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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-13082
KENNETH COLE PRODUCTIONS, INC.
(Exact name of registrant as specified in its charter)
New York 13-3131650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
603 West 50th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 265-1500
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") during the preceding 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes (X ) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class May 5, 2004
Class A Common Stock ( $.01 par value) 11,793,118
Class B Common Stock ( $.01 par value) 8,145,497
Kenneth Cole Productions, Inc.
Index to 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2004 and
December 31, 2003.................................................... 3
Condensed Consolidated Statements of Income for the three months
ended March 31, 2004 and 2003........................................ 5
Condensed Consolidated Statement of Changes in Shareholders' Equity
for the three months ended March 31, 2004............................ 6
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2004 and 2003........................................ 7
Notes to Condensed Consolidated Financial Statements................. 8
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................15
Item 3. Quantitative and Qualitative Disclosure about Market Risk.........20
Item 4. Controls and Procedures...........................................20
Part II. OTHER INFORMATION
Item 1.Legal Proceedings..................................................21
Item 2.Changes in Securities and Use of Proceeds..........................21
Item 3.Defaults Upon Senior Securities....................................21
Item 4.Submission of Matters to a Vote of Security Holders................21
Item 5.Other Information..................................................21
Item 6.Exhibits and Reports on Form 8-K...................................21
Signatures................................................................23
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
March 31, December 31,
2004 2003
(Unaudited)
Assets
Current assets:
Cash $108,081,000 $111,102,000
Due from factor 42,294,000 31,487,000
Accounts receivable, net 11,073,000 11,254,000
Inventories 46,068,000 44,851,000
Prepaid expenses and other current assets 1,475,000 1,343,000
Deferred taxes 2,063,000 2,063,000
------------ ------------
Total current assets 211,054,000 202,100,000
Property and equipment - at cost, less
accumulated depreciation 35,565,000 36,755,000
Other assets:
Deposits and deferred taxes 16,822,000 16,603,000
Deferred compensation plans assets 20,325,000 18,383,000
------------ ------------
Total other assets 37,147,000 34,986,000
------------ ------------
Total assets $283,766,000 $273,841,000
============ ============
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
(Unaudited)
March 31, December 31,
2004 2003
(Unaudited)
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 34,637,000 $ 33,847,000
Accrued expenses and other current liabilities 8,855,000 11,153,000
Income taxes payable 5,013,000 2,939,000
------------ ------------
Total current liabilities 48,505,000 47,939,000
Deferred compensation 20,325,000 18,383,000
Accrued rent 10,086,000 9,884,000
Other 1,399,000 1,301,000
Commitments and contingencies
Shareholders' equity:
Series A Convertible Preferred Stock, par
value $1.00, 1,000,000 shares authorized,
none outstanding
Class A Common Stock, par value $.01,
20,000,000 shares authorized, 14,677,678
and 14,534,791 issued and outstanding in
2004 and 2003 147,000 145,000
Class B Common Stock, par value $.01,
9,000,000 shares authorized, 8,145,497
and 8,168,497 issued and outstanding in
2004 and 2003 81,000 82,000
Additional paid-in capital 72,711,000 69,992,000
Accumulated other comprehensive income 144,000 751,000
Retained earnings 196,589,000 191,585,000
------------ ------------
269,672,000 262,555,000
Class A Common Stock in treasury, at cost,
2,888,400 shares in 2004 and 2003 (66,221,000) (66,221,000)
------------ ------------
Total shareholders' equity 203,451,000 196,334,000
------------ ------------
Total liabilities and shareholders' equity $283,766,000 $273,841,000
============ ============
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
March 31,
2004 2003
Net sales $113,351,000 $102,117,000
Royalty revenue 9,026,000 8,007,000
------------ ------------
Net revenue 122,377,000 110,124,000
Cost of goods sold 69,909,000 62,542,000
------------ ------------
Gross profit 52,468,000 47,582,000
Selling, general and administrative
expenses 40,792,000 37,731,000
------------ ------------
Operating income 11,676,000 9,851,000
Interest and other income, net 249,000 242,000
------------ ------------
Income before provision for income taxes 11,925,000 10,093,000
Provision for income taxes 4,532,000 3,734,000
------------ ------------
Net income $ 7,393,000 $ 6,359,000
============ ============
Earnings per share:
Basic $.37 $.33
Diluted $.36 $.31
Dividends declared per share $.12
Shares used to compute earnings per share:
Basic 19,855,000 19,543,000
Diluted 20,610,000 20,448,000
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
Class A Class B
Common Stock Common Stock
Number Number
of shares Amount of shares Amount
Shareholders' equity
January 1, 2004 14,534,791 $145,000 8,168,497 $82,000
Net Income
Translation adjustments
foreign currency, net
of taxes of $(1,000)
forward contracts, net
of taxes of $(371,000)
Comprehensive income
Exercise of stock
options and related tax
benefits of $730,000 117,205 1,000
Issuance of Class A
Common Stock for ESPP 2,682
Dividends paid on
Common Stock
Conversion of Class B to
Class A shares of
common stock 23,000 1,000 (23,000) (1,000)
-------------------------------------------
Shareholders' equity
March 31, 2004 14,677,678 $147,000 8,145,497 $81,000
===========================================
Accumulated
Additional Other
Paid-in Comprehensive Retained
Capital Income Earnings
Shareholders' equity
January 1, 2004 $69,992,000 $ 751,000 $191,585,000
Net Income 7,393,000
Translation adjustments
foreign currency, net
of taxes of $(1,000) (2,000)
forward contracts, net
of taxes of $(371,000) (605,000)
Comprehensive income
Exercise of stock
options and related tax
benefits of $730,000 2,660,000
Issuance of Class A
Common Stock for ESPP 59,000
Dividends paid on
Common Stock (2,389,000)
Conversion of Class B to
Class A shares of
common stock
---------------------------------------------
Shareholders' equity
March 31, 2004 $72,711,000 $ 144,000 $196,589,000
=============================================
Treasury Stock
Number of
Shares Amount Total
Shareholders' equity
January 1, 2004 (2,888,400) $(66,221,000) $196,334,000
Net Income 7,393,000
Translation adjustments
foreign currency, net
of taxes of $(1,000) (2,000)
forward contracts, net
of taxes of $(371,000) (605,000)
-------------
Comprehensive income 6,786,000
Exercise of stock
options and related tax
benefits of $730,000 2,661,000
Issuance of Class A
Common Stock for ESPP 59,000
Dividends paid on
Common Stock (2,389,000)
Conversion of Class B to
Class A shares of
common stock
---------------------------------------------Shareholders' equity
March 31, 2004 (2,888,400) $(66,221,000) $203,451,000
=============================================
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
2004 2003
Cash flows from operating activities
Net income $ 7,393,000 $ 6,359,000
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 1,912,000 1,834,000
Unrealized (gain) loss on deferred
compensation plans (803,000) 54,000
Provision for bad debts 50,000 70,000
Tax benefit from exercise of stock options 730,000 199,000
Changes in assets and liabilities:
Increase in due from factor (10,807,000) (11,595,000)
Decrease in accounts receivable 131,000 1,038,000
(Increase) decrease in inventories (1,822,000) 480,000
(Increase) decrease in prepaid expenses and
other current assets (132,000) 200,000
Increase in other assets (1,358,000) (2,137,000)
Increase in accounts payable 790,000 81,000
Increase (decrease) in income taxes payable 2,074,000 (677,000)
Decrease in accrued expenses and other
current liabilities (2,298,000) (3,523,000)
Increase in other non-current liabilities 2,242,000 2,713,000
------------ ------------
Net cash used in operating activities (1,898,000) (4,904,000)
Cash flows from investing activities
Acquisition of property and equipment, net (722,000) (1,141,000)
------------ ------------
Net cash used in investing activities (722,000) (1,141,000)
Cash flows from financing activities
Proceeds from exercise of stock options 1,931,000 471,000
Proceeds from issuance of common stock from ESPP 59,000 49,000
Dividends paid to shareholders (2,389,000)
Purchases of treasury stock (4,526,000)
Principal payments on capital lease obligations (56,000)
------------ ------------
Net cash used in financing activities (399,000) (4,062,000)
Effect of exchange rate changes on cash (2,000) (3,000)
------------ ------------
Net decrease in cash (3,021,000) (10,110,000)
Cash, beginning of period 111,102,000 91,549,000
------------ ------------
Cash, end of period $108,081,000 $ 81,439,000
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 1,000 $ 16,000
Income taxes, net of refunds $ 1,728,000 $ 4,169,000
See accompanying notes to condensed consolidated financial statements.
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared by Kenneth Cole
Productions, Inc. (the "Company") in accordance with
generally accepted accounting principles in the United
States for interim financial information. Accordingly,
they do not include all of the information and footnotes
required by generally accepted accounting principles in the
United States for complete financial statements. Certain
items contained in these financial statements are based on
estimates. In the opinion of management, the accompanying
unaudited financial statements reflect all adjustments,
consisting of only normal and recurring adjustments,
necessary for a fair presentation of the financial position
and results of operations and cash flows for the periods
presented. All significant intercompany transactions have
been eliminated.
Operating results for the three months ended March 31,
2004 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2004. These
unaudited financial statements should be read in
conjunction with the financial statements and footnotes
included in the Company's annual report on Form 10-K for
the year ended December 31, 2003.
The consolidated balance sheet at December 31, 2003,
as presented, was derived from the audited financial
statements as of December 31, 2003 included in the
Company's annual report on Form 10-K.
2. Stock-Based Compensation
The Company measures compensation expense for its
stock-based compensation plans using the intrinsic value
method prescribed in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB
No. 25") and related Interpretations. The Company has
adopted disclosure only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123").
Pro forma disclosures, as required by Statement
of Financial Accounting Standard No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure", are
computed as if the Company recorded compensation expense
based on the fair value for stock-based awards or grants.
The following pro forma information includes the effects of
the options discussed above.
Three Months Ended March 31,
2004 2003
Net Income, as reported $7,393,000 $6,359,000
Deduct: Stock-based employee
compensation expense determined
under fair value method, net of
related tax effects 736,000 722,000
---------- ----------
Pro forma net income $6,657,000 $5,637,000
Earnings per share:
Basic - as reported $ .37 $ .33
Basic - pro forma $ .34 $ .29
Diluted - as reported $ .36 $ .31
Diluted - pro forma $ .32 $ .28
3. Earnings Per Share
The following is an analysis of the differences
between basic and diluted earnings per common share in
accordance with Statement of Financial Accounting Standards
No. 128, "Earnings Per Share".
March 31, March 31,
2004 2003
Weighted average common
shares outstanding 19,855,000 19,543,000
Effect of dilutive securities:
Stock options 755,000 905,000
Weighted average common shares
outstanding and common share ---------- ----------
equivalents 20,610,000 20,448,000
========== ==========
4. Comprehensive Income
Comprehensive income is comprised of net income, the
effect of foreign currency translation and changes in
unrealized gains and losses on forward exchange contracts
used to hedge merchandise commitments. Comprehensive
income amounted to $6,786,000 and $6,173,000 for the three-
month periods ended March 31, 2004 and 2003, respectively.
5. Derivative Instruments and Hedging Activities
The Company, in the normal course of business,
routinely enters into forward exchange contracts in
anticipation of future purchases of inventory denominated
in Euros. These forward exchange contracts are used to
hedge against the Company's exposure to changes in foreign
exchange rates to protect the purchase price of merchandise
under such commitments and are not held for the purpose of
trading or speculation, therefore the Company has
classified these contracts as cash flow hedges. The
Company had outstanding forward exchange contracts of
$20,500,000 at March 31, 2004 with maturity dates through
August 2004.
All terms and conditions of the Company's
foreign exchange contracts are included in the measurement
of the related hedge effectiveness. The critical terms of
the foreign exchange contracts are the same as the
underlying forecasted transactions; therefore changes in
the fair value of the contracts should be highly effective
in offsetting changes in the expected cash flows from the
forecasted transactions. No gains or losses related to
ineffectiveness of cash flow hedges were recognized in
earnings during the period ended March 31, 2004. At March
31, 2004 the Company's notional $20,500,000 in forward
exchange contracts resulted in an unrealized gain of
approximately $1,000 net of taxes, which was included as
an addition to other comprehensive income in the
5. Derivative Instruments and Hedging Activities
(continued)
Company's Statement of Changes in Shareholders' Equity and
a decrease to inventory, the underlying exposure on the
balance sheet. The Company expects to reclassify all of
the unrealized gains from other comprehensive income into
earnings within the next five months due to the actual
executions of foreign exchange contracts to purchase
merchandise and the ultimate sale of that merchandise.
6. Segment Information
The Company has three reportable segments:
Wholesale, Consumer Direct and Licensing/International.
The Company's reportable segments are business units that
offer different products and services or similar products
through different channels of distribution. The Wholesale
segment is comprised of designing, sourcing and marketing a
broad range of quality footwear and handbags for wholesale
distribution. The Consumer Direct segment markets the broad
selection of the Company's branded products, including
licensee products, for sale directly to the consumer
through its own channels of distribution, which include
full price retail stores, outlet stores, catalogs and e-
commerce (at website addresses www.kennethcole.com and
www.reactiononline.com). The Licensing/International
segment primarily consists of earning royalties on licensee
sales to third parties of the Company's branded products
and royalties earned on the purchase and sale to foreign
retailers or to consumers in foreign countries. The
Company maintains control over quality and image and allows
licensees to sell primarily to the same channels of
distribution as those of the Company's Wholesale segment.
The Company evaluates performance and allocates resources
based on profit or loss from each segment. The Wholesale
segment is evaluated on income from operations before
income taxes. The Consumer Direct segment is evaluated on
profit or loss from operations before unallocated corporate
overhead and income taxes. The Licensing/International
segment is evaluated based on royalties earned and pretax
segment profit. Intersegment sales between the Wholesale
and Consumer Direct segments include a markup, which is
eliminated in consolidation.
Revenues from international customers represent
less than two percent of the Company's consolidated
revenues.
6. Segment Information (continued)
Financial information of the Company's reportable segments
is as follows (in thousands):
Three Months Ended
March 31, 2004
Consumer Licensing/
Wholesale Direct International Totals
Revenues from external
customers $ 71,458 $ 41,014 $ 9,905 $122,377
Intersegment revenues 8,188 8,188
Segment income (1) 8,163 349 7,395 15,907
Segment assets 231,986 48,642 5,411 286,039
Three Months Ended
March 31, 2003
Consumer Licensing/
Wholesale Direct International Totals
Revenues from external
customers $ 69,402 $ 32,566 $ 8,156 $110,124
Intersegment revenues 7,245 7,245
Segment income (1) 10,746 (3,116) 6,041 13,671
Segment assets 187,884 50,672 4,592 243,148
(1) Before elimination of intersegment profit,
unallocated corporate overhead and income taxes
The reconciliation of the Company's reportable segment
revenues, profit and loss, and assets are as follows (in
thousands):
Three Months Ended
March 31, 2004 March 31, 2003
Revenues
Revenues for external customers $122,377 $110,124
Intersegment revenues 8,188 7,245
Elimination of intersegment revenues (8,188) (7,245)
-------- --------
Total consolidated revenues $122,377 $110,124
======== ========
Income
Total profit for reportable segments $ 15,907 $ 13,671
Elimination of intersegment profit and
unallocated corporate overhead (3,982) (3,578)
-------- --------
Total income before income taxes $ 11,925 $ 10,093
======== ========
Assets
Total assets for reportable segments $286,039 $243,148
Elimination of inventory profit in
consolidation (2,273) (1,913)
-------- --------
Total consolidated assets $283,766 $241,235
======== ========
7. Common Stock Repurchase
The Board of Directors of the Company has
authorized management to repurchase, from time to time, up
to an aggregate 4,250,000 shares of the Company's Class A
Common Stock. During the three months ended March 31,
2004, no shares were repurchased in the open market leaving
the available shares authorized for repurchase at
1,361,600.
