UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 33-93464
DICTAPHONE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 06-0996237
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3191 BROADBRIDGE AVENUE
STRATFORD, CT 06614
(203) 381-7000
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---- ----
Number of shares of Common Stock, par value $.01 per share, outstanding as of
August 11, 1998: 12,949,000
The Common Stock of the registrant is not publicly traded.
<PAGE>
DICTAPHONE CORPORATION
----------------------
INDEX
-----
PAGE NO.
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Statements of
Operations for the Three Months Ended June 30, 1998
and June 30, 1997 2
Unaudited Condensed Consolidated Statements of
Operations for the Six Months Ended June 30, 1998 and
June 30, 1997 3
Condensed Consolidated Balance Sheets as of June 30,
1998 (Unaudited) and December 31, 1997 4
Unaudited Condensed Consolidated Statements of Cash
Flow for the Six Months Ended June 30, 1998 and
June 30, 1997 5
Notes to Unaudited Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 24
PART II. OTHER INFORMATION
- ---------------------------
ITEM 1. Legal Proceedings 24
ITEM 6. Exhibits and Reports on Form 8-K 24
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
<TABLE>
DICTAPHONE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands)
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Revenues:
Product sales and rentals $ 46,762 $ 51,572
Contract manufacturing sales 10,574 11,545
Support services 22,605 21,868
---------- ----------
Total revenue 79,941 84,985
---------- ----------
Costs and expenses:
Cost of sales, rentals and support services 55,630 46,957
Selling and administrative 31,411 28,219
Amortization of intangibles 9,170 7,833
Research and development 3,599 3,256
---------- ----------
Operating loss (19,869) (1,280)
Interest expense 10,232 9,922
Other (income) expense - net (137) 171
---------- ----------
Loss before income taxes (29,964) (11,373)
Income tax benefit 10,884 662
---------- ----------
Net loss (19,080) (10,711)
Stock dividends on PIK Preferred Stock 678 755
---------- ----------
Net loss applicable to Common Stock $ (19,758) $ (11,466)
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
DICTAPHONE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands)
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Revenues:
Product sales and rentals $ 95,959 $ 101,219
Contract manufacturing sales 19,625 23,492
Support services 45,524 44,099
---------- ----------
Total revenue 161,108 168,810
---------- ----------
Costs and expenses:
Cost of sales, rentals and support services 98,445 91,969
Selling and administrative 57,766 55,329
Amortization of intangibles 18,548 15,714
Research and development 7,333 7,956
---------- ----------
Operating loss (20,984) (2,158)
Interest expense 20,677 19,719
Other expense (income) - net 236 (655)
---------- ----------
Loss before income taxes (41,897) (21,222)
Income tax benefit (expense) 14,983 (334)
---------- ----------
Net loss (26,914) (21,556)
Stock dividends on PIK Preferred Stock 1,313 1,484
---------- ----------
Net loss applicable to Common Stock $ (28,227) $ (23,040)
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
DICTAPHONE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 10,277 $ 5,896
Accounts receivable, less allowances of $810 and $2,421, respectively 71,939 71,810
Inventories 48,779 51,178
Other current assets 11,675 12,311
---------- ----------
Total current assets 142,670 141,195
Property, plant and equipment, net 35,331 28,801
Deferred financing costs, net of accumulated amortization of $12,517
and $13,368, respectively 10,900 10,048
Intangibles, net of accumulated amortization of $99,439 and $115,153, respectively 229,322 209,202
Other assets 51,837 52,296
---------- ----------
Total assets $ 470,060 $ 441,542
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,940 $ 7,667
Interest payable 10,144 9,986
Accrued liabilities 32,373 25,862
Advance billings 37,184 37,396
Current portion of long-term debt 795 791
---------- ----------
Total current liabilities 91,436 81,702
Long-term debt 342,816 342,933
Other liabilities 10,547 13,575
---------- ----------
Total liabilities 444,799 438,210
---------- ----------
Contingencies (Note 5)
Stockholders' equity:
Preferred stock ($.01 par value; 10,000,000 shares authorized; 1,500,000
shares of 14% PIK perpetual preferred stock
issued and outstanding, liquidation value at June 30, 1998, $22,325) 20,841 22,325
Common stock ($.01 par value; 20,000,000 shares authorized;
12,952,000 and 12,949,000 shares outstanding at December 31, 1997
and June 30, 1998, respectively) 130 130
Notes receivable from stockholders (831) (816)
Additional paid-in capital 129,870 129,870
Treasury stock, at cost (480) (510)
Accumulated deficit (122,597) (145,637)
Accumulated translation adjustment (1,672) (2,030)
---------- ----------
Total stockholders' equity 25,261 3,332
---------- ----------
Total liabilities and stockholders' equity $ 470,060 $ 441,542
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
DICTAPHONE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(Dollars in thousands)
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Operating activities:
Net loss $ (26,914) $ (21,556)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization (including $1,389
and $13, respectively, of nonrecurring charges) 29,764 24,104
Provision for deferred income taxes (14,770) 1,186
Non-cash provision for inventory obsolescence (Note 2) 10,491 ---
Changes in assets and liabilities:
Accounts receivable (408) (178)
Inventories 1,837 (2,489)
Other current assets (2,878) (713)
Accounts payable and accrued liabilities (1,309) (9,649)
Advance billings (2,780) 284
Other assets and other (2,231) (5,785)
---------- -----------
Net cash used in operating activities (9,198) (14,796)
---------- ----------
Investing activities:
Net investment in fixed assets (3,023) (4,602)
Sale of building --- 14,000
---------- ----------
Net cash (used in) provided by investing activities (3,023) 9,398
---------- ----------
Financing activities:
Repayment under term loan facility (5,500) (1,800)
Borrowings under revolving credit facility 37,500 29,000
Repayment under revolving credit facility (20,500) (27,000)
Other (1,299) 858
---------- ----------
Net cash provided by financing activities 10,201 1,058
---------- ----------
Effect of exchange rate changes on cash (86) (41)
---------- ----------
Decrease in cash (2,106) (4,381)
Cash, beginning of period 7,927 10,277
---------- ----------
Cash, end of period $ 5,821 $ 5,896
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 18,975 $ 19,029
========== ==========
Income taxes paid $ 349 $ 73
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
DICTAPHONE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, or as otherwise indicated)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements of the Company are
unaudited, as of and for the three and six month periods ended June 30,
1998 and June 30, 1997, but in the opinion of management contain all
adjustments which are of a normal and recurring nature necessary to
present fairly the financial position and results of operations and cash
flows for the periods presented. These financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. Certain amounts have been reclassified to conform to
current year presentation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
COSTS AND EXPENSES. Operating expenses of field sales and service
offices which represent the cost of support services revenue are included
in cost of sales.
DERIVATIVE FINANCIAL INSTRUMENTS. The Company has only limited
involvement with derivative financial instruments and does not use them
for trading purposes. The Company enters into interest rate swap
agreements to reduce its exposure to interest rate fluctuations. The net
gain or loss from exchange of interest payments is included in interest
expense in the consolidated financial statements and interest paid in the
condensed consolidated statements of cash flow.
In June, 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133"). The
statement requires companies to recognize all derivatives as either
assets or liabilities, with the instruments measured at fair value. The
accounting for changes in fair value, gains or losses, depends on the
intended use of the derivative and its resulting designation. The
statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company will adopt SFAS 133 by January 1, 2000.
Adoption of SFAS 133 is not currently expected to have a material impact
on the consolidated financial statements.
In March, 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1 ("SOP 98-1"), "Accounting
for the Costs of Computer Software Developed or Obtained for Internal
Use." The statement is effective for fiscal years beginning after
December 15, 1998. The statement defines which costs of computer software
developed or obtained for internal use are capital and which costs are
expensed. The Company will adopt SOP 98-1 effective January 1, 1999. The
Company is in the process of evaluating the effect the adoption of SOP
98-1 will have on its consolidated financial statements.
6
<PAGE>
2. INVENTORIES
Inventories consist of the following:
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
Raw materials and work in process $ 18,481 $ 18,761
Supplies and service parts 14,087 14,225
Finished products 16,211 18,192
---------- ----------
Total inventories $ 48,779 $ 51,178
========== ==========
With the commencement of production of Enterprise Express(TM) in
June 1997, the Company provided for the excess service parts and field
stock inventory associated with the products that Enterprise Express(TM)
was replacing, recording a non-cash charge of $10.5 million.
3. INTANGIBLES
The following summarizes intangible assets, net of accumulated
amortization and writedowns of $99,439 and $115,153 at December 31, 1997
and June 30, 1998, respectively. Amortization expense for the three and
six months ended June 30, 1997 and 1998 was $9,170, $18,548, $7,833 and
$15,714, respectively.
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
Goodwill $ 135,004 $ 128,847
Tradenames 73,211 72,238
Service contracts 8,920 5,041
Non-compete agreement 11,696 2,678
Patents 491 398
---------- ----------
$ 229,322 $ 209,202
========== ==========
4. INCOME TAXES
The income tax benefit (expense) for the three and six months ended
June 30, 1998 is $662 and $(334), respectively.
The Company has recorded a gross deferred tax asset of $80.0
million included in other assets reflecting the benefit of net operating
loss carryforwards and various book tax temporary differences. The net
operating loss carryforward for federal income tax purposes as of June
30, 1998 is $100.3 million of which $13.7 million of the net operating
loss carryforward will expire in the year 2010, $33.2 million will expire
in the year 2011, $39.3 million will expire in the year 2012, and $14.1
million will expire in the year 2018. In order to fully realize the
deferred tax asset, the Company will need to generate future taxable
income prior to expiration of the net operating loss carryforwards. In
December 1997, the Company established a valuation allowance of $24.1
million against the deferred tax assets. In the first and second quarters
of 1998, the Company increased its valuation allowance by $4.7 million
and $3.5 million, respectively, resulting in a net deferred tax asset of
$47.7 million. Management believes, based upon the Company's history of
prior operating results, its current circumstances, and its expectations
for the future, that taxable income of the Company will more likely than
not be sufficient to fully utilize the net deferred tax asset of $47.7
million recorded at June 30, 1998, prior to expiration. The amount of the
deferred tax asset considered realizable, however, could be reduced if
estimates of future taxable income during the net operating loss
carryforward period are reduced.
7
<PAGE>
5. CONTINGENCIES
On February 14, 1995, Pitney Bowes, Inc. ("Pitney Bowes") filed a
complaint against Sudbury Systems, Inc. ("Sudbury") in the United States
District court for the District of Connecticut alleging intentional and
wrongful interference with Pitney Bowes's plans to sell the Company. The
complaint seeks damages and a declaratory judgment relating to the
validity of a patent owned by Sudbury entitled "Rapid Simultaneous
Multiple Access Information Storage and Retrieval System" and the alleged
infringement thereof by the Company. Sudbury responded by answering the
complaint and filing a third-party complaint against the Company alleging
patent infringement and seeking preliminary and permanent injunctive
relief and treble damages. The third-party complaint filed by Sudbury did
not quantify the amount of damages sought. The litigation is in the
discovery stage and the Company cannot currently make a reasonable
estimate of the amount of damages that will be sought by Sudbury.
Management believes the Company has meritorious defenses to the
claims against it. Consequently, the Company has not provided for any
loss exposure in connection with this complaint. Additionally, regardless
of the outcome of this litigation, Pitney Bowes has agreed to defend this
action and to indemnify the Company for any liabilities arising from such
litigation.
The Company is subject to federal, state and local laws and
regulations concerning the environment and is currently participating in
administrative proceedings as a participant in a group of potentially
responsible parties in connection with two third party disposal sites.
These proceedings are at a preliminary stage, for which it is impossible
to reasonably estimate the potential costs of remediation, the timing and
extent of remedial actions which may be required by governmental
authorities, and the amount of the liability, if any, of the Company
alone or in relation to that of any other responsible parties. When it is
possible to make a reasonable estimate of the Company's liability with
respect to such a matter, a provision will be made as appropriate.
Additionally, the Company has settled and paid its liability at three
other third party disposal sites. At a fourth site, the Company has paid
approximately $10,000 for its share of the costs of the first phase of
the clean up of the site and management believes that it has no
continuing material liability for any later phases of the cleanup.
Consequently, management believes that its future liability, if any, for
these four sites is not material. In addition, regardless of the outcome
of such matters, Pitney Bowes has agreed to indemnify the Company in
connection with retained environmental liabilities and for breaches of
the environmental representations and warranties in the Stock and Asset
Purchase Agreement, as amended August 11, 1995 (the "Acquisition
Agreement"), subject to certain limitations.
The Company is a defendant in a number of additional lawsuits and
administrative proceedings, none of which will, in the opinion of
management, have a material adverse effect on the Company's consolidated
financial position or results of operations.
The Company does not believe that the ultimate resolution of the
litigation, administrative proceedings and environmental matters
described above in the aggregate will have a material adverse effect on
the Company's consolidated financial position or results of operations.
8
<PAGE>
6. SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
INFORMATION
The consolidated financial statements include the Company and all
majority-owned subsidiaries as follows: Dictaphone Corporation U.S.
("Dictaphone U.S."), and Dictaphone Canada Ltd/Ltee, Dictaphone Company
Ltd., Dictaphone Deutschland GmbH, Dictaphone Netherlands BV and
Dictaphone International A.G. (together "Dictaphone Non-U.S.").
Dictaphone U.S. has fully and unconditionally guaranteed the
repayment of $200,000 of senior subordinated notes (the "Notes") issued
to finance the acquisition of the Company from Pitney Bowes. The Notes
are subordinate to financing of the Credit Agreement, dated August 7,
1995, as amended by four amendments to Credit Agreement, dated June 28,
1996, June 27, 1997, July 21, 1997 and November 14, 1997 (collectively,
the "Credit Agreement"), and other senior indebtedness as defined in the
indenture pursuant to which the Notes were issued (the "Note Indenture").
The Credit Agreement currently consists of a $75.0 million Tranche B Term
Loan due June 30, 2002 (the "Tranche B Loan"), a $62.75 million Tranche C
Term Loan due June 30, 2003 (the "Tranche C Loan" and together with the
Tranche B Loan, the "Term Loans") and a six-year revolving credit
facility of up to $40.0 million (the "Revolving Credit Facility").
Dictaphone Non-U.S. is not a guarantor of the Notes. In January 1998,
Dictaphone Corporation was merged into Dictaphone Corporation (U.S.),
whereupon the surviving corporation changed its name to "Dictaphone
Corporation".
9
<PAGE>
6. SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
INFORMATION (continued)
The following are the supplemental consolidating statements of
operations for the three and six month periods ended June 30, 1997 and
1998, the supplemental consolidating balance sheet information as of
December 31, 1997 and June 30, 1998, and cash flow information for the
six month periods ended June 30, 1997 and 1998.
<TABLE>
DICTAPHONE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
THREE MONTHS ENDED JUNE 30, 1997
<CAPTION>
DICTAPHONE DICTAPHONE CONSOLIDATING
CORPORATION NON-U.S. ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue from:
Product sales and rentals $ 41,381 $ 8,337 $ (2,956) $ 46,762
Contract manufacturing sales 10,574 --- --- 10,574
Support services 19,750 2,855 --- 22,605
---------- ---------- ---------- ----------
Total revenues 71,705 11,192 (2,956) 79,941
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales, rentals and support services 50,504 8,158 (3,032) 55,630
Selling and administrative 37,254 3,327 --- 40,581
Research and development 3,599 --- --- 3,599
Interest expense - net and other 9,650 445 --- 10,095
---------- ---------- ---------- ----------
Total costs and expenses 101,007 11,930 (3,032) 109,905
---------- ---------- ---------- ----------
Equity (loss) earnings (117) --- 117 ---
---------- ---------- ---------- ----------
(Loss) income before income taxes (29,419) (738) 193 (29,964)
Income tax benefit (expense) 10,611 304 (31) 10,884
---------- ---------- ---------- ----------
Net (loss) income $ (18,808) $ (434) $ 162 $ (19,080)
========== ========== ========== ==========
</TABLE>
10
<PAGE>
6. SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
INFORMATION (continued)
<TABLE>
DICTAPHONE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
THREE MONTHS ENDED JUNE 30, 1998
<CAPTION>
DICTAPHONE DICTAPHONE CONSOLIDATING
CORPORATION NON-U.S. ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue from:
Product sales and rentals $ 49,435 $ 4,004 $ (1,867) $ 51,572
Contract manufacturing sales 11,545 --- --- 11,545
Support services 20,006 1,862 --- 21,868
---------- ---------- ---------- ----------
Total revenues 80,986 5,866 (1,867) 84,985
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales, rentals and support services 45,405 3,746 (2,194) 46,957
Selling and administrative 33,174 2,878 --- 36,052
Research and development 3,256 --- --- 3,256
Interest expense - net and other 9,323 770 --- 10,093
---------- ---------- ---------- ----------
Total costs and expenses 91,158 7,394 (2,194) 96,358
---------- ---------- ---------- ----------
Equity (loss) earnings (346) --- 346 ---
----------- ---------- ---------- ----------
(Loss) income before income taxes (10,518) (1,528) 673 (11,373)
Income tax (expense) benefit (187) 982 (133) 662
---------- ---------- ---------- ----------
Net (loss) income $ (10,705) $ (546) $ 540 $ (10,711)
========== ========== ========== ==========
</TABLE>
11
<PAGE>
6. SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
INFORMATION (continued)
<TABLE>
DICTAPHONE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
SIX MONTHS ENDED JUNE 30, 1997
<CAPTION>
DICTAPHONE DICTAPHONE CONSOLIDATING
CORPORATION NON-U.S. ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue from:
Product sales and rentals $ 84,372 $ 17,211 $ (5,624) $ 95,959
Contract manufacturing sales 19,625 --- --- 19,625
Support services 39,985 5,539 --- 45,524
---------- ---------- ---------- ----------
Total revenues 143,982 22,750 (5,624) 161,108
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales, rentals and support services 89,249 14,949 (5,753) 98,445
Selling and administrative 68,502 7,812 --- 76,314
Research and development 7,333 --- --- 7,333
Interest expense - net and other 19,499 1,414 --- 20,913
---------- ---------- ---------- ----------
Total costs and expenses 184,583 24,175 (5,753) 203,005
---------- ---------- ---------- ----------
Equity (loss) earnings (257) --- 257 ---
---------- ---------- ---------- ----------
(Loss) income before income taxes (40,858) (1,425) 386 (41,897)
Income tax benefit (expense) 14,671 365 (53) 14,983
---------- ---------- ---------- ----------
Net (loss) income $ (26,187) $ (1,060) $ 333 $ (26,914)
========== ========== ========== ==========
</TABLE>
12
<PAGE>
6. SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
INFORMATION (continued)
<TABLE>
DICTAPHONE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
SIX MONTHS ENDED JUNE 30, 1998
<CAPTION>
DICTAPHONE DICTAPHONE CONSOLIDATING
CORPORATION NON-U.S. ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue from:
Product sales and rentals $ 96,323 $ 9,921 $ (5,025) $ 101,219
Contract manufacturing sales 23,492 --- --- 23,492
Support services 40,266 3,833 --- 44,099
---------- ---------- ---------- ----------
Total revenues 160,081 13,754 (5,025) 168,810
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales, rentals and support services 88,559 8,815 (5,405) 91,969
Selling and administrative 64,605 6,438 --- 71,043
Research and development 7,956 --- --- 7,956
Interest expense - net and other 17,641 1,423 --- 19,064
---------- ---------- ---------- ----------
Total costs and expenses 178,761 16,676 (5,405) 190,032
---------- ---------- ---------- ----------
Equity (loss) earnings (1,098) --- 1,098 ---
---------- ---------- ---------- ----------
(Loss) income before income taxes (19,778) (2,922) 1,478 (21,222)
Income tax (expense) benefit (1,360) 1,168 (142) (334)
---------- ---------- ---------- ----------
Net (loss) income $ (21,138) $ (1,754) $ 1,336 $ (21,556)
========== ========== ========== ==========
</TABLE>
13
<PAGE>
6. SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
INFORMATION (continued)
<TABLE>
DICTAPHONE CORPORATION
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 1997
<CAPTION>
DICTAPHONE DICTAPHONE CONSOLIDATING
CORPORATION NON-U.S. ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 8,276 $ 2,001 $ --- $ 10,277
Accounts receivable 64,884 8,699 (1,644) 71,939
Inventories 45,962 3,645 (828) 48,779
Other current assets 7,869 3,806 --- 11,675
---------- ---------- ---------- ----------
Total current assets 126,991 18,151 (2,472) 142,670
Investments in subsidiaries 34,170 --- (34,170) ---
Fixed assets, net 32,041 3,290 --- 35,331
Intangibles, net 214,070 15,252 --- 229,322
Deferred financing costs 10,900 --- --- 10,900
Other assets 49,131 2,383 323 51,837
---------- ---------- ---------- ----------
Total assets $ 467,303 $ 39,076 $ (36,319) $ 470,060
========== ========== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable, interest payable
and accrued liabilities $ 48,649 $ 6,602 $ (1,794) $ 53,457
Advance billings 34,252 2,932 --- 37,184
Current portion of long-term debt 628 167 --- 795
---------- ---------- ---------- ----------
Total current liabilities 83,529 9,701 (1,794) 91,436
Long-term debt 342,372 17,935 (17,491) 342,816
Other liabilities 10,477 70 --- 10,547
Stockholders' equity 30,925 11,370 (17,034) 25,261
---------- ---------- ---------- ----------
Total liabilities and stockholders' equity $ 467,303 $ 39,076 $ (36,319) $ 470,060
========== ========== ========== ==========
</TABLE>
14
<PAGE>
6. SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
INFORMATION (continued)
<TABLE>
DICTAPHONE CORPORATION
SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
JUNE 30, 1998
<CAPTION>
DICTAPHONE DICTAPHONE CONSOLIDATING
CORPORATION NON-U.S. ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 4,658 $ 1,238 $ --- $ 5,896
Accounts receivable 68,359 5,560 (2,109) 71,810
Inventories 48,115 3,511 (448) 51,178
Other current assets 6,920 5,391 --- 12,311
---------- ---------- ---------- ----------
Total current assets 128,052 15,700 (2,557) 141,195
Investments in subsidiaries 31,134 --- (31,134) ---
Fixed assets, net 25,407 3,394 --- 28,801
Intangibles, net 195,165 14,037 --- 209,202
Deferred financing costs, net 10,048 --- --- 10,048
Other assets 49,683 2,432 181 52,296
---------- ---------- ---------- ----------
Total assets $ 439,489 $ 35,563 $ (33,510) $ 441,542
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable, interest payable
and accrued liabilities $ 39,175 $ 6,449 $ (2,109) $ 43,515
Advance billings 34,473 2,923 --- 37,396
Current portion of long-term debt 628 163 --- 791
---------- ---------- ---------- ----------
Total current liabilities 74,276 9,535 (2,109) 81,702
Long-term debt 342,572 17,852 (17,491) 342,933
Deferred gain 1,767 --- --- 1,767
Other liabilities 11,102 706 --- 11,808
Stockholders' equity 9,772 7,470 (13,910) 3,332
---------- ---------- ---------- ----------
Total liabilities and stockholders' equity $ 439,489 $ 35,563 $ (33,510) $ 441,542
========== ========== ========== ==========
</TABLE>
15
<PAGE>
6. SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
INFORMATION (continued)
<TABLE>
DICTAPHONE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
SIX MONTHS ENDED JUNE 30, 1997
<CAPTION>
DICTAPHONE DICTAPHONE CONSOLIDATING
CORPORATION NON-U.S. ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Operating activities:
Net loss $ (26,187) $ (1,060) $ 333 $ (26,914)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 28,010 1,754 --- 29,764
Provision for deferred income taxes (14,797) (26) 53 (14,770)
Non-cash provision for inventory
obsolescence 8,875 1,616 --- 10,491
Change in assets and liabilities:
Accounts receivable 3,098 (1,147) (2,359) (408)
Inventories (1,144) 3,110 (129) 1,837
Other current assets (1,065) (1,813) --- (2,878)
Accounts payable and accrued
liabilities (1,196) (2,619) 2,506 (1,309)
Advance billings (2,886) 106 --- (2,780)
Other assets and other (1,963) 256 (524) (2,231)
---------- ---------- ---------- ----------
Cash (used in) provided by operating
activities (9,255) 177 (120) (9,198)
---------- ---------- ---------- ----------
Investing activities:
Net investment in fixed assets (2,895) (128) --- (3,023)
---------- ---------- ---------- ----------
Cash used in investing activities (2,895) (128) --- (3,023)
---------- ---------- ---------- ----------
Financing activities:
Repayment under term loan facility (5,500) --- --- (5,500)
Borrowing from revolving credit facility 37,500 --- --- 37,500
Repayment under revolving credit facility (20,500) --- --- (20,500)
Other (612) (807) 120 (1,299)
---------- ---------- ---------- ----------
Cash provided by (used in) financing
activities 10,888 (807) 120 10,201
---------- ---------- ---------- ----------
Effect of exchange rate changes on cash --- (86) --- (86)
---------- ---------- ---------- ---------
Decrease in cash (1,262) (844) --- (2,106)
Cash, beginning of period 6,569 1,358 --- 7,927
---------- ---------- ---------- ---------
Cash, end of period $ 5,307 $ 514 $ --- $ 5,821
========== ========== ========== ==========
</TABLE>
16
<PAGE>
6. SUPPLEMENTAL CONSOLIDATING FINANCIAL STATEMENTS AND SEGMENT
INFORMATION (continued)
<TABLE>
DICTAPHONE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
SIX MONTHS ENDED JUNE 30, 1998
<CAPTION>
DICTAPHONE DICTAPHONE CONSOLIDATING
CORPORATION NON-U.S. ADJUSTMENTS CONSOLIDATED
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Operating activities:
Net loss $ (21,138) $ (1,754) $ 1,336 $ (21,556)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 22,699 1,405 --- 24,104
Provision for deferred income taxes 1,150 (106) 142 1,186
Change in assets and liabilities:
Accounts receivable (3,475) 2,832 465 (178)
Inventories (2,153) 44 (380) (2,489)
Other current assets 949 (1,662) --- (713)
Accounts payable and accrued
liabilities (9,673) 339 (315) (9,649)
Advance billings 221 63 --- 284
Other assets and other (3,050) 301 (3,036) (5,785)
---------- ---------- ---------- ----------
Cash (used in) provided by operating
activities (14,470) 1,462 (1,788) (14,796)
---------- ---------- ----------- ----------
Investing activities:
Net investment in fixed assets (4,263) (339) --- (4,602)
Sale of building 14,000 --- --- 14,000
---------- ---------- ---------- ----------
Cash provided by (used in) investing
activities 9,737 (339) --- 9,398
Financing activities:
Repayment under term loan facility (1,800) --- --- (1,800)
Borrowing from revolving credit facility 29,000 --- --- 29,000
Repayment under revolving credit facility (27,000) --- --- (27,000)
Other 915 (1,845) 1,788 858
---------- ---------- ---------- ----------
Cash provided by (used in) financing
activities 1,115 (1,845) 1,788 1,058
---------- ----------- ---------- ----------
Effect of exchange rate changes on cash --- (41) --- (41)
Decrease in cash (3,618) (763) --- (4,381)
Cash, beginning of period 8,276 2,001 --- 10,277
---------- ---------- ---------- ----------
Cash, end of period $ 4,658 $ 1,238 $ --- $ 5,896
========== ========== ========== ==========
</TABLE>
17
<PAGE>
7. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130") as of January 1, 1998.
SFAS 130 establishes standards for reporting and display of comprehensive
income and its components.
Total comprehensive income for the three and six months ending June
30, 1997 and 1998 consists of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $ (19,080) $ (10,711) $ (26,914) $ (21,556)
Foreign currency translation
adjustments 201 (111) (749) (358)
----------- ----------- ----------- -----------
Total comprehensive income $ (18,879) $ (10,822) $ (27,663) $ (21,914)
=========== =========== =========== ===========
</TABLE>
8. SALE/LEASEBACK AGREEMENT
In May 1998, the Company entered into a sale/leaseback agreement
for the sale of its Stratford, Connecticut land and headquarters facility
(which is included in "property, plant and equipment, net"). Cash
proceeds from the sale totalled $14.0 million. The net proceeds were used
by the Company to reduce amounts outstanding under the Term Loans and the
Revolving Credit Facility. The Company realized a gain of $1.8 million on
the sale, net of a $4.1 million writedown of associated goodwill. The
gain on the sale will be recognized over the term of the lease. The
lease, which was recorded as an operating lease, has a term of 20 years.
Future minimum lease payments are as follows:
YEARS ENDED DECEMBER 31,
1998 $ 919
1999 1,452
2000 1,452
2001 1,452
2002 1,452
Later years 24,796
---------
Total minimum lease payments $ 31,523
=========
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -------------------
1997 1998 1997 1998
---- ---- ---- ----
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Total revenue $ 79.9 $ 85.0 $ 161.1 $ 168.8
Cost of sales, rentals and support services 55.6 47.0 98.5 92.0
Selling and administrative expense (1) 40.6 36.0 76.3 71.0
Research and development 3.6 3.3 7.3 8.0
-------- --------- -------- ---------
Operating loss (19.9) (1.3) (21.0) (2.2)
-------- --------- -------- ---------
Net interest expense and other 10.1 10.1 20.9 19.0
Income tax (benefit) expense (10.9) (0.7) (15.0) 0.4
-------- --------- -------- ---------
Net loss $ (19.1) $ (10.7) $ (26.9) $ (21.6)
========== ========== =========== ===========
EBITDA (2) $ 4.3 $ 11.8 $ 17.4 $ 22.2
========== ========== =========== ===========
</TABLE>
- ---------------------
(1) Includes amortization of intangibles.
(2) EBITDA is defined as income before effect of changes in accounting
plus interest, income taxes, depreciation, amortization and other
significant non-cash, non-recurring charges. EBITDA is presented
because it is a widely accepted financial indicator of a company's
ability to incur and service debt. However, EBITDA should not be
considered in isolation or as a substitute for net income or cash
flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's profitability
or liquidity, and is not necessarily comparable to similarly
titled measures of other companies.
19
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- -------------------
1997 1998 1997 1998
---- ---- ---- ----
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue from:
Sales:
Integrated Voice Systems $ 11.0 $ 11.5 $ 22.6 $ 24.0
Integrated Health Systems 7.3 10.7 16.7 20.1
Communication Recording Systems 13.7 16.4 25.6 29.4
Customer Service Parts 4.4 4.7 9.0 9.1
International and Dealer Operations 9.9 7.9 21.1 18.0
Rentals 0.5 0.3 1.0 0.6
-------- --------- -------- ---------
Product sales and rentals 46.8 51.5 96.0 101.2
Contract Manufacturing 10.5 11.6 19.6 23.5
Support service:
Customer Service 19.3 19.9 39.0 39.2
Application & Training Specialists 0.5 0.2 1.0 1.1
International and Dealer Operations 2.8 1.8 5.5 3.8
-------- --------- -------- ---------
Total support service 22.6 21.9 45.5 44.1
Total revenue $ 79.9 $ 85.0 $ 161.1 $ 168.8
======== ========= ======== =========
</TABLE>
RESULTS OF OPERATIONS - SECOND QUARTER 1998 VS. SECOND QUARTER 1997
Total revenue increased 6.3% to $85.0 million in the second quarter of
1998 from $79.9 million for the second quarter of 1997. This increase in revenue
is attributable to higher product sales revenue from Integrated Voice Systems
("I.V.S."), Integrated Health Systems ("I.H.S."), Communications Recording
Systems ("C.R.S.") and higher revenue from Contract Manufacturing and Customer
Service (including sale of parts), offset in part by lower revenue from
International and Dealer Operations and Application and Training Specialists
("A.T.S.").
I.V.S. revenue increased 4.2% to $11.5 million from $11.0 million due to
higher sales of the Company's Enterprise Express(TM) and For the Record(TM)
Court Recording System products. I.V.S. orders in the second quarter of 1998
declined 24.6% to $11.2 million from $14.8 million in the second quarter of
1997. I.H.S. revenue increased 46.4% to $10.7 million from $7.3 million due to
increased Enterprise Express(TM) sales. I.H.S. orders in the second quarter of
1998 increased 55.0% to $13.4 million from $8.7 million in the second quarter of
1997. C.R.S. revenue increased 20.2% to $16.4 million from $13.7 million due to
increased Prolog(TM)/Guardian(TM) and Insight(TM) installations. C.R.S. orders
in the second quarter of 1998 increased 14.8% to $16.3 million from $14.2
million in the second quarter of 1997. Customer Service revenue (including sale
of parts) increased 3.9% to $24.6 million from $23.7 million due to higher
proprietary product service contract and warranty revenue, partially offset by
lower installation revenue. Sales and service revenue from International and
Dealer Operations declined 23.2% to $9.7 million from $12.7 million due to lower
sales of system, desktop/portable and C.R.S. products and lower service revenue
as well as $0.1 million of unfavorable currency exchange. Orders from
International and Dealer Operations declined 31.2% to $6.6 million in the second
quarter of 1998 from $9.6 million in the second quarter of 1997. Contract
Manufacturing revenue increased 9.4% to $11.6 million from $10.5 million due to
growth in new Contract Manufacturing customers.
20
<PAGE>
Cost of sales, rentals and support services declined 15.6% to $47.0
million (55.3% of revenue) during the second quarter of 1998 from the $55.6
million (69.6% of revenue) in the second quarter of 1997. Excluding additional
depreciation and amortization expense associated with purchase accounting
adjustments related to the Acquisition, cost of sales, rentals and support
services would have declined by 13.4 percentage points to 55.1%. This decline is
attributable to a $10.5 million charge in the second quarter of 1997 for excess
service parts and field stock inventory associated with products replaced by
Enterprise Express(TM). Higher realized prices for C.R.S. and I.H.S. products
and lower Customer Service parts cost also accounted for the decline.
Selling and administrative expenses (including amortization of
intangibles) declined 11.2% to $36.0 million (42.4% of revenue) during the
second quarter of 1998 from $40.6 million (50.8% of revenue) in the second
quarter of 1997. Excluding additional depreciation and amortization expense
associated with purchase accounting adjustments related to the Acquisition of
$7.8 million and $9.3 million for the second quarter of 1998 and 1997,
respectively, selling and administrative expenses would have declined by $3.1
million from the second quarter of 1997 to the second quarter of 1998. This
decline is attributable to a $2.3 million severance provision recorded in the
second quarter of 1997 in addition to lower I.V.S. and I.H.S. selling expenses,
as well as lower employee benefit and property tax expenses. Partially
offsetting these expense reductions were higher C.R.S. selling expenses and
increased manufacturing expenses associated with the Company's assembly facility
start-up.
Research and development expenses of $3.3 million declined 9.5% from $3.6
million as increased software development expenses qualified for capitalization.
The Company recorded an operating loss of $1.3 million during the second
quarter of 1998 compared to an operating loss of $19.9 million for the second
quarter of 1997. Excluding the impact of purchase accounting adjustments
associated with the Acquisition of $8.0 million and $10.2 million for the second
quarter of 1998 and 1997, respectively, operating profit would have increased by
$16.4 million due to second quarter 1997 charges for inventory obsolescence and
severance as well as higher revenue, higher price realization and lower
operating expenses. Operations were also impacted by favorable adjustments to
estimated sales and warranty reserves offset by an increase in accounts
receivable reserves in the second quarter.
The Company has recorded a gross deferred tax asset of $80.0 million
included in other assets reflecting the benefit of net operating loss
carryforwards and various book tax temporary differences. The net operating loss
carryforward for federal income tax purposes as of June 30, 1998 is $100.3
million of which $13.7 million of the net operating loss carryforward will
expire in the year 2010, $33.2 million will expire in the year 2011, $39.3
million will expire in the year 2012, and $14.1 million will expire in the year
2018. In order to fully realize the deferred tax asset, the Company will need to
generate future taxable income prior to expiration of the net operating loss
carryforwards. In December 1997, the Company established a valuation allowance
of $24.1 million against the deferred tax assets. In the first and second
quarters of 1998, the Company increased its valuation allowance by $4.7 million
and $3.5 million, respectively, resulting in a net deferred tax asset of $47.7
million. Management believes, based upon the Company's history of prior
operating results, its current circumstances, and its expectations for the
future, that taxable income of the Company will more likely than not be
sufficient to fully utilize the net deferred tax asset of $47.7 million recorded
at June 30, 1998, prior to expiration. The amount of the deferred tax asset
considered realizable, however, could be reduced if estimates of future taxable
income during the net operating loss carryforward period are reduced.
