
(Waiver of Subrogation), Landlord hereby indemnifies and saves harmless Tenant
from and against any claims and all loss, cost, liability, damage and/or
expense, including, but not limited to reasonable counsel fees, penalties and
fines, incurred in connection with or arising from (i) any default by Landlord
in the observance or performance of any of the provisions, covenants or
conditions of this Lease on Landlord's part to be observed or performed, or (ii)
any acts, omissions, or negligence of Landlord or any such person, or any
contractor, agent, servant, employee, visitor or licensee of Landlord, in or
about the Demised Premises. If any action or proceeding shall be brought against
Tenant based upon any such claim, Landlord, upon notice from Tenant, shall cause
such action or proceeding to be defended, at Landlord's expense, by counsel
acting for Landlord's insurance carriers in connection with such defense or by
other counsel reasonably satisfactory to Tenant.
Section 7.02. Tenant shall, during the Term (including any extension term)
and during any period prior to the commencement of the Term during which Tenant
or anyone acting by or on behalf of Tenant enters the Demised Premises, at
Tenant's own cost and expense, maintain and provide: (a) comprehensive general
liability insurance for the benefit and protection of Landlord and Tenant (said
policy to name Landlord, ground lessor, if any, and any other parties designated
by Landlord, as co-insureds) in an amount not less than $1,000,000 for injuries
or death to any one person, and not less than $3,000,000 for injuries or death
to more than one person in any one accident or occurrence and for damage to
property in an amount not less than $500,000 arising out of any one accident or
occurrence; (b) plate glass insurance covering all plate glass in the Demised
Premises (which may be self-insured by Tenant); and (c) worker's compensation
insurance covering all persons employed in connection with Tenant's use and
occupancy of the Demised Premises or any construction or alteration work
therein. Said policies shall be issued by companies reasonably satisfactory to
Landlord, licensed to do business in the state in which the Demised Premises is
located. Said policies or certificates thereof shall be delivered to Landlord at
the commencement of the Term (or prior thereto in the event of earlier entry by
Tenant upon the Demised Premises), together with proof of payment of premium
therefor, and renewal policies or certificates therefor shall be delivered to
Landlord not less than thirty (30) days prior to the expiration dates thereof.
Said policies and/or certificates shall contain an undertaking by the insurer to
give Landlord not less than thirty (30) days written notice of any cancellation
or change in scope or amount of coverage of said policies.
Section 7.03. (a) Landlord shall, during the Term, maintain and provide
general hazard insurance against loss or damage to the Building by fire,
lightning, including "builder's risk endorsements" during the course of
construction, other risks from time to time included under standard "Extended
Coverage" policies, vandalism and malicious mischief, in amount not less than
100 percent of the full replacement value of the Building and any other Building
or portion thereof covered by such insurance and rent loss insurance covering
all minimum and additional rental payable hereunder. Following the Commencement
Date, Tenant shall pay its proportionate share of the cost of maintaining and
providing such insurance, which proportionate share shall be a fraction the
numerator of which shall be the floor area of the Demised Premises, and the
denominator of which shall be the floor area of the buildings covered by such
insurance.
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Section 7.03. (b) Such payment shall be made to Landlord in monthly
installments on or before the first day of each calendar month, in advance, in
an amount estimated by Landlord. Periodically, Landlord shall furnish Tenant
with a written statement of the actual amount of Tenant's proportionate share of
said insurance costs. If the total amount paid by Tenant under this section for
any period during the Lease Term shall be less than the actual amount due from
Tenant for such period, as shown on such statement, Tenant shall pay to Landlord
the difference between the amount paid by Tenant and the actual amount due, such
deficiency to be paid within ten (10) days after demand therefor by Landlord;
and if the total amount paid by Tenant hereunder for any such period shall
exceed the actual amount due from Tenant for such period, the excess shall
promptly be applied by Landlord to the next accruing monthly installments
thereof or, at Landlord's option, to any other charges payable by Tenant. For
the calendar years in which this Lease commences and terminates, the provisions
of this section shall apply and Tenant's liability for its proportionate share
thereof for such years shall be subject to a pro rata adjustment based on the
number of days of said calendar years during the Lease Term. Prior to or at the
commencement of the Lease Term and from time to time thereafter throughout the
Lease term, Landlord will notify Tenant in writing of Landlord's estimate of
Tenant's monthly installments due hereunder. Tenant's obligations under this
section shall survive the expiration of the Least Term.
Section 7.04. Insurance coverages required of Tenant hereunder shall be
reviewed on an annual basis and Landlord may required that said coverages shall
be updated in accordance with the provisions hereinabove set forth as to amounts
and scope of coverage.
ARTICLE 8. FIRE DAMAGE
Section 8.01. If the Demised Premises shall be partially damaged by fire or
other insured casualty, the damages shall be repaired by and at the expense of
Landlord and the annual minium rental an additional rent until such repairs
shall be made shall abate equitably according to the part of the Demised
Premises which is unusable by Tenant (as determined by Tenant in the exercise of
Tenant's reasonable discretion) or, if by reason thereof, the Demised Premises
are rendered untenantable, said annual minimum rental and additional rent shall
totally abate until such repairs shall be made. Notwithstanding the foregoing,
in the event that more than thirty (30%) percent of the Demised Premises shall
be damaged and there shall be less than five (5) years remaining in the term of
the Lease, then, and in such event, Landlord may terminate this Lease upon
notice to Tenant given within ninety (90) days following such event , and upon
the date specified in such notice, which date shall not be less than thirty (30)
days nor more than sixty (60) days following the giving of said notice , this
Lease shall terminate and Tenant shall vacate and surrender the Demised Premises
to Landlord. Notwithstanding the termination right of Landlord set forth in the
preceding sentence, Tenant shall have the right to nullify such termination by
notifying Landlord that Tenant has elected to exercise its extension option set
forth in Article 39 hereof. Any annual minimum rental prepaid by Tenant beyond
said date shall be promptly refunded to Tenant. Notwithstanding any of the
foregoing provisions of this Article, if Landlord or the holder of any superior
mortgage shall be unable to collect all of the insurance proceeds (including
rent insurance proceeds) applicable to damage or destruction of the Demised
Premises or the Building by fire or other cause, by reason of some action or
inaction on the part of the Tenant or any of its
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employees, agents or contractors, then, without prejudice to any other remedies
which may be available against Tenant, the abatement of Tenant's rents provided
for in this Article shall not be effective to the extent of the uncollected
insurance proceeds.
Section 8.02. If this Lease shall not be terminated as provided above in
this Article, Landlord shall, at its expense, proceed with the restoration of
the Demised Premises, provided, Landlord's obligations hereunder shall not
exceed the scope of the initial building standard construction of the Demised
Premises and further provided, that Landlord's restoration obligations shall be
subject to building and zoning laws then in effect. No penalty shall accrue for
reasonable delay which may arise by reason of adjustment of insurance on the
part of Landlord. If Landlord shall so restore the Demised Premises, Tenant
shall repair, restore and redecorate the Demised Premises and reoccupy and
reopen the Demised Premises, within fifteen (15) days following notice of
restoration, in a manner and to the condition existing prior to the event of
damage, except to the extent that Landlord is obligated above, and Tenant shall
hold in trust the proceeds of all insurance carried by Tenant on its property
for the purpose of such repair and restoration.
Section 8.03. Nothing hereinabove contained with respect to the Tenant's
right to abate the rent under proper conditions shall be construed to limit or
effect the Landlord's right to payment under the rental loss coverage to be
provided pursuant to Section 7.03 hereof.
ARTICLE 9. WAIVER OF SUBROGATION
Section 9.01. Landlord and Tenant each agree to include in their respective
insurance policies applicable to the Demised Premises appropriate clauses
pursuant to which the insurance company or companies (i) waive the right of
subrogation against the other party with respect to losses payable under such
policy or policies and/or (ii) agree that such policy or policies shall not be
invalidated should the insured waive in writing prior to a loss any or all right
of recovery against any party for losses covered by such policy or policies,
Landlord and Tenant each agree that it will not make any claim against or seek
to recover form the other party for any loss ro damage to its property or the
property of others covered or which could be covered by such fire or extended
coverage insurance./ To the extent that Tenant shall be a self- insurer with
respect to Tenant's property, Tenant shall and hereby does waive its right of
recovery, if any, against Landlord, its agents and employees, for loss, damage
or destruction of Tenant's property.
ARTICLE 10. CONDEMNATION
Section 10.01. If the whole of the Demised Premises shall be taken by any
governmental authority under the power of condemnation, eminent domain, or
expropriation, or in the event of a conveyance in lieu thereof, the Term of this
Lease shall cease as of the day possession shall be taken by such governmental
authority. If more than 25 percent of the Demised Premises shall be so taken or
conveyed, either Landlord or Tenant shall have the right to terminate this Lease
upon notice to the other party, effective as of the day possession shall be
taken by such governmental authority, If this Lease is so terminated, annual
minimum rental shall be prorated as of the date that possession must be
surrendered to the condemning authority.
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Section 10.02. If this Lease continues after a partial taking, the annual
minimum rental shall abate equitably as to the part of the Demised Premises
which is taken. If this Lease continues after any such taking or conveyance,
Landlord shall make all necessary repairs and restorations so as to restore the
remainder of the Demised Premises to a complete architectural unit. Landlord's
reconstruction obligations shall not exceed the amount of the award or
compensation for the taking, shall not exceed the scope of the initial building
standard construction of the Demised Premises, and shall be subject to building
and zoning laws then in effect.
Section 10.03. If so much of the Center, Common Areas or Building shall be
so taken or conveyed so that in the reasonable exercise of Landlord's judgment,
the continued operation of the Building for use by its tenants is unfeasible,
then, in such event, Landlord may, by notice to Tenant, delivered not later than
thirty (30) days following the date that possession of the premises taken or
conveyed is delivered to the governmental authority, terminate this Lease, and
rent shall be pro rated as of the date that possession must be surrendered to
the condemning authority.
Section 10.04. Tenant and not Landlord shall be entitled to any portion of
the award made to Tenant for the value of Tenant's removable trade fixtures and
equipment other than equipment necessary for the operation of the Building. All
compensation awarded for the taking of the Building, the fee and the leasehold
shall belong to and be the property of Landlord, and Tenant shall not be
entitled to and hereby waives any damages for the unexpired portion of the Term
of this Lease, or injury to its leasehold interest.