8. Related Party Transaction
On May 1, 2003, the Company entered into an
exclusive license agreement with Candies, Inc. and its
trademark holding company, IP Holdings, LLC,
("Candies") to use the Bongo trademark in connection
with worldwide manufacture, sale and distribution of
women's, men's and children's footwear. The Chief
Executive Officer and Chairman of Candies is the
brother of the Company's Chief Executive Officer and
Chairman. The initial term of the agreement is
through December 31, 2007, with options to renew
through December 31, 2016 based upon the Company
reaching certain sales thresholds. During these
periods, the Company is obligated to pay Candies a
percentage of net sales based upon the terms of the
agreement. The Company recorded approximately
$328,000 in royalty and advertising expense to Candies
for the three months ended March 31, 2004.
9. Dividends
On February 26, 2004, the Board of Directors of the
Company declared a quarterly cash dividend of $0.12 per
share payable March 25, 2004 to shareholders of record at
the close of business on March 9, 2004. Aggregate
dividends in the amount of $2,389,000 were paid out,
approximately $1,411,000 and $978,000 to common stock
shareholders of Class A and Class B, respectively. During
the three months ended March 31, 2003, no dividends were
paid out or declared by the Company.
10. Other
a. Litigation
The Company, from time to time, is a party to
litigation that arises in the normal course of its business
operations. The Company presently is not a party to any
such litigation that it believes would have a material
adverse effect on its business operations.
b. New Jersey Office Lease
On February 24, 2004, the Company entered into a ten-
year lease with two additional five-year options to provide
the Company with approximately 51,000 square feet of office
space. The Company expects to move its existing
administrative offices into this new location during June
2004 in conjunction with the expiration of its current
office and distribution space lease. The lease also
provides options for the Company to expand into additional
space if the Company so desires. The office space will
replace the Company's existing office facility in New
Jersey (See 11.b below).
11. Subsequent Events
a. Dividend
On April 28 2004, the Board of Directors of the
Company declared a quarterly cash dividend of $0.12
per share payable June 16, 2004 to shareholders of
record at the close of business on May 24, 2004.
b. Severance
The Company decided to move its New Jersey
distribution operation to a third-party service
provider. On April 21, 2004, the Company entered into
a shutdown agreement with a local affiliate of The
International Leather Goods, Plastics, Handbags and
Novelty Workers' Union, Local I, Division of Local 342-
50 United Food and Commercial Workers Union which
provide severance payments for employees covered by
the expiring collective bargaining agreement. The
Company expects to incur during the second quarter
approximately $1 million in aggregate costs, including
severance from the aforementioned agreement, the
write-off of unamortized leasehold improvements and
moving costs. These costs will be expensed as incurred
in accordance with SFAS No. 146 "Accounts for Costs
Associated With Exit or Disposal Activity".
c. New York Office Building Purchase
The Company entered into an agreement during April
2004 to purchase the office building that it is
currently leasing for its New York headquarters for
approximately $24 million. The closing date will
occur within twenty-six months based on the ability of
the current landlord to satisfy certain terms and
conditions of the agreement.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward - Looking Statements Disclosure
The statements contained in this report which are not
historical facts including, without limitation, statements
that relate to future performance and/or statements
regarding the Company's anticipated results or level of
business for 2004 or any other future period, may be deemed
to constitute "forward - looking statements" within the
meaning of the Private Securities Litigation Reform Act of
1995. Such statements are based on current expectations
only, and actual future results might differ materially
from those projected in such statements due to a number of
risks and uncertainties, including but not limited to,
demand and competition for the Company's products, the
ability to enter into new license agreements, to maintain
and renew existing licensing agreements and to open new
stores, dependence on certain large customers and changes
in the Company's relationships with vendors and other
resources. The forward-looking statements contained herein
are also subject to other risks and uncertainties that are
described in the Company's reports and registration
statements filed with the Securities and Exchange
Commission. The Company undertakes no obligation to
publicly update or revise any forward-looking statement,
whether as a result of new information, future results or
otherwise.
Update on Critical Accounting Policies
The Company's consolidated financial statements are
prepared in accordance with accounting principles generally
accepted in the United States, which require the Company to
make estimates in the application of its accounting
policies based on the best assumptions, judgments, and
opinions of management. For a description of a summary of
the Company's significant accounting policies, see Note A
to the Company's consolidated financial statements included
in the Company's annual report on Form 10-K for the year
ended December 31, 2003.
Overview
Kenneth Cole Productions, Inc., designs, sources and
markets a broad range of fashion footwear and handbags and,
through license agreements, designs and markets apparel and
accessories under its Kenneth Cole New York, Reaction
Kenneth Cole and Unlisted brand names. During 2003, the
Company added the Bongo trademark brand for footwear
through a license agreement. In addition, the Company
designs and sources footwear and handbags for its customers
under its customer's own trademarks. The Company's
products are targeted to appeal to fashion conscious
consumers, reflecting a casual urban perspective and a
lifestyle uniquely associated with Kenneth Cole.
The Company markets its products to more than 7,500
department and specialty store locations, as well as
through its Consumer Direct business, which includes an
expanding base of retail and outlet stores, consumer
catalogs and interactive websites, including on-line e-
commerce.
The popularity of the Kenneth Cole brand names among
consumers has enabled the Company to expand its product
offerings and channels of distribution through licensing
agreements and offers through these agreements a lifestyle
collection of men's product categories including tailored
clothing, dress shirts, dress pants, sportswear, neckwear,
briefcases, portfolios, jewelry, fragrance, belts, leather
and fabric outerwear, sunglasses, optical eyewear, watches,
luggage, hosiery and small leather goods. Women's product
categories currently being sold pursuant to license
agreements include sportswear, small leather goods, belts,
scarves and wraps, hosiery, leather and fabric outerwear,
sunglasses, optical eyewear, watches, jewelry, fragrance,
swimwear, and luggage. In addition, the Company licenses
children's apparel under the Reaction Kenneth Cole brand.
The Company recorded revenues of $122.4 million for
the three months ended March 31, 2004, an 11.1% increase
over the comparable period in the prior year and earnings
per share grew 16.1% to $0.36 from $0.31 in the year-ago
quarter. The Company continues to focus on designing and
delivering excellent and timely products, creating
efficient and compelling retail environments and continuing
its close partnerships with its licensees to ensure brand
quality and distribution integrity. The Company's Balance
Sheet has $108.1 million in cash and remains debt-free at
March 31, 2004. Additionally, the Company continues to
concentrate on cost reduction strategies and inventory
control. Overall, the Company is pleased with its first
quarter results and is proud of its employees' endeavors to
attain these results.
Results of Operations
The following table sets forth the Company's condensed
consolidated statements of income in thousands of dollars
and as a percentage of net revenue for the three months
ended March 31, 2004 and 2003, respectively.
Three Months Ended March 31,
2004 2003
Net sales $113,351 92.6% $102,117 92.7%
Royalty revenue 9,026 7.4 8,007 7.3
-------- ------- -------- ------
Net revenue 122,377 100.0 110,124 100.0
Gross profit 52,468 42.9 47,582 43.2
-------- ------- -------- ------
Selling, general &
administrative expenses 40,792 33.3 37,731 34.3
-------- ------- -------- ------
Operating income 11,676 9.6 9,851 8.9
Interest and other
income, net 249 0.1 242 0.3
-------- ------- -------- ------
Income before income taxes 11,925 9.7 10,093 9.2
Income tax expense 4,532 3.7 3,734 3.4
-------- ------- -------- ------
Net income $ 7,393 6.0% $ 6,359 5.8%
======== ======= ======== ======
Three Months Ended March 31, 2004 Compared to Three Months
Ended March 31, 2003
Consolidated net revenues increased $12.3 million, or
11.1%, to $122.4 million for the three months ended March
31, 2004 from $110.1 million for the three months ended
March 31, 2003. This increase is attributable primarily to
the factors described below in the sections entitled "Net
Sales" and "Licensing/International Revenue".
NET SALES: Wholesale net sales (excluding sales to the
Consumer Direct and Licensing/International business
segments) increased $2.1 million, or 3.0% to $71.5 million
for the three months ended March 31, 2004 from $69.4
million for the three months ended March 31, 2003. This
increase is primarily attributable to an increase in sales
of the Company's footwear brands Kenneth Cole New York,
Kenneth Cole Reaction and additional sales of the new Bongo
licensed footwear, offset by declining sales in Unlisted
branded footwear. The Company sells its products under
these brands, among others, at varying price ranges and
through multiple distribution channels, thereby limiting
the Company's exposure to reductions in sales at any one
price level or in a particular channel of distribution.
Net sales in the Company's Consumer Direct segment
increased $8.4 million, or 25.9%, to $41.0 million for the
three months ended March 31, 2004, from $32.6 million for
the three months ended March 31, 2003. The increase in net
sales is due to a rise in comparable store sales of 18.2%,
or $5.6 million in addition to $2.1 million from that
portion of 2004 net sales for those stores not open for all
of 2003. The increase is due in part to the economic
recovery generally seen throughout the retail and apparel
industry, the Company's increasing use of test and react
programs and to the escalation in the level of non-seasonal
products carried in its stores. The remaining increase was
primarily the result of sales from the Company's Corporate
Gift Program.
LICENSING/INTERNATIONAL REVENUE: Royalty revenue
increased 12.7% to $9.0 million for the three months ended
March 31, 2004 from $8.0 million for the three months ended
March 31, 2003. The increase primarily reflects
incremental minimum royalties from existing licensees as
well as new royalties from its swimwear licensee and
several international licensees, which are still in their
first year of operations. In addition, the
Licensing/International segment generated approximately
$0.9 million in sales for the three months ended March 31,
2004 compared to $0.1 million for the three months ended
March 31, 2003. This was primarily attributable to
Canadian wholesale footwear and handbag sales, which were
previously licensed.
GROSS PROFIT: Consolidated gross profit as a
percentage of net revenue decreased to 42.9% for the three
months ended March 31, 2004 from 43.2% for the comparable
period last year. The decrease is due to a heavier mix of
lower margin product classifications in wholesale and
difficult currency comparison on product sourced from
Europe. This was largely offset by higher margins in the
Consumer Direct Segment, which represented a greater
percentage of total revenues versus the year ago quarter.
The Wholesale segment, which operates at a lower gross
profit level than the Consumer Direct segment, as a
percentage of net revenue decreased to 58.4% for the three
months ended March 31, 2004 from 63.0% for the three months
March 31, 2003, while the Consumer Direct segment as a
percentage of net revenue increased to 33.5% for the three
months ended March 31, 2004 from 29.6% for the three months
ended March 31, 2003. The Company believes the increase in
Consumer Direct margin is due to new assortments built
around more wear-now products and taking some seasonality
and vulnerability out of the mix without compromising
fashion and excitement resulting in stronger sales and more
stable margins. The decrease in gross profit as a
percentage of net revenue was slightly offset by the gross
profit generated from the Licensing/International segment
which carries nominal associated cost of goods sold.
Royalty revenue increased as a percentage of net revenues
to 7.4% for the three months ended March 31, 2004 from 7.3%
for the three months ended March 31, 2003.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling,
general and administrative expenses, including shipping and
warehousing, increased to $40.8 million (or 33.3% of net
revenue) for the three months ended March 31, 2004 from
$37.7 million (or 34.3% of net revenue) for the three
months ended March 31, 2003. The decrease as a percentage
of revenue is attributable to leverage created by the sales
increase, particularly in the Consumer Direct business and
from our ongoing cost containment program.
INTEREST AND OTHER INCOME, NET: Interest and other
income, net increased to $249,000 for the three months
ended March 31, 2004 from $242,000 for the three months
ended March 31, 2003. The increase is due to higher
average cash balances.
INCOME TAXES: The Company's effective tax rate
increased to 38.0% for the three months ended March 31,
2004, from 37.0% for the three months ended March 31, 2003
as a result of changes in tax laws from state and local
jurisdictions to which the Company's earnings are subject.
NET INCOME: As a result of the foregoing, net income
increased $1.0 million for the three months ended March 31,
2004 to $7.4 million (6.0% of net revenue) from $6.4
million (5.8% of net revenue) for the three months ended
March 31, 2003.
Liquidity and Capital Resources
The Company uses cash from operations as the primary
sources of financing for its expansion and seasonal
requirements. Cash requirements vary from time to time as
a result of the timing of merchandise receipts from
suppliers, the delivery of merchandise to its customers,
and the level of accounts receivable and due from factor
balances. At March 31, 2004 and December 31, 2003, working
capital was $162.5 million and $154.2 million,
respectively.
Cash used in operating activities was $1.9 million for
the three months ended March 31, 2004, compared to $4.9
million for the three months ended March 31, 2003. The
decrease in cash used in operating activities is primarily
attributable to the timing of payables and receivables from
increased sales and purchasing during the ordinary course
of business and the increase in net income, offset by an
increase in inventories.
Net cash used in investing activities decreased to
$0.7 million for the three months ended March 31, 2004 from
$1.1 million for the three months ended March 31, 2003.
Investing activities were entirely for capital
expenditures. These expenditures relate primarily to the
Company's retail and outlet store expansion.
Net cash used in financing activities was $0.4
million for the three months ended March 31, 2004 compared
to $4.1 million for the three months ended March 31, 2003.
During 2004, the Company declared and paid a quarterly cash
dividend of approximately $2.4 million to common stock
shareholders during the three months ended March 31, 2004
offset by proceeds of approximately $1.9 million for the
exercise of stock options. During the three months ended
March 31, 2003, the Company used approximately $4.1 million
in financing activities substantially due to the repurchase
of shares of Class A Common Stock under its buyback program
for an aggregate purchase price of $4.5 million.
The Company's material obligations under contractual
agreements, including commitments for future payments under
operating lease agreements as of March 31, 2004 are
summarized as follows:
Payments Due by Period
1 year or After 5
Total less 2-3 years 4-5 years years
Leases and other
Contractual
obligations $199,008,000 $23,213,000 $44,663,000 $39,857,000 $91,281,000
------------ ----------- ----------- ----------- -----------
Total Contractual
Obligations $199,008,000 $23,213,000 $44,663,000 $39,857,000 $91,281,000
============ =========== =========== =========== ===========
The Company will pay out approximately $575,000 in
connection with severance payments contractly agreed upon
with the Company's labor union as a result of the Company's
decision to close its distribution facility. In addition,
the Company entered into a ten-year lease for new office
space for its administrative offices and expects to incur
$1 million in capital expenditures for such offices within
the next year. Furthermore, the Company executed an
agreement in April 2004 to purchase its New York office
space for $24 million and expects to close the agreement
within the next twenty-six months.
The Company currently has a line of credit, which
allows for borrowings and letters of credit up to a maximum
of $25 million to finance working capital requirements.
The Company has no outstanding advances under this line of
credit; however, amounts available under the line were
reduced by $1.0 million in open letters of credit and $2.9
million standby letters of credit to $21.1 million at March
31, 2004.
The Company believes that it will be able to satisfy
its cash requirements for the next year, including
requirements for its retail store expansion, administrative
office build-out, severance, contractual obligations, New
York office purchase and enhancements to its information
systems, primarily with cash flow from operations, and
current cash levels.
The foregoing commentary should be considered to fall
with the coverage of the "Safe Harbor Statement" under the
Private Securities Litigation Reform Act of 1995 included
in this report.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
The Company does not believe it has a material
exposure to market risk. The Company is primarily exposed
to currency exchange rate risks with respect to its
inventory transactions denominated in Euros. Business
activities in various currencies expose the Company to the
risk that the eventual net dollar cash flows from
transactions with foreign suppliers denominated in foreign
currencies may be adversely affected by changes in currency
rates. The Company manages these risks by utilizing
foreign exchange forward contracts to hedge its costs on
future purchases. The Company does not enter into foreign
currency transactions for speculative purposes. At March
31, 2004, the Company had forward exchange contracts
totaling $20.5 million with an unrealized gain of
approximately $1,000 net of taxes. The Company's earnings
may also be affected by changes in short-term interest
rates as a result of borrowings under its line of credit
facility. At the Company's borrowing levels, a two percent
increase in interest rates affecting the Company's credit
facility would not have a material effect on the Company's
year-to-date and projected 2004 and actual 2003 net income.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
The Company's chief executive officer and chief
financial officer, after evaluating the effectiveness of
the Company's "disclosure controls and procedures" (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended) as of the end of the
period covered by this quarterly report, have concluded
that the Company's disclosure controls and procedures were
effective and designed to ensure that material information
relating to the Company and the Company's consolidated
subsidiaries would be made known to them by others within
those entities to allow timely decisions regarding required
disclosures.
