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NELSON COMMUNICATIONS INC - S-1 - 19990430 - CAPITALIZATION
CAPITALIZATION
The following table sets forth the consolidated capitalization of Nelson as
of December 31, 1998, (a) as reported in our Consolidated Financial Statements,
(b) on a pro forma basis to reflect the 1999 Purchase Transactions and (c) on a
pro forma basis as adjusted to give effect to the sale of the shares of common
stock offered hereby at an assumed initial public offering price of $ per
share. This table should be read in conjunction with our Consolidated Financial
Statements and the notes thereto and "Unaudited Pro Forma Consolidated Financial
Data" contained elsewhere in this prospectus.
DECEMBER 31, 1998
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- -------------- -----------
(IN THOUSANDS)
Long-term capital lease obligations................. $ 1,268 $ 1,268 $ 1,268
------- ------- -------
Stockholders' equity:
Common stock, $.01 par value, 100,000,000 shares
authorized; 24,348,408 shares issued and
outstanding; 24,487,607 shares issued and
outstanding pro forma; shares issued
and outstanding as adjusted(1)................. 243 245
Additional paid-in capital.......................... 11,242 12,221
Accumulated other comprehensive income.............. 12 12 12
Retained earnings................................... 4,525 4,525 4,525
------- ------- -------
Total stockholders' equity................ 16,022 17,003 52,703
------- ------- -------
Total capitalization...................... $17,290 $18,271 $53,971
======= ======= =======
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(1) Excludes 3,994,082 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted average exercise price of $6.70 per
share at April 19, 1999 and 1,019,428 additional shares of common stock
available for future grants under our stock incentive plans. See
"Management -- Stock Incentive Plans" and "-- Assumed Stock Option Plans."
Includes shares to be issued in connection with certain recently
completed acquisitions, assuming an initial public offering price of $
per share. See "Business -- Recent Acquisitions."
12
DILUTION
As of , 1999, Nelson had a net tangible book value of
approximately $ million or $ per share of common stock. Net tangible
book value represents the amount of total tangible assets less total liabilities
divided by the number of shares of common stock outstanding, including all
outstanding stock grants and excluding all outstanding stock options. Without
taking into account any other changes in the net tangible book value after
, 1999, other than to give effect to the receipt of the net proceeds
from the sale of the shares of common stock offered hereby at an
assumed initial public offering price of $ per share, the pro forma net
tangible book value of Nelson as of , 1999 would have been
approximately $ or $ per share. This represents an immediate increase in
net tangible book value of $ per share to existing stockholders and an
immediate dilution of $ per share to new investors. The following table
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illustrates this per share dilution:
Assumed initial public offering price per share......................... $
Net tangible book value per share before the offering..... $
Increase per share attributable to new investors..........
Pro forma net tangible book value per share after the offering..........
----------
Dilution per share to new investors..................................... $
==========
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The following table summarizes, on a pro forma basis as of ,
1999, the differences between existing stockholders and the new investors with
respect to the number of shares of common stock purchased from Nelson, the total
consideration paid and the average price per share paid before deducting
underwriting discounts and commissions and estimated offering expenses.
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- ------- -------- -------- -------------
Existing stockholders...... % % $
New investors.............. % % $
------- ------- ------- -------
Total................. % %
======= ======= ======= =======
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The foregoing computations assume no exercise of any outstanding stock
options after , 1999 or the underwriters' over-allotment option. As
of April 19, 1999, options to purchase 3,994,082 shares of common stock were
outstanding. To the extent these options are exercised, there will be further
dilution to new investors. See "Management -- 1998 Stock Incentive Plans" and
"-- Assumed Stock Option Plans." The foregoing computations assume the issuance
of shares of common stock to be issued in connection with certain
recently completed acquisitions, assuming an initial public offering price of
$ per share. See "Business -- Recent Acquisitions."
13
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
our Consolidated Financial Statements and notes thereto, "Unaudited Pro Forma
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained elsewhere in this
prospectus. The selected statement of income data for the years ended December
31, 1996, 1997 and 1998 and the selected balance sheet data as of December 31,
1997 and 1998 were derived from our audited Consolidated Financial Statements
included elsewhere in this prospectus. The selected income statement data for
the years ended December 31, 1994 and 1995 and the selected balance sheet data
as of December 31, 1994, 1995 and 1996 were derived from our historical
financial statements not included in this prospectus. The following selected
financial data present financial information for Nelson and Arista for the
periods prior to our consolidation as though they had been combined from
inception. The selected pro forma income statement data for the year ended
December 31, 1998 and the selected pro forma balance sheet data as of December
31, 1998 were derived from our Unaudited Pro Forma Consolidated Financial Data
included elsewhere in this prospectus.
(table on following page)
14
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
PRO FORMA
1994(1) 1995 1996 1997 1998 1998(2)
----------- ------- ------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Revenues................................... $36,984 $48,578 $86,039 $114,714 $126,946 $131,002
Cost of selling services................... 12,404 12,906 27,446 39,330 40,856 42,011
Compensation and related costs............. 9,667 17,726 27,150 36,216 40,814 41,883
Other operating and administrative
expenses(3).............................. 10,286 15,621 22,201 34,962 35,933 37,186
Reorganization costs(4).................... -- -- -- 1,540 1,815 1,815
------- ------- ------- -------- -------- --------
Income from operations..................... 4,627 2,325 9,242 2,666 7,528 8,107
Interest income (expense), net............. 175 120 100 447 (23) (21)
------- ------- ------- -------- -------- --------
Income before income taxes................. 4,802 2,445 9,342 3,113 7,505 8,086
Provision for income taxes................. 850 450 1,752 557 3,590 4,014
------- ------- ------- -------- -------- --------
Income before minority interest............ 3,952 1,995 7,590 2,556 3,915 4,072
Minority interest.......................... 2 28 123 97 (111) (169)
------- ------- ------- -------- -------- --------
Net income................................. $ 3,950 $ 1,967 $ 7,467 $ 2,459 $ 4,026 $ 4,241
======= ======= ======= ======== ======== ========
Basic earnings per share................... $ 0.23 $ 0.10 $ 0.33 $ 0.10 $ 0.17
======= ======= ======= ======== ========
Diluted earnings per share................. $ 0.23 $ 0.10 $ 0.33 $ 0.10 $ 0.17
======= ======= ======= ======== ========
UNAUDITED PRO FORMA DATA:
Income before income taxes................. $ 4,802 $ 2,445 $ 9,342 $ 3,113 $ 7,505
Pro forma provision for income taxes(5).... 2,114 1,134 4,175 1,564 3,609
Minority interest.......................... 2 28 123 97 (111)
------- ------- ------- -------- --------
Pro forma net income....................... $ 2,686 $ 1,283 $ 5,044 $ 1,452 $ 4,007
======= ======= ======= ======== ========
Pro forma basic earnings per share......... $ 0.16 $ 0.07 $ 0.23 $ 0.06 $ 0.17 $ 0.17
======= ======= ======= ======== ======== ========
Pro forma diluted earnings per share....... $ 0.16 $ 0.07 $ 0.22 $ 0.06 $ 0.17 $ 0.17
======= ======= ======= ======== ======== ========
Shares used in computing per share amounts:
Basic.................................... 16,956 19,376 22,403 23,463 23,912 24,496
Diluted.................................. 17,317 19,672 22,632 23,702 24,117 24,701
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AS OF DECEMBER 31,
--------------------------------------------------------------------------------
PRO FORMA
1994(1) 1995 1996 1997 1998 1998(6)
----------- ------- ------- -------- -------- ---------
(IN THOUSANDS)
BALANCE SHEET DATA:
Total assets............................... $19,678 $32,829 $49,377 $ 66,992 $ 75,398 $ 78,732
Long term debt............................. -- 1,091 480 -- -- --
Long-term capital lease obligations........ -- -- 393 642 1,268 1,268
Stockholders' equity....................... 3,519 3,231 4,179 3,285 16,022 17,003
|
(1) Includes financial data only for the Nelson Group for the period indicated
due to the fact that Arista acquired the assets comprising its business from
its predecessor in November 1994.
(2) The pro forma income statement data give effect to the 1998 Purchase
Transactions, the 1999 Purchase Transactions and the transactions relating
to the pro forma tax adjustments described in Note 5 below as if each had
occurred on January 1, 1998.
(3) Includes incentive compensation costs of $7,182 in 1997 and $2,500 in 1998
which were greater than our customary cash compensation levels. Such costs
are not expected to continue because of the implementation of our employee
stock incentive plan in October 1998.
(4) Includes legal and accounting fees related to the reorganization of the
Nelson Group and Arista.
(5) Certain Nelson companies previously elected to be treated as S Corporations
under the Internal Revenue Code and, where available, state tax laws. The S
Corporation elections of these companies were terminated at various times.
The pro forma provision for income taxes reflects a provision for federal
and state income taxes as though all Nelson companies had been treated as C
Corporations during the periods presented.
(6) The pro forma balance sheet data give effect to the 1999 Purchase
Transactions as if they had occurred on December 31, 1998.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with our Consolidated
Financial Statements and the notes thereto. This prospectus contains
forward-looking statements regarding our performance, strategy, plans,
objectives, expectations, beliefs and intentions. You are cautioned that any
such forward-looking statements are not guarantees of future performance and
involve substantial risks and uncertainties. Actual events or results may differ
materially from those discussed in the forward-looking statements as a result of
various factors, including, without limitation, the factors described below,
under "Risk Factors" and "Business" and in this prospectus generally.
GENERAL
We are a leading and growing provider of marketing communications services
to the healthcare industry. According to Med Ad News, we are the world's largest
independent healthcare marketing communications organization and the second
largest overall, based on 1998 revenues. We provide many of the largest
pharmaceutical companies with medical marketing and professional selling
services. Our clients include:
- Abbott Laboratories - Hoechst Marion Roussel - Organon
- American Home Products - Hoffman LaRoche - Parke Davis
- Astra Merck - Johnson & Johnson - Pfizer
- Bristol-Myers Squibb - Merck - Procter & Gamble
- Glaxo Wellcome - Novartis - SmithKline Beecham
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Our clients also include consumer products companies such as Kellogg
Company and ConAgra, which are increasingly promoting the health benefits of
their products. We believe that our broad service offerings and extensive
healthcare expertise provide clients with high quality, variable cost solutions
to meet the full range of their marketing communications objectives.
The first Nelson Group company, Professional Detailing Network, Inc.
("PDN"), was founded in 1987 to provide professional personal selling services
to pharmaceutical companies. In 1989, we acquired two healthcare marketing
services firms engaged in healthcare advertising and medical education services.
Since that time, we have grown and diversified primarily through the
establishment of new operating units around individuals with significant
experience in the healthcare industry. In July 1998, the Nelson Group companies
and Arista completed a consolidation pursuant to which we reorganized into our
current holding company structure. The transaction was accounted for as a
pooling of interests.
We have demonstrated strong internal growth by expanding revenues from
existing clients through the provision of new services and increased utilization
of services previously provided. We have served six of the 10 largest
pharmaceutical companies for five or more years and generated 72.0% of revenues
in 1998 from clients served in 1995. In 1998, we served all of the 10 largest
pharmaceutical companies in the world and 27 of the top 50, based on 1997
revenues. We also have successfully added new clients, including other leading
pharmaceutical and consumer product companies. The number of clients served has
grown from 84 in 1995 to 154 in 1998. As a result of the foregoing, our revenues
increased to $126.9 million in 1998 from $48.6 million in 1995.
Beginning in the last quarter of 1997 and continuing through 1998, we
reviewed and restructured our management in the professional selling segment of
our business following a period of strong growth. This resulted in reduced focus
on new business development during that period. In 1998, we strengthened our
management team by adding the former Vice President of Consumer Marketing and
Retail Sales from Allergan as the Group Chairman of Selling Services. We also
hired a former Director of Strategic Alliances-Sales of Astra Merck as President
of PDN. In addition, we broadened our service offerings in the professional
selling sector to include full-time and syndicated selling services and secured
several contracts for such services. We also have
16
begun to market our services in an integrated fashion, particularly
complementing our professional selling services with a number of medical
marketing services.
We generate a significant portion of our revenues from a number of major
clients. Our five largest clients accounted for 68.5% of our revenues in 1996,
63.8% of our revenues in 1997 and 52.8% of our revenues in 1998. In 1998, 11
operating companies of Johnson & Johnson accounted for 22.7% of revenues. In
1997, Johnson & Johnson accounted for 30.4% of revenues and SmithKline Beecham
accounted for 12.2% of revenues. Revenues from these and other major clients are
derived through relationships with and services provided by multiple operating
units within Nelson. In 1998, 23 of our operating units generated revenues from
Johnson & Johnson.
We derive our revenues through a variety of contract structures:
- Medical marketing services contracts generally provide for a monthly
retainer fee, extend for one year or less, and are cancelable upon 30 to
90 days' notice and without penalty. We recognize revenue from these
contracts monthly in accordance with services provided. We also enter
into contracts for project-based assignments, the duration of which vary
from days to several months. These contracts are usually cancelable with
minimal notice or penalty. We recognize revenue from these contracts as
services are provided. In limited circumstances, we derive revenue
through commissions on media production costs.
- Professional selling services contracts typically provide for fees based
on hours or the number of visits or telephone calls made by the sales
representatives. Contracts may provide for performance incentives based
upon increases in the product's market share or physician referrals.
Selling contracts are generally for one year and are cancelable upon 60
to 90 days' notice without penalty. Contracts for peer influence meetings
often include minimum performance criteria regarding the number of
doctors included in the meetings. If sufficient doctors are not included
in a set of meetings, additional meetings may be held at our expense to
meet the criteria. These contracts are generally terminable at will. We
recognize revenue from professional selling services as the services are
performed.
Cost of selling services represents personnel and other direct costs
associated with professional selling services. Personnel costs are comprised of
all labor related costs for sales representatives and field managers who are
directly responsible for rendering of services. These costs include salaries,
bonuses, fringe benefits and payroll taxes. These costs also include travel,
electronic data collection, recruitment and training costs for sales personnel.
Compensation and related costs include expenses for all employees and
contracted freelance services associated with our medical marketing services and
for all professional selling services staff not directly responsible for the
rendering of services. Other operating and administrative expenses include
compensation of executives and administrative staff, rent, depreciation and
amortization expenses and professional service fees. Other operating and
administrative expenses include incentive compensation costs of $7.2 million in
1997 and $2.5 million in 1998 which were greater than our customary cash
compensation levels. Such costs are not expected to continue because of the
implementation of our stock incentive plan in October 1998. In 1997 and 1998, we
also incurred $1.5 million and $1.8 million, respectively, in reorganization
expense related to the consolidation of the Nelson Group and Arista. These costs
consisted primarily of legal and accounting fees.
To incentivize the entrepreneurial management of new operating units, we
have created, and expect to continue to create, subsidiaries in which managers
of the units maintain a minority ownership position. The minority interests'
share of income is reflected as an adjustment of income on our financial
statements. As these subsidiaries grow, we expect to purchase the minority
positions in exchange for Nelson common stock. Goodwill and the related
amortization expense are expected to increase as a result of these transactions.
17
The following discussion covers periods when the Nelson Group and Arista
were not under common control or management. These results may not be indicative
of results that would have been reported had they been under common control or
of future financial or operating results.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated income statement data
of Nelson expressed as a percentage of revenue for the periods indicated.
YEAR ENDED
DECEMBER 31,
-----------------------
1996 1997 1998
----- ----- -----
Revenues................................................... 100.0% 100.0% 100.0%
Cost of selling services(1)................................ 31.9 34.3 32.2
Compensation and related costs............................. 31.6 31.6 32.2
Other operating and administrative expenses................ 25.8 30.5 28.3
Reorganization costs....................................... -- 1.3 1.4
----- ----- -----
Income from operations..................................... 10.7 2.3 5.9
Interest income, net....................................... 0.1 0.4 0.0
----- ----- -----
Income before income taxes................................. 10.8 2.7 5.9
Provision for income taxes................................. 2.0 0.5 2.8
----- ----- -----
Income before minority interest............................ 8.8 2.2 3.1
Minority interest.......................................... 0.1 0.1 (0.1)
----- ----- -----
Net income................................................. 8.7% 2.1% 3.2%
===== ===== =====
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(1) Cost of selling services represented 64.2% in 1996, 67.2% in 1997, and 67.9%
in 1998 of professional selling services revenue.
The following table sets forth certain supplemental data, in thousands, for
the periods indicated:
MEDICAL PROFESSIONAL
MARKETING SELLING OTHER(1) TOTAL
--------- ------------ -------- --------
1996
Revenues.................................... $43,317 $42,722 $ -- $ 86,039
Income from operations...................... 7,302 1,940 -- 9,242
1997
Revenues.................................... 56,217 58,497 -- 114,714
Income from operations...................... 8,523 2,865 (8,722) 2,666
1998
Revenues.................................... 66,746 60,200 -- 126,946
Income from operations...................... 8,908 2,935 (4,315) 7,528
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(1) Includes incentive compensation costs which were greater than customary cash
compensation levels and reorganization costs related to our consolidation.
Such costs are not expected to continue because of the implementation of our
employee stock incentive plan in October 1998 and the completion of the
consolidation. These costs are not allocated to the medical marketing or
professional selling segments in measuring their performance.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues. Revenues increased $12.2 million, or 10.7%, to $126.9 million in
1998 from $114.7 million in 1997. The increase in revenues resulted primarily
from projects from clients for whom we provided services within the last three
years ($8.0 million) and from new clients ($4.2 million). Revenues from medical
marketing services increased 18.7% to $66.7 million in 1998 from $56.2 million
in 1997. Professional selling services revenues increased 2.9% to $60.2
18
million from $58.5 million in 1997. Medical marketing revenues continued to grow
significantly due primarily to an increase in services provided to existing
clients. The growth in professional selling revenues slowed due to our
management restructuring, which resulted in reduced focus on new business
development during that period.
Cost of Selling Services. Cost of selling services increased $1.5 million,
or 3.9%, to $40.8 million in 1998 from $39.3 million in 1997. Cost of selling
services as a percentage of professional selling services revenues increased to
67.9% in 1998 from 67.2% in 1997. This increase was primarily attributable to a
change in the revenue mix in professional selling services resulting from a
relative increase in detailing revenues, which have lower gross margins than
revenues from other professional selling services.
Compensation and Related Costs. Compensation and related costs increased
$4.6 million, or 12.7%, to $40.8 million in 1998 from $36.2 million in 1997. As
a percentage of revenues, compensation and related costs increased to 32.2% in
1998 from 31.6% in 1997. The increase is primarily attributable to adding staff
to manage strong revenue growth in the medical marketing segment and investment
in new operating units. We formed eight new operating units in 1998, six of
which were in medical marketing services.
Other Operating and Administrative Expenses. Other operating and
administrative expenses increased $1.0 million, or 2.8%, to $35.9 million in
1998 from $34.9 million in 1997. As a percentage of revenues, other operating
and administrative expenses decreased to 28.3% in 1998 from 30.5% in 1997. Other
operating and administrative expenses include incentive compensation costs of
$2.5 million in 1998 and $7.2 million in 1997, which were greater than customary
cash compensation levels. Such costs are not expected to continue because of the
implementation of our employee stock incentive plan. Excluding these costs,
other operating and administrative expenses increased $5.6 million, or 20.3%, to
$33.4 million in 1998 from $27.8 million in 1997. As a percentage of revenues,
the adjusted other operating and administrative expenses increased to 26.3% in
1998 from 24.2% in 1997. This increase was primarily attributable to additional
rent and occupancy costs related to the expansion of office space to accommodate
growth ($4.1 million), costs associated with the establishment of start-up
operating units offering new services to clients ($0.8 million) and increased
operating costs ($0.7 million), including professional fees, equipment rental
and investment in technology and infrastructure.
Reorganization Costs. Reorganization costs increased $0.3 million, or
17.9%, to $1.8 million in 1998 from $1.5 million in 1997. These costs consisted
primarily of legal and accounting fees related to the consolidation of the
Nelson Group and Arista, and are not expected to continue.
Income from Operations. As a result of the foregoing, income from
operations increased $4.9 million, or 182.4%, to $7.5 million in 1998 from $2.6
million in 1997. Income from operations as a percentage of revenues increased to
5.9% in 1998 from 2.3% in 1997. Income from operations, adjusted to exclude
incentive compensation costs greater than customary cash compensation and
reorganization costs, increased $0.5 million, or 4.0%, to $11.8 million in 1998
from $11.3 million in 1997. Adjusted income from operations for the medical
marketing segment increased $0.4 million, or 4.5%, to $8.9 million in 1998 from
$8.5 million in 1997. As a percentage of medical marketing revenues, adjusted
income from operations for the medical marketing segment decreased to 13.3% in
1998 from 15.2% in 1997. Adjusted income from operations for the professional
selling segment increased $0.1 million, or 2.4%, to $2.9 million in 1998 from
$2.8 million in 1997. As a percentage of professional selling revenues, adjusted
income from operations for the professional selling segment was 4.9% in 1998 and
1997.
Provision for Income Taxes. The provision for income taxes for 1998 was
$3.6 million, an increase of $3.0 million from $0.6 million in 1997. Certain
Nelson companies were treated as S Corporations for federal and state income tax
purposes during 1998 and 1997. The pro forma provision for income taxes reflects
a provision for federal and state income taxes as if each of the companies that
were S Corporations were treated instead as C Corporations. The pro forma
19
provision for income taxes for 1998 was $3.6 million, an increase of $2.0
million, or 130.8%, from $1.6 million in 1997. This increase resulted primarily
from the increase in income from operations. On a pro forma basis, the effective
tax rate was 48.1% in 1998 as compared with 50.2% in 1997. The effective tax
rate in 1997 was higher than expected as nondeductible expenses were relatively
larger when compared to pretax earnings in 1997. Such earnings were affected by
the factors discussed below.
Net Income. Net income increased to $4.0 million in 1998 from $2.5 million
as a result of the factors discussed above. Net income, taking into effect the
pro forma provision for income taxes, increased to $4.0 million, in 1998 from
$1.5 million in 1997.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues. Revenues increased $28.7 million, or 33.3%, to $114.7 million in
1997 from $86.0 million in 1996. Revenues from medical marketing services
increased 29.8% to $56.2 million in 1997 from $43.3 million in 1996.
Professional selling services revenues increased 36.9% to $58.5 million from
$42.7 million in 1996. In both segments, revenues increased due to projects from
clients for whom we provided services within the last three years ($19.1
million) and from new clients ($9.6 million).
Cost of Selling Services. Cost of selling services increased $11.9
million, or 43.3%, to $39.3 million in 1997 from $27.4 million in 1996. Cost of
selling services as a percentage of professional selling services revenue
increased to 67.2% in 1997 from 64.2% in 1996. This increase was primarily
attributable to increased wages which were not immediately passed on to clients
through higher rates. This increase was also attributable to a change in the
revenue mix in professional selling services resulting from a relative increase
in detailing revenues, which have lower gross margins than revenues from other
professional selling services.
Compensation and Related Costs. Compensation and related costs increased
$9.1 million, or 33.4%, to $36.2 million in 1997 from $27.1 million in 1996.
This increase resulted from staffing increases in the medical marketing segment
to service existing and new business during the second half of 1997 and the cost
associated with the formation of new operating units. The increase was partially
offset by leveraging the management infrastructure in the professional selling
segment. Compensation and related costs as a percentage of revenues were 31.6%
in 1997 and 1996.
Other Operating and Administrative Expenses. Other operating and
administrative expenses increased $12.7 million, or 57.5%, to $34.9 million in
1997 from $22.2 million in 1996. As a percentage of revenues, other operating
and administrative expenses increased to 30.5% in 1997 from 25.8% in 1996. Other
operating and administrative expenses include incentive compensation costs of
$7.2 million in 1997, which were greater than customary cash compensation
levels. Excluding these costs, other operating and administrative expenses
increased $5.6 million, or 25.1%, to $27.8 million in 1997 from $22.2 million in
1996. The increase was primarily attributable to operating costs, including
professional fees, information technology and equipment rental, and additional
rent and occupancy costs related to the expansion of office space to accommodate
growth. As a percentage of revenues, the adjusted other operating and
administrative expenses decreased to 24.2% in 1997 from 25.8% in 1996 as Nelson
leveraged infrastructure costs over a larger revenue base.
Reorganization Costs. Reorganization costs in 1997 consisted primarily of
legal and accounting fees related to the consolidation of the Nelson Group and
Arista.
Income from Operations. As a result of the foregoing, income from
operations decreased $6.6 million, or 71.2%, to $2.6 million in 1997 from $9.2
million in 1996. Income from operations as a percentage of revenue decreased to
2.3% in 1997 from 10.7% in 1996. Income from operations, adjusted to exclude
incentive compensation costs greater than customary cash compensation and
reorganization costs, increased $2.1 million, or 23.2%, to $11.3 million in 1997
from $9.2 million in 1996. Adjusted income from operations for the medical
marketing
20
segment increased $1.2 million, or 16.7%, to $8.5 million in 1997 from $7.3
million in 1996. As a percentage of medical marketing revenues, adjusted income
from operations for the medical marketing segment decreased to 15.2% in 1997
from 16.9% in 1996. Adjusted income from operations for the professional selling
segment increased $0.9 million, or 47.7%, to $2.8 million in 1997 from $1.9
million in 1996. As a percentage of professional selling revenues, adjusted
income from operations for the professional selling segment increased to 4.9% in
1997 from 4.5% in 1996.
Provision for Income Taxes. The provision for income taxes was $0.6
million in 1997 versus $1.8 million in 1996. The pro forma provision for income
taxes for 1997 decreased $2.6 million to $1.6 million, from approximately $4.2
million in 1996. On a pro forma basis, the effective tax rate was 50.2% in 1997
and 44.7% in 1996. The increase in the effective tax rate was caused by
relatively larger nondeductible expenses when compared to pretax earnings. Such
earnings were affected by the factors discussed above.
Net Income. Net income decreased to $2.5 million in 1997 from $7.5 million
in 1996. Net income taking into effect the pro forma provision for income taxes
was $1.5 million in 1997 compared to $5.0 million in 1996.
Quarterly Operating Results
Our results of operations have and are expected to continue to fluctuate
quarterly. These quarterly fluctuations are caused by several factors, including
the timing of commencement, completion or cancellation of marketing
communications and selling projects, which are tied to clients' annual marketing
budgets. While a substantial portion of our costs are flexible, particularly in
professional selling services, we need to maintain staff throughout the year for
medical marketing services, despite the quarterly fluctuations in revenues.
Generally, medical marketing revenues and income are lower in the first quarter
and higher in the fourth quarter. The quarterly results of operations for the
professional selling segment fluctuate based on the timing of contract
commencement and completion dates.
In addition to the above factors, our quarterly results may also vary due
to non-operating factors such as government regulatory initiatives and overall
conditions in the healthcare industry. We believe that because of such
fluctuations, quarterly comparisons of our financial results cannot be relied
upon as an indication of future performance.
The following table sets forth, on a quarterly basis, certain financial
information, in thousands, for the periods indicated.
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
Revenues................... $26,260 $28,242 $27,750 $32,462 $27,893 $34,070 $32,069 $32,914
Cost of selling services... 9,704 10,517 9,266 9,843 10,137 10,831 10,247 9,641
Compensation and related
costs.................... 8,085 8,287 8,841 11,003 9,502 10,787 10,434 10,091
Other operating and
administrative
expenses(1).............. 6,041 6,559 6,768 15,594 7,424 7,941 8,389 12,179
Reorganization costs....... -- 440 900 200 530 554 731 --
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............... $ 2,430 $ 2,439 $ 1,975 $(4,178) $ 300 $ 3,957 $ 2,268 $ 1,003
======= ======= ======= ======= ======= ======= ======= =======
Net income (loss).......... $ 2,094 $ 2,101 $ 1,713 $(3,449) $ 321 $ 2,092 $ 1,053 $ 560
======= ======= ======= ======= ======= ======= ======= =======
|
(1) Includes incentive compensation costs of $7,182 in December 1997 and $2,500
in December 1998 which were greater than our customary cash compensation
levels.
21
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of funding has been, and continues to be, cash flow from
operations. Cash provided by operating activities during 1998 was $1.9 million,
driven primarily by income before non-cash charges of $6.9 million ($4.0 million
of net income plus $2.9 million of depreciation and other non-cash items),
partially offset by a $4.6 million increase in accounts receivable. Cash
provided by investing activities during 1998 was $0.5 million and was primarily
attributable to the net sale of marketable securities of $7.6 million, partially
offset by payments for property and equipment of $6.4 million. Cash used in
financing activities during 1998 was $7.6 million, and included distributions,
loans and advances to stockholders of $5.3 million and debt repayments of $1.5
million.
Cash provided by operating activities during 1997 was $9.5 million, driven
primarily by income before non-cash charges of $4.4 million ($2.5 million of net
income plus $1.9 million of depreciation and other non-cash items) and an $8.5
million increase in accrued liabilities, partially offset by a $3.3 million
increase in prepaid production costs and income taxes. Cash used in investing
activities during 1997 was $10.1 million and was primarily attributable to the
net purchase of marketable securities of $7.7 million and payments for property
and equipment of $2.3 million. Cash used in financing activities in 1997 was
$5.8 million and included distributions, loans and advances to stockholders of
$3.9 million and debt repayments of $1.8 million.
During 1998, we borrowed $9.0 million under a short-term bank note with
Fleet Bank, N.A. The note bore interest at the lender's prime rate minus 1% and
was repaid in August 1998. We paid a weighted-average annual interest rate of
7.3% on such borrowings. Effective August 31, 1998, we obtained a revolving line
of credit with the same lender in the amount of $5.0 million. Borrowings under
the credit line bear interest at the lender's prime rate minus 1% or LIBOR plus
150 basis points, at our option. No borrowings were outstanding under this
credit line at December 31, 1998. We intend to obtain an additional revolving
line of credit of $7.0 million prior to completion of this offering and to
increase such credit line to $20.0 million after the offering.
Our primary capital needs are for funding working capital requirements,
general corporate purposes and potential acquisitions. We anticipate that
capital expenditures for 1999 will total approximately $5.0 million. These
expenditures will primarily include spending associated with the expansion of
our offices and continued investment in information technology. We believe that
cash generated from operations and the net proceeds received by us from this
offering will be sufficient to fund our capital needs for at least the next 12
months.
INFLATION
Management does not believe that inflation has had a material adverse
effect on our results of operations. However, we cannot predict accurately the
effect of inflation on future operating results.
MARKET RISK
Our exposure to changes in interest rates is limited to borrowings under
revolving credit agreements, which have variable interest rates tied to the
prime and LIBOR rates. We had no borrowings outstanding as of December 31, 1998.
YEAR 2000 COMPLIANCE
We have reviewed the information systems and related applications used in
our business in order to assess our requirements regarding the year 2000 issue.
The year 2000 issue generally refers to the inability of systems hardware and
software to correctly identify two-digit references to specific calendar years,
beginning with 2000. The year 2000 issue can affect a company directly, by
affecting its internal database operations or processing, or indirectly, if its
suppliers'
22
or customers' systems are not year 2000 compliant. Either of these situations
may lead to disruptions in the operations of a company.
We have assembled a year 2000 task force to assess our year 2000 readiness.
Our year 2000 task force has divided the project to address the year 2000 issue
into the following phases:
1. Identifying and assessing systems and applications which may not be
year 2000 compliant;
2. Repairing or replacing all non-compliant systems and applications;
3. Testing repaired or replaced systems and applications;
4. Identifying and evaluating the year 2000 compliance of our major
business partners; and
5. Designing and implementing contingency plans for those systems and
applications which cannot be repaired or replaced.
The first phase, identifying and assessing our financial and operational
systems, which may not be year 2000 compliant, has been completed. Detailed
plans have been developed to make the necessary modifications to ensure year
2000 compliance.
Through March 1999, we have completed approximately 85% of Phase 2 and
approximately 20% of Phase 3. We expect to complete Phase 2 and 3 by the third
quarter of 1999.
As of March 31, 1999, we had substantially completed the process of
identifying our major business partners whose year 2000 readiness may impact our
business. We expect to begin the process of contacting these parties in the
second quarter of 1999 and expect to complete our assessment of their readiness
by the third quarter of 1999. We have not yet formulated a year 2000 contingency
plan, but expect to do so by the third quarter of 1999.
Through December 31, 1998, we have expended approximately $150,000 of
external costs related to the year 2000 readiness project and expect to expend
an additional $250,000 to $500,000 of external costs related to the project in
1999. We have not monitored internal time and costs to achieve year 2000
readiness.
If we do not address all of the year 2000 issues by the end of 1999, the
possibility of disrupting our business operations exists. However, based upon
the work performed by our year 2000 task force to date, it does not appear that
the year 2000 issue will have a material adverse effect on our financial
condition or results of operations.
NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which will be
effective for our consolidated financial statements beginning in the year 2000.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. We do not expect the adoption of this
new accounting standard to have a significant effect on the consolidated
financial statements of Nelson.
RECENT DEVELOPMENTS
On February 28, 1999, we acquired the remaining 20% minority interest in
one of our subsidiaries for $0.7 million. On March 5, 1999, we acquired the
assets comprising the business of Lipton Communications Group, Inc., a company
specializing in marketing services directed at the Hispanic community, to
augment our existing service capabilities in that area. The purchase price for
this acquisition was approximately $1.7 million.
23
In order to expand our international presence, on April 16, 1999, we
acquired a 9% equity interest in Pan Advertising Limited, a U.K. medical
advertising company. The purchase price for this acquisition was approximately
$0.6 million, payable in Nelson stock valued at the initial public offering
price. On April 15, 1999, we acquired a 60% interest in Monkey Communication
S.P.R.L., a Belgian medical marketing company. The purchase price for this
acquisition was approximately $0.6 million, payable one half in cash and one
half in Nelson stock valued at the initial public offering price. We have issued
71,017 shares of stock in connection with these acquisitions. Based upon an
assumed initial public offering price of $ per share, we would issue
additional shares in connection with these acquisitions shortly
after the closing of this offering.
24
BUSINESS
GENERAL
We are a leading and growing provider of marketing communications services
to the healthcare industry. According to Med Ad News, we are the world's largest
independent healthcare marketing communications organization and the second
largest overall, based on 1998 revenues. We provide many of the largest
pharmaceutical companies with a broad range of specialized services designed to
build and maintain leadership positions for their products and services. We
believe that our broad service offerings and extensive healthcare expertise
provide clients with high quality, variable cost solutions to meet the full
range of their marketing communications objectives.
The first Nelson Group company was founded in 1987 to provide professional
selling services to pharmaceutical companies. In 1989, we acquired two
healthcare marketing services firms engaged in healthcare advertising and
medical education services. Since that time we have grown and diversified
primarily through the establishment of new operating units around individuals
with significant experience in the healthcare industry. Management of our
individual operating units includes former pharmaceutical company senior
executives, medical professionals, senior advertising and public relations
executives from both consumer and healthcare agencies and a former Commissioner
of the FDA.
INDUSTRY
Pharmaceutical companies and other healthcare providers are increasing
spending devoted to promotion of their products. According to IMS Health
Incorporated, pharmaceutical manufacturers spent approximately $4.6 billion in
the U.S. promoting their products to professionals during the 12 months ended
September 30, 1998. This represents an increase of 17.8% over the prior year. Of
the $4.6 billion, approximately $4.1 billion was spent on personal on-site
selling (detailing) to office and hospital-based physicians, and approximately
$0.5 billion was spent on advertising in medical journals. In 1998, over $1.2
billion was also spent on direct-to-consumer advertising. We believe that this
promotional spending will continue to increase and that the portion going to
outside providers such as Nelson will grow due to a number of factors, including
the following:
Growth in the Prescription Drug Market. Promotional spending by
pharmaceutical companies is driven by growth in the overall prescription drug
market. According to IMS Health Incorporated, U.S. pharmaceutical sales rose to
approximately $99.5 billion in 1998 from approximately $89.6 billion in 1997. We
believe that this trend toward increased use of drug therapies is attributable
to a number of factors including an aging population, a greater number and
increased effectiveness of pharmaceutical products and the lower cost of drug
therapy relative to other medical procedures. As these trends continue, we
believe that marketing communications spending will continue to grow.
Introduction of New Products. Marketing communications expenditures in the
pharmaceutical industry are also directly linked to the number of new products
being introduced. The Pharmaceutical Research and Manufacturers of America, an
industry trade group, estimates that the pharmaceutical industry has tripled its
research and development budget during the past 10 years, spending an estimated
$21 billion on research and development in 1998. In addition, in 1998 and 1997,
the FDA approved 95 and 126 original new drug applications, compared to 79 in
1994. At the same time, the FDA's expedited review and approval procedures have
shortened median approval times to 12 months in 1998 from 19 months in 1994. We
believe that effective marketing communications services are a critical
component in clients' efforts to achieve maximum market penetration of new
products and prolong the life cycle of existing products.
Cost Containment Pressures in the Healthcare Industry. As a result of
certain changes affecting the healthcare industry, including increased
competition and the proliferation of managed care, pharmaceutical companies and
other healthcare providers are under pressure to
25
deliver a greater volume of products and services at reduced costs. These
pressures are contributing to an increased focus on reducing fixed operating
costs and improving productivity. As a result, pharmaceutical companies are
seeking to employ third party providers for a variety of services including
personal selling services. According to PMSI Scott-Levin, Inc., a leading
industry source, contract sales organizations provide nearly 7,000 part-time and
full-time representatives to 20 of the 40 companies tracked. As a result, we
believe that the market for personal selling services, in which third party
sales personnel act as the client's sales force, has grown to more than $350
million in 1998 from less than $20 million in 1988.
Growing Role of Consumers and Patients. As consumers and patients become
more directly involved in their selection of healthcare products and services,
pharmaceutical companies and other providers have sought to increase the level
of information available to consumers and patients and to influence their
decision-making process. According to Competitive Media Reporting, in 1998
pharmaceutical companies spent more than $1.2 billion on direct-to-consumer
advertising, an increase of approximately 20% from the prior year. In 1997, the
FDA modified its guidelines governing the content of direct-to-consumer
advertising. We believe that this has led to an increase in direct-to-consumer
advertising. Additionally, consumer product companies have increased promotion
of the health benefits of their food and cosmetic products. We believe that
pharmaceutical companies will continue to invest in direct-to-consumer
advertising with increased emphasis on targeted marketing aimed at patients.
BUSINESS STRATEGY
Key elements of our business strategy include:
Focus on Healthcare Industry. We believe that our focus on providing
marketing communications services to clients in the healthcare industry
represents a significant competitive advantage over traditional marketing
services companies and enables us to deliver a higher quality of service to our
clients. In addition to the extensive healthcare experience of our management,
we maintain an employee base of individuals with an in-depth understanding of
therapeutic applications and medical products, many of whom have experience
working for major pharmaceutical companies. Such expertise is essential given
the technical nature of pharmaceutical and other medical products and the
specialized requirements of physicians, managed care organizations and other
participants in the healthcare delivery system. This healthcare focus has also
enabled us to capitalize on the benefits of scale, particularly with respect to
our professional selling activities.
Broadest Range of Services. We believe that we provide the most
comprehensive range of services currently available from any marketing
communications company focusing on the healthcare industry. As part of our
strategy, we are continuously increasing our range of services to address the
growing communications requirements of the healthcare industry. In 1990, we
became the first organization in the U.S. to offer both personal selling and
healthcare advertising services. Since that time, we have augmented this
combination by offering:
- medical education services aimed at healthcare professionals and
consumers;
- public relations services to promote clients' products in times of
opportunity and crisis;
- healthcare consulting services to assist pharmaceutical companies in
influencing consumers, physicians and regulatory agencies in their
drug-related decision-making;
- database marketing services using database technology to develop
marketing campaigns aimed at specific product categories and market
segments;
- targeted marketing services focused on the Hispanic market;
- patient recruitment services to accelerate full enrollment in scheduled
clinical trials;
26
- sales force recruitment and training services to assist clients in
recruiting and training internal sales force personnel;
- behavioral modification services to improve patient compliance and
loyalty, thereby reducing costs;
- contract medical organization services providing in-office dissemination
of medical information and telephone responses to physicians' questions
about drugs;
- teleservices aimed at healthcare professionals and consumers/patients.
We believe that the breadth of our service offerings differentiates us from
competitors and offers opportunities to cross-sell additional services and to
provide an integrated package of services.
Recruitment of Industry Leaders. We have expanded primarily through the
formation of new operating units around executives who possess significant
experience in the healthcare industry. These men and women include former
pharmaceutical company executives, medical professionals, advertising executives
from both consumer and healthcare agencies and a former Commissioner of the FDA.
Nelson benefits from the expertise and creativity of these executives and
believes that their contacts within the industry are a significant asset in
developing and maintaining client relationships.
Decentralized, Entrepreneurial Structure. We provide our services through
four networks comprised of multiple operating units. Each unit is headed by an
executive who exercises considerable autonomy in matters of everyday operation.
We believe that this structure facilitates the attraction and retention of
management personnel. It also helps in the acquisition and integration of
acquired companies. By coupling this structure with an incentive compensation
program based partially on individual operating unit performance, we believe
that we combine the entrepreneurial initiative and responsiveness of a small
company with the resources and capabilities of an integrated, full service firm.
GROWTH STRATEGY
We seek to expand and enhance our business and our position as the leading
independent provider of marketing communications services to the healthcare
industry through the following growth strategies:
Increase Revenues from Existing Clients. We believe there is a significant
opportunity to increase revenues from our existing base of 154 clients, which
included the 10 largest pharmaceutical companies in the world in 1998, and 27 of
the top 50, based on 1997 revenues. Specifically, we target opportunities to
capture an increasing share of our clients' outsourced marketing, advertising
and personal sales activities, and to cross-sell our other services, including
consulting, medical education and public relations services which we believe
will comprise an increasing portion of pharmaceutical companies' marketing
expenditures. For example, in 1992 we began providing public relations services
to Johnson & Johnson's Janssen Pharmaceutica division. During 1998, 16 of our
operating units were providing a broad range of services to Janssen
Pharmaceutica including professional and direct-to-consumer advertising, medical
education and public relations. Similarly, the number of our operating units
providing services to SmithKline Beecham, our first client, has grown from one
in 1988 to seven in 1998. The strength of our client relationships has enabled
us to generate a high degree of recurring revenue with approximately 72.0% of
our 1998 revenue generated by clients served in 1995.
Expand Client Base. We target new clients within the pharmaceutical
industry as well as other healthcare providers. We also believe that consumer
product companies, which have been increasingly promoting the health benefits of
many of their products, due partly to changes in FDA guidelines, are a further
source of new clients. For example, in 1997, we successfully
27
implemented a campaign for Kellogg Company promoting the benefits of wheat bran
in cereal. We believe we have a competitive advantage in competing for these
various types of new clients because of our breadth of service offerings and
expertise and reputation for quality service with clients in the pharmaceutical
industry.
Expand Service Offerings. We regularly seek opportunities to provide new
services. For example, in the last 12 months we have expanded our medical
marketing services by introducing specialized forms of medical communications,
including in-office dissemination of medical information and telephone responses
to physicians' questions about drugs. We have recently expanded our professional
selling service offerings by adding both full-time representatives and
syndicated representatives (who make a single visit on behalf of multiple
clients) as additional options to our personal selling business. Creating
additional value-added services increases average account size, exploits new
revenue opportunities and strengthens our position as a leader in providing a
broad spectrum of services.
Pursue Strategic Acquisitions. We are continually seeking acquisition
opportunities that will expand our client base, augment our existing service
offerings or enable us to deliver new services. We believe that there are a
substantial number of attractive acquisition candidates in many of our existing
service areas due to the fragmented nature of the various service markets in
which we operate. In July 1998, we acquired The Medical Phone Company in order
to augment our telemarketing services. We have recently acquired the assets of
Lipton Communications Group, Inc. to enhance our capabilities in offering
targeted marketing services aimed at the Hispanic market. See "-- Recent
Acquisitions." We believe that our decentralized structure and entrepreneurial
managerial approach make us an attractive acquiror for potential acquisition
targets.
Increase International Presence. We currently operate internationally
through our offices in London and Brussels and maintain cross-referral
relationships with Pan Advertising Limited, a U.K. medical advertising company,
Publicis-Vital Werbeagentur GmbH, a German medical advertising company, and
Pharma International, Inc., a Japanese medical advertising firm. We believe that
strengthening our international capabilities will enhance our ability to compete
for business from large multinational pharmaceutical companies and to launch
global marketing and sales efforts. Recently, we have focused on expanding our
presence in Europe. We strengthened our existing relationship with Pan
Advertising Limited by acquiring 9% of its outstanding capital stock.
Additionally, we acquired a 60% interest in Monkey Communication S.P.R.L., a
Belgian medical marketing company. See "-- Recent Acquisitions."
Capitalize on Direct-to-Consumer/Patient Market. We seek to capitalize on
the growth of direct-to-consumer marketing expenditures of the pharmaceutical
industry by:
- increasing our clients' awareness of the potential of a
direct-to-consumer marketing strategy;
- helping our clients identify products that we believe are well suited for
direct-to-consumer marketing campaigns; and
- developing and implementing such campaigns through both traditional and
new forms of media.
For example, when Hoechst Marion Roussel was faced with the expiration of its
patent on Cardizem, a popular cardiac drug, we created a highly effective and
integrated direct-to-consumer relationship marketing campaign. The campaign
combined print and television advertisements, a quarterly newsletter about good
health and good living and personalized letters that encouraged patients to
speak to their doctors about switching to the more cost-effective once-daily
Cardizem CD formulation.
28
ORGANIZATIONAL STRUCTURE
Nelson is organized into four networks comprised of multiple operating
units. We provide medical marketing services through three networks: NCI
Network, a full-service advertising and marketing network; Diversified
Companies, a mixture of specialized advertising, marketing, medical education
and consulting practices; and SCIENS Worldwide Network, a full-service
advertising and marketing network with a strong focus on public relations and
medical education. We provide professional selling services through our fourth
network, Nelson Professional Sales, a personal selling, sales force recruitment
and training, peer influence and teleservices network.
SERVICES
We provide many of the largest pharmaceutical companies with a broad range
of specialized and diversified services designed to build and maintain
leadership positions for their products and services.
Medical Marketing Services
Professional and Consumer Advertising. Our professional and consumer
advertising services include strategic planning and creation, production and
placement of a variety of marketing materials including:
- materials for direct mailing and detailing to healthcare professionals;
- advertisements in print and electronic media;
- displays and interactive kiosks for use in hospitals and at professional
conventions;
- reminder promotional items; and
- explanatory literature for distribution with drug samples.
We operate three full-service studios that provide design work and
electronic production services including computer graphics and multimedia
presentations. We target our marketing programs to physicians, pharmacists,
nurses and other healthcare professionals and directly to patients and other
consumers.
We seek to execute direct-to-consumer marketing programs through a
combination of print and electronic media advertising and on-going direct
marketing. The programs include the establishment and advertisement of toll-free
numbers for the purpose of compiling and managing a patient database. The
database is then used for follow-up telephone, mail and electronic marketing
efforts to the target group, tracking compliance and fulfillment and promoting
healthcare initiatives.
Medical Education. We believe that we are one of the largest U.S. medical
education suppliers specializing in designing and developing medical education
programs aimed at professionals, patients and consumers. We design strategic
communications programs to educate healthcare professionals, government and
managed care organizations, patients and consumers. These programs include
accredited continuing medical education programs (which physicians and other
healthcare professionals are required to complete as part of their ongoing
license requirements), workshops, conferences, roundtable discussions, expert
panels and symposia on various healthcare related topics. We customize these
programs to fit a client's strategic objectives and use a variety of media,
including interactive video conferences. Our programs are also used by medical
institutions in their education offerings. Programs aimed at consumers include
patient information brochures, videos and outreach programs to educate consumers
about medical conditions and products.
29
Public Relations. Our public relations services include:
- media and community relations;
- event and crisis management;
- public policy planning;
- issues management; and
- public opinion research services.
We have implemented multiple media campaigns with national broadcast and
print coverage. We believe that, as a result of our significant experience and
contacts with both the professional trade and general consumer media, we are
well-positioned to use these media to publicize our clients' products and
services. On behalf of Johnson & Johnson, we developed and implemented a
multi-faceted program for the introduction of Propulsid, a prescription
heartburn medication. The program included preparation and dissemination of
pre-launch publication pieces, strategic alliances with professional
associations including the American Gastroenterological Association and the
American College of Gastroenterology and a national media relations campaign.
The program delivered broadcast coverage on the CBS Evening News and ABC World
News Tonight and print coverage in publications such as The New York Times, The
Chicago Tribune and USA Today.
Consulting. Our consulting services include:
- advice on prescription-to-over-the-counter switches;
- developing or improving clinical management programs;
- providing regulatory guidance;
- strategic and tactical planning for product development and marketing;
and
- extending patent protection.
We believe that our NCI Consulting unit is one of the largest healthcare
consulting firms in the U.S. specializing in prescription-to-over-the-counter
switches. In the past four years, NCI Consulting was involved with nine
completed prescription-to-over-the-counter switches. Our involvement in the
initial stages of the prescription-to-over-the-counter conversion process
provides an important conduit for cross-selling our other services.
Patient Recruitment. We work with our pharmaceutical company clients and,
in some cases, clinical research organizations to reduce overall clinical
development costs by accelerating patient recruitment for participation in
clinical trials. To attract patients, we design and implement integrated
programs using:
- targeted media campaigns;
- print and electronic advertising;
- physician referrals; and
- seminars.
We also operate a centralized patient information and qualification service
to pre-screen patients for trial eligibility and provide pre-qualified leads in
certain therapeutic areas. In 1997, we assisted 33 clinical sites in enrolling
760 subjects within a four-month period for participation in an Alzheimer's
disease study. We initiated a targeted media relations campaign for each site,
and placed customized television, radio and print advertisements. We received
more than 1,700 study inquiries and forwarded more than 1,500 pre-qualified
leads to study sites.
30
Targeted Marketing. We provide clients with a range of services focused on
the Hispanic market through Bienestar/LCG, a domestic full-service agency
targeting Spanish-speaking consumers and medical professionals. These services
include:
- consumer and professional advertising;
- medical and patient education;
- direct mail;
- teleservices;
- public relations; and
- promotional materials for public venues.
Bienestar/LCG can support marketing campaigns in the U.S. and throughout
Latin America.
Database Marketing. We use database technology to support direct marketing
campaigns aimed at specific product categories and market segments. We maintain
databases for our clients with information on more than one million individuals.
These databases are compiled mainly through calls received via toll free numbers
advertised in connection with consumer and patient directed marketing campaigns.
We then use the databases for a variety of marketing goals, including compliance
initiatives and brand loyalty programs, distribution of samples and follow-up
promotional activities. Our database marketing programs can be used effectively
in conjunction with our consumer advertising campaigns. For example, our
Cardizem campaign included quarterly newsletters, educational videos and other
materials.
Professional Selling Services -- Nelson Professional Sales
Personal Selling (detailing). We are one of the leading personal selling
organizations in the U.S. specializing exclusively in healthcare. Pharmaceutical
detailing is a form of selling that involves a presentation to a physician or
other medical professional by a field representative, during which the benefits
of a drug are discussed and product literature and samples are provided to the
medical professional. Products detailed by us include both prescription and
over-the-counter drugs and other healthcare products. We have approximately
1,000 detailing representatives who complete approximately 1,000,000 calls per
year to a wide range of medical professionals on behalf of clients.
Our detailing capabilities increase our clients' flexibility in selecting
the extent and cost of promoting products as well as their level of involvement
in managing the sales effort. We believe that use of our external detailing
personnel is considerably less expensive to our pharmaceutical clients than
using their internal sales staff, with comparable success rates. In addition,
use of our outsourced detailing services enables clients to meet the temporary
demands of active cycles while limiting layoffs of internal sales forces during
product lulls.
We employ a full-time staff of six national sales managers and 71 district
managers. We believe that our use of full-time versus part-time management
increases the quality of service provided to clients and improves recruitment of
sales personnel. Our detailing sales forces can be made up of representatives
working on a flexible part-time ("flextime") basis or on a full-time basis. A
sales force can also be either dedicated to one product or syndicated. A
syndicated sales force targets the same professionals on behalf of two or more
clients, which allows the clients to share the cost of detailing. Currently, the
majority of our detailing representatives work on a flextime and dedicated
basis. We seek to hire individuals with pharmaceutical sales or scientific
backgrounds. Each field representative undergoes specialized training in order
to familiarize himself or herself with the products being detailed.
31
We seek to utilize the most advanced technology in delivering our services.
To this end, we have equipped our sales force with hand-held computers that will
perform call and sample reporting and electronically record signatures of the
doctors being visited.
Peer Influence. We organize and conduct peer-to-peer meetings in which
eight to 20 healthcare professionals, primarily physicians, meet to discuss a
particular drug in the context of the wider therapeutic area in which it
competes. Such meetings are chaired by a full-time moderator who is employed by
us and trained to involve participants fully. The meetings are followed by
interactive discussions. Our clients sponsor these meetings in order to convey
information concerning their products to physicians. The meetings are
particularly useful in connection with new product launches, highly technical
products and products that compete in crowded markets.
Teleservices. We believe that we are one of the few teleservices suppliers
in the U.S. focused solely on healthcare. We create, manage and conduct
telephone-based detailing of healthcare products, direct sales and customer
service programs for pharmaceutical companies and other healthcare
organizations. Additionally, we provide toll-free interactive voice response
services in support of our clients' marketing efforts. Our teleservices
capabilities can be used in conjunction with our personal selling activities to
augment large scale programs or broaden geographic coverage for our clients. We
target physicians, nurses, pharmacists and other healthcare professionals with
telephone sales of prescription and over-the-counter drugs and other healthcare
products. In addition, we conduct patient support and education programs, and
telephone recruiting of healthcare professionals for seminars, teleconferences
and other programs organized by us or our clients. We also perform direct mail
follow-up and sample fulfillment services of both prescription and
over-the-counter products for our clients.
Professional Sales Force Recruitment & Training. We provide recruitment
services to help our pharmaceutical company clients identify and interview
qualified candidates for their internal sales forces. Dedicated recruitment
managers maintain and update an active national database of approximately 9,000
candidates from a variety of sources, including our 71 district managers and
national sales managers, a compensated referral program in the field and ongoing
advertising in major metropolitan areas. We interview candidates at least two
times and evaluate them for outstanding sales skills and selling successes. This
provides a ready pool of qualified full-time and part-time sales professionals.
We provide training to healthcare sales professionals in a variety of
media, including workshops, newsletters, audiotapes, texts and computer-based
programs. Our training materials provide healthcare sales professionals with
information about products, medical market trends and sales opportunities.
CLIENT RELATIONSHIPS
We seek to develop and maintain long-term relationships with our clients.
We believe that our clients view us as a strategic partner and a valuable
resource in designing and implementing their marketing communications programs.
In 1998, we provided our services to 154 clients. Based on 1998 revenues, our
largest clients include Johnson & Johnson, Procter & Gamble, SmithKline Beecham,
Organon, Glaxo-Wellcome, Abbott Laboratories, Bristol-Myers Squibb and Hoechst
Marion Roussel. In 1998, 11 operating companies of Johnson & Johnson accounted
for 22.7% of revenues. In 1997, Johnson & Johnson accounted for 30.4% of
revenues and SmithKline Beecham accounted for 12.2% of revenues.
We have enjoyed long-standing relationships with many of our clients, eight
of which, including Johnson & Johnson, Procter & Gamble, SmithKline Beecham,
Glaxo Wellcome and Hoechst Marion Roussel have been clients of ours for more
than eight years. Generally, our major client relationships represent multiple
contracts with several affiliates and/or divisions of the client. While the
affiliates of several of our major pharmaceutical clients account, on an
aggregate
32
basis, for a significant part of our total revenues, we believe that these
affiliates have sufficient operating autonomy to permit them to make marketing
commitments on an individual basis. Therefore, we believe that the termination
of a contract by one affiliate of a major pharmaceutical client would not
necessarily result in a termination of all contracts with that client.
Generally, our contracts for medical marketing services are one year or
less in duration and are subject to termination by the client upon 30 to 90
days' prior notice and without penalty. These contracts provide for payment
based on a monthly retainer fee. We also enter into contracts for project-based
assignments, the duration of which vary from days to several months. These
contracts are usually cancellable with minimal notice or penalty. Our contracts
for personal selling services generally are one year in duration, and many are
subject to termination by the client upon 60 to 90 days' prior notice and
without penalty. These contracts provide for payment based either on an hourly
billing rate or on each "completed call" by a field representative or telephone
call by a telerepresentative. A completed call is generally defined as a
face-to-face meeting by a field representative with a medical professional. In
the peer influence area our contracts require us to conduct a certain number of
meetings with a guaranteed level of physician participation. Payment is
typically made in three equal installments; upon commencement, at the mid-way
point and upon completion. Contracts in the peer influence area are generally
terminable at will.
We focus on maintaining strong relationships with product managers and
senior management at each of our clients and providing creative and
result-oriented solutions to their marketing communications needs. Our account
managers develop relationships principally with the product managers at the
pharmaceutical companies and spend significant time on-site at client
facilities. Our account managers work with the product managers to implement,
and in some cases assist in developing, the client's marketing plan within a
prescribed budget.
RECENT ACQUISITIONS
On February 28, 1999, we acquired the remaining 20% minority interest in
one of our subsidiaries for $0.7 million. On March 5, 1999, we acquired the
assets comprising the business of Lipton Communications Group, Inc., a company
specializing in marketing services directed at the Hispanic community, to
augment our existing service capabilities in that area. The purchase price for
this acquisition was approximately $1.7 million.
In order to expand our international presence, on April 16, 1999, we
acquired a 9% equity interest in Pan Advertising Limited, a U.K. medical
advertising company. The purchase price for this acquisition was approximately
$0.6 million, payable in Nelson stock valued at the initial public offering
price. On April 15, 1999, we acquired a 60% interest in Monkey Communication
S.P.R.L., a Belgian medical marketing company. The purchase price for this
acquisition was approximately $0.6 million, payable one half in cash and one
half in Nelson stock valued at the initial public offering price. We have issued
71,017 shares of stock in connection with these acquisitions. Based upon an
assumed initial public offering price of $ per share, we would issue
additional shares in connection with these acquisitions shortly after the
closing of this offering.
FACILITIES
Our corporate headquarters are located in New York, New York, in
approximately 13,500 square feet of space occupied under a lease which expires
on October 31, 2007, with a renewal option for an additional five-year term. We
also lease additional space, aggregating, at December 31, 1998, approximately
221,500 square feet, in New York, New York, Lawrenceville, Princeton and Clark,
New Jersey, Kansas City, Missouri, Blue Bell, Pennsylvania, Kennesaw, Georgia,
Walpole, Massachusetts, and Washington, D.C. We also have offices in London and
33
Brussels. We believe that our facilities are adequate for our current
operations, but that additional space will be needed as we continue to grow.
COMPETITION
Our industry is highly competitive and fragmented. In the medical marketing
area, we compete directly and indirectly with:
- specialty healthcare marketing and communications firms;
- public relations agencies;
- management consulting firms; and
- in-house advertising and marketing departments of pharmaceutical
companies.
The expansion in healthcare marketing to consumers has led to increased
competition from large traditional advertising agencies. Many of them offer both
consumer and professional advertising, as well as public relations services.
Certain of these agencies are beginning to broaden their services to include
medical education, as well as other medical marketing services.
In the professional selling area, we compete against:
- in-house sales and marketing departments of pharmaceutical companies;
- full-time and part-time contract selling organizations;
- general and healthcare-focused telemarketing firms; and
- other outside providers of peer influence services.
We believe that we compete primarily on the basis of demonstrated
reputation for:
- quality;
- breadth of services;
- price;
- geographic presence;
- technological expertise; and
- the ability to promptly provide clients with customized solutions to
their marketing communications needs.
We believe that our competitive strengths are our experience and expertise
in the healthcare industry, our ability to provide the broadest range of
services of any independent, healthcare focused marketing communications company
and our strong long-term client relationships with major pharmaceutical
companies.
GOVERNMENT REGULATION
The healthcare industry is extensively regulated. Various laws, regulations
and industry guidelines affect the provision, licensing, labeling, marketing,
promotion and reimbursement of healthcare services and products, including
pharmaceutical products. It is possible that new or different laws, regulations
or guidelines may apply in the future.
The pharmaceutical industry is subject to extensive federal regulation and
oversight by the FDA. For instance, the Federal Food, Drug and Cosmetic Act, as
supplemented by various other statutes, regulates, among other matters, the
approval, labeling, advertising, promotion, sale and distribution of drugs.
Under this statute, the FDA asserts its authority to regulate all promotional
activities involving prescription drugs. Accordingly, our business and that of
our clients, to the
34
extent such business involves promotion and marketing of pharmaceutical
products, is subject to the extensive regulation of the pharmaceutical industry.
The Prescription Drug Marketing Act of 1987 regulates the distribution of
drug samples to physicians and imposes strict storage, inventory and
record-keeping requirements on pharmaceutical manufacturers and distributors
related to such activities. We, as part of our detailing activities, distribute
prescription drug samples to physicians and other healthcare professionals and
are subject to the requirements of the Prescription Drug Marketing Act. We
believe that we are in compliance with this act.
Our services are affected by various guidelines promulgated by industry and
professional organizations. For example, certain ethical guidelines promulgated
by the American Medical Association (the "AMA") govern, among other matters, the
receipt by physicians of gifts from health-related entities. These guidelines
govern the honoraria and other items of pecuniary value which AMA-member
physicians may receive in connection with functions sponsored by our
pharmaceutical company clients. Similar regulations have been implemented by
other professional and industry organizations, such as the Pharmaceutical
Manufacturers Association. Some of our clients also have their own policies
regarding such matters. The provision of continuing medical education services
is subject to compliance with guidelines promulgated by the FDA and various
accreditation bodies and professional associations, such as the rules of the
Accreditation Council of Continuing Medical Education.
Certain portions of the teleservices industry have become subject to
increased federal and state regulation in recent years. The rules of the Federal
Communications Commission (the "FCC") under the Federal Telephone Consumer
Protection Act of 1991 limit the hours during which telemarketers may call
consumers and prohibit the use of automated telephone dialing equipment to call
certain telephone numbers. The Federal Telemarketing and Consumer Fraud and
Abuse Prevention Act of 1994 broadly authorizes the Federal Trade Commission
(the "FTC") to issue regulations prohibiting misrepresentation in telephone
sales. In August 1995, the FTC issued regulations which, among other things,
require telemarketers to make certain disclosures when soliciting sales. We
believe that our operating procedures comply with the telephone solicitation
rules of the FCC and the FTC. However, additional federal or state legislation,
or changes in the regulatory environment, may limit our or our clients'
activities in the future or significantly increase the cost of regulatory
compliance.
The failure of Nelson or its clients to comply with, or any change in, the
applicable regulatory requirements or professional organization or industry
guidelines could:
- limit or prohibit certain of our or our clients' business activities;
- subject us or our clients to adverse publicity; and
- increase the costs of regulatory compliance or subject us or our clients
to monetary fines or other penalties.
Such occurrences could have a material adverse effect on us.
We generally require our clients to indemnify us against claims and
expenses arising with respect to services performed on our clients' behalf,
except those resulting from our own negligence. We have never been made a party
to a claim or lawsuit based on our services for a pharmaceutical client nor have
we ever been held responsible for the regulatory non-compliance of a client.
LIABILITY AND INSURANCE
In recent years, there has been an increasing number of lawsuits against
healthcare industry participants alleging malpractice, product liability and
other legal theories. Such lawsuits often involve large claims and significant
legal costs. As a provider of services to the pharmaceutical
35
industry, we face the risk of being named as a party in such lawsuits, with the
attendant risks of significant legal costs, substantial damage awards and
adverse publicity. Even if any such claims ultimately prove to be without merit,
defending against them can result in adverse publicity, diversion of
management's time and attention and substantial expense. Therefore, such claims
could have a material adverse effect on us.
We maintain insurance policies, including liability insurance. We cannot be
certain that our insurance coverage will be sufficient to cover all future
claims or will continue to be available in adequate amounts or at a reasonable
cost. Although many of our contracts require our clients to indemnify us for
claims and expenses arising with respect to services performed by us on the
client's behalf, our contracts may not provide for adequate indemnification
against all potential litigation risks facing us. Our contracts often require us
to indemnify clients for our negligence. We can be held liable for errors and
omissions of our employees for services we perform that are outside the scope of
any indemnity. Our insurance policies do not insure us against the errors and
omissions of our employees. We could also incur losses because of the cost of
legal proceedings associated with our services or the pharmaceutical products
with respect to which we provide services.
LEGAL PROCEEDINGS
On November 22, 1995, a former Nelson employee filed a complaint against
Nelson and Wayne K. Nelson in the Superior Court of New Jersey, Mercer County.
The complaint alleges discrimination on the basis of his disability, intentional
infliction of emotional distress, invasion of privacy and interference with
prospective business advantage. The complaint seeks damages for lost past and
future wages and benefits, emotional distress and injury to his reputation. The
complaint also seeks punitive damages and attorneys' fees and costs. A monetary
amount, however, has not been specified in the complaint. The parties are
currently engaged in discovery. A trial date has not yet been scheduled.
We believe, upon the advice of counsel, that we have meritorious defenses
and are vigorously contesting the allegations. Because the action is still in
the discovery stage, and the ultimate outcome will depend upon the jury's
determination of the credibility of witnesses, we cannot predict the trial's
outcome and any potential monetary award. Management does not believe, however,
that Nelson will incur material liability as a result of these proceedings.
In addition to the foregoing matter, from time to time we are subject to
litigation incidental to our business.
EMPLOYEES
As of March 31, 1999, we had 1,764 employees, including 832 full-time
employees and 932 part-time employees. Our personal selling operations account
for all of our part-time employees. The following table shows the number of our
full-time and part-time employees broken down by discipline as of March 31,
1999:
NUMBER OF NUMBER OF
FULL-TIME PART-TIME TOTAL NUMBER
EMPLOYEES EMPLOYEES OF EMPLOYEES
--------- --------- ------------
Medical Marketing Services................... 594 -- 594
Professional Selling Services................ 238 932 1,170
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We are not party to a collective bargaining agreement with a labor union,
and we consider our relations with our employees to be good.
36
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the names, ages and positions of the executive officers
and directors of Nelson:
NAME AGE POSITION
---- --- --------
Wayne K. Nelson(1)............. 60 Chairman of the Board of Directors
Thomas A. Moore(2)............. 48 President, Chief Executive Officer and Director
Peter Law-Gisiko............... 44 Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
Fred H. Kellogg................ 53 Vice Chairman
Peter J. Scarperi.............. 55 Vice Chairman
Dr. Joseph A. Romano........... 52 Vice Chairman
Dr. Arthur Hull Hayes,
Jr.(3)....................... 65 Vice Chairman/Medical Director and Director
William I. Bergman(2)(4)....... 67 Director
Dr. Bernard Canavan(1)(5)...... 63 Director
Dr. Kathleen M. Foley(1)(4).... 55 Director
George S. Frazza(1)............ 65 Director
Lawrence C. Hoff(1)(4)......... 70 Director
Barry MacTaggart(3)(4)......... 67 Director
Dr. Herbert Pardes(2)(5)....... 64 Director
Robert G. Pinco(2)(5).......... 55 Director
Thomas O. Pyle(3)(5)........... 59 Director
Kenneth Roman(3)(5)............ 68 Director
|
(1) Class III Director
(2) Class II Director
(3) Class I Director
(4) Member of the Audit Committee
(5) Member of the Compensation Committee
Wayne K. Nelson has been Chairman of the Board of Directors of Nelson since
July 1998. In September 1987, Mr. Nelson established the first company in the
Nelson Group. Since that time he has founded or overseen the acquisition of each
of the companies comprising the Nelson Group and has been Chairman of the Board
of Directors and Chief Executive Officer of NCI Communications, Inc. ("NCI"), as
well as Chairman of the Board of a number of other Nelson Group companies. From
January 1983 to April 1985 Mr. Nelson was a member of the Executive Committee of
Johnson & Johnson, where he was responsible for 14 operating companies
worldwide. Mr. Nelson is also the founder of the McNeil Consumer Products
Company, a Johnson & Johnson operating company, where he served as President,
Chairman and Chief Executive Officer from July 1975 to September 1982. Prior to
such time, Mr. Nelson held marketing management positions at the Procter &
Gamble Company and within Johnson & Johnson.
Thomas A. Moore has been the President and Chief Executive Officer and has
served as a director of Nelson since July 1998. Mr. Moore joined the Nelson
Group in October 1996 as President and Chief Executive Officer of NCI. He has
also served as an officer and/or director of the majority of the Nelson Group
companies. Prior to joining the Nelson Group, he held management positions of
increasing responsibility with the Procter & Gamble Company (1973 to 1996), most
recently as its Group Vice President and President of Health Care Products USA
from December 1992 to April 1996. In this role, he was responsible for more than
$3 billion of
37
worldwide healthcare sales in both over-the counter and prescription drugs. Mr.
Moore is also the Chairman of the American Health Foundation, a research
institute that focuses on the role of nutrition in cancer and its prevention,
and is a member of the Board of Directors of Medical Science Systems, Inc., a
company that provides testing services to determine genetic susceptibility to
various ailments.
Peter Law-Gisiko has been Executive Vice President and Chief Financial
Officer of Nelson since July 1998. Since December 1997, he served as Executive
Vice President and Chief Financial Officer of NCI and a number of other Nelson
Group companies. Prior to joining the Nelson Group, Mr. Law-Gisiko served in
positions of increasing responsibility during a 10-year period at WPP Group
p.l.c. and Ogilvy & Mather Worldwide, Inc. (a subsidiary of WPP Group p.l.c.),
most recently as Chief Financial Officer of OgilvyOne North America from August
1996 until December 1997. From 1987 to 1990, he was controller for Europe, Asia
and Latin America for WPP Group p.l.c. In 1990 he was promoted to Deputy Group
Finance Director. From 1992 to 1996, he was Director of Finance and
Administration for Ogilvy & Mather S.A. in Paris as well as President of the WPP
Holding Company for all French operations.
Fred H. Kellogg has been Vice Chairman of Nelson since July 1998 and the
Chairman of the NCI Network since 1996. Mr. Kellogg joined the Nelson Group in
April 1991 and served as President of NCI Advertising until April 1997. Prior to
joining the Nelson Group, Mr. Kellogg was Executive Vice President of Operations
of Lally, McFarland & Pantello/EURO RSCG, a pharmaceutical advertising agency,
from September 1983 to April 1991, and Marketing Director of Ortho
Pharmaceutical Corp., a Johnson & Johnson operating company, from 1977 to 1983.
Peter J. Scarperi has been Vice Chairman of Nelson since July 1998,
Chairman of Nelson Professional Sales from July 1995 to January 1998,
Co-Chairman of the SCIENS Worldwide Network since September 1996 and Co-Chairman
of Nelson Professional Sales since January 1998. Mr. Scarperi joined the Nelson
Group in September 1994 following nine years with Ogilvy & Mather Worldwide,
Inc. where he served as Chief Financial Officer and as a member of its Executive
Committee responsible for directing worldwide operations from 1990 to 1994. Mr.
Scarperi was the Chief Financial Officer of the McNeil Consumer Products Company
from 1976 to 1985.
Joseph A. Romano, PharmD, has been Vice Chairman of Nelson since July 1998,
Co-Chairman of the SCIENS Worldwide Network since September 1996 and Co-Chairman
of Nelson Professional Sales since January 1998. Dr. Romano joined the Nelson
Group in April 1992. Previously, Dr. Romano served as President of AVMD/Carlson
Healthcare Communications from 1989 to 1992, Executive Director of External
Affairs for the Sandoz (Novartis) Corporation from 1988 to 1989 and Senior Vice
President and Director of Healthcare at Hill & Knowlton Public Relations from
1987 to 1988. Dr. Romano was also the Associate Dean at the University of
Washington School of Pharmacy from 1978 to 1983.
Arthur Hull Hayes, Jr., M.D., has been Vice Chairman/Medical Director and a
director of Nelson since July 1998, and President and Chief Operating Officer of
MediScience Associates and a member of the Advisory Board of the Nelson Group
since 1991. He joined the Nelson Group in July 1991. From July 1986 to June
1991, he was President and Chief Executive Officer of EM Pharmaceuticals, Inc.,
the North American subsidiary of E. Merck. From 1981 to 1983, Dr. Hayes served
as Commissioner of the FDA and as the Assistant Surgeon General of the United
States. He serves on the Board of Directors of Myriad Genetics, Inc., a
gene-sequencing company, Napro BioTherapeutics, Inc., a natural product
pharmaceutical company, Premier Research Worldwide, a clinical research
organization, and Celgene Corporation, a human pharmaceuticals and agrochemicals
company.
William I. Bergman has served as a director of Nelson since July 1998. He
had previously been a member of the Advisory Board of the Nelson Group since
1990. Mr. Bergman served as President of Richardson-Vicks USA from 1986 to 1990
and was a Vice President of Procter &
38
Gamble following the acquisition of Richardson-Vicks by Procter & Gamble in 1987
until his retirement in 1990. Mr. Bergman was President of the Council on Family
Health, a non-profit organization supported by the pharmaceutical industry that
educates consumers on the proper use of medicines through advertising and public
relations initiatives, through 1998 and now serves on its Board of Directors. He
is a director of ZymeTx, Inc., a development stage biotechnology company.
Dr. Bernard Canavan has served as a director of Nelson since July 1998. He
had previously been a member of the Advisory Board of the Nelson Group since
1994. From June 1990 to February 1994 he served as President of American Home
Products Corporation and from 1987 to 1990 he served as Chairman of Wyeth-Ayerst
Pharmaceutical. Dr. Canavan is also a director of Magainin Pharmaceuticals Inc.,
a biopharmaceutical company, BioChem Pharma Inc., an international
biopharmaceutical company and Shire Pharmaceutical Group p.l.c., a
pharmaceutical company.
Kathleen M. Foley, M.D. has served as a director of Nelson since January
1999. Dr. Foley has been the Attending Neurologist in the Neurology Department
of the Memorial Sloan-Kettering Cancer Center since 1988 and has worked in its
Pain and Palliative Care Service since 1982, where she is currently the
Attending Neurologist. She has also been Professor of Neurology and Neuroscience
since 1989 and Professor of Clinical Pharmacology since 1990 at the Cornell
University Medical College. She is a member of numerous scientific and medical
societies and has received many honors for her work, including being named
Director of the Project on Death in America of the Open Society Institute in
1994.
George S. Frazza has served as a director of Nelson since July 1998. He had
previously been a member of the Advisory Board of the Nelson Group since 1997.
He joined the law firm of Patterson, Belknap, Webb & Tyler LLP in 1997 as
Counsel after more than 30 years with Johnson & Johnson, where he most recently
held the positions of Vice President and General Counsel (1979 to 1997) and
member of its Executive Committee (1987 to 1997). Mr. Frazza is a director of
Impath, Inc., a cancer diagnostic services company.
Lawrence C. Hoff has served as a director of Nelson since July 1998. He had
previously been a member of the Advisory Board of the Nelson Group since 1993.
From 1950 to 1990, Mr. Hoff was employed by the Upjohn Company (now Pharmacia &
Upjohn, Inc.), most recently as President and Chief Operating Officer for six
years until his retirement in 1990. He is also a director of Curative Health
Services, Inc., a disease management company and MedImmune, Inc., a
biotechnology company.
Barry MacTaggart has served as a director of Nelson since July 1998. He had
previously been a member of the Advisory Board of the Nelson Group since 1993.
Mr. MacTaggart is the former Chairman, President and Chief Executive Officer of
Pfizer International. He retired from that position in 1991.
Herbert Pardes, M.D., has served as a director of Nelson since July 1998.
He had previously been a member of the Advisory Board of the Nelson Group since
January 1998. Dr. Pardes has been Vice President for Health Sciences, Dean of
the Faculty of Medicine since 1989 and Chairman of the Department of Psychiatry
at the College of Physicians and Surgeons at Columbia University since 1984. Dr.
Pardes has been a member of the Institute of Medicine since 1992, was previously
Director of The National Institute of Mental Health from 1978 to 1984 and served
as President of the American Psychiatric Association from 1989 to 1990 and
Chairman of the Association of American Medical Colleges from 1995 to 1996.
Robert G. Pinco has served as a director of Nelson since July 1998. He had
previously been a member of the Advisory Board of the Nelson Group since 1990.
Mr. Pinco has been a partner and head of the Food and Drug Group of the law firm
Akin, Gump, Strauss, Hauer & Feld LLP since 1993 and an Adjunct Associate
Professor of Pharmacy and a member of the Board of Advisors at
39
the University of Maryland School of Pharmacy since 1976 and 1994, respectively.
He also served as a Director of the Over-the-Counter Drug Review, a division of
the FDA, from 1974 to 1977. Mr. Pinco served as Associate General Counsel of the
White House Special Action Office for Drug Abuse Prevention from 1971 to 1974
and held positions at the United States Department of Justice in the Drug
Enforcement Administration and the United States Attorney's Office for the
District of Columbia from 1969 to 1971.
Thomas O. Pyle has served as a director of Nelson since July 1998. He had
previously been a member of the Advisory Board of the Nelson Group since 1995.
Mr. Pyle served as Chief Executive Officer of the Harvard Community Health Plan
(currently known as Harvard Pilgrim Healthcare) from 1978 to 1991. He was Chief
Executive Officer of Met Life Healthcare from 1993 to 1994 and Senior Adviser on
healthcare to the Boston Consulting Group from 1995 to 1997. Mr. Pyle is a
director of Lincare Holdings, a company involved in home respiration therapy,
and Millipore Corporation, a physical and chemical separations technology
company.
Kenneth Roman has served as a director of Nelson since July 1998. He had
previously been a member of the Advisory Board of the Nelson Group since January
1998. Mr. Roman was with Ogilvy & Mather Worldwide, Inc. for 26 years, most
recently serving as its Chairman from 1985 to 1989 and also as Chairman and
Chief Executive Officer of the Ogilvy Group from 1988 to 1989. From 1989 to 1991
he was an Executive Vice President of American Express Company. Since 1991 Mr.
Roman has been an independent consultant and has served on the boards of
directors of several companies. He is currently a director of Brunswick
Corporation, a manufacturer of marine and recreational products, Compaq Computer
Corporation, Coty Inc., a fragrance and cosmetics manufacturer and marketer, and
PennCorp Financial Group, Inc., an insurance holding company.
BOARD OF DIRECTORS
The number of Nelson's directors is currently fixed at 15, with two seats
currently vacant. Our Board of Directors is divided into three classes, with the
members of each class of directors serving for staggered three-year terms. The
Board of Directors consists of four Class I Directors, four Class II Directors
and five Class III Directors, whose initial terms will expire at the 1999, 2000
and 2001 annual meetings of stockholders, respectively.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee assists the Board of Directors in
fulfilling its responsibilities of ensuring that management is maintaining an
adequate system of internal controls such that there is reasonable assurance
that assets are safeguarded and that financial reports are properly prepared;
that there is consistent application of generally accepted accounting
principles; and that there is compliance with management's policies and
procedures. In performing these functions, the Audit Committee meets
periodically with the independent auditors and management to review their work
and confirm that they are properly discharging their respective
responsibilities. The Audit Committee also recommends the firm to be appointed
as independent accountants to audit financial statements and to perform services
related to the audit, reviews the scope and results of the audit with the
independent accountants, reviews our annual operating results with management
and the independent accountants, considers the adequacy of the internal
accounting procedures and considers the effect of such procedures on the
accountants' independence. The Audit Committee consists of William I. Bergman
(Chairman), Dr. Kathleen M. Foley, Lawrence C. Hoff and Barry MacTaggart.
The primary function of the Compensation Committee is to review the
compensation philosophy and policy of the Management Compensation Committee, a
non-Board of Directors committee composed of Wayne K. Nelson (Chairman), Thomas
A. Moore and Peter Law-Gisiko, which determines management and executive
compensation and establishes fringe benefit and other compensation policies. The
compensation of the members of the Management
40
Compensation Committee is determined by the Compensation Committee. The
Compensation Committee is also responsible for the administration of our stock
incentive plans, including reviewing management recommendations with respect to
option grants and taking such other actions as may be required in connection
with compensation and incentive plans. The Compensation Committee consists of
Dr. Bernard Canavan (Chairman), Dr. Herbert Pardes, Robert Pinco, Thomas O. Pyle
and Kenneth Roman.
DIRECTOR COMPENSATION
Directors who are employees of Nelson do not receive any additional
compensation for their services as directors or as members of committees. Each
director who is not an employee of Nelson receives a fee of (a) $2,000 for
attendance at each Board of Directors' meeting, (b) $1,000 for attendance at
each committee meeting that is held on the same day as a Board of Directors'
meeting and (c) $2,000 for each committee meeting that is not held on the same
day as a Board of Directors' meeting. These amounts are payable in common stock
or cash at the director's option. In addition, under Nelson's stock incentive
plan for outside directors, each non-employee director also receives an initial
grant of options to purchase 5,000 shares of common stock and an annual grant of
options to purchase 1,000 shares of common stock.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation for
services rendered in all capacities awarded to, earned by or paid to the chief
executive officer and the four most highly paid executive officers of Nelson
whose aggregate annual base salary and bonus for 1998 exceeded $100,000 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
1998 ANNUAL LONG-TERM COMPENSATION
COMPENSATION ----------------------
--------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS COMPENSATION($)
--------------------------- --------- -------- ---------------------- ---------------
Wayne K. Nelson................... (1)
Chairman of the Board of
Directors
Thomas A. Moore................... (2)
President and Chief Executive
Officer
Peter J. Scarperi................. (3) (4)
Vice Chairman
Dr. Joseph A. Romano.............. (4)
Vice Chairman
Fred H. Kellogg................... (4)
Vice Chairman
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(1) Includes $ paid to a company owned by Mr. Nelson.
(2) Includes $ paid to a company owned by Mr. Moore.
(3) Includes $ paid to a company owned by Mr. Scarperi.
(4) Includes grant of ownership interests in Nelson start-up companies. See
"Certain Related Party Transactions."
41
The following table sets forth information relating to grants of stock
options made during fiscal 1998 to each of the Named Executive Officers under
the Nelson Communications Inc. 1998 Stock Incentive Plan.
OPTION GRANTS IN FISCAL 1998
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE GRANT
UNDERLYING EMPLOYEES PRICE DATE
OPTIONS IN FISCAL PER EXPIRATION PRESENT
NAME GRANTED(1) YEAR SHARE DATE VALUE(2)
---- ---------- ---------- -------- ---------- ----------
Wayne K. Nelson.................. -- -- -- -- --
Thomas A. Moore.................. 425,000 13.2% $ 7.00 10/28/08 $1,000,000
Peter J. Scarperi................ 240,000 7.5 7.00 10/28/08 570,000
Dr. Joseph A. Romano............. 220,000 6.8 7.00 10/28/08 520,000
Fred H. Kellogg.................. 170,000 5.3 7.00 10/28/08 400,000
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(1) Also reflects the total number of shares of common stock underlying
unexercised options held by the Named Executive Officers as of the end of
fiscal 1998, none of which were exercisable at such time.
(2) The fair value of the options was estimated at the date of grant using the
Black-Scholes option pricing model. Significant assumptions used to estimate
the grant date present values include a risk-free interest rate of 5.5%, a
weighted-average expected life of 7.6 years, no expected volatility and no
expected dividends.
1998 STOCK INCENTIVE PLANS
On October 27, 1998 we adopted the Nelson Communications Inc. 1998 Stock
Incentive Plan for the benefit of the officers and other employees of Nelson and
certain subsidiaries (the "Employee Stock Incentive Plan") and the Nelson
Communications Inc. 1998 Stock Incentive Plan for Outside Directors for the
benefit of the non-employee directors of Nelson (the "Director Stock Incentive
Plan" and, together with the Employee Stock Incentive Plan, the "Stock Incentive
Plans"). Both plans will remain effective until October 26, 2008.
Employee Stock Incentive Plan
The Employee Stock Incentive Plan provides for the grant of:
- options that are intended to qualify as incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code;
- options not intended to so qualify ("NQOs");
- awards of restricted stock; and
- awards of deferred stock.
Officers and other employees (including director-employees) of Nelson and
any entity that is at least 20% owned by Nelson are eligible to receive grants
under this plan. The Employee Stock Incentive Plan is administered by the
Compensation Committee, and stock options, restricted stock awards and deferred
stock awards are granted at the discretion of the Compensation Committee.
Options. The Compensation Committee determines:
- which eligible persons will be granted options under the plan;
- the type of options, the terms and conditions of exercisability;
- the term of the options; and
- the number of shares of common stock for which an option will be granted.
The maximum term of each stock option granted pursuant to the plan is ten
years and one day. If an optionee's employment terminates, the option will
remain exercisable only to the extent determined by the Compensation Committee.
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The aggregate fair market value (determined at the date the option is
granted) of stock with respect to which ISOs granted under the Employee Stock
Incentive Plan are exercisable for the first time in any calendar year by any
eligible officer or other employee under the Employee Stock Incentive Plan may
not exceed $100,000. The exercise price of ISOs granted under the Employee Stock
Incentive Plan may not be less than fair market value of the stock on the date
of grant, as determined by the Compensation Committee. The exercise price for
each NQO granted under the Employee Stock Incentive Plan is determined by the
Compensation Committee at the time of grant.
Restricted Stock Awards. The Compensation Committee determines:
- which eligible persons will receive restricted stock awards;
- whether the grant will be an award of restricted stock or rights to
purchase restricted stock;
- the number of shares of restricted stock or rights to purchase restricted
stock granted;
- the price to be paid by the recipient of a right to purchase restricted
stock; and
- the vesting conditions of such awards.
Unless otherwise determined by the Compensation Committee, if an employee
terminates employment before all of his or her restricted stock has vested or
the vesting requirements are otherwise not met, the unvested shares of
restricted stock will be forfeited, and the purchase price paid by the employee
with respect to such shares will be returned to the employee or a cash payment
equal to such restricted stock's fair market value on the date of forfeiture, if
lower, will be paid to the employee. Holders of restricted stock will have the
right to vote with respect to such stock and will be entitled to dividends.
Deferred Stock Awards. The Compensation Committee determines which
eligible persons will receive deferred stock awards, the number of shares of
deferred stock to be awarded and the length and conditions of the deferral
period. Awards may be conditioned upon the attainment of specified performance
goals or other criteria. Upon the expiration of the deferral period, the grantee
will be paid the value of the deferred stock award in stock, cash or a
combination thereof, at the discretion of the Compensation Committee. Upon
termination of employment prior to the expiration of the deferral period, the
employee will forfeit all deferred stock awards.
The total number of shares of common stock reserved and available for
awards under the Employee Stock Incentive Plan is 4,500,000. As of April 19,
1999, there were options outstanding under the Employee Stock Incentive Plan to
purchase 3,680,572 shares of common stock. Such options generally vest over five
years and are exercisable at a price of $7.00 per share.
Director Stock Incentive Plan
The Director Stock Incentive Plan provides for the grant of NQOs to
directors of Nelson who are not also employees of Nelson or any entity that is
at least 20% owned by Nelson ("Outside Directors"). The Director Stock Incentive
Plan is administered by the Compensation Committee.
The Director Stock Incentive Plan provides for the grant to each Outside
Director of an option to purchase 5,000 shares of common stock upon the later of
the effective date of the plan or their election to the Board, and another
option to purchase 1,000 shares of common stock after each annual shareholder
meeting. The term of each option will be ten years and one day. Each option
granted under the Director Stock Incentive Plan will become exercisable over
three years of service as a director, with one-third of the shares covered by
the option becoming exercisable at the end of each year of service. Options also
would become fully exercisable if a director terminates service after the later
of age 65 and one year of service or by reason of death or disability. In
addition, if a change in control occurs, the options of the existing members of
the Board would become fully exercisable.
The exercise price for grants issued under the Director Stock Incentive
Plan is the fair market value of common stock on the date of grant. For grants
made prior to this offering, fair
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market value was determined by the Compensation Committee. For grants made after
the completion of this offering, fair market value is the closing price on the
New York Stock Exchange on the date of grant. Options may be exercised by
payment in cash and/or surrender of unrestricted shares of common stock that
have been owned by the Outside Director for at least 6 months. A six month
post-termination exercise period is available for Outside Directors who
terminate service after the later of age 65 and one year of service or by reason
of death or disability (provided such period does not extend beyond the end of
the option term). Any Outside Director who terminates service within one year
following a change in control would be able to exercise his or her option for
the remainder of the applicable option term. Upon termination for any other
reason, the post-termination exercise period is 60 days (provided such period
does not extend past the option term).
Change in Control.
Pursuant to the Stock Incentive Plans, in the event of a change in control,
all options become fully exercisable and all restrictions and deferral
limitations applicable to restricted stock awards and deferred stock awards
lapse. A change in control is defined under both Stock Incentive Plans as:
- a corporate merger or similar transaction in which Nelson is not the
surviving entity or the dissemination of a proxy statement seeking
shareholder approval of such a transaction;
- the acquisition of, or the announcement of the acquisition of, 35% of
Nelson's common stock by an outsider or a related group of outsiders; or
- a change in two-thirds of the composition of Nelson's Board of Directors
within two years without the approval of the existing directors, or the
announcement of such a change.
ASSUMED STOCK OPTION PLANS
As of April 19, 1999, there were options outstanding for an aggregate of
263,510 shares of common stock under two stock option plans assumed by Nelson in
the consolidation. Pursuant to a resolution of the Board of Directors, effective
October 27, 1998, these assumed plans were terminated. The termination of these
assumed plans does not affect any outstanding options thereunder.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
awards made under the Stock Incentive Plans or the assumed plans based upon the
laws in effect on the date hereof.
ISOs. No federal taxable income should be recognized by the employee upon
the grant or exercise of an ISO. If no disqualifying disposition of the shares
of common stock acquired upon exercise of an ISO is made within two years of the
date of grant or within one year after the transfer of the shares to the
employee, then: (a) upon the sale of the shares, any amount realized in excess
of the exercise price of the option will be taxed as a long-term capital gain
and (b) no deduction will be allowed to Nelson for federal income tax purposes.
The exercise of an ISO may result in an alternative minimum tax liability.
If common stock acquired upon the exercise of an ISO is disposed of prior
to the expiration of the holding periods described above, then generally: (a)
the employee will recognize ordinary income in an amount equal to the excess, if
any, of the fair market value of the shares at exercise (or, if less, the amount
realized on the disposition of the shares) over the exercise price of the option
and (b) Nelson will be entitled to deduct any such recognized amount. Any
further gain recognized by the employee will be taxed as short-term or long-term
capital gain, as the case may be, and will not result in any deduction by
Nelson.
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NQOs. Except as noted below, with respect to NQOs: (a) no federal taxable
income should be recognized by the optionee at the time the option is granted;
(b) generally upon exercise of the option, the optionee recognizes ordinary
income in an amount equal to the difference between the exercise price of the
option and the fair market value of the shares on the date of exercise and
Nelson will be entitled to a tax deduction in the same amount; and (c) at
disposition, generally any appreciation (or depreciation) after the date of
exercise is treated by the optionee either as long-term or short-term capital
gain (or loss), depending upon the length of time that the optionee has held the
shares. Nelson's tax deduction upon the exercise of a NQO by certain executive
officers may be subject to the limitations of Section 162(m) of the Internal
Revenue Code if the NQO was granted with an exercise price less than the fair
market value of the common stock on the date of grant.
Restricted Stock. An employee receiving restricted stock generally will
recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
the consideration paid for the restricted stock. However, an employee may elect,
under Section 83(b) of the Internal Revenue Code, to recognize ordinary income
on the date of grant equal to the excess of the fair market value of the shares
as of such date (determined without regard to the restrictions) over their
purchase price. With respect to the sale of shares after the forfeiture period
has expired, the holding period to determine whether the employee has long-term
or short-term capital gain generally begins when the restriction period expires,
and the tax basis for such shares will generally be based on the fair market
value of such shares on such date. However, if the employee makes an election
under Section 83(b) of the Internal Revenue Code, the holding period will
generally commence immediately following the purchase of the restricted stock
and the tax basis generally will be equal to the fair market value of the shares
on the date of purchase (determined without regard to restrictions). Nelson
generally will be entitled to a deduction equal to the amount that is taxable as
ordinary income to the employee in the year that such income is taxable.
Deferred Stock. An employee receiving deferred stock generally will
recognize ordinary income equal to the fair market value of the deferred stock
on the date that the deferred stock is distributed to the employee, and the
capital gain holding period for such stock will also commence on that date.
Nelson generally will be entitled to a deduction in the same amount as the
amount of ordinary income recognized by the employee in the year that such
income is taxable.
Special Rules Applicable to Corporate Insiders. Generally, except where an
election under Section 83(b) of the Internal Revenue Code is made or in the case
of ISOs, an individual subject to Section 16(b) of the Securities Exchange Act,
or to restrictions relating to "pooling of interests" accounting who receives
common stock in connection with an award may not become subject to tax at the
times discussed above, but may have the amount of income calculated (and
recognized) based on the fair market value of the common stock at a later date.
Dividends and Dividend Equivalents. Dividends paid on restricted stock
prior to the date on which the forfeiture restrictions lapse generally will be
treated as compensation that is taxable as ordinary income to the employee and
will be deductible by Nelson. If, however, the employee makes an election under
Section 83(b) of the Internal Revenue Code, the dividends will be taxable as
ordinary income to the employee but will not be deductible by Nelson. If
dividend equivalents are credited with respect to deferred stock awards, the
employee generally will recognize ordinary income when the dividend equivalents
are paid and Nelson will be entitled to a deduction at that time.
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EMPLOYMENT AGREEMENTS
Prior to the completion of this offering, we expect to enter into
employment agreements with each of our executive officers. We expect these
employment agreements to initially be for a three-year term and to contain
confidentiality, non-solicitation and non-competition provisions.
INCENTIVE BONUS PROGRAM
Nelson maintains an incentive bonus program for its senior employees and
executives, pursuant to which cash bonuses may be paid to such employees and
executives based on achievement of pre-established performance criteria. The
Compensation Committee determines the applicable performance criteria and
amounts payable to executive officers under this program. Management makes the
foregoing determinations with respect to amounts to be paid under the program to
non-executive officer participants.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The By-Laws provide that directors and officers of Nelson shall be, and in
the discretion of the Board of Directors non-officer employees may be,
indemnified by Nelson to the fullest extent authorized by Delaware law, as it
now exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for or on behalf of Nelson. The
By-Laws also provide that the right of directors and officers to indemnification
shall be a contract right and shall not be exclusive of any other right now
possessed or hereafter acquired under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise. The Certificate of
Incorporation contains a provision permitted by Delaware law that generally
eliminates the personal liability of directors for monetary damages for breaches
of their fiduciary duty, including breaches involving negligence or gross
negligence in business combinations, unless the director has breached his or her
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or a knowing violation of law, paid a dividend or approved a stock repurchase in
violation of the Delaware General Corporation Law or obtained an improper
personal benefit. This provision does not alter a director's liability under the
federal securities laws and does not affect the availability of equitable
remedies, such as an injunction or rescission, for breach of fiduciary duty.
We have entered into indemnification agreements with each member of our
Board of Directors. These agreements require us to indemnify our directors to
the fullest extent permitted by law against liabilities and expenses that are
incurred by them in any action or proceeding (including any action or proceeding
by or in the right of Nelson) arising out of their services as directors or
officers of Nelson, or of any other entity at the request of Nelson. The
agreements also require us to advance expenses incurred by any director in
connection with a claim and require us to set up a trust at the request of a
director for the funding of expenses in the event of a "potential change in
control" of Nelson (as that term is defined in the agreements).
We also maintain directors' and officers' liability insurance that covers
officers and directors against certain losses that may arise out of their
positions with Nelson and covers Nelson for liabilities it may incur to
indemnify its officers and directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to our consolidation, compensation policies and decisions, including
those relating to salary, bonuses and benefits of executive officers were made
by senior management. All decisions relating to compensation of executive
officers of Nelson are made by the Management Compensation Committee and are
subject to the review and approval of the Compensation Committee. The
compensation of the members of the Management Compensation Committee is
determined by the Compensation Committee. None of the directors who serve on the
Compensation Committee is or has been an officer or employee of Nelson. See
"-- Board of Directors."
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CERTAIN RELATED PARTY TRANSACTIONS
During 1998 and the first three months of 1999, Messrs. Scarperi, Romano
and Kellogg, each of whom is an executive officer of Nelson, received ownership
interests in start-up companies formed by Nelson during such periods. We expect
to continue to grant equity interests in start-up companies to executive
officers who have oversight responsibilities for those companies.
On March 29, 1999, Mr. Moore acquired 11,031 shares of common stock from
Nelson in exchange for shares of a subsidiary of Nelson held by him. The
subsidiary stock was acquired by Mr. Moore from a former stockholder who chose
not to participate in the consolidation. The exchange ratio was the same as that
used to calculate the conversion of stock held by stockholders of that
subsidiary in the consolidation.
Pursuant to a pre-existing agreement with Nelson, on July 16, 1998, Mr.
Moore acquired from Nelson 4,278,499 shares of PDN common stock which Nelson
previously acquired from a former stockholder. The purchase price for those
shares was approximately $5.2 million, which represents the same price per share
as Nelson paid when it acquired the stock. In the consolidation, Mr. Moore
received approximately 1,179,156 shares of common stock in exchange for those
shares of PDN common stock.
In the consolidation the following executive officers and/or directors of
Nelson and members of their families and entities controlled by them received
the following number of shares of common stock of Nelson in exchange for their
interests in the various Nelson Group companies:
Wayne K. Nelson........................................... 13,317,829
Thomas A. Moore........................................... 3,904,694
Peter J. Scarperi......................................... 3,021,724
Fred H. Kellogg........................................... 347,576
Joseph A. Romano.......................................... 615,755
Arthur Hull Hayes, Jr..................................... 10,655
|
In 1996 and 1997, Mr. Nelson had outstanding loans from several Nelson
Group companies in the aggregate amounts of $148,485 and $850,000, respectively.
As of December 31, 1998, these loans had been repaid. These loans were
noninterest-bearing and had no stated maturity date.
In 1996 and 1997, Dr. Romano had outstanding loans from several Nelson
Group companies in the aggregate amounts of $127,887 and $24,815, respectively.
As of December 31, 1998, these loans had been repaid. These loans were
noninterest-bearing and had no stated maturity date. In September 1998, Nelson
loaned Dr. Romano $586,244. This loan is for a maximum term of two years, bears
interest at the rate of 8.25% per annum and is unsecured.
In September, 1998, Nelson loaned Mr. Kellogg $97,609. This loan is for a
maximum term of two years, bears interest at the rate of 8.25% per annum and is
unsecured.
Mr. Frazza is of counsel to Patterson, Belknap, Webb & Tyler LLP, which
rendered services to Nelson in connection with the consolidation and serves as
special corporate counsel to Nelson. We believe that the fees charged for these
services are at rates no less favorable to Nelson than could have been obtained
from unaffiliated third parties.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as to the beneficial
ownership of the common stock as of March 31, 1999 and as adjusted to reflect
the sale of the shares of common stock offered hereby, of (a) each person known
by us to own beneficially five percent or more of the outstanding shares of
common stock, (b) each director and Named Executive Officer of Nelson and (c)
all directors and executive officers of Nelson as a group.
PERCENTAGE
BENEFICIALLY OWNED(1)
NAME AND ADDRESS OF NUMBER OF SHARES ---------------------------------
BENEFICIAL OWNER(2) BENEFICIALLY OWNED(1) BEFORE OFFERING AFTER OFFERING
------------------- --------------------- --------------- --------------
Wayne K. Nelson(3)..................... 13,317,829 54.5%
Thomas A. Moore(4)..................... 3,904,694 16.0
Peter J. Scarperi(5)................... 3,021,724 12.4
Dr. Joseph A. Romano(6)................ 615,755 2.5
Fred H. Kellogg........................ 347,576 1.4
Dr. Arthur Hull Hayes, Jr.............. 10,655 * *
William I. Bergman..................... -- -- --
Dr. Bernard Canavan.................... -- -- --
Dr. Kathleen M. Foley.................. -- -- --
George S. Frazza....................... -- -- --
Lawrence Hoff.......................... -- -- --
Barry MacTaggart....................... -- -- --
Dr. Herbert Pardes..................... -- -- --
Robert G. Pinco........................ -- -- --
Thomas O. Pyle......................... -- -- --
Kenneth Roman.......................... -- -- --
All executive officers and directors as
a group (17 persons).................
---------- --------- ---------
21,218,233 86.8%
|
* Less than 1%
(1) All percentages have been determined in accordance with Rule 13d-3 under the
Securities Exchange Act. For purposes of this table, a person or group of
persons is deemed to have "beneficial ownership" of any shares of common
stock which such person has the right to acquire within 60 days after the
date of this prospectus. For purposes of computing the percentage of
outstanding shares of common stock held by each person or group of persons
named above, any security which such person or persons has or have the right
to acquire within 60 days after the date of this prospectus is deemed to be
outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. As of March 31,
1999, a total of 24,449,089 shares of common stock were issued and
outstanding.
(2) The address of each person included in this chart is c/o Nelson
Communications Inc., 41 Madison Avenue, New York, New York 10010.
(3) Includes 2,474,021 shares owned by The Nelson Family Limited Partnership,
the general partner of which is a corporation owned by Mr. Nelson and his
wife. Accordingly, Mr. Nelson and his wife share voting and investment
control over the shares held by the partnership. Also includes 3,642,192
shares owned by The Wayne K. Nelson 1998 Grantor Retained Annuity Trust. Mr.
Nelson and his wife share voting and investment control over the shares held
by the trust as joint trustees.
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(4) Includes 437,566 shares owned by The Thomas and Avril Moore Family Limited
Partnership, the general partner of which is a corporation wholly owned by
Mr. Moore. Also includes 358,735 shares owned by The Thomas A. Moore 1998
Grantor Retained Annuity Trust. Mr. Moore and his wife share voting and
investment control over the shares held by the trust as joint trustees.
Approximately 60% of Mr. Moore's shareholdings shown above are pledged to
secure a third-party loan. The proceeds of the loan were used by Mr. Moore
to acquire a portion of his shareholdings in Nelson. The loan will become
payable sometime after the expiration of one year after the completion of
this offering. It is likely that, in order to repay the loan, Mr. Moore will
be required to sell a substantial portion of his shareholdings shown above
or transfer his shares to the lender.
(5) Includes 669,398 shares owned by The Scarperi Family Limited Partnership,
the general partner of which is a corporation wholly owned by Mr. Scarperi.
Also includes 381,546 shares owned by the Peter J. Scarperi 1998 Grantor
Retained Annuity Trust. Mr. Scarperi and his wife share voting and
investment control over the shares held by the trust as joint trustees.
(6) Includes 420,416 shares owned by the Joseph A. Romano 1998 Grantor Retained
Annuity Trust. Dr. Romano and his wife share voting and investment control
over the shares held by the trust as joint trustees.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Prior to the completion of this offering, there are 24,541,574 shares of
common stock outstanding. As of April 19, 1999, we had 58 stockholders.
Upon completion of this offering, the authorized capital stock of Nelson
will consist of 100,000,000 shares of common stock, of which
shares will be issued and outstanding and 2,000,000 shares of undesignated
preferred stock issuable in one or more series by the Board of Directors, of
which no shares will be issued and outstanding.
Common Stock. The holders of common stock are entitled to one vote per
share on all matters to be voted on by stockholders and are entitled to receive
such dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefor. Any issuance of preferred stock
with a dividend preference over common stock would adversely affect the dividend
rights of holders of common stock. Holders of common stock are not entitled to
cumulative voting rights. Therefore, the holders of a majority of the shares
voted in the election of directors can elect all of the directors then standing
for election, subject to any voting rights of the holders of any then
outstanding preferred stock. The holders of common stock have no preemptive or
other subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to the common stock. All outstanding shares
of common stock are fully paid and non-assessable. Upon completion of this
offering, all shares offered hereby will be fully paid and non-assessable.
Our By-laws provide, subject to the rights of the holders of any preferred
stock then outstanding, that the number of directors shall be fixed by the Board
of Directors. The directors, other than those who may be elected by the holders
of any preferred stock, are divided into three classes as nearly equal in number
as possible, with each class serving for a three-year term. Subject to any
rights of the holders of any preferred stock to elect directors, and to remove
any director whom the holders of any preferred stock had the right to elect, any
director may be removed from office only with cause and by the affirmative vote
of at least two-thirds of the total votes which would be eligible to be cast by
stockholders in the election of such director.
Undesignated Preferred Stock. The Board of Directors is authorized,
without further action of the stockholders, to issue up to 2,000,000 shares of
preferred stock in one or more series and to fix the designations, powers,
preferences and the relative, participating optional or other special rights of
the shares of each series and any qualifications, limitations and restrictions
thereon as set forth in our Certificate of Incorporation. Any such preferred
stock issued by Nelson may rank prior to the common stock as to dividend rights,
liquidation preference or both, may have full or limited voting rights and may
be convertible into shares of common stock.
The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring or seeking to acquire, a significant portion of the outstanding common
stock.
CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION AND BY-LAWS
A number of provisions of our Certificate of Incorporation and By-Laws
concern matters of corporate governance and the rights of stockholders. Certain
of these provisions, as well as the ability of the Board of Directors to issue
shares of preferred stock and to set the voting rights, preferences and other
terms thereof, may have an anti-takeover effect and may discourage takeover
attempts not first approved by the Board of Directors, including takeovers that
stockholders may consider to be in their best interests. To the extent takeover
attempts are discouraged, temporary fluctuations in the market price of the
common stock, that may result from actual or rumored takeover attempts, may be
inhibited. These provisions, together with the
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classified Board of Directors and the ability of the Board to issue preferred
stock without further stockholder action, also could delay or frustrate the
removal of incumbent directors or the assumption of control by stockholders,
even if such removal or assumption would be beneficial to stockholders of
Nelson. These provisions also could discourage or make more difficult a merger,
tender offer or proxy contest, even if favorable to the interests of
stockholders, and could depress the market price of the common stock. The Board
of Directors believes that these provisions are appropriate to protect the
interests of Nelson and its stockholders. The Board of Directors has no present
plans to adopt any other measures or devices that may have an "anti-takeover
effect."
Meetings of Stockholders. The By-Laws provide that a special meeting of
stockholders may be called only by the Board of Directors unless otherwise
required by law. The By-Laws provide that only those matters set forth in the
notice of the special meeting may be considered or acted upon at that special
meeting unless otherwise provided by law. In addition, the By-Laws set forth
certain advance notice and informational requirements and time limitations on
any director nomination or any new proposal that a stockholder wishes to make at
an annual meeting of stockholders.
Amendment of the Certificate of Incorporation. The Certificate of
Incorporation provides that an amendment must first be approved by a majority of
the Board of Directors and (with certain exceptions) then approved by a majority
(or 66 2/3% in the case of any proposed amendment to the provisions of the
Certificate of Incorporation relating to the composition of the Board or
amendments of the Certificate of Incorporation) of the total votes eligible to
be cast by holders of voting stock with respect to such amendment.
Amendment of By-Laws. The Certificate of Incorporation provides that the
By-Laws may be amended or repealed by the Board of Directors or by the
stockholders. Such action by the Board of Directors requires the affirmative
vote of a majority of the directors then in office. Such action by the
stockholders requires the affirmative vote of at least two-thirds of the total
votes eligible to be cast by holders of voting stock with respect to such
amendment or repeal at an annual meeting of stockholders or a special meeting
called for such purpose unless the Board of Directors recommends that the
stockholders approve such amendment or repeal at such meeting, in which case
such amendment or repeal shall only require the affirmative vote of a majority
of the total votes eligible to be cast by holders of voting stock with respect
to such amendment or repeal.
Ability to Adopt Shareholder Rights Plan. The Board of Directors may in
the future resolve to issue shares of preferred stock or rights to acquire such
shares to implement a shareholder rights plan. A shareholder rights plan
typically creates voting or other impediments or sets forth circumstances under
which shares are distributed to a third-party investor, to a group of investors
or stockholders or to an employee stock-ownership plan, to discourage persons
seeking to gain control of Nelson by means of a merger, tender offer, proxy
contest or otherwise if such change in control is not in the best interest of
Nelson and its stockholders. The Board of Directors has no present intention of
adopting a shareholder rights plan and is not aware of any attempt to obtain
control of Nelson.
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the offering, Nelson will be subject to the provisions
of Section 203 of the Delaware General Corporation Law ("Section 203"). Section
203 provides, with certain exceptions, that a Delaware corporation whose stock
generally is publicly traded or held of record by more than 2,000 shareholders
may not engage in any of a broad range of business combinations with a person or
affiliate, or associate of such person, who is an "interested stockholder" (as
defined below) for a period of three years from the date that such person became
an interested stockholder unless:
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-- the transaction resulting in a person becoming an interested
stockholder, or the business combination, is approved by the board
of directors of the corporation before the person becomes an
interested stockholder;
-- the interested stockholder acquired 85% or more of the outstanding
voting stock of the corporation in the same transaction that makes
it an interested stockholder (excluding shares owned by persons who
are both officers and directors of the corporation, and shares held
by certain employee stock ownership plans); or
-- on or after the date the person becomes an interested stockholder,
the business combination is approved by the corporation's board of
directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder.
The three-year prohibition also does not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving the corporation and
a person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of the majority
of the corporation's directors. The term "business combination" is defined
generally to include mergers or consolidations between a Delaware corporation
and an "interested stockholder," transactions with an "interested stockholder"
involving the assets or stock of the corporation or its majority-owned
subsidiaries and transactions which increase an interested stockholder's
percentage ownership of stock. The term "interested stockholder" is defined
generally as a stockholder who, together with affiliates and associates, owns
(or, within three years prior, did own) 15% or more of a Delaware corporation's
voting stock. Section 203 could prohibit or delay a merger, takeover or other
change in control of Nelson and therefore could discourage attempts to acquire
Nelson.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action of
its stockholders to exempt itself from coverage, provided that such by-law or
charter amendment shall not become effective until 12 months after the date it
is adopted. Neither our Certificate of Incorporation nor our By-Laws contains
any such exclusion.
TRANSFER AGENT AND REGISTRAR
Nelson has selected as the transfer agent and registrar for
the common stock.
52
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. We cannot predict the effect that the sale or availability for sale of
shares of additional common stock will have on the market price of the common
stock. Sales of substantial amounts of such shares in the public market after
the restrictions on resale described below, or the perception that such sales
could occur, could materially and adversely affect the market price of our
common stock and could impair Nelson's ability to raise equity capital in the
future.
Upon completion of this offering, we will have a total of
shares of common stock outstanding. Of these shares, the shares
of common stock offered hereby will be freely tradable without restriction or
registration under the Securities Act by persons other than "affiliates" of
Nelson, as defined in the Securities Act, who would be required to sell such
shares under Rule 144 under the Securities Act. The remaining 24,541,574 shares
of common stock outstanding will be "restricted securities" as that term is
defined by Rule 144 (the "Restricted Shares"). The Restricted Shares were issued
and sold by Nelson in private transactions in reliance upon exemptions from
registration under the Securities Act.
Lock-Up Agreements. Nelson, our directors and officers and existing
stockholders who hold an aggregate of 24,541,574 Restricted Shares, together
with the holders of options to purchase 3,994,082 shares of common stock, have
agreed that for a period of 180 days following the date of this prospectus,
without the prior written consent of SG Cowen Securities Corporation, they will
not: (1) directly or indirectly, offer, sell, assign, transfer, encumber,
pledge, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, lend
or otherwise dispose of, other than by operation of law, any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock (including, without limitation, common stock which may be deemed to
be beneficially owned in accordance with the rules and regulations promulgated
under the Securities Act); or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of common stock whether any such transaction described in clause (1)
or (2) above is to be settled by delivery of common stock or such other
securities, in cash or otherwise. The foregoing restrictions, however, do not
apply to the exercise of currently outstanding stock options or to existing
contractual obligations of Nelson.
Rule 144. Of the Restricted Shares, 24,326,643 shares will be eligible for
sale in the public market pursuant to Rule 144 under the Securities Act
beginning 90 days after the date of this prospectus. An additional
shares will be eligible for sale in the public market pursuant to Rule 144 under
the Securities Act beginning at various times from to ,
2000. All such shares will be subject to the lock-up agreements described above.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year (including the holding period of any prior owner except an
affiliate), including persons who may be deemed "affiliates" of Nelson, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of one percent of the number of shares of common stock then
outstanding (approximately shares upon completion of this
offering) or the average weekly trading volume of the common stock during the
four calender weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements, and to the availability of current public information
about Nelson. In addition, a person who is not deemed to have been an affiliate
of Nelson at the time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate), would be
entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. Rule 144 also provides that affiliates who are
selling shares that are not Restricted Shares must nonetheless comply with the
same restrictions applicable to Restricted Shares with the exception of the
holding period requirement.
Stock Options. We intend to file a registration statement on Form S-8
under the Securities Act to register 5,067,179 shares of common stock issued or
issuable pursuant to our stock incentive plans. As of April 19, 1999, there were
3,994,082 outstanding options to purchase shares of common stock. We expect to
file this registration statement immediately following the date of this
prospectus, and such registration statement will become effective upon filing.
Shares covered by such registration statement will be eligible for sale in the
public markets after the 180-day lock-up period described above, subject to Rule
144 volume limitations applicable to affiliates.
53
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated
, 1999, the underwriters named below, through their representatives SG
Cowen Securities Corporation and Bear, Stearns & Co. Inc., have severally agreed
to purchase from us the number of shares of common stock set forth opposite
their names at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus.
NUMBER OF
NAME SHARES
---- ----------------
SG Cowen Securities Corporation............................
Bear, Stearns & Co. Inc....................................
--------
Total............................................
========
|
The underwriting agreement provides that the obligations of the
underwriters are conditional and may be terminated at their discretion based on
their assessment of the state of the financial markets and may also be
terminated upon the occurrence of the events specified in the underwriting
agreement. The underwriters are severally committed to purchase all of the
common stock being offered by Nelson if any of such shares are purchased (other
than those covered by the over-allotment option described below).
The underwriters propose to offer the common stock directly to the public
at the public offering price set forth on the cover page of this prospectus. The
underwriters may offer the common stock to certain dealers at that price less a
concession not in excess of $ per share. Dealers may reallow a concession
not in excess of $ per share to certain other dealers. After the shares of
the common stock are released for sale to the public, the underwriters may vary
the offering price and other selling terms from time to time.
We have granted to the underwriters an option, exercisable for up to 30
days after the date of this prospectus, to purchase up to additional
shares of common stock at the public offering price set forth on the cover of
this prospectus to cover over-allotments, if any. If the underwriters exercise
their over-allotment option, the underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares of common stock to be purchased by each of them, as shown
in the foregoing table, bears to the common stock offered hereby.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the underwriters may be required to make in respect thereof.
At our request, the underwriters have reserved up to shares
of common stock for sale at the initial public offering price to certain
directors and employees of Nelson and other persons. The number of shares of
common stock available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered hereby. Certain individuals purchasing
reserved shares may be required to enter into agreements similar to those
described in the following paragraph.
Nelson, our directors and officers and existing stockholders who hold an
aggregate of 24,541,574 shares, together with the holders of options to purchase
3,994,082 shares of common stock, have agreed that for a period of 180 days
following the date of this prospectus, without the prior written consent of SG
Cowen Securities Corporation, they will not: (1) directly or indirectly, offer,
sell, assign, transfer, encumber, pledge, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise dispose of, other than by
operation of law, any shares of common stock or any securities convertible into
or exercisable or exchangeable for common stock
54
(including, without limitation, common stock which may be deemed to be
beneficially owned in accordance with the rules and regulations promulgated
under the Securities Act); or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of common stock whether any such transaction described in clause (1)
or (2) above is to be settled by delivery of common stock or such other
securities, in cash or otherwise. The foregoing restrictions, however, do not
apply to the exercise of currently outstanding stock options or to existing
contractual obligations of Nelson.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act. Over-allotment involves syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the representatives to reclaim a selling concession from a
syndicate member when the common stock originally sold by such syndicate member
is purchased in a syndicate covering transaction to cover syndicate short
positions. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the New York Stock Exchange or otherwise and, if commenced, may be
discontinued at any time.
The underwriters have advised us that they do not intend to confirm sales
in excess of 5% of the common stock offered hereby to any account over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price will be determined by
negotiations between us and the underwriters. Among the factors to be considered
in these negotiations are prevailing market conditions, the market
capitalizations and the stages of development of other companies that we and the
underwriters believe to be comparable to us, estimates of our business
potential, our results of operation in recent periods, the present state of our
development and other factors deemed relevant.
We estimate that our out of pocket expenses for this offering will be
approximately $ .
We expect to apply for listing of the common stock on the New York Stock
Exchange under the symbol "NCI." There can be no assurance, however, that an
active trading market will develop for the common stock or that the common stock
will trade in the public markets subsequent to the offering at or above the
initial offering price.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Nelson by Patterson, Belknap, Webb & Tyler LLP, New York, New York. Mr.
George S. Frazza, a member of our Board of Directors, is of counsel to
Patterson, Belknap, Webb & Tyler LLP. Certain legal matters related to this
offering will be passed upon for the underwriters by Willkie Farr and Gallagher,
New York, New York.
55
EXPERTS
The consolidated financial statements of Nelson as of December 31, 1997 and
1998 and for the years ended December 31, 1996, 1997 and 1998 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report included herein, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
ADDITIONAL INFORMATION
For more information with respect to Nelson and the common stock offered by
this prospectus, see the registration statement and the exhibits and schedules
filed by us with the Securities and Exchange Commission on Form S-1 under the
Securities Act. This prospectus does not contain all of the information set
forth in the registration statement and the related exhibits and schedules.
Statements contained in this prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by such reference.
A copy of the registration statement and the exhibits and schedules may be
inspected or copied at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549, the New York Regional Office located at Seven
World Trade Center, New York, New York 10048 and the Chicago Regional Office
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the SEC. The address of the SEC's Internet site is http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing
audited financial statements certified by our independent auditors.
56
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL DATA
The unaudited pro forma consolidated statement of income for the year ended
December 31, 1998 gives effect to the following transactions and events as if
they occurred on January 1, 1998: (a) the acquisition of additional equity
interests in three of our subsidiaries; (b) the acquisition of The Medical Phone
Company ((a) and (b) together, the "1998 Purchase Transactions" (each of which
occurred in July 1998)); (c) the acquisition of the assets of Lipton
Communications Group, Inc.; (d) the acquisition of the remaining 20% minority
interest in one of our subsidiaries; (e) the acquisition of 9% of the equity of
Pan Advertising Limited; (f) the acquisition of 60% of the equity of Monkey
Communication S.P.R.L. ((c), (d), (e) and (f) collectively, the "1999 Purchase
Transactions"); and (g) adjustments reflecting a provision for federal and state
income taxes as though all companies acquired had been treated as C corporations
during 1998. The unaudited pro forma consolidated balance sheet as of December
31, 1998 gives effect to the 1999 Purchase Transactions as if they occurred on
December 31, 1998.
The pro forma consolidated balance sheet and the pro forma consolidated
income statement are unaudited and, in the opinion of management, include all
adjustments necessary for a fair presentation of such data. The pro forma
consolidated financial statements are provided for informational purposes only
and should not be construed to be indicative of our consolidated financial
position or results of operations had the transactions been consummated on the
dates assumed and do not project our consolidated financial position or results
of operations for any future date or period.
The unaudited pro forma consolidated financial statements and accompanying
notes should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our historical
consolidated financial statements and the notes thereto included elsewhere in
this prospectus.
P-1
NELSON COMMUNICATIONS INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
PRO FORMA
ADJUSTMENTS
-------------
1999
PURCHASE
HISTORICAL TRANSACTIONS PRO FORMA
---------- ------------- ---------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 457 $ (369)(1) $ 88
Accounts receivable....................................... 44,429 303(1) 44,732
Stockholders' loans and advances.......................... 2,112 2,112
Prepaid production costs.................................. 4,379 4,379
Prepaid income taxes...................................... 1,327 1,327
Deferred income taxes..................................... 246 246
Other current assets...................................... 973 70(1) 1,043
------- ------ -------
Total current assets........................................ 53,923 4 53,927
Property and equipment -- net............................... 10,694 67(1) 10,761
Stockholders' loans and advances............................ 100 100
Goodwill -- net............................................. 7,506 2,673(2) 10,179
Deferred income taxes....................................... 1,878 -- 1,878
Deferred charges and other assets........................... 1,297 590(3) 1,887
------- ------ -------
$75,398 $3,334 $78,732
======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital lease obligations................................. $ 1,180 $ $ 1,180
Short-term debt........................................... -- 1,432(1) 1,432
Accounts payable.......................................... 4,873 834(1) 5,707
Accrued bonus............................................. 10,425 10,425
Accrued expenses and other current liabilities............ 7,804 7,804
Prebillings -- customer deposits.......................... 24,485 24,485
Deferred revenue.......................................... 9,294 9,294
------- ------ -------
Total current liabilities................................... 58,061 2,266 60,327
Long-term portion of capital lease obligation............... 1,268 1,268
------- ------ -------
Total liabilities........................................... 59,329 2,266 61,595
------- ------ -------
Minority interests.......................................... 47 87(4) 134
------- ------ -------
Stockholders' equity:
Common stock.............................................. 243 2 245
Additional paid-in capital................................ 11,242 979(1)(3) 12,221
Accumulated other comprehensive income.................... 12 12
Retained earnings......................................... 4,525 4,525
------- ------ -------
Total stockholders' equity.................................. 16,022 981 17,003
------- ------ -------
$75,398 $3,334 $78,732
======= ====== =======
|
See notes to unaudited pro forma consolidated financial data.
P-2
NELSON COMMUNICATIONS INC.
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA ADJUSTMENTS
--------------------------------
1998 1999
PURCHASE PURCHASE
HISTORICAL TRANSACTIONS TRANSACTIONS PRO FORMA
---------- ------------ ------------ ---------
Revenues........................ $126,946 $2,331(5) $1,725(10) $131,002
-------- ------ ------ --------
Cost of selling services........ 40,856 1,155(5) 42,011
Compensation and related
costs......................... 40,814 399(5) 670(10) 41,883
Other operating and
administrative expenses....... 35,933 474(5)(6) 779(10)(11) 37,186
Reorganization costs............ 1,815 1,815
-------- ------ ------ --------
119,418 2,028 1,449 122,895
-------- ------ ------ --------
Income from operations.......... 7,528 303 276 8,107
Interest income (expense),
net........................... (23) (7)(5) 9(10) (21)
-------- ------ ------ --------
Income before income taxes...... 7,505 296 285 8,086
Provision for income taxes...... 3,590 204(7) 220(12) 4,014
-------- ------ ------ --------
Income before minority
interest...................... 3,915 92 65 4,072
Minority interest............... (111) (131)(8) 73(13) (169)
-------- ------ ------ --------
Net income...................... $ 4,026 $ 223 $ (8) $ 4,241
======== ====== ====== ========
Basic earnings per share........ $ 0.17 $ 0.17
======== ========
Shares used in computing basic
earnings per share............ 23,912 445(9) 139(1)(3) 24,496
======== ====== ====== ========
Diluted earnings per share...... $ 0.17 $ 0.17
======== ========
Shares used in computing diluted
earnings per share............ 24,117 445(9) 139(1)(3) 24,701
======== ====== ====== ========
|
See notes to unaudited pro forma consolidated financial data.
P-3
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL DATA
1. Reflects the acquisition of certain assets and liabilities of Lipton
Communications Group, Inc. ("LCG"), the acquisition of the remaining 20%
minority interest in one of our subsidiaries for $0.7 million in cash and
the acquisition of 60% of the equity of Monkey Communication S.P.R.L.
("Monkey"). The aggregate purchase price for LCG was approximately $0.8
million in cash and approximately 68,182 shares of common stock. We also
recorded a $0.3 million liability as contingent acquisition consideration.
The aggregate purchase price for the 60% interest in Monkey was
approximately $0.3 million in cash and 23,249 shares of common stock. We
also recorded a $0.1 million liability as contingent acquisition
consideration, payable in Nelson stock. The cash consideration for these
transactions was provided by cash available of $0.4 million and short-term
debt of $1.4 million.
2. Reflects the addition of goodwill associated with the 1999 Purchase
Transactions.
3. Includes the acquisition of a 9% interest in Pan Advertising Limited for
47,768 shares of Nelson common stock. We also recorded a $0.2 million
liability as contingent acquisition consideration, payable in Nelson stock.
This investment was accounted for under the cost method.
4. Reflects the 40% minority interest of Monkey and the acquisition of the
remaining 20% minority interest in one of our subsidiaries.
5. Reflects the results of operations of The Medical Phone Company for the
period prior to August 1998.
6. Includes the amortization of goodwill of $0.2 million on a straight-line
basis (over 20 to 30 year lives) resulting from the 1998 Purchase
Transactions.
7. Reflects additional tax provisions of $0.2 million for federal and state
taxes as though The Medical Phone Company were treated as a C Corporation
prior to the acquisition.
8. Reflects the elimination of the minority interests' share of income in two
subsidiaries in which Nelson acquired additional equity interests.
9. Reflects the additional weighted-average shares outstanding as if the 1998
Purchase Transactions occurred on January 1, 1998.
10. Reflects the results of operations of LCG and Monkey.
11. Includes the amortization of goodwill of $0.2 million on a straight-line
basis (over eight to 20 year lives) resulting from the 1999 Purchase
Transactions.
12. Reflects additional tax provisions of $0.1 million for federal and state
taxes as though LCG were treated as a C Corporation during 1998.
13. Reflects the minority interest in Monkey and the elimination of the minority
interest's share of income in another subsidiary in which Nelson acquired
the remaining equity interest.
P-4
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998...................................................... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1997 and 1998.......................... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998.......................... F-5
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1997 and 1998.............. F-6
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1996, 1997 and 1998.................... F-7
|
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Nelson Communications Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Nelson
Communications Inc. and subsidiaries as of December 31, 1997 and 1998, and the
related consolidated statements of income, cash flows, and stockholders' equity
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Nelson Communications Inc. and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
April 5, 1999
(April 16, 1999 as to Note 16)
F-2
NELSON COMMUNICATIONS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31,
-----------------
NOTES 1997 1998
------ ------- -------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,672 $ 457
Marketable securities..................................... 3 7,666 --
Accounts receivable....................................... 39,171 44,429
Stockholders' loans and advances.......................... 5 1,291 2,112
Prepaid production costs.................................. 3,868 4,379
Prepaid income taxes...................................... 10 1,148 1,327
Deferred income taxes..................................... 10 378 246
Other current assets...................................... 1,083 973
------- -------
Total current assets........................................ 60,277 53,923
Property and equipment -- net............................... 4 4,139 10,694
Stockholders' loans and advances............................ 5 143 100
Goodwill -- net of accumulated amortization of $369 in 1997
and $649 in 1998.......................................... 1,331 7,506
Deferred income taxes....................................... -- 1,878
Deferred charges and other assets........................... 1,102 1,297
------- -------
$66,992 $75,398
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term-debt......................... 7 $ 483 $ --
Current portion of capital lease obligations.............. 8 655 1,180
Accounts payable.......................................... 5,398 4,873
Accrued bonus............................................. 8,777 10,425
Accrued expenses and other current liabilities............ 5,598 7,804
Prebillings -- customer deposits.......................... 24,911 24,485
Deferred revenue.......................................... 11,997 9,294
S Corporation distributions payable....................... 10, 12 3,953 --
Stockholders' loans....................................... 5 932 --
------- -------
Total current liabilities................................... 62,704 58,061
Long-term portion of capital lease obligations.............. 8 642 1,268
------- -------
Total liabilities........................................... 63,346 59,329
------- -------
Commitments and contingencies............................... 8 -- --
------- -------
Minority interests.......................................... 361 47
------- -------
Stockholders' equity:
Preferred stock, 2,000 shares authorized; no shares issued
and outstanding........................................ -- --
Common stock, $.01 par value, 100,000 shares authorized;
24,348 shares issued and outstanding................... 9 235 243
Additional paid-in capital................................ 9 2,519 11,242
Accumulated other comprehensive income.................... 3 32 12
Retained earnings......................................... 499 4,525
------- -------
Total stockholders' equity.................................. 3,285 16,022
------- -------
$66,992 $75,398
======= =======
|
See notes to consolidated financial statements.