ARTICLE 11. ASSIGNMENT AND SUBLETTING
Section 11.01. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, as the case may
be, expressly covenants that it shall not assign, mortgage or encumber this
agreement, nor sublet or underlet nor suffer or permit the Demised Premises or
any part thereof to be used by others without the prior written consent of
Landlord in each instance. If, with consent of Landlord, this Lease may be
assigned, or the Demised Premises or any part thereof be undelete or occupied by
anybody other than Tenant, Landlord may collect rent from the assignee,
undertenant or occupant and apply the amount collected to the rent herein
reserved, but no such assignment, underletting, occupancy or collecting shall be
deemed to relieve Tenant or any guarantor of this Lease or guarantor of the
obligations of Tenant hereunder of any of its or their obligations hereunder nor
be deemed a wavier of this covenant, or the acceptance of the assignee,
undertenant or occupant as tenant, or a release of Tenant or any guarantor of
this Lease or any guarantor of the obligations of Tenant hereunder from its or
their obligations under the covenants, provisions and conditions hereof; it
being understood and agreed that Tenant and a guarantor of this Lease or any
guarantor of the obligations of Tenant hereunder shall at all times, including
during any extension term, remain obligated as primary obligors under this
Lease. The consent by Landlord to an assignment or underletting shall not in any
wise be construed to relieve Tenant or any other Tenant, assignee, undertenant,
or occupant of the Demised Premises from obtaining the express consent in
writing of Landlord to any further assignment or underletting, and no such
assignment or subletting shall be made to anyone who shall occupy the Demised
Premises for any use other than as permitted by Section 2.01 or which would in
any way violate the applicable ordinances, rules and regulations of applicable
governmental boards or bureaus having or claiming jurisdiction
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thereof, or of the carrier of the fire insurance to be provided under this
Lease. Notwithstanding anything contained in this Lease to the contrary, in the
event that it shall be found by a court of competent jurisdiction that Landlord
was unreasonable in withholding its consent to the assignment of this Lease or
the subletting of all or any portion of the Demised Premises, Tenant's sole
remedy shall be limited to specific performance and Tenant shall not be entitled
to damages or any other affirmative relief or remedy as a result thereof. In the
event of a leveraged buy-out or other take-over of Tenant, Landlord's consent to
an assignment of this Lease or subletting of the Demised Premises to the
successor entity shall not be deemed to have been unreasonably withheld if said
successor entity shall not have a net worth (in the event of a corporate entity,
on a market value basis) as certified to by a certified public accountant at
lease equal to the net worth of Tenant upon the date of execution of this Lease.
Section 11.02. Supplementing the provisions of Section 11.01 of this Lease,
provided Tenant is not in default under any of the terms, covenants, conditions
and provisions of the Lease, Landlord agrees that (a) Landlord's consent shall
not be required with respect to any subletting (s) which do not either
individually, or in the aggregate, exceed sixty (60%) percent of the floor area
of the Demised Premises, and (b) Landlord shall not unreasonably withhold or
delay or condition its consent to any proposed assignment of this Lease, or
subletting(s) which either individually, or in the aggregate, exceed sixty
(60%)percent of the floor area of the Demised Premises; and provided, however,
that notwithstanding any such assignment, transfer or subletting, Tenant
covenants and agrees that it shall remain liable as a primary obligor for the
due performance of all of the covenants, agreements, terms, provisions and
conditions of this Lease on the part of Tenant to be performed or observed. Any
assignment or transfer of this Lease and any subletting of all or a portion of
the Demised Premises shall be subject to Landlord's prior written consent
(except as otherwise provided herein) and shall be made only if, and shall not
be effective until, the assignee or subtenant shall execute, acknowledge and
deliver to Landlord an agreement, in form and substance satisfactory to Landlord
and counsel for Landlord, whereby the assignee shall assume for the benefit of
landlord the obligations and performance of this Lease and agree to be
personally bound by and upon all of the covenants, agreements, terms, provisions
and conditions hereof on the part of Tenant to be performed or observed, and
whereby Tenant covenants and agrees to remain liable as a primary obligor for
the due performance of all of the covenants, agreements, terms, provisions and
conditions of this Lease on the part of Tenant to be performed or observed, or
with respect to a sublease, the subtenant shall acknowledge in writing for the
benefit of the Landlord that the sublease shall be subject to all of the
covenants, agreements, terms provisions and conditions of this Lease, and that
upon receipt of notice from Landlord that the Tenant is in default hereunder,
and during the continuance of any such default, the subtenant agrees to pay all
subrent due under the sublease to Landlord. In the event of any assignment of
this Lease or any subletting of all or any portion of the Demised Premises, the
obligations of Tenant under this Lease as a primary obligor shall be unaffected
and shall remain in full force and effect.
Section 11.03. Notwithstanding anything heretofore contained, in the event
that Tenant desires to assign this Lease or sublet all or a portion of the
Demised Premises, Tenant shall first notify Landlord in writing of its
intention, and such notice shall state the name of the proposed assignee or
subtenant, together with its full address and a description of its proposed use
(but nothing
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contained herein shall permit, nor obligate Landlord to permit, a use other than
the use permitted by Section 2.01 of this Lease, it being understood that nay
change in use shall be subject to Landlord's consent, which Tenant agrees may,
notwithstanding anything contained herein to the contrary, be unreasonably
withheld). Tenant shall include therewith such financial information as may be
available concerning the proposed assignee or subtenant, including without
limitation current updated financial statements (which financial information
Tenant, and/or the proposed assignee or subtenant shall supplement on demand if
required by landlord).
Section 11.04. Tenant hereby covenants and agrees to tender to Landlord
upon receipt fifty (50%) percent of any annual minimum rent or additional rent
or lump sum or installment payment or sum which Tenant shall receive from or on
behalf of any assignee(s) or subtenant(s) or any occupant by, through or under
Tenant, which is in excess of the annual minimum rent or additional rent payable
by Tenant in accordance with the provisions of this Lease (or in the event of a
subletting of less than the whole of the Demised Premises, the annual minimum
rent or additional rent allocable to that portion of the Demised Premises
affected by such sublease) less the actual bona-fide expenses paid by Tenant in
connection with such subletting or assignment (e.g. cost of alterations, and
brokerage, legal and architectural and engineering fees.) At the time of
submission of the proposed assignment or sublease to Landlord, Tenant shall
certify to landlord in writing whether or not the assignee or subtenant has
agreed to pay any such monies to Tenant or any designee of Tenant other than as
specified and set forth in such instruments, and if so Tenant shall certify the
amounts and time of payment thereof, in reasonable detail.
Section 11.05. In the event that any assignee of Tenant (which shall be
deemed to include any subsequent assignee(s) of Tenant's initial assignee) shall
become insolvent or shall be adjudicated a bankrupt, or shall file a petition
for reorganization, arrangement or similar relief under any present or future
provisions of the Bankruptcy Act, or if such a petition filed by creditors of
any such assignee shall be approved by a court, or if any such assignee shall
seek or if there shall be sought against any such assignee a judicial
readjustment of the rights of its creditors under any present or future Federal,
State or local law, or if a receiver of all or part of its property and assets
is appointed by any Court, and in any such proceeding the Lease shall be
terminated or rejected, or the obligations of any such assignee thereunder shall
be modified, Tenant (which for the purposes hereof shall be deemed to mean the
original tenant named hereunder and all subsequent assignee(s) other than the
assignee that is subject to the bankruptcy or insolvency provisions referenced
above) agrees that it will immediately pay the Landlord an amount equal to all
rent and additional rent accrued to the date of such termination, rejection or
modification. Tenant shall also pay to Landlord or its successors or assigns, an
amount equal to the rent and additional rent which would have been payable under
the Lease for the balance of the term thereof or the balance of any extension
and/or renewal period then in effect, as the same would have become due and
payable in accordance with the provisions of the Lease without regard to any
such termination, rejection or modification. Tenant's obligations to make
payment in accordance with the terms hereof, shall not be impaired, modified,
changed, released or limited in any manner whatsoever by any impairment,
modification, change, release or limitation of the liability of any such
assignee or its estate in bankruptcy resulting from the
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operation of any present or future provisions of the Bankruptcy Act or other
statue, or from the decision of any court.
Section 11.06. Notwithstanding anything to the contrary contained in this
Article, Tenant may assign this Lease or sublet any portion of the Demised
Premises at any time during the term of this lease, without obtaining Landlord's
consent, upon Tenant giving Landlord prior written notice, to (a) another
corporation succeeding to substantially all of the assets of Tenant as a result
of a consolidation or merger or to a corporation to which all or substantially
all of the assets of Tenant have been sold; (b) a wholly-owned subsidiary
corporation; or (c) an affiliated corporation (defined as any corporation whose
majority of shares are owned or controlled by the same persons owning or
controlling the majority of shares of Tenant); provided: (i) documentation in
compliance with Section 11.02 above shall be delivered to Landlord prior to the
effective date of such assignment or sublease, and (ii) Tenant shall remain
primarily liable under all terms and conditions of this Lease (unless Tenant's
corporate existence ends as a matter of law pursuant to such consolidation or
merger).
ARTICLE 12. COMMON AREA MAINTENANCE
Section 12.01. As used in this lease, the term "Common Area Operating
Costs" shall include the total cost and expense incurred by Landlord in
operating, lighting, striping, maintaining, cleaning, landscaping, repairing
(including replacement and resurfacing) managing, signing, equipping and
insuring the Common Areas within Lot No. 3/1 plus ten (10%) percent of the
foregoing costs to cover Landlord's administrative and overhead costs. Such
costs and expenses shall include without limitation (including appropriate
reserves): cleaning; fire and police protection and general security (Landlord
not incurring or assuming any obligation to provide such protection or security
or any liability for the failure of the same); repairing and replacing paving
(provided, however, that notwithstanding the foregoing, in no event shall costs
associated with re-surfacing of the Common Areas be included in Common Area
Operating Costs for the first five (5) years of the term hereof, it being
understood that the foregoing is not intended to exclude routine maintenance of
the paved areas, e.g. patching, pothole refilling, striping, etc); keeping the
Common Areas supervised, drained, reasonably free of snow, ice, rubbish and
other obstructions, and in a neat, clean, orderly and sanitary condition; the
charges for rubbish containers and removal (except that at Landlord's option,
Tenant shall be directly responsible for contracting for an for providing
(subject to Landlord's approval of the provisions and conditions of the
agreement therefor) rubbish containers and removal); the maintenance of any and
all fire protection systems servicing Lot No. 3/1; the cost of public liability
insurance; keeping the Common Areas suitably lighted; maintaining signs (other
than Tenant's signs), markers, painted lines delineating parking spaces, and
other means and methods of pedestrian and vehicular traffic control;
constructing, maintaining and repairing of onsite and offsite traffic controls;
maintaining adequate roadways, entrances and exits; maintaining any plants and
landscaped areas; Lot No. 3/1 management fees incurred by Landlord, including
management fees payable to parties or entities owned or controlled by Landlord
or any of them (provided, however in no event shall Landlord include in Common
Area Operating Costs both the ten (10%) percent administrative and overhead fee
referenced above and management fees); maintenance and repair of all utilities,
utility conduits and storm drainage systems situated within or servicing Lot
3/1; fees for required licenses and permits; and depreciation of machinery and
equipment used in the operation and maintenance of the Common Areas and personal
property
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taxes and other charges incurred in connection with such equipment. The term
"Common Areas" shall be defined as all paved areas, driveways, truckways,
walkways, and landscaped and planted areas within Lot No. 3/1. Landlord shall
maintain, light, clean and repair (including snow removal) the Common Areas so
that such Common Areas may be used for their intended purposes, and in order to
enable Landlord to perform its obligations as aforesaid, Landlord may incur such
Common Area Operating Costs as Landlord, in its sole discretion, may determine.
Section 12.02. During the initial term of this Lease and during any
extension term hereof, Tenant shall pay Landlord Tenant's proportionate share of
Common Area Operating Costs incurred or expended by Landlord as aforesaid. Such
payment shall be made to Landlord in monthly installments on or before the first
day of each calendar month, in advance, in an amount estimated by Landlord.