Changes in internal controls
During the Company's most recent fiscal quarter, no
changes occurred in the Company's internal control over
financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company's
control over financial reporting.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities, Use of Proceeds, and Issuer
Purchases of Equity Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6.Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.20 Lease agreement dated February 21, 2004 between
Kenneth Cole Services, Inc. and 400 Plaza Drive Inc.
10.21 Sale and purchase agreement between Kenneth Cole
Productions Inc. and SAAR Company, LLC for the premises
located at 601 and 615 West 50th Street, New York, NY
10019
31.1 Certification of Kenneth D. Cole, Chief Executive
Officer of Kenneth Cole Productions, Inc., pursuant to
Rule 13(a)-14(a) or Rule 15(d)-14(a) of the Securities
Exchange Act of 1934, as amended.
31.2 Certification of Stanley A. Mayer, Chief
Financial Officer of Kenneth Cole
Productions, Inc., pursuant to Rule 13(a)-
14(a) or Rule 15(d)-14(a) of the Securities
Exchange Act of 1934, as amended.
32.1 Certification of Kenneth D. Cole, Chief
Executive Officer of Kenneth Cole
Productions, Inc., pursuant to 18 U.S.C. section 1350, as
adopted pursuant to section 906 of the Sarbanes-Oxley Act
of 2002.
32.2 Certification of Stanley A. Mayer, Chief
Financial Officer of Kenneth Cole
Productions, Inc., pursuant to 18 U.S.C.
section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K:
(i) The Company filed a report on Form 8-K on February
27, 2004 in conjunction with the announcement of the
Company's results for the year ended December 31, 2003.
(ii) The Company filed a report an Form 8-K on March 25,
2004 announcing that the Company will not renew their
licensing agreement with Liz Claiborne, Inc., which designs,
manufactures, and sells women's sportswear under the
Kenneth Cole brand. The Company has contracted Paul Davril, Inc.,
its current menswear licensee to replace Liz Claiborne, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Kenneth Cole Productions, Inc.
Registrant
May 7, 2004 /s/ STANLEY A. MAYER
Stanley A. Mayer
Executive Vice President and
Chief Financial Officer
Exhibit 31.1
CERTIFICATION
I, Kenneth D. Cole, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q
of Kenneth Cole Productions, Inc.;
2. Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements,
and other financial information included in the report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13(a)-15(e) and 15(d)-15(e) for the registrant and have:
a. designed such disclosure controls and
procedures to ensure that material information
relating to the registrant, including
its consolidated subsidiaries, is made known to us
by others within those entities, particularly during
the period in which this quarterly report is being
prepared;
b. evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c. disclosed in this report any change in the
registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal
quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I
have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent function) :
a. all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial date and have identified for the
registrant's auditors and material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls
By: /s/ Kenneth D. Cole
---------------------
Kenneth D. Cole
Chief Executive Officer
Date: May 7, 2004
Exhibit 31.2
CERTIFICATION
I, Stanley A. Mayer, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q
of Kenneth Cole Productions, Inc.;
2. Based on my knowledge, this quarterly report does
not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements,
and other financial information included in the report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13(a)-15 and 15(d)-15(e) for the registrant and have:
a. designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c. disclosed in this report any change in the
registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal
quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I
have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent function) :
a. all significant deficiencies in the design or
operation of internal controls which could
adversely affect the registrant's ability to record,
process, summarize and report financial date and
have identified for the registrant's auditors and
material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls
By: /s/ Stanley A. Mayer
-----------------------
Stanley A. Mayer
Chief Financial Officer
Date: May 7, 2004
Exhibit 32.01
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Kenneth Cole
Productions, Inc. (the "Company") on Form 10-Q for the
period ended March 31, 2004 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"),
I, Kenneth D. Cole, Chairman and Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. 1350, as
adopted pursuant to 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2) The information contained in the Report
fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ Kenneth D. Cole
Kenneth D. Cole
Chairman and Chief Executive Officer
Kenneth Cole Productions, Inc.
May 7, 2004
A signed original of this written statement required by
Section 906, other document authenticating, acknowledging,
or otherwise adopting the signature that appears in typed
form within the electronic version of this written
statement required by Section 906, has been provided to
Kenneth Cole Productions, Inc. and will be retained by
Kenneth Cole Productions, Inc. and furnished to the
Securities and Exchange Commission or its staff upon
request.
Exhibit 32.02
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Kenneth Cole
Productions, Inc. (the "Company") on Form 10-Q for the
period ended March 31, 2004 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"),
I, Stanley A. Mayer, Executive Vice President and Chief
Financial Officer of the Company, certify, pursuant to 18
U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-
Oxley Act of 2002, that:
(1) The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2) The information contained in the Report
fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ Stanley A. Mayer
Stanley A. Mayer
Executive Vice President and
Chief Financial Officer
Kenneth Cole Productions, Inc.
May 7, 2004
A signed original of this written statement required by
Section 906, other document authenticating, acknowledging,
or otherwise adopting the signature that appears in typed
form within the electronic version of this written
statement required by Section 906, has been provided to
Kenneth Cole Productions, Inc. and will be retained by
Kenneth Cole Productions, Inc. and furnished to the
Securities and Exchange Commission or its staff upon
request.
EXHIBIT 10.20
400 PLAZA DRIVE, INC.
Landlord,
and
KENNETH COLE SERVICES, INC.
Tenant
_____________________
LEASE
_____________________
Office Premises
in
400 Plaza Drive
Secaucus, New Jersey
___________________________________________________________
___________________________________________________________
TABLE OF CONTENTS
A R T I C L E S P A G E
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 - DEMISE AND TERM 8
ARTICLE 3 - RENT 9
ARTICLE 4 - USE OF DEMISED PREMISES 10
ARTICLE 5 - PREPARATION OF DEMISED PREMISES 10
ARTICLE 6 - TAX AND OPERATING EXPENSE PAYMENTS 11
ARTICLE 7 - COMMON AREAS 13
ARTICLE 8 - SECURITY 14
ARTICLE 9 - SUBORDINATION 15
ARTICLE 10 - QUIET ENJOYMENT 17
ARTICLE 11 - ASSIGNMENT, SUBLETTING AND MORTGAGING 17
ARTICLE 12 - COMPLIANCE WITH LAWS 21
ARTICLE 13 - INSURANCE AND INDEMNITY 22
ARTICLE 14 - RULES AND REGULATIONS 25
ARTICLE 15 - ALTERATIONS 25
ARTICLE 16 - LANDLORD'S AND TENANT'S PROPERTY 27
ARTICLE 17 - REPAIRS AND MAINTENANCE 28
ARTICLE 18 - ELECTRIC ENERGY 29
ARTICLE 19 - HEAT, VENTILATION AND AIR-CONDITIONING 29
ARTICLE 20 - OTHER SERVICES; SERVICE INTERRUPTION 30
ARTICLE 21 - ACCESS, CHANGES AND NAME 31
ARTICLE 22 - MECHANICS' LIENS AND OTHER LIENS 32
ARTICLE 23 - NON-LIABILITY AND INDEMNIFICATION 32
ARTICLE 24 - DAMAGE OR DESTRUCTION 33
ARTICLE 25 - EMINENT DOMAIN 35
ARTICLE 26 - SURRENDER 36
ARTICLE 27 - CONDITIONS OF LIMITATION 37
ARTICLE 28 - RE-ENTRY BY LANDLORD 38
ARTICLE 29 - DAMAGES 38
ARTICLE 30 - AFFIRMATIVE WAIVERS 41
ARTICLE 31 - NO WAIVERS 41
ARTICLE 32 - CURING DEFAULTS 41
ARTICLE 33 - BROKER 42
ARTICLE 34 - NOTICES 43
ARTICLE 35 - ESTOPPEL CERTIFICATES 43
ARTICLE 36 - ARBITRATION 44
ARTICLE 37 - MEMORANDUM OF LEASE 44
ARTICLE 38 - INTENTIONALLY OMITTED 45
ARTICLE 39 - MISCELLANEOUS 45
EXHIBITS
Exhibit A - Demised Premises
Exhibit B - Description of Land
Exhibit C - Workletter
Exhibit D - Rules and Regulations
Exhibit E - Cleaning Specifications
Exhibit F - Letter of Credit
Exhibit G - Copies of Real Estate Tax Bills for 2003 & 2004
Exhibit H - Form of Subordination, Non-Disturbance and
Attornment Agreement
LEASE, dated February 21, 2004, between 400 Plaza Drive, Inc.,
a New Jersey Corporation, having an office at 400 Plaza Drive,
Secaucus, New Jersey 07096-1515 ("Landlord"), and Kenneth Cole
Services, Inc., a corporation, having an office at 2 Emerson Lane,
Secaucus, New Jersey 07094 ("Tenant").
ARTICLE 1 - DEFINITIONS
1.01. As used in this Lease (including in all Exhibits and
any Riders attached hereto, all of which shall be deemed to be
part of this Lease) the following words and phrases shall have the
meanings indicated:
A. Advance Rent: Intentionally Omitted.
B. Additional Charges: All amounts that become payable by
Tenant to Landlord hereunder other than the Fixed Rent.
C. Architect: Vincent Antonacci or such other architect as
Landlord may designate.
D. Base Year: The twelve month period commencing June 1, 2004
and ending on May 31, 2005.
E. Broker: Cresa Partners.
F. Building: The building or buildings now or hereafter
located on the Land and known or to be known as 400 Plaza Drive,
Secaucus, New Jersey.
G. Building Fraction: A fraction the numerator of which is the
Floor Space of the Building (approximately 252,354 square feet)
and the denominator of which is the aggregate Floor Space of the
buildings in the Development. If the aggregate Floor Space of the
buildings in the Development shall be changed due to any
construction or alteration, the denominator of the Building
Fraction shall be increased or decreased to reflect such change.
H. Business Days: All days except Saturdays, Sundays, days
observed by the federal or state government as legal holidays and
such other holidays as shall be designated as holidays by the
applicable building service union employees' service contract or
by the applicable operating engineers' contract.
I. Business Hours: Generally customary daytime business hours,
but not before 8:00 A.M. or after 6:00 P.M.
J. Calendar Year: Any twelve-month period commencing on a
January 1.
A.
K. Commencement Date: The earlier of (a) the date on which
both: (i) the Demised Premises shall be Ready for Occupancy, and
(ii) actual possession of the Demised Premises shall have been
delivered to Tenant by notice to Tenant (but not earlier than May
1, 2004), or (b) the date Tenant, or anyone claiming under or
through Tenant, first occupies the Demised Premises or any part
thereof for any purpose other than the performance of Tenant's
Work.
L. Common Areas: All areas, spaces and improvements in the
Building and on the Land which Landlord makes available from time
to time for the common use and benefit of the tenants and
occupants of the Building and which are not exclusively available
for use by a single tenant or occupant, including, without
limitation, parking areas, roads, walkways, sidewalks, landscaped
and planted areas, community rooms, if any, the managing agent's
office, if any, and public rest rooms, if any.
M. Demised Premises: The space that is or will be located on
the 3rd Floor of the Building and that is indicated on the floor
plan(s) attached hereto as Exhibit A. Landlord and Tenant have
agreed that for purposes of this Lease, the Demised Premises as
shown on Exhibit A contain 51,031 square feet of Floor Space.
N. Harmon Meadow-Development: All lands and improvements now
existing or hereafter constructed, in which Landlord or its
related entities has an interest, located north of Route 3, east
of the eastern spur of the New Jersey Turnpike, south of 69th
Street and west of West Side Avenue.
O. Expiration Date: The date that is the day before the 10th
anniversary of the Commencement Date if the Commencement Date is
the first day of a month, or the 10th anniversary of the last day
of the month in which the Commencement Date occurs if the
Commencement Date is not the first day of a month. However, if the
Term is extended by Tenant's effective exercise of Tenant's right,
if any, to extend the Term, the "Expiration Date" shall be changed
to the last day of the last extended period as to which Tenant
shall have effectively exercised its right to extend the Term. For
the purposes of this definition, the earlier termination of this
Lease shall not affect the "Expiration Date."
P. Fixed Rent: An amount at the annual rate of $20.50
multiplied by the number of square feet of Floor Space of the
Demised Premises for the period commencing on the Commencement
Date through the date which ids the day before the fifth
anniversary of the Commencement Date (i.e. years 1-5), and at the
annual rate of $22.50 multiplied by the number of square feet of
Floor Space of the Demised Premises for the period commencing on
the fifth anniversary of the Commencement Date through the date
which is the original Expiration Date (i.e. years 6-10). It is
intended that except as expressly provided in this Lease,
including but not limited to Article 6, Article 17 and Section
1.01 Z hereof, the Fixed Rent shall be an absolutely net return to
Landlord throughout the Term, free of any expense, charge or other
deduction whatsoever, with respect to the Demised Premises, the
Building, the Land and/or the ownership, leasing, operation,
management, maintenance, repair, rebuilding, use or occupation
thereof, or any portion thereof, with respect to any interest of
Landlord therein.
K.
Q. Floor Space: As to the Demised Premises, the sum of the
floor area stated in square feet bounded by the exterior faces of
the exterior walls, or by the exterior or Common Area face of any
wall between the Demised Premises and any portion of the Common
Areas, or by the center line of any wall between the Demised
Premises and space leased or available to be leased to a tenant or
occupant plus eighteen (18%). Notwithstanding anything contained
in the preceding sentence to the contrary, Landlord and Tenant
have agreed that for purposes of this Lease, the Demised Premises
as shown on Exhibit A contain 51,031 square feet of Floor Space.
Any reference to Floor Space of a building other than the
Demised Premises shall mean the floor area of all levels or
stories of such building, excluding any roof, except such portion
thereof (other than cooling towers, elevator penthouses,
mechanical rooms, chimneys and staircases, entrances and exits) as
is permanently enclosed, and including any interior basement level
or mezzanine area not occupied or used by a tenant on a continuing
or repetitive basis, and any mechanical room, enclosed or interior
truck dock, interior common areas, and areas used by Landlord for
storage, for housing meters and/or other equipment or for other
purposes. Any reference to the Floor Space is intended to refer to
the Floor Space of the entire area in question irrespective of the
Person(s) who may be the owner(s) of all or any part thereof.
S. Guarantor: Kenneth Cole Productions, Inc.
T. Insurance Requirements: Rules, regulations, orders and
other requirements of the applicable board of underwriters and/or
the applicable fire insurance rating organization and/or any other
similar body performing the same or similar functions and having
jurisdiction or cognizance over the Land and Building, whether now
or hereafter in force.
U. Land: The Land upon which the Building and Common Areas are
located. The Land is described on Exhibit B.
V. Landlord's Work: The materials and work to be furnished,
installed and performed by Landlord in accordance with the
provisions of Exhibit C.
W. Legal Requirements: Laws and ordinances of all federal,
state, city, town, county, borough and village governments, and
rules, regulations, orders and directives of all departments,
subdivisions, bureaus, agencies or offices thereof, and of any
other governmental, public or quasi-public authorities having
jurisdiction over the Land and Building, whether now or hereafter
in force, including, but not limited to, those pertaining to
environmental matters.
X. Mortgage: A mortgage and/or a deed of trust.
Y. Mortgagee: A holder of a mortgage or a beneficiary of a
deed of trust.
Z. Operating Expenses: The sum of the following: (1) the cost
and expense (whether or not within the contemplation of the
parties) for the repair, replacement, maintenance, policing,
insurance and operation of the Building and Land, and (2) the
Building Fraction of the sum of (a) the cost and expense for the
repair, replacement, maintenance, policing, insurance and
operation of the
S.
Development Common Areas; (b) the Real Estate Taxes, if any,
attributable to the Development Common Areas; and (3) the Parking
Charges; The "Operating Expenses" shall, include, without
limitation, the following: (x) the cost for rent, casualty,
liability, boiler and fidelity insurance, (y) if an independent
managing agent is employed by Landlord, the fees payable to such
agent (provided the same are competitive with the fees payable to
independent managing agents of comparable facilities in Hudson
County, and (z) costs and expenses incurred for legal, accounting
and other professional services (including, but not limited to,
costs and expenses for in-house or staff legal counsel or outside
counsel at rates not to exceed the reasonable and customary
charges for any such services as would be imposed in an arms
length third party agreement for such services, subject to the
limitations of subsection (vii) below). In all years subsequent to
Base Year, if Landlord is itself managing the Building and has not
employed an independent third party for such management, Landlord
shall be entitled to 15% of the resulting total of all of the
foregoing items making up "Operating Expenses" for Landlord's home
office administration and overhead cost and expense. All items
included in Operating Expenses shall be determined in accordance
with generally accepted accounting principles consistently
applied.