F-3
NELSON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
NOTES ------- -------- --------
Revenues.................................................. 2 $86,039 $114,714 $126,946
------- -------- --------
Cost of selling services.................................. 27,446 39,330 40,856
Compensation and related costs............................ 27,150 36,216 40,814
Other operating and administrative
expenses................................................ 22,201 34,962 35,933
Reorganization costs...................................... 2 -- 1,540 1,815
------- -------- --------
76,797 112,048 119,418
------- -------- --------
Income from operations.................................... 9,242 2,666 7,528
Interest income (expense), net............................ 100 447 (23)
------- -------- --------
Income before income taxes................................ 9,342 3,113 7,505
Provision for income taxes................................ 10 1,752 557 3,590
------- -------- --------
Income before minority interest........................... 7,590 2,556 3,915
Minority interest......................................... 123 97 (111)
------- -------- --------
Net income................................................ $ 7,467 $ 2,459 $ 4,026
======= ======== ========
Basic earnings per share.................................. $ 0.33 $ 0.10 $ 0.17
======= ======== ========
Diluted earnings per share................................ $ 0.33 $ 0.10 $ 0.17
======= ======== ========
Shares used in computing basic earnings per share......... 22,403 23,463 23,912
======= ======== ========
Shares used in computing diluted earnings per share....... 22,632 23,702 24,117
======= ======== ========
Unaudited pro forma net income and earnings per share
data:
Historical income before income taxes as reported......... $ 9,342 $ 3,113 $ 7,505
Pro forma provision for income taxes...................... 10 4,175 1,564 3,609
------- -------- --------
Pro forma income before minority interest................. 5,167 1,549 3,896
Minority interest......................................... 123 97 (111)
------- -------- --------
Pro forma net income...................................... $ 5,044 $ 1,452 $ 4,007
======= ======== ========
Pro forma basic earnings per share........................ $ 0.23 $ 0.06 $ 0.17
======= ======== ========
Pro forma diluted earnings per share...................... $ 0.22 $ 0.06 $ 0.17
======= ======== ========
Shares used in computing pro forma basic earnings
per share............................................... 22,403 23,463 23,912
======= ======== ========
Shares used in computing pro forma diluted earnings
per share............................................... 22,632 23,702 24,117
======= ======== ========
|
See notes to consolidated financial statements.
F-4
NELSON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
-------- -------- --------
Cash flows from operating activities:
Net income................................................ $ 7,467 $ 2,459 $ 4,026
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 1,400 1,757 2,812
Common stock awards....................................... 196 485 --
Minority interest......................................... 123 97 (111)
Deferred income taxes..................................... -- (378) 164
Changes in operating assets and liabilities, exclusive of
acquisitions:
Accounts receivable....................................... (16,702) (9,243) (4,597)
Prepaid production costs.................................. 2,857 (2,121) (511)
Prepaid income taxes...................................... 308 (1,148) 323
Other current assets...................................... 33 (837) (317)
Other assets.............................................. 255 (236) 203
Accounts payable.......................................... 2,329 1,591 (726)
Accrued bonus............................................. 1,276 5,521 1,739
Accrued expenses and other current liabilities............ 1,208 1,407 2,118
Income taxes payable...................................... 603 (603) --
Prebillings -- customer deposits.......................... 2,010 8,317 (493)
Deferred revenue.......................................... 3,303 2,464 (2,703)
-------- -------- --------
Net cash provided by operating
activities............................................ 6,666 9,532 1,927
-------- -------- --------
Cash flows from investing activities:
Payments for property and equipment....................... (382) (2,334) (6,377)
Purchase of marketable securities......................... -- (24,917) (10,434)
Sale of marketable securities............................. -- 17,316 18,035
Acquisition of The Medical Phone Company.................. -- -- (719)
Acquisition of intangibles................................ -- (388) --
Increase from subsidiary stock transactions............... 11 216 --
-------- -------- --------
Net cash provided (used) in investing
activities............................................ (371) (10,107) 505
-------- -------- --------
Cash flows from financing activities:
Borrowings of bank debt................................... 490 -- 13,500
Payments of bank debt..................................... -- (599) (13,539)
Payments on long-term debt................................ (697) (619) (444)
Payment of capital lease obligations...................... -- (598) (984)
S Corporation distributions paid.......................... (3,934) (2,792) (3,953)
Stockholders' loans and advances.......................... 842 (1,102) (1,383)
Stock repurchases......................................... -- (109) (6,048)
Stock issuances........................................... -- -- 5,204
-------- -------- --------
Net cash used in financing activities................... (3,299) (5,819) (7,647)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents.... 2,996 (6,394) (5,215)
Cash and cash equivalents -- beginning of period............ 9,070 12,066 5,672
-------- -------- --------
Cash and cash equivalents -- end of period.................. $ 12,066 $ 5,672 $ 457
======== ======== ========
|
See Note 12 for supplemental information.
See notes to consolidated financial statements.
F-5
NELSON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
ADDITIONAL ACCUMULATED
COMMON PAID-IN OTHER COMPREHENSIVE RETAINED COMPREHENSIVE
STOCK CAPITAL INCOME EARNINGS INCOME
------ ---------- ------------------- -------- -------------
JANUARY 1, 1996................ $235 $ 1,744 $ 1,252
Net income..................... 7,467 $7,467
S Corporation distributions.... (6,726)
Stock issuances................ 207
---- ------- ------- ------
DECEMBER 31, 1996.............. 235 1,951 1,993 $7,467
======
Net income..................... 2,459 $2,459
S Corporation distributions.... (3,953)
Stock repurchases.............. (109)
Stock issuances................ 677
Unrealized gain on marketable
securities................... $ 65 65
Foreign currency translation
adjustments.................. (33) (33)
---- ------- ---- ------- ------
DECEMBER 31, 1997.............. 235 2,519 32 499 $2,491
======
Net income..................... 4,026 $4,026
Stock
issuances -- acquisitions.... 8 5,499
Other stock issuances and
capital contributions,
including tax benefits....... 12 9,260
Stock repurchases.............. (12) (6,036)
Change in unrealized gain on
marketable securities........ (65) (65)
Foreign currency translation
adjustments.................. 45 45
---- ------- ---- ------- ------
DECEMBER 31, 1998.............. $243 $11,242 $ 12 $ 4,525 $4,006
==== ======= ==== ======= ======
|
See notes to consolidated financial statements.
F-6
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1 -- ORGANIZATION AND DESCRIPTION OF BUSINESS
On July 16, 1998, Arista Marketing Associates, Inc.("Arista") issued
22,816,879 shares of its common stock in exchange for all of the outstanding
shares of 21 of the 25 companies comprising the Nelson Group and a majority of
the outstanding shares of the remaining four companies. The combination was
accounted for as a pooling of interests and the accompanying financial
statements have been prepared to give effect to the combined results of Arista
and the Nelson Group since inception. On July 21, 1998, Arista changed its name
to Nelson Communications Inc. All references to the "Company" hereafter shall
mean the company formed by the combination of Arista and the Nelson Group.
Revenues and net income for the Nelson Group and Arista for periods prior
to the combination were as follows:
YEAR YEAR SIX MONTHS
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998
------------ ------------ ----------
(UNAUDITED)
Revenues:
Nelson Group............................. $77,227 $105,323 $56,818
Arista................................... 8,812 9,391 5,145
------- -------- -------
Total............................ $86,039 $114,714 $61,963
======= ======== =======
Net income:
Nelson Group............................. $ 7,750 $ 2,674 $ 2,247
Arista................................... (283) (215) 166
------- -------- -------
Total............................ $ 7,467 $ 2,459 $ 2,413
======= ======== =======
|
The Company provides medical marketing and professional selling services to
the healthcare industry. (See Note 13).
The Company derives its revenues through a variety of contract structures:
- Medical marketing services contracts generally provide for a monthly
retainer fee, extend for one year or less, and are cancelable upon 30 to
90 days' notice and without penalty. The Company recognizes revenue from
these contracts monthly in accordance with services provided. The Company
also enters into contracts for project-based assignments, the duration of
which vary from days to several months. These contracts are usually
cancelable with minimal notice or penalty. The Company recognizes revenue
from these contracts as services are provided. In limited circumstances,
the Company derives revenue through commissions on media production
costs.
- Professional selling services contracts typically provide for fees based
on hours or the number of visits or telephone calls made by the sales
representatives. Contracts may provide for performance incentives based
upon increases in the product's market share or physician referrals.
Selling contracts are generally for one year and are cancelable upon 60
to 90 days' notice without penalty. Contracts for peer influence meetings
often include minimum performance criteria regarding the number of
doctors included in the meetings. If sufficient doctors are not included
in a set of meetings, additional meetings may be held at the Company's
expense to meet the criteria. These contracts are generally terminable at
will. The Company recognizes revenue from professional selling services
as the services are performed.
F-7
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies followed by the Company are as
follows:
(a) Principles of consolidation
The consolidated financial statements include the accounts of Arista and of
all the companies comprising the Nelson Group. Arista and the Nelson Group's
combination was accounted for as a pooling of interests and, accordingly, the
accompanying consolidated financial statements have been prepared to give effect
to the combined results since inception. (See note 1).
All significant intercompany accounts and transactions have been eliminated
in consolidation.
(b) Revenue recognition
Revenues are recognized as services are provided. When amounts are
collected in advance or billed in excess of performance on contracts, such
amounts are shown as prebillings or deferred revenue. Prepaid production costs
represent amounts incurred on client contracts but not billed to customers as of
the balance sheet date.
(c) Cash and cash equivalents
Cash equivalents are short-term, highly liquid investments that are both
readily convertible to known amounts of cash and have original maturities of
three months or less.
(d) Property and equipment
Property and equipment is stated at cost and depreciation is provided on
the straight-line basis over the estimated useful lives of up to 10 years for
furniture, fixtures and equipment. Leased equipment and leasehold improvements
are amortized on a straight-line basis over the lesser of the terms of the
related lease or the estimated useful lives of these assets.
(e) Amortization of goodwill
Goodwill is amortized on a straight-line basis, over periods ranging from 8
to 30 years.
(f) Foreign currency translation
The functional currency for the Company's foreign operations is the
applicable local currency. The translation from the applicable foreign currency
to U.S. dollars is performed for balance sheet accounts based on exchange rates
in effect at the end of each period, and revenue and expenses are translated at
average exchange rates during the period. Currency transaction gains or losses,
which are included in results from operations, are immaterial for all periods
presented. Gains or losses from balance sheet translations are recorded as a
component of accumulated other comprehensive income.
(g) Long-lived assets
In accordance with Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-lived Assets and Long-lived Assets
to be Disposed of", long-lived assets including goodwill held by the Company are
periodically reviewed for impairment by comparing the carrying value to
undiscounted expected future cash flows. If an impairment is indicated, a
write-down to fair value (normally measured by discounting estimated future cash
flows) is taken.
F-8
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(h) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(i) Earnings per share
A reconciliation of the income and weighted average shares used in the
calculation of basic and diluted earnings per share for the three years ended
December 31, 1998 follows:
EFFECT OF
BASIC OPTIONS DILUTED
------- ---------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
1996
Net income......................................... $ 7,467 $ 7,467
Average shares..................................... 22,403 229 22,632
Earnings per share................................. $ 0.33 $ 0.33
1997
Net income......................................... $ 2,459 $ 2,459
Average shares..................................... 23,463 239 23,702
Earnings per share................................. $ 0.10 $ 0.10
1998
Net income......................................... $ 4,026 $ 4,026
Average shares..................................... 23,912 205 24,117
Earnings per share................................. $ 0.17 $ 0.17
|
(j) Reorganization costs
Reorganization costs in 1997 and 1998 are primarily legal and accounting
fees related to the reorganization of the Nelson group of companies and Arista.
(k) New accounting standards
In the first quarter of 1998, the Company adopted the provisions of SFAS
No. 130, "Reporting Comprehensive Income." Comprehensive income for the Company
includes foreign currency translation adjustments and unrealized gains on
marketable securities in addition to net income as reported in the Company's
Consolidated Statements of Stockholders' Equity and in the Stockholders' Equity
section of the Company's Consolidated Balance Sheets.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which will be
effective for our consolidated financial statements beginning in the year 2000.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. We do not expect the adoption of this
new accounting standard to have a significant effect on the Company's
consolidated financial statements.
(l) Fair value of financial instruments
For financial instruments, including cash and cash equivalents, accounts
receivable, accounts payable and debt due within one year, the carrying amount
approximates fair value because of the short maturity of these instruments.
F-9
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- MARKETABLE SECURITIES
Marketable securities consist of debt securities issued by the U.S.
Treasury and other U.S. government corporations and agencies that all mature
within one year and are considered to be "available for sale." Accordingly,
marketable securities are recorded at fair value on the balance sheet.
DECEMBER 31,
1997
------------
Aggregate fair value........................................ $7,666
Gross unrealized holding gains.............................. (65)
------
Amortized cost basis........................................ $7,601
======
|
NOTE 4 -- PROPERTY AND EQUIPMENT -- NET
Property and equipment consists of the following:
DECEMBER 31,
-----------------
1997 1998
------ -------
Furniture, fixtures and equipment........................... $3,350 $ 6,847
Leased equipment............................................ 2,310 3,879
Leasehold improvements...................................... 1,714 5,311
------ -------
7,374 16,037
Less accumulated depreciation and amortization.............. 3,235 5,343
------ -------
$4,139 $10,694
====== =======
|
Depreciation and amortization expense amounted to $753, $1,200 and $2,108
for the years ended December 31, 1996, 1997 and 1998, respectively.
NOTE 5 -- STOCKHOLDERS' LOANS AND ADVANCES AND LOANS FROM STOCKHOLDERS
Loans and advances to stockholders amounted to $1,434 and $2,212 at
December 31, 1997 and 1998, respectively. The amounts outstanding at December
31, 1998 bear interest at rates ranging from 5.7% to 8.25% and have maturity
dates up to 5 years.
Loans from stockholders of $932 at December 31, 1997 had no scheduled
maturity dates and did not bear interest. These loans were repaid in 1998.
NOTE 6 -- REVOLVING LINE OF CREDIT
During 1996, the Company executed revolving loan agreements for two credit
lines totaling $800 which bear interest ranging from prime rate plus 1/2% to
prime rate plus 1%. On September 2, 1997 one agreement was increased an
additional $200, bringing the total to $1,000. One credit line had a maturity
date of June 11, 1997, which was extended to June 11, 1998, and those borrowings
were repaid in full during 1997. The weighted average interest rate on the
credit line was 8.91% for 1997. The second credit line has a maturity date of
August 31, 1999, when the entire unpaid balance is due. This credit line is
secured by a general business security agreement on all assets of Arista and the
personal guaranty of Arista's former sole stockholder. As of December 31, 1998,
no funds have been drawn against the credit line.
F-10
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1998, the Company had borrowings under a short-term bank note with
Fleet Bank, N.A. The note bore interest at the lender's prime rate minus 1%, and
was repaid in August 1998. The Company paid a weighted-average annual interest
rate of 7.3% on such borrowings. Effective August 31, 1998, the Company arranged
a revolving line of credit with Fleet Bank, N.A. in the amount of $5.0 million.
Borrowings under this line bear interest at the lender's prime rate minus 1% or
LIBOR plus 150 basis points, at the Company's option and mature on June 30,
1999. As of December 31, 1998, no funds have been drawn against the revolving
line of credit.
NOTE 7 -- LONG-TERM DEBT
DECEMBER 31,
1997
------------
Long-term debt consists of:
Notes to the former principal shareholder of a subsidiary,
11% interest, due in equal quarterly installments of
principal and interest of $119 through December, 1998,
collateralized by the stock of the subsidiary............. $444
Notes payable to bank, interest rates ranging from 9% to 10%
due in monthly installments to July 1998, collateralized
by substantially all the assets of the subsidiary......... 39
----
483
Current portion of long-term debt........................... (483)
----
$ --
====
The notes were repaid in 1998.
|
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
(a) Operating and capital leases
The Company is obligated under non-cancelable operating leases for office
space and equipment. The leases, which expire on various dates through 2007,
provide for future minimum payments. Additionally, the leases for office space
provide for contingent rental payments consisting of a share of increases in
operating expenses and real estate taxes.
As of December 31, 1998, the future minimum lease payments are as follows:
1999.............................................. $ 5,400
2000.............................................. 4,700
2001.............................................. 4,200
2002.............................................. 4,000
2003.............................................. 3,700
Thereafter........................................ 13,500
-------
$35,500
=======
|
Rent expense, included in the results of operations, amounted to $2,366,
$3,098 and $4,722 for the years ended December 31, 1996, 1997 and 1998,
respectively.
F-11
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under capital leases are approximately as
follows, as of December 31, 1998:
1999................................................ $1,330
2000................................................ 848
2001................................................ 290
2002................................................ 128
2003................................................ 88
------
2,684
Amount representing interest........................ (236)
------
Present value of minimum lease payments............. 2,448
Current portion of lease payments................... (1,180)
------
$1,268
======
|
(b) Letter of credit
At December 31, 1998, the Company has a letter of credit outstanding in the
amount of $481 in favor of the landlord as security on the leased office space.
(c) Legal proceedings
A former employee of the Company has filed an action alleging wrongful
termination and discrimination. The Company believes, upon the advice of
counsel, that meritorious defenses exist and is vigorously contesting the
allegations. Because the action is still in the discovery stage and because no
monetary amount has been specified, the Company is unable to predict its
outcome.
In addition to the foregoing, the Company from time to time is involved in
legal proceedings in the normal course of business. Management of the Company
does not believe that the Company will incur any material liability as a result
of these proceedings.
NOTE 9 -- STOCKHOLDERS' EQUITY
Stock-based compensation plans consist of the following:
(a) Incentive stock option plans
NCI Advertising, Inc., ("NCIA") and World Health Communications, Inc.
("WHC"), which are subsidiaries of the Company, had stock incentive plans for
the benefit of key employees. Stock options granted under the plans allowed for
the purchase of NCIA and WHC common stock at a price of not less than fair
market value on the date of grant and typically expire five or ten years from
the date of grant. Effective July 16, 1998, the plans were assumed by the
Company and options to purchase NCIA and WHC stock were converted to options to
purchase common stock of the Company.
On October 27, 1998, the Company adopted the Nelson Communications Inc.
1998 Stock Incentive Plan for the benefit of the officers and other employees of
the Company and certain subsidiaries (the "Employee Stock Incentive Plan") and
the Nelson Communications Inc. 1998 Stock Incentive Plan for Outside Directors
for the benefit of the non-employee directors of the Company (the "Director
Stock Incentive Plan" and, together with the Employee Stock Incentive Plan, the
"Stock Incentive Plans"). Both plans will remain effective until October 26,
2008. The Stock Incentive Plan authorizes grants of up to 4,500,000 shares of
the Company's stock. Options granted under the plan vest 15% per year for the
first four years and 40% in year five. All options granted pursuant to the Stock
Incentive Plans will expire no later than ten years and one day from the date
the options were granted.
F-12
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the option activity for each of the plans
during 1996, 1997 and 1998. When options were granted under the NCIA or WHC
plans, these options are treated as if they had originally been granted for the
Company's common stock.
1996 1997 1998
-------------------- -------------------- --------------------
WEIGHTED NUMBER OF WEIGHTED NUMBER OF WEIGHTED NUMBER OF
AVERAGE SHARES AVERAGE SHARES AVERAGE SHARES
EXERCISE UNDER EXERCISE UNDER EXERCISE UNDER
PRICE OPTION PRICE OPTION PRICE OPTION
-------- --------- -------- --------- -------- ---------
Balance at January 1..... $1.59 503,354 $2.36 359,623 $3.01 424,515
Options granted.......... 3.54 52,696 4.11 156,128 7.00 3,226,500
Options exercised........ 0.67 (187,840) 2.34 (71,916) 2.92 (10,734)
Options expired.......... 1.51 (8,587) 2.34 (19,320) 3.93 (107,336)
-------- ------- ---------
Balance at December 31... 2.36 359,623 3.01 424,515 6.63 3,532,945
======== ======= =========
Exercisable at December 31.. 2.72 144,905 2.08 215,691 2.34 257,653
======== ======= =========
|
Summary information about the Company's stock options outstanding at
December 31, 1998:
WEIGHTED-AVERAGE
--------------------
REMAINING
RANGE OF PRICES NUMBER OUTSTANDING PRICE CONTRACT LIFE
--------------- ------------------ ----- -------------
$1.37-$2.92 156,172 $1.46 6.0 years
$3.37-$4.71 150,273 3.96 3.5
$7.00 3,226,500 7.00 10.0
|
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issues to Employees" (APB 25) and related
interpretations in accounting for its stock options. Under APB 25, because the
exercise price of the stock options equal the fair value of the underlying stock
on the grant date, no compensation is recognized. However, SFAS 123, "Accounting
for Stock-Based Compensation", requires presentation of pro forma net income as
if the Company had accounted for its employee stock options granted subsequent
to December 31, 1994, under the fair value method. The estimated fair value of
options granted in 1998 was $7.6 million. The company's pro forma information,
amortizing the fair value of the stock options over the vesting period, is as
follows:
1996 1997 1998
---- ---- ----
Pro forma net income.............................. $7,405 $2,193 $3,789
====== ====== ======
Pro forma basic earnings per share................ $0.33 $0.09 $0.16
====== ====== ======
Pro forma diluted earnings per share.............. $0.33 $0.09 $0.16
====== ====== ======
|
The fair value of the options was estimated at the date of grant using the
Black-Scholes option pricing model. Significant assumptions used to estimate
fair values of options include the following: (1) risk-free interest rate of 6%
in 1996, 6.5% in 1997 and 5.5% in 1998; (2) weighted-average expected life of
the options equal 5 years in 1996 and 1997 and 7.6 years in 1998; (3) no
expected volatility; and, (4) no expected dividends. The Company used the
minimum value method to value the stock options granted in 1996, 1997 and 1998.
(b) Other long-term performance awards
In 1996 and 1997, incentive awards were provided to officers and other key
employees. The awards were administered by an executive committee (a non-board
committee) which determined the type and terms of the awards to be granted,
including vesting provisions. Such awards resulted in compensation expense of
$196 in 1996 and $485 in 1997. The Company has the ability to make long-term
performance awards of restricted stock and deferred stock under the
F-13
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Incentive Plan. This plan is administered by the Compensation Committee of
the Board of Directors of the Company. No awards were issued in 1998.
Stock Repurchase and Sale
In March 1998, one of the Nelson Group companies participating in the
combination repurchased shares equivalent to 1,378,000 shares of the Company.
The majority of these shares were subsequently sold to an officer of the Company
at the same price per share paid by the Nelson Group.
NOTE 10 -- INCOME TAXES
The financial statements include certain companies that had elected to be
treated as S corporations for federal and state income tax purposes. At various
times prior to July 16, 1998, these companies terminated their S Corporation
elections and are now taxed as C corporations. Prior to the date such elections
were terminated, items of income, loss, credits, and deductions were not taxed
within the Company but were reported on the income tax returns of the individual
shareholders. Accordingly, no provision for income taxes was recorded.
Since the termination of their S corporation status, the Company provides
for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes,"
which requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for the differences between financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense equals the taxes payable or
refundable for the period plus or minus the change in the period of deferred tax
assets and liabilities.
The provision for income taxes are computed as follows:
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
Income before income taxes.......................... $ 9,342 $ 3,113 $ 7,505
Less income of S corporations....................... (7,685) (4,017) (166)
------- ------- -------
Income (loss) subject to Federal corporate tax...... $ 1,657 $ (904) $ 7,339
======= ======= =======
Federal income tax expense (benefit):
Current........................................... $ 712 $ (311) $ 2,372
Deferred.......................................... -- (378) (231)
State and local income tax, including S
corporations...................................... 1,040 1,246 1,449
------- ------- -------
$ 1,752 $ 557 $ 3,590
======= ======= =======
|
A reconciliation between total income tax provisions and tax computed at
the statutory rate on income (loss) subject to Federal corporate tax, above, is
as follows:
Tax computed at the statutory rate..................... $ 563 $ (307) $2,495
State income taxes, net of Federal benefit............. 1,040 1,246 956
Other.................................................. 149 (382) 139
------ ------ ------
Total provision for income taxes....................... $1,752 $ 557 $3,590
====== ====== ======
|
F-14
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The deferred tax benefit in 1997 relates principally to the recognition of
the tax effect of temporary differences at the date that certain companies
terminated their election to be treated as S Corporations. The Company has a
federal net operating loss carryforward of $3,900, expiring in the year 2018.
The unaudited pro forma provision for income taxes reflects a provision for
federal and state income taxes as if the Company had been a C corporation for
each period presented. The effective tax rates of 45% in 1996, 50% in 1997, and
48% in 1998 reflect both federal and state income taxes.
Deferred income tax assets are comprised of:
DECEMBER 31,
----------------
1997 1998
------ ------
Current-Accrued bonuses/other............................... $ 378 $ 246
------ ------
Non current:
Net operating loss carryforward............................. -- 2,024
Valuation allowance......................................... -- (146)
------ ------
Non current -- net.......................................... -- 1,878
------ ------
Total............................................. $ 378 $2,124
====== ======
|
NOTE 11 -- EMPLOYEE BENEFIT PLANS
The Company sponsors qualified 401(k) profit sharing plans for all eligible
employees. The plans allow eligible employees to elect to defer a portion of
their annual compensation and have those amounts contributed to the plans. The
plans provide for, among other things: (a) matching by the Company of a
percentage of employees' contributions and additional contributions both at the
discretion of the Board of Directors; (b) a normal retirement age at 65; and,
(c) vesting in Company contributions after specified years of service, as
defined in the various plans. Contributions by the Company for the years ended
December 31, 1996, 1997 and 1998 totaled $318, $435 and $528, respectively.
NOTE 12 -- SUPPLEMENTARY CASH FLOW INFORMATION
In the periods indicated cash was paid for:
YEARS ENDED DECEMBER 31,
--------------------------
1996 1997 1998
------ ------ ------
Income taxes........................................... $1,068 $2,538 $3,196
====== ====== ======
Interest............................................... $ 270 $ 214 $ 365
====== ====== ======
|
Supplementary non-cash investing and financing activities were as follows:
In 1996, S corporation distributions included $2,792 which were declared
but unpaid at December 31, 1996 with respect to 1996 earnings. Assets acquired
under capital lease obligations totaled $633.
In 1997, S corporation distributions included $3,953 which were declared
but unpaid at December 31, 1997, with respect to 1997 earnings. Assets acquired
under capital lease obligations were $983.
In 1998, the Company acquired the net assets of The Medical Phone Company.
The fair value of the assets acquired was $3,500 and liabilities assumed were
$469. The portion of the purchase price paid in cash was $719 with the remaining
consideration being 348,704 shares of stock. In 1998, assets acquired under
capital lease obligations were $2,117.
F-15
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- FINANCIAL INFORMATION BY BUSINESS SEGMENT
(a) Basis of organization
The Company has two reportable segments: medical marketing and professional
selling. The medical marketing segment provides services to healthcare
companies, including; professional and consumer advertising; medical education;
public relations; consulting; patient recruitment; targeted marketing; and
database marketing. The professional sales segment provides services to the
healthcare industry, including: Personal selling (detailing); peer influence;
teleservices; and professional sales force recruitment & training.
The Company's segments offer varying services to the healthcare industry
and require different strategies and management skills. The accounting policies
of the segments are the same as those described in Note 2 -- Summary of
significant accounting policies. The Other category, below, includes incentive
compensation costs which are greater than customary cash compensation levels and
reorganization costs that are not expected to continue. Such costs are not
allocated by management to the medical marketing and professional selling
segments in evaluating their ongoing performance.
(b) Information related to the segments of the Company's business
MEDICAL PROFESSIONAL
MARKETING SELLING OTHER TOTAL
--------- ------------ ----- -----
1996
Revenues................................. $ 43,317 $ 42,722 $ -- $ 86,039
Income from operations................... 7,302 1,940 -- 9,242
Depreciation & amortization.............. 557 843 -- 1,400
Assets................................... 30,467 18,910 -- 49,377
1997
Revenues................................. 56,217 58,497 -- 114,714
Income from operations................... 8,523 2,865 (8,722) 2,666
Depreciation & amortization.............. 884 873 -- 1,757
Assets................................... 45,347 21,645 -- 66,992
1998
Revenues................................. 66,746 60,200 -- 126,946
Income from operations................... 8,908 2,935 (4,315) 7,528
Depreciation & amortization.............. 1,885 927 -- 2,812
Assets................................... 52,274 23,124 -- 75,398
|
(c) Major clients and concentration of credit risk
For the years ended December 31, 1996 and 1997, the Company had two clients
which represented 38.8% and 13.6% of total revenues in 1996 and 30.4% and 12.2%
of total revenues in 1997. For the year ended December 31, 1998, the Company had
one client, which represented 22.7% of total revenues in 1998. Revenues from
these clients are reflected in both the medical marketing and professional
selling segments. In addition, the Company's five largest clients represented
68.5%, 63.8% and 52.8% of total revenues for 1996, 1997 and 1998, respectively.
The Company's accounts receivable from its two largest clients were $7,325 and
$2,892 as of December 31, 1997 and $6,632 from its largest client as of December
31, 1998. As of December 31, 1997 and 1998, primarily all of the Company's trade
accounts receivable were concentrated in companies in the pharmaceutical
industry. The Company extends credit to all qualified clients, but does not
believe that it is exposed to any undue concentration of credit risk. The
Company has not experienced any material losses from individual clients or
groups of clients.
F-16
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- ACQUISITIONS
In July 1998, the Company acquired additional equity interests in three
subsidiaries of the Company and The Medical Phone Company. Such acquisitions
were made via the issuance of 793,522, shares of common stock in addition to
cash payments of $719. Such acquisitions were accounted for under the purchase
method of accounting for business combinations. In addition, the Company
converted outstanding options of two subsidiaries to options of the Company. The
goodwill resulting from these purchase transactions was $6,453.
In 1997, the Company acquired 45,000 shares of a subsidiary's common stock
held by a third party for an aggregate consideration of $388. The Company
accounted for this transaction as a purchase, which resulted in the recording of
goodwill of $300. See Note 9(a) for other activity in the stock option plans of
subsidiaries.
NOTE 15 -- QUARTERLY RESULTS (UNAUDITED)
The following table presents summarized unaudited quarterly results of
operations for the Company for 1997 and 1998. The Company believes all necessary
adjustments consisting of ordinary recurring accruals have been included in the
amounts stated below to present fairly the following selected information.
Future quarterly operating results may fluctuate depending on a number of
factors. Results of operations for any particular quarter are not necessarily
indicative of results of operations for a full year or any other quarter.
1997
---------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues............................. $26,260 $28,242 $27,750 $32,462 $114,714
Net income(loss)(1).................. $ 2,094 $ 2,101 $ 1,713 $(3,449)(2) $ 2,459
Basic earnings (loss) per share...... $ 0.09 $ 0.09 $ 0.07 $ (0.15) $ 0.10
Diluted earnings (loss) per share.... $ 0.09 $ 0.09 $ 0.07 $ (0.15) $ 0.10
Basic common shares outstanding...... 23,419 23,393 23,466 23,528 23,463
Diluted common shares outstanding.... 23,641 23,649 23,723 23,767 23,702
|
1998
---------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues............................. $27,893 $34,070 $32,069 $32,914 $126,946
Net income(1)........................ $ 321 $ 2,092 $ 1,053 $ 560(2) $ 4,026
Basic earnings per share............. $ 0.01 $ 0.09 $ 0.04 $ 0.02 $ 0.17
Diluted earnings per share........... $ 0.01 $ 0.09 $ 0.04 $ 0.02 $ 0.17
Basic common shares outstanding...... 23,544 23,544 24,139 24,343 23,912
Diluted common shares outstanding.... 23,774 23,739 24,335 24,535 24,117
|
(1) Includes reorganization costs representing legal and accounting fees of $440
in the second quarter of 1997, $900 in the third quarter of 1997, $200 in
the fourth quarter of 1997, $530 in the first quarter of 1998, $554 in the
second quarter of 1998, and $731 in the third quarter of 1998.
(2) Includes incentive compensation costs of $7,182 in the fourth quarter of
1997 and $2,500 in the fourth quarter of 1998 which were greater than our
customary cash compensation levels. Such costs are not expected to continue
because of the implementation of our employee stock incentive plan.
F-17
NELSON COMMUNICATIONS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 -- SUBSEQUENT EVENTS
On February 28, 1999, the Company acquired the remaining 20% minority
interest in one of its subsidiaries for $0.7 million. On March 5, 1999, the
Company acquired the assets comprising the business of Lipton Communications
Group, Inc., a company specializing in marketing services directed at the
Hispanic community, for a purchase price of approximately $1.7 million.
On April 16, 1999, the Company acquired a 9% equity interest in Pan
Advertising Limited, a U.K. medical advertising company. The purchase price for
this acquisition was approximately $0.6 million, payable in Company stock valued
at the initial public offering price. On April 15, 1999, the Company acquired a
60% interest in Monkey Communication S.P.R.L., a Belgian medical marketing
company. The purchase price for this acquisition was approximately $0.6 million,
payable one half in cash and one half in Company stock valued at the initial
public offering price. The Company has issued 71,017 shares of stock in
connection with these acquisitions. In connection with these acquisitions, the
Company also recorded a $0.3 million liability as contingent acquisition
consideration, payable in Company stock.
F-18
You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor sale of common stock
means that information contained in this prospectus is correct after the date of
this prospectus. This prospectus is not an offer to sell or solicitation of an
offer to buy these shares of common stock in any circumstances under which the
offer or solicitation is unlawful.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary......................... 1
Risk Factors............................... 5
Use of Proceeds............................ 11
Dividend Policy............................ 11
Capitalization............................. 12
Dilution................................... 13
Selected Financial Data.................... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 16
Business................................... 25
Management................................. 37
Certain Related Party Transactions......... 47
Principal Stockholders..................... 48
Description of Capital Stock............... 50
Shares Eligible for Future Sale............ 53
Underwriting............................... 54
Legal Matters.............................. 55
Experts.................................... 56
Additional Information..................... 56
Unaudited Pro Forma Consolidated Financial
Data..................................... P-1
Index to Financial Statements.............. F-1
|
UNTIL , 1999 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
SHARES
NELSON
COMMUNICATIONS INC.
[LOGO]
COMMON STOCK
PROSPECTUS
SG COWEN
BEAR, STEARNS & CO. INC.
, 1999
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1)
The following table sets forth the expenses payable by Nelson in connection
with this offering (excluding underwriting discounts and commissions):
NATURE OF EXPENSE AMOUNT
----------------- -------
SEC Registration Fee........................................ $12,788
NASD Filing Fee............................................. 5,100
New York Stock Exchange Fee................................. (2)
Accounting Fees and Expenses................................ (2)
Legal Fees and Expenses..................................... (2)
Printing Expenses........................................... (2)
Blue Sky Qualification Fees and Expenses.................... (2)
Transfer Agent's Fee........................................ (2)
Miscellaneous............................................... (2)
-------
Total............................................. $ (2)
=======
|
(1) The amounts set forth above, except for the SEC, NASD and New York Stock
Exchange fees, are in each case estimated.
(2) To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of the Certificate of Incorporation provides that no director of
Nelson shall be personally liable to Nelson or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (a) for
any breach of the director's duty of loyalty to Nelson or its stockholders, (b)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (c) in respect of certain unlawful dividend
payments or stock redemptions or repurchases, or (d) for any transaction from
which the director derived an improper personal benefit. In addition, the
Certificate of Incorporation provides that if the Delaware General Corporation
Law is amended to authorize the further elimination or limitation of the
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Article V of the By-Laws provides for indemnification by Nelson of its
officers and certain non-officer employees under certain circumstances against
expenses (including attorneys fees, judgments, fines and amounts paid in
settlement) reasonably incurred in connection with the defense or settlement of
any threatened, pending or completed legal proceeding in which any such person
is involved by reason of the fact that such person is or was an officer or
employee of Nelson or any subsidiary of Nelson or served in any capacity with
any other entity at the request of Nelson if such person acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of Nelson, and, with respect to criminal actions or proceedings, if
such person had no reasonable cause to believe his or her conduct was unlawful.
We have entered into indemnification agreements with each member of our
Board of Directors. These agreements require us to indemnify our directors to
the fullest extent permitted by law against liabilities and expenses that are
incurred by them in any action or proceeding (including any action or proceeding
by or in the right of Nelson) arising out of their services as directors or
officers of Nelson, or of any other entity at the request of Nelson. The
agreements
II-1
also require us to advance expenses incurred by any director in connection with
a claim and require us to set up a trust at the request of a director for the
funding of expenses in the event of a "potential change in control" of Nelson
(as that term is defined in the agreements).
Nelson maintains directors and officers liability insurance that covers its
officers and directors against certain losses that may arise out of their
positions with Nelson and covers Nelson for liabilities it may incur to
indemnify its officers and directors.
Under Section of the underwriting agreement filed as Exhibit 1.1
hereto, the underwriters have agreed to indemnify, under certain conditions,
Nelson, its directors, certain officers and persons who control Nelson within
the meaning of the Securities Act against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following transactions give effect to Nelson's for one reverse
stock split.
(1) On June 26, 1998, in connection with the redomiscilliation of Arista in
Delaware by merger into its wholly owned subsidiary, the then sole
stockholder of Arista received 727,273 shares of common stock in exchange
for 1,000 shares of Arista. Such transaction was effected in reliance upon
the exemption from registration under the Securities Act contained in
Section 4(2) of the Securities Act.
(2) On July 16, 1998, in connection with the consolidation, we issued 23,261,696
shares of common stock to the former stockholders of the Nelson Group in
exchange for all of their stock of the Nelson Group companies. Such
transactions were effected in reliance upon the exemption from registration
under the Securities Act contained in Section 4(2) of the Securities Act and
Regulation D of the rules and regulations promulgated thereunder.
(3) On July 31, 1998, we issued 348,704 shares of common stock to the
stockholders of The Medical Phone Company in exchange for all of the stock
of The Medical Phone Company. Such transaction was effected in reliance upon
the exemption from registration under the Securities Act contained in
Section 4(2) of the Securities Act.
(4) On November 20, 1998, we issued 10,734 shares of common stock to an employee
upon the exercise of outstanding stock options. Such transaction was
effected in reliance upon Rule 701 of the rules and regulations promulgated
under the Securities Act.
(5) On March 5, 1999, we issued 68,182 shares of common stock to Lipton
Communications Group, Inc. in connection with the purchase of its assets.
Such transaction was effected in reliance on the exemption from registration
under the Securities Act contained in Section 4(2) of the Securities Act and
Regulation D of the rules and regulations promulgated thereunder.
(6) On March 22, 1999, we issued 21,468 shares of common stock to an employee
upon the exercise of outstanding stock options. Such transaction was
effected in reliance upon Rule 701 of the rules and regulations promulgated
under the Securities Act.
(7) On March 29, 1999, we issued 11,031 shares of common stock to Thomas A.
Moore, in exchange for shares of common stock of a subsidiary of Nelson.
Such transaction was effected in reliance on the exemption from registration
under the Securities Act contained in Section 4(2) of the Securities Act.
(8) On April 6, 1999, we issued 21,468 shares of common stock to an employee
upon the exercise of outstanding stock options. Such transaction was
effected in reliance upon Rule 701 of the rules and regulations promulgated
under the Securities Act.
(9) On April 15, 1999, we issued 23,249 shares of common stock to the
shareholders of Monkey Communication S.P.R.L. in connection with our
acquisition of 60% of the equity of Monkey Communication S.P.R.L. Such
transaction was effected in reliance on the exemption from
II-2
registration under the Securities Act contained in Regulation S of the rules and
regulations promulgated thereunder.
(10) On April 16, 1999, we issued 47,768 shares of common stock to the
shareholders of Pan Advertising Limited in connection with our acquisition
of 9% of the equity of Pan Advertising Limited. Such transaction was
effected in reliance on the exemption from registration under the
Securities Act contained in Regulation S of the rules and regulations
promulgated thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
1.1* Form of Underwriting Agreement.
2.1 Consolidation Agreement by and among Arista Marketing
Associates, Inc., the Nelson Companies (as defined therein)
and the other parties named therein, dated as of June 25,
1998.
2.2 Agreement and Plan of Merger by and among Nelson
Communications Inc., Barton & Pittinos, Inc., J. Douglas
Barton and Terrence O. Tormey, dated as of July 31, 1998.
2.3 Asset Purchase Agreement by and among Nelson Communications
Inc., Bienestar Communications, Inc., Lipton Communications
Group, Inc. and Latin Reports, Ltd., dated March 5, 1999.
3.1 Amended and Restated Certificate of Incorporation.
3.2 Amended and Restated By-Laws.
4.1* Specimen certificate for shares of common stock, $.01 par
value, of Nelson Communications Inc.
5.1* Opinion of Patterson, Belknap, Webb & Tyler LLP as to the
validity of the securities being offered.
10.1 Office Lease by and between Nelson Communications Inc.
(subsequently renamed NCI Communications, Inc.) ("NCI") and
A&R Real Estate, Inc., dated May 9, 1997, for office space
at 105 Madison Avenue, New York, New York, as amended by
First Amendment of Lease dated as of June 6, 1997.
10.2 Office Sublease by and between NCI and the Thomas Group,
Inc., dated August 25, 1997, for office space at 103
Carnegie Center, Princeton New Jersey.
10.3 Office Lease by and between NCI and Carnegie 214 Associates
Ltd. Partnership, dated January 23, 1996, for office space
at 214 Carnegie Center, Princeton, New Jersey.
10.4 Office Sublease by and between NCI and Mathtech, Inc., dated
December 22, 1997, for office space at 202 Carnegie Center,
Princeton, New Jersey.
10.5 Office Lease by and between NCI and Princeton 202 Associates
Limited Partnership, dated June 1995, for office space at
202 Carnegie Center, Princeton, New Jersey.
10.6 Office Lease by and between NCI and Princeton Pike Corporate
Center Associates IV, dated January 9, 1997, for office
space at 1009 Lennox Drive, Lawrenceville, New Jersey.
10.7 Office Sublease by and between NCI and Jay Yang Partners,
dated December 8, 1997, for office space at 41 Madison
Avenue, New York, New York.
10.8 Office Lease by and between NCI Advertising, Inc. and 41
Madison Co., dated October 4, 1996, for office space at 41
Madison Avenue, New York, New York, as amended by letter
agreement dated February 12, 1998, and letter agreement
dated March 1, 1998.
10.9 Office Lease by and between NCI Advertising, Inc. and 41
Madison Co., dated November 30, 1995, for office space at 41
Madison Avenue, New York, New York.
|
* To be filed by amendment
|
II-3
10.10 Office Lease by and between NCI Public Relations, Inc. and
Keller Carnegie Associates, dated November 9, 1993, for
office space at 103 Carnegie Center, Princeton, New Jersey,
as amended by First Amendment to Lease, dated January 22,
1999.
10.11 Nelson Communications Inc. 1998 Stock Incentive Plan.
10.12 Nelson Communications Inc. 1998 Stock Incentive Plan for
Outside Directors.
10.13 RWR Advertising, Inc. Stock Incentive Plan
10.14 World Health Communications, Inc. Stock Incentive Plan
10.15 Form of Subscription Agreement among Arista Marketing
Associates, Inc. and the Nelson Group stockholders
participating in the consolidation of the Nelson Group and
Arista Marketing Associates, Inc., dated July 16, 1998.
10.16 Indemnification Agreements among Nelson Communications Inc.
and each of its directors, dated April 7, 1999.
10.17* Consulting Agreement, dated as of August 1, 1997, between
NCI and Consulting Services of America, Inc.
10.18* Consulting Agreement, dated as of August 1, 1997, between
NCI and SAI, Inc.
10.19* Amended and Restated Employment Letter Agreement, by and
between NCI and Thomas A. Moore.
10.20* Amended and Restated Employment Letter Agreement, by and
between NCI and Peter Law-Gisiko.
10.21 Promissory Note in the principal amount of $97,608.80 made
by Fred H. Kellogg in favor of Nelson Communications Inc.,
dated September 14, 1998.
10.22 Promissory Note in the principal amount of $586,243.67 made
by Dr. Joseph A. Romano in favor of Nelson Communications
Inc., dated September 14, 1998
21.1 Subsidiaries of Nelson Communications Inc.
23.1* Consent of Patterson, Belknap, Webb & Tyler LLP (included in
Exhibit 5.1 hereto).
23.2 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (included on the signature pages hereto).
27.1 Financial Data Schedule.
|
* To be filed by amendment
II-4
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
3. The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York on April 30, 1999.
NELSON COMMUNICATIONS INC.
By: /s/ THOMAS A. MOORE
------------------------------------
Name: Thomas A. Moore
Title: President and Chief
Executive Officer
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints each of Wayne K. Nelson, Thomas A. Moore and
Peter Law-Gisiko, such person's true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
(or to any other registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act), and to
file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that any said attorney-in-fact
and agent, or any substitute or substitutes of any of them, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WAYNE K. NELSON Chairman of the Board of
--------------------------------------------------- Directors April 30, 1999
Wayne K. Nelson
/s/ THOMAS A. MOORE President, Chief Executive
--------------------------------------------------- Officer and Director April 30, 1999
Thomas A. Moore
/s/ PETER LAW-GISIKO Executive Vice President, Chief
--------------------------------------------------- Financial Officer, Secretary
Peter Law-Gisiko and Treasurer April 30, 1999
/s/ WILLIAM I. BERGMAN Director April 30, 1999
---------------------------------------------------
William I. Bergman
/s/ DR. BERNARD CANAVAN Director April 30, 1999
---------------------------------------------------
Dr. Bernard Canavan
|
II-6
SIGNATURE TITLE DATE
--------- ----- ----
/s/ KATHLEEN M. FOLEY Director April 30, 1999
---------------------------------------------------
Kathleen M. Foley
/s/ GEORGE S. FRAZZA Director April 30, 1999
---------------------------------------------------
George S. Frazza
/s/ LAWRENCE C. HOFF Director April 30, 1999
---------------------------------------------------
Lawrence C. Hoff
/s/ BARRY MACTAGGART Director April 30, 1999
---------------------------------------------------
Barry MacTaggart
/s/ DR. HERBERT PARDES Director April 30, 1999
---------------------------------------------------
Dr. Herbert Pardes
/s/ ROBERT G. PINCO Director April 30, 1999
---------------------------------------------------
Robert G. Pinco
/s/ THOMAS O. PYLE Director April 30, 1999
---------------------------------------------------
Thomas O. Pyle
/s/ KENNETH ROMAN Director April 30, 1999
---------------------------------------------------
Kenneth Roman
/s/ DR. ARTHUR HULL HAYES, JR. Director April 30, 1999
---------------------------------------------------
Dr. Arthur Hull Hayes, Jr.
|
II-7
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
1.1* Form of Underwriting Agreement..............................
2.1 Consolidation Agreement by and among Arista Marketing
Associates, Inc., the Nelson Companies (as defined therein)
and the other parties named therein, dated as of June 25,
1998........................................................
2.2 Agreement and Plan of Merger by and among Nelson
Communications Inc., Barton & Pittinos, Inc., J. Douglas
Barton and Terrence O. Tormey, dated as of July 31, 1998....
2.3 Asset Purchase Agreement by and among Nelson Communications
Inc., Bienestar Communications, Inc., Lipton Communications
Group, Inc. and Latin Reports, Ltd., dated March 5, 1999....
3.1 Amended and Restated Certificate of Incorporation...........
3.2 Amended and Restated By-Laws................................
4.1* Specimen certificate for shares of common stock, $.01 par
value, of Nelson Communications Inc.........................
5.1* Opinion of Patterson, Belknap, Webb & Tyler LLP as to the
validity of the securities being offered....................
10.1 Office Lease by and between Nelson Communications Inc.
(subsequently renamed NCI Communications, Inc.) ("NCI") and
A&R Real Estate, Inc., dated May 9, 1997, for office space
at 105 Madison Avenue, New York, New York, as amended by
First Amendment of Lease dated as of June 6, 1997...........
10.2 Office Sublease by and between NCI and the Thomas Group,
Inc., dated August 25, 1997, for office space at 103
Carnegie Center, Princeton New Jersey.......................
10.3 Office Lease by and between NCI and Carnegie 214 Associates
Ltd. Partnership, dated January 23, 1996, for office space
at 214 Carnegie Center, Princeton, New Jersey...............
10.4 Office Sublease by and between NCI and Mathtech, Inc., dated
December 22, 1997, for office space at 202 Carnegie Center,
Princeton, New Jersey.......................................
10.5 Office Lease by and between NCI and Princeton 202 Associates
Limited Partnership, dated June 1995, for office space at
202 Carnegie Center, Princeton, New Jersey..................
10.6 Office Lease by and between NCI and Princeton Pike Corporate
Center Associates IV, dated January 9, 1997, for office
space at 1009 Lennox Drive, Lawrenceville, New Jersey.......
10.7 Office Sublease by and between NCI and Jay Yang Partners,
dated December 8, 1997, for office space at 41 Madison
Avenue, New York, New York..................................
10.8 Office Lease by and between NCI Advertising, Inc. and 41
Madison Co., dated October 4, 1996, for office space at 41
Madison Avenue, New York, New York, as amended by letter
agreement dated February 12, 1998, and letter agreement
dated March 1, 1998.........................................
10.9 Office Lease by and between NCI Advertising, Inc. and 41
Madison Co., dated November 30, 1995, for office space at 41
Madison Avenue, New York, New York..........................
|
* To be filed by amendment
|
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
10.10 Office Lease by and between NCI Public Relations, Inc. and
Keller Carnegie Associates, dated November 9, 1993, for
office space at 103 Carnegie Center, Princeton, New Jersey,
as amended by First Amendment to Lease, dated January 22,
1999........................................................
10.11 Nelson Communications Inc. 1998 Stock Incentive Plan........
10.12 Nelson Communications Inc. 1998 Stock Incentive Plan for
Outside Directors...........................................
10.13 RWR Advertising, Inc. Stock Incentive Plan..................
10.14 World Health Communications, Inc. Stock Incentive Plan......
10.15 Form of Subscription Agreement among Arista Marketing
Associates, Inc. and the Nelson Group stockholders
participating in the consolidation of the Nelson Group and
Arista Marketing Associates, Inc., dated July 16, 1998......
10.16 Indemnification Agreements among Nelson Communications Inc.
and each of its directors, dated April 7, 1999..............
10.17* Consulting Agreement, dated as of August 1, 1997, between
NCI and Consulting Services of America, Inc. ...............
10.18* Consulting Agreement, dated as of August 1, 1997, between
NCI and SAI, Inc. ..........................................
10.19* Amended and Restated Employment Letter Agreement, by and
between NCI and Thomas A. Moore. ...........................
10.20* Amended and Restated Employment Letter Agreement, by and
between NCI and Peter Law-Gisiko............................
10.21 Promissory Note in the principal amount of $97,608.80 made
by Fred H. Kellogg in favor of Nelson Communications Inc.,
dated September 14, 1998....................................
10.22 Promissory Note in the principal amount of $586,243.67 made
by Dr. Joseph A. Romano in favor of Nelson Communications
Inc., dated September 14, 1998..............................
21.1 Subsidiaries of Nelson Communications Inc. .................
23.1* Consent of Patterson, Belknap, Webb & Tyler LLP (included in
Exhibit 5.1 hereto).........................................
23.2 Consent of Deloitte & Touche LLP............................
24.1 Power of Attorney (included on the signature pages
hereto).....................................................
27.1 Financial Data Schedule.....................................
|
* To be filed by amendment.
EXHIBIT 2.1
ARISTA MARKETING ASSOCIATES, INC.
THE NELSON COMPANIES
CONSOLIDATION AGREEMENT
As of June 25, 1998
TABLE OF CONTENTS
Page
1. Definitions..............................................................1
2. Basic Transactions.......................................................4
2.1. Nelson Companies..................................................4
2.2. Scott Transfer Corp...............................................5
2.3. Consequences of Transactions......................................5
2.4. Effect of this Agreement..........................................5
2.5. The Closing.......................................................6
2.6. Actions at the Closing............................................6
2.7. Redomiciliation of Arista, etc....................................7
2.8. Issuance of Additional Shares to Curcura..........................7
3. Representations and Warranties of Arista and Curcura.....................8
3.1. Organization and Qualification....................................8
3.2. Subsidiaries......................................................8
3.3. Capitalization....................................................8
3.4. Agreement; Title to Shares........................................9
3.5. Financial Statements.............................................10
3.6. Title to Property, Absence of Encumbrances, etc..................11
3.7. Accounts Receivable and Accounts Payable.........................12
3.8. Books and Records................................................13
3.9. Patents, Trademarks, etc.........................................13
3.10. Employee Remuneration, etc.......................................14
3.11. Labor Matters....................................................15
3.12. Bank Accounts....................................................16
3.13. No Adverse Change................................................17
3.14. Absence of Certain Changes.......................................17
3.15. Litigation.......................................................20
3.16. Compliance with Other Instruments and Laws.......................20
3.17. Contracts, etc...................................................21
3.18. Taxes............................................................23
3.19. Permits..........................................................28
3.20. Employee Benefit Plans...........................................29
3.21. Insurance........................................................31
3.22. Transactions with Affiliates.....................................32
3.23. Clients..........................................................32
3.24. Information Technology...........................................33
3.25. Other Liabilities................................................33
3.26. Brokers..........................................................33
3.27. Absence of Certain Payments......................................33
3.28. Disclosure.......................................................34
3.29. Pooling..........................................................34
3.30. Adequate Information.............................................35
4. Representations and Warranties of the Nelson Companies..................35
|
4.1. Organization and Qualification...................................35
4.2. Agreement........................................................35
i
4.3. Brokers..........................................................36
5. Covenants of Arista and Curcura.........................................37
5.1. Action to Closing................................................37
5.2. Access and Information...........................................39
5.3. Publicity; Confidentiality.......................................39
5.4. Best Efforts.....................................................39
5.5. Negotiations with Other Parties..................................39
5.6. Public Offering..................................................40
6. Covenants of the Nelson Companies.......................................40
6.1. Publicity; Confidentiality.......................................40
6.2. Best Efforts.....................................................40
7. Conditions to the Obligations of Arista and Curcura.....................41
7.1. Representations and Warranties...................................41
7.2. Performance......................................................41
7.3. Closing Certificate..............................................41
7.4. Opinion of Counsel...............................................41
8. Conditions to the Obligations of the Nelson Companies...................42
8.1. Representations and Warranties...................................42
8.3. Closing Certificate..............................................42
8.4. Opinion of Counsel...............................................43
8.5. Consents; Permits................................................43
8.6. Employment Agreements............................................43
8.7. Redomiciliation..................................................43
8.8. Subscription Agreements..........................................43
8.9. Pooling Letter...................................................44
8.10. Ability to File Registration Statement...........................44
9. Adoption of Plans of Certain Nelson Companies' Subsidiaries.............44
10. Survival of Representations and Warranties; Indemnification.............45
10.1. Survival of Representations and Warranties.......................45
10.2. Indemnification by Curcura.......................................46
10.3. Indemnification by the Nelson Companies..........................47
10.4. Limit of Indemnification Obligations.............................47
10.5. Indemnification Procedures.......................................49
10.6. Waiver of Right to Contribution..................................50
11. Termination.............................................................51
12. General Provisions......................................................51
12.1. Modification; Waiver.............................................51
12.2. Entire Agreement, etc. .........................................51
12.3. Curcura's Consent................................................52
12.4. Expenses.........................................................52
12.5. Further Actions..................................................52
12.6. Notices..........................................................52
|
ii
12.7. Assignment.......................................................53
12.8. Counterparts.....................................................54
12.9. Headings.........................................................54
12.10. Governing Law....................................................54
12.11. Separability.....................................................54
12.12. Incorporation of Exhibits and Schedules..........................54
12.13. Submission to Jurisdiction.......................................54
12.14. Notice of Developments...........................................55
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iii
EXHIBITS
Exhibit A - Arista - Delaware Certificate of Incorporation
and By-Laws
Exhibit B - Form of Opinion of Patterson, Belknap, Webb
& Tyler LLP
Exhibit C - Form of Scott Transfer Corp. Representation Letter
Exhibit D - Form of Opinion of Winne, Banta, Rizzi, Hetherington &
Basralian, P.C.
Exhibit E - Employment Agreement
Exhibit F - Pooling Letter
iv
CONSOLIDATION AGREEMENT
CONSOLIDATION AGREEMENT, dated as of June 25, 1998, by and among
ARISTA MARKETING ASSOCIATES, INC., a New Jersey corporation ("Arista"), PHILIP
J. CURCURA ("Curcura"), SCOTT TRANSFER CORP., a Delaware corporation ("Scott
Transfer"), and the corporations other than Arista and Scott Transfer listed on
the signature pages hereof (the "Nelson Companies"; Arista, Curcura, Scott
Transfer and the Nelson Companies, collectively, the "Parties").
WHEREAS, the Parties wish Arista to acquire all of the issued and
outstanding common stock of the Nelson Companies, as well as an affiliated
company;
WHEREAS, Curcura is the sole shareholder of Arista; and
WHEREAS, the Parties intend that the acquisition of all of the
equity of the Nelson Companies be accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and covenants herein contained, the Parties agree as
follows:
1. Definitions. As used herein, the following terms shall have the
respective meanings set forth below or in the section indicated.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
1
"Arista Shares" means the shares of the Common Stock, $0.01 par
value per share, of Arista, after Redomiciliation.
"Arista Stock Option Plan" has the meaning set forth in Section
9(b).
"Balance Sheet" has the meaning set forth in Section 3.7.
"Benefit Plans" has the meaning set forth in Section 3.20(a).
"Closing" has the meaning set forth in Section 2.5.
"Closing Date" has the meaning set forth in Section 2.5.
"Code" has the meaning set forth in Section 3.19(a)(iii).
"Common Stock" has the meaning set forth in Section 3.3.
"Curcura Affiliate" has the meaning set forth in Section 3.22.
"Curcura Loan" has the meaning set forth in Section 5.7.
"Damages" has the meaning set forth in Section 10.2.
"Deductible Amount" has the meaning set forth in Section 10.4(a).
"ERISA" has the meaning set forth in Section 3.20(a).
"Financial Statements" has the meaning set forth in Section 3.5.
"Found Assets" has the meaning set forth in Section
2
10.4(a).
"Fry Arbitration" has the meaning set forth in Section 2.8.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Indemnitee" has the meaning set forth in Section 10.5.
"Indemnitor" has the meaning set forth in Section 10.5.
"IRS" means the Internal Revenue Service.
"Insurance Policies" has the meaning set forth in Section 3.21.
"Knowledge" means, with respect to a Person which is an individual,
the actual knowledge or awareness of such Person and, with respect to any other
Person, the actual knowledge or awareness of a Responsible Person of such
Person.
"Nelson Companies" means the corporations (other than Arista and
Scott Transfer) listed on the signature pages hereof.
"Nelson Shares" means the shares of the Nelson Companies.
"Nelson Stockholders" means the holders of the Nelson Shares.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Permits" has the meaning set forth in Section 3.19.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited
3
liability company, a trust, a joint venture, an unincorporated organization, or
a governmental entity (or any department, agency, or political subdivision
thereof).
"Private Placement Memorandum" has the meaning set forth in Section
3.30.
"Redomiciliation" has the meaning set forth in Section 2.6.
"Responsible Person" means, with respect to any Person which is a
corporation, the chairman of the board of directors, president, chief executive
officer, chief financial officer, controller, secretary, treasurer, or any
director or vice president, and with respect to any other Person which is not an
individual, any partner, officer, trustee, member of the board of directors or
senior manager.
"Return" has the meaning set forth in Section 3.18(a)(ii).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Subscription Agreement" has the meaning set forth in Section
2.3(c).
"Tax" has the meaning set forth in Section 3.18(a)(i).
2. Basic Transactions.
2.1. Nelson Companies. On the terms and subject to the conditions
set forth in this Agreement, Arista will at the
4
Closing exchange Arista Shares for all of the issued and outstanding shares of
common stock of the Nelson Companies tendered to it by Nelson Stockholders by
execution and delivery to Arista by such Nelson Stockholders prior to the
Closing Date of a Subscription Agreement. Each of the holders of the stock of
the Nelson Companies shall receive the number of Arista Shares set forth on
Exhibit A (subject to the provisions of Section 2.2) for the shares of stock of
the Nelson Companies held by such Person.
2.2. Scott Transfer Corp. On the terms and subject to the
conditions set forth in this Agreement, Arista will at the Closing exchange
Arista Shares for all of the shares of Scott Transfer, an entity which is a
member of Healthcall Network LLC. The number of Arista Shares that Craig H.
Scott, the sole shareholder of Scott Transfer, will receive as a result of this
exchange is included in the total set forth opposite his name on Exhibit A.
2.3. Consequences of Transactions. As a result of the transactions
described in Sections 2.1 and 2.2, and after Redomiciliation, (a) if
Subscription Agreements are received from all of the Nelson Stockholders and the
sole stockholder of Scott Transfer with respect to all of the Nelson Shares,
Arista will have 24,000,000 Arista Shares issued and outstanding and (b) Curcura
will own 727,273 Arista Shares.
2.4. Effect of this Agreement. By entering into this Agreement, the
Nelson Companies agree to:
5
(a) recommend to the Nelson Stockholders that they tender
their share holdings to Arista for exchange for Arista Shares in
accordance with the terms of this Agreement;
(b) circulate to the Nelson Stockholders a Private Placement
Memorandum setting forth such information as to the proposed
exchange as the Nelson Companies believe is advisable to include to
ensure compliance with the Securities Act; and
(c) use their best efforts to obtain from the Nelson
Stockholders a subscription agreement (the "Subscription Agreement")
tendering their shares for exchange in accordance with the
provisions of this Agreement and making such representations to
Arista as are customary in private placements of securities.
2.5. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Patterson,
Belknap, Webb & Tyler LLP, 1133 Avenue of the Americas, New York, New York,
commencing at 10:00 a.m. local time on June 30, 1998 (the "Closing Date") or at
or on such other date, time and place as may be agreed upon by the Parties.
2.6. Actions at the Closing. On the Closing Date, (a) Arista will
deliver to the Nelson Companies and Scott Transfer the various certificates,
instruments, and documents referred to in Section 8, (b) the Nelson Companies
and Scott
6
Transfer will deliver to Arista the various certificates, instruments, and
documents referred to in Section 7, (c) Arista will deliver to the Nelson
Stockholders and the sole stockholder of Scott Transfer certificates evidencing
Arista Shares against surrender of the certificates (or, in the case of share
certificates that cannot be found, lost certificate affidavits) evidencing the
Nelson Shares, endorsed for transfer or accompanied by executed stock powers.
2.7. Redomiciliation of Arista, etc. Prior to Closing Date,
Arista, acting through its Board of Directors and sole shareholder in accordance
with applicable law, its certificate of incorporation and by-laws, and the
written consent of its sole shareholder, shall have redomiciled in the State of
Delaware and adopted its certificate of incorporation and by-laws in the
respective forms set forth in Exhibit A (such actions, the "Redomiciliation").
Among other things, such certificate of incorporation shall authorize the
issuance of a sufficient number of shares of Common Stock to allow the share
exchange contemplated by this Agreement.
2.8. Issuance of Additional Shares to Curcura. In the event
that the arbitration with Barry J. Fry and The Peer Group, Inc. (the "Fry
Arbitration") results in a recovery of monies by Arista in excess of legal fees
incurred by Arista after the Closing Date, Arista shall issue to Curcura that
number of additional Arista Shares as shall be equal in value such excess.
7
For the purpose of any such issuance of Arista Shares, the valuation set forth
in Section 10.4(b) shall govern.
3. Representations and Warranties of Arista and Curcura. Arista and
Curcura, jointly and severally, represent and warrant to the Nelson Companies
and Scott Transfer as follows:
3.1. Organization and Qualification. Arista is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Jersey and has all requisite power and authority to own, lease and
operate its properties and carry on its business as now being conducted.
3.2. Subsidiaries. Arista does not own or control, directly or
indirectly, any shares of, or interest in, any corporation, partnership, joint
venture, association or other business entity.
3.3. Capitalization. The authorized capital stock of Arista
consists of 2,500 shares of common stock, par value $1.00 per share (the "Common
Stock"), of which 1,000 shares of Common Stock are issued and outstanding. All
of the issued and outstanding shares of Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. Other
than pursuant to this Agreement, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights or other agreements or
commitments of any character whatsoever obligating Arista to issue or sell any
shares of its capital stock or any securities convertible into or exchangeable
8
or exercisable for, or otherwise evidencing a right to acquire, any shares of
its capital stock or other securities of any kind of Arista. There are no voting
trusts or other agreements or understandings to which Arista is a party with
respect to the voting of the capital stock of Arista.
3.4. Agreement; Title to Shares. Arista has all requisite
power and authority and Curcura has all requisite capacity and authority to
enter into this Agreement. This Agreement has been duly authorized, executed and
delivered by Arista and Curcura and constitutes the legal and binding obligation
of Arista and Curcura, enforceable in accordance with its terms. The execution
and delivery by Arista and Curcura of this Agreement, the consummation of the
transactions contemplated hereby, and the performance by Arista and Curcura of
their respective obligations hereunder will not conflict with or result in any
violation of, or any default under (either immediately or with notice or lapse
of time), or any right to accelerate or the creation of any lien, charge or
encumbrance pursuant to, any provision of (a) the certificate of incorporation
or by-laws of Arista, (b) except as set forth on Schedule 3.4, any agreement,
contract, lease, license, note, bond, mortgage, indenture, deed of trust or
other instrument to which Arista or Curcura is a party or by which any of the
properties or other assets of Arista or Curcura is bound, (c) any governmental
franchise, license, permit or authorization, or any judgment or order of any
tribunal or governmental body applicable to Arista or Curcura or any of
9
the properties or other assets of Arista or Curcura, or (d) any law, statute,
decree, rule or regulation of any jurisdiction. No authorization, consent or
approval of, or declaration of, filing with or notice to any governmental body
or authority by Arista or Curcura is necessary for the execution of this
Agreement by Arista or Curcura, the consummation by Arista and Curcura of the
transactions contemplated hereby or the performance by Arista and Curcura of
their respective obligations hereunder. Curcura owns beneficially and of record,
free and clear of any lien, pledge, hypothecation, mortgage or other
encumbrance, all of the issued and outstanding Common Stock, and will own
beneficially and of record, free and clear of any lien, pledge, hypothecation,
mortgage or other encumbrance, all of the Arista Shares after Redomiciliation.
3.5. Financial Statements. Arista has previously delivered to
Nelson true and complete copies of (a) the balance sheets of Arista as of
December 31, 1997, 1996 and 1995 and the related statements of income, retained
earnings and cash flows for such years then ended, as compiled by Ross, Anglim,
Angelini, Valla & Krawitz LLP, certified public accountants, and interim
statements of income for the quarter ended March 31, 1998, prepared by Arista's
staff. Such statements, including the notes to all such statements, if any, are
referred to herein collectively as the "Financial Statements." The Financial
Statements have been prepared on a consistent basis throughout the periods
specified, although not in accordance with GAAP, and
10
present fairly the financial position of Arista as of the respective dates
specified and the results of operations and changes in financial position of
Arista for the respective periods specified. All information supplied by Arista
to Kelly Massad LLP, certified public accountants, to permit such firm to
prepare financial statements in accordance with GAAP and all information
supplied to Deloitte & Touche LLP, certified public accountants, to permit such
firm to audit such financial statements, is and will be true and correct.
3.6. Title to Property, Absence of Encumbrances, etc. Set
forth on Schedule 3.6 is a complete and accurate list of (a) all real property
and all material equipment, furniture and fixtures owned or leased by Arista,
and (b) all mortgages, liens and material encumbrances to which such real
property, equipment, furniture and fixtures are subject. Except for leased
property and as specified in Schedule 3.6, Arista has good and marketable title
to all assets, real or personal, tangible or intangible, owned or used by it,
respectively, including, without limitation, all assets reflected in the most
recent balance sheet included in the Financial Statements (other than any assets
sold or otherwise disposed of in the Ordinary Course of Business since the date
of such balance sheet), free and clear of all mortgages, pledges, liens,
security interests or encumbrances of any nature (other than liens for taxes,
assessments or other governmental charges not yet due and payable, or presently
payable without penalty or interest) including, without limitation, any
11
governmental restrictions on the operation of such assets. All buildings,
equipment, furniture and fixtures listed on Schedule 3.6 owned or leased by
Arista are in good operating condition and repair. All real property owned or
leased by Arista has been constructed and operated in compliance with all
applicable federal, state, county and municipal laws, regulations, ordinances,
standards and orders, including without limitation all zoning and environmental
laws, regulations, ordinances, standards and orders. There are no outstanding
enforcement actions or notices of violation issued by any federal, state, county
or municipal authority having jurisdiction over any such property.
3.7. Accounts Receivable and Accounts Payable. The accounts
receivable of Arista reflected in the Financial Statements, to the extent not
yet collected, are from bona fide accounts receivable created in the Ordinary
Course of Business and, except to the extent reserved against on the Financial
Statements, are current and there is no reason to believe they will not be
collectible in the Ordinary Course of Business. Any reserve established against
accounts receivable after December 31, 1997 is and shall be on a basis
consistent with that applied in preparing the balance sheets included in the
Financial Statements. Except as set forth in Schedule 3.7 or to the extent
reserved against in the balance sheet as of December 31, 1997 included in the
Financial Statements (the "Balance Sheet"), no client has indicated or asserted
that it has a counterclaim or
12
other offsetting claim with respect to such receivables. All accounts payable
reflected on the Balance Sheet, and all accounts payable arising subsequent to
the date of such Balance Sheet, have arisen in the Ordinary Course of Business,
represent valid obligations of Arista and, have been paid or are being paid in
accordance with past practices.
3.8. Books and Records. Except as stated on Schedule 3.8, the
minute books, stock record books, and other material non-financial records of
Arista, all of which have been made available to the Nelson Companies, are
complete and correct in all material respects and have been maintained in
accordance with sound business practices and substantially reflect the basis for
the financial condition and results of operations of Arista set forth in the
Financial Statements. The minute books of Arista contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of Directors
of Arista, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. As of the Closing Date, all of the books and
records referred to in this Section 3.8 will be in the possession of the Nelson
Companies.
3.9. Patents, Trademarks, etc. Schedule 3.9 contains a
complete and correct list of all patents, trademarks registered or claimed by
Arista, trade names and registered copyrights owned or used by, or registered in
the name of,
13
Arista, and of all applications for patents or for registration of trademarks,
trade names or copyrights made by Arista, or by any of its employees, for the
benefit of Arista. Except as otherwise indicated in Schedule 3.9, Arista is the
registered and beneficial owner of all such patents, trademarks, trade names and
registered copyrights, free and clear of any license, royalty, lien, encumbrance
or other interest of any third party. Arista owns or has the right to use all
patents, patent applications, trademarks, trade names, copyrights or other
intellectual property rights, including, without limitation, trade secrets,
technology and know-how, necessary for the conduct of its business. Other than
as set forth on Schedule 3.9, there is no existing, pending or threatened claim
by Arista against any third party for infringement, misuse or misappropriation
of any patent, trademark, trade name, copyright or other intellectual property
(including without limitation any trade secrets or know-how) owned by Arista or
in which Arista has an interest. There is no existing, pending or, to the
Knowledge of Arista or Curcura, threatened, action, suit, or proceeding against
Arista for infringement, misuse or appropriation by Arista of any patent,
trademark, trade name, copyright or other intellectual property (including
without limitation any trade secret or know-how) owned or claimed to be owned by
any third party or any basis therefor.
3.10. Employee Remuneration, etc. (a) Schedule 3.10 lists the
position and the current salaries, bonuses, or any other form of compensation
paid (together with pending or
14
anticipated increases therein) to each director, officer, employee, consultant
or agent of Arista including any bonuses which Arista has promised or currently
anticipates paying to any such person. No officer or other key employee of
Arista has indicated an intention to terminate his or her employment with
Arista.
(b) Schedule 3.10 also lists each officer, employee, consultant and
agent of Arista who has entered into an employment contract, consulting contract
or other special arrangement with Arista, and true and complete copies of all
such contracts and descriptions of all such arrangements have been previously
delivered to the Nelson Companies.
(c) Except as set forth on Schedule 3.10, Arista has not entered
into any agreement or arrangement with any employee, officer, director or
provider of services of Arista to pay any of them any amount beyond their
regular salary or other compensation as an inducement to remain at their present
position until, or contingent upon, the execution of this Agreement or the
consummation of the transactions contemplated hereby or pursuant to which Arista
could have any obligation to pay any of them compensation in the event of, or as
a consequence of (i) the severance of their employment or relationship with
Arista following a change of control of Arista or (ii) a change of control of
Arista.
3.11. Labor Matters. Arista is not a party to any collective
bargaining agreement. Except as disclosed on Schedule
15
3.11, no attempt to organize the employees of Arista has been made, nor is any
such attempt now threatened or, to the Knowledge of Arista or Curcura, being
planned. Arista is in compliance with all applicable Federal, state and local
laws, rules and regulations regarding employment conditions and practices, has
withheld all amounts required by law or agreement to be withheld from the wages
or salaries of its employees and is not liable for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing. Arista has
not engaged in any unfair labor practices and has not discriminated on the basis
of age, sex or other discrimination prohibited by law in its respective
employment conditions or practices. Except as set forth on Schedule 3.11, there
are no unfair labor practice or age or sex discrimination charges or complaints
or other charges or complaints alleging illegal discriminatory practices pending
or threatened against Arista before any Federal, state or local board,
department, commission or agency, nor to the Knowledge of Arista or Curcura does
any basis therefor exist. There are no existing or threatened labor strikes,
disputes, grievances, controversies or other labor troubles affecting Arista.
There are no pending or threatened representation questions respecting the
employees of Arista or any pending arbitration proceedings.
3.12. Bank Accounts. Schedule 3.12 lists the name and location
of each bank or other institution in which Arista has any account or safe
deposit box, the number or other
16
identification thereof and the names of all persons authorized to draw thereon
or have access thereto.
3.13. No Adverse Change. Since January 1, 1998, there has not
been any material adverse change in the financial condition, operations,
business or prospects of Arista.
3.14. Absence of Certain Changes. Except as set forth on
Schedule 3.14 or pursuant to the Other Merger Agreements, since January 1, 1998,
Arista has not (a) issued, sold or delivered or agreed to issue, sell or deliver
any shares of its capital stock or any options or rights to acquire any such
capital stock or securities convertible into or exchangeable for such capital
stock, (b) incurred any material obligations or liabilities, whether absolute,
accrued, contingent or other, other than obligations and liabilities incurred in
the Ordinary Course of Business, (c) mortgaged, pledged or subjected to any
lien, lease, security interest or other encumbrance (other than liens for taxes,
assessments or other governmental charges not yet due and payable, or presently
payable without penalty or interest), any of its assets, real or personal,
tangible or intangible, (d) acquired or disposed of any assets or properties, or
entered into any agreement for any such acquisition or disposition, except in
the Ordinary Course of Business, (e) incurred any obligation for borrowed money
which remains outstanding on the date hereof, except for borrowings in an
aggregate amount not exceeding $10,000 in the Ordinary Course of Business, (f)
forgiven or canceled any debts or claims or waived
17
any rights of material value not previously accrued, (g) granted or promised any
increase in compensation in any form of more than five percent to any officer or
other employee or granted any severance or termination pay, agreed to or
indicated the intention of paying to any officer or other employee a bonus or
other compensation not included in such person's base salary in excess of the
bonus or other compensation previously paid such person, or entered into any
employment agreement, or any modification of a previously existing employment
agreement, with any officer or any other salaried employee, (h) adopted, amended
or entered into any collective bargaining, bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation or other plan,
agreement or arrangement for the benefit of employees, (i) granted any rights or
licenses under any of its trademarks, trade names, copyrights or other
intellectual property rights, (j) made any capital expenditure or binding
commitment therefor which individually or in the aggregate exceeds $10,000, (k)
sold, assigned or transferred any of its assets (tangible or intangible) or
otherwise disposed of any property, trademark, trade name, assumed name,
copyright (or pending application therefor) or interest thereunder, except in
each case in the Ordinary Course of Business, (l) suffered any material loss of,
or adverse change in its relationship with, any material client or customer or
has Knowledge that any such client or customer intends or is contemplating any
action which would constitute or lead to such a loss or adverse change, or
written
18
down the value of any work-in-process or written off as uncollectible any notes
or accounts receivable, except write-downs and write-offs in the Ordinary Course
of Business, (m) suffered any damage, destruction or loss (whether or not
covered by insurance) which has a material adverse effect on its business, (n)
suffered any strike or other labor trouble which has materially affected its
operations, (o) terminated or made any substantial revision of, or engaged in
any renegotiation of, any material contract, (p) materially decreased the level
of maintenance on, or its expenditures for maintenance of, the real property,
equipment, furniture and fixtures owned or leased by it, (q) made any change in
accounting principles or methods or in classification, depreciation or
amortization policies or rates, (r) settled any dispute involving payment by
Arista in excess of $5,000, or canceled, forgiven or reduced any obligation of
any Person in an amount in excess of $5,000, (s) made any loan or advance in
excess of $5,000 to any Person other than travel or expense advances in
accordance with its normal policies which have been accounted for or repaid and
extension of trade credit in accordance with its normal business practices, (t)
amended or terminated any agreement which is material to its business, except
amendments in the Ordinary Course of Business which have not had and will not
have a material adverse effect on Arista; (u) renewed, extended or modified any
lease of real property, or personal property, except in the Ordinary Course of
Business, in circumstances that have not had and will not have a material
19
adverse effect on Arista; or (v) entered into any material transaction other
than in the Ordinary Course of Business.
3.15. Litigation. Other than as set forth on Schedule 3.15,
there is no judicial or administrative action, suit, proceeding or governmental
investigation pending or to the Knowledge of Arista or Curcura threatened before
any court or tribunal or governmental instrumentality, or any citation, order or
notice of violation of any law, decree, rule or regulation, by or against Arista
or Curcura or any of Arista's properties, or which relates in any way to
Arista's business, properties, assets or operations, or which has or is likely
to result in an imposition of a lien on any of the properties or assets owned or
leased by Arista, or which questions the validity of this Agreement or any
action to be taken in connection herewith, nor is there any such action, suit,
proceeding or investigation, pending or, to the Knowledge of Arista or Curcura
threatened, which involves any director, officer, employee, consultant or
independent contractor of Arista in its or his capacity as such. Except as set
forth in Schedule 3.15, neither Arista nor any property or assets of Arista is
subject to any judicial or administrative order, judgment, injunction or decree
nor has Arista been a party to any product or professional liability litigation
within the last five years.
3.16. Compliance with Other Instruments and Laws. Arista is
not in violation of any provision of (a) its charter or by-laws, or (b) any
agreement, contract, mortgage, lease, license
20
or other instrument, governmental franchise, license, permit or authorization,
judgment or order of any tribunal or governmental body, or law, statute, decree,
rule or regulation applicable to it or any of its properties or to which it is a
party or by which it is bound.
3.17. Contracts, etc. Schedule 3.17 contains a complete and
correct list (to the extent not listed on any other Schedule to this Agreement)
of each (a) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension, retirement or similar plan, agreement or arrangement of
Arista, (b) mortgage, debenture, note or installment obligation, or other
instrument or contract for the borrowing or lending of money by Arista,
including without limitation any agreement or arrangement relating to the
maintenance of compensating balances or the availability of a line of credit,
(c) license agreement, sales agency agreement or franchise agreement (other than
off-the-shelf software licenses) to which Arista is a party, (d) guaranty of any
obligation of any person by Arista, including without limitation any keep-well,
make-whole or maintenance of working capital or earnings or similar agreement,
(e) agreement for the sale of any properties or assets by Arista other than
sales of products or services in the Ordinary Course of Business to clients or
customers which in 1997 generated or which in 1998 obligates the customer or
client to pay, revenues of $10,000 or more, (f) contract, purchase order or
other agreement, other than a contract, purchase order or other agreement (i)
for the
21
purchase of equipment, furniture or fixtures with an aggregate consideration of
less than $10,000, made in the Ordinary Course of Business, or (ii) for the
purchase of materials or supplies made in the Ordinary Course of Business,
pursuant to which Arista is or may be obligated to make payments, contingent or
otherwise, on account of or arising out of the acquisition, prior, pending or
future, of the shares, business, or other assets of another enterprise, (g)
secrecy or invention agreement under which Arista or any of the present officers
or employees of Arista has any obligation and relating to the business of
Arista, (h) agreement for the purchase or sale of goods or services not
terminable without liability by Arista on 90 days' (or less) notice or involving
payments by or to Arista in excess of $10,000, (i) agreement or arrangement with
a customer or client of Arista for rebates, sharing of expenses or any similar
device for the effective reduction or increase of prices or other charges and
involving products or services with a value in excess of $10,000, (j) agreement
of Arista with, or loan or advance by Arista to or from, or other obligation of
Arista to or from any officer or director of Arista, (k) lease of real or
personal property with Arista as lessor or lessee, involving rents of more than
$10,000 per year, (l) agreement or arrangement limiting the freedom of Arista
or, to the Knowledge of Arista or Curcura, any of the present or former officers
or employees of Arista to compete in any line of business similar to Arista's
business, with any person or other entity or in any geographical area, (m)
22
governmental license, franchise, permit or authorization held by and material to
the business of Arista and not listed on any other Schedule hereto, (n)
outstanding powers of attorney executed by or on behalf of Arista, (o) joint
venture agreement or partnership, profit sharing or other similar agreements to
which Arista is a party, (p) contract, commitment or agreement not referred to
above in this Section 3.17 or in any other Schedule to this Agreement and any
one of which involves aggregate payments by or to Arista of $10,000 or more. All
such contracts and agreements are, with respect to Arista, valid, binding and in
full force and effect, neither Arista nor any other party is in material default
thereunder and no event has occurred which, whether with notice, lapse of time
or otherwise, would constitute a default by Arista thereunder, and Arista has
not received or sent any notice of cancellation or termination thereunder.
Except as disclosed in Schedule 3.17 hereto, no consent of any party or the
payment of any penalty or incurrence of any additional obligation or change of
any terms is necessary so that all rights of Arista under contracts extending
beyond the Closing Date shall continue unimpaired on and after the Closing Date.
3.18. Taxes. (a) As used in this Section 3.18, the following
terms have the following meanings:
(i) "Tax" means any federal, state, local, or foreign
income, gross income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation,
23
premium, windfall profits, environmental (including taxes under Code ss. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, ad valorem, lease, service use, registration, value added,
alternative or add-on minimum, estimated, or other tax, fee, assessment or
change of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not, together with any expenses incurred in
connection with the determination, settlement or litigation of any Tax
liability;
(ii) The term "Return" means any return, declaration,
report, statements or other document required to be filed in respect of Taxes,
including, where permitted or required, combined or consolidated returns for any
group of entities that includes Arista;
(iii) The term "Code" means the Internal Revenue Code of
1986, as amended; all citations to the Code, or to the Treasury Regulations
promulgated thereunder, shall include any amendments or any substitute or
successor provisions thereto; and
(iv) Any reference in this Section 3.18 to Arista
includes a reference to a person acting on behalf of Arista.
(b) Arista has timely filed all Returns that it was required
to file. All such Returns were correct and complete in all respects. All Taxes
owed by Arista (whether or not shown
24
on any Return) have been paid. Arista currently is not the beneficiary of any
extension of time within which to file any Return. No claim has ever been made
by an authority in a jurisdiction where Arista does not file a Return that it is
or may be subject to taxation by that jurisdiction. There are no liens on any of
the assets of any of Arista that arose in connection with any failure (or
alleged failure) to pay any Tax.
(c) Arista has withheld and paid to the appropriate
governmental or regulatory authority all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(d) No director or officer (or employee responsible for Tax
matters) of Arista expects any authority to assess any additional Taxes for any
period for which tax returns have been filed. There is no dispute or claim
concerning any Tax liability of Arista either (i) claimed or raised by any
authority in writing or (ii) as to which any of Arista and the directors and
officers (and employees responsible for Tax matters) of Arista has Knowledge.
Schedule 3.18 lists all federal, state, local, and foreign income tax returns
filed with respect to Arista for taxable periods ended on or after December 31,
1994, indicates those Returns that have been audited, and indicates those
Returns that currently are the subject of audit. Arista has delivered to Nelson
correct and complete copies of all federal income tax returns, examination
reports, and statements
25
of deficiencies assessed against or agreed to by Arista since December 31, 1994.
(e) Arista has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(f) Arista has not filed a consent under Code ss. 341(f),
concerning collapsible corporations. Arista has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any parachutes payments that
will not be deductible under Code ss. 280G, concerning "golden parachutes."
Arista has disclosed on its federal income tax returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code ss. 6662. Arista is not a party to any Tax
indemnity, Tax allocation or Tax sharing agreement. Arista is not a party to any
closing agreement pursuant to Section 7121 of the Code or any similar provision
of any state, provincial, local, or foreign law with respect to Arista or any
assets thereof. Arista has not received a Tax ruling from any Tax authority. No
power of attorney currently in force has been granted by Arista concerning any
Tax matter. Arista (i) has not been a member of an affiliated group filing a
consolidated federal income tax return and (ii) has no liability for the Taxes
of any person under Treas. Reg. ss. 1.1502-6 (or any similar provision of state,
local,
26
or foreign law), as a transferee or successor, by contract, or otherwise.
(g) None of the assets of Arista is "tax-exempt use property"
within the meaning of Section 168(h) of the Code. Arista has not agreed to make,
nor is it required to make, any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise. None of the assets of
Arista is property that Arista is required to treat as being owned by any other
person pursuant to the "safe harbor lease" provisions of former section
168(f)(8) of the Code. None of the assets of Arista directly or indirectly
secures any debt the interest on which is tax-exempt under Section 103(a) of the
Code. Arista has not participated in an international boycott within the meaning
of Section 999 of the Code. Arista has not been a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Arista has
not had a permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such foreign
country. Arista has made available (or, in the case of Tax Returns filed after
the Closing Date, will make available) to Nelson complete and accurate copies of
all Tax Returns and associated work papers filed by or on behalf of Arista for
all taxable years ending on or prior to the Closing Date.
(h) Schedule 3.18 sets forth the following information with
respect to Arista as of the most recent
27
practicable date (as well as on an estimated pro forma basis as of the Closing
giving effect to the consummation of the transactions contemplated hereby): (i)
the basis of Arista in its assets and (ii) the amount of any net operating loss,
net capital loss, unused investment or other credit, unused foreign tax credit,
or excess charitable contribution allocable to Arista.
(i) The unpaid Taxes of Arista (i) did not, as of the most
recent fiscal month end, exceed the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the most recent balance sheet
(rather than in any notes thereto) and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of Arista in filing their tax returns.
3.19. Permits. Arista has obtained and holds all licenses,
permits, authorizations, consents and orders or approvals of all foreign,
Federal, state or local governmental or regulatory bodies that are necessary for
the lawful conduct of its business and to operate its properties and assets as
presently being operated (the "Permits"). All of the Permits are listed on
Schedule 3.19 and are validly issued and in full force and effect and Arista is
in compliance therewith. No proceeding is pending or threatened which seeks or
may result in the cancellation, suspension, restriction or modification of any
28
Permit. The business of Arista is being operated in all respects in accordance
with the terms and conditions of the Permits.
3.20. Employee Benefit Plans.
(a) Schedule 3.20 lists (i) all "employee benefit plans," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that are maintained, contributed to or required to be
contributed to by Arista, or under which Arista could incur any liability for
the benefit of current, former or retired employees of Arista or any of their
beneficiaries or dependents, and (ii) each other plan, program, policy,
contract, agreement or arrangement providing for bonuses, pensions, deferred
compensation, stock or stock related awards, severance pay, salary continuation
or similar benefits, hospitalization, medical, dental or disability benefits,
life insurance, key man life insurance or other employee benefits or
compensation to or for any Arista employee or members of their families, whether
or not insured or funded (together, the "Benefit Plans").
(b) Each Benefit Plan has been administered in all material
respects in accordance with its terms. On the date hereof, the Benefit Plans are
in compliance with the applicable provisions of ERISA and the Code, the rules
and regulations promulgated thereunder, all other applicable laws and the terms
of all applicable collective bargaining agreements. There are no investigations
by any governmental entity, or other claims (except routine claims for benefits
payable under the Benefit
29
Plans), suits or proceedings against or with respect to which any Benefit Plan
is a party or asserting any rights to or claims for benefits under any Benefit
Plan that would give rise to any liability. To Arista's Knowledge, there are no
involuntary termination proceedings which have been instituted against any
Benefit Plans.
(c) All contributions to, and payments from, the Benefit Plans
that were required to be made in accordance with the terms of the Benefit Plans
and any applicable collective bargaining agreement have been timely made. All
premium payments that were required to be made in accordance with the terms of
the Benefit Plans or an underlying insurance contract have been timely made in
accordance therewith, except where such failure would not result in material
liability to Arista.
(d) Each Benefit Plan that is intended to be a tax-qualified
pension plan has been the subject of a favorable determination letter from the
IRS which was filed with the IRS within the remedial amendment period prescribed
under Section 401(b) of the Code with respect to compliance with the Tax Reform
Act of 1986 to the effect that such pension plan is qualified under Section
401(a) of the Code, subject to the customary reservations as to the plan's
operational compliance with the Code's requirements. No such determination
letter has been revoked and, to Arista's Knowledge, the IRS has not issued
written notice of its intent to revoke the qualified status of any such plan. To
Arista's Knowledge, no circumstances exist
30
that would reasonably be expected to result in disqualification of such pension
plan.
(e) Arista does not and has not ever in the past maintained or
contributed to (i) any plan or arrangement that is intended to provide retiree
medical benefits to its retired employees or their beneficiaries or dependents,
(ii) any defined benefit pension plan that is required to meet the minimum
funding standards of Section 412 of the Code or Section 302 of ERISA, or (iii) a
multiemployer plan, as defined in Section 3(37) of ERISA.
3.21. Insurance. Schedule 3.21 lists all insurance policies to
which Arista is a party or which relate to the employees of Arista (the
"Insurance Policies") and sets forth for each Insurance Policy the name of the
insurer, the coverage limit, the amount and frequency of payment of the premium,
the term of the policy and a claims history for each Insurance Policy which is a
liability policy since January 1, 1995. The Insurance Policies are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the date of the Closing have been paid or will be paid when due, and
no notice of cancellation or termination has been received with respect to any
Insurance Policy. The Insurance Policies provide coverage that is in compliance
with all material requirements of law and of all material agreements to which
Arista is a party, are valid, outstanding and enforceable policies, and provide
adequate insurance coverage for Arista and the operations of its business.
31
3.22. Transactions with Affiliates. Schedule 3.22 describes
all transactions in excess of $5,000 individually and $20,000 in the aggregate
since January 1, 1997 between Arista and, directly and indirectly, Curcura or
any Affiliate of Curcura (a "Curcura Affiliate"), including, without limitation,
any loans by Arista to Curcura or any Curcura Affiliate or by any Curcura
Affiliate to Arista and the amounts outstanding under such loans on the date
hereof. Curcura has from time to time made loans to the Company. Except as set
forth in Schedule 3.22, none of Curcura, any Curcura Affiliate or any officer,
director or employee of Arista owns any interest (excepting stock holdings of up
to 1% of the capital stock of a corporation listed on a national securities
exchange or traded in an over-the-counter market) in a Person that is a
competitor of Arista. No officer, director, or employee of Arista is an officer,
director or employee of any organization that is a competitor or supplier of
Arista.
3.23. Clients. Schedule 3.23 sets forth the four largest
clients (measured by fees generated) of Arista as of December 31, 1997. Except
as described on Schedule 3.23, neither Arista nor Curcura has Knowledge or has
any reason to believe that any of Arista's clients or any supplier of goods,
products or services to Arista (a) has any complaint or objection with respect
to the service or any business practices of Arista or the transactions
contemplated hereby, or (b) will cease to do business, or significantly reduce
the business conducted, with
32
Arista after or as a result of the consummation of any transactions contemplated
hereby.
3.24. Information Technology. Except as set forth on Schedule
3.24, Arista has the unrestricted right to use all software associated with its
databases. All of the hardware, software and firmware used in connection with
the business of Arista is and will be able accurately to process data
(including, but not limited to, calculating, comparing, and sequencing) from,
into and between the twentieth and twenty-first centuries, including leap year
calculations.
3.25. Other Liabilities. Arista does not have any liabilities
or obligations (direct or indirect, contingent or absolute, matured or
unmatured) of whatever nature, whether arising out of contract, tort, statute or
otherwise, except (a) as reflected in the Balance Sheet, (b) disclosed in the
Schedules to this Agreement and (c) liabilities and obligations incurred in the
Ordinary Course of Business which do not in the aggregate involve an amount
greater than $5,000.
3.26. Brokers. No finder, broker, agent or other intermediary
has acted on behalf of Arista in connection with this Agreement or the
transactions contemplated hereby.
3.27. Absence of Certain Payments. Neither Arista nor any
officers, directors, employees, agents, representatives, or independent
contractors of Arista has made, or arranged for the making of, any unlawful
payment to any official, officer or employee of any foreign, Federal, state,
county, municipal or
33
other governmental or regulatory body or authority or any self-regulatory body
or authority, or made any payment to any customer or supplier of Arista or any
officer, director, partner, employee or agent of any customer or supplier, for
the unlawful sharing of fees or to any such customer or supplier or any such
officer, director, partner, employee or agent for the unlawful rebating of
charges, or engaged in any other unlawful reciprocal practice, or made any other
unlawful payment or given any other unlawful consideration to any such customer
or supplier or any such officer, director, partner, employee or agent, in
respect of Arista.
3.28. Disclosure. This Agreement, the Schedules hereto, the
Financial Statements and any other information furnished or to be furnished by
Arista in connection with this Agreement and the transactions contemplated
hereby do not contain any untrue statement of a material fact or omit to state
any fact necessary to make the statements contained therein not false or
misleading. There is no fact known to Arista, its directors and officers or
Curcura which materially affects or will materially affect the properties,
assets, financial condition, operations, prospects or business of Arista which
has not been set forth in this Agreement, the Schedules hereto or the Financial
Statements.
3.29. Pooling. Neither Arista nor any of its Affiliates has
through the date of this Agreement taken or agreed to take any action that would
prevent Arista and the Nelson
34
Companies from accounting for Arista's acquisition of the Nelson Shares as a
pooling of interests.
3.30. Adequate Information. Each of Curcura and Arista
acknowledges that he and it have received a copy of the preliminary Private
Placement Memorandum, dated May 7, 1998, including the exhibits thereto, and of
the final Private Placement Memorandum, dated June 4, 1998, including the
exhibits thereto (the "Private Placement Memorandum"), which describe the
business and structure of Arista and its Affiliates after giving effect to the
transactions contemplated hereby, and has had the opportunity to ask questions
of and obtain information from the responsible officers of the Nelson Companies
with respect thereto.
4. Representations and Warranties of the Nelson Companies. The
Nelson Companies represent and warrant to Arista and Curcura as follows:
4.1. Organization and Qualification. Each of the Nelson
Companies is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation and has all requisite power and
authority to own, lease and operate its properties and carry on its business as
now being conducted.
4.2. Agreement. Each of the Nelson Companies has the requisite
corporate power to enter into this Agreement. This Agreement has been duly
authorized, executed and delivered by the Nelson Companies and constitutes the
legal and binding obligation
35
of the Nelson Companies, enforceable in accordance with its terms. The execution
and delivery by the Nelson Companies of this Agreement, the consummation by the
Nelson Stockholders of the transactions contemplated hereby and the performance
by the Nelson Companies of their obligations hereunder will not conflict with or
result in any violation of, or any default under (either immediately or with
notice or lapse of time), any provision of (a) any agreement, contract, lease,
license, note, bond, mortgage, indenture, deed of trust or other instrument to
which any of the Nelson Companies is a party or by which any of their respective
properties or other assets is bound, (b) any governmental franchise, license,
permit or authorization, or any judgment or order of any tribunal or
governmental body applicable to any of the Nelson Companies or any of their
respective properties or other assets, or (c) any law, statute, decree, rule or
regulation of any jurisdiction. No authorization, consent or approval of, or
declaration of, filing with or notice to any governmental body or authority by
any of the Nelson Companies is necessary for the execution of this Agreement by
the Nelson Companies, the consummation by the Nelson Stockholders of the
transactions contemplated hereby or the performance by the Nelson Companies of
their obligations hereunder.
4.3. Brokers. No finder, broker, agent or other intermediary
has acted on behalf of the Nelson Companies in connection with this Agreement or
the transactions contemplated hereby.
36
5. Covenants of Arista and Curcura. Arista and Curcura covenant as
follows:
5.1. Action to Closing. From the date of this Agreement until
the Closing Date, Arista will, and Curcura shall cause Arista to, (a) conduct
its affairs only in the Ordinary Course of Business, in substantially the manner
as heretofore conducted and in accordance with all laws, rules, regulations,
orders, approvals, authorizations, exemptions, classifications and
registrations, (b) maintain all of its assets in as good condition and repair as
of the date hereof, reasonable wear and tear excepted, (c) perform in all
material respects all of its obligations under all contracts to which it is a
party, and not amend, alter or modify any provision of any such contract or
enter into any new contract or transaction involving consideration in excess of
$5,000 or which would have been required to be listed on Schedule 3.17 if in
effect on the date hereof, or dispose, other than in the Ordinary Course of
Business, of any assets having a value in excess of $5,000 in the aggregate
without the prior written consent of Nelson, (d) use its best efforts to
maintain the existing relationships with all clients, customers and others
having business dealings with Arista, (e) use its best efforts to keep available
the services of its present officers and employees, (f) promptly deliver to the
Nelson Companies interim financial statements as regularly prepared for their
internal use, (g) confer on a regular and frequent basis with representatives of
the Nelson Companies to
37
report material operational matters and the general status of ongoing
operations, (h) not authorize or effect any change in its certificate of
incorporation or by-laws; (i) not grant any options, warrants, or other rights
to purchase or obtain any of its capital stock or issue, sell, or otherwise
dispose of any of its capital stock (except upon the conversion or exercise of
options, warrants, and other rights currently outstanding); (j) not issue any
note, bond, or other debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation outside the
Ordinary Course of Business; (k) not permit the imposition of any lien, security
interest or other encumbrance upon any of its assets outside the Ordinary Course
of Business; (l) not make any capital investment in, make any loan to, or
acquire the securities or assets of any other Person outside the Ordinary Course
of Business; (m) not make any change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business; (n)
not, without the prior written consent of the Nelson Companies, take any action
or engage in any transaction not expressly permitted by this Section 6.1 or
otherwise contemplated by this Agreement which would cause any of the
representations and warranties made by Arista or Curcura herein to be untrue as
of the Closing Date or a breach of the terms and conditions of this Agreement
and (o) take all actions required of it pursuant to this Agreement.
38
5.2. Access and Information. Arista will afford the Nelson
Companies and their employees, accountants, counsel and other authorized
representatives reasonable access to Arista's properties, employees, books and
records and Arista will furnish to the Nelson Companies and their
representatives all additional financial and operating data and other
information as to Arista as the Nelson Companies may from time to time
reasonably request.
5.3. Publicity; Confidentiality. Arista and Curcura will not,
without the consent of the Nelson Companies, issue or cause the publication of
any press release or other public announcement with respect to this Agreement
after the date hereof, except where such release or announcement is required by
law.
5.4. Best Efforts. Arista and Curcura agree to use their best
efforts to satisfy the conditions to the obligations of the Nelson Companies
hereunder set forth in Section 8.
5.5. Negotiations with Other Parties. Neither Arista nor
Curcura will participate in any negotiations with any third party for the
acquisition of all or any part of the equity or assets of Arista prior to the
Closing or the termination of this Agreement pursuant to Section 11. Arista will
report to the Nelson Companies any contacts or indications of interest from any
third party with respect to such possible acquisition.
39
5.6. Public Offering. Curcura acknowledges that following the
Closing the Parties expect to file a Registration Statement on Form S-1 with the
Securities and Exchange Commission for an initial public offering of Arista's
common stock. In connection with such public offering, Curcura agrees to execute
such documents and take such actions as may reasonably be requested by the
underwriters.
5.7. Loans by Curcura to Arista. With respect to amounts lent
by Curcura to Arista, which amounts are stipulated and agreed to be $632,933 as
of March 31, 1998, less any amounts withdrawn by Curcura from Arista (other than
expenses) in excess of his salary of $30,000 per month from April 1, 1998
through the Closing Date (the "Curcura Loan"), Arista will repay the Curcura
Loan upon demand therefor.
6. Covenants of the Nelson Companies. The Nelson Companies covenant
as follows:
6.1. Publicity; Confidentiality. The Nelson Companies will
not, without the consent of Arista, issue or cause the publication of any press
release or other public announcement with respect to this Agreement after the
date hereof, except where such release or announcement is required by law.
6.2. Best Efforts. The Nelson Companies will use their best
efforts to satisfy the conditions to the obligations of Arista and Curcura
hereunder set forth in Section 7.
40
7. Conditions to the Obligations of Arista and Curcura. The
obligations of Arista and Curcura to effect the transactions contemplated hereby
are subject to the fulfillment to their satisfaction prior to or at the Closing
of the following conditions:
7.1. Representations and Warranties. The representations and
warranties of the Nelson Companies contained herein are true and correct when
made and shall be true and correct in all material respects at and as of the
Closing as though such representations and warranties were made at and as of the
Closing.
7.2. Performance. The Nelson Companies shall have performed
and complied with each covenant and condition required by this Agreement to be
performed or complied with by it before or at the Closing.
7.3. Closing Certificate. The Nelson Companies shall have
delivered to Arista and Curcura a certificate, dated the Closing Date and
executed by a principal executive officer of each of the Nelson Companies,
certifying that the conditions specified in Sections 7.1 and 7.2 have been
fulfilled.
7.4. Opinion of Counsel. Arista and Curcura shall have
received from Patterson, Belknap, Webb & Tyler LLP, counsel for the Nelson
Companies, an opinion, dated the Closing Date, addressed to Arista and Curcura
and in substantially the form of Exhibit B.
41
7.5. Scott Representation Letter. Arista and Curcura shall
have received from Craig Scott, the sole stockholder of Scott Transfer, a
representation letter in substantially the form of Exhibit C.
8. Conditions to the Obligations of the Nelson Companies. The
obligations of the Nelson Companies to effect the transactions contemplated
hereby are subject to the fulfillment to its satisfaction before or at the
Closing of the following conditions:
8.1. Representations and Warranties. The representations and
warranties of Arista and Curcura contained in this Agreement (including the
Schedules hereto) shall have been true and correct when made and shall be true
and correct in all material respects at and as of the Closing as though such
representations and warranties were made at and as of the Closing.
8.2. Performance. Arista and Curcura shall have performed and
complied with each covenant and condition required by this Agreement to be
performed or complied with by it or him before or at the Closing.
8.3. Closing Certificate. Arista and Curcura shall have
delivered to the Nelson Companies a certificate, dated the Closing Date and
executed Curcura, on his own behalf and as a principal executive officer of
Arista, certifying that the conditions specified in Sections 8.1 and 8.2 have
been fulfilled.
42
8.4. Opinion of Counsel. The Nelson Companies shall have
received from Winne, Banta, Rizzi, Hetherton & Basralian, P.C., counsel to
Arista and Curcura, an opinion, dated the Closing Date, addressed to the Nelson
Companies and in substantially the form of Exhibit D.
8.5. Consents; Permits. Arista shall have obtained and the
Nelson Companies shall have received, in form and substance satisfactory to the
Nelson Companies, all consents which are required to consummate the transactions
contemplated hereby or to avoid the termination of any Permit or Contract upon
such consummation (including without limitation waivers of due-on-sale clauses
contained in any contracts and any consents to the change of ownership of the
Arista required under the terms of any Permit or Contract).
8.6. Employment Agreements. The executives of Arista listed as
parties to the Employment Agreements set forth in Exhibit E shall have entered
into employment agreements in substantially the form therein set forth.
8.7. Redomiciliation. Redomiciliation shall have occurred.
8.8. Subscription Agreements. Arista shall have received
Subscription Agreements from the Nelson Stockholders or their representatives
holding such number of Nelson Shares in each of the Nelson Companies so that
Arista's acquisition of Nelson Shares of each of the Nelson Companies can be
accounted for as a pooling of interests.
43
8.9. Pooling Letter. Curcura, as sole stockholder of Arista,
shall have executed a letter, dated as of the Closing Date, in the form of
Exhibit F attached hereto.
8.10. Ability to File Registration Statement. Either (a)
Arista shall have provided the necessary financial information for 1993 and
1994, or (b) the Securities and Exchange Commission shall have confirmed to the
Nelson Companies that a Registration Statement may be filed by Arista without
inclusion of 1993 and 1994 financial information of Arista and that the absence
of such financial information from the Registration Statement shall not act as
an impediment to such Registration Statement becoming effective under the
Securities Act or materially delay such effectiveness.
9. Adoption of Plans of Certain Nelson Companies' Subsidiaries. (a)
Effective on the Closing Date, Arista will assume the Stock Incentive Plan of
NCI Advertising, Inc., which was formerly known as the RWR Advertising, Inc.
Stock Incentive Plan (the "Advertising Stock Option Plan"), and the World Health
Communications, Inc. Stock Incentive Plan (the "WHC Stock Option Plan").
Effective on the Closing Date, all unexercised and unexpired options grants
under the Advertising Stock Option Plan and the WHC Stock Option Plan shall be
converted into and represent the right to acquire Arista Shares and shall be
adjusted as is reasonable and appropriate. Notwithstanding the foregoing, any
such adjustment in outstanding options shall be
44
made without changing the aggregate exercise price applicable to the unexercised
portions of such options and shall be made in such a manner as to comply with
all applicable provisions of the Code.
(b) Subsequent to the Closing Date but prior to the contemplated
initial public offering of Arista Shares, subject to shareholder approval,
Arista will establish a new stock option plan (the "Arista Stock Option Plan")
which shall provide for the grant of (i) options that are intended to qualify as
incentive stock options within the meaning of Section 422 of the Code to
officers and key employees of Arista and its subsidiaries, and (ii) options that
are not intended to so qualify to directors, officers and key employees of
Arista and its subsidiaries. Arista shall use its best efforts to obtain
shareholder approval of the Arista Stock Option Plan prior to such initial
public offering.
10. Survival of Representations and Warranties; Indemnification.
10.1. Survival of Representations and Warranties. The
representations and warranties contained in Sections 3, 4 and 5 of this
Agreement shall survive any investigation by any Party and the Closing but shall
expire and be extinguished on the first anniversary of the Closing Date, except
that Arista's and Curcura's representations and warranties set forth in (a)
Sections 3.18 and 3.20 shall survive until 90 days after expiration of the
applicable statute of limitations for any
45
affected taxable period, and (b) Section 3.5 shall survive until 90 days after
expiration of the applicable statute of limitations. No action for
indemnification under this Section 10 may be brought with respect to such
representations and warranties after the applicable date indicated in the
preceding sentence unless, before the date such representations and warranties
expire, the party seeking indemnification has notified in reasonable detail the
party from whom indemnification is sought of a claim for indemnity hereunder.
10.2. Indemnification by Curcura. Subject to Section 10.1,
from and after the Closing, Curcura agrees to indemnify and defend the Nelson
Companies and Scott Transfer, and hold the Nelson Companies and Scott Transfer
harmless from and against, any out-of-pocket loss, liability, damage, penalty,
claim or expense (including reasonable attorneys' and consultants' fees and
other costs and expenses) (collectively, "Damages") incurred or sustained by the
Nelson Companies or Arista as a result of or relating to:
(a) the non-fulfillment or breach of any covenant or
agreement or the breach of any representation or warranty of Arista or Curcura
set forth in this Agreement;
(b) any investigation, claim, lawsuit, arbitration, or
regulatory or administrative suit, proceeding, order or action relating to, or
arising out of, any acts, omissions or activities of Arista before the Closing
Date, whether or not disclosed herein or in the Schedules hereto; and
46
(c) the Fry Arbitration.
10.3. Indemnification by the Nelson Companies. Subject to
Section 10.1, from and after the Closing, the Nelson Companies agree, jointly
and severally to indemnify Curcura, and hold Curcura harmless from and against,
damages incurred or sustained by Curcura as a result of or relating to:
(a) the non-fulfillment or breach of any covenant or
agreement or the breach of any representation or warranty of the Nelson
Companies set forth in this Agreement; and
(b) any investigation, claim, lawsuit, arbitration, or
regulatory or administrative suit, proceeding, order or action relating to, or
arising out of, any acts, omissions or activities of the Nelson Companies before
the Closing Date, whether or not disclosed herein or in the Schedules hereto.
10.4. Limit of Indemnification Obligations. The
indemnification obligations the Parties hereunder shall be subject to the
following terms and limitations:
(a) Except for indemnification for Damages incurred or
sustained as the result of the matter referred to in Section 10.2(c), no claim
for indemnification shall be made and no compensation therefor shall be due with
respect to the first $25,000 of Damages (the "Deductible Amount") incurred by
the Party incurring or sustaining such Damage. In the case of Curcura only, the
Deductible Amount shall be $25,000 plus the amount ("Found Assets") of cash or
each equivalents realized by
47
Arista during the longest period set forth in Section 10.1 and not shown on the
Balance Sheet of Arista as of the Closing Date, but excluding any recoveries on
bad receivables previously charged to the bad debt reserves. In calculating the
amount due from Curcura under this Section 10, only the amount of Found Assets
established at the time payment is due shall be taken into account.
(b) Any indemnification due from Curcura shall be paid
by Curcura returning to Arista such number of Arista Shares as shall equal the
amount of indemnification due. For the purposes of indemnification, it is agreed
that the value of the 727,273 Arista Shares to be owned by Curcura from and
after the Closing Date is $3,794,000, which is the amount shown on the valuation
findings of Veronis, Suhler & Associates Inc. appended to the Private Placement
Memorandum referred to in Section 2.3(b).
(c) Nothing in this Section 10 shall be construed to
require Curcura to return to Arista more than 145,455 Arista Shares, provided,
however, that any liability of Arista resulting from the arbitration with Barry
J. Fry and The Peer Group, Inc. shall not be subject to this limitation and any
Arista Shares returned by Curcura to compensate Arista for any such liability
shall not be counted against such limitation.
(d) Except with respect to Curcura's indemnification of
the Nelson Companies and Scott Transfer pursuant to Section 10.2(c) with respect
to the Fry Arbitration,
48
Curcura's indemnification obligations hereunder shall be limited to 40 percent
of any Damages incurred or sustained by the Nelson Companies in excess of the
amount referred to in Section 10.4(a) for which indemnification is payable
hereunder.
(e) Curcura shall have no liability for the first
$15,000 of legal fees incurred by Arista with respect to the Fry Arbitration.
10.5. Indemnification Procedures. A party entitled to
indemnification hereunder shall herein be referred to as an "Indemnitee." A
party obligated to indemnify an Indemnitee hereunder shall herein be referred to
as an "Indemnitor." Promptly after receipt by an Indemnitee of notice of any
claim or the commencement of any action, or upon discovery of any facts which an
Indemnitee believes may give rise to a claim for indemnification from an
Indemnitor hereunder, such Indemnitee shall, if a claim in respect thereof is to
be made against an Indemnitor under this Section 10, notify such Indemnitor in
writing in reasonable detail of the claim or the commencement of such action. If
any such claim shall be brought against such Indemnitee, it shall notify such
Indemnitor thereof, the Indemnitor shall be entitled to participate therein, and
to assume the defense thereof with counsel reasonably satisfactory to the
Indemnitee, and to settle or compromise any such claim or action; provided,
however, that any such settlement or compromise shall be effected only with the
consent of the Indemnitee, which consent shall not be unreasonably withheld; and
provided further,
49
that if the Indemnitee rejects a settlement that would have included a complete
release of the Indemnitee from any further liability, its right to
indemnification from the Indemnitor shall be limited to the amount that would
have been payable by the Indemnitor under such settlement or compromise. After
notice to the Indemnitee of the Indemnitor's election to assume the defense of
such claim or action, the Indemnitor shall not be liable to the Indemnitee under
this Section 10 for any legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof; provided, however, that the
Indemnitee shall have the right to employ counsel to represent it if, in the
Indemnitee's reasonable judgment, it is advisable for the Indemnitee to be
represented by separate counsel, and in that event the fees and expenses of such
separate counsel shall be paid by the Indemnitee. If the Indemnitor does not
elect to assume the defense of such claim or action, the Indemnitee shall act
reasonably and in accordance with its good faith business judgment with respect
thereto, and shall not settle or compromise any such claim or action without the
consent of the Indemnitor, which consent shall not be unreasonably withheld. The
parties hereto agree to render to each other such assistance as may reasonably
be requested in order in insure the proper and adequate defense of any such
claim or proceeding.
10.6. Waiver of Right to Contribution. Curcura hereby waives,
effective as of the Closing Date, any right which he may have against Arista in
connection with any contribution or
50
indemnification for payments made after the Closing Date pursuant to this
Agreement or otherwise.
11. Termination. (a) This Agreement may be terminated by the Nelson
Companies, on the one hand, or Arista and Curcura, on the other hand:
(i) by mutual consent;
(ii) by either, if there has been a material breach on
the part of the other in any representation or warranty or covenant set forth in
or made pursuant to this Agreement; or
(iii) by either, if the Closing has not occurred by July
31, 1998 no fault of the terminating party.
(b) A termination pursuant to Section 11(a)(ii) shall not
relieve the breaching party from liability for such breach.
12. General Provisions.
12.1. Modification; Waiver. This Agreement may be modified
only by a written instrument executed by the Parties. Any of the terms and
conditions of this Agreement may be waived in writing at any time on or before
the Closing Date by the party entitled to the benefits thereof.
12.2. Entire Agreement, etc. This Agreement, together with the
schedules and exhibits hereto, constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings of the parties in connection therewith.
51
12.3. Curcura's Consent. By execution of this Agreement by
Curcura, Arista hereby acts by consent of its sole stockholder to approve this
Agreement and the transactions contemplated hereby.
12.4. Expenses. Whether or not the transactions contemplated
herein shall be consummated, except as provided herein each party shall pay its
own expenses incident to the preparation and performance of this Agreement. In
addition, Arista will pay, following the Closing Date, the fees of Kelly Massad
LLP for preparing financial statements in accordance with GAAP, of Deloitte &
Touche LLP, for preparing audited financial statements and a portion of the fees
of Patterson, Belknap, Webb & Tyler LLP for Redomiciliation and preparing the
Private Placement Memorandum.
12.5. Further Actions. Each party shall execute and deliver
such certificates, agreements and other documents and take such other actions as
may reasonably be requested by the other parties in order to consummate or
implement the transactions contemplated hereby.
12.6. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed, registered mail, first-class postage paid,
return receipt requested, or any other delivery service with proof of delivery:
(a) If to Arista or Curcura:
Arista Marketing Associates, Inc.
67 Walnut Avenue
52
Clark, New Jersey 07066-1640
Attention: Mr. Philip J. Curcura
President
with a copy to:
Winne, Banta, Rizzi, Hetherington &
Basralian, P.C.
Court Plaza North
25 Main Street
P.O. Box 647
Hackensack, New Jersey 07602
(b) If to the Nelson Companies:
Nelson Communications, Inc.
41 Madison Avenue
New York, New York 10010
Attention: Thomas A. Moore
President and Chief Executive
Officer
with a copy to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
22nd Floor
New York, New York 10036
Attention: Alan Gettner, Esq.
or to such other address or to such other persons as the Parties shall have last
designated by notice to the other Parties.
12.7. Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but shall not be assignable, by operation of law or
otherwise, by any party hereto without the prior written consent of the other
parties.
53
12.8. Counterparts. This Agreement may be executed in several
counterparts, each of which is an original but all of which shall constitute one
instrument.
12.9. Headings. The Section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof.
12.10. Governing Law. The validity, performance and
enforcement of this Agreement shall be governed by the laws of the State if New
York without giving effect to the principles of conflicts of law thereof.
12.11. Separability. Any term or provision of this Agreement
which is invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement.
12.12. Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
12.13. Submission to Jurisdiction. Each of the Parties submits
to the jurisdiction of any state or federal court sitting in New York, New York,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each of the Parties also agrees not to bring any
action or proceeding arising out of or relating
54
to this Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Any Party may make service on any other Party by
sending or delivering a copy of the process (i) to the Party to be served at the
address and in the manner provided for the giving of notices in Section 12.6
above or (ii) to the party to be served in care of the Process Agent at the
address and in the manner provided for the giving of notices in Section 11.6
above. Nothing in this Section 12.13, however, shall affect the right of any
Party to serve legal process in any other manner permitted by law or at equity.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
12.14. Notice of Developments. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of its own representations and warranties in Sections 3, 4 or 5
above. No disclosure by any Party pursuant to this Section 12.14, however, shall
be deemed to amend or supplement the Schedules hereto or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
55
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed as of the date first above written.
ARISTA MARKETING ASSOCIATES, INC.
By: /s/ Philip J. Curcura
----------------------------------------
Name:
Title:
|
PHILIP J. CURCURA
/s/ Philip J. Curcura
--------------------------------------------
|
SCOTT TRANSFER CORP.
By: /s/ Craig H. Scott
----------------------------------------
Name: Craig H. Scott
Title: President
|
THE NELSON COMPANIES:
BIENESTAR COMMUNICATIONS, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
ISSUESPHERE, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
MADISON GRAPHICS, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
MEDISCIENCE ASSOCIATES, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
MEDISOLUTIONS, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
MEDISPHERE COMMUNICATIONS, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
NCI ADVERTISING, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
NCI CONSULTING, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
NCI DIRECT, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
NCI HEALTHCALL NETWORK, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
NCI MANAGED CARE, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
NCI MASTERSON ADVERTISING, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
NELSON COMMUNICATIONS INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
PHARMA COMMUNICATIONS, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
PRINCETON GRAPHICS CORPORATION
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
PROFESSIONAL DETAILING NETWORK, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
SCIENS WORLDWIDE ADVERTISING, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
SCIENS WORLDWIDE PUBLIC RELATIONS, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
SOLUTIONS ON-LINE, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
WORLD HEALTH COMMUNICATIONS, INC.
By: /s/ Peter Law-Gisiko
----------------------------------------
Name:
Title:
|
EXHIBITS AND SCHEDULES TO CONSOLIDATION AGREEMENT
Pursuant to Item 601(b)(2) of Regulation S-K, Nelson Communications Inc. agrees
to furnish supplementally a copy of any of the following omitted exhibits or
schedules to the Commission upon request:
Exhibit Description
------- -----------
A Certificate of Incorporation and By-Laws of Arista
Marketing Associates, Inc.
B Form of Opinion of Patterson, Belknap, Webb & Tyler LLP
C Form of Scott Transfer Corp. Representation Letter
D Form of Opinion of Winne, Banta, Rizzi, Hetherington &
Basralian, P.C.
E Employment Agreement
F Pooling Letter
Schedule Description
-------- -----------
3.4 Agreements, Contracts, Leases, etc. requiring Consent
3.6 Title to Property, Absence of Encumberances, etc.
3.7 Accounts Receivable and Accounts Payable
3.8 Books and Records
3.9 Patents, Trademarks, etc.
3.10 Employee Remuneration, etc.
3.11 Labor Matters
3.12 Bank Accounts
3.14 Absence of Certain Changes
3.15 Litigation
3.17 Contracts
3.18 Taxes
3.19 Permits
3.20 Employee Benefits Plans
3.21 Insurance
3.22 Transactions with Affiliates
3.23 Clients
3.24 Information Technology
|
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
Dated as of July 31, 1998
BY AND AMONG
NELSON COMMUNICATIONS INC.
(formerly named Arista Marketing Associates, Inc.),
BARTON & PITTINOS, INC.,
J. DOUGLAS BARTON and TERRENCE O. TORMEY
Table of Contents
Page
ARTICLE I
DEFINITIONS 1
ARTICLE II
THE MERGER AND MERGER SHARES 5
2.1. The Merger 5
2.2. Effective Time of the Merger 6
2.3. Certificate of Incorporation of Surviving Corporation 6
2.4. By-laws of Surviving Corporation 6
2.5. Officers of Surviving Corporation 6
2.6. Directors of Surviving Corporation 6
2.7. Further Assurances 6
2.8. Status of Buyer Common Stock 7
2.9. Conversion of the Common Stock 7
2.10. Shares Held by the Company 7
2.11. No Rights as Stockholders 7
2.12. Surrender of Certificates 7
2.13. Status of Certificates 7
2.14. No Further Transfers 7
2.15. Escrow of Shares 8
ARTICLE III
STEPS PRELIMINARY TO THE MERGER 8
3.1. Asset Sale 8
3.2. Distribution 8
3.3. Contingent Purchase Price 9
ARTICLE IV
CLOSING 10
4.1. The Closing 10
ARTICLE V
REPRESENTATIONS AND WARRANTIES 10
5.1. Representations and Warranties of the Shareholders 10
5.2. Representations and Warranties of the Buyer 23
ARTICLE VI
CLOSING DOCUMENTS 26
6.1. The Company and the Shareholders 26
6.2. The Buyer 26
ARTICLE VII
POST-CLOSING COVENANTS 26
|
7.1. Further Assurances 26
7.2. Repurchase Rights 27
7.3. Guarantees 28
7.4. Final Tax Returns 28
ARTICLE VIII
INDEMNIFICATION 28
8.1. Indemnification 28
8.3. Indemnifiable Losses 31
ARTICLE IX
CERTAIN SHAREHOLDER AGREEMENTS 32
9.1. Confidentiality 32
9.2. Non-Competition 33
9.3. Relief 34
ARTICLE X
MISCELLANEOUS 34
10.1. Press Releases and Public Announcements 34
10.2. No Third-Party Beneficiaries 34
10.3. Entire Agreement 34
10.4. Succession and Assignment 34
10.5. Counterparts 35
10.6. Headings 35
10.7. Notices 35
10.8. Governing Law 36
10.9. Amendments and Waivers 36
10.10. Severability 37
10.11. Survival of Representations and Warranties 37
10.12. Expenses 38
Exhibit A - Certificate of Merger
Exhibit B - Articles of Merger
Exhibit C - Joint Balance Sheet, Initial Cash
Distribution Amount and Accounts Receivable
Exhibit D - Method of Allocating Corporate Overhead
Schedule 7.3 - Equipment Leases
|
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 31, 1998, by and
among NELSON COMMUNICATIONS INC. (formerly named Arista Marketing Associates,
Inc.), a Delaware corporation (the "Buyer"), BARTON &: PITTINOS, INC., a
Pennsylvania corporation (the "Company") , and J. DOUGLAS BARTON ("Barton") and
TERRENCE 0. TORMEY ("Tormey") , the owners of all of the shares of the Company.
The Buyer, the Company, Barton and Tormey are each referred to individually as a
"Party" and collectively as the "Parties". Barton and Tormey are each referred
to individually as a "Shareholder" and collectively as the "Shareholders".
A. The Parties desire to have the Company merge with and into the
Buyer (the "Merger") on the terms and conditions and for the consideration
described in this Agreement (capitalized terms used in this Agreement without
definition shall have the meanings set forth in Article I);
B. The Boards of Directors of the Buyer and the Company have
determined that the Merger is consistent with and in furtherance of the
long-term business strategy of the Buyer and the Company, and is fair to, and in
the best interest of, the Buyer and the Company and their respective
shareholders;
C. In furtherance of the Merger, the Board of Directors and the
shareholders of the Company and the Board of Directors of the Buyer have
approved the Merger upon the terms and subject to the conditions set forth in
this Agreement; and
D. The Parties desire to make certain representations, warranties
and agreements in connection with the Merger.
In consideration of the premises and the representations, warranties and
agreements set forth in this Agreement, and intending to be legally bound, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first Person. "Control" (including the terms 'controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a Person, whether
through the ownership of voting securities, by contract, as trustee or executor,
or otherwise. With respect to
the Company, "Affiliate" includes each of the Shareholders, and with respect to
the Shareholders, "Affiliate" includes all relatives of the Shareholders.
"Agreement" means this Agreement and Plan of Merger, including the schedules and
exhibits.
"Benefit Arrangement" means any employment, consulting, severance, change in
control or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including, but not limited to, any self-insured supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health,
disability or accident benefits or for deferred compensation, profit-sharing,
bonuses, stock options, restricted stock, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement insurance,
compensation or benefits) that (1) is not an employee benefit plan, within the
meaning of Section 3(3) of ERISA, (2) is entered into, maintained, contributed
to or required to be contributed to, as the case may be, by the Company or any
ERISA Affiliate and (3) covers any employee or former employee of the Company or
any ERISA Affiliate (with respect to the employee's or former employee's
relationship with the Company or ERISA Affiliate).
"Buyer Common Stock" means the common stock of the Buyer, par value $.01 per
share.
"Certificates" has the meaning set forth in Section 2.12.
"Certificate of Merger" has the meaning set forth in Section 2.2.
"Closing" has the meaning set forth in Section 4.1.
"Closing Date" has the meaning set forth in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended. Reference to any
section of the Code includes reference to any regulations issued thereunder as
well as to any comparable provisions of any legislation that amends, supplements
or replaces such section.
"Company Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Company Financial Statements" has the meaning set forth in Section 5.1(g).
"Company Most Recent Financial Statements" has the meaning set forth in Section
5.1(g).
"Company Most Recent Fiscal Period" has the meaning set forth in Section 5.1(g).
"Confidential Information" has the meaning set forth in Section 9.1(b).
"Cut-Off Date" means the third anniversary of the Closing Date.
"Effective Time" has the meaning set forth in Section 2.2.
"Environmental Law" means all federal, state, local and foreign statutes,
ordinances, regulations, orders, directives, decrees and other requirements of
law and obligations arising under common law, concerning pollution or protection
of public health or the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
Reference to any section of the ERISA includes reference to any regulations
issued thereunder, as well as to any comparable provisions of any legislation
that amends, supplements or replaces such section.
"ERISA Affiliate" means any entity that is (or at any relevant time was) a
member of a "controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, the Company, as defined
in Section 414 (d) (c), (m) or (o) of the Code.
"Escrow Agent" means Corbin Silverman & Sanseverino LLP, as escrow agent under
the Escrow Agreement.
"Escrow Agreement" means the escrow agreement dated the Closing Date among the
Buyer, the Shareholders and the Escrow Agent.
"Escrow Shares" means the shares of Buyer Common Stock subject to the Escrow
Agreement.
"Final Balance Sheet" has the meaning set forth in Section 3.3(a).
"Final Cash Distribution Amount" has the meaning set forth in Section 3.3(a) .
"Financial Statements" has the meaning set forth in Section 5.2(f).
"GAAP" means United States generally accepted accounting principles as in effect
from time to time.
"Hazardous Substances" means "hazardous substances", "pollutants",
"contaminants", or "regulated substances" under any Environmental Law, or any
other substance considered toxic, hazardous or a potential threat to public
health or the environment, the presence of which might result in a Person
incurring liability under any Environmental Law.
"Initial Cash Distribution Amount" has the meaning set forth in Section 3.1(a).
"IRS" means the Internal Revenue Service.
"Intellectual Property" means the United States and foreign trademarks, service
marks, trade names, trade dress, domain names, copyrights and similar properties
and rights, including registrations and applications to register or renew the
registration of any of the foregoing; United States and foreign letters patent
and patent applications; and inventions, processes, designs, formulae, trade
secrets, know-how, Confidential Information, computer software, data and
documentation and all similar intellectual property and related proprietary
rights.
"Joint Balance Sheet" has the meaning set forth in Section 3.1(a).
"Licenses" has the meaning set forth in Section 5.1(t).
"Material Adverse Effect" has the meaning set forth in Section 5.1(a).
"Merger" has the meaning set forth in the recitals of this Agreement.
"Merger Filing" has the meaning set forth in Section 2.2.
"Merger Shares" has the meaning set forth in Section 2.1.
"Most Recent Financial Statements" has the meaning set forth in Section 5.2(f).
"Most Recent Fiscal Period" has the meaning set forth in Section 5.2 (f)
"MPC" means The Medical Phone Company, Inc., a Delaware corporation and an
Affiliate of the Buyer.