21
<PAGE>
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1998 VS. SIX MONTHS
ENDED JUNE 30, 1997
Total revenue increased 4.8% to $168.8 million for the first six months
of 1998 from $161.1 million for the first six months of 1997. This increase in
revenue is attributable to higher product sales revenue from I.V.S., I.H.S.,
C.R.S., and higher revenue from Contract Manufacturing, A.T.S., and Customer
Service (including sale of parts), offset in part by lower revenue from
International and Dealer Operations.
I.V.S. revenue increased 6.0% to $24.0 million from $22.6 million due to
higher Enterprise Express(TM) sales. I.V.S. orders in the first six months of
1998 declined 11.1% to $23.8 million from $26.8 million in the first six months
of 1997. I.V.S. order backlog at June 30, 1998 declined 3.3% to $6.2 million
versus order backlog at December 31, 1997. I.H.S. revenue increased 20.6% to
$20.1 million from $16.7 million due to increased Enterprise Express(TM) sales.
I.H.S. orders for the first six months of 1998 increased 19.7% to $20.0 million
from $16.7 million in the first six months of 1997. I.H.S. order backlog at June
30, 1998 declined 2.0% to $11.6 million versus order backlog at December 31,
1997. C.R.S. revenue increased 14.9% to $29.4 million from $25.6 million due to
increased Prolog(TM)/Guardian(TM) and Insight(TM) installations. C.R.S. orders
for the first six months of 1998 increased 2.2% to $28.6 million from $28.0
million in the first six months of 1997. C.R.S. order backlog at June 30, 1998
declined 8.7% to $6.8 million versus order backlog at December 31, 1997.
Customer service revenue (including sale of parts) increased 0.7% to $48.3
million from $48.0 million as increased warranty revenue offset reductions in
proprietary product contract, hourly, installation and integration revenue.
A.T.S. revenue increased 8.6% to $1.1 million from $1.0 million due to increased
customer training in support of I.V.S., I.H.S. and C.R.S. products. Sales and
service revenue from International and Dealer Operations declined 18.1% to $21.8
million from $26.6 million due to lower sales of systems, C.R.S. and
desktop/portable products and lower service revenue as well as $0.3 million of
unfavorable currency exchange. Orders from International and Dealer Operations
for the first six months of 1998 declined 22.4% to $15.8 million from $20.4
million in the first six months of 1997. International and Dealer Operations
order backlog at June 30, 1998 declined 51.4% to $1.0 million versus order
backlog at December 31, 1997. Contract Manufacturing revenue increased 19.7% to
$23.5 million from $19.6 million due primarily to growth from existing Contract
Manufacturing customers.
Cost of sales, rentals and support services declined 6.6% to $92.0
million (54.5% of revenue) during the first six months of 1998 from $98.5
million (61.1% of revenue) for the first six months of 1997. Excluding
additional depreciation and amortization expense associated with purchase
accounting adjustments related to the Acquisition, cost of sales, rentals and
support services would have declined by 5.7 percentage points to 54.3%. This
decline is attributable to a $10.5 million charge in the second quarter of 1997
for inventory obsolescence, offset in part by lower C.R.S. price realization,
higher Customer Service field and technical support costs and a higher content
of low margin Contract Manufacturing revenue.
Selling and administrative expenses (including amortization of
intangibles) declined 6.9% to $71.0 million (42.1% of revenue) during the first
six months of 1998 from $76.3 million (47.4% of revenue) for the first six
months of 1997. Excluding additional depreciation and amortization expense
associated with purchase accounting adjustments related to the acquisition of
$15.7 million and $18.9 million for the first six months of 1998 and 1997,
respectively, selling and administrative expenses would have declined by $2.1
million from the first six months of 1997 to the first six months of 1998. This
decline is attributable to a $2.3 million severance provision in the second
quarter of 1997, lower I.V.S. and I.H.S. selling expenses and lower management
compensation and property tax expenses, partially offset by increased C.R.S.
selling costs and start-up costs associated with the Company's Milford assembly
facility.
Research and development expenses of $8.0 million (7.9% of product sales
and rental revenue) increased 8.5% from $7.3 million (7.6% of product sales and
rental revenue), reflecting increased staffing and compensation.
22
<PAGE>
The Company recorded an operating loss of $2.2 million during the first
six months of 1998 compared to an operating loss of $21.0 million for the first
six months of 1997. Excluding the impact of purchase accounting adjustments
associated with the Acquisition of $16.0 million and $20.7 million for the first
six months of 1998 and 1997, respectively, operating profit would have increased
by $14.1 million due to 1997 charges for inventory obsolescence and severance,
and higher revenue.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consists primarily of scheduled
payments of principal and interest on its indebtedness, working capital needs
and capital expenditures. At June 30, 1998, the Company had outstanding Term
Loans of $132.2 million, a $11.0 million loan outstanding under the $40.0
million Revolving Credit Facility and $200.0 million of Notes. Availability
under the Revolving Credit Facility at June 30, 1998 was $29.0 million.
Scheduled annual principal payments on the Term Loans are $0.6 million in 1998,
1999 and 2000. There are no scheduled reductions in the Revolving Credit
Facility over the next three years.
In May 1998, the Company entered into a sale/leaseback agreement for the
sale of its Stratford, Connecticut land and headquarters facility. Cash proceeds
from the sale totalled $14.0 million. The net proceeds were used by the Company
to reduce amounts outstanding under the Term Loans and the Revolving Credit
Facility. A gain of $1.8 million was recorded on the sale, which is being
amortized over the lease term of 20 years.
In connection with the terms of the Credit Agreement, the Company entered
into interest rate swap agreements in November 1995, effective February 16,
1996, with an aggregate notional principal amount equivalent to $75.0 million
maturing on February 16, 1999. The swap effectively converts that portion of the
Term Loans to a fixed rate component of 5.8%; thus, reducing the impact of
changes in interest rates, converting the total effective interest rate on fifty
percent of the initial outstanding Term Loans to 9.3%. No funds under the swap
agreements are actually borrowed or are to be repaid. Amounts due to or from the
counterparties are reflected in interest expense in the periods in which they
accrue.
In addition, the Credit Agreement contains covenants that significantly
limit or prohibit, among other things, the ability of the Company to incur
indebtedness, make prepayments of certain indebtedness, pay dividends on Common
Stock, make investments, engage in transactions with stockholders and
affiliates, create liens, sell assets and engage in mergers and consolidations
and requires that the Company maintain certain financial ratios.
The Company had $200.0 million of Notes outstanding as of June 30, 1998.
The Notes are subordinated to the Credit Agreement financings and other senior
indebtedness, as defined in the Note Indenture. The Notes contain covenants
similar to the Credit Agreement and provide for each noteholder to have the
right to require that the Company repurchase the Notes at 101% of the principal
amount upon a change of control as defined in the Note Indenture. The Notes bear
interest of 11-3/4% per annum, payable semi-annually on each February 1 and
August 1. The Notes mature on August 1, 2005. At June 30, 1998, the fair value
of the Notes was favorable $4.0 million based on dealer quotes.
Capital expenditures for the first six months of 1998 totaled $5.1 million.
The Company does not expect that the limitation on capital expenditures
contained in the Credit Agreement will limit, in any material respects, the
Company's ability to fund capital expenditures.
23
<PAGE>
The Company's quarterly revenues and other operating results have been
and will continue to be affected by a wide variety of factors that could have a
material adverse effect on the Company's financial performance during any
particular quarter. Such factors include, but are not limited to, the level of
orders that are received and shipped by the Company in any given quarter, the
rescheduling and cancellation of orders by customers, availability and cost of
materials, the Company's ability to enhance its existing products and to
develop, manufacture and successfully introduce and market new products, new
product developments by the Company's competitors, market acceptance of products
of both the Company and its competitors, competitive pressures on prices,
significant damage to or prolonged delay in operations at the Company's sole
manufacturing facility, and interest rate and foreign exchange fluctuations. The
Company introduced a number of new products in its target markets in 1997 and
plans to introduce additional new products in 1998 which are expected to enhance
future revenues and liquidity of the Company. However, there can be no assurance
that the Company will be able to implement its plans to introduce such products
in a timely fashion, or that such products will meet the expectations of the
Company for either revenues or profitability. The Company believes that cash
flows from operating activities, the successful introduction of its new
products, and provisions under the Credit Agreement for the sale or financing of
certain assets, as well as its ability to borrow under the Revolving Credit
Facility, will be adequate to meet the Company's debt service obligations,
working capital needs and planned capital expenditures for the foreseeable
future.
On August 4, 1998, the Securities and Exchange Commission issued an
interpretation, "Disclosure of Year 2000 Issues and Consequences by Public
Companies, Investment Advisers, Investment Companies, and Municipal Securities
Issuers", which provides guidance on disclosure about Year 2000 issues in public
filings. The Company is aware of this interpretation and is currently
accumulating the necessary information to comply with the provisions of this
release in subsequent filings. The Company remains actively engaged in resolving
issues associated with the Year 2000 challenge and is performing assessments of
its internal systems, products, physical plant and infrastructure, and is making
inquiries with respect to Year 2000 compliance of certain of its customers and
suppliers. The Company is also making necessary modifications to resolve related
Year 2000 issues and anticipates completion of modifications and testing
programs by mid 1999.
The Company may, from time to time, provide estimates as to future
performance. Such estimates would be "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Because such statements include risks and
uncertainties, actual results may differ materially from those estimates
provided. The Company undertakes no duty to update such forward looking
statements. Factors that could cause actual results to differ from these forward
looking statements include, but are not limited to, those previously discussed
herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Not currently applicable to the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
See Note 5 to the Company's Condensed Consolidated Statements of
Operations (Unaudited) which is incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) EXHIBITS
10.20 -- Agreement of Purchase and Sale of Stratford,
CT property between Dictaphone Corporation and
Stratford, CT Business Trust, dated May 14, 1998.
10.21 -- Lease Agreement of Stratford, CT property
between Dictaphone Corporation and Stratford, CT
Business Trust, dated May 14, 1998.
27 -- Financial Data Schedule.
24
<PAGE>
UNDERTAKING:
The undersigned, Dictaphone Corporation, hereby undertakes, pursuant to
Regulation S-K, Item 601(b), paragraph (4) (iii), to furnish to the Securities
and Exchange Commission upon request all constituent instruments defining the
rights of holders of long-term debt of Dictaphone Corporation and its
consolidated subsidiaries not filed herewith for the reason that the total
amount of securities authorized under any of such instruments does not exceed 10
percent of the total consolidated assets of Dictaphone Corporation and its
consolidated subsidiaries.
(b) REPORTS ON FORM 8-K
-------------------
There were no Reports on Form 8-K filed by the Company
during the three months ended June 30, 1998.
25
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1998 Dictaphone Corporation
--------------------------------------
(Registrant)
By: /s/ John H. Duerden
--------------------------------------
Name: John H. Duerden
Title: Chairman, Chief Executive
Officer and President
(Principal Executive Officer)
By: /s/ Joseph D. Skrzypczak
--------------------------------------
Name: Joseph D. Skrzypczak
Title: Senior Vice President,
Chief Financial Officer and
Director (Principal Financial
and Accounting Officer)
26
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBITS DESCRIPTION NUMBERED PAGE
- -------- ----------- -------------
10.20 -- Agreement of Purchase and Sale of
Stratford, CT property between Dictaphone
Corporation and Stratford CT Business Trust,
dated May 14, 1998.
10.21 -- Lease Agreement of Stratford, CT property
between Dictaphone Corporation and Stratford,
CT Business Trust, dated May 14, 1998.
27 -- Financial Data Schedule.
27
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement) is dated as of
the 14th day of May, 1998 by and between DICTAPHONE CORPORATION, a Delaware
corporation, ("Seller"), at the address of 3191 Broadridge Avenue, Stratford,
Connecticut 06497; and STRATFORD CT BUSINESS TRUST, a Delaware business trust
(the "Purchaser"), at the address of c/o U.S. Realty Advisors, Inc., 1370 Avenue
of the Americas, New York, New York 10019.
RECITALS
A. Seller owns that certain parcel of real property located in
Stratford, Connecticut more particularly described herein, which Seller desires
to sell to Purchaser.
B. Purchaser and Seller desire to enter into this Agreement pursuant
to which Purchaser will buy and Seller will sell the Purchased Assets, as
defined below, and the other assets hereinafter described.
AGREEMENTS
In consideration of the purchase price, the promises and covenants
contained herein, the parties hereto, hereby agree as follows:
1. DEFINITIONS:
A. ACCEPTANCE DATE. "Acceptance Date" means the date upon
which this Agreement is signed by both Seller and Purchaser.
B. APPRAISAL. "Appraisal" means the appraisal obtained by
Purchaser, at Seller's expense, for each of the Purchased Assets.
C. CLOSING. "Closing" means the consummation of the purchase
of the Purchased Assets (defined below) as contemplated by Section 12 of this
Agreement.
D. CONSENT. "Consent" shall mean that certain Assignment of
Master Lease and Guaranty Consent Agreement, dated as of the date hereof, among
Seller, Purchaser and Purchaser's Lender.
E. DUE DILIGENCE DOCUMENTS. "Due Diligence Documents" shall
have the meaning set forth in Section 8(A).
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F. MASTER LEASE. "Master Lease" means the lease to be executed
at the Closing between Tenant, as lessee, and Purchaser, as lessor, with respect
to all of the Purchased Assets, the form of which is attached hereto as
EXHIBIT B.
G. PERMITTED EXCEPTIONS. "Permitted Exceptions" means the
exceptions relating to title as more particularly described in Section 10(E)
below.
H. PROJECT. "Project" shall mean a Real Property with the
Improvements located thereon.
I. PURCHASED ASSETS. "Purchased Assets" means the Project
(Real Property, Improvements and FF&E) as more particularly described in Section
3 below, which is purchased by Purchaser pursuant to the terms of this
Agreement.
J. PURCHASE PRICE. "Purchase Price" means the price payable
for the purchase of the Purchased Assets as more particularly set forth in
Section 5 below.
K. PURCHASER'S LENDER. "Purchaser's Lender" means the lender
engaged by Purchaser to finance a portion of the Purchase Price.
L. REAL PROPERTY. "Real Property" means that certain parcel of
real property located in Stratford, Connecticut described on EXHIBIT A attached
hereto and incorporated herein, together with all easements, rights-of-way,
privileges and appurtenances to all of such parcels.
M. SELLER COSTS. "Seller Costs" means the costs actually
incurred by Seller in connection with the closing of the transaction as
contemplated by Section 12(D)(1) of this Agreement.
N. TENANT. "Tenant" shall mean Dictaphone Corporation.
O. TITLE COMPANY. "Title Company" means Commonwealth Land
Title Insurance Company.
2. AGREEMENT. Subject to the terms and conditions set forth in this
Agreement, Seller will sell and convey to Purchaser and Purchaser will purchase
from Seller at the Purchase Price and upon the terms and conditions set forth in
this Agreement the Purchased Assets more particularly described in Section 3
below.
3. PROPERTY TO BE SOLD. The Purchased Assets to be purchased and sold
(free and clear of all liens, claims, pledges and encumbrances, subject only to
the Permitted Exceptions) are as follows:
A. REAL PROPERTY. Fee simple title to the Real Property.
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<PAGE>
B. IMPROVEMENTS. All improvements now or hereafter located in,
upon, and under the Real Property, including without limitation, all buildings,
utilities systems, landscaping and lighting facilities, but excluding Tenant's
Personal Property (as defined in the Master Lease) (collectively, the
"Improvements").
C. FF&E. All fixtures and equipment located in, upon, and
under the Real Property, excluding only Tenant's Personal Property, as such term
is defined in the Master Lease (the "FF&E").
4. INTENTIONALLY OMITTED.
5. PURCHASE PRICE. The total Purchase Price for the Purchased Assets
shall be FOURTEEN MILLION and 00/100 Dollars ($14,000,000); plus all Purchaser
Costs (if allowed as an addition pursuant to the provisions of Section 12(D)).
The Purchase Price shall be payable by Purchaser at Closing via federal wire
transfer, which amount shall be adjusted for closing costs as provided herein
and in Section 12 below.
6. SELLER'S WARRANTIES AND REPRESENTATIONS. Seller represents,
warrants and agrees that the following are true and correct on the Acceptance
Date of this Agreement and will be true and correct on and as of Closing:
A. AUTHORITY. At Closing, Seller will be the sole owner of the
Purchased Assets and will possess all right, authority, and power to execute and
perform under this Agreement, the Master Lease, the Consent and the other
documents executed and delivered by Seller in connection with this transaction.
This Agreement, the Master Lease, the Consent and the other documents executed
and delivered by Seller in connection with this transaction have been duly
executed by Seller and are enforceable against Seller in accordance with their
terms, and Seller will convey good and marketable title to the Purchased Assets
to Purchaser at Closing, free and clear of all liens, claims, pledges and
encumbrances arising by, through and under Seller, except for the Permitted
Exceptions.
B. TITLE. Seller is the sole owner of all the Purchased Assets
and has not assigned, pledged, transferred, leased or otherwise encumbered
Seller's interest in the Purchased Assets. Seller shall be able to and will
transfer to Purchaser at Closing good and marketable title to the Purchased
Assets, free and clear of all liens, claims, pledges and encumbrances arising
by, through and under Seller, other than the Permitted Exceptions.
C. TAXES. Subject to Section 12(C), Seller has paid, or will
pay when due after Closing, in full all taxes and special assessments on the
Purchased Assets that have become due and payable through the date of the
Closing, and the Purchased Assets will not be subject to any lien for payment of
taxes, other than general property and personal property taxes and assessments
and other taxes constituting a lien not yet payable.
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<PAGE>
D. NO VIOLATIONS. Neither execution and delivery of this
Agreement, the Master Lease nor the Consent nor the consummation of the
transactions hereby contemplated, nor performance of the covenants and
obligations on the part of Seller to be performed hereunder, under the Master
Lease nor under the Consent nor the fulfillment of the terms hereof, under the
Master Lease nor under the Consent are restricted by, will conflict with, result
in a violation or breach of, constitute (with or without notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration by the other parties thereto) under or require the consent of any
person under any of the terms, conditions or provision of any agreement to which
Seller is a party, or any order, writ, injunction, decree, statute, rule or
regulation applicable to Seller.
E. LITIGATION AND CLAIMS. There are no material actions, suits
or proceedings by any governmental or quasi-governmental entity or any other
person or entity, pending or, to the best knowledge of Seller, threatened
against any part of the Purchased Assets.
F. COMPLIANCE WITH LAW. To Seller's best knowledge and belief,
Seller is in possession of all governmental licenses, permits and easements
necessary or required to own and operate the Projects. Such licenses, permits
and easements are in full force and effect and Seller as received no written
notice that a violation exists in respect of any such license, permit or
easement.
G. ZONING. The Real Property upon which each of the Projects
is located is currently zoned to allow the use of the Project as a an office
property.
H. INSURANCE. Seller presently causes to be maintained
policies of insurance with respect to the Purchased Assets, which policies meet
all of the requirements under any existing mortgage and
under the Master Lease.
I. BANKRUPTCY. There are no bankruptcy, reorganization or
arrangement proceedings pending, being contemplated by or, to the best knowledge
of Seller, threatened against Seller or Tenant. Each of Tenant and Seller is
solvent and will not be rendered insolvent by virtue of the transactions
contemplated by this Agreement.
J. NON-FOREIGN STATUS. Seller is not a "foreign person" as
defined in section 1445 of the Internal Revenue Code of 1986, as amended, and
the Income Tax Regulations thereunder.
7. PURCHASER'S REPRESENTATIONS AND WARRANTIES AND ACKNOWLEDGMENT.
A. REPRESENTATIONS AND WARRANTIES. Purchaser represents,
warrants and agrees that on the Acceptance Date of this Agreement and on and as
of Closing, Purchaser will have all right, power and authorization to execute
and perform under this Agreement, the Master Lease, the Consent and the other
documents executed and delivered by Purchaser in connection
4
<PAGE>
with this transaction. Purchaser further represents, warrants and agrees that
this Agreement, the Master Lease, the Consent and the other documents executed
and delivered by Purchaser in connection with this transaction have been duly
executed by Purchaser and are enforceable against Purchaser in accordance with
their terms.
B. NO VIOLATIONS. Neither execution and delivery of this
Agreement, the Master Lease nor the Consent nor the consummation of the
transactions hereby contemplated, nor performance of the covenants and
obligations on the part of Purchaser to be performed hereunder, under the Master
Lease nor under the Consent nor the fulfillment of the terms hereof, under the
Master Leaser nor under the Consent are restricted by, will conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration by the other parties thereto) under or require the
consent of any person under any of the terms, conditions or provision of any
agreement to which Purchaser is a party, or any order, writ, injunction, decree,
statute, rule or regulation applicable to Purchaser.
C. BANKRUPTCY. There are no bankruptcy, reorganization or
arrangement proceedings pending, being contemplated by or, to the best knowledge
of Purchaser, threatened against Purchaser. Purchaser is solvent and will not be
rendered insolvent by virtue of the transactions contemplated by this Agreement.
8. PURCHASER'S INSPECTION OF THE PURCHASED ASSETS.
A. DELIVERY OF DOCUMENTS. Seller hereby represents that it has
provided copies of the following documents, if any, in Seller's possession, as
they relate to the Purchased Assets, for Purchaser's review:
(1) Copy of existing plans and specifications, and copy of
existing location maps;
(2) Audited financial statements for Tenant;
(3) Environmental studies or reports (Phase 1) for the
Purchased Assets completed within six months of the
date of this Agreement, certified to Purchaser and its
assigns, and to Purchaser's Lender;
(4) A Survey for the Real Property completed within six
months of the date of this Agreement as specified in
Section 9 below, certified (in form acceptable to
Purchaser's Lender) to Purchaser and its assigns, and
to Purchaser's Lender;
(5) A Title Commitment for the Real Property in
conformance with Section 10(B) below; and
5
<PAGE>
(6) An engineering and property condition report.
The documents referred to this Section 8(A) shall be referred to as the "Due
Diligence Documents". The cost of the Due Diligence Documents shall be a Seller
Cost, and shall be added to the Purchase Price at Closing if allowed under the
provisions of Section 12(D).
B. PURCHASER'S ACCESS TO THE PURCHASED ASSETS. Seller
covenants and agrees that from and after the Acceptance Date until Closing or
earlier termination of this Agreement, Purchaser and its lenders, contractors,
agents and/or employees, at the sole expense of Purchaser, may enter upon any
portion of the Real Property from time to time during reasonable business hours,
without any disruption of the normal conduct of Seller's business in or
construction activities on, the Real Property, and with reasonable prior notice
to Seller for the purposes of inspection (mechanical, structural and otherwise),
making surveys and test, staking and obtaining topographical information,
including environmental testing and examination of title and operating condition
of the Purchased Assets. Except as otherwise provided herein, all such
inspections and tests shall be at Purchaser's sole cost and expense. In
addition, Purchaser hereby agrees to indemnify, defend and hold Seller harmless
from any and all losses, liabilities, claims, expenses, costs, damages and
mechanics' liens which may be brought or which may be filed against the
Purchased Assets or any portion thereof by reason of the performance of any of
the acts herein mentioned by Purchaser or Purchaser's agents, and to defend any
action brought by reason of any of the acts herein mentioned and reimburse
Seller for reasonable attorneys' fees and costs incurred by Seller by reason of
any such action. The provisions of this paragraph shall survive Closing and
delivery of deeds.
9. SURVEY. Seller has provided an ALTA "as built" survey, or the
appropriate documentation for the state in which the Real Property is located,
for the Real Property, which meets ALTA/ACSM 1992 requirements, is certified to
Purchaser and the Title Company and Purchaser's Lender, and which shall be
sufficient for the Title Company to remove the preprinted title exceptions
related to survey matters or take other actions as appropriate (the "Surveys").
10. EVIDENCE OF TITLE.
A. CONDITION OF TITLE. Seller shall convey to Purchaser good
and marketable, fee simple title to each of the Purchased Assets, free and clear
of all liens, claims, pledges and encumbrances arising by, through or under
Seller, subject only to the Permitted Exceptions as provided below. It is
specifically understood that the Purchased Assets will not, at the time of
Closing, be subject to any monetary liens or encumbrances, regardless of whether
they arose by, through or under Seller.
B. TITLE COMMITMENT. Seller shall provide, at Seller's expense
and such expense shall be a Seller Cost, and shall be added to the Purchase
Price if allowed under Section 12(D), to Purchaser a commitment (the "Title
Commitment") issued through the Title Company committing to issue to Purchaser
an ALTA Form 1970 revised 1984 owner's policy of title
6
<PAGE>
insurance, insuring good and marketable fee simple title to each of the
Purchased Assets, free and clear of all liens, claims, pledges and encumbrances
other than the Permitted Exceptions, but not subject to the standard printed
exceptions (unless such standard printed exceptions cannot be removed with the
Surveys and an affidavit by Seller) and such reasonable endorsements requested
by Purchaser, together with legible copies of all exceptions to the title
referred to in the Title Commitment (the "Title Documents"). Purchaser shall
also be provided with amounts of reinsurance and direct access agreements as
Purchaser or Purchaser's Lender may require.
C. TITLE POLICY. Purchaser shall pay at Closing the cost of
the premium for the Title Policy for the Purchased Assets (the "Title Policy")
(and the expense shall be a Purchaser Cost, and shall be added to the Purchase
Price if allowed under Section 12(D)), and the Title Company shall deliver such
title policy to Purchaser at the Closing, which title policy shall insure title
to the Purchased Assets, subject only to the Permitted Exceptions.
D. DEFECTS OF TITLE. If prior to Closing Purchaser asserts the
existence of any encumbrance, encroachment on or defect in or objection to title
to any portion of any Purchased Asset based on Purchaser's examination of the
Title Commitments, the Title Documents, and the Surveys or any other information
received by Purchaser (any of which is called a "Defect" in Title"), Purchaser
shall give Seller written notice of such Defect in Title, and Seller shall have
five (5) days after receipt of such notice to elect to either (i) terminate this
Agreement by written notice to Purchaser (unless Purchaser waives such Defect in
Title), or (ii) remove, or otherwise cure to Purchaser's satisfaction, the
Defect in Title, and if necessary the date of Closing shall be extended for such
5-day period to allow Seller to so remove or cure the Defect in Title. Seller
shall be obligated to remove any monetary lien or encumbrance with respect to
the Purchased Asset. In the event Seller fails, refuses or is unable to remove
or cure the Defect in Title, then Purchaser shall have the right to either: (i)
waive such Defect in Title and proceed to Closing or (ii) terminate this
Agreement by delivering written notice of such to Seller, except that with
respect to monetary liens or encumbrances, Purchaser shall have the right to
enforce Seller's obligation to remove the same.
E. PERMITTED EXCEPTIONS. Any title exceptions not disapproved
by Purchaser in writing on or before the Closing, including any Defect in Title
waived by Purchaser as provided in Section 10(D) above, shall be deemed to be
approved by Purchaser and shall be referred to as "Permitted Exceptions" under
this Agreement.
11. CONDITIONS PRECEDENT TO CLOSING. The obligations of the respective
parties to close the purchase of the Purchased Assets will be subject to
fulfillment of the following conditions prior to the Closing:
A. SELLER'S CONDITIONS. Seller will not be obligated to close
the purchase of the Purchased Assets unless Purchaser has complied with all of
the terms and conditions of this Agreement to be met by Purchaser prior to
Closing, and has delivered all funds, instruments, and documents required to be
deposited by Purchaser in connection with the Closing pursuant to the
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<PAGE>
terms of this Agreement and Purchaser's representations and warranties remain
accurate. Seller may at any time at or prior to Closing waive any of the
preceding requirements.
B. PURCHASER'S CONDITIONS. Purchaser will not be obligated to
close the purchase of the Purchased Assets unless (i) Seller has complied with
all of the terms and conditions of this Agreement to be met by Seller prior to
the Closing, and has delivered all instruments and documents required to be
deposited by Seller in connection with the Closing pursuant to the terms of this
Agreement; (ii) there has been no material, adverse change in the financial
condition or results of operation of Seller from and after Purchaser's
acceptance of the Due Diligence Documents prior to the Closing; and (iii) all
representations and warranties of Seller contained herein shall remain accurate
in all material respects. Purchaser may at any time at or prior to Closing waive
any one or more of the preceding requirements.
12. CLOSING.
A. DATE, TIME AND PLACE. Closing will take place at the
location designated by Purchaser's Lender, or at such other location as agreed
to by the parties, at 10:00 a.m. on May 14, 1998, (the "Closing Date"), or
earlier upon the mutual agreement of the parties. At Purchaser's Lender's
option, the Closing shall be conducted either by delivery of all closing
documents into escrow, or in the manner of a New York style closing.
The transactions consummated at Closing, when effected, will
be deemed to be effective as of the close of business on the date of Closing,
except as otherwise specifically provided in this Agreement. All action to be
taken at Closing will be considered as taken simultaneously and no paper,
document, or instrument will be considered to be delivered until all items to be
delivered have been delivered.
B. CONVEYANCES.
(1) At Closing, Seller will deliver to Purchaser the
following:
(i) A special or limited warranty deed, sufficient
to permit the issuance of the Title Policy, conveying each of the Purchased
Assets free and clear of all liens, claims, pledges and encumbrances arising by,
through or under Seller, subject only to the Permitted Exceptions, and not
subject to any monetary encumbrances.
(ii) Four original counterparts of the Master
Lease, executed by Tenant, as tenant, and Purchaser, as landlord, provided that
rent under the Master Lease shall be specified on Schedule C to the Master Lease
as provided in Section 15 below in this Agreement.
(iii) Tenant shall have delivered to Purchaser
certificates evidencing the insurance coverage and policies to be carried by
Tenant, as tenant, under the terms of the Master Lease naming Purchaser as an
additional insured.
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(iv) Seller shall have delivered to Purchaser a
certified copy of the resolutions of the Board of Directors of Seller and
Tenant, as applicable, authorizing the sale of the Purchased Assets and
authorizing the execution, delivery and performance of the Master Lease.
(v) Seller shall have delivered to Purchaser a
"non-foreign" certificate pursuant to Treas. Reg. ss. 1.14452T(b)(2), in form
and substance satisfactory to Purchaser, or such other evidence that Seller is
not a "foreign person" within the meaning of Internal Revenue Code Section 1445,
as Purchaser may reasonably require.
(vi) Seller shall have caused to be filed at its
cost and expense (which expense will be a Seller Cost, and will be added to the
Purchase Price if allowed under Section 12(D)) any negative declaration or
similar document which may be required by the statutes of the state in which the
Real Property is located with respect to environmental matters.
(vii) Any legal opinions reasonably required by
Purchaser's Lender or by Purchaser in connection with the Master Lease, this
Agreement or the closing documents.
(viii) Any other documents contemplated to be
delivered by Seller under the terms of this Agreement or reasonably required to
effectuate the terms of this Agreement.
C. PRORATIONS. In view of the continuing relationship between
Seller, as tenant, and Purchaser, as landlord, under the Master Lease, and the
obligations of Seller under the terms and conditions of the Master Lease, there
shall be no proration of insurance, taxes, special assessments, utilities or any
other similar costs at Closing. The parties acknowledge that Purchaser shall
have no obligation with respect to such expenses, and that the same shall be
paid by Tenant as tenant under the Master Lease.
D. CLOSING COSTS. The costs incurred by Purchaser and Seller
in connection with the Closing shall be paid as follows:
(1) Purchaser shall pay (i) Purchaser's lender's fee, (ii)
Purchaser's lender's reasonable attorneys' fees, (iii) mortgage recording taxes
and the cost of obtaining both the fee and mortgage title policy in excess of a
fee policy, (iv) Purchaser's local counsel fees, and (v) Purchaser's
out-of-pocket costs. Purchaser shall also pay any other expenses incurred in
connection with the Closing, unless Seller has agreed to pay the same as
outlined below. To the extent that any Purchaser Costs are not allowed to be
included in the Purchase Price, Purchaser shall be solely responsible for the
payment thereof.
(2) Seller shall pay all transfer taxes, title fees and
expenses, capital gains taxes (if any), its own attorney's fees, environmental
certification, engineering costs, appraisal fees and all other costs and fees
customarily paid in a net lease transaction.
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E. POSSESSION. Possession of the Purchased Assets shall be
retained by Seller from and after the Closing Date pursuant to the terms and
conditions of the Master Lease.
13. PURCHASER'S CLOSING OBLIGATIONS. At Closing, Purchaser will
deliver to Seller the following:
A. The amount of the Purchase Price provided in Section 5
above for the Purchased Assets via federal wire transfer (as adjusted for
closing costs under Section 12 above).
B. Four (4) original counterparts of the Master Lease signed
by Purchaser as Lessor.
C. The amount of its share of any closing costs via federal
wire transfer, or by proration on the settlement statement.
D. A resolution of Purchaser authorizing the transactions
contemplated under this Agreement, the Master Lease and the Consent.
E. Any legal opinions reasonably required by Purchaser's
Lender or by Seller in connection with the Master Lease, this Agreement, the
closing documents or the loan obtained from Purchaser's Lender.
F. Any other documents required by this Agreement to be
delivered by Purchaser at Closing or reasonably required to effectuate the terms
of this Agreement.
14. CASUALTY/CONDEMNATION. From the date hereof until Closing, Seller
shall continue to maintain the Purchased Assets in as good condition and repair
as existing on the date of this Agreement, and promptly notify Purchaser of the
occurrence of any event known to it which materially affects the value or
utility of the Purchased Assets. Notwithstanding anything herein to the
contrary, from and after the Acceptance Date to the Closing, Seller is
considered the owner of the Purchased Assets for all purposes and shall be
entitle to receive all insurance proceeds and/or condemnation awards that may
become payable with respect thereto. Any and all risks associated with ownership
of the Purchased Assets shall be borne by Seller from the Acceptance Date until
Closing. If the Purchased Assets are substantially damaged or condemned as to
material part prior to the Closing Date and is not substantially repaired or
restored on or before the Closing Date, Purchaser may, at it election, (i)
proceed to Closing on the Purchased Assets so damaged, or (ii) terminate and
cancel this Agreement. If Purchaser does not exercise the election, the
occurrence shall be dealt with under the terms of the Master Lease, as if it had
occurred after the commencement date of the Master Lease and the proceeds will
be applied as set forth in the Master Lease.
15. MASTER LEASE. Upon closing, Purchaser agrees to lease back the
Purchased Assets to Tenant and Seller agrees to cause Tenant to lease from
Purchaser under a Master Lease covering all of the Purchased Assets on the terms
contained in EXHIBIT B attached hereto.
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16. BROKERAGE. The parties acknowledge that no real estate broker or
other party, other than CB Commercial (the "Broker") and U.S. Realty Advisors,
Inc. ("Purchaser's Agent"), is entitled to any commission as a result of the
transactions contemplated in this Agreement. Seller shall be responsible for the
payment at Closing of a commission to the Broker and Purchaser shall be
responsible for the payment of any fees or commission to Purchaser's Agent. In
the event that any other claim for a broker's fee or real estate commission is
asserted, the party against whom the claim is asserted shall indemnify and hold
harmless the other party from any and all claims, losses, damages, or expenses
of any nature whatsoever arising out of said claim, including, but not limited
to, reasonably attorneys' fees and costs.
17. DEFAULT.
A. PURCHASER'S DEFAULT. If Purchaser, in default of its
obligations under this Agreement, fails to perform any of the obligations
contemplated by this Agreement, Seller will have the right to: (i) obtain
specific performance by Purchaser of Purchaser's obligations under this
Agreement; or (ii) terminate this Agreement, and both parties shall be released
from all further obligations under this Agreement. Seller shall not terminate
this Agreement pursuant to this Section unless Seller shall have given Purchaser
written notice of default, and Purchaser shall have failed to cure such default
within ten (10) days after receipt of such notice (other than a failure to close
in accordance with the terms of this Agreement, for which Purchaser shall only
be allowed a two (2) business day cure period).