Following the expiration of each calendar year during the Lease Term hereof,
Landlord shall furnish Tenant with a reasonably detailed written statement of
the actual amount of Tenant's proportionate share of the Common Area Operating
Costs for such year. Upon request by Tenant, Landlord will provide Tenant with
reasonably detailed documentation evidencing the payment of Common Area
Operating Costs incurred by Landlord. If the total amount paid by Tenant under
this section for any calendar year during the Lease term shall be less than the
actual amount due from Tenant for such year, as shown on such statement, Tenant
shall pay to Landlord the difference between the amount paid by Tenant and the
actual amount due, such deficiency to be paid within ten (10) days after demand
therefor by Landlord; and if the total amount paid by Tenant hereunder for any
such calendar year shall exceed such actual amount due from Tenant for such
calendar year, such excess shall promptly be applied by Landlord to the next
accruing monthly installments of Tenant's proportionate share of Common Area
Operating Costs or, at Landlord's option, to any other charges payable by
Tenant. Tenant shall have the right, upon reasonable prior notice and at
mutually acceptable times (not more than once per year) to conduct an audit of
Landlord's books and records with respect to Common Area Operating Costs billed
to Tenant hereunder. For the calendar years in which this Lease commences and
terminates, the provisions of this section shall apply, and Tenant's liability
for its proportionate share of any Common Area Operating Costs for such years
shall be subject to a pro rata adjustment based on the number of days of said
calendar years during the Lease term. Prior to or at the commencement of the
Lease term and from time to time thereafter throughout the Lease term, Landlord
will notify Tenant in writing of Landlord's estimate of Tenant's monthly
installments due hereunder, Landlord shall have the right to make special
assessments from time to time for extraordinary Common Area Operating Costs and
Tenant shall pay any such special assessment within ten (10) days following
Landlord's billing therefor. Extraordinary Common Area Operating Costs shall
include, without limitation, any charge which would otherwise constitute a
common Area Operating Expense and not anticipated by Landlord in determining
Landlord's estimate of Tenant's proportion of shares of Common Area Operating
Costs for the year in question and any charges, costs and expenses incurred by
Landlord which might cause the amounts paid by Tenant pursuant to Landlord's
estimate of Tenant's proportionate share of Common Area Operating Costs for the
year in question to be less than the amount actually due from Tenant for such
year pursuant to this Section 12.02. Tenant's obligations under this section
shall survive the expiration of the Lease term. Tenant's proportionate share of
Common Area Operating Costs shall be a fraction, having as its numerator, the
number of square fee of floor area within the Demised Premises and as its
denominator, the total number of square
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feet of floor area of all buildings within Lot No. 3/1 or, at Landlord's option,
the portion thereof affected by such cost, including the Demised Premises.
Notwithstanding the foregoing provisions of this Article, in the event the
obligations of Tenant under this Article 12 are specifically identifiable
separate charges reflecting to Tenant and/or the Demised Premises, then, and in
such event, the obligations of Tenant under this Article 12 may, at the
Landlord's option be measured and payable in accordance with such separate and
specifically identifiable charge and not by the provisions of the preceding
sentence. Landlord shall deliver copies of any invoice with respect to any
expense included within Common Area Operating Expenses on request therefor
provided such request is made within thirty (30) days of the date Tenant
receives a statement which includes the expense in question.
Section 12.03. Tenant, its concessionaires, officers, employees, and agents
may use the Common Areas, subject to such reasonable rules and regulations as
Landlord may from time to time impose, including the designation of specific
areas in which vehicles owned or operated by Tenant, its concessionaires,
officers, employees and agents must be parked. Tenant shall abide by such rules
and regulations and cause its concessionaires, officers, employees, agents,
customers and invitees to conform thereto. Landlord may, at any time, close
temporarily any Common Areas to make repairs or changes therein or to effect
construction repairs or changes within Lot No. 3/1, and Landlord may do such
other acts in and to the Common Areas as in its reasonable judgment may be
desirable to improve the convenience thereof.
Section 12.04. Notwithstanding anything to the contrary herein contained,
Landlord hereby reserves the right (and Tenant hereby consents thereto) to
construct or permit the construction, use and maintenance within the Common
Areas of Lot No. 3/1 including without limitation, the parking areas, of various
commercial type buildings, structures, and appurtenances, and equipment
incidental thereto, except that the foregoing shall not be permitted in Tenant's
Parking Area.
Section 12.05 Notwithstanding anything to the contrary set forth herein, if
Landlord defaults in its obligations to maintain the Common Areas within the
Center as required pursuant to this Article 12, and such default continues after
not less than thirty (30) days prior written notice to Landlord specifying the
nature of such default, and which notice shall also specifically state that
Tenant shall have the right to cure such default, Tenant may undertake to remedy
the then existing deficiencies and all necessary and reasonable out of pocket
costs and expenses so incurred by Tenant may be deducted by it from the next
installments of annual minimum rent, additional rent and/or other charges due to
Landlord hereunder. In addition, Tenant shall have the right, but shall not be
obligated to, notify Landlord that Tenant shall take over the responsibility of
maintenance for that portion of the Common Areas designated as "Tenant's Parking
Area" on Exhibit "A", and in such event Tenant shall be responsible for
providing all maintenance for Tenant's Parking Area, in accordance with the
requirements of Article 12 in essentially the same manner as was previously
performed by Landlord. Notwithstanding anything to the contrary hereinabove set
forth in this Section 12.05, it is agreed that Tenant's right to perform all
maintenance for the Tenant's Parking Area shall be dependent upon Tenant's
prompt and satisfactory performance of same. In the event that Landlord
determines, in Landlord's reasonable judgment, that Tenant is not promptly and
satisfactorily performing such maintenance, Landlord shall provide notice of
same to Tenant, which notice shall set forth Landlord's specific objections to
the manner of Tenant's
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performance of such exterior maintenance. Tenant shall have thirty (30) days
following such notice (or in emergency situations such shorter time periods as
Landlord may designate in its notice to the Tenant) within which to remedy the
objections specified in Landlord's notice, failing which Landlord can elect to
take over the performance of same upon thirty (30) days notice to Tenant.
ARTICLE 13. UTILITIES
Section 13.01. Tenant shall pay, as and when they shall be due and payable,
all water charges, taxes, water rates and/or meter charges, sprinkler charges
(standby or otherwise), sewer taxes, sewer charges, sewer fees, and sewer rental
taxes and charges for utilities, including, without limitation, the charges for
gas, electricity, and other utilities furnished to Tenant and consumed in the
Demised Premises. Tenant shall heat the Demised Premises whenever the weather
shall require. If Landlord, or any property of Landlord, shall be held
responsible for any expense covered by this Article, Tenant shall pay Landlord
the amount thereof within five (5) days following written request. Landlord
shall not be responsible to Tenant for any failure or interruption of any such
services, irrespective of the cause thereof.
ARTICLE 14. TAXES
Section 14.01. (a) During the Term of this Lease, Tenant shall pay, as
additional rent, all taxes, duties, assessments and charges commonly and
generally referred to as "real estate taxes" and assessment, whether general or
special, of every kind and nature whatsoever which have been or which shall
during said Term or any renewal thereof, be levied, assessed, or otherwise
imposed upon the land within the Demised Premises, or any part thereof, and upon
the buildings and improvements which may be thereon or which may hereafter
during the said Term, or any renewal thereof, be erected or constructed thereon.
The term "real estate taxes" for purposes of this Lease shall exclude income,
franchise, estate or inheritance taxes levied against Landlord or taxes based
upon rental receipts, but shall include any taxes levied in lieu of or as a
substitute for real estate taxes. In the event any assessment against the Center
shall be payable in a lump sum or on an installment basis, Landlord shall elect
to pay any such assessment over the longest permissible period, and there shall
be included in real estate taxes only those installments which shall become due
and payable during the Lease Term. Any such installments due and payable in the
years in which this Lease commences and terminates shall be prorated
proportionately. Tenant shall pay to Landlord, as additional rent, at the time
and in the manner set forth in Section 14.01 (b), Tenant's proportionate share
of such taxes, which proportionate share shall be based upon the methods of
calculation set forth in Sections 14.02 and 14.03 hereof. Tenant understands
that the Demised Premises are part of a larger tract and that under the present
status of the law of New Jersey, the improvements within the Center and the land
within the Demised Premises may not receive a separate assessment attributable
solely thereto.
Section 14.01. (b) All amounts payable by Tenant pursuant to this Article
shall be paid to Landlord in monthly installments on or before the first day of
each calendar month, in advance, in an amount estimated by Landlord; provided,
that in the event Landlord is required under any mortgage encumbering the Center
to escrow real estate taxes, Landlord may, but shall not be obligated to, use
the amount required to be so escrowed as a basis for its
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estimate of the monthly installments due from Tenant hereunder. As soon as shall
be reasonably practicable following each calendar year during the Lease Term,
Landlord shall furnish Tenant with a written statement of the actual amount of
Tenant's share of the taxes for such year. If the total amount paid by Tenant
under this section for any calendar year during the Lease Term shall be less
than the actual amount due from Tenant for such year, as shown on such
statement, Tenant shall pay to Landlord the difference between the amount paid
by Tenant and the actual amount due, such deficiency to be paid within ten (10)
days after demand therefor by Landlord; and if the total amount paid by Tenant
hereunder for any such calendar year shall exceed such actual amount due from
Tenant for such calendar year, such excess shall be applied by Landlord to the
next accruing monthly installments of taxes due from Tenant or, at Landlord's
option, to any other charges payable by Tenant. For the calendar years in which
this Lease commences and terminates the provisions of this Section shall apply,
and Tenant's liability for its share of taxes for such years shall be subject to
a pro rata adjustment based on the number of days of said calendar years during
the Lease Term. Prior to or at the commencement of the Lease Term and from time
to time thereafter throughout the Lease Term, Landlord may notify Tenant in
writing of Landlord's estimate of Tenant's monthly installments due hereunder.
Tenant's obligations under this Section and Landlord's obligations to refund
overpayment hereunder to Tenant shall survive the expiration of the Lease Term.
Section 14.02. Tenant shall pay its proportionate share of the taxes upon
the land within the Center based upon the following formula: The taxes upon the
land within the Center (or the land taxes applicable to the parcel within which
the Demised Premises is included) (inclusive of the Demised Premises) shall be
multiplied by a fraction having as its numerator the floor area of the Demised
Premises and as its denominator the floor area of buildings in the Center (or
upon the parcel within which the Demised Premises if included) (inclusive of the
Demised Premises), but in no event shall Tenant's proportionate share of the
entire taxes upon the land in the Center exceed 23.1%.
Section 14.03. If the improvements (or any portion thereof) within the
Demised Premises or the building or buildings (or part thereof) of which the
Demised Premises is a part shall receive a separate assessment, the taxes
payable by Tenant under this Lease for such improvements shall be based thereon.
Such improvements shall be deemed to be separately assessed if the same is
separately assessed according to the real estate tax bill, the assessor's
records or written certification by the assessor (any such separate assessment
is hereinafter referred to as the "Tenant Assessment") In the event no such
separate assessment is obtained, Tenant shall pay its proportionate share of the
taxes attributable to the improvements within the Center, which proportionate
share shall be a fraction having as its numerator the floor area of the Demised
Premises and as its denominator the floor area of all buildings (or the relevant
portion thereof) included within the assessment of which the Demised Premises is
a part (inclusive of the Demised Premises), plus Tenant shall pay one hundred
(100%) percent of the taxes payable upon any increased assessment of the Center
attributable to improvements constructed at the Demised Premises by Tenant.
Section 14.04. Tenant shall be liable for all taxes on or against property
and trade fixtures and equipment placed by Tenant in or about the Demised
Premises, or taxes on Tenant's right to occupy the Demised Premises. If any such
taxes are levied against the Landlord or Landlord's property, and if Landlord
pays same, or
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if the assessed valuation of Landlord's property is increased by the inclusion
therein of a value placed upon such property, and if the Landlord pays the taxes
based on such increased assessment, Tenant, upon demand, shall repay to Landlord
the taxes so paid by Landlord or the portion of such taxes resulting from such
increase in assessment.