"NCI" means NCI, Inc. (formerly named Nelson Communications Inc.), a Delaware
corporation and an Affiliate of the Buyer.
"Ordinary Course of Business" means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and
frequency).
"Person" means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity (or any department, agency
or political subdivision thereof).
"PTI" means Professional Telemarketing, Inc., a Missouri corporation and an
Affiliate of the Buyer.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and
regulations issued thereunder.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge or
other security interest, other than (a) mechanic's, materialmen's and similar
liens, (b) liens for taxes not yet due and payable, (c) purchase money liens and
liens securing rental payments under capital lease arrangements, and (d) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"SmithKline Litigation" means the action pending in the United States District
Court, Eastern District of Pennsylvania, titled Barton & Pittinos. Inc. v.
SmithKline Beecham Corporation (Civil Action No. 95-6619 (MK) and any related
counterclaims.
"Subsidiary" means each corporation, partnership, limited liability company or
other entity as to which 50% or more of the equity is owned, directly or
indirectly, by the Company.
"Surviving Corporation" has the meaning set forth in Section 2.1. Following the
Merger and a transfer of the assets and business of the Company to MPC, the term
"Surviving Corporation" shall mean MPC.
"Taxes" means any federal, state, local or foreign income, payroll, sales, gross
receipts, use, property or other tax, including any interest, penalty or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto.
ARTICLE II
THE MERGER AND MERGER SHARES
2.1. The Merger. In accordance with and subject to the terms and
provisions of this Agreement, at the Effective Time: (a) the Company shall be
merged with and into the Buyer, the separate existence of the Company shall
cease, and the Buyer shall be the surviving corporation (the "Surviving
Corporation") and shall continue its corporate existence under the laws of
Delaware; and (b) the Merger shall have the effects set forth in Sections 259
and 261 of the Delaware General Corporation Law. The Parties intend that the
Merger will meet the "tax-free reorganization" requirements of Section 368(a)
(1) (A) of the Code. The Merger Shares (the "Merger Shares") shall be an
aggregate of three hundred forty-eight thousand seven hundred four (348,704)
shares of Buyer Common Stock. Subject to Section 2.15, the Merger Shares shall
be allocated and distributed to the Shareholders in proportion to their
ownership of Company Common Stock.
2.2. Effective Time of the Merger. The Merger shall become effective at
such time (the "Effective Time") as shall be stated in the Certificate of Merger
and Articles of Merger (each, a
"Certificate of Merger"), in substantially the forms attached to this Agreement
as Exhibits A and B, to be filed with the Secretary of State of Delaware and the
Secretary of the Commonwealth of Pennsylvania (together with any other documents
required to be filed by applicable law, the "Merger Filing"). The Merger Filing
shall be made simultaneously with or as soon as practicable after the Closing of
the transactions contemplated by this Agreement in accordance with Section 4.1.
2.3. Certificate of Incorporation of Surviving Corporation. As of the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
shall remain the Certificate of Incorporation of the Buyer immediately prior to
the Effective Time.
2.4. By-laws of Surviving Corporation. As of the Effective Time, the
By-laws of the Surviving Corporation shall remain the Bylaws of the Buyer
immediately prior to the Effective Time.
2.5. Officers of Surviving Corporation. At the Effective Time, the
officers of the Surviving Corporation shall be the persons in office on the date
of this Agreement, and such officers shall serve, subject to the By-laws of the
Surviving Corporation, until the next annual meeting of the Board of Directors
of the Surviving Corporation and thereafter until their respective successors
are duly elected. The Board of Directors of the Surviving Corporation may
designate such other officers as it determines in accordance with the By-laws.
2.6. Directors of Surviving Corporation. At the Effective Time, the
directors of the Surviving Corporation shall be the persons in office on the
date of this Agreement, and such directors shall serve, subject to the By-laws
of the Surviving Corporation, until the next annual meeting of the stockholders
of the Surviving Corporation and thereafter until their respective successors
are duly elected.
2.7. Further Assurances. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or documents are necessary,
desirable or proper (a) to vest, perfect or confirm of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, immunities, powers, purposes, franchises, properties or
assets of the Company, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to solicit in the name of the Company any
third party consents or other documents required to be delivered by any
third-party, to execute and deliver, in the name and on behalf of the Company,
all such deeds, bills of sale, assignments and assurances and do, in the name
and on behalf of the Company, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or interest in,
to or under any of the rights, privileges, immunities, powers, purposes,
franchises,
properties or assets of the Company and otherwise to carry out the purposes of
this Agreement.
2.8. Status of Buyer Common Stock. At the Effective Time, by virtue of the
Merger, each share of Buyer Common Stock outstanding immediately prior to the
Merger shall remain outstanding as one share of Buyer Common Stock as the
Surviving Corporation in the Merger.
2.9. Conversion of the--Common Stock. The Company Common Stock outstanding
and owned by Barton and Tormey immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holders thereof,
be converted into, in the aggregate, the Merger Shares.
2.10. Shares Held by the Company. Each share of Company Common Stock that
at the Effective Time is held in the treasury of the Company shall, by virtue of
the Merger and without any action on the part of the Company, be canceled and
retired and cease to exist, without any conversion thereof.
2.11. No Rights as Stockholders. The holders of Certificates (as defined
in Section 2.12) representing shares of Company Common Stock shall, as of the
Effective Time, cease to have any rights as Company shareholders, and their sole
right shall be the right to receive their portion of the Merger Shares, as
determined and distributed in the manner set forth in this Agreement.
2.12. Surrender of Certificates. At the Effective Time, each holder of an
outstanding certificate or certificates that prior thereto represented
outstanding Company Common Stock (the "Certificates") shall surrender such
Certificates to the Surviving Corporation and be entitled to the portion of the
Merger Shares into which the aggregate number of shares of Company Common Stock
previously represented by such Certificate or Certificates so surrendered shall
have been converted pursuant to this Agreement.
2.13. Status of Certificates. Until surrendered in accordance with the
provisions of Section 2.12, from and after the Effective Time, each Certificate
(other than Certificates representing former shares of Company Common Stock held
in the treasury of the Company) shall represent for all purposes only the right
to receive a portion of the Merger Shares as determined and distributed in the
manner set forth in this Agreement.
2.14. No Further Transfers. After the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no transfers on the
stock transfer books of the surviving Corporation of the shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for a portion of the Merger
Shares as provided in Section 2.12.
2.15. Escrow of Shares. At the Effective Time, the Buyer shall deposit 10%
of the Merger Shares with the Escrow Agent to be held and disbursed by the
Escrow Agent in accordance with the Escrow Agreement. Such shares shall be
deducted pro rata from the Merger Shares allocable to each Shareholder.
ARTICLE III
STEPS PRELIMINARY TO THE MERGER
3.1. Asset Sale. During the week prior to the Merger, the accountants for
the Company, Rosenberg Rich Baker Berman Company ("Rosenberg Rich"), and the
accountants for the Buyer, Kelly Massad LLP ("Kelly Massad"), prepared a
mutually agreed to preliminary balance sheet of the Company as of June 30, 1998
(the "Joint Balance Sheet"), a copy of which is attached to this Agreement as
Exhibit C. On the Closing Date, and prior to the Merger, based on the Joint
Balance Sheet the Company shall have (i) determined the excess of (A) the sum of
its current assets plus security deposits plus prepaid expenses plus agreed-upon
fixed assets acquired of $19,481 over (B) the sum of its current liabilities
(excluding the current portion of its lease payables and any lines of credit)
plus any non-current deferred revenues, as shown on the Joint Balance Sheet (the
"Initial Cash Distribution Amount"), (ii) provided the Buyer with a copy of the
calculation of the Initial Cash Distribution Amount and (iii) identified to
the Buyer on Exhibit C accounts receivable of the Company (the "Purchased
Accounts Receivable") the aggregate net present value of which (applying an
agreed discount rate of 7% per annum and assuming that all such accounts
receivable will be collected within forty-five (45) days after the date of
invoice) is at least 100% of the Initial Cash Distribution Amount. Prior to the
Merger, the Buyer shall purchase from the Company the Purchased Accounts
Receivable for a purchase price equal to the sum of the Initial Cash
Distribution Amount plus the amount (if any) to be received in accordance with
Section 3.3(b), subject to downward adjustment and refund as described in
Section 3.3 (c) (the "Purchase Price"), on the Closing Date, the Buyer shall
transfer to the Company cash in an amount equal to the Initial Cash Distribution
Amount.
3.2. Distribution. On the day of the Merger, and prior to the Effective
Time, the Company shall declare and pay in cash to the Shareholders a dividend
in an amount equal to the Initial Cash Distribution Amount. Such amount is
subject to refund to the Company in accordance with Section 3.3(c). Prior to the
Merger, the Company shall also declare a dividend with respect to any increases
in the Purchase Price determined in accordance with Section 3.3(b), such
dividend (if any) to be payable to the Shareholders after the Merger.
3.3. Contingent Purchase Price. (a) Within twenty (20) days after receipt
from the Company of a preliminary balance sheet of
the Company as of the Closing Date, Kelly Massad shall (i) prepare a final
balance sheet of the Company as of the Closing Date in accordance with GAAP and
in a manner consistent with the accounting methodology utilized and agreed to by
the Parties with respect to the preparation of the Joint Balance Sheet (the
"Final Balance Sheet") and (ii) within such 20-day period, deliver to the Buyer,
the Shareholders and Rosenberg Rich a copy of such Final Balance Sheet and,
based on that Final Balance Sheet and using the same method of calculation as
described in Section 3.1, either deliver a revised calculation of the Initial
Cash Distribution Amount or confirm to such Persons that there should be no
change in the Initial Cash Distribution Amount (the "Final Cash Distribution
Amount"), In the event that either the Buyer or the Shareholders shall dispute
the Final Cash Distribution Amount, as so determined by Kelly Massad, such Party
shall, within thirty (30) days after receipt of Kelly Massad's determination,
submit the Final Cash Distribution Amount to Deloitte & Touche LLP for
determination in accordance with the methodology described above. Deloitte &
Touche shall, within thirty (30) days thereafter, either deliver a revised
calculation of the Final Cash Distribution Amount or confirm to such Persons
that there should be no change in the Final Cash Distribution Amount determined
by Kelly Massad. The Final Cash Distribution Amount, as so determined by
Deloitte & Touche, shall be final, conclusive and binding on the Parties and
shall not be subject to judicial review. The expenses of Kelly Massad shall be
borne by the Buyer. The expenses of Rosenberg Rich shall be borne by the
Shareholders. The expenses of Deloitte & Touche shall be borne in equal shares
by the Buyer, on the one hand, and the Shareholders, on the other hand.
(b) If the Final Cash Distribution Amount exceeds the Initial Cash Distribution
Amount, the Purchase Price of the accounts receivable listed on Exhibit c shall
be adjusted to be equal to the Final Cash Distribution Amount, and the Surviving
Corporation, as successor in interest to the Company, shall pay the dividend
declared in accordance with Section 3.2 within 10 days after the final
determination of the Final Cash Distribution Amount.
(c) If the Final Cash Distribution Amount is less than the Initial Cash
Distribution amount, the Purchase Price of the accounts receivable listed on
Exhibit C shall be decreased by such difference, and the Shareholders shall,
within 10 days after the final determination of the Final Cash Distribution
Amount, pay such amount to the Surviving Corporation, as successor in interest
to the Company, in proportion to the Company Common Stock owned by the
Shareholders.
ARTICLE IV
CLOSING
4.1. The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing) shall take place at the offices of Corbin
Silverman & Sanseverino LLP, 805 Third Avenue, New York, New York 10022,
commencing at 10:00 a.m. local time on the date of execution and delivery of
this Agreement and shall be deemed effective as of the Effective Time (the
"Closing Date").
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Shareholder. Except as set
forth on the disclosure schedule (the "Disclosure Schedule") delivered to the
Buyer on or before the date of this Agreement that specifically identifies the
relevant provisions of this Agreement to which such exceptions relate (which
exceptions shall be deemed to be representations and warranties of the
Shareholders as if made in this Agreement and shall, to the extent applicable,
amend the representations and warranties set forth below), the Shareholders
jointly make the following representations and warranties to the Buyer:
(a) Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the Commonwealth of Pennsylvania. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required (each of which jurisdictions is listed on
the Disclosure Schedule), except where the lack of such qualification would not
have a material adverse effect on the condition (financial or otherwise),
results of operations, assets, business or prospects (a "Material Adverse
Effect") of the Company. The Company has full corporate power and authority to
carry on the businesses in which it is engaged and to own and use the property
owned and used by it. The Company has no Subsidiaries. The Certificate of
Incorporation (as amended) and Bylaws (as amended) of the Company are in the
respective forms of the certified copies previously provided to the Buyer. The
minute books of the Company accurately reflect all material action taken (and
required to be taken) by the Company's Shareholders and directors from the date
of its incorporation to the Closing Date. The Company has delivered to the Buyer
true and complete copies of all minutes, consents and related documents
contained in the Company's minute books.
(b) Authorization of Transaction. The Company has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Company and the Shareholders, enforceable in accordance with its terms.
Except as required for the Merger Filing, neither the Company nor the
Shareholders need give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency or
other Person in order to consummate the transactions contemplated by this
Agreement.
(c) Capitalization. The entire authorized capital stock of the Company consists
of one hundred thousand(100,000) shares of Company Common Stock, of which ten
thousand twenty (10,020) shares of Company Common Stock are issued and
outstanding and owned by the Shareholders as set forth on the Disclosure
Schedule. All of the issued and outstanding shares of Company Common Stock have
been duly authorized, are validly issued, fully paid and nonassessable, are
owned beneficially and of record by the Shareholders free of all claims and
Security Interests and were issued in compliance with all applicable federal and
state securities laws. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights or
other contracts or commitments that could require the Company or the
Shareholders to issue, sell, transfer or otherwise cause to become outstanding
any of the Company's capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights with respect
to the Company.
(d) Noncontravention. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, governmental agency,
court or arbitral panel to which the Company is subject or any provision of the
Certificate of Incorporation or By-laws of the Company, or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any Person the right to accelerate, terminate, modify or cancel or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which the Company is a party or by which it is bound or to
which any of its assets are subject (or result in the imposition of any Security
Interest upon any of its assets).
(e) Broker's Fees. Neither the Company nor the Shareholders have incurred a
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
(f) Tangible Assets. The Company has good and marketable title to, or a valid
leasehold interest in, the tangible assets used in the conduct of its business,
free of all Security Interests. All such tangible assets are in good condition
and repair and are adequate and sufficient to carry on the business of the
Company. The Disclosure Schedule contains an accurate list and summary
description of all property and assets of the Company as of June 30, 1998 where
the value of an individual item exceeds $1,000 or where an aggregate of similar
items exceeds $1,000. The property and assets listed on the Disclosure Schedule
constitute substantially all of the property and assets used in or necessary to
the conduct of the Company's business. All such property and assets conforms in
all material respects to all applicable laws and regulations relating to their
construction, use and
operation. Except pursuant to leases described on the Disclosure Schedule, no
Person other than the Company owns any vehicles, equipment or other property or
assets used by the Company. The Company owns no real property.
(g) Financial Statements. The Company has delivered to the Buyer the following
financial statements (collectively, the "Company Financial Statements"): (i)
reviewed balance sheets and profit and loss statements and statements of cash
flows as of and for the fiscal years ended September 30, 1995, 1996 and 1997 for
the Company; and (ii) unaudited balance sheet and profit and loss statements and
statements of cash flows (collectively, the "Company Most Recent Financial
Statements") as of and for the six months ended March 31, 1998 (the "Company
Most Recent Fiscal Period") for the Company. The Company Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and present
fairly in all material respects the financial condition of the Company as of
such dates and the results of operations of the Company for such periods;
provided, however, that the Company Most Recent Financial Statements are subject
to normal year-end adjustments and lack notes and other presentation items.
(h) Events Subsequent to Company Most Recent Fiscal Period. Since the Company
Most Recent Fiscal Period, there has not been:
(i) any change in the condition (financial or otherwise), results of operations,
assets, business or prospects of the Company from that reflected in the Company
Most Recent Financial Statements, except for changes in the Ordinary Course of
Business that have not been, in the aggregate, materially adverse;
(ii) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the condition (financial or otherwise),
results of operations, assets, business or prospects of the Company;
(iii) any waiver by the Company of a valuable right or debt owed to it;
(iv) any Security Interest created on any of the Company's properties or assets;
(v) any sale, assignment or transfer of any of the Company's properties or
assets, except in the Ordinary Course of Business;
(vi) any material amendment or termination of any material agreement to which
the Company is a party or by which it is bound, except in the Ordinary Course of
Business;
(vii) any increase in the compensation payable or benefits available, or to
become payable or available, to any of the Company's officers, directors,
employees or consultants;
(viii) any incurrence of any debt for borrowed money or any guaranty of the debt
or obligations of a third party;
(ix) any capital expenditures in excess of $5,000 that have not been previously
approved by the Buyer of NCI in writing;
(x) any transaction or commitment of the Company except in the Ordinary Course
of Business;
(xi) any commitment to enter into or do any of the foregoing; or
(xii) any other event or condition of any character that might result in a
Material Adverse Effect on the Company.
(i) Absence of Undisclosed Liabilities. Except to the extent (a) reflected or
reserved against in the Company Most Recent Financial Statements, or (b)
incurred with Persons other than any Affiliate of the Company or the
Shareholders in the Ordinary Course of Business after the date of the Company
Most Recent Financial Statements, the Company has no liabilities or obligations
of any nature, whether accrued, absolute, contingent or otherwise (including,
but not limited to, liabilities, as guarantor or otherwise, in respect of
obligations of others) other than performance obligations with respect to
contracts and commitments that would not be required to be reflected or reserved
against in a balance sheet prepared in accordance with GAAP.
(j) Legal Compliance. The Company has complied and is in compliance with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings and charges thereunder) of federal, state,
local and foreign governments (and all agencies thereof), except where the
failure to comply, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
(k) Books of Account; Tax Matters.
(i) The books of account of the Company fairly reflect: (A) all transactions
relating to the Company and (B) all items of income and expense, assets and
liabilities and accruals relating to the Company. The Company has not engaged in
any transaction, maintained any bank account or used any corporate funds except
for transactions, bank accounts and funds that are reflected in the
normally maintained books of account and records of the Company.
(ii) The Company has filed in a timely manner all Tax Returns that it has been
required to file, and has paid in a timely manner all Taxes shown thereon as
owing. The provision for Taxes in the Company Most Recent Financial Statements
is adequate for the payment of all Tax liabilities for the period covered by
such Statements.
(iii) All Tax Returns of the Company for taxable periods ended on or before
September 30, 1991 are closed to the assessment of additional Taxes under the
applicable statute of limitations (except for possible allegations of fraud),
and none of the other Tax Returns of the Company has been, or is currently, the
subject of audit by any governmental authority. The Company and the Shareholders
know of no Tax deficiency or claim for additional Taxes asserted or threatened
to be asserted against the Company by any taxing authority and the Company and
the Shareholders know of no grounds for any such assessment. The Company has
delivered to the Buyer correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by the Company since October 1, 1994.
(iv) The Company has not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(v) Prior to the closing, the Company has duly elected to be taxed as, and is
and has been eligible to be taxed as, a "small business corporation" ("S"
corporation) under the provisions of Section 1361 et seq. of the Code.
(1) Intellectual Property. The Disclosure Schedule identifies (i) each patent or
registration that has been issued to the Company with respect to any of its
Intellectual Property, (ii) each pending patent application or application for
registration that the Company has made with respect to any of its Intellectual
Property, and (iii) each license, agreement or other permission that the Company
has granted to any third party with respect to any of its Intellectual Property.
The Company has all necessary title to and ownership of all its Intellectual
Property (including, but not limited to, the registered service mark "The
Medical Phone Company") necessary or desirable for its business and to the
knowledge of the Company and the Shareholders, without any conflict with or
infringement on the rights of any other Person. The Disclosure Schedule contains
a list and summary description of all options, licenses and agreements of or
relating to Intellectual Property granted by the Company to any Person (and as
to which true and complete copies of all relevant documents have been delivered
to the Buyer). To the knowledge of the Company and the Shareholders, the Company
is not bound by or a party to any options, licenses or agreements of any kind
with respect to the Intellectual Property of any other Person. To the knowledge
of the Company and the Shareholders, the Company has not violated and is not in
violation of any of the Intellectual Property rights of any other Person. To the
knowledge of the Company and the Shareholders, none of the activities of the
employees of the Company on behalf of the Company violates any agreements or
arrangements that any such employees have with former employers.
(m) Contracts. The Disclosure Schedule sets forth a complete list of all
contracts, leases and other agreements (oral or written)
to which the Company is a party. The Company has delivered to the Buyer a
correct and complete copy of each written contract, lease or other agreement
listed on the Disclosure Schedule. The Disclosure Schedule contains an accurate
summary of each oral contract, lease and agreement. All of the contracts, leases
and agreements listed on the Disclosure Schedule are valid and in full force and
effect, and the Company is not in default or breach of any such contract, lease
or agreement. Neither the Company nor the Shareholders has notice of any default
or breach on the part of any other party to any such contract, lease or
agreement. No approval or consent of any Person is needed in order that each
such contract, lease and agreement will continue in full force and effect
subsequent to the consummation of the transactions contemplated by this
Agreement and, upon consummation of such transactions, will be enforceable by
the Buyer in accordance with its terms.
(n) Litigation. No litigation, arbitration, action, suit, proceeding or
investigation (whether conducted by any judicial or regulatory body, arbitrator
or other Person) is pending or, to the knowledge of the Company or the
Shareholders, threatened against the Company (nor is there any basis therefor
known to the Company or the Shareholders). There are no outstanding orders,
awards, judgments, injunctions, decrees or other requirements of any court,
arbitrator or governmental or regulatory body against the Company or its assets.
(o) Certain Business Relationships with the Company. The Shareholders and their
Affiliates have not been involved in any business arrangement or relationship
with the Company or any supplier, client or competitor of the Company within the
past 36 months, other than serving as an employee, officer and/or director of
the Company, and neither the Shareholders nor any of their Affiliates owns any
asset, tangible or intangible, that is used in the business of the Company.
(p) ERISA
(i) Schedule of Plans. The Disclosure Schedule sets forth a correct and complete
list of each written "employee benefit plan," within the meaning of section 3(3)
of ERISA, of the Company and each Benefit Arrangement of the Company
(collectively, the "Company Plans"). The Company has delivered to the Buyer
correct and complete copies of all written Company Plans, all related trusts or
other funding agreements, and all amendments to the Company Plans, the most
recent IRS Form 5500 filed in respect of each such Company Plan and any material
employee, IRS and U.S. Department of Labor communications with respect to any
and all Company Plans (including, but not limited to, summary plan descriptions
and summaries of material modifications). Except as disclosed on the Disclosure
Schedule, each Company Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the IRS as to its
qualification under the Code (a correct and
complete copy of which has been delivered to the Buyer) and (A) no amendment has
been made to any such Company Plan since the date of its most recent
determination letter that would result in the disqualification of such Company
Plan and (B) no other event has occurred with respect to any such Company Plan
that may adversely affect the qualification of such Company Plan.
(ii) No Minimum Funding Standards. Except as disclosed on the Disclosure
Schedule, no Company Plan is subject to the minimum funding standards of Section
302 of ERISA or Section 412 of the Code. No Company Plan is a multi-employer
plan (as defined in section 3(37) of ERISA) or a multiple employer plan and no
Company Plan is maintained in connection with any trust described in Section
501(c)(9) of the Code. No liability has been incurred pursuant to the provisions
of Title I or IV of ERISA by the Company or any ERISA Affiliate and no condition
or event exists or has occurred that may result in any such liability.
(iii) Operation of the Company Plans. Each of the Company Plans has been
operated and administered in compliance with its terms and all applicable law,
including, but not limited to, ERISA and the Code. There are no claims pending
or, to the knowledge of the Company and the Shareholders, threatened by or on
behalf of an employee of the Company involving any Company Plan or its assets
(other than routine claims for benefits under the terms of any such Company
Plan). All contributions required to have been made to any Company Plan subject
to Title IV of ERISA by the Company or any ERISA Affiliate pursuant to
applicable law (including, but not limited to, ERISA and the Code) have been
made within the time required by applicable law.
(iv) No Prohibited Transactions. Neither the Company nor any ERISA Affiliate has
any liability with respect to any transaction including a Company Plan in
violation of Section 406 of ERISA or any "prohibited transaction," as defined in
Section 4975(c) (1) of the Code, for which no exemption exists under Section 408
of ERISA or Section 4975(c)(2) or (d) of the Code. Neither the Company nor any
ERISA Affiliate has participated in a violation of Part 4 of Title I, Subtitle B
or ERISA by any plan fiduciary of any Company Plan and has any unpaid civil
liability under Section 502(l) of ERISA. There are no suits, investigations or
other proceedings pending or threatened by any governmental authority of or
against any Company Plan, the trustee of any assets held thereunder or the
Company, relating to the Company Plans.
(v) Market Value. The market value of assets under each Company Plan that is a
Company Pension Plan, as defined below, is not less than the present value of
all benefit liabilities within the meaning of Section 4001(a)(a) of ERISA, as
determined in accordance with Pension Benefit Guaranty Corporation ("PBGC")
methods, factors and assumptions applicable to a pension plan terminating on the
last day of the plan year immediately preceding the date of this Agreement. For
purposes of this
Section, "Company Pension Plan shall mean a funded employee pension benefit
plan, as defined in Section 3(2) of ERISA, established or maintained by the
Company or any ERISA Affiliate that is not an individual account plan within the
meaning of Section 3(34) of ERISA. Neither the Company nor any ERISA Affiliate
is required to provide security to a Company Pension Plan under Section
402(a)(29) of the Code.
(vi) Reportable Event. No Company Pension Plan has been the subject of a
reportable event within the meaning of Section 4043(c) of ERISA as to which
notices would be required to be filed with the PBGC.
(vii) No Increase in Expense. There has been no amendment to, written
interpretation or announcement (whether or not written) or change in employee
participation or coverage under any Company Plan that would increase materially
the expense of maintaining such Company Plan above the level of expense incurred
in respect of such Company Plan for the most recently completed plan year.
(viii) No Liability. No liability has been incurred by the Company or any ERISA
Affiliate for any tax, penalty or other liability with respect to any Company
Plan.
(ix) Required Contributions. The Company has made all required contributions
under each Company Plan on a timely basis or, if not due yet, adequate accruals
therefor have been provided for in the Company Most Recent Financial Statements.
No Company Pension Plan has incurred any "accumulated funding deficiency" within
the meaning of Section 302 of ERISA or Section 412 of the Code and no Company
Plan that is a Company Pension Plan has applied for or received a waiver of the
minimum funding standards imposed by Section 412 of the Code.
(x) No Termination. There has been no termination or partial termination, as
defined in Section 411(d) of the Code, of any Company Plan. No filing has been
made by the Company or any ERISA Affiliate with the PBGC and no proceeding has
been commenced by the PBGC to terminate any Company Pension Plan. No condition
exists and no event has occurred that could constitute grounds for the
termination of any Company Pension Plan by the PBGC or which could reasonably be
expected to result in any material liability of the Company or of any ERISA
Affiliate to the PBGC with respect to any Company Pension Plan, other than
liabilities for premium payments.
(xi) Welfare Plans. The employee welfare benefit plans, as defined in Section
3(l) of ERISA, that are group health plans (as defined for the purposes of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA
("COBRA")) have complied with the requirements of COBRA to provide healthcare
continuation coverage to qualified beneficiaries who have elected, or may elect
to have, such coverage. The Company, or its agents who administer any of the
welfare plans, have complied with the
notification and written notice requirements of COBRA and the Health Insurance
Portability and Accountability Act of 1997. Except as disclosed on the
Disclosure Schedule, no Company Plan provides life insurance or medical benefits
coverage to former or retired employees of the Company or any ERISA Affiliate.
(q) Environmental Matters.
(i) The Company has been and is in compliance with all Environmental Laws.
(ii) No events, facts or conditions will prevent, hinder or limit continued
compliance by the Company with applicable Environmental Laws, and no
expenditures or commitments by the Company are necessary to maintain continued
compliance by the Company as of the date of this Agreement or beyond the
Effective Time.
(iii) The Company has obtained all permits, licenses and authorizations required
pursuant to applicable Environmental Laws to carry on its business as now
conducted; all such permits are in full force and effect and are not subject to
any appeals or to any unsatisfied conditions; and no such permits are subject to
any pending or threatened modification, suspension, revocation, rescission or
cancellation.
(iv) The Company is not liable under any applicable Environmental Laws with
respect to the release, threatened release or presence of any Hazardous
Substance.
(v) No Hazardous Substance that may require response or corrective action or
remediation under any Environmental Law is present at, threatened or emanating
from any property owned or operated by the Company, or was present at or
emanating from any other property when previously owned or operated by the
Company.
(vi) The Company is not subject to any pending or threatened claim nor obligated
to comply with any judgment, order, ruling, settlement or agreement arising
under any Environmental Law.
(vii) The Company has not entered into any negotiations or agreements relating
to any response or corrective action or remediation relating to liabilities or
potential liabilities arising under any Environmental Law or providing any
indemnification for any liabilities arising under any Environmental Law.
(r) Insurance. All of the property and assets of the Company that is of an
insurable character is insured by responsible insurance companies against loss
or damage by fire and other risks to its full replacement value, and the Company
is insured against liability, errors and omissions to the extent and in the
manner customary for companies engaged in similar businesses or owning similar
assets. The Company has all insurance required by applicable law. The Disclosure
Schedule contains a correct and
complete list of the Company's insurance, all of which is in full force and
effect. Correct and complete copies of all insurance policies have been
delivered to the Buyer. The Company is not in default with respect to any
provision or requirement of such insurance, nor has it failed to give any notice
or present any claim under any such insurance. All premiums on such insurance
have been paid.
(s) Labor Agreements and Actions. The Company enjoys generally good
employer-employee relations. The Company is not delinquent in any payments to
its employees or consultants for wages, salaries, commissions, bonuses or other
compensation. The Company is not bound by or subject to any written or oral,
express or implied, contract, commitment or arrangement with any labor union,
and no labor union has requested or, to the knowledge of the Company or the
Shareholders, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company or the Shareholders,
threatened, nor are the Company or the Shareholders aware of any labor
organization activity involving the Company's employees. Neither the Company nor
the Shareholders are aware that any key employee, or any group of key employees,
intends to terminate his or their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the fore
going persons. The employment of each employee of the Company is terminable at
the will of the Company, without any obligation for severance pay or other
payments (other than accrued salary, vacation and sick pay in accordance with
the Company's normal policies).
(t) Compliance With Applicable Law. The Company holds all material licenses,
franchises, permits and authorizations (collectively, "Licenses") necessary for
the lawful conduct of its business, and is not in default or violation under any
such License or any applicable law, order, rule, regulation, policy and/or
guideline of any governmental agency or authority. The Company has not received
any notice of any claim of default or violation with respect to any such License
where such default or violation could result in a Material Adverse Effect on the
Company. Except as otherwise governed by law, all such Licenses are renewable
by their terms or in the Ordinary Course of Business without the need to comply
with any special qualification procedures or to pay any amounts other than
routine filing fees. The Disclosure Schedule contains a complete and correct
list of all Licenses. The Company is not subject to any written or oral
agreement or understanding with any governmental agency or authority that
imposes any restriction on its business or operations.
(u) Shareholder Claims. Neither the Shareholders nor any Affiliate have any
claims against the Company for any monetary or contractual or other obligation
(oral or in writing).
(v) Distributions. Except as described in Article III of this Agreement, since
October 1, 1997, the Company has not made any distributions to its shareholders
or paid any bonuses or other extraordinary compensation to its employees,
consultants or any other Persons.
(w) Accounts-Receivables. All of the accounts receivable of the Company arose in
the Ordinary Course of Business of the Company and are valid and bona fide
obligations. Such accounts receivable (net of any reserves reflected on the
Company Most Recent Balance Sheet) will be collected in full in the Ordinary
Course of Business without resort to an attorney or collection agency. Such
accounts receivable are not subject to counterclaim or offset and do not require
any future performance obligation on the part of the Company. Immediately prior
to the Closing, all of the Purchased Accounts Receivable are valid and bona fide
obligations and will be collectible in the Ordinary Course of Business within
sixty (60) days after the Closing.
(x) Clients. No client of the Company that accounted for $200,000 or more of the
Company's sales or revenues for the fiscal year ended September 30, 1997 has
cancelled or otherwise terminated or curtailed its business or relationship with
the Company or notified the Company that it intends to do so. The Disclosure
Schedule contains, with respect to each client of the Company that, to the
Shareholders, knowledge, is expected to generate revenues of $200,000 or more in
the fiscal year ending September 30, 1998, information as to the revenues billed
to such client through March 31, 1998 and, to the knowledge of the Shareholders,
the projected revenues for the balance of fiscal 1998 (based on commitments on
hand as of the Closing Date). The Shareholders have no reason to believe that
any of such commitments will be terminated or materially reduced.
(y) Bank Accounts. The Disclosure Schedule contains a correct and complete list
of (i) each bank account and other account where funds of the Company or any
Company Plan or related trust are deposited, (ii) each safe deposit box and
vault where property of the Company may be stored, (iii) each power of attorney
granted by the Company, and (iv) the signatories for each account, safe deposit
box, vault and power of attorney.
(z) Disclosure. No representation or warranty of the Company or the Shareholders
in this Agreement (including the exhibits and schedules), or any of the other
agreements to be executed and delivered by the Company and the Shareholders as
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not false
or misleading. There is no fact that the Company or the Shareholders have not
disclosed to the Buyer in writing that materially adversely affects or may
affect the condition (financial or otherwise), results of operations, assets,
business or prospects of the Company or the ability of
the Company or the Shareholders to perform its or their obligations under this
Agreement or to consummate any of the transactions contemplated hereby.
(aa) Accreditation, Due Diligence and Sophistication Matters.
(i) The Shareholders are each acquiring the Merger Shares pursuant to the Merger
and this Agreement solely for their own investment accounts and not with a view
to or for sale in connection with any distribution of all or any part of such
Merger Shares. The Shareholders acknowledge the Buyer's understanding that the
delivery of such Merger Shares hereunder is intended to be exempt from
registration under the Securities Act. The Shareholders agree that they will
not, directly or indirectly, offer, transfer, sell, pledge or otherwise dispose
of any Merger Shares, unless such offer, transfer, sale, pledge or other
disposition is either (i) pursuant to an effective registration statement under
the Securities Act and registered under any applicable state laws, or (ii)
effected only after a Shareholder has furnished the Buyer with an opinion of
counsel, which counsel shall be satisfactory to the Buyer and which opinion
shall be in form and substance satisfactory to the Buyer, stating that no such
registration of the Merger Shares is required because of the availability of an
exemption from registration under the Securities Act and under applicable state
laws.
(ii) The Shareholders have been advised that (A) the Merger Shares have not been
registered under the Securities Act or any state laws; (B) the Merger Shares
must be held indefinitely and the Shareholders must continue to bear the
economic risk of holding the Merger Shares unless (1) the Merger Shares are
subsequently registered for sale under the Securities Act and any applicable
state laws, or (2) an exemption from such registration is available, or (3) the
Shareholders exercise their rights under Section 7.2 of this Agreement; (C)
there is presently no public market for the Merger Shares and there is no
assurance that a public market for the Merger Shares will develop; (D) Rule 144
promulgated under the Securities Act ("Rule 14411) is not currently available
with respect to sales of Merger Shares, and the Buyer has made no agreement with
the Shareholders to make Rule 144 available; (E) if and when the Merger Shares
may be disposed of in reliance on Rule 144, such disposition may be made only in
limited amounts in accordance with the terms and conditions of Rule 144; (F) if
the Rule 144 exemption is not available, public sale of the Merger Shares
without registration will require the availability of another exemption under
the Securities Act; (G) a notation will be made in the records of the Buyer and
any transfer agent that the Merger Shares are subject to restrictions on
transfer; and (H) a restrictive legend will be placed on the certificates
representing the Merger Shares in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
(A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") AND THE REGISTRATION REQUIREMENTS OF ANY
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, OR (B) IF NELSON
COMMUNICATIONS INC. (THE "COMPANY") HAS PREVIOUSLY BEEN FURNISHED WITH AN
OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER,
SALE, PLEDGE OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE
ACT AND THE RULES AND REGULATIONS THEREUNDER AND SUCH STATE SECURITIES OR
"BLUE SKY" LAWS. THE TRANSFER OF SUCH SHARES MAY ALSO BE SUBJECT TO
CONTRACTUAL RESTRICTIONS UNDER ONE OR MORE AGREEMENTS, COPIES OF WHICH ARE
ON FILE AT THE OFFICES OF THE COMPANY.
(iii) The Shareholders have been provided an opportunity to ask questions of,
and have received answers thereto satisfactory to them from, the Buyer and its
representatives regarding the terms and conditions of this Agreement, the Buyer,
NCI, PTI, the Merger, the Merger Shares and other matters pertaining to this
transaction, and the Shareholders have obtained all additional information
requested of the Buyer and its representatives. The Shareholders have
investigated and are familiar with the affairs, financial condition and
prospects of the Buyer and its Affiliates and have been given sufficient access
to and have acquired sufficient information and documents as requested by the
Share holders, including, but not limited to, financial information, about the
Buyer and its Affiliates to reach an informed and knowledgeable decision to
acquire such Merger Shares.
(iv) The Shareholders have such knowledge and experience in financial affairs
that they are capable of evaluating the merits and risks of this transaction.
The Shareholders have not relied in connection with this transaction upon any
representations, warranties or agreements other than those set forth in this
Agreement. The Shareholders, respective financial situations are such that they
can each afford to bear the economic risk of holding such Merger Shares for an
indefinite period of time.
(v) Neither the Buyer nor any officer, employee, agent or Affiliate of the Buyer
has made any representations or warranties to the Shareholders, other than as
set forth in this Agreement. Although the Buyer has previously furnished the
Shareholders with certain projections and other forward-looking information, the
Shareholders acknowledge that (A) such projections and information are based on
estimates and that actual results or events could differ materially from that
anticipated or projected, (B) the Buyer is not making any representations or
warranties concerning such projections and other forward-looking information,
and (C) the Shareholders have not relied on any such projections and
forward-looking information in entering into this Agreement.
5.2. Representations and warranties of the Buyer. The Buyer represents and
warrants to the Shareholders as follows:
(a) Organization. The Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
The Buyer is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required, except where
the lack of such qualification would not have a Material Adverse Effect on the
Buyer. The Buyer has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it.
(b) Authorization of Transaction. The Buyer has full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms. Except as required for the
Merger Filing, the Buyer need not give any notice to, make any filing with, or
obtain any authorization, consent or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
(c) Capitalization. The entire authorized capital stock of the Buyer consists of
one hundred million (100,000,000) shares of Buyer Common Stock and two million
(2,000,000) shares of preferred stock, of which 23,988,969 shares of Buyer
Common Stock (excluding the Merger Shares) are issued and outstanding. All of
the issued and outstanding shares of Buyer Common Stock have been duly
authorized, are validly issued, fully paid and nonassessable. All of the Merger
Shares to be issued in connection with the Merger will be duly authorized,
validly issued and fully paid and nonassessable. The Certificate of
Incorporation (as amended) and By-laws (as amended) of the Buyer are in the
respective forms of the certified copies previously provided to the
Shareholders.
(d) Noncontravention. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any government, governmental
agency or court to which the Buyer is subject or any provision of the
Certificate of Incorporation or By-laws of the Buyer or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which the Buyer is a party or by which the Buyer is bound
or to which any of the assets of the Buyer is subject (or result in the
imposition of any Security Interest upon any of the assets of the Buyer).
(e) Brokers, Fees. The Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
(f) Financial Statements. The Buyer has delivered to the Shareholders the
following financial statements (collectively the "Financial Statements") audited
consolidated balance sheets and statements of income and cash flow as of and for
the fiscal years ended December 31, 1996 and December 31, 1997 (the "Most Recent
Fiscal Period") for NCI and unaudited consolidating balance sheets and
statements of income and cash flow as of and for the fiscal years ended December
31, 1996 and 1997 for PTI (such latter statements, the "Most Recent Financial
Statements"), The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of each of
NCI and PTI as of such dates and the results of operations of each of NCI and
PTI for such periods.
(g) Absence of Undisclosed Liabilities. Except to the extent reflected or
reserved against in the balance sheets of the Most Recent Financial Statements,
NCI and PTI have no material liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise (including, but not limited to,
liabilities, as guarantor or otherwise, in respect of obligations of others)
other than performance obligations with respect to contracts and commitments
that would not be required to be reflected or reserved against in a balance
sheet prepared in accordance with GAAP.
(h) Events Subsequent to Most Recent Fiscal Period. Since the Most Recent Fiscal
Period, there has not been any material adverse change in the consolidated
condition (financial or otherwise), results of operations, assets, business or
prospects of NCI and PTI, taken as a whole.
(i) Litigation. No litigation, arbitration, action, suit, proceeding or
investigation (whether conducted by any judicial or regulatory body, arbitrator
or other Person) is pending or, to the knowledge of the Buyer, threatened
against NCI, PTI or the Buyer (nor is there any basis therefor known to NCI, PTI
or the Buyer). There are no outstanding orders, awards, judgments, injunctions,
decrees or other requirements of any court, arbitrator or governmental or
regulatory body against NCI, PTI or the Buyer or their assets.
(j) Compliance With Applicable Law. NCI, PTI and the Buyer hold all material
licenses, franchises, permits and authorizations (collectively, the "Permits")
necessary for the lawful conduct of their businesses, and are not in default or
violation under any such Permit or any applicable law, order, rule, regulation,
policy and/or guideline of any governmental agency or authority. Neither NCI,
PTI nor the Buyer has received any notice of any claim of default or violation
with respect to any such Permit where such default or violation could result in
a Material Adverse Effect on NCI, PTI or the Buyer. Except as otherwise governed
by law, all such Permits are renewable by their terms or
in the Ordinary Course of Business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
Neither NCI, PTI nor the Buyer is subject to any written or oral agreement or
understanding with any governmental agency or authority that imposes any
restriction on its business or operations.
(k) Disclosure. No representation or warranty of the Buyer in this Agreement, or
any of the other agreements to be executed and delivered by the Buyer as
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not false
or misleading. There is no fact that the Buyer has not disclosed to the
Shareholders in writing that materially adversely affects or may affect the
consolidated condition (financial or otherwise), results of operations, assets,
business or prospects of NCI, PTI or the Buyer or the ability of the Buyer to
perform its obligations under this Agreement or to consummate any of the
transactions contemplated hereby.
ARTICLE VI
CLOSING DOCUMENTS
6.1. The Company and the Shareholders. At the Closing, the Company and the
Shareholders are delivering to the Buyer the following:
(a) Employment agreements between each of Barton and Tormey and MPC, signed by
Barton and Tormey.
(b) Barton's and Tormey's Certificates.
(c) A Secretary's Certificate.
(d) The minute book, stock book and corporate seal of the Company.
(e) Good standing certificates of the Company in the Commonwealth of
Pennsylvania and each jurisdiction in which the Company is qualified to do
business.
(f) The resignation of Barton as trustee of the trusts under the Company Plans.
(g) The Merger Filing, signed on behalf of the Company.
(h) The Escrow Agreement, signed by the Shareholders.
6.2. The Buyer. At or prior to the Closing, the Buyer is delivering to the
Shareholders and the Company the following:
(a) Employment agreements between each of Barton and Tormey and the Buyer,
signed on behalf of MPC.
(b) A Secretary's Certificate.
(c) The Escrow Agreement, signed by the Buyer and the Escrow Agent.
(d) The Merger Filing, signed on behalf of the Buyer.
(e) The Merger Shares.
(f) The Initial Cash Distribution Amount.
ARTICLE VII
POST-CLOSING COVENANTS
7.1. Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request.
7.2. Repurchase Rights. (a) After the Closing, the Buyer presently intends
to consummate an initial public offering of shares of Buyer Common Stock (the
"IPO")
(b) In the event that the IPO is not consummated by December 31,
1999 (i.e., shares of Buyer Common Stock are not traded on a national securities
exchange, the NASDAQ National Market System or in the over-the-counter market by
such date), then each of the Shareholders who at the time own Buyer Common Stock
shall have the option (the "Re-purchase Option") to require the Buyer to
repurchase all (and not less than all) of such shares (the "Repurchased Shares")
for an aggregate cash purchase price in an amount equal to the sum of (i) ten
times the "Average Post-Tax Profits 11 (as defined below) of the Buyer (or that
division or direct or indirect subsidiary of the Buyer as shall operate solely
the business of the Company after the Merger) and (ii) $120,000.00, such
purchase price to be pro rated if the Merger Shares of only one of the
Shareholders are repurchased. The Shareholders (to the extent they own the
Repurchased Shares) shall give the Buyer written notice (the "Exercise Notice")
of their intent to exercise the Repurchase Option no earlier than January 1,
2000 and no later than February 28, 2000. Time shall be of the essence with
respect to the giving of the Exercise Notice.
(c) If the Repurchase Option shall be timely exercised, (i) the closing of the
repurchase of the Repurchased Shares shall take place at a time and place
designated by the Buyer within 120 days after the Buyer's receipt of the
Exercise Notice, and (ii) at the
closing, the holders of the Repurchased Shares shall deliver to the Buyer (or
its assignee) the certificates representing the Repurchased Shares, duly
endorsed for transfer and warranted to be free of all liens, claims, security
interests and encumbrances, against payment of the purchase price by certified
or bank cashier's checks or wire transfers.
(d) As used in this Agreement, the term "Average Post-Tax Profits" shall mean,
with respect to the Buyer (or that division or direct or indirect subsidiary of
the Buyer as shall operate solely the business of the Company after the Merger),
the average of its net income (if any) or loss, determined in accordance with
generally accepted accounting principles, applied on a consistent basis, after
provision for all Taxes, for the years ending December 31, 1998 and 1999
(including any net income or loss of the Company from January 1, 1998 through
the Closing Date), except that the following shall not be included in the
determination of "Average Post-Tax Profits": (a) any gains or losses from sales
of assets or securities and other transactions not in the Ordinary Course of
Business, or (b) the proceeds of any life or disability insurance. Corporate
overhead allocations used in determining Average Post-Tax Profits shall be
consistent with the method of allocations generally used by the Buyer's
Affiliates, as reflected on Exhibit D to this Agreement. For purposes of this
Agreement, Average Post-Tax Profits shall be determined by the firm of
independent certified public accountants then auditing the books and records of
the Buyer and its Affiliates, and the determinations of such firm shall be
final, binding and conclusive on the Parties and shall not be subject to
judicial review.
7.3. Guarantees. Barton has advised the Buyer that he has personally
guaranteed on behalf of the Company certain office equipment leases of the
Company as listed on Schedule 7.3 to this Agreement (the "Equipment Leases")
After the Closing, the Buyer agrees (a) to use its best efforts to cause the
lessors of the Equipment Leases to release Barton from such guarantees, and (b)
to indemnify Barton and hold him harmless from any loss, liability, damage and
expense arising out of such guarantees (in the manner and to the extent provided
in Section 8.1(b)).
7.4. Final Tax Returns. The Shareholders shall, on a timely basis and at
their expense, cause the preparation and filing of the final income tax returns
(federal and state) of the Company for the period ending on the Closing Date.
Such tax returns shall include, as appropriate, the sale of the accounts
receivable as provided in Article III of this Agreement. The Shareholders shall
provide the Buyer with copies of its proposed tax returns at least 15 days
before the respective filing due dates, with extensions, for the Buyer's review
and comments.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification. (a) The Shareholders, jointly, agree to indemnify
and hold the Buyer and the Company harmless from and against any and all loss,
liability, damage and expense (including, but not limited to, reasonable
attorneys, fees and disbursements and court costs and any reasonable attorneys,
fees and disbursements and court costs incurred by the Buyer and the Company in
establishing the Shareholders, liability under this indemnity and in collecting
amounts payable under this indemnity) arising out of or resulting from (i) any
misrepresentation or alleged misrepresentation or breach or alleged breach of
any warranty, agreement or covenant by the Company or the Share holders in this
Agreement, and (ii) without limiting the generality of the foregoing indemnity,
any liability, damage or expense arising out of or in connection with the
SmithKline Litigation.
(b) The Buyer agrees to indemnify and hold the Shareholders harmless from and
against any and all loss, liability, damage and expense (including, but not
limited to, reasonable attorneys' fees and disbursements and court costs and any
reasonable attorneys, fees and disbursements and court costs incurred by the
Shareholders in establishing the Buyer's liability under this indemnity and in
collecting amounts payable under this indemnity) arising out of or resulting
from any misrepresentation or alleged misrepresentation or breach or alleged
breach of any warranty, agreement or covenant by the Buyer in this Agreement.
8.2. Claims Procedure. Claims for indemnification under this Agreement
shall be made and resolved as follows:
(a) Third Party Claims. (i) In the event that any claim or demand for which any
Party would be entitled to indemnification under this Agreement is asserted or
sought to be collected by a third party, the Party seeking indemnity (the
"Indemnitee") shall give a Claim Notice (as described below) to the Party or
Parties from whom indemnity is sought (the "Indemnitor"). The Indemnitor shall
have twenty (20) days from the date of delivery of the Claim Notice (the "Notice
Period") to notify the Indemnitee whether or not the right to indemnity for such
claim or demand is disputed and, if disputed, the reasons therefor.
(ii) Unless disputed by the Indemnitor by written notice to the Indemnitee given
within twenty (20) days after receipt of the Claim Notice stating (in reasonable
detail) the reasons therefor, each claim under this Section shall be
conclusively deemed to be a liability of the Indemnitor and shall be paid within
twenty (20) days after the date of receipt of the Claim Notice therefor. If any
claim under Section 8.2(a) shall not be paid within such twenty (20) day period,
or if the Indemnitor disputes such claim by written notice to the Indemnitee
within such first twenty (20) day period stating (in reasonable detail) the
reasons therefor, the Indemnitee shall have the right to commence legal
proceedings
for the enforcement of its rights hereunder, and shall be entitled to recover
interest thereon at the rate of ten percent (10?c) per annum from the date the
claim or demand arose. If there shall be a dispute as to the amount or manner of
determination of any indemnity obligation owed under Section 8.2(a), the
Indemnitor shall nevertheless pay when due such portion, if any, of the
obligation as shall not be subject to dispute. The excess, if any, of the amount
of the obligation ultimately determined as properly payable under this Section
8.2(a)(ii) over the portion, if any, theretofore paid shall bear interest as
provided in this Section 8.2(a)(ii).
(iii) Whether or not the right to indemnity is disputed by the Indemnitor, the
Buyer shall assume the control and defense and/or settlement of such claim or
demand with counsel reasonably acceptable to the Shareholders. The amount of any
settlement or judgment and the reasonable costs and expenses of such defense
shall be included as part of the indemnification obligations of the Indemnitor
under Section 8.1 of this Agreement. In any case where the Shareholders are the
Indemnitor with respect to a Claim Notice, the Buyer (as Indemnitee) shall be
reimbursed for any Indemnifiable Losses (as defined below) (A) first, from and
out of the Escrow Shares (if and to the extent such shares are then available)
in accordance with the terms and conditions of the Escrow Agreement, and (B)
thereafter, by the Shareholders in cash. Notwithstanding the foregoing, (X) the
Shareholders may, in their sole discretion, elect to satisfy any Indemnifiable
Losses under Article VIII of this Agreement by cash payment to the Indemnitee
instead of by releasing Escrow Shares and (Y) the Shareholders shall have no
liability under the provisions of Article VIII of this Agreement with respect to
Indemnifiable Losses claimed by an Indemnitee if and to the extent that such
Indemnifiable Losses (or any part thereof) are covered by insurance (net of any
costs incurred in the collection of such insurance). The Parties shall cooperate
in seeking all reasonable remedies against all applicable insurers. If the
Shareholders shall desire to participate in or assume control over any such
defense, the Shareholders may do so at their sole cost and expense with counsel
reasonably acceptable to the Indemnitee. No settlement of any claim or demand
which would adversely affect the rights of the Indemnitee may be made without
the written consent(s) of the Indemnitee, which consent(s) may not be
unreasonably withheld or delayed. Without limiting the generality of the
foregoing, it shall not be deemed unreasonable to withhold consent to a
settlement involving injunctive or other relief against the Indemnitee or its
assets, employees or businesses.
(iv) The Indemnitee shall, on reasonable notice during business hours, make
available to the Indemnitor and its attorneys and accountants all books and
records of the Indemnitee and the Company relating to any such claim or demand
and the parties agree to render to each other such assistance as they may
reasonably require in order to permit the proper and adequate
defense of any such claim or demand.
(b) Non-third Party and Other Claims. In the event of a claim or demand for
which any Party would be entitled to indemnification under this Agreement which
does not involve a claim or demand being asserted or sought to be collected by a
third party, the Indemnitee shall give a Claim Notice with respect to such claim
or demand to the Indemnitor. Unless disputed by the Indemnitor by written notice
within twenty (20) days after receipt of the Claim Notice to the Indemnitee
stating (in reasonable detail) the reasons therefor, each claim under this
Section shall be conclusively deemed to be a liability of the Indemnitor and
shall be paid within twenty (20) days after the date of receipt of the Claim
Notice therefor. If any claim under this Section 8 shall not be paid within such
twenty (20) day period, or if the Indemnitor disputes such claim by written
notice to the Indemnitee within such first twenty (20) day period stating (in
reasonable detail) the reasons therefor, the Indemnitee shall have the right to
commence legal proceedings for the enforcement of its rights hereunder, and
shall be entitled to recover interest thereon at the rate of ten percent (10%)
per annum from the date the claim or demand arose. If there should be a dispute
as to the amount or manner of determination of any indemnity obligation owed
under this Section 8, the Indemnitor shall nevertheless pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
difference, if any, between the amount of the obligation ultimately determined
as properly payable under this Section 8 and the portion, if any, theretofore
paid shall bear interest as provided in this Section 8.2(b). Any Indemnifiable
Losses payable under this Section 8.2(b) by the Shareholders shall first be
satisfied from and out of the Escrow Shares (if and to the extent such shares
are then available) in accordance with the terms and conditions of the Escrow
Agreement, and thereafter by the Shareholders in cash. Notwithstanding the
foregoing, (X) the Shareholders may, in their sole discretion, elect to satisfy
any Indemnifiable Losses under this Article VIII by cash payment to the
Indemnitee instead of by releasing Escrow Shares, and (Y) the Shareholders shall
have no liability under the provisions of Article VIII of this Agreement with
respect to Indemnifiable Losses claimed by the Indemnitee if and to the extent
that such Indemnifiable Losses (or any part thereof) are covered by insurance
(net of any costs incurred in the collection of such insurance). The Parties
shall cooperate in seeking all reasonable remedies against all applicable
insurers.
(c) Timing of Claim Notice. Each Claim Notice shall be given by the Indemnitee
as promptly as practicable after the Indemnitee becomes aware of the claim or
demand and the facts indicating that a claim for indemnification in respect of
the same may be warranted. Each Claim Notice shall specify in reasonable detail
the nature of the claim or demand, the applicable provisions) of this Agreement
or other instrument under which the claim for indemnity arises and the amount or
the estimated amount thereof.
No failure or delay in giving a Claim Notice and no failure to include any
specific information or any reference to the provisions of this Agreement or
other instrument under which the claim for indemnification arises shall affect
the obligation of the Indemnitor under this Section 8, except to the extent that
such failure or delay shall adversely affect the ability of the Indemnitor to
defend, settle or satisfy the claim or demand.
(d) Contingent Claims. Nothing in this Section 8.2 shall prevent any Indemnitee
from making a claim hereunder on or prior to the Cut-Off Date for potential or
contingent claims or demands based on facts known to the Indemnitee on such
date, provided the Claim Notice sets forth the basis for any such potential or
contingent claim or demand and the estimated amount thereof to the extent then
feasible.
8.3. Indemnifiable Losses. An Indemnitor shall have liability for
indemnification to an Indemnitee under Section 8.1 only if the aggregate of all
such Indemnitee's claimed loss, liability, damage and expense ("Indemnifiable
Losses") shall exceed $10,000 (the 'Minimum Loss'); provided, however, that the
Minimum Loss requirement shall not be applicable with respect to claims for
breach of the representation and warranty in Section 5.1(w). Once the Minimum
Loss has been exceeded, the Indemnitee shall be entitled to recover all
Indemnifiable Losses from the first dollar of such Indemnifiable Losses;
provided, however, that the aggregate of the Indemnifiable Losses for which the
Shareholders (collectively) or the Buyer shall have liability shall not, in each
case, exceed $2,300,000.
ARTICLE IX
CERTAIN SHAREHOLDER AGREEMENTS
9.1. Confidentiality. (a) Each Shareholder understands and acknowledges
that, as a firm in a highly competitive industry, the Company follows (and the
Surviving Corporation, as successor to the Company, will follow) a policy
intended to fully protect its Confidential Information (as defined below). In
the course of his employment with the Company, each Shareholder has had, and
will have, access to Confidential Information, the use or disclosure of which
would be seriously damaging to the Surviving Corporation's business after the
Merger. Such information is the Surviving Corporation's property and is not
readily ascertainable from public sources, and it is essential to the Surviving
Corporation's continued success after the Merger that each Shareholder not use
any such Confidential Information or disclose any such Confidential Information
to anyone, except as necessary to perform a Shareholder's obligations as an
employee of the Surviving Corporation. Each Shareholder's access to
Confidential Information has been, and is expected to be, essential to the
performance of his duties for the Surviving Corporation.
(b) Accordingly, each Shareholder agrees that he will not, at any time during
the course of his employment with the Surviving Corporation or thereafter
(except in furtherance of the Surviving Corporation's business), directly or
indirectly use, disclose or make available to anyone any Confidential
Information concerning the Surviving Corporation or its business or clients.
Such Confidential Information relates generally to four types of information:
information about clients and their service requirements; information about
employees and agents of the Surviving Corporation; information about the
business and financial affairs of the Surviving Corporation; and information
about technical data, processes and equipment of the Surviving Corporation. Such
Confidential Information includes (but is not limited to) computer programs
(source and object codes), systems and technology; client and prospective client
names, leads and information; information supplied by clients to the Surviving
Corporation in confidence; prices charged or proposed to be charged to clients;
cost information; supplier information; employee names, compensation, benefits
and related data; engineering and technical data and equipment specifications;
client service requirements; information regarding equipment and facilities;
the Surviving Corporation's business policies and plans; and the Surviving
Corporation's banking, financial, tax and accounting information. Confidential
Information does not include (i) information already known to, or readily
ascertainable by, the public or which be comes known to the public other than as
a result of disclosure by a Shareholder, or (ii) information which is lawfully
obtained in good faith by a Shareholder from a third party independent of the
Surviving Corporation without the obligation of nondisclosure.
(c) At the Surviving Corporation's request at any time, each Shareholder shall
promptly make all disclosures, execute all documents and perform all acts
necessary or reasonably requested by the Surviving Corporation in connection
with preserving the confidentiality of any Confidential Information, including,
but not limited to, surrendering to the Surviving Corporation all papers, files,
lists, computer disks and other documents (in all media, including all copies
and notes and memoranda made by each Shareholder) relating to or containing
Confidential Information.
9.2. Non-Competition. (a) Each Shareholder acknowledges that the business
in which the Surviving Corporation engages is unique and has benefitted from the
Shareholder's specialized expertise, who has performed, and is expected to
perform, unique services for the Surviving Corporation, as successor to the
Company. In carrying on its business, the Surviving Corporation has developed
goodwill throughout the territory in which it does business, which extends
throughout the United States (the "Territory"). In performing his services for
the Surviving Corporation, each Shareholder has had, and is expected to have,
access to all of the Surviving Corporation's clients, suppliers and Confidential
Information. Accordingly, in order to preserve the value of the Surviving
Corporation upon the Merger and to preserve the goodwill of the Surviving
Corporation, each Shareholder agrees
that he will not (alone, or as a partner, employee, officer, agent,
representative, director, stockholder, lender or investor of or in any person or
entity), directly or indirectly (a) any time while he is employed by the
Surviving Corporation or any Affiliate and for a period of two (2) years after
termination of such employment (regardless of the circumstances of such
termination), engage in any activity, anywhere in the Territory, that involves
the telemarketing of medical, pharmaceutical or healthcare products or services,
or otherwise engage in or assist another Person in any business that relates to
telemarketing of services or products as to which such Shareholder was involved
or exposed to at any time while he was an employee of the Surviving Corporation
or any Affiliate; or (b) at any time solicit, induce or encourage any of the
employees of, or consultants to, the Surviving Corporation or any Affiliate to
terminate his employment or consultancy or to work for a competitor of the
Surviving Corporation or any Affiliate or engage any of such persons to work for
a competitor of the Surviving Corporation or any Affiliate; or (c) at any time
solicit, induce or encourage any client or supplier of the Surviving Corporation
or any Affiliate who was a client or supplier of the Surviving Corporation or
any Affiliate at any time during the term of such Shareholder's employment with
the Surviving Corporation or any Affiliate to modify, discontinue, terminate or
cancel any contract, agreement, service or relationship with the Surviving
Corporation or any Affiliate in effect or proposed at the time of the
termination of employment of such Shareholder with the Surviving Corporation or
any Affiliate; or (d) at any time solicit, induce or encourage any Person that
was a prospective client or supplier of the Surviving Corporation or any
Affiliate during the term of such Shareholder's employment with the Surviving
Corporation or any Affiliate not to enter into a relationship with the Surviving
Corporation or any Affiliate.
9.3. Relief. Each Shareholder acknowledges that a breach or threatened
breach of this Article will cause the Surviving Corporation and its Affiliates
irreparable injury and damage. Each Shareholder therefore agrees that, in
addition to any other remedies that may be available, the Surviving Corporation
and its Affiliates shall be entitled to an injunction and/or other equitable
relief (without the requirement of posting a bond or other security) to prevent
a breach or threatened breach of this Section and to secure its enforcement.
ARTICLE X
MISCELLANEOUS
10.1. Press Releases and Public Announcements. Neither the Company nor the
Shareholders shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of the Buyer.
10.2. No Third-Party Beneficiaries. Except as specifically provided in
this Agreement, this Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors and permitted
assigns.
10.3. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter of
this Agreement (including, but not limited to, a Letter of Intent dated November
13, 1997).
10.4. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors (including
any entity with which a corporate Party shall merge or consolidate or to which
it shall sell or transfer all or substantially all of its assets and any entity
to which the assets and business of the Surviving Corporation shall be
transferred after the Merger) and permitted assigns. Where the context requires,
references in this Agreement to the Buyer shall mean and include the Surviving
Corporation after the Merger. The Shareholders may not assign either this
Agreement or any of their rights, interests or obligations hereunder without the
prior written approval of the Buyer.
10.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.6. Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is
personally delivered (against receipt) or sent by registered or certified mail,
return receipt requested, postage prepaid, or sent by prepaid recognized
overnight carrier, and addressed to the intended recipient as set forth below:
If to the Buyer:
c/o Nelson Communications Inc.
41 Madison Avenue
New York, NY 10010
Att: Peter J. Scarperi
With a copy to-
Stephen B. Silverman
Corbin Silverman & Sanseverino LLP
805 Third Avenue
New York, NY 10022
If to the Company:
Barton & Pittinos, Inc.
Dublin Hall
1777 Sentry Parkway West
Suite 300
Blue Bell, PA 19422
With a copy to:
Jeffrey P. Libson
Pepper Hamilton LLP
1235 Westlakes Drive
Berwyn, PA 19312-2401
If to Barton:
J. Douglas Barton
7424 Ferry Road
Point Pleasant, PA 18950
With a copy to:
Jeffrey P. Libson
Pepper Hamilton LLP
1235 Westlakes Drive
Berwyn, PA 19312-2401
If to Tormey:
Terrence 0. Tormey
844 Dekalb Drive
Yardley, PA 19067
With a copy to:
Jeffrey P. Lipson
Pepper Hamilton LLP
1235 Westlakes Drive
Berwyn, PA 19312-2401
No such notice, request, demand, claim, or other communication shall be deemed
to have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner set forth in this Section.
10.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule. If a dispute
arises pertaining to this Agreement, the exclusive jurisdiction and venue for
the resolution of any such dispute shall be the Federal and State courts located
in New York County, New York. The parties irrevocably submit to the jurisdiction
of the State of New York. The Parties each waive any objection which it or he
may have based upon improper venue or forum nonconveniens to the conduct of any
proceeding in any such court and waives personal service of any process upon it
or him, and consent that all such service of process may be made in the manner
provided in Section 10.7.
10.9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Party against whom such amendment is sought to be enforced. No waiver by any
Party of any default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
10.10. Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision shall not
affect the validity and enforceability of any other provision. If any provision
of this Agreement is finally held to be invalid or unenforceable by a court of
competent jurisdiction, such provision shall be appropriately limited and
reduced (in time, duration, geographical scope, activity or subject) and given
effect to the extent it may be enforceable in accordance with applicable law.
The rights and remedies of the parties are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
10.11. Survival of Representations and Warranties. Notwithstanding any
right of any Party to fully investigate the affairs of another Party and
notwithstanding any knowledge of facts determined or determinable by such Party
pursuant to such investigation or right of investigation, each Party has the
right to rely fully upon the representations, warranties, covenants, indemnities
and agreements of each other Party in this Agreement or in any certificate,
financial statement or other document delivered by any Party pursuant to this
Agreement. The representations and warranties of the Parties shall survive the
execution and delivery of this Agreement, the Closing and the Effective Time and
shall expire on the Cut-Off Date; provided, however, that (a) any matter that is
the subject of a Claim Notice given on or prior to the CutOff Date (including,
but not limited to, any Claim Notices given pursuant to Section 8.2(d)) shall
continue in effect for purposes of the indemnification provisions of Section 8.1
until resolved or judicially determined, and (b) the representations and
warranties of the Company and the Shareholders in Sections 5.1(k), 5.1(p) and
5.1(q) of this Agreement shall continue in effect and shall not
expire.
10.12. Expenses. Each of the Parties will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, except that the Buyer
shall pay up to $57,500 of the Shareholders' legal fees and expenses in
connection with this Agreement and such transactions. None of the expenses
relating to this Agreement and the transactions contemplated hereby shall be
paid by the Company.
NELSON COMMUNICATIONS INC.
(formerly Arista Marketing Associates, Inc.)
By: /s/ Peter J. Scarperi
-------------------------------------
Peter J. Scarperi
Chairman
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BARTON & PITTINOS, INC.
By: /s/ J. Douglas Barton
-------------------------------------
J. Douglas Barton
President
/s/ J. Douglas Barton
----------------------------------------
J. Douglas Barton
/s/ Terrence O. Tormey
----------------------------------------
Terrence O. Tormey
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The undersigned hereby certifies, pursuant to Section 251(f) of the General
Corporation Law of Delaware, that the foregoing Agreement and Plan of Merger has
been adopted by the Board of Directors of Nelson Communications Inc. without any
vote of its stockholders and that the conditions specified in the first sentence
of Section 251(f) have been satisfied.
NELSON COMMUNICATIONS INC.
By: /s/ Peter J. Scarperi
------------------------------------
Peter J. Scarperi
Assistant Secretary
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EXHIBITS AND SCHEDULE TO AGREEMENT
Pursuant to Item 601(b)(2) of Regulation S-K, Nelson Communications Inc. agrees
to furnish supplementally a copy of any of the following omitted exhibits or
schedule to the Commission upon request:
Exhibit Description
------- -----------
A Certificate of Merger of Barton and Pittinos,
Inc., and Nelson Communications Inc. (Delaware)
B Articles of Merger-Domestic Corporation
(Pennsylvania)
C Joint Balance Sheet, Initial Cash Distribution
Amount and Accounts Receivable
D Method of Allocating Corporate Overhead
Schedule Description
-------- -----------
7.3 Equipment Leases
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EXHIBIT 2.3
NELSON COMMUNICATIONS INC.
BIENESTAR COMMUNICATIONS, INC.
LIPTON COMMUNICATIONS GROUP, INC.
LATIN REPORTS, LTD.
ASSET PURCHASE AGREEMENT
As of March 5, 1999
TABLE OF CONTENTS
Page
1. Purchase and Sale....................................................1
1.1. Sale and Purchase of Assets....................................1
1.2. Title to the Assets............................................3
2. Liabilities of the Sellers...........................................4
2.1. Assumed Liabilities............................................4
2.2. Excluded Liabilities...........................................5
3. The Closing; Purchase Price, etc.....................................6
3.1. Time and Place; Closing Date...................................6
3.2. Purchase Price.................................................6
3.3. Allocation of Purchase Price...................................7
3.4. Cash Instead of NCI Shares.....................................7
4. Representations and Warranties of the Sellers........................7
4.1. Organization, Qualification and Stock Ownership................7
4.2. Subsidiaries...................................................8
4.3. Agreement; etc.................................................9
4.4. Financial Statements..........................................10
4.5. Title to Property, Absence of Encumbrances, etc...............11
4.6. Accounts Receivable and Accounts Payable......................12
4.7. Books and Records.............................................12
4.8. Patents, Trademarks, etc......................................12
4.9. Employee Remuneration, etc....................................13
4.10. Labor Matters.................................................15
4.11. Bank Accounts.................................................16
4.12. No Adverse Change.............................................16
4.13. Absence of Certain Changes....................................16
4.14. Litigation....................................................19
4.15. Compliance with Other Instruments and Laws....................20
4.16. Contracts, etc................................................20
4.17. Taxes.........................................................23
4.18. Permits.......................................................27
4.19. Employee Benefit Plans and Employment Agreements..............27
4.20. Clients.......................................................28
4.21. Brokers. ....................................................28
4.22. Disclosure....................................................28
4.23. Investment....................................................28
4.24. Actions Subsequent to November 30,1998........................31
4.25. Lease for Space at 230 West 41st Street.......................33
5. Representations and Warranties of NCI and the Buyer.................34
5.1. Organization and Qualification................................34
5.2. Agreement, etc................................................34
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ii
5.3. Brokers.......................................................35
5.4. Capital Stock.................................................36
5.5. Financial Statements..........................................36
6. Covenants of the Sellers. .........................................37
6.1. Publicity; Confidentiality....................................37
6.2. Public Offering...............................................37
6.3. Taxes.........................................................38
6.4. Securities Law Matters........................................38
6.5. Latin Reports and LCG Latino..................................38
6.6. Compliance with Letter to Landlord............................39
7. Covenants of NCI and the Buyer......................................39
7.1. Publicity; Confidentiality....................................39
7.2. Public Offering Documents.....................................39
7.3. Permitted Transfer of NCI Shares..............................40
7.4. Employee Matters..............................................40
7.5. Change of Name................................................42
7.6. Filing of Reports.............................................42
7.7. Grant of Stock Option.........................................43
7.8. Compliance with Letter to Landlord............................43
8. Conditions to the Obligations of the Sellers........................43
8.1. Representations and Warranties................................44
8.2. Performance...................................................44
8.3. Closing Certificates..........................................44
8.4. Opinion of Counsel............................................44
8.5. Employment Agreements.........................................44
8.6. Stock Option Plans............................................45
8.7. Assumption of Liabilities.....................................45
8.8. Lease for Office Space........................................45
9. Conditions to the Obligations of NCI and the Buyer..................46
9.1. Representations and Warranties................................46
9.2. Performance...................................................46
9.3. Closing Certificate...........................................46
9.4. Opinion of Counsel............................................47
9.5. Consents; Permits.............................................47
9.6. Employment Agreements.........................................47
9.7. Instruments of Conveyance.....................................47
9.8. Lease for Office Space........................................48
10. Survival of Representations and Warranties; Indemnification ........48
10.1. Survival of Representations and Warranties...................48
10.2. Indemnification by the Sellers...............................49
10.3. Indemnification by NCI and the Buyer.........................49
10.4. Indemnification Procedures...................................50
11. General Provisions..................................................52
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iii
11.1. Modification; Waiver.........................................52
11.2. Entire Agreement, etc. .....................................52
11.3. Expenses.....................................................52
11.4. Further Actions..............................................52
11.5. Bulk Sales Law...............................................53
11.6. Notices......................................................53
11.7. Assignment, etc..............................................54
11.8. Counterparts.................................................55
11.9. Headings.....................................................55
11.10. Governing Law................................................55
11.11. Separability.................................................55
11.12. Incorporation of Exhibits and Schedules......................55
11.13. Guaranty by NCI..............................................55
Schedules
Schedule 1.1 Certain Excluded Assets
Schedule 2.1 Certain Assumed Debts, Liabilities and Contracts
Schedule 3.2(b) Itemization of Cash Portion of Purchase Price
Schedule 4.4 Financial Statements of Sellers
Schedule 4.5 Properties, Equipment, etc.
Schedule 4.8 Patents, Trademarks, etc.
Schedule 4.9 Employee Remuneration, etc.
Schedule 4.10 Labor Matters
Schedule 4.11 Bank Accounts
Schedule 4.13 Certain Changes
Schedule 4.14 Litigation
Schedule 4.16 Contracts
Schedule 4.17 Taxes
Schedule 4.18 Permits
Schedule 4.19 Employee Benefit Plans
Schedule 4.20 Clients
Schedule 4.24 Certain Actions Subsequent to November 30, 1998
Schedule 5.5 Financial Statements of NCI
Schedule 7.4(a) Transferred Employees
|
Exhibits
Exhibit A - Opinion of Patterson, Belknap, Webb & Tyler LLP
Exhibit B - Employment Agreement of Sheldon Lipton
Exhibit C - Employment Agreement of Bronna Lipton
Exhibit D - NCI Stock Option Plan
Exhibit E - Assumption of Liabilities
Exhibit F - Amendment Letter
Exhibit G - Assignment and Assumption of Lease Agreement
Exhibit H - Opinion of Frankenthaler Kohn Schneider & Katz
iv
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of March 5, 1999, by and among
NELSON COMMUNICATIONS INC., a Delaware corporation ("NCI"), BIENESTAR
COMMUNICATIONS, INC., a Florida corporation (the "Buyer"), LIPTON COMMUNICATIONS
GROUP, INC., a New York corporation ("LCG"), and LATIN REPORTS, LTD, a New York
corporation ("LR"; LCG and LR, collectively, the "Sellers").
WHEREAS, the Buyer desires to purchase from the Sellers, and the
Sellers wish to sell to the Buyer, certain of the assets of LCG and LR;
WHEREAS, the Buyer is a wholly-owned subsidiary of NCI; and
WHEREAS, NCI is willing to issue shares of its common stock to the
Sellers as a portion of the consideration payable hereunder and to guaranty the
performance of this Agreement by the Buyer;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. Purchase and Sale.
1.1. Sale and Purchase of Assets. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations,
warranties and covenants contained herein, each of the Sellers will sell,
convey, transfer, assign and deliver to the Buyer, and the Buyer will purchase
and acquire from each of
the Sellers, the entire business of each Seller as a going concern, including
without limitation the businesses conducted under the names "LCG Latino" and
"Latin Reports," and all of the right, title and interest of each Seller in all
of the assets, properties and business of each Seller, of every kind and
description, real, personal or mixed, tangible or intangible, wherever located,
as the same shall exist on the Closing Date (as such term is defined in Section
3.1), other than the Excluded Assets described below, including without
limitation, good will, the trade names "LCG Latino" and "Latin Reports," and all
variants thereof and any related trade marks to the extent permitted by law, all
know-how, trade secrets, other trade names, governmental filings, licenses,
approvals and authorizations, leasehold improvements, equipment, fixtures,
rights under contracts, agreements and leases, prepaid expenses, franchises,
deposits, rights to funds of whatever nature, client lists, client
correspondence, advertising materials and files of any kind and other books and
records, and all other properties and rights of every kind of nature owned or
held by each Seller on the Closing Date or then used by it in its business,
whether or not referred to in this Agreement (collectively, the "Assets");
provided that the following assets of the Sellers ("Excluded Assets") are
excluded from the assets and properties being sold hereunder and shall be
retained by and remain the property of the Sellers:
2
(i) All cash and all cash equivalents on hand as of the
Closing Date, amounting to a total of $346,604, in the accounts identified in
Schedule 1.1.
(ii) All art work and other personal effects of any of the
employees or shareholders of LCG which are on LCG's premises;
(iii) Computer equipment used by Sheldon Lipton at his home;
and
(iv) Leasehold improvements at Sheldon Lipton's home, in the
amount of $9,040, as set forth in Schedule 1.1.
1.2. Title to the Assets. The Sellers shall sell, transfer, convey
and assign to the Buyer as of the Closing Date title to the Assets free and
clear of all liens, mortgages, security interests, charges, encumbrances,
claims, defenses, rights of others and other restrictions of any kind or
character (collectively, "Encumbrances") not disclosed in this Agreement or the
Schedules hereto and other than restrictions imposed by laws and regulations
applicable to the businesses conducted by the Sellers. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign any agreement or other instrument, and the Buyer shall
not be deemed to have assumed the same or to be required to perform any
obligations thereunder, if an attempted assignment thereof, without the consent
of a third party thereto, would constitute a breach thereof or in any way affect
the rights under any such agreement or other instrument. Any transfer or
3
assignment to the Buyer by the Sellers of any such agreement or other instrument
or any right or benefit arising thereunder or resulting therefrom which shall
require the consent or approval of any third party shall be made subject to such
consent or approval being obtained, and the Sellers shall use their best efforts
to obtain such consents and approvals. In the event such consent or approval
cannot be obtained, the Sellers will cooperate with the Buyer and use their best
efforts to provide for the Buyer all benefits to which either Seller is entitled
under such agreement or other instrument.
2. Liabilities of the Sellers.
2.1. Assumed Liabilities. On the Closing Date, the Buyer shall
assume, and agrees to pay or otherwise discharge, the following debts,
liabilities and obligations of the Sellers (the "Assumed Liabilities"):
(a) All of the debts, liabilities and obligations of the
Sellers under the contracts and commitments of the Sellers listed on Schedule
2.1 (the "Contracts");
(b) All other debts, liabilities and obligations of the
Sellers (other than Excluded Liabilities) related to the businesses of the
Sellers or the Assets that arose or accrued between November 30, 1998 and the
Closing Date to the extent not discharged or paid prior to the Closing Date and
to the extent that the incurrence by the Sellers of any such debts, liabilities
or obligations arose in the ordinary course of the business of
4
LCG and is not contrary to any representation or warranty of the Sellers
contained herein.
2.2. Excluded Liabilities. Except as expressly provided in Section
2.1, the Buyer shall not and does not assume any other liabilities of any kind,
liquidated or contingent, asserted or unasserted, known or unknown, of the
Sellers (collectively, the "Excluded Liabilities"), including without limitation
all liabilities and all obligations related to:
(a) all employee benefit plans, as defined by Section 3(3) of
the Employee Retirement Income Securities Act of 1974, as amended ("ERISA"),
that are maintained, contributed to or required to be contributed to by either
of the Sellers, or under which either of the Sellers could incur any liability
for the benefit of current, former or retired employees of either of the Sellers
or any of their beneficiaries or dependents;
(b) each other plan, program, policy, contract, agreement, or
arrangement providing for bonuses, pensions, deferred compensation, stock or
stock related awards, severance pay, salary continuation or similar benefits,
hospitalization, medical, dental or disability benefits, life insurance, key man
life insurance or other employee benefits or compensation to or for any employee
of either of the Sellers or members or their families, whether or not insured or
funded;
(c) all liabilities for continuation coverage under any
hospitalization, medical or dental plan, program, policy, contract, agreement or
arrangement, maintained by either
5
of the Sellers for any employee of either of the Sellers or members of their
families that is required by the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA") or any similar state law; and
(d) any other liabilities of the Sellers which are not Assumed
Liabilities.
3. The Closing; Purchase Price, etc.
3.1. Time and Place; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Patterson, Belknap, Webb & Tyler LLP, 1133 Avenue of the Americas, New York,
New York, at 10:00 a.m. local time on the date hereof. The date of the Closing
is referred to herein as the "Closing Date".
3.2. Purchase Price. In addition to assuming the Assumed Liabilities
and in consideration of the sale, assignment, transfer and delivery of the
Assets, the Buyer will pay the Sellers at the Closing a purchase price (the
"Purchase Price"), consisting of:
(a) $750,000 by delivery of 68,182 shares of the common stock,
par value $0.01 per share ("NCI Stock"), of NCI (the "NCI Shares") to be issued
by NCI on behalf of the Buyer. In the event that the price at which the NCI
Stock is sold in the contemplated initial public offering by NCI (the "IPO") is
less than $11.00 per share, then within ten days of the effective date of the
Registration Statement (as defined in Section 6.2) the
6
Buyer will pay to the Sellers in cash an amount equal to (x) the difference
between the price per share at which the NCI Stock is sold to the public in the
IPO and $11.00 (y) multiplied by 68,182; and
(b) $829,805 in cash, as itemized on Schedule 3.2(b), by delivery to
LCG of an official bank check or checks.
3.3. Allocation of Purchase Price.
[Intentionally Omitted]
3.4. Cash Instead of NCI Shares. In the event that the closing of
the IPO does not occur within nine months after the Closing, then within ten
days after the expiration of such nine month period, NCI will repurchase the NCI
Shares to be issued to the Sellers pursuant to Section 3.2(a) for $750,000 in
cash, payable to Sellers upon return of the share certificates representing such
NCI Shares. NCI's obligation to repurchase the NCI Shares shall be an absolute
obligation and shall not be subject to any right of offset or counterclaim or
any other right to refuse to effect such repurchase.
4. Representations and Warranties of the Sellers. The Sellers
jointly and severally represent and warrant to NCI and the Buyer as follows:
4.1. Organization, Qualification and Stock Ownership. Each of the
Sellers is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York and has all requisite power and
authority to own, lease and
7
operate its properties and carry on its business as now being conducted. Each of
the Sellers is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the failure to so qualify
would have a material adverse effect on the business or assets of such Seller.
As of the date hereof, the authorized capital stock of LCG consists of 200
shares of common stock, of which 100 shares are issued and outstanding. As of
the date hereof, the authorized capital stock of LR consists of 200 shares of
common stock, of which 95 shares are issued and outstanding. All of the issued
and outstanding shares of the Sellers' stock are owned by Sheldon and Bronna
Lipton and are validly issued, fully paid and nonassessable. The Sellers have no
shares of capital stock reserved for issuance. Except as indicated above, as of
the date hereof (i) there are no shares of capital stock of the Sellers
authorized, issued or outstanding and (ii) there are no outstanding
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character obligating either Seller to issue,
transfer or sell any shares of its capital stock or any security convertible
into, exchangeable for, or evidencing the right to subscribe for any shares of
its capital stock.
4.2. Subsidiaries. The Sellers do not own or control, directly or
indirectly, individually or collectively, any shares of, or interest in, any
corporation, partnership, joint venture, association or other business entity.
8
4.3. Agreement; etc. Each of the Sellers has all requisite corporate
power and authority to enter into this Agreement, to consummate the transactions
contemplated hereby and perform its obligations hereunder. This Agreement has
been duly executed and delivered by the Sellers and constitutes the legal and
binding obligation of the Sellers enforceable in accordance with its terms. The
execution and delivery by the Sellers of this Agreement, the consummation of the
transactions contemplated hereby, and the performance by the Sellers of their
respective obligations hereunder will not conflict with or result in any
violation of, or any default under (either immediately or with notice or lapse
of time), or any right to accelerate or the creation of any lien, charge or
encumbrance pursuant to, any provision of (a) the respective certificates of
incorporation or by-laws of the Sellers, (b) any agreement, contract, mortgage,
lease, license, note, bond, indenture, deed of trust or other instrument to
which the Sellers or either of them is a party or by which any of the Assets are
bound, (c) any governmental franchise, license, permit or authorization, or any
judgment or order of any tribunal or governmental body applicable to the Sellers
or any of the Assets, or (d) any law, statute, decree, rule or regulation of any
jurisdiction. No authorization, consent or approval of, or declaration of,
filing with or notice to any governmental body or authority by the Sellers is
necessary for the execution of this Agreement by the Sellers, the consummation
by the Sellers of the transactions contemplated
9
hereby or the performance by the Sellers of their respective obligations
hereunder.
4.4. Financial Statements. Set forth in Schedule 4.4 are true and
complete copies of the combined balance sheets of the Sellers as of December 31,
1997 and the related statements of income, retained earnings and cash flows for
the year then ended and the notes thereto (the "1997 Financial Statements") and
of the combined balance sheets of the Sellers as of November 30, 1998 and the
related statements of income, retained earnings and cash flows for the 11-month
period then ended and the notes thereto (the "1998 Financial Statements" and,
together with the 1997 Financial Statements the "Financial Statements"), all of
which were compiled by Price and Company, certified public accountants. The
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
specified, and present fairly the financial position of the Sellers as of the
respective dates specified and the results of operations and changes in
financial position of the Sellers for the respective periods specified. LR has
had no material business activity or revenues since prior to January 1, 1997.
Except as reflected in the 1998 Financial Statements or otherwise disclosed in
this Agreement or the Schedules hereto, the Sellers have no liabilities or
obligations (direct or indirect, contingent or absolute, matured or unmatured)
of any nature, whether arising out of contract, tort, statute or otherwise,
other than
10
obligations to perform under contracts and commitments which (a) have been
incurred in the ordinary course of business, (b) would not be required to be
reflected in or reserved against in a balance sheet prepared in accordance with
generally accepted accounting principles and (c) would not be required to be
disclosed in this Agreement or in any Schedule hereto.
4.5. Title to Property, Absence of Encumbrances, etc. Set forth in
Schedule 4.5 is a complete and accurate list of (a) all real property and (b)
all material equipment, furniture and fixtures owned or leased by the Sellers,
and of all mortgages, liens and material encumbrances to which such real
property, equipment, furniture and fixtures are subject. Except for leased
property and as specified in such Schedule 4.5, the Sellers have good and
marketable title to all assets, real or personal, tangible or intangible, owned
or used by either or both of them, including, without limitation, all assets
reflected in the most recent balance sheet included in the 1998 Financial
Statements, free and clear of all mortgages, pledges, liens, security interests
or encumbrances of any nature (other than liens for taxes, assessments or other
governmental charges not yet due and payable, or presently payable without
penalty or interest) including, without limitation, any governmental
restrictions on the operation of such assets. All buildings, equipment,
furniture and fixtures listed on Schedule 4.5 owned or leased by the Sellers are
in good operating condition and repair.
11
4.6. Accounts Receivable and Accounts Payable. The accounts
receivable of the Sellers reflected in the Financial Statements, to the extent
not yet collected, are from bona fide accounts receivable created in the
ordinary course of business. All accounts payable reflected on the balance sheet
as of November 30, 1998 included in the 1998 Financial Statements and all
accounts payable arising subsequent to the date of such balance sheet, have
arisen in the ordinary course of business and represent valid obligations of
LCG. The accounts payable of LCG reflected on the balance sheet as of November
30, 1998 included in the 1998 Financial Statements have been paid or are being
paid in accordance with past practices.
4.7. Books and Records. The stock record books, and other material
non-financial records of the Sellers (other than the minute books), all of which
have been made available to the Buyer, are complete and correct in all material
respects and have been maintained in accordance with sound business practices
and substantially reflect the basis for the financial condition and results of
operations of the Sellers set forth in the Financial Statements and the Interim
Financials.
4.8. Patents, Trademarks, etc. Schedule 4.8 contains a complete and
correct list of all patents, trademarks registered or claimed by the Sellers,
trade names and registered copyrights owned or used by, or registered in the
name of, the Sellers, and of all applications for patents or for registration of
trademarks, trade names or copyrights made by the Sellers, or by
12
any of their employees, for the benefit of the Sellers. Except as otherwise
indicated in Schedule 4.8, one or the other of the Sellers is the registered and
beneficial owner of all such patents, trademarks, trade names and registered
copyrights, free and clear of any license, royalty, lien, encumbrance or other
interest of any third party. The Sellers own or have the right to use all
patents, patent applications, trademarks, trade names, copyrights or other
intellectual property rights, including, without limitation, trade secrets,
technology and know-how, necessary for the conduct of their respective
businesses. Other than as set forth on Schedule 4.8, there is no existing,
pending or threatened claim by either of the Sellers against any third party for
infringement, misuse or misappropriation of any patent, trademark, trade name,
copyright or other intellectual property (including without limitation any trade
secrets or know-how) owned by either of the Sellers or in which either of the
Sellers have an interest. There is no existing, pending or, to the knowledge of
the Sellers threatened, action, suit, or proceeding against either of the
Sellers for infringement, misuse or appropriation by either of the Sellers of
any patent, trademark, trade name, copyright or other intellectual property
(including without limitation any trade secret or know-how) owned by any third
party or any basis therefor.
4.9. Employee Remuneration, etc. (a) Schedule 4.9 lists the position
and the current salaries, bonuses, or any other form of compensation paid
(together with pending or
13
anticipated increases therein) to each director, officer, employee, consultant
or agent of either of the Sellers, including any bonuses which either of the
Sellers has promised or currently anticipates paying to any such person. Except
as indicated on Schedule 4.9, no officer or other key employee of either of the
Sellers has indicated an intention to terminate his or her employment with
either of the Sellers.
(b) Schedule 4.9 also lists each officer, employee, consultant
and agent of either of the Sellers who has entered into an employment contract,
consulting contract or other special arrangement with either of the Sellers, and
true and complete copies of all such contracts and descriptions of all such
arrangements have been previously delivered to the Buyer.
(c) Except as set forth on Schedule 4.9, neither of the
Sellers has entered into any agreement or arrangement with any employee,
officer, director or provider of services of either of the Sellers to pay any of
them any amount beyond their regular salary or other compensation as an
inducement to remain at their present position until, or contingent upon, the
execution of this Agreement or the consummation of the transactions contemplated
hereby or pursuant to which either of the Sellers or the Buyer could have any
obligation to pay any of them compensation in the event of, or as a consequence
of (i) the severance of their employment or relationship with the Sellers
following a change of control of either of the Sellers or their employment by
the Buyer or (ii) a change of control of either of the Sellers.
14
4.10. Labor Matters. Neither of the Sellers is a party to any
collective bargaining agreement. Except as disclosed on Schedule 4.10, no
attempt to organize the employees of either of the Sellers has been made, nor is
any such attempt now threatened or, to the knowledge of the Sellers, being
planned. The Sellers are in compliance with all applicable Federal, state and
local laws, rules and regulations regarding employment conditions and practices,
have withheld all amounts required by law or agreement to be withheld from the
wages or salaries of their respective employees and are not liable for any
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing. The Sellers have not engaged in any unfair labor practices and have
not discriminated on the basis of age, sex or other discrimination prohibited by
law in their respective employment conditions or practices. Except as set forth
on Schedule 4.10, there are no unfair labor practice or age or sex
discrimination charges or complaints or other charges or complaints alleging
illegal discriminatory practices pending or threatened against either of the
Sellers before any Federal, state or local board, department, commission or
agency nor to the knowledge of the Sellers does any basis therefor exist. There
are no existing or threatened labor strikes, disputes, grievances, controversies
or other labor troubles affecting the Sellers. There are no pending or
threatened representation questions respecting the employees of the Sellers or
any pending arbitration proceedings.
15
4.11. Bank Accounts. Schedule 4.11 lists the name and location of
each bank or other institution in which either of the Sellers has any account or
safe deposit box, the number or other identification thereof and the names of
all persons authorized to draw thereon or have access thereto.
4.12. No Adverse Change. Since January 1, 1998, there has not been
any material adverse change in the financial condition, operations, business or
prospects of either of the Sellers.
4.13. Absence of Certain Changes. Except as set forth on Schedule
4.13 or any other Schedule to this Agreement, since January 1, 1998, the Sellers
have not, either individually or together, (a) incurred any material obligations
or liabilities, whether absolute, accrued, contingent or other, other than
obligations and liabilities incurred in the ordinary course of business, (b)
mortgaged, pledged or subjected to any lien, lease, security interest or other
encumbrance (other than liens for taxes, assessments or other governmental
charges not yet due and payable, or presently payable without penalty or
interest), any of their assets, real or personal, tangible or intangible, (c)
acquired or disposed of any assets or properties, or entered into any agreement
for any such acquisition or disposition, except in the ordinary course of
business, (d) incurred any obligation for borrowed money which remains
outstanding on the date hereof, except for borrowings in an aggregate amount not
exceeding $10,000 incurred in the ordinary course of business, (e) forgiven
16
or canceled any debts or claims or waived any rights of material value not
previously accrued, (f) granted or promised any increase in compensation in any
form of more than 10% to any officer or other employee or granted any severance
or termination pay, agreed to or indicated the intention of paying to any
officer or other employee a bonus or other compensation not included in such
person's base salary in excess of the bonus or other compensation previously
paid such person, or entered into any employment agreement, or any modification
of a previously existing employment agreement, with any officer or any other
salaried employee, (g) adopted, amended or entered into any collective
bargaining, bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation or other plan, agreement or arrangement for
the benefit of employees, (h) granted any rights or licenses under any of its
trademarks, trade names, copyrights or other intellectual property rights, (i)
made any capital expenditure or binding commitment therefor which individually
or in the aggregate exceeds $10,000, (j) sold, assigned or transferred any of
its assets (tangible or intangible) or otherwise disposed of any property,
trademark, trade name, assumed name, copyright (or pending application therefor)
or interest thereunder, except in each case in the ordinary course of business,
(k) suffered any material loss of, or adverse change in its relationship with,
any material client or customer or has knowledge that any such client or
customer intends or is contemplating any action which would constitute or
17
lead to such a loss or adverse change, or written down the value of any
work-in-process or written off as uncollectible any notes or accounts
receivable, except write-downs and write-offs in the ordinary course of
business, (l) suffered any damage, destruction or loss (whether or not covered
by insurance) which has had a material adverse effect on its business, (m)
suffered any strike or other labor trouble which has materially affected its
operations, (n) terminated or made any substantial revision of, or engaged in
any renegotiation of, any material contract, (o) materially decreased the level
of maintenance on, or its expenditures for maintenance of, the real property,
equipment, furniture and fixtures owned or leased by it, (p) made any change in
accounting principles or methods or in classification, depreciation or
amortization policies or rates, (q) settled any dispute involving payment by
either of the Sellers in excess of $5,000, or canceled, forgiven or reduced any
obligation of any person or entity in an amount in excess of $5,000, (r) made
any loan or advance in excess of $5,000 to any person or entity other than
travel or expense advances in accordance with its normal policies which have
been accounted for or repaid and extension of trade credit in accordance with
its normal business practices, (s) amended or terminated any agreement which is
material to its business, except amendments in the ordinary course of business
which have not had and will not have a material adverse effect on the business
of the Sellers or the Assets; (t) renewed, extended or modified any lease of
real property or personal property,
18
except in the ordinary course of business, in circumstances that have not had
and will not have a material adverse effect on the business of the Sellers or
the Assets; or (u) entered into any other material transaction other than in the
ordinary course of business.
4.14. Litigation. Other than as set forth on Schedule 4.14, there is
no judicial or administrative action, suit, proceeding or governmental
investigation pending or threatened before any court or tribunal or governmental
instrumentality, or any citation, order or notice of violation of any law,
decree, rule or regulation, by or against either of the Sellers or any of the
Sellers' properties, or which relates in any way to the Sellers' respective
businesses, properties, assets or operations, or which has or is likely to
result in an imposition of a lien on any of the properties or assets owned or
leased by either of the Sellers, or which questions the validity of this
Agreement or any action to be taken in connection herewith, nor is there any
such action, suit, proceeding or investigation, pending or, to the knowledge of
any director or officer of the Sellers, threatened, which involves any director,
officer, employee, consultant or independent contractor of the Sellers in its or
his capacity as such. Except as set forth in Schedule 4.14, neither the Sellers
nor any property or assets of either of the Sellers is subject to any judicial
or administrative order, judgment, injunction or decree nor has either of the
Sellers been a party to any product or professional liability litigation within
the last five years.
19
4.15. Compliance with Other Instruments and Laws. Neither of the
Sellers is in violation of any provision of (a) its charter or by-laws, or (b)
any agreement, contract, mortgage, lease, license or other instrument,
governmental franchise, license, permit or authorization, judgment or order of
any tribunal or governmental body, or law, statute, decree, rule or regulation
applicable to it or any of its properties or to which it is a party or by which
it is bound.
4.16. Contracts, etc. Schedule 4.16 contains a complete and correct
list and attachments thereto (to the extent not listed on any other Schedule to
this Agreement) of each (a) profit sharing, bonus, deferred compensation, stock
option, severance pay, pension, retirement or similar plan, agreement or
arrangement of either of the Sellers, (b) mortgage, debenture, note or
installment obligation, or other instrument or contract for the borrowing or
lending of money by either of the Sellers, including without limitation any
agreement or arrangement relating to the maintenance of compensating balances or
the availability of a line of credit, (c) license agreement, sales agency
agreement or franchise agreement (other than off-the-shelf software licenses) to
which either of the Sellers is a party, (d) guaranty of any obligation of any
person by either of the Sellers, including without limitation any keep-well,
make-whole or maintenance of working capital or earnings or similar agreement,
(e) agreement for the sale of any properties or assets by either of the Sellers
other than sales of products or services
20
in the ordinary course of business to clients or customers which in 1997
generated or which in 1998 obligates the customer or client to pay, revenues of
less than $50,000, (f) contract, purchase order or other agreement, other than a
contract, purchase order or other agreement (i) for the purchase of equipment,
furniture or fixtures with an aggregate consideration of less than $5,000, made
in the ordinary course of business, or (ii) for the purchase of materials or
supplies made in the ordinary course of business, pursuant to which either of
the Sellers is or may be obligated to make payments, contingent or otherwise, on
account of or arising out of the acquisition, prior, pending or future, of the
shares, business, or other assets of another enterprise, (g) secrecy or
invention agreement under which either of the Sellers or any of the present
officers or employees of either of the Sellers has any obligation and relating
to the business of either of the Sellers, (h) agreement for the purchase or sale
of goods or services not terminable without liability by the applicable Seller
on 90 days' (or less) notice or involving payments by or to it in excess of
$5,000, (i) agreement or arrangement with a customer or client of either of the
Sellers for rebates, sharing of expenses or any similar device for the effective
reduction or increase of prices or other charges and involving products or
services with a value in excess of $5,000, (j) lease of real or personal
property with either of the Sellers as lessor or lessee, involving rents of more
than $5,000 per year, (k) agreement or arrangement limiting the
21
freedom of either of the Sellers or, to the knowledge of either of the Sellers,
any of the present or former officers or employees of either of the Sellers, to
compete in any line of business similar to the businesses of the Sellers, with
any person or other entity or in any geographical area, (l) governmental
license, franchise, permit or authorization held by and material to the business
of either of the Sellers and not listed on any other Schedule hereto, (m)
outstanding powers of attorney executed by or on behalf of either of the
Sellers, (n) joint venture agreement or partnership, profit sharing or other
similar agreements to which either of the Sellers is a party, (o) contract,
commitment or agreement not referred to above in this Section 4.16 or in any
other Schedule to this Agreement and any one of which involves aggregate
payments by or to either of the Sellers of $5,000 or more. All such contracts
and agreements are, with respect to the Sellers, valid, binding and in full
force and effect, neither the Seller which is a party thereto nor any other
party is in material default thereunder and no event has occurred which, whether
with notice, lapse or time or otherwise, would constitute a default by such
Seller thereunder, and such Seller has not received or sent any notice of
cancellation or termination thereunder. Except as disclosed in Schedule 4.16
hereto, no consent of any party or the payment of any penalty or incurrence of
any additional obligation or change of any terms is necessary so that all rights
of the Sellers under
22
contracts extending beyond the Closing Date may be transferred to the Buyer on,
and continue in effect after, the Closing Date.
4.17. Taxes. (a) As used in this Section 4.17, the following terms
have the following meanings:
(i) "Tax" means any federal, state, local, or foreign
income, gross income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code ss.59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, ad valorem, lease,
service use, registration, value added, alternative or add-on minimum,
estimated, or other tax, fee, assessment or charge of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not,
together with any expenses incurred in connection with the determination,
settlement or litigation of any Tax liability:
(ii) The term "Tax Return" means any return,
declaration, report, claim for refund, information return or any statement or
other document required to be filed in respect of Taxes, including, where
permitted or required, combined or consolidated returns for any group of
entities that includes the Sellers, including any schedule or attachment thereto
and any amendment thereof;
(iii) The term "Code" means the Internal Revenue Code of
1986, as amended; all citations to the Code, or
23
to the Treasury Regulations promulgated thereunder, shall include any amendments
or any substitute or successor provisions thereto; and
(iv) Any reference in this Section 4.17 to the Sellers
includes a reference to a person acting on behalf of the Sellers.
(b) The Sellers have timely filed all Tax Returns that they
were required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Sellers (whether or not shown on any Tax Return)
have been paid. The Sellers currently are not the beneficiary of any extension
of time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Sellers do not file a Tax Return that it
is or may be subject to taxation by that jurisdiction. There are no liens or
other encumbrances on any of the Assets that arose in connection with any
failure (or alleged failure) to pay any Tax.
(c) The Sellers have withheld and paid to the appropriate
governmental or regulatory authority all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(d) No stockholder, director or officer (or employee
responsible for Tax matters) of the Sellers expects any authority to assess any
additional Taxes for any period for which tax returns have been filed. There is
no dispute or claim
24
concerning any Tax liability of the Sellers either (i) claimed or raised by any
authority in writing or (ii) as to which any of the Sellers and the
stockholders, directors and officers (and employees responsible for Tax matters)
of the Sellers has knowledge based upon personal contact with any agent of such
authority.
(e) Schedule 4.17 lists all federal, state, local and foreign
income Tax Returns filed with respect to either of the Sellers for the taxable
period ended on or after December 31, 1991, indicates those Tax Returns that
have been audited, and lists all Tax Returns, from whatever taxable period, that
are currently the subject of audit. The Sellers have delivered to the Buyers
correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by
Sellers.
(f) Neither of the Sellers has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(g) None of the assets of the Sellers is "tax- exempt use
property" within the meaning of Section 168(h) of the Code. Except as set forth
in Schedule 4.17, neither of the Sellers has agreed to make, nor is it required
to make, any adjustment under Section 481(a) of the Code by reason of a change
in accounting method or otherwise. None of the assets of the Sellers is property
that either Seller is required to treat as being owned by any other person
pursuant to the safe harbor lease
25
provisions of former section 168(f)(8) of the Code. The Sellers have not
participated in an international boycott within the meaning of Section 999 of
the Code. Neither of the Sellers has been a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. Neither of the Sellers
has had a permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such foreign
country.
(h) The unpaid taxes of the Sellers (i) did not, as of the
most recent month end, exceed the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the most recent balance sheet
(rather than in any notes thereto) and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Sellers in filing their tax returns.
(i) None of the assumed liabilities is an obligation to make a
payment that will not be deductible under Section ss.280G of the Code. Each of
the Sellers have disclosed on their federal income Tax Returns all positions
taken therein that would give rise to a substantial understatement of tax within
the meaning of Section ss.6622 of the Code. Neither of the Sellers is a party to
any Tax allocation or sharing agreement. Neither of the Sellers (i) has been a
member of an Affiliated Group filing a
26
consolidated federal income Tax Return nor (ii) has any liability for the Taxes
of any person (other than the Sellers) under Reg. ss.1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
4.18. Permits. The Sellers have obtained and hold all licenses,
permits, authorizations, consents and orders or approvals of all foreign,
Federal, state or local governmental or regulatory bodies that are necessary for
the lawful conduct of their respective businesses and to operate the Assets as
presently being operated (the "Permits"). All of the Permits are listed on
Schedule 4.18 and are validly issued and in full force and effect and the
Sellers are in compliance therewith. No proceeding is pending or threatened
which seeks or may result in the cancellation, suspension, restriction or
modification of any Permit. The businesses of the Sellers are being operated in
all respects in accordance with the terms and conditions of the Permits.
4.19. Employee Benefit Plans and Employment Agreements. Except for
the Sellers' tax-qualified Profit Sharing Plan (the "Profit Sharing Plan") and
certain medical and other welfare benefit plans maintained currently by either
of the Sellers, as set forth on Schedule 4.19 (the "Welfare Plans", and with the
Profit Sharing Plan, collectively, the "Plans"), the Sellers are not a party to,
do not sponsor or maintain, or have any obligation or liability arising for any
periods ending prior to, on or after the Closing Date under or in connection
with, any
27
collective bargaining agreement, pension, profit sharing, deferred compensation,
incentive compensation, welfare benefit or other similar plan or arrangement or
understanding providing benefits to any Transferred Employee (as defined in
Section 7.4(a)) or any other obligation or liability arising from the employment
or termination of employment of any Transferred Employee.
4.20. Clients. Schedule 4.20 sets forth the ten largest clients
(measured by fees generated) of each of the Sellers as of December 31, 1997 and
November 30, 1998.
4.21. Brokers. No finder, broker, agent or other intermediary has
acted on behalf of the Sellers in connection with this Agreement or the
transactions contemplated hereby for whose fees the Buyer is liable.
4.22. Disclosure. This Agreement, the Schedules hereto, the
Financial Statements and any other information furnished or to be furnished to
the Buyer in connection with this Agreement and the transactions contemplated
hereby do not contain any untrue statement of a material fact or omit to state
any fact necessary to make the statements contained therein not false or
misleading. There is no fact known to the Sellers or their respective directors
or officers which materially affects or will materially affect the businesses of
the Sellers or the Assets which has not been set forth in this Agreement, the
Schedules hereto or the Financial Statements.
4.23. Investment.
28
4.23.1. The Sellers (a) understand that the NCI Shares that
they will receive as part of the Purchase Price have not been, and will not be,
registered under the Securities Act, or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (b) are acquiring the NCI Shares
solely for each of their own accounts for investment purposes, and not with a
view to the distribution thereof, (c) are sophisticated investors with knowledge
and experience in business and financial matters, (d) have received certain
information concerning NCI, and have had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent in
holding the NCI Shares, (e) are "Accredited Investors", as such term is defined
in Rule 501 promulgated under the Securities Act, (f) are able to bear the
economic risk and lack of liquidity inherent in holding the NCI Shares, and (g)
acknowledge that, except as specifically set forth herein, no party has made any
representation or warranty regarding NCI or the NCI Shares.
4.23.2. The Sellers acknowledge that they have been advised
that (a) the NCI Shares must be held indefinitely and the Sellers must continue
to bear the economic risk of holding the NCI Shares unless (i) the NCI Shares
are subsequently registered for sale under the Securities Act and any applicable
state laws, (ii) an exemption from such registration is available or (iii) the
NCI Shares are repurchased by NCI pursuant to
29
Section 3.4 of this Agreement, (b) there is presently no public market for the
NCI Shares and there is no assurance that a public market for the NCI Shares
will develop; (c) Rule 144 promulgated under the Securities Act ("Rule 144") is
not currently available with respect to sales of NCI Shares, and, except to the
extent set forth in Section 7.6 hereof, NCI has made no agreement with the
Sellers to take such actions as may be necessary to make Rule 144 available; (d)
if and when the NCI Shares may be disposed of in reliance on Rule 144, such
disposition may be made only in limited amounts in accordance with the terms and
conditions of Rule 144; (e) if sale under Rule 144 is not available, public sale
of the NCI Shares without registration will require the availability of another
exemption under the Securities Act; (f) a notation will be made in the records
of NCI and any transfer agent that the NCI Shares are subject to restrictions on
transfer; and (g) a restrictive legend will be placed on the certificates
representing the NCI Shares in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED, SOLD, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND THE
REGISTRATION REQUIREMENTS OF ANY APPLICABLE
30
STATE SECURITIES OR "BLUE SKY" LAWS, OR (B) IF
NELSON COMMUNICATIONS INC. (THE "COMPANY") HAS
PREVIOUSLY BEEN FURNISHED WITH AN OPINION OF
COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO
THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER,
SALE, PLEDGE OR OTHER DISPOSITION IS EXEMPT
FROM REGISTRATION UNDER THE ACT AND THE RULES
AND REGULATIONS THEREUNDER AND SUCH STATE
SECURITIES OR "BLUE SKY" LAWS. THE TRANSFER OF
SUCH SHARES MAY ALSO BE SUBJECT TO CONTRACTUAL
RESTRICTIONS UNDER ONE OR MORE AGREEMENTS,
COPIES OF WHICH ARE ON FILE AT THE OFFICES OF
THE COMPANY.
4.24. Actions Subsequent to November 30, 1998. From November 30,
1998 until the Closing Date, the Sellers have (a) conducted their respective
affairs only in the ordinary course of business, in substantially the manner as
theretofore conducted and in accordance with all laws, rules, regulations,
orders, approvals, authorizations, exemptions, classifications and
registrations, (b) maintained all of their respective Assets in
31
as good condition and repair as of November 30, 1998, reasonable wear and tear
excepted, (c) performed all of their respective obligations under all contracts
to which either of them is a party, and, except as reflected in any Schedule to
this Agreement (each item so reflected in any such Schedule to this Agreement
representing only transactions entered into in the ordinary course of business),
not amended, altered or modified any provision of any such contract or entered
into any new contract or transaction involving consideration in excess of $5,000
or disposed of any assets having a value in excess of $5,000 in the aggregate
without the prior written consent of NCI and the Buyer, (e) used their best
efforts to maintain the existing relationships with all clients, customers and
others having business dealings with either of the Sellers, (f) used their best
efforts to keep available the services of each of the Sellers' officers and
employees, (g) promptly delivered to NCI and the Buyer interim financial
statements and internal financial records as and when requested by the Buyer and
NCI, (h) conferred on a regular and frequent basis with representatives of NCI
or the Buyer to report material operational matters and the general status of
ongoing operations, (i) not permitted the imposition of any lien, security
interest or other encumbrance upon any of the Assets; (j) not made any capital
investment in, made any loan to, or acquired the securities or assets of any
other entity or person; (k) not made any change in employment terms for any of
their respective directors, officers, and employees outside the
32
ordinary course of business; (l) except as reflected in Schedule 4.24 or any
other Schedule to this Agreement (each item so reflected in any such Schedule to
this Agreement representing only transactions entered into in the ordinary
course of business), not incurred any obligation or liability, whether absolute,
accrued, contingent or other and (m) not, without the prior written consent of
NCI and the Buyer, taken any action or engaged in any transaction not expressly
permitted by this Section 4.24 or otherwise contemplated by this Agreement which
would cause any of the representations and warranties made by the Sellers herein
to be untrue as of the Closing Date or a breach of the terms and conditions of
this Agreement.
4.25. Lease for Space at 230 West 41st Street. LCG has not committed
a breach or violation of, is not in default under and has committed no act which
with the passage of time or any applicable grace period would in the future
constitute a default under the lease between 230 West 41st Street, L.L.C. [(as
successor to RKC Tribune Associates)] as Landlord (the "Landlord") and LCG as
Tenant dated June 9, 1993, as modified by various agreements including but not
limited to First Amendment of Agreement of Lease dated June 26, 1996 and a
further agreement to be dated as of the date hereof (collectively, the "Lease")
for LCG's office space located on the 17th floor of the building known as 230
West 41st Street, New York, New York. There is no ongoing dispute between LCG
and the Landlord (or any of their representatives) relating to the Lease, LCG
has paid all rent
33
required to be paid under the Lease through February 28, 1999, and all
alterations and modifications made by LCG to the space subject to the Lease have
been made in accordance with the terms of the Lease and all applicable laws and
regulations.
5. Representations and Warranties of NCI and the Buyer. NCI and the
Buyer represents and warrants to the Sellers as follows:
5.1. Organization and Qualification. NCI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease and operate its
properties and business as now being conducted. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has all requisite power and authority to own, lease and operate its
properties and business as it is now being conducted. NCI and the Buyer are duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction where the character of the properties they own or
lease or the nature of their activities makes such qualification necessary.
5.2. Agreement, etc. Each of NCI and the Buyer has all requisite
corporate power and authority to enter into this Agreement, to consummate the
transactions contemplated hereby and perform its obligations hereunder. This
Agreement has been duly authorized, executed and delivered by NCI and the Buyer
and constitutes the legal and binding obligation of NCI and the Buyer
34
enforceable in accordance with its terms. The execution and delivery by NCI and
the Buyer of this Agreement, the consummation of the transactions contemplated
hereby, and the performance by NCI and the Buyer of their respective obligations
hereunder will not conflict with or result in any violation of, or any default
under (either immediately or with notice or lapse of time) any provision of (a)
the respective certificates of incorporation or by-laws of NCI or the Buyer, (b)
any agreement, contract, mortgage, lease, license, note, bond, indenture, deed
of trust or other instrument to which NCI and the Buyer or either of them is a
party, (c) any governmental franchise, license, permit or authorization, or any
judgment or order of any tribunal or governmental body applicable to NCI or the
Buyer, or any of NCI's or the Buyer's properties or other assets, or (d) any
law, statute, decree, rule or regulation of any jurisdiction. No authorization,
consent or approval of, or declaration of, filing with or notice to any
governmental body or authority by NCI or the Buyer is necessary for the
execution of this Agreement by NCI and the Buyer, the consummation by NCI and
the Buyer of the transactions contemplated hereby or the performance by NCI and
the Buyer of their respective obligations hereunder.
5.3. Brokers. No finder, broker, agent or other intermediary
has acted on behalf of NCI or the Buyer in connection with this Agreement or the
transactions contemplated hereby for whose fees the Sellers are liable.
35
5.4. Capital Stock. The authorized capital stock of NCI consists of
100,000,000 shares of the common stock, par value $0.01 per share of NCI and
2,000,000 shares of undesignated preferred stock of NCI. On the date hereof (i)
24,348,408 shares of the authorized common stock were validly issued and
outstanding, fully paid and nonassessable, (ii) no shares of the authorized
preferred stock were issued and outstanding, and (iii) an aggregate of 5,056,445
shares of the authorized common stock and no shares of the authorized preferred
stock are reserved for issuance upon the exercise of warrants, options and other
rights heretofore issued by NCI or which NCI is committed to issue. The NCI
Shares when issued by NCI to the Sellers at the Closing shall be validly issued,
fully paid and nonassessable.
5.5. Financial Statements. Set forth in Schedule 5.5 are true and
complete copies of (a) the unaudited balance sheet of NCI as of December 31,
1997 and the related statements of income, retained earnings and cash flow for
such year (the "1997 Financial Statements") and (b) the preliminary unaudited
balance sheet of NCI as of December 31, 1998 and the related statements of
income and, retained earnings for the year then ended (the "1998 Financial
Statements"). The 1997 Financial Statements (i) present fairly the financial
position of NCI as of the date specified and the results of operations and
changes in financial position of NCI for the respective period indicated and
(ii) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the period
36
specified. Since December 31, 1997 no change has occurred in the financial
condition, assets, liabilities or business of NCI, other than (a) as shown on
the 1998 Financial Statements or (b) changes which are in the aggregate not
materially adverse.
6. Covenants of the Sellers. The Sellers covenant as follows:
6.1. Publicity; Confidentiality. The Sellers will not, without the
consent of NCI and the Buyer, issue or cause the publication of any press
release or other public announcement with respect to this Agreement after the
date hereof, except where such release or announcement is required by law.
6.2. Public Offering. The Sellers understand that NCI expects to
file a registration statement (together with all amendments thereto, the
"Registration Statement") with the SEC for the IPO. In connection with the IPO,
the Sellers agree to execute such documents and take such actions as may
reasonably be requested by NCI or the underwriters of the IPO; provided,
however, that in no event shall the Sellers or their designees be required to
sign any agreement or undertaking which restricts them from selling any NCI
shares for a period in excess of 180 days from the closing of the IPO. In
addition, the Sellers will not disclose to any third party the intention of NCI
to consummate the IPO prior to the filing by NCI of the Registration Statement
with the SEC.
37
6.3. Taxes. The Sellers shall be solely liable for any obligation
for Taxes attributable to, arising from or associated with the sale or transfer
from the Sellers to the Buyer of the Assets, other than federal, state and local
income taxes, if any, of NCI or the Buyer and any sales taxes attributable to or
in connection with such sale or transfer, which taxes shall be paid by the Buyer
or NCI.
6.4. Securities Law Matters. (a) The Sellers will not, directly or
indirectly, offer, transfer, sell, pledge or otherwise dispose of any NCI
Shares, unless such offer, transfer, sale, pledge or other disposition is either
(i) pursuant to an effective registration statement under the Securities Act and
registration under any applicable state laws, or (ii) effected only after
furnishing NCI with an opinion of counsel, which counsel shall be reasonably
satisfactory to NCI and which opinion shall be in form and substance reasonably
satisfactory to NCI, stating that no such registration of the NCI Shares is
required because of the availability of an exemption from registration under the
Securities Act and under applicable state laws.
6.5. Latin Reports and LCG Latino. Promptly after the Closing LR and
LCG shall take such steps as NCI and the Buyer shall reasonably request so as to
allow the Buyer to use the names "Latin Reports" and "LCG Latino" including
without limitation the change of name or dissolution of LR and the filing by LCG
of a certificate of termination of use of the assumed name "LCG Latino" with the
State of New York.
38
6.6. Compliance With Letter to Landlord. No later than 3 business
days after the Closing Date, LCG shall, in accordance with the Letter to
Landlord (as defined in Section 8.8(b) hereof), deliver to Goldfarb & Fleece,
345 Park Avenue, New York, New York 10154 (Attn. Marc J. Becker and Pamela B.
Silverman), the attorneys for the Landlord, the Closing Notice (as defined in
Section 8.8(b) and, if not delivered prior thereto, evidence of the corporate
authorization of LCG to execute the Amendment Letter and the Assignment and
Assumption (each as defined in Section 8.8 hereof).
7. Covenants of NCI and the Buyer. NCI and the Buyer covenant as
follows:
7.1. Publicity; Confidentiality. NCI and the Buyer shall consult
with the Sellers as to the contents of any press release or other public
announcement with respect to this Agreement after the date hereof and will not,
without the consent of the Sellers, issue or cause the publication of any press
release or other public announcement with respect to this Agreement after the
date hereof, except where such release or announcement is required by law,
including without limitation NCI's Registration Statement for the IPO.
7.2. Public Offering Documents. In connection with the IPO, NCI will
deliver to the Sellers copies of the Registration Statement and the Prospectus,
and will keep the Sellers informed of the expected timing of the IPO. In
addition,
39
NCI will deliver to the Sellers, upon request, any exhibits to the Registration
Statement.
7.3. Permitted Transfer of NCI Shares. If the Sellers distribute
their assets to their shareholders then NCI will permit the transfer of the NCI
Shares by the Sellers to such shareholders, provided that any such shares
received by the shareholders contain the legend set forth above in Section
4.23.2, are subject to the same sale restrictions as are applicable to the
Sellers and the opinion of counsel referenced therein is received by NCI.
7.4. Employee Matters.
(a) Subsequent to the Closing, the Buyer shall make offers of
employment to each employee of the Sellers listed on Schedule 7.4(a) hereto (the
"Transferred Employees") effective as of the Closing Date, and such offer of
employment with Buyer shall be at rates of regular compensation generally
enjoyed by similarly situated employees of the Buyer, with such benefits as are
generally offered by the Buyer to similarly situated employees of the Buyer;
provided, however, that Simon Lo will be hired at a salary not less than $4,000
per year greater than his present salary. If a Transferred Employee is on
disability leave (short or long term) as of the Closing Date, such offer of
employment shall not be effective until termination of such leave. The Sellers
agree that, with respect to any employees of the Sellers who do not become
Transferred Employees, the Sellers shall retain all liabilities and obligations,
with respect to
40
compensation or benefits to which such employees are entitled. The Sellers
further agree that with respect to any employees of the Sellers who become
Transferred Employees, except as set forth in Schedule 7.4(a), the Sellers shall
retain all liabilities and obligations with respect to compensation or benefits
to which such employees were entitled by virtue of their employment by the
Sellers prior to the Closing Date and Buyer's liability and obligations with
respect to such Transferred Employees shall apply only with respect to any such
amounts that become payable with respect to, and which are directly attributable
to, such employees' employment with the Buyer after the Closing Date.
(b) The Buyer shall credit each Transferred Employee under the
Buyer's Benefit Plans (as defined in Section 7.4(d) below) with service equal to
such employee's period of service with the Sellers prior to the Closing Date for
purposes of eligibility to participate in or receive benefits (including for
vesting purposes) under the Buyer's Benefit Plans, and any waiting period under
the Buyer's Benefit Plans shall be waived with respect to such Transferred
Employees.
(c) On and after the Closing Date, the Buyer's 401(k) Plan (as
defined in Section 7.4(d) below) shall accept rollovers of amounts held under
the Lipton Communications Group Profit Sharing Plan ("Sellers' Profit-Sharing
Plan") on behalf of any Transferred Employee, provided such rollover meets the
requirements of Code Section 402(c). The Sellers hereby represent that (i) the
Sellers' Profit-Sharing Plan has been the
41
subject of a favorable determination letter from the IRS which was filed with
the IRS within the remedial amendment period prescribed under Section 401(b) of
the Code with respect to compliance with the Tax Reform Act of 1986 to the
effect that Sellers' Profit-Sharing Plan is qualified under Section 401(a) of
the Code, subject to the customary reservations as to the plan's operational
compliance with the Code's requirements, (ii) no such determination letter has
been revoked, (iii) to the Sellers' knowledge, the IRS has not issued written
notice of its intent to revoke the qualified status of the Sellers'
Profit-Sharing Plan, and (iv) and to the Sellers' knowledge, no circumstances
exist that would reasonably be expected to result in disqualification of the
Sellers' Profit-Sharing Plan.
(d) For purposes of this Section 7.4, "Buyer's Benefit Plans"
shall mean all employee benefit plans and programs maintained by the Buyer,
including, but not limited to, the Nelson Communications, Inc.
Savings/Investment Plan (the "Buyer's 401(k) Plan"), the Buyer's medical,
dental, group life, accidental death and dismemberment and long-term disability
plan, and the Buyer's vacation program.
7.5. Change of Name. Promptly following the Closing, the Buyer will
change its name to Bienestar/LCG Communications, Inc.
7.6. Filing of Reports. If the IPO is completed, NCI confirms that,
while the Sellers (or their designees) own any NCI shares, it expects to take
all steps and file all reports
42
required of an issuer of restricted securities to enable the Sellers (or their
designees) to make sales of the NCI Shares pursuant to Rule 144.
7.7. Grant of Stock Option. No later than 14 days after the Closing
Date, NCI shall grant to Simon Lo a nonqualified option to purchase $30,000 in
NCI Shares, with an exercise price of $7.00 per share, subject to other terms
and conditions with respect to exercise period and other matters that are
generally applicable to similarly situated employees of NCI or the Buyer, as
determined by NCI's Compensation Committee under the terms of the NCI 1998 Stock
Incentive Plan, attached hereto as Exhibit D.
7.8. Compliance With Letter to Landlord. No later than 3 business
days after the Closing Date, NCI shall, in accordance with the Letter to
Landlord (as defined in Section 8.8(b) hereof), deliver to Goldfarb & Fleece,
345 Park Avenue, New York, New York 10154 (Attn. Marc J. Becker and Pamela B.
Silverman), the attorneys for the Landlord, the following documents: The Closing
Notice (as defined in Section 8.8(b) hereof) and, if not delivered prior
thereto, certified or bank checks for $5,201.33 and $39,870.00, a Form W-9.
completed by NCI and evidence of the corporate authorization of NCI to execute
the Assignment and Assumption (as defined in Section 8.8(a) hereof).
8. Conditions to the Obligations of the Sellers. The obligations of
the Sellers to effect the transactions
43
contemplated hereby are subject to the fulfillment prior to or at the Closing of
the following conditions:
8.1. Representations and Warranties. The representations and
warranties of NCI and the Buyer contained herein are true and correct when made
and shall be true and correct at and as of the Closing as though such
representations and warranties were made at and as of the Closing.
8.2. Performance. NCI and the Buyer shall have performed and
complied with each covenant or condition required by this Agreement to be
performed or complied with by them before or at the Closing.
8.3. Closing Certificates. NCI and the Buyer shall each have
delivered to the Sellers a certificate, dated the Closing Date and executed by a
principal executive or financial officer, certifying that the conditions
specified in Sections 8.1 and 8.2 applying to NCI or the Buyer, as the case may
be have been fulfilled.
8.4. Opinion of Counsel. The Sellers shall have received from
Patterson, Belknap, Webb & Tyler LLP, counsel for NCI and the Buyer, an opinion,
dated the Closing Date, addressed to the Sellers and in substantially the form
of Exhibit A.
8.5. Employment Agreements. The Buyer shall have entered into
employment agreements (the "Employment Agreements") with:
(a) Sheldon Lipton in substantially the form set forth in
Exhibit B; and
44
(b) Bronna Lipton in substantially the form set forth in
Exhibit C.
8.6. Stock Option Plans. NCI shall have granted to Sheldon Lipton a
nonqualified option to purchase $100,000 in NCI Shares, with an exercise price
of $7.00 per share, subject to other terms and conditions with respect to
exercise period and other matters that are generally applicable to similarly
situated employees of NCI or the Buyer, as determined by NCI's Compensation
Committee under the terms of the NCI 1998 Stock Incentive Plan, attached hereto
as Exhibit D.
8.7. Assumption of Liabilities. The Buyer shall have executed an
Assumption of Liabilities in substantially the form set forth in Exhibit E.
8.8 Lease for Office Space.
(a) The Landlord shall have signed and returned to NCI and LCG
(I) a letter agreement (the "Amendment Letter") in the form attached hereto as
Exhibit F between LCG and the Landlord further amending the Lease and (ii) an
Assignment and Assumption of Lease Agreement in the form attached hereto as
Exhibit G (the "Assignment and Assumption") among the Landlord, LCG and NCI.
(b) NCI and LCG shall have each signed the Closing Notice (the
"Closing Notice") directed to the Landlord and Goldfarb & Fleece, referred to in
the letter from NCI and LCG to the Landlord dated March 1, 1999 (the "Letter to
Landlord") attached to the Amendment Letter and the Assignment and
45
Assumption, and NCI shall, unless previously delivered to the Landlord, have
available at the Closing the following documents referred to in the Letter to
Landlord: Certified or bank checks for $5,201.33 and $39,870.00, a Form W-9
completed by NCI and evidence of the corporate authorization of NCI to execute
the Assignment and Assumption.
9. Conditions to the Obligations of NCI and the Buyer. The
obligations of NCI and the Buyer to effect the transactions contemplated hereby
are subject to the fulfillment before or at the Closing of the following
conditions:
9.1. Representations and Warranties. The representations and
warranties of the Sellers contained in this Agreement (including the Schedules
hereto) shall have been true and correct when made and shall be true and correct
in all material respects at and as of the Closing as though such representations
and warranties were made at and as of the Closing.
9.2. Performance. The Sellers shall have performed and complied with
each covenant and condition required by this Agreement to be performed or
complied with by each of them before or at the Closing.
9.3. Closing Certificate. The Sellers shall have delivered to the
Buyer a certificate, dated the Closing Date and executed by a principal
executive or financial officer of each
46
Seller, certifying that the conditions specified in Sections 9.1 and 9.2 have
been fulfilled.
9.4. Opinion of Counsel. NCI and the Buyer shall have received from
Frankenthaler Kohn Schneider & Katz, counsel to the Sellers, an opinion, dated
the Closing Date, addressed to NCI and the Buyer and in substantially the form
of Exhibit H.
9.5. Consents; Permits. The Sellers shall have obtained, and NCI and
the Buyer shall have received, in form and substance satisfactory to NCI and the
Buyer, all consents which are required to consummate the transactions
contemplated hereby or to avoid the termination of any Permit or contract upon
such consummation, including without limitation waivers of due-on-sale clauses
contained in any contracts and any consents to the change of ownership of the
Assets required under the terms of any Permit or contract.
9.6. Employment Agreements. The persons listed as parties to the
Employment Agreements set forth in Exhibits B and C shall have entered into
employment agreements in substantially the respective forms set forth therein.
9.7. Instruments of Conveyance. The Sellers shall have executed and
delivered such bills of sales, assignments of intellectual property and other
assignments and instruments as the Buyer may reasonably require to transfer the
Assets to the Buyer free and clear of all Encumbrances not disclosed in this
Agreement or the Schedules hereto.