B. SELLER'S DEFAULT. If Seller, in default of its obligations
hereunder, fails to perform any of the obligations contemplated by this
Agreement, Purchaser will have the right to: (i) obtain specific performance by
Seller of Seller's obligations under this Agreement; or (ii) terminate this
Agreement, and both parties shall be released from all further obligations under
this Agreement. Purchaser shall not terminate this Agreement pursuant to this
Section unless Purchaser shall have given Seller written notice of default, and
Seller shall have failed to cure such default within ten (10) days after receipt
of such notice (other than a failure to close in accordance with the terms of
this Agreement, for which Seller shall only be allowed a two (2) business day
cure period).
C. ATTORNEY'S FEES. In the event of litigation arising out of
any alleged default or breach of this Agreement, the prevailing party shall be
entitled to recover all costs and expenses incurred in the prosecution or
defense of such litigation, including reasonable attorneys' fees and costs (and
legal assistant fees). For purposes of this Section, "prevailing party" shall
include, but not be limited to, a party who withdraws or moves to dismiss a
claim in consideration for payment due, performance owed, or other consideration
in substantial satisfaction of the claim withdrawn or dismissed.
18. MISCELLANEOUS.
A. NOTICES. All notices hereunder to the respective parties
will be in writing and will be served by personal delivery or by prepaid,
overnight mail via a reputable courier
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service, or by telecopy, or by prepaid, registered or certified mail, addressed
to the respective parties at their addresses set forth below. Any such notice to
Seller or Purchaser will be deemed to be given and effective: (i) if personally
delivered or sent by telecopy, then on the date of such delivery, (ii) if sent
via overnight courier, then twenty-four (24) hours after the date such notice is
sent, or (iii) if sent by registered or certified mail, then three (3) days
following the date on which such notice is deposited in the United States mail
addressed as aforesaid. Copies of all notices will be sent to the following:
If to Purchaser: c/o U.S. Realty Advisors, Inc.
1370 Avenue of the Americas
New York, New York 10019
Attention: David M. Ledy
with a copy to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Kenneth S. Hilton, Esq.
If to Seller: Dictaphone Corporation
3191 Broadridge Avenue
Stratford, Connecticut 06497
Attn: Mr. Joseph K. Skrzypczak
with a copy to: Kelley, Drye & Warren LLP
281 Tresser Blvd.
Two Stamford Plaza
Stamford, CT 06901
Attention: Steven M. Torkelsen, Esq.
All such addresses may be changed by notice given in accordance with this
Section.
B. PARTIES IN INTEREST. All of the terms and provisions of
this Agreement will be binding upon and inure to the benefit of and be
enforceable by the successors, representatives, and permitted assigns of Seller
and Purchaser.
C. ENTIRE AGREEMENT. There are and were no verbal or written
representations, warranties, understandings, stipulations, agreements, or
promises pertaining to the subject matter of this Agreement made by either party
or any agent, employee, or other representative of either party or by any broker
or any other person representing or purporting to represent either party, not
incorporated in writing in this Agreement, and neither this Agreement nor any of
the terms, provisions, conditions, representations, or covenants contained in
this Agreement can be modified, changed or terminated, amended, superseded,
waived, or extended except by an appropriately written instrument duly executed
by the parties.
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D. SURVIVAL. The representations and warranties on the part of
Seller or Purchaser contained in this Agreement shall survive the Closing and
delivery of the deed and shall not be merged thereby.
E. ORIGINALS. This Agreement may be executed in two or more
counterparts, each of which will be an original.
F. TIME. Time is of the essence under this Agreement. In the
event the last day permitted for the performance of any act required or
permitted under this Agreement falls on a Saturday, Sunday, or holiday, the time
for such performance will be extended to the next succeeding business day. Time
periods under this Agreement will exclude the first day and include the last day
of such time period.
G. SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and will not in any
way affect the meaning or interpretation of the text of this Agreement.
H. GOVERNING LAW. This Agreement will be construed and
enforced in accordance with the laws of the State of New York.
I. ASSIGNMENT OF AGREEMENT. Seller acknowledges that the
actual purchaser under this Agreement may be a trust in which Purchaser (or its
permitted assignee) owns the beneficial interest. Except as provided in Section
12.1, Purchaser may not assign all or any interest in this Agreement, nor any of
the benefits or obligations of this Agreement, without the prior written consent
of Seller, and such consent shall not be unreasonably withheld if the assignment
is to any entity that owns or is owned in whole or in part by Purchaser or any
entity affiliated with Purchaser or to a partnership of which Purchaser is a
general partner. Seller shall be entitled to assign all or any interest in this
Agreement without the prior written consent of Purchaser. Any assignment in
violation hereof will be void.
J. RECORDING. This Agreement may not be recorded in whole or
in part, and any recordation in violation hereof shall be deemed to be a default
under this Agreement by the recording party.
K. BINDING EFFECT. This Agreement will not be binding or
effective until property executed and delivered by the Seller and Purchaser.
L. GENDER. As used in this Agreement, the masculine will
include the feminine and neuter, the singular will include the plural, and the
plural will include the singular, as the context may require.
M. NO JOINT VENTURE, PARTNERSHIP, AGENCY, ETC. This Agreement
shall not be construed as in any way establishing a partnership, joint venture,
express or implied agency, or employer-employee relationship between Purchaser
and Seller.
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N. NO THIRD PARTY BENEFICIARIES. This Agreement is for the
sole benefit of Purchaser and Seller and their respective successors and
permitted assigns, and no other person or entity shall be entitled to rely upon
or receive any benefit from this Agreement.
O. NO WAIVER. No consent or waiver, express or implied, by
Purchaser to or of any breach of any representation, covenant or warranty of
Seller shall be construed as a consent or waiver to or of any other breach of
the same or any other representation, covenant or warranty.
P. PUBLICITY. Seller and Purchaser agree that before or
following Closing under this Agreement, neither party will issue or authorize
the issuance of any press release, publicity, or information to any third party
whatsoever (except Purchaser's Lender or other lenders and agents and Seller's
lender(s) or to governmental authorities as necessary in any approval process)
pertaining to the transaction contemplated hereunder without the prior written
approval of the other party. The results of any inspections conducted by
Purchaser prior to Closing and any other information delivered to Purchaser by
Seller related to this transaction shall be treated as strictly confidential,
except that Purchaser may transmit such information to Purchaser's Lender and to
Purchaser's agents, attorneys and other consultants.
Q. CONCERNING WILMINGTON TRUST COMPANY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as trustee of Landlord, in the exercise of the powers and authority
conferred and vested in them under the Trust Agreement of Landlord dated as of
May 4, 1998 (b) each of the representations, undertakings and agreements herein
made on the part of Purchaser is made and intended not as personal
representations, undertakings and agreements of Wilmington Trust Company but is
made and intended for the purpose of binding only Purchaser, and (c) under no
circumstance shall Wilmington Trust Company be personally liable for the payment
of any indebtedness or other obligations of Purchaser or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by Purchaser under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date specified below.
SELLER:
DICTAPHONE CORPORATION,
a Delaware corporation
By: /s/ Joseph D. Skrzypczak
-----------------------------
Name: Joseph D. Skrzypczak
Title: Senior Vice President
and Chief Financial Officer
PURCHASER:
STRATFORD CT BUSINESS TRUST,
a Delaware business trust
By: WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as
trustee under Trust Agreement dated as
of May 4, 1998
By: /s/ Donald G. Mackelcan
----------------------------
Name: DONALD G. MACKELCAN
Title: ASSISTANT VICE PRESIDENT
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EXHIBIT A
Policy No: S985180
ALL THAT CERTAIN tract or parcel of land situate, lying and being in
the Town of Stratford, County of Fairfield, and State of Connecticut,
more particularly described as follows:
Beginning a point on the southwesterly line of Broadbridge Avenue,
which point is located at the northeast corner of land formerly of
Remington Arms Company, Inc. and 324.66 feet northwesterly from the
intersection of said street line of Broadbridge Avenue with the
westerly street line of Broadmere Road; thence proceeding the following
courses and distances:
S 19"(degree)" 52' 50" W 63.84 feet
S 19"(degree)" 31' 50" W 341.15 feet
S 19"(degree)" 11' 20" W 447.03 feet
S 19"(degree)" 25' 30" W 486.81 feet
S 82"(degree)" 41' 50" E 10.00 feet
S 82"(degree)" 51' 10" E 163.56 feet
S 05"(degree)" 47' 35" W 82.76 feet
S 00"(degree)" 38' 40" E 105.87 feet
S 00"(degree)" 34' 50" E 18.77 feet
S 00"(degree)" 22' 30" W 64.06 feet
S 08"(degree)" 03' 40" E 81.43 feet
S 13"(degree)" 20' 30" E 43.29 feet
S 10"(degree)" 40' 20" E 161.02 feet
S 05"(degree)" 28' 10" E 288.27 feet
S 04"(degree)" 51' 10" E 174.61 feet
S 00"(degree)" 53' 20" E 36.06 feet
S 82"(degree)" 57' 20" W 61.98 feet
S 77"(degree)" 59' 40" W 420.15 feet
N 07"(degree)" 52' 45" E 643.57 feet
N 17"(degree)" 03' 40" E 65.41 feet
N 07"(degree)" 55' 30" E 43.33 feet
N 16"(degree)" 13' 20" W 31.34 feet
N 13"(degree)" 48' 40" E 142.76 feet
N 74"(degree)" 57' 55" W 28.32 feet
N 13"(degree)" 56' 36" E 133.34 feet
N 18"(degree)" 12' 28" E 133.89 feet
N 18"(degree)" 41' 22" E 486.79 feet
N 19"(degree)" 02' 29" E 447.09 feet and
N 19"(degree)" 29' 44" E 422.49 feet to the southwesterly street line
of Broadbridge Avenue; thence along said street line S 45"(degree)"
55' 00" E, 41.83 feet, to the point or place of beginning, which is
also the northwesterly corner of land now or formerly of L. J. & C.
Cristini.
Continued....
<PAGE>
EXHIBIT A (cont'd.)
Policy No.: S985180
Containing within said bounds 9.6789 acres, be the same more or less, said
premises being all that certain tract or parcel of land shown on the drawing
entitled "Plan of Survey of Property in Stratford, Connecticut" prepared by
Fuller & Co., Inc., dated November 30, 1984 and filed in the office of the Clerk
of the Town of Stratford as Maps #2574 & 2575.
TOGETHER WITH the rights and privileges conveyed to Dictaphone Corporation in a
deed from Remington Arms Company, Inc. dated June 26, 1986 and recorded June 27,
1986 in Book 636 at Page 964 of the Stratford Land Records.
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EXHIBIT B
MASTER LEASE AGREEMENT
[See execution copy filed as Exhibit 10.21].
LEASE AGREEMENT
BETWEEN
STRATFORD CT BUSINESS TRUST,
a Delaware business trust,
as Landlord,
and
DICTAPHONE CORPORATION
a Delaware corporation,
as Tenant
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1......................................................................1
1.1 LEASE OF PREMISES; TITLE AND CONDITION.......................1
1.2 USE..........................................................2
1.3 TERMS........................................................3
1.4 RENT.........................................................3
ARTICLE 2......................................................................4
2.1 NET LEASE....................................................4
2.2 TAXES AND ASSESSMENTS; COMPLIANCE WITH LAW...................5
2.3 LIENS........................................................8
2.4 INDEMNIFICATION..............................................8
2.5 MAINTENANCE AND REPAIR.......................................9
2.6 PERMITTED CONTESTS..........................................10
ARTICLE 3.....................................................................11
3.1 PROCEDURE UPON PURCHASE.....................................11
3.2 CONDEMNATION AND CASUALTY...................................12
3.3 REJECTABLE OFFER............................................14
3.4 [Intentionally omitted.]....................................14
3.5 REJECTION OF REJECTABLE OFFER...............................14
3.6 LESS THAN MAJOR CONDEMNATION OR MAJOR CASUALTY..............15
3.7 INSURANCE...................................................19
3.8 ALTERATIONS.................................................23
3.9 INTENTIONALLY OMITTED.......................................26
3.10 EASEMENTS...................................................27
ARTICLE 4.....................................................................29
4.1 ASSIGNMENT AND SUBLETTING...................................29
ARTICLE 5.....................................................................31
5.1 CONDITIONAL LIMITATIONS; DEFAULT PROVISIONS.................31
5.2 BANKRUPTCY OR INSOLVENCY....................................35
5.3 ADDITIONAL RIGHTS OF LANDLORD...............................37
ARTICLE 6.....................................................................38
6.1 NOTICES AND OTHER INSTRUMENTS...............................38
6.2 ESTOPPEL CERTIFICATES, FINANCIAL INFORMATION................40
ARTICLE 7.....................................................................43
(i)
<PAGE>
7.1 ENVIRONMENTAL COVENANT AND WARRANTY.........................43
7.2 ENVIRONMENTAL INDEMNITY.....................................48
7.3 NOTICE......................................................48
7.4 SURVIVAL....................................................49
ARTICLE 8.....................................................................49
8.1 HOLDOVER....................................................49
ARTICLE 9.....................................................................49
ARTICLE 10....................................................................49
10.1 NO MERGER...................................................49
10.2 SURRENDER...................................................49
10.3 MERGER, CONSOLIDATION OR SALE OF ASSETS.....................50
10.4 SEPARABILITY; BINDING EFFECT................................50
10.5 TABLE OF CONTENTS AND HEADINGS..............................51
10.6 COUNTERPARTS................................................51
10.7 RECORDING OF LEASE..........................................51
10.8 RATING OF THE TRANSACTION...................................51
10.9 NO BROKERS..................................................52
10.10 GOVERNING LAW...............................................52
10.11 WAIVER OF JURY TRIAL AND PREJUDGMENT WAIVER.................52
10.12 CONVEYANCE BY LANDLORD......................................53
10.13 RELATIONSHIP OF THE PARTIES.................................53
10.14 REPRESENTATION BY COUNSEL...................................53
10.15 ACCESS TO PREMISES..........................................53
10.16 SHOWING.....................................................53
10.17 TRUE LEASE..................................................54
10.18 LANDLORD'S CONSENT AND STANDARDS............................54
10.19 QUIET ENJOYMENT.............................................54
10.20 FORCE MAJEURE...............................................54
10.21 CONCERNING WILMINGTON TRUST COMPANY.........................55
(ii)
<PAGE>
INDEX OF DEFINITIONS
Section
Additional Rent ........................................................ 1.4(b)
Alterations ............................................................ 3.8(a)
Architect............................................................... 3.6(b)
Assignee ............................................................... 5.2(d)
Assurance ........................................................... 5.2(b)(ii)
Basic Rent ............................................................. 1.4(a)
Business Day ........................................................... 1.4(a)
Casualty ............................................................... 3.2(a)
Compensation ........................................................... 3.2(a)
Condemnation ........................................................... 3.2(a)
Environmental Claim ................................................. 7.1(h)(iv)
Environmental Laws ...................................................7.1 (a)(i)
Environmental Violation ............................................. 7.1(h)(iv)
Estimated Cost ...........................................................3.8(a)
Event of Default ....................................................... 5.1(a)
Extended Terms ............................................................ 1.3
Force Majeure .............................................................10.21
Governmental Authority ...................................................7.1(c)
Guarantor ...........................................................5.1(a)(iii)
Hazardous Substance .................................................7.1(a)(iii)
Impositions ............................................................ 2.2(a)
Improvements ........................................................ 1.1(a)(ii)
Indemnified Parties ....................................................... 2.4
Indenture .............................................................. 3.7(c)
Investment Grade Rating ................................................ 3.6(b)
Land ................................................................ 1.1(a)(i)
Landlord............................................................... Heading
Lease.................................................................. Heading
Lease Termination Date ................................................. 3.2(b)
Legal Requirements ..................................................... 2.2(b)
Lender.................................................................. 3.7(c)
Major Casualty ......................................................... 3.2(b)
Major Condemnation ..................................................... 3.2(b)
Make Whole Premium ..................................................... 3.1(b)
Material Alteration .................................................... 3.8(a)
Net Proceeds ........................................................... 3.2(a)
Payment Dates .......................................................... 1.4(a)
Permitted Exceptions ................................................ 1.1(a)(ii)
(iii)
<PAGE>
Premises ............................................................... 1.1(a)
Primary Term .............................................................. 1.3
Purchase Agreement .................................................. 3.4(d)(v)
Rate ................................................................... 1.4(b)
Rating Agency ....................................................... 3.4(d)(ii)
Regulated Activity ................................................ 7.1(a)(iii)
Rejectable Offer ....................................................... 3.3(a)
Remedial Work .......................................................... 7.1(c)
Responsible Officer ......................................................3.3(a)
Restoration Cost ....................................................... 3.6(a)
Severable Alterations ..................................................... 3.9
Stipulated Loss Value .................................................. 3.3(a)
Structural Work ........................................................ 3.8(a)
Tenant................................................................. Heading
Tenant's Personal Property ......................................... 1.1(a)(ii)
Term ...................................................................... 1.3
Work ................................................................... 3.8(a)
(iv)
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT, dated as of May 14, 1998 (this "Lease"), is made and
entered into between STRATFORD CT BUSINESS TRUST, a Delaware business trust
(together with its successors and assigns, herein called "Landlord") having an
address at c/o U.S. Realty Advisors, LLC, 1370 Avenue of the Americas, 29th
Floor, New York, New York 10019, and DICTAPHONE CORPORATION, a Delaware
corporation (together with its successors and assigns, herein called "Tenant"),
having an address at 3191 Broadbridge Avenue, Stratford, Connecticut 06497.
ARTICLE 1.
1.1 LEASE OF PREMISES; TITLE AND CONDITION.
(a) In consideration of the rents and covenants herein stipulated to be
paid and performed by Tenant and upon the terms and conditions herein specified,
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the
premises (the "PREMISES") consisting of:
(i) that certain parcel of land more particularly described on
SCHEDULE A attached hereto and made a part hereof, together with all of the
Landlord's right, title and interest, if any, in and to (1) all easements,
rights-of-way, appurtenances, and other rights and benefits belonging to the
parcel of land, and (2) all public or private streets, roads, avenues, alleys,
or passageways, open or proposed, on or abutting the parcel of land, and any
award made or to be made in lieu thereof (collectively, the "LAND"); and
(ii) all buildings located on the Land, together with all plumbing,
electrical, ventilating, heating, cooling, lighting and other utility systems,
equipment, ducts, conduits and piping and apparatus of every kind and all other
fixtures and other personalty owned by Landlord (including the security system
and cameras serving the Premises) and located on, attached to or comprising a
part thereof, including, without limitation, all replacements thereof (the
"IMPROVEMENTS").
Notwithstanding anything to the contrary in the foregoing, the Premises shall
not include Tenant's or any sublessee's tradenames or trademarks or the right to
use the same, Tenant's or any sublessee's trade fixtures (not attached to the
Premises in a manner that such trade fixture cannot be removed or severed from
the Premises without causing material damage thereto), Tenant's or any
sublessee's goods, chattels, equipment, materials, furniture, or any other
business machinery, equipment, motorized vehicles, tools, supplies and
materials, security systems and cameras (other than those serving the Premises),
inventory, proprietary or any other computer software (other than software used
in connection with HVAC, life safety, security system, or other mechanical
systems servicing the Premises), and all other personal property (whether owned
or leased by Tenant) and materials placed by Tenant in or upon the Premises
(collectively, the "TENANT'S
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PERSONAL PROPERTY"), which shall remain the property of Tenant, sublessee, or
any of their respective affiliates, as the case may be. In addition, Tenant may
from time to time own or hold under lease from persons other than Landlord,
Tenant's Personal Property and personal property located on or about the Land
and Improvements that are not subject to this Lease.
The Premises are leased to Tenant in their present condition without
representation or warranty by Landlord and subject to the rights of parties in
possession, to the existing state of title and any state of facts which an
accurate survey or physical inspection might reveal, to all applicable Legal
Requirements (as hereinafter defined) now or hereafter in effect and subject to
those matters listed in Schedule B attached hereto and made a part hereof (the
"PERMITTED EXCEPTIONS").
(b) Tenant has examined the Premises and title to the Premises and has
found all of the same satisfactory for all purposes. Tenant acknowledges that
Tenant is fully familiar with the physical condition of the Premises and that
the Landlord makes no representation or warranty, express or implied, with
respect to same. THE LEASE OF THE PREMISES IS ON AN "AS IS" BASIS, IT BEING
AGREED THAT TENANT WILL LEASE THE PREMISES IN ITS PRESENT CONDITION, WITH ALL
FAULTS. LANDLORD HEREBY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE RELATIVE TO THE PREMISES
OR ANY COMPONENT PART THEREOF. Tenant acknowledges and agrees that no
representations or warranties have been made by Landlord, or by any person, firm
or agent acting or purporting to act on behalf of Landlord, as to (i) the
presence or absence on or in the Premises of any particular materials or
substances (including, without limitation, asbestos, hydrocarbons or hazardous
or toxic substances), (ii) the condition or repair of the Premises or any
portion thereof, (iii) the value, expense of operation or income potential of
the Premises, (iv) the accuracy or completeness of any title, survey, structural
reports, environmental audits or other information provided to Tenant by any
third party contractor relative to the Premises (regardless of whether the same
were retained or paid for by Landlord), or (v) any other fact or condition which
has or might affect the Premises or the condition, repair, value, expense of
operation or income potential thereof. Tenant represents that the officers of
Tenant are knowledgeable and experienced in the leasing of properties comparable
to the Premises and agrees that Tenant will be relying solely on Tenant's
inspections of the Premises in leasing the Premises. THE PROVISIONS OF THIS
PARAGRAPH HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND
NEGATION BY THE LANDLORD OF, AND THE LANDLORD DOES HEREBY DISCLAIM, ANY AND ALL
WARRANTIES BY THE LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES OR
ANY PORTION THEREOF, WHETHER ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR
ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE, AND TENANT HEREBY
ACKNOWLEDGES AND ACCEPTS SUCH EXCLUSION, NEGATION AND DISCLAIMER.
1.2 USE. Tenant may use the Premises for any lawful purpose. Landlord and
its agents and designees may enter upon and examine the Premises at reasonable
times, subject to the
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provisions of Section 10.15. In no event shall the Premises or any portion
thereof be used for any purpose which violates any of the provisions of this
Lease, including but not limited to, provisions with respect to compliance with
Legal Requirements (as defined in Section 2.2(b) hereof) and other recorded
covenants, restrictions or agreements which are applicable to the Premises.
Tenant shall not use, occupy or permit the Premises to be used or occupied, nor
do or permit anything to be done in or on the Premises in a manner which would
(i) violate any certificate of occupancy or equivalent certificate affecting the
Premises or violate any zoning or other law, ordinance or regulation, (ii) make
void or voidable any insurance then in effect with respect to the Premises,
(iii) materially and adversely affect in any manner the ability of Tenant to
obtain fire and other insurance which Tenant is required to furnish hereunder,
(iv) cause any injury or damage to the Improvements which is not repaired in
accordance with the provisions of this Lease, or (v) constitute a public or
private nuisance or waste; provided that all of the foregoing shall be qualified
to the extent otherwise provided elsewhere in this Lease. Tenant shall not
conduct its business operation in the Premises unless and until (and only during
such time as) all necessary certificates of occupancy, permits, licenses and
consents from any or all appropriate governmental authorities applicable to the
Premises have been obtained by Tenant, at Tenant's sole cost and expense, and
are in full force and effect.
1.3 TERMS. The Premises are leased for a primary term of twenty (20) years
and eighteen days (the "PRIMARY TERM"), and, at Tenant's option, for up to four
(4) five (5) year consecutive additional terms (the "EXTENDED TERMS"), unless
and until the term of this Lease shall expire or be terminated pursuant to any
provision hereof. The Primary Term and each Extended Term (collectively, the
"TERM") shall commence and expire on the dates set forth in SCHEDULE C attached
hereto and made a part hereof. So long as no Event of Default (as hereinafter
defined) shall have occurred and be continuing, Tenant may elect to exercise its
option to extend the term of this Lease for an Extended Term by giving written
notice thereof to Landlord not less than 365 days prior to the expiration of the
then existing Term. Each notice of election to extend the term of this Lease
given in accordance with the provisions of this Section 1.3 shall automatically
extend the term of this Lease for the Extended Term selected, without further
writing; provided, however, either party, upon request of the other, shall
execute and acknowledge, in form suitable for recording, an instrument
confirming any such extension. Each Extended Term shall be upon the same terms
as provided in this Lease for the Primary Term, except as otherwise stated
herein. Tenant shall not be entitled to extend the term of this Lease for any
Extended Term unless Tenant shall have extended the term of this Lease for the
preceding Extended Term, if any.
1.4 RENT.
(a) Tenant shall pay to Landlord by federal funds wire transfer in
immediately available funds (in U.S. Dollars) as basic rent for the Premises the
amounts set forth in SCHEDULE D attached hereto and made a part hereof (the
"BASIC RENT") on the first day of each calendar month occurring during the Term
hereof commencing June 1, 1998 (the "PAYMENT DATES"), to the account designated
by Landlord on the commencement date hereof, or to such other account or
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<PAGE>
to such address or to such other person as Landlord from time to time may
designate upon three (3) Business Days prior written notice to Tenant. In
addition, during all Extended Terms, the Basic Rent shall be as set forth in
SCHEDULE D. If any Payment Date falls on a day which is not a Business Day (as
hereinafter defined), the Basic Rent due and payable on such date shall be due
and payable on the next succeeding Business Day without interest or penalty if
paid on such succeeding Business Day and such day shall be deemed the Payment
Date. A "BUSINESS DAY" is defined as any day other than a Saturday or Sunday or
other day on which banking or saving and loan institutions in the State of New
York are authorized or required to be closed.
(b) All taxes, costs, expenses and amounts which Tenant is required to
pay pursuant to this Lease (other than Basic Rent), together with every fine,
penalty, interest and cost which may be added for non-payment or late payment
thereof, shall constitute additional rent ("ADDITIONAL RENT"). If Tenant shall
fail to pay any such Additional Rent or any other sum due hereunder when the
same shall become due, Landlord shall have all rights, powers and remedies with
respect thereto as are provided herein or by law in the case of non-payment of
any Basic Rent and shall, except as expressly provided herein, have the right to
pay the same on behalf of Tenant. Tenant shall pay to Landlord interest at a
rate (the "RATE") equal to 12.45% percent per annum (but in no event shall the
Rate exceed the maximum amount permitted by law), on all Basic Rent which is not
paid within three (3) Business Days after the due date thereof until paid by
Tenant and on all overdue Additional Rent and other sums due hereunder from the
due date thereof until paid by Tenant. In addition, if Tenant fails to make any
payment of Basic Rent or Additional Rent to Landlord within three (3) Business
Days following the Payment Date on which payment is due, Tenant shall pay a late
charge equal to four percent (4%) of the amount past due. Tenant shall perform
all its obligations under this Lease at its sole cost and expense, and shall pay
all Basic Rent, Additional Rent and any other sum due hereunder when due and
payable, without offset, notice or demand.
ARTICLE 2.
2.1 NET LEASE.
(a) This Lease is a net lease and, any present or future law to the
contrary notwithstanding, shall not terminate except as otherwise expressly
provided herein, nor shall Tenant be entitled to any abatement, reduction
(except as otherwise expressly provided herein), diminution (except as otherwise
expressly provided herein), set-off, counterclaim, defense (except for the
defense that the performance or payment has been made) or deduction with respect
to any Basic Rent, Additional Rent or other sums payable hereunder, nor shall
the obligations of Tenant hereunder be affected, by reason of: any damage to or
destruction of the Premises or any portion thereof; any defect in the condition,
design, operation or fitness for use of the Premises or any portion thereof; any
taking of the Premises or any part thereof by condemnation or otherwise; any
prohibition, limitation, interruption, cessation, restriction or prevention of
Tenant's use, occupancy or enjoyment of the Premises or any portion thereof, or
any interference with such use,
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occupancy or enjoyment by any person; any eviction by paramount title or
otherwise; any default by Landlord hereunder or under any other agreement; the
impossibility or illegality of performance by Landlord, Tenant or both; any
action of any governmental authority (including, without limitation, changes in
Legal Requirements); construction on or renovation of the Premises or any
portion thereof or any failure in the Premises to comply with applicable laws,
Legal Requirements, or any other cause whether similar or dissimilar to the
foregoing. All costs, expenses and obligations of every kind and nature
whatsoever relating to the Premises and the appurtenances thereto and the use
and occupancy thereof which may arise or become due and payable with respect to
the period which ends on the expiration or earlier termination of the Term in
accordance with the provisions hereof (whether or not the same shall become
payable during the Term or thereafter) shall be paid by Tenant except as
otherwise expressly provided herein. It is the purpose and intention of the
parties to this Lease that the Basic Rent, Additional Rent and other sums
payable by Landlord hereunder shall be absolutely net to Landlord and that this
Lease shall yield, net to Landlord, the Basic Rent, Additional Rent and other
sums payable to Landlord provided in this Lease. The parties intend that the
obligations of Tenant hereunder shall be separate and independent covenants and
agreements and shall continue unaffected unless such obligations shall have been
modified or terminated pursuant to an express provision of this Lease.
(b) Tenant shall remain obligated under this Lease in accordance with
its terms and shall not take any action to terminate, rescind or avoid this
Lease, notwithstanding any bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding affecting Landlord or any action with respect to
this Lease which may be taken by any trustee, receiver or liquidator or by any
court.
(c) Except as otherwise expressly provided herein, Tenant waives all
rights to terminate or surrender this Lease, or to any abatement or deferment of
Basic Rent, Additional Rent or other sums payable hereunder.
2.2 TAXES AND ASSESSMENTS; COMPLIANCE WITH LAW.
(a) Subject to Tenant's right to contest pursuant to Section 2.6 of
this Lease, Tenant shall pay, prior to delinquency, all "IMPOSITIONS", which are
defined as: (i) all taxes (including, without limitation, those described in
(iii) below), assessments (including, without limitation, all assessments for
public improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not commenced or completed within the term of
this Lease), excises, levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), water and sewer rents and
charges, ground lease rents, and all other governmental charges, general and
special, ordinary and extraordinary, foreseen and unforeseen, and any interest
and penalties thereon which are, at any time prior to or during the Primary Term
or any Extended Term hereof, imposed or levied upon or assessed against or which
arise with respect to (A) the Premises, (B) any Basic Rent, Additional Rent or
other sums payable hereunder, (C) this Lease or the leasehold estate hereby
created or (D) the operation, possession
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or use of the Premises; (ii) all gross receipts or similar taxes (i.e., taxes
based upon gross income which fail to take into account deductions with respect
to depreciation, interest, taxes or ordinary and necessary business expenses, in
each case relating to the Premises) imposed or levied upon, assessed against or
measured by any Basic Rent, Additional Rent or other sums payable hereunder;
(iii) all sales (including those imposed on lease rentals), value added, ad
valorem, gross receipts, use and similar taxes at any time levied, assessed or
payable on account of the acquisition, ownership, leasing, operation, possession
or use of the Premises; (iv) all transfer, recording, stamp and real property
gain taxes incurred upon the sale or transfer, or other disposition of the
Premises or any interest therein to Tenant or the foreclosure of the Premises,
(v) all offers, claims and demands of mechanics, laborers, materialmen and
others which, if unpaid, might create a lien on the Premises, (vi) all charges
of utilities, communications and similar services serving the Premises, and
(vii) any other tax relating to the Premises resulting from any law enacted or
adopted or amended after the date of this Lease imposed on Landlord. Tenant
shall not be required to pay any franchise, estate, inheritance, transfer, net
income or similar tax payable by or on behalf of Landlord (other than any tax
referred to in clause (ii) above) unless such tax is imposed, levied or assessed
in substitution for any other tax, assessment, charge or levy which Tenant is
required to pay pursuant to this Section 2.2(a). If any law is enacted or
adopted or amended after the date of this Lease which deducts the indebtedness
secured by the Indenture (as hereinafter defined) from the value of the Premises
for the purpose of taxation or which imposes a tax, either directly or
indirectly, on such indebtedness or on Landlord's interest in the Premises,
Tenant will pay such tax, with interest and penalties thereon, if any, as
Additional Rent hereunder. Subject to Tenant's right to contest pursuant to
Section 2.6 of this Lease, Tenant will furnish to Landlord, within 30 days after
the due date thereof, proof of payment of all Impositions. If any such
Imposition may legally be paid in installments, Tenant may pay such Imposition
in installments; in such event, Tenant shall be liable only for installments
which become due and payable during the Primary Term and any Extended Term
hereof. Without limiting the generality of the provisions of this Section
2.2(a), Tenant hereby agrees that if any sales taxes (or penalties or interest
thereon) are imposed as a result of the transfer of personal property to
Landlord or the lease of the same by Landlord, Tenant shall be responsible for
the payment of such taxes, penalties and interest. Tenant hereby agrees to
indemnify Landlord and to hold Landlord harmless from and against any and all
reasonable third party costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred by Landlord as a result of any claim that
such sales taxes are due and owing.
(b) Tenant shall comply with and cause the Premises to comply with and
shall assume all obligations and liabilities with respect to (i) all laws,
ordinances and regulations, and other governmental rules, orders and
determinations presently in effect or hereafter enacted, made or issued, both
foreseen and unforeseen and ordinary and extraordinary applicable to the
Premises or
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the ownership, operation, use or possession thereof and (ii) all contracts
(including, but not limited to, insurance policies (including, without
limitation, to the extent necessary to prevent cancellation thereof and to
insure full payment of any claims made under such policies)), agreements,
covenants, conditions and restrictions now or hereafter applicable to the
Premises or the ownership, operation, use or possession thereof (collectively,
"LEGAL REQUIREMENTS"), including but not limited to all such Legal Requirements,
contracts, agreements, covenants, conditions and restrictions which require
structural, unforeseen or extraordinary changes. Notwithstanding the foregoing,
Legal Requirements shall not include any contracts, agreements, covenants,
conditions or restrictions applicable to the Premises which are hereafter
voluntarily entered into by Landlord without the consent or approval of Tenant
(which approval shall not be unreasonably withheld or delayed), unless Landlord
is required to enter into such contract, agreement, covenant, condition or
restrictions by any governmental or quasi-governmental entity and Tenant has
received notice of such contract, agreement, covenant or restriction from
Landlord or otherwise has actual knowledge thereof.
(c) Tenant represents and warrants to Landlord that, to Tenant's best
knowledge and belief, there has not been committed by Tenant or any other Person
in occupancy of or involved with the operation or use of the Premises or any
part thereof any act or omission affording the federal government or any state
or local government the right of forfeiture as against the Premises or any part
thereof or on any monies paid in performance of Tenant's obligations under this
Lease. Tenant hereby covenants and agrees not to commit, permit or suffer to
exist any act, omission or circumstance affording such right of forfeiture. In
furtherance thereof, Tenant hereby indemnifies Landlord and Lender (as
hereinafter defined) and agrees to defend and hold Landlord and Lender harmless
from and against any loss, damage or injuries by reason of the breach of the
covenants and agreements or the representations and warranties set forth in this
clause (c). Without limiting the generality of the foregoing, the filing of
formal charges or the commencement of proceedings against Tenant or all or any
part of the Premises under any state or federal law for which forfeiture of the
Premises or any part thereof or of any monies paid in performance of Tenant's
obligations under this Lease is a potential result, shall, at the election of
Landlord, constitute an automatic Event of Default hereunder unless Tenant is
contesting the same in accordance with the provisions of Section 2.6.