Section 14.05. Tenant may, upon not less than thirty (30) days' prior
written notice to Landlord, request if Landlord intends to prosecute an action
to contest the amount of real estate taxes separately assessed against the
Building (such contest hereinafter referred to as the "Tax Appeal"). Such notice
shall specifically state that in the event Landlord shall not respond thereto
within thirty (30) days that Tenant shall have the right to prosecute the Tax
Appeal, in Landlord's or Tenant's name. In the event that Landlord advises
Tenant that Landlord is not prosecuting the Tax Appeal, Tenant shall have the
right to prosecute the Tax Appeal. Landlord agrees to cooperate with Tenant in
prosecuting the Tax Appeal. Tenant agrees that any compromise, settlement or
discharge of any such proceedings shall be subject to Landlord's prior written
approval, not to be unreasonably withheld or delayed, and conditioned upon and
subject to the option of Landlord to take over such proceedings prior to the
settlement or discharge thereof, provided, however, that if Landlord should take
over such proceedings or shall itself institute any such proceedings, Landlord
shall diligently prosecute the same and shall not compromise, settle or
discharge such proceedings without Tenant's prior written approval, not to be
unreasonably withheld or delayed. If Landlord receives a refund for any year for
which a tax payment shall have been made by Tenant, then Landlord, after paying
all reasonable costs and expenses incurred in connection with the attainment of
such refund, shall repay to Tenant, within thirty (30) days after such refund is
received by or credited to Landlord, an amount equal to Tenant's Proportionate
Share of the refund and of any interest received thereon. In the event that for
any year Tenant contests the Taxes and a refund is issued for such year, then
such refund shall first be used to reimburse Tenant for all reasonable costs and
expenses incurred by Tenant in connection with the attainment of such refund,
then in payment of Tenant's Proportionate Share of the refund, which amount
shall be retained by Tenant, and then the balance of the refund shall be paid to
Landlord. In addition, Tenant agrees to cooperate with other tenants of the
Center who may have the right to bring such proceedings, provided, however, that
Landlord agrees to impose a like obligation of all other future tenants of the
Center who have the right to bring such proceedings.
ARTICLE 15. REMEDIES OF LANDLORD
Section 15.01. (a) If Tenant shall default in the payment of the annual
minimum rental reserved herein, or in the payment of any item of additional rent
or other monies due hereunder, or any part of same, and any such default shall
continue for more than ten (10) days after written notice of such default; or
Section 15.01. (b) If Tenant shall default in the observance of any of the
provisions, covenants and conditions of this Lease (other than a default covered
by subsection (a) above and other than Sections which provide a specific period
or date for performance), and such default shall continue for more than thirty
(30) days after written notice of such default, or for such other period
provided in the relevant Section hereof, provided, however, in the event such
default cannot be cured within such thirty (30)
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day period or such other period provided in the relevant Section hereof, then
Tenant shall not be in default so long as Tenant commences the cure thereof
within such thirty (30) day period or such other period provided in the relevant
Section hereof and diligently prosecutes the cure of such default to completion
at all times; or
Section 15.01. (c) If the Demised Premises shall be abandoned, or if Tenant
shall sublet the Demised Premises or assign this Lease, except as herein
provided, or if Tenant shall be in default under any other obligations of Tenant
to Landlord of any nature whatsoever, or if Tenant shall be in default under any
other lease of space in either any building located on Lot 3/1 or in the center
commonly known as Shrewsbury Executive Center in which Tenant holds the interest
of tenant thereunder; or
Section 15.01. (d) If Tenant or any guarantor of Tenant's obligations
hereunder shall make an assignment for the benefit of creditors, or if any such
party shall file or have filed against it a petition in bankruptcy, or be
adjudicated a bankrupt by any court and such adjudication shall not be vacated
within thirty (30) days, or if Tenant or any guarantor of Tenant's obligations
hereunder takes the benefit of any insolvency act, or if Tenant or any guarantor
of Tenant's obligations hereunder be dissolved voluntarily or involuntarily or
have a receiver of its property appointed in any proceedings other than
bankruptcy proceedings and such appointment shall not be vacated within thirty
(30) days after it has been made, or if any levy, sale or execution of any kind
is made upon or of any property of Tenant in the Demised Premises; then, upon
the happening of any one or more of the defaults or events specified above, at
the option of Landlord: (1) this Lease and the Term hereof shall wholly cease
and terminate, with the same force and effect as though such termination was the
date of the expiration of the Term of this Lease, and thereupon, or at any time
thereafter, Landlord may re-enter said premises either by force, or otherwise,
and have possession of the same and/or may recover possession thereof by summary
proceeding, or otherwise (but Tenant shall remain liable to Landlord as
hereinafter provided); or (2) Landlord may, without further notice, exercise any
remedy available at law or in equity.
Section 15.02. In case of any default, event, re-entry, expiration,
termination and/or dispossession by summary proceedings, or otherwise, Tenant
shall, nevertheless, remain and continue liable to Landlord in a sum equal to
all annual minimum rental and additional rent herein reserved for the balance of
the Term herein demised as the same may become due and payable pursuant to the
provisions of this Lease. Landlord may repair or alter the Demised Premises in
such manner as to Landlord may deem necessary or advisable, and/or let or re-let
the Demised Premises and any and all parts thereof for the whole or any part of
the remainder of the original Term hereof or for a longer period, in Landlord's
name, or as the agent of Tenant, and, out of any rent so collected or received,
Landlord shall, first, pay to itself, the expense and cost or retaking,
repossessing, repairing and/or altering the Demised Premises, and the expense of
removing all persons and property therefrom, second, pay to itself, any cost or
expense sustained in securing any new tenant or tenants, and third, pay to
itself, any balance remaining on account of the liability of Tenant to Landlord
for the sum equal to the annual minimum rental and additional rent reserved
herein and unpaid by Tenant for the remainder of the Term herein demised. Any
entry or re-entry by Landlord, whether had or taken under summary proceedings or
otherwise, shall not absolve or discharge Tenant from liability
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hereunder. Landlord shall use commercially reasonable efforts to re-let the
Deposed Premises as hereinabove provided.
Section 15.03. Should any rent so collected by Landlord after the payment
aforesaid by insufficient fully to pay to Landlord a sum equal to all annual
minimum rental and additional rent herein reserved, the balance or deficiency
shall be paid by Tenant on the rent days herein specified; that is, upon each of
such rent days Tenant shall pay to Landlord the amount of the deficiency then
existing and Tenant shall be and remain liable for any such deficiency, and the
right of Landlord to recover from Tenant the amount thereof, or a sum equal to
the amount of all annual minimum rental and additional rent herein reserved if
there shall be no reletting, shall survive the issuance of any dispossessory
warrant or other termination thereof.
Section 15.04. Suit or suits for the recovery of such deficiency or damage,
or for a sum equal to any installment or installments of annual minimum rental
or additional rent hereunder, may be brought by Landlord from time to time at
Landlord's election, and nothing herein contained shall be deemed to require
Landlord to await the date on which this Lease or the Term hereof would have
expired by limitation had there been no such default by Tenant or no such
termination or cancellation.
Section 15.05. Tenant hereby expressly waives service of any notice of
intention to re-enter subsequent to the giving of the aforesaid notices under
Section 15.01 above. Tenant hereby expressly waives any and all right to recover
or regain possession of the Demised Premises or to reinstate or to redeem this
tenancy or this Lease as is permitted or provided by or under any statute, law,
or decision now or hereafter in force and effect.
Section 15.06. Tenant shall reimburse Landlord, within five (5) days
following written demand, for any counsel fees or collection charges incurred or
expended by Landlord by reason of Tenant's default in the performance of any
provision, covenant, or condition of this Lease and any such amounts, at the
option of Landlord, may be recovered in the same action or proceeding forming
the basis of the default or in another action or proceeding.
Section 15.07. Notwithstanding any other remedy provided for hereunder and
without the requirement of notice, except as provided in this Section, if Tenant
shall not comply with any of its obligations hereunder, Landlord shall have the
right, at Landlord's sole option, at anytime in the event of an emergency or
otherwise after three (3) days notice to Tenant, to cure such breach at Tenant's
expense. Tenant shall reimburse Landlord, within three (3) days following
demand, as additional rent, for all costs and expenses incurred by Landlord in
curing such breach, together with interest computed thereon at the rate of
eighteen (18%) percent per annum or the maximum rate permitted by law, whichever
shall be the higher.
Section 15.08. Notwithstanding anything to the contrary contained in this
Lease, if Tenant fails to pay any rent, additional rent or any other money item
due hereunder within thirty (30) days after same are due and payable, Landlord
shall have the right (in addition to any other rights or remedies of Landlord
and without the requirement of any notice) to commence immediate legal
proceedings or action for dispossession and damages or Landlord may avail itself
of any other remedies at law or in equity and include in such action or
proceeding any amounts then due and payable as of the date of the commencement
of such action or proceeding. Notwithstanding anything contained in this Lease,
if Tenant fails
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to pay any monetary items due hereunder within ten (10) days following the date
on which the same are due and payable, a late charge of four ($.04) cents for
each ONE ($1.00) DOLLAR so overdue shall become immediately due and payable to
the Landlord as damages for failure to make prompt payment and the same shall be
considered as additional rent hereunder payable together with the next
installment of monthly rent. In the event that Tenant defaults in the payment of
rent more than once in any twelve (12) month period, the aforesaid late charge
shall be due and payable upon the second day of the month if payment has not
been made on or before the first of said month. In addition, all such unpaid
monetary items shall bear interest at a rate equal to prime rate as published in
The Wall Street Journal plus five (5%) percent from the date such monies were
due until the date on which Landlord shall receive payment.
Section 15.09. The rights and remedies whether herein or elsewhere provided
in this Lease shall be cumulative and the exercise of any one right or remedy
shall not preclude the exercise of or act as a waiver of any other right or
remedy of Landlord hereunder, or which may be existing at law, or in equity, by
statute or otherwise.
Section 15.10. Tenant covenants and agrees to give any mortgagee and/or
ground lessor of the Center or any portion thereof notice of any default by
Landlord under this Lease and such mortgagee and/or ground lessor shall be
afforded the right (but shall not have the obligation) to cure any default by
Landlord within such reasonably period of time as may be required by such
mortgagee and/or ground lessor.
ARTICLE 16. WAIVER OF TRIAL BY JURY
Section 16.01. It is mutually agreed by and between Landlord, Tenant and
any guarantor of the obligations of Tenant hereunder, that the respective
parties hereto shall and they hereby do waive trial by jury in any action,
proceeding, or counterclaim brought by the parties hereto on any matters
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Demised
Premises, and/or any claim of injury or damage, and any emergency, summary or
statutory remedy. If Landlord commences any summary proceeding, or any other
action for collection of rent or additional rent hereunder, Tenant shall not
interpose any counterclaim or cross claim of any nature in any such proceeding
or action, nor shall Tenant mover to consolidate any such claim with any claim
being maintained by Landlord.
ARTICLE 17. ACCESS TO PREMISES
Section 17.01. Landlord and its designees shall have the right to enter
upon the Demises Premises at all times to inspect and examine same, to make
repairs, additions, alterations, or improvements to the Demised Premises, the
Building within which the Demised Premises are located or any property owned or
controlled by Landlord within such Building. Landlord's rights of entry as
aforesaid, and the taking of all property into and upon the Demised Premises
that may be required in connection therewith, shall not be considered an
eviction of Tenant, in whole or in part, constructive or otherwise, and Landlord
shall not be liable to Tenant for any expense, damage, or loss or interruption
of the business of Tenant by reason thereof, and the rent reserved hereunder
shall continue without abatement during the period of any such entry and while
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such repairs, alterations, improvements or additions are being made. Landlord or
Landlord's designees shall have the right to enter the Demised Premises at all
times to show the Demised Premises to prospective purchasers, mortgagees or
lessees of the Demised Premises or building of which the Demised Premises form a
part. During the six month period prior to the expiration of the Term hereof,
Landlord may exhibit the Demised Premises to prospective tenants and Landlord
may place within the Common Areas notices reading, "To Let" or "For Rent", which
notices Tenant shall allow to be posted conspicuously without molestation.