47
9.8 Lease for Office Space.
(a) The Landlord shall have signed and returned to NCI and LCG
the Amendment Letter and the Assignment and Assumption.
(b) NCI and LCG shall have each signed the Closing Notice and
LCG shall, unless previously delivered to the Landlord, have available at the
Closing evidence of the corporate authorization of LCG to execute the Assignment
and Assumption and the Amendment Letter.
10. Survival of Representations and Warranties; Indemnification.
10.1. Survival of Representations and Warranties. The
representations and warranties contained in Sections 4 and 5 of this Agreement
shall survive any investigation by any party and the Closing but shall expire
and be extinguished on the third anniversary of the Closing Date, except that
the Sellers' representations and warranties set forth in Sections 4.17 and 4.19
shall survive until 90 days after expiration of the applicable statute of
limitations for any affected taxable period. No action for indemnification under
this Section 10 may be brought with respect to such representations and
warranties after the applicable date indicated in the preceding sentence unless,
before the date such representations and warranties expire, the party seeking
indemnification has notified in
48
reasonable detail the party from whom indemnification is sought of a claim for
indemnity hereunder.
10.2. Indemnification by the Sellers. Subject to Section 10.1, from
and after the Closing, the Sellers jointly and severally agree to indemnify and
defend NCI and the Buyer, and hold NCI and the Buyer harmless from and against,
any out-of-pocket loss, liability, damage, penalty, claim or expense (including
reasonable attorneys' and consultants' fees and other costs and expenses)
incurred or sustained by NCI or the Buyer as a result of or relating to:
(a) the non-fulfillment or breach of any covenant or agreement
or the breach of any representation or warranty of the Sellers set forth in this
Agreement;
(b) any investigation, claim, lawsuit, arbitration, or
regulatory or administrative suit, proceeding, order or action relating to, or
arising out of, any acts, omissions or activities of the Sellers before the
Closing Date, whether or not disclosed herein or in the Schedules hereto; and
(c) the non-fulfillment or breach by LCG prior to the Closing
Date of any covenant or agreement set forth in the Lease.
10.3. Indemnification by NCI and the Buyer. Subject to Section 10.1,
from and after the Closing, NCI and the Buyer jointly and severally agree to
indemnify and defend the Sellers, and hold the Sellers harmless from and against
any out-of-pocket loss, liability, damages, penalty, claim or expense (including
49
reasonable attorneys' and consultants' fees and other costs and expenses)
incurred or sustained by the Sellers as a result of or relating to:
(a) the non-fulfillment or breach of any covenant or agreement
or the breach of any representation or warranty of NCI or the Buyer set forth in
this Agreement; and
(b) any investigation, claim, lawsuit, arbitration, or
regulatory or administrative suit, proceeding, order or action relating to, or
arising out of, any acts, omissions or activities of NCI or the Buyer before the
Closing Date, whether or not disclosed herein or in the Schedules hereto, or
with respect to the conduct of the businesses presently conducted by the Sellers
or the Assets after the Closing Date.
10.4. Indemnification Procedures. The procedures set forth in this
Section 10.4 are applicable to any claims made or which may be made by a third
party against a party indemnified pursuant to Section 10.2 or 10.3. A party
entitled to indemnification hereunder shall herein be referred to as an
"Indemnitee." A party obligated to indemnify an Indemnitee hereunder shall
herein be referred to as an "Indemnitor." Promptly after receipt by an
Indemnitee of notice of any claim or the commencement of any action, or upon
discovery of any facts which an Indemnitee believes may give rise to a claim for
indemnification from an Indemnitor hereunder, such Indemnitee shall, if a claim
in respect thereof is to be made against an Indemnitor under this Section 10,
notify such Indemnitor in
50
writing in reasonable detail of the claim or the commencement of such action. If
any such claim shall be brought against such Indemnitee, it shall notify such
Indemnitor thereof, the Indemnitor shall be entitled to participate therein, and
to assume the defense thereof with counsel reasonably satisfactory to the
Indemnitee, and to settle or compromise any such claim or action; provided,
however, that any such settlement or compromise shall be effected only with the
consent of the Indemnitee, which consent shall not be unreasonably withheld; and
provided further, that if the Indemnitee rejects a settlement that would have
included a complete release of the Indemnitee from any further liability, its
right to indemnification from the Indemnitor shall be limited to the amount that
would have been payable by the Indemnitor under such settlement or compromise.
After notice to the Indemnitee of the Indemnitor's election to assume the
defense of such claim or action, the Indemnitor shall not be liable to the
Indemnitee under this Section 10 for any legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense thereof; provided,
however, that the Indemnitee shall have the right to employ counsel to represent
it if, in the Indemnitee's reasonable judgment, it is advisable for the
Indemnitee to be represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the Indemnitor. If the
Indemnitor does not elect to assume the defense of such claim or action, the
Indemnitee shall act reasonably and in accordance with its good faith business
51
judgment with respect thereto, and shall not settle or compromise any such claim
or action without the consent of the Indemnitor, which consent shall not be
unreasonably withheld. The parties hereto agree to render to each other such
assistance as may reasonably be requested in order in insure the proper and
adequate defense of any such claim or proceeding.
11. General Provisions.
11.1. Modification; Waiver. This Agreement may be modified only by a
written instrument executed by the parties herein. Any of the terms and
conditions of this Agreement may be waived in writing at any time on or before
the Closing Date by the party entitled to the benefits thereof.
11.2. Entire Agreement, etc. This Agreement, together with the
schedules and exhibits hereto, constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings of the parties in connection therewith.
11.3. Expenses. Whether or not the transactions contemplated herein
shall be consummated, NCI, the Buyer and the Sellers shall each pay its own
expenses incident to the preparation and performance of this Agreement;
provided, however, that the Buyer will pay at the Closing the Sellers' actually
incurred legal fees and disbursements up to a maximum of $30,000.
11.4. Further Actions. Each party shall execute and deliver such
certificates, agreements and other documents and
52
take such other actions as may reasonably be requested by the other parties in
order to consummate or implement the transactions contemplated hereby.
11.5. Bulk Sales Law. The Sellers shall not be required to comply
with the New York bulk sales law. However, the Sellers shall indemnify and hold
NCI and the Buyer harmless from and against all claims and liabilities,
including reasonable attorneys' fees and costs, arising out of any suit, action
or proceeding against NCI or the Buyer in which any claim is made due to or on
account of the Sellers' failure to comply with the New York bulk sales law,
provided that the claim in any such suit, action or proceeding is for an amount
owing by the Sellers to any creditor as of November 30, 1998 or for an amount
owing by the Sellers to any creditor which was incurred by the Sellers after
November 30, 1998 and prior to the Closing Date if such incurrence was contrary
to any representation or warranty of the Sellers contained herein.
11.6. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed, registered mail, first-class postage paid,
return receipt requested, or any other delivery service with proof of delivery:
(a) If to the Sellers:
Mr. Sheldon Lipton, President
LCG Latino
230 West 41st Street
New York, New York 10036-7207
53
with a copy to:
Frankenthaler Kohn Schneider
& Katz
26 Broadway - Suite 700
New York, New York 10004
Attention: Michael Katz, Esq.
(b) If to NCI or the Buyer:
Bienestar Communications, Inc.
214 Carnegie Center - Suite 102
Princeton, New Jersey 04850
Attention: Craig H. Scott
President and Chief Operating
Officer
with a copy to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
22nd Floor
New York, New York 10036
Attention: Alan Gettner, Esq.
or to such other address or to such other persons as the Parties shall have last
designated by notice to the other Parties.
11.7. Assignment, etc. (a) This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
permitted assigns and legal representatives, but shall not be assignable, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other parties.
(b) Any payments or other distributions to be made by the
Buyer or NCI to the Sellers hereunder shall be made to the designees of the
Sellers (as provided in writing to the Buyer or NCI) if the Sellers shall have
been dissolved or be in
54
the process of dissolution prior to or at the time of such payment or
distribution.
11.8. Counterparts. This Agreement may be executed in several
counterparts, each of which is an original but all of which shall constitute one
instrument.
11.9. Headings. The Section and other headings in this Agreement are
for convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provision hereof.
11.10. Governing Law. The validity, performance and enforcement of
this Agreement shall be governed by the laws of the State of New York without
giving effect to the principles of conflicts of law thereof.
11.11. Separability. Any term or provision of this Agreement which
is invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement.
11.12. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
11.13. Guaranty by NCI. NCI hereby unconditionally guarantees to the
Sellers the prompt and complete performance by the Buyer of all the terms,
covenants, conditions and agreements contained in this Agreement. This guaranty
shall apply with the same force and effect to all modifications or amendments to
this
55
Agreement. Recovery may be had on this guaranty without first asserting,
prosecuting or exhausting any remedy or claim against the Buyer or its
successors, assigns or legal representatives.
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
NELSON COMMUNICATIONS INC.
By: /s/ Thomas A. Moore
------------------------------------
Title:
|
BIENESTAR COMMUNICATIONS, INC.
By: /s/ Peter Law-Gisiko
------------------------------------
Title:
|
LIPTON COMMUNICATIONS GROUP, INC.
By: /s/ Sheldon Lipton
------------------------------------
Title:
|
LATIN REPORTS, LTD.
By: /s/ Sheldon Lipton
------------------------------------
Title:
|
57
EXHIBITS AND SCHEDULES TO ASSET PURCHASE AGREEMENT
Pursuant to Item 601(b)(2) of Regulation S-K, Nelson Communications Inc. agrees
to furnish supplementally a copy of any of the following omitted exhibits or
schedules to the Commission upon request:
Exhibit Description
------ -----------
A Opinion of Patterson, Belknap, Webb & Tyler LLP
B Employment Agreement of Sheldon Lipton
C Employment Agreement of Bronna Lipton
D NCI Stock Option Plan
E Assumption of Liabilities
F Amendment Letter
G Assignment and Assumption of Lease Agreement
H Opinion of Frankenthaler Kohn Schneider & Katz
Schedule Description
-------- -----------
1.1 Certain Excluded Assets
2.1 Certain Assumed Debts, Liabilities and
Contracts
3.2(b) Itemization of Cash Portion of Purchase Price
4.4 Financial Statements of Sellers
4.5 Properties, Equipment, Etc.
4.8 Patents, Trademarks, Etc.
4.9 Employee Remuneration, Etc.
4.10 Labor Matters
4.11 Bank Accounts
4.13 Certain Changes
4.14 Litigation
4.16 Contracts
4.17 Taxes
4.18 Permits
4.19 Employee Benefit Plans
4.20 Clients
4.24 Certain Actions Subsequent to November 30, 1998
5.5 Nelson Communications Inc. Financial Statements
7.4 (a) Transferred Employees
|
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ARISTA MARKETING ASSOCIATES, INC.
Arista Marketing Associates, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Arista Marketing Associates, Inc. The
date of the filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was June 8, 1998.
2. This Amended and Restated Certificate of Incorporation amends and
restates the Certificate of Incorporation of the Corporation, as now in effect,
and in so doing changes the name of the Corporation to "Nelson Communications
Inc." This Certificate of Incorporation was duly adopted by the Board of
Directors and stockholders of the Corporation entitled to vote in respect
thereof in the manner and by the vote prescribed by Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware (the "DGCL").
3. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to provide as herein set forth in full.
ARTICLE I
NAME
The name of the Corporation is Nelson Communications Inc.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is Corporation Service Company.
ARTICLE III
PURPOSES
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
Section 1. Number of Shares.
The total number of shares of capital stock which the Corporation shall
have the authority to issue is One Hundred Two Million (102,000,000) shares, of
which (i) One Hundred Million (100,000,000) shares shall be Common Stock, par
value $.01 per share (the "Common Stock") and (ii) Two Million (2,000,000)
shares shall be Undesignated Preferred Stock, par value $.01 per share (the
"Undesignated Preferred Stock"). As set forth in this Article IV, the Board of
Directors or any authorized committee thereof is authorized from time to time to
establish and designate one or more series of Undesignated Preferred Stock, to
fix and determine the variations in the relative rights and preferences as
between the different series of Undesignated Preferred Stock in the manner
hereinafter set forth in this Article IV, and to fix or alter the number of
shares comprising any such series and the designation thereof to the extent
permitted by law.
The number of authorized shares of the class of Undesignated Preferred
Stock may be increased or decreased (but not below the number of shares
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of the holders of the Undesignated Preferred Stock,
pursuant to the resolution or resolutions establishing the class of Undesignated
Preferred Stock or this Restated Certificate of Incorporation, as it may be
amended from time to time.
Section 2. General.
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, Sections 3 and
4 of this Article IV.
Section 3. Common Stock.
Subject to all of the rights, powers and preferences of the Undesignated
Preferred Stock, and except as provided by law or in this Article IV (or in any
certificate of designation of any series of Undesignated Preferred Stock) or by
the Board of Directors or any authorized committee thereof pursuant to this
Article IV:
(a) the holders of the Common Stock shall have the exclusive right
to vote for the election of Directors and on all other matters requiring
stockholder action, each share being entitled to one vote;
(b) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the Corporation legally available
for the payment of dividends, but only when and as declared by the Board of
Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with their
respective rights and interests.
Section 4. Undesignated Preferred Stock.
Subject to any limitations prescribed by law, the Board of Directors or
any authorized committee thereof is expressly authorized to provide for the
issuance of the shares of Undesignated Preferred Stock in one or more series of
such stock, and by filing a certificate pursuant to applicable law of the State
of Delaware, to establish or change from time to time the number of shares to be
included in each such series, and to fix the designations, powers, preferences
and the relative, participating, optional or other special rights of the shares
of each series and any qualifications, limitations and restrictions thereof. Any
action by the Board of Directors or any authorized committee thereof under this
Article IV.4 shall require the affirmative vote of a majority of the Directors
then in office or a majority of the members of such committee. The Board of
Directors or any authorized committee thereof shall have the right to determine
or fix one or more of the following with respect to each series of Undesignated
Preferred Stock to the extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date
or dates for dividends, and the participating and other rights, if any, with
respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of
such series;
(d) Whether the shares of such series shall be redeemable and, if
so, the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund and the
manner of its application, including the price or prices at which such shares
may be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued;
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
Undesignated Preferred Stock (or series thereof) and whether such shares may be
reissued as shares of the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
ARTICLE V
STOCKHOLDER ACTION
Any action required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders of the Corporation
must be effected at a duly
called annual or special meeting of stockholders and may not be taken or
effected by a written consent of stockholders in lieu thereof.
ARTICLE VI
DIRECTORS
Section 1. General.
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors except as otherwise provided herein or
required by law.
Section 2. Election of Directors.
Election of Directors need not be by written ballot unless the By-laws of
the Corporation shall so provide.
Section 3. Terms of Directors.
The number of Directors of the Corporation shall be fixed by resolution
duly adopted from time to time by the Board of Directors. The Directors, other
than those who may be elected by the holders of any series of Undesignated
Preferred Stock of the Corporation, shall be classified, with respect to the
term for which they severally hold office, into three classes, as nearly equal
in number as possible. The initial Class I Directors shall serve for a term
expiring at the annual meeting of stockholders to be held in 1999, the initial
Class II Directors shall serve for a term expiring at the annual meeting of
stockholders to be held in 2000, and the initial Class III Directors shall serve
for a term expiring at the annual meeting of stockholders to be held in 2001. At
each annual meeting of stockholders, the successor or successors of the class of
Directors whose term expires at that meeting shall be elected by a plurality of
the votes cast at such meeting and shall hold office for a term expiring at the
annual meeting of stockholders held in the third year following the year of
their election. The Directors elected to each class shall hold office until
their successors are duly elected and qualified or until their earlier
resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Restated Certificate of Incorporation, the holders of any one
or more series of Undesignated Preferred Stock shall have the right, voting
separately as a series or together with holders of other such series, to elect
Directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of this Restated Certificate of Incorporation and any
certificate of designations applicable thereto, and such
Directors so elected shall not be divided into classes pursuant to this Article
V.3.
During any period when the holders of any series of Undesignated Preferred
Stock have the right to elect additional Directors as provided for or fixed
pursuant to the provisions of Article IV hereof, then upon commencement and for
the duration of the period during which such right continues: (i) the then
otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional Directors so provided for or fixed pursuant to said provisions, and
(ii) each such additional Director shall serve until such Director's successor
shall have been duly elected and qualified, or until such Director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such Director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Undesignated Preferred Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such stock, the terms of
office of all such additional Directors elected by the holders of such stock, or
elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
Section 4. Vacancies.
Subject to the rights, if any, of the holders of any series of
Undesignated Preferred Stock to elect Directors and to fill vacancies in the
Board of Directors relating thereto, any and all vacancies in the Board of
Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a Director, shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
if less than a quorum of the Board of Directors. Any Director appointed in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new directorship was
created or the vacancy occurred and until such Director's successor shall have
been duly elected and qualified or until his or her earlier resignation or
removal. Subject to the rights, if any, of the holders of any series of
Undesignated Preferred Stock to elect Directors, when the number of Directors is
increased or decreased, the Board of Directors shall determine the class or
classes to which the increased or decreased number of Directors shall be
apportioned; provided, however, that no decrease in the number of Directors
shall shorten the term of any incumbent
Director. In the event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled.
Section 5. Removal.
Subject to the rights, if any, of any series of Undesignated Preferred
Stock to elect Directors and to remove any Director whom the holders of any such
stock have the right to elect, any Director (including persons elected by
Directors to fill vacancies in the Board of Directors) may be removed from
office (i) only with cause and (ii) only by the affirmative vote of at least
two-thirds of the total votes which would be eligible to be cast by stockholders
in the election of such Director. At least 30 days prior to any meeting of
stockholders at which it is proposed that any Director be removed from office,
written notice of such proposed removal shall be sent to the Director whose
removal will be considered at the meeting. For purposes of this Restated
Certificate of Incorporation, "cause," with respect to the removal of any
Director shall mean only (i) conviction of a felony, (ii) declaration of unsound
mind by order of court, (iii) gross dereliction of duty, (iv) commission of any
action involving moral turpitude, or (v) commission of an action which
constitutes intentional misconduct or a knowing violation of law if such action
in either event results both in an improper substantial personal benefit and a
material injury to the Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If the
DGCL is amended after the effective date of this Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect
to any acts or omissions occurring before such repeal or modification of a
person serving as a Director at the time of such repeal or modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Section 1. Amendment by Directors
Except as otherwise provided by law, the By-laws of the Corporation may be
amended or repealed by the Board of Directors.
Section 2. Amendment by Stockholders
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
statute and this Restated Certificate of Incorporation, and all rights conferred
upon stockholders herein are granted subject to this reservation. No amendment
or repeal of this Restated Certificate of Incorporation shall be made unless the
same is first approved by the Board of Directors pursuant to a resolution
adopted by the Board of Directors in accordance with Section 242 of the DGCL,
and, except as otherwise provided by law, thereafter approved by the
stockholders. Whenever any vote of the holders of voting stock is required, and
in addition to any other vote of holders of voting stock that is required by
this Restated Certificate of Incorporation or by law, the affirmative vote of a
majority of the total votes eligible to be cast by holders of voting stock with
respect to such amendment or repeal, voting together as a single class, at a
duly constituted meeting of stockholders called expressly for such purpose shall
be required to amend or repeal any provisions of this Restated Certificate of
Incorporation; provided, however, that the affirmative vote of not less than
two-thirds of the
total votes eligible to be cast by holders of voting stock, voting together as a
single class, shall be required to amend or repeal any of the provisions of
Article VI or Article IX of this Restated Certificate of Incorporation.
I, Thomas A. Moore, President of the Corporation, for the purpose of
amending and restating the Corporation's Second Amended and Restated Certificate
of Incorporation pursuant to the General Corporation Law of the State of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed on behalf of the Corporation this 21st day of July, 1998.
/s/ Thomas A. Moore
------------------------------------
Thomas A. Moore, President and
Chief Executive Officer
|
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
NELSON COMMUNICATIONS INC. (the "Corporation")
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of stockholders shall be
held at the hour, date and place within or without the United States which is
fixed by the majority of the Board of Directors, the Chairman of the Board, if
one is elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
SECTION 2. Matters to be Considered at Annual Meetings. At any annual
meeting of stockholders or any special meeting in lieu of annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (a) give timely notice as required by this Section 2 to the
Secretary of the Corporation and (b) be present at such meeting, either in
person or by a representative. For the first Annual Meeting
following the initial public offering of common stock of the Corporation, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (a) the 75th day prior to the scheduled date of such
Annual Meeting or (b) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made or sent by the
Corporation. For all subsequent Annual Meetings, a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior to
the anniversary date of the immediately preceding Annual Meeting (the
"Anniversary Date"); provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary Date or
more than 60 days after the Anniversary Date, a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(a) the 75th day prior to the scheduled date of such Annual Meeting or (b) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation.
For purposes of these By-laws, "public announcement" shall mean: (a)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (b) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (c) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Secretary shall set forth as to each matter
proposed to be brought before an Annual Meeting: (a) a brief description of the
business the stockholder desires to bring before such Annual Meeting and the
reasons for conducting such business at such Annual Meeting, (b) the name and
address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (c) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (d) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (e) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (f) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines
that any stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 2 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If neither the Board of Directors nor
such committee makes a determination as to the validity of any stockholder
proposal in the manner set forth above, the presiding officer of the Annual
Meeting shall determine whether the stockholder proposal was made in accordance
with the terms of this Section 2. If the presiding officer determines that any
stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2 in any
material respect, such proposal shall not be presented for action at the Annual
Meeting in question. If the Board of Directors, a designated committee thereof
or the presiding officer determines that a stockholder proposal was made in
accordance with the requirements of this Section 2, the presiding officer shall
so declare at the Annual Meeting and ballots shall be provided for use at the
meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Section 2, and nothing
in this Section 2 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 3. Special Meetings. Except as otherwise required by law and
subject to the rights, if any, of the holders of any series of preferred stock,
special meetings of the stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution approved by the affirmative vote
of a majority of the directors then in office.
SECTION 4. Matters to be Considered at Special Meetings. Only those
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
SECTION 5. Notice of Meetings; Adjournments. A written notice of each
Annual Meeting stating the hour, date and place of such Annual Meeting shall be
given by the Secretary or an Assistant Secretary (or other person authorized by
these By-laws or by law) not less than 10 days nor more than 60 days before the
Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Restated Certificate
of Incorporation of the Corporation (as the same may hereafter be amended and/or
restated, the "Certificate") or under these By-laws, is entitled to such notice,
by delivering such notice to him or by mailing it, postage prepaid, addressed to
such stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be delivered
when hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
Notice of all special meetings of stockholders shall be given in the same
manner as provided for Annual Meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an Annual Meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any Annual Meeting or special meeting of stockholders need be
specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously
scheduled Annual Meeting or special meeting of stockholders and any record date
with respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise. In no event shall the
public announcement of an adjournment, postponement or rescheduling of any
previously scheduled meeting of stockholders commence a new time period for the
giving of a stockholder's notice under Section 2 of Article I and Section 3 of
Article II of these By-laws.
When any meeting is convened, the presiding officer may adjourn the
meeting if (a) no quorum is present for the transaction of business, (b) the
Board of Directors determines that adjournment is necessary or appropriate to
enable the stockholders to consider fully information which the Board of
Directors determines has not been made sufficiently or timely available to
stockholders, or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When any Annual Meeting or
special meeting of stockholders is adjourned to another hour, date or place,
notice need not be given of the adjourned meeting other than an announcement at
the meeting at which the adjournment is taken of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote thereat and each
stockholder who, by law or under the Certificate or these By-laws, is entitled
to such notice.
SECTION 6. Quorum. The holders of shares of voting stock representing a
majority of the voting power of the outstanding shares of voting stock issued,
outstanding and entitled to vote at a meeting of stockholders, represented in
person or by proxy at such meeting, shall constitute a quorum; but if less than
a quorum is present at a meeting, the holders of voting stock representing a
majority of the voting power present at the meeting or the presiding officer may
adjourn the meeting from time to time, and the meeting may be held as adjourned
without further notice, except as provided in Section 5 of this Article I. At
such adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The stockholders present at a duly constituted meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 7. Voting and Proxies. Stockholders shall have one vote for each
share of stock entitled to vote owned by them of record according to the books
of the Corporation, unless otherwise provided by law or by the Certificate.
Stockholders may vote either in person or by written proxy, but no proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Proxies shall be filed with the Secretary of the
meeting before being voted. Except as otherwise limited therein or as otherwise
provided by law, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting, but they shall not be valid after final
adjournment of such meeting. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by or on behalf of any one of
them unless at or prior to the exercise of the proxy the Corporation receives a
specific written notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a stockholder shall be deemed valid, and the
burden of proving invalidity shall rest on the challenger.
SECTION 8. Action at Meeting. When a quorum is present, any matter before
any meeting of stockholders shall be decided by the vote of a majority of the
voting power of shares of voting stock, present in person or represented by
proxy at such meeting and entitled to vote on such matter, except where a larger
vote is required by law, by the Certificate or by these By-laws. Any election by
stockholders shall be determined by a plurality of the votes cast, except where
a larger vote is required by law, by the Certificate or by these By-laws. The
Corporation shall not directly or indirectly vote any shares of its own stock;
provided, however, that the Corporation may vote shares which it holds in a
fiduciary capacity to the extent permitted by law.
SECTION 9. Stockholder Lists. The Secretary or an Assistant Secretary (or
the Corporation's transfer agent or other person authorized by these By-laws or
by law) shall prepare and make, at least 10 days before every Annual Meeting or
special meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 10. Presiding Officer. The Chairman of the Board, if one is
elected, or if not elected or in his or her absence, the President, shall
preside at all Annual Meetings or special meetings of stockholders and shall
have the power, among other things, to adjourn such meeting at any time and from
time to time, subject to Sections 5 and 6 of this Article I. The order of
business and all other matters of procedure at any meeting of the stockholders
shall be determined by the presiding officer.
SECTION 11. Voting Procedures and Inspectors of Elections. The Corporation
shall, in advance of any meeting of stockholders, appoint one or more inspectors
to act at the meeting and make a written report thereof. The Corporation may
designate one or more persons as alternate inspectors to replace any inspector
who fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the presiding officer shall appoint one or more inspectors to act
at the meeting. Any inspector may, but need not, be an officer, employee or
agent of the Corporation. Each inspector, before entering upon the discharge of
his or her duties, shall take and sign an oath faithfully to execute the duties
of inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall perform such duties as are required by the General
Corporation Law of the State of Delaware, as amended from time to time (the
"DGCL"), including the counting of all votes and ballots. The inspectors may
appoint or retain other persons or entities to assist the inspectors in the
performance of the duties of the inspectors. The presiding officer may review
all determinations made by the inspectors, and in so doing the presiding officer
shall be entitled to exercise his or her sole judgment and discretion and he or
she shall not be bound by any determinations made by the inspectors. All
determinations by the inspectors and, if applicable, the presiding officer,
shall be subject to further review by any court of competent jurisdiction.
ARTICLE II
Directors
SECTION 1. Powers. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. Number and Terms. The number of directors of the Corporation
shall be fixed by resolution duly adopted from time to time by the Board of
Directors. The directors shall hold office in the manner provided in the
Certificate.
SECTION 3. Director Nominations. Nominations of candidates for election as
directors of the Corporation at any Annual Meeting may be made only (a) by, or
at the direction of, a majority of the Board of Directors or (b) by any holder
of record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this Section 3. Any stockholder who has complied
with the timing, informational and other requirements set forth in this Section
3 and who seeks to make such a nomination, or his, her or its representative,
must be present in person at the Annual Meeting. Only persons nominated in
accordance with the procedures set forth in this Section 3 shall be eligible for
election as directors at an Annual Meeting.
Nominations, other than those made by, or at the direction of, the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Section 3. For the first
Annual Meeting following the initial public offering of common stock of the
Corporation, a stockholder's notice shall be timely if delivered to, or mailed
to and received by, the Corporation at its principal executive office not later
than the close of business on the later of (a) the 75th day prior to the
scheduled date of such Annual Meeting or (b) the 15th day following the day on
which public announcement of the date of such Annual Meeting is first made or
sent by the Corporation. For all subsequent Annual Meetings, a stockholder's
notice shall be timely if delivered to, or mailed to and received by, the
Corporation at its principal executive office not less than 75 days nor more
than 120 days prior to the Anniversary Date; provided, however, that in the
event the Annual Meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (a) the 75th day prior to the scheduled date of
such Annual Meeting or (b) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
A stockholder's notice to the Secretary shall set forth as to each person
whom the stockholder proposes to nominate for election or re-election as a
director: (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the class
and number of shares of the Corporation's capital stock which are beneficially
owned by such person on the date of such stockholder notice, and (d) the consent
of each nominee to serve as a director if elected. A stockholder's notice to the
Secretary shall further set forth as to the stockholder giving such notice: (a)
the name and address, as they appear on the Corporation's stock transfer books,
of such stockholder and of the beneficial owners (if any) of the Corporation's
capital stock registered in such stockholder's name and the name and address of
other stockholders known by such stockholder to be supporting such nominee(s),
(b) the class and number of shares of the Corporation's capital stock which are
held of record, beneficially owned or represented by proxy by such stockholder
and by any other stockholders known by such stockholder to be supporting such
nominee(s) on the record date for the Annual Meeting in question (if such date
shall then have been made publicly available) and on the date of such
stockholder's notice, and (c) a description of all arrangements or
understandings between such stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder.
If the Board of Directors or a designated committee thereof determines
that any stockholder nomination was not made in accordance with the terms of
this Section 3 or that the information provided in a stockholder's notice does
not satisfy the informational requirements of this Section 3 in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3, the presiding officer of the Annual Meeting shall
determine whether a nomination was made in accordance with such provisions. If
the presiding officer determines that any stockholder nomination was not made in
a timely fashion in accordance with the terms of this Section 3 or that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Section 3 in any material respect, then such
nomination shall not be considered at the Annual Meeting in question. If the
Board of Directors, a designated committee thereof or the presiding officer
determines that a nomination was made in accordance with the terms of this
Section 3, the presiding officer shall so declare at the Annual
Meeting and ballots shall be provided for use at the meeting with respect to
such nominee.
Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this Section 3, in the event that the number of directors to
be elected to the Board of Directors of the Corporation is increased and there
is no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 75
days prior to the Anniversary Date, a stockholder's notice required by this
Section 3 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if such notice shall be delivered
to, or mailed to and received by, the Corporation at its principal executive
office not later than the close of business on the 15th day following the day on
which such public announcement is first made by the Corporation.
No person shall be elected by the stockholders as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of directors at an Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
SECTION 4. Qualification. No director need be a stockholder of the
Corporation.
SECTION 5. Vacancies. Subject to the rights, if any, of the holders of any
series of preferred stock to elect directors and to fill vacancies in the Board
of Directors relating thereto, any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by reason of an increase in
size of the Board of Directors, or the death, resignation, disqualification or
removal of a director, shall be filled solely by the affirmative vote of a
majority of the remaining directors then in office, even if less than a quorum
of the Board of Directors. Any director appointed in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been duly elected and
qualified or until his or her earlier resignation or removal. Subject to the
rights, if any, of the holders of any series of preferred stock to elect
directors, when the number of directors is increased or decreased, the Board of
Directors shall determine the class or classes to which the increased or
decreased number of directors shall be apportioned; provided, however, that no
decrease in the number of directors shall shorten the term of any incumbent
director. In the event of a vacancy in the Board of Directors, the remaining
directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled.
SECTION 6. Removal. Directors may be removed from office in the manner
provided in the Certificate.
SECTION 7. Resignation. A director may resign at any time by giving
written notice to the Chairman of the Board, if one is elected, the President or
the Secretary. A resignation shall be effective upon receipt, unless the
resignation otherwise provides.
SECTION 8. Regular Meetings. The regular annual meeting of the Board of
Directors shall be held, without notice other than this Section 8, on the same
date and at the same place as the Annual Meeting following the close of such
meeting of stockholders. Other regular meetings of the Board of Directors may be
held at such hour, date and place as the Board of Directors may by resolution
from time to time determine without notice other than such resolution.
SECTION 9. Special Meetings. Special meetings of the Board of Directors
may be called, orally or in writing, by or at the request of a majority of the
directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
SECTION 10. Notice of Meetings. Notice of the hour, date and place of all
special meetings of the Board of Directors shall be given to each director by
the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting of
the Board of Directors shall be given to each director in person, by telephone,
or by facsimile, telex, telecopy, telegram, or other written form of electronic
communication, sent to his or her business or home address, at least 24 hours in
advance of the meeting, or by written notice mailed to his or her business or
home address, at least 48 hours in advance of the meeting. Such notice shall be
deemed to be delivered when hand delivered to such address, read to such
director by telephone, deposited in the mail so addressed, with postage thereon
prepaid if mailed, dispatched or transmitted if faxed, telexed or telecopied, or
when delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original
meeting. It shall not be necessary to give any notice of the hour, date or place
of any meeting adjourned for less than 30 days or of the business to be
transacted thereat, other than an announcement at the meeting at which such
adjournment is taken of the hour, date and place to which the meeting is
adjourned.
A written waiver of notice signed before or after a meeting by a director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Certificate or by these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 11. Quorum. At any meeting of the Board of Directors, a majority
of the directors then in office shall constitute a quorum for the transaction of
business, but if less than a quorum is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time, and the meeting may
be held as adjourned without further notice, except as provided in Section 10 of
this Article II. Any business which might have been transacted at the meeting as
originally noticed may be transacted at such adjourned meeting at which a quorum
is present.
SECTION 12. Action at Meeting. At any meeting of the Board of Directors at
which a quorum is present, a majority of the directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these By-laws.
SECTION 13. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
SECTION 14. Manner of Participation. Directors may participate in meetings
of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-laws.
SECTION 15. Committees. The Board of Directors, by vote of a majority of
the directors then in office, may elect from its number one or more committees,
including, without limitation, an Executive Committee, a Compensation and Option
Committee and an Audit Committee, and may delegate thereto some or all of its
powers except those which by law, by the Certificate or by these By-laws may not
be delegated. Except as the Board of Directors may otherwise determine, any such
committee may make rules for the conduct of its business, but unless otherwise
provided by the Board of Directors or in such rules, its business shall be
conducted so far as possible in the same manner as is provided by these By-laws
for the Board of Directors. All members of such committees shall hold such
offices at the pleasure of the Board of Directors. The Board of Directors may
abolish any such committee at any time. Any committee to which the Board of
Directors delegates any of its powers or duties shall keep records of its
meetings and shall report its action to the Board of Directors. The Board of
Directors shall have power to rescind any action of any committee, to the extent
permitted by law, but no such rescission shall have retroactive effect.
SECTION 16. Compensation of Directors. Directors shall receive such
compensation for their services as shall be determined by a majority of the
Board of Directors provided that directors who are serving the Corporation as
employees and who receive compensation for their services as such, shall not
receive any salary or other compensation for their services as directors of the
Corporation.
ARTICLE III
Officers
SECTION 1. Enumeration. The officers of the Corporation shall consist of a
President, a Treasurer, a Secretary and such other officers, including, without
limitation, a Chairman of the Board, a Chief Executive Officer and one or more
Vice Presidents (including Executive Vice Presidents or Senior Vice Presidents),
Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as
the Board of Directors may determine.
SECTION 2. Election. At the regular annual meeting of the Board following
the Annual Meeting of stockholders, the Board of Directors shall elect the
President, the Treasurer and the Secretary. Other officers may be elected by the
Board of Directors at such regular annual meeting of the Board of Directors or
at any other regular or special meeting.
SECTION 3. Qualification. No officer need be a stockholder or a director.
Any person may occupy more than one office of the Corporation at any time. Any
officer may be required by the Board of Directors to give bond for the faithful
performance of his or
her duties in such amount and with such sureties as the Board of Directors may
determine.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or by
these By-laws, each of the officers of the Corporation shall hold office until
the regular annual meeting of the Board of Directors following the next Annual
Meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
SECTION 5. Resignation. Any officer may resign by delivering his or her
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors.
SECTION 9. Chairman of the Board. The Chairman of the Board, if one is
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
SECTION 10. Chief Executive Officer. The Chief Executive Officer, if one
is elected, shall, subject to the direction of the Board of Directors, have
general supervision and control of the Corporation's business. If there is no
Chairman of the Board or if he or she is absent, the Chief Executive Officer
shall preside, when present, at all meetings of stockholders and of the Board of
Directors. The Chief Executive Officer shall have such other powers and perform
such other duties as the Board of Directors may from time to time designate.
SECTION 11. President. The President shall generally have such powers and
shall perform such duties as the Board of Directors may from time to time
designate. However, if no Chief Executive Officer is elected, the President
shall have general supervision and control of the Corporation's business. If
there
is neither a Chairman of the Board nor a Chief Executive Officer or if both such
officers are absent, the President shall preside, when present, at all meetings
of stockholders and of the Board of Directors.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall,
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation and shall cause to be kept
accurate books of account. The Treasurer shall have custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have such
other duties and powers as may be designated from time to time by the Board of
Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose. In
his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 15. Other Powers and Duties. Subject to these By-laws and to such
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to
their respective offices, as well as such powers and duties as from time to time
may be conferred by the Board of Directors or the Chief Executive Officer.
ARTICLE IV
Capital Stock
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a
certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman of the Board of Directors, the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary. The Corporation seal and the signatures by the
Corporation's officers, the transfer agent or the registrar may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the time of its issue. Every certificate
for shares of stock which are subject to any restriction on transfer and every
certificate issued when the Corporation is authorized to issue more than one
class or series of stock shall contain such legend with respect thereto as is
required by law.
SECTION 2. Transfers. Subject to any restrictions on transfer and unless
otherwise provided by the Board of Directors, shares of stock may be transferred
only on the books of the Corporation by the surrender to the Corporation or its
transfer agent of the certificate theretofore properly endorsed or accompanied
by a written assignment or power of attorney properly executed, with transfer
stamps (if necessary) affixed, and with such proof of the authenticity of
signature as the Corporation or its transfer agent may reasonably require.
SECTION 3. Record Holders. Except as may otherwise be required by law, by
the Certificate or by these By-laws, the Corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to vote with
respect thereto, regardless of any transfer, pledge or other disposition of such
stock, until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of his
or her post office address and any changes thereto.
SECTION 4. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date: (a) in the case of
determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than sixty nor less than
ten days before the date of such meeting and (b) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (b) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
SECTION 5. Replacement of Certificates. In case of the alleged loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
Indemnification
SECTION 1. Definitions. For purposes of this Article: (a) "Officer" means
any person who serves or has served as a director or officer of the Corporation
or in any other office filled by election or appointment by the stockholders or
the Board of Directors of the Corporation and any heirs, executors,
administrators or personal representatives of such person; (b) "Non- Officer
Employee" means any person who serves or has served as an employee of the
Corporation, but who is not or was not an Officer, and any heirs, executors,
administrators or personal representatives of such person; (c) "Proceeding"
means any threatened, pending, or completed action, suit or proceeding (or part
thereof), whether civil, criminal, administrative, arbitrative or investigative,
any appeal of such an action, suit or proceeding, and any inquiry or
investigation which could lead to such an action, suit, or proceeding; and (d)
"Expenses" means any liability fixed by a judgment, order, decree or award in a
Proceeding, any amount reasonably paid in settlement of a Proceeding and any
professional fees and other expenses and
disbursements reasonably incurred in a Proceeding or in settlement of a
Proceeding, including fines, taxes and penalties relating thereto.
SECTION 2. Officers. Except as provided in Section 4 of this Article V,
each Officer of the Corporation shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader rights
than said law permitted the Corporation to provide prior to such amendment)
against any and all Expenses incurred by such Officer in connection with any
Proceeding in which such Officer is involved as a result of serving or having
served (a) as an Officer or employee of the Corporation, (b) as a director,
officer or employee of any subsidiary of the Corporation, or (c) in any capacity
with any other corporation, organization, partnership, joint venture, trust or
other entity at the written request or direction of the Corporation, including
service with respect to employee or other benefit plans, and shall continue as
to an Officer after he or she has ceased to be an Officer and shall inure to the
benefit of his or her heirs, executors, administrators and personal
representatives; provided, however, that the Corporation shall indemnify any
such Officer seeking indemnification in connection with a Proceeding initiated
by such Officer only if such Proceeding was authorized by the Board of Directors
of the Corporation.
SECTION 3. Non-Officer Employees. Except as provided in Section 4 of this
Article V, each Non-Officer Employee of the Corporation may, in the discretion
of the Board of Directors, be indemnified by the Corporation to the fullest
extent authorized by the DGCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader rights than said law permitted the
Corporation to provide prior to such amendment) against any or all Expenses
incurred by such Non-Officer Employee in connection with any Proceeding in which
such Non-Officer Employee is involved as a result of serving or having served
(a) as a Non-Officer Employee of the Corporation, (b) as a director, officer or
employee of any subsidiary of the Corporation, or (c) in any capacity with any
other corporation, organization, partnership, joint venture, trust or other
entity at the request or direction of the Corporation, including service with
respect to employee or other benefit plans, and shall continue as to a Non-
Officer Employee after he or she has ceased to be a Non-Officer Employee and
shall inure to the benefit of his or her heirs, personal representatives,
executors and administrators; provided, however, that the Corporation may
indemnify any such Non-Officer Employee seeking indemnification in connection
with a Proceeding initiated by such Non-Officer Employee only if such Proceeding
was authorized by the Board of Directors of the Corporation.
SECTION 4. Good Faith. No indemnification shall be provided pursuant to
this Article V to an Officer or to a Non-Officer Employee with respect to a
matter as to which such person shall have been finally adjudicated in any
Proceeding (a) not to have acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and (b) with respect to any criminal Proceeding, to have had
reasonable cause to believe his or her conduct was unlawful. In the event that a
Proceeding is compromised or settled prior to final adjudication so as to impose
any liability or obligation upon an Officer or Non-Officer Employee, no
indemnification shall be provided pursuant to this Article V to said Officer or
Non-Officer Employee with respect to a matter if there be a determination that
with respect to such matter such person did not act in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his or her conduct was unlawful. The
determination contemplated by the preceding sentence shall be made by (a) a
majority vote of those directors who are not involved in such Proceeding (the
"Disinterested Directors"); (b) by the stockholders; or (c) if directed by a
majority of Disinterested Directors, by independent legal counsel in a written
opinion. However, if more than half of the directors are not Disinterested
Directors, the determination shall be made by (a) a majority vote of a committee
of one or more disinterested director(s) chosen by the Disinterested Director(s)
at a regular or special meeting; (b) by the stockholders; or (c) by independent
legal counsel chosen by the Board of Directors in a written opinion.
SECTION 5. Prior to Final Disposition. Unless otherwise determined by (a)
the Board of Directors, (b) if more than half of the directors are involved in a
Proceeding by a majority vote of a committee of one or more Disinterested
Director(s) chosen in accordance with the procedures specified in Section 4 of
this Article or (c) if directed by the Board of Directors, by independent legal
counsel in a written opinion, any indemnification extended to an Officer or
Non-Officer Employee pursuant to this Article V shall include payment by the
Corporation or a subsidiary of the Corporation of Expenses as the same are
incurred in defending a Proceeding in advance of the final disposition of such
Proceeding upon receipt of an undertaking by such Officer or Non-Officer
Employee seeking indemnification to repay such payment if such Officer or
Non-Officer Employee shall be adjudicated or determined not to be entitled to
indemnification under this Article V.
SECTION 6. Contractual Nature of Rights. The foregoing provisions of this
Article V shall be deemed to be a contract between the Corporation and each
Officer and Non-Officer Employee who serves in such capacity at any time while
this Article V is in effect, and any repeal or modification thereof shall not
affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any Proceeding theretofore or thereafter
brought based in whole or in part upon any such state of facts. If a claim for
indemnification or advancement of expenses hereunder by an Officer or Non-
Officer Employee is not paid in full by the Corporation within 60 days after a
written claim for indemnification or documentation of expenses has been received
by the Corporation, such Officer or Non-Officer Employee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Officer or Non-Officer
Employee shall also be entitled to be paid the expenses of prosecuting such
claim. The failure of the Corporation (including its Board of Directors or any
committee thereof, independent legal counsel, or stockholders) to make a
determination concerning the permissibility of such indemnification or
advancement of expenses under this Article V shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible.
SECTION 7. Non-Exclusivity of Rights. The provisions in respect of
indemnification and the payment of expenses incurred in defending a Proceeding
in advance of its final disposition set forth in this Article V shall not be
exclusive of any right which any person may have or hereafter acquire under any
statute, provision of the Certificate or these By-laws, agreement, vote of
stockholders or disinterested directors or otherwise; provided, however, that in
the event the provisions of this Article V in any respect conflict with the
terms of any agreement between the Corporation or any of its subsidiaries and
any person entitled to indemnification under this Article V, then,
notwithstanding anything contained herein to the contrary, the provision which
is more favorable to the relevant individual shall govern.
SECTION 8. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any Officer or Non-Officer Employee against any
liability of any character asserted against or incurred by the Corporation or
any such Officer or Non-Officer Employee, or arising out of any such status,
whether or not the Corporation would have the power to indemnify such person
against such liability under the DGCL or the provisions of this Article V.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Fiscal Year. Except as otherwise determined by the Board of
Directors, the fiscal year of the Corporation shall end on the last day of
December of each year.
SECTION 2. Seal. The Board of Directors shall have power to adopt and
alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers,
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its business without director action may
be executed on behalf of the Corporation by the Chairman of the Board, if one is
elected, the President or the Treasurer or any other officer, employee or agent
of the Corporation as the Board of Directors or Executive Committee may
authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors otherwise
provides, the Chairman of the Board, if one is elected, the President or the
Treasurer may waive notice of and act on behalf of this Corporation, or appoint
another person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitution, at
any meeting of stockholders or shareholders of any other corporation or
organization, any of whose securities are held by this Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a resident
agent upon whom legal process may be served in any action or proceeding against
the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the
Certificate, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of Delaware and
shall be kept at the principal office of the Corporation, at the office of its
counsel or at an office of its transfer agent or at such other place or places
as may be designated from time to time by the Board of Directors.
SECTION 7. Certificate. All references in these By-laws to the Certificate
shall be deemed to refer to the Restated Certificate of Incorporation of the
Corporation, as amended and in effect from time to time.
SECTION 8. Amendment of By-laws.
(a) Amendment by Directors. Except as provided otherwise by law,
these By-laws may be amended or repealed by the Board of Directors.
(b) Amendment by Stockholders. These By-laws may be amended or
repealed at any Annual Meeting of stockholders, or special meeting of
stockholders called for such purpose, by the affirmative vote of at least two-
thirds of the total votes eligible to be cast on such amendment or repeal by
holders of
voting stock, voting together as a single class; provided, however, that if the
Board of Directors recommends that stockholders approve such amendment or repeal
at such meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
Adopted July 20, 1998 and effective as of July 20, 1998.
EXHIBIT 10.1
STANDARD FORM OF OFFICE LEASE
The Real Estate Board of New York, Inc.
Agreement of Lease, made as of this 9th day of MAY 1997, between A & R REAL
ESTATE, INC., having an address at 105 Madison Avenue, New York, New York 10016
party of the first part, hereinafter referred to as OWNER, and NELSON
COMMUNICATIONS INC., a Delaware corporation having an address at 41 Madison
Avenue, New York, New York party of the second part, hereinafter referred to as
TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner the
premises (hereinafter referred to as the "premises", "Demised Premises" or
"Premises") consisting of the rentable area of the entire sixteenth (16th) and
seventeenth (17th) floors in the building known as 105 Madison Avenue in the
Borough of Manhattan, City of New York, for the term of approximately ten (10)
years commencing as set forth below (or until such term shall sooner cease and
expire as hereinafter provided) both dates inclusive, at an annual fixed rental
rates of Five Hundred Twenty-five Thousand ($525,000.00) Dollars for the first
five (5) "Lease Years" (as defined below) of the Term and Five Hundred
Seventy-five Thousand ($575,000.00) Dollars commencing on the first day of the
sixth (6th) Lease year until the scheduled "Expiration Date" (as defined below)
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction, except as otherwise provided in
this Lease except that Tenant shall pay the first monthly installment on the
execution hereof.
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner
predecessor in interest, Owner may at Owner's option and without notice to
Tenant add the amount of such arrears to any monthly installment of rent payable
hereunder and the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Rent: 1. Tenant shall pay the rent as above and as
hereinafter provided.
Occupancy: 2. Tenant shall use and occupy demised premises for
general, administrative and executive offices and for
no other purpose.
|
Tenant Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
without Owner's prior written consent except as otherwise provided for in this
Lease. Owner's consent to interior non-structural alterations
1
shall not be unreasonably withheld. Tenant shall not be obligated to remove the
stairway between the two (2) floors comprising the Demised Premises. Subject to
the prior written consent of Owner, and to the provisions of this article,
Tenant, at Tenant's expense, may make alterations, installations, additions or
improvements which are non-structural and which do not affect utility services
or plumbing and electrical lines, in or to the interior of the demised premises
by using contractors or mechanics first approved in each instance by Owner which
consent shall not be unreasonably withheld or delayed. With respect to
alterations after the initial work, Owner shall review and respond to a request
for consent to alterations within ten (10) days after submission of such request
accompanied by reasonably appropriate plans and specifications and to a request
for the approval of any contractor within five (5) days after submission of
information regarding the contractor which shall be sufficient for Owner to base
its approval. Tenant shall, before making any alterations, additions,
installations or improvements, at its expense, obtain all permits, approvals and
certificates required by any governmental or quasi-governmental bodies and (upon
completion) certificates of final approval thereof and shall deliver promptly on
request duplicates of all such permits, approvals and certificates to Owner and
Tenant agrees to carry and will cause Tenant's contractors and sub-contractors
to carry such workman's compensation, general liability, personal and property
damage insurance as Owner may reasonably require. If any mechanic's lien is
filed against the demised premises, or the building of which the same forms a
part, for work claimed to have been done for, or materials furnished to, Tenant,
whether or not done pursuant to this article, the same shall be discharged by
Tenant within thirty days after notice at Tenant's expense, by payment or filing
the bond required by law. All fixtures and all paneling, partitions, railings
and like installations, installed in the premises at any time, either by Tenant
or by Owner on Tenant's behalf, shall, upon installation, become the property of
Owner and shall remain upon and be surrendered with the demised premises. Tenant
shall be required to remove its movable equipment, furniture, furnishings and
other personal property from the Demised Premises upon the expiration of the
Term. Nothing in this Article shall be construed to give Owner title to or to
prevent Tenant's removal of trade fixtures, moveable office furniture and
equipment, but upon removal of any such from the premises Tenant shall
immediately and at its expense, repair any damage to the demised premises or the
building due to such removal. 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 Owner, either be
retained as Owner's property or may be removed from the premises by Owner, at
Tenant's expense.
Maintenance and Repairs:
4. Tenant shall, throughout the term of this lease, take good care of the
demised premises and the fixtures and appurtenances therein. To the extent not
covered by Owner's insurance, Tenant shall be responsible for all damage or
injury to the demised premises or any other part of the building and the systems
and equipment thereof, whether requiring structural or nonstructural repairs
caused by or resulting from the negligence or willful misconduct of Tenant,
Tenant's subtenants, agents, employees, invitees or licensees, or which arise
out of any work, labor, service or equipment done
2
for or supplied to Tenant or any subtenant or arising out of the installation,
use or operation of the property or equipment of Tenant or any subtenant. Tenant
shall also repair all damage to the building and the demised premises caused by
the moving of Tenant's fixtures, furniture and equipment. Tenant shall promptly
make, at Tenant's expense, all repairs in and to the demised premises for which
Tenant is responsible, using only the contractor for the trade or trades in
question, selected from a list of at least two contractors per trade submitted
by Owner. Any other repairs in or to the building or the facilities and systems
thereof for which Tenant is responsible shall be performed by Owner at the
Tenant's expense. Owner shall maintain in good working order and repair the
exterior and the structural portions of the building, including the structural
portions of its demised premises, and the public portions of the building
interior and the building plumbing, electrical, heating and ventilating systems
(to the extent such systems presently exist) serving the demised premises. Owner
shall maintain the sprinkler riser servicing the Demised Premises. Tenant shall
connect to that riser and install and maintain the sprinkler system within the
Demised Premises at Tenant's expense. Owner shall repair and, to the extent
necessary, replace any portion or components of the original existing
air-conditioning units servicing the Demised Premises. Tenant shall repair any
additional air-conditioning units or systems installed by or on behalf of
Tenant. On the Commencement Date, the electrical, plumbing, heating and original
air-conditioning systems shall be in good working order. On the Commencement
Date, the building sprinkler system servicing the Demised Premises shall be in
good working order. Tenant agrees to give prompt notice of any defective
condition in the premises for which Owner may be responsible hereunder. Except
as may be otherwise provided for in this Lease, there shall be no allowance to
Tenant for diminution of rental value and no liability on the part of Owner by
reason of inconvenience, annoyance or injury to business arising from Owner or
others making repairs, alterations, additions or improvements in or to any
portion of the building or the demised premises or in and to the fixtures,
appurtenances or equipment thereof. It is specifically agreed that Tenant shall
not be entitled to any setoff or reduction of rent by reason of any failure of
Owner to comply with the covenants of this or any other article of this Lease.
Tenant agrees that Tenant's sole remedy at law in such instance will be by way
of an action for damages for breach of contract. In performing any repairs or
alterations to the Demised Premises, Owner shall exercise reasonable due
diligence so as not to cause unreasonable interference with Tenant's business
operations. Except in the case of an emergency, prior to commencing any such
work, Owner shall give Tenant reasonable advance notice of the commencement of
such work and permit a representative of Tenant to be present during the
performance of any such work. The provisions of this Article 4 shall not apply
in the case of fire or other casualty which are dealt with in Article 9 hereof.
Window Cleaning:
5. Tenant will not clean nor require, permit, suffer or allow any window in the
demised premises to be cleaned from the outside in violation of Section 202 of
the Labor Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or asserting
jurisdiction.
3
Requirements of Law, Fire Insurance, Floor Loads:
6. Prior to the commencement of the lease term, if Tenant is then in possession,
and at all times thereafter, Tenant, at Tenant's sole cost and expense, shall
promptly comply with all present and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions and
boards and any direction of any public officer pursuant to law, and all orders,
rules and regulations of the New York Board of Fire Underwriters, Insurance
Services Office, or any similar body which shall impose any violation, order or
duty upon Owner or Tenant with respect to the demised premises, whether or not
arising out of Tenant's use or manner of use thereof, (including Tenant's
permitted use) or, with respect to the building if arising out of Tenant's use
or manner of use of the premises or the building (including the use permitted
under the lease). Nothing herein shall require Tenant to make repairs or
alterations unless Tenant has, by its manner of use of the demised premises or
method of operation therein (as opposed to the mere use of the Demised Premises
as general business and executive offices) violated any such laws, ordinances,
orders, rules, regulations or requirements with respect thereto or unless the
need for any repairs or alterations arises by reason of any alterations proposed
by Tenant. Except to the extent Tenant is required to do so, Owner shall comply
with all such laws, orders, rules, or regulations which shall impose any
violation or duty to perform repairs or alternations or install improvements to
the building or the Demised Premises, provided that Owner's failure to comply
would adversely affect the Demised Premises or Tenant's use thereof. Owner
represents that as of the date of this Lease, there are no existing violations
of record which affect the Demised Premises, including any violations of local
laws 5, 10 and 16 (as amended). Tenant may, after securing Owner to Owner's
satisfaction against all damages, interest, penalties and expenses, including,
but not limited to, reasonable attorney's fees, by cash deposit or by surety
bond in an amount and in a company satisfactory to Owner, contest and appeal any
such laws, ordinances, orders, rules, regulations or requirements provided same
is done with all reasonable promptness and provided such appeal shall not
subject Owner to prosecution for a criminal offense or constitute a default
under any lease or mortgage under which Owner may be obligated, or cause the
demised premises or any part thereof to be condemned or vacated. Tenant shall
not do or permit any act or thing to be done in or to the demised premises which
is contrary to law, or which will invalidate or be in conflict with public
liability, fire or other policies of insurance at any time carried by or for the
benefit of Owner with respect to the demised premises or the building of which
the demised premises form a part, or which shall or might subject Owner to any
liability or responsibility to any person or for property damage. Tenant shall
not keep anything in the demised premises except as now or hereafter permitted
by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating
Organization or other authority having jurisdiction, and then only in such
manner and such quantity so as not to increase the rate for fire insurance
applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that in
effect prior to the commencement of Tenant's occupancy. Tenant shall pay all
costs, expenses, fines, penalties, or damages, which may be imposed upon Owner
by reason of Tenant's failure to comply with the provisions of this article and
if by reason of such failure the fire insurance rate
4
shall, at the beginning of this lease or at any time thereafter, be higher than
it otherwise would be, then Tenant shall reimburse Owner, as additional rent
hereunder, for that portion of al fire insurance premiums thereafter paid by
Owner which shall have been charged because of such failure by Tenant. In any
action or proceeding wherein Owner and Tenant are parties, a schedule or
"make-up" of rate for the building or demised premises issued by the New York
Fire Insurance Exchange, or other body making fire insurance rates applicable to
said premises shall be conclusive evidence of the facts therein stated and of
the several items and charges in the fire insurance rates then applicable to
said premises. Notwithstanding the foregoing, Tenant shall not be liable for any
increase in insurance premiums by reason of Tenant's use of the Demised Premises
for the uses permitted under this Lease. Tenant shall not place a load upon any
floor of the demised premises exceeding the floor load per square foot area
which it was designed to carry and which is allowed by law. [Intentionally
Omitted] Owner reserves the right to prescribe the weight and position of all
safes. Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient, in Owner's reasonable judgement, to absorb and
prevent excessive vibration, noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying leases and
to all mortgages which may now or hereafter affect such leases or the real
property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall from time to time execute promptly any certificate that Owner may
request.
Property Loss, Damage Reimbursement Indemnity:
8. Owner or its agents shall not be liable for any damage to property of Tenant
or of others entrusted to employees of the building, nor for loss of or damage
to any property of Tenant by theft or otherwise, nor for any injury or damage to
persons or property resulting from any cause of whatsoever nature, unless caused
by or due to the negligence or willful misconduct of Owner, its agents, servants
or employees. Owner or its agents will not be liable for any such damage caused
by other tenants or persons in, upon or about said building or caused by
operations in construction of any private, public or quasi public work. If at
any time any windows of the demised premises are temporarily closed or darkened
by reason of repairs or maintenance to the building (or permanently closed,
darkened or bricked up, if required by law) Owner shall not be liable for any
damage Tenant may sustain thereby and Tenant shall not be entitled to any
compensation therefor nor abatement or diminution of rent nor shall the same
release Tenant from its obligations hereunder nor constitute an eviction
provided that in the case of a temporary closing or darkening, Owner shall act
diligently to reduce the duration of such closing or darkening and minimize any
interference with the conduct of Tenant's
5
business during such period. Tenant shall indemnify and save harmless Owner
against and from all liabilities, obligations, damages, penalties, claims, costs
and expenses for which Owner shall not be reimbursed by insurance, including
reasonable attorneys fees, paid, suffered or incurred as a result of any breach
by Tenant, Tenant's agents, contractors, employees, invitees, or licensees, of
any covenant or condition of this lease, or the negligence or willful misconduct
of the Tenant, Tenant's agents, contractors, employees, invitees or licensees,
Tenant's liability under this lease extends to the acts and omissions of any
sub-tenant, and any agent, contractor, employee, invitee or licensee of any
sub-tenant. In case any action or proceeding is brought against Owner by reason
of any such claim, Tenant, upon written notice from Owner, will, at Tenant's
expense, resist or defend such action or proceeding by counsel approved by Owner
in writing, such approval not to be unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) If the demised premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give notice thereof to Owner promptly after Tenant
becomes aware of same and this lease shall continue in full force and effect
except as hereinafter set forth. (b) If the demised premises are partially
damaged or rendered partially unusable by fire or other casualty, the damages
thereto shall be repaired by and at the expense of Owner and the rent and other
items of additional rent, until such repair shall be substantially completed and
the Demised Premises made accessible to Tenant shall be apportioned from the day
following the casualty according to the part of the premises which is usable.
(c) If the demised premises are totally damaged or rendered wholly unusable by
fire or other casualty, then the rent and other items of additional rent as
hereinafter expressly provided shall be proportionately paid up to the time of
the casualty and thenceforth shall cease until the date when the premises shall
have been repaired and restored by Owner (or sooner reoccupied in part by Tenant
then rent shall be apportioned as provided in subsection (b) above), subject to
Owner's right to elect not to restore the same as hereinafter provided. If the
building shall be so damaged that Owner shall decide to demolish it or to
rebuild it, then, in any of such events, Owner may elect to terminate this lease
by written notice to Tenant, given within 90 days after such fire or casualty,
or 30 days after adjustment of the insurance claim for such fire or casualty,
whichever is sooner, specifying a date for the expiration of the lease, which
date shall not be less than 120 nor more than 180 days after the giving of such
notice, and upon the date specified in such notice the term of this lease shall
expire as fully and completely as if such date were the date set forth above for
the termination of this lease and Tenant shall forthwith quit, surrender and
vacate the premises without prejudice however, to Landlord's rights and remedies
against Tenant under the lease provisions in effect prior to such termination,
and any rent owing shall be paid up to such date and any payments of rent made
by Tenant which were on account of any period subsequent to such date shall be
returned to Tenant. Unless Owner shall serve a termination notice as provided
for herein, Owner shall make the repairs and restorations under the conditions
of (b) and (c) hereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond Owner's
control. After any such casualty, Tenant shall cooperate with Owner's
restoration by removing from the premises as
6
promptly as reasonably possible, all of Tenant's salvageable inventory and
moveable equipment, furniture, and other property. Tenant's liability for rent
shall resume after the Demised Premises is accessible to Tenant, but not sooner
than fifteen (15) days after written notice from Owner that the premises are
substantially ready for Tenant's occupancy. (d) Nothing contained hereinabove
shall relieve Tenant from liability that may exist as a result of damage from
fire or other casualty. Notwithstanding the foregoing, including Owner's
obligation to restore under subparagraph (b) above, each party shall look to any
insurance in its favor for recovery for loss or damage resulting from fire or
other casualty, Owner and Tenant each hereby releases and waives all right of
recovery with respect to subparagraphs (b) and (d) above, against the other or
any one claiming through or under each of them by way of subrogation or
otherwise. The release and waiver herein referred to shall be deemed to include
any loss or damage to the demised premises and/or to any personal property,
equipment, trade fixtures, goods and merchandise located therein. If, and to the
extent, that such waiver can be obtained only by the payment of additional
premiums, then the party benefiting from the waiver shall pay such premium
within ten days after written demand or shall be deemed to have agreed that the
party obtaining insurance coverage shall be free of any further obligation under
the provisions hereof with respect to waiver of subrogation. Tenant acknowledges
that Owner will not carry insurance on Tenant's furniture and/or furnishings or
any fixtures or equipment, improvements, or appurtenances removable by Tenant
and agrees that Owner will not be obligated to repair any damage thereto or
replace the same. (f) Tenant hereby waives the provisions of Section 227 of the
Real Property Law and agrees that the provisions of this article shall govern
and control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose, then
and in that event, the term of this lease shall cease and terminate from the
date of title vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired term of said lease and assigns to Owner, Tenant's entire
interest in any such award. Tenant shall have the right to make an independent
claim to the condemning authority for the value of Tenant's moving expenses and
personal property, trade fixtures and equipment, provided Tenant is entitled
pursuant to the terms of the lease to remove such property, trade fixture and
equipment at the end of the term and provided further such claim does not reduce
Owner's award.
Assignment, Mortgage, Etc.:
11. Tenant, for itself, its heirs, distributees, executors, administrators,
legal representative, successor and assigns, expressly covenants that it shall
not assign, mortgage or encumber this agreement, nor underlet, or suffer or
permit the demised premises or any part thereof to be used by others, without
the prior written consent of Owner in each instance. Transfer of the majority of
the stock of a corporate Tenant or the majority partnership interest of a
partnership Tenant shall be deemed an assignment. If this lease be assigned, or
if the demised premises or any part thereof be underlet or occupied by anybody
other than Tenant,
7
Owner may, after default by Tenant, collect rent from the assignee, under-
tenant or occupant, and apply the net amount collected to the rent herein
reserved, but no such assignment, underletting, occupancy or collection shall be
deemed a waiver of this covenant, or the acceptance of the assignee,
under-tenant or occupant as tenant, or a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant herein contained. The
consent by Owner to an assignment or underletting shall not in any wise be
construed to relieve Tenant from obtaining the express consent in writing of
Owner to any further assignment or underletting.
Electric Current:
12. Rates and conditions in respect to submetering or rent inclusion, as the
case may be, to be added in RIDER attached hereto. Tenant covenants and agrees
that at all times its use of electric current shall not exceed the capacity of
existing feeders to the building or the risers or wiring installation and Tenant
may not use any electrical equipment which, in Owner's opinion, reasonably
exercised, will overload such installations or interfere with the use thereof by
other tenants of the building. The change at any time of the character of
electric service shall in no wise make Owner liable or responsible to Tenant,
for any loss, damages or expenses which Tenant may sustain.
Access to Premises:
13. Owner or Owner's agents shall have the right (but shall not be obligated) to
enter the demised premises in any emergency at any time, and, at other
reasonable times upon reasonable notice to Tenant to examine the same and to
make such repairs, replacements and improvements as Owner may deem necessary and
reasonably desirable to the demised premises or to any other portion of the
building or which Owner may elect to perform. Tenant shall permit Owner to use
and maintain and replace pipes and conduits in and through the demised premises
and to erect new pipes and conduits therein provided they are concealed within
the walls, floor, or ceiling, do not reduce Tenant's useable space by more than
1%, are consistent with Tenant's decor, and do not interfere with the conduct of
Tenant's business operations. Owner may, during the progress of any work in the
demised premises, take all necessary materials and equipment into said premises
without the same constituting an eviction nor shall the Tenant be entitled to
any abatement of rent while such work is in progress nor to any damages by
reason of loss or interruption of business or otherwise provided that Owner
shall exercise due diligence to minimize any interference with the conduct of
Tenant's business operations. Throughout the term hereof Owner shall have the
right to enter the demised premises at reasonable hours upon reasonable notice
to Tenant for the purpose of showing the same to prospective purchasers or
mortgagees of the building, and during the last six months of the term for the
purpose of showing the same to prospective tenants. If Tenant is not present to
open and permit in entry into the demised premises, Owner or Owner's agents may
enter the same whenever such entry may be necessary in the event of an emergency
by master key or forcibly and provided reasonable care is exercised to safeguard
Tenant's property, such entry shall not render Owner or its agents liable
therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the term Tenant shall have removed all or
8
substantially all of Tenant's property therefrom Owner may immediately enter,
alter, renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any compensation and
such act shall have no effect on this lease or Tenant's obligations hereunder.
Vault, Vault Space, Area:
14. No Vaults, vault space or area, whether or not enclosed or covered, not
within the property line of the building is leased hereunder, anything contained
in or indicated on any sketch, blue print or plan, or anything contained
elsewhere in this lease to the contrary notwithstanding. Owner makes no
representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in violation
of the certificate of occupancy issued for the building of which the demised
premises are a part a true copy of which has been delivered to Tenant. Owner
shall not amend the certificate of occupancy during the term of this Lease to
preclude the use of the Demised Premises as general administrative or executive
offices or to reduce the number of persons who may occupy the Demised Premises.
Tenant has inspected the premises and accepts them as is, subject to the riders
annexed hereto with respect to Owner's work, if any. In any event, Owner makes
no representation as to the condition of the premises except as otherwise
provided for in this Lease.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this
lease may be canceled by Owner by the sending of a written notice to Tenant
within a reasonable time after the happening of any one or more of the following
events: (1) the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as the debtor, and the failure of Tenant to have such case
dismissed or vacated within ninety (90) days after the filing thereof; or (2)
the making by Tenant of an assignment or any other arrangement for the benefit
of creditors under any state statute. Neither Tenant nor any person claiming
through or under Tenant, or by reason of any statute or order of court, shall
thereafter be entitled to possession of the premises demised but shall forthwith
quit and surrender the premises. If this lease shall be assigned in accordance
with its terms, the provisions of this Article 16 shall be applicable only to
the party then owning Tenant's interest in this lease.
9
(b) it is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be re-let by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such re-letting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default:
17. (1) If Tenant defaults in fulfilling any of the covenants of this lease or
if the demised premises are abandoned or if any execution or attachment shall be
issued against Tenant or any of Tenant's property whereupon the demised premises
shall be taken or occupied by someone other than Tenant: or if this lease be
rejected under Section 365 of Title 11 of the U.S. Code (bankruptcy code); then,
in any one or more of such events, upon Owner serving a written ten (10) days'
notice to Tenant in the case of Tenant's failure to pay rent or additional rent,
and a twenty (20) day notice with respect to any other default specifying the
nature of said default and upon the expiration of the applicable period, if
Tenant shall have failed to comply with or remedy such default, or except for a
default in the payment of rent or additional rent if the said default or
omission complained of shall be of a nature that the same cannot be completely
cured or remedied within the applicable period, and if Tenant shall not have
diligently commenced curing such default within such period, and shall not
thereafter with reasonable diligence and in good faith, proceed to remedy or
cure such default, then Owner may serve a written seven (7) days' notice of
cancellation of this lease upon Tenant, and upon the expiration of said seven
(7) days this lease and the term thereunder shall end and expire as fully and
completely as if the expiration of such seven (7) day period were the day herein
definitely fixed for the end and expiration of this lease and the term thereof
and Tenant shall then quit and surrender the demised premises to Owner but
Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given and
the notice and any grace period shall have expired without Tenant curing the
default in the payment of rent or additional rent or without Tenant curing or
commencing to cure (as provided for above) any other
10
default and the term shall expire as aforesaid: then and in any of such events
Owner may without notice, re-enter the demised premises and dispossess Tenant by
summary proceedings and the legal representative of Tenant or other occupant of
demised premises and remove their effects and hold the premises as if this lease
had not been made, and Tenant hereby waives the service of notice of intention
to re-enter or to institute legal proceedings to that end.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or other wise, (a) the rent shall become due thereupon and
be paid up to the time of such re-entry, dispossess and/or expiration, (b) Owner
may re-let the premises or any part or parts thereof, either in the name of
Owner or otherwise, for a term or terms, which may at Owner's option be less
than or exceed the period which would otherwise have constituted the balance of
the term of this lease and may grant concessions or free rent or charge a higher
rental than that in this lease, and/or (c) Tenant or the legal representatives
of Tenant shall also pay Owner as liquidated damages for the failure of Tenant
to observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and/or covenanted to be paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised premises for each month of the period which would otherwise have
constituted the balance of the term of this lease. The failure of Owner to
re-let the premises or any part or parts thereof shall not release or affect
Tenant's liability for damages. In computing such liquidated damages there shall
be added to the said deficiency such expenses as Owner may incur in connection
with re-letting, such as legal expenses, reasonable attorneys' fees, brokerage,
advertising and for keeping the demised premises in good order or for preparing
the same for re-letting. Any such liquidated damages shall be paid in monthly
installments by Tenant on the rent day specified in this lease and any suit
brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised premises
in good order or preparing the same for re-rental may, at Owner's option, make
such alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgement, considers advisable and necessary
for the purpose of re-letting the demised premises, and the making of such
alterations, repairs, replacements, and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Owner shall
in no event be liable in any way whatsoever for failure to re-let the demised
premises, or in the event that the demised premises are re-let, for failure to
collect the rent thereof under such reletting, and in no event shall Tenant be
entitled to receive any excess, if any, of such net rents collected over the
sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws in
11
the event of Tenant being evicted or dispossessed for any cause, or in the event
of Owner obtaining possession of demised premises, by reason of the violation by
Tenant of any of the covenants and conditions of this lease, or otherwise.
Fees and Expenses:
19. If Tenant shall default in the observance or performance of any term or
covenant on Tenant's part to be observed or performed under or by virtue of any
of the terms or provisions in any article of this lease, after notice if
required and upon expiration of any applicable grace period if any, (except in
an emergency), then, unless otherwise provided elsewhere in this lease, Owner
may immediately or at any time thereafter and without notice in the case of an
emergency, and upon five (5) days' notice in all other cases, perform the
obligation of Tenant thereunder. If Owner, in connection with the foregoing or
in connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or incurs any obligations for the payment of money,
including but not limited to reasonable attorneys' fees, in instituting,
prosecuting or defending any action or proceeding, and prevails in any such
action or proceeding then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within thirty (30) days of rendition of any
bill or statement to Tenant therefor. If Tenant's lease term shall have expired
at the time of making of such expenditures or incurring of such obligations,
such sums shall be recoverable by Owner, as damages.
Building Alterations and Management:
20. Owner shall have the right at any time without the same constituting an
eviction and without incurring liability to Tenant therefor to change the
arrangement and/or location of public entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets or other public parts of the building and
to change the name, number or designation by which the building may be known
provided that access to the Demised Premises and the building shall not be
impaired and reasonable advance notice is given to Tenant. Except as otherwise
provided in this Lease, there shall be no allowance to Tenant for diminution of
rental value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner or other Tenants making any
repairs in the building or any such alterations, additions and improvements.
Furthermore, Tenant shall not have any claim against Owner by reason of Owner's
imposition of such controls of the manner of access to the building by Tenant's
social or business visitors as the Owner may deem necessary for the security of
the building and its occupants.
No Representations by Owner:
21. Neither Owner nor Owner's agents have made any representations or promises
with respect to the physical condition of the building, the land upon which it
is erected or the demised premises, the rents, leases, expenses of operation or
any other matter or thing affecting or related to the premises except as herein
expressly set forth and no rights, easements
12
or licenses are acquired by Tenant by implication or otherwise except as
expressly set forth in the provisions of this lease. Tenant has inspected the
demised premises and is thoroughly acquainted with their condition and except as
otherwise provided in this Lease agrees to take the same "as is" but in broom
clean condition and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises were in
good and satisfactory condition at the time such possession was so taken, except
as to latent defects. All understandings and agreements heretofore made between
the parties hereto are merged in this contract, which alone fully and completely
expresses the agreement between Owner and Tenant and any executory agreement
hereafter made shall be ineffective to change, modify, discharge or effect an
abandonment of it in whole or in part, unless such executory agreement is in
writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment, is sought.
End of Term:
22. Upon the expiration or other termination of the term of this lease, Tenant
shall quit and surrender to Owner the demised premises, broom clean, in good
order and condition, ordinary wear and damage by fire, other casualty and the
negligence or willful misconduct of Owner, its agents, employees and licensees
and damages which Tenant is not required to repair as provided elsewhere in this
lease excepted, and Tenant shall remove all its personal property. Tenant's
obligation to observe or perform this covenant shall survive the expiration or
other termination of this lease. If the last day of the term of this Lease or
any renewal thereof, falls on Sunday, this lease shall expire at 6:00 p.m. on
the preceding Saturday unless it be a legal holiday in which case it shall
expire at noon on the preceding business day.
Quiet Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and
additional rent and observing and performing all the terms, covenants and
conditions, on Tenant's part to be observed and performed, Tenant may peaceably
and quietly enjoy the premises hereby demised, subject, nevertheless, to the
terms and conditions of this lease including, but not limited to, Article 31
hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
Failure to Give Possession:
24. If Owner is unable to give possession of the demised premises on the date of
the commencement of the term hereof, because of the holding-over or retention of
possession of any tenant, undertenant or occupants or if the demised premises
are located in a building being constructed, because such building has not been
sufficiently completed to make the premises ready for occupancy or because of
the fact that a certificate of occupancy has not been procured or for any other
reason, Owner shall not be subject to any liability for failure to give
possession on said date and the validity of the lease shall not be impaired
under such circumstances, nor shall the same be construed in any wise to extend
the term of this lease, but the rent payable hereunder shall be abated (provided
Tenant is not responsible
13
for Owner's inability to obtain possession or complete construction) until after
Owner shall have given Tenant written notice that the Owner is able to deliver
possession in condition required by this lease. If permission is given to Tenant
to enter into the possession of the demises premises or to occupy premises other
than the demised premises prior to the date specified as the commencement of the
term of this lease, Tenant covenants and agrees that such possession and/or
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease except the obligation to pay the fixed annual rent set
forth in the preamble to this lease. The provisions of this article are intended
to constitute "an express provision to the contrary" within the meaning of
Section 223-a of the New York Real Property Law. The foregoing provisions of
this printed Article 24 shall not apply to the original premises initially
demised under this Lease.
No Waiver:
25. The failure of Owner or Tenant, as the case may be to seek redress for
violation of, or to insist upon the strict performance of any covenant or
condition of this lease or in the case of Owner of any of the Rules or
Regulations, set forth or hereafter adopted by Owner, shall not prevent a
subsequent act which would have originally constituted a violation from having
all the force and effect of an original violation. The receipt by Owner of rent
and/or additional rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach and no provision of this lease
shall be deemed to have been waived by Owner or Tenant, as the case may be
unless such waiver be in writing signed by Owner or Tenant, as the case may be.
No payment by Tenant or receipt by Owner of a lesser amount than the monthly
rent herein stipulated shall be deemed to be other than on account of the
earliest stipulated rent, nor shall any endorsement or statement of any check or
any letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Owner may accept such check or payment without prejudice to
Owner's right to recover the balance of such rent or pursue any other remedy in
this lease provided. No act or thing done by Owner or Owner's agents during the
term hereby demised shall be deemed an acceptance of a surrender of said
premises, and no agreement to accept such surrender shall be valid unless in
writing signed by Owner. No employee of Owner or Owner's agent shall have any
power to accept the keys of said premises prior to the termination of the lease
and the delivery of keys to any such agent or employee shall not operate as a
termination of the lease or a surrender of the premises.
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the respective
parties hereto shall and they hereby do waive trial by jury in any action
proceeding or counterclaim brought by either of the parties hereto against the
other (except for personal injury or property damage) on any matters whatsoever
arising out of or in any way connected with this lease, the relationship of
Owner and Tenant, Tenant's use of or occupancy of said premises, and any
emergency statutory or any other statutory remedy. It is further mutually agreed
that in the event Owner commences any proceeding or action for possession
including a summary proceeding for possession of the premises. Tenant will not
interpose any counterclaim of
14
whatever nature or description in any such proceeding including a counterclaim
under Article 4 except for statutory mandatory counterclaims.
Inability to Perform:
27. This Lease and the obligation of Tenant to pay rent hereunder and perform
all of the other covenants and agreements hereunder on part of Tenant to be
performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment,
fixtures, or other materials if Owner is prevented or delayed from so doing by
reason of strike or labor troubles or any cause beyond Owner's reasonable
control including, but not limited to, government preemption or restrictions or
by reason of any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions which have been
or are affected, either directly or indirectly, by war or other emergency. The
lack of funds shall not be deemed to be a cause beyond any party's control.
Bills and Notices:
28. Except as otherwise in this lease provided, a bill, statement, notice or
communication which Owner may desire or be required to give to Tenant, shall be
deemed sufficiently given or rendered if, in writing, delivered to Tenant
personally, with receipt acknowledged, or sent by registered or certified mail,
return receipt requested, addressed to Tenant at the building of which the
demised premises form a part or at the last known residence address or business
address of Tenant or left at any of the aforesaid premises addressed to Tenant
and with a copy of notices to Tenant to Mr. Wayne Nelson, Chairman at the
Demised Premises, and a copy to Ray Sanseverino, Esq., Corbin, Silverman &
Sanseverino LLP, 805 Third Avenue, 11th Floor, New York, New York and the time
of the rendition of such bill or statement and of the giving of such notice or
communication shall be deemed to be the time when the same is delivered to
Tenant if delivered personally, or three (3) business days after mailing, if
sent by certified mail. Any notice by Tenant to Owner must be served personally
with receipt acknowledged or by registered or certified mail, return receipt
requested, addressed to Owner at the address first hereinabove given or at such
other address as Owner shall designate by written notice.
Services Provided by Owners:
29. Owner at its expense shall provide: (a) necessary elevator facilities on
business days from 8 a.m. to 6 p.m. and have one elevator subject to call at all
other times; (b) heat to the demised premises when and as required by law, on
business days from 8 a.m. to 6 p.m.; (c) water for ordinary cleaning and
lavatory purposes, but if Tenant uses or consumes water for any other purposes
or in unusual quantities (of which fact Owner shall be the sole judge). Owner
may install a water meter at Tenant's expense which Tenant shall thereafter
maintain at Tenant's expense in good working order and repair to register such
water consumption and Tenant shall pay for water consumed as shown on said meter
as additional rent as
15
and when bills are rendered. Said premises are to be kept clean by Tenant, it
shall be done at Tenant's sole expense, in a manner reasonably satisfactory to
Owner and no one other than persons approved by Owner shall be permitted to
enter said premises or the building of which they are a part for such purpose.
Tenant shall pay Owner the cost of removal of any of Tenant's refuse and rubbish
from the building; (d) Owner reserves the right to stop services of the heating,
elevators, plumbing, air-conditioning, electric, power systems or cleaning or
other services, if any, when necessary by reason of accident or for repairs,
alterations, replacements or improvements necessary or desirable in the judgment
of Owner for as long as may be reasonably required by reason thereof. If the
building of which the demised premises are a part supplies manually operated
elevator service. Owner at any time may substitute automatic control elevator
service and proceed diligently with alterations necessary therefor without in
any wise affecting this lease or the obligation of Tenant hereunder.
Captions:
30. The Captions are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope of this lease nor the intent
of any provisions thereof.
Definitions:
31. The term "office", or "offices", wherever used in this lease, shall not be
construed to mean premises used as a store or stores, for the sale or display,
at any time, of goods, wares or merchandise, of any kind, or as a restaurant,
shop, booth, bootblack or other stand, barber shop, or for other similar
purposes or for manufacturing. The term "Owner" means a landlord or lessor, and
as used in this lease means only the owner, or the mortgagee in possession, for
the time being of the land and building (or the owner of a lease of the building
or of the land and building) of which the demised premises form a part, so that
in the event of any sale or sales of said land and building or of said lease, or
in the event of a lease of said building, or of the land and building, the said
Owner shall be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder except in the performance of work which Owner
shall have approved pursuant to the provisions of this Lease and it shall be
deemed and construed without further agreement between the parties or their
successors in interest, or between the parties and the purchaser, at any such
sale, or the said lessee of the building, or of the land and building, that the
purchaser or the lessee of the building has assumed and agreed to carry out any
and all covenants and obligations of Owner, hereunder except in the performance
of work which Owner shall have approved pursuant to the provisions of this
Lease. The words "re-enter" and "re-entry" as used in this lease are not
restricted to their technical legal meaning. The term "business days" as used in
this lease shall exclude Saturdays, Sundays and all days as observed by the
State or Federal Government as legal holidays and those designated as holidays
by the applicable building service union employees service contract or by the
applicable Operating Engineers contract with respect to HVAC service. Wherever
it is expressly provided in this lease that consent shall not be unreasonably
withheld, such consent shall not be unreasonably delayed.
16
Adjacent Excavation-Shoring:
32. If an excavation shall be made upon land adjacent to the demised premises,
or shall be authorized to be made, Tenant shall afford to the person causing or
authorized to cause such excavation, license to enter upon the demised premises
for the purpose of doing such work as said person shall deem necessary to
preserve the wall or the building of which demised premises form a part from
injury or damage and to support the same by proper foundations without any claim
for damages or indemnity against Owner, or diminution or abatement of rent.
Rules and Regulations:
33. Tenant and Tenant's servants, employees, agents, visitors, and licensees
shall observe faithfully, and comply with, the Rules and Regulations and such
other and further reasonable Rules and Regulations as Owner or Owner's agents
may from time to time adopt. Notice of any additional rules or regulations shall
be given pursuant to Article 28 of this Lease. In case Tenant disputes the
reasonableness of any additional Rule or Regulation hereafter made or adopted by
Owner or Owner's agents, the parties hereto agree to submit the question of the
reasonableness of such Rule or Regulation for decision to the New York office of
the American Arbitration Association, whose determination shall be final and
conclusive upon the parties hereto. The right to dispute the reasonableness of
any additional Rule or Regulation upon Tenant's part shall be deemed waived
unless the same shall be asserted by service of a notice, in writing upon Owner
within fifteen (15) days after the giving of notice thereof. Nothing in this
lease contained shall be construed to impose upon Owner any duty or obligation
to enforce the Rules and Regulations or terms, covenants or conditions in any
other lease, as against any other tenant and Owner shall not be liable to Tenant
for violation of the same by any other tenant, its servants, employees, agents,
visitors or licensees.
Estoppel Certificate:
34. Tenant, at any time, and from time to time, upon at least 10 days' prior
notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any
other person, firm or corporation specified by Owner, a statement certifying
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), stating the dates to which the rent and additional
rent have been paid, and stating whether or not there exists any default by
Owner under this Lease, and, if so, specifying each such default.
Successors and Assigns:
35. The covenants, conditions and agreements contained in this lease shall bind
and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns. Tenant shall look only to Owner's estate
and interest in the land and building, for the satisfaction of Tenant's remedies
for the collection of a judgment (or other judicial process) against Owner in
the event of any default by Owner hereunder, and
17
no other property or assets of such Owner (or any partner, member, officer or
director thereof, disclosed or undisclosed), shall be subject to levy, execution
or other enforcement procedure for the satisfaction of Tenant's remedies under
or with respect to this lease, the relationship of Owner and Tenant hereunder,
or Tenant's use and occupancy of the demised premises.
SEE RIDER ATTACHED TO AND MADE A PART HEREOF.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
Witness for Owner: A & R REAL ESTATE, INC.
By: /s/ Signature Illegible By: /s/ Signature Illegible
President
Witness for Tenant: NELSON COMMUNICATIONS INC.
By: /s/ Signature Illegible By: /s/ W. K. Nelson
President
|
ACKNOWLEDGMENTS
CORPORATE OWNER STATE OF NEW YORK, ss.:
COUNTY OF
On this day of ____________, 19 before me personally came _______________ to
me known, who being by me duly sworn, did depose and say that he resides in
_______________; that he is the ______________ of ________________ the
corporation described in and which executed the foregoing instrument, as OWNER;
that he knows the seal of said corporation; the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of said corporation, and that he signed his name thereto by like
order.
CORPORATE TENANT STATE OF NEW YORK, ss.:
COUNTY OF
On this day of ____________, 19 before me personally came _______________ to
me known, who being by me duly sworn, did depose and say that he resides in
___________; that he is the ______________ of ________________ the corporation
described in and which executed the foregoing instrument, as OWNER; that he
knows the seal of said corporation; the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation, and that he signed his name thereto by like order.
18
INDIVIDUAL OWNER STATE OF NEW YORK, ss.:
COUNTY OF
On this ___ day of __________ 19__, before me personally came _____________ to
me known and known to me to be the individual described in and who, as OWNER,
executed the foregoing instrument and acknowledged to me that he executed the
same.
INDIVIDUAL TENANT STATE OF NEW YORK, ss.:
COUNTY OF
On this ___ day of __________ 19__, before me personally came _____________ to
me known and known to me to be the individual described in and who, as TENANT,
executed the foregoing instrument and acknowledged to me that he executed the
same.
19
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an
inducement to Owner making the within lease with Tenant, the undersigned
guarantees to Owner, Owner's successors and assigns, the full performance and
observance of all the covenants, conditions and agreements, therein provided to
be performed and observed by Tenant, including the "Rules and Regulations" as
therein provided, without requiring any notice of non-payment, non-performance,
or non-observance, or proof, or notice, or demand, whereby to charge the
undersigned therefor, all of which the undersigned hereby expressly waives and
expressly agrees that the validity of this agreement and the obligations of the
guarantor hereunder shall in no wise be terminated, affected or impaired by
reason of the assertion by Owner against Tenant of any of the rights or remedies
reserved to Owner pursuant to the provisions of the within lease. The
undersigned further covenants and agrees that this guaranty shall remain and
continue in full force and effect as to any renewal, modification or extension
of this lease and during any period when Tenant is occupying the premises as a
"statutory tenant." As a further inducement to Owner to make this lease and in
consideration thereof. Owner and the undersigned covenant and agree that in any
action or proceeding brought by either Owner or the undersigned against the
other on any matters whatsoever arising out of, under, or by virtue of the terms
of this lease or of this guarantee that Owner and the undersigned shall and do
hereby waive trial by jury.
Dated: 19
Guarantor
Witness
Guarantor's Residence
Business Address
Firm Name
STATE OF NEW YORK ) ss
COUNTY OF )
On this ___ day of ____________ 19__ before me personally came
________________________ to me known and known to me to be the individual
described in, and who executed the foregoing Guaranty and acknowledged to me
that he executed the same
20
Notary
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.
1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by any
Tenant or used for any purpose other than for ingress or egress from the demised
premises and for delivery of merchandise and equipment in a prompt and efficient
manner using elevators and passageways designated for such delivery by Owner.
There shall not be used in any space, or in the public hall of the building,
either by any Tenant or by jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and
sideguards. If said premises are situated on the ground floor of the building.
Tenant thereof shall further, at Tenant's expense, keep the sidewalk and curb in
front of said premises clean and free from ice, snow, dirt and rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any window of
the building and no Tenant shall sweep or throw or permit to be swept or thrown
from the demised premises any dirt or other substances into any of the corridors
or halls, elevators, or out of the doors or windows or stairways of the building
and Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the demised premises, or permit or suffer the demised
premises to be occupied or used in a manner offensive or objectionable to Owner
or other occupants of the building by reason of noise, odors, and/or vibrations,
or interfere in any way with other Tenants or those having business therein, nor
shall any bicycles, vehicles, animals, fish, or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of the
building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
building or on the inside of the demised premise if the same is visible from the
outside of the premises without the prior written consent of Owner, except that
the name of Tenant may appear on the entrance door of the premises. In the event
of the violation of the foregoing by any Tenant. Owner may remove same without
any liability, and may charge the expense
21
incurred by such removal to Tenant or Tenants violating this rule.
6. No Tenant shall mark, paint, drill into, or in any way deface any part of the
demised premises or the building of which they form a part except in the
performance of work which Owner shall have approved pursuant to the provisions
of this Lease. No boring, cutting or stringing of wires shall be permitted,
except with the prior written consent of Owner which consent shall not be
unreasonably withheld or delayed. No Tenant shall lay linoleum, or other similar
floor covering, so that the same shall come in direct contact with the floor of
the demised premises, and, if linoleum or other similar floor covering is
desired to be used an interlining of builder's deadening felt shall be first
affixed to the floor, by a paste or other material, soluble in water, the use of
cement or other similar adhesive material being expressly prohibited.
7. Each Tenant must, upon the termination of his Tenancy, restore to Owner all
keys of stores, offices and toilet rooms, either furnished to, or otherwise
procured by, such Tenant, and in the event of the loss of any keys, so
furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of any
description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease or which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and each
Tenant shall cooperate in prevent the same.
10. Owner reserves the right to exclude from the building all persons who do not
present a pass to the building signed by Owner. Owner will furnish passes to
persons for whom any Tenant requests same in writing. Each Tenant shall be
responsible for all persons for whom he requests such pass and shall be liable
to Owner for all acts of such persons. Tenant shall not have a claim against
Owner by reason of Owner excluding from the building any person who does not
present such pass.
11. Tenant shall not bring or permit to be brought or kept in or on the demised
premises, any inflammable, combustible, explosive, or hazardous fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
12. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky
matter, or fixtures into or out of the building without Owner's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures requires
special handling, all work in connection therewith shall comply with the
Administrative Code of the City of New York and all other laws and regulations
applicable thereto and shall be done during such hours as Owner may designate.
13. Refuse and Trash. (1) Compliance by Tenant. Tenant covenants and
22
agrees, at its sole cost and expense, to comply with all present and future
laws, orders, and regulations of all state, federal, municipal, and local
governments, departments, commissions and boards regarding the collection,
sorting, separation and recycling of waste products, garbage, refuse and trash.
Tenant shall sort and separate such waste products, garbage, refuse and trash
into such categories as provided by law. Each separately sorted category of
waste products, garbage, refuse and trash shall be placed in separate
receptacles reasonably approved by Owner. Such separate receptacles may, at
Owner's option, be removed from the demised premises in accordance with a
collection schedule prescribed by law. Tenant shall remove, or cause to be
removed by a contractor acceptable to Owner, at Owner's sole discretion, such
items as Owner may expressly designate. (2) Owner's Rights in Event of
Noncompliance. Owner has the option to refuse to collect or accept from Tenant
waste products, garbage, refuse or trash (a) that is not separated and sorted as
required by law or (b) which consists of such items as Owner may expressly
designate for Tenant's removal, and to require Tenant to arrange for such
collection at Tenant's sole cost and expense, utilizing a contractor
satisfactory to Owner. Tenant shall pay all costs, expenses, fines, penalties,
or damages that may be imposed on Owner or Tenant by reason of Tenant's failure
to comply with the provisions of this Building Rule 15, and, at Tenant's sole
cost and expense, shall indemnity, defend and hold Owner harmless (including
reasonable legal fees and expenses) from and against any actions, claims and
suits arising from such noncompliance, utilizing counsel reasonably satisfactory
to Owner.
[CHART OMITTED]
23
RIDER ANNEXED TO LEASE DATED MAY 9, 1997 BETWEEN A & R REAL ESTATE,
INC., AS OWNER, AND NELSON COMMUNICATIONS INC., AS TENANT.
37. RIDER PROVISIONS PREVAIL:
If and to the extent that any of the provisions of this Rider conflict
or are otherwise inconsistent with any of the preceding provisions of this
lease, the provisions of this Rider shall prevail.
38. OWNER'S WORK:
(a) Owner and Tenant shall comply with the terms and conditions of the
"Building Standard Work Letter" attached to and made a part of this Lease as
Exhibit A with respect to the preparation of the Demised Premises for Tenant's
occupancy. Reference to "Landlord" in Exhibit A shall be deemed to refer to
Owner. Reference to "Owner's Work" means the work described as Landlord's Work
on Exhibit A. The terms and conditions of Exhibit A shall control with respect
to the performance of Owner's Work and "Tenant's Work" (as defined in Exhibit
A). Owner's Work shall be performed in accordance with applicable legal
requirements in a good and workmanlike manner. Other than the existing
air-conditioning units servicing the Demised Premises, all equipment installed
and materials used as part of Owner's Work shall be new.
(b) If Owner shall not substantially complete Owner's Work by December
31, 1997 (the "Outside Date"), Tenant may elect to terminate this Lease by
giving notice to Owner within forty-five (45) days after that right to terminate
shall arise. Upon any such termination, neither party shall have any further'
rights or obligations hereunder except that Owner shall return any rent which
may have been prepaid by Tenant. The Outside Date shall be extended for the
period of any delay in the commencement of or performance of Owner's Work caused
by Tenant, its agent, employees or contractors, including changes and
substitutions requested by Tenant and Tenant's failure to deliver the plans and
specifications required by Part B of Exhibit A - Part I by the "Submission Date"
(as defined therein).
(c) Within thirty (30) days following Delivery of Possession (as
defined below), Tenant shall prepare and deliver to Landlord a punch list
setting forth any deficiencies or defects in Owner's Work. Upon receipt of that
list, Owner shall correct any such defects or deficiencies. Provided that Tenant
shall deliver such a punch list within that thirty (30) day period, Owner shall
correct any defects in Owner's Work which shall arise within one (1) year
following Delivery of Possession. The foregoing warranty shall not apply to the
ceiling at the Demised Premises if Tenant shall require an open ceiling plan.
39. BASIC BUILDING WORK:
In addition to Owner's Work, Owner agrees to perform certain work at
other portions of the Building outside of the Demised Premises in accordance
with a work schedule established by Owner. Such other work is described as the
"Basic Building Work" and is listed on Exhibit B attached to and made a part of
this Lease. Owner shall substantially complete the
24
installation of the thermopane windows at the Demised Premises by August 1,
1997. Owner shall complete its renovation of the lobby of the building by
December 31, 1997. If Owner fails to substantially complete the renovation of
the lobby of the Building by December 31, 1997, from and after that date and
until the renovation of the lobby shall be substantially completed, the fixed
annual rent payable hereunder shall be reduced by ten (10%) percent.
40. TERM, COMMENCEMENT AND EXPIRATION DATES:
A. The "Commencement Date" of the term of this lease shall be the date
of Delivery of Possession of the Demised Premises.
B. The "Expiration Date" of this lease shall be October 31, 2007. If
this lease is canceled before the "Expiration Date", the effective date of
cancellation shall be the "Expiration Date".
C. "Lease Year" means each period of twelve (12) consecutive months
occurring within the Term of this Lease except that if the Commencement Date is
not the first day of a month, the first Lease Year shall consist of the partial
calendar month in which the Term commenced together with the next twelve (12)
full calendar months and except that the last Lease Year shall end on the
Expiration Date.
41. DELIVERY OF POSSESSION AND ENTRY BY TENANT:
A. Delivery of Possession shall occur when Owner shall notify Tenant
that Owner's Work is substantially complete and that the Tenant may take
possession of the Demised Premises.
B. Subject to the provisions set forth below, when Owner's Work has
progressed sufficiently in Owner's reasonable judgment to permit Tenant to do
so, and provided that in Owner's judgment entry and performance of work by
Tenant shall not interfere with or delay the performance of Owner's Work or
result in a possible or threatened work stoppage, labor dispute or labor
difficulty of any nature, Tenant may enter the Demised Premises prior to
Delivery of Possession for the purpose of wiring and/or cables for Tenant's
telephone and computer systems. If after any such entry by Tenant, a delay or
interference with Owner's Work, a work stoppage or labor dispute or difficulty
of any kind shall occur or be threatened, Tenant shall be required to cease such
work and activities. Tenant shall be responsible for any damage to any portion
of the Demised Premises and Owner's Work arising as a result of Tenant's entry
or the activities of Tenant, its contractors or their respective employees.
Except for the payment of rent, any such entry by Tenant shall be subject to all
of the terms and conditions of this Lease.
42. ESCALATION FOR WAGE RATES:
A. For the purposes of this lease:
1. The term "Escalation Year" shall mean each calendar year
which shall include any part of the term of this Lease.
2. The term "R.A.B." shall mean the Realty Advisory Board on
25
Labor Relations, Incorporated, or its successor.
3. The term "Local 32B" shall mean Local 32B-32J of the
Building Service Employees International Union, AFL-CIO, or its successor.
4. The term "Class A Office Buildings" shall mean office
buildings in the Class A category under the building operating agreement between
R.A.B. and Local 32B.
5. The term "Wage Rates" with respect to any Escalation Year
shall mean the regular average hourly wage rate, exclusive of fringe benefits,
required to be paid to Porters in Class A Office Buildings pursuant to any
agreement between R.A.B. and Local 32B in effect during such Escalation Year,
provided that if any such agreement shall require Porters to be regularly
employed on days or during hours when overtime or other premium pay rates are in
effect, then the term "regular average hourly wage rate" shall mean the regular
average hourly wage rate for the hours in a calendar week which Porters are
required to be regularly employed (whether or not actually at work in the
building). If there is no such agreement in effect as of the date of Owner's
Statement on which such regular average hourly wage rate is determinable, the
computations shall be made on the basis of the regular average hourly wage rate
being paid by Owner or by the contractor performing porter or cleaning services
for Owner as of the date of such Owner's Statement and appropriate retroactive
adjustments shall be made when the regular average hourly wage rate paid as of
such Owner's Statement is finally determined. If length of service shall be a
factor in determining the wage rate, it shall be conclusively presumed that all
employees have five (5) or more years of service.
6. The term "Porters" shall mean that classification of
employee engaged in the general maintenance and operation of Class A Office
Buildings most nearly comparable to the classification now applicable to porters
in the current agreements between R.A.B. and Local 32B (which classification is
presently termed "others" in said agreement).
B. 1. Commencing on the first anniversary of the Commencement Date and
thereafter during the Term, for each Escalation Year or partial Escalation Year
occurring during the term of this Lease, Tenant shall pay ("Tenant's Operating
Payment") a sum equal to 25,000 multiplied by the number of cents (inclusive of
any fractions of a cent) of any increase in Wage Rates above those in effect as
of December 31, 1997. Any such payment shall be effective as of, and retroactive
to, if necessary, the date of such increase in Wage Rates.
2. Owner shall furnish to Tenant, prior to the commencement of
each Escalation Year, a written statement setting forth Owner's estimate of
Tenant's Operating Payment for such Escalation Year. Tenant shall pay to Owner
on the first day of each month during such Escalation Year an amount equal to
one-twelfth (1/12th) of Owner's estimate of Tenant's Operating Payment for such
Escalation Year. The Owner's estimate shall be based upon the published Wage
Rate, if any, for the new Escalation Year. If the Wage Rate for the new
Escalation Year shall not be known, then Owner's estimate may not exceed one
hundred eight (108%) percent of Tenant's Operating Payment for the immediately
prior Escalation Year. If, however, Owner shall
26
furnish any such estimate for an Escalation Year subsequent to the commencement
thereof, then (a) until the first day of the month following the month in which
such estimate is furnished to Tenant, Tenant shall pay to Owner on the first day
of each month an amount equal to the monthly sum payable by Tenant to Owner
under this Section in respect of the last month of the preceding Escalation
Year; (b) promptly after such estimate is furnished to Tenant or together
therewith, Owner shall give notice to Tenant stating whether the installments of
Tenant's Operating Payment previously made for such Escalation Year were greater
or less than the installments of the Tenant's Operating Payment to be made for
such Escalation Year in accordance with such estimate, and (i) if there shall be
a deficiency, "Tenant shall pay the amount thereof within thirty (30) days after
demand therefor, or (ii) if there shall have been an overpayment, Owner shall
either refund to Tenant the amount thereof or permit Tenant to credit the amount
thereof against subsequent rent payments until Tenant is reimbursed; and (c) on
the first day of the month following the month in which such estimate is
furnished to Tenant, and monthly thereafter throughout the remainder of such
Escalation Year, Tenant shall pay to Owner an amount equal to one-twelfth
(1/12th) of Tenant's Operating Payment shown on such estimate. Owner may at any
time or from time to time furnish to Tenant a revised statement of Owner's
estimate of Tenant's Operating Payment for such Escalation Year; and in such
case, Tenant's Operating Payment for such Escalation Year shall be adjusted and
paid or refunded, as the case may be, substantially in the same manner as
provided in the preceding sentence.
3. Within ninety (90) days after the end of each Escalation
Year, Owner shall furnish to Tenant a Owner's Statement for such Escalation
Year. If the Owner's Statement shall show that the sums paid by Tenant under
this Section exceeded Tenant's Operating Payment paid by Tenant for such
Escalation Year, Owner shall either refund to Tenant the amount of such excess
or permit Tenant to credit the amount of such excess against subsequent rent
payments until Tenant is reimbursed; and if the Owner's Statement for such
Escalation Year shall show that the sums so paid by Tenant were less than
Tenant's Operating Payment paid by Tenant for such Escalation Year, Tenant shall
pay the amount of such deficiency within thirty (30) days after demand therefor.
4. The computation under this Article is intended to
constitute a formula for an agreed rental escalation and may or may not
constitute an actual reimbursement to Owner for its costs and expenses paid by
Owner with respect to the building.
5. If the first anniversary of the Commencement Date or if the
Expiration Date shall occur on a date other than January 1 or December 31,
respectively, any additional rent under this Article for the Escalation Year in
which the first anniversary of the Commencement Date or Expiration Date shall
occur shall be apportioned in that percentage which the number of days in the
period from the first anniversary of the Commencement Date to December 31 or
from January 1 to the Expiration Date, as the case may be, both inclusive, shall
bear to the total number of days in such Escalation Year. In the event of a
termination of this Lease, any additional rent under this Article shall be paid
or adjusted within thirty (30) days after submission of a Owner's Statement. In
no event shall fixed
27
rent ever be reduced by operation of this Article and the rights an obligations
of Owner and Tenant under the provisions of this Article with respect to any
additional rent shall survive the termination of this Lease.
C. Owner's failure to render Owner's Statement with respect to any
Escalation Year shall not prejudice Owner's right to thereafter render a Owner's
Statement with respect thereto or with respect to any subsequent Escalation
Year. Nothing herein contained shall restrict Owner from issuing Owner's
Statement at any time there is an increase in Wage Rates during any Escalation
year or any time thereafter. Notwithstanding the foregoing, if Owner fails to
render Owner's Statement for any Escalation Year for more than three (3) years
after the statement shall be due, Owner shall be precluded from thereafter
rendering Owner's Statement with respect to that Escalation Year and Tenant
shall not be required to pay any deficiency with respect to that Escalation
Year.
D. Within ninety (90) days following receipt of Owner's Statement for
any Escalation Year, Tenant shall have the right to dispute the correctness of
and method in which Tenant's Operating Payment for that Escalation Year was
determined. If Tenant shall elect to do so, Tenant shall nevertheless be
obligated to pay Tenant's Operating Payments pursuant to Landlord's Statement
until the dispute is resolved. Tenant shall be entitled to inspect Owner's
records with respect to the calculation of Tenant's Operating Payment. If the
parties are unable to resolve any such dispute, upon the request of a party, the
parties shall submit the dispute to arbitration before the New York City office
of the American Arbitration Association. The cost of the arbitration, including
actual out-of-pocket attorneys' fees, shall be borne entirely by the party
against whom the arbitrator shall decide. The finding of the arbitrator shall be
binding upon the parties. Notwithstanding anything to the contrary, Tenant shall
have no right to elect to resolve any such dispute by arbitration and Landlord
shall not be required to do so if Tenant shall be in default in the payment of
fixed rent, additional rent or in default of any other material obligation under
the Lease beyond any applicable cure period either at the time a dispute shall
arise, at the time the election to arbitrate is sought to be made by Tenant, or
at the time an arbitration is scheduled to commence.
43. ESCALATION FOR INCREASE IN REAL ESTATE TAXES:
A. As used herein:
1. "Taxes" shall mean all real estate taxes, assessments,
sewer and water rents, governmental levies, municipal taxes, county taxes or any
other governmental charge, general or special, ordinary or extraordinary,
unforeseen as well as foreseen, of any kind or nature whatsoever, which are or
may be assessed, levied or imposed upon all or any part of the land known as and
located at 105 Madison Avenue, New York, New York, the Building, and the
sidewalks or streets in front of or adjacent thereto, including any tax, excise
or fee measured by or payable with respect to any rent, and levied against Owner
and/or land and building under the laws of the United States, the State of New
York, or any political subdivision thereof, or by the City of New York, or any
political subdivision thereof. Except as provided for below, "Taxes" shall not
include income, franchise,
28
estate, capital gains, recording, transfer, excise, occupancy, gift, capital
stock or inheritance taxes of Owner or any penalties or interest due to a late
payment. If, due to a future change in the method of taxation or in the taxing
authority, a new or additional real estate tax, or a franchise, income, transit,
profit or other tax or governmental imposition, however designated, shall be
levied against Owner and/or the land and building, in addition to, or in
substitution in whole or in part of any tax which would constitute "Taxes", or
in lieu of additional Taxes, such tax or imposition shall be deemed for the
purposes hereof to be included within the term "Taxes" provided that any such
Taxes are calculated as if the Building was Owner's sole asset.
2. "Tax Year" shall mean each period of twelve (12) months,
commencing on the first day of July, which occurs in whole or in part of the
term of this lease.
3. "Base Tax" shall mean the Taxes for the twelve (12) month
period commencing July 1, 1997 and ending June 30, 1998 (the "Base Tax Year").
4. "Tenant's Proportionate Share" means ten (10%) percent.
B. If the Taxes for any Tax Year or portion of a Tax Year shall be
greater than the Base Tax, Tenant shall pay as additional rent for such Tax Year
a sum equal to Tenant's Proportionate Share of the amount by which the Taxes for
such Tax Year are greater than the Base Tax (which amount is hereinafter called
the "Tax Payment") within thirty (30) days after Owner renders its bill
accompanied by a photocopy of the current real estate tax bill. Owner shall not
be required to send a copy of a tax bill more than one time each year. Should
this lease terminate prior to the expiration of a Tax Year, such Tax Payment
shall be prorated to, and shall be payable on, or as and when ascertained after,
the Expiration Date as the case may be. Tenant's obligation to pay such
additional rent shall survive the termination of this lease for up to fifteen
(15) months. If the Taxes for any Tax Year subsequent to the Base Tax Year, or
an installation thereof, shall be reduced before such Taxes, or such
installment, shall be paid, the amount of Owner's reasonable costs and expenses
of obtaining such reduction (but not exceeding the amount of such reduction)
shall be added to and be deemed part of the Taxes for such Tax Year. Payment of
additional rent for any Tax Payment due from Tenant shall be made as and subject
to the conditions hereinafter provided in this Article.
C. Only Owner shall be eligible to institute proceedings to contest the
Taxes or reduce the assessed valuation of the land and Building. Owner shall be
under no obligation to contest the Taxes or the assessed valuation of the land
and the building for any Tax Year or to refrain from contesting the same, and
may settle any such contest on such terms as Owner in its sole judgment
considers proper. If Owner shall receive a refund for any Tax Year for which a
Tax Payment shall have been made by Tenant pursuant to Paragraph B above, Owner
shall repay to Tenant, with reasonable promptness but not exceeding thirty (30)
days, the lesser of (i) Tenant's Proportionate Share of such refund after
deducting from such refund the reasonable costs and expenses (including experts'
and attorneys' fees) of obtaining such refund or (ii) the applicable Tax Payment
made by Tenant
29
less Tenant's proportionate share of such costs and expenses in obtaining that
refund. If the assessment for the Base Tax Year shall be reduced from the amount
originally imposed after Owner shall have rendered a comparative statement (as
provided in Paragraph D below) to Tenant with respect to a Tax Year, the amount
of the Tax Payment shall be adjusted in accordance with such change and Tenant,
on Owner's demand, shall pay any increase in additional rent resulting from such
adjustment.
D. At any time during or prior to a Tax Year after the Taxes for such
Tax Year become known, Owner may, or else with reasonable promptness after the
end of each Tax Year, Owner shall render to Tenant a comparative statement
showing the amount of the Base Tax, the amount of the Taxes for such Tax Year
and the Tax Payment, if any, due from Tenant for such Tax Year and indicating in
reasonable detail the computation of such Tax Payment. The Tax Payment shown on
such comparative statement may, at Owner's option, be payable in full within
twenty (20) days prior to the due date of such taxes or in monthly installments
as Owner may determine. Tenant shall pay the Tax Payment shown on such
comparative statement (or the balance of a proportionate installment thereof, if
only an installment is due) concurrently with the installment of fixed rent then
or next due. However, if such statement shall be rendered at or after the
termination of this lease the total Tax Payment shall be payable within thirty
(30) days after such rendition.
E. Owner's failure during the lease term to prepare and deliver any tax
statements or bills, or Owner's failure to make a demand under this Article or
under any other provision of this lease shall not in any way be deemed to be a
waiver of, or cause Owner to forfeit or surrender, its rights to collect any
items of additional rent which may have become due pursuant to this Article
provided, however, Owner may not render a bill for any Tax Year which has
occurred more than three (3) full tax years prior to the time Owner shall first
seek to render Owner's bill. Owner's obligation to refund any overpayments shall
survive the expiration or sooner termination of this lease.
F. In no event shall any adjustment of Tax Payments hereunder result in
a decrease in the fixed rent or additional rent payable pursuant to any other
provision of this lease, it being agreed that the payment of additional rent
under this Article is an obligation supplemental to Tenant's obligation to pay
fixed rent except for any refund or credit due to Tenant on account of Taxes
paid by Tenant.
G. If Tenant shall dispute the accuracy of any bill submitted by Owner
pursuant to this rider Article 43, Tenant shall nevertheless be obligated to pay
the amount which has been billed by Owner. If the parties are unable to resolve
the dispute, upon the request of a party, the parties shall submit the dispute
to arbitration before the New York City office of the American Arbitration
Association. The cost of the arbitration, including actual out-of-pocket
attorneys' fees, shall be borne entirely by the party against whom the
arbitrator shall decide. The finding of the arbitrator shall be binding upon the
parties. Notwithstanding anything to the contrary, Tenant shall have no right to
elect to resolve any such dispute by arbitration and Landlord shall not be
required to do so if Tenant shall be in default in the payment of fixed rent,
additional rent or
30
in default of any other material obligation under the Lease beyond any
applicable cure period either at the time a dispute shall arise, at the time the
election to arbitrate is sought to be made by Tenant, or at the time an
arbitration is scheduled to commence.
H. Notwithstanding the foregoing, Tenant shall not have the obligation
to pay any increases in Taxes arising from an expansion of the Building.
44. ELECTRICITY:
A. Electricity shall be supplied to the Demised Premises in accordance
with the provisions of Paragraph B of this Article.
B. 1. Electricity shall be supplied by Owner to service the Demised
Premises on a submetering basis. Tenant shall pay to Owner, as additional rent,
the sum of (a) the "actual out-of-pocket cost of Owner to supply electric
current to the Demised Premises" plus (b) five (5%) percent of Owner's actual
cost (which sum is referred to herein as "Electrical Charges"). For the purposes
hereof, Owner's actual out-of-pocket cost to supply electrical service to the
Demised Premises include the actual cost of the electricity as recorded on the
submeter or submeters servicing the Demised Premises, any fuel adjustments
relating to the cost of such electricity that may be billed to Owner, any
special assessments, sales or other taxes or charges imposed by any governmental
authority on Owner and any other payment, charge, tax, penalty or cost actually
incurred by Owner in order to supply electrical current to the Demised Premises.
Landlord shall repair and maintain the submeters servicing the Demised Premises.
Landlord represents that at least five (5) watts per square foot of floor area
of the Demised Premises, inclusive of the electricity used to operate the main
air-conditioning units at the Demised Premises, is available for use at the
Demised Premises.
2. If more than one meter measures the electrical service to
the Demised Premises, the service rendered through each meter shall be
separately computed and billed in accordance with the charges, taxes, terms and
rates stated herein. Landlord represents that the meters servicing the Demised
Premises do not measure electricity consumed on any other floor.
3. Bills for Electrical Charges shall be rendered monthly.
Electrical Charges shall commence on the date of Delivery of Possession.
Electrical Charges shall be deemed to be, and be paid as, additional rent
without set-off or deduction.
4. If Tenant disputes the accuracy of any bill, Tenant shall
nonetheless pay the amount billed pending resolution of the dispute. Tenant
shall be permitted to review Landlord's books and records pertaining the manner
in which Tenant's electric bill was calculated. Tenant may not dispute the
accuracy of any bill more than one (1) year after it was rendered and bills more
than one (1) year old which Tenant has not previously disputed shall
conclusively be deemed to be correct. If the parties are unable to resolve any
such dispute, at the request of a party, the parties shall submit the dispute to
arbitration before the New York
31
City office of the American Arbitration Association. The cost of the
arbitration, including actual out-of-pocket attorneys' fees, shall be borne
entirely by the party against whom the arbitrator shall decide. The finding of
the arbitrator shall be binding upon the parties. Notwithstanding anything to
the contrary, Tenant shall have no right to elect to resolve any such dispute by
arbitration and Landlord shall not be required to do so if Tenant shall be in
default in the payment of fixed rent, additional rent or in default of any other
material obligation under the Lease beyond any applicable cure period either at
the time a dispute shall arise, at the time the election to arbitrate is sought
to be made by Tenant, or at the time an arbitration is scheduled to commence.
C. Owner shall not in any way be liable or responsible to Tenant for
any loss or damage or expense which Tenant may sustain or incur if either the
quantity or character of electric service is changed or is no longer available
or suitable for Tenant's requirements unless caused by the negligence or willful
misconduct of Owner or Owner's representatives or agents. Tenant's use of
electric current in the Demised Premises shall not at any time exceed the
capacity of any of the electrical conductors and facilities in or otherwise
serving the Demised Premises. In order to insure that such capacity is not
exceeded and to avert any possible adverse effect upon the Building's electric
service, Tenant shall not, without Owner's prior written consent in each
instance (not to be unreasonably withheld or delayed), make any alteration or
addition to the electric system of the Demised Premises. Should Owner grant such
consent, all additional risers or other equipment required in connection with
any such alteration or addition shall be provided by Owner at Tenant's expense
and upon notice to Tenant, and all reasonable and out-of-pocket costs and
expenses in connection therewith shall be paid by Tenant.
D. Provided that Owner elects to do so for the entire Building, Owner
reserves the right to discontinue furnishing electric current to Tenant in the
Demised Premises at any time upon not less than sixty (60) days' notice to
Tenant and provided that an alternate source of service shall be available for
the Demised Premises. If Owner, at its option, exercises such right of
discontinuance, this lease shall continue in full force and effect and shall be
unaffected thereby, except only that, from and after the effective date of such
discontinuance, Owner shall not be obligated to furnish electric current to
Tenant and except that, from and after the effective date of such
discontinuance, Electrical Charges shall no longer be payable by Tenant as
additional rent.
E. If Owner elects not to furnish electric current to Tenant, Tenant
shall arrange to obtain electric current directly from the public utility
corporation supplying electric current to the Building; and in that event, all
risers, equipment and other facilities which may be required for Tenant to
obtain electric current directly from such public utility corporation and may
already be in the Building, may be used by Tenant at no additional charge to
Tenant to receive service of up to five (5) watts per square foot of floor area
of the Demised Premises. The cost of converting from a submetering basis to a
direct metering basis shall be borne by Owner. If Owner shall not furnish
electric current to Tenant, it shall not be liable to Tenant therefor and the
same shall not be deemed to be a lessening or diminution of services within the
meaning of any law, rule or regulation
32
now or hereafter enacted, promulgated or issued, unless due to Owner's, its
agents' or employees' willful act or omission or gross negligence.
F. At all times during the term of this lease, Tenant will comply with
all present and future general rules, regulations, terms and conditions
applicable to service equipment, wiring and requirements in accordance with the
regulations of the public utility corporation supplying electric current to the
Building with respect to the Demised Premises and Tenant's manner of use of the
electrical system for the Building.
33
45. RIDER TO SECTION 3 - ALTERATIONS:
A. All alterations shall comply with all applicable governmental
requirements, legal requirements and Insurance Requirements. Tenant shall obtain
all necessary permits to perform the work and all approvals and sign-offs when
the work is completed at its sole expense.
B. Tenant shall make no alteration to the Demised Premises without
Owner's consent and unless it gives Owner at least thirty days prior notice
accompanied by detailed specifications and working drawings describing and
illustrating the proposed alteration. The specifications and drawings must be
prepared by an architect or engineer licensed in New York State. Owner's consent
to such alteration and approval of such plans and specifications shall not be
unreasonably withheld or delayed. Promptly after the substantial completion of
any alteration other than the initial alterations. Tenant shall prepare a set of
"as built" plans and specifications describing and illustrating the effect of
the alteration on the Demised Premises in reasonable detail. The "as built"
plans and specifications shall be delivered to Owner within sixty days after
substantial completion of an alteration.
C. Alterations shall be performed by Tenant in a manner which shall
cause the least interference to other occupants of the Building and not
unreasonably interfere with, delay or impose any additional expense upon Owner
in the operation of the Building. Owner reserves the right to reasonably
designate the time of day which shall include the hours during the business day
when materials or debris may be moved in or out of the building and when
alterations may be performed. If any portion of Tenant's Work or any alteration
approved by Owner involves alterations to the plumbing, heating, air
conditioning, mechanical or electrical systems of the building or involves
alterations to any structural element of the building that work shall be
performed at Tenant's reasonable expense by contractors reasonably designated by
Owner.
D. Except for the plans and specifications prepared by or on behalf of
Tenant for the initial alterations to prepare the Demised Premises for
occupancy, Tenant shall reimburse Owner for all reasonable out-of-pocket
expenses incurred by Owner in reviewing and approving Tenant's plans and
specifications and alterations. Payment shall be due within thirty (30) days
after Owner shall render a bill therefor.
E. "Alterations" or "alterations" means alterations, improvements, or
both.
F. Prior to commencing any alteration or any repairs, Tenant shall be
required to deliver to Owner the certificates evidencing public liability
insurance and workers' compensation insurance required hereunder.
G. Notwithstanding anything to the contrary contained herein, Owner's
consent and plans and specifications shall not be necessary for and Tenant may
make minor changes such as painting, decorating, finishing, carpeting,
installation of cabinets and shelves. Owner's prior written consent and plans
and specifications shall also not be necessary for other
34
non-structural alterations to the Demised Premises if the alterations cost less
than Twenty-five Thousand ($25,000.00) Dollars; do not require a permit or
approval from any government entity; and do not reduce the value or impair the
safety of the Demised Premises or Building.
H. Except as otherwise expressly provided for herein, the cost of any
alterations and any repairs shall be paid for by Tenant so that the Demised
Premises and Building shall at all times be free of liens for labor and
materials supplied in connection with any alterations or repairs. Tenant agrees
to indemnify and save Owner harmless from and against any and all bills for
labor performed and equipment, fixtures and materials furnished to Tenant and
applicable sales taxes thereon as required by New York law and from and against
any and all liens, bills or claims therefor or against the Demised Premises or
the Building and from and against all losses, damages, costs, expenses, suits
and claims whatsoever in connection with Tenant's Work or any other alterations.
I. Prior to commencing any alteration or repair, Tenant shall at its
own cost and expense deliver to Owner an endorsement of its policy of
comprehensive general liability insurance referred to in Article 50 of this
lease, covering the risk during the course of performance of the work, together
with proof of payment of such endorsement, which policy as endorsed shall
protect Owner in the same amounts against any claims or liability arising out of
the work, and Tenant or Tenant's contractors shall obtain worker's compensation
insurance to cover all persons engaged in the work.
J. Except for the initial alterations and installations by Tenant,
prior to commencing any other work costing in excess of Two Hundred Fifty
Thousand ($250,000.00) Dollars, Tenant, at its own cost and expense, shall
deliver to Owner a surety company performance bond and a labor and material and
payment bond, issued by a surety company acceptable to Owner, or other security
satisfactory to Owner, in an amount at least equal to Owner's estimated cost of
the work, guaranteeing the performance thereof and payment therefor within a
reasonable time, free and clear of all liens, encumbrances, chattel mortgages,
conditional bills of sale and other charges, and in accordance with the plans
and specifications approved by Owner.
K. Notwithstanding anything herein contained to the contrary, Tenant
shall make all repairs to the Demised Premises necessitated by any work
permitted under this lease, and shall keep and maintain in good order and
condition all of the installations in connection with the work, and shall make
all necessary replacements thereto subject to ordinary wear and tear and damage
by fire or other insurable casualty and Owner's obligation to perform repairs
pursuant to this lease.
L. In granting its consent to any alterations, Owner may impose such
reasonable conditions subject to subsection J (as to guarantee of completion,
payment, restoration and otherwise including, the requirement of Tenant to post
a bond to insure the completion of the alterations) as Owner may require. In no
event shall Owner be required to consent to any alterations which would
adversely physically affect any part of the Building outside of the Demised
Premises or would adversely affect the
35
proper functioning of the mechanical, electrical, sanitary or other service
systems of the Building.
M. If the performance of Tenant's work or any alteration shall
unreasonably interfere with the comfort and/or convenience of other tenants in
the Building or shall cause damage to or otherwise interfere with the occupancy
of adjacent buildings, Tenant shall upon Owner's demand remedy or remove the
condition or conditions complained of. Tenant further covenants and agrees to
indemnify and save Owner harmless from and against any and all claims, losses,
damages, costs, expenses, suits and demands whatsoever made or asserted against
Owner by reason of the foregoing.
46. RIDER TO ARTICLE 4 - REPAIRS:
Landlord shall maintain, repair and replace (to the extent necessary)
the air-conditioning units servicing the Demised Premises. On the Commencement
Date, the existing air-conditioning units servicing the Demised Premises shall
be delivered in good working order.
47. RIDER TO ARTICLE 6 - COMPLIANCE WITH LAWS:
Supplementing the provisions of Article 6 hereof, Tenant shall notify
Owner within three (3) days of its receipt of any notice it receives of the
violation of any law or requirement of any public authority with respect to the
Demised Premises or the use or occupation thereof.
48. RIDER TO ARTICLE 7 - SUBORDINATION AND MORTGAGEE'S RIGHTS:
A. If the land, the Building or the Demised Premises shall be
encumbered by a mortgage and the mortgage is foreclosed, or if the land, the
Demised Premises or the Building are sold pursuant to a foreclosure or by reason
of a default under a mortgage, then notwithstanding the foreclosure, sale, or
default:
1. Tenant shall not disaffirm this lease or any of its
obligations contained in this lease; and
2. At the request of the applicable mortgagee or
purchaser at the foreclosure sale, Tenant shall attorn to the mortgagee or
purchaser.
B. Insofar as Tenant is concerned, the performance by a mortgagee of
any of Owner's obligations shall be deemed performance on behalf of Owner and
shall be accepted by Tenant as if performed by Owner.
C. Owner represents that the Building is not encumbered by any ground
lease, mortgage of record or any "Institutional Mortgage" (as defined below).
D. 1. Notwithstanding anything to the contrary in Article 7 or Article
49, Owner shall use Owner's best efforts to obtain a nondisturbance
36
agreement between Tenant and the holder of any future institutional mortgage
hereafter encumbering the Demised Premises as a condition of Tenant
subordinating its leasehold interest to any future institutional mortgage.
Reference to an "institutional mortgage" means a mortgage held by a savings
bank, commercial bank, savings and loan association, real estate investment
trust, pension fund, insurance company or other recognized mortgage lender. If
the holder of such an institutional mortgage shall refuse to enter into such an
agreement, this Lease shall continue and shall be subordinate to that mortgage.
Any such nondisturbance agreement shall provide in effect that provided Tenant
shall not be in default beyond any applicable notice or cure period, this Lease
and Tenant's rights under it shall not be terminated by reason of any default
under or foreclosure of the mortgage and that Tenant shall not be named as a
party in any foreclosure action. The form of the nondisturbance agreement shall
contain the customary terms and conditions and must be reasonably satisfactory
to the mortgagee.
2. Notwithstanding anything to the contrary in Article 7, this
Lease shall not be subordinate to any ground lease hereafter entered into or to
any mortgage granted hereafter (or any mortgage now in existence which may be
recorded at any time) by Owner which is not an institutional mortgage unless the
ground lessor or the mortgagee shall enter into such a subordination,
nondisturbance agreement with tenant in a form reasonably satisfactory to Tenant
and to any such ground lessor or mortgagee, as the case may be.
49. RIDER TO ARTICLE 8 - INDEMNIFICATION, LIABILITY INSURANCE:
A. Tenant shall indemnify and save harmless Owner; Owner's affiliates
who occupy or have an interest in the Building; and Owner's officers, directors,
stockholders and employees; and any mortgagee against any and all losses,
liabilities, claims, costs, expenses or damages that may result from any
occurrence in or about the Demised Premises; the use of the Demised Premises;
any work or thing done on the Demised Premises or any condition created by
Tenant, its agents, servants, employees, or contractor on or off the Demised
Premises. Owner shall notify Tenant of any claim made against Owner for which
Tenant is obligated to indemnify and save Owner harmless.
B. Tenant shall defend any lawsuit using attorneys selected by Tenant
with respect to claims for loss, liability or damages against which the
indemnity provided in Paragraph A applies and pay any judgments which result
from the lawsuits. "Lawsuits" includes arbitration proceedings and
administrative proceedings and all other governmental and quasi-governmental
proceedings. "Liabilities" includes the fees and disbursements of attorneys and
witnesses. Landlord may not settle any claim without Tenant's participation and
joinder in the settlement.
C. Tenant shall provide and keep in force a comprehensive policy of
general public liability insurance with respect to the Demised Premises which
shall include a contractual liability endorsement as of the date of this lease.
The coverage limits shall not be less than a combined single limit of Three
Million ($3,000,000.00) Dollars with respect to personal
37
injury, death or property damage in respect to any one occurrence. Each
insurance policy must be reasonably satisfactory to Owner, any Mortgagee and
Master Lessor as to form and as to substance. The insurance coverage may be
provided under a blanket policy.
D. Owner and any mortgagee (provided Owner notifies Tenant of the name
of the mortgagee) shall be named as additional insureds with respect to the
insurance. Upon Owner's request, any designee of Owner, including any partners
of Owner, the partners of the partners of Owner, and the officers, directors and
stockholders of Owner or of any corporation which is a partner of Owner shall be
named as an additional insured and if any additional premiums are charged
therefor, Owner may either elect to pay those premiums or forego having any such
designee named as an insured.