The items making up Operating Expenses shall not include the
following:
(i) Costs for which Landlord is specifically reimbursed by
Tenant or any other tenant (other than through operating expense
provisions), or by insurance carried pursuant to this Lease;
(ii) Interest or principal on mortgages of the Land and Building
or the Development, if any, and costs relating to financing or
refinancing, rents under underlying leases or Superior Leases, and
any ground rent, additional rent, or other charges under
underlying leases or Superior Leases, unless otherwise includable
in Operating Expenses (but not in duplication thereof);
(iii) Rent concessions or expenditures for any tenant alteration,
renovation, decoration, redecoration or finish of any other tenant
space in the Building or in other buildings in the Development
whether performed in connection with the occupancy of such space
by a new tenant or in connection with a renewal of a lease for
such space by the existing tenant thereof or the relocation of a
tenant or otherwise with respect to such tenancy;
(iv) Leasing commissions, marketing and advertising costs
related to leasing space in the Building and all finder's fees and
all other leasing expenses incurred in procuring tenants,
including without limitation, tenant space preparation and
relocation costs;
(v) The cost of repairs, replacements or other work incurred by
reason of fire, casualty, or condemnation to the extent same is
reimbursed by insurance proceeds, provided that if any non-
reimbursement is due to Landlord's failure to pay the applicable
insurance premiums or Landlord is otherwise at fault for such non-
reimbursement, then such non-reimbursed amounts shall not be
included Operating Expenses;
(i)
(vi) Any cost or other sum, representing an amount paid to an
affiliated corporation, entity, or person which is in excess of
the amount which would be paid in the absence of such
relationship;
(vii) Costs and expenses for legal, accounting and other
professional services (including, but not limited to, costs and
expenses for in-house or staff legal counsel or outside counsel)
incurred in connection with any negotiation of any lease in the
Building, enforcement of lease provisions (other than relating to
Common Areas or Rules and Regulations) or the collection of rent,
any relationships or disputes with any former tenants, prospective
tenants, or other lawful occupants of the Building, preparation of
financial statements for Mortgagees, preparation of Landlord's
income tax returns (other than in connection with Real Estate
Taxes);
(viii) Capital improvements by Landlord, except as follows: to
the extent any of the expenditures by Landlord making up Operating
Expenses hereunder would be classified as capital expenditure
items pursuant to generally accepted accounting principles then
only an amount, per annum, equal to the cost of such items
amortized over the useful life of such item, as reasonably
determined by Landlord, together with interest thereon at the
Prime Rate as announced in the Wall Street Journal (or a successor
index reasonably selected by Landlord), shall be included annually
in Operating Expenses with respect to the capital expenditures
(including but not limited to capital expenditures of Landlord in
connection with any change in Legal Requirements, but excluding
any capital expenditures for additions to the Building to the
extent such additions increase the Floor Space of the Building,
and any capital expenditures made from insurance or condemnation
proceeds in connection with the restoration of any casualty or
condemnation of the Building);
(ix) With respect to the Development Common Areas, capital
expenditures under generally accepted accounting principals with
respect to office buildings and retail premises in the Development
occupied or offered for sale or lease other than the Building;
(x) Income and franchise taxes of Landlord or its affiliated
entities (other than the Building Share of any taxes imposed upon
the property owner's association pursuant to the Declaration)
including corporate, unincorporated business, estate or
inheritance tax or charges imposed upon or assessed against
Landlord, provided however, that nothing in this subsection (ix)
shall be deemed to limit the provisions of Section 6.01 hereof;
(xi) Lease takeover or termination costs incurred by Landlord
in connection with any other lease in the Building, including any
payments required to be made in connection with the termination of
such lease.
(xii) depreciation and amortization in connection with the
Building or the Building equipment, fixtures, or systems except as
otherwise specifically provided in subsection (viii);
(xiii) the cost of electricity (including applicable taxes) and
other utilities furnished directly to leased areas of the Building
or other areas of the Building offered for lease (other than the
Demised Premises) as measured by meters, or if there be no meters,
as determined by a
(vi)
reputable independent electrical consultant mutually acceptable
to Landlord and Tenant, and the cost of other utilities furnished
to such other leased areas of the Building or other areas of the
Building offered for lease (other than the Demised Premises) as
measured by meters or, if there be no meters, as determined by a
reputable independent consultant mutually acceptable to Landlord
and Tenant;
(xiv) salaries, fringe benefits, administrative expenses and any
other compensation of personnel above the grade of vice president,
property management or equally held positions (if any such
personnel perform services for premises other than the Building,
the salaries, fringe benefits, administrative expenses and other
compensation of such personnel shall be allocated pro rata between
the Building and such other premises);
(xv) Real Estate Taxes (which are provided for in Section 6.01
hereof);
(xvi) Bad debt or rent loss reserves;
(xvii) Any interest, fine, penalty or other late charge payable by
Landlord (other than if caused by the act of Tenant, or Tenant's
agents or invitees) except to the extent that the cost of avoiding
liability for such interest, fine, penalty or other late charge
exceeds the amount thereof or any increase in insurance premium or
charge resulting from Landlord's violation of any Legal
Requirements or insurance requirement; and
(xviii)Costs incurred to test, survey, cleanup, contain, abate,
remove, or otherwise remedy hazardous chemicals, hazardous wastes
or asbestos containing materials from the Land or the Building, to
the extent such hazardous chemicals, hazardous wastes or asbestos
containing materials were located on the Land or in the building
prior to the date Tenant occupies any part of the Building or the
Land.
AA. Parking Charges: The cost and expense of the repair,
replacement, striping, maintenance, policing, insurance, Real
Estate Taxes, utilities, and landscaping attributable to the pro
rata share of the parking deck(s) allocated to the Building. The
pro rata share shall be determined based upon the number of
parking spaces allocated to the Building divided by the total
number of the parking spaces in the parking deck(s). The parking
charges shall include expenses attributable only to the parking
deck(s) and shall not include expenses attributable to any other
improvements.
BB. Permitted Uses: Executive and administrative offices of a
character consistent with that of a first class office building.
CC. Person: A natural person or persons, a partnership, a
corporation, or any other form of business or legal association or
entity.
DD. Ready for Occupancy: The condition of the Demised
Premises when for the first time the Landlord's Work shall have
been substantially completed. The Landlord's Work shall be deemed
substantially completed notwithstanding the fact that minor or
insubstantial details of construction, mechanical adjustment or
decoration remain to be performed, the non-completion of which
does not
materially interfere with Tenant's use of the Demised Premises.
EE. Real Estate Taxes: The real estate taxes, assessments and
special assessments imposed upon the Building and Land by any
federal, state, municipal or other governments or governmental
bodies or authorities, and any expenses incurred by Landlord in
contesting such taxes or assessments and/or the assessed value of
the Building and Land, which expenses shall be allocated to the
period of time to which such expenses relate. If at any time
during the Term the methods of taxation prevailing on the date
hereof shall be altered so that in lieu of, or as an addition to
or as a substitute for, the whole or any part of such real estate
taxes, assessments and special assessments now imposed on real
estate there shall be levied, assessed or imposed (a) a tax,
assessment, levy, imposition, license fee or charge wholly or
partially as a capital levy or otherwise on the rents received
therefrom, or (b) any other such additional or substitute tax,
assessment, levy, imposition or charge, then all such taxes,
assessments, levies, impositions, fees or charges or the part
thereof so measured or based shall be deemed to be included within
the term "Real Estate Taxes" for the purposes hereof. Absent an
alteration in the method of taxation as set forth above, and
except with respect to charges imposed in lieu of real estate
taxes, assessments and special assessments, "Real Estate Taxes"
shall not be deemed to include Landlord's personal and corporate
income taxes, inheritance and estate taxes, franchise, gift and
transfer taxes. With respect to the calculation of Tenant's
Fraction of Real Estate Taxes payable by Tenant under this Lease
for the any year subsequent to the Base Year, Landlord agrees that
the Real Estate Taxes for the Base Year shall not include any
discount received by Landlord for payment of Real Estate Taxes in
advance for purposes of obtaining a discount on such taxes unless
Landlord pays such Real Estate Taxes in advance on a discounted
basis in the Base Year as well as the year for which Tenant's
Fraction of Real Estate Taxes is being calculated. A copy of the
real estate tax bill for the Land and the Building for the year
2003 and a copy of the preliminary real estate tax bill for the
Land and Building for 2004 are attached hereto for reference as
Exhibit G; no representation or warranty is made by Landlord with
respect to such real estate tax bills or with respect to any
future Real Estate Taxes.
FF. Rent: The Fixed Rent and the Additional Charges.
GG. Rules and Regulations: The reasonable rules and
regulations that may be promulgated by Landlord from time to time,
which may be reasonably changed by Landlord from time to time. The
Rules and Regulations now in effect are attached hereto as Exhibit
D.
HH. Security Deposit: One Hundred Seventy-Four Thousand Three
Hundred Fifty-Five & 92/100 Dollars ($174,355.92).
II. Intentionally Omitted.
JJ. Successor Landlord: As defined in Section 9.03.
KK. Superior Lease: Any lease to which this Lease is, at the
time referred to, subject and subordinate.
LL. Superior Lessor: The lessor of a Superior Lease or its
successor in interest, at the time
referred to.
MM. Superior Mortgage: Any Mortgage to which this Lease is,
at the time referred to, subject and subordinate.
NN. Superior Mortgagee: The Mortgagee of a Superior Mortgage
at the time referred to.
OO. Tenant's Fraction: The Tenant's Fraction shall mean the
fraction, the numerator of which shall be the Floor Space of the
Demised Premises and the denominator of which shall be the Floor
Space of the Building (20.22%). If the size of the Demised
Premises or the Building shall be changed from the initial size
thereof, due to any taking, any construction or alteration work or
otherwise, the Tenant's Fraction shall be changed to the fraction
the numerator of which shall be the Floor Space of the Demised
Premises and the denominator of which shall be the Floor Space of
the Building. In the event Landlord reasonably determines that
Tenant's utilization of any item of Operating Expenses exceeds the
fraction referred to above, Tenant's Fraction with respect to such
item shall, at Landlord's option, mean the percentage of any such
item (but not less than the fraction referred to above) which
Landlord reasonably estimates as Tenant's proportionate share
thereof and for which Landlord provides documentation to Tenant
setting forth such determination in reasonable detail.
PP. Tenant's Property: As defined in Section 16.02.
QQ. Tenant's Work: The facilities, materials and work which
may be undertaken by or for the account of Tenant (other than the
Landlord's Work) to equip, decorate and furnish the Demised
Premises for Tenant's occupancy in accordance with the provisions
of Exhibit C.
RR. Term: The period commencing on the Commencement Date and
ending at 11:59 p.m. of the Expiration Date, but in any event the
Term shall end on the date when this Lease is earlier terminated.
SS. Unavoidable Delays: A delay arising from or as a result
of a strike, lockout, or labor difficulty, explosion, sabotage,
accident, riot or civil commotion, act of war, fire or other
catastrophe, Legal Requirement or an act of the other party and
any cause beyond the reasonable control of that party, provided
that the party asserting such Unavoidable Delay has exercised its
best efforts to minimize such delay.
ARTICLE 2 - DEMISE AND TERM
2.01. Landlord hereby leases to Tenant, and Tenant hereby
hires from Landlord, the Demised Premises, for the Term. Promptly
following the Commencement Date, the parties hereto shall enter
into an agreement in form and substance satisfactory to Landlord
setting forth the Commencement Date.
ARTICLE 3 - RENT
3.01. Tenant shall pay the Fixed Rent in equal monthly
installments in advance on the first day of each and every
calendar month during the Term. If the Commencement Date occurs
on a day other than the first day of a calendar month, the Fixed
Rent for the partial calendar month at the commencement of the
Term shall be prorated.
3.02. The Rent shall be paid in lawful money of the United
States to Landlord at its office, or such other place, or
Landlord's agent, as Landlord shall designate by notice to Tenant.
Tenant shall pay the Rent promptly when due without notice or
demand therefor and without any abatement, deduction or setoff for
any reason whatsoever, except as may be expressly provided in this
Lease. If Tenant makes any payment to Landlord by check, same
shall be by check of Tenant and Landlord shall not be required to
accept the check of any other Person, and any check received by
Landlord shall be deemed received subject to collection. If any
check is mailed by Tenant, Tenant shall post such check in
sufficient time prior to the date when payment is due so that such
check will be received by Landlord on or before the date when
payment is due. Tenant shall assume the risk of lateness or
failure of delivery of the mails, and no lateness or failure of
the mails will excuse Tenant from its obligation to have made the
payment in question when required under this Lease.
3.03. No payment by Tenant or receipt or acceptance by
Landlord of a lesser amount than the correct Rent shall be deemed
to be other than a payment on account, nor shall any endorsement
or statement on any check or any letter accompanying any check or
payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right
to recover the balance or pursue any other remedy in this Lease or
at law provided.
3.04. If Tenant is in arrears in payment of Rent, Tenant
waives Tenant's right, if any, to designate the items to which any
payments made by Tenant are to be credited, and Landlord may apply
any payments made by Tenant to such items as Landlord sees fit,
irrespective of and notwithstanding any designation or request by
Tenant as to the items to which any such payments shall be
credited.
3.05. In the event that any installment of Rent due hereunder
shall be overdue for more than five (5) days, a "Late Charge"
equal to four percent (4%) or the maximum rate permitted by law,
whichever is less ("Late Payment Rate") for Rent so overdue may be
charged by Landlord for each month or part thereof that the same
remains overdue ("Late Payment Rate"). Provided Tenant is not
otherwise in default under this Lease beyond applicable notice and
cure periods, Landlord shall waive the Late Charge with respect to
Tenant's first late payment of Rent within any calendar year,
provided further that Tenant pays such late Rent within ten (10)
days after written notice that same has not been paid. In the
event that any check tendered by Tenant to Landlord is returned
for insufficient funds, Tenant shall pay to Landlord, in addition
to the charge imposed by the preceding sentence, a fee of $50.00.
Any such Late Charges if not previously paid shall, at the option
of the Landlord, be added to and become part of the next
succeeding Rent payment to be made hereunder.
ARTICLE 4 - USE OF DEMISED PREMISES
4.01. Tenant shall use and occupy the Demised Premises for
the Permitted Uses, and Tenant shall not use or permit or suffer
the use of the Demised Premises or any part thereof for any other
purpose.
4.02. If any governmental license or permit: including, but
not limited to a Certificate of Occupancy or a Certificate of
Continued Occupancy shall be required for the proper and lawful
conduct of Tenant's business in the Demised Premises or any part
thereof, Tenant shall duly procure and thereafter maintain such
license or permit and submit the same to Landlord for inspection.
Tenant shall at all times comply with the terms and conditions of
each such license or permit. Tenant shall not at any time use or
occupy, or suffer or permit anyone to use or occupy the Demised
Premises, or do or permit anything to be done in the Demised
Premises, in any manner which (a) violates the Certificate of
Occupancy or Certificate of Continued Occupancy for the Demised
Premises or for the Building; (b) causes or is liable to cause
injury to the Building or any equipment, facilities or systems
therein; (c) constitutes a violation of the Legal Requirements or
applicable Insurance Requirements; (d) constitutes a violation of
applicable Insurance Requirements, of which Tenant has been given
notice (e) impairs or tends to impair the character, reputation or
appearance of the Building as a first-class office building; (f)
impairs or tends to impair the proper and economic maintenance,
operation and repair of the Building and/or its equipment,
facilities or systems; or (g) constitutes a nuisance or adversely
affects other tenants or occupants of the Building.