ARTICLE 18. NO WAIVER
Section 18.01. No delay or omission of the exercise of any right by either
party hereto shall impair any such right or shall be construed as a waiver of
any default or as acquiescence therein. One or more waivers of any provision,
covenant, or condition of this Lease by either party shall not be construed by
the other party as a waiver of a subsequent breach of any other or the same
provisions, covenant, or condition. No requirements whatsoever of this Lease
shall be deemed waived or varied because of either party's failure or delay in
taking advantage of any default, and Landlord's acceptance of any payment from
Tenant with actual or constructive knowledge of any default shall not constitute
a waiver of Landlord's rights in respect to such default, nor of any subsequent
or continued breach of any such default or any other requirement of this Lease.
Section 18.02. No payment by Tenant or receipt by Landlord of a lesser
amount than the rent or other sum stipulated to be paid or reserved shall be
deemed to be other than on account of the earliest stipulated or reserved sum
payable, nor shall any such payment and acceptance by Landlord be deemed an
accord and satisfaction or a modification or waiver of any rights or obligations
or liabilities hereunder notwithstanding any statement, written or oral,
accompanying such payment, or by way of endorsement or otherwise; and Landlord
may accept any such payment whether by check, draft or other means whatsoever
without prejudice to Landlord's right to recover the balance owing, or to pursue
any other remedy in this Lease or at law or in equity provided. Landlord may, at
Landlord's option, accept payment of rent or any other charge hereunder from any
person or entity other than the Tenant named herein and the same shall not
constitute a recognition by Landlord of, or vest in said person or entity, any
rights hereunder.
ARTICLE 19. REQUIREMENTS OF LAW;
INSURANCE REQUIREMENTS
Section 19.01. In Tenant's performance of its rights and obligations under
this Lease, including without limitation, any preterm right, obligation or entry
into the Demised Premises, Tenant covenants and agrees to comply with all laws,
orders, and regulations of federal, state, city, county, governmental and
municipal authorities, fire insurance rating organizations and fire insurance
underwriters, and insurance companies issuing coverage respecting the Demised
Premises and Tenant shall make all alterations or installations necessary to
comply therewith which may be applicable to the Demised Premises (which shall
not be deemed to include structural alterations or installations unless required
by reason of any act or conduct on the part of the Tenant, or by reason of the
character of its occupancy of the Demised Premises). Tenant shall secure all
permits or approvals necessary to operate its business within the Demised
Premises and shall only
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operate its business within the Demised Premises in compliance with all laws,
orders and regulations of federal, state, city and county, governmental and
municipal authorities, fire insurance rating organizations and fire insurance
underwriters, and insurance companies issuing coverage respecting the Demised
Premises.
Section 19.02. Tenant shall not use or occupy the Demised Premises or do or
permit anything to be done therein in any manner which shall make it impossible
for Landlord and/or Tenant to obtain at standard rates any insurance required or
desired, or which will invalidate or increase the cost to Landlord of any
insurance.
Section 19.03. If, by reason of Tenant's failure to comply with the
provisions of Section 19.01 above, or if, by reason of any act or failure to act
of Tenant, its agents, servants, contractors, employees or licensees, or if, by
reason of the use of the Demised Premises, the fire insurance rates applicable
to the Demised Premises, or of the Building or any other premises in said
Building, shall be increased above the rate applicable to the occupancy
permitted hereunder, Tenant shall pay to Landlord, within three (3) days
following demand, the amount of additional premium for fire insurance payable by
reason thereof.
Section 19.04. No abatement, diminution, or reduction in annual minimum
rental or any sums constituting additional rent shall be claimed by or allowed
to Tenant for any inconvenience or interruption, cessation or loss of business
caused directly or indirectly, by any present or future laws, ordinances, rules
or regulations, requirements or orders of federal, state, county, township or
municipal governments or any other lawful authority whatsoever, or by
priorities, rationing, or curtailment of labor or materials, or by war, civil
commotion, strikes or riots, or any manner or thing resulting therefrom, or by
any other cause or causes beyond the control of Landlord, nor shall this Lease
be affected by any such causes.
ARTICLE 20. SIGNS
Section 20.01. Tenant shall not place, install or maintain any sign upon or
outside the Demised Premises or in the Center until approved by Landlord, nor
shall Tenant place, install or maintain any sign within one-half mile of the
Center; nor shall Tenant place, install or maintain any awning, canopy, aerial,
antenna or the like in or upon the Demised Premises, the Building or the Center.
Any sign must conform to all applicable rules, regulations, codes and directives
of governmental agencies having jurisdiction, and Tenant shall, at its expense,
apply for and obtain all permits necessary in connection therewith. If Landlord
shall submit to Tenant a general sign criteria or specification, Tenant shall
comply therewith. Tenant shall be solely responsible for all maintenance and
repairs respecting its signs. Notwithstanding the foregoing, Tenant shall be
permitted to place a panel on the Center identification sign, and subject to
local code, Tenant may place a sign on the lawn in front of the Building,
subject to Landlord's approval of the size and design thereof, which approval
shall not be unreasonably withheld or delayed.
ARTICLE 21. TENANT'S ADDITIONAL COVENANTS
Section 21.01. Tenant covenants and agrees for itself, its officers,
employees, contractors, agents, servants, licenses, invitees, subtenants,
concessionaires, and all others doing
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business with Tenant (hereinafter for the purposes of this Article, collectively
referred to as "Tenant") that:
(a) Deleted prior to execution.
(b) Tenant shall not encumber or obstruct the Center or sidewalks in
and about the Demised Premises;
(c) Tenant shall not display, advertise or sell its products or goods
in the Common Areas of the Center or sidewalk in and about the Demised Premises;
(d) Deleted prior to execution.
(e) Tenant shall not cause or permit trash, refuse, dirt or other
rubbish to accumulate on the Demised Premises or in the Center and shall cause
same to be promptly removed;
(f) Tenant shall not injure, overload, deface, commit waste or
otherwise harm the Demised Premises or any part thereof;
(g) Tenant shall not commit any nuisance;
(h) Tenant shall not permit the emission from the Demised Premises of
any objectionable noise or odor;
(i) Tenant shall not burn any trash, rubbish, dirt or refuse within
the Center;
(j) Tenant shall use the Demised Premises only for business and
commercial purpose (subject to the provisions of Article 2 hereof) and Tenant
shall not use, allow or permit any industrial, manufacturing or processing
activities within the Demised Premises, except as may be expressly permitted by
Section 2.01 of this Lease;
(k) Tenant shall conform and comply with all non-discriminatory and
uniformly applicable rules and regulations which Landlord may promulgate for the
management and use of the Center;
(l) Tenant shall not use any advertising medium that may constitute a
nuisance, such as loudspeakers, sound amplifiers or phonographs, in a manner to
be heard outside the Demised Premises;
(m) Tenant shall cooperate with Landlord in promoting the use of the
name of the Center;
(n) Tenant shall not place a load on any floor of the Demised Premises
exceeding the floor load per square foot which such floor was designed to carry;
(o) Tenant shall not install, operate or maintain in the Demised
Premises any electrical equipment which will overload the electrical system
therein or any part thereof beyond the capacity for proper and safe operation,
as determined by Landlord, in relation to the overall system and requirements
for electricity in the Building;
(p) Tenant shall not install, operate, or maintain any electrical
equipment in the Demised Premises which does not bear underwriters approval; and
(q) No portion of the Demised Premises shall be used or occupied for
the sale, dispensing, storage or display of food, foodstuffs, or food products
for consumption on or off the Demised
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Premises, provided that the foregoing shall not prohibit the use and occupancy
of the Demised Premises as permitted by Section 2.01 hereof.
ARTICLE 22. EASEMENTS FOR UTILITIES
Section 22.01. Landlord or its designee shall have the right and Tenant
shall permit Landlord or its designee to erect, use, maintain and repair pipes,
cables, conduits, plumbing, vents and wires in, to and through the Demised
Premises as and to the extent that Landlord may now or hereafter deem necessary
or appropriate for the use or proper operation and maintenance of the Demised
Premises, or the Building or any other portion of the Center. Landlord's rights
under this Article shall be exercised, as far as practicable, in such manner as
to avoid unreasonable interference with Tenant's occupancy of the Demised
Premises.
ARTICLE 23. CONSENTS AND APPROVALS
Section 23.01. With respect to any provision of this Lease providing that
Landlord shall not unreasonably withhold or unreasonably delay any consent or
any approval, Tenant, in no event, shall be entitled to make, nor shall Tenant
make, any claim for, and Tenant hereby waives any claim for money damages; nor
shall Tenant claim any money damages by way of setoff, counterclaim or defense,
based upon any claim or assertion by Tenant that Landlord has unreasonably
withheld or unreasonably delayed any consent or approval; but Tenant's sole
remedy shall be an action or proceeding to enforce any such provision, or for
specific performance, injunction or declaratory judgment.
ARTICLE 24. THERE IS NO ARTICLE 24 IN THIS LEASE
ARTICLE 25. END OF TERM HOLDOVER
Section 25.01. If the last day of the Term of this Lease falls on a Sunday,
or legal holiday, this Lease shall expire on the business day immediately
following. Upon the expiration or other termination of the Term of this Lease,
Tenant shall quit and surrender to Landlord the Demised Premises, together with
all buildings and improvements thereon, "broom-clean" and in good order and
condition, ordinary wear and tear and damage by the elements excepted, and
Tenant shall thereupon remove all property of Tenant and, failing to do so,
Landlord may cause all of the said property to be removed, stored and/or
disposed of at the expense of Tenant. Tenant shall pay all costs and expenses
thereby incurred. Any property not so removed shall be deemed to have been
abandoned by Tenant and may be retained or disposed of by Landlord as Landlord,
in its sole discretion, shall determine and Tenant hereby releases Landlord from
all claims for loss or damage to such property arising out of such retention or
disposition thereof. Tenant's obligations under this Article shall survive the
expiration or other termination of the Term of this Lease.
Section 25.02. If Tenant remains in possession of the Demised Premises at
the expiration of the Term hereof, Tenant, at Landlord's option, shall be deemed
to be occupying the Demised Premises as a Tenant from month to month, at a
monthly rental equal to twice the sum of the monthly installment of annual
minimum rent payable during the last month of the Term hereof plus all
additional rent coming due hereunder. In the event of such
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holdover, Tenant's occupancy of the Demised Premises, except as aforesaid, shall
be subject to all other conditions, provisions and obligations of this Lease,
but only insofar as the same are applicable to a month to month tenancy. Such
month to month tenancy shall be terminable by Landlord upon one (1) month's
notice to Tenant, and if Landlord shall give such notice, Tenant shall quit and
surrender the Demised Premises to Landlord as above provided.
ARTICLE 26. AUTHORITY TO EXECUTE
Section 26.01. Landlord and Tenant do hereby respectively represent to the
other that it has the capacity to enter into this Agreement.