E. 1. Tenant shall deliver a duplicate original of each policy carried
pursuant to Paragraph C or, at Tenant's option, an original certificate of
insurance showing full payment to Owner before Tenant enters the Demised
Premises for any reason. At least twenty (20) days before coverage of any policy
carried pursuant to Paragraph C expires, Tenant shall renew the policy and
deliver to Owner certificates evidencing the renewal policy.
2. Each insurance policy carried pursuant to Paragraph C shall be
issued by an insurer of recognized responsibility. The insurer shall be
reasonably satisfactory to Owner and qualified to do business in the State of
New York. A policy shall provide that it may not be canceled, reduced in amount
or materially altered unless the insurer gives at least ten (10) days' notice to
Owner and any Mortgagee by certified mail, return receipt requested.
F. Prior to commencing any work including Tenant's Work or any
alterations or repairs at the Demised Premises, Tenant shall cause any
contractor or other party engaged to perform the Work to deliver a certificate
evidencing public liability insurance for at least the limits specified in
Paragraph C. Tenant and any contractor employed by Tenant shall also carry
workers' compensation insurance for any person employed by them on or about the
Demised Premises and deliver a certificate evidencing same to Owner. The amount
and insurance company shall be reasonably satisfactory to Owner and in keeping
with the customary limits maintained with respect to office buildings in the
midtown-south area of Manhattan. No contractor or subcontractor shall be
permitted to perform work at the Demised Premises until the required certificate
relating to public liability insurance evidence of workers' compensation
insurance is delivered to Owner. Each policy shall conform to the criteria set
forth in this lease. The certificate for public liability insurance shall name
Owner and any mortgagee and, upon notification of Owner, any of the parties
referred to in Paragraph D as additional insureds.
50. RIDER TO ARTICLE 9 - DESTRUCTION, FIRE AND OTHER CASUALTY:
A. If the Demised Premises shall be damaged by fire or other casualty
to the extent of twenty-five (25%) percent or more of its replacement value
during the last two (2) years of the Term, Owner may
38
elect to terminate this Lease by giving notice to Tenant within sixty (60) days
after the occurrence of the damage. Owner's notice shall specify the date of
cancellation which shall be no sooner than sixty (60) days and no later than one
hundred twenty (120) days after the date of the notice. On the cancellation
date, Tenant shall vacate the Demised Premises and surrender it to Owner without
prejudice to Owner's rights and remedies against Tenant which have occurred
prior to the date of cancellation.
B. If all or a portion of the Demised Premises shall be damaged by fire
or other casualty, within seventy-five (75) days after the occurrence of the
damage, Owner shall notify Tenant of the time, in the reasonable judgment of a
reputable independent contractor, it shall take to substantially repair the
damage and make the Demised Premises acceptable to Tenant. If such period shall
exceed two hundred seventy (270) days from the date of the damage, Tenant may
elect to terminate this Lease by giving notice to Owner within thirty (30) days
of the date of Owner's notice. If this Lease shall not be canceled as aforesaid
and the damage is not substantially repaired by Owner within that two hundred
seventy (270) day period, Tenant may elect to terminate this Lease by giving
notice to Owner within thirty (30) days after that right to terminate shall
arise. If Tenant shall elect to so terminate this Lease, this Lease shall expire
as of the date of termination set forth in Tenant's notice which shall be no
later than sixty (60) days following the date of Tenant's notice.
C. If during the last year of the term of this Lease, if the Demised
Premises shall be damaged to the extent of twenty-five (25%) percent or more of
its replacement value, Tenant may elect to terminate this Lease by giving notice
to Owner within sixty (60) days after the occurrence of the damage. If Tenant
shall elect to so terminate this Lease, this Lease shall expire as of the date
of termination set forth in Tenant's notice which shall be no later than sixty
(60) days following the date of Tenant's notice.
D. Each party hereby releases the other party (which term as used in
this Article includes the employees, agent, officers and directors of the other
party) from all liability, whether for negligence or otherwise, in connection
with loss covered by any fire and/or extended coverage insurance policies, which
the releasor carriers with respect to the Demised Premises, or any interest or
property therein or thereon (whether or not such insurance is required to be
carried under this lease) but only to the extent that such loss is collected
under said fire and/or extended coverage insurance policies. Such release is
also conditioned upon the inclusion in the policy or policies of a provision
whereby any such release shall not adversely affect said policies, or prejudice
any right of the releasor to recover thereunder. Each party agrees that its
insurance policies aforesaid will include such a provision so long as the same
shall be obtainable without extra cost, or if extra cost shall be charged
therefor, so long as the party for whose benefit the clause or endorsement is
obtained shall pay such extra cost. If extra cost shall be chargeable therefor,
each party shall advise the other of the amount of the extra cost, and the other
party at its election may pay the same, but shall not be obligated to do so.
39
51. RIDER TO ARTICLE 11 - ASSIGNMENT AND SUBLET OF TENANT'S INTEREST.
A. If Tenant shall desire to assign this Lease or to sublet the Demised
Premises, Tenant shall submit to Owner a written request for Owner's consent to
such assignment or subletting, which request shall contain or be accompanied by
the following information: (1) the name and address of the proposed assignee or
subtenant; (ii) a duplicate original or photocopy of the executed assignment
agreement or sublease; (iii) the nature and character of the business of the
proposed assignee or subtenant and its proposed use of the Demised Premises; and
(iv) banking, financial and other credit information with respect to the
proposed assignee or subtenant reasonably sufficient to enable Owner to
determine the financial responsibility of the proposed assignee or subtenant.
Owner shall then have the following options, any and all of which must be
exercised by notice ("Exercise Notice") given to Tenant within thirty (30) days
after receipt of Tenant's request for consent:
1. If the proposed transaction is an assignment of this Lease
or a subletting of the entire Demised Premises, the following shall apply:
(i) Owner may require Tenant to surrender the Demised
Premises to Owner and to accept a termination of this Lease as of a date (the
"Termination Date") to be designated by Owner in the Exercise Notice, which date
shall not be less than sixty (60) days nor more than one hundred twenty (120)
days following the date of Owner's Exercise Notice; or
(ii) Owner may require Tenant to assign this Lease to
Owner without merger of Owner's estates effective as of the day preceding the
proposed assignment or sublease and upon such an assignment, Tenant shall be
released from any future liability under this Lease which shall first accrue
after the date of the assignment.
2. If the proposed transaction involves a subletting of one of
the floors comprising the Demised Premises, the following shall apply: Owner may
require Tenant to surrender the floor proposed to be sublet and to enter into a
modification agreement with Owner to reflect the reduction in the size of the
Demised Premises and to provide for a proportionate reduction in the rent
payable under this Lease as of the date of the surrender to Owner of the floor
proposed to be sublet.
If pursuant to part (1) above, Owner shall elect to require Tenant to
surrender the Demised Premises and accept a termination of this Lease, then this
Lease shall expire on the Termination Date as if that date had been originally
fixed as the Expiration Date. Regardless of any option Owner exercises under
this subsection A, whether to terminate this Lease or to take an assignment
thereof, Owner shall be free to, and shall have no liability to Tenant if Owner
shall, lease the Demised Premises to Tenant's prospective assignee or subtenant.
B. If Owner shall not exercise any of its options under Section A above
or Section I below within the applicable time periods therein provided, then
Owner shall not unreasonably withhold consent to the proposed assignment or
subletting of the entire Demised Premises, or one of
40
the floors comprising the Demised Premises, provided that the following further
conditions shall be fulfilled:
1. An event of default beyond applicable notice or cure
periods shall not have occurred at the time Owner's consent is requested and on
the effective date of the assignment or sublet.
2. In the case of an assignment, the proposed assignee shall
be financially capable, in Owner's reasonable discretion, to assume the
obligations of Tenant under the lease. The proposed assignee or subtenant shall
be of a character in keeping with the standards of the other office tenants of
the Building. Tenant shall deliver to Owner all reasonably complete and accurate
financial data and other information as Owner may reasonably request in a form
prepared by Tenant in the ordinary course of its business. In the case of a
sublease, the proposed subtenant shall be financially capable, in Owner's
reasonable discretion to pay the rent and all other charges relating to the
sublease.
3. The proposed assignee or subtenant shall not be a tenant
(or subsidiary, affiliate or parent of a tenant unless such subsidiary,
affiliate or parent of a tenant shall be occupying space in any other building
in the New York City metropolitan area at the time of the proposed assignment or
subletting) of other space in the Building with a lease coming due within two
(2) years from the date of the assignment, unless Owner previously grants its
written consent to this assignment or sublet.
4. The Demised Premises shall be used by the assignee or
subtenant solely in accordance with the terms of this lease.
5. The use shall not violate any restrictions contained in any
other leases in the Building.
6. In case of an assignment, the instrument of assignment
shall provide for the acceptance by the assignee of the assignment; the
assignee's assumption of all of the obligations and liabilities of Tenant under
this lease, and assignee's agreement to perform directly for the benefit of
Owner all of the terms and provisions of this lease on Tenant's part to be
performed. The instrument of assignment shall further provide an acknowledgment
by Tenant that its obligations under the lease shall not be discharged, released
or impaired by the assignment, any amendment or modification to the lease
consented to by Owner, any further assignment of the lease consented to by
Owner, any waiver, consent, extension, indulgence, act or omission with respect
to the tenant's obligations under the lease, any exercise or nonexercise or
waiver by Owner of any right, remedy, power or privilege under or with respect
to the lease, or any act or failure to act which, but for the provisions of the
assignment, may be deemed a legal or equitable discharge of a surety or
assignor.
7. Except as provided for below in this paragraph 7, in case
of a subletting, the sublease shall be for all of the Demised Premises or one of
the floors comprising part of the Demised Premises, the sublease shall be
expressly subject to all of the obligations of Tenant and the conditions of
Tenant's tenancy under this lease, the subtenant shall not assign, encumber or
otherwise transfer or sublease the Premises in whole or in
41
part, or allow any part to be used or occupied by others without the prior
written consent of Owner in each instance.
C. The consent by Owner to any transfer, assignment or subletting shall
not be deemed to be a waiver on the part of Owner of any prohibition of any
future transfer, assignment or subletting. In no event shall an assignment or
subletting to which Owner shall have consented to under this Section release or
relieve Tenant of its obligations or liabilities under this lease.
D. Owner shall be furnished with a duplicate original of the assignment
or sublease within (i) ten (10) days after its execution, or (ii) prior to its
effective date, whichever is earlier. The assignment or sublease shall be fully
executed.
E. Tenant shall reimburse Owner for all reasonable out-of-pocket
expenses incurred by Owner in reviewing and approving Tenant's request to any
transfer, assignment or sublet.
F. If Owner consents to an assignment of this lease or a subletting,
the following shall apply:
1. Tenant shall pay to Owner, as and when received,
seventy-five (75%) percent of any consideration paid directly and/or indirectly
in connection with any such assignment in excess of the brokerage fees,
reasonable legal fees, the unamortized cost of any unattached personal property
sold to the transferee and other direct reasonable out-of-pocket costs incurred
by Tenant in connection with the assignment.
2. Tenant shall pay to Owner, as and when received,
seventy-five (75%) percent of the amount by which the rental or other charges
paid under or in connection with any sublease shall exceed the rental payable
under this lease for the applicable periods after Tenant shall recover from any
such excess, brokerage fees, reasonable legal fees, the unamortized cost of any
unattached personal property sold to the transferee and other direct reasonable
out-of-pocket costs incurred by Tenant in connection with the subletting.
3. The provisions of this paragraph shall not be construed as
a waiver of the prohibition against assignment or subletting without Owner's
prior written consent.
4. For the purposes of this section, any personal property
sold by Tenant shall be deemed to have been amortized on a straight line basis
over the earlier of ten (10) years or its useful life from the date the item of
personal property was acquired by Tenant.
G. An assignment or sublease consummated in violation of this Rider
Article 51 shall not be valid.
H. Notwithstanding anything to the contrary hereinabove set forth (but
provided that any assignee shall expressly assume in writing the obligations of
Tenant hereunder for the benefit of Owner), none of the following transactions
shall require Owner's consent: (i) the merger or
42
consolidation of Tenant with or into an "Affiliate" (as defined below) of
Tenant; (ii) the exchange of all or any part of Tenant's outstanding shares of
stock for shares of stock of an Affiliate of Tenant; (iii) the sale of all or
substantially all of the assets of Tenant to an Affiliate of Tenant, and the
assignment to, and assumption of, this Lease by such Affiliate in connection
with the sale of those assets; (iv) the sale of shares of Tenant's outstanding
stock to, or a merger or consolidation of Tenant with or into, an entity (or an
Affiliate of an entity) whose shares are traded on a recognized stock exchange
or on NASDAQ or another over-the-counter market; (v) the sale of all or
substantially all of the assets of Tenant to an entity (or an Affiliate of an
entity) whose shares are traded on a recognized stock exchange or on NASDAQ or
another over-the-counter market, and the assignment to, and assumption of, this
Lease by such entity in connection with the sale of those assets; (vi) the sale
of shares of stock of Tenant in a public offering; or (vii) the occupancy of all
or any part of the Demised Premises by one or more Affiliates of Tenant. As used
in this Section with respect to Tenant or any other person or entity, the term
"Affiliate" shall mean a person, corporation, partnership, limited liability
company or other entity that directly or indirectly controls, is controlled by,
or is under common control with, Tenant or such other person or entity.
Notwithstanding the foregoing provisions of this section, unless the shares of
stock of an Affiliate of Tenant to which this Lease has been previously assigned
either (a) are traded on a recognized stock exchange or on NASDAQ or another
over-the-counter market or (b) sold in connection with or as part of a public
offering of such Affiliates shown, the sale of all or a controlling interest in
that Affiliate to which this Lease has been previously assigned shall be deemed
to be an assignment of this Lease which requires the consent of Owner.
I. 1. As an alternative to the requirements for consummated agreements
as set forth in Section A above and in addition to Owner's option set forth in
Section A above, if Tenant shall desire to assign this Lease or to sublet all or
any single floor comprising a part of the Demised Premises other than by an
assignment or sublease permitted pursuant to Section H above, Tenant may give
Owner notice thereof (the "Marketing Notice"), which notice shall include all of
the material and economic terms and conditions (other than the identity of the
proposed assignee or subtenant, if not yet known to Tenant) of the proposed
assignment or subletting, including, without limitation, the proposed effective
date thereof, fixed rent, all regularly scheduled items of additional rent, the
base year for all escalations, any rental concession, the amount of any tenant
installation allowance, any work to be performed by Tenant to prepare the
Demised Premises for occupancy by the proposed subtenant or assignee, any
consideration to be paid for the acquisition of the Demised Premises by reason
of such assignment or subletting, or for the acquisition or rental of any
leasehold improvements, furniture, fixtures or equipment of Tenant, any takeover
obligation and any options to be granted to the proposed subtenant. Such
Marketing Notice shall be deemed an offer from Tenant to Owner whereby Owner may
exercise an option (the "Recapture Option") to terminate this Lease. Within
forty-five (45) days after Owner shall have received the Marketing Notice, Owner
shall notify Tenant whether Owner shall exercise such Recapture Option. If Owner
shall fail to notify Tenant that Owner elects to exercise the Recapture Option,
the provisions of Section B above shall apply with respect to any sublease or
assignment
43
proposed by Tenant, provided, however, that if within two hundred seventy (270)
days after the Marketing Notice, Tenant shall not have delivered to Landlord a
"Qualified" consummated agreement with respect to a proposed assignment of this
Lease or a subletting, Tenant shall be required to again deliver a Marketing
Notice and otherwise comply with the foregoing provisions before Owner shall be
required to make its election as to the exercise of a Recapture Option.
Reference to a "Qualified" agreement means (x) in the case of an assignment of
this Lease, a deviation or decrease of more than seven and one-half (7-1/2%)
percent of the consideration (if any) to be paid to Tenant by the assignee
stated in the applicable Marketing Notice, or (y) in the case of a subletting, a
decrease in the economic terms of more than seven and one-half (7-1/2%) percent
from the Marketing Notice, then Owner shall once again have a right to exercise
its Recapture Option with respect thereto. For the purposes of the foregoing, a
decrease in the economic terms shall be calculated by determination of the
effective rent, taking into account the monetary values of all of the
concessions, incentives and payments to be made under or in connection with any
such sublease or assignment.
2. The provisions of Section B, C, D, E and F above shall
apply with respect to any sublease or assignment consummated in accordance with
this Section I.
52. RIDER TO ARTICLE 27:
If Tenant is prevented or delayed from performing its obligations
hereunder, other than its obligations to pay rent, additional rent or any other
charges due under this Lease, by reason of strike or labor troubles or any other
cause whatsoever beyond Tenant's reasonable control, including any governmental
preemptions or restrictions or to conditions arising by reason of war or other
emergency, the period of time which Tenant is prevented or delayed shall be
added to the time in which Tenant shall be required to perform the obligation
and Tenant shall not be in default hereunder for the failure to perform that
obligation during the period Tenant is so prevented or delayed. The provisions
of this rider Article do not excuse Tenant from the failure to pay rent,
additional rent or any other charges when they shall be due in accordance with
the provisions of this Lease.
53. RIDER TO ARTICLE 29 - SERVICES:
A. Owner shall not be required to supply cleaning services to Tenant.
B. Subject to compliance with Owner's obligations under rider Article
46, Owner shall not otherwise be required to supply air-conditioning service to
Tenant. Tenant shall pay for the cost of electricity used to pay for the
operation of the air-conditioning units servicing the Demised Premises.
C. If Owner shall fail to provide electric service to the Demised
44
Premises for any consecutive period of ten (10) business days or more and if the
Demised Premises or portions thereof are rendered untenantable thereby and
Tenant actually ceases to use such portion of the Demised Premises due to events
arising or causes originating within the Building, fixed annual rent and
additional rent shall abate from said tenth (10th) business day in proportion to
the rentable area rendered untenantable hereby until electrical service to the
Demised Premises is restored.
D. If Owner shall fail to provide water for lavatory purposes to the
Demised Premises for any consecutive period of ten (10) business days or more
and Owner is unable to arrange for reasonably adequate substitute lavatory use
at other locations in the Building due to events arising or causes originating
within the Building and not otherwise attributable to the acts or omission of
the public utility company serving the Building, fixed annual rent and
additional rent shall abate from said tenth (10th) business day until either
water service for lavatory purposes is restored or such substitute lavatory use
is provided.
E. If Owner shall cease to provide heat to the Demised Premises during
the regular heating season for any period of ten (10) consecutive business days
or more and if the Demised Premises or any portion thereof is rendered
untenantable thereby and Tenant actually ceases using such portion of the
Demised Premises due to events arising or causes originating within the
Building, fixed annual rent and additional rent shall abate from said tenth
(10th) business day in proportion to the rentable area rendered untenantable
thereby until heat service is provided by Owner or the regular hearing season
ends, whichever is earlier.
F. Tenant shall be entitled to a reasonable number of listings on the
Building directory, up to Tenant's proportionate share of the total number of
listings on that directory.
G. Tenant shall be entitled to up to eight (8) hours of use of overtime
freight elevator service to initially move into the Building without charge.
54. RIDER TO ARTICLE 33 - RULES AND REGULATIONS:
Owner shall not enforce any rules or regulations against Tenant in a
discriminatory manner. If there is a conflict or inconsistency between any rules
and regulations and the provisions of this Lease, the provisions of this Lease
shall govern and the conflicting rule or regulation shall be deemed to be
amended accordingly.
55. TENANT'S EQUIPMENT:
A. 1. "Tenant's Equipment" means all personal property, furniture,
equipment and furnishings (whether or not affixed to the Demised Premises)
installed and maintained by Tenant for use in connection with the conduct of its
business. Heating, ventilating, air conditioning, plumbing,
45
electrical, sprinkler, fire detection, and illumination fixtures (but excluding
track or other detachable lighting) and systems shall not be deemed to be
included as part of Tenant's Equipment.
2. Except as provided in this Section, Tenant shall be
entitled to affix Tenant's Equipment to, to install Tenant's Equipment in, and
to remove Tenant's Equipment from, the Demised Premises.
3. Tenant may not install any equipment, fixtures or machinery
in a manner which shall cause damage to any part of the building, overload
existing utility systems, create undue noise or create undue vibrations.
B. Tenant's Equipment shall be the property of Tenant and shall not be
part of the Demised Premises. Tenant shall keep Tenant's Equipment in good order
and repair. Upon removal of Tenant's Equipment, Tenant shall repair any damage
to the Demised Premises or building which shall have resulted from affixing,
installing or removing Tenant's Equipment.
56. ACCESS TO THE DEMISED PREMISES, PIPES AND EASEMENTS:
A. Owner and any mortgagee may inspect the Demised Premises during
regular business hours after giving Tenant reasonable notice and at all other
times after giving reasonable notice to Tenant except in an emergency when no
notice shall be required.
B. Owner shall be entitled after reasonable notice and at mutually
convenient times during business hours to access to the Demised Premises for the
purpose of carrying out Owner's obligations under this lease provided they do
not unreasonably interfere with Tenant's use and occupancy of the Demised
Premises. Owner agrees that certain work which is customarily performed in
office buildings after regular business hours such as core drilling shall be
performed at the Demised Premises only after regular business hours.
C. 1. Owner reserves an easement to install (along walls, floors and
ceilings), use, replace, repair and maintain equipment; installations; chutes,
shafts, chases, flues, duct, wires, pipes, cables, risers and conduits in parts
of the Demised Premises, provided that any new installation shall result in a de
minimis reduction in useable floor area.
2. Owner reserves the right to drill holes in the floor of the
Demised Premises and in any floor or surface above the Demised Premises.
3. The installation pursuant to parts 1 or 2 shall not unreasonably
or materially interfere with Tenant's use and enjoyment of the Demised Premises.
D. The easements created pursuant to Paragraph C shall be for the
benefit of Owner and any designee of Owner. Owner, Owner's mortgagee and their
agents, employees or contractors may enter the Demised Premises for the purposes
specified in Paragraphs A, B and C after reasonable notice and at mutually
convenient times during business hours. A person that enters
46
the Demised Premises for a purpose specified in Paragraphs A, B or C shall do so
with due regard for the business being conducted in the Demised Premises by
Tenant.
E. Owner shall repair any damage to the Demised Premises that results
from the installation, replacement or repair of facilities pursuant to this
Section to the extent practicable, to the same condition it was prior thereto.
57. CERTIFICATES BY TENANT:
At any time and from time to time, Tenant or Owner, as the case may be,
for the benefit of the other party and the lessor under any ground lease or
underlying lease or the holder of any mortgage affecting any ground lease or
underlying lease, or of any fee mortgage covering the land or the land and
building, or any permitted assignee or subtenant of Tenant or any lender of
Tenant on at least fifteen (15) days prior written request by Owner or Tenant,
as the case may be, will deliver to the other party a statement, certifying in
recordable form that this lease is not modified and is in full force and effect
(or if there shall have been modifications that same is in full force and effect
as modified, and stating the modifications), the Commencement and Expiration
Dates hereof, the dates to which the fixed rent, additional rent and other
charges to which the fixed rent, additional rent and other charges have been
paid, and whether or not, to the best knowledge of the signer of such statement,
there are any then existing defaults on the part of either Owner or Tenant in
the performance of the terms, covenants and conditions of this lease, and if so,
specifying the default of which the signer of such statement has knowledge.
58. LIMITATIONS OF LIABILITY:
Tenant agrees that the liability of Owner under this lease and all
matters pertaining to or arising out of the tenancy and the use and occupancy of
the Demised Premises, shall be limited to Owner's interest in the Building and
the rents, profits and proceeds therefrom at the time the claim is asserted for
the satisfaction of any and all remedies of Tenant arising from the claim. In no
event shall Tenant make any claim against, proceed against, recover damages from
any other asset of Owner or to seek to impose any personal liability upon any
general or limited partner of Owner, or any principal shareholder of any firm or
corporation that may hereafter be or become the Owner.
59. BROKER:
Tenant represents and warrants that it neither consulted nor negotiated
with any broker or finder with regard to the rental of the Demised Premises from
Owner other than Newmark & Company Real Estate, Inc. and Insignia - Edward S.
Gordon, Inc. (collectively the "Broker"). Owner
47
shall pay any commission due to the Broker pursuant to a separate agreement
between Owner and the Broker. Tenant agrees to indemnify and hold Owner harmless
from any damages, costs and expenses suffered by Owner by reason of any breach
of the foregoing representation by Tenant. Owner agrees to indemnify and hold
Tenant harmless from any damages, cost and expenses suffered by Tenant by reason
of any breach of the foregoing representation by Owner.
60. BINDING EFFECT:
It is specifically understood and agreed that this lease is offered to
Tenant for signature subject to Owner's acceptance and approval, and that Tenant
shall have affixed its signature hereto with the understanding that such act
shall not, in any way, bind Owner or its agent until such time as this lease
shall have been approved and executed by Owner and delivered to Tenant.
61. NON-WAIVER AND SURVIVAL OF ADDITIONAL RENTAL OBLIGATIONS:
Owner's failure during the lease term to prepare and deliver any of the
tax bills, statements, notice or bills set forth in this lease or Owner's
failure to make a demand, shall not in any way cause Owner to forfeit or
surrender its rights to collect any of the items of additional rent which may
have become due during the term of this lease provided Owner does so within
fifteen (15) months of incurring such expense, or Owner shall be deemed to have
waived its rights thereto. Tenant's liability for all amounts due under this
lease shall survive the expiration of the lease term for fifteen (15) months
from incurring such expense, as hereinabove set forth.
62. INTERFERENCE WITH BUILDING OPERATIONS:
Tenant covenants and agrees that prior to and through the term of this
lease, it shall not take any action which would knowingly violate Owner's union
contract, if any, affecting the Building, nor wilfully create any work stoppage,
picketing, labor disruption or dispute, or knowingly interfere with the business
of the Owner or any other tenant or occupant in the building or with the rights
and privileges of any person(s) lawfully in said Building, nor cause any
impairment or reduction of the good name of the Building. Any default by Tenant
under this Article, beyond the expiration of the applicable grace period, shall
be deemed a material default entitling Owner to exercise any or all of the
remedies as provided in this lease subject to the notice provisions provided in
Article 17 hereof.
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63. HOLDOVER:
Supplementing Article 22 hereof, if Tenant shall default in
surrendering the Demised Premises upon the expiration or termination of the
term, Tenant's occupancy subsequent to such expiration or termination, if not
with the consent or acquiescence of Owner, shall be deemed to be that of a
tenancy at will and in no event from month-to-month or from year-to-year, and it
shall be subject to all the terms, covenants and conditions of this lease
applicable thereto, except the fixed rent shall be one hundred fifty (150%)
percent thereafter times the amount payable in the last year of the term, and no
extension or renewal of this lease shall be deemed to have occurred by such
holding over. In the event Owner shall commence proceedings to dispossess Tenant
by reason of Tenant's default hereunder only, Tenant shall pay, in addition to
costs and disbursements, reasonable legal fees for each proceeding in which
Owner finally prevails as additional rent hereunder.
64. RULE AGAINST PERPETUITIES:
Notwithstanding anything to the contrary, if the Commencement Date has
not occurred on or before the fifth anniversary of the date of this Lease, this
Lease shall be null and void and of no further force and effect. Upon any such
cancellation, any security deposited by Tenant shall be returned to Tenant.
65. DEFINITIONS:
For the purposes of this lease and all agreements supplemental to this
lease, and all communications with respect thereto, unless the context otherwise
requires:
A. The term "fixed rent" shall mean rent at the annual rental rate or
rates provided for in the granting clause appearing at the beginning of this
lease.
B. The term "additional rent" shall mean all sums of money, other than
fixed rent, and which become due and payable from Tenant to Owner hereunder, and
Owner shall have the same remedies therefor as for a default in payment of fixed
rent.
C. The term "rent" and "rents" shall mean and include fixed rent and/or
additional rent hereunder.
D. The terms "include", "including" and "such as" shall each be
construed as if followed by the phrase "without being limited to".
E. The terms "laws, legal requirements and/or requirements of public
authorities" and words of like import shall mean laws and ordinances of any or
all of the Federal, state, city, county and borough governments and
49
rules, regulations, orders and/or directives of any or all departments,
subdivisions, bureaus, agencies or offices thereof, or of any other
governmental, public or quasi-public authorities, having jurisdiction in the
premises, and/or the direction of any public officer pursuant to law.
F. The terms "requirements of insurance bodies" or "Insurance
Requirements" and words of like import shall mean rules, regulations, orders and
other requirements of the New York Board of Fire Underwriters and/or the New
York Fire Insurance Rating Organization and/or any other similar body performing
the same or similar functions and having jurisdiction or cognizance of the
building and/or the Demised Premises.
G. The term "repair" shall be deemed to include restoration and
replacement as may be necessary to achieve and/or maintain good working order
and condition.
H. Words and phrases used in the singular shall be deemed to include
the plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender. The term "person" and "persons" as
used in this lease, shall be deemed to include natural persons, firms,
corporations, associations and other private or public entities.
66. RENT CONCESSION:
A. Notwithstanding anything to the contrary, Tenant shall not be
obligated to pay the monthly installments of fixed rent due with respect to the
first four (4) full months of the Term of this Lease and the installments of
fixed rent due for the fifth (5th) through the twelfth (12th) full months of the
term shall be reduced to one-half of the regular monthly rate.
B. If the Commencement Date is a day other than the first day of a
month, the installment of fixed rent for that partial month shall be equitably
prorated based upon the number of days in that month and shall be due and
payable on the Commencement Date.
67. SECURITY:
A. Contemporaneously with the execution and delivery by Tenant of this
Lease, Tenant has deposited Ninety-five Thousand Eight Hundred Thirty-three
Dollars and 33/100 ($95,833.33) with Owner to be held by Owner as security for
the full and faithful performance by Tenant of each and every term, covenant and
condition of this Lease. The security shall be held in a separate interest
bearing account selected by Owner. Interest earned on the security, less
interest of one (1%) percent which may be retained by Owner, shall accrue for
the account of Tenant and shall be paid to Tenant from time to time upon
Tenant's request, provided Tenant shall not be in default beyond any notice or
cure period. In the event that Tenant defaults in respect to any of the terms,
provisions, covenants and conditions of this
50
Lease, including, but not limited to, payment of any item of fixed rent or any
item of additional rental or other charge payable under this Lease or the
performance of any other obligation hereunder which shall remain uncured beyond
notice or cure periods, if any, then the said security deposit may be used,
applied or retained by Owner, in whole or in Part, for the payment of any item
of fixed rental or additional rental or other charge in default or for any other
sum which Owner may expend or be required to expend by reason of Tenant's
default, including any damages or deficiency in the reletting of the Demised
Premises, whether such damage or deficiency may accrue before or after summary
proceedings or other re-entry by Owner. In the event Owner shall apply the
security on account of amounts due, upon Owner's demand, Tenant shall replenish
the amount which has been applied by Owner. In the event that Tenant shall fully
and faithfully comply with all the terms, provisions, covenants and conditions
of this Lease, the security or any balance thereof together with accrued and
unpaid interest shall be returned to Tenant after the time fixed as the
expiration of the herein demised Term as same may be extended. In the absence of
evidence satisfactory to Owner of any assignment of the security, or the
remaining balance thereof, Owner may return the security or balance to the
original Tenant, regardless of one or more assignments of the lease itself. In
the event of a bona fide sale, subject to this Lease, Owner shall have the right
to transfer any security deposit to the vendee for the benefit of Tenant and
upon the transfer to said vendee the Owner shall be considered released by
Tenant from all liability for the return of such or security or balance, and
Tenant agrees to look to the new Owner solely for the return of the said
security or balance, and it is agreed that this shall apply to every transfer or
assignment made of the security or balance to a new Owner. No holder of a
mortgage to which this Lease is subordinate shall be responsible in connection
with the security deposited hereunder, unless such mortgagee actually shall have
received the security deposited hereunder. The security deposited under this
Lease shall not be mortgaged, assigned or encumbered by Tenant without the
written consent of Owner.
68. HAZARDOUS MATERIAL:
A. Owner shall deliver an ACP-5 certificate for the Demised Premises to
Tenant. Owner represents that Owner has no knowledge of the presence of any
hazardous substance at the Demised Premises.
B. If Tenant, its employees, agents or contractors shall cause any
hazardous substance or material, including asbestos, petroleum products or any
other substance or material declared to be hazardous under any federal, state or
local law, ordinance, rule or regulation, to be present at the Demised Premises
or the Building, Tenant shall be required to correct and abate that condition in
the manner and to the extent required by such legal requirements. Tenant shall
defend, indemnify and hold Owner harmless from and against any claims, loss,
liability, fines, or penalties arising as a result of any condition created by
Tenant, its employees, agents or contractors. The provisions of this Section
shall survive the expiration of
51
the term of this Lease.
69. TENANT'S OPTIONS TO LEASE:
A. Tenant shall have the option to elect to lease the fourteenth (14th)
floor of the building upon the terms and conditions described below by giving
notice to Owner of Tenant's election to do so on or before the thirtieth (30th)
day following the date of this Lease. If Tenant shall elect to do so, the
following shall apply:
1. This Lease shall be automatically amended to include the
fourteenth (14th) floor as part of the Demised Premises;
2. commencing as of the date Delivery of Possession shall
occur with respect to the fourteenth (14th) floor, the annual rate of fixed
annual rent shall be increased to Seven Hundred Eighty-seven Thousand Five
Hundred ($787,500.00) Dollars for the first five (5) Lease Years and Eight
Hundred Sixty-two Thousand Five Hundred ($862,500.00) Dollars from the first day
of the sixth (6th) Lease Year until the Expiration Date;
3. The multiple in the amount of 25,000 set forth in paragraph
1 of Section B of Rider Article 42 shall be increased to 37,500;
4. Tenant's Proportionate Share under Rider Article 43 shall
be increased to fifteen (15%) percent;
5. Tenant shall deliver plans and specifications for the
fourteenth (14th) floor within twenty (20) business days after the date of
Tenant's notice and Owner shall be required to perform Owner's Work to prepare
that floor for Tenant's occupancy;
6. The outside date for the completion of Owner's Work on the
fourteenth (14th) floor shall be extended for a period of sixty (60) days after
the date referred to in Section (b) of Rider Article 38 and if Delivery of
Possession of the original two floors comprising the Demised Premises shall
occur prior to the delivery of the fourteenth (14th) floor, the Term of this
Lease shall commence upon the occurrence of Delivery of Possession with respect
to the original two floors; and
7. The security deposit required under Rider Article 67 shall
be increased by the sum of Forty-seven Thousand Nine Hundred Sixteen
($47,916.00) Dollars.
8. Notwithstanding paragraph 2 above, the increase in rent
attributable to the fourteenth (14th) floor shall be abated for the same number
of months and in the same manner as the abatement referred to in Rider Article
66.
B. Subject to a right of first refusal granted to another lessee in the
Building, Furman Selz Incorporated, Tenant shall have the option to elect to
lease the sixth and/or the seventh floors of the Building by giving notice to
Owner of Tenant's election to do so on or before the
52
"Outside Option Date". With respect to either such floor, the "Outside Option
Date" means the earlier to occur of (i) the ninetieth (90th) day following the
date of this Lease or (ii) five (5) business days after Owner shall notify
Tenant that Owner has received a bonafide offer which Owner is willing to accept
from an unaffiliated party to lease any such floor. If Tenant shall elect to do
so, Owner shall immediately notify Furman Selz Incorporated of Tenant's offer.
If Furman Selz Incorporated exercises that right of first refusal, Tenant's
election shall be canceled. If Furman Selz Incorporated shall not exercise its
right of first refusal, the following shall apply:
1. This Lease shall be automatically amended to include said
floor or floors Tenant has elected to lease;
2. Commencing as of the date of Delivery of Possession with
respect to any such floor, the annual rate of fixed annual rent shall be
increased for each such floor leased by Tenant by the sum of Two Hundred
Thirty-seven Thousand Five Hundred ($237,500.00) Dollars for the first five (5)
Lease Years and by the sum of Two Hundred Sixty-two Thousand Five Hundred
($262,500.00) Dollars from the first day of the sixth (6th) Lease Year until the
Expiration Date;
3. The multiple set forth in paragraph 1 of Section B of Rider
Article 42 shall be increased, or further increased as the case may be, by the
amount 12,500 for each such additional floor Tenant has elected to lease;
4. Tenant's Proportionate Share under Rider Article 43 shall
be increased by adding an additional five (5%) percent for each such floor
Tenant has elected to lease;
5. Tenant shall deliver plans and specifications for any such
additional floor Tenant has elected to lease within twenty (20) business days
after the date Owner shall notify Tenant that Furman Selz Incorporated has not
exercised its right of first refusal and Owner shall be required to perform
Owner's Work to prepare any such floor for Tenant's occupancy, which work shall
be performed with reasonable dispatch in accordance with a work schedule
established by Owner in Owner's reasonable judgment;
6. The security deposit required under Rider Article 67 shall
be increased by the sum of Forty-three Thousand Seven Hundred Fifty ($43,750.00)
Dollars for each such additional floor leased by Tenant.
7. Notwithstanding the provisions of paragraph 2 above, any
increase in rent attributable to any such additional floor shall be abated for
the same number of months and in the same manner as the abatement referred to in
Rider Article 66.
C. The provisions of Rider Article 38 and Exhibit A shall control with
respect to the performance of Owner's Work for any additional floors leased by
Tenant pursuant to Sections A and B above.
D. If Tenant shall exercise any such option, at the request of either
party, the parties shall enter into a confirmatory written agreement
53
reflecting the applicable changes to the Lease.
70. TENANT'S RIGHT OF FIRST OFFER:
A. At the time the existing Lease with the Natori Company, Inc. for the
fifteenth (15th) floor shall be terminated or expire without being renewed or
extended, if Owner shall desire to lease that floor to any party which is not
affiliated with or under common control with Owner, owned by or related to
Owner's principal shareholder, officers or directors or members of their family
(an "Affiliated Entity"), provided Tenant shall not be in default under this
Lease beyond any applicable notice or grace period, Owner shall notify Tenant of
Owner's intention to do so ("Owner's Notice"). Owner's Notice shall set forth
the rental rate, the term and other terms and conditions acceptable to Owner.
B. Tenant shall have fifteen (15) days from the date of Owner's Notice
to elect to lease the fifteenth (15th) floor at the rental rate, for the term
and upon the terms and conditions set forth in Owner's Notice by notifying Owner
of Tenant's agreement to do so. If Tenant shall fail to so notify Owner,
Tenant's right of first offer with respect to that floor shall expire and Owner
shall be free to lease the floor to any other party at a rental rate of no less
than ninety-two and one-half (92.5%) percent of the rental rate set forth in
Owner's Notice. If Owner shall seek to lease the floor for more than seven and
one-half (7.5%) percent less than the rental rate set forth in Owner's Notice,
Tenant's right of first offer shall apply anew with respect to the reduced
rental rate.
C. If Tenant shall elect to lease the vacant space within 15 days after
Owner's Notice, Owner shall submit a lease or a lease amendment containing the
rental terms, the term and other terms and conditions set forth in Owner's
Notice and Tenant shall have ten (10) business days after submission of the
lease to execute and deliver it to Owner. If Tenant shall fail to execute and
deliver the lease OR AMENDMENT within that 10 business day period, Tenant's
right to lease the floor shall expire.
D. The provisions of this Rider Article 70 shall not apply to the
renewal or extension of the existing lease for the fifteenth (15th) floor.
54
71. SATELLITE DISH AND EXTERIOR LOUVER:
A. Subject to Tenant's compliance with applicable legal requirements
and approval of the size and manner of installation thereof, Owner hereby
consents to the installation of a mini satellite dish on the roof of the
building. Owner's consent shall not be unreasonably withheld or delayed. Tenant
shall be responsible for any damage to the roof or other portions of the
building caused by the installation of that satellite dish.
B. Subject to compliance with applicable legal requirements, Owner
consents that Tenant may install a louver to the exterior of the building at a
location on east side of building near lot line windows designated by Owner for
the purpose of supplying fresh air to a supplementary air-conditioning system to
be installed by Tenant for the purpose of cooling Tenant's telephone room.
72. MISCELLANEOUS:
A. No receipt of monies by Owner from Tenant, after any reentry or
after the cancellation or termination of this lease in any lawful manner, shall
reinstate the lease; and after the service of notice to terminate this lease, or
after the commencement of any action, proceeding or other remedy, Owner may
demand, receive and collect any monies due, and apply them on account of
Tenant's obligations under this lease but without in any respect affecting such
notice, action, proceeding or remedy, except that if a money judgment is being
sought in any such action or proceeding, the amount of such judgment shall be
reduced by such payment.
B. If Tenant is in arrears in the payment of fixed rent or additional
rent, Tenant waives it right, if any, to designate the items in arrears against
which any payments made by Tenant are to be credited and Owner may apply any of
such payments to any such items in arrears as Owner, in its sole discretion,
shall determine, irrespective of any designation or request by Tenant as to the
items against which any such payments shall be credited.
C. 1. In every case in which Tenant is required by the terms of this
lease to pay to Owner a sum of money as fixed rent, additional rent, or
otherwise and payment is not made within ten (10) days after written notice that
the same shall become due, interest shall accrue and be payable on such sum or
so much thereof as shall be unpaid from the date it becomes due until it is
paid. Such interest shall be at an annual rate which shall be two (2) percentage
points above the prime commercial lending rate of Citibank, N.A., charged to its
customers of highest credit standing for ninety (90) day unsecured loans, in
effect from time to time, but in no event more than the highest rate of interest
which at such time shall be permitted under the laws of the State of New York.
2. If Tenant shall issue a check to Owner which is returnable unpaid
for any reason, Tenant shall pay Owner an additional charge of $100.00 for
Owner's expenses in connection therewith.
55
D. Owner will not be required to furnish any services, including window
or other cleaning services, except as otherwise expressly provided in this
lease.
E. This lease contains the entire agreement between the parties and all
prior negotiations and agreements are merged into this lease. This lease may not
be changed, modified, terminated or discharged, in whole or in part, nor any of
its provisions waived except by a written instrument which (i) expressly refers
to this lease, (ii) is executed by the party against whom enforcement of the
change, modification, termination, discharge or waiver is sought and (iii) is
reasonably permissible under all mortgages affecting the real property of which
the Demised Premises are a part and any underlying leases.
F. Tenant expressly acknowledges that neither Owner nor Owner's agents
has made or is making, and Tenant, in executing and delivering this lease, is
not relying upon, any warranties, representations, promises or statements,
except to the extent that the same are expressly set forth in this lease, and no
rights, easements or licenses are or shall be acquired by Tenant by implication
or otherwise unless expressly set forth in this lease.
G. The laws of the State of New York applicable to contracts made and
to be performed wholly within the State of New York shall govern and control the
validity, interpretation, performance and enforcement of this lease.
H. Except for the inside surfaces of all walls, windows and doors
bounding the Demised Premises, all of the building including exterior building
walls, core corridor walls and doors and any core corridor entrance and any
space in or adjacent to the Demised Premises used for shafts, stacks, pipes,
conduits, fan rooms, ducts, electric or other utilities, sinks or other building
facilities, and the use thereof, as well as access thereto through the Demised
Premises for the purpose of operation, maintenance, decoration and repair, are
reserved to Owner.
I. With respect to any provision of this lease which provides, in
effect, that Owner shall not unreasonably withhold or unreasonably delay any
consent or any approval, Tenant in no event, shall be entitled to make, nor
shall Tenant make, any claim, and Tenant hereby waives any claim, for money
damages; nor shall Tenant claim any money damages by way of setoff, counterclaim
or defense, based upon any claim assertion by Tenant that Owner has unreasonably
withheld or unreasonably delayed any consent or approval; but Tenant's sole
remedy shall be an action or proceeding to enforce any such provision, or for
specific performance, injunction or declaratory judgment, except as otherwise
permitted by law if it is proven that Owner acted with malicious intent. As an
alternative to commencing any action or proceeding, Tenant may submit the
dispute to expedited arbitration before the American Arbitration Association at
its New York City offices. The finding of the arbitrator shall be binding upon
the parties. Notwithstanding anything to the contrary, Tenant shall have no
right to elect to resolve any such dispute by arbitration and Landlord shall not
be required to do so if Tenant shall be in default in the payment of fixed rent,
additional rent or in default of any other material
56
obligation under the Lease beyond any applicable cure period either at the time
a dispute shall arise, at the time the election to arbitrate is sought to be
made by Tenant, or at the time an arbitration is scheduled to commence.
J. Tenant covenants not to place this lease on record without the
consent of Owner. At the request of Owner, Tenant will execute a statutory short
form lease for recording purposes containing references to such provisions of
this lease as Owner, in its sole discretion, shall deem necessary.
K. All rent payments shall be paid without notice, demand,
counterclaim, offset, deduction, defense or abatement except as otherwise
provided herein. If the Commencement Date is not the first day of the month, the
first and last rent payments shall be for the proportionate fraction of the
whole month.
OWNER:
A & R REAL ESTATE, INC.
By: /s/ Signature Illegible
President
TENANT:
|
NELSON COMMUNICATIONS INC.
By: /s/ W.K. Nelson
President
|
57
EXHIBIT A - PART I
105 MADISON AVENUE
BUILDING STANDARD WORKLETTER
OFFICE CONSTRUCTION
FEBRUARY 1997 - A
"BUILDING STANDARD" DEFINITION
The term "Building Standard" shall refer to all work to be performed by
Landlord, at his sole expense, on the Demised Premises with "Standard of the
Building" materials as outlined in the Workletter of the Lease.
PART A - LANDLORD'S WORK
Landlord shall provide and install the following facilities and materials and
complete the following work at Landlord's sole cost and expense (except as
herein otherwise provided) in accordance with Tenant's Final Plans, as defined
in Part B herein. The term "Building Standard" shall mean such materials as
Landlord may elect to use as part of its standard construction substantially
throughout the Building. For purposes of this Lease the Landlord's work shall
be:
(1) PARTITIONS
A. One (1) lineal foot of drywall partition for every 15 square
feet of rentable area.
B. Drywall partitions shall be constructed of 2-1/2" steel studs
24" on center with a layer of 5/8" sheetrock on each side.
Interior partitions shall extend to 6" above the hung ceiling.
C. Demising partitions shall be constructed of 2-1/2" steel studs
with one layer of 5/8" sheetrock on one side and layer of 5/8"
sheetrock on the other side. Both layers of 5/8" sheetrock
shall extend to the slab above. All demising partitions shall
be packed with insulation.
D. Any angles in any partition shall be at Tenant's expense.
Partitions ending at the exterior walls shall meet a column or
mullion.
E. Two (2) 5' long paint-grade hat shelves and poles will be
provided.
(2) DOORS & BUCKS
A. One (1) door and buck for every 25 lineal feet of drywall
partition allowed pursuant to Item (1) above.
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B. Doors shall be flush type, hollow metal 3'-0" x 8'-0" high.
C. Two (2) 5'-0" x 8'-0" closet double doors.
(3) HARDWARE
A. Each interior door allowed pursuant to Item (2) above shall be
fitted with one 1/1/2 pair of butt hinges, heavy duty latch
set, brushed chrome finish and door bumper.
(4) ELECTRIC SERVICE
A. The Demised Premises will be served with an incoming electric
service of adequate capacity to meet conditions constructed in
accordance with the "Building Standard Workletter". The
distribution system is designed for 5 watts per square foot of
rentable area for the combined lighting and power load.
Subject to the foregoing, any required alteration at electric
panel shall be performed by Landlord.
B. One (1) 15 amp, 120 volt duplex electrical receptacle for
every 125 sq. ft. of rentable area, to be installed within
building standard partitions specified above.
C. Two (2) 30 amp, 120 volt separate circuit outlets.
(5) LIGHTING
A. One (1) modern recessed type fluorescent, 4 tube light fixture
with Parawedge lens, for every 90 sq. ft. of rentable area.
B. One (1) silent type wall switch for every room.
C. Exit and emergency lighting to be in accordance with state and
city Building Code.
(6) FIRE ALARM
A. Provide five (5) combination speaker/strobe devices per floor
and any required work at the central building alarm panel.
(7) HVAC
The HVAC System shall be capable of maintaining 74 degrees Fahrenheit
plus or minus 2 degrees, when outdoor conditions are 91 degrees
Fahrenheit dry bulb and 75 degrees Fahrenheit wet bulb. The HVAC System
shall be capable of maintaining 70 degrees Fahrenheit at outdoor
temperature 5 degrees Fahrenheit dry bulb. The HVAC System is designed
based upon (i) electrical usage of 5 watts per usable square
59
foot for all purposes (lighting and power) and (ii) occupancy rate of
one (1) person per usable 100 square feet.
(8) ACOUSTIC CEILING
A. A mechanically suspended acoustic ceiling shall be installed
throughout the Demised Premises. The acoustic tile shall be 2'
x 2' mineral fissured with an exposed semi-regressed spline
suspension system.
(9) FLOOR COVERING
A. Furnish and install carpeting throughout the Demised Premises
in colors selected by the Tenant from samples submitted by the
Landlord. If Tenant chooses to install his own carpeting he
will be allowed $18.00 per square yard of carpeted area.
B. Furnish and install 4" vinyl base, straight or cove, on all
columns and partitions allowed pursuant to Item (1) above.
(10) PAINT
A. One prime coat and one flat finish coat, in colors selected by
Tenant from samples submitted by Landlord. Special colors, and
additional colors per room, where requested shall be done at
additional expense to Tenant. Paint to be Benjamin Moore flat
latex or equal. Doors and door bucks to receive two coats of
semi-gloss enamel in the same color as the walls.
B. Paint existing radiator enclosure as required.
(11) WINDOW TREATMENT
A. Furnish and install one Building Standard Solar Shade in each
window. Shades shall be of a light neutral color. There shall
be no substitution allowed for this item.
(12) ENTRANCE
A. Furnish and install 1/2" clear tempered glass doors, 6' x 8"
pair with top and bottom shoe.
Or
B. Furnish and install 1 3/4" veneered wood doors, 6'-8" pair
with hollow metal frame.
(13) PLUMBING
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A. Provide one (1) pantry sink and faucet and all associated
roughing.
(14) MILLWORK
A. Provide plastic laminate pantry cabinets, both wall and base
(including a countertop) not to exceed 10 lineal feet.
The foregoing provisions of this Part A of Exhibit A, Part I shall be deemed to
be modified and supplemented by the provisions of Exhibit A, Part II attached
hereto and made a part hereof.
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PART B - PLANS, SPECIFICATIONS AND DRAWINGS
(1) Tenant, at its sole cost and expense, shall prepare and submit to
Landlord, for Landlord's approval, plans, specifications and drawings,
including basic construction work and finished work (herein referred to
as Tenant's Final Plans) on or before 20 business days after the date
of this Lease (the Submission Date).
(2) All engineering for electrical, structural, plumbing and HVAC services
required for any of Tenant's layouts, Tenant's Final Plans or Tenant's
installations (including Landlord's work under Part A) shall be
performed by Landlord's engineers only, and at Tenant's expense.
(3) Tenant's Final Plans shall comply with and conform with the Building
plans filed with Department of Buildings, and with all the rules,
regulations and/or other requirements of any governmental department
having jurisdiction over the construction of the building and/or
Demised Premises. Landlord shall, at Tenant's sole cost and expense,
file Tenant's Final Plans together with any mechanical plans and
specifications with the appropriate governmental agencies in such form
(building notice, alteration or other form) as Landlord may direct.
Landlord shall also obtain, at Tenant's sole cost and expense, all
necessary permits and approvals. Any changes required by any
governmental department affecting the construction of the building
and/or the Demised Premises shall be complied with by Landlord in
completing said building and/or the Demised Premises and shall not be
deemed to be a violation of Tenant's Final Plans or any provisions of
this Part B, and shall be accepted by the Tenant.
(4) If after the delivery of any phase of Tenant's Final Plans Tenant
shall make any changes thereto, Tenant shall reimburse Landlord for
any additional costs and expenses in connection therewith, including
Landlord's engineers' charges resulting from such changes or
revisions. Tenant shall also reimburse Landlord for the delay
resulting from such changes or revisions as set forth in Part D
thereof.
(5) Tenant's final plans are expressly subject to landlord's written
approval, which approval or rejection landlord shall use all
reasonable efforts to provide within 2 weeks. Landlord's approval may
not address aesthetic matter and shall not be unreasonably withheld
provided, however, if Tenant's Final Plans (1) require any materials,
services or installations that are not readily available at the
appropriate time or will result in an unreasonable delay in
construction or (ii) require structural alterations not contemplated
under Part A of the Workletter, Landlord may withhold approval. If
Landlord shall not disapprove or comment upon the plans and
specifications within that two (2) week period, the plans and
specifications shall be deemed to be approved.
62
PART C - TENANT'S WORK
All labor and materials which are to be furnished at the expense of Tenant in
accordance with Section B above, and all labor and materials required by Tenant
for any of its initial installations over and above the work to be furnished by
landlord pursuant to Section A above, shall be indicated on Tenant's Final Plans
and shall be performed at Tenant's cost and expense.
(A) All such work, irrespective of the nature thereof (excluding carpeting,
draperies, furniture, accessories and interior decorations other than
wall treatments) shall be performed by Landlord's contractors and shall
be charged to Tenant based upon Landlord's actual cost thereof plus 21%
of said cost for Landlord's expenses and overhead in connection
therewith.
(B) Prior to commencing any such work required by Tenant, Landlord shall
submit to Tenant written estimates of the cost of such work with
copies of the transmittal letter accompanying such estimates sent to
Tenant's attorney as set forth in the Lease. Tenant shall either
approve any such estimate within ten working days or reissue a revised
set of working drawings eliminating the extra work so as not to delay
construction of the work undertaken by Landlord pursuant to Section A
above. Failure of Tenant to reply to such estimate as aforesaid within
said ten working day period shall be deemed an approval of said
estimate with appropriate back-ups. In rejecting any estimate, Tenant
may direct Landlord in writing to proceed with such additional
materials on a "time and material" basis plus the applicable
percentage of cost to be added thereto in accordance with Paragraph A
above, and Tenant shall pay such sums as provided in Paragraph C,
below. Landlord shall submit to Tenant an itemized statement as to the
cost of "time and materials" billed and if requested by Tenant,
Landlord shall submit its records substantiating the same.
(C) Tenant agrees to pay Landlord for the cost of such work (together with
the applicable percentage of cost set forth in Paragraph A above) as
work progresses or materials are delivered, within thirty days after
submission of bills therefore.
PART D - SUBSTITUTES AND CREDITS
Tenant may substitute material, equipment and fixtures for those specified in
Section A except where substitution is specifically prohibited, provided that
the item substituted is of like kind, quality and character. All finish work
shall require the installation of new materials at least comparable to the
quality of the item being substituted. Tenant shall pay Landlord the cost to
Landlord for such substitute items which are in excess of such items to be
furnished. The cost to Tenant for such substitution shall be Landlord's cost for
the substitute item less a credit for the item to be furnished, plus 21% of the
balance for Landlord's expenses and overhead in the handling of the
substitution. Tenant may also request Landlord to omit the installation of any
item not theretofore installed,
63
provided Landlord shall not thereafter be obligated to install the same. Tenant
shall not be entitled to any credit for any such item omitted against any
additional item or any item of a different kind or character. There shall be no
cash credits. Where a substitution is made in accordance with the provisions of
this Part D, the item substituted shall be deemed the property of Landlord. Any
delays resulting from substitutions or omissions designated by Tenant shall be
subject to Part E below.
PART E - DELAYS BY TENANT
Tenant has been advised of the importance to Landlord of completing the Demised
Premises as speedily as possible and the great financial loss to Landlord
resulting from a delay thereof. If Tenant, or Persons Within Tenant's Control,
delay the progress or completion of work required to be performed by Landlord
hereunder or pursuant to any separate agreement, or delay the Commencement Date
of the Lease by (I) failing to submit to Landlord timely any of Tenant's Final
Plans, or failing to approve any estimate for additional work or failing to make
necessary revisions in Tenant's Final Plans within the time required, or
delaying any selections of materials to be made by Tenant, or (ii) requesting
changes in Tenant's Final Plans or of any items to be provided by Landlord, or
(iii) otherwise interfering or delaying Landlord's performance, then the date of
substantial completion of the Demised Premises shall be deemed to date upon
which the Demised Premises would have been substantially completed but for the
acts or omissions by Tenant or Persons Within Tenant's Control and Tenant shall
reimburse Landlord for Fixed Minimum Rent and additional rent for the period of
such delay and for the additional cost to Landlord and damages resulting from
such delay, within thirty days after being billed therefore, whether or not the
Lease has commenced. Landlord agrees to give written notice to Tenant of any
delay which Tenant is causing at or about the time the delay commences. The
above provisions shall be in addition to, and not in limitation of, any other
rights Landlord shall have under the Lease or at law; provided, however, that
Landlord shall not terminate this Lease if Tenant fails to submit Tenant's Final
Plans on the submission dates so long as Tenant pays Fixed Minimum Rent for the
period of delay and any other sums that may be due, as aforesaid.
64
EXHIBIT A
PART II
PARTITIONS
1. Existing exterior walls and core walls will be repaired, if
necessary, and painted.
2. Up to 20% of the interior walls should have 24" high
clearstory glass.
3. Low drywall with wood and/or plastic laminate cap may be
substituted for full height dry wall.
4. In addition to the demising partitions, up to 10% of the
interior walls shall have sound attenuating insulation and go
slab to slab.
5. Tenant shall be allowed to angle partitions and dogleg
partitions at exterior walls.
HARDWARE
Interior doors shall have heavy duty A.D.A. approved hardware and locksets.
ELECTRIC SERVICE
1. Electrical distribution system shall be a minimum of 5 watts
per square foot of rentable area.
2. One 15 amp outlet 120_.duplex outlets shall be provided for
every 100 sq. ft. of rentable area.
LIGHTING
1. Up to 15% of the fixtures may be substituted with fluorescent
high hat fixtures with (2) 1BW. The Landlord's contribution
for each high hat fixture shall not exceed the cost of the
recessed fluorescent fixture.
2. All wall switches shall be Decura type.
3. Lampak units shall be provided in the fluorescent fixtures in
accordance with the N.Y.C. Building Codes.
FIRE ALARM
Shall comply to the N.Y.C. Building Code.
65
H.V.A.C.
Distribution ductwork to accommodate the interior layout shall be provided.
FLOOR COVERING
Landlord shall repair floor and flash patch as required.
PAINT
A minimum of (2) colors of eggshell finish. Benjamin Moore Paint shall be over a
prime coat shall be applied to all gypsum board surfaces. All metal work shall
receive (2) coats of semi-gloss in a different color.
WINDOW TREATMENT
Landlord will consider using a LeVelor "Rivera" Series mini-blind as building
standard. If not, Landlord and Tenant will agree upon a building standard blind.
PLUMBING
BATHROOMS
FIRE PROTECTION
Landlord to compartmentalize space as required by Code.
RADIATOR COVERS
Landlord to provide for new radiator convector covers using basic standard
aluminum covers.
CEILINGS
Tenant may not want to have an acoustic ceiling. Tenant may instead prefer to
have Landlord to repair and patch ceiling and paint ceiling.
66
EXHIBIT B
BASIC BUILDING WORK
1. Install new thermopane windows at the Demised Premises.
2. Renovate lobby, including upgrading floor in elevator cabs.
3. Prior to Delivery of Possession (as defined in the Lease), remove
stairway between 18th and 17th floors and install and patch ceiling of the 17th
floor.
4. Refurbish existing bathrooms to building standards prior to Delivery
of Possession with the number of water closets and sinks in the men's and
women's bathrooms as existing as of the date hereof and in their present
locations. Install one separate ADA compliant bathroom on each floor.
67
FIRST AMENDMENT OF LEASE DATED AS OF JUNE 6, 1997 BETWEEN A & R REAL
ESTATE, INC. AND NELSON COMMUNICATIONS, INC.
The parties agree as follows:
ARTICLE I
RECITALS AND DEFINITIONS
SECTION 1.01 THE PARTIES
(a) A & R Real Estate, Inc. is a New York corporation. It has an
address at 105 Madison Avenue, New York, New York 10016. It is referred to below
as "Owner".
(b) Nelson Communications, Inc. is a Delaware corporation. It has an
address at 41 Madison Avenue, New York, New York 10016. It is referred to below
as "Tenant".
SECTION 1.02 THE LEASE
Reference to the "Lease" means the lease dated May 9, 1997 between
Owner, as lessor, and Tenant, as lessee, relating to the sixteenth (16th) and
seventeenth (17th) floors of the building known as 105 Madison Avenue, New York,
New York (the "Building").
SECTION 1.03 DEFINITIONS
The words and phrases defined in the Lease have the same meaning in
this agreement, except as may be otherwise provided in this agreement.
ARTICLE II
AMENDMENTS
SECTION 2.01 THE OPTION TO LEASE
(a) Owner and Tenant hereby confirm that Tenant has validly exercised
Tenant's option to lease the fourteenth (14th) floor of the Building pursuant to
Rider Section 69 A of the Lease.
(b) Pursuant to Rider Section 69 A of the Lease, the fourteenth (14th)
floor is included as part of the Demised Premises and the provisions of
paragraphs 1 through 8 of said Rider Section 69 A apply and are in full force
and effect.
1
(c) Contemporaneously with the execution of this agreement, Tenant has
paid the first month's worth of fixed annual rent in the amount of Twenty-one
Thousand, Eight Hundred and Seventy-five ($21,875.00) Dollars attributable to
the fourteenth floor and has deposited with Landlord the additional sum of
Forty-seven Thousand Nine Hundred Sixteen ($47,916.00) Dollars as additional
security to be held and applied pursuant to Rider Article 67 of the Lease.
SECTION 2.02 ASSIGNMENT
Rider Section 51H of the Lease is hereby amended as follows:
(a) the words "either (a)" are inserted after the words "has been
previously assigned are" in the fifth line from the bottom of the Section; and
(b) the words "or (b) sold in connection with or as part of a public
offering of such Affiliate's shares" are inserted after the words "over the
counter market" in the fourth line from the bottom of the Section.
ARTICLE III
GENERAL PROVISIONS
SECTION 3.01 CONFIRMATION
Except as set forth in this agreement, the Lease remains unchanged and
in full force and effect.
SECTION 3.02 SUCCESSORS AND ASSIGNS
This agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
SECTION 3.03 MODIFICATION
This agreement may not be modified orally.
SECTION 3.04 INTERPRETATION
This agreement shall be interpreted under and governed by the laws of
the State of New York.
The parties have caused this agreement to be duly executed as
2
of the date set forth above by their respective duly authorized representatives.
A & R Real Estate, Inc.
By: /s/ Signature Illegible
President
Nelson Communications, Inc.
By: /s/ Blanca Stephens
Blanca Stephens
|
3
A & R REAL ESTATE, INC.
105 MADISON AVENUE
NEW YORK, NEW YORK 10016
July 28, 1997
Nelson Communications, Inc.
41 Madison Avenue
New York, New York
Re: Lease dated May 9, 1997 - Nelson Communications, Inc.
with A&R Real Estate, Inc. - 105 Madison Avenue, N.Y.
Gentlemen:
This letter relates to the above captioned lease as amended by the
Amendment of Lease dated June 6, 1997, (collectively the "Lease"). This letter
is intended to be an amendment of the Lease with respect to the work to be
performed at the 14th, 16th and 17th floors of the building. The words and
phrases defined with Lease have the same meaning in this letter, except as may
be otherwise set forth below.
With respect to the 16th and 17th floors, reference below to the "Plans
and Specifications" means the plans and specifications dated 6/09/97, prepared
by Montroy Andersen, numbered 16-A1 through A6, 17A1 through A6, A7 through A14,
M1 through M6, F1 through F5, P3 and P4, SP1 through SP3, E1 through E6, FA1 and
FA2, which Plans and Specifications have been approved by Owner. Tenant has not
yet prepared plans and specifications for the 14th floor. The plans and
specifications for the 14th floor work shall be subject to Owner's approval
which shall not be unreasonably withheld or delayed. Tenant agrees that the
plans and specifications for the 14th floor shall be substantially similar to
the Plans and Specifications. The work described in the Plans and Specifications
and the contemplated work for the 14th floor are referred to below as "Tenant's
Build Out Work".
We hereby agree as follows:
1. Notwithstanding the provisions of this Lease, Owner shall not be
required to perform any work, including but not limited to Owner's Work, to
prepare the 14th, 16th and 17th floors for Tenant's occupancy, except that Owner
shall be required to close the opening in the slab between the 17th and 18th
floors (unless Tenant and Owner enter into a lease for the 18th floor within 45
days after the date of this letter).
1
2. (a) Tenant shall perform Tenant's Build Out Work at Tenant's sole
cost and expense.
(b) From and after the date hereof, Tenant may enter the
Demised Premises for the purpose of performing Tenant's Build Out Work. Tenant's
Build Out Work shall be performed in accordance with the Plans and
Specifications with respect to the 16th and 17th floors and the plans and
specifications approved by Owner with respect to the 14th floor, in a good and
workmanlike manner, and in accordance with all applicable legal requirements.
Tenant may not commence work at the 14th floor until plans and specifications
for the 14th floor have been approved by Owner. Any changes or deletions in
Tenant's Build Out Work shall be subject to Owner's approval, which approval
shall not be unreasonably withheld. All materials, fixtures and equipment
installed by Tenant as part of Tenant's Build Out Work shall be new. Rider
Section 41B is deleted with respect to the 16th and 17th floors.
(c) Tenant shall abide by all reasonable rules and
regulations prescribed by Owner with respect to the delivery of materials and
performance of Tenant's Build Out Work. Tenant shall be responsible for any
damage caused to the Building by Tenant's agents, employees, contractors or
subcontractors. The provisions of Rider Section 49 of the Lease shall apply with
respect to the performance of Tenant's Build Out Work.
(d) Upon completion of Tenant's Build Out Work, Tenant shall
deliver to Owner a complete and detailed list of the costs and expenses incurred
by Tenant for Tenant's Build Out Work and two (2) sets of "as built" plans and
specifications for Tenant's Build Out Work.
(e) Owner shall be entitled to inspect Tenant's Build Out
Work as the work progresses. Tenant's Build Out Work shall be subject to Owner's
approval with respect to whether Tenant's Build Out Work conforms to the
approved plans and specifications (including the Plans and Specifications) and
applicable legal requirements and whether the work was performed in a good and
workmanlike manner. Owner's approval shall not be unreasonably withheld. Tenant
shall correct any defects or deficiencies in Tenant's Build Out Work.
Notwithstanding the provisions of the Lease, during the Term, Tenant shall be
responsible for all repairs to any heating, ventilating and air conditioning
equipment installed by Tenant. The foregoing shall not be deemed to be a release
of Owner's obligation to maintain the existing air-conditioning units servicing
the Demised Premises.
(f) Owner shall be obligated to complete the unfinished
portions of the Basic Building Work pursuant to the Lease.
2
3. (a) Upon substantial completion of Tenant's Build Out Work and
submission to Owner of reasonably satisfactory evidence that the Tenant's Build
Out Work has been paid for in full, no mechanic's liens have been filed, all
contractors and subcontractors have delivered the appropriate waiver of liens
and all governmental approval and signoffs have been obtained, in addition to
the rent concession provided for in Rider Section 66, Tenant shall be entitled
to an additional abatement of fixed annual rent in the net amount of One Million
One Hundred Ninety Thousand Six Hundred Twenty-five ($1,190,624.00) Dollars less
Owner's inspection and supervisory fee of Ninety-nine Thousand Three Hundred
Seventy-five ($99,375.00) Dollars. The net additional rent abatement of One
Million Ninety-one Thousand Two Hundred Fifty ($1,091,250.00) Dollars shall be
applied as follows:
(i) The installment of fixed rent for the fifth
(5th) through the twelfth (12th) months of the Term shall be abated in full
rather than the one-half abatement provided for in Rider Subsection 66A;
(ii) the installment of fixed annual rent due for
the thirteenth (13th) through the twenty-fourth (24th) months of the Term shall
be abated in full; and
(iii) the installment of fixed annual rent due for
the twenty- fifth (25th) month of the Term shall be reduced by Forty-one
Thousand Two Hundred Fifty ($41,250.00) Dollars.
4. Notwithstanding the provisions of the Lease, the Commencement Date
with respect to the entire Demised Premises shall be changed to the ninetieth
(90th) day after the date of this letter.
5. Any contractor employed by Tenant to perform Tenant's Build Out Work
shall be subject to Owner's approval. Which approval shall not be unreasonably
withheld.
6. Owner hereby approves Halpern Construction Company ("Halpern") as a
contractor to perform Tenant's Build Out Work. Owner shall cause Halpern to
employ the subcontractors listed in Schedule A hereof to perform the HVAC work,
the sprinkler work, the plumbing work, the electrical work and the Class E fire
safety work provided for in the Plans and Specifications. With respect to the
electrical work, Tenant and/or its general contractor and not the electricity
subcontractor shall supply the electrical fixtures. Tenant and/or its general
contractor shall be solely responsible for any delay in supplying same or any
missing, defective or incomplete fixtures and delays arising therefrom.
7. Except as set forth in this letter, the Lease remains
3
unchanged and in full force and effect.
Please confirm your agreement to the foregoing by countersigning a
counterpart of this letter.
Very truly yours,
A & R Real Estate, Inc.
By: /s/ Signature Illegible
President
Agreed as of July 28, 1997
|
Nelson Communications, Inc.
4
SCHEDULE A
16th and 17th Floor
Prices
------
1. HVAC: Meltzer Wimco $121,000
2. Plumbers & Sprinklers: Melenik Plumbing $ 67,000
3. Electric: Sidney Electric $175,000
(Labor Only)
4. Class E Alarm: FSA Fire Alarm $ 24,725
|
NOTE: Subject to differences in the scope of the work for the 14th floor, Bid
Prices for the 14th floor shall be reasonably comparable to the above
prices.
5
THIRD AMENDMENT OF LEASE DATED AS OF OCTOBER 1, 1997 BETWEEN A & R REAL
ESTATE, INC. AND NELSON COMMUNICATIONS, INC.
The parties agree as follows:
ARTICLE I
RECITALS AND DEFINITIONS
SECTION 1.01 THE PARTIES
(a) A & R Real Estate, Inc. is a New York corporation. It has an
address at 105 Madison Avenue, New York, New York 10016. It is referred to below
as "Owner".
(b) Nelson Communications, Inc. is a Delaware corporation. It has an
address at 41 Madison Avenue, New York, New York 10016. It is referred to below
as "Tenant".
SECTION 1.02 THE LEASE AND LEASE YEAR
(a) Reference to the "Lease" means the lease dated May 9, 1997 between
Owner, as lessor, and Tenant, as lessee, relating to the sixteenth (16th) and
seventeenth (17th) floors of the building known as 105 Madison Avenue, New York,
New York (the "Building"), as amended by the First Amendment of Lease dated as
of June 6, 1997 confirming the addition of the fourteenth (14th) floor of the
Building as part of the Demised Premises, and by a letter agreement dated July
28, 1997.
(b) The parties hereby confirm that the first "Lease Year" of the
Lease shall commence on October 26, 1997 and shall end on October 31, 1998.
SECTION 1.03 DEFINITIONS
The words and phrases defined in the Lease have the same meaning in
this agreement, except as may be otherwise provided in this agreement.
SECTION 1.04 AGREEMENT TO AMEND
The parties have agreed to further amend the Lease by adding the
eighteenth (18th) floor of the Building as part of the Demised Premises.
1
ARTICLE II
AMENDMENTS
SECTION 2.01 THE ADDITIONAL PREMISES
The eighteenth (18th) floor of the Building is hereby added to and
included as part of the Demised Premises. Tenant represents that Tenant is
familiar with the condition of the eighteenth (18th) floor and agrees to accept
possession of it in "as is" condition as of the date of this Agreement. Tenant
shall be entitled to possession of the eighteenth (18th) floor on the date of
this Agreement. Owner shall not be required to perform any work with respect to
the eighteenth (18th) floor of the Building. Landlord shall not be required to
enclose the floor slab between the seventeenth (17th) and eighteenth (18th)
floors.
SECTION 2.02 ADDITIONAL SECURITY AND FIXED RENT
Contemporaneously with the execution of this agreement, Tenant has paid
the first month's worth of the "Eighteenth Floor Rent" (as defined below) in the
amount of Twenty- four Thousand Four Hundred Seventy-nine Dollars and 67/100
($24,479.67) Dollars and has deposited with Landlord the additional sum of
Fifty-three Thousand One Hundred Twenty-five ($53,125.00) Dollars as additional
security to be held and applied pursuant to Rider Article 67 of the Lease.
SECTION 2.03 RENTAL INCREASE
(a) Commencing as of January 1, 1998, subject to the abatement
provided for in Section 2.04 below, the annual rate of fixed annual rent payable
under the Lease is further increased by an annual rate of fixed rent equal to
the "Eighteenth Floor Rent". Reference to the "Eighteenth Floor Rent" means the
annual rate of fixed rent attributable to the eighteenth floor at the following
annual rates:
(i) for the period from January 1, 1998 until the end of the
fifth (5th) Lease Year, the Eighteenth Floor Rent shall be Two Hundred
Ninety-three Thousand Seven Hundred Fifty ($293,750.00) Dollars; and
(ii) from the first day of the sixth (6th) Lease Year until
the Expiration Date, the Eighteenth Floor Rent shall be Three Hundred Eighteen
Thousand Seven Hundred Fifty ($318,750.00) Dollars.
(b) Commencing as of January 1, 1998, the multiple set forth in
paragraph 1 of Section B of Rider Article 42 shall be increased by an additional
12,500 to an aggregate of 50,000.
2
(c) Commencing as of January 1, 1998, Tenant's Pro Rata Share under
Article 43 shall be increased by an additional five (5%) percent to an aggregate
of twenty (20%) percent.
(d) The Eighteenth Floor Rent shall not be payable for the period from
October 1, 1997 until December 31, 1997.
SECTION 2.04 ABATEMENT OF EIGHTEENTH FLOOR RENT
(a) Notwithstanding the provisions of subsection 2.03(a) above, the
increase in fixed annual rent provided for in said subsection 2.03(a) above
shall be abated as follows:
(i) The Eighteenth Floor Rent shall not be payable for the
eight (8) month period from January 1, 1998 through August 31, 1998; and
(ii) Provided Tenant shall not be in default beyond any
applicable notice or cure period, including any default relating to Tenant's
obligation under Section 2.05, in order to partially reimburse Tenant for the
cost of preparing the Demised Premises for Tenant's possession, commencing on
September 1, 1998 and on the first day of each month thereafter, Tenant shall be
entitled to an abatement of the monthly installments of the Eighteenth Floor
Rent until Tenant has received an aggregate abatement pursuant to this part (ii)
equal to "Tenant's Eighteenth Floor Costs".
(b) "Tenant's Eighteenth Floor Costs" means the lesser of (i)
ninety-five (95%) percent of actual costs of work performed at and improvements
made by or on behalf of Tenant to the eighteenth (18th) floor (the "Eighteenth
Floor Work") and (ii) the difference between (x) Three Hundred Seventy-five
Thousand ($375,000.00) Dollars less (y) five (5%) percent of the actual cost of
the Eighteenth Floor Work.
SECTION 2.05 PERFORMANCE OF THE WORK
(a) Tenant shall perform the Eighteenth Floor Work at Tenant's sole
cost and expense. Prior to commencing any part of the Eighteenth Floor Work,
Tenant shall submit to Owner complete plans and specifications for the
Eighteenth Floor Work for Owner's approval. Owner's approval of the Eighteenth
Floor Work shall not be unreasonably withheld or delayed and shall not be deemed
to be an agreement by Owner that the plans and specifications comply with
applicable legal requirements. The plans and specifications shall be prepared by
an architect licensed in the State of New York. The Eighteenth Floor Work shall
be performed in a good and workmanlike manner in accordance with the approved
plans and specifications and applicable legal requirements.
3
(b) Tenant shall abide by all reasonable rules and regulations
prescribed by Owner with respect to the delivery of materials and performance of
the Eighteenth Floor Work. Tenant shall be responsible for any damage caused to
the Building by Tenant's agents, employees, contractors or subcontractors. The
provisions of Rider Section 49 of the Lease shall apply with respect to the
performance of the Eighteenth Floor Work.
(c) Upon completion of the Eighteenth Floor Work, Tenant shall deliver
to Owner a complete and detailed list of the costs and expenses incurred by
Tenant for the Eighteenth Floor Work and two (2) sets of "as built" plans and
specifications for the Eighteenth Floor Work.
(d) Owner shall be entitled to inspect the Eighteenth Floor Work as
the work progresses. The Eighteenth Floor Work shall be subject to Owner's
approval with respect to whether the Eighteenth Floor Work conforms to the
approved plans and specifications and applicable legal requirements and whether
the work was performed in a good and workmanlike manner. Owner's approval shall
not be unreasonably withheld. Tenant shall correct any defects or deficiencies
in the Eighteenth Floor Work. Notwithstanding the provisions of the Lease,
during the Term, Tenant shall be responsible for all repairs of any portion of
the Eighteenth Floor Work including any repairs to any heating, ventilating and
air conditioning installations or equipment installed by Tenant as part of the
Eighteenth Floor Work. The parties hereby confirm that the Owner shall be
responsible for the repair of the heating, ventilating and air-conditioning unit
located on the eighteenth (18th) floor on the date of this Agreement.
(e) Upon substantial completion of the Eighteenth Floor Work, Tenant
shall deliver to Owner reasonably satisfactory evidence that the Eighteenth
Floor Work has been paid for in full, no mechanic's liens have been filed, all
contractors and subcontractors have delivered the appropriate waiver of liens
and all governmental approvals and signoffs have been obtained.
SECTION 2.06 CONTRACTORS
(a) Any general contractor or construction manager employed by Tenant
with respect to the Eighteenth Floor Work shall be subject to Owner's approval,
which approval shall not be unreasonably withheld. Notwithstanding anything to
the contrary, Tenant shall not be permitted to employ Halpern Construction
Company or any affiliate, person or party related to Halpern Construction
Company with respect to the performance of the Eighteenth Floor Work.
4
(b) Tenant and any contractor or construction manager employed by
Tenant shall be required to employ the subcontractors designated by Owner for
the performance of any electrical, plumbing, heating and air-conditioning and
alarm work at the eighteenth floor.
ARTICLE III
GENERAL PROVISIONS
SECTION 3.01 CONFIRMATION
Except as set forth in this agreement, the Lease remains unchanged and
in full force and effect.
SECTION 3.02 SUCCESSORS AND ASSIGNS
This agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
SECTION 3.03 BROKERS
The parties hereby represent to each other that they have dealt with no
brokers in connection with this amendment agreement and the Lease other than
Newmark & Co. and Insignia/Edward S. Gordon Co.
SECTION 3.04 MODIFICATION
This agreement may not be modified orally.
SECTION 3.05 INTERPRETATION
This agreement shall be interpreted under and governed by the laws of
the State of New York.
The parties have caused this agreement to be duly executed as of the
date set forth above by their respective duly authorized representatives.
A & R Real Estate, Inc.
By: /s/ Signature Illegible
----------------------
Nelson Communications, Inc.
By: /s/ Blanca Stephens
|
5
EXHIBIT A - PART I
105 MADISON AVENUE
BUILDING STANDARD WORKLETTER
OFFICE CONSTRUCTION
FEBRUARY 1997 - A
"BUILDING STANDARD" DEFINITION
The term "Building Standard" shall refer to all work to be performed by
Landlord, at his sole expense, on the Demised Premises with "Standard of the
Building" materials as outlined in the Workletter of the Lease.
PART A - LANDLORD'S WORK
Landlord shall provide and install the following facilities and materials and
complete the following work at Landlord's sole cost and expense (except as
herein otherwise provided) in accordance with Tenant's Final Plans, as defined
in Part B herein. The term "Building Standard" shall mean such materials as
Landlord may elect to use as part of its standard construction substantially
throughout the Building. For purposes of this Lease the Landlord's work shall
be:
(1) PARTITIONS
A. One (1) lineal foot of drywall partition for every 15 square
feet of rentable area.
B. Drywall partitions shall be constructed of 2 1/2" steel studs
24" on center with a layer of 5/8" sheetrock on each side.
Interior partitions shall extend to 6" above the hung ceiling.
C. Demising partitions shall be constructed of 2 1/2" steel studs
with one layer of 5/8" sheetrock on one side and layer of 5/8"
sheetrock on the other side. Both layers of 5/8" sheetrock
shall extend to the slab above. All demising partitions shall
be packed with insulation.
D. Any angles in any partition shall be at Tenant's expense.
Partitions ending at the exterior walls shall meet a column or
mullion.
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E. Two (2) 5' long paint-grade hat shelves and poles will be provided.
(2) DOORS & BUCKS
A. One (1) door and buck for every 25 lineal feet of drywall partition
allowed pursuant to Item (1) above.
B. Doors shall be flush type, hollow metal 3'-0" x 8'-0" high.
C. Two (2) 5'-0" x 8'-0" closet double doors.
(3) HARDWARE
A. Each interior door allowed pursuant to Item (2) above shall be fitted
with one 1/1/2 pair of butt hinges, heavy duty latch set, brushed
chrome finish and door bumper.
(4) ELECTRIC SERVICE
A. The Demised Premises will be served with an incoming electric
service of adequate capacity to meet conditions constructed in
accordance with the "Building Standard Workletter". The
distribution system is designed for 5 watts per square foot of
rentable area for the combined lighting and power load.
Subject to the foregoing, any required alteration at electric
panel shall be performed by Landlord.
B. One (1) 15 amp, 120 volt duplex electrical receptacle for
every 125 sq. ft. of rentable area, to be installed within
building standard partitions specified above.
C. Two (2) 30 amp, 120 volt separate circuit outlets.
(5) LIGHTING
A. One (1) modern recessed type fluorescent, 4 tube light fixture
with Parawedge lens, for every 90 sq. ft. of rentable area.
B. One (1) silent type wall switch for every room.
C. Exit and emergency lighting to be in accordance with state and
city Building Code.
(6) FIRE ALARM
A. Provide five (5) combination speaker/strobe devices per floor
and any required work at the central building alarm panel.
7
(7) HVAC
The HVAC System shall be capable of maintaining 74 degrees Fahrenheit
plus or minus 2 degrees, when outdoor conditions are 91 degrees
Fahrenheit dry bulb and 75 degrees Fahrenheit wet bulb. The HVAC System
shall be capable of maintaining 70 degrees Fahrenheit at outdoor
temperature 5 degrees Fahrenheit dry bulb. The HVAC System is designed
based upon (i) electrical usage of 5 watts per usable square foot for
all purposes (lighting and power) and (ii) occupancy rate of one (1)
person per usable 100 square feet.
(A) ACOUSTIC CEILING
A. A mechanically suspended acoustic ceiling shall be installed
throughout the Demised Premises. The acoustic tile shall be 2'
x 2' mineral fissured with an exposed semi-regressed spline
suspension system.
(9) FLOOR COVERING
A. Furnish and install carpeting throughout the Demised Premises
in colors selected by the Tenant from samples submitted by the
Landlord. If Tenant chooses to install his own carpeting he
will be allowed $18.00 per square yard of carpeted area.
B. Furnish and install 4" vinyl base, straight or cove, on all
columns and partitions allowed pursuant to Item (1) above.
(10) PAINT
A. One prime coat and one flat finish coat, in colors selected by
Tenant from samples submitted by Landlord. Special colors, and
additional colors per room, where requested shall be done at
additional expense to Tenant. Paint to be Benjamin Moore flat
latex or equal. Doors and door bucks to receive two coats of
semi-gloss enamel in the same color as the walls.
B. Paint existing radiator enclosure as required.
(11) WINDOW TREATMENT
A. Furnish and install one Building Standard Solar Shade in each
window. Shades shall be of a light neutral color. There shall
be no substitution allowed for this item.
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(12) ENTRANCE
A. Furnish and install 1/2" clear tempered glass doors, 6' x 8"
pair with top and bottom shoe.
Or
B. Furnish and install 1 3/4" vaneered wood doors, 6'-8" pair
with hollow metal frame.
(13) PLUMBING
A. Provide one (1) pantry sink and faucet and all associated
roughing.
(14) MILLWORK
A. Provide plastic laminate pantry cabinets, both wall and base
(including a countertop) not to exceed 10 lineal feet.
The foregoing provisions of this Part A of Exhibit A, Part I shall be deemed to
be modified and supplemented by the provisions of Exhibit A, Part II attached
hereto and made a part hereof.
9
PART B - PLANS, SPECIFICATIONS AND DRAWINGS
(1) Tenant, at its sole cost and expense, shall prepare and submit to
Landlord, for Landlord's approval, plans, specifications and drawings,
including basic construction work and finished work (herein referred to
as Tenant's Final Plans) on or before 20 business days after the date
of this Lease (the Submission Date).
(2) All engineering for electrical, structural, plumbing and HVAC services
required for any of Tenant's layouts, Tenant's Final Plans or Tenant's
installations (including Landlord's work under Part A) shall be
performed by Landlord's engineers only, and at Tenant's expense.
(3) Tenant's Final Plans shall comply with and conform with the Building
plans filed with Department of Buildings, and with all the rules,
regulations and/or other requirements of any governmental department
having jurisdiction over the construction of the building and/or
Demised Premises. Landlord shall, at Tenant's sole cost and expense,
file Tenant's Final Plans together with any mechanical plans and
specifications with the appropriate governmental agencies in such form
(building notice, alteration or other form) as Landlord may direct.
Landlord shall also obtain, at Tenant's sole cost and expense, all
necessary permits and approve's. Any changes required by any
governmental department affecting the construction of the building
and/or the Demised Premises shall be complied with by Landlord in
completing said building and/or the Demised Premises and shall not be
deemed to be a violation of Tenant's Final Plans or any provisions of
this Part B, and shall be accepted by the Tenant.
(4) If after the delivery of any phase of Tenant's Final Plans Tenant shall
make any changes thereto, Tenant shall reimburse Landlord for any
additional costs and expenses in connection therewith, including
Landlord's engineers' charges resulting from such changes or revisions.
Tenant shall also reimburse Landlord for the delay resulting from such
changes or revisions as set forth in Part D thereof.
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(5) Tenant's Final Plans are expressly subject to Landlord's written
approval, which approval or rejection Landlord shall use all reasonable
efforts to provide within 2 weeks. Landlord's approval may not address
asthetic matter and shall not be unreasonably withheld provided,
however, if Tenant's Final Plans (1) require any materials, services or
installations that are not readily available at the appropriate time or
will result in an unreasonable delay in construction or (ii) require
structural alterations not contemplated under Part A of the Workletter,
Landlord may withhold approval. If Landlord shall not disapprove or
comment upon the plans and specifications within that two (2) week
period, the plans and specifications shall be deemed to be approved.
PART C - TENANT'S WORK
All labor and materials which are to be furnished at the expense of Tenant in
accordance with Section B above, and all labor and materials required by Tenant
for any of its initial installations over and above the work to be furnished by
landlord pursuant to Section A above, shall be indicated on Tenant's Final Plans
and shall be performed at Tenant's cost and expense.
(A) All such work, irrespective of the nature thereof (excluding carpeting,
draperies, furniture, accessories and interior decorations other than
wall treatments) shall be performed by Landlord's contractors and shall
be charged to Tenant based upon Landlord's actual cost thereof plus 21%
of said cost for Landlord's expenses and overhead in connection
therewith.
(B) Prior to commencing any such work required by Tenant, Landlord shall
submit to Tenant written estimates of the cost of such work with copies
of the transmittal letter accompanying such estimates sent to Tenant's
attorney as set forth in the Lease. Tenant shall either approve any
such estimate within ten working days or reissue a revised set of
working drawings eliminating the extra work so as not to delay
construction of the work undertaken by Landlord pursuant to Section A
above. Failure of Tenant to reply to such estimate as aforesaid within
said ten working day period shall be deemed an approval of said
estimate with appropriate back-ups. In rejecting any estimate, Tenant
may direct Landlord in writing to proceed with such additional
materials on a "time and material" basis plus the applicable percentage
of cost to be added thereto in accordance with Paragraph A above, and
Tenant shall pay such sums as provided in Paragraph C, below. Landlord
shall submit to Tenant an itemized statement as to the cost of "time
and materials" billed and if requested by Tenant, Landlord shall submit
its records substantiating the same.
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(C) Tenant agrees to pay Landlord for the cost of such work (together with
the applicable percentage of cost set forth in Paragraph A above) as
work progresses or materials are delivered, within thirty days after
submission of bills therefore.
PART D - SUBSTITUTES AND CREDITS
Tenant may substitute material, equipment and fixtures for those specified in
Section A except where substitution is specifically prohibited, provided that
the item substituted is of like kind, quality and character. All finish work
shall require the installation of new materials at least comparable to the
quality of the item being substituted. Tenant shall pay Landlord the cost to
Landlord for such substitute items which are in excess of such items to be
furnished. The cost to Tenant for such substitution shall be Landlord's cost for
the substitute item less a credit for the item to be furnished, plus 21% of the
balance for Landlord's expenses and overhead in the handling of the
substitution. Tenant may also request Landlord to omit the installation of any
item not theretofore installed, provided Landlord shall not thereafter be
obligated to install the same. Tenant shall not be entitled to any credit for
any such item omitted against any additional item or any item of a different
kind or character. There shall be no cash credits. Where a substitution is made
in accordance with the provisions of this Part D, the item substituted shall be
deemed the property of Landlord. Any delays resulting from substitutions or
omissions designated by Tenant shall be subject to Part E below.
PART E - DELAYS BY TENANT
Tenant has been advised of the importance to Landlord of completing the Demised
Premises as speedily as possible and the great financial loss to Landlord
resulting from a delay thereof. If Tenant, or Persons Within Tenant's Control,
delay the progress or completion of work required to be performed by Landlord
hereunder or pursuant to any separate agreement, or delay the Commencement Date
of the Lease by (I) failing to submit to Landlord timely any of Tenant's Final
Plans, or failing to approve any estimate for additional work or failing to make
necessary revisions in Tenant's Final Plans within the time required, or
delaying any selections of materials to be made by Tenant, or (ii) requesting
changes in Tenant's Final Plans or of any items to be provided by Landlord, or
(iii) otherwise interfering or delaying Landlord's performance, then the date of
substantial completion of the Demised Premises shall be deemed to date upon
which the Demised Premises would have been
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substantially completed but for the acts or omissions by Tenant or Persons
Within Tenant's Control and Tenant shall reimburse Landlord for Fixed Minimum
Rent and additional rent for the period of such delay and for the additional
cost to Landlord and damages resulting from such delay, within thirty days after
being billed therefore, whether or not the Lease has commenced. Landlord agrees
to give written notice to Tenant of any delay which Tenant is causing at or
about the time the delay commences. The above provisions shall be in addition
to, and not in limitation of, any other rights Landlord shall have under the
Lease or at law; provided, however, that Landlord shall not terminate this Lease
if Tenant fails to submit Tenant's Final Plans on the submission dates so long
as Tenant pays Fixed Minimum Rent for the period of delay and any other sums
that may be due, as aforesaid.
13
EXHIBIT A
PART II
PARTITIONS
1. Existing exterior walls and core walls will be repaired, if
necessary, and painted.
2. Up to 20% of the interior walls should have 24" high
clearstory glass.
3. Low drywall with wood and/or plastic laminate cap may be
substituted for full height dry wall.
4. In addition to the demising partitions, up to 10% of the
interior walls shall have sound attenuating insulation and go
slab to slab.
5. Tenant shall be allowed to angle partitions and dogleg
partitions at exterior walls.
HARDWARE
Interior doors shall have heavy duty A.D.A. approved hardware and locksets.
ELECTRIC SERVICE
1. Electrical distribution system shall be a minimum of 5 watts
per square foot of rentable area.
2. One 15 amp outlet 120_. duplex outlets shall be provided for
every 100 sq. ft. of rentable area.
LIGHTING
1. Up to 15% of the fixtures may be substituted with fluorescent
high hat fixtures with (2) 1BW. The Landlord's contribution
for each high hat fixture shall not exceed the cost of the
recessed fluorescent fixture.
2. All wall switches shall be Decura type.
3. Lampak units shall be provided in the fluorescent fixtures in
accordance with the N.Y.C. Building Codes.
FIRE ALARM
Shall comply to the N.Y.C. Building Code.
H.V.A.C.
Distribution ductwork to accommodate the interior layout shall be provided.
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FLOOR COVERING
Landlord shall repair floor and flash patch as required.
PAINT
A minimum of (2) colors of eggshell finish. Benjamin Moore Paint shall be over a
prime coat shall be applied to all gypsum board surfaces. All metal work shall
receive (2) coats of semi-gloss in a different color.
WINDOW TREATMENT
Landlord will consider using a LeVelor "Rivera" Series mini-blind as building
standard. If not, Landlord and Tenant will agree upon a building standard blind.
PLUMBING
BATHROOMS
FIRE PROTECTION
Landlord to compartmentalize space as required by Code.
RADIATOR COVERS
Landlord to provide for new radiator convector covers using basic standard
aluminum covers.
CEILINGS
Tenant may not want to have an acoustic ceiling. Tenant may instead prefer to
have Landlord to repair and patch ceiling and paint ceiling.
15
EXHIBIT 10.2
SUBLEASE AGREEMENT
1. PARTIES.
This Sublease Agreement ("Sublease"), dated August 25, 1997 is made
between Thomas Group, Inc. ("Sublessor") and Nelson Communications,
Inc. ("Sublessee").
2. STATEMENT OF FACTS AND MASTER LEASE.
Thomas Group, Inc. and Keller Carnegie Associates, L.P. entered into a
Lease dated January 14, 1992 (the "Lease") covering 4,514 sq. ft. on
the second (2nd) floor, A-wing (the "Premises") in the building located
at 103 Carnegie Center, West Windsor Township, Mercer County, New
Jersey (the "Building"); and on March 20, 1996, Century Plaza
Associates whose address is c/o Cali Realty Corporation, 11 Commerce
Drive, Cranford, N.J. 07016, succeeded to the interest of Keller
Carnegie Associates, L.P. (the "Lessor"). Said Lease is herein referred
to as the "Master Lease" and attached hereto as Exhibit "A."
3. PREMISES.
Sublessor hereby subleases to Sublessee under the same terms and
conditions set forth in the Master Lease except as specifically
provided by this Sublease, 4,514 rentable sq. ft. in its as-is
condition, known as Suite 202, 103 Carnegie Center, Princeton, New
Jersey 08540 ("Premises").
4. WARRANTY BY SUBLESSOR.
Sublessor warrants and represents to Sublessee that the Master Lease
has not been amended or modified except as expressly set forth herein,
that Sublessor is not, and as of the commencement of the Term hereof
will not be, in default or breach of any of the provisions of the
Master Lease, and that Sublessor has no knowledge of any claim by
Lessor that Sublessor is in default or breach of any of the provisions
of the Master Lease. Sublessor further represents and warrants to
Sublessee as follows: the execution of this Sublease has been
authorized by all requisite corporate action, and this Sublease is the
valid and binding obligation of Sublessor, enforceable in accordance
with its terms.
5. TERM.
The Term of this Sublease shall commence on September 1, 1997
("Commencement Date"), or when Lessor consents to this Sublease (which
consent is required under the Master Lease), whichever shall last
occur, and end on March 31, 2002 ("Termination Date"), unless otherwise
sooner terminated in accordance with the provisions of this Sublease or
in accordance with the Master Lease. In the event the Term commences on
a date other than the Commencement Date, Sublessor and Sublessee shall
execute a memorandum setting forth the actual date of commencement of
the Term. Possession of the Premises ("Possession") shall be delivered
to Sublessee on the commencement of the Term. If for any reason
Sublessor does not deliver Possession to Sublessee on the commencement
of the Term, Sublessor shall not be subject to any liability for such
failure, the Termination Date shall not be extended by the delay, and
the validity of this Sublease shall not be impaired, but rent shall
abate until delivery
1
of Possession. Notwithstanding the foregoing, if Sublessor has not
delivered Possession to Sublessee within fifteen (15) days after the
Commencement Date, then at any time thereafter and before delivery of
Possession, Sublessee may give written notice to Sublessor of
Sublessee's intention to cancel this Sublease. Said notice shall set
forth an effective date for such cancellation which shall be five (5)
days after delivery of said notice to Sublessor. If Sublessor delivers
Possession to Sublessee on or before such effective date, this Sublease
shall remain in full force and effect.
If Sublessor fails to deliver Possession to Sublessee on or before such
effective date, this Sublease shall be cancelled, in which case all
consideration previously paid by the Sublessee to Sublessor on account
of this Sublease shall be returned to Sublessee, this Sublease shall
thereafter be of no further force or effect, and Sublessor shall have
no further liability to Sublessee on account of such delay or
cancellation.
If Sublessor permits Sublessee to take Possession prior to the
commencement of the Term, such early Possession shall not advance the
Termination Date and shall be subject to the provisions of the
Sublease, including, without limitation, the payment of rent.
6. RENT.
6.1 Minimum Rent. Sublessee shall pay to Sublessor the Minimum Rent of
$21.00 per sq. ft. per annum plus tenant electric and all other rents
due under Article 4.03, with the additional rent to be paid calculated
on a new 1997 operating cost base year and 1997 real estate tax base
year, without deduction, setoff, notice or demand at Thomas Group,
Inc., Suite 2500, 5215 N. O'Connor Blvd., Irving, Texas 75039 ATTN:
Mark Collins or at such other place as Sublessor shall designate from
time to time by notice to Sublessee, in advance on the first day of
each month of the Term. Sublessee shall pay to Sublessor upon execution
of this Sublease the sum of Eight Thousand Three Hundred Sixty Nine
dollars and seventy one cents ($8,369.71) as rent and electric service
for September, 1997, as outlined in Exhibit B (attached). If the Term
begins or ends on a day other than the first or last day of a month,
the rent for the partial month shall be prorated on a per diem basis.
7. Sublessor conveys to Sublessee all rights it has under the Master Lease
except that Sublessor shall be under no obligation to renew the Master
Lease after March 31, 2002.
8. SECURITY DEPOSIT.
Sublessee shall deposit with Sublessor upon execution of the Sublease
the sum of one month's base rent ($7,899.50) plus one month's tenant
electric service ($470.21) totaling $8,369.71 as security for
Sublessee's faithful performance of Sublessee's obligations hereunder
("Security Deposit"). If Sublessee fails to perform any of its other
obligations hereunder, Sublessor may use or apply all or any portion of
the Security Deposit for the payment of any rent or other amount then
due hereunder and unpaid, for the payment of any sum for which
Sublessor may become obligated by reason of Sublessee's default of
breach, or for any loss or damage sustained by
2
Sublessor as a result of Sublessee's default or breach. If Sublessor so
uses any portion of the Security Deposit, Sublessee shall, within ten
(10) days after written demand by Sublessor, restore the Security
Deposit to the full amount originally deposited, and Sublessee's
failure to do so shall constitute a default under this Sublease.
Sublessor shall be required to keep the Security Deposit separate from
its general accounts, and shall have no obligation or liability for
payment of interest on the Security Deposit. In the event Sublessor
assigns its interest in this Sublease, Sublessor shall deliver to its
assignee so much of the Security Deposit as is then held by Sublessor.
Within thirty (30) days after the Term has expired, or Sublessee has
vacated the Premises, or final adjustment has been made, whichever
shall last occur, and provided Sublessee is not then in default of any
of its obligations hereunder, the Security Deposit, or so much thereof
as had not theretofore been applied by Sublessor, shall be returned to
Sublessee or to the last assignee, if any, of Sublessee's interest
hereunder.
9. USE OF PREMISES.
The premises shall be used and occupied only for that use as specified
in the Master Lease (general office uses) and no other purposes.
10. ASSIGNMENT AND SUBLETTING.
Sublessee shall not assign this Sublease or further sublet all or any
part of the Premises without the prior written consent of Sublessor and
the prior written consent of Lessor. Notwithstanding anything in this
Sublease or the Master Lease to the contrary, Sublessee may, without
Sublessor's or Lessor's consent, assign or convey this Sublease (or
further sublet) to any corporation into or with which Sublessee may be
merged or consolidated or which acquires all or substantially all of
Sublessee's assets or to any corporation which is a parent, subsidiary
or affiliate or successor in interest of Sublessee. Said occupancy of
the Premises by any subsidiary or affiliated entity of Sublessee shall
not constitute an assignment or subletting provided that the Sublessee
provides written notice to Sublessor of Sublessee's intent to alter its
occupancy and that the proposed use of the Premises is not a prohibited
use nor one which violates any provisions of the Master Lease or the
rules and regulations attached thereto. It is further expressly
understood and agreed that throughout the term of this Sublease and
regardless of which subsidiary or affiliate of Sublessee occupies the
Premises, Sublessee will continue to be primarily liable to perform all
of the obligations imposed by this Sublease.
11. INDEMNIFICATION.
Sublessee shall not do or permit to be done any act or thing which will
constitute a breach or violation of any of the terms, covenants,
conditions or provisions of the Master Lease. Sublessee will defend,
indemnify and hold harmless Sublessor and/or Lessor from and against
all losses, costs, damages, expenses and liabilities, including but not
limited to reasonable attorneys' fees, which Sublessor and/or Lessor
may incur or pay out by reason of any injuries or death to persons or
damage to property occurring in, on or about the Premises during the
term of the Sublease or by reason of any breach or default hereunder on
Sublessee's part, or by reason of any work done in or to the Premises
during term of Sublease or any act or negligence on the part of
Sublessee, its agents, employees, guests, invitees and contractors.
Sublessee shall in no case have any rights in respect of the Premises
greater than Sublessor's rights under Master Lease, and Sublessor shall
have no liability to Sublessee for any matter whatsoever for which
Sublessor does not have at least coextensive rights as Lessee, against
the Landlord under the Master Lease. Notwithstanding the foregoing,
this section shall not reduce or minimize Sublessor's obligations under
the Master Lease. Sublessor will defend, indemnify and hold harmless
Sublessee from and against all losses, costs, damages, expenses and
liabilities, including but not limited to reasonable attorneys' fees,
which Sublessee may incur or pay out by reason of any inquiries or
death to persons or damage to property occurring in, on or about the
Premises prior to the term of this Sublease, or by reason of any breach
or default hereunder on Sublessor's part.
12. LIABILITY INSURANCE.
Sublessee covenants to provide in the form of an insurance certificate
on or before the Commencement Date and to keep in force during the Term
hereof a comprehensive general liability policy, including personal
injury, property damage (including broad form
3
property damage, explosion, and collapse) and loss of use of property
of others, applicable to the Premises, with a combined single limit per
person and per accident of not less than One Million Dollars
($1,000,000.00). Such policy which shall name Sublessor and Landlord as
additional insureds, is to be written by insurance companies licensed
to do business in the State of New Jersey. Prior to the time such
insurance is first required to be carried by Sublessee, and thereafter,
at least fifteen (15) days prior to the expiration of any such policy,
Sublessee agrees to deliver to Sublessor either a duplicate original of
the aforesaid policy or a certificate containing an endorsement that
such insurance may not be cancelled or materially changed except upon
ten (10) days' notice to Sublessor, together with evidence of payment
of the premium. Sublessee's failure to provide and keep in force the
aforementioned insurance shall be regarded as a material default
hereunder entitling Sublessor to exercise any or all of the remedies as
provided in the Sublease in the event of Sublessee's default.
Notwithstanding anything to the contrary contained in this Sublease,
the carrying of insurance by Sublessee in compliance with this
paragraph shall not modify, reduce, limit or impair Sublessee's
obligations and liability under paragraph 11 hereof.
Provisions of this section should not reduce or limit Sublessor's
insurance obligations under the Master Lease.
13. OTHER PROVISIONS OF SUBLEASE.
All applicable terms and conditions of the Master Lease other than
those obligations related to Minimum Rent, Additional Rent, Security
Deposit and Sublessee's assignment rights contained in this Sublease
are incorporated into and made a part of this Sublease as if Sublessor
were the Lessor thereunder and Sublessee were the Lessee thereunder,
and the Premises were the Master Premises, and except to the extent
that the terms of this Sublease and the Master Lease (other than those
obligations related to Minimum Rent, Additional Rent, Security Deposit
and Sublessee's assignment rights contained in this Sublease) are
inconsistent, the Master Lease shall control.
Sublessee assumes and agrees to perform the obligations of the Tenant
under the Master Lease during the Term to the extent that such
obligations are applicable to the Premises. Sublessee and Sublessor
shall not commit or suffer any act or omission
4
that will violate any of the provisions of the Master Lease. Sublessor
shall exercise due diligence in attempting to cause Lessor to Perform
its obligations under the Master Lease for the benefit of Sublessee.
Sublessor shall provide to Sublessee copies of all notices it receives
from the Lessor, within three (3) business days of receipt. If Lessor
issues a notice of default, Sublessee shall be entitled to cure such
default, and shall be entitled to reimbursement for costs and expenses
incurred in curing the default, to the extent the default was caused by
Sublessor. In the event Sublessor is in default under the Master Lease
or this Sublease and such default is not timely cured, then in such
event Sublessee shall have the right to immediately terminate this
Sublease by written notice to such effect. Sublessor covenants that it
shall immediately send to Sublessee, any notices of default under the
Master Lease received by Sublessor. If the Master Lease terminates,
this Sublease shall terminate and the parties shall be relieved of any
further liability or obligation under this Sublease, provided however,
that if the Master Lease terminates as a result of a default or breach
by Sublessor or Sublessee under this Sublease and/or the Master Lease,
then the defaulting party shall be liable to the nondefaulting party
for all damage suffered as a result of such termination.
Notwithstanding the foregoing, if the Master Lease gives Sublessor any
right to terminate the Master Lease in the event of the partial or
total damage, destruction, or condemnation of the Master Premises of
the building or project of which the Master Premises are a part, the
exercise of such right by Sublessee shall not constitute a default or
breach hereunder.
Sublessor agrees to maintain the Master Lease in full force and effect
during the term of this Sublease and not to make any changes to the
Master Lease which materially affect the Premises without Sublessee's
prior written consent. Sublessor further covenants and agrees to comply
with the terms of the Master Lease (except to the extent inapplicable
because of Sublessee's occupancy of the Premises or as expressly
limited or made inapplicable by this Sublease). Sublessor agrees to
respond to all reasonable written requests by Sublessee in the event
that Lessor shall fail to fulfill its obligations under the Master
Lease, provided that such requests by Sublessee are reasonably within
the ability of Sublessor to fulfill. In such event Sublessor shall, on
behalf of Sublessee, but at Sublessee's sole cost and expense,
undertake all actions available to Sublessor, as the tenant under the
Master Lease, to have Lessor comply with Lessor's obligations
thereunder.
14. ATTORNEY'S FEES.
If Sublessor or Sublessee shall commence an action against the other
arising out of or in connection with this Sublease, the prevailing
party shall be entitled to recover its costs of suit and reasonable
attorney's fees.
15. REAL ESTATE BROKERAGE.
Sublessor shall be responsible for all related real estate brokerage
commissions and fees related to this Sublease. Sublessee represents and
warrants to Sublessor that no other brokers other than Keller, Dodds &
Woodworth, Inc. and The Staubach Company are the brokers with whom
Sublessee has negotiated in bringing about this Sublease and Sublessee
agrees to indemnify and hold Sublessor and its mortgagee(s) harmless
from any and all claims of other brokers and expenses in connection
therewith arising out of or in connection with the negotiation of or
the entering into
5
this Sublease by Sublessor and Sublessee. In no event shall Sublessor's
mortgagee(s) and/or Lessor have any obligation to any broker involved
in this transaction.
16. QUIET POSSESSION.
Sublessor covenants that upon Sublessee's compliance with the terms and
conditions of this Sublease, Sublessee shall and may peacefully and
quietly hold and enjoy the Premises for the term provided herein.
17. TRANSFER OF RECEPTION DESK AND OTHER PROPERTY.
Sublessor hereby agrees to assign, transfer and convey to Sublessee, as
of the Commencement Date, all of Sublessor's right, title and interest
in and to the reception desk and all appliances in the Premises,
together with the card access system and the existing phone system, to
the Sublessee. Concurrently with the Sublessor's execution and delivery
of this Sublease, Sublessor shall execute and deliver a bill of sale in
form acceptable to Sublessee, conveying all of Sublessor's right, title
and interest in the aforementioned property. Sublessor represents and
warrants that it has good title for the foregoing property, free and
clear of all claims, liens, leases and other encumbrances. It is
understood that the transfer of the phone system will be for a sum of
$5,000.00 which said payment will be made with the security deposit and
first month's rent.
18. The laws of the State of New Jersey shall govern the validity,
performance and enforcement of this Sublease.
19. NOTICE.
Any notice given pursuant to this Sublease shall be in writing and
shall be given by personal service or by United States certified mail,
return receipt requested, postage prepaid to the addresses appearing
below, or as changed through written notice to the other party. Notice
given by personal service shall be deemed effective on the date it is
delivered to the addressee, and notice mailed shall be deemed affective
on the third day following its placement in the mail addressed as
follows:
Sublessor: Thomas Group, Inc.
5215 N. O'Connor Blvd., Suite 2500
Irving, Texas 75039-3714
ATTN: President
Sublessee: Nelson Communications, Inc.
41 Madison Avenue
New York, New York 10010
ATTN: Chief Executive Officer
|
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20. ENTIRE AGREEMENT.
This Sublease, including all exhibits/attachments hereto, constitutes the
entire agreement between the parties and supersedes any prior written or
oral representations, understandings, discussions or agreements between the
parties with respect to the subject matter of this Agreement. All amendment
to this Sublease must be in an instrument in writing signed by an authorized
officer of each of Sublessor and Sublessee.
Date: 8/25/97 Date: 8/15/97
Sublessor: Thomas Group, Inc. Sublessee: Nelson Communications, Inc.
By: /s/John L. Eaton By: /s/ Blanca Stephens
Title: Vice President Title: EVP HR/Operations
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7
EXHIBIT "B"
September 1997 Invoice
9/1/97 September 1997 Rent $7,899.50
9/1/97 Electric 470.21
---------
TOTAL DUE $8,369.71
=========
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BILL OF SALE
In consideration of the delivery by Nelson Communications, Inc. ("Buyer") to
Thomas Group, Inc. ("Seller") of a check in the amount of Five Thousand Dollars
($5,000.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller does hereby GRANT, SELL,
ASSIGN AND CONVEY to Buyer, all of Seller's right, title and interest in and to
all of the following items of property:
1. Certain assets of Seller reflected in the listing attached as Exhibit A.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale this 25th day
of August, 1997.
THOMAS GROUP, INC.
By: /s/ John L. Eaton
John L. Eaton, Vice President
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EXHIBIT A
---------PROPERTY LISTING
Certain personal property located at Suite 202, 103 Carnegie Center, in
Princeton, New Jersey:
- reception desk
- miscellaneous appliances
- card access security system
- phone system, including PBX, associated wiring and telephones (having
the following Thomas Group asset numbers: 100338, 100340, 100345,
100679, 100738)
CONSENT TO SUBLEASE
The undersigned, CENTURY PLAZA ASSOCIATES, as successor-in-interest to Keller
Carnegie Associates, L.P., ("Landlord") owner and landlord of approximately
4,514 square feet ("Premises") leased by THOMAS GROUP, INC. ("Tenant" or
"Sublandlord"), and located at 103 CARNEGIE CENTER, PRINCETON, NEW JERSEY 08540
("Building") under a certain lease entered into between Landlord and Tenant
dated January 14, 1992 (the "Lease") hereby consents to the sublease of said
Premises to NELSON COMMUNICATIONS, INC. ("Subtenant") for use and occupancy of
the Premises only for the same use as permitted under the Lease and for no other
purpose or use whatsoever, without the written consent of the Landlord, under
penalty of termination of the Lease, at the option of the Landlord; in
consideration for the assumption of all tenant obligations thereunder by
Subtenant and in further consideration of the continuing obligation of Tenant
under the Lease. Neither this consent nor the collection of rent from said
Subtenant shall be deemed a waiver or relinquishment in the future for any
rights the Landlord may have under said Lease concerning any other or further
assignment or subletting, nor shall the acceptance of said Subtenant be
construed as releasing Tenant from the full performance of the provisions and
obligations under the Lease or any defaults of the Tenant under the Lease.
Landlord's consent herein shall not, in any way, be construed as a consent or
endorsement of any sublease provisions.
Tenant and Subtenant represent, warrant and agree to indemnify and hold
Landlord, all affiliated company and its mortgagee(s) harmless from any and all
claims of my brokers and expenses in connection therewith arising out of or in
connection with the negotiation of or the entering into the Sublease by Tenant
and Subtenant.
Tenant represents, warrants and covenants that Landlord is not in default of the
Lease.
This consent shall be still and void unless the SUBLEASE AGREEMENT annexed
hereto and this CONSENT TO SUBLEASE is signed by the Tenant, as Sublandlord, and
the Subtenant, and delivery of original documents to this Landlord.
CENTURY PLAZA ASSOCIATES,
LANDLORD
BY: Cali Sub IV, Inc., Managing General Partner
BY: /s/ James G. Nugent
James G. Nugent
Vice President - Leasing
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THOMAS GROUP, INC.,
SUBLANDLORD and TENANT
BY: /s/ John L. Eaton
ITS: Vice President
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NELSON COMMUNICATIONS, INC.
SUBTENANT
BY: /s/ Blanca Stephens
ITS: EVP HR/Operation
|
LEASE
THIS LEASE, dated this 14th day of January, 1992, by and between Keller
Carnegie Associates, a New Jersey limited partnership, having an office at 103
Carnegie Center, Princeton, New Jersey 08540, hereinafter referred to as
"Landlord", and Thomas Group, Inc., a Delaware corporation, having an office at
Suite 2500, 5215 N. O'Connor Blvd., Irving, Texas 75039, hereinafter referred to
as "Tenant".
WITNESSETH
ARTICLE 1 - DEMISE:1.01 - That in consideration of the rents and covenants
herein set forth, Landlord hereby leases to Tenant, and Tenant hereby rents from
Landlord, premises containing approximately 4,514 sq. ft. (hereinafter called
"Premises"), as shown outlined in red on Exhibit "A-1", a copy of which is
attached hereto, located on the 2nd floor, A-Wing, in the office building
located at 103 Carnegie Center, Princeton, New Jersey 08540, in the Township of
West Windsor, County of Mercer, State of New Jersey (hereinafter called
"Building") which is situated on that certain parcel of land (said parcel of
land together with the Premises, Building and all other improvements located
thereon, including the Common Area, are hereinafter referred to as the "Parcel")
more particularly described in Exhibit "A-2" attached hereto. The gross rentable
area of the Building is approximately 95,155 square feet and the Premises
constitutes approximately 4.74% (hereinafter called "Tenant's Percentage") of
said gross rentable area. This Lease shall be for the term, upon the rentals and
subject to the terms and conditions set forth in this Lease and the Exhibits
attached hereto.
ARTICLE 2 - TERM
2.01 - The term of this Lease shall commence on (hereinafter called
"Commencement Date"), the earliest to occur of (i) March 15, 1992, provided the
entire Premises are "ready for occupancy" (as that term is defined in Article 3
- Improvements), (ii) fifteen (15) days after the mailing of notice by Landlord
to Tenant that the Premises are "ready for occupancy", or (iii) actual
possession (as hereinafter defined in Section 3.05) of the Premises by Tenant.
The term shall be for a period of ten (10) years plus the part of a month, if
any, from the Commencement Date to the last day of the month in which the
Commencement Date occurs. If the entire Premises are not "ready for occupancy"
by eighteen (18) months from the date of execution of this Lease and Tenant
shall not have taken actual possession of any part thereof, Tenant shall have
the right to cancel this Lease by written notice to Landlord.
2.02 - As soon as the Commencement Date hereof has been determined, a memorandum
will be signed by the Landlord and Tenant setting forth actual commencement and
expiration dates of the term of this Lease and certifying that the Premises are
ready for occupancy and Tenant has accepted the Premises, and that this
memorandum will be in the form of Exhibit "B", attached hereto and made a part
hereof.
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2.03 - Anything to the contrary notwithstanding Tenant shall have the right to
occupy a portion of the premises prior to the finishing of the entire space, at
a pro-rated rental, subject to the provisions of Section 3.05 hereof.
ARTICLE 3 - IMPROVEMENTS
3.01 - The parties have initialled Outline Specifications, Building Standard
Workletter and Standard Allowance for Credits and Extras identified collectively
as Exhibit "C", a copy of which is attached hereto, describing improvements to
be provided and installed by Landlord at its expense, and Landlord agrees to
perform the work and make the installations in the Premises which are set forth
in Exhibit "C". The premises will be considered as "ready for occupancy" on the
date on which Landlord shall have substantially completed all work to be
performed by Landlord pursuant to Exhibit "C", and upon the receipt of
Certificate of Occupancy.
3.02 - Within twenty (20) days of the execution of this Lease, Tenant shall
submit to Landlord a plan for the Premises (hereinafter referred to as "Tenant's
Plan") containing all designations and selections required to be made by Tenant
in connection with Landlord's installations pursuant to Exhibit "C".
3.03 - Landlord shall prepare the Premises for Tenant in accordance with
Tenant's Plan and the provisions of this Article 3, and Landlord's general
contractor shall schedule the performance of said work in such a manner as it
considers proper for the rapid completion thereof. Tenant may, at its own
expense, select and employ its own contractors for finishing work, such as
carpeting, cabinet work, millwork, draperies, installation of special equipment
or decorations (hereinafter called "Tenant's Work"), provided (i) Tenant advises
Landlord in writing of its intention to do so prior to commencement of any such
work, and (ii) the contractors and sub-contractors employed by Tenant shall have
been previously approved by Landlord, and it is hereby agreed and understood
that Tenant shall not employ any contractor while, in Landlord's reasonable
opinion, may prejudice Landlord's negotiations or relationship with Landlord's
contractors or sub-contractors or as may disturb harmonious labor relations. In
no event shall any contractors and subcontractors performing Tenant's Work file
any mechanics lien against the Building and /or Parcel of Landlord, and Tenant
hereby protects, defends, indemnifies and saves Landlord harmless of and from
any damages, costs or expenses incurred by Landlord in connection with such
mechanics liens.
Tenant and its contractor shall be responsible for transportation,
safekeeping and storage of materials and equipment used in the performance of
Tenant's Work and for the removal of waste and debris resulting from the
performance of Tenant's Work and Landlord shall not be responsible for, but will
cooperative with Tenant, in the coordination of work of Landlord's contractors
with the work of Tenant's contractors. Without specific charge being made
therefore, Landlord shall allow Tenant and its contractors during normal working
hours to use utilities, to the extent available, as may be reasonably required
in the Premises for the performance of Tenant's Work. Prior to commencement of
Tenant's Work, Tenant shall obtain and maintain, at its expense, Worker's
Compensation and Bodily Injury and Property Damage Public Liability Insurance
and so called "Builder's Risk" insurance (all such insurance shall conform to
the requirements of Article 11 hereof) and shall submit Certificates as evidence
thereof to Landlord.
3.04 - Landlord shall afford Tenant access to the Premises, at reasonable times
prior to the Commencement Date and at Tenant's sole risk and expense, for the
purposes of making preparations for and performing or inspecting the performance
of Tenant's Work. Access for such purposes shall not be deemed to constitute
possession or occupancy. Tenant will not store building materials, equipment, or
machinery outside the Premises except with prior written consent of the
Landlord, and if such consent is given, such storage is to be done in a manner
so as to cause as little inconvenience to the Landlord, other tenants, their
employees, invitees and visitors, and as little interference with their business
pursuits as is reasonable possible.
3.05 - If the whole of the Premises shall not be ready for occupancy at
approximately the same time, Tenant may, with the written consent of Landlord,
take possession of any part or parts of the Premises before the Commencement
Date, provided that a Certificate of Occupancy shall have been obtained for the
part or parts of the Premises in respect of which Tenant desires to take
possession. Tenant shall be deemed to have taken possession of a part of the
Premises (herein called "actual possession") when any personnel of Tenant or
anyone claiming under or through Tenant shall first occupy such part for the
conduct of business. Tenant's actual possession of any part or parts of the
Premises prior to the
2
Commencement Date shall be subject to all of the obligations of this Lease,
including the payment of rent, except that Landlord shall reasonably apportion
the rent to the rentable area of each such part, pro-rated from the date of
taking actual possession, which shall be payable at the end of each calendar
month preceding the Commencement Date.
3.06 - Landlord will provide a building standard workletter to have a dollar
value not to exceed $50,000.00.
ARTICLE 4 - RENT
4.01 - Landlord reserves and Tenant covenants to pay to Landlord without demand,
setoff or abatement at 103 Carnegie Center, Princeton, New Jersey 08540, or at
such other place as may hereafter be designated in writing by Landlord, on the
days and in the manner herein prescribed for the payment thereof guaranteed
minimum rent and additional rent for the Premises as set forth in this Article 4
and Article 6.
4.02 - Tenant covenants to pay a fixed guaranteed minimum annual rent
(hereinafter called "Minimum Rent") of $97,051.00 per annum for years 1 through
5 of the Lease, payable in equal monthly installments of $8,087.58 and
$108,336.00 per annum for years 6 through 10 of the Lease, payable in equal
monthly installments of $9,028.00, in advance on the first day of the month
throughout the term of this Lease, commencing on the Commencement Date. Minimum
Rent for a period of less than one calendar month shall be pro-rated.
3
4.03 - In addition to the Minimum Rent stipulated herein, Tenant covenants and
agrees to pay to Landlord as additional rent (hereinafter called "Additional
Rent") all other sums and charges which are, pursuant to the terms of this
Lease, to be paid by the Tenant. Except as otherwise specifically provided in
this Lease, Additional Rent shall be due and payable on the first day of the
month but not less than ten (10) days following the date on which Tenant is
given notice of Additional Rent due.
4.04 - The term "lease year" means each twelve (12) month period during the term
hereof, the first lease year being the period beginning on the date when the
first monthly installment of Minimum Rent is to be paid in advance and ending at
the conclusion of that twelve (12) month period. The last lease year means the
period beginning on the first day of the twelve (12) month period at the end of
which this Lease expires and ending on the date that this Lease shall terminate.
4.05 - In the event Tenant shall fail to pay Minimum Rent and/or Additional Rent
when due, then, in addition to the Landlord's rights as contained in Article 20
hereof, interest shall accrue thereon at a fluctuating per annum rate equal to
the sum of the prime rate of Bankers Trust Company plus two (2) percentage
points from the tenth day after the due date to the date of payment.
4.06 - If at the expiration of the initial term, this Lease shall then be in
full force and effect and the Tenant shall have fully performed all of the terms
and conditions hereof, the Tenant shall have an option to extend this Lease for
one term of five (5) years upon the same terms and conditions except that the
Minimum Rent reserved under Section 4.02, shall be an amount equal to
$108,336.00, increased by a percentage amount equal to one hundred percent
(100%) of the percentage increase in the "All Items" Index for the New York -
Northeastern, New Jersey Area of the "Consumer Price Index for all Urban
Consumers" (Revised CPI-U) (1967=100) published by the Bureau of Labor
Statistics of the U.S. Dept. of Labor as of the commencement of the renewal term
over said index as of the first day of the 61st month of the lease. In no event
shall the Minimum Rent be less than the Minimum Rent provided in Section 4.02.
Said option shall be exercisable only by notice in writing pursuant to
Section 26.01 and such notice shall be given not less than nine (9) months prior
to the expiration of the initial term.
ARTICLE 5 - USE OF PREMISES
5.01 - Tenant covenants and agrees to continuously use and occupy the entire
Premises solely for the purpose of conducting a business office and for no other
purpose, and such use and occupancy shall be in compliance with all applicable
laws, ordinances, requirements and regulations of any governmental authority
having jurisdiction, and also in compliance with Landlord's Rules and
Regulations set forth in Exhibit "D" hereto.
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5.02 - Tenant acknowledges that there are federal, state and local laws,
regulations and guidelines may hereafter be enacted relating to or affecting the
Parcel and concerning the impact on the environment of construction, land use,
the maintenance and operation of structures, and the conduct of business. Tenant
will not cause or permit to be caused, any act or practice, by negligence,
omission or otherwise, that would adversely affect the environment or that would
violate any of said laws, regulations or guidelines. Any violation of this
covenant shall be an event of default pursuant to Article 20 hereof. Tenant
shall have no claim against Landlord by reason of any changes that Landlord may
make in the Premises and/or Parcel pursuant to said laws, regulations and
guidelines.
5.03 - It is understood and agreed that Tenant shall not place a load on any
floor of the Premises exceeding a floor load which such floor was designed to
carry and which is allowed by law, landlord reserves the right to prescribe the
weight and position of all safes and vaults which must be placed so as to
distribute the weight. Business machines and mechanical equipment shall be
placed and maintained by the Tenant at Tenant's expense in settings sufficient
in the Landlord's judgment to absorb and prevent vibrations, noise and
annoyance.
5.04 - Tenant further covenants that it will cause all goods and supplies to be
delivered and/or removed by way of such entrances and exists as may be
designated for Tenant's use by the Landlord, which shall be used by Tenant in
common with other tenants during such hours reasonably designated by the
Landlord and subject to such other rules and regulations which may be
established by Landlord.
5.05 - Tenant shall not place any obstructions, refuse or debris of any kind
which would tend to obstruct the hallway areas in front of or around the
Premises. subject to Landlord's obligation to clean and remove waste as in
Exhibit "E", Tenant shall keep the Premises in a neat and clean condition, and
shall cause all garbage and refuse to be removed by way of such exits as may
from time to time be so designated by the Landlord.
5.06 - Tenant shall not suffer or permit the Premises, or any part thereof to be
used in any manner which would in any way, (i) violate any of the provisions of
any grant, Lease or mortgage to which this Lease is subordinate, provided that
any such provision is not inconsistent with the rights acquired by Tenant under
this Lease, (ii) violate any laws or requirements of public authorities, (iii)
make void or voidable any fire or liability insurance policy then in force with
respect to the Parcel, (iv) make unobtainable or extraordinarily difficult to
obtain from reputable insurance companies authorized to business in New Jersey
at standard rates any fire insurance with extended coverage, or liability,
elevator or boiler or other insurance which may be furnished by Landlord under
the terms of any Lease or any mortgage to which this Lease is subordinate, (v)
cause physical damage to the Parcel or any part thereof, or constitute a
nuisance therein, (vi) impair the appearance, character or reputation of the
Parcel, (vii) discharge objectionable fumes, vapors or odors into the Building
air conditioning system or flues or vents not designed to receive them, or
(viii) impair or interfere with any of the Building services or the proper and
economic cleaning, heating, air conditioning, ventilating or other servicing of
the Building or the Premises or impair or
5
interfere with the use of the Building by, or occasion discomfort, annoyance or
inconvenience to Landlord or any of the other Tenants of the Building. The
provisions of this Section 5.06 and the application thereof, shall not be deemed
to be limited in any way to or by the provisions of any of the articles of this
Lease or any of the Rules and Regulations referred to in this Lease except as
may herein be expressly otherwise provided.
5.07 - If any governmental license or permit, other than a Certificate of
Occupancy, shall be required for the proper and lawful conduct of Tenant's
business in the premises, or any part thereof, then Tenant, at its expense,
shall duly procure and thereafter maintain such license or permit and Tenant
shall at all times comply with the terms and conditions of each such license or
permit.
5.08 - Tenant's Standard Industrial Classification Number is 8742. Tenant will
immediately notify Landlord of any change in this number during the term of this
Lease.
ARTICLE 6 - ADDITIONAL RENT: OPERATION AND MAINTENANCE COSTS, UTILITIES, REAL
ESTATE TAXES
6.01 - Landlord shall pay all operating and maintenance costs and expenses
incurred in the operation and maintenance of the Parcel reduced by any amounts
received from tenants as service charges pursuant to Section 10.01 (a)
(hereinafter in this Section 6.01 referred to as "Operation and Maintenance
Costs"). For and with respect to each calendar year of the original and any
additional term hereof (but pro-rated for any period less than one year), that
Operation and Maintenance Costs of the Parcel shall exceed a sum equal to the
1992 per square foot cost of the gross rentable area of the Building. Tenant
shall pay additional rent in that amount which is equal to Tenant's Percentage
of such excess of such Operation and Maintenance Costs. The Operation and
Maintenance Costs shall include the cost and expense to Landlord of the
following items:
(a) All reasonable wages, salaries and fees of all employees and agents for
time actually devoted to the management, operation, repair, replacement,
maintenance and security (if provided), including taxes, insurance and all other
employee benefits relating thereto, including a management fee to an affiliate
of Landlord or any other management company. (Management fee to be an amount not
to exceed customary industry practices for Class A office buildings within the
Princeton market, currently at three percent (3%) of gross rents received.)