ARTICLE 5 - PREPARATION OF DEMISED PREMISES
5.01.(a) The Demised Premises shall be completed and prepared
for Tenant's occupancy in the manner described in, and subject to
the provisions of, Exhibit C (including but not limited to the
approved Plans attached thereto and referred to herein). Tenant
shall occupy the Demised Premises promptly after the same are
Ready for Occupancy and possession thereof is delivered to Tenant
by Landlord giving to Tenant a notice of such effect, but not
prior to May 1, 2004. Except as expressly provided to the contrary
in this Lease, the taking of possession by Tenant of the Demised
Premises shall be conclusive evidence as against Tenant that the
Demised Premises and the Building were in good and satisfactory
condition at the time such possession was taken.
Tenant shall provide Landlord with written notice of any
claimed defects in workmanship or materials in Landlord's Work
(except for any defects in the Demised Premises or the Building
which were not known or reasonably discoverable by Tenant by
observation or an inspection ["Latent Defects"]), and any items of
work performed by Landlord of a minor or insubstantial nature
("Punchlist Items") not later than thirty (30) days after Tenant
receives notice from Landlord that the Demised Premises are Ready
for Occupancy, and with respect to any Latent Defects, within
thirty (30) days after tenant becomes aware of such defect.
Landlord shall us reasonable efforts to complete any punchlist
items within thirty (30) days after receipt of written notice from
Tenant. If Landlord fails to complete any punchlist items within
said thirty (30) day period, other than as a result of unavoidable
delay, Tenant shall have the right to exercise self help with
respect thereto as more particularly provided in Section 32.02 of
this Lease.
5.01.(b) If Tenant requests and revised changes in the
working drawings, the provisions of Section 5.02 shall apply.
Tenant shall, within fifteen (15) days of its receipt of prices
from Landlord with respect to any changes requested by Tenant,
review and approve the prices by giving Landlord written notice
thereof. If Tenant does not respond within said fifteen (15) day
period, the prices shall be deemed approved. If Tenant disapproves
of any prices, the provisions of Section 5.02 shall apply.
5.02. If the substantial completion of the Landlord's Work
shall be delayed due to (a) any act or omission of Tenant or any
of its employees, agents or contractors (including, without
limitation, [i] any delays due to changes in or additions to the
Landlord's Work, or [ii] any delays by Tenant in the submission of
plans, drawings, specifications or other information or in
approving any working drawings or estimates or in giving any
authorizations or approvals), or (b) any additional time needed
for the completion of the Landlord's Work by the inclusion in the
Landlord's Work of any items specified by Tenant that require long
lead time for delivery or installation, then the Demised Premises
shall be deemed Ready for Occupancy on the date when they would
have been ready but for such delay(s).
5.03. Intentionally Omitted.
5.04. Landlord reserves the right, at any time and from time
to time, to increase, reduce or change the number, type, size,
location, elevation, nature and use of any of the Common Areas and
the Building and any other buildings and other improvements on the
Land, including, without limitation, the right to move and/or
remove same, provided same shall not unreasonably block or
interfere with Tenant's means of ingress or egress to and from the
Demised Premises.
ARTICLE 6 - TAX AND OPERATING EXPENSE PAYMENTS
6.01. Tenant shall pay to Landlord, as hereinafter provided,
Tenant's Fraction of the Real Estate Taxes. Tenant's Fraction of
the Real Estate Taxes shall be the Real Estate Taxes in respect of
the Building for the period in question, less the Real Estate
Taxes attributable to the Base Year, multiplied by the Tenant's
Fraction, plus the Real Estate Taxes in respect of the Land for
the period in question, less the Real Estate Taxes attributable to
the Base Year, multiplied by the Tenant's Fraction. If any portion
of the Building shall be exempt from all or any part of the Real
Estate Taxes, then for the period of time when such exemption is
in effect, the Floor Space on such exempt portion shall be
excluded when making the above computations in respect of the part
of the Real Estate Taxes for which such portion shall be exempt.
Landlord shall estimate the annual amount of Tenant's Fraction of
the Real Estate Taxes (which estimate may be changed by Landlord
at any time and from time to time), and Tenant shall pay to
Landlord 1/12th of the amount so estimated on the first day of
each month in advance. Tenant shall also pay to Landlord on demand
from time to time the amount which, together with said monthly
installments, will be sufficient in Landlord's estimation to pay
Tenant's Fraction of any Real Estate Taxes thirty (30) days prior
to the date when such Real Estate Taxes shall first become due.
When the amount of any item comprising Real Estate Taxes is
finally determined for a real estate fiscal tax year, Landlord
shall submit to Tenant a
statement in reasonable detail of the same, and the figures used
for computing Tenant's Fraction of the same, and if Tenant's
Fraction so stated is more or less than the amount theretofore
paid by Tenant for such item based on Landlord's estimate, Tenant
shall pay to Landlord the deficiency within ten (10) days after
submission of such statement, or Landlord shall, at its sole
election, either refund to Tenant the excess or apply same to
future installments of Real Estate Taxes due hereunder. Any Real
Estate Taxes for a real estate fiscal tax year, a part of which is
included within the Term and a part of which is not so included,
shall be apportioned on the basis of the number of days in the
real estate fiscal tax year included in the Term, and the real
estate fiscal tax year for any improvement assessment will be
deemed to be the one-year period commencing on the date when such
assessment is due, except that if any improvement assessment is
payable in installments, the real estate fiscal tax year for each
installment will be deemed to be the one-year period commencing on
the date when such installment is due. The above computations
shall be made by Landlord in accordance with generally accepted
accounting principles, and the Floor Space referred to will be
based upon the average of the Floor Space in existence on the
first day of each month during the period in question. In addition
to the foregoing, Tenant shall be responsible for any increase in
Real Estate Taxes attributable to assessments for improvements
installed by or for the account of Tenant at the Demised Premises.
If the Demised Premises are not separately assessed, the amount of
any such increase shall be determined by reference to the records
of the tax assessor.
6.02. Tenant shall pay to Landlord, as hereinafter provided,
Tenant's Fraction of the Operating Expenses. Tenant's Fraction of
the Operating Expenses shall be the Operating Expenses for the
period in question, less the Operating Expenses for the Base Year,
multiplied by Tenant's Fraction]. Landlord shall estimate Tenant's
annual Fraction of the Operating Expenses (which estimate may be
reasonably changed by Landlord from time to time), and Tenant
shall pay to Landlord 1/12th of the amount so estimated on the
first day of each month in advance. If at any time Landlord
changes its estimate of Tenant's Fraction of the Operating
Expenses for the then current Calendar Year or partial Calendar
Year, Landlord shall give notice to Tenant of such change and
within ten (10) days after such notice Landlord and Tenant shall
adjust for any overpayment or underpayment during the prior months
of the then current Calendar Year or partial Calendar Year. After
the end of each Calendar Year, including any partial Calendar Year
at the beginning of the Term, and after the end of the Term,
Landlord shall submit to Tenant a statement in reasonable detail
stating Tenant's Fraction of the Operating Expenses for such
Calendar Year, or partial Calendar Year in the event the Term
shall begin on a date other than a January 1st and/or end on a
date other than a December 31st, as the case may be, and stating
the Operating Expenses for the period in question and the figures
used for computing Tenant's Fraction, and if Tenant's Fraction so
stated for such period is more or less than the amount paid for
such period, Tenant shall pay to Landlord the deficiency within
ten (10) days after submission of such statement, or Landlord
shall, at its sole election, either refund to Tenant the excess or
apply same to future installments of Operating Expenses due
hereunder. All computations shall be made in accordance with
generally accepted accounting principles.
6.03. Landlord shall, within thirty (30) days after written
request from Tenant (given no later than one hundred twenty (120)
days after the issuance of the Landlord's statement of Real Estate
Taxes or Operating Expenses pursuant to Section 6.01 or 6.02
hereof which Tenant desires to review), provide Tenant with such
information as Tenant may reasonably request to permit Tenant to
verify the charges first appearing in such statement including,
without limitation access to and review of Landlord's relevant
books, records and other financial information. Each such
statement given by Landlord pursuant to Section 6.01 or Section
6.02 shall be conclusive and binding upon Tenant unless before the
date which is one hundred twenty (120) days after the receipt of
such statement, Tenant shall notify Landlord in writing that it
disputes the correctness of the statement, specifying the
particular respects in which the statement is claimed to be
incorrect. If such dispute is not settled by agreement, either
party may submit the dispute to arbitration as provided in Article
36. Pending the determination of such dispute by agreement or
arbitration as aforesaid, Tenant shall, within thirty (30) days
after receipt of such statement, pay the Additional Charges in
accordance with such statement, without prejudice to Tenant's
position. If the dispute shall be determined in Tenant's favor,
Landlord shall credit or reimburse Tenant the amount of Tenant's
overpayment.
ARTICLE 7 - COMMON AREAS
7.01. So long as Tenant is not in default in the payment of
Rent under this Lease beyond any applicable notice or cure period,
subject to the provisions of Section 5.04, Landlord will operate,
manage, equip, light, repair and maintain, or cause to be
operated, managed, equipped, lighted, repaired and maintained, the
Common Areas for their intended purposes. Landlord reserves the
right, at any time and from time to time, to construct within the
Common Areas kiosks, fountains, aquariums, planters, pools and
sculptures, and to install vending machines, telephone booths,
benches and the like, provided same shall not unreasonably block
or interfere with Tenant's means of ingress or egress to and from
the Demised Premises.
7.02. So long as Tenant is not in default in the payment of
Rent under this Lease beyond any applicable notice or cure period,
Tenant and its subtenants and concessionaires, and their
respective officers, employees, agents, customers and invitees,
shall have the non-exclusive right, in common with Landlord and
all others to whom Landlord has granted or may hereafter grant
such right, but subject to the Rules and Regulations, to use the
Common Areas. Landlord reserves the right, at any time and from
time to time, to close temporarily all or any portions of the
Common Areas when in Landlord's reasonable judgment any such
closing is necessary or desirable (a) to make repairs or changes
or to effect construction, (b) to prevent the acquisition of
public rights in such areas, (c) to discourage unauthorized
parking, or (d) to protect or preserve natural persons or
property. Landlord may do such other acts in and to the Common
Areas as in its judgment may be desirable to improve or maintain
same.
7.03. Tenant agrees that it, any subtenant or licensee and
their respective officers, employees, contractors and agents will
park their automobiles and other vehicles only where and as
permitted by Landlord. Tenant will, if and when so requested by
Landlord, furnish Landlord with the license numbers of any
vehicles of Tenant, any subtenant or licensee and their respective
officers, employees and agents. So long as Tenant is not in
default under this Lease beyond any applicable notice and cure
period, Tenant shall, during the Term, be entitled to the use by
Tenant and its officers, employees, agents, and invitees of ten
(10) reserved parking spaces for parking of automobiles, in
locations designated by Landlord under the Building, and Landlord
shall provide Tenant with parking identification passes or decals
for up to one hundred ninety (190) automobiles on a non-exclusive
unreserved spaces in the parking areas serving the
Building, for the non-exclusive use by Tenant and its officers,
employees, agents, and invitees. Any use by Tenant of the Parking
Facility at times other than on Business Days and during Business
Hours shall be at Tenant's sole risk and cost and without
additional cost or expense to Landlord.
ARTICLE 8 - SECURITY
8.01(a). Tenant has deposited with Landlord the Security
Deposit as security for the full and faithful payment and
performance by Tenant of Tenant's obligations under this Lease. If
Tenant defaults in the full and prompt payment and performance of
any of its obligations under this Lease, beyond applicable notice
and cure periods (provided, however that no notice or cure period
shall be required after any event referred to under Section 27.01
occurs), if any, including, without limitation, the payment of
Rent, Landlord may use, apply or retain the whole or any part of
the Security Deposit to the extent required for the payment of any
Rent or any other sums as to which Tenant is in default or for any
sum which Landlord may expend or may be required to expend by
reason of Tenant's default in respect of any of Tenant's
obligations under this Lease, including, without limitation, any
damages or deficiency in the reletting of the Demised Premises,
whether such damages or deficiency accrue before or after summary
proceedings or other re-entry by Landlord. If Landlord shall so
use, apply or retain the whole or any part of the security, Tenant
shall upon demand immediately deposit with Landlord a sum equal to
the amount so used, applied and retained, as security as
aforesaid. If Tenant shall fully and faithfully pay and perform
all of Tenant's obligations under this Lease, the Security Deposit
or any balance thereof to which Tenant is entitled shall be
returned or paid over to Tenant after the date on which this Lease
shall expire or sooner end or terminate, and after delivery to
Landlord of entire possession of the Demised Premises. In the
event of any sale or leasing of the Land, Landlord shall have the
right to transfer the security to which Tenant is entitled to the
vendee or lessee and Landlord shall thereupon be released by
Tenant from all liability for the return or payment thereof; and
Tenant shall look solely to the new landlord for the return or
payment of the same; and the provisions hereof shall apply to
every transfer or assignment made of the same to a new landlord.
Tenant shall not assign or encumber or attempt to assign or
encumber the monies deposited herein as security, and neither
Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted
encumbrance.
8.01(b). In lieu of the cash security required by this Lease,
at Landlord's option, Tenant shall provide to Landlord an
irrevocable Letter of Credit in the amount of the Security Deposit
in form and substance satisfactory to Landlord and issued by a
financial institution approved by Landlord and otherwise
conforming to Exhibit F, annexed hereto and made a part hereof.
Landlord shall have the right, upon written notice to Tenant
(except for Tenant's non-payment of Rent or for Tenant's failure
to comply with Article 8.03 for which no notice shall be
required), and regardless of the exercise of any other remedy the
Landlord may have by reason of a default, to draw upon said Letter
of Credit to cure any default of Tenant or for any purpose
authorized by section 8.01(a) of this Lease and if Landlord does
so, Tenant shall, upon demand, additionally fund the Letter of
Credit with the amount so drawn so that Landlord shall have the
full deposit on hand at all times during the Term of the Lease and
for a period of thirty (30) days' thereafter. In the event of a
sale of the Building or a lease of the Building subject to this
Lease, Landlord shall have the right to transfer the security to
the vendee or lessee.
8.02. The Letter of Credit shall expire not earlier than
thirty (30) days after the Expiration Date of this Lease. Upon
Landlord's prior consent, the Letter of Credit may be of the type
which is automatically renewed on an annual basis (Annual Renewal
Date), provided however, in such event Tenant shall maintain the
Letter of Credit and its renewals in full force and effect during
the entire Term of this Lease (including any renewals or
extensions) and for a period of thirty (30) days thereafter. The
Letter of Credit will contain a provision requiring the issuer
thereof to give the beneficiary (Landlord) sixty (60) days'
advance written notice of its intention not to renew the Letter of
Credit on the next Annual Renewal Date.
8.03. In the event Tenant shall fail to deliver to Landlord a
substitute irrevocable Letter of Credit, in the amount stated
above, on or before thirty (30) days prior to the next Annual
Renewal Date, said failure shall be deemed a default under this
Lease. Landlord may, in its discretion treat this the same as a
default in the payment of Rent or any other default and pursue the
appropriate remedy. In addition, and not in limitation, Landlord
shall be permitted to draw upon the Letter of Credit as in the
case of any other default by Tenant under the Lease.