(d) Anything contained herein to the contrary notwithstanding, from
and after the occurrence of any Event of Default or if otherwise required by
Lender, Tenant agrees that it shall deposit with Landlord or, if directed by
Landlord, to Lender (or its designee)(Landlord hereby irrevocably directs Tenant
to make such deposits with Lender as long as the Indenture shall remain
outstanding) on each Payment Date, as Additional Rent, one twelfth (1/12) of all
Impositions (which, for the purposes of this Section 2.2(d) shall exclude the
items described in subparagraphs (iv), (v) and (vi) of the definition of
Impositions set forth in Section 2.2(a)) for the Premises for the year then in
effect as reasonably estimated by Landlord. To the extent permitted by
applicable law, neither Landlord nor Lender or its designee (each of Landlord
and Lender hereinafter referred to as "DEPOSITORY"), as the case may be, shall
be required to maintain such amounts in an account separate from other funds of
such party or to deposit any such amounts in an interest-bearing account,
provided, however, in the event such amounts are maintained in an interest
bearing account and no Event of Default shall have occurred and be continuing
hereunder, Tenant shall be entitled to receive any interest earned thereon on a
quarterly basis. Tenant shall
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deposit with Depository, prior to the date which is thirty (30) days prior to
the due date of any Imposition, such additional amount as may be necessary to
provide Depository with sufficient funds in such deposit account to pay each
such charge at least thirty (30) days in advance of the due date thereof.
Depository shall apply the aforesaid deposits for such purpose not later than
the last day on which any such charges may be paid without penalty or interest.
If, at any time, the amount of any Imposition is increased or Landlord or Lender
receives information that such Imposition will be increased, and if the monthly
deposits then being made by Tenant for this purpose (if continued) would not
make up a fund sufficient to pay such Imposition thirty (30) days prior to the
due date, said monthly deposits thereupon shall be increased and Tenant
immediately shall deposit with the Depository, on demand, sufficient moneys so
that the moneys then on hand for the payment of said Imposition, plus the
increased payments and such additional sums demanded, shall be sufficient so
that the Depository shall have received from Tenant adequate amounts to pay such
Imposition at least thirty (30) days before such Imposition becomes due and
payable. For the purpose of determining whether the Depository has on hand
sufficient moneys to pay any particular Imposition at least thirty (30) days
prior to the due date therefor, deposits for each category of Imposition shall
be treated separately, it being the intention that the Depository shall not be
obligated to use moneys deposited for the payment of an item not yet due and
payable to the payment of an item that is due and payable. Notwithstanding the
foregoing, it is understood and agreed that (a) to the extent permitted by
applicable law, deposits provided for hereunder may be held by the Depository in
a single bank account and commingled with other funds of the Depository, and (b)
the Depository may, if Tenant fails to make any deposit required hereunder,
apply deposits made for any one Imposition for the payment of the same, any
other Imposition or any outstanding Basic Rent or Additional Rent. If this Lease
shall be terminated by reason of any Event of Default, all deposits then held by
the Depository shall be applied on account of any and all sums due under this
Lease and Tenant shall forthwith pay the resulting deficiency in accordance with
the terms hereof. If Landlord ceases to have any interest in the Premises,
Landlord shall direct the Depository to transfer to the person or entity who
owns or acquires such interest in the Premises and is the transferee of the
Landlord's interest in this Lease, the deposits made pursuant to the provisions
hereof. In addition, in the event that the Lender (or a servicing agent on
Lender's behalf) is the Depository, the Lender shall have the right to transfer
the deposits (or to cause its servicing agent to transfer such deposits) to any
transferee of the Indenture or to the holder of any substitute Indenture. Upon
any such transfer of the deposits and notice thereof to Tenant, the transferor
shall be deemed to be released from all liability with respect thereto and
Tenant agrees to look to the transferee solely with respect thereto, and the
provisions hereof shall apply to each successive transfer of the said deposits.
2.3 LIENS. Subject to Tenant's right to contest pursuant to Section 2.6 of
this Lease, Tenant will promptly remove and discharge any charge, lien, security
interest or encumbrance upon the Premises or any Basic Rent, Additional Rent or
other sums payable hereunder which arise for any reason, including all liens
which arise out of the possession, use, occupancy, construction, repair or
rebuilding of the Premises or by reason of labor or materials furnished or
claimed to have been furnished to Tenant or for the Premises, but not including
(i) the Permitted
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Exceptions, and (ii) any mortgage, charge, lien, security interest or
encumbrance created by Landlord without the consent of Tenant (it being agreed
that the Indenture for purposes of this sentence, will be deemed to have been
created without the consent of Tenant). Nothing contained in this Lease shall be
construed as constituting the consent or request of Landlord, express or
implied, to or for the performance by any contractor, laborer, materialman, or
vendor of any labor or services or for the furnishing of any materials for any
construction, alteration, addition repair or demolition of or to the Premises or
any part thereof which would result in any liability of the Landlord for the
payment therefor. Notice is hereby given that Landlord will not be liable for
any labor, services or materials furnished or to be furnished to Tenant, or to
anyone holding an interest in the Premises or any part thereof through or under
Tenant, and that no mechanic's or other liens for any such labor, services or
materials shall attach to or affect the interest of Landlord in and to the
Premises.
2.4 INDEMNIFICATION. Tenant shall defend all actions against Landlord or
any owner, beneficial owner, partner, member, officer, director or shareholder
of Landlord, and of any of Landlord's partners or members, together with Lender,
or any owner, trustee of Landlord, beneficial owner, partner, member, officer,
director, agent or shareholder of Lender, together with their respective
successors and assigns (herein, collectively, "INDEMNIFIED PARTIES") with
respect to, and shall pay, protect, indemnify and save harmless the Indemnified
Parties from and against, any and all liabilities, losses, damages, costs,
expenses (including reasonable attorneys' fees and expenses), causes of action,
suits, claims, demands or judgments of any nature (but specifically excluding
claims resulting from the gross negligence or willful misconduct of an
Indemnified Party, subject to the provisions of Section 10.18(b) and excluding
consequential or punitive damages assessed against Landlord as a result of the
commission of an overt act by Landlord constituting gross negligence or willful
misconduct, subject to the provisions of Section 10.18(b)) (a) to which any
Indemnified Party is subject because of Landlord's interest in the Premises or
the receipt of any of Basic Rent or Additional Rent hereunder or (b) arising
from (i) any accident, injury to or death of any person or loss of or damage to
property occurring in, on or about the Premises or portion thereof or on the
adjoining sidewalks, curbs, parking areas, streets or ways; (ii) any use,
non-use or condition in, on or about, or possession, alteration, repair,
operation, maintenance or management of, the Premises or any portion thereof or
on the adjoining sidewalks, curbs, parking areas, streets or ways; (iii) any
failure on the part of Tenant to perform or comply with any of the terms,
covenants or conditions of this Lease or any other instrument, contract,
document or agreement to which Tenant is a party relating to the Premises (an
"OPERATIVE DOCUMENT"); (iv) any representation or warranty made herein by
Tenant, in any certificate delivered in connection herewith or in any other
Operative Document to which Tenant is a party or pursuant thereto being false or
misleading in any material respect as of the date of such representation or
warranty was made; (v) performance of any labor or services or the furnishing of
any materials or other property in respect to the Premises or any portion
thereof, (vi) any Imposition, including without limitation, any Imposition
attributable to the execution, delivery, filing or recording of any Operative
Document, this Lease or memorandum thereof; (vii) any lien, encumbrance or claim
arising on or against the Premises or any portion thereof
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under any Legal Requirement or otherwise which Tenant is obligated to remove and
discharge pursuant to Section 2.3 or any liability asserted against the
Indemnified Parties with respect thereto, or (viii) the claims of any subtenants
of all or any portion of the Premises or any Person acting through or under
Tenant or otherwise acting under or as a consequence of this Lease or any
sublease, (ix) any act or omission of Tenant or its agents, contractors,
licensees, subtenants or invitees, and (x) any contest referred to in Section
2.6.
2.5 MAINTENANCE AND REPAIR.
(a) Tenant acknowledges that it has received the Premises in good
order and repair. Tenant, at its own expense, will maintain all parts of the
Premises in good repair and sound condition, except for ordinary wear and tear,
and will take all action and will make all structural and non-structural,
foreseen and unforeseen and ordinary and extraordinary changes and repairs which
may be required to keep all parts of the Premises in good repair and sound
condition. Landlord shall not be required to maintain, repair or rebuild all or
any part of the Premises. Tenant waives the right to (i) require Landlord to
maintain, repair or rebuild all or any part of the Premises, or (ii) make
repairs at the expense of Landlord pursuant to any Legal Requirement, contract,
agreement, covenant, condition or restriction set forth in subsection
2.2(b)(ii), at any time in effect.
(b) In the event that all or any part of the Improvements shall
encroach upon any property, street or right-of-way adjoining or adjacent to the
Premises, or shall violate the agreements or conditions affecting the Premises
or any part thereof, or any Legal Requirements, or shall hinder, obstruct or
impair any easement or right-of-way to which the Premises is subject, then,
promptly after written request of Landlord (unless such encroachment, violation,
hindrance, obstruction or impairment is a Permitted Exception) or of any person
so affected, Tenant shall, at its expense, either (i) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting
therefrom, or (ii) make such changes, including alteration or removal, to the
Improvements and take such other action as shall be necessary to remove or
eliminate such encroachments, violations, hindrances, obstructions or
impairments, provided that, if Landlord's consent is required for such changes
pursuant to this Lease, Landlord's consent shall have been obtained, which
consent shall not be unreasonably withheld.
2.6 PERMITTED CONTESTS.
(a) Tenant shall not be required, nor shall Landlord have the right, to
pay, discharge or remove an Imposition, lien or encumbrance, or to comply with
any Legal Requirement applicable to the Premises or the use thereof, as long as
no Event of Default under this Lease shall have occurred and be continuing and
Tenant shall, in good faith, contest the existence, amount or validity thereof
by appropriate proceedings diligently pursued, and provided that (a) with
respect to a failure to pay such Imposition, lien or encumbrance or failure to
perform such Legal Requirement, Tenant shall have provided security as set forth
in Section 2.6(b), which
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shall be deposited with Landlord or Lender prior to the commencement of such
contest, (b) Tenant shall give Landlord prior written notice of Tenant's intent
to contest such matter, and (c) failing to pay such Imposition, lien or
encumbrance or perform such Legal Requirement will not (1) subject Landlord or
Lender to any risk of criminal or a material risk of civil penalties or fines or
to any risk of prosecution for a crime, (2) subject the Premises or any part
thereof to being condemned, vacated, forfeited or otherwise impaired, (3) have
the effect of interrupting or preventing the collection of any contested amount
or other realization of value from the Premises or any part thereof or interest
therein, the Basic Rent, Additional Rent or any other sums payable hereunder or
any portion thereof to satisfy the claim, (4) subject the Premises, any portion
thereof or interest therein, the Basic Rent, Additional Rent or any other sums
payable under this Lease or any portion thereof to satisfy the claim, (5)
subject the Premises, any portion thereof or interest therein, the Basic Rent,
Additional Rent or any other sums payable under this Lease or any portion
thereof, to sale, forfeiture, interruption or loss by reason of such proceedings
or (6) affect the ownership, lease or occupancy of the Premises or Landlord's
ability or right to exercise its remedies hereunder, or Lender's ability or
right to exercise its remedies under the Indenture, including without
limitation, foreclosure against the Premises; PROVIDED, FURTHER, that prior to
the date on which such Imposition or charge would otherwise have become
delinquent Tenant shall have given Landlord and Lender prior notice of such
contest. To the extent that the consent of Landlord is required with respect to
any contest of Tenant, Landlord agrees not to unreasonably withhold such
consent, Landlord agrees that Tenant shall be allowed to file appeals, protests,
contests and other matters described in this Section in the name of Landlord, if
necessary, provided that Tenant has complied with all of the provisions of this
Section 2.6 in connection with such matter.
(b) Tenant shall give such security (including a bond) as may be
reasonably required by Landlord or Lender to ensure ultimate payment of such
Imposition, lien or encumbrance and compliance with Legal Requirements and to
prevent any sale, forfeiture, interruption or loss of the Premises or any
portion thereof, any Basic Rent, Additional Rent or other sums required to be
paid by Tenant hereunder, by reason of such nonpayment or noncompliance.
Notwithstanding the preceding sentence, during such time as no Event of Default
shall have occurred and be continuing and Tenant maintains an Investment Grade
Rating (as hereinafter defined), Tenant shall not be required to provide such
security with respect to a contest if the contest involves claims for less than
$300,000.
ARTICLE 3.
3.1 PROCEDURE UPON PURCHASE.
(a) If Tenant shall purchase the Premises or any portion thereof
pursuant to this Lease, Landlord shall convey or cause to be conveyed title
thereto, the state of which shall be at least as good as the state of title
which existed in Landlord with respect to Landlord's interests in
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the Premises on the date on which this Lease commenced, except for liens and
encumbrances created by, through, under or with the consent of Tenant, and
Tenant or its designee shall accept such title, subject, however, to the
condition of the Premises on the date of purchase, the Permitted Exceptions, all
liens and encumbrances created by, through, under or with the consent of Tenant
and all applicable Legal Requirements, but free of the lien of the Indenture and
of liens, and encumbrances resulting from acts of Landlord taken without the
consent of Tenant.
(b) Upon the date fixed for any purchase of any interests in the
Premises or any portion thereof hereunder, Tenant shall, by wire transfer of
immediately available funds, pay to Landlord, or as Landlord may direct in
writing, the purchase price therefor specified herein, together with all Basic
Rent, Additional Rent, the Make Whole Premium (as hereinafter defined), if
applicable, and other sums then accrued or due and payable hereunder with
respect to the Premises to and including such date of purchase, and there shall
be delivered to Tenant a warranty deed to or other conveyance of the interests
in the Premises or portion thereof then being sold to Tenant and any other
instruments necessary to convey the title thereto described in Section 3.1(a)
and to assign any other property then required to be assigned by Landlord
pursuant hereto. In addition, on the date fixed for purchase, Landlord shall
deliver or cause to be delivered to Tenant all Compensation (as hereinafter
defined) or other condemnation or insurance proceeds held by Landlord or Lender
or their designees net of any and all costs incurred by Landlord or Lender in
connection with the collection of same and Landlord shall assign or cause to be
assigned to Tenant all right, title and interest of such parties to the
Compensation. All such transfer and assignment documentation shall be reasonably
acceptable to Tenant provided, however, that any failure of any such
documentation to be acceptable to Tenant shall in no event affect Tenant's
obligations under this Lease. Tenant shall pay, on an after-tax basis, (i) all
charges incident to such conveyance and assignment, including, without
limitation, counsel fees, escrow fees, recording fees, title insurance premiums,
transfer taxes and all other applicable taxes (other than any income or
franchise taxes of Landlord) which may be imposed by reason of such conveyance
and assignment and the delivery of said deed or conveyance and other
instruments, (ii) all costs and expenses incurred by Landlord in connection with
a defeasance of all or any portion of the indebtedness secured by the Indenture,
including, without limitation, reasonable attorneys' fees and expenses of
Landlord, Lender and the Rating Agencies (as hereinafter defined), any revenue,
documentary stamp or intangible taxes, or any other tax or charge due in
connection with the transfer or creation of the note or notes which evidence the
indebtedness secured by the Indenture or the defeased indebtedness(but in no
event any income taxes payable by said parties), and (iii) all costs and
expenses associated with the release of the lien of the Indenture. Upon the
completion of any purchase of the entire Premises (but not of any lesser
interest than the entire Premises) but not prior thereto (whether or not any
delay or failure in the completion of such purchase shall be the fault of
Landlord), this Lease shall terminate with respect to the Premises, except with
respect to obligations and liabilities of Tenant hereunder, actual or
contingent, which have arisen on or prior to such completion of purchase. The
"MAKE WHOLE PREMIUM" shall have the meaning set forth in the Indenture, or if
not defined in the Indenture, shall mean the amount which Landlord is obligated
to pay in excess of outstanding principal and accrued interest in connection
with a
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prepayment or defeasance of the Indenture, which prepayment or defeasance arises
as a result of the event giving rise to the Make Whole Premium. To the extent
that any provisions of this Lease require Tenant to pay sums then accrued or due
and payable hereunder with respect to the Premises on a Lease Termination Date
(as hereinafter defined), and if such Lease Termination Date occurs on other
than a Payment Date, such accrued amounts shall include all Basic Rent from the
immediately preceding Payment Date through the Lease Termination Date (allocated
on a per diem basis based on a 360 day year for the annual Basic Rent and the
actual number of days elapsed).
3.2 CONDEMNATION AND CASUALTY.
(a) GENERAL PROVISIONS. Subject to Tenant's rights to utilize or
obtain the same in accordance with Section 3.2(b) and Section 3.6, Tenant hereby
irrevocably assigns to Landlord any award, compensation or insurance payment to
which Tenant may become entitled by reason of Tenant's interest in the Premises
(i) if the use, occupancy or title of the Premises or any part thereof is taken,
requisitioned or sold in, by or on account of any actual or threatened eminent
domain proceeding or other action by any person having the power of eminent
domain ("CONDEMNATION") or (ii) if the Premises or any part thereof is damaged
or destroyed by fire, flood or other casualty ("CASUALTY"). Any such irrevocable
assignment to Landlord of any award, compensation or insurance payment with
respect to a Casualty shall exclude all awards and payments made to Tenant under
Tenant's leasehold title insurance policy, Tenant's insurance for its Personal
Property, Tenant's insurance with respect to business interruption (provided
Tenant is separately maintaining a rental loss insurance policy for the benefit
of Landlord and Lender as required by this Lease) and all awards based on
Tenant's goodwill or any other award based upon items other than the Premises
provided that any such awards or payments to be made to Tenant shall not reduce
any award, compensation or insurance otherwise payable to Landlord.
"COMPENSATION" shall mean all awards, compensations, and insurance payments on
account of any Condemnation or Casualty (net of any amounts applicable to
Tenant's Personal Property). All Compensation so received by Landlord shall be
held in a segregated account maintained by Landlord or by Lender to the extent
required by the Indenture. In the event of any Casualty, or in the event of a
Condemnation or threatened Condemnation with respect to a the Premises or any
part thereof, Tenant shall give prompt written notice thereof to Landlord (which
notice shall set forth Tenant's good faith estimates of the cost of repairing or
restoring any damage or destruction caused thereby, or, if Tenant cannot
reasonably estimate the anticipated cost of restoration, Tenant shall
nonetheless give Landlord prompt notice of the occurrence of any such Casualty
or Condemnation, and will diligently proceed to obtain estimates to enable
Tenant to quantify the anticipated cost of such restoration, whereupon Tenant
shall promptly notify Landlord of such good faith estimate). Landlord may, if it
reasonably so elects, participate in any such proceeding or action to negotiate,
prosecute and adjust any claim for any Compensation, and Landlord shall collect
any such Compensation. Tenant shall pay all costs and expenses in connection
with each such proceeding, action, negotiation, prosecution and adjustment.
Notwithstanding Landlord's right to participate therein, Tenant shall initiate
and conduct any such proceeding, action,
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negotiation, prosecution or adjustment and Tenant may settle any such
insurance claims of less than $100,000, unless an Event of Default shall have
occurred and be continuing, in which event Landlord shall have the sole right to
conduct such proceedings, actions, negotiations, prosecutions and adjustments.
All Compensation shall be applied pursuant to the applicable provisions of
Article 3, and all such Compensation (less the reasonable costs and expenses of
Landlord, Tenant and Lender, if applicable, in collecting such Compensation), is
herein called the "NET PROCEEDS".
(b) MAJOR CONDEMNATION AND MAJOR CASUALTY. If (x) a Condemnation shall
affect all or a substantial portion of the Premises which renders the Premises
unsuitable for restoration for continued use and occupancy in Tenant's Business,
(y) a Condemnation or Casualty shall result in a loss affecting or which is
estimated to have a cost to repair and restore of fifty (50%) percent or more of
the then fair market value of the Premises as determined by Landlord or solely
by Lender (if the Indenture is then outstanding) in the exercise of their sole
discretion, or (z) a Condemnation or Casualty shall result in a loss affecting
or which is estimated to have a cost to repair and restore in excess of
twenty-five (25%) but less than fifty (50%) of the then fair market value of the
Premises as determined by Landlord or solely by Lender (if the Identure is then
outstanding) in the exercise of their sole discretion (herein, a "MAJOR
CASUALTY" and a "MAJOR CONDEMNATION"), then (a) in the case of (x) or (y) above,
Tenant shall, not later than sixty (60) days after such Major Condemnation or
Major Casualty, and (b) in the case of (z) above, Tenant may, not later than
sixty (60) days after such Major Condemnation or Major Casualty, as the case may
be, deliver to Landlord (i) notice of its intention to terminate this Lease on a
Payment Date(or if such day is not a Business Day, on the next following
Business Day)(herein, with respect to any termination resulting from a
Rejectable Offer, the "LEASE TERMINATION DATE") which occurs not less than 150
days and not more than 180 days after the delivery of such notice (it being
understood that in all events under this Lease, the Lease Termination Date must
be on the first Business Day of a calendar month) and (ii) a certificate of
Tenant describing the event giving rise to such termination and stating that
Tenant has determined in good faith that such a Major Condemnation or Major
Casualty, as the case may be, has occurred, and (iii) documentation to the
effect that termination of this Lease will not be in violation of any agreement
then in effect with which Tenant is obligated to comply pursuant to this Lease.
If the Lease Termination Date occurs during the Primary Term, such notice must
be accompanied by a Rejectable Offer, as described in Section 3.3, in which
event the provisions of such Section shall be controlling. Notwithstanding the
foregoing, in the event of a Condemnation (other than a Condemnation of the type
described in clause (x) above) or a Casualty which is estimated to have a cost
to repair and restore of fifty (50%) percent or more of the fair market value of
the Premises as determined by Landlord or solely by Lender (if the Indenture is
then outstanding) in the exercise of their sole discretion, Tenant shall not be
required to deliver a notice of Tenant's intention to terminate this Lease
provided Tenant shall have delivered to Landlord and Lender (if the Indenture is
then outstanding) evidence satisfactory to Landlord and Lender (if the Indenture
is then outstanding) that: (i) adequate Net Proceeds are available to fully
restore the Premises, (ii) the Premises are susceptible of being fully restored
within a period of fifteen months following the occurrence of such Condemnation
or Casualty, (iii) the Premises are capable of being restored to substantially
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the same condition as the Premises as of the date immediately prior to such
Casualty or Condemnation and as a functional architectural unit which will, upon
completion, have a fair market value equal to or greater than the market value
of the Premises immediately prior to the occurrence of such Condemnation or
Casualty, (iv) no Event of Default shall have occurred and be continuing under
this Lease, and (v) Tenant's rental interruption insurance is in full force and
effect and will fully cover all Basic Rent and Additional Rent which will be due
and payable by Tenant hereunder during the period the Premises are being
restored.
3.3 REJECTABLE OFFER.
(a) In the event of a Major Casualty or Major Condemnation during the
Primary Term and Tenant has given, or is required to give, a notice to Landlord
of Tenant's intention to terminate this Lease pursuant to Section 3.2(b) hereof,
Tenant shall deliver to Landlord, no later than sixty (60) days after such Major
Casualty or Major Condemnation, (i) an irrevocable rejectable written offer (the
"REJECTABLE OFFER") to purchase Landlord's interest in the Premises on the Lease
Termination Date for a price equal to the "STIPULATED LOSS VALUE" as specified
on SCHEDULE E attached hereto and made a part hereof, and (ii) a certificate
from the president, the chief financial officer or the treasurer of Tenant
(herein, a "RESPONSIBLE OFFICER") which describes the event(s) giving rise to
the Major Casualty or Major Condemnation, as the case may be. Within 90 days of
the date Landlord receives the items required to be delivered in (i) and (ii)
above, Landlord shall deliver written notice of its election to either accept or
reject Tenant's Rejectable Offer (with a failure to respond constituting an
acceptance of such Rejectable Offer). Any rejection by Landlord of a Rejectable
Offer shall comply with and be accomplished in accordance with the provisions of
Section 3.5. In the event of an acceptance or deemed acceptance of a Rejectable
Offer, on the applicable Lease Termination Date, the Landlord's interest in the
Premises shall be conveyed to Tenant or its designee, including but not limited
to the delivery to Tenant of all Net Proceeds held by Lender and/or Landlord
(and/or their respective designees), as the case may be, and Landlord shall
deliver an assignment, without representation, warranty or recourse, to Tenant
of all right, title and interest of Landlord or its designees to receive payment
of all Compensation together with a release in full of the Indenture by Lender,
in exchange for payment by Tenant to Landlord of the applicable Stipulated Loss
Value, together with all Basic Rent, Additional Rent and other sums accrued or
due and payable under this Lease as of the applicable Lease Termination Date
(and, if an Event of Default has occurred and is continuing at the time of the
Rejectable Offer or on the Lease Termination Date, together with a Make Whole
Premium).
(b) Tenant agrees that so long as any portion of the note secured by
the Indenture is outstanding, Tenant shall deliver to Lender at the address for
Lender as set forth in the Tenant Consent (as defined in the Indenture),
concurrently with the delivery thereof to Landlord, a copy of any Rejectable
Offer, together with all items required to be delivered in connection therewith
and together with copies of all items required to be delivered pursuant to this
Section 3.3.
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3.4 [Intentionally omitted.]
3.5 REJECTION OF REJECTABLE OFFER. If the Landlord rejects a Rejectable
Offer with respect to the Premises by a written notice given to the Tenant
within the time period set forth in Section 3.3, then this Lease shall terminate
on the Lease Termination Date and any Net Proceeds (other than those
specifically relating to the Tenant's Personal Property), if any, payable in
connection with a Major Casualty or Major Condemnation (or the right to receive
the same when made if payment therefor has not yet been made) shall be assigned
or paid and belong to the Landlord, and, in addition, the Tenant shall pay to
the Landlord an amount equal to any deductible or self insurance amount in
effect under the policy or policies insuring the risk relating to such Major
Casualty or Major Condemnation, all Basic Rent and Additional Rent accrued as of
such Lease Termination Date and all other amounts then accrued or due and
payable by the Tenant under this Lease. During such time as an Indenture
encumbers the Premises, no rejection of a Rejectable Offer shall be effective
unless countersigned by the Lender.
3.6 LESS THAN MAJOR CONDEMNATION OR MAJOR CASUALTY.
(a) If, after a Condemnation or Casualty, Tenant is not permitted to
give or, if permitted, does not give notice of its intention to terminate this
Lease as provided in Section 3.2 (and is not required to give such notice
pursuant to Section 3.2), then this Lease shall continue in full force and
effect and Tenant shall, at its expense, promptly rebuild, replace or repair the
Premises in conformity with the requirements of Sections 2.5 and 3.8 so as to
restore the Premises (in the case of Condemnation, as nearly as practicable) to
the condition and fair market value thereof immediately prior to such occurrence
(or if the Premises was under renovation at such time, to the condition and fair
market value thereof at the time of completion of renovation) pursuant to this
Section 3.6. Prior to any such rebuilding, replacement or repair, Tenant shall
deliver its reasonable estimate of the cost thereof, which shall be subject to
the approval of Landlord, which approval shall not be unreasonably withheld (the
cost approved by Landlord is referred to as the "RESTORATION COST").
(b) If the repair constitutes a Material Alteration, the Restoration
Cost must be confirmed by an architect reasonably acceptable to Landlord (an
"ARCHITECT"), and if the Restoration Cost is more than the amount of Net
Proceeds, the Tenant shall deliver or cause to be delivered to Landlord (or, if
the Indenture is then outstanding, to Lender): (i) cash collateral in an amount
equal to such excess, or (ii) an unconditional, irrevocable, clean sight draft
letter of credit, in form and substance, and issued by a bank, acceptable to
Landlord in its sole discretion (and, if the Indenture is then outstanding, to
Lender in its sole discretion), in the amount of such excess, or (iii) a bond in
form and from an institution reasonably acceptable to Landlord (and, if the
Indenture is then outstanding, to Lender), in the amount of such excess; or (iv)
evidence acceptable to Landlord (and, if the Indenture is then outstanding, to
Lender) that the excess has been expended in performing the restoration work
prior to any funds being drawn from the Net Proceeds; provided, however, Tenant
shall not be required to deliver the items set forth (i)
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through (iv) above as long as (x) the amount of the Restoration Cost in excess
of the Net Proceeds is not more than $1,000,000, (y) no Event of Default shall
have occurred and be continuing and (z) at such time and thereafter until
completion of such Material Alterations Tenant or a Guarantor has an Investment
Grade Rating (as hereinafter defined) by all of the Rating Agencies (as
hereinafter defined) then rating Tenant or Guarantor. For the purposes of this
Lease, the term (x) "INVESTMENT GRADE RATING" shall mean that Tenant or a
Guarantor is rated BBB or better by Standard & Poors Rating Group ("S&P"), Baa2
or better by Moody's Investor's Service Inc. ("MOODY'S"), BBB or better by Fitch
IBCA, Inc.("FITCH"), and/or BBB or better by Duff & Phelps Credit Rating Co.
("DUFF &PHELPS"), and (y) "RATING AGENCIES" shall mean S&P, Moody's, Fitch and
Duff & Phelps, or any of their respective successors, or any other nationally
recognized credit rating agency or agencies which is rating securities issued in
connection with any securitizations which include the loan secured by the
Indenture are referred to in this Lease.
(c) The Restoration Cost shall be paid first out of Tenant's own funds
to the extent that the Restoration Cost exceeds the Net Proceeds payable in
connection with such occurrence, after which expenditure Tenant shall be
entitled to receive the Net Proceeds, but only against certificates of Tenant
(and lien releases and other items generally and reasonably required in
connection with disbursement of construction loan or insurance proceeds)
delivered to Landlord from time to time as such work or rebuilding, replacement
and repair progresses, each such certificate describing the work for which
Tenant is requesting payment and the cost incurred by Tenant in connection
therewith and stating that Tenant has not theretofore received payment for such
work. To the extent that the Indenture requires that Tenant deliver its portion
of the Restoration Costs to Lender (or other security acceptable to Lender),
Landlord hereby instructs Tenant, and Tenant agrees, to deliver the same to
Lender, provided that same shall be applied in accordance with the terms and
conditions of this Lease. In addition, in such event the Restoration Cost shall
be disbursed in accordance with the procedure set forth in Section 3.6(e) below.
If the Net Proceeds relate to a Casualty, any Net Proceeds remaining after final
payment has been made for such work and after Tenant has been reimbursed for any
portions it contributed to the Restoration Cost shall be retained by Tenant. If
the Net Proceeds relate to a Condemnation and the Net Proceeds remaining after
final payment for the work are less than $100,000, any such Net Proceeds
remaining after final payment has been made for such work and after Tenant has
been reimbursed for any portions it contributed to the Restoration Cost shall be
retained by Tenant and no adjustment shall be made in the Basic Rent. If the Net
Proceeds relate to a Condemnation and the Net Proceeds remaining after final
payment for the work are $100,000 or more, any such Net Proceeds remaining after
final payment has been made for such work and after Tenant has been reimbursed
for any portions it contributed to the Restoration Cost shall be retained by
Landlord and no adjustment shall be made in the Basic Rent. In the event of any
temporary Condemnation, this Lease shall remain in full force and effect and so
long as no Event of Default shall have occurred and be continuing the Net
Proceeds allocable to such temporary Condemnation shall be paid to Tenant,
unless such Net Proceeds from temporary Condemnation are in excess of $500,000,
in which event such Net Proceeds in excess of $500,000 from temporary
Condemnation shall be delivered to Landlord (or if required by the Indenture, to
Lender), to be applied towards
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the payment of Basic Rent as the same becomes due (with any balance delivered to
Tenant, except that such portion of the Net Proceeds allocable to the period
after the expiration or termination of the term of this Lease shall be paid to
Landlord). If the cost of any rebuilding, replacement or repair required to be
made by Tenant pursuant to this Section 3.6 shall exceed the amount of such Net
Proceeds, the deficiency shall be paid by Tenant. Tenant shall not be entitled
to disbursements of the Net Proceeds if an Event of Default has occurred and is
continuing.
(d) The Basic Rent and the Additional Rent payable under the provisions
of this Lease shall not be affected, altered or reduced by any Casualty or
Condemnation and Tenant's obligation to continue to pay Basic Rent and
Additional Rent shall continue notwithstanding any such Condemnation or
Casualty.
(e) If the Restoration Costs are required to be held by Landlord
pursuant to this Lease, or if required under this Lease or the Indenture, by
Lender, then Net Proceeds shall be held by Landlord or Lender, as the case may
be, and shall be paid out from time to time to Tenant as the work progresses
(less any cost to Lender or Landlord of recovering and paying out such proceeds,
including, without limitation, reasonable attorneys', trustees' or escrow fees
relating thereto and costs allocable to inspecting the work and the plans and
specifications therefor), subject to each of the following conditions:
(i) Each request for payment shall be made on not less than ten
(10) Business Days' prior notice to Landlord and Lender and shall be accompanied
by an officer's certificate (or if such work is being performed under the
supervision of an Architect, by a certificate of such Architect), stating (A) in
the case of an officer's certificate only, that no Event of Default exists
hereunder, (B) that, based upon an inspection of the Premises, all of the work
completed has been done in substantial compliance with the approved plans and
specifications, if required, (C) that the sum requested is validly required to
reimburse Tenant for payments by Tenant, or is validly due to the contractor,
subcontractors, materialmen, laborers, engineers, architects or other persons
rendering services or materials for the work (giving a brief description of such
services and materials), and that when added to all sums previously paid out by
Landlord or Lender, as the case may be, does not exceed the value of the work
done to the date of such certificate, (D) if the sum requested is to cover
payment relating to repair and restoration of personal property required or
relating to the Premises, that title to the personal property items covered by
the request for payment is vested in Landlord or Tenant, as applicable, and (E)
the remaining cost to complete such work and that the remaining amount held by
Lender (together with any amounts contemporaneously deposited by Tenant with
Landlord or Lender, as the case may be, in connection therewith) shall be
sufficient to cover such cost of completion; PROVIDED, HOWEVER, that if such
certificate is given by an Architect, such Architect shall certify as to clause
(B) above, and Tenant shall certify as to the remaining clauses above, and
provided, further, that Landlord or Lender, as the case may be, shall not be
obligated to disburse such funds if Landlord or Lender, as the case may be,
determines, in Landlord's or Lender's reasonable discretion, as the case may be,
that Tenant shall not be in compliance with this Section 3.6(e)(i).
Additionally,
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each request for payment shall contain a statement signed by Tenant approving
both the work done to date and the work covered by the request for payment in
question.
(ii) Each request for payment shall be accompanied by waivers of
lien reasonably satisfactory to Lender covering that part of the work for which
payment or reimbursement has been made as of the date shown on the current
request and, if required by Landlord or Lender, a search prepared by a title
company or licensed abstractor, or by other evidence satisfactory to Landlord
and Lender that there has not been filed with respect to the Premises any
mechanics, or other lien or instrument for the retention of title relating to
any part of the work not discharged of record and such other contractors sworn
statements, plots of survey and evidence of cost, payment and performance as
Lender may reasonably request and approve.
(iii) Landlord and Lender, and their respective architects or duly
authorized representatives, shall have the right to inspect the work at all
reasonable times upon reasonable prior notice and may condition any disbursement
of Net Proceeds upon the satisfactory completion, as determined in Lender's
reasonable discretion, of any portion of the work for which payment or
reimbursement is being requested. Neither the approval by Lender or Landlord of
any required plans and specifications for the work nor the inspection by Lender
or Landlord of the work shall make Lender or Landlord responsible for the
preparation of such plans and specifications or the compliance of such plans and
specifications, or of the work, with any applicable Legal Requirement, covenant
or agreement.
(iv) Net Proceeds shall not be disbursed more frequently than once
every thirty (30) days; provided, however, that if any Event of Default has
occurred and is continuing, or if at such time Tenant does not have an
Investment Grade Rating, no disbursement made prior to final completion shall
exceed 90% of the value of the work completed from time to time.
(v) So long as an Event of Default shall have occurred and be
continuing, Landlord (or Lender, if allowed by the Indenture), may apply any Net
Proceeds held by it to continue the restoration and repair of the Premises or
such Net Proceeds may be applied to pay or prepay, in whole or in part, any
indebtedness secured by the Indenture.
Net Proceeds held by Landlord or Lender in accordance with this Section shall be
held in a segregated interest bearing account if (A) such an account is
available at the institution at which Landlord or Lender holds such Net
Proceeds, and (B) Landlord or Lender determines, in its reasonable judgment,
that holding the Net Proceeds in such an account is practical under the then
existing circumstances. Any interest earned on the Net Proceeds shall be a part
of the Net Proceeds, and shall be disbursed in accordance with this Lease.