"Replacement" for the purposes of this Section 6.01 shall exclude replacements
which are properly capitalized except as provided in Section 6.01 (k).
"Management" for the purposes of this Section 6.01 shall include the time spent
by those persons directly supervising work and not the time of those persons
employed in any main or branch office of Landlord, its contractors and
sub-contractors, it being the intention of the parties hereto to include herein
only such costs and expenses usually included in determining management contract
fees, costs and expenses in other comparable buildings and Parcels in the West
Windsor area;
(b) All supplies and materials (including lavatory supplies) used in the
management,
6
operation, repair, replacement, maintenance and security, exclusive of work
required as a result of construction defects during the construction warranty
periods and exclusive of structural work other than repairs relating to the
roof;
(c) All Maintenance and service agreements on equipment including, without
limitation, alarm service, window cleaning, elevator maintenance and heating and
air conditioning units;
(d) All fire and other casualty and public liability insurance;
(e) All repairs, replacements and general maintenance, including common area
maintenance exclusive of work required as a result of construction defects
during the construction warranty periods and exclusive of structural work;
(f) All service or maintenance contracts with independent contractors for
operation, repair, replacement, maintenance or security;
(g) All janitorial services including cleaning services;
(h) All landscaping including lawn maintenance;
(i) All snow removal from sidewalks, driveways and parking areas;
(j) Costs of water (including sewer rental and assessments) to the extent not
metered and paid directly by tenant and including any taxes on such utilities;
(k) All other costs and expenses, dissimilar or similar, necessarily and
reasonably incurred by Landlord in the proper operation and maintenance of a
first class building and parcel; provided, however, that costs and expenses (1)
for capital improvement items (except where such capital improvements result in
the reduction of Operation and Maintenance Costs attributable to such item), the
cost of the replacement, with legal interest on the unamortized amount, may be
amortized over a reasonable period of time according to sound accounting
practices and charged to Operational and Maintenance Costs, (2) paid or required
to be paid from proceeds of insurance, (3) assumed or required to be paid by any
Tenant, (4) interest, amortization or other payments made by landlord on loans
to Landlord, (5) incurred in leasing, including commissions, advertising and
tenant work, (6) income, excess profits or franchise taxes or other such taxes
imposed on or measured by the income of Landlord from the Parcel and (7)
depreciation and amortization except as provided in (1), are excluded from the
term Operation and Maintenance Costs.
6.02 - Landlord shall pay all Utility Costs and Expenses for the Parcel. For and
with respect to each calendar year of the original and any additional term
hereof (but prorated for any period less than one year) that Utility Costs and
Expenses shall exceed a sum equal to the 1992 cost per square foot of the gross
rentable area of the Building, Tenant shall pay additional rent in that amount
which is equal to Tenant's Percentage of such excess of such
7
Utility Costs and Expenses. Utility Costs and Expenses shall include without
limitation the cost and expense to Landlord of charges for oil, gas, electricity
for lighting the common areas and parking lot, heating, ventilating and air
conditioning (including, but not limited to, fuel cost adjustments) furnished to
the Building (including common areas thereof) and including any taxes on such
utilities. The cost of electric energy furnished directly to the Premises other
than for heating and air conditioning purposes shall be borne by Tenant pursuant
to the provisions of Section 6.04 hereof.
6.03 - Landlord shall pay all Real Estate Taxes for the Parcel. For and with
respect to each calendar year of the original and any additional term hereof
(but pro-rated for any period less than one year), that Real Estate Taxes of the
Parcel shall exceed a sum equal to the 1992 cost per square foot of the gross
rentable area of the Building, Tenant shall pay additional rent in that amount
which is equal to Tenant's Percentage of such excess of such Real Estate Taxes.
For the purpose of this Section 6.03, "Annual Real Estate Tax" shall be the
actual annual tax billed for the Parcel. In the event any Annual Real Estate Tax
shall be reduced subsequent to the determination of Additional Rent payable
pursuant to this Section 6.03, Tenant shall receive a credit or refund of
Tenant's Percentage of the reduction. Said payments by Tenant shall be pro-rated
for any period of said term which is less than a lease year.
6.04 - Landlord shall furnish the electric energy that Tenant shall require in
the Premises. For such electric energy as Tenant shall require for heating and
air-conditioning during the hours, upon the days and subject to the limits set
forth in Section 10.01 (a), Landlord shall furnish same on a rent inclusion
basis, such electric energy being included in Landlord's services which are
covered by the fixed rent reserved hereunder, subject to adjustment as set forth
in Article 6.02. Tenant shall pay Landlord, as additional rent, for all electric
energy furnished to Tenant at the Premises, other than for heating and air
conditioning purposes. Additional rent for such electric energy shall be
calculated and payable in the manner hereinafter set forth.
(a) Landlord agrees to install a separate meter or to arrange for an
independent electric survey to measure the amount of electric energy consumed by
Tenant exclusive of electric energy used for heating, air-conditioning and
common areas. Tenant shall pay Landlord the cost of such electric energy at the
then prevailing rates of the utility supplier, as so calculated on a monthly
basis, as Additional Rent, together with its payment of fixed rent. If the
utility supplier will permit separate metering and billing to Tenant, Tenant
shall pay for said electric energy directly to the utility supplier instead of
making payment to Landlord as additional rent.
(b) Landlord shall not be liable in any way to Tenant for any failure or defect
in the supply or character of electric energy furnished to the Premises by
reason of any requirement, act or omission of the public utility serving the
Building with electricity or for any other reason not attributable to Landlord.
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(c) Tenant's use of electric energy in the Premises shall not, at any time,
exceed the capacity of any of the electrical conductors and equipment serving
the Premises. In order to insure that such capacity is not exceeded and to avert
possible adverse effect upon the Building electric service, Tenant shall not,
without Landlord's prior written consent in each instance (which consent shall
not be unreasonably withheld), connect any additional fixtures, appliances or
equipment which would draw a higher than normal level of electric demand and not
considered standard office equipment (personal computers, fax, coffee pot, etc.)
to the Building electric distribution system or make any alteration or addition
to the electric system of the Premises existing on the Commencement Date. Should
Landlord grant such consent, all additional risers or other equipment required
therefore shall be provided by Landlord and the cost thereof shall be paid by
Tenant upon Landlord's demand.
(d) Tenant shall pay as Additional Rent a charge of $50.00 per hour to run the
building HVAC system within the demised premises for each hour Landlord provides
heat or air-conditioning other than during the hours and upon the days set forth
in Section 10.01 (a) hereof. The above rates are effective as of the
commencement of the Lease and subject to change as a result of the P.S.E. & G.
scheduled rates.
6.05 - Tenant shall pay to Landlord in monthly installments on the first day of
each month one-twelfth of the estimated Additional Rent for the first calendar
year under the terms and conditions of this Article 6 starting after the
thirteenth month. Commencing after the second calendar year, Landlord shall
determine and notify tenant in writing, on or before the first day of April of
each calendar year, the total amount of: (i) all items which went into the
computation of Additional Rent for the preceding calendar year under the terms
and conditions of this Article 6; and (ii) the projected Additional Rent due
from Tenant for the then current calendar year. Tenant shall thereafter pay to
Landlord, on the first day of each succeeding month during said then current
year, 1/12 of said projected Additional Rent; however, the April 1, payment
shall also include the difference between the projected payments and the
payments made of the months of January, February and March which will be based
on the preceding calendar year. In each of the following calendar years, upon
notification by Landlord to Tenant of the projected Additional Rent payable by
Tenant for the then current calendar year, such Additional Rent shall be payable
in like manner. Tenant shall pay to Landlord or Landlord shall pay to Tenant, as
the case may be, on or before the first day of each April, the difference
between the Additional Rent projected by Landlord for the preceding calendar
year already paid by Tenant and the actual Additional Rent due from Tenant for
the preceding calendar year (as determined by Landlord on or prior to the first
day of each April as aforesaid). Anything hereinabove to the contrary
notwithstanding, Landlord shall have the right to bill Tenant for Tenant's
Percentage of Real Estate Taxes as the taxes are due instead of having them paid
in monthly installments as hereinabove provided.
6.06 - The Additional Rent due under the terms and conditions of this Article 6
shall be payable by Tenant without any setoff or deduction and shall be
pro-rated as aforesaid during the first and last lease years of the lease term
or any renewal thereof.
9
6.07 - Tenant shall have the right, upon the giving of two (2) weeks prior
written notice to Landlord, to make reasonable inspections of Landlord's books
and records so as to verify the sums due from Tenant as Additional Rent under
the terms and conditions of this Article 6. Landlord will retain the books and
records used in determining Additional Rent amounts for a period of two years
after notification of said amounts is given to Tenant.
ARTICLE 7 - RULES AND REGULATIONS
7.01 - Tenant covenants and agrees to faithfully observe and comply with the
Rules and Regulations affixed to this Lease and made a part hereof, as Exhibit
"D" as well as any other and further Reasonable Rules and Regulations which
Landlord may hereafter make, landlord shall not be responsible to Tenant for the
noncompliance or breach by any other Tenant of any said Rules and Regulations.
ARTICLE 8 - COMMON AREA
8.01 - To the extent the same may from time to time or any time during the term
of this Lease be made available, Tenant shall have the right to the nonexclusive
use, in common with others, of driveways and footways and of such loading and
other facilities as may be constructed and designated by Landlord in the Parcel
for use by Tenants of the Parcel. Said areas, which are included in the
definition of the Parcel, shall hereafter be referred to as "Common Area".
Landlord may at any time and from time to time, in its sole discretion,
increase, decrease, or change in any manner the Common Area, including, without
limitation, eliminate, relocate, expand, reduce, modify or prescribe changes in
the permitted use of any or all of the present or future Common Area, and no
such action of Landlord shall be deemed to be an eviction of Tenant, or breach
of this Lease, nor give rise to any claim for damages or for a reduction or
abatement of the Minimum Rent or Additional Rent.
8.02 - No action by Landlord shall be permitted which would eliminate or
substantially reduce access to the Premises.
ARTICLE 9 - REAL ESTATE TAXES
9.01 - The Tenant agrees that if at any time during the term of this Lease the
present method of taxation or assessment shall be so changed that the taxes now
levied, assessed or imposed on real estate and the buildings and improvements
thereon shall, in lieu thereof, be imposed, assessed or levied wholly as a
capital levy or otherwise upon the rents reserved herein or as a tax,
corporation franchise tax, assessment, levy or charge or any part thereof,
measured by or based in whole upon the Parcel, or on the rents derived therefrom
and imposed upon Landlord, then Tenant shall pay all such taxes so measured or
based exceeding Tenant's allowance of the 1992 per square foot base year cost
and on an equitable basis consistent with Tenant's Percentage.
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9.02 - The certificate, advice or bill of the appropriate official designated by
law to make or issue the same or to receive payment of such tax and/or
assessment shall be prima facie evidence of the amount of the same which is due
at the time of the making or issuance of such certificate, advice or bill.
ARTICLE 10 - SERVICES BY LANDLORD
10.01 - Landlord shall furnish the following services to the Premises and the
Parcel:
(a) Keep in operation in the Building a heating apparatus during such periods
as same may be necessary to maintain an inside temperature at 70 degrees at a
minimum outside temperature of 0 degrees dry bulb between the 15th day of
October and the 1st day of May of each year and an air conditioning system
during such periods as same may be necessary to maintain an inside temperature
of 78 degrees when the outside temperature is at a maximum of 94 degrees dry
bulb to be operated throughout the term of this Lease or any renewal hereof,
between the hours of 8:00 a.m. to 6:00 p.m., Monday through Friday (Legal
Holidays excepted as set forth in Exhibit "F"), subject, however, to
governmental requirements. Landlord, at its cost, at the inception of this
Lease, will furnish a light bulb or bulbs or fluorescent tube or tubes, as the
case may be, and standard ballasts, for each lighting fixture then installed on
the Premises. landlord shall provide and reserves the right to make reasonable
additional charges, payable as Additional Rent, for services furnished at the
request of Tenant on days or at times other than those above defined as provided
in Section 6.04 (d). Notwithstanding the foregoing, Tenant shall have the right
to enter and use the Premises at all hours and times in which event Tenant
agrees to keep all outside doors locked.
(b) Furnish cold water (at the normal temperature of the water supply to the
Building) to the Building for drinking and lavatory purposes and hot water (from
the regular Building supply at prevailing temperatures) to the Building for
lavatory purposes.
(c) Cause the Premises to be cleaned after normal business hours in accordance
with the Cleaning Specifications as set forth in Exhibit "E".
(d) Make such repairs and replacements to the Premises as reasonably required
(Tenant shall solely be responsible for the payment of the cost of same, if
required, due to the negligence, misuse, abuse or willful misconduct of Tenant,
its agents, servants or employees, invitees, subtenants, contractors or
assigns).
(e) Provide window washing, landscaping, including lawn maintenance, snow
removal from sidewalks, driveways and parking areas and directory board
maintenance.
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10.02 - Landlord does not warrant that the services provided for in Section
10.01 hereof shall be free from any slow-down, interruption or stoppage pursuant
to voluntary agreement by and between Landlord and governmental bodies and
regulatory agencies, or caused by the maintenance, repair, substitution,
renewal, replacement or improvements of any of the equipment involved in the
furnishing of any such services, or caused by changes of services, quantity or
character of electric service, alterations, strikes, lock-outs, labor
controversies, fuel shortages, accidents, Acts of God or the elements or any
other cause beyond the reasonable control of Landlord; and, specifically, no
such slow-down, interruption or stoppage of any such services shall ever be
construed as an eviction, actual ore constructive, of Tenant, nor shall same
cause any abatement of Minimum Rent or Additional Rent payable hereunder or in
any manner or for any purpose relieve Tenant from any of its obligations
hereunder, and in no event shall Landlord be liable for damage to persons or
property or be in default hereunder as a result of such slow-down, interruption
or stoppage.
10.03 - Landlord will not be responsible for the failure of the air-conditioning
system if such failure results from the occupancy of the Premises with more than
an average of one person for each 100 usable square feet or if the Tenant
installs and operates machines and appliances, the installed electrical load of
which when combined with the load of all lighting fixtures exceeds four watts
per square foot of floor area in any one room or other area. If due to use of
the Premises in a manner exceeding the aforementioned occupancy and electrical
load criteria, or due to rearrangement of partitioning after the initial
preparation of the Premises, interference with normal operation of the
air-conditioning in the Premises results, necessitating changes in the
air-conditioning system servicing the Premises, such changes shall be made by
Landlord upon written notice to Tenant at Tenant's sole cost and expense. Tenant
agrees to lower and close window coverings when necessary because of the sun's
position whenever the said airconditioning system is in operation, and Tenant
agrees at all times to cooperate fully with Landlord and to abide by all the
Rules and Regulations which Landlord may prescribe for the proper functioning
and protection of the said air-conditioning system.
ARTICLE 11 - ALTERATIONS, ETC.
11.01 - Tenant shall make no alterations, decorations, installations, additions
or improvements (hereinafter called "Tenant Changes") in or to the Premises
exceeding $10,000.00 without in each instance obtaining the Landlord's prior
written consent, which consent shall not be unreasonably withheld, and then only
by contractors or mechanics subject to Landlord;s reasonable approval, and in
conformance with detailed plans and specifications which have been previously
submitted to the Landlord and which are subject to the Landlord's approval.
However, all Tenant Changes which are structural in character or which affect
the mechanical or HVAC systems must receive Landlord's prior written consent
whether the cost thereof is more or less than $10,000.00. All Tenant Changes
shall be done at Tenant's cost and expense and at such times and in such manner
as Landlord may designate. All Tenant Changes upon the Premises, made by either
party (excepting only Tenant's movable trade fixtures) shall, unless Landlord
shall elect otherwise, (which election shall be made by giving a notice not less
than thirty (30) days prior to the expiration or other termination of this Lease
or any renewal
12
thereof) become the property of Landlord, and shall remain upon, and be
surrendered with, the Premises as a part thereof at the end of the term. Tenant
shall also furnish Landlord with outline plans and specifications for Tenant
Changes less than $10,000.00 prior to the performance of the work.
11.02 - Tenant agrees that any Tenant Changes shall be done in a good and
workmanlike manner and in conformity with all laws, ordinances and regulations
of all public authorities having jurisdiction.
11.03 - Tenant agrees that it will procure all necessary permits before making
any Tenant Changes. landlord agrees that, without cost or expense to Landlord,
it will cooperate with Tenant in obtaining such permits. Tenant agrees to pay
promptly when due the entire cost of any work done by or for Tenant upon the
Premises so that the Premises shall at all times be free of liens for labor or
materials. Tenant agrees to save and indemnify Landlord from any and all injury,
loss, claims, or damages to any person or property occasioned by or in
connection with any Tenant Changes.
11.04 - Any such Tenant Changes shall be performed in such manner as not to
interfere with the occupancy of any other Tenant in the Building nor delay or
impose any additional expense upon Landlord in the maintenance or operation of
the Building. Prior to the commencement of Tenant changes, Tenant shall obtain
and maintain at its expense worker's Compensation Insurance and Bodily Injury
and Property Damage Public Liability Insurance and so-called "Builders Risk
Insurance" (all such insurance shall conform to the requirements of Article 12
hereof) and shall submit certificates as evidence thereof to Landlord.
ARTICLE 12 - INSURANCE
12.01 - Tenant covenants to provide at Tenant's cost and expense on or before
the earlier of (i) the Commencement Date, or (ii) Tenant's taking actual
possession for the purpose of Tenant's Work, and to keep in full force and
effect during the entire term and so long thereafter as Tenant, or anyone
claiming by, through or under Tenant, shall occupy the Premises, insurance
coverage as follows:
(a) Comprehensive Public Liability Insurance with contractual liability
endorsements with respect to the Premises and the business of Tenant in which
Tenant shall be adequately covered under limits of liability of not less than
$500.000.00 for injury or death to any one person, and $1,000,000.00 for injury
or death to more than one person and $100,000.00 with respect to property
damage.
(b) Fire and Extended Coverage, Vandalism, Malicious Mischief and Special
Extended Coverage Insurance in an amount adequate to cover the cost of
replacement of all personal property, decorations, trade fixtures, furnishings,
equipment in the Premises, vaults, safes and all contents therein. Landlord
shall not be liable for any damage to such property of Tenant by fire or other
peril includable in the coverage afforded by the standard form of fire insurance
policy with extended coverage endorsement attached (whether or not such Coverage
is in effect), no matter how caused, it being understood that the Tenant will
look solely to its insurer for reimbursement.
(c) Worker's Compensation Insurance covering all persons employed by Tenant.
(d) Upon demand, Tenant shall furnish Landlord, at Tenant's expense, with such
increased amounts of existing insurance, and such other insurance coverage in
such limits as Landlord may require, and such other hazard insurance as the
nature and condition of the Premises may require in the sole judgment of
Landlord, to afford Landlord adequate protection for said risks.
12.02 - All of the aforesaid insurance shall be written by one or more
responsible insurance companies satisfactory to Landlord and in form
satisfactory to Landlord. The Comprehensive Public Liability Insurance shall
contain endorsements substantially as follows: "It is understood and agreed that
the insurer will give to Keller Carnegie Associates (or any successor Landlord)
103 Carnegie Center, Princeton, New Jersey 08540, ten (10) days prior written
notice of any material change in or cancellation of this policy".
12.03 - Tenant shall be solely responsible for payment of premium and Landlord
(or its designee) shall not be required to pay any premium for such insurance.
Tenant shall deliver to Landlord at least fifteen (15) days prior to the time
such insurance is first
13
required to be carried by Tenant, and thereafter at least fifteen (15) days
prior to the expiration of such policy, either a duplicate original or a
certificate, it being the intention of the parties hereto that the insurance
required under the terms hereof shall be continuous during the entire term of
this Lease and any other period of time during which, pursuant to the term
hereof, said insurance is required.
12.04 - Tenant agrees, at its own cost and expense, to comply with all of the
rules and regulations of the Fire Insurance Rating Organization having
jurisdiction and any similar body. If, at any time or from time to time, as a
result of or in connection with any failure by Tenant to comply with the
foregoing sentence or any act or omission or commission by Tenant, its
employees, agents, contractors or licensees, or as a result of or in connection
with the use to which the Premises are put (notwithstanding that such use may
have been consented to by Landlord), the fire insurance rate(s) applicable to
the Premises or the Building in which same are located shall be higher than that
which would be applicable for the least hazardous type of occupancy legally
permitted therein, Tenant agrees that it will pay to Landlord as Additional
Rent, such portion or the premiums for all fire insurance policies in force with
respect to the aforesaid properties and the contents of any occupant thereof as
shall be attributable to such higher rate(s).
14
12.05 - Landlord makes no representation that the limits of liability specified
to be carried by Tenant or Landlord under the terms of this Lease are adequate
to protect Tenant against Tenant's undertaking under this Article 12, and in the
event Tenant believes that any such insurance coverage called for under this
Lease is insufficient, Tenant shall provide, at its own expense, such additional
insurance as Tenant deems adequate.
ARTICLE 13 - INDEMNIFICATION
13.01 - Tenant shall save and hold Landlord harmless from and against all
liability, claims, and demands on account of personal injuries (including,
without limitation of the foregoing, Worker's Compensation and death claims) or
property loss or damage of any kind whatsoever which arise out of or are in any
manner connected with, or are claimed to arise out of or in any manner connected
with Tenant's occupancy, and which result from, and only from, the negligent act
of Tenant.
ARTICLE 14 - FIRE
14.01 - In the event of the total destruction of the Building or the Premises by
fire or other casualty during the term hereof or in the event of such partial
destruction thereof as to render the Premises wholly untenantable or unfit for
occupancy, then in either event, unless such damage can, in the reasonable
opinion of Landlord, be repaired within one hundred eighty (180) days after the
occurrence, this Lease and the term hereby created shall at either party's
option, to be exercised within fifteen (15) days after notice from Landlord as
hereinafter provided, cease from the date of such damage or destruction, and
Tenant shall upon written notice from Landlord immediately surrender the
Premises to Landlord and Tenant shall pay rent within said term only to the time
of such damage or destruction. If, however, in Landlord's reasonable opinion,
the damage as aforesaid can be repaired within one hundred eighty (180) days
from the occurrence thereof, Landlord shall (unless Landlord shall elect not to
repair or rebuild, as hereinafter provided) repair the Premises with all
reasonable speed, this lease shall continue in full force and effect and there
shall be an abatement of rent until the repair is completed so that Tenant can
occupy the Premises. Landlord shall notify Tenant within Thirty (30) days from
the occurrence of the destruction as to whether or not the damage can be
repaired within one hundred eighty (180) days after the occurrence thereof.
14.02 - In the event of the partial destruction of the Building or Premises by
fire or other casualty during the term hereof, which such partial destruction
does not render the Premises wholly untenantable or unfit for occupancy, for
more than one hundred eighty (180) days in the Landlord's reasonable opinion,
Landlord shall continue in full force and effect and there shall be an abatement
of rent until the repair work is completed so that Tenant can occupy the
Premises, in such proportion as the part of the Premises destroyed or rendered
untenantable bears to the total Leased Premises. If such damage cannot be
repaired within one hundred eighty (180) days after the occurrence in the
reasonable opinion of Landlord, this Lease and the term hereby created shall at
either party's option, to be exercised within fifteen (15) days from the date of
such damage or destruction as provided in Section 14.01. Landlord shall notify
Tenant within thirty (30) days from the occurrence of the destruction as to
whether or not the damage can be repaired within one hundred eighty (180) days
after the occurrence thereof.
14.03 - In the event that the Building or the Premises shall be so slightly
damaged by fire or other casualty so as not to affect or only slightly affect
the operation of Tenant's business in the Premises, then in that event, there
shall be no abatement of rent and this Lease shall continue in full force and
effect, and Landlord shall enter and repair the damage with all reasonable
speed.
14.04 - In the event that the Landlord elects, after any such damage or
destruction, to reconstruct the Premises pursuant to this Lease, Tenant may
elect, at Tenant's expense, to redecorate the Premises in a manner and to at
least a condition equal to that existing prior to its destruction or casualty,
except that Tenant may elect not to redecorate if a fire or other casualty
occurs during the last year of any term of the Lease.
14.05 - Notwithstanding anything contained herein to the contrary:
(a) if any or all of the areas or offices comprising the Building are
substantially damaged by fire or other casualty to such an extent that the
Building cannot, in the reasonable judgment of Landlord, be operated as an
integrated office building, or
(b) if during the last two (2) years of the term of this Lease the Premises or
the
15
Building shall be so damaged by fire or other casualty that the Landlord decides
not to repair or rebuild, or
(c) if the same are damaged by a casualty which is not insurable under standard
or extended coverage insurance, or if the proceeds of such insurance are not
made available to Landlord, or if such proceeds are, in Landlord's judgment,
insufficient to repair or rebuild, and Landlord decides in its judgment either
(i) not to repair or rebuild, or (ii) to demolish the entire Building and
rebuild same, then upon the happening of any such event Landlord may cancel this
Lease (whether or not the Premises are damaged) by giving written notice of such
cancellation to Tenant within thirty (30) days after the happening of such
damage and thereupon this Lease and the term hereof shall cease and terminate as
of the date of the happening of such damage, and rent and other charges payable
by Tenant shall be pro-rated to the day of such damage.
14.06 - Landlord shall use its best efforts to effect any such repair or
restoration promptly and in such manner as not unreasonably to interfere with
Tenant's use and occupancy of the Premises but such efforts shall be subject to
(i) Landlord's inability to obtain materials, (ii) Acts of God, (iii) strikes,
fire or weather, (iv) acts of governmental authority, or (v) any other cause
beyond the control of Landlord. Notwithstanding the above, Landlord shall not be
required to incur overtime or additional charges in any such repair or
restoration of the premises or of the building pursuant to this Article 14.
16
14.07 - The provisions of this Article 14 shall be considered an express
agreement governing any case of damage or destruction of the Premises by fire or
other casualty, and any law of the State of New Jersey, providing for such a
contingency in the absence of an express agreement, and any other law of like
import, now or hereafter in force, shall have no application in such case.
14.08 - In case of any damage by fire or other casualty, Tenant shall
immediately notify Landlord and Landlord shall immediately notify Tenant.
ARTICLE 15 - EMINENT DOMAIN
15.01 - In the event that the entire or substantially the entire Premises or
Building should be taken for any public or quasipublic use or should be taken by
right of eminent domain or any other right, or should be sold to the condemning
authority in lieu of condemnation, then this Lease shall terminate as of the
date when physical possession of the Building or the Premises is taken by the
condemning authority.
15.02 - In the event more than 50% of the parking spaces on the parcel are
affected by said taking without being replaced or, in the event of a partial
(less than substantial) taking of the Premises during the last year of the Lease
term or any renewal thereof, Landlord and Tenant shall have the right to
terminate this Lease. The landlord or the Tenant may exercise the aforesaid
right or rights to terminate this Lease in its entirety as aforesaid by giving
written notice to the other within sixty (60) days after the date of the vesting
of title in such proceeding, specifying a date not more than thirty (30) days
after the giving of such notice as the date of such termination.
15.03 - In the event of any taking of the Building or the Parcel, Landlord shall
be entitled to receive the entire award and Tenant hereby assigns to Landlord
any and all right, title and interest of Tenant in or to any such award or any
part thereof and hereby waives all rights against Landlord and the condemning
authority, except that Tenant shall have the right to claim and prove in any
such proceeding and to receive any award which may be made, if any, specifically
for damages or condemnation of Tenant's movable trade fixtures and equipment and
any other improvements made at Tenant's expense.
15.04 - In the event that this Lease is not terminated after the eminent domain
proceeding, Landlord shall promptly commence to repair or restore the Premises,
including refixturing, to tenantable condition and complete same with due
diligence, except for delays caused by (i) Landlord's inability to obtain
materials, (ii) Acts of God, (iii) strikes, fire or weather, (iv) acts of
governmental authority, or (v) any other cause beyond the control of Landlord,
and the Minimum and Additional Rent shall be equitably reduced from and after
the date title vest sin the condemnor for the balance of the term by taking into
account the character and the amount of the taking. The Tenant's Percentage
shall be adjusted to reflect the balance of square feet of rentable area
remaining as the Premises subsequent to said eminent domain proceeding.
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ARTICLE 16 - ASSIGNMENT OR SUBLETTING
16.01 - Tenant agrees not to sell, assign, mortgage, hypothecate, pledge, or in
any manner transfer this Lease or any estate or interest hereunder and not to
sublet the Premises or any part or parts thereof without the previous written
consent of Landlord, which consent by Landlord shall not be unreasonably
withheld. If Tenant violates the provisions of this Article 16, Landlord may
accept from any assignee, sublessee, licensee, concessionaire or anyone who
claims a right to the interest of Tenant under this Lease or who occupies any
part or the whole of the Premises the payment of Minimum Rent and Additional
Rent and/or the performance of any of the other obligations of Tenant under this
Lease, but acceptance shall not be deemed to be a waiver by Landlord of the
breach by Tenant of the Provisions of this Article 16, nor a recognition by
Landlord that any such assignee, sublessee, licensee, concessionaire, claimant
or occupant has succeeded to the rights of Tenant hereunder, nor a release by
Landlord of Tenant from further performance by Tenant of the covenants on
Tenant's part to be performed under this lease; provided, however, that the net
amount of rent collected from any such assignee, sublessee, licensee,
concessionaire, claimant or occupant shall be applied by Landlord to the rent to
be paid hereunder. Any consent by landlord to any such assignment, transfer,
subletting, license or concession or other matter or thing contained in this
Article 16 shall not in anyway be construed to relieve Tenant from obtaining the
prior consent of Landlord to any other or further such assignment, transfer,
subletting, license, concession, matter or thing.
16.02 - If Tenant shall desire to assign this Lease or to sublet all or a
portion of the Premises, Tenant shall submit to Landlord a written request for
Landlord's consent to such assignment or subletting, which request shall contain
or be accompanied by the following information: (i) the name and address of the
proposed assignee or subtenant; (ii) in the case of a proposed subletting, a
description identifying the space to be sublet (the "Sublet Space"); (iii) the
nature and character of the business of the proposed assignee or subtenant and
of its proposed use of the Premises; and (iv) the effective date of such
proposed assignment or subletting t (the "Termination Date"). If the Landlord
consents thereto as provided in Section 16.01, Tenant shall pay to Landlord
one-half (1/2) of the amount by which the Minimum Rent under the assignment or
subletting exceeds the Minimum Rent payable under this Lease after deducting all
reasonable expenses incurred by Tenant in connection with such assignment or
subletting.
16.03 - Notwithstanding the foregoing provisions of this Article 16, Tenant
shall have the right, without Landlord's consent, to assign this Lease or to
sublet all or any portion of the premises to an "Affiliate", but no such
assignment or subletting shall relieve Tenant of its obligations to Landlord
hereunder. The term "Affiliate" shall mean any corporation owning more than 50%
of the controlling stock of which is owned by Tenant, or any person, firm or
corporation which owns more than 50% of the controlling stock of Tenant.
It is understood that neither Section 16.01 or Section 16.02 shall
apply to any assignment or subletting to an Affiliate, except that such
Affiliate shall be deemed bound by all of the other terms and conditions of this
Lease, and any Affiliate who is an assignee of this Lease shall agree with
Landlord in writing to assume all of the obligations of this Lease and to attorn
to Landlord. No Affiliate who is an assignee or subtenant hereunder shall
thereafter be permitted to assign the Lease or further sublet the Premises or
portion thereof under its control without first complying with the provisions of
Sections 16.01 and 16.02.
Tenant shall notify Landlord of any assignment or subletting to an
Affiliate at least thirty (30) days prior to the date of such subletting or
assignment. Such notification shall be accompanied by evidence satisfactory to
Landlord which demonstrates such proposed assignee's or subtenant's status as an
Affiliate.
ARTICLE 17 - ENTRY BY LANDLORD
17.01 - Landlord, by its duly authorized employees and agents, may enter the
Premises at reasonable hours (i) to inspect the same, (ii) to supply janitor,
cleaning (after normal business hours) and any other service to be provided by
Landlord under the terms of this Lease, (iii) to make repairs required of
Landlord hereunder, or to Building, and (iv) to perform any work therein that
may be necessary to comply with any laws, statues, ordinances, regulations,
orders and requirements of all governmental authorities having jurisdiction over
the Premises, or to prevent waste or deterioration of the Premises; provided,
however, that all such work shall be done as promptly as reasonably possible.
Any repairs, alterations or improvements to the Premises shall be done as
required. Landlord may, during the progress of any such work keep and store upon
the Premises, all necessary materials, tools and equipment required for said
work but Tenant shall not be
18
responsible therefore. Landlord shall at all times retain a key with which to
unlock all of the doors in, on or about the Premises (excluding Tenant's vaults,
safes and similar areas designated in writing by Tenant in advance); and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open said doors in an emergency in order to obtain entry to the
Premises, and any entry to the Premises obtained by Landlord by any of said
means or otherwise shall not under any circumstances be construed or deemed to
be forcible or unlawful entry into or a detainer of the Premises or an eviction,
actual or constructive, of Tenant from the Premises or any portion thereof.
ARTICLE 18 - INSPECTIONS BY PROSPECTIVE PURCHASERS AND TENANTS AND BY LENDERS
18.01 - The landlord is hereby given the right, upon the giving of forty-eight
(48) hours prior notice to Tenant, to enter the Premises during usual business
hours (i) to exhibit the same to prospective Building purchasers or prospective
or current lenders at any time during the Lease term or any renewal thereof, and
(ii) to exhibit the same to prospective Tenants within six (6) months prior to
the expiration of the Lease term or any renewal thereof. A representative of
Landlord shall always accompany any such purchaser, Tenant or Lender on any of
the aforesaid inspections. A representative of Tenant shall be present whenever
any portion of the Premises other than the general business offices are entered
by Landlord and/or any third parties, such as prospective Tenants, Lenders or
Purchasers, for purposes set forth under this Section 18.01. Landlord will try
to limit visits by prospective building purchasers or lenders to allow tenant
maximum privacy due to confidential nature of tenant's work.
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ARTICLE 19 - SURRENDER
19.01 - On the last day of the term demised, or the sooner termination thereof,
Tenant shall peaceably surrender the Premises broom clean, in good order,
condition and repair wear and tear excepted. On or before the last day of the
term or the sooner termination thereof, Tenant shall, at its expense, remove its
trade fixtures and signs from the Premises, and any property not removed shall
be deemed abandoned and may be removed and disposed of by Landlord and the
expense of such removal shall be paid to Landlord by Tenant without any setoff
for the salvage value of goods so removed. If the Premises be not surrendered at
the end of the term or the sooner termination thereof, Tenant shall indemnify
Landlord against loss or liability resulting from delay by Tenant in so
surrendering the Premises, including, without limitation, claims made by any
succeeding Tenant founded on such delay. Tenant shall promptly surrender all
keys for the Premises and Building bathrooms to Landlord at the place then fixed
for payment of rent. Tenant's covenants hereunder shall survive the expiration
or termination of this Lease.
19.02 - If the Tenant shall occupy the Premises with the consent of the Landlord
after the expiration of this Lease and rent is accepted from said Tenant, such
occupancy and payment shall be construed as an extension of this Lease for a
term expiring on the last day of the month next following the month in which the
said Lease expired, and occupation thereafter shall operate to extend the term
of this Lease for but (1) month at a time unless other terms of such extension
are made in writing and signed by the parties hereto. In such event, if either
Landlord or tenant desires to terminate said occupancy at the end of any month
after the termination of this Lease, the party so desiring to terminate the same
shall give the other party at least thirty (30) days written notice to that
effect. Failure on the part of the Tenant to give such notice shall obligate it
to pay rent for an additional calendar month following the month in which the
Tenant has vacated the Premises.
ARTICLE 20 - DEFAULT
20.01 - Tenant shall, without any previous demand therefore, pay to Landlord the
Minimum Rent and Additional Rent at the times and in the manner heretofore
provided.
In the event:
(a) of default in the payment of said rents or of any installment
or part thereof, or in the payment of any other sum or any
part thereof which may become due from Tenant to Landlord
hereunder, at the time and in the manner provided therein, and
if the same shall remain in default for ten (10) days after
becoming due, or
(b) the Premises shall be deserted or abandoned, or
20
(c) of the violation by Tenant of any of the covenants, agreements
and conditions herein provided or of any of the Rules and
Regulations now or hereafter reasonable established by
Landlord, and the failure to cure such violation within
fifteen (15) days after notice in writing of such violation by
Landlord to Tenant;
then upon the happening of any such event, Landlord may, at its option,
elect either to terminate this Lease or to enter the said Premises as
the agent of Tenant, without being liable for any prosecution or damage
therefore, and relet the Premises as the agent of Tenant, and receive
the rent therefore, upon such terms as shall be satisfactory to
Landlord, and all rights of Tenant to repossess the Premises under this
Lease shall cease and end upon such termination or entry. Such entry
for reletting by Landlord shall not operate to release Tenant from any
rent to be paid or covenants to be performed hereunder during the full
term of this Lease. For the purpose of reletting, Landlord shall be
authorized to make such repairs or alterations in or to the Premises as
may be necessary to place the same in good order and condition. Tenant
shall be liable for and hereby agrees to pay to Landlord the cost of
such repairs or alterations and all expenses of such reletting. If the
sum realized or to be realized from the reletting is insufficient to
satisfy the rent provided in this Lease, Landlord, at its option, may
require Tenant to pay such deficiency month by month (or at any greater
intervals), or may hold Tenant in advance for the entire deficiency
resulting from such reletting. Landlord is hereby granted a lien, in
addition to any statutory lien or right to distrain that may exist, on
all personal property of Tenant in or upon the Premises, including,
without limitation, furniture, fixtures (including trade fixtures) and
merchandise of Tenant, to assure payment of the rent and performance of
the covenants and conditions of this Lease. Landlord shall have the
right, as agent of Tenant, to take possession of all personal property
of Tenant found in or about the Premises, including, without
limitation, furniture and fixtures of Tenant, and sell the same at
public or private sale and to apply the proceeds thereof to the payment
of any monies becoming due under this Lease, or remove all such effects
and store the same in a pblic warehouse or elsewhere at the cost of and
for the account of Tenant, or any other occupant, Tenant hereby waiving
the benefit of all laws exempting property from execution, levy and
sale on distress or judgment.
20.02 - In the event of any breach or threatened breach by Tenant of any of the
agreements, terms, covenants or conditions contained in this Lease, Landlord
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any right and remedy allowed at law or in equity or by statute
or otherwise as though reentry, summary proceedings, and other remedies were not
provided for in this Lease.
20.03 - Each right and remedy of Landlord provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by Landlord of any or all other rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise.
20.04 - If the term of this Lease shall be terminated due to default by the
Tenant of any of the terms or covenants herein contained, this Lease and the
term and estate hereby granted, whether or not the term shall heretofore have
commence, shall terminate with the same effect as if that day were the
expiration date of the term of this Lease, but Tenant shall remain liable for
all damages as are provided for herein.
ARTICLE 21 - BANKRUPTCY
21.01 - At any time prior to or during the term of this Lease, if Tenant shall
make an assignment for the benefit of its creditors; or if Tenant shall file a
voluntary petition in bankruptcy; or if Tenant shall be adjudicated a bankrupt
or insolvent; or if the affairs of Tenant shall be taken over by or pursuant to
an order of any court or of any other officer or governmental authority pursuant
to any federal, state or other statute or law; or if Tenant shall admit in
writing its inability to pay debts generally as they become due; or if Tenant
shall file any petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
present or any future federal bankruptcy act or any other present or future
applicable federal, state or other statute or law; or if Tenant shall seek or
consent to or acquiesce
21
in the appointment of any trustee, receiver or liquidator of Tenant or of all or
any substantial part of its property; or, if, within (60) days after the
commencement of any proceedings against Tenant seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or future federal bankruptcy act or any other present
or future applicable federal, state or other statute or law, such proceedings
shall have not been dismissed; or, if, within sixty (60) days after the
appointment, without the consent or acquiescence of Tenant, of any trustee,
receiver or liquidator of Tenant or of all or any substantial part of its
property, such appointment shall not have been vacated or stayed or dismissed;
or if, within sixty (60) days after the expiration of any such stay, such
appointment shall not have been vacated; or in the event action shall be taken
by Tenant in furtherance of any of the aforesaid purposes, then and in any such
event, Landlord amy at its option terminate this Lease and all rights of Tenant
herein, by giving to Tenant notice in writing of the election of Landlord so to
terminate, and n such event neither Tenant nor any person claiming by, through
or under Tenant by virtue of any statute or of any order of any court shall be
entitled to possession or to remain in possession of the Premises but shall
forthwith quit and surrender the Premises. Such causes for the termination of
this Lease as set forth in this Article 21 shall constitute a default by Tenant
and all rights and remedies stated or otherwise reserved under Article 20 hereof
shall be available to Landlord. The word "Tenant" in this Article 21 shall be
construed to include any Surety or Guarantor of this Lease.
22
21.02 - It is stipulated and agreed that in the event of the termination of this
Lease pursuant to this Article 21, Landlord shall forthwith, notwithstanding any
other provisions of this Lease to the contrary, be entitled to recover from
Tenant, as and for liquidated damages, an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the then fair and reasonable rental value of the Premises for the same period.
In the computation of such damages, the difference between any installment of
rent becoming due hereunder after the date of termination and the fair and
reasonable rental value of the Premises for the period for which such
installment was payable shall be discounted to the date of termination at the
rate of four (4%) percent per annum. If such Premises, or any part thereof, be
relet by the Landlord for the unexpired term of said Lease, or any part thereof,
before presentation of proof of such liquidated damages to any court, commission
or tribunal, the amount of rent reserved upon such reletting shall be prima
facia evidence as to the fair and reasonable rental value for the part or the
whole of the Premises so relet during the term of the reletting. Nothing herein
contained shall limit or prejudice the right of the Landlord to prove and obtain
as liquidated damages by reason of such termination an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which such damages are to be proved, whether or not
such amount be greater than, equal to, or less than the amount of the difference
referred to above.
ARTICLE 22 - QUIET ENJOYMENT
22.01 - Tenant, subject to the terms and provisions of this Lease and to all
mortgages and underlying Leases of record to which this Lease may be or may
become subordinate, on payment of all Minimum Rent and Additional Rent and
observing, keeping and performing all of the terms and provisions of this Lease,
shall lawfully, peaceable and quietly have, hold, occupy and enjoy the Premises
during the term hereof. This covenant shall be binding on Landlord only during
its ownership of the Premises. In the event Landlord shall sell or otherwise
dispose of its interest in the Premises during the term of this Lease, such sale
or other disposition shall operate to release and relieve Landlord from any
further liability or obligation to Tenant hereunder.
ARTICLE 23 - CONSENT BY LANDLORD
23.01 - Whenever, under this Lease, provision is made for Tenant securing the
written consent or approval by Landlord, such consent or approval shall be in
writing and may be withheld by Landlord in its sole discretion, unless it is
otherwise herein specifically provided that such consent shall not unreasonable
be withheld.
ARTICLE 21 - SUBORDINATION
24.01 - This Lease, and all rights of Tenant hereunder, are and shall be subject
to subordination in all respects to all future ground Leases, overriding Leases
and underlying Leases of the Premises, Building or the Parcel and to all
mortgages and building loan agreements, including leasehold mortgages and
building loan mortgages, which may now or hereafter affect the same, to each and
every advance made or to be made under such mortgages, and to all renewals,
modifications, replacements and consolidations of such mortgages. This Section
24.01 shall be self operative and no further instrument of subordination shall
be required. In confirmation of such subordination, Tenant shall promptly
execute and deliver at its own cost and expense any instrument, in recordable
form if required, that Landlord, the lessor of any such lease or the holder of
any mortgage or any of their respective successors in interest may require to
evidence such subordination, and Tenant hereby irrevocably constitutes and
appoints Landlord attorney-in-fact for Tenant to execute any such instrument for
and on behalf of Tenant.
24.02 - If for any reason the leasehold estate of Landlord as Tenant under any
underlying Lease is terminated by summary proceedings or otherwise, Tenant will
attorn to the Landlord under such underlying Lease and will recognize such
Landlord as Tenant's Landlord under this sublease. Tenant agrees to execute and
deliver, at any time and from time to time, upon the request of Landlord or of
the Landlord under any such underlying Lease, any instruments which may be
necessary or appropriate to evidence such attornment and Tenant to execute and
deliver any such instrument for and on behalf of Tenant. Tenant further waives
the provisions of any statute or rule of law now or hereafter in effect which
may give or purport to give Tenant any right or election to terminate this
sublease or to surrender possession of the leased premises in the event such
underlying Lease terminates or any such proceeding is brought by the Landlord
under such underlying Lease, and agrees that, at the election of Landlord under
such underlying lease, this sublease shall not be
23
affected in any way whatsoever by any such proceeding or termination.
24.03 - Any mortgagee, including leasehold mortgages and building loan
mortgages, which may now or hereafter affect the Premises, may require that this
Lease be superior and have priority as to the mortgage, in which event Tenant
agrees to execute any instrument that the holder of the mortgage may require to
evidence same.
ARTICLE 25 - MECHANICS' LIENS
25.01 - Tenant shall not suffer any mechanic's lien to be filed against the
Premises by reason of work, labor, services or materials performed or furnished
to Tenant or to anyone holding the Premises through or under Tenant. If any such
mechanic's lien shall at any time be filed against the Premises, Tenant shall
forthwith cause the same to be discharged of record by payment, bond, order of a
court of competent jurisdiction or otherwise, but Tenant shall have the right to
contest any and all such liens. If Tenant shall fail to cause such lien to be
discharged within thirty (30) days after being notified of the filing thereof
and before judgment or sale thereunder, then, in addition to any other right or
remedy of Landlord, Landlord may, but shall not be obligated to, discharge the
same by paying the amount claimed to be due or by bonding or other proceeding
deemed appropriate by Landlord, and the amount so paid by Landlord and/or all
costs and expenses, including reasonable attorney's fees, incurred by Landlord
in procuring the discharge of such lien, shall be deemed to be Additional Rent.
24
ARTICLE 26 - NOTICES
26.01 - Any notice required or permitted under this Lease shall, unless
otherwise specifically provided herein, be deemed sufficiently given or served
if sent by registered or certified mail, return receipt requested, postage
prepaid, addressed to Tenant at 103 Carnegie Center, Princeton, New Jersey 08540
and to Landlord at the address then fixed for the payment of rent. Any such
notice shall be deemed given as of the date of mailing. Either party may by
fifteen (15) days notice at any time designate a different address to which
notices shall subsequently be mailed.
ARTICLE 27 - WAIVER OF TRIAL BY JURY
27.01 - To the extent permitted by law, Landlord and Tenant hereby waive Trial
By Jury in an action brought by either against the other on any matter arising
out of or in any way connected with this Lease, the relationship of Landlord and
Tenant or Tenant's use or occupancy of the Premises including any claim or
injury or damage.
ARTICLE 28 - NO OTHER WAIVER OR MODIFICATIONS
28.01 - The failure of either party to insist in any one or more instances upon
the strict performance of any one or more of the agreements, terms, covenants,
conditions or obligations of this Lease, or to exercise any right, remedy or
election herein contained, shall not be construed as a waiver or relinquishment
for the future of the performance of such one or more obligations of this Lease
or of the right to exercise such election, but the same shall continue and
remain in full force and effect with respect to any subsequent breach, act or
omission.
ARTICLE 29 - CURING TENANT'S DEFAULTS
29.01 - If Tenant shall default in the performance of any covenant, agreement,
term, provision or condition herein contained, Landlord without thereby waiving
such default, may (but shall not be obligated to) perform the same for the
account of and at the expense of Tenant, without notice in a case of emergency,
and in any other case if such default continues after fifteen (15) days from the
date of the giving by Landlord to Tenant of written notice of such default.
Bills for any reasonable and necessary expense incurred by Landlord in
connection with any such performance by Landlord for the account of Tenant, and
reasonable and necessary bills for all costs, expenses and disbursements,
including (without being limited to) reasonable counsel fee, incurred in
collecting or endeavoring to collect the Minimum Rent or Additional Rent or
other charge or any part thereof, or enforcing or endeavoring to enforce, any
rights against Tenant under or in connection with this Lease, or pursuant to
law, including (without being limited to any such cost, expense and disbursement
involved in instituting and prosecuting summary proceedings, as well as bills
for any property, material, labor or services provided, furnished or rendered,
or caused to be provided, furnished or rendered, by Landlord to Tenant and any
charges for other services incurred by Tenant under this Lease, may be sent by
Landlord to Tenant monthly, or immediately, at Landlords's option, and shall be
due and payable by
25
Tenant in accordance with the terms of said bills and if not paid when due, the
amounts thereof shall immediately become due and payable as Additional Rent
under this Lease, together with interest thereon at a per annum rate equal to
the sum of the prime rate of Bankers Trust Company, plus two (2) percentage
points from the date the said bills should have been paid in accordance with
their terms.
ARTICLE 30 - ESTOPPEL CERTIFICATE
30.01 - Tenant agrees, at any time, and from time to time, as requested by
Landlord, upon not less than ten (10) days prior notice, to execute and deliver
without cost or expense to the Landlord a statement certifying that this Lease
is unmodified and in full force and effect (or if there have been modifications
that the same is in full force and effect as modified and stating the
modifications), certifying the dates to which the Minimum Rent and Additional
Rent have been paid, and stating whether or not, to the best knowledge of the
Tenant, the Landlord is in default in performance of any of its obligations
under this Lease, and if so, specifying each such default of which the Tenant
may have knowledge.
30.02 - It is intended that any such statement delivered to the Landlord
pursuant to this Article 30 may be relied upon by any prospective purchaser of
the fee or any mortgagee thereof or any assignee of any mortgage upon the
Leasehold or fee of the Premises or any proposed lessee of all or part of the
Parcel.
ARTICLE 31 - PARTIES BOUND
31.01 - The obligations of this Lease shall bind and benefit the successors and
assigns of the parties with the same effect as if mentioned in each instance
where a party is named or referred to, except that no violation of the
provisions of Article 16 shall operate to vest any rights in any successor or
assignee of Tenant and that the provisions of this Article 31 shall not be
construed as modifying the conditions of limitation contained in Article 20.
However, the obligations of Landlord under this Lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Parcel as owner or lessee thereof and in the event of such
transfer said obligations shall thereafter be binding upon each transferee of
the interest of Landlord herein named as such owner or lessee of the Parcel, but
only with respect to the period ending with a subsequent transfer within the
meaning of this Article 31 and such transferee, by accepting such interest,
shall be deemed to have assumed such obligations except only as may be expressly
otherwise provided in this Lease. A Lease of Landlord's entire interest in the
Parcel as owner or lessee thereof shall be deemed a transfer within the meaning
of this Article 31.
31.02 - Tenant shall look solely to Landlord's estate and property in the
Premises (or the proceeds thereof) for the satisfaction of Tenant's remedies for
the collection of a judgment (or other judicial process) requiring the payment
of money by Landlord in the event of any default by Landlord hereunder, and no
other property or assets of Landlord, or Landlord's partners or members, shall
be subject to levy, execution or other enforcement procedure for the
satisfaction
26
of Tenant's remedies under or with respect to either this Lease, the
relationship of Landlord and Tenant hereunder, or Tenant's use and occupancy of
the Premises.
ARTICLE 32 - FORCE MAJEUR
32.01 - Except as otherwise expressly provided herein, this Lease and the
obligations of Tenant to pay rent hereunder and perform all of the other
covenants, agreements, terms, provisions and conditions hereunder on the part of
Tenant to be performed shall in no ways be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease, or is
unable to supply or is delayed in supplying, any service, express or implied, to
be supplied or unable to supply, or is delayed in supplying any equipment or
fixtures if Landlord is prevented or delayed from so doing by reason of any
cause beyond Landlord's reasonable control including, but not limited to, Acts
of God, strikes, labor troubles, shortage of materials, governmental preemption
in connection with a national emergency or by reason of any rule, order or
regulation of any governmental agency or by reason of the conditions of supply
and demand which have been or are affected by war, hostilities or similar
emergency, provided that Landlord shall in each instance exercise reasonable
diligence to affect performance as soon as possible. It is agreed that the
Landlord shall not be required to incur any overtime or additional expenses in
Landlord's reasonable diligence to effect the performance of any of Landlord's
obligations in this lease contained.
ARTICLE 33 - PARKING
33.01 - Tenant shall have the right to the non-exclusive use of a total of
eighteen (18) parking spaces on the Parcel for all employees and visitors, which
spaces Landlord will have the right to appropriately so designate. Tenant
covenants and agrees to comply with all reasonable rules and regulations which
Landlord may hereafter from time to time or at any time make to assure exclusive
use of designated parking spaces on the Parcel by permitted users. Landlord's
remedies under such rules and regulations may include, but shall not be limited
to, the right to tow away at owner's expense any vehicles not parked in
compliance with these rules and regulations. Landlord shall not be responsible
to Tenant for the noncompliance or breach by any other Tenant of said rules and
regulations, provided, however, Landlord agrees to use its best efforts to
enforce such rules and regulations uniformly.
ARTICLE 34 - DEFINITION OF LANDLORD
34.01 - The term "Landlord" as used in this Lease shall mean, at any given time
or from time to time as described in Section 32.01, the owner, or owners,
collectively or individually, for the time being of the fee or leasehold of all
or any portions of the Building. The necessary grammatical changes required to
make the provisions of this Lease apply in the plural sense where there is more
than one Landlord or Tenant and to either corporation, associations,
partnerships or individuals, males or females, shall in all instances be assumed
as though in each case fully expressed.
27
ARTICLE 35 - TAXES ON TENANT'S PROPERTY
35.01 - Tenant shall be liable for all taxes levied or assessed against any
personalty, fixtures and equipment installed by Tenant in the Premises. If any
such taxes are levied or assessed against Landlord, Tenant shall pay Landlord,
upon demand, taxes for which Tenant is liable as aforesaid.
ARTICLE 36 - GENERAL PROVISIONS
36.01 - Tenant represents and agrees that it has not directly or indirectly
dealt with any real estate brokers other than Keller, Dodds & Woodworth, Inc.
and in connection with this transaction. Tenant agrees to hold Landlord harmless
from and against any claims for brokerage commission or finder's fee arising out
of, or based on, any actions of Tenant with any other broker or brokers.
36.02 - The laws of the State of New Jersey shall govern the validity,
performance and enforcement of this Lease.
36.03 - The invalidity of one or more phrases, articles, sections, sentences,
clauses or paragraphs contained in this Lease shall not affect the remaining
portions of this Lease or any part thereof, and in the event that any one or
more of the phrases, articles, sections, sentences, clauses or paragraphs
contained in this Lease should be declared invalid by the final order, decree or
judgment of a court of competent jurisdiction, this Lease shall be construed as
if such invalid phrases, articles, sections, sentences, clauses or paragraphs
had not been inserted herein.
36.04 - Tenant shall not record this Lease, but if either party should desire to
record a short form Memorandum of Lease setting forth only the parties, the
Premises and the term, such Memorandum of Lease shall be executed, acknowledged
and delivered by both parties upon notice from either party.
36.05 - Tenant agrees to give any Mortgagee and/or Trust Deed Holders, by
Registered Mail, a copy of any Notice of Default served upon the Landlord,
provided that prior to such notice Tenant has been notified, in writing, (by way
of Notice of Assignment of Rents and Leases, or other) of the address of such
Mortgagees and/or Trust Deed Holders. Tenant further agrees that if Landlord
shall have failed to cure such default within the time provided for in this
Lease, then the Mortgagees and/or Trust Deed Holders shall have an additional
thirty (30) days within which to cure such default, or if such default cannot be
cured within that time, then such additional time as may be necessary, if within
such thirty (30) days, any Mortgagee and/or Trust Deed Holder has commenced and
is diligently pursuing the remedies necessary to cure such default (including,
but not limited to, commencement of foreclosure proceedings, if necessary to
effect such cure), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.
28
36.06 - It is understood and agreed that Landlord shall have the right, at its
sole cost and expense (including tenant retro-fit to tenant's prior construction
specifications, moving costs, reprinting stationery, relocation of phones,
etc.), to relocate Tenant to other premises within the Building of equal or
greater kind and quality. In no event shall any relocation accomplished pursuant
to this section result in an increase in the rent payable under this lease.
36.07 - Tenant further agrees not to look to the Mutual Benefit Life Insurance
Company ("Mutual"), whether as mortgagee, mortgagee in possession or successor
in title to the property, for accountability for any security deposit required
by the Landlord under said Lease or interest thereon if Tenant is entitled to
same under the Lease or at law, unless such sums have actually been received by
Mutual as cash security for Tenant's performance of this Lease.
ARTICLE 37 - SECURITY DEPOSIT
37.01 - Tenant will provide to Landlord a security deposit equal to one month
base rent ($8,087.58) at the lease execution. Landlord shall return the Security
Deposit to Tenant within 30 days of the Tenant's expiration of the Lease and
Tenant is not in default at such time and space is delivered subject to normal
wear and tear.
IN WITNESS WHEREOF, Landlord and Tenant have signed their names and
affixed their seals the day and year first above written.
(LANDLORD)
Keller Carnegie Associates, Inc.
A New Jersey Limited Partnership
ATTEST:
/s/ Signature Illegible By: /s/ Signature Illegible
(TENANT)
|
Thomas Group Inc.
A Delaware Corporation
ATTEST:
/s/ Signature Illegible /s/ Signature Illegible
|
29
EXHIBIT "A-2"
DESCRIPTION OF PROPERTY Lot 69, Section 9
WEST WINDSOR TOWNSHIP
MERCER COUNTY, NEW JERSEY
All that certain lot, tract or parcel of land situate, lying and being in the
Township of West Windsor, County of Mercer, and State of New Jersey, and being
more particularly bounded and described as follows:
BEGINNING at a point in the southwesterly line of Alexander Road (now or about
to become 40" half right-of-way), said point being distant 444.37 feet measured
on a bearing South 44 degrees 40' 00" East from a monument set at the
intersection of said southwesterly line of Alexander Road with the southerly
line of the jughandle connecting said line of Alexander Road with the
southeasterly line of Brunswick Pike (U.S. Route 1) (100' right-of-way), said
point of beginning being the most easterly corner of Lot 68, Section 9 (all lot
identification as per West Windsor Township Tax Atlas Data), lands now or
formerly of Carnegie Center Associates, and from said point of beginning
running, thence -
1) South 44 degrees 40' 00" East, 447.90 feet along the aforementioned
southwesterly line of Alexander Road to a monument now or about to be set at the
most northerly corner of Lot 21, Section 9, lands now or formerly of Walter R.
Higgins, thence -
2) South 42 degrees 59' 55" West, 957.43 feet along the northwesterly line of
Lot 21 and beyond, along the northwesterly line of Lot 64, Section 9, lands now
or formerly of Princeton Applied Research Corporation, to a point, said point
being the northeasterly corner of Lot 70, Section 9, other lands now or formerly
of Carnegie Center Associates, thence -
3) North 47 degrees 15' 05" West, 443.27 feet along the northeasterly line of
said Lot 70 to a point, said point being the most southerly corner of the
aforementioned Lot 68, thence -
4) North 42 degrees 44' 55" East, 977.62 feet along the southeasterly line of
said Lot 68 to a point and place of Beginning.
Containing 430,916 square feet or 9.892 acres of land more or less.
EXHIBIT "B"
COMMENCEMENT DATE AGREEMENT
THIS AGREEMENT made the 14 day of January, 1992, by and between Keller
Carnegie Associates (Landlord) and Thomas Group, Inc. (Tenant).
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a Lease dated January 14,
1992 setting forth the terms of occupancy by Tenant a portion of a building
located at 103 Carnegie Center, Princeton, New Jersey 08540; and
WHEREAS, the Lease is for a term of ten (10) years with the
"Commencement Date" of the term being defined in Section 2.01 of the Lease; and
WHEREAS, it has been determined in accordance with the provisions of
Section 2.01 that March 15, 1992 is the Commencement date of the initial term of
the Lease.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter set forth, it is agreed:
1. The Commencement Date of the term of the Lease is March 15, 1992 and
the termination date thereof is March 31, 2002.
2. This agreement is executed by the parties for the purpose of
providing a record of the commencement and termination dates of the term of the
Lease.
IN WITNESS WHEREOF, the parties hereto have duly executed this
instrument as of the day and year first above written.
ATTEST: Thomas Group, Inc.
(TENANT)
/s/ Signature Illegible By: /s/ Signature Illegible
Title) VICE PRESIDENT, C.F.O.
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EXHIBIT "D"
RULES & REGULATIONS
1. The sidewalks, lobbies, halls, passages, elevators and stairways shall not be
obstructed by any of the tenants, nor used by them for any other purpose than
for ingress and egress to and from their respective offices, nor shall they be
used as a waiting or lounging place for tenants' employees, or those having
business with tenants. The halls, passages, elevators and stairways are not for
the use of the general public, and Landlord retains in all cases the right to
control and prevent access to any part of said building of all persons whose
presence, in the judgment of Landlord of Landlord's employees, may be
prejudicial to the safety, character, reputation or interests of the building
and its tenants. In case of invasion, mob, riot, public excitement or other
commotion, Landlord reserves the right to prevent access to the building during
the continuance of same by closing the doors or otherwise, for the safety of
tenants and the protection of property in said building. During other than
business hours, access to the Building may also be refused, unless the person
seeking admission is identified and the production of a key to such premises may
in addition be required. Landlord shall in no case be liable in damages for the
admission or exclusion of any person from said building. No tenant and no
employees or invitees of tenant shall go upon the roof of building.
2. The floors, walls, partitions, skylights, windows, doors and transoms that
reflect or admit light into passageways or into any place in said Building shall
not be covered or obstructed by any of the tenants; provided, however, that
tenants may install curtains or draperies on the windows. The toilet-rooms,
sinks and other water apparatus shall not be used for any purpose other than
those for which they were constructed and no sweepings, rubbish, rags, ashes,
chemicals or refuse shall be thrown or placed therein. The cost of any damage
resulting from such misuses or abuse shall be borne and immediately paid by
tenant by whom, or by whose employees, it shall have been caused.
3. Nothing shall be placed by tenants or their employees on the outside of the
building.
4. No sign, placard, picture, advertisement, notice or name, temporary or
permanent, shall be inscribed, displayed, printed, painted or affixed on or to
any part of the outside or inside of said building without written consent of
Landlord and in such character, color, size and material and place as designated
by Landlord. Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice with notice to and at the expense of
tenant. All approved signs or letters on doors shall be printed, painted,
affixed or inscribed at the expense of tenant by a person approved by the
Landlord.
5. Tenant shall see that the doors of the premises are closed and
securely locked before leaving the building and must observe strict care and
caution that all water faucets or water apparatus are entirely shut off before
tenant or tenant's employees leave the building, and that all electricity shall
likewise be carefully shut off, so as to prevent waste or damage, and for any
default or carelessness, tenant shall make good all injuries sustained by other
tenants or occupants of the building or Landlord.
6. Tenants, their employees or others, shall not make or commit any improper
noises or disturbances of any kind in the building, nor smoke in the elevators,
mark or defile the elevators, bathrooms or the walls, windows, doors or any part
of the building, nor interfere in any way with other tenants, or those having
business in the building. Tenants shall be liable for all damage to the building
done by their employees.
7. No tenant shall sweep or throw, or permit to be swept or thrown, from the
premises any dirt or other substance into any of the corridors or halls,
elevators or stairways of the building, or into any of the light-shafts or
ventilators thereof.
8. Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the building, or permit or suffer the building to be
occupied or used in a manner offensive or objectionable to the Landlord or other
occupants of the building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenants or those having business therein, nor
shall any animals or birds be brought in or kept in or about the premises or the
building, except for laboratory purposes.
9. If the tenants desire to introduce signalling, telegraphic, telephonic or
other wires and instruments, Landlord will direct the electricians as to where
and how the same are to be placed; and, without such direction, no placing,
boring or cutting for wires will be permitted. Landlord retains, in all cases,
the right to require the placing and using of such electrical protecting devices
to prevent the transmission of excessive currents of electricity into or through
the building, to require the changing of wires and of their placing and
arrangement underground, or otherwise, as Landlord may direct, and further to
require compliance on the part of all using or seeking access to such wires with
such rules as Landlord may establish relating thereto; and, in the event of
non-compliance by tenants or by those furnishing service by or using such wires,
or by others with the directions, requirements or rules, Landlord shall have the
right to immediately cut, displace and prevent the use of such wires. Notice
requiring such changing of wires and their replacing and rearrangement given by
Landlord to any company or individual furnishing service, by means of such wires
to any tenant, shall be regarded as notice to such tenants and shall take effect
immediately. All wires used by tenants must be clearly tagged at the
distributing boards and junction boxes and elsewhere in the building with the
number of the office to which said wires lead and the purpose for which said
wires respectively are used, together with the name of the company operating
same.
10. A directory in a conspicuous place on the first floor, with the names
of tenants, will be provided by Landlord.
11. No varnish, stain, paint, linoleum, oilcloth, rubber or other air-tight
covering shall be laid or put upon the floors; nor shall articles be fastened
to, or holes drilled, or nails or screws driven into walls, doors or partitions;
nor shall the walls, doors or partitions be painted, papered, or otherwise
covered or in any way marked or broken; nor shall machinery of any kind be
operated on the premises; nor shall any tenant use any other method of heating
than that provided by Landlord; without the written consent of the Landlord,
which consent shall not be unreasonably withheld. Tenant shall not use or keep
in the building any kerosene, gasoline or inflammable or combustible fluid or
material, or use any method of heating or air conditioning other than that
supplied by Landlord.
12. The delivery of materials and other supplies to tenants in the building will
be permitted only under the direction, control and supervision of the Landlord.
No furniture, freight or equipment of any kind shall be brought into the
building without the consent of Landlord, and all moving of the same into or out
of the building shall be done at such time and in such manner as Landlord shall
designate. Landlord shall have the right to prescribe the weight, size and
position of all safes, files and other heavy equipment brought into the
building, and also the times and manner of moving the same in and out of the
building. Safes or other heavy objects shall, if considered necessary by
Landlord, stand on wood strips of such thickness as is necessary to properly
distribute the weight. Landlord will not be responsible for loss of, or damage
to, any such property from any cause, and all damage done to the building by
moving or maintaining such property shall be repaired at the expense of the
tenant. No furniture, packages, supplies, equipment or merchandise shall be
received in the building, or carried up or down in the elevators, except between
such hours and in such elevators as shall be designated by the Landlord.
13. Tenant shall not employ any person or persons other than the janitor of
Landlord for the purpose of cleaning the premises unless otherwise agreed to by
Landlord. Except with the written consent of Landlord, no person or persons
other than those approved by Landlord shall be permitted to enter the building
for the purpose of cleaning the same. Tenant shall not cause any unnecessary
labor by reason of tenants' carelessness or indifference in the preservation of
good order and cleanliness. Landlord shall in nowise be responsible to tenant
for any loss of property on the premises, however occurring, or for any damage
done to the effects of tenant by the janitor or any other employee or person.
Janitor service shall include ordinary dusting and cleaning by the janitor
assigned to such work, and shall not include cleaning of carpets or rugs, except
normal vacuuming or moving of furniture or other special services.
14. No vending machine or machines of any description shall be installed,
maintained or operated upon the premises without the written consent of the
Landlord.
15. Without the written consent of Landlord, tenant shall not use the name of
the building in connection with, or in promoting or advertising the business of
tenant, except as tenant's address.
16. The word "building" as used herein means the building of which the premises
are a part.
17. Tenant shall not install coathooks or other similar devices on the doors of
his premises.
18. Tenant shall provide chair pads for all desk chairs of the swivel-base type
that are used on carpeted areas.
19. The use of rooms as sleeping apartments is prohibited.
20. All entrance doors leading from the hallways are to be kept closed at all
times.
21. For the protection of tenants, the Landlord reserves the right to refuse
admittance to the building between the hours of 6:00 p.m. and 8:00 a.m., Monday
through Friday, and from 1:00 p.m. Saturday to 8:00 a.m. Monday to any person
not producing both a key to such tenant's office or suite and proper
identification.
22. The following keys will be provided:
a. One building entrance key for each 1,500 sq. ft. of rentable space
in the Premises.
b. One entrance key to the tenant space for each 1,500 sq. ft. of
rentable space in the Premises.
c. Two keys for each passage lock within the Premises.
d. One master key for the Premises.
Additional keys may be purchased at cost. No locks are to be changed,
added or re-keyed except by Landlord. All keys must be signed for and returned
when the Premises are vacated. Should a key be lost or stolen, tenant will pay
for re-keying locks and reissuing keys.
23. The above rules and regulations, or any further rules and regulations, are
for the exclusive benefit of and enforceable only by Landlord herein, and they
shall not inure to the benefit of tenant herein as against other tenants, or in
favor of other tenants as against tenant herein; nor does Landlord warrant to
enforce them against other tenants; provided, however, that Landlord, in any
enforcement of said rules and regulations, shall enforce them uniformly as to
all tenants in the building.
EXHIBIT "E"
CLEANING SERVICES
CLEANING
Cleaning Services provided five (5) days per week unless otherwise specified.
Cleaning hours Monday through Friday, between 6:00 p.m. and before 8:00 a.m. of
the following day.
On the last day of the week, the work will be done after 6:00 p.m. Friday, but
before 8:00 a.m. Monday.
No cleaning on holidays.
OFFICE AREA
Furniture and fixtures within reach will be dusted and desk tops will be wiped
clean.Ash trays to be emptied and cleaned. Window sills and baseboards to be
dusted an washed when necessary.
Office wastepaper baskets will be emptied nightly.
Cartons or refuse in excess of that which can be placed in wastebaskets will not
be removed. Tenants are required to place such unusual refuse in trash cans.
Cleaner will not remove or clean tea or coffee cups or similar containers: also,
if such liquids are spilled in wastebaskets, the wastebaskets will be emptied
but not otherwise cleaned.
Hard floors will be swept daily and washed and waxed monthly.
Carpets will be vacuumed nightly.
Wipe clean all glass, brass and other bright work weekly.
Dust all pictures, charts, wall hangings monthly that are not reached in nightly
cleaning.
Dust all vertical surfaces to include doors, bucks and partitions monthly,
Dust all ventilating louvers and other such installations monthly.
Lavatories
All lavatory floors to be swept and washed with disinfectant nightly. Tile walls
and dividing partitions to be washed and disinfected weekly. Basins, bowls,
urinals to be washed and disinfected daily.
Mirrors, shelves, plumbing work, bright work, and enamel surfaces cleaned
nightly.
Waste receptacles will be emptied and cleaned and wash dispensaries to be filled
with appropriate tissues, towels, soap nightly.
Main Lobby Elevators, Building Exterior and Corridors
Wipe and wash all floors in Main Lobby nightly.
Wipe and/or vacuum elevator floors nightly.
Polish floors weekly in elevator.
EXHIBIT "F"
LEGAL HOLIDAY SCHEDULE
New Year's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Christmas Day
EXHIBIT 10.3
LEASE AND LEASE AGREEMENT
Between
CARNEGIE 214 ASSOCIATES LIMITED PARTNERSHIP
The Landlord
And
NELSON COMMUNICATIONS, INC.
The Tenant
For Leased Premises In
214 CARNEGIE CENTER
Princeton, New Jersey
January 23, 1996
Prepared by:
Gary O. Turndorf
210 Carnegie Center
Suite 100
Princeton, NJ 08540
(xxx) xxx-xxxx
TABLE OF CONTENTS
Article Page
1. Definitions 1
2. Lease of the Leased Premises 1
3. Rent 1
4. Term 2
5. Preparation of the Leased Premises 2
6. Options 2
7. Use and Occupancy 3
8. Utilities, Services, Maintenance and Repairs 4
9. Allocation of the Expense of Utilities,
Services, Maintenance, Repairs and Taxes 5
10. Computation and Payment of Allocated Expenses of Utilities,
Services, Maintenance, Repairs, Taxes and Capital Expenditures 6
11. Leasehold Improvements, Fixtures and Trade Fixtures 11
12. Alterations, Improvements and Other Modifications by the Tenant 11
13. Landlord's Rights of Entry and Access 13
14. Liabilities and Insurance Obligations 13
15. Casualty Damage to Building or Leased Premises 15
16. Condemnation 16
17. Assignment or Subletting by Tenant 16
18. Signs, Displays and Advertising 18
19. Quiet Enjoyment 19
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20. Relocation 19
21. Surrender 19
22. Events of Default 19
23. Rights and Remedies 20
24. Termination of the Term 23
25. Mortgage and Underlying Lease Priority 24
26. Transfer by Landlord 24
27. Indemnification 25
28. Parties' Liability 26
29. Security Deposit 27
30. Representations 27
31. Reservation in Favor of Tenant 28
32. Tenant's Certificates and Mortgagee Notice Requirements 28
33. Waiver of Jury Trial and Arbitration 30
34. Severability 30
35. Notices 30
36. Captions 30
37. Counterparts 30
38. Applicable Law 30
39. Exclusive Benefit 30
40. Successors 30
41. Amendments 31
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42. Waiver 31
43. Course of Performance 31
44. Landlord's Concessions 31
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TABLE OF EXHIBITS
Exhibit
-------
Leased Premises Floor Space Diagram A
Property Description B
Work Letter C
Building Rules and Regulations D
Definitions and Index of Definitions E
Form of Estoppel Certificate F
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LEASE AND LEASE AGREEMENT, dated as of January 23, 1996, between CARNEGIE 214
ASSOCIATES LIMITED PARTNERSHIP, a New Jersey limited partnership, with offices
at Suite 101, 101 Carnegie Center, Princeton, New Jersey 08540 (the "Landlord"),
and NELSON COMMUNICATIONS, INC., a Delaware corporation, with an office at 41
Madison Avenue, New York, NY 10010 (the "Tenant").
Subject to all the terms and conditions set forth below, the Landlord and the
Tenant hereby agree as follows:
1. Definitions.
Certain terms and phrases used in this Agreement (generally those whose first
letters are capitalized) are defined in Exhibit E attached hereto and, as used
in this Agreement, they shall have the respective meanings assigned or referred
to in that exhibit.
2. Lease of the Leased Premises.
2.1. The Landlord shall, and hereby does, lease to the Tenant, and the Tenant
shall, and hereby does, accept and lease from the Landlord, the Leased
Premises during the Term. The Leased Premises consist of 5,720 square feet
of gross rentable floor space on the first floor of 214 Carnegie Center,
as more fully described in the definition of Leased Premises set forth in
Exhibit E attached hereto.
2.2. The Landlord shall, and hereby does, grant to the Tenant, and the Tenant
shall, and hereby does, accept from the Landlord, the non-exclusive right
to use the Common Facilities during the Term for itself, its employees,
other agents and Guests in common with the Landlord, any tenants of Other
Leased Premises, any of their respective employees, other agents and
guests and such other persons as the Landlord may, in the Landlord's sole
discretion, determine from time to time.
3. Rent.
3.1. The Tenant shall punctually pay the Rent for the Leased Premises for the
Term to the Landlord in the amounts and at the times set forth below,
without bill or other demand and without any offset, deduction or, except
as may be otherwise specifically set forth in this Agreement, abatement
whatsoever.
3.2. The Basic Rent for the Leased Premises during the Initial Term shall be at
the rate per year set forth below.
ANNUAL RATE MONTHLY RATE
----------- ------------
$127,269.96 $10,605.83
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The annual rate of Basic Rent for the Leased Premises during any Renewal
Term shall be calculated as set forth in subsection 6.3 of this Agreement
for the respective Renewal Term.
3.3. The Tenant shall punctually pay the applicable Basic Rent in equal monthly
installments in advance on the first day of each month during the Term,
subject to the concession provided by the terms of subsection 44.2 of this
Agreement for the first eight calendar months of the Initial Term. The
Tenant shall pay the Basic Rent for the ninth full calendar month of the
Initial Term upon execution and delivery of this Agreement. The Tenant
also shall punctually pay the Basic Rent for a period of less than a full
calendar month at the beginning of the Term on the Commencement Date.
3.4. The Basic Rent and the Additional Rent for any period of less than a full
calendar month shall be prorated. In the event that any installment of
Basic Rent cannot be calculated by the time payment is due, such portion
as is then known or calculable shall be then due and payable; and the
balance shall be due upon the Landlord's giving notice to the Tenant of
the amount of the balance due.
3.5. The Additional Rent for the Leased Premises during the Term shall be
promptly paid by the Tenant in the respective amounts and at the
respective times set forth in this Agreement.
1
3.6. That portion of any amount of Rent or other amount due under this
Agreement which is not paid on the day it is first due shall incur a late
charge equal to the sum of: (i) five percent of that portion of any amount
of Rent or other amount due under this Agreement which is not paid on the
day it is first due and (ii) interest on that portion of any amount of
Rent or other amount due under this Agreement which is not paid on the day
it is first due at the Base Rate(s) in effect from time to time plus two
additional percentage points from the day such portion is first due
through the day of receipt thereof by the Landlord. Any such late charge
due from the Tenant shall be due immediately.
4. Term.
The Initial Term shall commence on the Target Date and shall continue until July
31, 2000, unless sooner terminated in accordance with section 24 of this
Agreement. The Term shall continue until the later of the conclusion of the
Initial Term or the conclusion of any Renewal Term, unless sooner terminated in
accordance with section 24 of this Agreement.
5. Preparation of the Leased Premises.
The Landlord shall repaint the Leased Premises, where needed, and shall improve
the lighting in the core middle section in accordance with the sketch and
specifications initialed and exchanged by the parties. Landlord shall also
permit Tenant to install new carpeting, at its expense. Landlord shall otherwise
deliver actual and exclusive possession of the Leased Premises to the Tenant in
an "AS-IS" condition, free of rubbish and debris.
6. Options.
6.1. If, prior to the respective date of exercise thereof, (a)(i) no Event of
Default shall have occurred or (ii) if an Event of Default shall have
occurred, the Tenant shall have previously cured it in full and the
Landlord shall have waived it (b) there shall not have been a History of
Recurring Events of Default and (c) the Term has not been terminated
pursuant to the provisions of subsection 24.1.7 of this Agreement, the
Tenant shall have one option, exercisable exclusively at the time and in
the manner set forth below in subsection 6.2 of this Agreement, to extend
the Term for one additional period of five years' duration. If the option
is properly exercised, the period to which it relates shall commence upon
the end of the Expiring Term. The option is an "Option to Renew."
6.2. In the event the Tenant is interested in exercising the Option to Renew,
the Tenant shall give timely notice of the Tenant's interest to the
Landlord no earlier than nine, and no later than eight, months prior to
the end of the Expiring Term. Within four weeks of the giving of such
notice, the Landlord shall give notice to the Tenant of the Market Rental
Rate in effect eight months prior to end of the Expiring Term. In the
event the Tenant desires to exercise the Option to Renew, the Tenant shall
do so exclusively by giving timely notice thereof to the Landlord no
earlier than seven, and no later than six, months prior to the end of the
Expiring Term, and indicating in that notice whether or not the Market
Rental Rate in effect eight months prior to the end of the Expiring Term
is acceptable. In the event the Tenant fails timely to notify the Landlord
of its interest in exercising the Option to Renew or timely to exercise
the Option to Renew, that Option to Renew shall thereupon expire.
6.3. The Basic Rent for the Leased Premises during the Renewal Term shall be
the Market Rental Rate, as set forth in the Landlord's notice to the
Tenant of the Market Rental Rate, unless the Tenant, in the Tenant's
notice contemplated by the third sentence of subsection 6.2 of this
Agreement affirmatively indicates that the Market Rental Rate for the
Renewal Term is not acceptable, in which case the Basic Rent for the
Leased Premises during the Renewal Term shall be the greater of:
6.3.1. that amount which is the product of the annual rate of Basic
Rent in effect during the last 12 months of the Expiring Term
multiplied by the sum of the following two amounts: (a) one
and (b) the amount obtained by multiplying five-hundredths
(.05) by the number of full calendar months in the Expiring
Term and dividing the result by 12; or
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6.3.2. that amount which bears the same ratio to the annual rate of
Basic Rent in effect during the Expiring Term as the Index for
the ninth month before the end of the Expiring Term bears to
the Index for the ninth month before the first full calendar
month at the beginning of the Expiring Term.
6.4. Except in the case of an assignment or sublease in accordance with the
provisions of subsection 17.6 of this Agreement, in the event the Tenant
assigns this Agreement or sublets, or licenses the use or occupancy of,
the Leased Premises or any portions thereof in accordance with section 17
of this Agreement or otherwise, or attempts to do so:
6.4.1. any Option to Renew which the Tenant has theretofore properly
exercised with respect to a Renewal Term that has not yet
actually commenced shall be rescinded, if the Landlord so
elects by notice to the Tenant, to the same extent as if it
had not been exercised at all; and
6.4.2. any Option to Renew or any other type of option or optional
right exercisable by the Tenant not theretofore timely and
otherwise properly exercised by the Tenant shall thereupon
expire.
7. Use and Occupancy.
7.1. The Tenant shall continuously occupy and use the Leased Premises during
the Term exclusively as an office for its business of healthcare marketing
services, medical education, medical advertising and related financial,
accounting and other services.
7.2. In connection with the Tenant's use and occupancy of the Leased Premises
and use of the Common Facilities, the Tenant shall observe, and the Tenant
shall cause the Tenant's employees, other agents and Guests to observe,
each of the following:
7.2.1. the Tenant shall not do, or permit or suffer the doing of,
anything which might have the effect of creating not
insignificantly increased risk of, or damage from, fire,
explosion or other casualty;
7.2.2. the Tenant shall not do, or permit or suffer the doing of,
anything which would have the effect of (a) increasing any
premium for any liability, property, casualty or excess
coverage insurance policy otherwise payable by the Landlord or
any tenant of Other Leased Premises or (b) making any such
types or amounts of insurance coverage unavailable or less
available to the Landlord or any tenant of Other Leased
Premises;
7.2.3. to the extent they are not inconsistent with this Agreement,
the Tenant and Tenant's employees, other agents and Guests
shall comply with the Building Rules and Regulations attached
hereto as Exhibit D, and with any changes made therein by the
Landlord if, with respect to any such changes, the Landlord
shall have given notice of the particular changes to the
Tenant and such changes shall not materially adversely affect
the conduct of the Tenant's business in the Leased Premises;
7.2.4. the Tenant and the Tenant's employees, other agents and Guests
shall not create, permit or continue any Nuisance in or around
the Carnegie Center Complex, the Leased Premises, the Other
Leased Premises, the Building, the Common Facilities and the
Property;
7.2.5. The Tenant and the Tenant's employees, other agents and Guests
shall not permit the Leased Premises to be regularly occupied
by more than one individual per 200 square feet of usable
floor space of the Leased Premises;
7.2.6. the Tenant and the Tenant's employees, other agents and Guests
shall comply with all Federal, state and local statutes,
ordinances, rules, regulations and orders as they pertain to
the Tenant's use and occupancy
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of the Leased Premises, to the conduct of the Tenant's
business and to the use of the Common Facilities, except that
this subsection shall not require the Tenant to make any
structural changes that may be required thereby that are
generally applicable to the Building as a whole;
7.2.7. the Tenant and the Tenant's employees, other agents and Guests
shall comply with the requirements of the Board of Fire
Underwriters (or successor organization) and of any insurance
carriers providing liability, property, casualty or excess
insurance coverage regarding the Property, the Building, the
Common Facilities or any portions thereof, any other
improvements on the Property and the Carnegie Center Complex,
except that this subsection shall not require the Tenant to
make any structural changes that may be required thereby that
are generally applicable to the Building as a whole;
7.2.8. the Tenant and the Tenant's employees, other agents and Guests
shall not bring or discharge any substance (solid liquid or
gaseous), or conduct any activity, in or on the Carnegie
Center Complex, the Property, the Building, the Common
Facilities or the Leased Premises that shall have been
identified by the scientific community or by any Federal,
state or local statute (including, without limiting the
generality of the foregoing, the Spill Compensation and
Control Act (58 N.J.S.A. Section 23.11 et seq.) and the
Industrial Site Recovery Act (13 N.J.S.A. Section -- --- 1 K-6
et seq.), as they may be amended), ordinance, rule, regulation
or order as toxic or hazardous to health or to the
environment;
7.2.9. the Tenant and the Tenant's employees, other agents and Guests
shall not draw electricity in the Leased Premises in excess of
the rated capacity of the electrical conductors and safety
devices including, without limiting the generality of the
foregoing, circuit breakers and fuses, by which electricity is
distributed to and throughout the Leased Premises and, without
the prior written consent of the Landlord in each instance,
shall not connect any fixtures, appliances or equipment to the
electrical distribution system serving the Building and the
Leased Premises other than typical professional office
equipment such as minicomputers, microcomputers, typewriters,
copiers, telephone systems, coffee machines and table top
microwave ovens, none of which, considered individually and in
the aggregate, overall and per fused or circuit breaker
protected circuit, shall exceed the above limits;
7.2.10. on a timely basis the Tenant shall pay directly and promptly
to the respective taxing authorities any taxes (other than
Taxes) charged, assessed or levied exclusively on the Leased
Premises or arising exclusively from the Tenant's use and
occupancy of the Leased Premises; and
7.2.11. the Tenant shall not initiate any appeal or contest of any
assessment or collection of Taxes for any period without, in
each instance, the prior written consent of the Landlord
which, without being deemed unreasonable, the Landlord may
withhold if the Building was not 90% occupied by paying
tenants throughout that period or if the Tenant is not joined
by tenants of Other Leased Premises that leased throughout
that period, and that are then leasing, at least 80% of all
Other Leased Premises, determined by their gross rentable
floor space.
8. Utilities, Services, Maintenance and Repairs.
8.1. The Landlord shall provide or arrange for the provision of:
8.1.1. such maintenance and repair of the Building (except the Leased
Premises and Other Leased Premises); the Common Facilities;
and the heating, ventilation and air conditioning systems, any
plumbing systems and the electrical systems in the Building,
the Common Facilities, the Leased Premises and Other Leased
Premises as is customarily provided for first class office
buildings in the immediate area;
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8.1.2. such garbage removal from the Building and the Common
Facilities and such janitorial services for the Building, the
Leased Premises and Other Leased Premises as is customarily
provided for first class office buildings in the immediate
area;
8.1.3. water to the Building and, if the appropriate plumbing has
been installed therein, the Leased Premises and Other Leased
Premises;
8.1.4. sewage disposal for the Building;
8.1.5. passenger elevator service for the Building;
8.1.6. snow clearance from, and sweeping of, Parking Facilities and
private access roads which are part of the Property or the
Common Facilities; and
8.1.7. the maintenance of landscaping which is part of the Property
or the Common Facilities.
8.2. The Landlord shall provide or arrange for the provision of:
8.2.1. such maintenance and repair of the Leased Premises, except for
refinishing walls and wall treatments, base, ceilings, floor
treatments and doors in general from time to time or for
gouges, spots, marks, damage or defacement caused by anyone
other than the Landlord, its employees and other agents, and
except for the Tenant's furniture, furnishings, equipment and
other property;
8.2.2. such maintenance and repair of the Other Leased Premises,
except for refinishing walls and wall treatments, base,
ceilings, floor treatments and doors in general from time to
time or for gouges, spots, marks, damage or defacement caused
by anyone other than the Landlord, its employees and other
agents, and except for the respective tenants' furniture,
furnishings, equipment and other property;
8.2.3. the electricity required for the operation of the Building,
the Property and the Common Facilities during Regular Business
Hours and, on a reduced service basis, during other than
Regular Business Hours, and, at all times, the electricity
required for the Leased Premises and Other Leased Premises;
8.2.4. such heat, ventilation and air conditioning for the Building,
the Leased Premises and Other Leased Premises as is
customarily provided for first class office buildings in the
immediate area for the comfortable use of the Building during
Regular Business Hours; and
8.2.5. heated water to the Building (except the Leased Premises and
Other Leased Premises, unless the appropriate plumbing,
fixtures and hot water heating units have been installed
therein).
8.3. Except as specifically set forth in subsections 8.1 and 8.2.1 of this
Agreement, the Tenant shall maintain and repair the Leased Premises and
keep the Leased Premises in as good condition and repair, reasonable wear
and use excepted, as the Leased Premises are upon the completion of any
improvements contemplated by section 5 of this Agreement.
9. Allocation of the Expense of Utilities, Services, Maintenance, Repairs and
Taxes.
9.1. All Tenant Electric Charges shall be borne by the Tenant.
9.2. Between the Commencement Date and the end of the No Pass Through Period,
the Tenant's Share of all Operational Expenses and Taxes incurred during
such period shall be borne by the Landlord.
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9.3. Between the day after the end of the No Pass Through Period and the end of
the Term, the Tenant's Share of Operational Expenses and Taxes incurred
during each annual or shorter period ending on (a) December 31 of each
year and (b) the end of the Term shall be borne as follows:
9.3.1. the Tenant's Share of: Operational Expenses and Taxes incurred
during each such period of 12 months (or shorter period), up
to the amounts of Base Year Operational Expenses and Base Year
Taxes, respectively (or proportional amount thereof for
periods shorter than 12 months), shall be borne by the
Landlord; and
9.3.2. the Tenant's Share of: the amounts by which Operational
Expenses and Taxes incurred during each such period of 12
months (or shorter period) exceed Base Year Operational
Expenses and Base Year Taxes, respectively (or proportional
amount thereof for periods shorter than 12 months) shall be
allocated to, and borne by, the Tenant as more specifically
set forth in section 10 of this Agreement.
10. Computation and Payment of Allocated Expenses of Utilities, Services,
Maintenance, Repairs, Taxes and Capital Expenditures.
10.1. The Tenant shall promptly pay the following additional amounts to the
Landlord at the respective times set forth below:
10.1.1. commencing with the first day after the end of the No Pass
Through Period, and on the first day of each month thereafter
during the Term, one-twelfth of the Tenant's Share of the
amount by which Taxes for the then current calendar year
exceeds Base Year Taxes, but only after Tenant receives a bill
therefor computed in accordance with subsection 10.5 of this
Agreement;
10.1.2. within 20 days of the Landlord's giving notice to the Tenant
after the close of each calendar year closing during the Term,
commencing with the first calendar year closing after the
close of the No Pass Through Period, and after the end of the
Term, the Tenant's Share of the difference between the
Landlord's previously projected amount of Taxes for such
period and the actual amount of Taxes for such period, in
either case in excess of Base Year Taxes, computed in
accordance with subsection 10.6 of this Agreement (unless such
difference is a negative amount, in which case the Landlord
shall credit such difference against any amounts next due from
the Tenant under subsections 10.1.1 and 10.5 of this
Agreement);
10.1.3. commencing with the first day after the end of the No Pass
Through Period, and on the first day of each month thereafter
during the Term, one-twelfth of the Tenant's Share of the
amount by which Operational Expenses for the then current
calendar year exceed Base Year Operational Expenses, but only
after Tenant receives a bill therefor computed in accordance
with subsection 10.7 of this Agreement;
10.1.4. within 20 days of the Landlord's giving notice to the Tenant
after the close of each calendar year closing during the Term,
commencing with the first calendar year closing after the
close of the No Pass Through Period, and after the end of the
Term, the Tenant's Share of the difference between the
Landlord's previously projected amount of Operational Expenses
for such period and the actual amount of Operational Expenses
for such period, in either case in excess of Base Year
Operational Expenses, computed in accordance with subsection
10.8 of this Agreement (unless such difference is a negative
amount, in which case the Landlord shall credit such
difference against any amounts next due from the Tenant under
subsections 10.1.5 and 10.7 of this Agreement);
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10.1.5. commencing with the first day of the first month after the
Landlord gives any notice contemplated by subsection 10.9 of
this Agreement to the Tenant and continuing on the first day
of each month thereafter until the earlier of (a) the end of
the Term or (b) the last month of the useful life set forth in
the respective notice, one-twelfth of the Tenant's Share of
any Annual Amortized Capital Expenditure, computed in
accordance with subsection 10.9 of this Agreement;
10.1.6. on the first day of each month during the Term, the monthly
Tenant Electric Charges, computed in accordance with
subsection 10.10 of this Agreement; and
10.1.7. promptly as and when billed therefor by the Landlord, the
amount of any expense which would otherwise fall within the
definition of Operational Expenses, but which is specifically
paid or incurred by the Landlord for operation and maintenance
of the Building, the Common Facilities or the Property outside
Regular Business Hours at the specific request of the Tenant
or the amount of any expenditure incurred for maintenance or
repair of damage to the Building, the Common Facilities, the
Property, the Leased Premises or the Other Leased Premises
caused directly or indirectly, in whole or in part, by the
active or passive negligence or intentional act of the Tenant
or any of its employees, other agents or Guests.
10.2. "Operational Expenses" means all expenses paid or incurred by the Landlord
in connection with the Property, the Building, the Common Facilities and
any other improvements on the Property and their operation and maintenance
(other than Taxes (which are separately allocated to the Tenant in
accordance with subsections 10.1.1 and 10.1.2 of this Agreement), Capital
Expenditures (which are separately allocated to the Tenant in accordance
with subsection 10.1.5 of this Agreement) and those expenses contemplated
by subsections 10.1.6 and 10.1.7 of this Agreement)) including, without
limiting the generality of the foregoing:
10.2.1. Utilities Expenses;
10.2.2. the expense of providing the services, maintenance and repairs
contemplated by subsections 8.1, 8.2.1 and 8.2.2 of this
Agreement, whether furnished by the Landlord's employees or by
independent contractors or other agents;
10.2.3. wages, salaries, fees and other compensation and payments and
payroll taxes and contributions to any social security,
unemployment insurance, welfare, pension or similar fund and
payments for other fringe benefits required by law or union
agreement (or, if the employees or any of them are not
represented by a union, then payments for benefits comparable
to those generally required by union agreement in first class
office buildings in the immediate area which are unionized)
made to or on behalf of any employees of Landlord performing
services rendered in connection with the operation and
maintenance of the Building, the Common Facilities and the
Property, including, without limiting the generality of the
foregoing, elevator operators, elevator starters, window
cleaners, porters, janitors, maids, miscellaneous handymen,
watchmen, persons engaged in patrolling and protecting the
Building, the Common Facilities and the Property, carpenters,
engineers, firemen, mechanics, electricians, plumbers, other
tradesmen, other persons engaged in the operation and
maintenance of the Building, Common Facilities and Property,
Building superintendent and assistants, Building manager, and
clerical and administrative personnel;
10.2.4. the uniforms of all employees and the cleaning, pressing and
repair thereof;
10.2.5. premiums and other charges incurred by Landlord with respect
to all insurance relating to the Building, the Common
Facilities and the Property and the operation and maintenance
thereof, including, without
7
limitation: property and casualty, fire and extended coverage
insurance, including windstorm, flood, hail, explosion, other
casualty, riot, rioting attending a strike, civil commotion,
aircraft, vehicle and smoke insurance; public liability
insurance; elevator, boiler and machinery insurance; excess
liability coverage insurance; use and occupancy insurance;
workers' compensation and health, accident, disability and
group life insurance for all employees; and casualty rent
insurance;
10.2.6. sales and excise taxes and the like upon any Operational
Expenses and Capital Expenditures;
10.2.7. management fees of any independent managing agent for the
Property, the Building or the Common Facilities; and if there
shall be no independent managing agent, or if the managing
agent shall be a person affiliated with the Landlord, the
management fees that would customarily be charged for the
management of the Property, the Building and the Common
Facilities by an independent, first class managing agent in
the immediate area;
10.2.8. the cost of replacements for tools, supplies and equipment
used in the operation, service, maintenance, improvement,
inspection, repair and alteration of the Building, the Common
Facilities and the Property;
10.2.9. the cost of repainting or otherwise redecorating any part of
the Building or the Common Facilities;
10.2.10. decorations for the lobbies and other Common Facilities in the
Building;
10.2.11. the cost of licenses, permits and similar fees and charges
related to operation, repair and maintenance of the Building,
the Property and the Common Facilities;
10.2.12. an allocable share of service, replacement, repair,
maintenance and other charges assessed from time to time by
the Carnegie Center Owner's Association II to the Building;
and
10.2.13. any and all other expenditures of the Landlord in connection
with the operation, alteration, repair or maintenance of the
Property, the Common Facilities or the Building as a
first-class office building and facilities in the immediate
area which are properly treated as an expense fully deductible
as incurred in accordance with generally applied real estate
accounting practice.
10.3. "Capital Expenditures" means the following expenditures incurred or paid
by the Landlord in connection with the Property, the Building, the Common
Facilities and any other improvements on the Property:
10.3.1. all costs and expenses incurred by the Landlord in connection
with retro-fitting the entire Building or the Common
Facilities, or any portion thereof, to comply with any change
in Federal, state or local statute, rule, regulation, order or
requirement which change takes effect after the original
completion of the Building;
10.3.2. all costs and expenses incurred by the Landlord to replace and
improve the Property, the Building or the Common Facilities or
portions thereof for the purpose of continued operation of the
Property, the Building and the Common Facilities as a first
class office complex in the immediate area; and
10.3.3. all costs and expenses incurred by the Landlord in connection
with the installation of any energy, labor or other cost
saving device or system on the Property or in the Building or
the Common Facilities.
10.4. Neither "Operational Expenses" nor "Capital Expenditures" shall include
any of the following:
8
10.4.1. principal or interest on any mortgage indebtedness on the
Property, the Building or any portion thereof;
10.4.2. any capital expenditure, or amortized portion thereof, other
than those included in the definition of Capital Expenditures
set forth in subsection 10.3 above;
10.4.3. expenditures for any leasehold improvement which is made in
connection with the preparation of any portion of the Building
for occupancy by a new tenant or which is not made generally
to or for the benefit of the Leased Premises and all Other
Leased Premises or generally to the Building or the Common
Facilities;
10.4.4. to the extent the Landlord actually receives proceeds of
property and casualty insurance policies on the Building,
other improvements on the Property or the Common Facilities,
expenditures for repairs or replacements occasioned by fire or
other casualty to the Building or the Common Facilities;
10.4.5. expenditures for repairs, replacements or rebuilding
occasioned by any of the events contemplated by section 16 of
this Agreement;
10.4.6. expenditures for costs, including advertising and leasing
commissions, incurred in connection with efforts to lease
portions of the Building and to procure new tenants for the
Building;
10.4.7. legal fees and expenses incurred in enforcing any of
Landlord's rights or remedies against tenants of Other Leased
Premises;
10.4.8. expenditures for the salaries and benefits of the executive
officers, if any, of the Landlord; and
10.4.9. depreciation (as that term is used in the accounting sense in
the context of generally applied real estate accounting
practice) of the Building, the Common Facilities and any other
improvement on the Property.
10.5. As soon as practicable after the close of the No Pass Through Period and
December 31 of each year thereafter, any portion of which is during the
Term, the Landlord shall furnish the Tenant with a notice setting forth:
10.5.1. Taxes billed, or if a bill has not then been received for the
entire period, the Landlord's projection of Taxes to be
billed, for the then current calendar year;
10.5.2. the amount of Base Year Taxes;
10.5.3. the amount, if any, by which item 10.5.1 above exceeds item
10.5.2 above; and
10.5.4. the Tenant's Share of item 10.5.3 above.
10.6. As soon as practicable after December 31 of each year during the Term and
after the end of the Term, the Landlord shall furnish the Tenant with a
notice setting forth:
10.6.1. the actual amount of Taxes for the preceding calendar year in
excess of Base Year Taxes (or proportional amount thereof for
shorter periods during the Term);
10.6.2. the Landlord's previously projected amount of Taxes for the
preceding calendar year in excess of Base Year Taxes (or
proportional amount thereof for shorter periods during the
Term);
10.6.3. the difference obtained by subtracting item 10.6.2 above from
item 10.6.1 above; and
9
10.6.4. the Tenant's Share of item 10.6.3 above.
10.7. As soon as practicable after the close of the No Pass Through Period and
December 31 of each year thereafter, any portion of which is during the
Term, the Landlord shall furnish the Tenant with a notice setting forth:
10.7.1. the Landlord's projection of annual Operational Expenses for
the current period (if any portion thereof is during the
Term);
10.7.2. the amount of the Base Year Operational Expenses;
10.7.3. the amount, if any, by which item 10.7.1 above exceeds item
10.7.2 above; and
10.7.4. the Tenant's Share of item 10.7.3 above.
10.8. As soon as practicable after December 31 of each year during the
Term and after the end of the Term, the Landlord shall furnish the
Tenant with a notice setting forth:
10.8.1. the actual amount of Operational Expenses for the preceding
calendar year in excess of Base Year Operational Expenses (or
proportional amount thereof for shorter periods during the
Term);
10.8.2. the Landlord's previously projected amount of Operational
Expenses for the preceding calendar year in excess of Base
Year Operational Expenses (or proportional amount thereof for
shorter periods during the Term);
10.8.3. the difference obtained by subtracting item 10.8.2 above from
item 10.8.1 above; and
10.8.4. the Tenant's Share of item 10.8.3 above.
10.9. As soon as practicable after incurring any Capital Expenditure, the
Landlord shall furnish the Tenant with a notice setting forth:
10.9.1. a description of the Capital Expenditure and the subject
thereof;
10.9.2. the date the subject of the respective Capital Expenditure was
first placed into service and the period of useful life
selected by the Landlord in connection with the determination
of the Annual Amortized Capital Expenditure;
10.9.3. the amount of the Annual Amortized Capital Expenditure; and
10.9.4. the Tenant's Share of item 10.9.3 above.
10.10.As soon as practicable after the Commencement Date and from time to time
thereafter, the Landlord shall furnish the Tenant with a notice setting
forth its estimate of Tenant Electric Charges per month. Unless the Tenant
desires to question the Landlord's then most recent estimate of Tenant
Electric Charges exclusively in the manner set forth below, the Landlord's
then most recent estimate shall be binding and shall continue in effect
until any question raised by the Tenant is otherwise resolved in
accordance with this subsection 10.10 of the Agreement. If the Tenant
desires to question the Landlord's estimate of Tenant Electric Charges,
the Tenant shall give notice to the Landlord of its desire. Upon receipt
of the Tenant's notice, the Landlord shall obtain, at the Tenant's
expense, a reputable, independent electrical engineer's formal written
estimate and computation of the Tenant Electric Charges. The engineer's
estimate and computation of Tenant Electric Charges shall thereupon
control for a 12 month period commencing with the date as of which it is
given effect as to Tenant Electric Charges, and until the Landlord
furnishes the Tenant with a subsequent notice setting forth its estimate
of Tenant Electric Charges per month, except to the extent that the
Landlord may increase them in proportion to increases in Utilities
Expenses during the same period.
10
10.11 Within 60 days after the Landlord gives any notice enumerated in
subsections 10.5 through 10.10 of this Agreement, the Tenant or the
Tenant's authorized agent, upon one week's prior notice to the Landlord,
may inspect the Landlord's books and records, as they pertain to the
particular expense in question, at the Landlord's office regarding the
subject of any such notice to verify the amount(s) and calculation(s)
thereof. After payment of the Tenant's Share in accordance with the
provisions of section 10 of this Agreement, no further audit shall be
conducted except with respect to items which may have been questioned
within the 60 day period.
10.12 The mere enumeration of an item within the definitions of Operational
Expenses and Capital Expenditures in subsections 10.2 and 10.3 of this
Agreement, respectively, shall not be deemed to create an obligation on
the part of the Landlord to provide such item unless the Landlord is
affirmatively required to provide such item elsewhere in this Agreement.
11. Leasehold Improvements, Fixtures and Trade Fixtures.
All leasehold improvements to the Leased Premises, fixtures installed in the
Leased Premises and the blinds and floor treatments or coverings shall be the
property of the Landlord, regardless of when, by which party or at which party's
cost the item is installed. Movable furniture, furnishings, trade fixtures and
equipment of the Tenant which are in the Leased Premises shall be the property
of the Tenant, except as may otherwise be set forth in section 23 of this
Agreement.
12. Alterations, Improvements and Other Modifications by the Tenant.
12.1. The Tenant shall not make any alterations, improvements or other
modifications to the Leased Premises which effect structural changes in
the Building or any portion thereof, change the functional utility or
rental value of the Leased Premises or, except as may be contemplated by
section 5 of this Agreement prior to the Commencement Date, affect the
mechanical, electrical, plumbing or other systems installed in the
Building or the Leased Premises.
12.2. The Tenant shall not make any other alterations, improvements or
modifications to the Leased Premises, the Building or the Property or make
any boring in the ceiling, walls or floor of the Leased Premises or the
Building unless the Tenant shall have first:
12.2.1. furnished to the Landlord detailed, New Jersey
architect-certified construction drawings, construction
specifications and, if they pertain in any way to the heating,
ventilation and air conditioning or other systems of the
Building, related engineering design work and specifications
regarding, the proposed alterations, improvements or other
modifications;
12.2.2. not received a notice from the Landlord objecting thereto in
any respect within 30 days of the furnishing thereof (which
shall not be deemed the Landlord's affirmative consent for any
purpose);
12.2.3. obtained any necessary or appropriate building permits or
other approvals from the Municipality and, if such permits or
other approvals are conditional, satisfied all conditions to
the satisfaction of the Municipality; and
12.2.4. met, and continued to meet, all the following conditions with
regard to any contractors selected by the Tenant and any
subcontractors, including materialmen, in turn selected by any
of them:
12.2.4.1. the Tenant shall have sole responsibility for
payment of, and shall pay, such contractors;
12.2.4.2. the Tenant shall have sole responsibility for
coordinating, and shall coordinate, the work to
be supplied or performed
11
by such contractors, both among themselves and
with any contractors selected by the Landlord;
12.2.4.3. the Tenant shall not permit or suffer the filing
of any mechanic's notice of intention or other
lien or prospective lien by any such contractor or
subcontractor with respect to the Property, the
Common Facilities, the Building or any other
improvements on the Property; and if any of the
foregoing should be filed by any such contractor
or subcontractor, the Tenant shall forthwith
obtain and file the complete discharge and release
thereof or provide such payment bond(s) from a
reputable, financially sound institutional surety
as will, in the opinions of the Landlord, the
holders of any mortgage indebtedness on, or other
interest in, the Property, the Building, the
Common Facilities or any other improvements on the
Property, or any portions thereof, and their
respective title insurers, be adequate to assure
the complete discharge and release thereof;
12.2.4.4. prior to any such contractor's entering upon the
Property, the Building or the Leased Premises or
commencing work the Tenant shall have delivered to
the Landlord (a) all the Tenant's certificates of
insurance set forth in section 14 of this
Agreement, conforming in all respects to the
requirements of section 14 of this Agreement,
except that the effective dates of all such
insurance policies shall be prior to any such
contractor's entering upon the Property, the
Building or the Leased Premises or commencing work
(if any work is scheduled to begin before the
Commencement Date) and (b) similar certificates of
insurance from each of the Tenant's contractors
providing for coverage in equivalent amounts,
together with their respective certificates of
workers' compensation insurance, employer's
liability insurance and products-completed
operations insurance, the latter providing
coverage in at least the amount required for the
Tenant's comprehensive general public liability
and excess insurance;
12.2.4.5. each such contractor shall be a party to
collective bargaining agreements with those unions
that are certified as the collective bargaining
agents of all bargaining units of such contractor,
of which all such contractor's workpersons shall
be members in good standing;
12.2.4.6. each such contractor shall perform its work in a
good and workpersonlike manner and shall not
interfere with or hinder the Landlord or any other
contractor in any manner;
12.2.4.7. there shall be no labor dispute of any nature
whatsoever involving any such contractor or any
workpersons of such contractor of the unions of
which they are members with anyone; and if such a
labor dispute exists or comes into existence the
Tenant shall forthwith, at the Tenant's sole cost
and expense, remove all such contractors and their
workpersons from the Building, the Common
Facilities and the Property; and
12.2.4.8. the Tenant shall have the sole responsibility for
the security of the Leased Premises and all
contractors' materials, equipment and work,
regardless of whether their work is in progress or
completed.
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12.3. After the Commencement Date, the Tenant shall not apply any wall covering
(except latex based flat paint) or other treatment to the walls of the
Leased Premises without the prior written consent of the Landlord.
13. Landlord's Rights of Entry and Access.
The Landlord and its authorized agents shall have the following rights of entry
and access to the Leased Premises:
13.1. In case of any emergency or threatened emergency, at any time for any
purpose which the Landlord reasonably believes under such circumstances
will serve to prevent, eliminate or reduce the emergency, or the threat
thereof, or damage or threatened damage to persons and property.
13.2. Upon at least one day's prior verbal advice to the Tenant, at any time for
the purpose of erecting or constructing improvements, modifications,
alterations and other changes to the Building or any portion thereof,
including, without limiting the generality of the foregoing, the Leased
Premises, the Common Facilities or the Property or for the purpose of
repairing, maintaining or cleaning them, whether for the benefit of the
Landlord, the Building, all tenants of Other Leased Premises in the
Building, or one or more tenants of Other Leased Premises, the Carnegie
Center Complex or others. In connection with any such improvements,
modifications, alterations, other changes, repairs, maintenance or
cleaning, the Landlord may close off such portions of the Property, the
Building and the Common Facilities and interrupt such services as may be
necessary to accomplish such work, without liability to the Tenant
therefor and without such closing or interruption being deemed an eviction
or constructive eviction or requiring an abatement of Rent. However, in
accomplishing any such work, the Landlord shall endeavor not to materially
interfere with the Tenant's use and enjoyment of the Leased Premises or
the conduct of the Tenant's business and to minimize interference,
inconvenience and annoyance to the Tenant.
13.3. At all reasonable hours for the purpose of operating, inspecting or
examining the Building, including the Leased Premises, or the Property.
13.4. At any time after the Tenant has vacated the Leased Premises, for the
purpose of preparing the Leased Premises for another tenant or prospective
tenant.
13.5. If practicable by appointment with the Tenant, at all reasonable hours for
the purpose of showing the Building to prospective purchasers, mortgagees
and prospective mortgagees and prospective ground lessees and lessors.
13.6. If practicable by appointment with the Tenant, at all reasonable hours
during the last six months of the Term for the purpose of showing the
Leased Premises to prospective tenants thereof.
13.7. The mere enumeration of any right of the Landlord within this section 13
of the Agreement shall not be deemed to create an obligation on the part
of the Landlord to exercise any such right unless the Landlord is
affirmatively required to exercise such right elsewhere in this Agreement.
14. Liabilities and Insurance Obligations.
14.1. The Tenant shall, at the Tenant's own expense, purchase before the
Commencement Date, and maintain in full force and effect throughout the
Term and any other period during which the Tenant may have possession of
the Leased Premises, the following types of insurance coverage from
financially sound and reputable insurers, licensed by the State of New
Jersey to provide such insurance and acceptable to the Landlord, in the
minimum amounts set forth below, each of which insurance policies shall be
for the benefit of, and shall name the Landlord, the Landlord's managing
agent and mortgagees and ground lessors known to the Tenant, if any, of
the Building, the Common Facilities, the Property or any interest therein,
their successors and assigns as additional persons insured, and none of
which insurance policies shall contain a "co-insurance" clause:
13
14.1.1. commercial general liability insurance (including "broad form
and contractual liability" coverage) and excess ("umbrella")
insurance which, without limiting the generality of the
foregoing, considered together shall insure against such risks
as bodily injury, death and property damage, with a combined
single limit of not less than $3,000,000.00 for each
occurrence; and
14.1.2. "all-risks" property insurance covering the Leased Premises in
an amount sufficient, as determined by the Landlord from time
to time, to cover the replacement costs for all Tenant's
alterations, improvements, fixtures and personal property
located in or on the Leased Premises.
14.2. With respect to risks:
14.2.1. as to which this Agreement requires either party to maintain
insurance, or
14.2.2. as to which either party is effectively insured and for which
risks the other party may be liable,
the party required to maintain such insurance and the party effectively
insured shall use its best efforts to obtain a clause, if available from
the respective insurer, in each such insurance policy expressly waiving
any right of recovery, by reason of subrogation to such party's rights or
otherwise, the respective insurer might otherwise have or obtain against
the other party, so long as such a clause can be obtained in the
respective insurance policy without additional premium cost. If such a
clause can be obtained in the respective insurance policy, but only at
additional premium cost, such party shall, by notice to the other party,
promptly advise the other party of such fact and the amount of the
additional premium cost. If the other party desires the inclusion of such
a clause in the notifying party's respective insurance policy, the other
party shall, within 10 days of receipt of the notifying party's notice, by
notice advise the notifying party of its desire and enclose therewith its
check in the full amount of the additional premium cost; otherwise the
notifying party need not obtain such a clause in the respective insurance.
14.3. Each party hereby waives any right of recovery against the other party for
any and all damages for property losses and property damages which are
actually insured by either party, but only to the extent:
14.3.1. that the waiver set forth in this subsection 14.3 does not
cause or result in any cancellation of, or diminution in, the
insurance coverage otherwise available under any applicable
insurance policy;
14.3.2. of the proceeds of any applicable insurance policy (without
adjustment for any deductible amount set forth therein)
actually received by such party for such respective loss or
damages; and
14.3.3. the substance of the clause contemplated by subsection 14.2 of
this Agreement is actually and effectively set forth in the
respective insurance policy.
The waiver set forth in this subsection 14.3 of the Agreement shall not
apply with respect to liability insurance policies (as opposed to property
and casualty insurance policies).
14.4. Each party hereby waives any right of recovery against the other party for
any and all damages for property losses and property damages which are
actually insured by either party, but only to the extent of the proceeds
of any applicable insurance policy (without adjustment for any deductible
amount set forth therein) actually received by such party for such
respective loss or damages. The waiver set forth in this subsection 14.3
of the Agreement shall not apply with respect to liability insurance
policies (as opposed to property and casualty insurance policies).
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14.5. The Landlord shall have no liability whatsoever to the Tenant or the
Tenant's employees, other agents or Guests or anyone else for any death,
bodily injury, property loss or other damages suffered by any of them or
any of their property which is not caused by the negligence or intentional
misconduct of the Landlord.
14.6. Each policy of insurance required under subsection 14.1 of this Agreement
shall include provisions to the effect that:
14.6.1. no act or omission of the Tenant, its employees, other agents
or Guests shall result in a loss of insurance coverage
otherwise available under such policy to any person required
to be named as an additional insured in accordance with
subsection 14.1 of this Agreement; and
14.6.2. the insurance coverage afforded by such policy shall not be
diminished, cancelled, permitted to expire or otherwise
terminated for any reason except upon 30 days' prior written
notice from the insurer to every person required to be named
as an additional insured in accordance with subsection 14.1 of
this Agreement.
14.7. With respect to each type of insurance coverage referred to in subsection
14.1 of this Agreement, prior to the Commencement Date the Tenant shall
cause its insurer(s) to deliver to the Landlord the certificate(s) of the
insurer(s) setting forth the name and address of the insurer, the name and
address of each additional insured, the type of coverage provided, the
limits of the coverage, any deductible amounts, the effective dates of
coverage and that each policy under which coverage is provided
affirmatively includes provisions to the effect set forth in subsection
14.6 of this Agreement. In the event any of such certificates indicates a
coverage termination date earlier than the end of the Term or the end of
any other period during which the Tenant may have possession of the Leased
Premises, no later than 10 days before any such coverage termination date,
the Tenant shall deliver to the Landlord respective, equivalent, new
certificate(s) of the insurer(s).
15. Casualty Damage to Building or Leased Premises.
15.1. In the event of any damage to the Building or any portion thereof by fire
or other casualty which was not caused directly or indirectly, in whole or
in part, by the active or passive negligence or intentional act of the
Tenant, its employees, other agents or Guests:
15.1.1. with the result that the Leased Premises are rendered
untenantable in whole or in part,
15.1.2. regarding which, within 60 days after the occurrence of the
casualty, the Landlord gives notice to the Tenant that the
Landlord can restore the Leased Premises within 180 days after
the occurrence of the casualty to such an extent that the
Leased Premises are then fully tenantable, and
15.1.3. regarding which the Landlord does restore the Leased Premises
within such period of 180 days,
then this Agreement shall remain in full force and effect, but Rent shall
abate until such time as the Leased Premises are again fully tenantable
and be reduced during such period by the amount which bears the same
proportion to the Rent otherwise payable during such period as the gross
rentable floor space of the Leased Premises which are rendered
untenantable bears to the gross rentable floor space of the Leased
Premises.
15.2. In the event of casualty damages in the circumstances set forth in
subsection 15.1 of this Agreement which do not result in a termination of
the Term, the Landlord shall cause restoration to proceed diligently and
expediently to the extent the Landlord has received proceeds of any
property, casualty or liability insurance on the damaged portions. If the
Landlord does not complete the restoration within the permitted time then
the Term shall terminate thirty (30) days after written notice
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from the Tenant unless the restoration is completed within the thirty (30)
day interval.
15.3. The Tenant shall promptly advise the Landlord by the quickest means of
communication of the occurrence or threatened occurrence of any casualty
damage to the Building or the Leased Premises of which the Tenant becomes
aware.
16. Condemnation.
If the Leased Premises, or any portion thereof, or the Building or the Common
Facilities, or any substantial portion of any of the foregoing, shall be
acquired for any public or quasi-public use or purpose by statute, right of
eminent domain or private sale in lieu thereof, with the result the Tenant can
not use and occupy the Leased Premises for the purpose set forth in subsection
7.1 of this Agreement, the Tenant hereby waives any claim against the Landlord,
the condemning authority or other person acquiring same for any thing of value,
tangible or intangible, including, without limiting the generality of the
foregoing, the putative value of any leasehold interest or loss of the use of
same, except for any right the Tenant might have to make a claim, independent
of, and without reference to or having any effect on, any award or claim of the
Landlord, against the condemning authority or other acquiring party regarding
the value of the Tenant's installed trade fixtures and other installed equipment
which are not removable from the Leased Premises or for ordinary and necessary
moving expenses occasioned thereby.
17. Assignment or Subletting by Tenant.
17.1. Except as may be specifically set forth in this section 17 of the
Agreement, the Tenant shall not:
17.1.1. assign, or purport to assign, this Agreement or any of the
Tenant's rights hereunder;
17.1.2. sublet, or purport to sublet, the Leased Premises or any
portion thereof;
17.1.3. license, or purport to license, the use or occupancy of the
Leased Premises or any portion thereof;
17.1.4. otherwise transfer, or attempt to transfer any interest
including, without limiting the generality of the foregoing, a
mortgage, pledge or security interest, in this Agreement, the
Leased Premises or the right to the use and occupancy of the
Leased Premises; or
17.1.5. indirectly accomplish, or permit or suffer the accomplishment
of, any of the foregoing by merger or consolidation with
another entity, by acquisition or disposition of assets or
liabilities outside the ordinary course of the Tenant's
business or by acquisition or disposition, by the Tenant's
equity owners or subordinated creditors, of any of their
respective interests in the Tenant.
17.2. The Tenant shall not assign this Agreement or any of the Tenant's rights
hereunder or sublet the Leased Premises or any portion thereof without
first giving 45 days' prior notice to the Landlord of its desire to assign
or sublet and requesting the Landlord's consent and without first
receiving the Landlord's prior written consent.
The Tenant's notice to the Landlord shall include:
17.2.1. the full name, address and telephone number of the proposed
assignee or sublessee;
17.2.2. a description of the type(s) of business in which the proposed
assignee or sublessee is engaged and proposes to engage;
17.2.3. a description of the precise use to which the proposed
assignee or sublessee intends to put the Leased Premises or
portion thereof;
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17.2.4. the proposed assignee's or subtenant's most recent quarterly
and annual financial statements prepared in accordance with
generally accepted accounting principles and any other
evidence of financial position and responsibility that the
Tenant or proposed assignee or sublessee may desire to submit;
17.2.5. by diagram and measurement of the actual square feet of floor
space, the precise portion of the Leased Premises proposed to
be subject to the assignment of this Agreement or to be
sublet;
17.2.6. a complete, accurate and detailed description of the terms of
the proposed assignment or sublease including, without
limiting the generality of the foregoing, all consideration
paid or given, or proposed to be paid or to be given, by the
proposed assignee, sublessee or other person to the Tenant and
the respective times of payment or delivery; and
17.2.7. any other information reasonably requested by the Landlord.
17.3. By the expiration of the notice period contemplated by subsection 17.2 of
this Agreement, the Landlord, in its sole discretion, shall take one of
the following actions by notice to the Tenant:
17.3.1. grant consent on the terms and conditions set forth in
subsection 17.4 of this Agreement and such other reasonable
terms and conditions set forth in the Landlord's notice;
17.3.2. refuse to grant consent for any of the reasons set forth in
subsection 17.5 of this Agreement or for any other reasonable
reason set forth in the Landlord's notice; or
17.3.3. elect to terminate the Term as of (a) the end of the third
full month after the Tenant has given notice of the Tenant's
desire to assign or sublet or (b) the proposed effective date
of the proposed assignment or sublease.
17.4. The Landlord's consent to the Tenant's proposed assignment or sublease, if
granted under subsection 17.3.1 of this Agreement, shall be subject to all
the following terms and conditions (and to any other terms and conditions
permitted by that subsection):
17.4.1. any proposed assignee or sublessee shall, by document executed
and delivered forthwith to the Landlord, agree to be bound by
all the obligations of the Tenant set forth in this Agreement;
17.4.2. the Tenant shall remain liable under this Agreement, jointly
and severally with any proposed assignee or sublessee, for the
timely performance of all obligations of the Tenant set forth
in this Agreement;
17.4.3. the Tenant shall forthwith deliver to the Landlord manually
executed copies of all documents regarding the proposed
assignment or sublease and a written, accurate and complete
description, manually executed both by the Tenant and the
proposed assignee or sublessee, of any other agreement,
arrangement or understanding between them regarding the same;
17.4.4. with respect to any consideration or other thing of value
received or to be received by the Tenant in connection with
any such assignment or sublease (other than those payable in
equal monthly installments each month during the proposed term
of any such assignment or sublease), the Tenant shall pay to
the Landlord one-half of any such amount and one-half of the
fair market value of any other thing of value within 10 days
of receipt of same; and
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17.4.5. with respect to any amount payable to the Tenant in equal
monthly installments each month during the proposed term of
any such assignment or sublease in connection with such
assignment or sublease, which amount is in excess of the
amount which bears the same ratio to the monthly installment
of Rent due from the Tenant as the usable floor space of the
Leased Premises subject to the assignment or sublease bears to
the usable floor space of the entire Leased Premises, the
Tenant shall pay one-half of such excess to the Landlord
together with the Tenant's monthly installment of Rent.
17.5. The Landlord's refusal to grant consent under subsection 17.3.2 of this
Agreement shall not be deemed an unreasonable withholding of consent if
based upon any of the following reasons (or any other reason permitted by
that subsection):
17.5.1. the Landlord desires to take one of the other actions
enumerated in subsection 17.3 of this Agreement;
17.5.2. there is already another assignee, sublessee or licensee of
all or a portion of the Leased Premises;
17.5.3. the proposed sublease is for a term of less than one year;
17.5.4. the proposed sublease is for a term which would expire after
the Term;
17.5.5. less than one year remains in the Term as of the proposed
effective date of the proposed assignment or sublease;
17.5.6. the general reputation, financial position or ability or type
of business of, or the anticipated use of the Leased Premises
by, the proposed assignee or proposed sublessee is
unsatisfactory to the Landlord or is inconsistent with those
of tenants of Other Leased Premises or of the Carnegie Center
Complex or inconsistent with any commitment made by the
Landlord to any such other tenant;
17.5.7. the proposed consideration to be paid to the Tenant during any
period of 12 months is less than the amount of the Market
Rental Rate divided by the gross rentable floor space of the
Leased Premises and multiplied by that portion of the gross
rentable floor space of the Leased Premises proposed to be
subject to the proposed assignment or sublease; or
17.5.8. the gross rentable floor space of the portion of the Leased
Premises proposed to be sublet is less than one-third of the
gross rentable floor space of the Leased Premises.
17.6. An assignment or sublease to a parent, subsidiary, affiliate, or successor
in interest by acquisition or merger of Tenant may be done without consent
provided that (i) the Tenant complies with the requirements of subsection
17.4 of this Agreement; and (ii) the assignment is not to an entity formed
for the purpose of avoiding the provisions of section 17 of this
Agreement.
18. Signs, Displays and Advertising.
18.1. The Tenant shall have one sign identifying the Landlord's assigned number
for the Leased Premises at the principal entrance to the Leased Premises.
The Tenant may identify itself in or on each of: the sign at the principal
entrance to the Leased Premises, the Building directory and the directory,
if any, on the floor of the Building on which the Leased Premises is
located. All such signs, and the method and materials used in mounting and
dismounting them, shall be in accordance with the Landlord's
specifications. All such signs shall be provided and mounted by the
Landlord at the Landlord's expense, except that the Tenant shall bear any
expense of identifying itself on the sign at the principal entrance to the
Leased Premises.
18.2. No other sign, advertisement, fixture or display shall be used by the
Tenant on the Property or in the Building or the Common Facilities. Any
signs other than those
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specifically permitted under subsection 18.1 of this Agreement shall be
removed promptly by the Tenant or by the Landlord at the Tenant's expense.
19. Quiet Enjoyment.
The Landlord is the owner of the Building, the Property and those Common
Facilities located on the Property. The Landlord has the right and authority to
enter into and execute and deliver this Agreement with the Tenant. So long as an
Event of Default shall not have occurred and be continuing, the Tenant shall and
may peaceably and quietly have, hold and enjoy the Leased Premises during the
Term in accordance with this Agreement.
20. Relocation.
At any time and from time to time during the Term, on at least one hundred
twenty (120) days prior notice to Tenant, the Landlord shall have the right to
move the Tenant out of the Leased Premises and into premises having at least
equal square footage as the Leased Premises located in the Building or in any
other comparable building in the Carnegie Center Complex for the duration of the
Term. In the event that there is not comparable space located in the Building,
the Landlord shall use its best efforts to relocate the Tenant into a 200 Series
building in the Carnegie Center Complex. If comparable space is not available in
a 200 Series building, the Landlord may relocate the Tenant to another building
in the Carnegie Center Complex. In connection with the relocation of the Tenant,
the Landlord shall pay (i) all costs and expenses of preparing and decorating
the new premises so that such premises will be substantially similar to the
Leased Premises; (ii) all costs and expenses of removing, relocating and
installing Tenant's furniture, trade fixtures, furnishings and equipment to the
new premises; and (iii) other expenses incurred by Tenant including, but not
limited to, the reprinting of stationery and business cards. The use and
occupancy by Tenant of the new premises shall be under and pursuant to the same
terms, conditions and provisions of this Lease except that the description of
the Leased Premises, building (if applicable) and the Property which, upon
completion of such relocation, shall be deemed amended to describe the
substitute new premises, building and property respectively, to which Tenant
shall have been relocated in accordance with this Section 20. Notwithstanding
the foregoing, upon receipt of the written notice of the Landlord's intention to
relocate the Tenant, the Tenant may, upon written notice to Landlord, elect not
to relocate to such other premises and, in lieu thereof, may terminate this
Lease effective on the date the proposed relocation would have been effective.
21. Surrender.
Upon termination of the Term, or at any other time at which the Landlord, by
virtue of any provision of this Agreement or otherwise has the right to re-enter
and re-take possession of the Leased Premises, the Tenant shall surrender
possession of the Leased Premises; remove from the Leased Premises all property
owned by the Tenant or anyone else other than the Landlord; remove from the
Leased Premises any alterations, improvements or other modifications to the
Leased Premises that the Landlord may request by notice; make any repairs
required by such removal; clean the Leased Premises; leave the Leased Premises
in as good order and condition as it was upon the completion of any improvements
contemplated by section 5 of this Agreement, ordinary wear and use excepted;
return all copies of all keys and passes to the Leased Premises, the Common
Facilities and the Building to the Landlord; and receive the Landlord's written
acceptance of the Tenant's surrender. The Landlord shall not be deemed to have
accepted the Tenant's surrender of the Leased Premises unless and until the
Landlord shall have executed and delivered the Landlord's written acceptance of
surrender to the Tenant, which shall not be unreasonably withheld or delayed.