ARTICLE 9 - SUBORDINATION
9.01. Provided that (a) the Superior Mortgagee pursuant to a
Mortgage dated prior to the date hereof shall execute and deliver
to Tenant an agreement, in recordable form, substantially in the
form attached hereto and made a part hereof as Exhibit H, or (b)
with respect to any future Mortgagee pursuant to a future
Mortgage, such future Mortgagee shall execute and deliver to
Tenant an agreement, in recordable form, in such form as is
reasonably acceptable to Tenant and such future Mortgagee,
provided such form does not increase Tenant's responsibilities or
decrease Tenant's rights under this Lease, to the effect that,
provided no event of default has occurred and is continuing
hereunder, such future Mortgagee will not name or join Tenant as a
party defendant or otherwise in any suit, action or proceeding to
enforce any rights granted to such future Mortgagee against
Landlord under its Superior Mortgage, and to the further effect
that if there shall be a foreclosure of its Superior Mortgage,
that such future Mortgagee will not make Tenant a party defendant
to such foreclosure, evict Tenant, disturb Tenant's possession
under this Lease, or terminate or disturb Tenant's Leasehold
estate or rights, hereunder, or (c) a future Superior Lessor shall
execute and deliver to Tenant an agreement, in recordable form to
the effect that, provided no event of default has occurred and is
continuing hereunder, such future Superior Lessor will not name or
join Tenant as a party defendant or otherwise in any suit, action
or proceeding to enforce any rights granted to such future
Superior Lessor against Landlord under its Superior Lease, and to
the further effect that if its Superior Lease shall terminate or
be terminated for any reason, such future Superior Lessor will
recognize Tenant as the direct tenant of such Superior Lessor on
the same terms as are contained in this Lease (any such agreement
of similar import from a Superior Mortgagee or a Superior Lessor,
as the case may be, being hereinafter referred to as a "Non-
Disturbance Agreement"), this Lease, and all rights of Tenant
hereunder, are and shall be subject and subordinate to all ground
leases and underlying leases of the Land and/or the Building now
or hereafter existing and to all Mortgages which may now or
hereafter affect the Land and/or building and/or any of such
leases, whether or not such Mortgages or leases shall also cover
other lands and/or buildings, to each and every advance made or
hereafter to be made under such Mortgages, and to all renewals,
modifications,
replacements and extensions of such leases and such Mortgages and
spreaders and consolidations of such Mortgages. The provisions of
this Section 9.01 shall be self-operative and no further
instrument of subordination shall be required. In confirmation of
such subordination, Tenant shall promptly execute, acknowledge and
deliver any instrument that Landlord, the lessor under any such
lease or the Mortgagee of any such Mortgage or any of their
respective successors in interest may reasonably request to
evidence such subordination.
9.02. If any act or omission of Landlord would give Tenant
the right, immediately or after lapse of a period of time, to
cancel or terminate this Lease, or to claim a partial or total
eviction, Tenant shall not exercise such right (a) until it has
given written notice of such act or omission to Landlord and each
Superior Mortgagee and each Superior Lessor whose name and address
shall previously have been furnished to Tenant, and (b) until a
reasonable period for remedying such act or omission shall have
elapsed following the giving of such notice and following the time
when such Superior Mortgagee or Superior Lessor shall have become
entitled under such Superior Mortgage or Superior Lease, as the
case may be, to remedy the same (which reasonable period shall in
no event be less than the period to which Landlord would be
entitled under this Lease or otherwise, after similar notice, to
effect such remedy), provided such Superior Mortgagee or Superior
Lessor shall with due diligence give Tenant notice of intention
to, and commence and continue to, remedy such act or omission.
9.03. Except as provided in Section 9.01 of this Lease, if
any Superior Lessor or Superior Mortgagee shall succeed to the
rights of Landlord under this Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, then at the
request of such party so succeeding to Landlord's rights
("Successor Landlord") and upon such Successor Landlord's written
agreement to accept Tenant's attornment, Tenant shall attorn to
and recognize such Successor Landlord as Tenant's landlord under
this Lease and shall promptly execute and deliver any instrument
that such Successor Landlord may reasonably request to evidence
such attornment. Upon such attornment this Lease shall continue in
full force and effect as a direct lease between the Successor
Landlord and Tenant upon all of the terms, conditions and
covenants as are set forth in this Lease except that the Successor
Landlord shall not (a) be liable for any previous act or omission
of Landlord under this Lease; (b) be subject to any offset, not
expressly provided for in this Lease, which theretofore shall have
accrued to Tenant against Landlord; (c) be liable for the return
of any Security Deposit, in whole or in part, to the extent that
same is not paid over to the Successor Landlord; or (d) be bound
by any previous modification of this Lease or by any previous
prepayment of more than one month's Fixed Rent or Additional
Charges, unless such modification or prepayment shall have been
expressly approved in writing by the Superior Lessor of the
Superior Lease or the Mortgagee of the Superior Mortgage through
or by reason of which the Successor Landlord shall have succeeded
to the rights of Landlord under this Lease.
9.04. If any then present or prospective Superior Mortgagee
shall require any modification(s) of this Lease, Tenant shall
promptly execute and deliver to Landlord such instruments
effecting such modification(s) as Landlord shall request, provided
that such modification(s) do not adversely affect in any material
respect any of Tenant's rights under this Lease.
ARTICLE 10 - QUIET ENJOYMENT
10.01. So long as Tenant pays all of the Rent and performs
all of Tenant's other obligations hereunder, Tenant shall
peaceably and quietly have, hold and enjoy the Demised Premises
without hindrance, ejection or molestation by Landlord or any
person lawfully claiming through or under Landlord, subject,
nevertheless, to the provisions of this Lease and to Superior
Leases and Superior Mortgages.
ARTICLE 11 - ASSIGNMENT, SUBLETTING AND MORTGAGING
11.01. Tenant shall not, whether voluntarily, involuntarily,
or by operation of law or otherwise, (a) assign or otherwise
transfer this Lease, or offer or advertise to do so, (b) sublet
the Demised Premises or any part thereof, or offer or advertise to
do so, or allow the same to be used, occupied or utilized by
anyone other than Tenant, or (c) mortgage, pledge, encumber or
otherwise hypothecate this Lease in any manner whatsoever, without
in each instance obtaining the prior written consent of Landlord.
Landlord agrees not to unreasonably withhold its consent to
the subletting of the Demised Premises or an assignment of this
Lease. In determining reasonableness, Landlord may take into
consideration all relevant factors surrounding the proposed
sublease and assignment, including, without limitation, the
following: (i) The business reputation of the proposed assignee or
subtenant and its officers or directors in relation to the other
tenants or occupants of the Building or Development; (ii) the
nature of the business and the proposed use of the Demised
Premises by the proposed assignee or subtenant in relation to the
other tenants or occupants of the Building or Development; (iii)
whether the proposed assignee or subtenant is then a tenant (or
subsidiary, affiliate or parent of a tenant) of other space in the
Building or Development; (iv) the financial condition of the
proposed assignee or subtenant; (v) restrictions, if any,
contained in leases or other agreements affecting the Building and
the Development; (vi) the effect that the proposed assignee's or
subtenant's occupancy or use of the Demised Premises would have
upon the operation and maintenance of the Building and the
Development; (vii) the extent to which the proposed assignee or
subtenant and Tenant provide Landlord with assurances reasonably
satisfactory to Landlord as to the satisfaction of Tenant's
obligations hereunder. In any event, at no time shall there be
more than three (3) subtenants of the Demised Premises permitted.
In the event the Demised Premises are sublet or this Lease is
assigned, Tenant shall pay to Landlord as an Additional Charge the
following amounts less the actual reasonable expense incurred by
Tenant in connection with such assignment or subletting, as
substantiated by Tenant, in writing, to Landlord's reasonable
satisfaction, including, without limitation, a reasonable
brokerage fee and reasonable legal fees including but not limited
to the cost and expenses for in-house or staff legal counsel or
outside counsel at rates not to exceed the reasonable and
customary charges for any such legal services as would be imposed
in an arms length third party agreement for such services), as the
case may be: (i) in the case of an assignment, an amount equal to
fifty percent (50%) of all sums and other consideration paid to
Tenant by the assignee for or by reason of such assignment, and
(ii) in the case of a sublease, fifty percent (50%) of any rents,
additional charge or other consideration payable under the
sublease to Tenant by the subtenant which is in excess of the
Fixed Rent and
Additional Charges accruing during the term of the sublease in
respect of the subleased space (at the rate per square foot
payable by Tenant hereunder) pursuant to the terms hereof.
11.02. (a) If at any time (a) the original Tenant named
herein, (b) the then Tenant, (c) any Guarantor, or (d) any Person
owning a majority of the voting stock of, or directly or
indirectly controlling, the then Tenant shall be a corporation or
partnership, any transfer of voting stock or partnership interest
resulting in the person(s) who shall have owned a majority of such
corporation's shares of voting stock or the general partners'
interest in such partnership, as the case may be, immediately
before such transfer, ceasing to own a majority of such shares of
voting stock or general partner's interest, as the case may be,
except as the result of transfers by inheritance, shall be deemed
to be an assignment of this Lease as to which Landlord's consent
shall have been required, and in any such event Tenant shall
notify Landlord. The provisions of this Section 11.02 shall not be
applicable to any corporation all the outstanding voting stock of
which is listed on a national securities exchange (as defined in
the Securities Exchange Act of 1934, as amended) or is traded in
the over-the-counter market with quotations reported by the
National Association of Securities Dealers through its automated
system for reporting quotations and shall not apply to
transactions with a corporation into or with which the then Tenant
is merged or consolidated or to which substantially all of the
then Tenant's assets are transferred or to any corporation which
controls or is controlled by the then Tenant or is under common
control with the then Tenant, provided that in any of such events
(i) the successor to Tenant or Guarantor has a net worth
(exclusive of any value ascribed to good will or other similar
intangibles) computed in accordance with generally accepted
accounting principles (herein referred to as a "tangible net
worth") at least equal to One Hundred Seventy Million
($170,000,000.00) Dollars, and (ii) proof satisfactory to Landlord
of such net worth shall have been delivered to Landlord at least
10 days prior to the effective date of any such transaction. For
the purposes of this Section, the words "voting stock" shall refer
to shares of stock regularly entitled to vote for the election of
directors of the corporation. Landlord shall have the right at any
time and from time to time during the Term to inspect the stock
record books of the corporation to which the provisions of this
Section 11.02 apply, and Tenant will produce the same on request
of Landlord.
(b) Notwithstanding anything contained herein to the contrary
neither Tenant nor Guarantor shall form or sublet, assign or
transfer to or merge, consolidate or enter into any transaction
covered by Section 11.02 hereof for the principal or primary
purpose of evading the Excess Amount payments otherwise required
hereunder, or the restrictions on subletting, assignment or
transfer otherwise provided in this Lease (such assignment,
subletting, transfer, merger, consolidation or transaction being
referred to herein as an "Evasion Transfer"); in the event of any
such Evasion Transfer Tenant shall be required to comply with
Excess Amount provisions and the restrictions on subletting,
assignment and transfer otherwise provided in this Article 11
(including, but not limited to Landlord's recapture rights
pursuant to section 11.08) as if such subtenant, assignee or
transferee were not an Affiliate of Tenant or such transaction
were not permitted pursuant to Section 11.02 hereof.
(c) Except for any Evasion Transfer, a public offering of
securities, or merger of Tenant or Guarantor shall not be deemed
to be an assignment for which Landlord's consent would have been
(b)
required pursuant to Section 11.01 hereof, provided that such
public offering of securities, or merger does not result in the
Tenant (or successor) and Guarantor (or successor) having a
combined tangible net worth less than One Hundred Seventy Million
($170,000,000.00) Dollars. Proof satisfactory to Landlord of such
net worth shall be delivered to Landlord not less than fifteen
(15) days prior to the effective date of any such transaction.
Landlord agrees that the provisions of this Section 11.02 shall
not apply to any transfers of stock of Tenant so long as Tenant is
a publicly traded company listed on a national securities
exchange, and such transfer will not result in Tenant ceasing to
be such publicly traded company listed on such national exchange.
Tenant will produce proof reasonably satisfactory to Landlord of
compliance with the provisions of this Section 11.02 upon request
of Landlord.
11.03 If this Lease is assigned, whether or not in violation
of this Lease, Landlord may collect rent from the assignee. If the
Demised Premises or any part thereof are sublet or used or
occupied by anybody other than Tenant, whether or not in violation
of this Lease, Landlord may, after default by Tenant, and
expiration of Tenant's time to cure such default, collect rent
from the subtenant or occupant. In either event, Landlord may
apply the net amount collected to the Rent, but no such
assignment, subletting, occupancy or collection shall be deemed a
waiver of any of the provisions of Section 11.01 or Section 11.02,
or the acceptance of the assignee, subtenant or occupant as
tenant, or a release of Tenant from the performance by Tenant of
Tenant's obligations under this Lease. The consent by Landlord to
any assignment, mortgaging, subletting or use or occupancy by
others shall not in any way be considered to relieve Tenant from
obtaining the express written consent of Landlord to any other or
further assignment, mortgaging or subletting or use or occupancy
by others not expressly permitted by this Article 11. References
in this Lease to use or occupancy by others (that is, anyone other
than Tenant) shall not be construed as limited to subtenants and
those claiming under or through subtenants but shall be construed
as including also licensees and others claiming under or through
Tenant, immediately or remotely.
11.04. Any permitted assignment or transfer, whether made
with Landlord's consent pursuant to Section 11.01 or without
Landlord's consent if permitted by Section 11.02, shall be made
only if, and shall not be effective until, the assignee shall
execute, acknowledge and deliver to Landlord an agreement in form
and substance satisfactory to Landlord whereby the assignee shall
assume Tenant's obligations under this Lease and whereby the
assignee shall agree that all of the provisions in this Article 11
shall, notwithstanding such assignment or transfer, continue to be
binding upon it in respect to all future assignments and
transfers. Notwithstanding any assignment or transfer, whether or
not in violation of the provisions of this Lease, and
notwithstanding the acceptance of Rent by Landlord from an
assignee, transferee, or any other party, the original Tenant and
any other person(s) who at any time was or were Tenant shall
remain fully liable for the payment of the Rent and for Tenant's
other obligations under this Lease.
11.05. The liability of the original named Tenant and any
other Person(s) (including but not limited to any Guarantor) who
at any time are or become responsible for Tenant's obligations
under this Lease shall not be discharged, released or impaired by
any agreement extending the time of, or modifying any of the terms
or obligations under this Lease, or by any waiver or failure of
Landlord to enforce, any of this Lease.
11.06. The listing of any name other than that of Tenant,
whether on the doors of the
Demised Premises or the Building directory, or otherwise, shall
not operate to vest any right or interest in this Lease or in the
Demised Premises, nor shall it be deemed to be the consent of
Landlord to any assignment or transfer of this Lease or to any
sublease of the Demised Premises or to the use or occupancy
thereof by others. Notwithstanding anything contained in this
Lease to the contrary, Landlord shall have the absolute right to
withhold its consent to an assignment or subletting to a Person
who is otherwise a tenant or occupant of the Building, or of a
building owned or managed by Landlord or its affiliated entities.
Notwithstanding anything contained in this Lease to the contrary,
Landlord shall have the absolute right to withhold its consent to
an assignment, subletting to, or occupancy by, a Person who is
either (i) otherwise a tenant or occupant of the Building, or
(ii) of a building in the Development or the development known as
Mill Creek owned or managed by Landlord or its affiliated
entities in the event Landlord or its affiliates have or
reasonably anticipate having within three (3) months of the date
of the commencement of such proposed assignment or subletting, a
substantially equivalent sized space for a substantially
equivalent term available in a property in the Development or the
development known as Mil Creek owned or managed by Landlord or
any of its affiliates.
11.07. Without limiting any of the provisions of Article 27,
if pursuant to the Federal Bankruptcy Code (or any similar law
hereafter enacted having the same general purpose), Tenant is
permitted to assign this Lease notwithstanding the restrictions
contained in this Lease, adequate assurance of future performance
by an assignee expressly permitted under such Code shall be deemed
to mean the deposit of cash security in an amount equal to the sum
of one (1) year's Fixed Rent plus an amount equal to the
Additional Charges for the Calendar Year preceding the year in
which such assignment is intended to become effective, which
deposit shall be held by Landlord for the balance of the Term,
without interest, as security for the full performance of all of
Tenant's obligations under this Lease, to be held and applied in
the manner specified for security in Section 8.01.