(f) Notwithstanding any other provision of this Section, if either
Tenant or a Guarantor is then currently maintaining an Investment Grade Rating
and in Tenant's reasonable judgment the cost of the Work (as hereinafter
defined) is less than $500,000 with respect to any
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one casualty or partial condemnation (and the cost of all outstanding Work at
such time is less than $750,000), such Work can be completed in less than one
hundred twenty (120) days (subject to Force Majeure) and no Event of Default has
occurred and is continuing and if allowed pursuant to the provisions of the
Indenture, then Landlord, upon request by Tenant, shall permit Tenant to apply
for and receive the Net Proceeds directly from the insurer or payor thereof (and
Landlord shall advise such insurer or payor and Lender to pay over such Net
Proceeds directly to Tenant), provided that Tenant shall promptly and diligently
commence and complete such Work in a good and workmanlike manner.
(g) If an Event of Default shall have occurred and be continuing or if
Tenant (i) shall fail to submit to Landlord for approval plans and
specifications (if required pursuant to Section 3.6(b) hereof) for the Work
(approved by the Architect and by all governmental authorities whose approval is
required), (ii) after any such plans and specifications are approved by all such
governmental authorities, the Architect, Landlord and Lender, shall fail to
commence promptly such Work, (iii) after Lender or Landlord has released the Net
Proceeds to the extent provided for hereunder, shall fail to diligently
prosecute such Work to completion, or (iv) materially fail in any other respect
to comply with the Work obligations under this Section 3.6, then in addition to
all other rights available hereunder, at law or in equity, Landlord or Lender,
or any receiver of the Premises or any portion thereof, upon fifteen (15) days
prior written notice to Tenant (except in the event of emergency in which case
no notice shall be required), may (but shall have no obligation to) perform or
cause to be performed such Work, and may take such other steps as either
Landlord or Lender deems advisable (but such performance shall not cure the
default of Tenant). In addition, Tenant acknowledges that if an Event of Default
shall have occurred and be continuing, Lender may apply any Net Proceeds towards
payment of the indebtedness secured by the Indenture, which payment shall not
relieve Tenant of any of its obligations hereunder. Tenant hereby waives, for
Tenant and all others holding under or through Tenant, any claim, other than for
gross negligence or willful misconduct (subject to the provisions of Section
10.18(b)), against Landlord and Lender and any receiver arising out of any act
or omission of Landlord or Lender or such receiver pursuant hereto, and Landlord
or Lender may apply all or any portion of the Net Proceeds (without the need to
fulfill any other requirements forth in this Section 3.6) to reimburse Landlord
or Lender or such receiver, for all amounts incurred in connection with the
Work, and any costs not reimbursed to such parties shall be paid by Tenant to
Landlord (or such other party) on demand, together with interest thereon at the
Rate from the date such amounts are advanced until the same are paid by Tenant.
(h) Tenant shall be entitled to settle any and all insurance claims
less than $100,000, provided that no Event of Default shall have occurred and be
continuing (in which event Landlord or Lender, as the case may be, shall
exclusively settle insurance claims).
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3.7 INSURANCE.
(a) Tenant will maintain insurance on the Premises of the following
character:
(i) Insurance with respect to the Improvements against all perils
included within the classification "All Risk of Physical Loss", covering such
risks as shall be customarily insured against with respect to improvements
similar in construction, location and use including by way of example,
earthquake, flood, sprinkler leakage, debris removal, act of municipal authority
(building ordinance or law, increased cost of construction and demolition),
malicious mischief, water damage, boiler and machinery explosion or damage and
the like, with extended coverage, and in amounts not less than the greater of
(x) 100% of the actual replacement cost of the Improvements (exclusive of
foundations and excavations), without regard to depreciation, and (y) such other
amount as is necessary to prevent any reduction in such policy by reason of and
to prevent Landlord, Lender or any other insured thereunder from being deemed to
be a co-insurer. If as of the date hereof, or at any time during the term of
this Lease, the Premises is not in compliance with all Legal Requirements such
that in the event of a partial or total casualty or destruction such Legal
Requirements would prohibit Landlord or Tenant from restoring or rebuilding the
Premises to the specifications and condition of the Premises prior to such
casualty or destruction, then Landlord or Tenant shall be required to carry
agreed value insurance.
(ii) Commercial general public liability insurance insuring Tenant,
with Landlord and Lender as additional insureds, against all claims for damages
to person or property or for loss of life or of property occurring upon, in, or
about the Premises, in limits of at least $1,000,000 per occurrence, $2,000,000
in the aggregate, with excess or umbrella coverage of at least $20,000,000, or
such greater limits as may be required from time to time by Landlord or Lender
consistent with insurance coverage on properties similarly constructed, occupied
and maintained.
(iii) Worker's compensation insurance (including employers'
liability insurance, if requested by Landlord or Lender) to the extent required
by the law of the state in which the Premises is located.
(iv) Flood insurance in an amount equal to the full Replacement
Cost of the Premises or the maximum amount available, whichever is less, if all
or any portion of the Improvements are located in an area which has been
designated by the Secretary of Housing and Urban Development or by the Federal
Emergency Management Agency as having special flood hazards, and if flood
insurance is available under the National Flood Insurance Act.
(v) Insurance against loss or damage from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning equipment, pressure
vessels or similar apparatus now or hereafter installed at the Premises, in an
amount not less than $5,000,000 or
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such greater amount as Landlord or Lender may from time to time reasonably
require and which are customarily required with respect to similar properties
similarly situated.
(vi) Rental loss insurance covering at least 15 months of rental
interruption, in an amount equal to 15 months of Basic Rent and estimated
Impositions.
(vii) During any period during which construction is conducted on
the Premises and during which period the construction and materials are not
covered by the existing policies, premium prepaid insurance policies covering
the Premises (which during construction shall be on an "All-Risk" perils,
including theft, "Builder's Risk," "Completed Value" form) in amounts equal to
the replacement costs of the Improvements (including construction materials and
personal property on or off site) covering insurance risks no less broad than
those covered under a Standard Multi Peril (SMP) policy form, which contains a
1987 Commercial ISO "Causes of Loss-Special Form," with coverage for such other
expenses as Landlord or Lender may reasonably require, including, without
limitation, coverage for hired automobiles and other automobiles not owned by
Tenant. Such insurance shall contain an agreed amount endorsement (such amount
to include foundation and underground pipes) and bear a 100% co-insurance
clause. Said policies shall contain a permission to occupy endorsement.
(viii) Such other insurance as may from time to time be reasonably
required by Landlord or by Lender in order to protect their respective
interests.
(ix) During any period when construction is conducted on the
Premises, worker's compensation, employers' liability, commercial auto
liability, and commercial general liability insurance (including contractual
liability and completed operations coverage) for each general contractor written
on a 1986 or 1993 standard "ISO" occurrence basis form or equivalent and excess
umbrella coverage, carried during the course of construction, with general
liability insurance limits as set forth in clause (ii) above.
(b) Such insurance shall be issued by companies authorized to transact
business in the state in which the Premises is located and having an Alfred M.
Best Company rating of "A" or better and financial size category of not less
than X, and a Standard & Poor's rating of "A" or better as to claims paying
ability, provided that with respect to worker's compensation insurance such
insurance company must have an Alfred M. Best Company rating of "A" or better
and financial size category of not less than VIII. No liability insurance policy
maintained by Tenant shall provide for a deductible or self-insured retention in
excess of $50,000 unless Tenant then maintains an Investment Grade Rating and no
Event of Default shall have occurred and be continuing hereunder, in which event
the self-insured retention or the deductible shall not be in excess of $100,000.
No casualty or other insurance policy maintained by Tenant (other than liability
policies) hereunder shall provide for a deductible or self-insured retention in
excess of $25,000 unless Tenant then maintains an Investment Grade Rating and no
Event of Default shall have occurred and be continuing hereunder, in which event
the deductible or the self-insured retention
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shall not be in excess of $100,000. Notwithstanding the foregoing, if Tenant
maintains an Investment Grade Rating and no Event of Default shall have occurred
and be continuing hereunder, the deductible or the self-insured retention shall
not be in excess of the following amounts: (i) $25,000 for general property
damage, (ii) $25,000 for boiler damage, (iii) $100,000 for flood damage, and
(iv) 2% of the insurable value of the Property for wind (including hurricane)
damage. Tenant shall, promptly upon receipt but in no event less than ten (10)
days prior to the expiration date of any of the insurance policies required to
be maintained pursuant to this Lease, deliver to Landlord and Lender originals
or certified copies of certificates evidencing the renewal of such policies
bearing notations evidencing the payment of premiums. Originals or certified
copies of all insurance policies shall be delivered to Landlord and Lender by
Tenant promptly upon Tenant's receipt thereof and in no event later than ninety
(90) days after the effective date thereof and original binders or original or
certified certificates evidencing such policies (or amendments) and bearing
notations evidencing the payment of premiums therefor shall be delivered to
Landlord and Lender by Tenant in no event later than ten (10) days prior to the
effective date of such policies (or amendments). If at any time during the Term
of this Lease, Tenant shall fail to deliver to Landlord and Lender original
binders or original or certified certificates evidencing any insurance required
to be maintained by Tenant hereunder (or any amendments or renewals of any such
insurance policies)in any case within five (5) Business Days prior to the
expiration date of any such policies, then Landlord shall, at its option, have
the right to require Tenant to deposit, and Tenant agrees that it shall deposit
with Landlord or, if directed by Landlord, to Lender (or its designee)(Landlord
hereby irrevocably directs Tenant to make such deposits with Lender as long as
the Indenture shall remain outstanding) on each Payment Date, as Additional
Rent, one twelfth (1/12) of all estimated insurance premiums in respect of all
insurance required to be maintained by Tenant hereunder (collectively, the
"ESTIMATED PREMIUMS") for the year then in effect as reasonably estimated by
Landlord. To the extent permitted by applicable law, neither Landlord nor Lender
or its designee, as Depository, shall be required to maintain the Estimated
Premiums in an account separate from other funds of such party or to deposit any
such amounts in an interest-bearing account, provided, however, in the event
such amounts are maintained in an interest bearing account and no Event of
Default shall have occurred and be continuing hereunder, Tenant shall be
entitled to receive any interest earned thereon on a quarterly basis. Tenant
shall deposit with Depository, prior to the date which is thirty (30) days prior
to the due date of insurance premiums, such additional amount as may be
necessary to provide Depository with sufficient funds in such deposit account to
pay each such insurance premium at least thirty (30) days in advance of the due
date thereof. Depository shall apply the aforesaid deposits for such purpose not
later than the last day on which any such insurance premiums are due. If, at any
time, the amount of any insurance premiums are increased or Landlord or Lender
receives information that such insurance premiums will be increased, and if the
monthly deposits then being made by Tenant for this purpose (if continued) would
not make up a fund sufficient to pay such insurance premiums thirty (30) days
prior to the due date, said monthly deposits thereupon shall be increased and
Tenant immediately shall deposit with the Depository, on demand, sufficient
moneys so that the moneys then on hand for the payment of said Insurance
Premiums, plus the increased payments and such additional sums demanded, shall
be sufficient so that the
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Depository shall have received from Tenant adequate amounts to pay such
Insurance Premiums at least thirty (30) days before such insurance premiums
become due and payable. For the purpose of determining whether the Depository
has on hand sufficient moneys to pay any particular insurance premium at least
thirty (30) days prior to the due date therefor, deposits for each category of
insurance premium shall be treated separately, it being the intention that the
Depository shall not be obligated to use moneys deposited for the payment of an
item not yet due and payable to the payment of an item that is due and payable.
Notwithstanding the foregoing, it is understood and agreed that (a) to the
extent permitted by applicable law, deposits provided for hereunder may be held
by the Depository in a single bank account and commingled with other funds of
the Depository, and (b) the Depository may, if Tenant fails to make any deposit
required hereunder, apply deposits made for any one insurance premium for the
payment of the same, any other insurance premium or any outstanding Basic Rent
or Additional Rent. If this Lease shall be terminated by reason of any Event of
Default, all deposits then held by the Depository shall be applied on account of
any and all sums due under this Lease and Tenant shall forthwith pay the
resulting deficiency in accordance with the terms hereof. If Landlord ceases to
have any interest in the Premises, Landlord shall direct the Depository to
transfer to the person or entity who owns or acquires such interest in the
Premises and is the transferee of the Landlord's interest in this Lease, the
deposits made pursuant to the provisions hereof. In addition, in the event that
the Lender (or a servicing agent on Lender's behalf) is the Depository, the
Lender shall have the right to transfer the deposits (or to cause its servicing
agent to transfer such deposits) to any transferee of the Indenture or to the
holder of any substitute Indenture. Upon any such transfer of the deposits and
notice thereof to Tenant, the transferor shall be deemed to be released from all
liability with respect thereto and Tenant agrees to look to the transferee
solely with respect thereto, and the provisions hereof shall apply to each
successive transfer of the said deposits.
(c) Every such policy (other than any general public liability, auto
liability or worker's compensation policy) shall bear a mortgagee's loss payable
clause or a mortgagee endorsement in favor of the mortgagee or beneficiary
(whether one or more, and together with its or their successors and assigns, the
"LENDER") under each mortgage, deed of trust or similar security instrument
creating a lien on the interests of Landlord in the Premises (whether one or
more, the "INDENTURE"), and any loss under any such policy shall be payable to
the Lender which has a first lien on such interests (if there is more than one
first Lender, then to the trustee for such Lenders) to be held and applied
pursuant to this Article 3.
(d) All such insurance (other than any worker's compensation policy)
shall be endorsed to provide that:
(i) such insurance will not be canceled or amended except after 30
days' written notice to Landlord and Lender and that it shall not be invalidated
by any act or negligence of Landlord, Tenant or any person or entity having an
interest in the Premises, nor by occupancy or use of the Premises for purposes
more hazardous than permitted by such policy, nor by any
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foreclosure or other proceedings relating to the Premises nor by change in title
to or ownership of the Premises;
(ii) the Landlord and Lender are each an additional insured with
the understanding that any obligation imposed upon the insured (including,
without limitation, the liability to pay premiums, but excluding any obligation
of the insured to cooperate with any insurer or any insurer's representative in
the investigation, defense or settlement of any claim covered under such
insurance) shall be the sole obligation of Tenant and not that of any other
insured;
(iii) all insurance proceeds payable under any policy of property,
sprinkler or flood insurance with respect to the Premises shall be paid to
Lender as sole loss payee for losses in excess of $100,000 under a standard
mortgagee clause (or if no Lender exists, to Landlord);
(iv) the interests of the Lender shall not be invalidated by any
action or inaction of the Landlord, Tenant or any other person, and such
insurance shall insure the Lender regardless of any breach or violation by the
Tenant, the Landlord or any other person of any warranties, declarations or
conditions contained in the policies relating to such insurance or application
therefor;
(v) the interests of Landlord shall not be invalidated by any
action or inaction of the Tenant or any other person, and such insurance shall
insure the Landlord regardless of any breach or violation by the Tenant or any
other person of any warranties, declarations or conditions contained in the
policies relating to such insurance or application therefor;
(vi) the insurer thereunder waives all rights of subrogation
against the Lender and Landlord and waives any right of set-off and counterclaim
and any other right of deduction, whether by attachment or otherwise;
(vii) such insurance shall be primary to Tenant without right of
contribution from any other insurance carried by or on behalf of the Tenant with
respect to Tenant's operation only or the Landlord or the Lender or any other
person with respect to its interest in the Premises;
(viii) all terms, conditions, insuring agreements and endorsements,
with the exception of limits of liability, shall operate in the same manner as
if there were a separate policy covering each insured, including, without
limitation, that if any such policy is a blanket policy covering other
properties in addition to the Premises, Tenant shall provide evidence
satisfactory to Landlord that the insurance premiums for each of the other
properties and the Premises are separately allocated under such policy and
payment of such allocated premiums shall
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continue such policy as to the Premises notwithstanding any other payment or
non-payment of premiums thereunder.
(e) In the event of any transfer by Landlord of Landlord's interest in
the Premises or any financing or refinancing of Landlord's interest in the
Premises, Tenant shall, upon not less than ten (10) days' prior written notice,
deliver to Landlord or any Lender providing such financing or refinancing, as
the case may be, certificates of all insurance required to be maintained by
Tenant hereunder naming such transferee or such Lender, as the case may be, as
an additional named insured to the extent required herein effective as of the
date of such transfer, financing or refinancing. Tenant shall not obtain or
carry separate insurance concurrent in form or contributing in the event of loss
with that required by this Section 3.7 unless Landlord is an additional named
insured therein and unless there is a Lender endorsement in favor of Lender with
loss payable as provided herein. Tenant shall immediately notify Landlord
whenever any such separate insurance is obtained and shall deliver to Landlord
and Lender the policies or certificates evidencing the same. Any insurance
required hereunder may be provided under blanket policies provided that the
Premises and the applicable coverage applicable thereto are specified therein.
(f) Any loss under any property damage insurance required to be
maintained by Tenant shall be adjusted by Landlord and Tenant pursuant to the
provisions of Section 3.2(a), provided, however, if an Event of Default shall
have occurred and be continuing, Landlord shall have the sole right to make such
adjustment and collection, but Tenant shall be entitled to any proceeds relating
to Tenant's Personal Property (subject to Landlord's right to offset any amounts
owed to Landlord under this Lease).
(g) The requirements of this Section 3.7 shall not be construed to
negate or modify Tenant's obligations under Section 2.4.
(h) If Tenant fails to maintain and deliver to Landlord and Lender the
original policies and certificates of insurance required by this Lease, Landlord
or Lender may, at their option, procure such insurance, and Tenant shall
reimburse Landlord or Lender, as the case may be, in the amount of all such
premiums thereon, promptly following demand by Landlord or Lender, as the case
may be, with interest thereon at the Rate from the date paid by Landlord or
Lender, as the case may be, to the date or repayment by Tenant; provided,
however, that this sentence shall not prevent any default under this Section 3.7
from becoming an Event of Default.
3.8 ALTERATIONS.
(a) Tenant may, at its expense, make additions to and alterations of
the Improvements, and construct additional Improvements (collectively,
"ALTERATIONS"), provided that (i) the fair market value, utility and useful life
of the Premises shall not be reduced or lessened in any material respect
thereby, (ii) such Alterations shall be expeditiously completed in a good and
workmanlike manner, free and clear of liens and encumbrances, and in compliance
with all
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applicable Legal Requirements and the requirements of all insurance policies
required to be maintained by Tenant hereunder, (iii) Tenant shall not make any
Alterations in violation of the terms of any restriction, easement, condition,
covenant or other matter affecting title to or use of the Premises and (iv) no
Material Alterations (as hereinafter defined), shall be made unless Landlord's
prior written consent shall have been obtained, which consent shall not be
unreasonably withheld, delayed or conditioned, unless an Event of Default shall
have occurred and be continuing in which case such consent may be withheld by
Landlord in its sole discretion. "MATERIAL ALTERATION" is defined as either (A)
Structural Work (as hereinafter defined), or (B) a demolition of any material
portion of the Improvements, or (C) Alterations which would materially and
adversely affect the building systems or equipment, or (D) Work which involves
the construction of a shared common or party wall on a property line which
separates the Premises from adjacent land, or (E) Work for which the Estimated
Cost is in excess of $250,000. "STRUCTURAL WORK" is defined as Work which
involves in any material respect any roof, load-bearing wall, structural beams,
columns, supports, foundation or any other structural element of the Premises.
"ESTIMATED COST" is defined as the estimated cost of materials, construction and
labor (not including architects, engineers or other professionals), as estimated
by a licensed Architect (or if not required to be estimated by an Architect, as
reasonably estimated by Tenant), which estimate together with a complete
description of the Work and all related work shall be delivered to, and such
estimate and description reasonably approved by, Lender and Landlord before the
commencement of any Work hereunder. In addition to the limitations set forth in
(i) through (iv) above, Tenant agrees that all Alterations, Material
Alterations, Structural Work, restoration, repair and any other work which
Tenant shall be required or permitted to do under the provisions of this Lease
(hereinafter collectively called the "WORK") shall be performed in each case
subject to the following:
(i) Tenant shall not perform any Work which shall have a material
adverse effect on the use or operation of the Premises, as operated by Tenant as
of the date hereof (except such adverse effect as shall occur during the period
of time needed to complete the Work). Any Work when completed shall be of such a
character as not to materially reduce the value of the Premises below its value
immediately prior to the commencement of such Work or damage to the Premises
necessitating such Work or change.
(ii) Except with respect to adverse effects occurring during the
period of time needed to complete the applicable Work, no Work shall be
performed by Tenant if the same would materially reduce the usable square
footage of the Premises, or would materially weaken, temporarily or permanently,
the structure of the Premises or any part thereof, or reduce the permitted uses
thereof under applicable zoning laws or impair other amenities of the Premises.
(iii) No Material Alterations shall be commenced until detailed
plans and specifications (including layout, architectural, mechanical and
structural drawings), prepared by an Architect shall have been submitted to and
approved by Landlord, which approval shall not be
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unreasonably delayed, conditioned or withheld, provided however, that any such
approval by Landlord shall be subject to Landlord's receipt of any approval
required to be obtained from the Lender and no such Work shall be undertaken
except under the supervision of the Architect.
(iv) The reasonable cost and expense paid to third parties
(including Landlord's asset manager or any servicer retained by Lender) of
Landlord's and Lender's respective (A) review of any plans and specifications
required to be furnished pursuant to this Lease or (B) reasonable
review/supervision of any such Work shall be paid by Tenant to Landlord, within
ten (10) days after demand, or, at the option of Landlord, as Additional Rent.
(v) All Work shall be commenced only after all required municipal
and other governmental permits, authorizations and approvals shall have been
obtained by Tenant, at its own cost and expense, and copies thereof delivered to
Landlord. Landlord will, on Tenant's written request, promptly execute any
documents necessary to be signed by Landlord to obtain any such permits,
authorizations and approvals, provided that Tenant shall bear any expense or
liability of Landlord in connection therewith; provided, however, that none of
the foregoing shall, in any manner, result in a change in zoning or otherwise
have a material adverse affect on the ability to use the Premises as currently
operated by Tenant.
(vi) If the Work shall constitute a Material Alteration, it shall
not be commenced until Tenant shall have obtained and delivered to Landlord and
Lender, either (A) a performance bond and a labor and materials payment bond
(issued by a corporate surety licensed to do business in the state in which the
Premises is located and satisfactory to Landlord and Lender), each in an amount
equal to the Estimated Cost of such Work and in form otherwise satisfactory to
Landlord and Lender, or (B) such other security as shall be reasonably
satisfactory to Landlord and Lender; provided, however, that if at the time the
Work is commenced, either Tenant or a Guarantor then maintains and continues to
maintain until such Work is completed an Investment Grade Rating and no Event of
Default shall have occurred and be continuing and Estimated Cost of the Work
does not exceed $1,000,000 (as adjusted for changes in the consumer price
index), Tenant shall not be required to comply with this subsection (vi).
(vii) All Work shall be performed in a good and workmanlike manner,
and in accordance with all Legal Requirements, as well as any plans and
specifications therefor which shall have been approved by Landlord. All Work
shall be commenced and completed in a commercially reasonable manner.
(viii) Subject to the terms of Section 2.6 hereof, the cost of all
Work shall be paid promptly, in cash, so that the Premises and Tenant's
leasehold estate therein shall at all times be free from (A) liens for labor or
materials supplied or claimed to have been supplied to the Premises or Tenant,
and (B) chattel mortgages, conditional sales contracts, title retention
agreements, security interest and agreements, and financing agreements and
statements.
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(ix) Upon completion of any Work, Tenant, at Tenant's expense,
shall obtain certificates of final approval of such Work required by any
governmental or quasi-governmental authority and shall furnish Landlord with
copies thereof, and, if the Work constituted Material Alterations, together with
"as-built" plans and specifications for such Work.
(x) Any Work shall be subject to inspection at any time and from
time to time by any of Landlord or Lender, their respective architect(s), or
their duly authorized representatives, and if any such party upon any such
inspection shall be of the opinion that the Work is not being performed in
accordance with the provisions of this Section 3.8 or the plans and
specifications, or that any of the materials or workmanship are unsound or
improper, Tenant shall correct any such failure and shall replace any unsound or
improper materials or workmanship. Anything contained herein to the contrary
notwithstanding, any different procedure for the performance of Work which may
be required under any Indenture shall take precedence over and be in addition to
the procedures provided for in this Lease provided that any such different
procedures contained in any Indenture entered into by Landlord subsequent to the
commencement date of this Lease are consistent with prevailing commercial
lending practices for similar transactions.
(xi) Except as may be expressly provided to the contrary hereunder
with respect to Severable Alterations or with respect to Tenant's Personal
Property, all Alterations installed in or upon the Premises at any time during
the Term shall become the property of Landlord and shall remain upon and be
surrendered with the Premises unless Landlord, by notice to Tenant no later than
ninety (90) days prior to the Expiration Date, elects to have the same removed
or demolished by Tenant, in which event, the same shall be removed from the
Premises by Tenant prior to the termination of this Lease, at Tenant's expense.
Tenant may expressly request in Tenant's written request for consent that
Landlord determine its election prior to installation (which written request
shall include the estimated cost of removal and restoration). Tenant shall
immediately repair any damage to the Premises caused by its removal of any of
the Severable Alterations or Tenant's Personal Property or Alterations which
remain the property of Tenant pursuant to the terms of this Section. All
property permitted or required to be removed by Tenant at the end of the Term
remaining in the Premises after Tenant's removal shall be deemed abandoned and
may, at the election of Landlord, either be retained as Landlord's property or
may be removed from the Premises by Landlord at Tenant's expense. The provisions
of this Section shall survive the expiration of the Term or earlier termination
of this Lease.
(b) Tenant may, at its cost and expense, install, or place upon or
reinstall, or replace and remove from the Premises any Tenant's Personal
Property. Subject to and conditioned upon compliance with the provisions of
Section 3.8(a) above, Tenant may make Alterations or undertake construction
which requires sharing the use of existing facilities and utilities, provided
that reciprocal easement agreements and joint use agreements allocate ownership,
use and expenses to the reasonable satisfaction of Landlord, and provided that
the same comply with the provisions of Section 3.10. No such construction shall
impair the structural
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and functional integrity of the Premises as an independent commercial property,
in compliance with Legal Requirements, at the time the Alterations are made or
at the end of the term of this Lease.
3.9 INTENTIONALLY OMITTED.
3.10 EASEMENTS.
(a) Landlord agrees from time to time during the term of this Lease, at
the request of Tenant, without additional consideration, and with the prior
written consent of Lender, which, shall not be unreasonably withheld or delayed
(1) to sell, assign, convey, or otherwise transfer an interest in the Premises
of a nature described in this Section 3.10 to any Person legally empowered to
take such interest under the power of eminent domain which Person has indicated
it intends to do so, (2) to grant easements, licenses, rights of way and other
rights and privileges in the nature of easements of such nature, extent and
duration as Tenant may reasonably request provided that such easements,
licenses, rights of way and other rights and privileges are customarily granted
by prudent operators, managers, or owners of properties similar to the Premises;
(3) to release or relocate existing easements and appurtenances which are for
the benefit of the Premises; (4) to dedicate or transfer unimproved portions of
the Premises for road, highway or other public purposes; (5) to execute
petitions to have the Premises annexed to any municipal corporation or utility
district; (6) to execute amendments to any covenants and restrictions affecting
the Premises; and (7) to execute and deliver any instrument necessary or
appropriate to confirm or effect such grants, releases, dedication, transfer,
petition or amendment to any person in each of the foregoing instances, the same
to be without consideration, but only if (i) such grant, release, dedication,
transfer, petition or amendment is not detrimental to the proper conduct of
business of Tenant on the Premises, (ii) such grant, release, dedication,
transfer, petition or amendment does not materially impair the effective use of
the Premises for its intended purposes or materially and adversely affect its
value, (iii) Tenant considers the consideration, if any, being paid for such
grant, release, dedication, transfer, petition or amendment to be fair and
adequate, (iv) for so long as this Lease is in effect, Tenant will perform all
obligations, if any, of Owner under the applicable instrument, and (v) Landlord
and Lender shall have received (W) a certificate from the appropriate officer of
Tenant certifying as to the satisfaction of the conditions described in clause
(i) through (v) above, (X) a duly authorized undertaking of Tenant and each
Guarantor, in form and substance reasonably satisfactory to Landlord, to the
effect that Tenant will remain obligated hereunder to the same extent as if such
grant, release, dedication, transfer, petition or amendment had not been made
and Guarantor will remain obligated under the Guaranty in accordance with its
terms, and (Y) such instruments, certificates (including evidence of authority),
surveys, title insurance policy endorsements, and opinions of counsel reasonably
acceptable to Landlord, as Landlord may reasonably request in connection with
such grant, release, dedication, transfer, petition or amendment. Any easement
that imposes any obligation or liability on Landlord shall expressly provide
that it is without recourse to Landlord (except to the extent of Landlord's
interest in the Premises), and that any lien arising by virtue of the
nonperformance of
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obligations under such easement shall be subordinate to the lien of any
Indenture. The grant of any such easement shall be subject to Lender's consent,
which consent shall not be unreasonably withheld or delayed. Tenant shall be
responsible for the payment of all costs and expenses paid to third parties
(including the reasonable costs and expenses of Landlord and Lender) incurred in
connection with this Section 3.10. Subject to the provisions of Sections 3.2 and
3.6, any consideration received for the grants, releases, dedications,
transfers, petitions or amendments outlined in this Section shall be the
property of Landlord.
(b) Without limiting the generality of any other provision of this
Lease requiring payments of Additional Rent, if the Premises is presently, or
should at sometime in the future be, affected by an easement agreement, Tenant
agrees during the term of this Lease (i) to perform all of the duties and
obligations of Landlord under such easement agreement (including, without
limitation, paying any and all costs, charges and assessments imposed
thereunder), (ii) Tenant shall comply with, all of the terms, conditions,
covenants, provisions, restrictions and agreements set forth in such easement
agreement, (iii) that any obligation or liability arising under any such
easement agreement shall be nonrecourse to Landlord (except to the extent of
Landlord's interest in the Premises and this Lease), (iv) that any lien against
the Premises arising by virtue of the nonperformance of obligations under such
easement agreement shall be subordinate to the lien of any Indenture; and (v) to
indemnify, defend and hold the Indemnified Parties harmless in accordance with
Section 2.4 hereof from and against every, any and all demands, claims and
assertions of liability, or action relating to Tenant's failure to comply with
the obligations set forth in this Section 3.10(b). Landlord agrees that it shall
not (except as may be required by any governmental agency or in connection with
any condemnation proceeding) enter into any easement without the prior written
consent of Tenant, which consent shall not be unreasonably withheld or delayed.
3.11 RIGHT OF FIRST OFFER. (a) Subject to the provisions of Section 3.11(b)
hereof and provided no Event of Default shall have occurred and be continuing
hereunder, if the Landlord intends to offer to sell or transfer Landlord's
interest in the Property during the Term and as long as Dictaphone Corporation
is the tenant under this Lease, then Landlord shall notify Tenant of the
provisions of Landlord's proposed offer to sell the Property and the offer price
thereof (the "Offer Price"). Tenant shall be entitled, within thirty (30) days
after receipt of the Landlord's notice (time being of the essence as of such
date), to elect by written notice to the Landlord ("TENANT'S NOTICE") to
purchase the Property for the Offer Price and upon the other provisions stated
in the Landlord's notice, except that title shall close thirty (30) days after
delivery of Tenant's Notice (time being of the essence as of such date). Should
the Tenant fail to exercise this right within the time and manner required
above, or waives such right in writing, Landlord shall be free to enter into an
agreement of sale relating to the sale of the Property by Landlord for a stated
purchase price (subject to adjustments) in an amount equal to or greater than
90% of the Offer Price and on such other terms and conditions as Landlord shall
elect and to consummate the sale of the Property in accordance with the terms
and conditions of such agreement of sale without reoffering to sell the Property
to Tenant. In the event that following the giving of a
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Landlord's notice as provided above, Landlord shall elect to enter into an
agreement of sale relating to the Property for a stated purchase price (subject
to adjustments) which is less than 90% of the Offer Price, Landlord shall first
deliver a notice to Tenant of the revised Offer Price and Tenant shall have a
period of three (3) Business Days following receipt of such notice (time being
of the essence as of such date) to elect to accept Landlord's revised Offer
Price by delivery of written notice thereof to Landlord. In the event that
Tenant shall fail to accept Landlord's revised Offer Price within said three (3)
Business Day period, Tenant shall be deemed to have rejected such revised Offer
Price and Landlord shall be free to sell the Property for an Offer Price which
is equal to or greater than 90% of such revised Offer Price as provided above.
If Tenant elects to accept such revised offer, Tenant shall be required to the
purchase the Premises within thirty (30) days following Tenant's notice to
Landlord accepting such revised offer (time being of the essence as of such
date) in accordance with the terms and conditions of this Lease. Tenant agrees
that such sale or transfer shall be subject to the provisions of this Lease,
excluding however, the right of first offer granted hereunder which shall
thereupon be deemed null and void and of no further force and effect.
(b) Notwithstanding the provisions of Section 3.11(a) hereof: (i) the
right of first offer granted to Tenant shall not apply to any transfer of
Landlord's interest in the Property pursuant to or in connection with a
foreclosure of the Indenture or any transfer of the Property by Landlord to
Lender or its designee in lieu thereof, (ii) in the event of any transfer of the
Property pursuant to or in connection with a foreclosure of the Indenture or any
transfer of the Property to a Lender or its designee in lieu thereof, the
provisions of Section 3.11(a) shall be automatically deemed null and void and of
no further force and effect, and (iii) any transfer of the Property upon an
exercise of the right of first offer granted to Tenant shall be subject to
Landlord's obtaining the consent of the Lender and shall be further subject to
any conditions and/or prohibitions contained in the Indenture applicable to a
transfer by Landlord of its interest in the Property, including, without
limitation, the conditions set forth in Section 2.16(a)(i) through (x) of the
Indenture. In addition, in the event that Tenant shall exercise the right of
first offer granted to Tenant pursuant to Section 3.11(a) hereof, Tenant shall
be required to (i) form a single purpose, bankruptcy remote entity satisfactory
to the Lender, in Lender's sole discretion, to acquire the Property and (ii)
otherwise comply with the terms and conditions of the Indenture in connection
with the acquisition of the Property. In addition, no such transfer shall be
permitted if such transfer could result in a merging of the fee and leasehold
estates.
ARTICLE 4.