22. Events of Default.
The occurrence of any of the following events shall constitute an Event of
Default under this Agreement:
22.1. the Tenant's failure to pay any installment of Basic Rent or any amount of
Additional Rent when it is first due;
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22.2. the Tenant's failure to perform any of its obligations under this
Agreement if such failure has caused, or may cause, loss or damage that
can not promptly be cured by subsequent act of the Tenant;
22.3. the Tenant's failure to complete performance of any of the Tenant's
obligations under this Agreement (other than those contemplated by
subsections 22.1 and 22.2 of this Agreement) within 30 days after the
Landlord shall have given notice to the Tenant specifying which of the
Tenant's obligations has not been performed and in what respects, unless
completion of performance within such period of 30 days is not possible
using diligence and expedience, then within a reasonable time of the
Landlord's notice so long as the Tenant shall have commenced substantial
performance within the first three days of such period of 30 days and
shall have continued to provide substantial performance, diligently and
expediently, through to completion of performance;
22.4. the discovery that any representation made by the Tenant in this Agreement
shall have been inaccurate or incomplete in any material respect either on
the date it was made or the date as of which it was made;
22.5. the sale, transfer or other disposition of any interest of the Tenant in
the Leased Premises by way of execution or other legal process;
22.6. with the exception of those of the following events to which section 365
of the Bankruptcy Code shall apply in the context of an office lease (in
which case subsection 22.7 of this Agreement shall apply):
22.6.1. the Tenant's becoming a "debtor," as that term is defined in
section 101 of the Bankruptcy Code;
22.6.2. any time when either the value of the Tenant's liabilities
exceed the value of the Tenant's assets or the Tenant is
unable to pay its obligations as and when they respectively
become due in the ordinary course of business;
22.6.3. the appointment of a receiver or trustee of the Tenant's
property or affairs; or
22.6.4. the Tenant's making an assignment for the benefit of, or an
arrangement with or among, creditors or filing a petition in
insolvency or for reorganization or for the appointment of a
receiver;
22.7. in the event of the occurrence of any of the events enumerated in
subsection 22.6 of this Agreement to which section 365 of the Bankruptcy
Code shall apply in the context of an office lease, the earlier of the
bankruptcy trustee's rejection or deemed rejection (as those terms are
used in section 365 of the Bankruptcy Code) of this Agreement; or
22.8. the Tenant's abandoning the Leased Premises before expiration of the Term
without the prior written consent of the Landlord.
23. Rights and Remedies.
23.1. Upon the occurrence of an Event of Default the Landlord shall have all the
following rights and remedies:
23.1.1. to elect to terminate the Term by giving notice of such
election, and the effective date thereof, to the Tenant and to
receive Termination Damages;
23.1.2. to elect to re-enter and re-take possession of the Leased
Premises, without thereby terminating the Term, by giving
notice of such election, and the effective date thereof, to
the Tenant and to receive Re-Leasing Damages;
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23.1.3. if the Tenant remains in possession of the Leased Premises
after the Tenant's obligation to surrender the Leased Premises
shall have arisen, to remove the Tenant and the Tenant's and
any others' possessions from the Leased Premises by any of the
following means without any liability to the Tenant therefor,
any such liability to the Tenant therefor which might
otherwise arise being hereby waived by the Tenant: legal
proceedings (summary or otherwise), writ of dispossession and
any other means and to receive Holdover Damages and, except in
the circumstances contemplated by section 20 of this
Agreement, to receive all expenses incurred in removing the
Tenant and the Tenant's and any others' possessions from the
Leased Premises, and of storing such possessions if the
Landlord so elects;
23.1.4. to be awarded specific performance, temporary restraints and
preliminary and permanent injunctive relief regarding Events
of Default where the Landlord's rights and remedies at law may
be inadequate, without the necessity of proving actual damages
or the inadequacy of the rights and remedies at law;
23.1.5. to receive all expenses incurred in securing, preserving,
maintaining and operating the Leased Premises during any
period of vacancy, in making repairs to the Leased Premises,
in preparing the Leased Premises for re-leasing and in
re-leasing the Leased Premises including, without limiting the
generality of the foregoing, any brokerage commissions;
23.1.6. to receive all legal expenses, including without limiting the
generality of the foregoing, attorneys' fees incurred in
connection with pursuing any of the Landlord's rights and
remedies, including indemnification rights and remedies;
23.1.7. if the Landlord, in its sole discretion, elects to perform any
obligation of the Tenant under this Agreement (other than the
obligation to pay Rent) which the Tenant has not timely
performed, to receive all expenses incurred in so doing;
23.1.8. to elect to pursue any legal or equitable right and remedy
available to the Landlord under this Agreement or otherwise;
and
23.1.9. to elect any combination, or any sequential combination of any
of the rights and remedies set forth in subsection 23.1 of
this Agreement.
23.2. In the event the Landlord elects the right and remedy set forth in
subsection 23.1.1 of this Agreement, Termination Damages shall be equal to
the amount which, at the time of actual payment thereof to the Landlord,
is the sum of:
23.2.1. all accrued but unpaid Rent;
23.2.2. the present value (calculated using the most recently
available (at the time of calculation) published weekly
average yield on United States Treasury securities having
maturities comparable to the balance of the then remaining
Term) of the sum of all payments of Rent remaining due (at the
time of calculation) until the date the Term would have
expired (had there been no election to terminate it earlier)
less the present value (similarly calculated) of all payments
of rent to be received through the end of the Term (had there
been no election to terminate it earlier) from a lessee, if
any, of the Leased Premises at the time of calculation (and it
shall be assumed for purposes of such calculations that (i)
the amount of future Additional Rent due per year under this
Agreement will be equal to the average Additional Rent per
month due during the 12 full calendar months immediately
preceding the date of any such calculation, increasing
annually at a rate of eight percent compounded, (ii) if any
calculation is made before the first anniversary of the end of
the No Pass Through Period, the average Additional Rent due
for any month after the end of the No Pass Through Period will
be equal to nine percent of the sum of the Base Year Operating
Expenses,
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Base Year Taxes and Tenant Electric Charges (considered on an
annual basis), (iii) if any calculation is made before the
beginning of the Base Year, the sum of Base Year Taxes and
Base Year Operational Expenses shall be assumed to be $5.00
per gross rentable square foot and (iv) if any calculation is
made before the end of the Base Year, Base Year Taxes and Base
Year Operational Expenses may be extrapolated based on the
year to date experience of the Landlord);
23.2.3. the Landlord's reasonably estimated cost of demolishing any
leasehold improvements to the Leased Premises; and
23.2.4. that amount, which as of the occurrence of the Event of
Default, bears the same ratio to the costs, if any, incurred
by the Landlord (and not paid by the Tenant) in building out
the Leased Premises in accordance with section 5 of this
Agreement as the number of months remaining in the Term
(immediately before the occurrence of the Event of Default)
bears to the number of months in the entire Term (immediately
before the occurrence of the Event of Default).
23.3. In the event the Landlord elects the right and remedy set forth in
subsection 23.1.2 of this Agreement, Re-Leasing Damages shall be equal to
the Rent less any rent actually and timely received by the Landlord from
any lessee of the Leased Premises or any portion thereof, payable at the
respective times that Rent is payable under the Agreement plus the cost,
if any, to the Landlord of building out or otherwise preparing the Leased
Premises for, and leasing the Leased Premises to, any such lessee.
23.4. In the event the Landlord elects the right and remedy set forth in
subsection 23.1.3 of this Agreement, Holdover Damages shall mean damages
at the rate per month or part thereof equal to the greater of: (a) one and
one-half times one-twelfth of the then Market Rental Rate plus all
Additional Rent as set forth in this Agreement or (b) double the average
amount of all payments of Rent due under this Agreement during each of the
last 12 full calendar months prior to the Landlord's so electing or, in
the event the Term shall have terminated by expiration under subsection
24.1.1 of this Agreement, the last full 12 calendar months of the Term, in
either case payable in full on the first day of each holdover month or
part thereof.
23.5. In connection with any summary proceeding to dispossess and remove the
Tenant from the Leased Premises under subsection 23.1.3 of this Agreement,
the Tenant hereby waives:
23.5.1. any notices for delivery of possession thereof, of
termination, of demand for removal therefrom, of the cause
therefor, to cease, to quit and all other notices that might
otherwise be required pursuant to 2A N.J.S.A. Section 18-53 et
seq.;
23.5.2. any right the Tenant might otherwise have to cause a
termination of the action or proceeding by paying to the
Landlord or into court or otherwise any Rent in arrears;
23.5.3. any right the Tenant might otherwise have to a period of
waiting between issuance of any warrant in execution of any
judgment for possession obtained by the Landlord and the
execution thereof;
23.5.4. any right the Tenant might otherwise have to transfer or
remove such proceeding from the court (or the particular
division or part of the court) or other forum in which it
shall have been instituted by the Landlord to another court,
division or part;
23.5.5. any right the Tenant might otherwise have to redeem the
Tenant's former leasehold interest between the entry of any
judgment and the execution of any warrant issued in connection
therewith by paying to the Landlord or into Court or otherwise
any Rent in arrears; and
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23.5.6. any right the Tenant might otherwise have to appeal any
judgment awarding possession of the Leased Premises to the
Landlord.
23.6. The enumeration of rights and remedies in this section 23 of the Agreement
is not intended to be exhaustive or exclusive of any rights and remedies
which might otherwise be available to the Landlord, or to force an
election of one or more rights and remedies to the exclusion of others,
concurrently, consecutively or sequentially. On the contrary, each right
and remedy enumerated in this section 23 of the Agreement is intended to
be cumulative with each other right and remedy enumerated in this section
23 of the Agreement and with each other right and remedy that might
otherwise be available to the Landlord; and the selection of one or more
of such rights and remedies at any time shall not be deemed to prevent
resort to one or more others of such rights and remedies at the same time
or a subsequent time, even with regard to the same occurrence sought to be
remedied.
23.7. It is expressly understood and agreed that the Landlord shall have no duty
to mitigate damages. In the event the Landlord elects the right and remedy
set forth in subsection 23.1.2 of this Agreement, Re-Leasing Damages shall
be equal to the Rent less any rent actually and timely received by the
Landlord from any lessee of the Leased Premises or any portion thereof,
payable at the respective times that Rent is payable under the Agreement
plus the cost, if any, to the Landlord of building out or otherwise
preparing the Leased Premises for, and leasing the Leased Premises to, any
such lessee. The Landlord may relet some or all of the Leased Premises but
shall have no duty to do so. The Tenant shall retain its rights to sublet
or assign the Leased Premises, or portions thereof, pursuant to Article 17
hereof and the right to exercise the Option to Renew in connection
therewith except to the extent that the Landlord shall have already relet
the same which shall abrogate the Tenant's rights, pro tanto.
23.8 Notwithstanding the provisions of section 23.1 of this Agreement, if
notice of Landlord's election is served because of a failure to pay Basic
Rent or Additional Rent, and the Tenant pays the Basic Rent or Additional
Rent and other charges due as a result of the Event of Default within five
days of the service of the notice then the notice shall be withdrawn and
the Term or right to possession shall continue as though no Event of
Default had occurred. The Tenant may not avail itself of this grace
provision more than twice in any twelve month period.
24. Termination of the Term.
-----------------------
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24.1. The Term shall terminate upon the earliest of the following events to
occur:
24.1.1. expiration of the Term;
24.1.2. in connection with a transaction contemplated by section 16 of
this Agreement, the later of (a) the vesting of the acquiring
party's right to possession or (b) the Tenant's vacating the
Leased Premises;
24.1.3. under the circumstances contemplated by subsection 15.1 of
this Agreement, upon the Tenant's giving prompt notice of the
failure of the Landlord to give, on a timely basis, the notice
contemplated by subsection 15.1.2 of this Agreement and that
the Tenant desires termination of the Term (which termination
shall be effective as of the date of the subject casualty with
respect to those portions of the Leased Premises rendered
untenantable and as of the date of the Tenant's giving notice
with respect to those portions of the Leased Premises which
were not rendered untenantable);
24.1.4. under the circumstances contemplated by subsection 15.1 of
this Agreement, upon the expiration of 45 additional days
(without the Landlord's completion of restoration in the
interim) after the Tenant shall have given prompt notice that
the Landlord has not restored the Leased Premises on a timely
basis and that the Tenant desires termination of the Term
(which termination shall be effective as of the date of the
subject casualty with respect to those portions of the Leased
Premises rendered untenantable and as of the date of the
Tenant's
23
giving notice with respect to those portions of the Leased
Premises which were not rendered untenantable);
24.1.5. the effective date of any election by the Landlord under
subsection 17.3.3 of this Agreement in response to the
Tenant's notice of the Tenant's desire to assign this
Agreement or to sublet all or a portion of the Leased
Premises; or
24.1.6. the effective date of any election by the Landlord to
terminate the Term under subsection 23.1.1 of this Agreement.
24.2. No termination of the Term shall have the effect of releasing the Tenant
from any obligation or liability theretofore or thereby incurred and,
until the Tenant shall have surrendered the Leased Premises in accordance
with section 21 of this Agreement, from any obligation or liability
thereafter incurred.
25. Mortgage and Underlying Lease Priority.
25.1. This Agreement and the estate, interest and rights hereby created for the
benefit of the Tenant are, and shall always be, subordinate to any
mortgage (other than a mortgage created by the Tenant or a sale, transfer
or other disposition by the Tenant in the nature of a security interest in
violation of subsections 17.1.4 and 22.5, respectively, of this Agreement)
already or afterwards placed on the Carnegie Center Complex, the Property,
the Common Facilities, the Building or any estate or interest therein
including, without limiting the generality of the foregoing, any new
mortgage or any mortgage extension, renewal, modification, consolidation,
replacement, supplement or substitution. This Agreement and the estate,
interest and rights hereby created for the benefit of the Tenant are, and
shall always be, subordinate to any ground lease already or afterwards
made with regard to the Carnegie Center Complex, the Property, the Common
Facilities, the Building or any estate or interest therein including,
without limiting the generality of the foregoing, any new ground lease or
any ground lease extension, renewal, modification, consolidation,
replacement, supplement or substitution. The provisions of this section 25
of the Agreement shall be self-effecting; and no further instrument shall
be necessary to effect any such subordination. Nevertheless, the Tenant
hereby consents that any mortgagee or mortgagee's successor in interest
may, at any time and from time to time, by notice to the Tenant,
subordinate its mortgage to the estate and interest created by this
Agreement; and upon the giving of such notice, the subject mortgage shall
be deemed subordinate to the estate and interest created by this Agreement
regardless of the respective times of execution or delivery of either or
of recording the subject mortgage.
25.2. Notwithstanding anything to the contrary that may be set forth in
subsection 25.1 of this Agreement, the Landlord shall obtain from each
such mortgagee and ground lessor its respective standard form of
nondisturbance, attornment and subordination agreement including a
provision to the effect that, in the event of enforcement of any remedies
provided in the respective mortgage or ground lease, so long as an Event
of Default shall not have occurred and be continuing, the Tenant shall not
be disturbed in its possession of the Leased Premises in accordance with
this Agreement.
26. Transfer by Landlord.
26.1. The Landlord shall have the right at any time and from time to time to
sell, transfer, lease or otherwise dispose of the Carnegie Center Complex,
the Property, the Common Facilities or the Building or any of the
Landlord's interests therein, or to assign this Agreement or any of the
Landlord's rights thereunder.
26.2. Upon giving notice of the occurrence of any transaction contemplated by
subsection 26.1 of this Agreement, the Landlord shall thereby be relieved
of any obligation that might otherwise exist under this Agreement with
respect to periods subsequent to the effective date of any such
transaction. If, in connection with any transaction contemplated by
subsection 26.1 of this Agreement the Landlord transfers, or makes
allowance for, any Security Deposit of the Tenant and gives notice of that
fact to the Tenant, the Landlord shall thereby be relieved of any
24
further obligation to the Tenant with regard to any such Security Deposit;
and the Tenant shall look solely to the transferee with respect to any
such Security Deposit.
26.3. In the event of the occurrence of any transaction contemplated by
subsection 26.1 of this Agreement the Tenant, upon written request
therefor from the transferee, shall attorn to and become the tenant of
such transferee upon the terms and conditions set forth in this Agreement.
26.4. Notwithstanding anything to the contrary that may be set forth in
subsections 26.1, 26.2 and 26.3 of this Agreement, in the event any
mortgage contemplated by section 25 of this Agreement is enforced by the
respective mortgagee pursuant to remedies provided in the mortgage or
otherwise provided by law or equity and any person succeeds to the
interest of the Landlord as a result of, or in connection with, any such
enforcement, the Tenant shall, upon the request of such successor in
interest, automatically attorn to and become the Tenant of such successor
in interest without any change in the terms or provisions of this
Agreement, except that such successor in interest shall not be bound by:
(a) any payment of Basic Rent or Additional Rent (exclusive of prepayments
in the nature of a Security Deposit) for more than one month in advance or
(b) any amendment or other modification of this Agreement which was made
without the consent of such mortgagee or such successor in interest; and,
upon the request of such successor in interest, the Tenant shall execute,
acknowledge and deliver any instrument(s) confirming such attornment.
26.5. If this Agreement and the estate, interest and rights hereby created for
the benefit of the Tenant are ever subject and subordinate to any ground
lease contemplated by section 25 of this Agreement:
26.5.1. upon the expiration or earlier termination of the term of any
such ground lease before the termination of the Term under
this Agreement, the Tenant shall attorn to, and become the
Tenant of, the lessor under any such ground lease and
recognize such lessor as the Landlord under this Agreement for
the balance of the Term; and
26.5.2. such expiration or earlier termination of the term of any such
ground lease shall have no effect on the Term under this
Agreement.
27. Indemnification.
27.1. The Tenant shall, and hereby does, indemnify the Landlord against any and
all liabilities, obligations, damages, penalties, claims, costs, charges
and expenses including, without limiting the generality of the foregoing,
expenses of investigation, defense and enforcement thereof or of the
obligation set forth in this section 27 of the Agreement including,
without limiting the generality of the foregoing, attorneys' fees, imposed
on or incurred by the Landlord in connection with any of the following
matters which occurs during the Term:
27.1.1. any matter, cause or thing arising out of the use, occupancy,
control or management of the Leased Premises or any portion
thereof which is not caused by the Landlord's negligence or
intentional act;
27.1.2. any negligence or intentional act on the part of the Tenant or
any of its employees, other agents or Guests;
27.1.3. any accident, injury or damage to any person or property
occurring in or about the Leased Premises which is not caused
by the Landlord's negligence or intentional act;
27.1.4. any representation made by the Tenant in this Agreement shall
have been inaccurate or incomplete in any material respect
either on the date it was made or the date as of which it was
made;
27.1.5. the imposition of any mechanic's, materialman's or other lien
on the Property, the Common Facilities, the Building, the
Leased Premises or any portion of any of the foregoing, or the
filing of any notice of
25
intention to obtain any such lien, in connection with any
alteration, improvement or other modification of the Leased
Premises made or authorized by the Tenant (which
indemnification obligation shall be deemed to include the
Tenant's obligations set forth in subsection 12.2.4.3 of this
Agreement); or
27.1.6. any failure on the part of the Tenant to perform or comply
with any obligation of the Tenant set forth in this Agreement.
27.2. Payment of indemnification claims by the Tenant to the Landlord shall be
due upon the Landlord's giving notice thereof to the Tenant.
27.3. The Landlord shall promptly give notice of any claim asserted, or action
or preceeding commenced, against it as to which it intends to claim
indemnification from the Tenant and, upon notice from the Tenant so
requesting, shall forward to the Tenant copies of all claim or litigation
documents received by it. Upon receipt of such notice the Tenant may, by
notice to the Landlord, participate therein and, to the extent it may
desire, assume the defense thereof through independent counsel selected by
the Tenant and reasonably satisfactory to the Landlord. The Landlord shall
not be bound by any compromise or settlement of any such claim, action or
proceeding without its prior written consent.
28. Parties' Liability.
28.1. None of the following occurrences shall constitute a breach of this
Agreement by the Landlord, a termination of the Term, an active or
constructive eviction or an occurrence requiring an abatement of Rent:
28.1.1. the inability of the Landlord to provide any utility or
service to be provided by the Landlord, as described in
section 8 of this Agreement which is due to causes beyond the
Landlord's control, or to necessary or advisable improvements,
maintenance, repairs or emergency, so long as the Landlord
uses reasonable efforts and diligence under the circumstances
to restore the interrupted service or utility;
28.1.2. any improvement, modification, alteration or other change made
to the Carnegie Center Complex, the Property, the Building or
the Common Facilities by the Landlord consistently with the
Landlord's obligations set forth in subsection 13.2 of this
Agreement; and
28.1.3. any change in any Federal, state or local law or ordinance.
28.2. Except for the commencement, duration or termination of the Term (other
than under the circumstances contemplated by subsection 15.1 of this
Agreement), the Tenant's obligation to make timely payments of Rent, the
Tenant's obligation to maintain certain insurance coverage in effect, the
Tenant's failure to perform any of its other obligations under this
Agreement if such failure has caused loss or damage that can not promptly
be cured by subsequent act of the Tenant and the period within which any
Option to Renew or any other type of option or optional right exercisable
by the Tenant must be exercised, any period of time during which the
Landlord or the Tenant is prevented from performing any of its respective
obligations under this Agreement because of fire, any other casualty or
catastrophe, strikes, lockouts, civil commotion, acts of God or the public
enemy, governmental prohibitions or preemptions, embargoes or inability to
obtain labor or material due to shortage, governmental regulation or
prohibition, shall be added to the time when such performance is otherwise
required under this Agreement.
28.3. In the event the Landlord is an individual, partnership, joint venture,
association or a participant in a joint tenancy or tenancy in common, the
Landlord, the partners, venturers, members and joint owners shall not have
any personal liability or obligation under or in connection with this
Agreement or the Tenant's use and occupancy of the Leased Premises; but
recourse shall be limited exclusively to the Landlord's interest in the
Building.
26
28.4. If, at any time during the Term, the payment or collection of any Rent
otherwise due under this Agreement shall be limited, frozen or otherwise
subjected to a moratorium by applicable law, and such limitation, freeze
or other moratorium shall subsequently be lifted, whether before or after
the termination of the Term, such aggregate amount of Rent as shall not
have been paid or collected during the Term on account of any such
limitation, freeze or other moratorium, shall thereupon be due and payable
at once. There shall be added to the maximum period of any otherwise
applicable statute of limitation the entire period during which any such
limitation, freeze or other moratorium shall have been in effect.
28.5. If this Agreement is executed by more than one person as Tenant, their
liability under this Agreement and in connection with the use and
occupancy of the Leased Premises shall be joint and several.
28.6. In the event any rate of interest, or other charge in the nature of
interest, calculated as set forth in this Agreement would lead to the
imposition of a rate of interest in excess of the maximum rate permitted
by applicable usury law, only the maximum rate permitted shall be charged
and collected.
28.7. The rule of construction that any ambiguities that may be contained in any
contract shall be construed against the party drafting the contract shall
be inapplicable in construing this Agreement.
29. Security Deposit.
(This section has been omitted intentionally.)
30. Representations.
30.1. The Tenant hereby represents and warrants that:
30.1.1. its Standard Industrial Classification (SIC) code is 9886 and
it will promptly give notice of any change therein during the
Term to the Landlord;
30.1.2. no broker or other agent has shown the Leased Premises or the
Building to the Tenant, or brought either to the Tenant's
attention, except Princeton Realty Advisors, whose entire
commission therefor is set forth in a separate document and
which commission the Tenant understands will be paid by the
Landlord directly to the person named;
30.1.3. the execution and delivery of, the consummation of the
transactions contemplated by and the performance of all its
obligations under, this Agreement by the Tenant have been duly
and validly authorized by its general partners, to the extent
required by their partnership agreement and applicable law, if
the Tenant is a partnership or, if the Tenant is a
corporation, by its board of directors and, if necessary, by
its stockholders at meetings duly called and held on proper
notice for that purpose at which there were respective quorums
present and voting throughout; and no other approval,
partnership, corporate, governmental or otherwise, is required
to authorize any of the foregoing or to give effect to the
Tenant's execution and delivery of this Agreement; and
30.1.4. the execution and delivery of, the consummation of the
transactions contemplated by and the performance of all its
obligations under, this Agreement by the Tenant will not
result in a breach or violation of, or constitute a default
under, the provisions of any statute, charter, certificate of
incorporation or bylaws or partnership agreement of the Tenant
or any affiliate of the Tenant, as presently in effect, or any
indenture, mortgage, lease, deed of trust, other agreement,
instrument, franchise, permit, license, decree, order, notice,
judgment, rule or order to or of which the Tenant or any
affiliate of the Tenant is a party, a subject or a recipient
or by which the Tenant, any affiliate of the Tenant or any of
their respective properties and other assets is bound.
27
30.2. The Landlord hereby represents and warrants that:
30.2.1. the execution and delivery of, the consummation of the
transactions contemplated by and the performance of all its
obligations under, this Agreement by the Landlord have been
duly and validly authorized by its general partner, to the
extent required by its partnership agreement and applicable
law, and no other approval, partnership, governmental or
otherwise, is required to authorize any of the foregoing
except for the approval of Connecticut General Life Insurance
Company, the holder of the first mortgage, or to give effect
to the Landlord's execution and delivery of this Agreement;
and
30.2.2. the execution and delivery of, the consummation of the
transactions contemplated by and the performance of all its
obligations under, this Agreement by the Landlord will not
result in a breach or violation of, or constitute a default
under, the provisions of any statute, charter, or partnership
agreement of the Landlord or any affiliate of the Landlord, as
presently in effect, or any indenture, mortgage, lease, deed
of trust, other agreement, instrument, franchise, permit,
license, decree, order, notice, judgment, rule or order to or
of which the Landlord or any affiliate of the Landlord is a
party, a subject or a recipient or by which the Landlord, any
affiliate of the Landlord or any of their respective
properties and other assets is bound, except as above stated.
31. Reservation in Favor of Tenant.
Neither the Landlord's forwarding a copy of this document to any prospective
tenant nor any other act on the part of the Landlord prior to execution and
delivery of this Agreement by the Landlord shall give rise to any implication
that any prospective tenant has a reservation, an option to lease or an
outstanding offer to lease any premises.
32. Tenant's Certificates and Mortgagee Notice Requirements.
32.1. Promptly upon request of the Landlord at any time or from time to time,
but in no event more than five days after the Landlord's respective
request, the Tenant shall execute, acknowledge and deliver to the Landlord
or its designee an estoppel or other certificates, satisfactory in form
and substance to the Landlord and any of its mortgagees, ground lessors or
lessees or transferees or prospective mortgagees, ground lessors or
lessees or transferees, with respect to any of or all the following
matters:
32.1.1. whether this Agreement is then in full force and effect;
32.1.2. whether this Agreement has not been amended, modified,
superseded, canceled, repudiated or revoked;
32.1.3. whether the Landlord has satisfactorily completed all
construction work, if any, required of the Landlord or
contractors selected and retained by the Landlord in
connection with readying the Leased Premises for occupancy by
the Tenant in accordance with section 5 of this Agreement;
32.1.4. whether the Tenant is then in actual possession of the Leased
Premises;
32.1.5. whether the Tenant then has no defenses or counterclaims under
this Agreement or otherwise against the Landlord or with
respect to the Leased Premises;
32.1.6. whether Landlord is not then in breach of this Agreement in
any respect;
32.1.7. whether the Tenant then has no knowledge of any assignment of
this Agreement, the pledging or granting of any security
interest in this Agreement or in Rent due and to become due
under this Agreement;
28
32.1.8. whether Rent is not then accruing under this Agreement in
accordance with its terms;
32.1.9. whether any Rent is not then in arrears;
32.1.10. whether Rent due or to become due under this Agreement has not
been prepaid by more than one month;
32.1.11. if the response to any of the foregoing matters is in the
negative, a specification of all the precise reasons that
necessitated the negative response in each instance; and
32.1.12. any other matter reasonably requested by the Landlord or any
of its mortgagees, ground lessors or lessees or transferees or
prospective mortgagees, ground lessors or lessees or
transferees, including, without limiting the generality of the
foregoing, such information as the Landlord may request for
purposes of assuring compliance with the Industrial Site
Recovery Act (13 N.J.S.A. Section 1K-6 et seq.), as it may be
amended, and any other applicable Federal, state or local
statute, ordinance, rule, regulation or order concerned with
environmental matters.
32.2. If, in connection with the Landlord's or a prospective transferee's
obtaining financing or refinancing of the Carnegie Center Complex, the
Property, the Building, the Common Facilities, any portion thereof or any
interest therein, the Landlord or a prospective lender shall so request,
the Tenant shall furnish to the requesting party within 15 days of the
request:
32.2.1. its written consent to any requested modifications of this
Agreement provided that, in each such instance, the requested
modification does not increase the Rent otherwise due or, in
the reasonable judgment of the Tenant, otherwise materially
increase the obligations of the Tenant under this Agreement or
materially adversely affect the Tenant's leasehold interest
created hereby or the Tenant's use and enjoyment of the Leased
Premises (except in the circumstances contemplated by section
16 of this Agreement); and
32.2.2. summary financial information regarding its financial position
as of the close of its most recently completed fiscal year and
its most recently completed interim fiscal period and
regarding its results of operations for the periods then ended
and comparable year earlier periods, certified by Tenant's
chief financial officer to be a complete, accurate and fair
presentation of the summary financial information purporting
to be set forth therein.
32.3. If the Landlord or any of its mortgagees gives notice to the Tenant of any
of their respective names and addresses from time to time, the Tenant
shall give notice to each such mortgagee of any notice of breach or
default previously or afterwards given by the Tenant to the Landlord under
this Agreement and provide in such notice that if the Landlord has not
cured such breach or default within any permissible cure period then such
mortgagee shall have the greater of (a) an additional period of 30 days or
(b) if such default cannot practically be cured within such period, such
additional period as is reasonable under the circumstances, within which
to cure such default. Upon request of the Landlord at any time or from
time to time, the Tenant shall execute, acknowledge and deliver to the
Landlord or its designee an acknowledgment of receipt of any such notice,
an acknowledgment of receipt of any notice of assignment of this Agreement
or rights hereunder by the Landlord to any of its mortgagees and the
Tenant's agreement to the foregoing effect on the respective forms, if
any, furnished by the Landlord or the respective mortgagees.
32.4. Approximately (i) 90 days prior to the termination of the Term and (ii) 30
days prior to any relocation of the Tenant from the Leased Premises (as
constituted on the Commencement Date), the Tenant shall obtain from the
New Jersey Department of Environmental Protection, and deliver to the
Landlord, the Department's unconditional certificate of non-applicability
or approval of the Tenant's negative
29
declaration or clean-up plan, together with copies of all documents
furnished to the Department in connection with obtaining such certificate
or approval.
33. Waiver of Jury Trial and Arbitration.
The parties hereby waive any right they might otherwise have to a trial by jury
in connection with any dispute arising out of or in connection with this
Agreement or the use and occupancy of the Leased Premises; and they hereby
consent to arbitration of any such dispute in Princeton, New Jersey, in
accordance with the rules for commercial arbitration of the American Arbitration
Association or successor organization, except that the Landlord, in its sole
discretion, may, with respect to any dispute involving either (i) the Landlord's
right to re-enter and re-take possession of the Leased Premises or (ii) the
determination of money damages following the occurrence of an Event of Default
under this Agreement, elect to pursue any of or all its rights in any court of
competent jurisdiction. Judgment upon any arbitration award may be entered in
any court of competent jurisdiction.
34. Severability.
In the event that any provision of this Agreement, or the application of any
provision in any instance, shall be conclusively determined by a court of
competent jurisdiction to be illegal, invalid or otherwise unenforceable, such
determination shall not affect the validity or enforceability of the balance of
this Agreement.
35. Notices.
All notices contemplated by, permitted or required by this Agreement shall be in
writing. All notices required by this Agreement shall be personally delivered or
forwarded by certified mail--return receipt requested, addressed to the intended
party at its address first set forth above (adding, in the case of notices to
the Landlord after the Commencement Date, "Attention: Lease Administration") or,
in the case of notices to the Tenant during the Term or any other period during
which the Tenant shall be in possession of the Leased Premises, at the Leased
Premises. Either party may from time to time change the address prescribed in
this Agreement for notices to it by notice to the other. All notices required
under this Agreement shall be deemed given upon their deposit, properly
addressed and postage prepaid, in a postal depository or upon personal delivery
to the intended party, regardless of whether delivery shall be refused.
36. Captions.
Captions have been inserted at the beginning of each section of this Agreement
for convenience of reference only and such captions shall not affect the
construction or interpretation of any such section of this Agreement.
37. Counterparts.
This Agreement may be executed in more than one counterpart, each of which shall
constitute an original of this Agreement but all of which, taken together, shall
constitute one and the same Agreement.
38. Applicable Law.
This Agreement and the obligations of the parties hereunder shall be governed by
and construed in accordance with the laws of the State of New Jersey.
39. Exclusive Benefit.
Except as may be otherwise specifically set forth in this Agreement, this
Agreement is made exclusively for the benefit of the parties hereto and their
permitted assignees and no one else shall be entitled to any right, remedy or
claim by reason of any provision of this Agreement.
40. Successors.
30
This Agreement shall be binding upon the parties hereto and their respective
successors and assigns.
41. Amendments.
This Agreement contains the entire agreement of the parties hereto, subsumes all
prior discussions and negotiations and, except as may otherwise be specifically
set forth in this Agreement, this Agreement may not be amended or otherwise
modified except by a writing signed by all the parties to this Agreement.
42. Waiver.
Except as may otherwise be specifically set forth in this Agreement, the failure
of any party at any time or times to require performance of any provision of
this Agreement shall in no manner affect the right at a later time to enforce
the same. No waiver by any party of any condition, or of the breach of any term,
covenant, representation or warranty set forth in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach, or
as a waiver of any other condition or of the breach of any other term, covenant,
representation or warranty set forth in this Agreement. The Landlord's
acceptance of, or endorsement on, any partial payment of Rent or any late
payment of Rent from the Tenant shall not operate as a waiver of the Landlord's
right to the balance of the Rent due on a timely basis regardless of any writing
to the contrary on, or accompanying, the Tenant's partial payment or the
Landlord's putative acquiescence therein.
43. Course of Performance.
No course of dealing or performance by the parties, or any of them, shall be
admissible for the purpose of obtaining an interpretation or construction of
this Agreement at variance with the express language of the Agreement itself.
44. Landlord's Concessions.
44.1. The Tenant agrees to accept the Leased Premises as presently configured.
Landlord will make Herman Miller furniture systems available to Tenant for
its use without charge. Tenant shall move, install and return the
furniture systems at the end of the Term at its expense and in good order,
reasonable wear and tear excepted.
44.2. Notwithstanding anything to the contrary that may be set forth in section
3 of this Agreement, (a)(i) if no Event of Default shall have occurred or
(ii) if an Event of Default shall have occurred, the Tenant shall have
previously cured it in full and the Landlord shall have waived it and (b)
if there shall not have been a History of Recurring Events of Default, the
Landlord hereby waives its right to receive one-half of the Basic Rent
otherwise due and payable for the first eight calendar months of the
Initial Term.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
LANDLORD:
CARNEGIE 214 ASSOCIATES LIMITED PARTNERSHIP
By: 214 Capital Corp.
By:/s/ Alan B. Landis
------------------------------------------
Alan B. Landis, President
|
TENANT:
NELSON COMMUNICATIONS, INC.
By: /s/ Blanca M. Stephens
------------------------------------------
Blanca M. Stephens, Senior Vice President
|
31
[EXHIBIT A]
LEASED PREMISES FLOOR SPACE DIAGRAM
214 Carnegie Center
Nelson Communications, Inc.
[Floor Plan]
32
EXHIBIT B
DESCRIPTION OF LOT 76, BLOCK S-9
WEST WINDSOR TOWNSHIP
MERCER COUNTY, NEW JERSEY
All that certain lot, parcel, or tract of land situate and lying in the Township
of West Windsor, County of Mercer and State of New Jersey and being more
particularly bounded and described as follows:
BEGINNING at a point, said point being distant the following five courses
(designated A through E) from the intersection of the southerly line of Roszel
Road (60' R.O.W.) and the westerly line of Lot 61, Block S-9 as shown on a Major
Subdivision Map entitled "Preliminary-Final Major Subdivision, Lot 7, Block S-9
situated in West Windsor Township, Mercer County, New Jersey," prepared by
Lynch, Carmody, Giuliano & Karol, P.A., filed in the Mercer County Clerk's
Office on February 18, 1983, as Map No. 2513, and running thence:
(A) South 44 13' 07" East, a distance of 324.42 feet to a point; thence
(B) South 58 57' 14" West, a distance of 716.08 feet to a point; thence
(C) South 16 48' 22" West, a distance of 198.72 feet to a point; thence
(D) South 49 39' 04" West, a distance of 583.64 feet to a point; thence
(E) South 42 48' 22" West, a distance of 10.00 feet to the aforementioned
point of BEGINNING, and running thence from the point of BEGINNING:
1. Along a curve to the right, said curve having a radius of 250.00 feet and
an arc length of 196.35 feet, to a point of tangency; thence
2. South 87 48' 22" West, a distance of 340.00 feet to a point; thence
3. North 02 11' 38" West, a distance of 394.25 feet to a point of curvature;
thence
4. Along a curve to the left, said curve having a radius of 200.00 feet and
an arc length of 157.08 feet, to a point of tangency; thence
5. North 47 11' 38" West, a distance of 295.16 feet to a point; thence
6. North 42 48' 22" East, a distance of 615.00 feet to a point; thence
7. South 47 11' 38" East, a distance of 279.19 feet to a point; thence
8. South 02 11' 38" East, a distance of 756.83 feet to a point; thence
9. South 47 11' 38" East, a distance of 214.65 feet to the point and place of
BEGINNING.
The above described parcel of land is intended to be the same as shown on a map
entitled "Preliminary-Final Major Subdivision, Lots 7 & 20, Block S-9, situated
in West Windsor Township, Mercer County, New Jersey," prepared by Lynch,
Carmody, Giuliano & Karol, P.A., dated October 8, 1984, and revised to December
10, 1985, and filed in the Mercer County Clerk's office on October 30, 1985 as
Map No. 2730. The above description is in accordance with a survey prepared by
Fellows Read & Associates, Inc. dated January 9, 1986, revised to January 30,
1986.
33
EXHIBIT C
WORK LETTER
The following is the Work Letter provided for in the Agreement of which this
exhibit is a part.
The Building's structure is a three-story office building of Construction Type
2C with a steel frame, a metal deck floor system, a granite and concrete
exterior facade and insulated glass. The floors will sustain a live load of 100
pounds per square foot of usable floor space plus an allowance of 20 pounds per
square foot for partitions and will have a typical bay size of 30 feet by 30
feet.
Among other Common Facilities, the Building will contain two men's and two
women's bathrooms on each floor, two drinking fountains on each floor and two
hydraulic elevators with a capacity of 2,500 pounds each and will have Parking
Facilities with approximately 500 lined parking spaces.
As used in this Work Letter, "building standard" shall mean the type and grade
of material, equipment or device designated by the Landlord as standard for
leased premises in the Building. Any work performed in the Building shall
conform to such standard.
34
EXHIBIT D
BUILDING RULES AND REGULATIONS
The following are the Building Rules and Regulations adopted in accordance with
subsection 7.2.3 of the Agreement of which this exhibit is a part; and the
Tenant and the Tenant's employees, other agents and Guests shall comply with
these Building Rules and Regulations:
1. The sidewalks, driveways, entrances, passages, courts, lobby, esplanade
areas, plazas, elevators, vestibules, stairways, corridors, halls and
other Common Facilities shall not be obstructed or encumbered or used for
any purpose other than ingress and egress to and from the Leased Premises.
The Tenant shall not permit or suffer any of its employees, other agents
or Guests to congregate in any of the said areas. No door mat of any kind
whatsoever shall be placed or left in any public hall or outside any entry
door of the Leased Premises.
2. No awnings or other projections shall be attached to the outside walls of
the Building. No curtains, drapes, blinds, shades or screens shall be
attached to, hung in or used in connection with any window or door of the
Leased Premises without the prior written consent of Landlord. If such
consent is given, such curtains, drapes, blinds, shades or screens shall
be of a quality, type, design and color, and attached in the manner,
approved by Landlord.
3. Except as otherwise specifically provided in subsection 18.1 of the
Agreement, no sign, insignia, advertisement, object, notice or other
lettering shall be exhibited, inscribed, painted or affixed so as to be
visible from outside the Leased Premises or the Building. In the event of
the violation of the foregoing by the Tenant, the Landlord may remove same
without any liability and may charge the expense incurred in such removal
to the Tenant.
4. The sashes, doors, skylights, windows, and doors that reflect or admit
light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed and no bottles, parcels or
other articles shall be placed on the window sills.
5. No showcase or other articles shall be placed in front of or affixed to
any part of the Building or the Common Facilities.
6. The lavatories, water and wash closets and other plumbing fixtures shall
not be used for any purposes other than those for which they were designed
and constructed, and no sweepings, rubbish, rags, acids or other
substances shall be thrown or deposited therein. All damages resulting
from any misuse thereof shall be repaired at the expense of the Tenant
that permitted or suffered the violation hereof by the Tenant, the
Tenant's employees, other agents or Guests.
7. The Tenant shall not mark, paint, drill into or in any way deface any part
of the Leased Premises, the Building, the Common Facilities or the
Property. No boring, cutting or stringing of wires shall be permitted,
except with the prior written consent of the Landlord, and as the Landlord
may direct. Linoleum and other resilient floor coverings shall be laid so
that the same shall not come in direct contact with the floor of the
Leased Premises; and if linoleum or other resilient floor coverings are
desired, an interlining of builder's deadening felt shall be first affixed
to the floor by a paste or other material that is, and will remain,
soluble in water. The use of cement or other adhesive material that either
is not, or will not remain, soluble in water is prohibited.
8. No bicycles, vehicles, animals, reptiles, fish or birds of any kind shall
be brought into or kept in or about the Leased Premises.
9. No noise including, without limiting the generality of the foregoing,
music or the playing of musical instruments, recordings, radio or
television which, in the reasonable judgment of Landlord, might disturb
tenants of Other Leased Premises shall be made or permitted by the Tenant.
Nothing shall be done or permitted in the Leased Premises by the Tenant
which would impair or interfere with the use or enjoyment of Other Leased
Premises by any tenant thereof. Nothing shall be thrown
35
out of the doors, windows or skylights or down the passageways of the
Building.
10. The Tenant shall not manufacture any commodity, or prepare or dispense any
foods or beverages, tobacco, flowers or other commodities or articles
without the prior written consent of the Landlord.
11. Duplicates of keys and passes distributed to the Tenant by the Landlord
shall not be made. The Tenant shall provide appropriate security for keys.
Nothing shall be done to render any lock inoperable by the Building Grand
Master Key. No lock shall be installed without the Landlord's prior
written consent; and any lock so installed shall be operable by the
Building Grand Master Key. Upon termination of the Term, all keys, passes
and duplicates provided by the Landlord to the Tenant, or otherwise
procured by the Tenant, shall be returned to the Landlord. Any failure to
comply with the foregoing which requires changes in locks, new or
additional keys, passes or duplicates or other services of a locksmith
shall be paid by the Tenant.
12. All deliveries and removals, and the carrying in or out of any safes,
freight, furniture, packages, boxes, crates or any other object or matter
of any description shall take place during such hours, in such manner and
in such elevators and passageways as the Landlord may determine from time
to time. The Landlord reserves the right to inspect all objects and matter
being brought into the Building or the Common Facilities and to exclude
from the Building and the Common Facilities all objects and matter that
violates any of these Building Rules and Regulations or that are
contraband. The Landlord may (but shall not be obligated to) require any
person leaving the Building or the Common Facilities with any package or
object or matter from the Leased Premises to establish his authority from
the Tenant to do so. The establishment and enforcement of such a
requirement shall not impose any responsibility on the Landlord for the
protection of the Tenant against the removal of property from the Leased
Premises. The Landlord shall not be liable to the Tenant for damages or
loss arising from the admission, exclusion or ejection of any person to or
from the Leased Premises or the Building or the Common Facilities under
this rule.
13. The Tenant shall not place any object in any portion of the Building that
is in excess of the safe carrying or designed load capacity of the
structure.
14. The Landlord shall have the right to prohibit any advertising or display
of any identifying sign by the Tenant which in the Landlord's judgment
tends to impair the reputation of the Building or its desirability; and,
on written notice from the Landlord, the Tenant shall refrain from or
discontinue such advertising or display of such identifying sign.
15. The Landlord reserves the right to exclude from the Building and the
Common Facilities during hours other than Regular Business Hours all
persons who do not present a pass thereto signed by both the Landlord and
the Tenant. All persons entering or leaving the Building or the Common
Facilities during hours other than Regular Business may be required to
sign a register. The Landlord will furnish passes to persons for whom the
Tenant requests same in writing. The establishment and enforcement of such
a requirement shall not impose any responsibility on the Landlord for the
protection of the Tenant against unauthorized entry of persons.
16. The Tenant, before closing and leaving the Leased Premises at any time
shall see that all lights and appliances generating heat (other than the
heating system) are turned off. All entrance doors to the Leased Premises
shall be left locked by the Tenant when the Leased Premises are not in
use. At any time when the Building or the Common Facilities are locked
during hours other than Regular Business Hours, the Building and the
Common Facilities locks shall not be defeated by any means, such as by
leaving a door ajar.
17. No person shall go upon the roof of the Building without the prior written
consent of the Landlord.
18. Any requirements of the Tenant may be attended to only upon application at
the office of the Building. The Landlord and its agents shall not perform
any work or do any work or do anything outside of the Landlord's
obligations under the Agreement
36
except upon special instructions from the Landlord on terms acceptable to
the Landlord and the Tenant.
19. Canvassing, soliciting and peddling in the Building and the Common
Facilities are prohibited and the Tenant shall cooperate to prevent same.
20. There shall not be used in any space, or in the public halls or other
Common Facilities of the Building, in connection with the moving or
delivery or receipt of safes, freight, furniture, packages, boxes, crates,
paper, office material, or any other matter or thing, any hand trucks or
dollies except those equipped with rubber tires, side guards and such
other safeguards as the Landlord shall require. No hand trucks shall be
used in passenger elevators, and no passenger elevators shall be used for
the moving, delivery or receipt of the aforementioned articles. In
connection with moving in or out any furniture, furnishings, equipment,
heavy articles and heavy packages, the Tenant shall take such precautions
as may be necessary to prevent excessive wear and tear in the Building's
Common Facilities and the Leased Premises including, without limiting the
generality of the foregoing, floor and wall treatments.
21. The Tenant shall not cause or permit any odors of cooking or other
processes or any unusual or objectionable odors to emanate from the Leased
Premises which might constitute a Nuisance. No cooking shall be done in
the Leased Premises other than as specifically permitted in the Agreement.
22. The Landlord reserves the right not to enforce any Building Rule or
Regulation against any tenants of Other Leased Premises. The Landlord
reserves the right to rescind, amend or waive any Building Rule and
Regulation when, in the Landlord's reasonable judgment, it appears
necessary or desirable for the reputation, safety, care or appearance of
the Building or the preservation of good order therein or the operation of
the Building or the comfort of tenants or others in the Building. No
rescission, amendment or waiver of any Building Rule and Regulation in
favor of one tenant shall operate as a rescission, amendment or waiver in
favor of any other tenant.
37
EXHIBIT E
DEFINITIONS AND INDEX OF DEFINITIONS
In accordance with section 1 of the Agreement of which this exhibit is a part,
throughout the Agreement the following terms and phrases shall have the meanings
set forth or referred to below:
1. "Additional Rent" means all amounts, other than Basic Rent and any
Security Deposit, required to be paid by the Tenant to the Landlord in
accordance with this Agreement.
2. "Agreement" means this Lease and Lease Agreement (including exhibits), as
it may have been amended.
3. "Annual Amortized Capital Expenditure" means the payment amount determined
as an annuity in arrears using the cost incurred by the Landlord for any
Capital Expenditure as the present value, the number of years of its
useful life (not exceeding 10 years) selected by the Landlord in
accordance with generally applied real estate accounting practice as the
number of periods and the Base Rate in effect when the respective
improvement is first placed into service plus two additional percentage
points as the annual rate of interest.
4. "Base Rate" means the prime commercial lending rate per year as announced
from time to time by The Chase Manhattan Bank (National Association) at
its principal office in New York City.
5. "Base Year" means the full calendar year 1996 with respect to Operational
Expenses and Taxes.
6. "Base Year Operational Expenses" means actual Operational Expenses
incurred by the Landlord during the Base Year.
7. "Base Year Taxes" means the product of the final assessed value, as the
same may subsequently be adjusted in any appeal of the tax assessor's
valuation, of the Property, the Building and any other improvements on the
Property in the Base Year and the Municipality's tax rate for the Base
Year.
8. "Basic Rent" is defined in subsection 3.2 of this Agreement.
9. "Building" means the office building erected on the Property which is
commonly known as 214 Carnegie Center, Princeton, New Jersey 08540, as it
may, in the Landlord's sole discretion, be increased, decreased, modified,
altered or otherwise changed from time to time before, during or after the
Term. As the Building is presently constructed it consists of 149,043
gross rentable square feet of floor space.
10. "Capital Expenditure" is defined in subsection 10.3 of this Agreement.
11. "Commencement Date" is defined in section 4 of this Agreement.
12. "Common Facilities" means the areas, facilities and improvements provided
by the Landlord in the Building (except the Leased Premises and the Other
Leased Premises) and on or about the Property, including, without limiting
the generality of the foregoing, the Parking Facilities and access roads
thereto, for non-exclusive use by the Tenant in accordance with subsection
2.2 of this Agreement, as they may, in the Landlord's sole discretion, be
increased, decreased, modified, altered or otherwise changed from time to
time before, during or after the Term.
13. "Common Walls" means those walls which separate the Leased Premises from
Other Leased Premises.
14. "Electric Charges" means all the supplying utility's charges for, or in
connection with, furnishing electricity including charges determined by
actual usage, any seasonal adjustments, demand charges, energy charges,
energy adjustment charges and any other charges, howsoever denominated, of
the supplying utility, including sales and excise taxes and the like.
38
15. "Event of Default" is defined in section 22 of this Agreement.
16. "Expiring Term" means, when used in the context of any Option to Renew,
the Term as it is then scheduled to expire (immediately prior to exercise
of the next available Option to Renew).
17. The Tenant's "Guests" shall mean the Tenant's licensees, invitees and all
others in, on or about the Leased Premises, the Building, the Common
Facilities or the Property, either at the Tenant's express or implied
request or invitation or for the purpose of soliciting or visiting the
Tenant.
18. A "History of Recurring Events of Default" means the occurrence of three
or more Events of Default (whether or not cured by the Tenant) in any
period of 12 months.
19. "Holdover Damages" is defined in subsection 23.4 of this Agreement.
20. The "Index" means the "all items" index figure for the New York
Northeastern New Jersey average of the Consumer Price Index for all urban
wage earners and clerical workers which uses a base period of 1982-84=100,
published by the United States Department of Labor, so long as it
continues to be published. If the Index is not published for a period of
three consecutive months, or if its base period is changed, the term
"Index" shall mean that index, as nearly equivalent in purpose, function
and coverage as practicable to the original Index, which the Landlord
shall have designated by notice to the Tenant.
21. "Initial Term" means the period so designated in subsection 4.1 of this
Agreement.
22. "Initial Year" means the first 12 full calendar months of the Initial
Term.
23. "Landlord" means the person so designated at the beginning of this
Agreement and those successors to the Landlord's interest in the Property
and/or the Landlord's rights and obligations under this Agreement
contemplated by section 26 of this Agreement.
24. "Leased Premises" means that portion of the interior of the Building (as
viewed from the interior of the Leased Premises) bounded by the interior
sides of the unfinished floor and the finished ceiling on the first floor
(as the floors have been designated by the Landlord) of the Building, the
centers of all Common Walls and the exterior sides of all walls other than
Common Walls, the outline of which floor space is designated on the
diagram set forth in Exhibit A attached hereto, which portion contains
4,807 square feet of usable floor space and 5,720 square feet of gross
rentable floor space; and references within this Agreement to the gross
rentable floor space and the usable floor space, respectively, of the
Leased Premises shall mean the respective quantities herein specified.
25. "Legal Holidays" means New Year's Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
26. "Market Rental Rate" means, at the time of reference, the gross rentable
floor space of the Leased Premises multiplied by the greater of: (a) that
annual rate of Basic Rent per square foot of gross rentable floor space
which is then being quoted by the Landlord for comparable Other Leased
Premises (or would then be quoted if comparable Other Leased Premises were
then available) or (b) that annual rate of Basic Rent per square foot of
gross rentable floor space in effect during the Expiring Term.
27. "Municipality" means the Township of West Windsor in Mercer County, New
Jersey, or any successor municipality with jurisdiction over the Property.
28. "No Pass Through Period" means, in the context of Operational Expenses and
Taxes, the period beginning on the Commencement Date and ending on
December 31, 1996.
29. "Nuisance" means any condition or occurrence which unreasonably or
materially interferes with the authorized use and enjoyment of the Other
Leased Premises and the Common Facilities by any tenant of Other Leased
Premises or by any person authorized to use any Other Leased Premises or
Common Facilities or with the
39
authorized use of any other areas, buildings or other improvements in the
Carnegie Center Complex.
30. "Operational Expenses" is defined in subsection 10.2 of this Agreement.
31. "Option to Renew" is defined in subsection 6.1 of this Agreement.
32. "Other Leased Premises" means all premises within the Building, with the
exception of the Leased Premises, that are, or are available to be, leased
to tenants or prospective tenants, respectively.
33. "Parking Facilities" means the parking area adjacent to the Building,
containing the approximate number of lined parking spaces set forth in the
Work Letter, which parking area is provided as Common Facilities.
34. "Person" includes an individual, a corporation, a partnership, a trust, an
estate, an unincorporated group of persons and any group of persons.
35. "Property" means the parcel of land, as it may, in the Landlord's sole
discretion, be increased, decreased, modified, altered or otherwise
changed from time to time before, during or after the Term, on which the
Building is (or is about to be) erected. As the Property is presently
constituted, it is more particularly described in Exhibit B attached
hereto.
36. "Regular Business Hours" means 8:00 A.M. to 6:00 P.M., Monday through
Friday, except on Legal Holidays.
37. "Re-Leasing Damages" is defined in subsection 23.3.
38. "Renewal Term" means, at the time of reference, any portion of the Term,
other than the Initial Term, as to which the Tenant has properly exercised
an Option to Renew which Option to Renew has not been rescinded in
accordance with subsection 6.4.1 of this Agreement.
39. "Rent" means Basic Rent and Additional Rent.
40. "Security Deposit" is designated in section 29 of this Agreement.
41. "Target Date" means, upon execution and delivery of this Agreement, the
then estimated Commencement Date which is hereby established to be
February 1, 1996.
42. "Taxes" means, in any calendar year, the aggregate amount of real property
taxes, assessments and sewer rents, rates and charges, state and local
taxes, transit taxes and every other governmental charge, whether general
or special, ordinary or extraordinary (except corporate franchise taxes
and taxes imposed on, or computed as a function of, net income or net
profits from all sources and except taxes charged, assessed or levied
exclusively on the Leased Premises or arising exclusively from the
Tenant's occupancy of the Leased Premises) charged, assessed or levied by
any taxing authority with respect to the Property, the Building, the
Common Facilities and any other improvements on the Property and an
allocable portion of Taxes with respect to other portions of the Carnegie
Center Complex, less any refunds or rebates (net of expenses incurred in
obtaining any such refunds or rebates) of Taxes actually received by the
Landlord during such calendar year with respect to any period during the
Term for the benefit of the Tenant, tenants of Other Leased Premises and
the Landlord. If during the Term there shall be a change in the means or
methods of taxing real property generally in effect at the beginning of
the Term and another type of tax or method of taxation should be
substituted in whole or in part for, or in lieu of, Taxes, the amounts
calculated under such other types of tax or by such other methods of
taxation shall also be deemed to be Taxes. Until such time as the actual
amount of Taxes for any calendar year becomes known, the amount thereof
shall be the Landlord's estimate of Taxes for that calendar year.
43. "Tenant" means the person so designated at the beginning of this
Agreement.
44. "Tenant Electric Charges" means (a) during Regular Business Hours,
Electric Charges
40
attributable to the Tenant's use of electricity in the Leased Premises for
purposes other than heating, ventilation and air conditioning provided to
the Leased Premises by the Landlord in accordance with subsection 8.2.4 of
this Agreement and (b) during other than Regular Business Hours, a charge
at the rate of $75.00 per hour or partial hour of use plus Electric
Charges attributable to the Tenant's use of electricity in the Leased
Premises for all purposes including, without limiting the generality of
the foregoing, heating, ventilation and air conditioning.
45. "Tenant's Share" of any amount means 3.838%.
46. "Term" means the Initial Term plus, at the time of reference, any Renewal
Term.
47. "Termination Damages" is defined in subsection 23.2 of this Agreement.
48. "Utilities Expenses" means Electric Charges (other than Tenant Electric
Charges) and all charges for any other fuel that may be used in providing
electricity and services powered by electricity that the Landlord provides
in accordance with section 8 of this Agreement to the Building, the Leased
Premises, Other Leased Premises, the Common Facilities and the Property,
including sales and excise taxes and the like, but excluding charges for
electricity which is recovered by Landlord as tenant electric charges
pursuant to leases for Other Leased Premises.
41
EXHIBIT F
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
FORM OF ESTOPPEL CERTIFICATE
STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA
440 Lincoln Street
Worcester, MA 01605
Gentlemen:
This instrument is being furnished to State Mutual Life Assurance Company of
America ("Lender") by _________ _____ ("Tenant"), which is the tenant under a
lease (the "Lease") dated ____________ from CARNEGIE 214 ASSOCIATES LIMITED
PARTNERSHIP ("Landlord"), pertaining to and covering a portion, as such portion
is specifically described in the Lease (the "Demised Premises"), of that real
estate commonly designated as 214 Carnegie Center, Princeton, Mercer County, New
Jersey (the "Property" or "Building"), such real estate being more specifically
described in Exhibit "A" attached hereto.
As an inducement to Lender to make a loan (the "Loan") as permanent financing
for the Property, with the intention of having Lender rely thereon, and for
other good and valuable consideration, Tenant hereby warrants and represents to
Lender and agrees with Lender as follows:
(a) That the Lease has not been amended or modified, except as follows:
____________________ and is in full force and effect as originally
executed or as so amended, whichever is appropriate, and that neither
Landlord nor the Tenant is in default in any respect under any terms of
the Lease;
(b) The commencement date of the term of the Lease was _______________, and
the term of the Lease will expire on ______________________, unless
extended or sooner terminated as provided in the Lease;
(c) That Tenant is in possession of the Demised Premises and that Landlord has
complied fully and completely with all of Landlord's covenants, warranties
and other undertakings and obligations under the Lease to this date,
including, without limitation, those with respect to (i) the construction,
character, condition and location of the Demised Premises; (ii)
improvements, tenant's spaces and the common areas situated on the
Property; (iii) other tenancies, occupancies, stores or businesses on the
Property; (iv) any property adjacent to the Property; (v) parking and
access; and (vi) the provision of maintenance and services under the
Lease, with the result that Tenant is fully obligated to pay, and is
paying, the rent and other charges due thereunder, and is fully obligated
to perform, and is performing, all of the other obligations of Tenant
under the Lease without current claim or counterclaim, offset, defense or
otherwise;
(d) That Tenant has not and will not make any prepayment of rental under the
Lease for more than one (1) month in advance of the due date thereof, and
that there are currently no offsets, defenses, counterclaims or credits
against the rentals due thereunder;
(e) That Tenant has not received notice and has no knowledge of any
assignment, hypothecation or pledge of the rents or of Landlord's interest
under the Lease other than ___________________.
(f) That Tenant understands and acknowledges that (i) Landlord shall execute a
conditional assignment of the Lease in favor of Lender; (ii)
notwithstanding said assignment, all rental payments under the Lease shall
be paid as heretofore stated and in accordance with the terms of the Lease
until and unless Tenant is notified to the contrary in writing by Lender;
(iii) under the conditions of said assignment and after the date thereof,
it is expressly agreed that, unless the written consent of Lender be first
obtained, no rents are to be collected more than one month in advance of
the due date thereof, and no alterations, modification, amendments,
terminations, waivers, consents, approvals or other actions whatsoever are
to be
42
made or become effective with respect to the Lease except as permitted
under the terms of said conditional assignment; and (iv) the interest of
the Landlord in the Lease shall be assigned to Lender solely as additional
security for said Loan and Lender assumes no duty, liability or obligation
under the Lease, either by virtue of said assignment, the exercise of
remedies thereunder, or by any subsequent receipt or collection of rents
thereunder or any other sums due under the terms of the Lease;
(g) That Lender shall not be (i) liable for any action or omission of any
person or party who may be Landlord under the Lease prior to your
acquisition of title to the Property by foreclosure or otherwise; (ii)
subject to any offsets or defenses which Tenant may have against any such
prior Landlord; or (iii) liable for the return of any security deposit
unless Lender actually receives such deposit;
(h) That Tenant has not subordinated by separate written instrument its
interest under the Lease to any mortgage, deed of trust or other lien on
title to the Property.
(i) That Tenant has paid in full for all labor and materials and other
services in connection with Tenant's construction work and Tenant's other
work in the Demised Premises, so that no lien by reason thereof may attach
against the Landlord's interest in the Demised Premises or the Property of
which they are a part and that Tenant, to the extent required by the terms
of the Lease, has been fully reimbursed by Landlord for all improvements
made by Tenant to the Demised Premises.
(j) In consideration of the premises and other good and valuable consideration
to the Tenant by Lender, the receipt and sufficiency of which are hereby
acknowledged, Tenant further agrees with Lender as follows: In the event
of any default by Landlord under the Lease, Tenant shall promptly send to
Lender at the address hereinabove set forth a copy of any notice of such
default sent to Landlord, in the same manner as such notice to Landlord is
sent, and in such event and prior to the exercise by Tenant of any of its
rights or remedies under the Lease or otherwise with respect to such
default, Lender shall be permitted to cure such default within the period
of time during which Landlord would be permitted to cure such default as
set forth in the Lease.
(k) Tenant agrees that, with respect to any successor to Landlord's interest
in the Property, to look solely to such successor's interest in the
Property for recovery of any judgment from such successor to Landlord; it
being specifically agreed that no successor to Landlord's interest in the
Property shall ever be personally liable for any such judgment.
(l) This Certificate shall inure to the benefit of Lender, its successors and
assigns, and shall be binding upon Tenant and Tenant's heirs, legal
representatives, successors and assigns. This Certificate shall not be
deemed to alter or modify any of the terms, conditions, covenants or
obligations of the Lease, except to the extent, if any specifically set
forth herein.
EXECUTED this ________ day of _______________, 19___.
ATTEST:
______________________ BY:____________________
43
EXHIBIT 10.4
SUBLEASE
TABLE OF CONTENTS
Section Caption
------- -------
1 Demise
2 Rent
3 Extension
4 Subject to Lease
5 Parking
6 Preparation of the Leased Premises
7 Right to Lease Additional Space
Leased by Sublandlord
8 Assignment and Subletting
9 Obligations of Sublandlord
10 Utilities and Services
11 Insurance
12 Damage and Destruction
13 Broker
14 Signs
15 Quiet Possession
16 Sublandlord's Representations
17 Notice
18 Table of Contents; Captions
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LIST OF EXHIBITS
Exhibit I Copy of Lease
Exhibit II Description of the Subleased
Premises
Exhibit III Consent of Landlord
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THIS SUBLEASE is made as of the 22nd day of December, 1995, by and between
MATHTECH, INC., a Delaware corporation, with an office at 202 Carnegie Center,
Suite 111, Princeton, NJ 08540 (hereinafter called "Sublandlord") and NELSON
COMMUNICATIONS, INC. a Delaware corporation, with an office at 41 Madison
Avenue, 27th Floor, New York, NY 10010 (hereinafter called "Subtenant").
R E C I T A L S
WHEREAS, pursuant to Landlord's form of Lease by and between PRINCETON 202
ASSOCIATES LIMITED PARTNERSHIP (hereinafter called the "Landlord") and
Sublandlord dated April 15, 1994, a copy of which is attached hereto as Exhibit
I (as the same may be amended from time to time, hereinafter called the
"Lease"), Sublandlord is the tenant of certain space consisting of approximately
11,989 square feet of rentable floor space on the first floor of the building
known as 202 Carnegie Center, known as Suite 111, located in Princeton, New
Jersey 08540 (hereinafter called the "Building") as shown on Exhibit A attached
to the Lease (hereinafter called the "Premises"); and
WHEREAS, Subtenant desires to sublease from Sublandlord a portion of the
Premises consisting of approximately 4,667 square feet of rentable floor space
on the first floor of the Building as shown on Exhibit II attached hereto
(hereinafter called the "Subleased Premises"); and
WHEREAS, the parties desire to enter into this Sublease defining their
respective rights, duties and liabilities relating to the Subleased Premises.
NOW, THEREFORE, WITNESSETH in consideration of the mutual promises and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Sublandlord and
Subtenant hereby agree as follows:
SECTION 1
DEMISE
Sublandlord, for and in consideration of the payment of the rent and the
performance of the covenants hereinafter mentioned, does hereby demise, lease
and assign unto Subtenant, the Subleased Premises, for a term to begin
immediately upon receipt by Subtenant of written notice from Sublandlord that a
"Certificate of Approval" has been issued for the "Sublandlord Work", (as each
of these terms are defined in Section 6 of this Sublease) but in no event prior
to January 1, 1996 (hereinafter called the "Commencement Date"), and to end on
June 30, 2000 (hereinafter called the "Term"). Subtenant shall have the right to
have an architect or leasing consultant confirm the measurement of the rentable
square footage prior to the Commencement Date at Subtenant's sole cost and
expense.
SECTION 2
RENT
The basic rent during the Term hereunder shall be in the amount of $18.00
per year per rentable square feet for the period beginning on the Commencement
Date and ending on June 30, 1997. Thereafter, for the period from July 1, 1997
to June 30, 2000, the basic rent shall be in the amount of $18.50 per year per
rentable square foot. The basic rent shall be payable in advance on the first
day of each calendar month during the Term at the offices of Sublandlord in
installments of seven thousand dollars and fifty cents ($7,000.50) each for the
period beginning on the Commencement Date and ending on June 30, 1997, and in
installments of seven thousand one hundred ninety four dollars and ninety six
cents ($7,194.96) each for the period beginning on July 1, 1997 and ending on
June 30, 2000, except that a proportionately lesser sum may be paid for the
first and last months of the Term of this Sublease if the Term commences on a
date other than the first day of the month as and in accordance with the
provisions of this Sublease hereinabove set forth. The basic rent shall be
payable at the office of the Sublandlord at the address set forth above, or as
may otherwise be directed by notice from Sublandlord to Subtenant. Sublandlord
acknowledges receipt from Subtenant of the sum of seven thousand dollars and
fifty cents ($7,000.50) by check, subject to collection, for basic rent for the
first month of the term.
In addition to the amount set forth above as the basic rent, Subtenant
shall make monthly payments for Subtenant's electric charges and its share of
Operational Expenses, Capital Expenditures and Taxes as set forth in Paragraphs
9 and 10 of the Lease. Payments for such expenses shall be computed and
allocated in accordance with Paragraph 10 of the Lease, and shall be made by
Subtenant together with the basic rent on or before the first day of each
calendar month during the Term. Subtenant shall receive an invoice from
Sublandlord at least five (5) days prior to the date on which such rent is
payable, which notice shall include a copy of the notice Sublandlord received
from the Landlord under the Lease. It is understood that the No Pass Through
Period has expired and that Subtenant shall assume all obligations of the
Sublandlord with respect to the Subleased Premises, adjusted as set forth in
Section 4 of this Sublease. Throughout the year, Sublandlord shall provide to
Subtenant any notices received from Landlord with respect to payments or
adjustments set forth in Paragraphs 9 and 10 of the Lease.
SECTION 3
EXTENSION
Upon the expiration of the Term, the parties may extend the term of this
Sublease provided that the Subtenant has not been in default hereunder. In the
event that the parties agree to any Extension Term, all provisions of this
Sublease shall apply during each Extension Term, except the amount of rent,
which shall be negotiated and documented in writing.
SECTION 4
SUBJECT TO LEASE
This Sublease is subject and subordinate to the Lease. The Rules and
Regulations attached to the Lease as Exhibit D and the terms set forth in the
Sections of the Lease, which is attached in its entirety as Exhibit I (except as
may be inconsistent with other
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provisions of this Sublease), shall be deemed a part of this Sublease, with
references in the Lease to "Landlord" deemed made to Sublandlord, references to
"Tenant" deemed made to Subtenant, and references to the "Premises" deemed made
to the Subleased Premises.
Notwithstanding anything contained herein to the contrary, in the event
that a condition exists in the Subleased Premises that Landlord is obligated to
repair under the Lease, Subtenant shall so advise Sublandlord, and Sublandlord,
in turn, shall promptly advise Landlord thereof. Sublandlord shall have no
liability to Subtenant for Landlord's failure to make any such repair.
When any fraction, factor or formula is expressed in the Lease, it will be
adjusted by substituting the number of square feet of the Subleased Premises for
the number of square feet of the Premises leased in the Lease.
Except where the context clearly indicates that any additional expense
should be borne totally or partially by Subtenant as a result of its
proportional subtenancy or as a result of any act or failure to act by
Subtenant, Subtenant shall not be responsible for any additional costs under the
Sublease or the Lease.
SECTION 5
PARKING
Subtenant shall be entitled to access Subtenant's proportionate share of
the unallocated 400 lined parking spaces adjacent to the Building, as defined in
Exhibit C and E attached thereto to the Lease shown as Exhibit I.
SECTION 6
PREPARATION OF THE LEASED PREMISES
Sublandlord will deliver the Subleased premises in AS-IS condition, except
that Sublandlord shall remove all of its trade fixtures and equipment prior to
the Commencement Date of Subtenants's possession and repair any material damage
caused by said removal. Subtenant agrees to accept the Subleased Premises
subject to the normal and reasonable wear and tear associated with removing the
aforesaid trade fixtures and equipment. With respect to the phone room,
Sublandlord will install at Sublandlord's sole cost and expense a new hallway
access door to provide direct access thereto from the hallway. The existing door
shall be locked from the interior of the phone room and the phone room shall not
be part of the Subleased Premises unless separate written arrangements are made
therefor. Sublandlord shall install and paint a demising wall between the
Subleased Premises and the remainder of the Premises and shall seek a
"Certificate of Approval" for that work. (The term "Certificate of Approval" as
used herein shall refer to the West Windsor Township's approval of the
construction of the demising wall). The parties agree that upon receipt of the
"Certificate of Approval", the Subleased Premises and the Premises, shall be
ready for occupancy. Subtenant agrees not to commence any construction work in
the Subleased Premises until the "Certificate of Approval" has been obtained.
For purposes of defining the Commencement Date of the Term, "Sublandlord Work"
shall be defined as the installation of the aforesaid demising wall, a second,
back entrance door, and any other required modifications in order for the
Subleased Premises to comply with applicable construction codes, and the receipt
of a "Certificate of Approval" with respect only to that work. Sublandlord shall
properly commence Sublandlord Work after the execution of the Sublease; shall
diligently pursue completion of the Sublandlord Work; and shall regularly advise
Subtenant of the status of that work and of the expected date of completion.
SECTION 7
RIGHT TO LEASE ADDITIONAL PREMISES LEASED BY SUBLANDLORD
Sublandlord acknowledges that Subtenant may desire to lease additional
portions of the Premises, and Sublandlord hereby grants Subtenant a right of
first notice with respect to any portion of the Premises which Sublandlord may
seek to sublease during the Term of this Sublease. Sublandlord agrees that prior
to entering into any other subleases for any portion of the Premises,
Sublandlord shall first notify Subtenant in writing of its intention to do so
and Subtenant shall have ten (10) days within which to indicate in writing its
intention to rent more space. Subtenant acknowledges that Sublandlord now
subleases two (2) offices to others and that the rights granted by this Section
7 shall not extend to any extension or renewal of those subtenancies. The terms
of any such
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additional lease between Sublandlord and Subtenant shall be negotiated at the
time of the indication by Subtenant of its interest in renting such additional
portions on the Premises.
SECTION 8
ASSIGNMENT AND SUBLETTING
Subtenant shall not further sublet all or any part of the Subleased
Premises nor assign the Sublease or any interest in it without the prior written
consent of the Sublandlord. Notwithstanding the foregoing or any paragraph in
the Lease, Subtenant may, without Sublandlord's or Landlord's consent, assign or
convey this Sublease (or further sublet) to any corporation into or with which
Subtenant may be merged or consolidated or which acquires all or substantially
all of Subtenant's assets or to any corporation which is a parent, subsidiary or
affiliate or successor in interest of Subtenant. Said occupancy of the Subleased
Premises by any subsidiary or affiliated entity of Subtenant shall not
constitute an assignment or subletting, provided that Subtenant provides prior
written notice to Sublandlord of Subtenant's intent to alter its occupancy and
that the proposed use of the Subleased Premises is not a prohibited use and nor
one which violates any provisions of the Lease or the Rules and Regulations
attached thereto. It is further expressly understood and agreed that throughout
the Term, regardless of which subsidiary or affiliate of Subtenant occupies the
Subleased Premises, Subtenant will continue to be primarily liable to perform
all of the obligations imposed by this Sublease.
SECTION 9
OBLIGATIONS OF SUBLANDLORD
Sublandlord agrees to maintain the Lease in full force and effect during
the term of the Sublease and not to make any changes to the Lease which
materially affect the Subleased Premises without Subtenant's consent.
Sublandlord further agrees to comply with the terms of the Lease (except to the
extent inapplicable because of Subtenant's occupancy of the Subleased Premises
or as expressly limited or made inapplicable by this Sublease). Sublandlord
agrees to respond to all reasonable written requests by Subtenant in the event
that Landlord shall fail to fulfill its obligations under the Lease, provided
that such requests by Subtenant are reasonably within the ability of Sublandlord
to fulfill. In addition, Sublandlord shall promptly forward to Subtenant copies
of all notices involving the Subleased Premises or the obligations of Subtenant,
received from Landlord. In such event Sublandlord shall, on behalf of Subtenant,
but at Subtenant's sole cost and expense, undertake all actions available to
Sublandlord, as the tenant under the Lease, to have Landlord comply with such
obligations.
SECTION 10
UTILITIES AND SERVICES
Sublandlord agrees as a part of the above named consideration to cause the
Subleased Premises to be kept properly heated and supplied with electric power,
electric light and water. All services for and supplying of utilities to the
Subleased Premises are the obligations of the Landlord under the Lease, and the
covenants herein by Sublandlord to furnish any services for or to supply any
utilities to the Subleased Premises shall be subject to the condition that
Sublandlord shall not be liable for any failure of the Landlord to furnish any
services or to supply any utilities; provided the same is not caused by the
negligence or willful act of Sublandlord or its contractors or subcontractors or
its or their agents or employees nor shall any such failure constitute an
abrogation of any of the other terms or conditions of this Sublease.
SECTION 11
INSURANCE
Subtenant shall purchase prior to the Commencement Date of Subtenant's
possession and keep in full force and effect during the Term of this Sublease
and for any other period during which the Subtenant may have possession of the
Subleased Premises, insurance coverage from financially sound reputable
insurers, licensed by the State of New Jersey, for the benefit of the
Sublandlord and as further required in Section 14 of the Lease.
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SECTION 12
DAMAGE AND DESTRUCTION
It is understood and agreed that in the event the Subleased Premises is
damaged by fire, storm, the elements, acts of god, unavoidable accident and/or
the public enemy, but not to such an extent as to render the same untenantable,
then it is the obligation of the Landlord under the Lease to restore, or cause
to be restored, the Subleased Premises as speedily as possible, and there shall
be no abatement of Rent, unless such an abatement is provided for under the
terms of the Lease. If the Subleased Premises is injured or damaged by any of
the aforesaid causes to such an extent as to render the same wholly or partially
untenantable, then upon written notice from either party to the other this
Sublease shall thereupon become null and void, and all liability of Subtenant
shall terminate upon payment of all Rent due and payable to the date of such
happening.
If the Subleased Premises is to be repaired under this Section, Subtenant
shall, at Subtenant's sole cost and expense, be responsible for repairing and
restoring all Subtenant's improvements and of replacing any equipment and trade
fixtures of Subtenant located in the Subleased Premises.
SECTION 13
BROKER
Sublandlord and Subtenant agree that The Garibaldi Group procured this
Sublease. Sublandlord and Subtenant represent that no broker other than the
Garibaldi Group is entitled to a commission. Subtenant and Sublandlord will
indemnify and hold each other harmless against any claim or liability which
either is legally obligated to discharge to any other broker and which is
imposed wholly or partly because of the indemnifying party's relations or
contact with such other broker or representative, together with all reasonable
legal expenses and costs incurred in connection with such claim or liability.
Sublandlord will pay a broker's commission to the Garibaldi Group pursuant to
the terms of a separate agreement.
SECTION 14
SIGNS
Sublandlord shall remove its signage from the Subleased Premises on or
before the Commencement Date and Subtenant may, at its expense, and with
Sublandlord's consent, which consent shall not be unreasonably withheld, place
signage in the Subleased Premises, provided that Subtenant's signage is in
compliance with the terms and conditions set forth in Paragraph 18 of the Lease
and has been approved in writing by the Landlord and does not diminish the size
of signage which Sublandlord may install. Sublandlord shall request the Landlord
under the Lease to add Subtenant's name to the building directory in the lobby
of the building.
SECTION 15
QUIET POSSESSION
Sublandlord covenants that upon Subtenant's compliance with the terms and
conditions of this Sublease, Subtenant shall and may peacefully and quietly hold
and enjoy the Subleased Premises for the term provided herein.
SECTION 16
SUBLANDLORD'S REPRESENTATIONS
Sublandlord represents and warrants to Subtenant that Sublandlord has made
no prior assignment or sublet of its interest in the Lease or in the Premises.
Sublandlord represents that to the best of Sublandlord's knowledge, that
the Lease is in full force and effect and that there are no defaults on
Sublandlord's part under it as of the commencement of the term of this Sublease.
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SECTION 17
NOTICES
Except where otherwise required by statute and notices which pertain to
invoices for rents or any other payments or adjustments which shall be permitted
by facsimile, all notices given pursuant to the provisions of this Sublease
shall be in writing, addressed to the party to whom notice is given and sent
registered or certified mail, return receipt requested, in a postpaid envelope,
or hand delivered, as follows:
To Subtenant:
NELSON COMMUNICATIONS, INC.
Attn: Blanca Stephens
41 Madison Avenue, 27th Floor
New York, NY 10010
Telefax: (212) 213-4694
To Sublandlord:
MATHTECH, INC.
Attn: Deborah Daughtry
202 Carnegie Center, Suite 111
Princeton, NJ 08540
Telefax: (609) 520-3849
It is understood and agreed that unless specifically modified by this
Sublease, Sublandlord shall be entitled to the length of notice required to be
given Landlord under the Lease plus five (5) days and shall be entitled to give
Subtenant the amount of notice required to be given Tenant under the Lease less
three (3) days. All notices shall be deemed given upon receipt or rejection.
SECTION 18
TABLE OF CONTENTS; CAPTIONS
The Table of Contents and the captions appearing in this Sublease are
inserted only as a matter of convenience and do not define, limit, construe or
describe scope or intent of the Sections of this Sublease nor in any way affect
this Sublease.
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
properly executed as of the day and year first above written.
SUBLANDLORD:
ATTEST: MATHTECH, INC.
BY: /s/ Lorraine Weitz (SEAL)
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SUBTENANT:
ATTEST: NELSON COMMUNICATIONS, INC.
BY: /s/ Blanca Stephens (SEAL)
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STATE OF NEW JERSEY, COUNTY OF MERCER, to wit:
On this 22 day of December, 1995, before me, the subscriber, Lorraine
Weitz personally appeared ____________________, who, I am satisfied, is the
person who signed the within instrument as Vice President of MATHTECH, INC. the
corporation named therein, and he/she thereupon acknowledged that the said
instrument made by the corporation and sealed with its corporate seal, was
signed, sealed with the corporate seal and delivered by him/her as such officer
and is the voluntary act and deed of the corporation, made by virtue of
authority from its Board of Directors.
/s/ Traci L. Hirthler (SEAL)
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[STAMP OMITTED]
STATE OF NEW York, COUNTY OF NEW York, to wit:
On this 13th day of December, 1995, before me, the subscriber, Blanca
Stephens, personally appeared ____________________, who, I am satisfied, is the
person who signed the within instrument as Sr. V.P. of NELSON COMMUNICATIONS,
INC. the corporation named therein, and he/she thereupon acknowledged that the
said instrument made by the corporation and sealed with its corporate seal, was
signed, sealed with the corporate seal and delivered by him/her as such officer
and is the voluntary act and deed of the corporation, made by virtue of
authority from its Board of Directors.
/s/ Myra B. Cronin (SEAL)
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[STAMP OMITTED]
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EXHIBIT I
COPY OF LEASE
TO BE ATTACHED
-8-
LEASE AND LEASE AGREEMENT
Between
PRINCETON 202 ASSOCIATES LIMITED PARTNERSHIP
The Landlord
And
MATHTECH, INC.
The Tenant
For Leased Premises In
202 CARNEGIE CENTER
Princeton, New Jersey
APRIL 15, 1994
Prepared by:
Gary O. Turndorf
210 Carnegie Center
Suite 100
Princeton, NJ 08540
(xxx) xxx-xxxx
TABLE OF CONTENTS
ARTICLE Page
1. Definitions 1
2. Lease of the Leased Premises 1
3. Rent 1
4. Term 2
5. Preparation of the Leased Premises 3
6. Options 4
7. Use and Occupancy 5
8. Utilities, Services, Maintenance and Repairs 6
9. Allocation of the Expense of Utilities, Services,
Maintenance, Repairs and Taxes 7
10. Computation and Payment of Allocated Expenses of
Utilities, Services, Maintenance, Repairs, Taxes
and Capital Expenditures 8
11. Leasehold Improvements, Fixtures and Trade Fixtures 13
12. Alterations, Improvements and Other Modifications
by the Tenant 13
13. Landlord's Rights of Entry and Access 15
14. Liabilities and Insurance Obligations 16
15. Casualty Damage to Building or Leased Premises 18
16. Condemnation 19
17. Assignment or Subletting by Tenant 19
18. Signs, Displays and Advertising 21
19. Quiet Enjoyment 22
20. Relocation 22
21. Surrender 22
22. Events of Default 23
23. Rights and Remedies 24
24. Termination of the Term 26
25. Mortgage and Underlying Lease Priority 27
26. Transfer by Landlord 27
27. Indemnification 28
28. Parties' Liability 30
29. Security Deposit 31
30. Representations 31
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(i)
31. Reservation in Favor of Tenant 32
32. Tenant's Certificates and Mortgagee Notice Requirements 32
33. Waiver of Jury Trial and Arbitration 33
34. Severability 34
35. Notices 34
36. Captions 34
37. Counterparts 34
38. Applicable Law 34
39. Exclusive Benefit 34
40. Successors 34
41. Amendments 34
42. Waiver 35
43. Course of Performance 35
44. Landlord's Concessions 35
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TABLE OF EXHIBITS
Exhibit
Leased Premises Floor Space Diagram A
Property Description B
Work Letter C
Building Rules and Regulations D
Definitions and Index of Definitions E
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(ii)
LEASE AND LEASE AGREEMENT, dated as of April 15, 1994, between PRINCETON 202
ASSOCIATES LIMITED PARTNERSHIP, a New Jersey limited partnership, with offices
at Suite 100, 210 Carnegie Center, Princeton, New Jersey 08540 (the "Landlord"),
and MATHTECH, INC., a Delaware corporation, with its office at 210 Carnegie
Center, Suite 200, Princeton, NJ 08540 (the "Tenant").
Subject to all the terms and conditions set forth below, the Landlord and the
Tenant hereby agree as follows:
1. Definitions.
Certain terms and phrases used in this Agreement (generally those whose
first letters are capitalized) are defined in Exhibit E attached hereto
and, as used in this Agreement, they shall have the respective meanings
assigned or referred to in that exhibit.
2. Lease of the Leased Premises.
2.1. The Landlord shall, and hereby does, lease to the Tenant, and the Tenant
shall, and hereby does, accept and lease from the Landlord, the Leased
Premises during the Term. The Leased Premises consist of 11,989 square
feet of gross rentable floor space on the first floor of 202 Carnegie
Center, to be known as Suite 111, as more fully described in the
definition of Leased Premises set forth in Exhibit E attached hereto.
2.2. The Landlord shall, and hereby does, grant to the Tenant, and the Tenant
shall, and hereby does, accept from the Landlord, the non-exclusive right
to use the Common Facilities during the Term for itself, its employees,
other agents and Guests in common with the Landlord, any tenants of Other
Leased Premises, any of their respective employees, other agents and
guests and such other persons as the Landlord may, in the Landlord's sole
discretion, determine from time to time. Tenant shall have the right to
use such Common Facilities on the same terms and conditions afforded to
any tenant of Other Leased Premises. Tenant's employees shall also have
the right to use each facility in other buildings in the Carnegie Center
Complex for which any charge is passed through to Tenant pursuant to this
Agreement on the same terms and conditions afforded to the tenants in the
buildings in which said facilities are located. This includes, but is not
limited to, the health club facilities, conference/meeting rooms,
par-fitness course and cafeterias. Tenant's employees will have full
access to and use of the health club facilities, subject to rules and
regulations of uniform application, including a charge for the use of the
health club facilities. The Landlord only will agree to maintain health
club facilities, conference/meeting rooms, par-fitness course and
cafeterias as long as it is economically feasible to do so.
3. Rent.
3.1. The Tenant shall punctually pay the Rent for the Leased Premises for the
Term to the Landlord in the amounts and at the times set forth below,
without bill or other demand and without any offset, deduction or, except
as may be otherwise specifically set forth in this Agreement, abatement
whatsoever.
3.2. The Basic Rent for the Leased Premises during the Initial Term shall be at
the rate per year set forth below.
YEARS ANNUAL RATE MONTHLY RATE
1, 2 and 3 $257,763.60 $21,480.30
4, 5 and 6 $266,755.32 $22,229.61
7 through 10 $275,747.04 $22,978.92
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The annual rate of Basic Rent for the Leased Premises during any Renewal
Term shall be calculated as set forth in subsection 6.3 of this Agreement
for the respective Renewal Term.
3.3. The Tenant shall punctually pay the applicable Basic Rent in equal monthly
installments in advance on the first day of each month during the Term,
with the exception of Basic Rent for the first full calendar month of the
Initial Term and
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for any period of less than a full calendar month at the beginning of the
Term. The Tenant shall pay the Basic Rent for the first full calendar
month of the Initial Term upon execution and delivery of this Agreement.
The Tenant shall punctually pay the Basic Rent for a period of less than a
full calendar month at the beginning of the Term on the Commencement Date.
3.4. The Basic Rent and the Additional Rent for any period of less than a full
calendar month shall be prorated. In the event that any installment of
Basic Rent cannot be calculated by the time payment is due, such portion
as is then known or calculable shall be then due and payable; and the
balance shall be due upon the Landlord's giving notice to the Tenant of
the amount of the balance due.
3.5. The Additional Rent for the Leased Premises during the Term shall be
promptly paid by the Tenant in the respective amounts and at the
respective times set forth in this Agreement.
3.6. That portion of any amount of Rent or other amount due under this
Agreement which is not paid on the fifth day after it is first due shall
incur a late charge equal to the sum of: (i) five percent of that portion
of any amount of Rent or other amount due under this Agreement which is
not paid on the day it is first due and (ii) interest on that portion of
any amount of Rent or other amount due under this Agreement at the Base
Rate(s) in effect from time to time plus two additional percentage points
from the day such portion is first due through the day of receipt thereof
by the Landlord. Any such late charge due from the Tenant shall be due
immediately; provided that if any Rent is not paid within five days of the
date when it is first due more than twice in any twelve month period then,
thereafter, the late charge imposed by the provisions of subparagraph (i)
in the preceding sentence shall apply to any amount of Rent not paid on
the day it is first due.
4. Term.
4.1. The Initial Term shall commence on the Commencement Date and shall
continue for ten years from the beginning of the Initial Year, unless
sooner terminated in accordance with section 24 of this Agreement. The
Term shall commence on the Commencement Date and shall continue until the
later of the conclusion of the Initial Term or the conclusion of any
Renewal Term, unless sooner terminated in accordance with section 24 of
this Agreement.
4.2. The Landlord shall give the Tenant at least ten days notice of the
anticipated Commencement Date. Unless one or more of the conditions
contemplated by subsection 4.3 of this Agreement occurs, the Commencement
Date shall be the date that the last of each of the following conditions
set forth in this subsection 4.2 of the Agreement that is specifically
applicable shall have occurred:
4.2.1. if the Leased Premises is being prepared exclusively by contractors
selected and retained by the Landlord, the date the Leased Premises
can first be legally occupied for its intended use which shall be
evidenced by the customary official action of the municipality;
4.2.2. preparation of the Leased Premises in accordance with the Tenant
Plan is substantially completed (except for (i) punchlist items
which are minor finishing details the absence of which will not
materially interfere with Tenant's use and occupancy and (ii) any
preparation work that is not being performed exclusively by
contractors selected and retained by the Landlord); and
4.2.3. the Landlord can deliver actual and exclusive possession of the
Leased Premises, free of rubbish and debris, to the Tenant (except
for any contractors not selected and retained by the Landlord and
their rubbish and debris).
4.2.4. Landlord will complete all items on the punchlist within thirty days
of the Commencement Date.
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4.3. In the event one or more of the conditions contemplated by this subsection
4.3 of the Agreement occurs, notwithstanding anything to the contrary set
forth in subsection 4.2 of this Agreement, the Commencement Date shall be
the earliest applicable date specified below:
4.3.1. the earliest date the Tenant takes any of the following actions
shall be the Commencement Date in the event the Tenant takes
possession of, occupies or moves any furniture, furnishings,
equipment (with the exception of equipment required for
telecommunications hook-ups), supplies or other possessions into,
the Leased Premises or any portion thereof earlier than the date
otherwise determined in accordance with subsections 4.2 and 4.5 of
this Agreement; or
4.3.2. the date that the last of the conditions set forth in subsection 4.2
of this Agreement that is specifically applicable shall have
occurred if (i) the Tenant shall have requested the Landlord or any
contractors selected and retained by the Landlord to complete their
work before the Target Date and (ii) they shall have done so.
4.4. Once it is ascertained in accordance with subsections 4.2 and 4.3 of this
Agreement, the Landlord shall give prompt notice of the Commencement Date
to the Tenant; and if the Tenant does not object thereto by notice given
to the Landlord within 10 days of the Landlord's notice, the date set
forth in the Landlord's notice shall thereafter be conclusively presumed
to be the Commencement Date.
4.5. Notwithstanding the foregoing provisions, the Tenant shall be afforded
access to the Leased Premises during construction for the purposes of
installing any of its telecommunications and other special electronics and
to prepare the Leased Premises for the commencement of business. The entry
shall be coordinated with the Landlord's representatives so that it does
not interfere with the performance of the Landlord's work. All such
preparatory work shall be done in conformance with the requirements of
section 12 of this Agreement.
4.6. Notwithstanding the foregoing provisions, the Commencement Date shall not
occur between July 16, 1994 and October 31, 1994 unless delays in the
Commencement Date are caused by the acts of the Tenant or its employees,
agents or contractors. The Commencement Date may be occur one day later
than July 15th for each day of delay caused by the Tenant or its
employees, agents or contractors.
5. Preparation of the Leased Premises.
5.1. The Tenant has previously provided to the Landlord each of the following:
5.1.1. a conceptual drawing, as detailed as practicable, of the
proposed Tenant Plan; and
5.1.2. an itemized list, as detailed as practicable, of the types and
quantities of materials, supplies, equipment and work to be
incorporated into the Tenant Plan by the Tenant.
5.2. The Landlord has determined the Landlord's contractors' estimated price to
build out the Leased Premises.
5.3. The Tenant shall deliver the complete Tenant Plan to the Landlord not
later than the Tenant Plan Due Date. The Tenant Plan shall be the
Landlord's expense. Future bills from the Tenant's Architect will be paid
by Landlord within 30 days of presentation.
5.4. Landlord will bear the costs associated with the buildout to a level
substantially equal to the buildout provided for Tenant in 210 Carnegie
Center. Costs for upgrades above that level will be borne by Tenant.
Tenant will cooperate with Landlord to utilize the existing buildout to
the extent practical and if consistent with the design and program needs
of Tenant to minimize the cost of retrofit. This includes consideration of
the use of the existing clerestory glass, use of existing cabinets in the
kitchen and use of the copy room shelving in Tenant's current space in
Building 210.
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Design, approval and other target dates will be mutually agreed. The
present objective is to have building permit in hand by April 30, 1994.
Landlord will submit to Tenant's Architect a schematic plan of all
proposed mechanical system and duct work modifications for their review
prior to any fabrication or modification of the system. Review and
approval will not be unreasonably withheld or delayed. Said schematic will
show all VAV boxes and thermostat locations. Landlord will also install an
energy management system in the Building no later than the Commencement
Date which shall be equal to or better than the system in the 210
Building, including dial-up service on the day service is desired.
Landlord will bear all expenses associated with the move including the
voice and data lines and the security system, but not including the
expenses of printing new stationery, brochures and the like. Landlord will
reimburse Tenant within five days of submission of bills payable by the
Tenant for such expenses. Tenant will supply reasonable support for such
bills upon request. If there are upgrades, Tenant will pay for the
upgrades. Landlord will use movers and installers of Tenant's choice, or
as dictated by equipment manufacturers, as long as they are qualified and
do not delay or interfere with the work to prepare the premises and are at
competitive prices. To the extent possible, Tenant will get competitive
bids for said moving contracts.
The Tenant shall pay the Landlord for upgrades in proportion to the
progress of such work, as and when billed by the Landlord at convenient
intervals, with payment of any remaining final balance due from the Tenant
prior to the Commencement Date.
Tenant shall have 24 hour, 7 day a week access. Access will be afforded
via a card-key system similar to that in place in 210 Carnegie Center.
6. Options
6.1. If, prior to the respective date of exercise thereof, (i) no Event of
Default shall have occurred or (ii) if an Event of Default shall have
occurred, the Tenant shall have previously cured it in full, the Tenant
shall have two options, exercisable exclusively at the times and in the
manner set forth below in subsection 6.2 of this Agreement, to extend the
Term for two additional period of five years' duration per option. The
respective options and the respective periods to which each option relates
shall be consecutive and, if the respective option is properly exercised,
the respective period to which it relates shall commence upon the end of
the Expiring Term. Each such option is an "Option to Renew."
6.2. In the event the Tenant is interested in exercising the next available
Option to Renew, the Tenant shall give timely notice of the Tenant's
interest to the Landlord no earlier than nine, and no later than eight,
months prior to the end of the Expiring Term. Within four weeks of the
giving of such notice, the Landlord shall give notice to the Tenant of the
Market Rental Rate in effect at the end of the Expiring Term. In the event
the Tenant desires to exercise the Option to Renew, the Tenant shall do so
exclusively by giving timely notice thereof to the Landlord no earlier
than seven, and no later than six, months prior to the end of the Expiring
Term, and indicating in that notice whether or not the Market Rental Rate
in effect at the end of the Expiring Term is acceptable. In the event the
Tenant fails timely to notify the Landlord of its interest in exercising
any Option to Renew or timely to exercise any such Option to Renew, that
Option to Renew and any subsequent Options to Renew shall thereupon
expire.
6.3. The Basic Rent for the Leased Premises during each Renewal Term shall be
95% of the Market Rental Rate, as set forth in the Landlord's notice to
the Tenant of the Market Rental Rate, unless the Tenant, in the Tenant's
notice contemplated by the third sentence of subsection 6.2 of this
Agreement affirmatively indicates that the Market Rental Rate for the
respective Renewal Term is not acceptable, in which case the Basic Rent
for the Leased Premises during such Renewal Term shall be the greater of:
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6.3.1. the annual rate of Basic Rent in effect during the last 12
months of the Expiring Term; or
6.3.2. 95% of the Market Rental Rate determined in accordance with
the alternate procedure set forth in the definition of Market
Rental Rate.
6.4. In the event the Tenant agrees to assign or sublet this Agreement, or
agrees to license the use or occupancy of, the Leased Premises or any
portions thereof other than in accordance with section 17 of this
Agreement or otherwise, or attempts to do so, prior to the valid exercise
of any Option to Renew then any Option to Renew or any other type of
option or optional right exercisable by the Tenant not theretofore timely
and otherwise properly exercised by the Tenant shall thereupon expire.
7. Use and Occupancy.
7.1. The Tenant shall continuously occupy and use the Leased Premises during
the Term exclusively as an office for its business and for no other
purpose.
7.2. In connection with the Tenant's use and occupancy of the Leased Premises
and use of the Common Facilities, the Tenant shall observe, and the Tenant
shall cause the Tenant's employees, other agents and Guests to observe,
each of the following:
7.2.1. the Tenant shall not do, or permit or suffer the doing of,
anything which might have the effect of creating not
insignificantly increased risk of, or damage from, fire,
explosion or other casualty;
7.2.2. the Tenant shall not do, or permit or suffer the doing of,
anything which would have the effect of (a) increasing any
premium for any liability, property, casualty or excess
coverage insurance policy otherwise payable by the Landlord or
any tenant of Other Leased Premises or (b) making any such
types or amounts of insurance coverage unavailable or less
available to the Landlord or any tenant of Other Leased
Premises;
7.2.3. to the extent they are not inconsistent with this Agreement,
the Tenant and the Tenant's employees, other agents and Guests
shall comply with the Building Rules and Regulations attached
hereto as Exhibit D, and with any changes of uniform
application made therein by the Landlord if, with respect to
any such changes, the Landlord shall have given notice of the
particular changes to the Tenant and such changes shall not
materially adversely affect the conduct of the Tenant's
business in the Leased Premises;
7.2.4. the Tenant and the Tenant's employees, other agents and Guests
shall not create, permit or continue any Nuisance in or around
the Carnegie Center Complex, the Leased Premises, the Other
Leased Premises, the Building, the Common Facilities and the
Property;
7.2.5. The Tenant and the Tenant's employees, other agents and Guests
shall not permit the Leased Premises to be regularly occupied
by more than one individual per 200 square feet of usable
floor space of the Leased Premises;
7.2.6. the Tenant and the Tenant's employees, other agents and Guests
shall comply with all Federal, state and local statutes,
ordinances, rules, regulations and orders as they pertain to
the Tenant's use and occupancy of the Leased Premises, to the
conduct of the Tenant's business and to the use of the Common
Facilities, except that this subsection shall not require the
Tenant to make any structural changes that may be required
thereby that are generally applicable to the Building as a
whole;
7.2.7. the Tenant and the Tenant's employees, other agents and Guests
shall comply with the requirements of the Board of Fire
Underwriters (or successor organization) and of any insurance
carriers providing liability, property, casualty or excess
insurance coverage regarding the
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Property, the Building, the Common Facilities or any portions
thereof, any other improvements on the Property and the
Carnegie Center Complex, except that this subsection shall not
require the Tenant to make any structural changes that may be
required thereby that are generally applicable to the Building
as a whole;
7.2.8. the Tenant's and the Tenant's employees, other agents and
Guests shall not bring or discharge any substance (solid
liquid or gaseous), or conduct any activity, in or on the
Carnegie Center Complex, the Property, the Building, the
Common Facilities or the Leased Premises that shall have been
identified by the scientific community or by any Federal,
state or local statute (including, without limiting the
generality of the foregoing, the Spill Compensation and
Control Act (58 N.J.S.A. Section 23.11 et seq.) and the
Industrial Site Recovery Act (13 N.J.S.A. Section 1 K-6 et
seq.), as they may be amended), ordinance, rule, regulation or
order as toxic or hazardous to health or to the environment;
7.2.9. the Tenant and the Tenant's employees, other agents and Guests
shall not draw electricity in the Leased Premises in excess of
the rated capacity of the electrical conductors and safety
devices including, without limiting the generality of the
foregoing, circuit breakers and fuses, by which electricity is
distributed to and throughout the Leased Premises and, without
the prior written consent of the Landlord in each instance,
shall not connect any fixtures, appliances or equipment to the
electrical distribution system serving the Building and the
Leased Premises other than typical professional office
equipment such as minicomputers, microcomputers, typewriters,
copiers, telephone systems, coffee machines and table top
microwave ovens, none of which, considered individually and in
the aggregate, overall and per fused or circuit breaker
protected circuit, shall exceed the above limits;
7.2.10. on a timely basis the Tenant shall pay directly and promptly
to the respective taxing authorities any taxes (other than
Taxes) charged, assessed or levied from the Tenant's use and
occupancy of the Leased Premises; and
7.2.11. the Tenant shall not initiate any appeal or contest of any
assessment or collection of Taxes for any period without, in
each instance, the prior written consent of the Landlord
which, without being deemed unreasonable, the Landlord may
withhold if the Building was not 90% occupied by paying
tenants throughout that period or if the Tenant is not joined
by tenants of Other Leased Premises that leased throughout
that period, and that are then leasing, at least 80% of all
Other Leased Premises, determined by their gross rentable
floor space.
7.2.12. The Tenant shall supply the name, address and telephone number
of a representative authorized to enter room #137 who can be
contacted at any hour of the day or night so that access can
be arranged at any time in the event of an emergency. A number
shall be posted outside the door to room #137 so that fire and
police personnel can gain access in the event of an emergency.
8. Utilities, Services, Maintenance and Repairs.
8.1. The Landlord shall provide or arrange for the provision of:
8.1.1. such maintenance and repair of the Building (except the Leased
Premises and Other Leased Premises); the Common Facilities;
and the heating, ventilation and air conditioning systems, any
plumbing systems and the electrical systems in the Building,
the Common Facilities, the Leased Premises and Other Leased
Premises as is customarily provided for first class office
buildings in the immediate area;
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8.1.2. such garbage removal from the Building and the Common
Facilities and such janitorial services for the Building, the
Leased Premises and Other Leased Premises as is customarily
provided for first class office buildings in the immediate
area;
8.1.3. water to the Building and, if the appropriate plumbing has
been installed therein, the Leased Premises and Other Leased
Premises;
8.1.4. sewage disposal for the Building;
8.1.5. passenger elevator service for the Building;
8.1.6. snow clearance from, and sweeping of, Parking Facilities and
private access roads which are part of the Property or the
Common Facilities; and
8.1.7. the maintenance of landscaping which is part of the Property
or the Common Facilities.
8.2. The Landlord shall provide or arrange for the provision of:
8.2.1. such maintenance and repair of the Leased Premises as is
customarily provided for first class office buildings in the
immediate area, except for refinishing walls and wall
treatments, base, ceilings, floor treatments and doors in
general from time to time or for gouges, spots, marks, damage
or defacement caused by anyone other than the Landlord, its
employees and other agents, and except for the Tenant's
furniture, furnishings, equipment and other property;
8.2.2. such maintenance and repair of the Other Leased Premises,
except for refinishing walls and wall treatments, base,
ceilings, floor treatments and doors in general from time to
time or for gouges, spots, marks, damage or defacement caused
by anyone other than the Landlord, its employees and other
agents, and except for the respective tenants' furniture,
furnishings, equipment and other property;
8.2.3. the electricity required for the operation of the Building,
the Property and the Common Facilities during Regular Business
Hours and, on a reduced service basis, during other than
Regular Business Hours, and, at all times, the electricity
required for the Leased Premises and Other Leased Premises;
8.2.4. such heat, ventilation and air conditioning for the Building,
the Leased Premises and Other Leased Premises as is
customarily provided for first class office buildings in the
immediate area for the comfortable use of the Building during
Regular Business Hours and in accordance with the
specifications set forth in Exhibit C; and
8.2.5. heated water to the Building (except the Leased Premises and
Other Leased Premises, unless the appropriate plumbing,
fixtures and hot water heating units have been installed
therein).
8.3. Except as specifically set forth in subsections 8.1 and 8.2.1 of this
Agreement, the Tenant shall maintain and repair the Leased Premises and
keep the Leased Premises in as good condition and repair, reasonable wear
and use excepted, as the Leased Premises are upon the completion of any
improvements contemplated by section 5 of this Agreement.
9. Allocation of the Expense of Utilities, Services, Maintenance, Repairs and
Taxes.
9.1. All Tenant Electric Charges shall be borne by the Tenant.
9.2. Between the Commencement Date and the end of the No Pass Through Period,
the Tenant's Share of all Operational Expenses, Capital Expenditures and
Taxes incurred during such period shall be borne by the Landlord.
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9.3. Between the day after the end of the No Pass Through Period and the end of
the Term, the Tenant's Share of Operational Expenses, Capital Expenditures
and Taxes incurred during each annual or shorter period ending on (a)
December 31 of each year and (b) the end of the Term shall be borne as
follows:
9.3.1. the Tenant's Share of: Operational Expenses, Capital
Expenditures and Taxes incurred during each such period of 12
months (or shorter period), up to the amounts of Base Year
Operational Expenses and Base Year Taxes, respectively (or
proportional amount thereof for periods shorter than 12
months), shall be borne by the Landlord; and
9.3.2. the Tenant's Share of: the amounts by which Operational
Expenses, Capital Expenditures and Taxes incurred during each
such period of 12 months (or shorter period) exceed Base Year
Operational Expenses and Base Year Taxes, respectively (or
proportional amount thereof for periods shorter than 12
months) shall be allocated to, and borne by, the Tenant as
more specifically set forth in section 10 of this Agreement.
10. Computation and Payment of Allocated Expenses of Utilities, Services,
Maintenance, Repairs, Taxes and Capital Expenditures.
10.1. The Tenant shall promptly pay the following additional amounts to the
Landlord at the respective times set forth below:
10.1.1. commencing with the first day after the end of the No Pass
Through Period, and on the first day of each month thereafter
during the Term, one-twelfth of the Tenant's Share of the
amount by which Taxes for the then current calendar year
exceeds Base Year Taxes, computed in accordance with
subsection 10.5 of this Agreement;
10.1.2. within 20 days of the Landlord's giving notice to the Tenant
after the close of each calendar year closing during the Term,
commencing with the first calendar year closing after the
close of the No Pass Through Period, and after the end of the
Term, the Tenant's Share of the difference between the
Landlord's previously projected amount of Taxes for such
period and the actual amount of Taxes for such period, in
either case in excess of Base Year Taxes, computed in
accordance with subsection 10.6 of this Agreement (unless such
difference is a negative amount, in which case the Landlord
shall credit such difference against any amounts next due from
the Tenant under subsections 10.1.1 and 10.5 of this Agreement
or, at the end of the term, promptly pay such difference to
Tenant);
10.1.3. commencing with the first day after the end of the No Pass
Through Period, and on the first day of each month thereafter
during the Term, one-twelfth of the Tenant's Share of the
amount by which Operational Expenses for the then current
calendar year exceed Base Year Operational Expenses, computed
in accordance with subsection 10.7 of this Agreement;
10.1.4. within 20 days of the Landlord's giving notice to the Tenant
after the close of each calendar year closing during the Term,
commencing with the first calendar year closing after the
close of the No Pass Through Period, and after the end of the
Term, the Tenant's Share of the difference between the
Landlord's previously projected amount of Operational Expenses
for such period and the actual amount of Operational Expenses
for such period, in either case in excess of Base Year
Operational Expenses, computed in accordance with subsection
10.8 of this Agreement (unless such difference is a negative
amount, in which case the Landlord shall credit such
difference against any amounts next due from the Tenant under
subsections 10.1.5 and 10.7 of this Agreement);
10.1.5. commencing with the first day of the first month after the
Landlord gives any notice contemplated by subsection 10.9 of
this Agreement to the Tenant and continuing on the first day
of each month thereafter
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until the earlier of (a) the end of the Term or (b) the last
month of the useful life set forth in the respective notice,
one-twelfth of the Tenant's Share of any Annual Amortized
Capital Expenditure, computed in accordance with subsection
10.9 of this Agreement but only to the extent that the
aggregate of each month's payment exceeds one-twelfth of
Tenant's Share of 1994 Annual Amortized Capital Expenditures;
10.1.6. on the first day of each month during the Term, the monthly
Tenant Electric Charges, computed in accordance with
subsection 10.10 of this Agreement; and
10.1.7. promptly as and when billed therefor by the Landlord, the
amount of any expense which would otherwise fall within the
definition of Operational Expenses, but which is specifically
paid or incurred by the Landlord for operation and maintenance
of the Building, the Common Facilities or the Property outside
Regular Business Hours at the specific request of the Tenant
or the amount of any expenditure incurred for maintenance or
repair of damage to the Building, the Common Facilities, the
Property, the Leased Premises or the Other Leased Premises
caused directly or indirectly, in whole or in part, by the
negligence or intentional act of the Tenant or any of its
employees, other agents or Guests.
10.2. Operational Expenses" means all expenses paid or incurred by the Landlord
(equitably adjusted to reflect a 95% occupancy level in the Building) in
connection with the Property, the Building, the Common Facilities and any
other improvements on the Property and their operation and maintenance
(other than Taxes (which are separately allocated to the Tenant in
accordance with subsections 10.1.1 and 10.1.2 of this Agreement), Capital
Expenditures (which are separately allocated to the Tenant in accordance
with subsection 10.1.5 of this Agreement) and those expenses contemplated
by subsections 10.1.6 and 10.1.7 of this Agreement)) including, without
limiting the generality of the foregoing:
10.2.1. Utilities Expenses;
10.2.2. the expense of providing the services, maintenance and repairs
contemplated by subsections 8.1, 8.2.1 and 8.2.2 of this
Agreement, whether furnished by the Landlord's employees or by
independent contractors or other agents;
10.2.3. wages, salaries, fees and other compensation and payments and
payroll taxes and contributions to any social security,
unemployment insurance, welfare, pension or similar fund and
payments for other fringe benefits required by law or union
agreement (or, if the employees or any of them are not
represented by a union, then payments for benefits comparable
to those generally required by union agreement in first class
office buildings in the immediate area which are unionized)
made to or on behalf of any employees of Landlord performing
services rendered in connection with the operation and
maintenance of the Building, the Common Facilities and the
Property, including, without limiting the generality of the
foregoing, elevator operators, elevator starters, window
cleaners, porters, janitors, maids, miscellaneous handymen,
watchmen, persons engaged in patrolling and protecting the
Building, the Common Facilities and the Property, carpenters,
engineers, firemen, mechanics, electricians, plumbers, other
tradesmen, other persons engaged in the operation and
maintenance of the Building, Common Facilities and Property,
Building superintendent and assistants, Building manager, and
clerical and administrative personnel. If any employee works
on more than one building then the charges under this
subsection and any other subsection related to such person
shall be allocated on an equitable basis;
10.2.4. the uniforms of all employees and the cleaning, pressing and
repair thereof;
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10.2.5. premiums and other charges incurred by Landlord with respect
to all insurance relating to the Building, the Common
Facilities and the Property and the operation and maintenance
thereof, including, without limitation: property and casualty,
fire and extended coverage insurance, including windstorm,
flood, hail, explosion, other casualty, riot, rioting
attending a strike, civil commotion, aircraft, vehicle and
smoke insurance; public liability insurance; elevator, boiler
and machinery insurance; excess liability coverage insurance;
use and occupancy insurance; workers' compensation and health,
accident, disability and group life insurance for all
employees; and casualty rent insurance;
10.2.6. sales and excise taxes and the like upon any Operational
Expenses and Capital Expenditures;
10.2.7. management fees of any independent managing agent for the
Property, the Building or the Common Facilities; and if there
shall be no independent managing agent, or if the managing
agent shall be a person affiliated with the Landlord, the
management fees that would customarily be charged for the
management of the Property, the Building and the Common
Facilities by an independent, first class managing agent in
the immediate area, but not more than 4% of gross revenues;
10.2.8. the cost of replacements for tools, supplies and equipment
used in the operation, service, maintenance, improvement,
inspection, repair and alteration of the Building, the Common
Facilities and the Property;
10.2.9. the cost of repainting or otherwise redecorating any part of
the Building or the Common Facilities;
10.2.10. decorations for the lobbies and other Common Facilities in the
Building;
10.2.11. the cost of licenses, permits and similar fees and charges
related to operation, repair and maintenance of the Building,
the Property and the Common Facilities;
10.2.12. an allocable share of service, replacement, repair,
maintenance and other charges assessed from time to time by
the Carnegie Center Owner's Association II to the Building;
and
10.2.13. any and all other expenditures of the Landlord in connection
with the operation, alteration, repair or maintenance of the
Property, the Common Facilities or the Building as a
first-class office building and facilities in the immediate
area which are properly treated as an expense fully deductible
as incurred in accordance with generally applied real estate
accounting practice.
10.3. "Capital Expenditures" means the following expenditures incurred or paid
by the Landlord in connection with the Property, the Building, the Common
Facilities and any other improvements on the Property:
10.3.1. all costs and expenses incurred by the Landlord in connection
with retro-fitting the entire Building or the Common
Facilities, or any portion thereof, to comply with any change
in Federal, state or local statute, rule, regulation, order or
requirement which change takes effect after the original
completion of the Building;
10.3.2. all costs and expenses incurred by the Landlord to replace and
improve the Property, the Building or the Common Facilities or
portions thereof for the purpose of continued operation of the
Property, the Building and the Common Facilities as a first
class office complex in the immediate area; and
10.3.3. all costs and expenses incurred by the Landlord in connection
with the installation of any energy, labor or other cost
saving device or system on the Property or in the Building or
the Common Facilities.
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10.4. "Operational Expenses", "Capital Expenditures" and "Taxes" shall not
include any of the following:
10.4.1. Costs of decorating, redecorating or special cleaning of
tenant spaces not provided on a regular basis to all tenants
of the Building, unless specifically authorized by the Tenant;
10.4.2. Wages, salaries, fees and fringe benefits paid to executive
personnel, officers or partners of Landlord;
10.4.3. All charges for depreciation of the Building or equipment and
all interest on the permanent loan;
10.4.4. All charges for Landlord's income taxes, excess profit taxes,
franchise taxes, and similar taxes on Landlord's business,
unless promulgated in lieu of or partially in place of Real
Estate Taxes;
10.4.5. All costs relating to activities for the solicitation and
execution of leases of space in the Building;
10.4.6. All costs for which Tenant or any other tenant in the Building
is being charged other than pursuant to the operating expense
clauses;
10.4.7. The costs of correcting defects in the original construction
of the Building or defects in the Building equipment when it
was first installed, except that conditions (not occasioned by
construction defects) resulting from ordinary wear and tear
will not be deemed defects for the purpose of this category;
10.4.8. The cost (except for the cost of insurance deductibles, which
deductible shall in all cases be at market levels) payable by
Landlord, of all repairs made by Landlord because of the total
or partial destruction of the Building or the condemnation of
a portion of the Building. (Landlord agrees to procure
insurance policies with the smallest commercially reasonable
deductible amount obtainable, provided said insurance is
available at reasonable market rates);
10.4.9. All increases in insurance premiums to the extent that any
such increase is caused or attributable to the use, occupancy
or act of tenants of Other Leased Premises in the Building and
insurance deductibles in excess of the amount specified in
part Subsection 10.4.8 of this Agreement;
10.4.10. The cost of all items for which Landlord is reimbursed or has
a right to be reimbursed by insurance or otherwise compensated
by parties other than Tenant;
10.4.11. The cost of all tools and equipment purchased by Landlord
prior to completion of the construction of the base Building;
10.4.12. The cost of all work or service performed for or facilities
furnished to one or more tenants of Other Leased Premises in
the Building to a greater extent or in a manner significantly
more favorable to such tenants than that performed for or
furnished to Tenant;
10.4.13. The cost of improvements to Other Leased Premises in the
Building leased or leasable to other tenants;
10.4.14. The cost of overtime and other expenses to Landlord in curing
its defaults or performing work expressly provided in the
lease to be borne at Landlord's expense;
10.4.15. The cost of abatement of pollutants and/or hazardous
substances and/or materials other than abatements required as
the result of acts of Tenant or its agents, servants,
employees, invitees and other Guests;
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10.4.16. Partnership overhead of Landlord, as specifically defined by
Landlord in the lease agreement;
10.4.17. Fines and/or penalties incurred due to violation by Landlord
of any law, governmental rule or regulation or directive of
any governmental authority including, but not limited to, the
Americans with Disabilities Act.
10.5. As soon as practicable after the close of the No Pass Through Period and
December 31 of each year thereafter, any portion of which is during the
Term, the Landlord shall furnish the Tenant with a notice setting forth:
10.5.1. Taxes billed, or if a bill has not then been received for the
entire period, the Landlord's projection of Taxes to be
billed, for the then current calendar year;
10.5.2. the amount of Base Year Taxes;
10.5.3. the amount, if any, by which item 10.5.1 above exceeds item
10.5.2 above; and
10.5.4. the Tenant's Share of item 10.5.3 above.
10.6. As soon as practicable after December 31 of each year during the Term and
after the end of the Term, the Landlord shall furnish the Tenant with a
notice setting forth:
10.6.1. the actual amount of Taxes for the preceding calendar year in
excess of Base Year Taxes (or proportional amount thereof for
shorter periods during the Term);
10.6.2. the Landlord's previously projected amount of Taxes for the
preceding calendar year in excess of Base Year Taxes (or
proportional amount thereof for shorter periods during the
Term);
10.6.3. the difference obtained by subtracting item 10.6.2 above from
item 10.6.1 above; and
10.6.4. the Tenant's Share of item 10.6.3 above.
10.7. As soon as practicable after the close of the No Pass Through Period and
December 31 of each year thereafter, any portion of which is during the
Term, the Landlord shall furnish the Tenant with a notice setting forth:
10.7.1. the Landlord's projection of annual Operational Expenses for
the current period (if any portion thereof is during the
Term);
10.7.2. the amount of the Base Year Operational Expenses;
10.7.3. the amount, if any, by which item 10.7.1 above exceeds item
10.7.2 above; and
10.7.4. the Tenant's Share of item 10.7.3 above.
10.8. As soon as practicable after December 31 of each year during the
Term and after the end of the Term, the Landlord shall furnish the
Tenant with a notice setting forth:
10.8.1. the actual amount of Operational Expenses for the preceding
calendar year in excess of Base Year Operational Expenses (or
proportional amount thereof for shorter periods during the
Term);
10.8.2. the Landlord's previously projected amount of Operational
Expenses for the preceding calendar year in excess of Base
Year Operational Expenses (or proportional amount thereof for
shorter periods during the Term);
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10.8.3. the difference obtained by subtracting item 10.8.2 above from
item 10.8.1 above; and
10.8.4. the Tenant's Share of item 10.8.3 above.
10.9. As soon as practicable after incurring any Capital Expenditure, the
Landlord shall furnish the Tenant with a notice setting forth:
10.9.1. a description of the Capital Expenditure and the subject
thereof;
10.9.2. the date the subject of the respective Capital Expenditure was
first placed into service and the period of useful life
selected by the Landlord in connection with the determination
of the Annual Amortized Capital Expenditure;
10.9.3. the amount of the Annual Amortized Capital Expenditure; and
10.9.4. the Tenant's Share of item 10.9.3 above.
10.10 As soon as practicable after the Commencement Date and from time to time
thereafter, the Landlord shall furnish the Tenant with a notice setting
forth its estimate of Tenant Electric Charges per month. Unless the Tenant
desires to question the Landlord's then most recent estimate of Tenant
Electric Charges exclusively in the manner set forth below, the Landlord's
then most recent estimate shall be binding and shall continue in effect
until any question raised by the Tenant is otherwise resolved in
accordance with this subsection 10.10 of the Agreement. If the Tenant
desires to question the Landlord's estimate of Tenant Electric Charges,
the Tenant shall give notice to the Landlord of its desire. Upon receipt
of the Tenant's notice, the Landlord shall obtain, at the Tenant's
expense, a reputable, independent electrical engineer's formal written
estimate and computation of the Tenant Electric Charges. The engineer's
estimate and computation of Tenant Electric Charges shall thereupon
control for a 12 month period commencing with the date as of which it is
given effect as to Tenant Electric Charges, and until the Landlord
furnishes the Tenant with a subsequent notice setting forth its estimate
of Tenant Electric Charges per month, except to the extent that the
Landlord may increase them in proportion to increases in Utilities
Expenses during the same period.
10.11 Within 30 days after the Landlord gives any notice enumerated in
subsections 10.5 through 10.10 of this Agreement, the Tenant or the
Tenant's authorized agent, upon one week's prior notice to the Landlord,
may inspect the Landlord's books and records, as they pertain to the
particular expense in question, at the Landlord's office regarding the
subject of any such notice to verify the amount(s) and calculation(s)
thereof.
10.12 The mere enumeration of an item within the definitions of Operational
Expenses and Capital Expenditures in subsections 10.2 and 10.3 of this
Agreement, respectively, shall not be deemed to create an obligation on
the part of the Landlord to provide such item unless the Landlord is
affirmatively required to provide such item elsewhere in this Agreement.
11. Leasehold Improvements, Fixtures and Trade Fixtures.
All leasehold improvements to the Leased Premises, fixtures installed in the
Leased Premises and the blinds and floor treatments or coverings shall be the
property of the Landlord, regardless of when, by which party or at which party's
cost the item is installed. Movable furniture, furnishings, trade fixtures and
equipment of the Tenant which are in the Leased Premises shall be the property
of the Tenant, except as may otherwise be set forth in section 23 of this
Agreement. The Tenant may elect to remove or leave certain movable items
provided that the removal shall be done prior to the expiration of the Term at
the Tenant's expense. Any damage to the Leased Premises caused by the removal
shall be restored at the expense of the Tenant.
12. Alterations, Improvements and Other Modifications by the Tenant.
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12.1. The Tenant shall not make any alterations, improvements or other
modifications to the Leased Premises which effect structural changes in
the Building or any portion thereof, change the functional utility or
rental value of the Leased Premises or, except as may be contemplated by
section 5 of this Agreement prior to the Commencement Date, affect the
mechanical, electrical, plumbing or other systems installed in the
Building or the Leased Premises.
12.2. The Tenant shall not make any other alterations, improvements or
modifications to the Leased Premises, the Building or the Property or make
any boring in the ceiling, walls or floor of the Leased Premises or the
Building unless the Tenant shall have first:
12.2.1. furnished to the Landlord detailed, New Jersey
architect-certified construction drawings, construction
specifications if required by code or if they pertain in any
way to the heating, ventilation and air conditioning or other
systems of the Building, with related engineering design work
and specifications regarding, the proposed alterations,
improvements or other modifications;
12.2.2. not received a notice from the Landlord objecting thereto in
any respect within 30 days of the furnishing thereof (which
shall not be deemed the Landlord's affirmative consent for any
purpose);
12.2.3. obtained any necessary or appropriate building permits or
other approvals from the Municipality and, if such permits or
other approvals are conditional, satisfied all conditions to
the satisfaction of the Municipality; and
12.2.4. met, and continued to meet, all the following conditions with
regard to any contractors selected by the Tenant and any
subcontractors, including materialmen, in turn selected by any
of them:
12.2.4.1. the Tenant shall have sole responsibility for payment
of, and shall pay, such contractors;
12.2.4.2. the Tenant shall have sole responsibility for
coordinating, and shall coordinate, the work to be
supplied or performed by such contractors, both among
themselves and with any contractors selected by the
Landlord;
12.2.4.3. the Tenant shall not permit or suffer the filing of any
mechanic's notice of intention or other lien or
prospective lien by any such contractor or subcontractor
with respect to the Property, the Common Facilities, the
Building or any other improvements on the Property; and
if any of the foregoing should be filed by any such
contractor or subcontractor, the Tenant shall forthwith
obtain and file the complete discharge and release
thereof or provide such payment bond(s) from a
reputable, financially sound institutional surety as
will, in the opinions of the Landlord, the holders of
any mortgage indebtedness on, or other interest in, the
Property, the Building, the Common Facilities or any
other improvements on the Property, or any portions
thereof, and their respective title insurers, be
adequate to assure the complete discharge and release
thereof;
12.2.4.4. prior to any such contractor's entering upon the
Property, the Building or the Leased Premises or
commencing work the Tenant shall have delivered to the
Landlord (a) all the Tenant's certificates of insurance
set forth in section 14 of this Agreement, conforming in
all respects to the requirements of section 14 of this
Agreement, except that the effective dates of all such
insurance policies shall be prior to any such
contractor's entering upon the Property, the Building or
the Leased Premises or commencing work (if any work is
scheduled to begin before the Commencement Date) and (b)
similar certificates
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of insurance from each of the Tenant's contractors
providing for coverage in equivalent amounts, together
with their respective certificates of workers'
compensation insurance, employer's liability insurance
and products completed operations insurance, the latter
providing coverage in at least the amount required for
the Tenant's comprehensive general public liability and
excess insurance;
12.2.4.5. each such contractor shall be a party to collective
bargaining agreements with those unions that are
certified as the collective bargaining agents of all
bargaining units of such contractor, of which all such
contractor's workpersons shall be members in good
standing;
12.2.4.6. each such contractor shall perform its work in a good
and workpersonlike manner and shall not interfere with
or hinder the Landlord or any other contractor in any
manner;
12.2.4.7. there shall be no labor dispute of any nature whatsoever
involving any such contractor or any workpersons of such
contractor or the unions of which they are members with
anyone; and if such a labor dispute exists or comes into
existence the Tenant shall forthwith, at the Tenant's
sole cost and expense, remove all such contractors and
their workpersons from the Building, the Common
Facilities and the Property; and
12.2.4.8. the Tenant shall have the sole responsibility for the
security of the Leased Premises and all contractors'
materials, equipment and work, regardless of whether
their work is in progress or completed.
12.3. After the Commencement Date, the Tenant shall not apply any wall covering
(except latex based flat paint) or other treatment to the walls of the
Leased Premises without the prior written consent of the Landlord.
Landlord shall not unreasonably withhold, condition or delay consent as
long as the materials conform to applicable flame spread standards and
will not cause additional expense of removal or result in damage to the
walls when removed.
12.4. Notwithstanding anything contained herein to the contrary, the Landlord
shall not object unreasonably to any any alterations, improvements or
modifications to the Leased Premises contemplated by subsection 12.2 of
this Agreement except that the Landlord may object to any such
alterations, improvements or modifications (i) which do not conform to
Carnegie Center building standards or (ii) which, if left by the Tenant at
the end of the Term, will cause expense to the Landlord for removal. If
the reason stated in subparagraph (ii) of the preceding sentence is the
sole basis for the objection, then Tenant may proceed with such
alterations, improvements or modifications provided that Tenant agrees to
remove the same by the expiration of the Term and to restore the Leased
Premises at its expense to the condition which existed prior to such
alterations, improvements or modifications. If Landlord objects to any
alterations, improvements or modifications to the Leased Premises, it
shall state its reasons in the notice objecting to the same.
13. Landlord's Rights of Entry and Access.
The Landlord and Its authorized agents shall have the following rights of entry
and access to the Leased Premises:
13.1. In case of any emergency or threatened emergency, at any time for any
purpose which the Landlord reasonably believes under such circumstances
will serve to prevent, eliminate or reduce the emergency, or the threat
thereof, or damage or threatened damage to persons and property.
13.2. Upon at least one day's prior verbal advice to the Tenant, at any time for
the purpose of erecting or constructing improvements, modifications,
alterations and other changes to the Building or any portion thereof,
including, without limiting
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the generality of the foregoing, the Leased Premises, the Common
Facilities or the Property or for the purpose of repairing, maintaining or
cleaning them, whether for the benefit of the Landlord, the Building, all
tenants of Other Leased Premises in the Building, or one or more tenants
of Other Leased Premises, the Carnegie Center Complex or others. In
connection with any such improvements, modifications, alterations, other
changes, repairs, maintenance or cleaning, the Landlord may close off such
portions of the Property, the Building and the Common Facilities and
interrupt such services as may be necessary to accomplish such work,
without liability to the Tenant therefor and without such closing or
interruption being deemed an eviction or constructive eviction or
requiring an abatement of Rent. However, in accomplishing any such work,
the Landlord shall endeavor not to materially interfere with the Tenant's
use and enjoyment of the Leased Premises or the conduct of the Tenant's
business and to minimize interference, inconvenience and annoyance to the
Tenant. If the Tenant's access or the conduct of its business is
interrupted for more than ten days then Basic Rent shall be abated
proportionately until the interruption is ended.