11.08. If Tenant shall propose to assign this Lease or sublet
the Demised Premises, or any part or parts thereof, or grant any
concession or license or otherwise permit occupancy of all or any
part of the Demised Premises by any person, Tenant shall give
notice thereof to Landlord, together with a copy of the proposed
instrument that is to accomplish same, if available, and such
financial and other information pertaining to the proposed
assignee, transferee, subtenant, concessionaire or licensee as
Landlord shall reasonably require and Landlord may, in addition to
Landlord's right to give or withhold consent, terminate this Lease
with respect to a proposed assignment, or terminate this Lease
with respect to the portion thereof to be subleased, with respect
to a proposed sublease of the Demised Premises, by notice given to
such assignee or to Tenant and such subtenant(s) within thirty
(30) days after receipt of said proposed instrument and financial
and other information, and upon the date specified in such notice,
which date shall be not less than sixty (60) days and not more
than one hundred twenty (120) days after the giving of said
notice, this Lease shall terminate with respect to that portion of
the Demised Premises proposed to be sublet (the "Surrendered
Premises") or in its entirety, in the case of an assignment, and
in the case of less than a complete termination of this Lease, all
Rents due hereunder shall be adjusted by Landlord on a pro rata
basis. If Landlord does not so terminate this Lease (entirely, or
with respect to the Surrendered Premises, as the case may be), and
(if Landlord consents to the subject transaction) if Tenant does
not consummate the subject transaction within ninety (90) days
thereafter, Tenant shall again be required to comply with
the provisions of this Section 11.08 in connection with any such
transaction as if the notice by Tenant referred to above in this
Section 11.08 had not been given. Notwithstanding anything
contained in this Lease to the contrary, Landlord shall not be
obligated to entertain or consider any request by Tenant or any
assignee or subtenant thereof to consent to any proposed
assignment of this Lease or sublet, concession, license, or
transfer of all or any part of the Demised Premises, unless each
request by Tenant, assignee, and/or subtenant, licensee,
concessionaire or transferee, as the case may be, is accompanied,
within thirty (30 days after such request, by a non-refundable fee
payable to Landlord in the amount of One Thousand Dollars
($1,000.00) to cover Landlord's administrative, legal, and other
costs and expenses incurred in processing each of Tenant's
requests. Neither Tenant's payment nor Landlord's acceptance of
the foregoing fee shall be construed to impose any obligation
whatsoever upon Landlord to consent to Tenant's request.
Notwithstanding anything to the contrary contained herein, the
party requesting consent to any such assignment, sublease,
license, concession or other transfer shall have the right to
rescind such request within twenty (20) days after receipt of
notice of Landlord's exercise of its right of recapture, and in
such event, Landlord shall have no right to recapture the
applicable portion of the Demised Premises except in connection
with a proposed further assignment after an assignment of this
Lease by Tenant, or a further sublet.
ARTICLE 12 - COMPLIANCE WITH LAWS
12.01. Tenant shall comply with all Legal Requirements which
shall, in respect of the Demised Premises or the use and
occupation thereof, or the abatement of any nuisance in, on or
about the Demised Premises, impose any violation, order or duty on
Landlord or Tenant; and Tenant shall pay all the costs, expenses,
fines, penalties and damages which may be imposed upon Landlord or
any Superior Lessor by reason of or arising out of Tenant's
failure to fully and promptly comply with and observe the
provisions of this Section 12.01. However, Tenant need not comply
with any such law or requirement of any public authority so long
as Tenant shall be contesting the validity thereof, or the
applicability thereof to the Demised Premises, in accordance with
Section 12.02. The cost of compliance by Landlord with any Legal
Requirements with respect to structural portions of the Building
or with respect to the Common Areas which do not arise as the
result of Tenant (or its subtenants licensees, agents or
invitees), the business of Tenant (or its subtenants licensees,
agents or invitees), Tenant's Work or any alterations or
installations of Tenant (or its subtenants licensees, agents or
invitees), or the use and occupation of the Demised Premises or
the Building by Tenant (or its subtenants licensees, agents or
invitees) shall be performed by Landlord and the cost thereof
included in Operating Expenses, subject to the provisions of sub-
section (vii) thereof.
12.02. Tenant may contest, by appropriate proceedings
prosecuted diligently and in good faith, the validity, or
applicability to the Demised Premises, of any Legal Requirement,
provided that (a) Landlord shall not be subject to criminal
penalty or to prosecution for a crime, and neither the Demised
Premises nor any part thereof shall be subject to being condemned
or vacated, by reason of non-compliance or otherwise by reason of
such contest; (b) before the commencement of such contest, Tenant
shall furnish to Landlord either (i) the bond of a surety company
satisfactory to Landlord, which bond shall be, as to its
provisions and form, satisfactory to Landlord, and shall be in an
amount at least equal to 125% of the cost of such compliance (as
estimated by a reputable
contractor designated by Landlord) and shall indemnify Landlord
against the cost thereof and against all liability for damages,
interest, penalties and expenses (including reasonable attorneys'
fees and expenses), resulting from or incurred in connection with
such contest or non-compliance, or (ii) other security in place of
such bond satisfactory to Landlord; (c) such non-compliance or
contest shall not constitute or result in any violation of any
Superior Lease or Superior Mortgage, or if any such Superior Lease
and/or Superior Mortgage shall permit such non-compliance or
contest on condition of the taking of action or furnishing of
security by Landlord, such action shall be taken and such security
shall be furnished at the expense of Tenant; and (d) Tenant shall
keep Landlord advised as to the status of such proceedings.
Without limiting the application of the above, Landlord shall be
deemed subject to prosecution for a crime if Landlord, or its
managing agent, or any officer, director, partner, shareholder or
employee of Landlord or its managing agent, as an individual, is
charged with a crime of any kind or degree whatsoever, whether by
service of a summons or otherwise, unless such charge is withdrawn
before Landlord or its managing agent, or such officer, director,
partner, shareholder or employee of Landlord or its managing agent
(as the case may be) is required to plead or answer thereto.
Notwithstanding anything contained in this Lease to the contrary,
Tenant shall not file any Real Estate Tax Appeal with respect to
the Land, Building or the Demised Premises.
ARTICLE 13 - INSURANCE AND INDEMNITY
13.01. Landlord shall maintain or cause to be maintained All
Risk insurance in respect of the Building and other improvements
on the Land normally covered by such insurance (except for the
property Tenant is required to cover with insurance under Section
13.02 and similar property of other tenants and occupants of the
Building or buildings and other improvements which are on land
neither owned by nor leased to Landlord) for the benefit of
Landlord, any Superior Lessors, any Superior Mortgagees and any
other parties Landlord may at any time and from time to time
designate, as their interests may appear, but not for the benefit
of Tenant, and shall maintain rent insurance as required by any
Superior Lessor or any Superior Mortgagee. The All Risk insurance
will be in the amounts required by any Superior Lessor or any
Superior Mortgagee but not less than the amount sufficient to
avoid the effect of the co-insurance provisions of the applicable
policy or policies. Landlord may also maintain any other forms and
types of insurance which Landlord shall deem reasonable in respect
of the Building and Land. Landlord shall have the right to provide
any insurance maintained or caused to be maintained by it under
blanket policies.
13.02. Tenant shall maintain the following insurance: (a)
commercial general liability insurance in respect of the Demised
Premises and the conduct and operation of business therein, having
a limit of liability not less than a $5,000,000. per occurrence
for bodily injury or property damage. coverage to include but not
be limited to premises/operations, completed operations,
contractual liability and product liability, (b) automobile
liability insurance covering all owned, hired and non-owned
vehicles used by the Tenant in connection with the premises and
any loading or unloading of such vehicles, with a limit of
liability not less than $2,000,000 per occurrence and (c) worker's
compensation and employers liability insurance as required by
statutes, but in any event not less than $500,000. for Employers
Liability; (d) All Risk insurance in respect of loss or damage to
Tenant's stock in trade, fixtures, furniture, furnishings,
removable
floor coverings, equipment, signs and all other property of Tenant
in the Demised Premises in an amount equal to the full replacement
value thereof as same might increase from time to time or such
higher amount as either may be required by the holder of any fee
mortgage, or is necessary to prevent Landlord and/or Tenant from
becoming a co-insurer. Such insurance shall include coverage for
property of others in the care, custody and control of Tenant in
amounts sufficient to cover the replacement value of such
property, to the extent of Tenant's liability therefor; and (e)
such other insurance as Landlord may reasonably require. Tenant
shall have the right to self insure for its furniture , fixtures
and equipment and property for the coverages required pursuant to
subsection (d) hereof; provided however that neither Landlord
shall not have any obligation to insure same. Landlord may at any
time and from time to time (but not more frequently than once
every five (5) years after the Commencement Date and not prior to
the fifth (5th) anniversary of the Commencement Date) require that
the limits for the general liability insurance to be maintained by
Tenant be increased to the limits that new tenants in the Building
are required by Landlord to maintain. Tenant shall deliver to
Landlord and any additional insured(s) certificates evidencing
such policies upon execution hereof. Tenant shall procure and pay
for renewals of such insurance from time to time before the
expiration thereof, and Tenant shall deliver to Landlord and any
additional insured(s) certificates therefor not less than ten (10)
days before the expiration of any existing policy. All such
policies shall be issued by companies acceptable to Landlord,
having a Bests Rating of not less than A, Class VII (or an
equivalent S&P rating if requested by Landlord), and licensed to
do business in New Jersey, and all such policies shall contain a
provision whereby the same cannot be canceled unless Landlord and
any additional insured(s) are given at least thirty (30) days'
prior written notice of such cancellation. The policies and
certificates of insurance (such certificates to be on Acord form
27 or its equivalent) to be delivered to Landlord by Tenant
pursuant to this Section 13.02 (other than workers compensation
insurance) shall name Landlord as an additional insured and, at
Landlord's request, shall also name any Superior Lessors or
Superior Mortgagees as additional insureds, and the following
phrase must be typed on the certificate of insurance: "Hartz
Mountain Industries, Inc., and its respective subsidiaries,
affiliates, associates, joint ventures, and partnerships, and (if
Landlord has so requested) Superior Lessors and Superior
Mortgagees are hereby named as additional insureds as their
interests may appear. It is intended for this insurance to be
primary and non-contributing." Tenant shall give Landlord at least
thirty (30) days' prior written notice that any such policy is
being canceled or replaced. Tenant shall have the right to provide
a portion of the insurance required by this Section 13.02 under an
umbrella policy, provided such umbrella policy fully complies with
the requirements of this Section for policies which are not
umbrella policies, including but not limited to the provisions
required by the phrase included in quotation marks above.
13.03. Tenant shall not do, permit or suffer to be done any
act, matter, thing or failure to act in respect of the Demised
Premises or use or occupy the Demised Premises or conduct or
operate Tenant's business in any manner objectionable to any
insurance company or companies whereby the fire insurance or any
other insurance then in effect in respect of the Land and Building
or any part thereof shall become void or suspended or whereby any
premiums in respect of insurance maintained by Landlord shall be
higher than those which would normally have been in effect for the
occupancy contemplated under the Permitted Uses. In case of a
breach of the provisions of this Section 13.03, in addition to all
other rights and remedies of Landlord hereunder, Tenant shall (a)
indemnify Landlord and the Superior Lessors and hold Landlord and
the Superior Lessors harmless from and against any loss which
would have been covered by insurance which shall have become void
or suspended because of such breach by Tenant and (b) pay to
Landlord any and all increases of premiums on any insurance,
including, without limitation, rent insurance, resulting from any
such breach.
13.04. Tenant shall indemnify and hold harmless Landlord and
all Superior Lessors and its and their respective partners, joint
venturers, directors, officers, agents, servants and employees
from and against any and all claims arising from or in connection
with (a) the conduct or management of the Demised Premises or of
any business therein, or any work or thing whatsoever done, or any
condition created (other than by Landlord) in the Demised Premises
during the Term or during the period of time, if any, prior to the
Commencement Date that Tenant may have been given access to the
Demised Premises; (b) any act, omission or negligence of Tenant or
any of its subtenants or licensees or its or their partners, joint
venturers, directors, officers, agents, employees or contractors;
(c) any accident, injury or damage whatever (unless caused solely
by Landlord's negligence) occurring in the Demised Premises; and
(d) any breach or default by Tenant in the full and prompt payment
and performance of Tenant's obligations under this Lease; together
with all costs, expenses and liabilities incurred in or in
connection with each such claim or action or proceeding brought
thereon, including, without limitation, all attorneys' fees and
expenses. In case any action or proceeding is brought against
Landlord and/or any Superior Lessor and/or its or their partners,
joint venturers, directors, officers, agents and/or employees by
reason of any such claim, Tenant, upon notice from Landlord or
such Superior Lessor, shall resist and defend such action or
proceeding by counsel reasonably satisfactory to Landlord.
Landlord shall indemnify and hold harmless Tenant and its
partners, directors, officers, agents, servants and employees from
and against any and all claims arising from any tortuous act or
omission of Landlord, or negligence of Landlord or its agents or
partners, joint ventures, directors, officers, or employees in the
conduct or management of the Common Areas; together with all
costs, expenses and liabilities incurred in or in connection with
each such claim or action or proceeding brought thereon, including
, without limitation, reasonable attorneys' fees and expenses;
provided however that in no event shall Landlord or its agents or
partners, joint ventures, directors, officers, or employees be
responsible or liable for (and the forgoing indemnity and hold
harmless excludes) any consequential or special damages or any
claims arising out of the matters referred to or representations
or warranties made pursuant to Section R6 of the Rider to this
Lease, except for the indemnification expressly provided therein
for any fines or penalties imposed upon it by the governmental
agency having jurisdiction of the matter. In the event any action
or proceeding is brought against Tenant and/or its directors,
officers, agents and/or employees by reason of any such claim,
Landlord, upon notice from Tenant, shall resist and defend such
action or proceeding by counsel reasonably satisfactory to Tenant.
Counsel satisfactory to Landlord's insurance carrier shall be
deemed satisfactory to Tenant for purposes of this paragraph.
13.05. Neither Landlord nor any Superior Lessor shall be
liable or responsible for, and Tenant hereby releases Landlord and
each Superior Lessor from, all liability and responsibility to
Tenant and any person claiming by, through or under Tenant, by way
of subrogation, for any injury, loss or damage to any person or
property in or around the Demised Premises or to Tenant's business
irrespective of the cause of such injury, loss or damage, and
Tenant shall require its insurers to include in all of Tenant's
insurance policies which could give rise to a right of subrogation
against Landlord or any Superior Lessor a clause or endorsement
whereby the insurer waives any rights of subrogation against
Landlord and such Superior Lessors or permits the insured, prior
to any loss, to agree with a third party to waive any claim it may
have against said third party without invalidating the coverage
under the insurance policy.
(b) Tenant shall not be responsible for and Landlord hereby
releases Tenant from, all liability and responsibility any person
claiming by, through or under Landlord by way of subrogation for
any injury, loss or damage to any person or property in or around
the Demised Premises covered under the All Risk insurance policy
referred to in Section 13.01 hereof, irrespective of the cause of
such injury, loss or damage, and Landlord shall require its
insurers to include in all of Landlord's insurance policies which
could give rise to a right of subrogation against the Tenant a
clause or endorsement whereby the insurer waives any rights of
subrogation against the Tenant or permits the insured, prior to
any loss, to agree with a third party to waive any claim it may
have against said third party without invalidating the coverage
under the insurance policy.
ARTICLE 14 - RULES AND REGULATIONS
14.01. Tenant and its employees and agents shall faithfully
observe and comply with the Rules and Regulations and such
reasonable changes therein (whether by modification, elimination
or addition) as Landlord at any time or times hereafter may make
and communicate to Tenant, which in Landlord's judgment, shall be
necessary for the reputation, safety, care or appearance of the
Land and Building, or the preservation of good order therein, or
the operation or maintenance of the Building or its equipment and
fixtures, or the Common Areas; provided, however, that in case of
any conflict or inconsistency between the provisions of this Lease
and any of the Rules and Regulations, the provisions of this Lease
shall control. Nothing in this Lease contained shall be construed
to impose upon Landlord any duty or obligation to enforce the
Rules and Regulations against any other tenant or any employees or
agents of any other tenant, and Landlord shall not be liable to
Tenant for violation of the Rules and Regulations by any other
tenant or its employees, agents, invitees or licensees.