4.1 ASSIGNMENT AND SUBLETTING.
(a) Without the prior written consent of Landlord, (A) neither this
Lease, nor any interest of Tenant in this Lease or in the Premises, shall be
sold, assigned, or otherwise transferred, directly or indirectly, whether by
operation of law or otherwise, and (B) the issued or outstanding capital stock
of Tenant shall not be sold, assigned or transferred, nor shall
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additional stock in Tenant be issued if the issuance of additional stock or
sale, assignment or transfer of the issued or outstanding capital stock of
Tenant would constitute a Change In Control Event (as hereinafter defined);
provided, however, that a Change In Control Event shall be permitted provided
that prior to, and as a condition of, any such Change In Control Event, Tenant
shall have provided evidence satisfactory to Landlord and Lender in all respects
that, (i) no Event of Default then exits under this Lease, (ii) the net worth
and credit standing of Tenant on the day after the Change In Control Event shall
be equal to or greater than the net worth and credit standing of Tenant on the
day prior to such Change In Control Event unless Tenant shall have provided a
Credit Enhancement Facility (as hereinafter defined) satisfactory to Landlord
and Lender in their sole discretion with respect to such Change In Control
Event, (iii) confirmation from the Rating Agencies involved in any secondary
market transaction relating to the Indenture that any such transaction (and the
Credit Enhancement Facility relating to such transaction, if any) will not
result in a qualification, withdrawal or downgrade of either the credit rating
of Tenant or of the then current rating of any securities issued in connection
with a secondary market transaction by any such Rating Agencies, (iv)
confirmation by the Guarantor of its guaranty, if any, (v) Tenant shall have
delivered such estoppels, certificates and/or opinions of counsel as may be
required by Landlord, Lender or such Rating Agencies in connection with such
transaction, including, but not limited to, A REMIC Opinion (as hereinafter
defined), and (vi) Lender and Landlord shall be given, as a prerequisite to such
Change In Control Event a written certification from the chief financial officer
of Tenant that the provisions of this Section have been satisfied (collectively,
the "CHANGE IN CONTROL CONDITIONS"). For purposes of this Lease, the term (A)
"Change In Control Event" shall mean the sale, assignment or transfer of the
issued or outstanding stock of Tenant, or any entity or person owning a
controlling interest in Tenant or the issuance of additional stock of Tenant, in
any such case, which would result in a change in the possession of the direct or
indirect power to direct, or cause the direction of, the management and policies
of Tenant, whether through the ownership of voting securities, or partnership
interest, or otherwise excluding, however, the sale of shares, which sale is
effected through an initial public offering, the "over-the-counter market" or
through any recognized stock exchange, and (B) "CREDIT ENHANCEMENT FACILITY"
shall mean any one or more of the following: (i) the delivery by Tenant of a
guaranty of the obligations of Tenant under this Lease, in form and substance
satisfactory to Landlord and Lender in all respects, from a Guarantor having a
rating which is Investment Grade or better by S&P and Moody's together with with
an opinion of counsel, in form and substance satisfactory to Landlord and
Lender, regarding the legality, validity and enforceability of such guaranty,
(ii) the delivery by Tenant of a clean, unconditional, transferable, irrevocable
standby letter of credit (the "STANDBY LETTER OF CREDIT") as security for the
full and faithful performance by Tenant of each of its obligations under this
Lease, including, without limitation, the payment of all Basic Rent and
Additional Rent as and when due and payable by Tenant hereunder, which Standby
Letter of Credit shall be (a) in form and substance satisfactory to Landlord and
Lender (as long as the Indenture is outstanding), (b) held by, and shall be
subject to draw by, Landlord or solely by Lender (as long as the Indenture shall
remain outstanding), (c) payable at sight upon the failure of Tenant to pay and
Basic Rent or Additional Rent as and when due and payable hereunder or upon the
occurrence of any other Event of Default by Tenant under
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this Lease, (d) issued by a bank satisfactory to Landlord and Lender which is a
member of the New York Clearinghouse Association and which has its principal
place of business in the City of New York, (e) in an amount equal to the
aggregate payments of Basic Rent and Additional Rent (as estimated by Landlord
and approved by Lender) due and payable from the date of the consummation of the
Merger and Sale Event (as hereinafter defined) or Change In Control Event, as
the case may be, through the expiration of the then current term of this Lease
(which amount shall be subject to increase from time to time upon demand of
Landlord or Lender in the event that the amount of the Standby Letter of Credit
is estimated to be less than the amount required to fully satisfy the
obligations of Tenant under this Lease through and including the expiration of
the then current term of this Lease; in which case Tenant shall be required to
amend the Standby Letter of Credit to increase the amount thereof or to deliver
a substitute Standby Letter of Credit in such increased amount and which
otherwise satisfies the requirements set forth above), or (iii) or such other
security which is satisfactory to Landlord, Lender and any Rating Agencies
involved in any secondary market transaction relating to the Indenture, and (C)
"REMIC Opinion" shall mean an opinion of counsel satisfactory to Lender and the
Rating Agencies stating that any securitization vehicle formed in connection
with a securitization which includes the loan secured by the Indenture which has
elected to be treated as a "real estate mortgage investment conduit" within the
meaning of Section 860(D) of the Internal Revenue Code, as amended "REMIC" ,
will not fail to maintain such REMIC status as a result of a Change In Control
Event, assignment or Merger and Sale Event, as the case may be, and that such
Change In Control Event, assignment or Merger and Sale Event, as the case may
be, does not constitute a "significant modification" of the loan secured by the
Indenture under Section 1001 of the Internal Revenue Code, as amended, or
otherwise cause a tax to be imposed on a "prohibited transaction" by any
securitization vehicle electing to be treated as a REMIC. Except as required by
law or court order or in connection with any enforcement by Landlord of its
rights and remedies under this Lease, for a period which is the earlier of (x)
twelve months following receipt thereof by Landlord, or (y) until such
information shall be disclosed to the public (other than by reason of a
disclosure thereof by Landlord in violation of this Lease), Landlord shall not
disclose the content of any information provided by Tenant to Landlord in
connection with any Change In Control Event to any party other than (i)
Landlord's beneficiaries (or the beneficial owners of any beneficiaries of
Landlord) or their respective accountants, consultants or counsel, and (ii)
Lender and the Rating Agencies or their respective accountants, consultants or
counsel. Tenant shall be responsible for all costs and expenses of Landlord,
Lender and/or the Rating Agencies (including reasonable attorneys' fees and
expenses) in connection with the transactions contemplated by this Section.
(b) So long as no Event of Default shall have occurred and be
continuing, Tenant may sublet the Premises (including, but not limited to,
subleases to affiliates of Tenant) and in connection therewith cause such
sublessee to perform Tenant's obligations hereunder; provided, however, (i) each
such sublease shall expressly be made subject to the provisions hereof, (ii) the
term of any subletting shall not extend beyond the Term of this Lease, (iii) no
sublease shall affect or reduce any obligation of the Tenant or right of the
Landlord hereunder, and (iv) all obligations of the Tenant hereunder shall
continue in full force and effect as the
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obligations of a principal and not of a guarantor or surety, as though no
subletting had been made. Neither this Lease nor the term hereby demised shall
be mortgaged or pledged by Tenant, nor shall Tenant mortgage or pledge its
interest in any sublease of any portion of the Premises or the rentals payable
thereunder. Any such mortgage or pledge, any sublease made otherwise than as
expressly permitted by this Section 4.1, and any assignment of Tenant's interest
hereunder shall be void. Tenant shall, within 10 days after the execution of any
sublease, deliver a conformed copy thereof to Landlord.
(c) So long as no Event of Default shall have occurred and be
continuing, Tenant may, notwithstanding the provisions of Section 4.1(a), assign
this Lease to any Person or entity provided that any such assignment is not a
Change In Control Event and provided, further, however, that (i) each such
assignment shall expressly be made subject to the provisions hereof, (ii) such
assignment shall be accomplished pursuant to a written assignment reasonably
approved by Landlord, (iii) the Guarantor, if any, shall specifically approve
such assignment and shall confirm in writing its continuing obligations under
its guaranty, (iv) Tenant and each Guarantor shall deliver such estoppels,
certificates, opinions of counsel including a REMIC Opinion and an opinion
concerning the continuing enforceability of this Lease and each guaranty of the
Guarantors and any other document assigned thereby, and other instruments as may
be reasonably required by Landlord or Lender or as are required by any of the
Rating Agencies, and Lender shall have received evidence in writing from the
Rating Agencies that such assignment shall not result in a withdrawal,
qualification or downgrade of the respective ratings for any securities issued
in connection with any securitization or other secondary market transaction in
which the indebtedness secured by the Indenture is included, (v) the assignee
shall specifically assume all obligations of Tenant under this Lease and under
any other agreement of Tenant related hereto or thereto, (vi) the assignee must
be a solvent entity, and (vii) the assignee must either be an entity formed in
the United States or must specifically consent to jurisdiction in all applicable
states of the United States, and must provide an opinion in form reasonably
acceptable to Landlord and to Lender and acceptable to the Rating Agencies that
such consent to jurisdiction is enforceable and valid. A certified copy of the
executed assignment approved by Landlord shall be provided to Landlord within
ten (10) days after the execution thereof. In no event shall any assignment,
transfer of sublease or license relieve Tenant of any liability or obligation
under this Lease, which shall be and remain that of a primary obligor and not a
guarantor or surety provided, however, Tenant shall be released of its
liabilities and obligations under this Lease in connection with an assignment in
the event the conditions set forth in this Section 4.1(c) have been satisfied to
Landlord's and Lender's reasonable satisfaction, and, as a condition of, any
such assignment, Tenant shall have provided evidence satisfactory to Landlord
and Lender in all respects that the assignee (i) is organized in the United
States, (ii) has a net worth and credit standing equal to or greater than the
net worth and credit standing of Tenant on the day prior to such assignment or
transfer, and (iii) has a credit rating, as confirmed by the Rating Agencies,
equal to or greater than the credit rating of Tenant on the day prior to such
assignment.
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(d) Without implying any authority of Tenant to assign this Lease, if
this Lease is assigned pursuant to the provisions hereof, or if the Premises or
any part thereof is sublet or occupied by any person or entity other than
Tenant, Landlord may, after an Event of Default has occurred and is continuing,
collect rent from the assignee, subtenant or occupant, and apply the net amount
collected to the Basic Rent and Additional Rent herein reserved, but no such
assignment, subletting, occupancy or collection shall be deemed a waiver of this
covenant, or the acceptance of the assignee, subtenant or occupant as Tenant, or
a release of Tenant from the further performance by Tenant of the terms,
covenants, and conditions on the part of Tenant to be observed or performed
hereunder, and, subsequent to any assignment or subletting, Tenant's liability
hereunder shall continue notwithstanding any subsequent modification or
amendment hereof or the release of any subsequent tenant hereunder from any
liability, to all of which Tenant hereby consents in advance.
ARTICLE 5.
5.1 CONDITIONAL LIMITATIONS; DEFAULT PROVISIONS.
(a) Any of the following occurrences or acts shall constitute an "EVENT
OF DEFAULT" under this Lease:
(i) if Tenant shall (1) fail to pay any Basic Rent on or before
three (3) Business Days following the due date thereof, (2) fail to pay
Additional Rent or other sum as and when required to be paid by Tenant
hereunder, or (3) fail to observe or perform any other provision hereof and such
failure shall continue for thirty (30) days after written notice to Tenant of
such failure (provided, that in the case of any such failure which is capable of
being cured but cannot be cured by the payment of money and cannot with
diligence be cured within such 30-day period, if Tenant shall commence promptly
to cure the same and thereafter prosecute the curing thereof with diligence, the
time within which such failure may be cured shall be extended for such period as
is necessary to complete the curing thereof with diligence, but in no event to
exceed one hundred fifty (150) days from the date of such failure); or
(ii) if any representation or warranty of Tenant or Guarantor set
forth herein or in any notice, certificate, demand, request or other document or
instrument delivered to Landlord in connection with this Lease shall prove to be
incorrect in any material respect as of the time when the same shall have been
made; or
(iii) if Tenant or any guarantor of Tenant's obligations under this
Lease (any such guarantor is referred to herein as a "GUARANTOR") shall file a
petition in bankruptcy or for reorganization or for an arrangement,
administration, liquidation or receivership pursuant to any federal or state law
(or any other law governing a Guarantor), or shall be adjudicated a bankrupt or
become insolvent or shall make an assignment for the benefit of creditors or
shall
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admit in writing its inability to pay its debts generally as they become
due, or if a petition or answer proposing the adjudication of Tenant or a
Guarantor as a bankrupt or its reorganization pursuant to any federal or state
bankruptcy, liquidation, voluntary administration, administration, receivership,
moratorium or trust law or any similar federal or state law shall be filed in
any court and Tenant or such Guarantor shall consent to or acquiesce in the
filing thereof or such petition or answer shall not be discharged or denied
within ninety (90) days after the filing thereof; or
(iv) if a receiver, trustee, administrator or liquidator of Tenant
or any Guarantor or of all or substantially all of the assets of Tenant or such
Guarantor or of the Premises or Tenant's estate therein shall be appointed in
any proceeding brought by Tenant or a Guarantor, or if any such receiver,
trustee or liquidator shall be appointed in any proceeding brought against
Tenant or a Guarantor and shall not be discharged within ninety (90) days after
such appointment, or if Tenant or a Guarantor shall consent to or acquiesce in
such appointment; or
(v) if the Premises shall have been left unoccupied and unattended
for a period of thirty (30) days (other than for renovation or reconstruction;
or
(vi) if Tenant or a Guarantor shall dissolve or otherwise fail to
maintain its legal existence; or
(vii) if Tenant shall default under Sections 2.2(c), 4.1(a), 4.1(b)
or 10.3 of this Lease; or
(viii) if any Guarantor shall default under the provisions of its
guaranty; or
(ix) if Tenant shall fail to maintain any insurance required to be
maintained by Tenant in accordance with the terms and conditions of Section 3.7
hereof.
(b) If an Event of Default shall have occurred and be continuing
Landlord shall be entitled to all remedies available at law or in equity.
Without limiting the foregoing, Landlord shall have the right to give Tenant
notice of Landlord's termination of the term of this Lease. Upon the giving of
such notice, the term of this Lease and the estate hereby granted shall expire
and terminate on such date as fully and completely and with the same effect as
if such date were the date herein fixed for the expiration of the term of this
Lease, and all rights of Tenant hereunder shall expire and terminate, but Tenant
shall remain liable as hereinafter provided.
(c) If an Event of Default shall have happened and be continuing,
Landlord shall have the immediate right, whether or not the term of this Lease
shall have been terminated pursuant to Section 5.1(b), to re-enter and repossess
the Premises and the right to remove all persons and property therefrom by
summary proceedings, ejectment, any other legal action or in any lawful manner
Landlord determines to be necessary or desirable, so long as Landlord is
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proceeding in accordance with applicable law and, if required under applicable
law, under authority of a court of proper jurisdiction. Landlord shall be under
no liability by reason of any such re-entry, repossession or removal. No such
re-entry, repossession or removal shall be construed as an election by Landlord
to terminate this Lease unless a notice of such termination is given to Tenant
pursuant to Section 5.1(b).
(d) At any time or from time to time after a re-entry, repossession or
removal pursuant to Section 5.1(c), whether or not the term of this Lease shall
have been terminated pursuant to Section 5.1(b), Landlord may (but shall be
under no obligation to) relet the Premises or any portion thereof for the
account of Tenant, in the name of Tenant or Landlord or otherwise, without
notice to Tenant, for such term or terms and on such conditions and for such
uses as Landlord, in its absolute discretion, may determine. Landlord may
collect any rents payable by reason of such reletting. Landlord shall not be
liable for any failure to relet the Premises or any portion thereof or for any
failure to collect any rent due upon any such reletting.
(e) No expiration or earlier termination of the term of this Lease
pursuant to Section 5.1(b), by operation of law or otherwise, and no re-entry,
repossession or removal pursuant to Section 5.1(c) or otherwise, and no
reletting of the Premises or any portion thereof pursuant to Section 5.1(d) or
otherwise, shall relieve Tenant of its liabilities and obligations hereunder,
all of which shall survive such expiration, termination, re-entry, repossession,
removal or reletting.
(f) In the event of the expiration or earlier termination of the term
of this Lease or re-entry or repossession of the Premises or removal of persons
or property therefrom by reason of the occurrence of an Event of Default, Tenant
shall pay to Landlord all Basic Rent, Additional Rent and other sums required to
be paid by Tenant, in each case together with interest thereon at the Rate from
the due date thereof to and including the date of such expiration, termination,
re-entry, repossession or removal; and thereafter, Tenant shall, until the end
of what would have been the term of this Lease in the absence of such
expiration, termination, re-entry, repossession or removal and whether or not
the Premises or any portion thereof shall have been relet, be liable to Landlord
for, and shall pay to Landlord, as liquidated and agreed current damages: (i)
all Basic Rent, Additional Rent and other sums which would be payable under this
Lease by Tenant in the absence of any such expiration, termination, re-entry,
repossession or removal, less (ii) the net proceeds, if any, of any reletting
effected for the account of Tenant pursuant to Section 5.1(d), after deducting
from such proceeds all expenses of Landlord in connection with such reletting
(including, without limitation, all repossession costs, brokerage commissions,
reasonable attorneys' fees and expenses (including fees and expenses of
appellate proceedings), employees' expenses, alteration costs and expenses of
preparation for such reletting). Tenant shall pay such liquidated and agreed
current damages on the dates on which Basic Rent would be payable under this
Lease in the absence of such expiration, termination, re-entry, repossession or
removal, and Landlord shall be entitled to recover the same from Tenant on each
such date.
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(g) At any time after any such expiration or earlier termination of the
term of this Lease or re-entry or repossession of the Premises or removal of
persons or property thereon by reason of the occurrence of an Event of Default,
whether or not Landlord shall have previously collected any liquidated and
agreed current damages pursuant to Section 5.1(f), Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord on demand, as and for
liquidated and agreed final damages for Tenant's default and in lieu of all
liquidated and agreed current damages beyond the date of such demand as outlined
in Section 5.1(f) above (it being agreed that it would be impracticable or
extremely difficult to fix the actual damages), an amount equal to, at the
election of Landlord in its sole discretion, (A) the excess, if any, of (a) the
aggregate of all Basic Rent, Additional Rent and other sums which would be
payable under this Lease, in each case from the date of such demand (or, if it
be earlier, the date to which Tenant shall have satisfied in full its
obligations under Section 5.1(f) to pay liquidated and agreed current damages)
for what would be the then-unexpired term of the then-current term of this Lease
in the absence of such expiration, termination, re-entry, repossession or
removal, discounted at a rate equal to the then yield on U.S. Treasury
obligations of comparable maturity to the Term (the "TREASURY RATE") over (b)
the then fair rental value of the Premises, for what would be such then
unexpired term of this Lease, discounted at the Treasury Rate for the same
period (such excess being hereinafter referred to as "LIQUIDATED DAMAGES") or
(B) an amount equal to the aggregate Stipulated Loss Value applicable to the
Premises as specified on Schedule E annexed hereto and made a part hereof as of
the immediately preceding Payment Date plus an amount equal to the Make-Whole
Premium, and any other sums then due and payable as of the date of such demand
under this Lease. For the purposes of determining value pursuant to this Section
5.1(g)(A), the following shall apply: (a) determinations of fair rental value
shall be made by an MAI appraiser (engaged by Landlord) who is a member of the
American Institute of Appraisers, with copies of such determinations and
supporting analysis to be provided to Tenant; and (b) all determinations of
Liquidated Damages shall be binding on Tenant in the absence of manifest error.
If any law shall limit the amount of liquidated final damages to less than the
amount above agreed upon, Landlord shall be entitled to the maximum amount
allowable under such law.
5.2 BANKRUPTCY OR INSOLVENCY.
(a) In the event that Tenant shall become a debtor in a case filed
under Chapter 7 of the Bankruptcy Code and Tenant's trustee or Tenant shall
elect to assume this Lease for the purpose of assigning the same or otherwise,
such election and assignment may be made only if the provisions of Sections
5.2(b) and 5.2(d) are satisfied as if the election to assume were made in a case
filed under Chapter 11 of the Bankruptcy Code. If Tenant or Tenant's trustee
shall fail to elect to assume this Lease within 60 days after the filing of such
petition or such additional time as provided by the court within such 60-day
period, this Lease shall be deemed to have been rejected. Immediately thereupon
Landlord shall be entitled to possession of the Premises without further
obligation to Tenant or Tenant's trustee and this Lease upon the election of
Landlord shall terminate, but Landlord's right to be compensated for damages
(including, without limitation,
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liquidated damages pursuant to any provision hereof) or the exercise of any
other remedies in any such proceeding shall survive, whether or not this Lease
shall be terminated.
(b) (i) In the event that Tenant shall become a debtor in a case filed
under Chapter 11 of the Bankruptcy Code, or in a case filed under Chapter 7 of
the Bankruptcy Code which is transferred to Chapter 11, Tenant's trustee or
Tenant, as debtor-in-possession, must elect to assume this Lease within 120 days
from the date of the filing of the petition under Chapter 11 or the transfer
thereto or Tenant's trustee or the debtor-in-possession shall be deemed to have
rejected this Lease. In the event that Tenant, Tenant's trustee or the
debtor-in-possession has failed to perform all of Tenant's obligations under
this Lease within the time periods (excluding grace periods) required for such
performance, no election by Tenant's trustee or the debtor-in-possession to
assume this Lease, whether under Chapter 7 or Chapter 11, shall be permitted or
effective unless each of the following conditions has been satisfied:
(1) Tenant's trustee or the debtor-in-possession has cured all
Events of Default under this Lease, or has provided Landlord with Assurance (as
hereinafter defined) that it will cure all Events of Default susceptible of
being cured by the payment of money within 10 days from the date of such
assumption and that it will cure all other Events of Default under this Lease
which are susceptible of being cured by the performance of any act promptly
after the date of such assumption.
(2) Tenant's trustee or the debtor-in-possession has
compensated Landlord, or has provided Landlord with Assurance that within 10
days from the date of such assumption it will compensate Landlord, for any
actual pecuniary loss incurred by Landlord arising from the default of Tenant,
Tenant's trustee, or the debtor-in-possession as indicated in any statement of
actual pecuniary loss sent by Landlord to Tenant's trustee or the
debtor-in-possession.
(3) Tenant's trustee or the debtor-in-possession has provided
Landlord with Assurance of the future performance of each of the obligations of
Tenant, Tenant's trustee or the debtor-in-possession under this Lease, and, if
Tenant's trustee or the debtor-in-possession has provided such Assurance,
Tenant's trustee or the debtor-in-possession shall also (i) deposit with
Landlord, as security for the timely payment of rent hereunder, an amount equal
to one (1) advance installment (in addition to the installment then due as a
result Basic Rent being payable in advance pursuant to subitem (ii) below) of
Basic Rent (at the rate then payable) which shall be applied to installments of
Basic Rent in the inverse order in which such installments shall become due
provided all the terms and provisions of this Lease shall have been complied
with, (ii) agree that from and after such date all Basic Rent shall be due and
payable in advance (rather than in arrears) on each Payment Date, and (iii) pay
in advance to Landlord on the date each installment of Basic Rent is payable a
pro rata share of Tenant's annual obligations for Additional Rent and other sums
pursuant to this Lease, such that Landlord shall hold funds sufficient to
satisfy all such obligations as they become due. The obligations imposed upon
Tenant's trustee
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or the debtor-in-possession by this Section shall continue with respect to
Tenant or any assignee of this Lease after the completion of bankruptcy
proceedings.
(4) The assumption of this Lease will not breach or cause a
default under any provision of any other lease, mortgage, financing arrangement
or other agreement by which Landlord is bound.
(ii) For purposes of this Section 5.2, Landlord and Tenant
acknowledge that "ASSURANCE" shall mean no less than: Tenant's trustee or the
debtor-in-possession has and will continue to have sufficient unencumbered
assets after the payment of all secured obligations and administrative expenses
to assure Landlord that sufficient funds will be available to fulfill the
obligations of Tenant under this Lease, and (x) there shall have been deposited
with Landlord, or the Bankruptcy Court shall have entered an order segregating,
sufficient cash payable to Landlord, and/or (y) Tenant's trustee or the
debtor-in-possession shall have granted a valid and perfected first lien and
security interest and/or mortgage in property of Tenant, Tenant's trustee or the
debtor-in-possession, acceptable as to value and kind to Landlord, to secure to
Landlord the obligation of Tenant, Tenant's trustee or the debtor-in-possession
to cure the Events of Default under this Lease, monetary and/or non-monetary,
within the time periods set forth above.
(c) In the event that this Lease is assumed in accordance with Section
5.2(b) and thereafter Tenant is liquidated or files or has filed against it a
subsequent petition under Chapter 7 or Chapter 11 of the Bankruptcy Code,
Landlord may, at its option, terminate this Lease and all rights of Tenant
hereunder by giving Tenant notice of its election to so terminate within 30 days
after the occurrence of any such event.
(d) If Tenant's trustee or the debtor-in-possession has assumed this
Lease pursuant to the terms and provisions of Sections 5.2(a) or 5.2(b) for the
purpose of assigning (or elects to assign) this Lease, this Lease may be so
assigned only if the proposed assignee (the "ASSIGNEE") has provided adequate
assurance of future performance (as hereinafter defined) of all of the terms,
covenants and conditions of this Lease to be performed by Tenant. Landlord shall
be entitled to receive all cash proceeds of such assignment. As used herein
"adequate assurance of future performance" shall mean no less than that each of
the following conditions has been satisfied:
(i) the Assignee has furnished Landlord with either (1) (x) a copy
of a credit rating of Assignee which Landlord reasonably determines to be
sufficient to assure the future performance by Assignee of Tenant's obligations
under this Lease and (y) a current financial statement of Assignee audited by a
certified public accountant indicating a net worth and working capital in
amounts which Landlord reasonably determines to be sufficient to assure the
future performance by Assignee of Tenant's obligations under this Lease, or (ii)
a guarantee or guarantees, in form and substance satisfactory to Landlord, from
one or more persons with a
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credit rating and net worth equal to or exceeding the credit rating and net
worth of Tenant as of the date hereof.
(ii) Landlord has obtained all consents or waivers from others
required under any lease, mortgage, financing arrangement or other agreement by
which Landlord is bound to permit Landlord to consent to such assignment.
(iii) The proposed assignment will not release or impair any
guaranty of the obligations of Tenant (including the Assignee) under this Lease.
(e) When, pursuant to the Bankruptcy Code, Tenant's trustee or the
debtor-in-possession shall be obligated to pay reasonable use and occupancy
charges for the use of the Premises, such charges shall not be less than the
Basic Rent, Additional Rent and other sums payable by Tenant under this Lease.
(f) Neither the whole nor any portion of Tenant's interest in this
Lease or its estate in the Premises shall pass to any trustee, receiver,
assignee for the benefit of creditors, or any other person or entity, by
operation of law or otherwise under the laws of any state having jurisdiction of
the person or property of Tenant unless Landlord shall have consented to such
transfer. No acceptance by Landlord of rent or any other payments from any such
trustee, receiver, assignee, person or other entity shall be deemed to
constitute such consent by Landlord nor shall it be deemed a waiver of
Landlord's right to terminate this Lease for any transfer of Tenant's interest
under this Lease without such consent.
(g) In the event of an assignment of Tenant's interests pursuant to
this Section 5.2, the right of Assignee to extend the term of this Lease for an
Extended Term beyond the then term of this Lease shall be extinguished.
5.3 ADDITIONAL RIGHTS OF LANDLORD.
(a) No right or remedy hereunder shall be exclusive of any other right
or remedy, but shall be cumulative and in addition to any other right or remedy
hereunder or now or hereafter existing. Failure to insist upon the strict
performance of any provision hereof or to exercise any option, right, power or
remedy contained herein shall not constitute a waiver or relinquishment thereof
for the future. Receipt by Landlord of any Basic Rent, Additional Rent or other
sums payable hereunder with knowledge of the breach of any provision hereof
shall not constitute waiver of such breach, and no waiver by Landlord of any
provision hereof shall be deemed to have been made unless made in writing duly
executed by Landlord. Landlord shall be entitled to injunctive relief in case of
the violation, or attempted or threatened violation, of any of the provisions
hereof, or to a decree compelling performance of any of the provisions hereof,
or to any other remedy allowed to Landlord by law or equity.
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(b) Tenant hereby waives and surrenders for itself and all those
claiming under it, including creditors of all kinds, (i) any right and privilege
which it or any of them may have to redeem any portion of the Premises or to
have a continuance of this Lease after termination of Tenant's right of
occupancy by order or judgment of any court or by any legal process or writ, or
under the terms of this Lease, or after the termination of the term of this
Lease as herein provided, and (ii) the benefits of any law which exempts
property from liability for debt or for distress for rent.
(c) If Tenant shall be in default in the observance or performance of
any term or covenant on Tenant's part to be observed or performed under any of
the provisions of this Lease, then, without thereby waiving such default,
Landlord may, but shall be under no obligation to, take all action, including,
without limitation, entry upon the Premises to perform the obligation of Tenant
hereunder immediately and without notice in the case of an emergency and upon 15
days' written notice to Tenant in other cases. All expenses incurred by Landlord
in connection therewith, including attorneys' fees and expenses (including those
incurred in connection with any appellate proceedings), together with interest
thereon at the Rate from the date any such expenses were incurred by Landlord
until the date of payment by Tenant, shall constitute Additional Rent and shall
be paid by Tenant to Landlord upon demand. Landlord shall deliver written notice
to Tenant of any work done on an emergency basis promptly after having completed
such work.
(d) If Tenant shall be in default in the performance of any of its
obligations hereunder, Tenant shall pay to Landlord or Lender, as appropriate,
on demand, all expenses incurred by Landlord or Lender as a result thereof,
including reasonable attorneys' fees and expenses (including those incurred in
connection with any appellate proceedings). If Landlord or Lender shall be made
a party to any litigation commenced against Tenant and Tenant shall fail to
provide Landlord or Lender with counsel reasonably approved by Landlord or
Lender, as appropriate, and pay the expenses thereof, Tenant shall pay all costs
and reasonable attorneys' fees and expenses in connection with such litigation
(including fees and expenses incurred in connection with any appellate
proceedings).
ARTICLE 6.
6.1 NOTICES AND OTHER INSTRUMENTS. All notices, consents, approvals and
requests required or permitted hereunder shall be given in writing and shall be
effective for all purposes if hand delivered or sent by (i) certified or
registered United States mail, postage prepaid, return receipt requested, or
(ii) expedited prepaid delivery service, either overnight delivery service of a
nationally recognized courier, commercial or United States Postal Service, with
proof of attempted delivery, addressed as follows:
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If to Landlord: Stratford CT Business Trust
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
With copy to: U.S. Realty Advisors, LLC
1370 Avenue of the Americas, 29th Floor
New York, New York 10019
Attention: David M. Ledy
With copy to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Kenneth S. Hilton, Esq.
With copy to: Nomura Asset Capital Corporation
Two World Financial Center
Building B
New York, New York 10281
Attention: Barry Funt, Esq.
With a copy to: Nomura Asset Capital Corporation
c/o Nomura Asset Capital Services LLC
600 East Los Colinas Boulevard
Suite 300
Irving, Texas 75039
Attention: Legal Department
With copy to: Day, Berry & Howard
City Place 1
Hartford, Connecticut 06103
Attention: Rodney J. Dillman, Esq.
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If to Tenant: Dictaphone Corporation
3191 Broadbridge Avenue
Stratford, Connecticut 06497
Attention: Mr. Joseph D. Skrzypczak
With copy to: Dictaphone Corporation
3191 Broadbridge Avenue
Stratford, Connecticut 06497
Attention: Mr. Michael J. Prandi
With copy to: Kelley, Drye & Warren LLP
281 Tresser Boulevard
Two Stamford Plaza
Stamford, Connecticut 06901
Attention: Steven M. Torkelsen, Esq.
Such address may be changed by any party in a written notice to the other
parties hereto in the manner provided for in this Section. A notice shall be
deemed to have been given: in the case of hand delivery, at the time of
delivery; in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; or in the case of expedited prepaid
delivery, upon the first attempted delivery on a Business Day. A party receiving
a notice which does not comply with the technical requirements for notice under
this Section may elect to waive any deficiencies and treat the notice as having
been properly given.
6.2 ESTOPPEL CERTIFICATES, FINANCIAL INFORMATION.
(a) Tenant shall at any time and from time to time during the term of
this Lease, upon not less than ten (10) days after prior written request by
Landlord, execute, acknowledge and deliver to Landlord or to any prospective
purchaser, assignee or mortgagee or third party designated by Landlord, a
certificate stating: (i) that this Lease is unmodified and in force and effect
(or if there have been modifications, that this Lease is in force and effect as
modified, and identifying the modification agreements); (ii) the date to which
Basic Rent has been paid; (iii) whether there is any existing default by the
Tenant in the payment of Basic Rent, whether there is an existing default by the
Tenant in the payment of any Additional Rent beyond any applicable grace period,
and whether there is any other existing default or Event of Default by either
party hereto, and, if there is any such default, specifying the nature and
extent thereof and the action taken to cure such default; (iv) whether there are
any actions or proceedings pending against the Premises before any governmental
authority to condemn the Premises or any portion thereof or any interest therein
and whether, to the knowledge of Tenant, any such actions or proceedings have
been threatened; (v) whether there exists any material unrepaired damage to the
Premises from fire or other casualty; (vi) whether, to the knowledge of Tenant,
there is any existing default by Landlord under this Lease; and (vii) other
items that may be reasonably requested. Any such
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certificate may be relied upon by any actual or prospective mortgagee or
purchaser of the Premises.
(b) Tenant will deliver to Landlord and to any Lender copies of all
financial statements, reports, notices and proxy statements sent by Tenant to
its stockholders or to the Securities and Exchange Commission; provided,
however, that if such statements and reports do not include the following
information, Tenant will deliver to Landlord the following:
(i) Within 120 days after the end of each fiscal year of Tenant, a
balance sheet of Tenant and its consolidated subsidiaries as at the end of such
year and a statement of profits and losses of Tenant and its consolidated
subsidiaries for such year setting forth in each case, in comparative form, the
corresponding figures for the preceding fiscal year in reasonable detail and
scope and audited by independent certified public accountants of recognized
national standing selected by Tenant; and within 60 days after the end of each
fiscal quarter of Tenant a balance sheet of Tenant and its consolidated
subsidiaries as at the end of such quarter and statements of profits and losses
of Tenant and its consolidated subsidiaries for such quarter setting forth in
each case, in comparative form, the corresponding figures for the similar
quarter of the preceding year, in reasonable detail and scope, and certified by
the chief financial officer of Tenant, the foregoing financial statements all
being prepared in accordance with generally accepted accounting principles,
consistently applied; and
(ii) With reasonable promptness, such additional information
(including copies of public reports filed by Tenant) regarding the business
affairs and financial condition of Tenant as Landlord or any such Lender may
reasonably request.
(c) Upon request of any Lender or of Tenant, and upon concurrent
compliance with the provisions of 6.2(d) below, Tenant shall enter into an
agreement with such Lender pursuant to which Tenant and Lender shall agree:
(i) that in the event that any such Lender, or any purchaser at a
foreclosure sale, shall acquire title to the Premises, Tenant shall attorn to
such Lender or such purchaser, as the case may be, as its new Landlord and this
Lease shall continue as a direct lease between Tenant and such Lender or
purchaser, as the case may be, with respect to the Premises upon the terms and
conditions set forth herein except that such Lender or purchaser, as the case
may be, shall not be liable to Tenant for any actions or omissions of Landlord
prior to the date such Lender or purchaser, as the case may be, acquired title
to the Premises;
(ii) Tenant shall not enter into any agreement with Landlord for
the termination of this Lease unless Tenant receives the written consent of the
Lender to such termination;
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(iii) no rejection by Landlord of any Rejectable Offer pursuant to
this Lease shall be effective unless Tenant receives the written consent of the
Lender to such rejection;
(iv) no consent to the release of Tenant from liability under this
Lease upon assignment of this Lease or sublease of the Premises shall be
effective unless Tenant shall receive the written consent of such Lender; and
(v) no subordination, amendment or modification of this Lease shall
be effective unless Tenant receives the written consent of the Lender thereto
and, if requested by Lender, written evidence in writing from the Rating
Agencies that any such action shall not result in a withdrawal, qualification or
downgrade of the current ratings for any securities issued in connection with
any securitization or other secondary market transaction in which the
indebtedness secured by the Indenture is included.
(d) Upon receipt of a request from a Lender for the agreement described
in Section 6.2(c) above, Tenant's obligations under Section 6.2(c) above shall
be conditioned upon such Lender entering into a non-disturbance and attornment
agreement which shall provide that unless an Event of Default then exists under
this Lease, Lender shall not join Tenant as a defendant in any action to
foreclose upon the interest of Landlord in the Premises and, upon the Lender's
foreclosure of Landlord's interest in the Premises by judicial proceedings or
otherwise, such Lender shall not be entitled to, nor shall it seek to terminate
this Lease or Tenant's interest in the Premises, PROVIDED, THAT, Tenant, from
and after the date of such succession, attorns to such Lender, pays to such
Lender all items of Basic Rent, Additional Rent and other items accruing from
and after such date and otherwise remains in compliance with all other terms and
provisions of this Lease. Tenant hereby acknowledges that the Assignment of
Master Lease Consent Agreement of even date herewith, among Tenant, Landlord and
Lender constitutes such an agreement. In the event that Tenant shall execute a
separate document for the benefit of a Lender relating to subordination,
attornment or non-disturbance, such document shall control to the extent that it
conflicts with the provisions of this Section 6.2(d).