13.3. At all reasonable hours, upon reasonable prior notice, for the purpose of
operating, inspecting or examining the Building, including the Leased
Premises, or the Property.
13.4. At any time after the Tenant has vacated the Leased Premises, for the
purpose of preparing the Leased Premises for another tenant or prospective
tenant.
13.5. At all reasonable hours, upon reasonable prior notice, for the purpose of
showing the Building to prospective purchasers, mortgagees and prospective
mortgagees and prospective ground lessees and lessors.
13.6. At all reasonable hours, upon reasonable prior notice, during the last six
months of the Term for the purpose of showing the Leased Premises to
prospective tenants thereof.
13.7. The mere enumeration of any right of the Landlord within this section 13
of the Agreement shall not be deemed to create an obligation on the part
of the Landlord to exercise any such right unless the Landlord is
affirmatively required to exercise such right elsewhere in this Agreement.
13.8. Notwithstanding any other provision to the contrary, the Landlord may not
have access to room #137 except on prior arrangement with the Tenant and
in the presence of an authorized representative of the Tenant.
14. Liabilities and Insurance Obligations.
14.1. The Tenant shall, at the Tenant's own expense, purchase before the
Commencement Date, and maintain in full force and effect throughout the
Term and any other period during which the Tenant may have possession of
the Leased Premises, the following types of insurance coverage from
financially sound and reputable insurers, licensed by the State of New
Jersey to provide such insurance and acceptable to the Landlord, in the
minimum amounts set forth below, each of which insurance policies shall be
for the benefit of, and shall name the Landlord, the Landlord's managing
agent and mortgagees and ground lessors known to the Tenant, if any, of
the Building, the Common Facilities, the Property or any interest therein,
their successors and assigns as additional persons insured, and none of
which insurance policies shall contain a "co-insurance" clause:
14.1.1. commercial general liability insurance (including "broad form
and contractual liability" coverage) and excess ("umbrella")
insurance which, without limiting the generality of the
foregoing, considered together shall insure against such risks
as bodily injury, death and property damage, with a combined
single limit of not less than $2,000,000.00 for each
occurrence (or such greater amounts as the Landlord may
reasonably specify from time to time by notice to the Tenant,
but only if all tenants are treated in the same manner); and
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14.1.2. "special" property insurance which, without limiting the
generality of the foregoing, shall insure against the risk of
damage and loss by reason of fire, explosion and all other
peils commonly insured against under a "special" property
insurance policy.
14.2. With respect to risks:
14.2.1. as to which this Agreement requires either party to maintain
insurance, or
14.2.2. as to which either party is effectively insured and for which
risks the other party may be liable,
the party required to maintain such insurance and the party effectively
insured shall use its best efforts to obtain a clause, if available from
the respective insurer, in each such insurance policy expressly waiving
any right of recovery, by reason of subrogation to such party's rights or
otherwise, the respective insurer might otherwise have or obtain against
the other party, so long as such a clause can be obtained in the
respective insurance policy without additional premium cost. If such a
clause can be obtained in the respective insurance policy, but only at
additional premium cost, such party shall, by notice to the other party,
promptly advise the other party of such fact and the amount of the
additional premium cost. If the other party desires the inclusion of such
a clause in the notifying party's respective insurance policy, the other
party shall, within 10 days of receipt of the notifying party's notice, by
notice advise the notifying party of its desire and enclose therewith its
check in the full amount of the additional premium cost; otherwise the
notifying party need not obtain such a clause in the respective insurance.
14.3. Each party hereby waives any right of recovery against the other party for
any and all damages for property losses and property damages which are
actually insured by either party, but only to the extent:
14.3.1. that the waiver set forth in this subsection 14.3 does not
cause or result in any cancellation of, or diminution in, the
insurance coverage otherwise available under any applicable
insurance policy;
14.3.2. of the proceeds of any applicable insurance policy (without
adjustment for any deductible amount set forth therein)
actually received by such party for such respective loss or
damages; and
14.3.3. the substance of the clause contemplated by subsection 14.2 of
this Agreement is actually and effectively set forth in the
respective insurance policy. The waiver set forth in this
subsection 14.3 of the Agreement shall not apply with respect
to liability insurance policies (as opposed to property and
casualty insurance policies).
14.4. Each party hereby waives any right of recovery it might otherwise have
against the other for losses and damages caused actively or passively, in
whole or in part, by any of the risks either is required to insure against
in accordance with subsections 14.1.1 or 14.1.2 or subsections 14.8.1 or
18.8.2 of this Agreement, unless such waiver would cause or result in a
cancellation of, or diminution in, the coverage of the policies of
insurance against such risks.
14.5. The Landlord shall have no liability whatsoever to the Tenant or the
Tenant's employees, other agents or Guests or anyone else for any death,
bodily injury, property loss or other damages suffered by any of them or
any of their property which is not caused directly or indirectly, in whole
or in part, by the negligence or intentional act of the Landlord or its
agents, employees or Guests.
14.6. Each policy of insurance required under subsections 14.1 and 14.8 of this
Agreement shall include provisions to the effect that:
14.6.1. no act or omission of the party securing the insurance, its
employees, other agents or Guests shall result in a loss of
insurance coverage
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otherwise available under such policy to any person required
to be named as an additional insured in accordance with
subsections 14.1 or 14.8 of this Agreement; and
14.6.2. the insurance coverage afforded by such policy shall not be
diminished, cancelled, permitted to expire or otherwise
terminated at the insured's request for any reason except upon
10 days' prior written notice from the insurer to the extent
required by the policy to every person required to be named as
an additional insured in accordance with subsections 14.1 or
14.8 of this Agreement.
14.7. With respect to each type of insurance coverage referred to in subsection
14.1 of this Agreement, prior to the Commencement Date the Tenant shall
cause its insurer(s) to deliver to the Landlord the certificate(s) of the
insurer(s) setting forth the name and address of the insurer, the name and
address of each additional insured, the type of coverage provided, the
limits of the coverage, any deductible amounts, the effective dates of
coverage and that each policy under which coverage is provided
affirmatively includes provisions to the effect set forth in subsection
14.6 of this Agreement. In the event any of such certificates indicates a
coverage termination date earlier than the end of the Term or the end of
any other period during which the Tenant may have possession of the Leased
Premises, no later than 10 days before any such coverage termination date,
the Tenant shall deliver to the Landlord respective, equivalent, new
certificate(s) of the insurer(s).
14.8. The Landlord shall purchase before the Commencement Date, and maintain in
full force and effect throughout the Term the following types of insurance
coverage from financially sound and reputable insurers, licensed by the
State of New Jersey to provide such insurance, in the minimum amounts set
forth below, each of which insurance policies shall be for the benefit of,
and shall name the Landlord, the Landlord's managing agent and mortgagees
and ground lessors, if any, of the Building, the Common Facilities, the
Property or any interest therein, their successors and assigns as
additional persons insured, and none of which insurance policies shall
contain a "co-insurance" clause:
14.8.1. commercial general liability insurance (including "broad form
and contractual liability" coverage) and excess ("umbrella")
insurance which, without limiting the generality of the
foregoing, considered together shall insure against such risks
as bodily injury, death and property damage, with a combined
single limit of not less than $2,000,000.00 for each
occurrence; and
14.8.2. property and casualty, and "all risks" coverage insurance in
an amount equal to the replacement value of the Building,
including windstorm, flood, hail, explosion, other casualty,
riot, rioting attending a strike, civil commotion, aircraft,
vehicle and smoke insurance; elevator, boiler and machinery
insurance; use and occupancy insurance; and casualty rent
insurance and all other casualties commonly insured against
under an "all risks" insurance policy.
15. Casualty Damage to Building or Leased Premises.
15.1. In the event of any damage to the Building or any portion thereof by fire
or other casualty which was not caused directly or indirectly, in whole or
in part, by the negligence or intentional act of the Tenant, its
employees, other agents or Guests:
15.1.1. with the result that the Leased Premises are rendered
untenantable in whole or in part,
15.1.2. regarding which, within 60 days after the occurrence of the
casualty, the Landlord gives notice to the Tenant that the
Landlord can restore the Leased Premises within 120 days after
the occurrence of the casualty to such an extent that the
Leased Premises are then fully tenantable, and
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15.1.3. regarding which the Landlord does restore the Leased Premises
within such period of 120 days,
then this Agreement shall remain in full force and effect, but Rent shall
abate until such time as the Leased Premises are again fully tenantable
and be reduced during such period by the amount which bears the same
proportion to the Rent otherwise payable during such period as the gross
rentable floor space of the Leased Premises which are rendered
untenantable bears to the gross rentable floor space of the Leased
Premises.
Either party may elect to terminate this Agreement by written notice
served within ten days after it is determined that the Landlord cannot
restore the Leased Premises within 120 days after the occurrence of the
casualty or if the Landlord fails to serve the notice contemplated by
subsection 15.1.2 of this Agreement. The Tenant may also elect to
terminate this Agreement by written notice served within ten days after
the occurrence of the casualty if more than 25% of the Leased Premises are
rendered untenantable by the casualty.
15.2. In the event of casualty damages in the circumstances set forth in
subsection 15.1 of this Agreement which do not result in a termination of
the Term, the Landlord shall cause restoration to proceed diligently and
expediently to the extent the Landlord has received proceeds of any
property, casualty or liability insurance on the damaged portions. The
fact that the Landlord has not received such proceeds shall not be a
ground to extend any time interval under section 15 of this Agreement.
15.3. The Tenant shall promptly advise the Landlord by the quickest means of
communication of the occurrence or threatened occurrence of any casualty
damage to the Building or the Leased Premises of which the Tenant becomes
aware.
16. Condemnation.
If the Leased Premises, or any portion thereof, or the Building or the Common
Facilities, or any substantial portion of any of the foregoing, shall be
acquired for any public or quasi public use or purpose by statute, right of
eminent domain or private sale in lieu thereof, with the result the Tenant can
not use and occupy the Leased Premises for the purpose set forth in subsection
7.1 of this Agreement, the Tenant hereby waives any claim against the Landlord,
the condemning authority or other person acquiring same for any thing of value,
tangible or intangible, including, without limiting the generality of the
foregoing, the putative value of any leasehold interest or loss of the use of
same, except for any right the Tenant might have to make a claim, independent
of, and without reference to or having any effect on, any award or claim of the
Landlord, against the condemning authority or other acquiring party regarding
the value of the Tenant's installed trade fixtures and other installed equipment
which are not removable from the Leased Premises or for ordinary and necessary
moving expenses occasioned thereby. Providing there is no reduction in the award
to the Landlord, the Tenant may recover any leasehold improvements installed at
its expense and its expenses of moving.
17. Assignment or Subletting by Tenant.
17.1. Except as may be specifically set forth in this section 17 of the
Agreement, the Tenant shall not:
17.1.1. assign, or purport to assign, this Agreement or any of the
Tenant's rights hereunder;
17.1.2. sublet, or purport to sublet, the Leased Premises or any
portion thereof;
17.1.3. license, or purport to license, the use or occupancy of the
Leased Premises or any portion thereof;
17.1.4. otherwise transfer, or attempt to transfer any interest
including, without limiting the generality of the foregoing, a
mortgage, pledge or
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security interest, in this Agreement, the Leased Premises or
the right to the use and occupancy of the Leased Premises;
17.1.5. publicize, or allow its agents or representatives to
publicize, the proposed sublease or assignment in the
newspaper or in other media or by broad based mailing at a
rental rate per foot which is less than 95% of the current
market rate for space in Carnegie Center; or
17.1.6. indirectly accomplish, or permit or suffer the accomplishment
of, any of the foregoing by merger or consolidation with
another entity, by acquisition or disposition of assets or
liabilities outside the ordinary course of the Tenant's
business or by acquisition or disposition, by the Tenant's
equity owners or subordinated creditors, of any of their
respective interests in the Tenant.
17.2. The Tenant shall not assign this Agreement or any of the Tenant's rights
hereunder or sublet the Leased Premises or any portion thereof without
first receiving the Landlord's prior written consent, which shall not be
unreasonably withheld or delayed. The Tenant's notice to the Landlord
shall include:
17.2.1. the full name, address and telephone number of the proposed
assignee or sublessee;
17.2.2. a description of the type(s) of business in which the proposed
assignee or sublessee is engaged and proposes to engage;
17.2.3. a description of the precise use to which the proposed
assignee or sublessee intends to put the Leased Premises or
portion thereof;
17.2.4. the proposed assignee's or subtenant's most recent quarterly
and annual financial statements prepared in accordance with
generally accepted accounting principles and any other
evidence of financial position and responsibility that the
Tenant or proposed assignee or sublessee may desire to submit;
17.2.5. by diagram and measurement of the actual square feet of floor
space, the precise portion of the Leased Premises proposed to
be subject to the assignment of this Agreement or to be
sublet;
17.2.6. a complete, accurate and detailed description of the terms of
the proposed assignment or sublease including, without
limiting the generality of the foregoing, all consideration
paid or given, or proposed to be paid or to be given, by the
proposed assignee, sublessee or other person to the Tenant and
the respective times of payment or delivery; and
17.2.7. any other information reasonably requested by the Landlord.
17.3. By the expiration of the notice period contemplated by subsection 17.2 of
this Agreement, the Landlord, in its sole discretion, shall take one of
the following actions by notice to the Tenant:
17.3.1. grant consent on the terms and conditions set forth in
subsection 17.4 of this Agreement and such other reasonable
terms and conditions set forth in the Landlord's notice; or
17.3.2. refuse to grant consent for any of the reasons set forth in
subsection 17.5 of this Agreement or for any other reasonable
reason set forth in the Landlord's notice.
17.4. The Landlord's consent to the Tenant's proposed assignment or sublease, if
granted under subsection 17.3.1 of this Agreement, shall be subject to all
the following terms and conditions (and to any other terms and conditions
permitted by that subsection):
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17.4.1. any proposed assignee or sublessee shall, by document executed
and delivered forthwith to the Landlord, agree to be bound by
all the obligations of the Tenant set forth in this Agreement;
17.4.2. the Tenant shall remain liable under this Agreement, jointly
and severally with any proposed assignee or sublessee, for the
timely performance of all obligations of the Tenant set forth
in this Agreement; and
17.4.3. the Tenant shall forthwith deliver to the Landlord manually
executed copies of all documents regarding the proposed
assignment or sublease and a written, accurate and complete
description, manually executed both by the Tenant and the
proposed assignee or sublessee, of any other agreement,
arrangement or understanding between them regarding the same.
17.5. The Landlord's refusal to grant consent under subsection
17.3.2 of this Agreement shall not be deemed an unreasonable
withholding of consent if based upon any of the following
reasons (or any other reason permitted by that subsection):
17.5.1. the proposed sublease or assignment is to a tenant which will
use the Leased Premises for a loan production office, any
facility for retail banking or for a law firm;
17.5.2. the proposed sublease is for a term of less than one year;
17.5.3. the proposed sublease is for a term which would expire after
the Term;
17.5.4. less than one year remains in the Term as of the proposed
effective date of the proposed assignment or sublease; or
17.5.5. the general reputation, financial position or ability or type
of business of, or the anticipated use of the Leased Premises
by, the proposed assignee or proposed sublessee is
unsatisfactory to the Landlord or is inconsistent with those
of tenants of Other Leased Premises or of the Carnegie Center
Complex or inconsistent with any commitment made by the
Landlord to any such other tenant.
17.6. Notwithstanding the foregoing provisions:
17.6.1. the Tenant may assign or sublet up to 25% of the Leased
Premises without permission, provided that the provisions of
subsection 17.5 of this Agreement would not have permitted the
Landlord to refuse to grant consent had the assignment or
subletting been for 25% or more of the Leased Premises; and
17.6.2. an assignment or sublease to a parent, subsidiary, affiliate,
or successor in interest by merger of Tenant or by sale of
stock or all or substantially all of Tenant's assets may be
done without consent provided that (i) the Tenant complies
with the requirements of subsection 17.4 of this Agreement;
and (ii) the assignment is not to an entity formed for the
purpose of avoiding the provisions of section 17 of this
Agreement.
17.7. An assignment or sublease to a parent, subsidiary, affiliate, or successor
in interest by merger of Tenant or by sale of stock or all or
substantially all of Tenant's assets may be done without consent provided
that (i) the Tenant complies with the requirements of subsection 17.4 of
this Agreement; and (ii) the assignment is not to an entity formed for the
purpose of avoiding the provisions of section 17 of this Agreement.
18. Signs, Displays and Advertising.
18.1. The Tenant shall have one sign identifying the Landlord's assigned number
for the Leased Premises at the principal entrance to the Leased Premises.
The Tenant may
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identify itself in or on each of: the sign at the principal entrance to
the Leased Premises, the Building directory and the directory, if any, on
the floor of the Building on which the Leased Premises is located. All
such signs, and the method and materials used in mounting and dismounting
them, shall be in accordance with the Landlord's specifications. All such
signs shall be provided and mounted by the Landlord at the Landlord's
expense, except that the Tenant shall bear any expense of identifying
itself on the sign at the principal entrance to the Leased Premises.
18.2. No other sign, advertisement, fixture or display shall be used by the
Tenant on the Property or in the Building or the Common Facilities. Any
signs other than those specifically permitted under subsection 18.1 of
this Agreement shall be removed promptly by the Tenant or by the Landlord
at the Tenant's expense.
19. Quiet Enjoyment.
The Landlord is the owner of the Building, the Property and those Common
Facilities located on the Property. The Landlord has the right and authority to
enter into and execute and deliver this Agreement with the Tenant. So long as an
Event of Default shall not have occurred, the Tenant shall and may peaceably and
quietly have, hold and enjoy the Leased Premises during the Term in accordance
with this Agreement.
20. Relocation
20.1. At any time and from time to time during the Term, on at least 120 days'
prior notice to the Tenant, the Landlord shall have the right to move the
Tenant out of the Leased Premises and into premises having at least equal
floor space located in the Building or in any other comparable building
located in the Carnegie Center Complex for the duration of the Term. In
the event the Landlord exercises this right of relocation, the Landlord
shall decorate the new premises similarly to the Leased Premises and
remove, relocate and reinstall the Tenant's furniture, trade fixtures,
furnishings and equipment, all at the sole cost and expense of the
Landlord. When the substitute new premises are ready, the Tenant shall
surrender the Leased Premises. Following any such relocation, this
Agreement shall continue in full force and effect except for the
description of the Leased Premises, the Building and the Property which,
upon completion of such relocation, shall be deemed amended to describe
the substitute new premises, building and property, respectively, to which
the Tenant shall have been relocated in accordance with this section 20 of
the Agreement.
20.2. Notwithstanding the foregoing provisions, relocation will not be permitted
during the first five years of the Term nor during the last 18 months of
the Term. Any relocation outside the foregoing moratorium period shall
comply with the following conditions: (i) The space shall (a) be located
in a building in the 200 series; (b) have a greenway view; (c) have the
same linear window expanse as that in the proposed building 202 suite; (d)
have a cafeteria in the building; (e) have deck parking; and (ii) the
costs of moving shall be paid by Landlord in accordance with the following
provisions:
20.2.1. Landlord shall remove, relocate and reinstall Tenant's
equipment, furniture and fixtures;
20.2.2. Landlord shall redecorate the new space similar to the old
space; and
20.2.3. Landlord shall bear all reasonable incidental expenses, if
any.
21. Surrender.
Upon termination of the Term, or at any other time at which the Landlord, by
virtue of any provision of this Agreement or otherwise has the right to re-enter
and re-take possession of the Leased Premises, the Tenant shall surrender
possession of the Leased Premises; remove from the Leased Premises all property
owned by the Tenant which Tenant chooses to remove (whether affixed to the
Leased Premises, or not); remove from the Leased Premises all property owned by
anyone else other than the Landlord; remove from the Leased Premises any
alterations, improvements or other modifications to the Leased Premises that the
Landlord specified would have to be removed in a notice pursuant to subsection
12.4 of
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this Agreement; make any repairs required by any such removal; clean the Leased
Premises; leave the Leased Premises in as good order and condition as it was
upon the completion of any improvements contemplated by section 5 of this
Agreement, ordinary wear and use excepted; return all copies of all keys and
passes to the Leased Premises, the Common Facilities and the Building to the
Landlord; and receive the Landlord's written acceptance of the Tenant's
surrender. The Landlord shall not be deemed to have accepted the Tenant's
surrender of the Leased Premises unless and until the Landlord shall have
executed and delivered the Landlord's written acceptance of surrender to the
Tenant, which shall not be unreasonably withheld or delayed.
22. Events of Default.
The occurrence of any of the following events shall constitute an Event of
Default under this Agreement:
22.1. the Tenant's failure to pay any installment of Basic Rent or any amount of
Additional Rent within five days of the date when it is first due,
provided that if such failure occurs more than twice in any twelve month
period then, thereafter, the Tenant's failure to pay any installment of
Basic Rent or any amount of Additional Rent when it is first due;
22.2. the Tenant's failure to perform any of its obligations under this
Agreement if such failure has caused, or may cause, loss or damage that
can not promptly be cured by subsequent act of the Tenant including, but
not limited to, an assignment or subletting in violation of the terms of
this Agreement;
22.3. the Tenant's failure to complete performance of any of the Tenant's
obligations under this Agreement (other than those contemplated by
subsections 22.1 and 22.2 of this Agreement) within 15 days after the
Landlord shall have given notice to the Tenant specifying which of the
Tenant's obligations has not been performed and in what respects, unless
completion of performance within such period of 15 days is not possible
using diligence and expedience, then within a reasonable time of the
Landlord's notice so long as the Tenant shall have commenced substantial
performance within such period of 15 days and shall have continued to
provide substantial performance, diligently and expediently, through to
completion of performance;
22.4. the discovery that any material representation made by the Tenant in this
Agreement shall have been inaccurate or incomplete in any material respect
either on the date it was made or the date as of which it was made;
22.5. the sale, transfer or other disposition of any interest of the Tenant in
the Leased Premises by way of execution or other legal process;
22.6. with the exception of those of the following events to which section 365
of the Bankruptcy Code shall apply in the context of an office lease (in
which case subsection 22.7 of this Agreement shall apply):
22.6.1. the Tenant's becoming a "debtor," as that term is defined in
section 101 of the Bankruptcy Code;
22.6.2. any time when either the value of the Tenant's liabilities
exceed the value of the Tenant's assets or the Tenant is
unable to pay its obligations as and when they respectively
become due in the ordinary course of business;
22.6.3. the appointment of a receiver or trustee of the Tenant's
property or affairs; or
22.6.4. the Tenant's making an assignment for the benefit of, or an
arrangement with or among, creditors or filing a petition in
insolvency or for reorganization or for the appointment of a
receiver;
22.7. in the event of the occurrence of any of the events enumerated in
subsection 22.6 of this Agreement to which section 365 of the Bankruptcy
Code shall apply in the context of an office lease, the earlier of the
bankruptcy trustee's rejection or
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deemed rejection (as those terms are used in section 365 of the Bankruptcy
Code) of this Agreement; or
22.8. the Tenant's abandoning the Leased Premises before expiration of the Term
without the prior written consent of the Landlord.
23. Rights and Remedies.
23.1. Upon the occurrence of an Event of Default the Landlord shall
have all the following rights and remedies:
23.1.1. to elect to terminate the Term by giving notice of such
election, and the effective date thereof, to the Tenant and to
receive Termination Damages;
23.1.2. to elect to re-enter and re-take possession of the Leased
Premises, without thereby terminating the Term, by giving
notice of such election, and the effective date thereof, to
the Tenant and to receive Re-Leasing Damages;
23.1.3. if the Tenant remains in possession of the Leased Premises
after the Tenant's obligation to surrender the Leased Premises
shall have arisen, to remove the Tenant and the Tenant's and
any others' possessions from the Leased Premises by any of the
following means without any liability to the Tenant therefor,
any such liability to the Tenant therefor which might
otherwise arise being hereby waived by the Tenant: legal
proceedings (summary or otherwise), writ of dispossession and
any other means and to receive Holdover Damages and, except in
the circumstances contemplated by section 20 of this
Agreement, to receive all expenses incurred in removing the
Tenant and the Tenant's and any others' possessions from the
Leased Premises, and of storing such possessions if the
Landlord so elects;
23.1.4. to be awarded specific performance, temporary restraints and
preliminary and permanent injunctive relief regarding Events
of Default where the Landlord's rights and remedies at law may
be inadequate, without the necessity of proving actual damages
or the inadequacy of the rights and remedies at law;
23.1.5. to receive all expenses incurred in securing, preserving,
maintaining and operating the Leased Premises during any
period of vacancy, in making repairs to the Leased Premises,
in preparing the Leased Premises for re-leasing and in
re-leasing the Leased Premises including, without limiting the
generality of the foregoing, any brokerage commissions;
23.1.6. to receive all reasonable legal expenses, including without
limiting the generality of the foregoing, attorneys' fees
incurred in connection with pursuing any of the Landlord's
rights and remedies, including indemnification rights and
remedies;
23.1.7. if the Landlord, in its sole discretion, elects to perform any
obligation of the Tenant under this Agreement (other than the
obligation to pay Rent) which the Tenant has not timely
performed, to receive all expenses incurred in so doing;
23.1.8. to elect to pursue any legal or equitable right and remedy
available to the Landlord under this Agreement or otherwise;
and
23.1.9. to elect any combination, or any sequential combination of any
of the rights and remedies set forth in subsection 23.1 of
this Agreement.
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23.2. In the event the Landlord elects the right and remedy set forth in
subsection 23.1.1 of this Agreement, Termination Damages shall be equal to
the amount which, at the time of actual payment thereof to the Landlord,
is the sum of:
23.2.1. all accrued but unpaid Rent;
23.2.2. the present value (calculated using the most recently
available (at the time of calculation) published weekly
average yield on United States Treasury securities having
maturities comparable to the balance of the then remaining
Term) of the sum of all payments of Rent remaining due (at the
time of calculation) until the date the Term would have
expired (had there been no election to terminate it earlier)
less the present value (similarly calculated) of all payments
of rent to be received through the end of the Term (had there
been no election to termination it earlier) from a lessee, if
any, of the Leased Premises at the time of calculation (and it
shall be assumed for purposes of such calculations that (i)
the amount of future Additional Rent due per year under this
Agreement will be equal to the average Additional Rent per
month due during the 12 full calendar months immediately
preceding the date of any such calculation, increasing
annually at a rate of eight percent compounded, (ii) if any
calculation is made before the first anniversary of the end of
the No Pass Through Period, the average Additional Rent due
for any month after the end of the No Pass Through Period will
be equal to nine percent of the sum of the Base Year Operating
Expenses, Base Year Taxes and Tenant Electric Charges
(considered on an annual basis), (iii) if any calculation is
made before the beginning of the Base Year, the sum of Base
Year Taxes and Base Year Operational Expenses shall be assumed
to be $5.00 per gross rentable square foot and (iv) if any
calculation is made before the end of the Base Year, Base Year
Taxes and Base Year Operational Expenses may be extrapolated
based on the year to date experience of the Landlord);
23.2.3. the Landlord's reasonably estimated cost of demolishing any
leasehold improvements to the Leased Premises; and
23.2.4. that amount, which as of the occurrence of the Event of
Default, bears the same ratio to the costs, if any, incurred
by the Landlord (and not paid by the Tenant) in building out
the Leased Premises in accordance with section 5 of this
Agreement as the number of months remaining in the Term
(immediately before the occurrence of the Event of Default)
bears to the number of months in the entire Term (immediately
before the occurrence of the Event of Default).
23.3. In the event the Landlord elects the right and remedy set forth in
subsection 23.1.2 of this Agreement, Re-Leasing Damages shall be equal to
the Rent less any rent actually and timely received by the Landlord from
any lessee of the Leased Premises or any portion thereof, payable at the
respective times that Rent is payable under the Agreement plus the cost,
if any, to the Landlord of building out or otherwise preparing the Leased
Premises for, and leasing the Leased Premises to, any such lessee.
23.4. In the event the Landlord elects the right and remedy set forth in
subsection 23.1.3. of this Agreement, Holdover Damages shall mean damages
at the rate per month or part thereof equal to the greater of: (a) one and
one-half times one-twelfth of the then Market Rental Rate plus all
Additional Rent as set forth in this Agreement or (b) double the average
amount of all payments of Rent due under this Agreement during each of the
last 12 full calendar months prior to the Landlord's so electing or, in
the event the Term shall have terminated by expiration under subsection
24.1.1. of this Agreement, the last full 12 calendar months of the Term,
in either case payable in full on the first day of each holdover month or
part thereof.
23.5. In connection with any summary proceeding to dispossess and remove the
Tenant from the Leased Premises under subsection 23.1.3 of this Agreement,
the Tenant hereby waives:
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23.5.1. any notices for delivery of possession thereof, of
termination, of demand for removal therefrom, of the cause
therefor, to cease, to quit and all other notices that might
otherwise be required pursuant to 2A.
N.J.S.A. Section 18-53 et seq;
23.5.2. any right the Tenant might otherwise have to cause a
termination of the action or proceeding by paying to the
Landlord or into court or otherwise any Rent in arrears;
23.5.3. any right the Tenant might otherwise have to a period of
waiting between issuance of any warrant in execution of any
judgment for possession obtained by the Landlord and the
execution thereof;
23.5.4. any right the Tenant might otherwise have to transfer or
remove such proceeding from the court (or the particular
division or part of the court) or other forum in which it
shall have been instituted by the Landlord to another court,
division or part;
23.5.5. any right the Tenant might otherwise have to redeem the
Tenant's former leasehold interest between the entry of any
judgment and the execution of any warrant issued in connection
therewith by paying to the Landlord or into Court or otherwise
any Rent in arrears; and
23.5.6. any right the Tenant might otherwise have to appeal any
judgment awarding possession of the Leased Premises to the
Landlord.
23.6. The enumeration of rights and remedies in this section 23 of the Agreement
is not intended to be exhaustive or exclusive of any rights and remedies
which might otherwise be available to the Landlord, or to force an
election of one or more rights and remedies to the exclusion of others,
concurrently, consecutively or sequentially. On the contrary, each right
and remedy enumerated in this section 23 of the Agreement is intended to
be cumulative with each other right and remedy enumerated in this section
23 of the Agreement and with each other right and remedy that might
otherwise be available to the Landlord; and the selection of one or more
of such rights and remedies at any time shall not be deemed to prevent
resort to one or more others of such rights and remedies at the same time
or a subsequent time, even with regard to the same occurrence sought to be
remedied.
23.7. Because the Tenant has been granted a relatively unfettered right to
sublet and assign, it is expressly understood and agreed that the Landlord
shall have no duty to mitigate damages. In the event the Landlord elects
the right and remedy set forth in subsection 23.1.2. of this Agreement,
Re-Leasing Damages shall be equal to the Rent less any rent actually and
timely received by the Landlord from any lessee of the Leased Premises or
any portion thereof, payable at the respective times that Rent is payable
under the Agreement plus the cost, if any, to the Landlord of building out
or otherwise preparing the Leased Premises for, and leasing the Leased
Premises to, any such lessee. The Landlord may relet some or all of the
Leased Premises but shall have no duty to do so. The Tenant shall retain
its rights to sublet or assign the Leased Premises, or portions thereof,
pursuant to Article 17 hereof except to the extent that the Landlord shall
have already relet the same which shall abrogate the Tenant's rights, pro
tanto.
24. Termination of the Term.
24.1. The Term shall terminate upon the earliest of the following events to
occur:
24.1.1. expiration of the Term including, but not limited to, by
reason of a condemnation or a transfer in lieu thereof;
24.1.2. in connection with a transaction contemplated by section 16 of
this Agreement, the later of (a) the vesting of the acquiring
party's right to possession or (b) the Tenant's vacating the
Leased Premises;
24.1.3. under the circumstances contemplated by subsection 15.1 of
this Agreement, upon the Tenant's giving prompt notice of the
failure of the
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Landlord to give, on a timely basis, the notice contemplated
by subsection 15.1.2. of this Agreement and that the Tenant
desires termination of the Term (which termination shall be
effective as of the date of the subject casualty with respect
to those portions of the Leased Premises rendered untenantable
and as of the date of the Tenant's giving notice with respect
to those portions of the Leased Premises which were not
rendered untenantable);
24.1.4. under the circumstances contemplated by subsection 15.1. of
this Agreement, upon the expiration of 45 additional days
(without the Landlord's completion of restoration in the
interim) after the Tenant shall have given prompt notice that
the Landlord has not restored the Leased Premises on a timely
basis and that the Tenant desires termination of the Term
(which termination shall be effective as of the date of the
subject casualty with respect to those portions of the Leased
Premises rendered untenantable and as of the date of the
Tenant's giving notice with respect to those portions of the
Leased Premises which were not rendered untenantable); or
24.1.5. the effective date of any election by the Landlord to
terminate the Term under subsection 23.1.1. of this Agreement.
24.2. No termination of the Term shall have the effect of releasing the Tenant
from any obligation or liability theretofore or thereby incurred and,
until the Tenant shall have surrendered the Leased Premises in accordance
with section 21 of this Agreement, from any obligation or liability
thereafter incurred.
25. Mortgage and Underlying Lease Priority.
25.1. This Agreement and the estate, interest and rights hereby created for the
benefit of the Tenant are, and shall always be, subordinate to any
mortgage (other than a mortgage created by the Tenant or a sale, transfer
or other disposition by the Tenant in-the nature of a security interest in
violation of subsections 17.1.4. and 22.5, respectively, of this
Agreement) already or afterwards placed on the Carnegie Center Complex,
the Property, the Common Facilities, the Building or any estate or
interest therein including, without limiting the generality of the
foregoing, any new mortgage or any mortgage extension, renewal,
modification, consolidation, replacement, supplement or substitution. This
Agreement and the estate, interest and rights hereby created for the
benefit of the Tenant are, and shall always be, subordinate to any ground
lease already or afterwards made with regard to the Carnegie Center
Complex, the Property, the Common Facilities, the Building or any estate
or interest therein including, without limiting the generality of the
foregoing, any new ground lease or any ground lease extension, renewal,
modification, consolidation, replacement, supplement or substitution. The
provisions of this section 25 of the Agreement shall be self-effecting;
and no further instrument shall be necessary to effect any such
subordination. Nevertheless, the Tenant hereby consents that any mortgagee
or mortgagee's successor in interest may, at any time and from time to
time, by notice to the Tenant, subordinate its mortgage to the estate and
interest created by this Agreement; and upon the giving of such notice,
the subject mortgage shall be deemed subordinate to the estate and
interest created by this Agreement regardless of the respective times of
execution or delivery of either or of recording the subject mortgage.
25.2. Notwithstanding anything to the contrary that may be set forth in
subsection 25.1 of this Agreement, the Landlord shall obtain from each
such mortgagee and ground lessor its respective standard form of
nondisturbance, attornment and subordination agreement including a
provision to the effect that, in the event of enforcement of any remedies
provided in the respective mortgage or ground lease, respectively, or
otherwise, so long as an Event of Default shall not have occurred, the
Tenant shall not be disturbed in its possession of the Leased Premises in
accordance with this Agreement and the rights set forth in favor of the
Tenant in subsections 44.2.1 through 44.2.3 of this Agreement shall be
honored.
26. Transfer by Landlord.
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26.1. The Landlord shall have the right at any time and from time to time to
sell, transfer, lease or otherwise dispose of the Carnegie Center Complex,
the Property, the Common Facilities or the Building or any of the
Landlord's interests therein, or to assign this Agreement or any of the
Landlord's rights thereunder.
26.2. Upon giving notice of the occurrence of any transaction contemplated by
subsection 26.1 of this Agreement, the Landlord shall thereby be relieved
of any obligation that might otherwise exist under this Agreement with
respect to periods subsequent to the effective date of any such
transaction. If, in connection with any transaction contemplated by
subsection 26.1 of this Agreement the Landlord transfers, or makes
allowance for, any Security Deposit of the Tenant and gives notice of that
fact to the Tenant, the Landlord shall thereby be relieved of any further
obligation to the Tenant with regard to any such Security Deposit; and the
Tenant shall look solely to the transferee with respect to any such
Security Deposit.
26.3. In the event of the occurrence of any transaction contemplated by
subsection 26.1 of this Agreement the Tenant, upon written request
therefor from the transferee, shall attorn to and become the tenant of
such transferee upon the terms and conditions set forth in this Agreement.
26.4. Notwithstanding anything to the contrary that may be set forth in
subsections 26.1, 26.2 and 26.3 of this Agreement, in the event any
mortgage contemplated by section 25 of this Agreement is enforced by the
respective mortgagee pursuant to remedies provided in the mortgage or
otherwise provided by law or equity and any person succeeds to the
interest of the Landlord as a result of, or in connection with, any such
enforcement, the Tenant shall, upon the request of such successor in
interest, automatically attorn to and become the Tenant of such successor
in interest without any change in the terms or provisions of this
Agreement, except that such successor in interest shall not be bound by:
(a) any payment of Basic Rent or Additional Rent (exclusive of prepayments
in the nature of a Security Deposit) for more than one month in advance or
(b) any amendment or other modification of this Agreement which was made
without the consent of such mortgagee or such successor in interest; and,
upon the request of such successor in interest, the Tenant shall execute,
acknowledge and deliver any instrument(s) confirming such attornment.
26.5. If this Agreement and the estate, interest and rights hereby created for
the benefit of the Tenant are ever subject and subordinate to any ground
lease contemplated by section 25 of this Agreement:
26.5.1. upon the expiration or earlier termination of the term of any
such ground lease before the termination of the Term under
this Agreement, the Tenant shall attorn to, and become the
Tenant of, the lessor under any such ground lease and
recognize such lessor as the Landlord under this Agreement for
the balance of the Term; and
26.5.2. such expiration or earlier termination of the term of any such
ground lease shall have no effect on the Term under this
Agreement.
27. Indemnification.
27.1. The Tenant shall, and hereby does, indemnify the Landlord against any and
all liabilities, obligations, damages, penalties, claims, costs, charges
and expenses including, without limiting the generality of the foregoing,
reasonable expenses of investigation, defense and enforcement thereof or
of the obligation set forth in subsection 27.1 of this Agreement
including, without limiting the generality of the foregoing, reasonable
attorneys' fees, imposed on or incurred by the Landlord in connection with
any of the following matters which occurs during the Term:
27.1.1. any matter, cause or thing arising out of the use, occupancy,
control or management of the Leased Premises or any portion
thereof which is not caused by the Landlord's negligence or
intentional acts or the negligence or intentional acts of
Landlord's agents, employees or Guests;
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27.1.2. any negligence or intentional act on the part of the Tenant or
any of its employees, other agents or Guests;
27.1.3. any accident, injury or damage to any person or property
occurring in the Leased Premises which is not caused by the
Landlord's negligence or intentional acts or the negligence or
intentional acts of Landlord's agents, employees or Guests;
27.1.4. any material representation made by the Tenant in this
Agreement shall have been inaccurate or incomplete in any
material respect either on the date it was made or the date as
of which it was made;
27.1.5. the imposition of any mechanic's, materialman's or other lien
on the Property, the Common Facilities, the Building, the
Leased Premises or any portion of any of the foregoing which
is not discharged or bonded within thirty days, or the filing
of any notice of intention to obtain any such lien, in
connection with any alteration, improvement or other
modification of the Leased Premises made or authorized by the
Tenant (which indemnification obligation shall be deemed to
include the Tenant's obligations set forth in subsection
12.2.4.3 of this Agreement); or
27.1.6. any failure on the part of the Tenant to perform or comply
with any obligation of the Tenant set forth in this Agreement,
including, but not limited to, the requirements of subsection
7.2.12 of this Agreement.
27.2. The Landlord shall, and hereby does, indemnify the Tenant against any and
all liabilities, obligations, damages, penalties, claims, costs, charges
and expenses including, without limiting the generality of the foregoing,
reasonable expenses of investigation, defense and enforcement thereof or
of the obligation set forth in subsection 27.2 of this Agreement
including, without limiting the generality of the foregoing, reasonable
attorneys' fees, imposed on or incurred by the Tenant in connection with
any of the following matters which occurs during the Term:
27.1.1. any matter, cause or thing arising out of the use, occupancy,
control or management of the Building or any portion thereof
which is not caused by the Tenant's negligence or intentional
acts or the negligence or intentional acts of Tenant's agents,
employees or Guests;
27.1.2. any negligence or intentional act on the part of the Landlord
or any of its employees, other agents or Guests;
27.1.3. any accident, injury or damage to any person or property
occurring in or about the Leased Premises which is not caused
by the Tenant's negligence or intentional acts or the
negligence or intentional acts of Tenant's agents, employees
or Guests; or
27.1.4. any material representation made by the Landlord in this
Agreement shall have been inaccurate or incomplete in any
material respect either on the date it was made or the date as
of which it was made.
27.3. Payment of indemnification claims by the either party to the other shall
be due upon the party's giving notice thereof to the other party.
27.4. The Landlord or Tenant shall promptly give notice of any claim asserted,
or action or proceeding commenced, against it as to which it intends to
claim indemnification from the other party and, upon notice from the party
so requesting, shall forward to the other party copies of all claim or
litigation documents received by it. Upon receipt of such notice the party
may, by notice to the other party, participate therein and, to the extent
it may desire, assume the defense thereof through independent counsel
selected by the such party and reasonably satisfactory to the other party.
Neither the Landlord nor the Tenant shall be bound by any compromise or
settlement of any such claim, action or proceeding without the prior
written consent of the other party.
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28. Parties' Liability.
28.1. None of the following occurrences shall constitute a breach of this
Agreement by the Landlord, a termination of the Term, an active or
constructive eviction or an occurrence requiring an abatement of Rent:
28.1.1. the inability of the Landlord to provide any utility or
service to be provided by the Landlord, as described in
section 8 of this Agreement which is due to causes beyond the
Landlord's control, or to necessary or advisable improvements,
maintenance, repairs or emergency, so long as the Landlord
uses reasonable efforts and diligence under the circumstances
to restore the interrupted service or utility;
28.1.2. any improvement, modification, alteration or other change made
to the Carnegie Center Complex, the Property, the Building or
the Common Facilities by the Landlord consistently with the
Landlord's obligations set forth in subsection 13.2 of this
Agreement; and
28.1.3. any change in any Federal, state or local law or ordinance.
28.2. Except for the commencement, duration or termination of the Term (other
than under the circumstances contemplated by subsection 15.1 of this
Agreement), the Tenant's obligation to make timely payments of Rent, the
Tenant's obligation to maintain certain insurance coverage in effect, the
Tenant's failure to perform any of its other obligations under this
Agreement if such failure has caused loss or damage that can not promptly
be cured by subsequent act of the Tenant and the period within which any
Option to Renew or any other type of option or optional right exercisable
by the Tenant must be exercised, any period of time during which the
Landlord or the Tenant is prevented from performing any of its respective
obligations under this Agreement because of fire, any other casualty or
catastrophe, strikes, lockouts, civil commotion, acts of God or the public
enemy, governmental prohibitions or preemptions, embargoes or inability to
obtain labor or material due to shortage, governmental regulation or
prohibition, shall be added to the time when such performance is otherwise
required under this Agreement.
28.3. In the event the Landlord is an individual, partnership, joint venture,
association or a participant in a joint tenancy or tenancy in common, the
Landlord, the partners, venturers, members and joint owners shall not have
any personal liability or obligation under or in connection with this
Agreement or the Tenant's use and occupancy of the Leased Premises; but
recourse shall be limited exclusively to the Landlord's interest in the
Building.
28.4. If, at any time during the Term, the payment or collection of any Rent
otherwise due under this Agreement shall be limited, frozen or otherwise
subjected to a moratorium by applicable law, and such limitation, freeze
or other moratorium shall subsequently be lifted, whether before or after
the termination of the Term, such aggregate amount of Rent as shall not
have been paid or collected during the Term on account of any such
limitation, freeze or other moratorium, shall thereupon be due and payable
at once. There shall be added to the maximum period of any otherwise
applicable statute of limitation the entire period during which any such
limitation, freeze or other moratorium shall have been in effect.
28.5. If this Agreement is executed by more than one person as Tenant, their
liability under this Agreement and in connection with the use and
occupancy of the Leased Premises shall be joint and several.
28.6. In the event any rate of interest, or other charge in the nature of
interest, calculated as set forth in this Agreement would lead to the
imposition of a rate of interest in excess of the maximum rate permitted
by applicable usury law, only the maximum rate permitted shall be charged
and collected.
28.7. The rule of construction that any ambiguities that may be contained in any
contract shall be construed against the party drafting the contract shall
be inapplicable in construing this Agreement.
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29. Security Deposit.
(This section is intentionally omitted.)
30. Representations.
30.1. The Tenant hereby represents and warrants that:
30.1.1. its Standard Industrial Classification (SIC) code is 7389 and
it will promptly give notice of any change therein during the
Term to the Landlord;
30.1.2. no broker or other agent has shown the Leased Premises or the
Building to the Tenant, or brought either to the Tenant's
attention, or is the procuring cause of this Agreement, except
The Garibaldi Group and Princeton Realty Advisors.
30.1.3. the execution and delivery of, the consummation of the
transactions contemplated by and the performance of all its
obligations under, this Agreement by the Tenant have been duly
and validly authorized by its general partners, to the extent
required by their partnership agreement and applicable law, if
the Tenant is a partnership or, if the Tenant is a
corporation, by its board of directors and, if necessary, by
its stockholders at meetings duly called and held on proper
notice for that purpose at which there were respective quorums
present and voting throughout; and no other approval,
partnership, corporate, governmental or otherwise, is required
to authorize any of the foregoing or to give effect to the
Tenant's execution and delivery of this Agreement; and
30.1.4. the execution and delivery of, the consummation of the
transactions contemplated by and the performance of all its
obligations under, this Agreement by the Tenant will not
result in a breach or violation of, or constitute a default
under, the provisions of any statute, charter, certificate of
incorporation or bylaws or partnership agreement of the Tenant
or any affiliate of the Tenant, as presently in effect, or any
indenture, mortgage, lease, deed of trust, other agreement,
instrument, franchise, permit, license, decree, order, notice,
judgment, rule or order to or of which the Tenant or any
affiliate of the Tenant is a party, a subject or a recipient
or by which the Tenant, any affiliate of the Tenant or any of
their respective properties and other assets is bound.
30.2. The Landlord hereby represents and warrants that:
30.2.1. no broker or other agent is the procuring cause of this
Agreement, except The Garibaldi Group and Princeton Realty
Advisors. The Garibaldi Group will be paid in accordance with
the terms of the existing agreement between Carnegie Center
Associates and The Garibaldi Group. Princeton Realty Advisors
will be paid pursuant to a separate agreement with Landlord;
30.2.2. the execution and delivery of, the consummation of the
transactions contemplated by and the performance of all its
obligations under, this Agreement by the Landlord have been
duly and validly authorized by its general partner, to the
extent required by its partnership agreement and applicable
law, and no other approval, partnership, governmental or
otherwise, is required to authorize any of the foregoing
except for the approval of Connecticut General Life Insurance
Company, the holder of the first mortgage, or to give effect
to the Landlord's execution and delivery of this Agreement;
30.2.3. the execution and delivery of, the consummation of the
transactions contemplated by and the performance of all its
obligations under, this Agreement by the Landlord will not
result in a breach or violation of, or constitute a default
under, the provisions of any statute, charter,
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or partnership agreement of the Landlord or any affiliate of
the Landlord, as presently in effect, or any indenture,
mortgage, lease, deed of trust, other agreement, instrument,
franchise, permit, license, decree, order, notice, judgment,
rule or order to or of which the Landlord or any affiliate of
the Landlord is a party, a subject or a recipient or by which
the Landlord, any affiliate of the Landlord or any of their
respective properties and other assets is bound, except as
above stated; and
30.2.4. at the time of the execution of this Agreement, the Building,
the Common Facilities and the Leased Premises comply with
applicable Federal, state and local statutes, ordinances,
rules, regulations and orders including, but not limited to,
the Americans with Disabilities Act.
31. Reservation in Favor of Tenant.
Neither the Landlord's forwarding a copy of this document to any prospective
tenant nor any other act on the part of the Landlord prior to execution and
delivery of this Agreement by the Landlord shall give rise to any implication
that any prospective tenant has a reservation, an option to lease or an
outstanding offer to lease any premises.
32. Tenant's Certificates and Mortgagee Notice Requirements.
32.1. Promptly upon request of the Landlord at any time or from time to time,
but in no event more than five days after the Landlord's respective
request, the Tenant shall execute, acknowledge and deliver to the Landlord
or its designee an estoppel or other certificate, satisfactory in form and
substance to the Landlord and any of its mortgagees, ground lessors or
lessees or transferees or prospective mortgagees, ground lessors or
lessees or transferees, with respect to any of or all the following
matters:
32.1.1. whether this Agreement is then in full force and effect;
32.1.2. whether this Agreement has not been amended, modified,
superseded, canceled, repudiated or revoked;
32.1.3. whether the Landlord has satisfactorily completed all
construction work, if any, required of the Landlord or
contractors selected and retained by the Landlord in
connection with readying the Leased Premises for occupancy by
the Tenant in accordance with section 5 of this Agreement;
32.1.4. whether the Tenant is then in actual possession of the Leased
Premises;
32.1.5. whether the Tenant then has no defenses or counterclaims under
this Agreement or otherwise against the Landlord or with
respect to the Leased Premises;
32.1.6. whether Landlord is not then in breach of this Agreement in
any respect;
32.1.7. whether the Tenant then has no knowledge of any assignment of
this Agreement, the pledging or granting of any security
interest in this Agreement or in Rent due and to become due
under this Agreement;
32.1.8. whether Rent is not then accruing under this Agreement in
accordance with its terms;
32.1.9. whether any Rent is not then in arrears;
32.1.10. whether Rent due or to become due under this Agreement has not
been prepaid by more than one month;
32.1.11. if the response to any of the foregoing matters is in the
negative, a specification of all the precise reasons that
necessitated the negative response in each instance; and
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32.1.12. any other matter reasonably requested by the Landlord or any
of its mortgagees, ground lessors or lessees or transferees or
prospective mortgagees, ground lessors or lessees or
transferees, including, without limiting the generality of the
foregoing, such information as the Landlord may request for
purposes of assuring compliance with the Industrial Site
Recovery Act (13 N.J.S.A. Section 1K-6 et seq.), as it may be
amended, and any other applicable Federal, state or local
statute, ordinance, rule, regulation or order concerned with
environmental matters.
32.2. If, in connection with the Landlord's or a prospective transferee's
obtaining financing or refinancing of the Carnegie Center Complex, the
Property, the Building, the Common Facilities, any portion thereof or any
interest therein, the Landlord or a prospective lender shall so request,
the Tenant shall furnish to the requesting party within 15 days of the
request:
32.2.1. its written consent to any requested modifications of this
Agreement provided that, in each such instance, the requested
modification does not increase the Rent otherwise due or, in
the reasonable judgment of the Tenant, otherwise increase the
obligations of the Tenant under this Agreement or adversely
affect the Tenant's leasehold interest created hereby or the
Tenant's use and enjoyment of the Leased Premises (except in
the circumstances contemplated by section 16 of this
Agreement) or, reduce the Landlord's obligations hereunder;
and
32.2.2. summary financial information regarding its financial position
as of the close of its most recently completed fiscal year and
its most recently completed interim fiscal period and
regarding its results of operations for the periods then ended
and comparable year earlier periods, certified by Tenant's
chief financial officer to be a complete, accurate and fair
presentation of the summary financial information purporting
to be set forth therein.
32.3. If the Landlord or any of its mortgagees gives notice to the Tenant of any
of their respective names and addresses from time to time, the Tenant
shall give notice to each such mortgagee of any notice of breach or
default previously or afterwards given by the Tenant to the Landlord under
this Agreement and provide in such notice that if the Landlord has not
cured such breach or default within any permissible cure period then such
mortgagee shall have the greater of (a) an additional period of 30 days or
(b) if such default cannot practically be cured within such period, such
additional period as is reasonable under the circumstances, within which
to cure such default. Upon request of the Landlord at any time or from
time to time, the Tenant shall execute, acknowledge and deliver to the
Landlord or its designee an acknowledgment of receipt of any such notice,
an acknowledgment of receipt of any notice of assignment of this Agreement
or rights hereunder by the Landlord to any of its mortgagees and the
Tenant's agreement to the foregoing effect on the respective forms, if
any, furnished by the Landlord or the respective mortgagees.
32.4. (i) 30 days prior to the termination of the Term and (ii) 30 days prior to
any relocation of the Tenant from the Leased Premises (as constituted on
the Commencement Date), the Tenant shall obtain from the New Jersey
Department of Environmental Protection, and deliver to the Landlord, the
Department's unconditional certificate of non-applicability or approval of
the Tenant's negative declaration or clean-up plan, together with copies
of all documents furnished to the Department in connection with obtaining
such certificate or approval. The Landlord shall cooperate with the Tenant
by supplying any information reasonably required and by signing any
affidavit in connection therewith as long as the Landlord may state that
it relies upon the information supplied by the Tenant, if that is the
case.
33. Waiver of Jury Trial and Arbitration.
The parties hereby waive any right they might otherwise have to a trial by jury
in connection with any dispute arising out of or in connection with this
Agreement or the use and occupancy of the Leased Premises; and they hereby
consent to arbitration of any such dispute in Princeton, New Jersey, in
accordance with the rules for commercial arbitration
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of the American Arbitration Association or successor organization, except that
the Landlord, in its sole discretion, may, with respect to any dispute involving
either (i) the Landlord's right to re-enter and re-take possession of the Leased
Premises or (ii) the determination of money damages following the occurrence of
an Event of Default under this Agreement, elect to pursue any of or all its
rights in any court of competent jurisdiction. Judgment upon any arbitration
award may be entered in any court of competent jurisdiction.
34. Severability.
In the event that any provision of this Agreement, or the application of any
provision in any instance, shall be conclusively determined by a court of
competent jurisdiction to be illegal, invalid or otherwise unenforceable, such
determination shall not affect the validity or enforceability of the balance of
this Agreement.
35. Notices.
All notices contemplated by, permitted or required by this Agreement shall be in
writing. All notices required by this Agreement shall be personally delivered or
forwarded by certified mail--return receipt requested, addressed to the intended
party at its address first set forth above (adding, in the case of notices to
the Landlord after the Commencement Date, "Attention: Lease Administration") or,
in the case of notices to the Tenant during the Term or any other period during
which the Tenant shall be in possession of the Leased Premises, at the Leased
Premises with a copy to Christopher S. Tarr, Esq., 600 College Road East,
Princeton, NJ 08540. Either party may from time to time change the address
prescribed in this Agreement for notices to it by notice to the other. All
notices required under this Agreement shall be deemed given upon their deposit,
properly addressed and postage prepaid, in a postal depository or upon personal
delivery to the intended party, regardless of whether delivery shall be refused.
36. Captions.
Captions have been inserted at the beginning of each section of this Agreement
for convenience of reference only and such captions shall not affect the
construction or interpretation of any such section of this Agreement.
37. Counterparts.
This Agreement may be executed in more than one counterpart, each of which shall
constitute an original of this Agreement but all of which, taken together, shall
constitute one and the same Agreement.
38. Applicable Law.
This Agreement and the obligations of the parties hereunder shall be governed by
and construed in accordance with the laws of the State of New Jersey.
39. Exclusive Benefit.
Except as may be otherwise specifically set forth in this Agreement, this
Agreement is made exclusively for the benefit of the parties hereto and their
permitted assignees and no one else shall be entitled to any right, remedy or
claim by reason of any provision of this Agreement.
40. Successors.
This Agreement shall be binding upon the parties hereto and their respective
successors and assigns.
41. Amendments.
This Agreement contains the entire agreement of the parties hereto, subsumes all
prior discussions and negotiations and, except as may otherwise be specifically
set forth in this Agreement, this Agreement may not be amended or otherwise
modified except by a writing signed by all the parties to this Agreement.
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42. Waiver.
Except as may otherwise be specifically set forth in this Agreement, the failure
of any party at any time or times to require performance of any provision of
this Agreement shall in no manner affect the right at a later time to enforce
the same. No waiver by any party of any condition, or of the breach of any term,
covenant, representation or warranty set forth in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach, or
as a waiver of any other condition or of the breach of any other term, covenant,
representation or warranty set forth in this Agreement. The Landlord's
acceptance of, or endorsement on, any partial payment of Rent or any late
payment of Rent from the Tenant shall not operate as a waiver of the Landlord's
right to the balance of the Rent due on a timely basis regardless of any writing
to the contrary on, or accompanying, the Tenant's partial payment or the
Landlord's putative acquiescence therein.
43. Course of Performance.
No course of dealing or performance by the parties, or any of them, shall be
admissible for the purpose of obtaining an interpretation or construction of
this Agreement at variance with the express language of the Agreement itself.
44. Landlord's Concessions.
44.1. If no Event of Default shall have occurred or, if an Event of Default
shall have occurred, the Tenant shall have previously cured it in full:
44.1.1. Whenever the Landlord knows that the contiguous space shown on
Exhibit A as Space A in the south wing of the first floor of
the Building will become available for leasing, the Landlord
shall give notice to the Tenant offering to lease Space A to
the Tenant at the Market Rental Rate specified in the notice
for a term commencing on the date set forth and continuing for
the interval specified. The requirement imposed upon the
Landlord by this subsection 44.1.1. with respect to Space A
shall continue in effect until the earlier of: (i) the
Tenant's timely and otherwise proper acceptance of any such
offer made by the Landlord or (ii) the Tenant's failure to
timely and otherwise properly accept any such offer made by
the Landlord. The Tenant shall have the right, exercisable
exclusively at the time and in the manner set forth below in
subsection 44.1.3, to accept the rentable floor space offered
(as set forth below) at the Market Rental Rate and for the
term specified. This is the "Right to Lease Additional Space
A".
44.1.1. Whenever the Landlord knows that the space shown on Exhibit A
as Space B in the south wing of the first floor of the
Building will become available for leasing, the Landlord shall
give notice to the Tenant offering to lease Space B to the
Tenant at the Market Rental Rate specified in the notice for a
term commencing on the date set forth and continuing for the
interval specified. The requirement imposed upon the Landlord
by this subsection 44.1.2 with respect to Space B shall
commence on the tenth day after the Tenant shall give notice
of its desire to lease additional space as specified in the
notice and shall continue in effect until the earlier of: (i)
the Tenant's timely and otherwise proper acceptance of any
such offer made by the Landlord or (ii) the Tenant's failure
to timely and otherwise properly accept any such offer made by
the Landlord. The Tenant shall have the right, exercisable
exclusively at the time and in the manner set forth below in
subsection 44.1.3, to accept the rentable floor space offered
(as set forth below) at the Market Rental Rate and for the
term specified. This is the "Right to Lease Additional Space
B".
44.1.3. The Tenant shall exercise its right to accept any Landlord's
offer of additional space contemplated by subsections 44.1.1
and 44.1.2 of this Agreement, by giving notice of acceptance
to the Landlord within ten
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business days after the Landlord gives notice of the offer to
the Tenant. All additional space leased by the Tenant pursuant
to the exercise of any Right to Lease Additional Space shall
be taken AS IS. The annual rate of Basic Rent for the
additional premises shall be the Market Rental Rate, as set
forth in the Landlord's notice to the Tenant, unless the
Tenant serves a notice upon the Landlord which affirmatively
indicates that the Market Rental Rate for the space is not
acceptable, in which case the Basic Rent for the additional
premises shall be that amount which is the product of the
rentable floor space of the additional premises, multiplied by
the lesser of (a) the Market Rental Rate on a rentable square
foot basis as set forth in the Landlord's notice to the
Tenant, or (b) the Market Rental Rate on a rentable foot basis
determined in accordance with the alternate procedure set
forth in the definition of Market Rental Rate. If the Tenant
fails timely to accept any offer of the Landlord, its Right to
Lease Additional Space A or the Right to Lease Additional
Space B, as the case may be, shall thereupon terminate.
44.2. Unless (i) a valid termination has occurred pursuant to the provisions of
subparagraph 23.1.1 of this Agreement; (ii) a valid termination has
occurred pursuant to any other provision of this Agreement; or (iii) a
valid election to re-enter pursuant to the provisions of subparagraph
23.1.2 of this Agreement has been made, if Landlord shall fail to provide
or arrange for the provision of:
44.2.1. any services in accordance with the provisions of section 8 of
this Agreement, for the Building, the Leased Premises or the
Property, after written notice from the Tenant specifying the
respects in which such services are not being provided and if,
the specified deficiencies in such services are not corrected
within a ten day interval following service of the notice, (or
if the deficiencies cannot be corrected within the ten day
interval, if the Landlord does not commence and diligently
prosecute the correction to completion) then, thereafter, the
Tenant may take corrective measures including the engagement
of the services of its own contractor to provide such services
and the Tenant may deduct the reasonable cost of the same from
payments of Additional Rent.
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44.2.2. garbage removal or janitorial services in accordance with the
provisions of subsection 8.1.2 of this Agreement after written
notice from the Tenant specifying the respects in which such
services are not being provided and if, the specified
deficiencies in such services are not corrected within a ten
day interval following service of the notice (or if the
deficiencies cannot be corrected within the ten day interval,
if the Landlord does not commence and diligently prosecute the
correction to completion) then, thereafter, the Tenant may
engage the services of its own contractor to provide such
garbage removal or janitorial services (as the case may be).
In such event, the cost of garbage removal or janitorial
services (as the case may be) shall be excluded as an
Operational Expense and the Tenant may deduct the reasonable
cost of the same from payments of Additional Rent.
44.2.3. If Landlord fails to pay The Garibaldi Group in accordance
with the provisions of the agreement with Carnegie Center
Associates then Tenant may pay the balance owing to The
Garibaldi Group and deduct the same from any Rent which falls
due hereunder.
44.2.4. As between Landlord and Tenant, Tenant may also deduct from
Rent any payments which it makes pursuant to any of the
following subsections:
44.2.4.1. Any moving costs which are not reimbursed by
Landlord pursuant to the provisions of subsection
5.4 of this Agreement;
44.2.4.2. Any payments by Tenant to complete punchlist items
required to be completed by Landlord which are not
completed pursuant to the provisions of subsection
4.2.4 of this Agreement;
44.2.4.3. Any overpayments by Tenant of Operational
Expenses, Capital Expenditures or Taxes when
Tenant is entitled to reimbursement by the
Landlord and Landlord has failed to reimburse
Tenant in accordance with the provisions of this
Agreement;
44.2.4.4. Any payment which Tenant makes as a result of a
default by Landlord of its obligations pursuant to
subsection 27.2 of this Agreement; and
44.2.4.5. Any funds expended by Tenant as a result of a
failure by Landlord to use insurance or
condemnation proceeds in accordance with the
requirements of this Agreement.
44.2.5. If Tenant has utilized any of the self help rights set forth
in subsection 44.2 of this Agreement and a subsequent valid
termination occurs pursuant to subparagraph 23.1.1 of this
Agreement or a valid election to re-enter is made pursuant to
subparagraph 23.1.2 of this Agreement, then the amount
remaining due to the Tenant under subsection 44.2 of this
Agreement, if any, shall be offset against any Termination
Damages or Re-Leasing Damages otherwise due under this
Agreement.
44.2.6. Tenant may also seek specific performance, temporary
restraints and preliminary and permanent injunctive relief
where the Tenant's rights and remedies at law may be
inadequate.
44.3. (a) If no Event of Default shall have occurred or, if an Event of Default
shall have occurred, the Tenant shall have previously cured it in full and
the Landlord shall have waived it; and (b) if there shall not have been a
History of Recurring Events of Default, the Landlord hereby waives its
right to receive (i) one-half the Basic Rent otherwise due and payable for
the Leased Premises for the months of October, November and December, 1994
and (ii) one-half the Basic Rent otherwise due and payable for the Leased
Premises for the months of October, November and December, 1995.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
LANDLORD:
PRINCETON 202 ASSOCIATES LIMITED PARTNERSHIP
By: ABL Funding Corp.
By: /s/ Alan B. Landis
-----------------------------
Alan B. Landis, President
|
TENANT:
MATHTECH, INC.
By: /s/ William A. Morrill
-----------------------------
William A. Morrill, President
|
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EXHIBIT A
LEASED PREMISES FLOOR SPACE DIAGRAM
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EXHIBIT B
DESCRIPTION OF 202 CARNEGIE CENTER
WEST WINDSOR TOWNSHIP
MERCER COUNTY, NEW JERSEY
All that certain tract and parcel of land located in the Township of West
Windsor, County of Mercer and State of New Jersey.
BEGINNING at a point, said point being the most northwesterly corner of Lot 77,
Block S-9, as shown on a Map entitled: "Major Subdivision Lot 7, Block S-9",
situated in West Windsor Township, Mercer County, New Jersey, dated 7-25-85,
latest revision 5-05-86, prepared by Lynch, Carmody, Giuliano & Karol, P.E., and
filed in the Mercer County Clerk's Office as Map No. 2800 on November 24, 1986:
From said BEGINNING POINT thence running;
1) North 87(degree)48' 22" east, 531.11 feet to a point; thence
2) South 02(degree)11' 38" east, 335.00 feet to a point; thence
3) South 42(degree)48' 22" west, 640.00 feet to a point; thence
4) North 47(degree)11' 38" west, 500.00 feet to a point; thence
5) North 42(degree)48' 22" east, 306.05 feet to a point of curvature; thence
6) Northerly along a curve to the left having a radius of 200.00 feet, an arc
length of 157.08 feet to a point of tangency; thence
7) North 02(degree)11' 38" west, 76.17 feet to the point and plaCE OF
BEGINNING.
Containing 8.9363 Acres.
BEING known and designated as Lot 77, Block S-9 as shown on a Map entitled:
"Major Subdivision Lot 7, Block S-9", situated in West Windsor Township, Mercer
County, New Jersey, dated 7-25-85, latest revision 5-05-86, prepared by Lynch,
Carmody, Giuliano & Karol, P.E., and filed in the Mercer County Clerk's Office
as Map No. 2800 on November 24, 1986.
The above description being in accordance with a survey prepared by Fellows,
Read & Associates, Inc. dated December 5, 1989, as revised January 23, 1990.
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EXHIBIT C
WORK LETTER
The following is the Work Letter provided for in the Agreement of which this
exhibit is a part.
The Building's structure is a three-story office building of Construction Type
2C with a steel frame, a metal deck floor system, a granite and concrete
exterior facade and insulated glass. The floors will sustain a live load of 100
pounds per square foot of usable floor space plus an allowance of 20 pounds per
square foot for partitions and will have a typical bay size of 30 feet by 30
feet.
Among other Common Facilities, the Building will contain one men's and one
women's bathroom on each floor, one drinking fountain on each floor and two
hydraulic elevators with a capacity of 2,500 pounds each and will have Parking
Facilities with approximately 400 lined parking spaces.
The Tenant will include the following information as part of its Tenant Plan:
1. The location and extent of floor loading, if any, in excess of the
building standard specified above.
2. Special air conditioning requirements, if any, in excess of the building
standard specified above by location and general description of special
requirements.
3. Plumbing requirements, if any.
4. Estimated total electrical load, including lighting requirements, lighting
switch requirements and electrical outlet requirements, if any, in excess
of the building standard specified above and being provided by the
Landlord, setting forth the amount of the load, locations and types.
All doors that have locksets shall be keyed as follows:
One master key shall operate all the locks except room #137, Office
Security, which shall have its own combination lock.
The entrance doors to the Leased Premises shall be keyed as "Lock-Out
System", with four master keys which can operate the lock so that it
remains in an open position. Fifty other keys will be provided which can
open the door for access, but cannot leave the lockset in an open
position.
Doors that requires closers as noted on drawings, shall have Norton
closers. Closers shall not have hold open feature. Two doors (as noted on
Architectural Plans) shall be equipped with pull side closers. If pull
side closers cannot be installed then concealed closers shall be
installed.
Contractor shall install Tenant's existing combination lockset on door to room
#137. Hardware shall be adjusted to meet the requirements of the Americans with
Disabilities Act.
The Heating, Ventilation and Air Conditioning specifications for the Building
are as follows:
HEATING
A. Outdoor 11 degrees F, 15 mph
B. Indoor 72 degrees F, no relative humidity control
AIR CONDITIONING
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A. Outdoor 88 degrees F DB, 74 degrees F WB
B. Indoor 75 degrees F DB, 50% RH
C. Tenant characteristics upon which to base air conditioning capacity are:
GSF/Person - 125
Lighting - 2 W/sf
Outlets - 1 W/sf
Desktop Terminals - 1 W/sf
INDOOR DESIGN CONDITIONS
A. Winter
Tenant Areas - 72 degrees F
Lobby - 72 degrees
Compactor Room - 55 degrees F
Sprinkler Room - 55 degrees F
Electric Panel Room - 60 degrees F
Vestibules - 55 degrees F
Stairwells - 65 degrees F
Service Lobby - 55 degrees F
B. Summer
Tenant Areas, Lobby and core area, Telephone Equipment Room, Elevator
Equipment Room - 75 degrees F 50% R.H.
Electric Panel Room - 90% F Service Lobby, Janitors Closets, Sprinkler
Room - Ventilation only
C. Ventilation
Tenant Areas, Electric Panel Room, Telephone Equipment Room, Elevator and
Equipment Room - 15 cfm/person
Toilets - 2 cfm/sf
Janitors Closet - 2 cfm/sf
Compactor Room 10 AC/H
Ventilation quantities shall be augmented as required to satisfy exhaust
and building pressurization requirements, and local code requirements
where more stringent.
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EXHIBIT D
BUILDING RULES AND REGULATIONS
The following are the Building Rules and Regulations adopted in accordance with
subsection 7.2.3 of the Agreement of which this exhibit is a part. The Landlord
shall enforce these Building Rules and Regulations in a uniform manner. The
Tenant and the Tenant's employees, other agents and Guests shall comply with
these Building Rules and Regulations:
1. The sidewalks, driveways, entrances, passages, courts, lobby, esplanade
areas, plazas, elevators, vestibules, stairways, corridors, halls and
other Common Facilities shall not be obstructed or encumbered or used for
any purpose other than ingress and egress to and from the Leased Premises.
The Tenant shall not permit or suffer any of its employees, other agents
or Guests to congregate in any of the said areas. No door mat of any kind
whatsoever shall be placed or left in any public hall or outside any entry
door of the Leased Premises.
2. No awnings or other projections shall be attached to the outside walls of
the Building. No curtains, drapes, blinds, shades or screens shall be
attached to, hung in or used in connection with any window or door of the
Leased Premises without the prior written consent of Landlord. If such
consent is given, such curtains, drapes, blinds, shades or screens shall
be of a quality, type, design and color, and attached in the manner,
approved by Landlord.
3. Except as otherwise specifically provided in subsection 18.1 of the
Agreement, no sign, insignia, advertisement, object, notice or other
lettering shall be exhibited, inscribed, painted or affixed so as to be
visible from outside the Leased Premises or the Building. In the event of
the violation of the foregoing by the Tenant, the Landlord may remove same
without any liability and may charge the expense incurred in such removal
to the Tenant.
4. The sashes, doors, skylights, windows, and doors that reflect or admit
light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed and no bottles, parcels or
other articles shall be placed on the window sills.
5. No showcase or other articles shall be placed in front of or affixed to
any part of the Building or the Common Facilities.
6. The lavatories, water and wash closets and other plumbing fixtures shall
not be used for any purposes other than those for which they were designed
and constructed, and no sweepings, rubbish, rags, acids or other
substances shall be thrown or deposited therein. All damages resulting
from any misuse thereof shall be repaired at the expense of the Tenant
that permitted or suffered the violation hereof by the Tenant, the
Tenant's employees, other agents or Guests.
7. The Tenant shall not mark, paint, drill into or in any way deface any part
of the Leased Premises, the Building, the Common Facilities or the
Property. No boring, cutting or stringing of wires shall be permitted,
except with the prior written consent of the Landlord, and as the Landlord
may direct. Linoleum and other resilient floor coverings shall be laid so
that the same shall not come in direct contact with the floor of the
Leased Premises; and if linoleum or other resilient floor coverings are
desired, an interlining of builder's deadening felt shall be first affixed
to the floor by a paste or other material that is, and will remain,
soluble in water. The use of cement or other adhesive material that either
is not, or will not remain, soluble in water is prohibited.
8. No bicycles, vehicles, animals, reptiles, fish or birds of any kind shall
be brought into or kept in or about the Leased Premises.
9. No noise including, without limiting the generality of the foregoing,
music or the playing of musical instruments, recordings, radio or
television which, in the reasonable judgment of Landlord, might disturb
tenants of Other Leased Premises shall be made or permitted by the Tenant.
Nothing shall be done or permitted in the
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Leased Premises by the Tenant which would impair or interfere with the use
or enjoyment of Other Leased Premises by any tenant thereof. Nothing shall
be thrown out of the doors, windows or skylights or down the passageways
of the Building.
10. The Tenant shall not manufacture any commodity, or prepare or dispense any
foods or beverages, tobacco, flowers or other commodities or articles
without the prior written consent of the Landlord.
11. Duplicates of keys and passes distributed to the Tenant by the Landlord
shall not be made. The Tenant shall provide appropriate security for keys.
Nothing shall be done to render any lock inoperable by the Building Grand
Master Key. No lock shall be installed without the Landlord's prior
written consent; and any lock so installed shall be operable by the
Building Grand Master Key. Upon termination of the Term, all keys, passes
and duplicates provided by the Landlord to the Tenant, or otherwise
procured by the Tenant, shall be returned to the Landlord. Any failure to
comply with the foregoing which requires changes in locks, new or
additional keys, passes or duplicates or other services of a locksmith
shall be paid by the Tenant. This rule and its requirements are subject to
the provisions of the Work Letter regarding keys, combination locks and
doors closers, and special provisions for room #137.
12. All deliveries and removals, and the carrying in or out of any safes,
freight, furniture, packages, boxes, crates or any other object or matter
of any description shall take place during such hours, in such manner and
in such elevators and passageways as the Landlord may determine from time
to time. The Landlord reserves the right to inspect all objects and matter
being brought into the Building or the Common Facilities and to exclude
from the Building and the Common Facilities all objects and matter that
violates any of these Building Rules and Regulations or that are
contraband. The Landlord may (but shall not be obligated to) require any
person leaving the Building or the Common Facilities with any package or
object or matter from the Leased Premises to establish his authority from
the Tenant to do so. The establishment and enforcement of such a
requirement shall not impose any responsibility on the Landlord for the
protection of the Tenant against the removal of property from the Leased
Premises. The Landlord shall not be liable to the Tenant for damages or
loss arising from the admission, exclusion or ejection of any person to or
from the Leased Premises or the Building or the Common Facilities under
this rule.
13. The Tenant shall not place any object in any portion of the Building that
is in excess of the safe carrying or designed load capacity of the
structure.
14. The Landlord shall have the right to prohibit any advertising or display
of any identifying sign by the Tenant which in the Landlord's judgment
tends to impair the reputation of the Building or its desirability; and,
on written notice from the Landlord, the Tenant shall refrain from or
discontinue such advertising or display of such identifying sign.
15. The Landlord reserves the right to exclude from the Building and the
Common Facilities during hours other than Regular Business Hours all
persons who do not present a pass thereto signed by both the Landlord and
the Tenant. All persons entering or leaving the Building or the Common
Facilities during hours other than Regular Business may be required to
sign a register. The Landlord will furnish passes to persons for whom the
Tenant requests same in writing. The establishment and enforcement of such
a requirement shall not impose any responsibility on the Landlord for the
protection of the Tenant against unauthorized entry of persons.
16. The Tenant, before closing and leaving the Leased Premises at any time
shall see that all lights and appliances generating heat (other than the
heating system) are turned off. All entrance doors to the Leased Premises
shall be left locked by the Tenant when the Leased Premises are not in
use. At any time when the Building or the Common Facilities are locked
during hours other than Regular Business Hours, the Building and the
Common Facilities locks shall not be defeated by any means, such as by
leaving a door ajar.
17. No person shall go upon the roof of the Building without the prior written
consent of the Landlord.
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18. Any requirements of the Tenant may be attended to only upon application at
the office of the Building. The Landlord and its agents shall not perform
any work or do any work or do anything outside of the Landlord's
obligations under the Agreement except upon special instructions from the
Landlord on terms acceptable to the Landlord and the Tenant.
19. Canvassing, soliciting and peddling in the Building and the Common
Facilities are prohibited and the Tenant shall cooperate to prevent same.
20. There shall not be used in any space, or in the public halls or other
Common Facilities of the Building, in connection with the moving or
delivery or receipt of safes, freight, furniture, packages, boxes, crates,
paper, office material, or any other matter or thing, any hand trucks or
dollies except those equipped with rubber tires, side guards and such
other safeguards as the Landlord shall require. No hand trucks shall be
used in passenger elevators, and no passenger elevators shall be used for
the moving, delivery or receipt of the aforementioned articles. In
connection with moving in or out any furniture, furnishings, equipment,
heavy articles and heavy packages, the Tenant shall take such precautions
as may be necessary to prevent excessive wear and tear in the Building's
Common Facilities and the Leased Premises including, without limiting the
generality of the foregoing, floor and wall treatments.
21. The Tenant shall not cause or permit any odors of cooking or other
processes or any unusual or objectionable odors to emanate from the Leased
Premises which might constitute a Nuisance. No cooking shall be done in
the Leased Premises other than as specifically permitted in the Agreement.
22. The Landlord reserves the right not to enforce any Building Rule or
Regulation against any tenants of Other Leased Premises. The Landlord
reserves the right to rescind, amend or waive any Building Rule and
Regulation when, in the Landlord's reasonable judgment, it appears
necessary or desirable for the reputation, safety, care or appearance of
the Building or the preservation of good order therein or the operation of
the Building or the comfort of tenants or others in the Building. Any
change shall be uniform in its application. No rescission, amendment or
waiver of any Building Rule and Regulation in favor of one tenant shall
operate as a rescission, amendment or waiver in favor of any other tenant.
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EXHIBIT E
DEFINITIONS AND INDEX OF DEFINITIONS
In accordance with section 1 of the Agreement of which this exhibit is a part,
throughout the Agreement the following terms and phrases shall have the meanings
set forth or referred to below:
1. "Additional Rent" means all amounts, other than Basic Rent and any
Security Deposit, required to be paid by the Tenant to the Landlord in
accordance with this Agreement.
2. "Agreement" means this Lease and Lease Agreement (including exhibits), as
it may have been amended.
3. "Annual Amortized Capital Expenditure" means the payment amount determined
as an annuity in arrears using the cost incurred by the Landlord for any
Capital Expenditure as the present value, the number of years of its
useful life (not exceeding 10 years) selected by the Landlord in
accordance with generally accepted accounting practice as the number of
periods and the Base Rate in effect when the respective improvement is
first placed into service plus two additional percentage points as the
annual rate of interest.
4. "Base Rate" means the prime commercial lending rate per year as announced
from time to time by The Chase Manhattan Bank (National Association) at
its principal office in New York City.
5. "Base Year" means the full calendar year 1994 with respect to Operational
Expenses and Taxes adjusted to reflect 95% occupancy.
6. "Base Year Operational Expenses" means actual Operational Expenses
incurred by the Landlord during the Base Year.
7. "Base Year Taxes" means the product of the final assessed value, as the
same may subsequently be adjusted in any appeal of the tax assessor's
valuation, of the Property, the Building and any other improvements on the
Property in the Base Year and the Municipality's lowest tax rate for
office buildings and the property on which they stand in effect during the
Base Year.
8. "Basic Rent" is defined in subsection 3.2 of this Agreement.
9. "Building" means the office building erected on the Property which is
commonly known as 202 Carnegie Center, Princeton, New Jersey 08540, as it
may, in the Landlord's sole discretion, be increased, decreased, modified,
altered or otherwise changed from time to time before, during or after the
Term. As the Building is presently constructed it consists of 126,745
gross rentable square feet of floor space.
10. "Capital Expenditure" is defined in subsection 10.3 of this Agreement.
11. "Commencement Date" is defined in section 4 of this Agreement.
12. "Common Facilities" means the areas, facilities and improvements provided
by the Landlord in the Building (except the Leased Premises and the Other
Leased Premises) and on or about the Property, including, without limiting
the generality of the foregoing, the Parking Facilities and access roads
thereto, for non-exclusive use by the Tenant in accordance with subsection
2.2 of this Agreement, as they may, in the Landlord's sole discretion, be
increased, decreased, modified, altered or otherwise changed from time to
time before, during or after the Term.
13. "Common Walls" means those walls which separate the Leased Premises from
Other Leased Premises.
14. "Electric Charges" means all the supplying utility's charges for, or in
connection with, furnishing electricity including charges determined by
actual usage, any
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seasonal adjustments, demand charges, energy charges, energy adjustment
charges and any other charges, howsoever denominated, of the supplying
utility, including sales and excise taxes and the like.
15. "Event of Default" is defined in section 22 of this Agreement.
16. "Expiring Term" means, when used in the context of any Option to Renew,
the Term as it is then scheduled to expire (immediately prior to exercise
of the next available Option to Renew).
17. The Tenant's "Guests" shall mean the Tenant's licensees, invitees and all
others in, on or about the Leased Premises, the Building, the Common
Facilities or the Property, either at the Tenant's express or implied
request or invitation or for the purpose of soliciting or visiting the
Tenant.
18. A "History of Recurring Events of Default" means the occurrence of three
or more Events of Default (whether or not cured by the Tenant) in any
period of 12 months.
19. "Holdover Damages" is defined in subsection 23.4 of this Agreement.
20. The "Index" means the "all items" index figure for the New York
Northeastern New Jersey average of the Consumer Price Index for all urban
wage earners and clerical workers which uses a base period of 1982-84=100,
published by the United States Department of Labor, so long as it
continues to be published. If the Index is not published for a period of
three consecutive months, or if its base period is changed, the term
"Index" shall mean that index, as nearly equivalent in purpose, function
and coverage as practicable to the original Index, which the Landlord
shall have designated by notice to the Tenant.
21. "Initial Term" means the period so designated in subsection 4.1 of this
Agreement.
22. "Initial Year" means the first 12 full calendar months of the Initial
Term.
23. "Landlord" means the person so designated at the beginning of this
Agreement and those successors to the Landlord's interest in the Property
and/or the Landlord's rights and obligations under this Agreement
contemplated by section 26 of this Agreement.
24. "Leased Premises" means that portion of the interior of the Building (as
viewed from the interior of the Leased Premises) bounded by the interior
sides of the unfinished floor and the finished ceiling on the first floor
(as the floors have been designated by the Landlord) of the Building, the
centers of all Common Walls and the exterior sides of all walls other than
Common Walls, the outline of which floor space is designated on the
diagram set forth in Exhibit A attached hereto, which portion contains
approximately 10,160 square feet of usable floor space (without including
the landing area) and 11,989 square feet of gross rentable floor space.
The actual footage will be determined in the design stage of the space.
The Tenant shall have full layout discretion based on architectural
assistance and program needs. After completion of construction, the usable
area of the premises shall be measured by Tenant's Architect. Usable area
of the premises shall mean the square footage computed based on the gross
area of the horizontal plane enclosed by the interior surface of the
exterior walls of the building, the midpoint of any walls separating the
premises from adjacent tenants, the slab penetration line of all walls
separating the premises from service areas, and the interior corridor side
of walls separating the premises from the interior common areas, which
shall include corridors, lobbies and other core and common areas. In
computing usable area, no deduction shall be made for columns or
projections necessary to the building. The number of square feet of gross
rentable space of the Leased Premises shall be equal to the usable area
multiplied by 1.18. References within this Agreement to the gross rentable
floor space and the usable floor space, respectively, of the Leased
Premises shall mean the respective quantities herein specified.
25. "Legal Holidays" means New Year's Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
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26. "Market Rental Rate" means, at the time of reference, the gross rentable
floor space of the Leased Premises multiplied by that annual rate of Basic
Rent per square foot of gross rentable floor space which is then being
quoted by the Landlord for comparable Other Leased Premises (or would then
be quoted if comparable Other Leased Premises were then available). If
Market Rental Rate is required to be determined pursuant to subsection
6.3.2 or subsection 44.1.3 of this Agreement, it shall be determined based
upon all the factors which are considered relevant to such a determination
including, but not limited to, allowances and concessions. In such cases,
the Market Rental Rate shall be determined by a board of three independent
Real Estate Brokers, one of whom shall be named by Landlord, one by
Tenant, and the two so appointed shall select a third. Each of said
Brokers shall be licensed in the State of New Jersey as Real Estate
Brokers, specializing in the field of commercial office buildings, having
at least ten years' experience and having no affiliation with Landlord or
Tenant. Landlord and Tenant agree to make their appointments promptly
within ten days after the process is invoked, or sooner if mutually
agreed. The two Brokers selected by the Landlord and Tenant shall promptly
select the third Broker within fifteen days after they both have been
appointed. Each Broker, within thirty days after the third Broker is
selected, shall submit in writing his or her determination of the Market
Rental Rate to Landlord and Tenant. The Market Rental Rate shall be the
arithmetic mean of the two closest Market Rental Rate determinations,
provided that if the absolute difference between the middle appraisal and
the highest and lowest appraisals, respectively, are equal then the middle
appraisal shall deemed to be the Market Rental Rate. Each party shall pay
the fee, if any, of the Broker which the party selected and they shall
share equally the fee, if any, of the third Broker.
27. "Municipality" means the Township of West Windsor in Mercer County, New
Jersey, or any suc27. Municipality" means the Township of West Windsor in
Mercer County, New Jersey, or any suc
28. "No Pass Through Period" means, in the context of Operational Expenses and
Taxes, the period beginning on the Commencement Date and ending at the
close of business on the day before the first anniversary of the
Commencement Date.
29. "Nuisance" means any condition or occurrence which unreasonably or
materially interferes with the authorized use and enjoyment of the Other
Leased Premises and the Common Facilities by any tenant of Other Leased
Premises or by any person authorized to use any Other Leased Premises or
Common Facilities or with the authorized use of any other areas, buildings
or other improvements in the Carnegie Center Complex.
30. "Operational Expenses" is defined in subsection 10.2 of this Agreement.
31. "Option to Renew" is defined in subsection 6.1 of this Agreement.
32. "Other Leased Premises" means all premises within the Building, with the
exception of the Leased Premises, that are, or are available to be, leased
to tenants or prospective tenants, respectively.
33. "Parking Facilities" means the parking area adjacent to the Building,
containing the approximate number of lined parking spaces set forth in the
Work Letter, which parking area is provided as Common Facilities. Landlord
will not provide any express agreement allowing tenants in other buildings
to use the Parking Facilities.
34. "Person" includes an individual, a corporation, a partnership, a trust, an
estate, an unincorporated group of persons and any group of persons.
35. "Property" means the parcel of land, as it may, in the Landlord's sole
discretion, be increased, decreased, modified, altered or otherwise
changed from time to time before, during or after the Term, on which the
Building is (or is about to be) erected. As the Property is presently
constituted, it is more particularly described in Exhibit B attached
hereto.
36. "Regular Business Hours" means 8:00 A.M. to 6:00 P.M., Monday through
Friday, and 8:00 A.M. to 1:00 P.M. on Saturday, except on Legal Holidays.
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37. "Re-Leasing Damages" is defined in subsection 23.3.
38. "Renewal Term" means, at the time of reference, any portion of the Term,
other than the Initial Term, as to which the Tenant has properly exercised
an Option to Renew which Option to Renew has not been rescinded in
accordance with subsection 6.4.1 of this Agreement.
39. "Rent" means Basic Rent and Additional Rent.
40. The "Right to Lease Additional Space A" is defined in subsection 44.1.1 of
this Agreement.
41. The "Right to Lease Additional Space B" is defined in subsection 44.1.2 of
this Agreement.
42. "Security Deposit" is designated in section 29 of this Agreement.
43. "Space A" is defined in subsection 44.1.1 of this Agreement.
44. "Space B" is defined in subsection 44.1.2 of this Agreement.
45. "Target Date" means, upon execution and delivery of this Agreement, the
then estimated Commencement Date which is hereby established to be July
15, 1994.
46. "Taxes" means, in any calendar year, the aggregate amount of real property
taxes, assessments and sewer rents, rates and charges, state and local
taxes, transit taxes and every other governmental charge, whether general
or special, ordinary or extraordinary (except corporate franchise taxes
and taxes imposed on, or computed as a function of, net income or net
profits from all sources and except taxes charged, assessed or levied
exclusively on the Leased Premises or arising exclusively from the
Tenant's occupancy of the Leased Premises) charged, assessed or levied by
any taxing authority with respect to the Property, the Building, the
Common Facilities and any other improvements on the Property and an
allocable portion of Taxes with respect to other portions of the Carnegie
Center Complex, less any refunds or rebates (net of expenses incurred in
obtaining any such refunds or rebates) of Taxes actually received by the
Landlord during such calendar year with respect to any period during the
Term for the benefit of the Tenant, tenants of Other Leased Premises and
the Landlord. If during the Term there shall be a change in the means or
methods of taxing real property generally in effect at the beginning of
the Term and another type of tax or method of taxation should be
substituted in whole or in part for, or in lieu of, Taxes, the amounts
calculated under such other types of tax or by such other methods of
taxation shall also be deemed to be Taxes. Until such time as the actual
amount of Taxes for any calendar year becomes known, the amount thereof
shall be the Landlord's estimate of Taxes for that calendar year.
47. "Tenant" means the person so designated at the beginning of this
Agreement.
48. "Tenant Electric Charges" means (a) during Regular Business Hours,
Electric Charges attributable to the Tenant's use of electricity in the
Leased Premises for purposes other than heating, ventilation and air
conditioning provided to the Leased Premises by the Landlord in accordance
with subsection 8.2.4 of this Agreement and (b) during other than Regular
Business Hours, a charge at the rate of $75.00 per hour or partial hour of
use plus Electric Charges attributable to the Tenant's use of electricity
in the Leased Premises for all purposes including, without limiting the
generality of the foregoing, heating, ventilation and air conditioning.
49. "Tenant Plan" means construction drawings and related construction
specifications regarding the build-out of the Leased Premises (with any
construction drawings in a reproducible diazo sepia mylar form) including,
without limiting the generality of the foregoing, the information called
for by the Work Letter, signed and sealed by Tenant's Architect, complying
in all respects with applicable building and fire codes and insurance
underwriting standards in effect and in sufficient detail to permit the
Municipality to issue any required building permits and to permit skilled
contractors to supply and perform the work called for therein. The Tenant
Plan is dated April 12, 1994 and consists of seven sheets, as follows:
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A1 General Notes
A2 First Floor Architectural Plan
A3 First Floor Reflected Ceiling Plan
A4 First Floor Electrical Plan
I1 Interior Elevations and Details
I2 Interior Elevations and Details
I3 Interior Elevations
The Tenant Plan has been initialed by the parties and a copy has been
retained by each of them.
50. "Tenant Plan Due Date" means March 31, 1994.
51. "Tenant's Architect" is AGM Architects.
52. "Tenant's Share" of any amount means 9.5%.
53. "Term" means the Initial Term plus, at the time of reference, any Renewal
Term.
54. "Termination Damages" is defined in subsection 23.2 of this Agreement.
55. "Utilities Expenses" means Electric Charges (other than Tenant Electric
Charges) and all charges for any other fuel that may be used in providing
electricity and services powered by electricity that the Landlord provides
in accordance with section 8 of this Agreement to the Building, the Leased
Premises, Other Leased Premises, the Common Facilities and the Property,
including sales and excise taxes and the like.
56. "Work Letter" means Exhibit C attached hereto which generally describes
the type of construction of the Building and, unless the Tenant Plan does
not require any such respective improvement, those improvements the
Landlord will provide or install in the Leased Premises without
installation charge to the Tenant in connection with the preparation of
the Leased Premises contemplated by section 5 of this Agreement.
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SECOND AMENDMENT TO LEASE AND LEASE AGREEMENT
Between
210 ASSOCIATES LIMITED PARTNERSHIP
The Landlord
And
MATHTECH, INC.
The Tenant
For Leased Premises In
210 Carnegie Center
Princeton, New Jersey
April 15, 1994
Prepared by:
Gary O. Turndorf
210 Carnegie Center
Suite 100
Princeton, NJ 08540
(XXX) XXX-XXXX
SECOND AMENDMENT TO LEASE AND LEASE AGREEMENT, dated as of April 15, 1994,
between 210 ASSOCIATES LIMITED PARTNERSHIP, a New Jersey partnership, with
offices at Suite 100, 210 Carnegie Center, Princeton, New Jersey 08540 (the
"Landlord"), and MATHTECH, INC., a Delaware corporation, with its office at 210
Carnegie Center, Suite 200, Princeton, NJ 08540 (the "Tenant").
The Landlord and the Tenant are parties to a lease for premises in 210 Carnegie
Center dated April 11, 1986 as amended by a first amendment dated February 17,
1987 (collectively, the "Lease"). An affiliate of Landlord has requested Tenant
to relocate to Building 202 in the Carnegie Center Complex and Tenant has agreed
to do so by a new lease (the "202 Lease") being executed contemporaneously with
this agreement (the "Second Amendment") subject, among other things to the
execution of this Second Amendment on the terms set forth below. Except as
amended by this Second Amendment, the terms of the Lease otherwise remain in
full force and effect.
In consideration of the premises and other good and valuable consideration, the
Lease is hereby amended, as follows:
1. Unless otherwise specified, all capitalized terms which are defined in the
Lease shall have the same definitions in this Second Amendment.
2. Tenant shall continue to comply with all obligations set forth in the
Lease through the date it vacates all the Leased Premises.
3. Article 3 of the Lease is hereby amended to state that the Term of the
Lease shall terminate upon the Commencement Date for the 202 Lease
Agreement (as such term is defined in the 202 Lease Agreement).
4. There shall be an accounting between the parties following the termination
of the Term with respect to all charges owing from one to the other
through the date of the termination of the Term.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be
executed as of the date first above written.
LANDLORD:
210 ASSOCIATES LIMITED PARTNERSHIP
By: Princeton 210 Associates Limited Partnership
By: 210 Capital Corp.
By: /s/ Alan B. Landis
----------------------------------
Alan B. Landis, President
|
TENANT:
MATHTECH, INC.
By: /s/ William A. Morrill
----------------------------------
William A. Morrill, President
|
210 Associates Limited Partnership
210 Carnegie Center, Suite 100
Princeton, NJ 08540
(609) 452-1444
April 15, 1994
Mr. William A. Morrill, President
Mathtech, Inc.
210 Carnegie Center, Suite 200
Princeton, NJ 08540
Re: Mathtech, Inc.
Dear Mr. Morrill:
The Tenant Plan attached to the Lease for the 202 Building specifies that the
walls will be built with 20 gauge studs, 16" on center, with 5/8" sheetrock. The
existing premises in 210 Carnegie Center were built with 25 gauge studs, 24" on
center, with 1/2" sheetrock. We have agreed to compromise the standard to 25
gauge studs, 24" on center, with 5/8" sheetrock. Please confirm that this is the
case by signing and returning the copy of this letter which is attached.
Sincerely yours,
PRINCETON 202 ASSOCIATES LIMITED PARTNERSHIP
By: ABL Funding Corp.
By: /s/ Alan B. Landis
----------------------------------
Alan B. Landis, President
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ABL/ego
EXHIBIT II
DESCRIPTION OF THE SUBLEASED PREMISES
[FLOOR PLAN]
EXHIBIT III
CONSENT OF LANDLORD
CARNEGIE CENTER 210 Carnegie Center xxx-xxx-xxxx
Princeton, NJ 08540-6233 Fax: xxx-xxx-xxxx
November 20, 1995
VIA FACSIMILE xxx-xxx-xxxx AND BY HAND New Mailing Address:
Ms. Deborah J. Daughtry 101 Carnegie Center
202 Carnegie Center, Suite 111 Suite 101
Princeton, NJ 08540-6239 Princeton, NJ 08540
RE: 1. Lease dated April 15, 1994, Between Princeton 202 Associates Limited
Partnership (the "Landlord") and Mathtech, Inc. ("Mathtech") (the
"Lease")
2. Letter dated November 16, 1995 addressed to Landlord from Mathtech,
Inc. (the "Letter")
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Dear Ms. Daughtry:
We are in receipt of the Letter in regard to a sublease between Mathtech and
Nelson Communications, Inc. ("NCI"). Pursuant to Subsection 17.3 of the Lease,
we hereby consent to the sublease, subject to Subsection 17.4 of the Lease and
the following conditions:
(i) a sublease is executed within thirty (30) days of the date hereof;
and
(ii) subsection 17.4.3. is complied with within ten (10) days after the
sublease is executed.
Consent is withdrawn in the event that Mathtech does not comply with the above
conditions as stated.
Please be advised that the within consent is not to be construed as our approval
of, or agreement to the sublease. Mathtech shall remain directly and primarily
responsible for payment and performance of the Lease obligations, whether or not
NCI is in default of its obligations under the sublease. In the event of any
conflict between the Lease and sublease, the Lease shall control.
In the event the sublease is executed, please provide us with an appropriate
notice specifying your notice address if other than that provided for in the
Lease.
Very truly yours,
PRINCETON 202 ASSOCIATES LIMITED PARTNERSHIP
By: ABL Funding Corp.
By: /s/ Alan B. Landis
----------------------------------
Alan B. Landis, President
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RAS/Ilb
co: Christopher S. Tarr, Esq.
600 College Road East
Princeton, NJ 08450
EXHIBIT 10.5
LEASE AND LEASE AGREEMENT
Between
PRINCETON 202 ASSOCIATES LIMITED PARTNERSHIP
The Landlord
And
NELSON COMMUNICATIONS, INC.
The Tenant
For Leased Premises In
202 CARNEGIE CENTER
Princeton, New Jersey
JUNE , 1995
Prepared by:
Gary O. Turndorf
210 Carnegie Center
Suite 100
Princeton, NJ 08540
(xxx) xxx-xxxx
TABLE OF CONTENTS
Article Page
1. Definitions 1
-----------
2. Lease of the Leased Premises 1
----------------------------
3. Rent 1
----
4. Term 3
----
5. Preparation of the Leased Premises 4
----------------------------------
6. Options 5
-------
7. Use and Occupancy 6
-----------------
8. Utilities, Services, Maintenance and Repairs 9
--------------------------------------------
9. Allocation of the Expense of Utilities,
Services, Maintenance, Repairs and Taxes 11
----------------------------------------
10. Computation and Payment of Allocated
Expenses of Utilities, Services, Maintenance,
Repairs, Taxes and Capital Expenditures 12
---------------------------------------------
11. Leasehold Improvements, Fixtures
and Trade Fixtures 21
------------------
12. Alterations, Improvements and
Other Modifications by the Tenant 21
---------------------------------
13. Landlord's Rights of Entry and Access 24
-------------------------------------
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i
14. Liabilities and Insurance Obligations 25
15. Casualty Damage to Building or Leased Premises 29
16. Condemnation 30
17. Assignment or Subletting by Tenant 30
18. Signs, Displays and Advertising 34
19. Quiet Enjoyment 35
20. Relocation 35
21. Surrender 36
22. Events of Default 36
23. Rights and Remedies 38
24. Termination of the Term 43
25. Mortgage and Underlying Lease Priority 45
26. Transfer by Landlord 46
27. Indemnification 47
28. Parties' Liability 49
29. Security Deposit 51
30. Representations 51
ii
31. Reservation in Favor of Tenant 53
------------------------------
32. Tenant's Certificates and Mortgagee
Notice Requirements 53
-------------------
33. Waiver of Jury Trial and Arbitration 56
------------------------------------
34. Severability 57
------------
35. Notices 57
-------
36. Captions 57
--------
37. Counterparts 57
------------
38. Applicable Law 58
--------------
39. Exclusive Benefit 58
-----------------
40. Successors 58
----------
41. Amendments 58
----------
42. Waiver 58
------
43. Course of Performance 59
---------------------
44. Landlord's Concessions 59
----------------------
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iii
TABLE OF EXHIBITS
Exhibit
-------
Leased Premises Floor Space Diagram A
Property Description B
Work Letter C
Building Rules and Regulations D
Definitions and Index of Definitions E
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iv
LEASE AND LEASE AGREEMENT, dated as of June __, 1995, between PRINCETON 202
ASSOCIATES LIMITED PARTNERSHIP, a New Jersey limited partnership, with offices
at Suite 100, 210 Carnegie Center, Princeton, New Jersey 08540 (the "Landlord"),
and NELSON COMMUNICATIONS, INC., a Delaware corporation, with its office at 41
Madison Avenue, New York, NY 10010 (the "Tenant").
Subject to all the terms and conditions set forth below, the Landlord and the
Tenant hereby agree as follows:
1. Definitions.
Certain terms and phrases used in this Agreement (generally those whose first
letters are capitalized) are defined in Exhibit E attached hereto and, as used
in this Agreement, they shall have the respective meanings assigned or referred
to in that exhibit.
2. Lease of the Leased Premises.
2.1. The Landlord shall, and hereby does, lease to the Tenant, and the
Tenant shall, and hereby does, accept and lease from the Landlord, the
Leased Premises during the Term. The Leased Premises consist of 6761
square feet of gross rentable floor space on the first floor of 202
Carnegie Center, as more fully described in the definition of Leased
Premises set forth in Exhibit E attached hereto.
2.2. The Landlord shall, and hereby does, grant to the Tenant,
and the Tenant shall, and hereby does, accept from the
Landlord, the non-exclusive right to use the Common
Facilities during the Term for itself, its employees, other
agents and Guests in common with the Landlord, any tenants
of Other Leased Premises, any of their respective employees,
other agents and guests and such other persons as the
Landlord may, in the Landlord's sole discretion, determine
from time to time.
3. Rent.
3.1. The Tenant shall punctually pay the Rent for the Leased Premises for
the Term to the Landlord in the amounts and at the times set forth
below, without bill or other demand and without any offset, deduction
or, except as may be otherwise specifically set forth in this
Agreement, abatement whatsoever.
1
3.2. The Basic Rent for the Leased Premises during the Initial Term shall be
at the rate per year set forth below.
ANNUAL RATE MONTHLY RATE
----------- ------------
$138,600.48 $11,550.04
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The annual rate of Basic Rent for the Leased Premises during any
Renewal Term shall be calculated as set forth in subsection 6.3 of this
Agreement for the respective Renewal Term.
3.3. The Tenant shall punctually pay the applicable Basic Rent in
equal monthly installments in advance on the first day of
each month during the Term, subject to the concession
provided by the terms of subsection 44.2 of this Agreement
for the first four calendar months of the Initial Term. The
Tenant shall pay the Basic Rent for the fifth full calendar
month of the Initial Term upon execution and delivery of
this Agreement. The Tenant also shall punctually pay the
Basic Rent for a period of less than a full calendar month
at the beginning of the Term on the Commencement Date.
3.4. The Basic Rent and the Additional Rent for any period of less than a
full calendar month shall be prorated. In the event that any
installment of Basic Rent cannot be calculated by the time payment is
due, such portion as is then known or calculable shall be then due and
payable; and the balance shall be due upon the Landlord's giving notice
to the Tenant of the amount of the balance due.
3.5. The Additional Rent for the Leased Premises during the Term shall be
promptly paid by the Tenant in the respective amounts and at the
respective times set forth in this Agreement.
3.6. That portion of any amount of Rent or other amount due under
this Agreement which is not paid on the day it is first due
shall incur a late charge equal to the sum of: (i) five
percent of that portion of any amount of Rent or other
amount due under this Agreement which is not paid on the day
it is first due and (ii) interest on that portion of any
amount of Rent or other amount due under this Agreement
which is not paid on the day it is first due at the Base
Rate(s) in effect from time to time plus two additional
percentage points from the day such portion is first due
through the day of receipt thereof by the Landlord. Any such
late charge due from the Tenant shall be due immediately.
2
4. Term.
4.1. The Initial Term shall commence on the Commencement Date and
shall continue for five years from the beginning of the
Initial Year, unless sooner terminated in accordance with
section 24 of this Agreement. The Term shall commence on the
Commencement Date and shall continue until the later of the
conclusion of the Initial Term or the conclusion of any
Renewal Term, unless sooner terminated in accordance with
section 24 of this Agreement.
4.2. Unless one or more of the conditions contemplated by subsection 4.3 of
this Agreement occurs, the Commencement Date shall be the later of:
4.2.1. the Target Date; or
4.2.2. the date that the last of each of the following conditions set
forth in this subsection 4.2.2 of the Agreement that is
specifically applicable shall have occurred:
4.2.2.1. if the Leased Premises is being prepared
exclusively by contractors selected and
retained by the Landlord, the date the
Leased Premises can first be legally
occupied for its intended use;
4.2.2.2. preparation of the Leased Premises in
accordance with the Tenant Plan is
substantially completed (except for (i) any
long lead time items that may be required by
the Tenant Plan that can not be delivered to
the Leased Premises in sufficient time to be
incorporated into the work in proper
sequence and (ii) any preparation work that
is not being performed exclusively by
contractors selected and retained by the
Landlord); and
4.3. In the event one or more of the conditions contemplated by this
subsection 4.3 of the Agreement occurs, notwithstanding anything to the
contrary set forth in subsection 4.2 of this Agreement, the
Commencement Date shall be the earliest applicable date specified
below:
3
4.3.1. the earliest date the Tenant takes any of the
following actions shall be the Commencement Date
in the event the Tenant takes possession of,
occupies or moves any furniture, furnishings,
equipment (with the exception of equipment
required for tele-communications hook-ups),
supplies or other possessions into, the Leased
Premises or any portion thereof earlier than the
date otherwise determined in accordance with
subsection 4.2 of this Agreement;
4.3.2. the Target Date in the event the Tenant does not timely: (i)
sign and return the notice contemplated by the last sentence
of subsection 5.4 of this Agreement to the Landlord and (ii)
make the initial payment contemplated by the next to last
sentence of subsection 5.4 of this Agreement to the Landlord;
or
4.3.3. the date that the last of the conditions set forth in
subsection 4.2.2 of this Agreement that is specifically
applicable shall have occurred if (i) the Tenant shall have
requested the Landlord or any contractors selected and
retained by the Landlord to complete their work before the
Target Date and (ii) they shall have done so.
4.4. Once it is ascertained in accordance with subsections 4.2 and 4.3 of
this Agreement, the Landlord shall give prompt notice of the
Commencement Date to the Tenant; and if the Tenant does not object
thereto by notice given to the Landlord within 10 days of the
Landlord's notice, the date set forth in the Landlord's notice shall
thereafter be conclusively presumed to be the Commencement Date.
5. Preparation of the Leased Premises.
5.1. The Landlord shall give notice to the Tenant of the
Landlord's price to the Tenant to supply or perform, or
both, the work contemplated by the Tenant Plan being
provided by the Landlord or the Landlord's contractors. Such
price shall include 15% of the Landlord's contractors'
aggregate price as the Landlord's general contracting fee
and shall be net of any credit for work being provided by
the Landlord without charge to the Tenant in accordance with
the Work Letter. If acceptable to the Tenant, the Tenant
shall sign a copy of the notice and return it to the
Landlord, together with payment of 33-1/3% of such price,
4
within one week after it was given authorizing the Landlord and the
Landlord's contractors to supply or perform the work contemplated by
both the Tenant Plan and the notice at the price set forth in the
notice. The Tenant shall pay the balance of such price to the Landlord
in proportion to the progress of such work, as and when billed by the
Landlord at convenient intervals, with payment of any remaining final
balance due from the Tenant prior to the Commencement Date.
5.2. The Landlord shall build the Leased Premises in accordance with the
Tenant Plan expending up to a maximum of $12.00 per square foot of
usable floor space.
6. Options.
6.1. If, prior to the respective date of exercise thereof, (a)(i)
no Event of Default shall have occurred or (ii) if an Event
of Default shall have occurred, the Tenant shall have
previously cured it in full and the Landlord shall have
waived it (b) there shall not have been a History of
Recurring Events of Default and (c) the Term has not been
terminated pursuant to the provisions of subsection 24.1.7
of this Agreement, the Tenant shall have one option,
exercisable exclusively at the time and in the manner set
forth below in subsection 6.2 of this Agreement, to extend
the Term for one additional period of five years' duration.
If the option is properly exercised, the period to which it
relates shall commence upon the end of the Expiring Term.
The option is an "Option to Renew."
6.2. In the event the Tenant is interested in exercising the
Option to Renew, the Tenant shall give timely notice of the
Tenant's interest to the Landlord no earlier than nine, and
no later than eight, months prior to the end of the Expiring
Term. Within four weeks of the giving of such notice, the
Landlord shall give notice of the Tenant of the Market
Rental Rate in effect eight months prior to end of the
Expiring Term. In the event the Tenant desires to exercise
the Option to Renew, the Tenant shall do so exclusively by
giving timely notice thereof to the Landlord no earlier than
seven, and no later than six, months prior to the end of the
Expiring Term, and indicating in that notice whether or not
the Market Rental Rate in effect eight months prior to the
end of the Expiring Term is acceptable. In the event the
Tenant fails timely to notify the Landlord of its interest
in exercising the Option to Renew or timely to exercise the
Option to Renew, that Option to Renew shall thereupon
expire.
5
6.3. The Basic Rent for the Leased Premises during the Renewal
Term shall be the Market Rental Rate, as set forth in the
Landlord's notice to the Tenant of the Market Rental Rate,
unless the Tenant, in the Tenant's notice contemplated by
the third sentence of subsection 6.2 of this Agreement
affirmatively indicates that the Market Rental Rate for the
Renewal Term is not acceptable, in which case the Basic Rent
for the Leased Premises during the Renewal Term shall be the
greater of:
6.3.1. that amount which is the product of the annual rate of Basic
Rent in effect during the last 12 months of the Expiring Term
multiplied by the sum of the following two amounts: (a) one
and (b) the amount obtained by multiplying five-hundredths
(.05) by the number of full calendar months in the Expiring
Term and dividing the result by 12; or
6.3.2. that amount which bears the same ratio to the annual rate of
Basic Rent in effect during the Expiring Term as the Index for
the ninth month before the end of the Expiring Term bears to
the Index for the ninth month before the first full calendar
month at the beginning of the Expiring Term.
6.4. Except in the case of an assignment or sublease in accordance with the
provisions of subsection 17.6 of this Agreement, in the event the
Tenant assigns this Agreement or sublets, or licenses the use or
occupancy of, the Leased Premises or any portions thereof in accordance
with section 17 of this Agreement or otherwise, or attempts to do so:
6.4.1. any Option to Renew which the Tenant has theretofore
properly exercised with respect to a Renewal Term
that has not yet actually commenced shall be
rescinded, if the Landlord so elects by notice to the
Tenant, to the same extent as if it had not been
exercised at all; and
6.4.2. any Option to Renew or any other type of option or
optional right exercisable by the Tenant not
theretofore timely and otherwise properly exercised
by the Tenant shall thereupon expire.
7. Use and Occupancy.
6
7.1. The Tenant shall continuously occupy and use the Leased Premises during
the Term exclusively as an office for its business of health care
marketing services, medical education, medical advertising and related
services.
7.2. In connection with the Tenant's use and occupancy of the Leased
Premises and use of the Common Facilities, the Tenant shall observe,
and the Tenant shall cause the Tenant's employees, other agents and
Guests to observe, each of the following:
7.2.1. the Tenant shall not do, or permit or suffer the
doing of, anything which might have the effect of
creating not insignificantly increased risk of, or
damage from, fire, explosion or other casualty;
7.2.2. the Tenant shall not do, or permit or suffer the
doing of, anything which would have the effect of
(a) increasing any premium for any liability,
property, casualty or excess coverage insurance
policy otherwise payable by the Landlord or any
tenant of Other Leased Premises or (b) making any
such types or amounts of insurance coverage
unavailable or less available to the Landlord or
any tenant of Other Leased Premises;
7.2.3. to the extent they are not inconsistent with this
Agreement, the Tenant and Tenant's employees,
other agents and Guests shall comply with the
Building Rules and Regulations attached hereto as
Exhibit D, and with any changes made therein by
the Landlord if, with respect to any such changes,
the Landlord shall have given notice of the
particular changes to the Tenant and such changes
shall not materially adversely affect the conduct
of the Tenant's business in the Leased Premises;
7.2.4. the Tenant and the Tenant's employees, other agents
and Guests shall not create, permit or continue any
Nuisance in or around the Carnegie Center Complex,
the Leased Premises, the Other Leased Premises, the
Building, the Common Facilities and the Property;
7.2.5. The Tenant and the Tenant's employees, other agents
and Guests shall not permit the Leased Premises to be
regularly occupied by more than one individual per
200 square feet of usable floor space of the Leased
Premises;
7
7.2.6. the Tenant and the Tenant's employees, other
agents and Guests shall comply with all Federal,
state and local statutes, ordinances, rules,
regulations and orders as they pertain to the
Tenant's use and occupancy of the Leased Premises,
to the conduct of the Tenant's business and to the
use of the Common Facilities, except that this
subsection shall not require the Tenant to make
any structural changes that may be required
thereby that are generally applicable to the
Building as a whole;
7.2.7. the Tenant and the Tenant's employees, other
agents and Guests shall comply with the
requirements of the Board of Fire Underwriters (or
successor organization) and of any insurance
carriers providing liability, property, casualty
or excess insurance coverage regarding the
Property, the Building, the Common Facilities or
any portions thereof, any other improvements on
the Property and the Carnegie Center Complex,
except that this subsection shall not require the
Tenant to make any structural changes that may be
required thereby that are generally applicable to
the Building as a whole;
7.2.8. the Tenant and the Tenant's employees, other
agents and Guests shall not bring or discharge any
substance (solid liquid or gaseous), or conduct
any activity, in or on the Carnegie Center
Complex, the Property, the Building, the Common
Facilities or the Leased Premises that shall have
been identified by the scientific community or by
any Federal, state or local statute (including,
without limiting the generality of the foregoing,
the Spill Compensation and Control Act (58
N.J.S.A. _23.11 et seq.) and the Industrial Site
Recovery Act (13 N.J.S.A. _1 K-6 et seq.), as they
may be amended), ordinance, rule, regulation or
order as toxic or hazardous to health or to the
environment;
7.2.9. the Tenant and the Tenant's employees, other agents
and Guests shall not draw electricity in the Leased
Premises in excess of the rated capacity of the
electrical conductors and safety devices including,
without limiting the generality of the foregoing,
circuit breakers and fuses, by
8
which electricity is distributed to and throughout
the Leased Premises and, without the prior written
consent of the Landlord in each instance, shall not
connect any fixtures, appliances or equipment to the
electrical distribution system serving the Building
and the Leased Premises other than typical
professional office equipment such as minicomputers,
microcomputers, typewriters, copiers, telephone
systems, coffee machines and table top microwave
ovens, none of which, considered individually and in
the aggregate, overall and per fused or circuit
breaker protected circuit, shall exceed the above
limits;
7.2.10. on a timely basis the Tenant shall pay directly and
promptly to the respective taxing authorities any
taxes (other than Taxes) charged, assessed or levied
exclusively on the Leased Premises or arising
exclusively from the Tenant's use and occupancy of
the Leased Premises; and
7.2.11. the Tenant shall not initiate any appeal or
contest of any assessment or collection of Taxes
for any period without, in each instance, the
prior written consent of the Landlord which,
without being deemed unreasonable, the Landlord
may withhold if the Building was not 90% occupied
by paying tenants throughout that period or if the
Tenant is not joined by tenants of Other Leased
Premises that leased throughout that period, and
that are then leasing, at least 80% of all Other
Leased Premises, determined by their gross
rentable floor space.
8. Utilities, Services, Maintenance and Repairs.
8.1. The Landlord shall provide or arrange for the provision of:
8.1.1. such maintenance and repair of the Building
(except the Leased Premises and Other Leased
Premises); the Common Facilities; and the heating,
ventilation and air conditioning systems, any
plumbing systems and the electrical systems in the
Building, the Common Facilities, the Leased
Premises and Other Leased Premises as is
customarily provided for first class office
buildings in the immediate area;
9
8.1.2. such garbage removal from the Building and the Common
Facilities and such janitorial services for the Building, the
Leased Premises and Other Leased Premises as is customarily
provided for first class office buildings in the immediate
area;
8.1.3. water to the Building and, if the appropriate plumbing has
been installed therein, the Leased Premises and Other Leased
Premises;
8.1.4. sewage disposal for the Building;
8.1.5. passenger elevator service for the Building;
8.1.6. snow clearance from, and sweeping of, Parking Facilities and
private access roads which are part of the Property or the
Common Facilities; and
8.1.7. the maintenance of landscaping which is part of the Property
or the Common Facilities.
8.2. The Landlord shall provide or arrange for the provision of:
8.2.1. such maintenance and repair of the Leased Premises, except for
refinishing walls and wall treatments, base, ceilings, floor
treatments and doors in general from time to time or for
gouges, spots, marks, damage or defacement caused by anyone
other than the Landlord, its employees and other agents, and
except for the Tenant's furniture, furnishings, equipment and
other property;
8.2.2. such maintenance and repair of the Other Leased Premises,
except for refinishing walls and wall treatments, base,
ceilings, floor treatments and doors in general from time to
time or for gouges, spots, marks, damage or defacement caused
by anyone other than the Landlord, its employees and other
agents, and except for the respective tenants' furniture,
furnishings, equipment and other property;
8.2.3. the electricity required for the operation of the Building,
the Property and the Common Facilities during Regular Business
Hours and, on a reduced service basis, during other than
Regular Business Hours, and, at all times, the electricity
required for the Leased Premises and Other Leased Premises;
10
8.2.4. such heat, ventilation and air conditioning for the
Building, the Leased Premises and Other Leased
Premises as is customarily provided for first class
office buildings in the immediate area for the
comfortable use of the Building during Regular
Business Hours; and
8.2.5. heated water to the Building (except the Leased
Premises and Other Leased Premises, unless the
appropriate plumbing, fixtures and hot water heating
units have been installed therein).
8.3. Except as specifically set forth in subsections 8.1 and 8.2.1 of this
Agreement, the Tenant shall maintain and repair the Leased Premises and
keep the Leased Premises in as good condition and repair, reasonable
wear and use excepted, as the Leased Premises are upon the completion
of any improvements contemplated by section 5 of this Agreement.
9. Allocation of the Expense of Utilities, Services, Maintenance, Repairs
and Taxes.
9.1. All Tenant Electric Charges shall be borne by the Tenant.
9.2. Between the Commencement Date and the end of the No Pass Through
Period, the Tenant's Share of all Operational Expenses and Taxes
incurred during such period shall be borne by the Landlord.
9.3. Between the day after the end of the No Pass Through Period and the end
of the Term, the Tenant's Share of Operational Expenses and Taxes
incurred during each annual or shorter period ending on (a) December 31
of each year and (b) the end of the Term shall be borne as follows:
9.3.1. the Tenant's Share of: Operational Expenses and
Taxes incurred during each such period of 12
months (or shorter period), up to the amounts of
Base Year Operational Expenses and Base Year
Taxes, respectively (or proportional amount
thereof for periods shorter than 12 months), shall
be borne by the Landlord; and
9.3.2. the Tenant's Share of: the amounts by which
Operational Expenses and Taxes incurred during
each such period of 12 months (or shorter period)
11
exceed Base Year Operational Expenses and Base Year
Taxes, respectively (or proportional amount thereof
for periods shorter than 12 months) shall be
allocated to, and borne by, the Tenant as more
specifically set forth in section 10 of this
Agreement.
10. Computation and Payment of Allocated Expenses of Utilities,
Services, Maintenance, Repairs, Taxes and Capital
Expenditures.
10.1. The Tenant shall promptly pay the following additional amounts to the
Landlord at the respective times set forth below:
10.1.1. commencing with the first day after the end of the
No Pass Through Period, and on the first day of
each month thereafter during the Term, one-twelfth
of the Tenant's Share of the amount by which Taxes
for the then current calendar year exceeds Base
Year Taxes, but only after Tenant receives a bill
therefor computed in accordance with subsection
10.5 of this Agreement;
10.1.2. within 20 days of the Landlord's giving notice to
the Tenant after the close of each calendar year
closing during the Term, commencing with the first
calendar year closing after the close of the No
Pass Through Period, and after the end of the
Term, the Tenant's Share of the difference between
the Landlord's previously projected amount of
Taxes for such period and the actual amount of
Taxes for such period, in either case in excess of
Base Year Taxes, computed in accordance with
subsection 10.6 of this Agreement (unless such
difference is a negative amount, in which case the
Landlord shall credit such difference against any
amounts next due from the Tenant under subsections
10.1.1 and 10.5 of this Agreement);
10.1.3. commencing with the first day after the end of the
No Pass Through Period, and on the first day of
each month thereafter during the Term, one-twelfth
of the Tenant's Share of the amount by which
Operational Expenses for the then current calendar
year exceed Base Year Operational Expenses, but
only after Tenant receives a bill therefor
12
computed in accordance with subsection 10.7 of
this Agreement;
10.1.4. within 20 days of the Landlord's giving notice to
the Tenant after the close of each calendar year
closing during the Term, commencing with the first
calendar year closing after the close of the No
Pass Through Period, and after the end of the
Term, the Tenant's Share of the difference between
the Landlord's previously projected amount of
Operational Expenses for such period and the
actual amount of Operational Expenses for such
period, in either case in excess of Base Year
Operational Expenses, computed in accordance with
subsection 10.8 of this Agreement (unless such
difference is a negative amount, in which case the
Landlord shall credit such difference against any
amounts next due from the Tenant under subsections
10.1.5 and 10.7 of this Agreement);
10.1.5. commencing with the first day of the first month
after the Landlord gives any notice contemplated
by subsection 10.9 of this Agreement to the Tenant
and continuing on the first day of each month
thereafter until the earlier of (a) the end of the
Term or (b) the last month of the useful life set
forth in the respective notice, one-twelfth of the
Tenant's Share of any Annual Amortized Capital
Expenditure, computed in accordance with
subsection 10.9 of this Agreement;
10.1.6. on the first day of each month during the Term,
the monthly Tenant Electric Charges, computed in
accordance with subsection 10.10 of this
Agreement; and
10.1.7. promptly as and when billed therefor by the
Landlord, the amount of any expense which would
otherwise fall within the definition of
Operational Expenses, but which is specifically
paid or incurred by the Landlord for operation and
maintenance of the Building, the Common Facilities
or the Property outside Regular Business Hours at
the specific request of the Tenant or the amount
of any expenditure incurred for maintenance or
repair of damage to the Building, the Common
Facilities, the Property, the Leased Premises or
the Other Leased Premises caused directly or
indirectly, in whole or in part, by the active or
13
passive negligence or intentional act of the
Tenant or any of its employees, other agents or
Guests.
10.2. "Operational Expenses" means all expenses paid or incurred by
the Landlord in connection with the Property, the Building,
the Common Facilities and any other improvements on the
Property and their operation and maintenance (other than Taxes
(which are separately allocated to the Tenant in accordance
with subsections 10.1.1 and 10.1.2 of this Agreement), Capital
Expenditures (which are separately allocated to the Tenant in
accordance with subsection 10.1.5 of this Agreement) and those
expenses contemplated by subsections 10.1.6 and 10.1.7 of this
Agreement)) including, without limiting the generality of the
foregoing:
10.2.1. Utilities Expenses;
10.2.2. the expense of providing the services, maintenance
and repairs contemplated by subsections 8.1, 8.2.1 and 8.2.2
of this Agreement, whether furnished by the Landlord's
employees or by independent contractors or other agents;
10.2.3. wages, salaries, fees and other compensation and
payments and payroll taxes and contributions to any social
security, unemployment insurance, welfare, pension or similar
fund and payments for other fringe benefits required by law or
union agreement (or, if the employees or any of them are not
represented by a union, then payments for benefits comparable
to those generally required by union agreement in first class
office buildings in the immediate area which are unionized)
made to or on behalf of any employees of Landlord performing
services rendered in connection with the operation and
maintenance of the Building, the Common Facilities and the
Property, including, without limiting the generality of the
foregoing, elevator operators, elevator starters, window
cleaners, porters, janitors, maids, miscellaneous handymen,
watchmen, persons engaged in patrolling and protecting the
Building, the Common Facilities and the
14
Property, carpenters, engineers, firemen, mechanics,
electricians, plumbers, other tradesmen, other
persons engaged in the operation and maintenance of
the Building, Common Facilities and Property,
Building superintendent and assistants, Building
manager, and clerical and administrative personnel;
10.2.4. the uniforms of all employees and the
cleaning, pressing and repair thereof;
10.2.5. premiums and other charges incurred by
Landlord with respect to all insurance
relating to the Building, the Common
Facilities and the Property and the operation
and maintenance thereof, including, without
limitation: property and casualty, fire and
extended coverage insurance, including
windstorm, flood, hail, explosion, other
casualty, riot, rioting attending a strike,
civil commotion, aircraft, vehicle and smoke
insurance; public liability insurance;
elevator, boiler and machinery insurance;
excess liability coverage insurance; use and
occupancy insurance; workers' compensation
and health, accident, disability and group
life insurance for all employees; and
casualty rent insurance;
10.2.6. sales and excise taxes and the like upon any
Operational Expenses and Capital
Expenditures;
10.2.7. management fees of any independent managing
agent for the Property, the Building or the
Common Facilities; and if there shall be no
independent managing agent, or if the
managing agent shall be a person affiliated
with the Landlord, the management fees that
would customarily be charged for the
management of the Property, the Building and
the Common Facilities by an independent,
first class managing agent in the immediate
area;
10.2.8. the cost of replacements for tools, supplies
and equipment used in the operation, service,
maintenance, improvement, inspection, repair
15
and alteration of the Building, the Common
Facilities and the Property;
10.2.9. the cost of repainting or otherwise
redecorating any part of the Building or the
Common Facilities;
10.2.10. decorations for the lobbies and other Common
Facilities in the Building;
10.2.11. the cost of licenses, permits and similar
fees and charges related to operation, repair
and maintenance of the Building, the Property
and the Common Facilities;
10.2.12. an allocable share of service, replacement, repair,
maintenance and other charges assessed from time to
time by the Carnegie Center Owner's Association II to
the Building; and
10.2.13. any and all other expenditures of the Landlord in
connection with the operation, alteration, repair or
maintenance of the Property, the Common Facilities or
the Building as a first-class office building and
facilities in the immediate area which are properly
treated as an expense fully deductible as incurred in
accordance with generally applied real estate
accounting practice.
10.3. "Capital Expenditures" means the following expenditures incurred or
paid by the Landlord in connection with the Property, the Building, the
Common Facilities and any other improvements on the Property:
10.3.1. all costs and expenses incurred by the
Landlord in connection with retro-fitting the
entire Building or the Common Facilities, or
any portion thereof, to comply with any
change in Federal, state or local statute,
rule, regulation, order or requirement which
change takes effect after the original
completion of the Building;
10.3.2. all costs and expenses incurred by the
Landlord to replace and improve the Property,
the Building or the Common Facilities or
16
portions thereof for the purpose of continued
operation of the Property, the Building and the
Common Facilities as a first class office complex in
the immediate area; and
10.3.3. all costs and expenses incurred by the Landlord in
connection with the installation of any energy, labor
or other cost saving device or system on the Property
or in the Building or the Common Facilities.
10.4. Neither "Operational Expenses" nor "Capital Expenditures" shall include
any of the following:
10.4.1. principal or interest on any mortgage
indebtedness on the Property, the Building or
any portion thereof;
10.4.2. any capital expenditure, or amortized portion
thereof, other than those included in the definition
of Capital Expenditures set forth in subsection 10.3
above;
10.4.3. expenditures for any leasehold improvement which
is made in connection with the preparation of any
portion of the Building for occupancy by a new
tenant or which is not made generally to or for
the benefit of the Leased Premises and all Other
Leased Premises or generally to the Building or
the Common Facilities;
10.4.4. to the extent the Landlord actually receives
proceeds of property and casualty insurance
policies on the Building, other improvements on
the Property or the Common Facilities,
expenditures for repairs or replacements
occasioned by fire or other casualty to the
Building or the Common Facilities;
10.4.5. expenditures for repairs, replacements or
rebuilding occasioned by any of the events
contemplated by section 16 of this Agreement;
10.4.6. expenditures for costs, including advertising and
leas
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