ARTICLE 27. NOTICES
Section 27.01. All notices to be given pursuant to this Lease shall be in
writing and sent by prepaid certified or registered U.S. mail, return receipt
requested, or by a recognized overnight courier service which requires
acknowledgment of receipt of delivery from addressee, to the address of the
parties below specified or at such other address as may be given by written
notice in the manner prescribed in this paragraph. Landlord's address for notice
shall be c/o National Realty & Development Corp., 3 Manhattanville Road,
Purchase, New York 10577. Tenant's address for notices shall be as follows:
Programmer's Paradise, Inc., 1163 Shrewsbury Avenue, Shrewsbury, New Jersey
07702, Attn: Chief Financial Officer, with a copy of all notices sent to:
Giordano, Halleran & Ciesla, 125 Half Mile Road, Lincroft, New Jersey 07738,
Attn: Edward S. Radzely, Esq. Notice shall be deemed to be given upon delivery
to the U.S. Postal Service or recognized overnight courier service.
ARTICLE 28. NO BROKER
Section 28.01. Each party represents and warrants to the other party that
it dealt with no broker or other person entitled to claim fees for such services
in connection with the negotiation, execution and delivery of this Lease. Each
party agrees to defend, indemnify and hold the other party harmless from and
against any and all claims for finders' fees or brokerage or other commission
which may at any time be asserted against the indemnified party founded upon a
claim that the substance of the aforesaid representation of the indemnifying
party is untrue, together with any and all losses, damages, costs and expenses
(including reasonable attorneys' fees) relating to such claims or arising
therefrom or incurred by the indemnified party in connection with the
enforcement of this indemnification provision.
ARTICLE 29. MEMORANDUM OF LEASE
Section 29.01. Tenant agrees not to record this Lease. The parties agree,
upon request of either, to execute, in recordable form, a short lease entitled
"Memorandum of Lease", it being the intention of the parties that this Lease
will not be recorded, but only a memorandum thereof. Such short form lease shall
contain those provisions of this Lease as shall be desired in the reasonable
discretion of counsel for the parties hereto, provided that in no event shall
such short form lease contain any
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provisions relevant to the annual minimum rent and/or additional rent payable
under this Lease.
ARTICLE 30. AIR AND WATER POLLUTION
Section 30.01. Tenant hereby indemnifies and saves Landlord harmless
against any claim, damage, liability, costs, penalties or fines which the
Landlord may suffer as a result of air, land or water pollution caused by Tenant
in its use or occupancy or manner of use or occupancy of the Demised Premises or
in its storage, handling, possession, transportation and/or disposal of any
Hazardous Waste or Hazardous Substance (as such terms are hereafter defined)
within or about the Demised Premises. Tenant covenants and agrees to notify
Landlord immediately of any claim or notice served upon it with respect to any
such claim that Tenant is causing air, land or water pollution; and Tenant, in
any event, will take immediate steps to halt, remedy and cure any pollution of
air, land or water caused by Tenant by its use of the Demised Premises, at it s
sole cost and expense.
Section 30.02. (a) Tenant shall comply with all state and federal
environmental laws, including the Spill Compensation and Control Act ("SCCA")
(N.J.S.A. 58:10-23.11 et seq.) and Industrial Site Recovery Act ("ISRA")
(N.J.S.A. 13:1K-6 et seq.) as the same may have been or may hereafter be amended
(collectively, the "Environmental Statutes") as the same may relate to Tenant's
use and occupancy or manner of use and occupancy of the Demised Premises or any
act or failure to act of Tenant. Tenant shall supply Landlord on demand with any
information Landlord may require in order to enable Landlord to comply with the
Environmental Statutes, including, without limitation, ISRA, whether upon the
transfer of title or closing of operations at the Demised Premises, or for any
reason whatsoever.
Section 30.02. (b) Tenant shall not use the Demised Premises for the
purpose of refining, producing, storing, handling, transferring, processing or
transporting said "Hazardous Substances", as such term is defined in N.J.S.A.
5B:10-23.11b(k) of the New Jersey Spill Compensation and Control Act (N.J.S.A.
58:10- 23.11 et seq.).
Section 30.02. (c) Tenant shall not use the Demised Premises to generate,
manufacture, refine, transport, treat, store, handle or dispose of "Hazardous
Substances", or "hazardous Wastes", as such terms are defined in N.J.A.C.
7:1-3.3.
Section 30.02. (d) Tenant shall not cause or permit to exist, as a result
of an intentional or unintentional action or omission on its part, a releasing,
spilling, leaking, pumping, emitting, pouring, emptying or dumping of a
"Hazardous Substance", as such term is defined in N.J.S.A. 58:10-23.11b(k) into
waters of the State of New Jersey or onto the lands from which it might flow or
drain into said waters, or into waters outside the jurisdiction of the State of
New Jersey where damage may result to the lands, waters, fish, shellfish,
wildfire, biota, air and other resources owned, managed, held in trust or
otherwise controlled by the State of New Jersey.
Section 30.02. (e) Tenant shall not use the Demised Premises as a "Major
Facility", as such term is defined in N.J.S.A. 58-10-23.1b(1).
Section 30.02. (f) Tenant shall not install nor permit to be installed in
the Demised Premises friable asbestos or any
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substance containing asbestos and deemed hazardous by federal or state
regulations respecting such material.
Section 30.03. Tenant represents that Tenant has not received a summons,
citation, directive, letter or other communication, written or oral, from the
New Jersey Department of Environmental Protection concerning any intentional or
unintentional action or omission on Tenant's part resulting in the releasing,
spilling, leaking, pumping, pouring, emitting, emptying or dumping of "Hazardous
Substances", as such term is defined in N.J.S.A. 58:10-23.11b(k), into the
waters or onto the lands of the State of New Jersey, or into the waters outside
the jurisdiction of the State of New Jersey resulting in damage to the lands,
waters, fish, shellfish, wildlife, biota, air and other resources owned,
managed, held in trust or otherwise controlled by the State of New Jersey.
Section 30.04. (a) In the event that Tenant does not expeditiously proceed
with any compliance required by any State or Federal authority under the
Environmental Statutes, Landlord may elect to undertake such compliance in order
to protect its interest in the Demised Premises. Any monies expended by Landlord
in efforts to comply with any environmental statute (including but not limited
to: the costs of hiring consultants, undertaking sampling and testing,
performing any cleanup necessary or useful in the compliance process and
attorney's fees), together with interest at the maximum rate permitted by law,
will be added to and payable with the next payment of annual minimum rental due
from Tenant, or will be payable on demand of Landlord.
Section 30.04. (b) Tenant will provide Landlord with all information as to
the use or manner of use of the Demised Premises by Tenant, and an environmental
audit of the Demised Premises which is designed to describe any materials on the
Demised Premises which would require a filing and/or any disclosure under the
Environmental Statutes in the event of any transfer or closure, or which would
require remedial action under any other Environmental Statutes.
Section 30.04. (c) In the event that Tenant receives notice from the
Department of Environmental Protection or any other governmental authority or
bureau having or asserting jurisdiction thereover under SCCA of a discharge on
or about the Demised Premises, or any other notice of violation of the
Environmental Statutes or any alleged or claimed violation thereof, Tenant will
immediately send a copy of such notice to Landlord and Tenant will promptly
proceed to remedy the condition described in the notice. Tenant shall take all
action necessary to ensure that the SCCA administrator does not spend Spill Fund
monies to clean up the site. In the event that the SCCA administrator should
spend money cleaning up property owned by Landlord due to Tenant's use or
occupancy or manner of use or occupancy of the Demised Premises or the act or
failure to act of Tenant, and/or a lien is imposed on the Demised Premises or
any portion of the parcel of which it forms a part of any property of Landlord,
Landlord may take such actions as it deems necessary to remove such lien,
including satisfaction thereof, or may require it to be bonded by Tenant, and
Tenant agrees to defend, indemnify and hold Landlord free and harmless from and
against all loss, costs, damage and expense (including attorney's fees and
costs) Landlord may sustain by reason of the assertion against Landlord by any
party of any claim in connection therewith. Landlord may demand such security,
in amounts and types which it deems appropriate in its sole discretion, for the
purpose of protecting its property from any such lien or to guarantee cleanup.
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ARTICLE 31. METHOD OF CALCULATION
Section 31.01. Landlord shall have the right at any time during the Term or
any extension term hereof, and Tenant hereby consents thereto, to subdivide Lot
No. 3/1 into such additional lot or lots as Landlord may in its sole discretion
elect, provided that the whole of the Building shall remain entirely within one
such subdivision and/or to expand Lot No. 3/1. Notwithstanding anything
contained in this Lease to the contrary, in the event of any such subdivision
and/or expansion of Lot No. 3/1 by Landlord then, at Landlord's option, (i)
references in this Lease to Lot No. 3/1 may be deemed to be to the original
(pre-subdivision or pre-expansion, as the case may be) Lot No. 3/1 or any
portion(s) thereof of which the Demised Premises forms a part, and (ii) in
calculating Tenant's proportionate share(s), Landlord may use as the denominator
of the fraction(s) representing Tenant's proportionate share(s) the building(s)
or portions thereof within said original Lot No. 3/1 or any portion(s) thereof
of which the Demised Premises forms a part. In the vent of such subdivision
and/or expansion, Tenant agrees to execute an agreement in recordable form
setting forth the description of Lot No. 3/1 as so subdivided or expanded, as
the case may be, and as renamed and/or renumbered.
ARTICLE 32. THERE IS NO ARTICLE 32 IN THIS LEASE.
ARTICLE 33. THERE IS NO ARTICLE 33 IN THIS LEASE.
ARTICLE 34. RELATIONSHIP OF PARTIES
Section 34.01. Nothing herein contained shall be deemed or construed by the
parties hereto, nor by any third party, as constituting the Landlord a partner
of Tenant in the conduct of Tenant's business, or as creating the relationship
of principal and agent or joint venturers between the parties hereto, it being
the intention of the parties hereto that the relationship between them is and
shall at all times be and remain that of Landlord and Tenant only. Tenant agrees
upon the demand of Landlord to deliver to Landlord and any mortgagee of Landlord
the most recently available financial statements of Tenant and any guarantor of
this Lease, certified to by a certified public accountant, and updated to the
extent reasonably requested by Landlord or any such mortgagee.
ARTICLE 35. CAPTIONS
Section 35.01. The Article captions contained herein are for convenience
only and do not define, limit, or construe the contents of such Articles and are
in no way to be construed as a part of this Lease.
ARTICLE 36. DEFINITIONS
Section 36.01. words of any gender used in this Lease shall be held to
include any other gender, and words in the singular number shall be held to
include the plural, when the sense requires.
Section 36.02. If any provisions of this Lease or the application thereof
to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Lease,
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or the application of such provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each provision of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
ARTICLE 37. ENTIRE AGREEMENT
37.01. This instrument of Lease contains the entire and only agreement
between the parties concerning the Demised Premises. No prior oral or written
statements or representation, if any, of any party hereto or any representative
of a party hereto, not contained in this instrument, shall have any force or
effect. This Lease shall not be modified in any way, except by a writing
executed by Landlord and Tenant. No oral agreement or representations shall be
deemed to constitute a lease other than this agreement. This agreement shall not
be binding until it shall have been executed and delivered by Landlord and
Tenant. The submission of this Lease to Tenant prior to its execution by
Landlord shall not be an offer to lease.
ARTICLE 38. SUCCESSORS IN INTEREST
Section 38.01. All provisions herein contained shall bind and inure to the
benefit of the respective parties hereto, their heirs, personal representatives,
successors and assigns, as the case may be. In the event Landlord or any
successor-lessor (owner) of the Demised Premises shall convey or otherwise
dispose of the Demised Premises and/or the Center and/or the Tax Lot of which
the Demised Premises forms a part, all liabilities and obligations of Landlord
or such successor-lessor (owner), as Landlord under this Lease shall terminate
upon such conveyance or disposal.