(e) Provided that a Lender shall execute and deliver to Tenant an
agreement to the effect that, if there shall be a foreclosure of its Indenture,
such Lender will not make Tenant a party defendant to such foreclosure, evict
Tenant, disturb Tenant's possession under this Lease, or terminate or disturb
Tenant's leasehold estate or rights hereunder, and will recognize Tenant as the
direct tenant of such Lender on the same terms and conditions as are contained
in this Lease, subject to the provisions hereinafter set forth, provided no
Event of Default shall have occurred and be continuing hereunder (any such
agreement, or any agreement of similar import, from a Lender being hereinafter
referred to as a "Nondisturbance Agreement"), this Lease and the leasehold
estate of Tenant hereunder shall be subject and subordinate to such Indenture.
This clause shall be self-operative and no further instrument of subordination
shall be required from Tenant to make the interest of any Lender superior to the
interest of Tenant hereunder. Tenant, however, at Tenant's sole cost and
expense, shall execute and deliver promptly the Nondistur-
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bance Agreement in form and substance reasonably satisfactory to such Lender and
Tenant in confirmation of such subordination. Any Nondisturbance Agreement may
be made on the condition that neither the Lender nor anyone claiming by, through
or under such Lender, including a purchaser at a foreclosure sale, shall be: (i)
liable for any act or omission of any prior lessor hereunder (including, without
limitation, the then defaulting lessor), (ii) subject to any defense or offsets
which Tenant may have against any prior lessor, (iii) bound by any payment of
Basic Rent which Tenant may have made to any prior lessor (including, without
limitation, the then defaulting lessor) more than thirty (30) days in advance of
the date upon which such payment was due, (iv) bound to any obligation of
Landlord to make any payment to Tenant pursuant to this Lease, or (v) bound by
any amendment or modification of this Lease made after such party became a
Lender which is made without its consent. Tenant shall promptly (within seven
(7) days after notice) so accept, execute and deliver any Nondisturbance
Agreement proposed by any such Lender which substantially conforms to the
provisions of this Section 6.2 (e) and is otherwise in form and content
reasonably satisfactory to Tenant which contains such provisions typically
required by institutional lenders in connection with mortgages for similar
transactions. Any such Nondisturbance Agreement may also contain other terms and
conditions as may otherwise be reasonably required by such Lender which do not
increase Tenant's monetary obligations under this Lease, or adversely affect or
diminish the rights or increase the other obligations of Tenant under this
Lease.
ARTICLE 7.
7.1 ENVIRONMENTAL COVENANT AND WARRANTY.
(a) Tenant represents and warrants to Landlord and Lender that, except
as disclosed or set forth in the environmental report entitled "Phase I
Environmental Site Assessment of Dictaphone Headquarters Building", prepared by
EMG, and dated May 12, 1998:
(i) the Premises complies with all present, and Tenant shall cause
the Premises to comply with all future, federal, state or local law, statute,
regulation or ordinance, and any judicial or administrative order or judgment
thereunder, and judicial opinions or orders, pertaining to health, industrial
hygiene, Hazardous Substances or the environment, including, but not limited to,
each of the following, as enacted as of the date hereof or as hereafter amended:
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. ss.ss. 9601 et seq.; the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. ss.ss. 6901 et seq.; the Toxic Substance Control Act, 15
U.S.C. ss.ss. 2601 et seq.; the Water Pollution Control Act (also known as the
Clean Water Act), 33 U.S.C. ss.ss. 1251 et seq.; the Clean Air Act, 42 U.S.C.
ss.ss. 7401 et seq.; and the Hazardous Materials Transportation Act, 49 U.S.C.
ss.ss. 1801 et seq. (collectively, the "ENVIRONMENTAL LAWS");
(ii) no notices, complaints or orders of violation or
non-compliance with Environmental Laws have been received by Tenant and, to the
best of Tenant's actual knowledge,
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no federal, state or local environmental investigation or proceeding is pending
or threatened with regard to the Premises or any use thereof or any alleged
violation of Environmental Laws with regard to the Premises;
(iii) neither the Premises, nor any portion thereof, has been used
by Tenant or, to the best of Tenant's knowledge, after due inquiry, by any prior
owner for the generation, manufacture, storage, handling, transfer, treatment,
recycling, transportation, processing, production, refinement or disposal (each,
a "REGULATED ACTIVITY") of any material, waste or substance which is (1)
included within the definitions of "hazardous substances," "hazardous
materials," "toxic substances," or "solid waste" in or pursuant to any
Environmental Law, or subject to regulation under any Environmental Law; (2)
listed in the United States Department of Transportation Optional Hazardous
Materials Table, 49 C.F.R. ss. 172.101, as enacted as of the date hereof or as
hereafter amended, or in the United States Environmental Protection Agency List
of Hazardous Substances and Reportable Quantities, 40 C.F.R. Part 302, as
enacted as of the date hereof or as hereafter amended; or (3) explosive,
radioactive, friable asbestos, a polychlorinated biphenyl, petroleum or a
petroleum product or waste oil (herein "HAZARDOUS SUBSTANCE");
(iv) to Tenant's knowledge, no underground storage tanks or surface
impoundments have been installed in the Premises in violation of applicable
Environmental Laws and there exists no Hazardous Substance contamination in
violation of applicable Environmental Laws to the Premises which originated on
or off the Premises; and
(v) to Tenant's knowledge and except as otherwise specifically set
forth in the Phase I environmental report delivered to Landlord in connection
with its acquisition of the Premises, the Premises is free of Hazardous
Substances and friable asbestos, the removal of which is required or the
maintenance of which is prohibited or penalized by any Environmental Law.
(b) Tenant covenants that during the Term of this Lease it (i) shall
comply, and cause the Premises to comply, with all Environmental Laws applicable
to the Premises, (ii) shall not use and shall prohibit the use of the Premises
for Regulated Activities or for the storage or handling of any Hazardous
Substance (other than in connection with the operation and maintenance of the
Premises and in commercially reasonable quantities as a consumer thereof and
except as to such household or commercial products customarily maintained in
similar establishments, subject to, in any event, compliance with Environmental
Laws), (iii) shall not install or permit the installation on the Premises of any
underground storage tanks or surface impoundments and shall not knowingly permit
there to exist any petroleum contamination in violation of applicable
Environmental Laws to the Premises originating on or off the Premises (other
than in connection with the use, operation and maintenance of the Premises and
then only in compliance with applicable Environmental Laws and all other
applicable laws, rules, orders, ordinances, regulations and requirements now or
hereafter enacted or promulgated of every government and municipality having
jurisdiction over the Premises and of any agency thereof) or
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asbestos-containing materials (it being understood that Tenant shall not be
obligated to remove existing non-friable asbestos unless hereafter required
pursuant to any Legal Requirement or unless such non-friable asbestos is
hereafter disturbed by renovation, casualty or other event, in which event the
non-friable asbestos shall be removed and provided, further, that any existing
non-friable asbestos shall be maintained in accordance with prudent industry
standards, including an appropriate operations and maintenance program), and
(iv) shall cause any alterations of the Premises to be done in a way so as to
not expose the persons working on or visiting the Premises to Hazardous
Substances and in connection with any such alterations shall remove any
Hazardous Substances present upon the Premises which are not in compliance with
Environmental Laws or which present a danger to persons working on or visiting
the Premises.
(c) If any investigation, site monitoring, containment, cleanup,
removal, restoration or other remedial work of any kind or nature (collectively,
the "REMEDIAL WORK") is required on the Premises pursuant to an order or
directive of any Governmental Authority (as hereinafter defined) or under any
applicable Environmental Law, or in Landlord's opinion, based upon
recommendations of qualified environmental engineer reasonably acceptable to
Landlord, after notice to Tenant, is reasonably necessary to prevent future
liability under any applicable Environmental Law, because of or in connection
with the current or future presence, suspected presence, release, or suspected
release of a Hazardous Substance into the air, soil, ground water, surface
water, or soil vapor on, under or emanating from the Premises or any portion
thereof, Tenant shall (at Tenant's sole cost and expense), or shall cause such
responsible third parties to, promptly commence and diligently prosecute to
completion all such Remedial Work. In all events, such Remedial Work shall be
commenced within thirty (30) days (or such shorter period as may be required
under any applicable Environmental Law) after the earlier to occur of Tenant's
actual knowledge that remediation is required under applicable Environmental
Laws or any written demand reasonably made therefor by Landlord; however, Tenant
shall not be required to commence such Remedial Work within the above-specified
time periods if (x) prevented from doing so by any Governmental Authority, (y)
commencing such Remedial Work within such time periods would result in Tenant or
such Remedial Work violating any Environmental Law or (z) Tenant is contesting
in good faith and by appropriate proceedings the applicability of the relevant
Environmental Laws in accordance with Section 2.6 of this Lease; provided,
however, that such contest shall not permit or materially increase the risk of
the spread, release or suspected release of any Hazardous Substance into the
air, soil, ground water, surface water, or soil vapor on, under or emanating
from the Premises or any portion thereof during the pendency of such contest.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, regional or local
government or political subdivision thereof and any Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
(d) All Remedial Work shall be performed by contractors, and under the
supervision of a consulting engineer, each approved in advance by Landlord
(which approval shall not be unreasonably withheld or delayed). All costs and
expenses reasonably incurred in connection with such Remedial Work and
Landlord's or Lender's reasonable monitoring or review
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of such Remedial Work which Lender or Landlord may, but are not obligated to, do
(including reasonable attorneys, fees and disbursements, but excluding internal
overhead, administrative and similar costs of Lender and Landlord) shall be paid
by Tenant. If Tenant does not timely commence and diligently prosecute to
completion the Remedial Work, then, Lender or Landlord may (but shall not be
obligated to) cause such Remedial Work to be performed. Tenant agrees to bear
and shall pay or reimburse Lender and Landlord on demand for all advances and
expenses (including reasonable attorneys' fees and disbursements, but excluding
internal overhead, administrative and similar costs of Lender or Landlord)
reasonably relating to or incurred by Lender or Landlord in connection with
monitoring, reviewing or performing any such Remedial Work.
(e) Except with Lender's and Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed, Tenant shall not commence
any Remedial Work or enter into any settlement agreement, consent decree or
other compromise relating to any Hazardous Substances or Environmental Laws
which might, in Landlord's reasonable judgment, impair the value of the Premises
to a material degree. Landlord's and Lender's prior written consent shall not be
required, however, if the presence or threatened presence of Hazardous
Substances on, under or about the Premises poses an immediate threat to the
health, safety or welfare of any person or is of such a nature that an immediate
remedial response is necessary, or if Lender or Landlord, as applicable, fails
to respond to any notification by Tenant hereunder within twenty (20) Business
Days from the date of such notification. In such event, Tenant shall notify
Lender and Landlord as soon as practicable of any action taken.
(f) Upon reasonable prior notice, Landlord and Lender and their agents,
representatives and employees shall have the right at all reasonable times and
during normal business hours, except to the extent such access is limited by
applicable law, to enter upon and inspect all or any portion of Premises;
provided, however, that such inspections shall not unreasonably interfere with
the operation thereof. Landlord or Lender, at their sole expense, except as
provided in subparagraph (g) hereof, (i) may retain an environmental consultant
to conduct and prepare reports of such inspections and (ii) Tenant shall be
given a reasonable opportunity to review any and all reports, data and other
documents or materials reviewed or prepared by the consultant, and to submit
comments and suggested revisions or rebuttals to same. The inspection rights
granted to Landlord and Lender in this Section shall be in addition to, and not
in limitation of, any other inspection rights granted to Landlord or Lender in
this Lease, and shall expressly include the right to conduct soil borings and
other customary environmental tests, assessments and audits in compliance with
applicable Legal Requirements; provided, however, that, except as set forth in
clause (g) below, Lender or Landlord, as applicable, shall cause to be repaired
any damage caused by such borings, tests, assessments or audits.
(g) Tenant agrees to bear and shall pay or reimburse Lender or Landlord
on demand for all expenses (including reasonable attorneys, fees and
disbursements, but excluding internal overhead, administrative and similar costs
of Lender or Landlord) reasonably relating to
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or incurred by Lender or Landlord in connection with the inspections, tests and
reports described in this Section 7.1 in the following situations:
(i) If Lender or Landlord, as applicable, has reasonable grounds
to believe at the time any such inspection is ordered, that there
exists an Environmental Violation or that a Hazardous Substance is
present on, under or emanating from the Premises, or is migrating to or
from adjoining property, except under conditions permitted by
applicable Environmental Laws and not prohibited by this Lease;
(ii) If any such inspection reveals an Environmental Violation or
that a Hazardous Substance is present on, under or emanating to or from
the Premises or is migrating from adjoining property, except under
conditions permitted by applicable Environmental Laws and not
prohibited by this Lease; or
(iii) If an Event of Default exists at the time any such
inspection is ordered.
(h) To the extent that Tenant has actual knowledge thereof, Tenant
shall promptly provide notice to Landlord and Lender of:
(i) any proceeding or investigation commenced or threatened by
any Governmental Authority with respect to the presence of any
Hazardous Substance on, under or emanating from the Premises;
(ii) any proceeding or investigation commenced or threatened by
any Governmental Authority, against Tenant or Landlord, with respect to
the presence, suspected presence, release or threatened release of
Hazardous Substances from any property not owned by Landlord,
including, but not limited to, proceedings under the Federal
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. ss. 9601 et seq.;
(iii) all claims made or any lawsuit or other legal action or
proceeding brought by any Person against (A) Tenant or Landlord or the
Premises or any portion thereof, or (B) any other party occupying the
Premises or any portion thereof, in any such case relating to any loss
or injury allegedly resulting from any Hazardous Substance or relating
to any violation or alleged violation of Environmental Law;
(iv) the discovery of any occurrence or condition on the Premises
or on any real property adjoining or in the vicinity of the Premises,
of which Tenant becomes aware, which reasonably could be expected to
lead to the Premises or any portion thereof being in violation of any
Environmental Law or subject to any restriction on ownership,
occupancy, transferability or use under any Environmental Law
(collectively, an
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"ENVIRONMENTAL VIOLATION") or which might subject Landlord or Lender
to an Environmental Claim. "ENVIRONMENTAL CLAIM" shall mean any claim,
action, investigation or written notice by any Person alleging
potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries or penalties) arising out of, based on or resulting from (A)
the presence, or release into the environment, of any Hazardous
Substance at the Premises or (B) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law; and
(v) the commencement and completion of any Remedial Work.
(i) Tenant will promptly transmit to Landlord and Lender copies of any
citations, orders, notices or other communications received by Tenant from any
Person with respect to the notices described in Section 7.1(h) hereof.
(j) Lender and Landlord may, but are not required to, join and
participate in, as a party if they so determine, any legal or administrative
proceeding or action concerning the Premises or any portion thereof under any
Environmental Law, if, in Landlord's or Lender's reasonable judgment, the
interests of Landlord or Lender, as applicable, will not be adequately protected
by Tenant. Tenant agrees to bear and shall pay or reimburse Lender and Landlord,
on demand for all reasonable expenses (including reasonable attorneys' fees and
disbursements, but excluding internal overhead, administrative and similar costs
of Lender and Landlord) relating to or incurred by Lender or Landlord in
connection with any such action or proceeding.
(k) Tenant shall, on or before sixty (60) days following the date
hereof, deliver to Landlord and Lender an "operating and management" program in
form satisfactory to Landlord and Lender relating to the treatment or
maintenance of all asbestos containing materials located in the Premises.
7.2 ENVIRONMENTAL INDEMNITY. Tenant agrees to indemnify, reimburse, defend,
and hold harmless the Indemnified Parties for, from, and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest, penalties, punitive
and consequential damages, costs of any Remedial Work, reasonable attorneys'
fees, disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses (but excluding internal overhead, administrative and
similar costs of the Indemnified Parties), asserted against, resulting to,
imposed on, or incurred by the Indemnified Parties, directly or indirectly, in
connection with any of the following:
(a) the events, circumstances, or conditions which are alleged to, or
do, (1) relate to the presence, or release into the environment, of any
Hazardous Substance at the Premises related to circumstances forming the basis
of any violation, or alleged violation, of any
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Environmental Law by Tenant or with respect to the Premises, and in either case,
result in Environmental Claims, or (2) constitute Environmental Violations;
(b) any pollution or threat to human health or the environment that is
related in any way to Tenant's or any previous owner's or operator's management,
use, control, ownership or operation of the Premises, including, without
limitation, all onsite and offsite activities involving Hazardous Substances,
and whether occurring, existing or arising prior to or from and after the date
hereof;
(c) any Environmental Claim against any Person whose liability for such
Environmental Claim Owner has or may have assumed or retained either
contractually or by operation of law;
(d) any Remedial Work required to be performed pursuant to any
Environmental Law or the terms hereof; or
(e) the breach of any environmental representation, warranty or
covenant set forth in this Lease,
including in each case, without limitation, with respect to each of the
Indemnified Parties, as the case may be, to the extent such Environmental Claims
result from their respective negligence, except in each case, to the extent that
they result solely from their respective gross negligence or willful misconduct
(subject to the provisions of Section 10.18(b)).
7.3 NOTICE. Promptly upon obtaining actual knowledge thereof, Tenant shall
give to the Landlord notice of the occurrence of any of the following events:
(i) the failure of the Premises to comply with any Environmental Law in any
manner whatsoever except for the use or disposal of incidental amounts of
Hazardous Substances customarily used in the operation of similar buildings
similarly situated in a commercially reasonably manner and in compliance with
Legal Requirements; (ii) the issuance to the Tenant or any tenant of space in
the Premises or any assignee or licensee of the Tenant of any notice, request
for information, complaint or order of violation or non-compliance or liability
of any nature whatsoever with regard to the Premises or the use thereof with
respect to Environmental Laws; (iii) any notice of a pending or threatened
investigation as to whether the Tenant's (or its "subtenants" or "assignees")
operations on the Premises are in compliance with, or may lead to liability to
the Tenant under, any Environmental Law; or (iv) the occurrence of an event or
the existence of a situation which is reasonably likely to result in a violation
of an Environmental Law at the Premises or which is likely to result in the
Tenant being liable to the Landlord by virtue of the indemnity given by the
Tenant pursuant to Section 7.2.
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7.4 SURVIVAL. The indemnity obligations of the Tenant and the rights and
remedies of the Landlord under this Article 7 shall survive the termination of
this Lease for an indefinite period of time.
ARTICLE 8.
8.1 HOLDOVER. If the Tenant shall continue to occupy the Premises after the
Expiration Date or earlier termination of this Lease, then Tenant shall be
deemed to be a holdover tenant, the tenancy of which shall be from month to
month upon the same provisions and conditions set forth in this Lease, except
that Basic Rent for the holdover period shall be an amount equal to one hundred
twenty-five percent (125%) of the Basic Rent in effect immediately prior to the
holdover period. This Article 8 does not amount to a waiver of the Landlord's
right of reentry or any other right granted under Article 5 and shall not
constitute a consent to any holdover by Tenant.
ARTICLE 9.
INTENTIONALLY OMITTED
ARTICLE 10.
10.1 NO MERGER. There shall be no merger of this Lease or of the leasehold
estate hereby created with the fee estate in the Premises by reason of the fact
that the same person acquires or holds, directly or indirectly, this Lease or
the leasehold estate hereby created or any interest herein or in such leasehold
estate as well as the fee estate in the Premises or any interest in such fee
estate.
10.2 SURRENDER. Upon the expiration or earlier termination of this Lease,
Tenant shall surrender the Premises to Landlord in the condition in which the
Premises were originally received from Landlord, except as repaired, rebuilt,
restored, altered or added to as permitted or required hereby and except for
ordinary wear and tear. Tenant shall remove from the Premises on or prior to
such expiration or termination all property situated thereon which is not owned
by Landlord and shall repair any damage caused by such removal. Property not so
removed shall become the property of Landlord, and Landlord may cause such
property to be removed from the Premises and disposed of, but the cost of any
such removal and disposition and of repairing any damage caused by such removal
shall be borne by Tenant. In the event that this Lease is terminated (either as
a result of a default, or the expiration hereof, or otherwise) Landlord shall
remove all of Tenant's Personal Property. Tenant's Personal Property shall only
be deemed to be retained by Landlord if Landlord specifically elects to retain
the same by written notice to Tenant. If Tenant abandons Tenant's Personal
Property, it shall become the property of Landlord as outlined above. The fair
market value of the Tenant's Personal Property shall be determined by the mutual
agreement of Landlord and Tenant, and if the parties cannot agree, by appraisal
by
55
<PAGE>
an unrelated third-party appraiser. The provisions of this Section shall survive
the termination or expiration of this Lease.
10.3 MERGER, CONSOLIDATION OR SALE OF ASSETS. Without waiving the
provisions of Section 4.1(a), it shall be a condition precedent to the merger of
Tenant with another entity, to the consolidation of Tenant with one or more
other entities, and to the sale or other disposition of all or substantially all
the assets of Tenant to one or more other entities (a "MERGER AND SALE EVENT")
that (i) the surviving entity or transferee of assets, as the case may be, shall
deliver to Landlord and Lender an acknowledged instrument in recordable form
assuming all obligations, covenants and responsibilities of Tenant hereunder and
under any instrument executed by Tenant relating to the Premises or this Lease,
including, without limitation, any consent to the assignment of Landlord's
interest in this Lease to the Lender as security for indebtedness, (ii) no Event
of Default then exists under this Lease, (iii) confirmation by the Guarantor of
its guaranty, if any, (iv) confirmation from the Rating Agencies involved in any
secondary market transaction relating to the Indenture, that any such
transaction (and the Credit Enhancement Facility relating to such transaction,
if any) will not result in a qualification, withdrawal or downgrade of either
the credit rating of Tenant or of the then current ratings for any securities
issued in connection with a secondary market transaction by any such Rating
Agencies, (v) the surviving entity of any merger or consolidation or the
transferee of such assets allowed above must be organized in the United States
and must have a net worth and credit standing equal to or greater than the net
worth and credit standing of Tenant on the day prior to such Merger and Sale
Event unless Tenant shall have provided a Credit Enhancement Facility
satisfactory to Landlord and Lender in their sole discretion with respect to
such Merger and Sale Event, (vi) Tenant shall have delivered such estoppels,
certificates and/or opinions of counsel as may be required by Landlord, Lender
or such Rating Agencies in connection with such transaction, including but not
limited to a REMIC Opinion, (vii) the surviving entity shall specifically assume
all obligations of Tenant under this Lease and under any other agreement of
Tenant related hereto or thereto, (viii) the surviving entity must be a solvent
entity, and (ix) the surviving entity must either be an entity formed in the
United States or must specifically consent to jurisdiction in all applicable
states of the United States, and must provide an opinion in form reasonably
acceptable to Landlord and to Lender and acceptable to the Rating Agencies that
such consent to jurisdiction is enforceable and valid and (x) Lender and
Landlord shall be given, as a prerequisite to such merger or consolidation or
disposition, a written certification from the chief financial officer of Tenant
that the provisions of this Section have been satisfied (collectively, the
"MERGER AND SALE CONDITIONS"). Tenant covenants that it will not engage in a
Merger and Sale Event unless the Merger and Sale Conditions have been satisfied.
Except as required by law or court order or in connection with any enforcement
by Landlord of its rights and remedies under this Lease, for a period which is
the earlier of (x) twelve months following receipt thereof by Landlord, or (y)
until such information shall be disclosed to the public (other than by reason of
a disclosure thereof by Landlord in violation of this Lease), Landlord shall not
disclose the content of any information provided by Tenant to Landlord in
connection with any Merger and Sale Event to any party other than (i) Landlord's
beneficiaries (or the beneficial owners of any beneficiaries of Landlord) or
their respective accountants, consultants
56
<PAGE>
or counsel, and (ii) Lender and the Rating Agencies or their respective
accountants, consultants or counsel. Tenant shall be responsible for all costs
and expenses of Landlord, Lender and/or the Rating Agencies (including
reasonable attorneys' fees and expenses) in connection with the transactions
contemplated by this Section.
10.4 SEPARABILITY; BINDING EFFECT. Each provision hereof shall be separate
and independent and the breach of any provision by Landlord shall not discharge
or relieve Tenant from any of its obligations hereunder. Each provision hereof
shall be valid and shall be enforceable to the extent not prohibited by law. If
any provision hereof or the application thereof to any person or circumstance
shall to any extent be invalid or unenforceable, the remaining provisions
hereof, or the application of such provision to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby. All provisions contained in this Lease shall be binding upon, inure to
the benefit of, and be enforceable by, the successors and assigns of Landlord to
the same extent as if each such successor and assign were named as a party
hereto. All provisions contained in this Lease shall be binding upon the
successors and assigns of Tenant and shall inure to the benefit of and be
enforceable by the permitted successors and assigns of Tenant in each case to
the same extent as if each such successor and assign were named as a party
hereto.
10.5 TABLE OF CONTENTS AND HEADINGS. The table of contents and the headings
of the various Sections and Schedules of this Lease have been inserted for
reference only and shall not to any extent have the effect of modifying the
express terms and provisions of this Lease.
10.6 COUNTERPARTS. This Lease may be executed in two or more counterparts
and shall be deemed to have become effective when and only when one or more of
such counterparts shall have been signed by or on behalf of each of the parties
hereto (although it shall not be necessary that any single counterpart be signed
by or on behalf of each of the parties hereto, and all such counterparts shall
be deemed to constitute but one and the same instrument), and shall have been
delivered by each of the parties to each other.
10.7 RECORDING OF LEASE. Tenant and Landlord will execute, acknowledge,
deliver and cause to be recorded or filed in the manner and place required by
any present or future law a memorandum of this Lease and all other instruments,
including, without limitation, financing statements, continuation statements,
releases and instruments of similar character, which shall be reasonably
requested by the Landlord. Tenant shall be responsible for all costs and
expenses in connection with the recording of this Lease or a memorandum hereof.
10.8 RATING OF THE TRANSACTION. Tenant will cooperate in good faith with
Lender in effecting any secondary market transaction (including satisfying the
market standards to which Lender customarily adheres) and to cooperate in good
faith to implement all requirements imposed by the Rating Agencies involved in
any such secondary market transaction including, without limitation,
57
<PAGE>
(a) to provide, or use its best efforts to cause to be provided by
Guarantor, as applicable, such financial and other information with respect to
the Premises, Tenant and Guarantor and to perform or permit or cause to be
performed or permitted such site inspections, appraisals, market studies,
environmental reviews and reports (Phase I's and, if appropriate, Phase II's),
engineering reports and other due diligence investigation of the Premises as may
be reasonably requested by the Lender or the Rating Agencies or as may be
necessary or appropriate in connection with any secondary market transaction,
together, if customary, with appropriate verification of such information
through letters of auditors or opinions of counsel acceptable to Lender and the
Rating Agencies;
(b) at Tenant's expense to cause counsel to render opinions customary
in secondary market transactions with respect to the Premises, Tenant and
Guarantor which counsel and opinions shall be reasonably satisfactory to Lender
and shall be acceptable to the Rating Agencies;
(c) to make, or use its best efforts to cause to be made by Guarantor,
as applicable, such representations and warranties, as of the closing date of
any such secondary market transaction, with respect to the Premises, Tenant and
Guarantor and the Operative Documents to which Tenant or Guarantor is a party as
are customarily provided in securitization transactions in which the Lender or
one if its affiliates is the issuer and as may be requested by the Rating
Agencies and consistent with the facts covered by such representations and
warranties as they exist on the date thereof, including the representations and
warranties made in or pursuant to the Operative Documents to which Tenant or
Guarantor is a party; and
(d) to execute modifications and cause Guarantor, as applicable, to
execute modifications to any Operative Documents to which Tenant or Guarantor is
a party acceptable to the Rating Agencies, provided, however, that neither
Tenant nor Guarantor shall be required to modify any such Operative Documents in
any way which would materially change the economics, or significantly change the
terms, of such Operative Documents.
10.9 NO BROKERS. The parties acknowledge that no real estate broker or
other party, other than CB Commercial (the "Broker"), is entitled to any
commission as a result of the purchase and leasing of the Premises. Tenant shall
be responsible for the payment of a commission to the Broker. Tenant shall
indemnify Landlord against the claims of brokers claiming through Tenant and
from any loss, liability, cost and expense (including, without limitation,
reasonable attorneys' fees) arising from a breach by Tenant under this Section
10.9.
10.10 GOVERNING LAW. The terms and provisions of this Lease shall be
governed by the laws of the State of New York, except the rights and remedies
with respect to the Premises shall be governed by the laws of the state in which
the Premises is located. To the fullest extent permitted by law, Tenant hereby
unconditionally and irrevocably waives any claim to assert that the law of any
jurisdiction other than New York or the law of the State in which the Premises
is located, as applicable, governs this Lease.
58
<PAGE>
10.11 WAIVER OF JURY TRIAL AND PREJUDGMENT WAIVER. LANDLORD AND TENANT
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS LEASE. TO INDUCE LANDLORD TO ENTER INTO THE
COMMERCIAL TRANSACTION EVIDENCED BY THIS LEASE, TENANT AGREES THAT SAID
TRANSACTION IS A COMMERCIAL AND NOT A CONSUMER TRANSACTION AND TO THE EXTENT
CONNECTICUT LAW IS APPLICABLE WAIVES ANY RIGHT TO NOTICE OF AND HEARING ON THE
RIGHT OF LANDLORD UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES OR
OTHER STATUTE OR STATUTES AFFECTING PREJUDGMENT REMEDIES AND AUTHORIZES
LANDLORD'S ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER
PROVIDED THE COMPLAINT SHALL SET FORTH A COPY OF THE WAIVER.
10.12 CONVEYANCE BY LANDLORD. The word "Landlord" as used in this Lease
means only the owner for the time being of the Premises, so that, if there is a
transfer of an owner's interest, the transferor shall be and hereby is entirely
freed and relieved of all covenants and obligations of the Landlord hereunder,
except any obligations which accrued prior to the date of transfer, and it shall
be deemed and construed, without further agreement between the parties or
between the parties and the transferee of the Premises, that the transferee has
assumed and has agreed to carry out any and all of the Landlord's covenants and
obligation hereunder from and after the date of transfer.
10.13 RELATIONSHIP OF THE PARTIES. Nothing contained in this Lease shall be
construed in any manner to create any relationship between the Landlord and the
Tenant other than the relationship of landlord and tenant. Without limitation,
the Landlord and the Tenant shall not be considered partners or co-venturers for
any purpose on account of this Lease.
10.14 REPRESENTATION BY COUNSEL. The Tenant and the Landlord each
acknowledge that it was represented by counsel in connection with the
negotiation and execution to the effect that ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Lease.
10.15 ACCESS TO PREMISES. The Tenant will permit the Landlord, any Lender
or prospective Lender or purchaser, and their duly authorized representatives to
enter upon the Premises and to inspect the same at any and all reasonable times,
upon five (5) Business days advance written notice, and at any time in the case
of an emergency without the giving of notice, and for any purpose reasonably
related to the rights of the Landlord and any Lender under this Lease. Landlord
and Lender shall, in exercising such rights of access, cause no unreasonable
interference with Tenant's business or Tenant's guests, employees, invitees,
shareholders, agents, contractors and the like. Notwithstanding the foregoing,
Landlord agrees that it will not exercise the foregoing right of access for the
Premises more than once in any calendar year except (a) during such time as an
Event of Default has occurred and is continuing, or (b) in the event of a
59
<PAGE>
sale, financing, refinancing or securitization of any Indenture relating to the
Premises, or (c) if Landlord has reasonable grounds to believe that the Premises
is in violation of Legal Requirements (including Environmental Laws) or that the
Premises is not being maintained in accordance with the requirements of this
Lease, or (d) as otherwise expressly provided in this Lease.
10.16 SHOWING. During the one year period preceding the date on which the
Term shall be scheduled to terminate or fully expire, Landlord, if accompanied
by a representative of Tenant and subject to the rights of any subtenant not
affiliated with Tenant, may show the Premises to prospective tenants or
purchasers at such reasonable times during normal business hours as Landlord may
select upon reasonable prior notice to Tenant, provided that Landlord does not
materially interfere with Tenant's normal business operations.
10.17 TRUE LEASE. This Lease is intended as, and shall constitute, an
agreement of lease, and nothing herein shall be construed as conveying to the
Tenant any right, title or interest in or to the Premises nor to any remainder
or reversionary estates in the Premises held by any Person, except, in each
instance, as a Tenant. Under no circumstances shall this Lease be regarded as an
assignment of all of Landlord's interests in and to the Premises; instead
Landlord and Tenant shall have the relationship between them of landlord and
tenant, pursuant to the provisions of this Lease.
10.18 LANDLORD'S CONSENT AND STANDARDS.
(a) Whenever Landlord is allowed or required to give its consent or
approval of any matter under this Lease or to deliver any estoppel or other
instrument, Tenant's sole remedy for Landlord's failure to give such consent or
approval or deliver such instrument in accordance with the applicable provision
of this Lease shall be to compel such approval or delivery. In no event and
under no circumstance shall Tenant be entitled to any monetary damages for such
failure or to terminate or otherwise modify this Lease. However, if Tenant shall
bring such an action to compel consent, approval or delivery, the prevailing
party in such action shall be entitled to reimbursement for its reasonable
attorneys' fees; provided, however, that with respect to any attorneys' fees to
be reimbursed by Landlord, such fees and Tenant's right to recover the same
shall be junior and subordinate to the Indenture, and in no event shall Tenant
be entitled to offset any amounts due under this Lease to recover such fees. In
addition, whenever Landlord is required to give its consent or approval of any
matter under this Lease and Landlord is required under the terms and conditions
of the Indenture to obtain the consent or approval as to such matter from the
Lender, then Landlord shall not be deemed to have unreasonably withheld its
consent or approval in the event that Landlord has not obtained the consent or
approval of the Lender as to such matter and in each instance Landlord's consent
or approval shall be subject to Landlord's obtaining the consent or approval of
such matter from the Lender to the extent required under the Indenture.
60
<PAGE>
(b) Under no circumstance shall Landlord be deemed to have acted
negligently, grossly negligently or willfully merely by Landlord's ownership of
the Premises, and in no event shall any occurrence relating to the Premises,
whether negligent, grossly negligent or willful, be imputed to Landlord by
reason of Landlord's interest in the Premises, it being understood that all
obligations with respect to the Premises are the responsibility of Tenant under
this Lease. In order to have acted negligently, grossly negligently or
willfully, Landlord must have committed an affirmative act.
10.19 QUIET ENJOYMENT. Landlord covenants that, so long as Tenant shall
faithfully perform the agreements, terms, and covenants and conditions hereof,
Tenant shall and may peaceably and quietly have, hold and enjoy the Premises for
the term hereby granted without molestation or disturbance by or from Landlord.
10.20 FORCE MAJEURE. The term "FORCE MAJEURE", as used in this Lease, shall
mean delays caused by acts of God, strikes and other similar events beyond the
control of Tenant. However, the duration of any delay excused by Force Majeure
shall be limited to the actual amount of time caused by the event giving rise to
the Force Majeure. In addition, no performance by Tenant under this Lease shall
be excused by Force Majeure unless the requirement for performance set forth in
this Lease specifically states that it is subject to Force Majeure.
10.21 CONCERNING WILMINGTON TRUST COMPANY. It is expressly understood and
agreed by the parties hereto that (a) this Lease is executed and delivered by
Wilmington Trust Company, not individually or personally but solely as trustee
of Landlord, in the exercise of the powers and authority conferred and vested in
them under the Trust Agreement of Landlord dated as of May 4, 1998 (b) each of
the representations, undertakings and agreements herein made on the part of
Landlord is made and intended not as personal representations, undertakings and
agreements of Wilmington Trust Company but is made and intended for the purpose
of binding only Landlord, and (c) under no circumstance shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or other
obligations of Landlord or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by Landlord
under this Agreement.
[END OF TEXT]
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed as of the date first above written.
LANDLORD:
STRATFORD CT BUSINESS TRUST
a Delaware business trust
By: WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely as
trustee under Trust Agreement dated as
of May 4, 1998
Witness:
/s/ Debra Eberly By: /s/ Donald G. Mackelcan
- ------------------- -------------------------------------
Name: Debra Eberly Title: Donald G. Mackelcan
/s/ Eric A. Mazie Assistant Vice President
Eric A. Mazie
TENANT:
DICTAPHONE CORPORATION
a Delaware corporation
Witness:
/s/ Seong-Mi Oh By: /s/ Joseph D. Skrzypczak
- ------------------- ---------------------------------------
Name: Seong-Mi Oh Title: Joseph D. Skrzypczak
/s/ Kelly G. Miley ITS Senior Vice President &
Kelly G. Miley Chief Financial Officer
<PAGE>
SCHEDULE A
Legal Descriptions
[See Attached]
<PAGE>
Policy No: S985180
ALL THAT CERTAIN tract or parcel of land situate, lying and being in
the Town of Stratford, County of Fairfield, and State of Connecticut,
more particularly described as follows:
Beginning a point on the southwesterly line of Broadbridge Avenue,
which point is located at the northeast corner of land formerly of
Remington Arms Company, Inc. and 324.66 feet northwesterly from the
intersection of said street line of Broadbridge Avenue with the
westerly street line of Broadmere Road; thence proceeding the
following courses and distances:
S 19"(degree)" 52' 50" W 63.84 feet
S 19"(degree)" 31' 50" W 341.15 feet
S 19"(degree)" 11' 20" W 447.03 feet
S 19"(degree)" 25' 30" W 486.81 feet
S 82"(degree)" 41' 50" E 10.00 feet
S 82"(degree)" 51' 10" E 163.56 feet
S 05"(degree)" 47' 35" W 82.76 feet
S 00"(degree)" 38' 40" E 105.87 feet
S 00"(degree)" 34' 50" E 18.77 feet
S 00"(degree)" 22' 30" W 64.06 feet
S 08"(degree)" 03' 40" E 81.43 feet
S 13"(degree)" 20' 30" E 43.29 feet
S 10"(degree)" 40' 20" E 161.02 feet
S 05"(degree)" 28' 10" E 288.27 feet
S 04"(degree)" 51' 10" E 174.61 feet
S 00"(degree)" 53' 20" E 36.06 feet
S 82"(degree)" 57' 20" W 61.98 feet
S 77"(degree)" 59' 40" W 420.15 feet
N 07"(degree)" 52' 45" E 643.57 feet
N 17"(degree)" 03' 40" E 65.41 feet
N 07"(degree)" 55' 30" E 43.33 feet
N 16"(degree)" 13' 20" W 31.34 feet
N 13"(degree)" 48' 40" E 142.76 feet
N 74"(degree)" 57' 55" W 28.32 feet
N 13"(degree)" 56' 36" E 133.34 feet
N 18"(degree)" 12' 28" E 133.89 feet
N 18"(degree)" 41' 22" E 486.79 feet
N 19"(degree)" 02' 29" E 447.09 feet and
N 19"(degree)" 29' 44" E 422.49 feet to the southwesterly street line
of Broadbridge Avenue; thence along said street line S 45"(degree)"
55' 00" E, 41.83 feet, to the point or place of beginning, which is
also the northwesterly corner of land now or formerly of L. J. & C.
Cristini.
Continued....
<PAGE>
EXHIBIT A (cont'd.)
Policy No.: S985180
Containing within said bounds 9.6789 acres, be the same more or less, said
premises being all that certain tract or parcel of land shown on the drawing
entitled "Plan of Survey of Property in Stratford, Connecticut" prepared by
Fuller & Co., Inc., dated November 30, 1984 and filed in the office of the Clerk
of the Town of Stratford as Maps #2574 & 2575.
TOGETHER WITH the rights and privileges conveyed to Dictaphone Corporation in a
deed from Remington Arms Company, Inc. dated June 26, 1986 and recorded June 27,
1986 in Book 636 at Page 964 of the Stratford Land Records.
2
<PAGE>
SCHEDULE B
Permitted Exceptions
All exceptions to title set forth on the owner's title insurance policy
issued by Commonwealth Land Title Insurance Company to Landlord in connection
with Landlord's acquisition of the Premises covered by this Lease.
<PAGE>
SCHEDULE C
Lease Term
TERM COMMENCEMENT DATE EXPIRATION DATE
Primary Term May 14, 1998 May 31, 2018
First Extended Term June 1, 2018 May 31, 2023
Second Extended Term June 1, 2023 May 31, 2028
Third Extended Term June 1, 2028 May 31, 2033
Fourth Extended Term June 1, 2033 May 31, 2038
<PAGE>
SCHEDULE D
Basic Rent
[See Attached]
<PAGE>
PRIMARY TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
6 1 1998 $120,991.67
7 1 1998 120,991.67
8 1 1998 120,991.67
9 1 1998 120,991.67
10 1 1998 120,991.67
11 1 1998 120,991.67
12 1 1998 120,991.67
1 1 1999 120,991.67
2 1 1999 120,991.67
3 1 1999 120,991.67
4 1 1999 120,991.67
5 1 1999 120,991.67
6 1 1999 120,991.67
7 1 1999 120,991.67
8 1 1999 120,991.67
9 1 1999 120,991.67
10 1 1999 120,991.67
11 1 1999 120,991.67
12 1 1999 120,991.67
1 1 2000 120,991.67
2 1 2000 120,991.67
3 1 2000 120,991.67
4 1 2000 120,991.67
5 1 2000 120,991.67
6 1 2000 120,991.67
7 1 2000 120,991.67
8 1 2000 120,991.67
9 1 2000 120,991.67
10 1 2000 120,991.67
11 1 2000 120,991.67
12 1 2000 120,991.67
1 1 2001 120,991.67
2 1 2001 120,991.67
3 1 2001 120,991.67
4 1 2001 120,991.67
5 1 2001 120,991.67
6 1 2001 120,991.67
7 1 2001 120,991.67
8 1 2001 120,991.67
9 1 2001 120,991.67
10 1 2001 120,991.67
11 1 2001 120,991.67
12 1 2001 120,991.67
1 1 2002 120,991.67
2 1 2002 120,991.67
3 1 2002 120,991.67
<PAGE>
PRIMARY TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
4 1 2002 120,991.67
5 1 2002 120,991.67
6 1 2002 120,991.67
7 1 2002 120,991.67
8 1 2002 120,991.67
9 1 2002 120,991.67
10 1 2002 120,991.67
11 1 2002 120,991.67
12 1 2002 120,991.67
1 1 2003 120,991.67
2 1 2003 120,991.67
3 1 2003 120,991.67
4 1 2003 120,991.67
5 1 2003 120,991.67
6 1 2003 127,646.21
7 1 2003 127,646.21
8 1 2003 127,646.21
9 1 2003 127,646.21
10 1 2003 127,646.21
11 1 2003 127,646.21
12 1 2003 127,646.21
1 1 2004 127,646.21
2 1 2004 127,646.21
3 1 2004 127,646.21
4 1 2004 127,646.21
5 1 2004 127,646.21
6 1 2004 127,646.21
7 1 2004 127,646.21
8 1 2004 127,646.21
9 1 2004 127,646.21
10 1 2004 127,646.21
11 1 2004 127,646.21
12 1 2004 127,646.21
1 1 2005 127,646.21
2 1 2005 127,646.21
3 1 2005 127,646.21
4 1 2005 127,646.21
5 1 2005 127,646.21
6 1 2005 127,646.21
7 1 2005 127,646.21
8 1 2005 127,646.21
9 1 2005 127,646.21
10 1 2005 127,646.21
11 1 2005 127,646.21
12 1 2005 127,646.21
1 1 2006 127,646.21
<PAGE>
PRIMARY TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
2 1 2006 127,646.21
3 1 2006 127,646.21
4 1 2006 127,646.21
5 1 2006 127,646.21
6 1 2006 127,646.21
7 1 2006 127,646.21
8 1 2006 127,646.21
9 1 2006 127,646.21
10 1 2006 127,646.21
11 1 2006 127,646.21
12 1 2006 127,646.21
1 1 2007 127,646.21
2 1 2007 127,646.21
3 1 2007 127,646.21
4 1 2007 127,646.21
5 1 2007 127,646.21
6 1 2007 127,646.21
7 1 2007 127,646.21
8 1 2007 127,646.21
9 1 2007 127,646.21
10 1 2007 127,646.21
11 1 2007 127,646.21
12 1 2007 127,646.21
1 1 2008 127,646.21
2 1 2008 127,646.21
3 1 2008 127,646.21
4 1 2008 127,646.21
5 1 2008 127,646.21
6 1 2008 134,666.75
7 1 2008 134,556.75
8 1 2008 134,666.75
9 1 2008 134,666.75
10 1 2008 134,666.75
11 1 2008 134,666.75
12 1 2008 134,666.75
1 1 2009 134,666.75
2 1 2009 134,666.75
3 1 2009 134,666.75
4 1 2009 134,666.75
5 1 2009 134,666.75
6 1 2009 134,666.75
7 1 2009 134,666.75
8 1 2009 134,666.75
9 1 2009 134,666.75
10 1 2009 134,666.75
11 1 2009 134,666.75
<PAGE>
PRIMARY TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
12 1 2009 134,666.75
1 1 2010 134,666.75
2 1 2010 134,666.75
3 1 2010 134,666.75
4 1 2010 134,666.75
5 1 2010 134,666.75
6 1 2010 134,666.75
7 1 2010 134,666.75
8 1 2010 134,666.75
9 1 2010 134,666.75
10 1 2010 134,666.75
11 1 2010 134,666.75
12 1 2010 134,666.75
1 1 2011 134,666.75
2 1 2011 134,666.75
3 1 2011 134,666.75
4 1 2011 134,666.75
5 1 2011 134,666.75
6 1 2011 134,666.75
7 1 2011 134,666.75
8 1 2011 134,666.75
9 1 2011 134,666.75
10 1 2011 134,666.75
11 1 2011 134,666.75
12 1 2011 134,666.75
1 1 2012 134,666.75
2 1 2012 134,666.75
3 1 2012 134,666.75
4 1 2012 134,666.75
5 1 2012 134,666.75
6 1 2012 134,666.75
7 1 2012 134,666.75
8 1 2012 134,666.75
9 1 2012 134,666.75
10 1 2012 134,666.75
11 1 2012 134,666.75
12 1 2012 134,666.75
1 1 2013 134,666.75
2 1 2013 134,666.75
3 1 2013 134,666.75
4 1 2013 134,666.75
5 1 2013 134,666.75
6 1 2013 142,073.42
7 1 2013 142,073.42
8 1 2013 142,073.42
9 1 2013 142,073.42
<PAGE>
PRIMARY TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
10 1 2013 142,073.42
11 1 2013 142,073.42
12 1 2013 142,073.42
1 1 2014 142,073.42
2 1 2014 142,073.42
3 1 2014 142,073.42
4 1 2014 142,073.42
5 1 2014 142,073.42
6 1 2014 142,073.42
7 1 2014 142,073.42
8 1 2014 142,073.42
9 1 2014 142,073.42
10 1 2014 142,073.42
11 1 2014 142,073.42
12 1 2014 142,073.42
1 1 2015 142,073.42
2 1 2015 142,073.42
3 1 2015 142,073.42
4 1 2015 142,073.42
5 1 2015 142,073.42
6 1 2015 142,073.42
7 1 2015 142,073.42
8 1 2015 142,073.42
9 1 2015 142,073.42
10 1 2015 142,073.42
11 1 2015 142,073.42
12 1 2015 142,073.42
1 1 2016 142,073.42
2 1 2016 142,073.42
3 1 2016 142,073.42
4 1 2016 142,073.42
5 1 2016 142,073.42
6 1 2016 142,073.42
7 1 2016 142,073.42
8 1 2016 142,073.42
9 1 2016 142,073.42
10 1 2016 142,073.42
11 1 2016 142,073.42
12 1 2016 142,073.42
1 1 2017 142,073.42
2 1 2017 142,073.42
3 1 2017 142,073.42
4 1 2017 142,073.42
5 1 2017 142,073.42
6 1 2017 142,073.42
7 1 2017 142,073.42
<PAGE>
PRIMARY TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
8 1 2017 142,073.42
9 1 2017 142,073.42
10 1 2017 142,073.42
11 1 2017 142,073.42
12 1 2017 142,073.42
1 1 2018 142,073.42
2 1 2018 142,073.42
3 1 2018 142,073.42
4 1 2018 142,073.42
5 1 2018 142,073.42
<PAGE>
FIRST RENEWAL TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
6 1 2018 $149,887.46
7 1 2018 149,887.46
8 1 2018 149,887.46
9 1 2018 149,887.46
10 1 2018 149,887.46
11 1 2018 149,887.46
12 1 2018 149,887.46
1 1 2019 149,887.46
2 1 2019 149,887.46
3 1 2019 149,887.46
4 1 2019 149,887.46
5 1 2019 149,887.46
6 1 2019 149,887.46
7 1 2019 149,887.46
8 1 2019 149,887.46
9 1 2019 149,887.46
10 1 2019 149,887.46
11 1 2019 149,887.46
12 1 2019 149,887.46
1 1 2020 149,887.46
2 1 2020 149,887.46
3 1 2020 149,887.46
4 1 2020 149,887.46
5 1 2020 149,887.46
6 1 2020 149,887.46
7 1 2020 149,887.46
8 1 2020 149,887.46
9 1 2020 149,887.46
10 1 2020 149,887.46
11 1 2020 149,887.46
12 1 2020 149,887.46
1 1 2021 149,887.46
2 1 2021 149,887.46
3 1 2021 149,887.46
4 1 2021 149,887.46
5 1 2021 149,887.46
6 1 2021 149,887.46
7 1 2021 149,887.46
8 1 2021 149,887.46
9 1 2021 149,887.46
10 1 2021 149,887.46
11 1 2021 149,887.46
12 1 2021 149,887.46
1 1 2022 149,887.46
2 1 2022 149,887.46
3 1 2022 149,887.46
<PAGE>
FIRST RENEWAL TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
4 1 2022 149,887.46
5 1 2022 149,887.46
6 1 2022 149,887.46
7 1 2022 149,887.46
8 1 2022 149,887.46
9 1 2022 149,887.46
10 1 2022 149,887.46
11 1 2022 149,887.46
12 1 2022 149,887.46
1 1 2023 149,887.46
2 1 2023 149,887.46
3 1 2023 149,887.46
4 1 2023 149,887.46
5 1 2023 149,887.46
<PAGE>
SECOND RENEWAL TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
6 1 2023 $158,131.27
7 1 2023 158,131.27
8 1 2023 158,131.27
9 1 2023 158,131.27
10 1 2023 158,131.27
11 1 2023 158,131.27
12 1 2023 158,131.27
1 1 2024 158,131.27
2 1 2024 158,131.27
3 1 2024 158,131.27
4 1 2024 158,131.27
5 1 2024 158,131.27
6 1 2024 158,131.27
7 1 2024 158,131.27
8 1 2024 158,131.27
9 1 2024 158,131.27
10 1 2024 158,131.27
11 1 2024 158,131.27
12 1 2024 158,131.27
1 1 2025 158,131.27
2 1 2025 158,131.27
3 1 2025 158,131.27
4 1 2025 158,131.27
5 1 2025 158,131.27
6 1 2025 158,131.27
7 1 2025 158,131.27
8 1 2025 158,131.27
9 1 2025 158,131.27
10 1 2025 158,131.27
11 1 2025 158,131.27
12 1 2025 158,131.27
1 1 2026 158,131.27
2 1 2026 158,131.27
3 1 2026 158,131.27
4 1 2026 158,131.27
5 1 2026 158,131.27
6 1 2026 158,131.27
7 1 2026 158,131.27
8 1 2026 158,131.27
9 1 2026 158,131.27
10 1 2026 158,131.27
11 1 2026 158,131.27
12 1 2026 158,131.27
1 1 2027 158,131.27
2 1 2027 158,131.27
3 1 2027 158,131.27
<PAGE>
SECOND RENEWAL TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
4 1 2027 158,131.27
5 1 2027 158,131.27
6 1 2027 158,131.27
7 1 2027 158,131.27
8 1 2027 158,131.27
9 1 2027 158,131.27
10 1 2027 158,131.27
11 1 2027 158,131.27
12 1 2027 158,131.27
1 1 2028 158,131.27
2 1 2028 158,131.27
3 1 2028 158,131.27
4 1 2028 158,131.27
5 1 2028 158,131.27
<PAGE>
THIRD RENEWAL TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
6 1 2028 $166,828.49
7 1 2028 166,828.49
8 1 2028 166,828.49
9 1 2028 166,828.49
10 1 2028 166,828.49
11 1 2028 166,828.49
12 1 2028 166,828.49
1 1 2029 166,828.49
2 1 2029 166,828.49
3 1 2029 166,828.49
4 1 2029 166,828.49
5 1 2029 166,828.49
6 1 2029 166,828.49
7 1 2029 166,828.49
8 1 2029 166,828.49
9 1 2029 166,828.49
10 1 2029 166,828.49
11 1 2029 166,828.49
12 1 2029 166,828.49
1 1 2030 166,828.49
2 1 2030 166,828.49
3 1 2030 166,828.49
4 1 2030 166,828.49
5 1 2030 166,828.49
6 1 2030 166,828.49
7 1 2030 166,828.49
8 1 2030 166,828.49
9 1 2030 166,828.49
10 1 2030 166,828.49
11 1 2030 166,828.49
12 1 2030 166,828.49
1 1 2031 166,828.49
2 1 2031 166,828.49
3 1 2031 166,828.49
4 1 2031 166,828.49
5 1 2031 166,828.49
6 1 2031 166,828.49
7 1 2031 166,828.49
8 1 2031 166,828.49
9 1 2031 166,828.49
10 1 2031 166,828.49
11 1 2031 166,828.49
12 1 2031 166,828.49
1 1 2032 166,828.49
2 1 2032 166,828.49
3 1 2032 166,828.49
<PAGE>
THIRD RENEWAL TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
4 1 2032 166,828.49
5 1 2032 166,828.49
6 1 2032 166,828.49
7 1 2032 166,828.49
8 1 2032 166,828.49
9 1 2032 166,828.49
10 1 2032 166,828.49
11 1 2032 166,828.49
12 1 2032 166,828.49
1 1 2033 166,828.49
2 1 2033 166,828.49
3 1 2033 166,828.49
4 1 2033 166,828.49
5 1 2033 166,828.49
<PAGE>
FOURTH RENEWAL TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
6 1 2033 $176,004.06
7 1 2033 176,004.06
8 1 2033 176,004.06
9 1 2033 176,004.06
10 1 2033 176,004.06
11 1 2033 176,004.06
12 1 2033 176,004.06
1 1 2034 176,004.06
2 1 2034 176,004.06
3 1 2034 176,004.06
4 1 2034 176,004.06
5 1 2034 176,004.06
6 1 2034 176,004.06
7 1 2034 176,004.06
8 1 2034 176,004.06
9 1 2034 176,004.06
10 1 2034 176,004.06
11 1 2034 176,004.06
12 1 2034 176,004.06
1 1 2035 176,004.06
2 1 2035 176,004.06
3 1 2035 176,004.06
4 1 2035 176,004.06
5 1 2035 176,004.06
6 1 2035 176,004.06
7 1 2035 176,004.06
8 1 2035 176,004.06
9 1 2035 176,004.06
10 1 2035 176,004.06
11 1 2035 176,004.06
12 1 2035 176,004.06
1 1 2036 176,004.06
2 1 2036 176,004.06
3 1 2036 176,004.06
4 1 2036 176,004.06
5 1 2036 176,004.06
6 1 2036 176,004.06
7 1 2036 176,004.06
8 1 2036 176,004.06
9 1 2036 176,004.06
10 1 2036 176,004.06
11 1 2036 176,004.06
12 1 2036 176,004.06
1 1 2037 176,004.06
2 1 2037 176,004.06
3 1 2037 176,004.06
<PAGE>
FOURTH RENEWAL TERM
RENT PAYMENT SCHEDULE
MONTH DAY YEAR RENT PAYMENT
- --------------------------------------------------------------------------------
4 1 2037 176,004.06
5 1 2037 176,004.06
6 1 2037 176,004.06
7 1 2037 176,004.06
8 1 2037 176,004.06
9 1 2037 176,004.06
10 1 2037 176,004.06
11 1 2037 176,004.06
12 1 2037 176,004.06
1 1 2038 176,004.06
2 1 2038 176,004.06
3 1 2038 176,004.06
4 1 2038 176,004.06
5 1 2038 176,004.06
<PAGE>
SCHEDULE E
Stipulated Loss Value
The Stipulated Loss Value for the Premises as of a particulate date shall
be determined by multiplying the percentage set forth below for the particular
date by the initial purchase price of the Premises, as set forth on SCHEDULE F
attached hereto and made a part hereof.
[See Attached]
<PAGE>
TERMINATION VALUES
T.V. as a % of
MONTH YEAR PURCHASE PRICE
- --------------------------------------------------------------- -----
5 1998 119.9286%
6 1998 119.9786%
7 1998 120.8029%
8 1998 120.7644%
9 1998 120.7256%
10 1998 120.6863%
11 1998 120.6467%
12 1998 120.6067%
1 1999 120.5663%
2 1999 120.5256%
3 1999 120.4844%
4 1999 120.4428%
5 1999 120.4009%
6 1999 120.3585%
7 1999 120.3157%
8 1999 120.2726%
9 1999 120.2290%
10 1999 120.1849%
11 1999 120.1405%
12 1999 120.0956%
1 2000 120.0504%
2 2000 120.0046%
3 2000 119.9585%
4 2000 119.9119%
5 2000 119.8649%
6 2000 119.8174%
7 2000 119.7695%
8 2000 119.7211%
9 2000 119.6722%
10 2000 119.6229%
11 2000 119.5732%
12 2000 119.5230%
1 2001 119.4723%
2 2001 119.4211%
3 2001 119.3694%
4 2001 119.3173%
5 2001 119.2646%
6 2001 119.2115%
7 2001 119.1579%
8 2001 119.1038%
9 2001 119.0491%
10 2001 118.9940%
11 2001 118.9384%
12 2001 118.8822%
1 2002 118.8255%
2 2002 118.7683%
<PAGE>
TERMINATION VALUES
T.V. as a % of
MONTH YEAR PURCHASE PRICE
- --------------------------------------------------------------- -----
3 2002 118.7106%
4 2002 118.6523%
5 2002 118.5935%
6 2002 118.5341%
7 2002 118.4742%
8 2002 118.4138%
9 2002 118.3527%
10 2002 118.2912%
11 2002 118.2290%
12 2002 118.1663%
1 2003 118.1030%
2 2003 118.0392%
3 2003 117.9747%
4 2003 117.9097%
5 2003 117.8440%
6 2003 117.7778%
7 2003 117.6631%
8 2003 117.5475%
9 2003 117.4308%
10 2003 117.3133%
11 2003 117.1947%
12 2003 117.0752%
1 2004 116.9547%
2 2004 116.8333%
3 2004 116.7108%
4 2004 116.5873%
5 2004 116.4628%
6 2004 116.3373%
7 2004 116.2107%
8 2004 116.0831%
9 2004 115.9545%
10 2004 115.8248%
11 2004 115.6940%
12 2004 115.5622%
1 2005 115.4293%
2 2005 115.2953%
3 2005 115.1602%
4 2005 115.0240%
5 2005 114.8867%
6 2005 114.7483%
7 2005 114.6087%
8 2005 114.4680%
9 2005 114.3262%
10 2005 114.1832%
11 2005 114.0390%
12 2005 113.8937%
<PAGE>
TERMINATION VALUES
T.V. as a % of
MONTH YEAR PURCHASE PRICE
- --------------------------------------------------------------- -----
1 2006 113.7471%
2 2006 113.5994%
3 2006 113.4505%
4 2006 113.3004%
5 2006 113.1490%
6 2006 112.9965%
7 2006 112.8426%
8 2006 112.6876%
9 2006 112.5312%
10 2006 112.3737%
11 2006 112.2148%
12 2006 112.0546%
1 2007 111.8932%
2 2007 111.7304%
3 2007 111.5663%
4 2007 111.4009%
5 2007 111.2342%
6 2007 111.0661%
7 2007 110.8966%
8 2007 110.7258%
9 2007 110.5536%
10 2007 110.3800%
11 2007 110.2050%
12 2007 110.0286%
1 2008 109.8508%
2 2008 109.6715%
3 2008 109.4908%
4 2008 109.3087%
5 2008 109.1250%
6 2008 108.9399%
7 2008 108.7028%
8 2008 108.4639%
9 2008 108.2231%
10 2008 107.9804%
11 2008 107.7358%
12 2008 107.4892%
1 2009 107.2408%
2 2009 106.9904%
3 2009 106.7381%
4 2009 106.4838%
5 2009 106.2275%
6 2009 105.9692%
7 2009 105.7088%
8 2009 105.4465%
9 2009 105.1821%
10 2009 104.9156%
<PAGE>
TERMINATION VALUES
T.V. as a % of
MONTH YEAR PURCHASE PRICE
- --------------------------------------------------------------- -----
11 2009 104.6471%
12 2009 104.3765%
1 2010 104.1038%
2 2010 103.8289%
3 2010 103.5519%
4 2010 103.2727%
5 2010 102.9914%
6 2010 102.7079%
7 2010 102.4222%
8 2010 102.1342%
9 2010 101.8440%
10 2010 101.5516%
11 2010 101.2569%
12 2010 100.9599%
1 2011 100.6606%
2 2011 100.3589%
3 2011 100.0549%
4 2011 99.7486%
5 2011 99.4399%
6 2011 99.1288%
7 2011 98.8153%
8 2011 98.4993%
9 2011 98.1809%
10 2011 97.8600%
11 2011 97.5367%
12 2011 97.2108%
1 2012 96.8824%
2 2012 96.5515%
3 2012 96.2180%
4 2012 95.8819%
5 2012 95.5433%
6 2012 95.2020%
7 2012 94.8580%
8 2012 94.5115%
9 2012 94.1622%
10 2012 93.8102%
11 2012 93.4555%
12 2012 93.0981%
1 2013 92.7379%
2 2013 92.3750%
3 2013 92.0092%
4 2013 91.6406%
5 2013 91.2692%
6 2013 90.8949%
7 2013 90.4644%
8 2013 90.0307%
<PAGE>
TERMINATION VALUES
T.V. as a % of
MONTH YEAR PURCHASE PRICE
- --------------------------------------------------------------- -----
9 2013 89.5936%
10 2013 89.1532%
11 2013 88.7095%
12 2013 88.2624%
1 2014 87.8118%
2 2014 87.3579%
3 2014 86.9005%
4 2014 86.4396%
5 2014 85.9752%
6 2014 85.5072%
7 2014 85.0357%
8 2014 84.5606%
9 2014 84.0819%
10 2014 83.5996%
11 2014 83.1136%
12 2014 82.6238%
1 2015 82.1304%
2 2015 81.6332%
3 2015 81.1323%
4 2015 80.6275%
5 2015 80.1189%
6 2015 79.6064%
7 2015 79.0901%
8 2015 78.5698%
9 2015 78.0456%
10 2015 77.5174%
11 2015 76.9852%
12 2015 76.4489%
1 2016 75.9086%
2 2016 75.3642%
3 2016 74.8157%
4 2016 74.2630%
5 2016 73.7061%
6 2016 73.1450%
7 2016 72.5796%
8 2016 72.0100%
9 2016 71.4360%
10 2016 70.8578%
11 2016 70.2751%
12 2016 69.6880%
1 2017 69.0965%
2 2017 68.5005%
3 2017 67.9000%
4 2017 67.2949%
5 2017 66.6853%
6 2017 66.0710%
<PAGE>
TERMINATION VALUES
T.V. as a % of
MONTH YEAR PURCHASE PRICE
- --------------------------------------------------------------- -----
7 2017 65.4521%
8 2017 64.8286%
9 2017 64.2003%
10 2017 63.5673%
11 2017 62.9295%
12 2017 62.2869%
1 2018 61.6394%
2 2018 60.9870%
3 2018 60.3297%
4 2018 59.6675%
5 2018 59.0002%
6 2018 58.3280%
<PAGE>
SCHEDULE F
Initial Purchase Price for the Premises
THE PREMISES INITIAL PURCHASE PRICE
3191 Broadbridge Avenue
Stratford, Connecticut $14,000,000.00
<PAGE>
SCHEDULE G
Survey Requirements
The following items are to be included in the ALTA/ACSM LAND TITLE SURVEY:
1. Monuments placed (or a reference monument or witness to the corner) at
all major corners of the boundary of the property, unless already
marked or referenced by an existing monument or witness to the corner.
2. Flood zone designation (with property annotation based on Federal Flood
Insurance Rate Maps or the state or local equivalent, by scaled map
location and graphic plotting only). If the property resides in two or
more zones then the survey shall clearly display the limits of each
zone by graphically transposing each zone line from the FIRM to the
survey.
3. Land area.
4. Identify, and show if possible, setback, height and bulk restrictions
of record or disclosed by applicable zoning or building codes (in
addition to those recorded in subdivision maps).
If none, so state.
5. (a) Exterior dimensions of all buildings at ground level.
(b) Square footage of exterior footprint of all buildings, or
gross floor area of all buildings, at ground level.
(c) Height of all buildings above grade at a defined location.
6. Parking areas and, if striped, the striping and the type (e.g.
handicapped, motorcycle, regular, etc.) and number of parking spaces.
Designate all "handicapped" spaces as such on the survey. Show all
striped parking spaces within the fee owned or leased land and within
the limits of all REAs with typical sizes. List in a tabular format the
number of regular spaces and handicap spaces, both within the limits of
the fee owned or leased land plus within the limits of any and all
REAs.
7. Indication of access to a public way, such as curb cuts, driveways marked.
8. Location of utilities serving or existing on the property, as evidenced
by on-site observation or as determined by records provided by client,
utility companies and other appropriate sources (with reference as to
the source of information). For example: (a) railroad tracks and
sidings; (b) manholes, catch basins, valve vaults or other surface
indications of subterranean uses; (c) wires and cables (including their
function) crossing
<PAGE>
the surveyed premises, all poles on or within ten feet of the surveyed
premises, all poles on or within ten feet of the surveyed premises and
the dimensions of all crosswires or overhangs affecting the surveyed
premises; and (d) utility company installations on the surveyed
premises.
In addition to the above the surveyor shall report all visible roof
drains and surface lines, including their outfalls. For hidden
underground utilities the surveyor is to show the approximate location
of underground connecting lines as may be discernible from visible
appurtenances. For hidden underground gravity flow as may be
discernible from visible appurtenances.
9. Significant observations not otherwise disclosed including but not
limited to, visible evidence of unusual subsurface matters (such as
underground storage tanks as may be apparent by surface appurtenances)
and general knowledge about the neighborhood (such as condemnation of
the area by US EPA) or restricted building heights by the FFA. If the
surveyor questions what is to be reported or encounters a special
reporting problem, he is to consult with his client.
10. Areas denoted or restricted in Reciprocal Easement Agreements ("REA").
The surveyor shall show the limits of any offsite appurtenant easements
on his survey, but no improvements or utilities within said easements
need to be field measured and reported on the survey. However, the
surveyor shall show the outlines of any and all buildings within the
REA by transposing building location information from available site
plans, aerial photographs or other plans and stating the source of such
information on his survey. If no other information is available showing
the location of buildings within the REA, then the surveyor shall
advise the client prior to the completion of his survey. If the client
requires additional field work to locate and report the location of
buildings, then this shall constitute an additional work order beyond
the scope of the survey. In the event the property is
disproportionately smaller than the REA or appurtenant easements, then
the surveyor shall provide on his survey smaller (larger scale) drawing
to depict the area affected in relationship to the fee or leased land.
11. Add the limits of any REAs or offsite appurtenant and beneficial
easements to the land subject to your survey and report the location of
all buildings, parking spaces and other improvements on those lands.
12. Add a note after your legal description stating it describes the same
property as insured in the title commitment. If there are exceptions to
this statement, then qualify such within the note.
<PAGE>
FORM OF SURVEY CERTIFICATION
I, ___________________, a duly licensed and qualified surveyor in and
for the State of ____________, does hereby CERTIFY to [insert name of Lender]
(collectively "Lender"), [insert name of seller], [insert name of Landlord] and
[insert name of title company], and their respective successors and assigns, as
of the ______ day of ____________, 19__, that the foregoing plat of survey
represents a true and correct survey made by me based on an inspection of the
following described premises (the "Premises"):
That certain property situated in the State of ____________, County of
_________ and more particularly described as follows:
[Legal Description]
The undersigned further hereby CERTIFIES to Lender, [insert name of
seller], [insert name of Landlord], and [insert name of title company], and
their respective successors and assigns, as of the ___ day of _________, 19__,
(a) that the within survey was actually made upon the ground, that it and the
information, courses and distances shown hereon are correct, and that it is an
accurate survey of all the real property legally described herein; and (b) that
the plat of survey correctly shows: (1) the location of all buildings,
structures and other improvements situated on the Premises; (2) the courses and
measured distances of the exterior property lines of the Premises and any
easements or licenses located on or affecting the Premises; (3) the location and
number of parking spaces and the total square foot area of the Premises; (4) the
dimensions of all improvements on the Premises, measured at ground surface
level, the distance of the buildings located adjacent to an exterior property
line of the Premises to said exterior property line and the distance between
adjacent buildings; (5) all curb cuts and means of ingress to and egress from
the Premises; and (6) the scale, the north direction, the beginning point, the
distance to the nearest intersecting street and the point of reference from
which the Premises are measured, the width of the street or streets on which the
Premises abut, the lot and block number shown on any recorded plat to which
reference is made in the legal description of the Premises, together with the
filing date and recording data of such plat, and an accurate reference to the
real estate records of ___________, _______________, identifying all easements
and licenses of record crossing or affecting the Premises. The undersigned
further CERTIFIES to the parties identified above that (i) except as shown,
there are no visible or recorded easements or rights-of-way which cross or
affect the Premises or any other easements or rights-of-way of which the
undersigned has been advised, no party walls, no encroachments on or above
adjoining premises, easements, streets or alleys by any of the buildings,
structures or other improvements located on the Premises and no encroachments on
or above the Premises by buildings, structures or other improvements situated on
adjoining premises; (ii) all streets abutting the Premises and all means of
ingress to and egress from the Premises have been completed, dedicated and
accepted for public maintenance and public use by the City of ___________ and
the property has valid access to said streets; (iii) all utilities for the
improvements enter the Premises from abutting public streets; (iv) the
<PAGE>
Premises are not situated within a flood hazard area, as defined by the Flood
Disaster Protection Act of 1973, as amended from time to time; (v) the within
survey was prepared in accordance with the "Minimum Standard Detail Requirements
for Land Title Surveys" jointly established and adopted by ALTA and ACSM in 1992
and meets the accuracy requirements of a Class A survey as defined therein, and
complies with all applicable laws of the State of __________; and (vi) the
Premises are properly zoned and subdivided to permit use as a __________ with
sufficient parking to meet the applicable parking requirements and zoning and
subdivision approval of the Premises is not based on any real property other
than the Premises.
Surveyor
Registration No.
[SEAL]
STATE OF ____________ )
)ss.
COUNTY OF ___________ )
SUBSCRIBED AND SWORN to before me this ___ day of ___________, 19__, by
_________________________.
WITNESS my hand and official seal.
My commission expires: ___________________
_______________________________
Notary Public
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of Dictaphone Corporation at June 30, 1998
and the condensed consolidated statement of operations for the six months ended
June 30, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,896
<SECURITIES> 0
<RECEIVABLES> 74,231
<ALLOWANCES> 2,421
<INVENTORY> 51,178
<CURRENT-ASSETS> 141,195
<PP&E> 62,621
<DEPRECIATION> 33,820
<TOTAL-ASSETS> 441,542
<CURRENT-LIABILITIES> 81,702
<BONDS> 342,933
22,325
0
<COMMON> 130
<OTHER-SE> (19,123)
<TOTAL-LIABILITY-AND-EQUITY> 441,542
<SALES> 101,219
<TOTAL-REVENUES> 168,810
<CGS> 91,969
<TOTAL-COSTS> 170,968
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,719
<INCOME-PRETAX> (21,222)
<INCOME-TAX> (334)
<INCOME-CONTINUING> (21,556)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,556)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