Section 38.02. If Landlord, or any successor in interest to Landlord, shall
be an individual, joint venturer, executor, estate, personal representative,
conservator, tenancy-in-common, trustee, trust, limited liability company,
limited liability partnership, partnership, general or limited, firm or
corporation, there shall be no personal liability on the part of such individual
or on the part of any members of such joint venture, tenancy-in-common, trustee,
trust, company, partnership, firm or corporation, its officers, directors,
managers or stockholders, or on the part of such joint venture, estate,
tenancy-in-common, trustee, trust, company, partnership, firm or corporation as
to any of the provisions, covenants or conditions of this Lease. Tenant hereby
acknowledges that it shall look solely to the real property interest of Landlord
in Lot No. 3/1 (or, in the event of a subdivision of said Lot, such subdivided
portion thereof which includes the Demised Premises) for the satisfaction or
assertion of any claims, rights and remedies of Tenant against Landlord, in the
event of breach by Landlord of any of the terms, provisions, covenants or
conditions of this Lease.
ARTICLE 39. EXTENSION OPTION
Section 39.01. (a) Renewal. Provided that Tenant is not in default
hereunder, Tenant shall have the option (the "Renewal Option") to extend the
term of this Lease for One (1) additional period of Five (5) years (the "Renewal
Term")), by giving Landlord notice thereof at least nine (9) months notice,
prior to the date of expiration of the term of this Lease. If Tenant shall
exercise
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the Renewal Option, then this Lease shall be extended for the Renewal Term upon
all of the terms, covenants, and conditions contained in this Lease, except
that, during the Renewal Term, the annual minimum rental for said term shall be
100% of the annual market value (the "Market Value Rent") of the Demised
Premises (assuming Tenant has removed all of its personal property and such
other property as this Lease permits Tenant to remove) on the date that Tenant
exercises the Renewal Option) the "Exercise Date"), determined as provided in
Section (b) below).
Section 39.01. (b) Arbitration. The term "Market Value" shall mean the
annual minimum rental that a willing Tenant would pay and a willing Landlord
would accept in an arms-length lease of the Demised Premises as of the Exercise
Date, assuming the same terms and conditions set forth in this Lease, and the
Demised Premises being in the condition described in (a) above. If Landlord and
Tenant shall fail to agree upon the Market Value Rent within (60) days after the
Exercise Date, then Landlord and Tenant each shall give notice (the
"Determination Notice") to the other setting forth their respective
determinations of the Market Value Rent, and, subject to the provisions of
Section (c) below, either party may apply to the American Arbitration
Association or any successor thereto for the designation of an arbitrator
satisfactory to both parties to render a final determination of the Market Value
Rent. If landlord and Tenant cannot agree upon an arbitrator, the parties shall
Jointly apply to the assignment judge of Monmouth County to select an
arbitrator. The arbitrator shall be a real estate appraiser, consultant, or
broker who shall have at least (15) year continuous experience in the business
of appraising or office leasing. The arbitrator shall conduct such hearings and
investigations as the arbitrator shall deem appropriate and shall, within thirty
(30) days after having been appointed, choose one of the determinations set
forth in either Landlord's or Tenant's Determination Notice, and that choice by
the arbitrator shall be binding upon Landlord and Tenant. Each party shall pay
its own counsel fees and expenses, if any, in connection with any arbitration
under this Section (b), and the parties shall share equally all other expenses
and fees of any such arbitration. The determination rendered in accordance with
the provisions of this Section (b) shall be final and binding in fixing the
Market Value rent. The arbitrator shall not have power to add to, modify or
change any of the provisions of this Lease.
Section 39.01. (c) Arbitration canceled. In the event that the
determination of the Market Value Rent set forth in the Landlord's and Tenant's
Determination notices shall differ by less than three (3%) percent per rentable
square foot per annum for the applicable Renewal Term, then the Market Value
Rent shall not be determined by arbitration, but shall instead be set by taking
the average of the determination set forth in Landlord's and Tenant's
Determination Notices. Only if the determinations set forth in Landlord's and
Tenant's Determination Notices shall differ by more than three (3%) percent per
rentable square foot per annum for the applicable Renewal Term shall the actual
determination of Market Value Rent be made by an arbitrator as set forth in
Section (b) above.
Section 39.01. (d) Late determination. If for any reason the Market Value
Rent shall not have been determined prior to the commencement of the Renewal
Term, then, until the Market Value Rent , and, accordingly, the annual minimum
rental, shall have been finally determined, the annual minimum rental shall
remain the same as payable during the last year of the expiring term of the
Lease. Upon final determination of the Market Value Rent, an appropriate
adjustment to the annual minimum rental shall
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be made reflecting such final determination, and Tenant, shall promptly pay to
Landlord any deficiency, in the payment of annual minimum rental from the
commencement of the Renewal Term to the date of such final determination.
Section 39.01. (e) Minimum Renewal Term Rental. Notwithstanding anything
contained in this Article to the contrary, in no event shall the annual minimum
rental payable by Tenant during the extension term be less than TWO HUNDRED
TWENTY FIVE THOUSAND AND 00/100 ($225,000.00) DOLLARS per annum
ARTICLE 40. APPROVALS
Section 40.01. Landlord will promptly file all necessary applications and
information and proceed with due diligence to obtain all governmental permits,
consents and approvals (including, without limitation, a building permit)
enabling Landlord to perform the Landlord's Work (herein referred to as the
"Approvals"). The Approvals shall be deemed to have been issued on the date when
all such permits, consents and approvals are final and unappealable (such date
referred to herein as the "Approvals Date"). Tenant shall cooperate with
Landlord's efforts to obtain Approvals. If Landlord fails to obtain such
Approvals (or any of same) on or before one hundred eighty (180) days from the
date hereof, Landlord and Tenant shall have the right to terminate this Lease as
herein provided at any time prior to the issuance of the Approvals, provided,
however, that the non-termination party may stay the other party's termination
of this Lease for a period of sixty (60) days (hereinafter called the "Approvals
Extension Period") if the non-terminating party shall in good faith believe that
the non- terminating party shall be able to obtain the Approvals within the
Approvals Extension Period, whereupon the non-terminating party shall diligently
pursue obtaining the Approvals, failing which the termination of this Lease by
the terminating party shall automatically take effect on the sixtieth (60th) day
of the Approvals Extension Period. If this Lease is terminated in the manner set
forth in this Section 40.01, the parties shall be released from any and all
further rights and/or obligations hereunder accruing after the effective date of
such termination.
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WITNESS:
- - ----------------------------- ---------------------------------------
ROBERT C. BAKER, INDIVIDUALLY, AS
TRUSTEE UNDER TRUST AGREEMENT DATED
MARCH 15, 1984 FOR THE BENEFIT OF
ASHLEY S. BAKER AND AS MANAGING
GENERAL PARTNER OF BAKER 1985
FAMILY PARTNERSHIP
- - ----------------------------- ---------------------------------------
GERALD H. BAKER
- - ----------------------------- ---------------------------------------
MARTIN S. BERGER, TRUSTEE UNDER
TRUSTEE AGREEMENT DATED MARCH 15
1984 FOR THE BENEFIT OF ASHLEY S.
BAKER
BY
- - ----------------------------- ---------------------------------------
JOHN C. ORRICO ATTORNEY-IN -FACT
- - ----------------------------- ---------------------------------------
ALAN M. OSHINS, AS TRUSTEE UNDER
TRUST ESTABLISHED UNDER ARTICLE IV
OF THE LAST WILL AND TESTAMENT OF
HARVEY B. OSHINS
KAREN SPIEGEL
- - ----------------------------- ---------------------------------------
ATTEST: PROGRAMMER'S PARADISE, INC.,
a Delaware corporation
By:
- - ----------------------------- ------------------------------------
Name: Roger Paradis
Title: President
STATE OF NEW YORK)
SS.:
COUNTY OF WESTCHESTER)
BE IT REMEMBERED, that on this ____ day of May, 1997, before me, the
subscriber personally appeared ROBERT C. BAKER, INDIVIDUALLY, AS TRUSTEE UNDER
TRUST AGREEMENT DATED MARCH 15, 1984 FOR THE BENEFIT OF ASHLEY S. BAKER AND AS
MANAGING GENERAL PARTNER OF BAKER 1985 FAMILY PARTNERSHIP, and JOHN G. ORRICO,
BY HIS ATTORNEY-IN-FACT, ROBERT C. BAKER, who I am satisfied are the persons
named in and who signed the within instrument, and, thereupon they acknowledged
that they signed, sealed and delivered the same as their respective act and
deed, for the uses and purposes therein expressed.
--------------------------
NOTARY PUBLIC
37
<PAGE>
STATE OF )
SS.:
COUNTY OF )
BE IT REMEMBERED, that on this _______ day of ____, 1997, before me, the
subscriber personally appeared GERALD H. BAKER, who I am satisfied is the person
named in and who signed the within instrument, and, thereupon he acknowledged
that he signed, sealed and delivered the same as his act and deed, for the uses
and purposes therein expressed.
---------------------------
NOTARY PUBLIC
STATE OF )
SS.:
COUNTY OF )
BE IT REMEMBERED, that on this _____ day of ______, 1997, before me, the
subscriber personally appeared MARTIN S. BERGER, AS TRUSTEE UNDER TRUST
AGREEMENT DATED MARCH 15, 1984 FOR THE BENEFIT OF ASHLEY S. BAKER, who I am
satisfied is the person named in and who signed the within instrument, and,
thereupon he acknowledged that he signed, sealed and delivered the same as his
act and deed, for the uses and purposes therein expressed.
---------------------------
NOTARY PUBLIC
STATE OF )
SS.:
COUNTY OF )
BE IT REMEMBERED, that on this _____ day of ______, 1997, before me, the
subscriber personally appeared ALAN M. OSHINS, AS TRUSTEE UNDER TRUST
ESTABLISHED UNDER ARTICLE IV OF THE LAST WILL AND TESTAMENT OF HARVEY B. OSHINS,
who I am satisfied is the person named in and who signed the within instrument,
and, thereupon he acknowledged that he signed, sealed and delivered the same as
his act and deed, for the uses and purposes therein expressed.
---------------------------
NOTARY PUBLIC
STATE OF )
SS.:
COUNTY OF )
BE IT REMEMBERED, that on this ____ day of _________, 1997, before me, the
subscriber personally appeared KAREN SPIEGEL, who I am satisfied is the person
named in and who signed, sealed and delivered the same as her act and deed, for
the uses and purposes therein expressed.
---------------------------
38
<PAGE>
NOTARY PUBLIC
STATE OF NEW )
SS.:
COUNTY OF )
BE IT REMEMBERED, that on the ________ day of _______, 1997, before me, the
subscriber, a notary public of the State of ________________, personally
appeared Roger Paradis, President of PROGRAMMER'S PARADISE, INC., who, I am
satisfied, is the person who signed the within instrument; and I having first
made known to him the contents thereof, he thereupon acknowledged that he
signed, sealed with the corporate seal and delivered the said instrument as such
officer aforesaid, and that the within instrument is the voluntary act and deed
of said corporation.
---------------------------
NOTARY PUBLIC
39
<PAGE>
EXHIBIT B
---------
WORK LETTER TO BE ATTACHED TO LEASE
TO PROGRAMMERS PARADISE, INC.
SHREWSBURY BUSINESS CENTER
SHREWSBURY, NEW JERSEY
1. SIZE
Overall size of Shrewsbury Avenue is approximately 18,000 square feet,
within which approximately 18,000 square feet shall be completed as office area.
All of the foregoing shall be constructed in accordance with the following
specifications and plans to be developed therefrom by Landlord's Architect to
meet the design criteria specified below. Any work not expressly specified
herein and any work necessary to comply with codes attributable to Tenant's use
shall be furnished and installed at the sole cost and expense of Tenant.
2. SPACE ALLOCATION
All office areas shall have suspended 9'0" high ceilings, painted
walls, recessed lighting, carpeted floors or resilient tile at Tenant's option.
3. BUILDING SHELL
A. Type of Construction - Structural steel frame, bar joists, metal
decking, precast concrete.
B. Exterior - Front and side elevations are precast concrete, rear
elevation is block (which may be smooth face), which block is waterproof and
insulated.
C. Architectural Metal - Sections of the front and side walls may be
covered with fluted metal panels above window line.
D. Front Entrances and Sidelites - Doors and frames shall be made up of
aluminum tubes and frames. One double glass front entrance with two (2)
sidelites. Two (2) side entrances with single glass doors and single sidelites.
E. Canopy - Canopies of similar design and look to the existing buildings
on site will cover all entrances. The finish will conform to that the
architectural design of the Building.
F. Windows - Fixed lites are solar bronze set into an aluminum frame. Widow
locations as per Exhibit B-1.
G. Roof - Single ply EPDM membrane or three-ply modified asphalt, insulated
with four ply built-up smooth fiberglass. Insulation mechanically fastened to
ribbed metal decking.
4. COMPONENT DESCRIPTION & SPECIFICATIONS FOR INTERIOR
A. Floor Slab - All concrete floor slabs are approximately 4" in thickness
and include wire mesh, 3,000 p.s.i. concrete.
B. Bay Size - All bays measure 30 feet in width and 30 feet in depth (front
to rear). Area of Bay - 900 sq. Ft.
5. OFFICE AREA
<PAGE>
Office space shall be constructed in accordance with Exhibit B-1 and the
following design specifications:
Office and Conference Room partitions to be insulated.
A. Interior Partitions - All interior partitions of finished area shall be
constructed of 1/2" gypsum board, taped and spackled on each side of 3-5/8"
metal studs, at Landlord's option 16" or 24" on center, to underside of ceiling
and covered with two coats of paint (Tenant's choice of color from Landlord's
standard selections). Landlord shall provide drywall finish to restrooms and
inside of exterior walls. As shown on attached floor plan the partitioning will
go to the deck in the following offices: president, executive vice president,
vice president-finance and main conference room. Partitioning to penetrate
ceiling at least one (1') foot on perimeter partition of training room, printer
room, computer room and bathrooms. Paint to be Conlux or equal.
B. Doors and Frames - Within the office areas, 3'-0"x7'0" stain grade solid
core wood doors with hollow metal frames shall be provided on the basis of a
Building Standard of one door per 40 lineal feet of interior partitioning. Doors
to be sealed and frames to be painted. Landlord to provide restroom and utility
room doors. Side lites provided at the quantity of 1 per 1500 square feet
rentable. Storage area door to be extra height (double doors) metal. Paint to be
Conlux or equal.
C. Hardware - All interior doors provided with standard weight lever
hardware with locks. Door closer provided on entrance door. Finish shall be
Schlage or equal. Door closets and crash bars as required by code, including
lavatories, ingress/egress doors, doors into storage room and training room. All
locks will have one (1) master and three (3) submaster keys.
D. Ceilings - Suspended acoustical tile ceilings, 2'x4' lay- in, illusion
#3575 by USG (second look tile) or equal to a height of 9'-0" above finished
floor.
Offices, Conference Rooms, computer room, printer room, training room and
lunch room to be insulated for sound.
E. Floor-Coverings - Office area shall be carpeted with 30 oz. commercial
grade from Landlord Standard Selection. Tenant's choice of color from Landlord's
standard selections.
Vinyl tile in lunchroom/kitchenette, anti-static in commuter room, print
room and tech support lab. Tenant's choice from Landlord's standard selection
(congoleum or equal).
Tile room floors to be covered with ceramic tile, includes base, and
ceramic tile to 4'0" above finish floor.
F. Vinyl Base - Four inch high building standard vinyl base shall be
provided along both sides of all partitions and column enclosures. Tenant's
choice from Landlord's standard selection (Nafco or equal).
6. PLUMBING (per 6,000 square feet of floor area)
Landlord to provide three (3) men's lavatories inclusive of a total of four
(4) water closets, three urinals and four wall hung sinks, and three (3) ladies
lavatories inclusive of a total of four (4) water closets and four (4) wall hung
sinks. Provisions for handicapped shall be included. Sanitary system connected
to
2
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Borough of Shrewsbury sewer system. All toilets and urinals shall be flushometer
type fixtures.
7. ELECTRICAL
A. BASIC SERVICE
1. Electrical conductors and distribution equipment will be provided to
deliver 277 volts for fluorescent lighting, 480 volts for H.V.A.C. equipment and
120 volts for general usage.
2. Service -300 amp.
3. Circuit breaker panel will be provided for Tenant.
4. Tenant to be metered independently.
B. LIGHTING
1. Office area to be provided with 2'x4' recessed lighting fixture. One
fixture will be provided for every 90 square feet of office floor area. All
fixtures to be prismatic lense type except in conference room and private
offices which shall receive parabolic lighting.
2. Storage room to be provided with six (6) eight (8') foot fluorescent
strip fixtures.
C. SWITCHES AND OUTLETS
1. One switch per room.
Open landscape area to have four (4) switches.
All offices with multiple entrances to have two (2) switches.
Outlets - 3 Offices:
3 duplex
1 data/voice
Outlets - 9 Offices:
4 duplex
1 data/voice
Floor Outlets:
1 per 1500 square feet
Perimeter Walls:
1 duplex per 20 liner feet
Miscellaneous:
18 dedicated 20 amp outlets to be located as
directed by Tenant
4 GFI duplex located in lunchroom/kitchenette
4 duplex to be located as directed by Tenant
3
<PAGE>
8. OFFICE AIR CONDITIONING
Office areas shall be air conditioned to provide 72 degrees F. when the
outside temperature is 91 degrees F., based on typical standard office use.
(Maximum average design is one ton of HVAC for each 350 square feet of usable
space). HVAC system to have a minimum of six (6) zones for cooling and heating.
Printer and computer rooms to be serviced by independent unit for heating and
cooling.
9. OFFICE HEAT
Forced hot air to provide 70 degrees F. when outside temperature is 0
degrees F., based on typical standard office use. Minimum of ten (10%) percent
recirculation of fresh air.
10. SPRINKLERS
The entire building will be sprinklered for ordinary hazard Group II type
usage. Should there be a change in usage and/or grouping as a result of Tenant's
business requirements and layout, required changes shall be paid for by Tenant.
Landlord will provide a maximum of one (1) sprinkler head per 225 square feet of
floor space in the office area or per code whichever is greater.
11. LANDSCAPING
Landscaping provided throughout the site includes trees, shrubs, lawn and
ground cover on a topsoil base. All landscaped areas are irrigated and
controlled by zone valves. Landlord to screen loading area to Osteotech
premises.
12. SIGNS
Tenant shall provide logo design and other signage requirements to
Landlord. Landlord shall have the right to approve the logo and other
requirements. Landlord shall provide aluminum sign and install same in
accordance with the standard for Shrewsbury Business Center. The furnishing and
installation of plastic letters/logo shall be at the Tenant's expense. Tenant
shall have signage on main entry sign equal to 1/3 of entire sign face. All
signage subject to applicable zoning ordinances.
13. WINDOW TREATMENT & CABINETRY
A. All windows and sidelites shall have window treatments furnished and
installed at Landlord's sole cost and expense. Tenant's choice of color from
Landlord's Standard Selection with minimum quality equal to window treatment in
tenants current offices at 1163 Shrewsbury Avenue.
B. Landlord to furnish and install fourteen (14) linear feet of base
cabinets (inclusive of two (2) double sinks) and ten (10) linear feet of wall
hung cabinets. Tenant's choice from Landlord's Standard Selection.
14. STORAGE AREA AND LOADING DOCKS
A. 1,000 sq. ft. of full height storage space at rear of building with
loading dock. Concrete floor sealed with Conlux or equivalent.
B. Two (2) additional planned loading docks (for future) at rear of
building with window installed instead of overhead door at
4
<PAGE>
location shown on Exhibit B-1. One (1) additional dock (future) to
have concrete pad for trailer delivery.
C. Two metal personnel doors to be installed as per Exhibit B-1.
15. MAIN AND SIDE ENTRANCE VESTIBULES
A. One double glass door main entrance interior vestibule.
B. Two single glass door interior side entrance vestibules.
16. JANITOR CLOSET
One (1) janitors closet with slop sink next to lavatories or kitchen.
Location to be determined by final floor plan.
17. CLOSETS
Install 40' of stainless closet rod and solid core hinged or sliding doors
at locations determined by final floor plan.
18. MISCELLANEOUS WORK
A. All "extras" furnished by Landlord, at Tenant's cost, as provided herein
or hereafter agreed to, shall be computed at Landlord's cost, plus 10 percent
overhead, plus 10 percent profit.
B. Credits to Tenant based upon deletions and reductions below Building
Standard set forth above, shall be computed based upon Landlord's unit cost set
forth above, without factor of overhead and profit.
C. All prices, if any, set forth in this Work Letter are predicated upon
quotations now in the hands of Landlord. Such quotations, by their terms, expire
at various intervals and accordingly these prices are subject to variation based
upon market conditions following the expiration of such quotations.
D. All prices are subject to inclusion of applicable taxes, but Landlord's
overhead and profit shall be computed without regard to such taxes.
E. Landlord shall furnish Tenant with a statement(s) computing the net
extras or credits due to Landlord or Tenant, as the case may be. Any amount due
to Landlord shall be due and payable in full simultaneously with the delivery by
Tenant to Landlord of the authorization for such work. Any credit due Tenant
shall give rise to a reduction in the first installments of minimum rent and
additional rent until such credit has been exhausted.
F. With execution of this Lease, Tenant shall furnish Landlord with design
criteria and specifications necessary to enable Landlord to comply with its
obligations above. All authorizations, deletions and implementations of the
foregoing Work Letter shall be in writing and confirmed by authorized
representatives of Landlord and Tenant.
G. If there shall be any conflict between the provisions of this Work
Letter and the final approved Plans, the final approved Plans shall govern and
control.
H. Landlord reserves the right to substitute for any materials and
equipment specified herein, materials and equipment of substantially equal
quality.
5
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I. Unless specifically stated in this Exhibit B or this Lease to the
contrary, and notwithstanding anything contained on any plans or drawings
(including Exhibit B-1 annexed hereto, if any) Tenant, and not Landlord, shall
be responsible for furnishing and installing at its sole cost and expense any
and all furniture, Tenant fixtures, appliances, shelving, cabinetry, phone
systems, computer wiring, landscaped furniture, modular partitioning, work
stations, computers and the like for the Demised Premises.
6
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-72249) pertaining to the Programmer's Paradise, Inc. 1986 Stock
Option Plan, the Programmer's Paradise, Inc. 1995 Stock Plan and the
Programmer's Paradise, Inc. 1995 Non-Employee Director Plan of our report dated
January 27, 1999, with respect to the consolidated financial statements and
schedule of Programmer's Paradise, Inc. included in the Annual Report (Form
10-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
MetroPark, New Jersey
March 26, 1999