ARTICLE 15 - ALTERATIONS
15.01. Tenant shall not make any structural alterations or
additions to the Demised Premises, or make any holes or cuts in
the walls, ceilings, roofs, or floors thereof, or change the
exterior color or architectural treatment of the Demised Premises,
or make any non-structural alterations costing Fifty Thousand
Dollars ($50,000.00) or more (exclusive of the cost of carpeting
or decoration), without on each occasion first obtaining the
consent of Landlord, which consent with respect to non-structural
alterations shall not be unreasonably withheld or delayed or
conditioned. Landlord's consent shall not be required for proposed
non-structural alterations costing less than One Hundred Thousand
Dollars ($50,000.00); provided however that in all events Tenant
shall submit to Landlord
plans and specifications for such work at the time Landlord's
consent is sought, or if no consent is required, prior to
commencement of such proposed alterations. In the event Landlord
engages an outside architect or other professional to review
Tenant's plans and specifications, Tenant shall pay to Landlord
upon demand the reasonable cost and expense of Landlord actually
incurred in (a) reviewing said plans and specifications and (b)
inspecting the alterations to determine whether the same are being
performed in accordance with the approved plans and specifications
and all Legal Requirements and Insurance Requirements, including,
without limitation, the fees of any architect or engineer employed
by Landlord for such purpose. Before proceeding with any permitted
alteration which will cost more than $50,000 (exclusive of the
costs of decorating work and items constituting Tenant's
Property), as estimated by a reputable contractor designated by
Landlord, Tenant shall obtain and deliver to Landlord either (i) a
performance bond and a labor and materials payment bond (issued by
a corporate surety licensed to do business in New Jersey), each in
an amount equal to 125% of such estimated cost and in form
satisfactory to Landlord, or (ii) such other security as shall be
satisfactory to Landlord. Tenant shall fully and promptly comply
with and observe the Rules and Regulations then in force in
respect of the making of alterations. Any review or approval by
Landlord of any plans and/or specifications with respect to any
alterations is solely for Landlord's benefit, and without any
representation or warranty whatsoever to Tenant in respect of the
adequacy, correctness or efficiency thereof or otherwise. ). So
long as Tenant has not assigned this Lease or sublet the Demised
Premises, and is not then in default under this Lease and has not
been in default in the payment of Rent, Landlord agrees not to
unreasonably withhold its consent to a request by Tenant that
Landlord waive the bonding and security requirements of
subsections (i) and (ii) of this Section, except to the extent
required by applicable Legal Requirements or the provisions of any
Superior Mortgage. Tenant shall fully and promptly comply with and
observe the Rules and Regulations then in force in respect of the
making of alterations. Any review or approval by Landlord of any
plans and/or specifications with respect to any alterations is
solely for Landlord's benefit, and without any representation or
warranty whatsoever to Tenant in respect of the adequacy,
correctness or efficiency thereof or otherwise.
15.02. Tenant shall obtain all necessary governmental permits
and certificates for the commencement and prosecution of permitted
alterations and for final approval thereof upon completion, and
shall cause alterations to be performed in compliance therewith
and with all applicable Legal Requirements and Insurance
Requirements. Alterations shall be diligently performed in a good
and workmanlike manner, using new materials and equipment at least
equal in quality and class to the better of (a) the original
installations of the Building, or (b) the then standards for the
Building established by Landlord. Alterations shall be performed
by contractors first reasonably approved by Landlord; provided,
however, that any alterations in or to the mechanical, electrical,
sanitary, heating, ventilating, air conditioning or other systems
of the Building shall be performed only by the contractor(s)
reasonably designated by Landlord. Alterations shall be made in
such manner as not to unreasonably interfere with or delay and as
not to impose any additional expense upon Landlord in the
construction, maintenance, repair or operation of the Building;
and if any such additional expense shall be incurred by Landlord
as a result of Tenant's making of any alterations, Tenant shall
pay any such additional expense upon demand. Throughout the making
of alterations, Tenant shall carry, or cause to be carried,
worker's compensation insurance in statutory limits and general
liability insurance, with completed operation
endorsement, for any occurrence in or about the Building, under
which Landlord and its managing agent and any Superior Lessor
whose name and address shall previously have been furnished to
Tenant shall be named as parties insured, in such limits as
Landlord may reasonably require, with insurers reasonably
satisfactory to Landlord. Tenant shall furnish Landlord with
reasonably satisfactory evidence that such insurance is in effect
at or before the commencement of alterations and, on request, at
reasonable intervals thereafter during the making of alterations.
ARTICLE 16 - LANDLORD'S AND TENANT'S PROPERTY
16.01 All fixtures, equipment, improvements and appurtenances
attached to or built into the Demised Premises at the commencement
of or during the Term, whether or not by or at the expense of
Tenant, shall be and remain a part of the Demised Premises, shall
be deemed to be the property of Landlord and shall not be removed
by Tenant, except as provided in Section 16.02. Further, any
carpeting or other personal property in the Demised Premises on
the Commencement Date, unless installed and paid for by Tenant,
shall be and shall remain Landlord's property and shall not be
removed by Tenant.
16.02. All movable partitions, business and trade fixtures,
machinery and equipment, communications equipment and office
equipment, whether or not attached to or built into the Demised
Premises, which are installed in the Demised Premises by or for
the account of Tenant without expense to Landlord and can be
removed without structural damage to the Building and all
furniture, furnishings, and other movable personal property owned
by Tenant and located in the Demised Premises (collectively,
"Tenant's Property") shall be and shall remain the property of
Tenant and may be removed by Tenant at any time during the Term;
provided that if any of the Tenant's Property is removed, Tenant
shall repair or pay the cost of repairing any damage to the
Demised Premises as used in this Article 16, (reasonable wear and
tear shall not, include any damage caused in the removal of any
such item), reasonable wear and tear excepted, the Building or the
Common Areas resulting from the installation and/or removal
thereof, reasonable wear and tear excepted. Any equipment or other
property for which Landlord shall have granted any allowance or
credit to Tenant shall not be deemed to have been installed by or
for the account of Tenant without expense to Landlord, shall not
be considered as the Tenant's Property and shall be deemed the
property of Landlord.
16.03. At or before the Expiration Date or the date of any
earlier termination of this Lease, or within fifteen (15) days
after such an earlier termination date, Tenant shall remove from
the Demised Premises all of the Tenant's Property (except such
items thereof as Landlord shall have expressly permitted to
remain, which property shall become the property of Landlord if
not removed), and Tenant shall repair any damage to the Demised
Premises, the Building and the Common Areas resulting from any
installation and/or removal of the Tenant's Property, reasonable
wear and tear excepted. Any items of the Tenant's Property which
shall remain in the Demised Premises after the Expiration Date or
after a period of fifteen (15) days following an earlier
termination date, may, at the option of Landlord, be deemed to
have been abandoned, and in such case such items may be retained
by Landlord as its property or disposed of by Landlord, without
accountability, in such manner as Landlord shall determine at
Tenant's Expense.
ARTICLE 17 - REPAIRS AND MAINTENANCE
17.01. Tenant shall, throughout the Term, take good care of
the Demised Premises, the fixtures and appurtenances therein.
Tenant shall be responsible for all repairs, interior and
exterior, structural and nonstructural, ordinary and
extraordinary, in and to the Demised Premises, and the Building
(including the facilities and systems thereof) and the Common
Areas the need for which arises out of (a) the performance or
existence of the Tenant's Work or alterations, (b) the
installation, use or operation of the Tenant's Property in the
Demised Premises, (c) the moving of the Tenant's Property in or
out of the Building, or (d) the act, omission, misuse or neglect
of Tenant or any of its subtenants or its or their employees,
agents, contractors or invitees. Tenant shall promptly replace all
scratched, damaged or broken doors and glass in and about the
Demised Premises and shall be responsible for all repairs,
maintenance and replacement of wall and floor coverings in the
Demised Premises and for the repair and maintenance of all
sanitary and electrical fixtures and equipment therein. Tenant
shall promptly make all repairs in or to the Demised Premises for
which Tenant is responsible, and any repairs required to be made
by Tenant to the mechanical, electrical, sanitary, heating,
ventilating, air-conditioning or other systems of the Building
shall be performed only by contractor(s) designated by Landlord.
Any other repairs in or to the Building and the facilities and
systems thereof for which Tenant is responsible shall be performed
by Landlord at Tenant's expense; but Landlord may, at its option,
before commencing any such work or at any time thereafter, require
Tenant to furnish to Landlord such security, in form (including,
without limitation, a bond issued by a corporate surety licensed
to do business in New Jersey) and amount, as Landlord shall deem
necessary to assure the payment for such work by Tenant. Tenant
shall not permit or suffer the overloading of the floors of the
Demised Premises beyond 100 pounds per square foot.
17.02. So long as Tenant is not in default under this Lease
beyond any applicable notice and cure period, Landlord shall be
responsible for all structural repairs and maintenance in and to
the Demised Premises and for repair and maintenance to the
Building, except for those repairs and maintenance for which
Tenant is responsible pursuant to any of the provisions of this
Lease. Landlord, will make, or cause to be made: (a) repairs to
any electrical, mechanical, sprinkler and other systems to the
point of entry to the Demised Premises, and in the Demised
Premises to the extent such items do not exclusively serve the
Demised Premises, provided repairs and alterations are not
occasioned or required by Tenant's negligence or by any act or
omission of Tenant, its agents, concessionaires, officers,
employees, licensees, invitees or contractors in which case the
cost of such repairs shall be the sole obligation of Tenant;
(b)structural repairs including to the exterior walls, structural
roof and structural floor (excluding floor coverings) which
collectively enclose the Demised Premises (excluding, however, all
doors, door frames, storefronts, windows and glass) and the
structural columns which enclose or are located in the Demised
Premises. The cost of all such repairs and maintenance by Landlord
for which Landlord may be responsible shall be included in
Operating Expenses (subject to the limitations set forth in
Section 1.01 Z) for which Tenant shall pay Tenant's Fraction
pursuant to this Lease.
17.03. Except as otherwise expressly provided in this Lease,
Landlord shall have no liability to Tenant, nor shall Tenant's
covenants and obligations under this Lease be reduced or abated in
any
manner whatsoever, by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord's doing
any repairs, maintenance, or changes which Landlord is required or
permitted by this Lease, or required by Law, to make in or to any
portion of the Building.
ARTICLE 18 - ELECTRIC ENERGY
18.01. Tenant shall purchase the electric energy required by
it in the Demised Premises at its own expense on a direct-metered
basis from the public utility servicing the Building, and Landlord
shall permit the risers, conduits and feeders in the Building, to
the extent available, suitable and safely capable, to be used for
the purpose of transmitting such electric energy to the Demised
Premises. Landlord shall not be liable for any failure, inadequacy
or defect in the character or supply of electric current furnished
to the Demised Premises. If Landlord is permitted by law to
provide electric energy to the Demised Premises by re-registering
meters or otherwise and to collect any charges for electric
energy, Landlord shall have the right to do so, in which event
Tenant shall pay to Landlord upon receipt of bills therefor
charges for electric energy provided the rates for such electric
energy shall not be more than the rates Tenant would be charged
for electric energy if furnished directly to Tenant by the public
utility which would otherwise have furnished electric energy.
18.02. Tenant's use of electric energy in the Demised
Premises shall not at any time exceed the capacity of any of the
electrical conductors and equipment in or otherwise serving the
Demised Premises. In order to insure that such capacity is not
exceeded and to avert possible adverse effect upon the Building's
electric service, Tenant shall not, without Landlord's prior
consent in each instance (which shall not be unreasonably
withheld), connect any fixtures, appliances or equipment to the
Building's electric distribution system or make any alteration or
addition to the electric system of the Demised Premises existing
on the Commencement Date. Should Landlord grant such consent, all
additional risers or other equipment required therefor shall be
provided by Landlord and the cost thereof shall be paid by Tenant
to Landlord on demand.
ARTICLE 19 - HEAT, VENTILATION AND AIR-CONDITIONING
19.01. So long as Tenant is not in default in the payment of
Rent under this Lease beyond any applicable notice or cure period,
Landlord shall maintain and operate the heating, ventilating and
air-conditioning systems ("HVAC") serving the Demised Premises,
and shall furnish HVAC in the Demised Premises as may be
reasonably required (except as otherwise provided in this Lease
and except for any special requirements of Tenant arising from its
particular use of the Demised Premises) for reasonably comfortable
occupancy of the Demised Premises, during Business Hours on
Business Days within the limits prescribed by the Legal
Requirements. If Tenant shall require HVAC at any other time,
Landlord shall furnish such service for such times upon not less
than six (6) hours advance notice from Tenant, and Tenant shall
pay to Landlord upon demand Landlord's then established charges
therefor. Demised Premises is currently located in three HVAC
zones, and as of the date hereof, Landlord's charge is thirty-five
dollars ($35) per hour per zone for overtime heating and forty-
five dollars ($45) per hour per zone for overtime air
conditioning.
19.02. The performance by Landlord of its obligation under
Section 19.01 in respect of HVAC is conditioned on the connected
electric load within the Demised Premises not exceeding three and
one-half (3 1/2) watts per usable square foot in the Demised
Premises and the occupancy of the Demised Premises not exceeding
one (1) person for each two hundred (200) usable square feet. Use
of the Demised Premises, or any part thereof, in a manner
exceeding the HVAC design conditions (including occupancy and
connected electrical load), or rearrangement of partitioning which
interferes with normal operation of the HVAC in the Demised
Premises, or the use of computer or data processing machines or
other machines or equipment, may require changes in the HVAC
systems servicing the Demised Premises, in order to provide
comfortable occupancy. Such changes, so occasioned, shall be made
by Tenant, at its expense, as alterations in accordance with the
provisions of Article 15, but only to the extent permitted and
upon the conditions set forth in Article 15.
ARTICLE 20 - OTHER SERVICES; SERVICE INTERRUPTION
20.01. So long as Tenant is not in default in the payment of
Rent under this Lease beyond any applicable notice or cure period,
Landlord shall provide elevator service to the Demised Premises
during Business Hours on Business Days, and Landlord shall have at
least one (1) elevator subject to call at all other times. The use
of the elevators shall be subject to the Rules and Regulations.
20.02. So long as Tenant is not in default in the payment of
Rent under this Lease beyond any applicable notice or cure period,
Landlord shall cause the Demised Premises, including the exterior
and the interior of the windows thereof, to be cleaned in a manner
standard to the Building and in accordance with the standards set
forth in Exhibit E. Tenant shall pay to Landlord on demand the
costs incurred by Landlord for (a) extra cleaning work in the
Demised Premises required because of (i) misuse or neglect on the
part of Tenant or its subtenants or its or their employees or
visitors, (ii) use of portions of the Demised Premises for
preparation, serving, consumption of food or beverages, training
rooms, data processing or reproducing operations, private
lavatories or toilets or other special purposes requiring greater
or more difficult cleaning work than office areas, (iii) interior
glass partitions or unusual quantity of interior glass surfaces,
and (iv) non-building standard materials or finishes installed by
Tenant or at its request, and (b) removal from the Demised
Premises and the Building of any refuse and rubbish of Tenant in
excess of that ordinarily accumulated in business office occupancy
or at times other than Landlord's standard cleaning times, and (c)
the use of the Demised Premises by Tenant other than during
Business Hours on Business Days.
20.03. Landlord, its cleaning contractor and their employees
shall have access to the Demised Premises after 5:30 P.M. and
before 8:00 A.M. and shall have the right to use, without charge
therefor, all light, power and water in the Demised Premises
reasonably required to clean the Demised Premises as required
under Section 20.02.
20.04. So long as Tenant is not in default in the payment of
Rent under this Lease beyond any applicable notice or cure period,
Landlord shall furnish adequate hot and cold water to the Demised
Premises for drinking, lavatory and cleaning purposes. If Tenant
uses water for any other
purpose Landlord may install and maintain, at Tenant's expense,
meters to measure Tenant's consumption of cold water and/or hot
water for such other purpose. Tenant shall reimburse Landlord for
the quantities of cold water and hot water shown on such meters on
demand.
20.05 Landlord shall use reasonable efforts to provide Tenant
with forty-eight (48) hours prior notification (which need not be
in writing) prior to suspending any services pursuant to this
Article 20 as the result of any default by Tenant in the payment
of Rent.
ARTICLE 21 - ACCESS, CHANGES AND NAME
21.01. Except for the space within the inside surfaces of all
walls, hung ceilings, floors, windows and doors bounding the
Demised Premises, all of the Building, including, without
limitation, exterior Building walls, core corridor walls and doors
and any core corridor entrance, any terraces or roofs adjacent to
the Demised Premises, 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 operating, maintenance,
decoration and repair, are reserved to Landlord. Landlord also
reserves the right, to install, erect, use and maintain pipes,
ducts and conduits in and through the Demised Premises, provided
such are properly enclosed.
21.02. Landlord and its agents shall have the right, upon not
less than one (1) day's prior notice (except that no such notice
shall be required in cases of emergency) to enter and/or pass
through the Demised Premises during Business Hours on Business
Days (except in cases of emergency): (a) to examine the Demised
Premises and to show them to actual and prospective Superior
Lessors, Superior Mortgagees, or prospective purchasers of the
Building, and (b) to make such repairs, alterations, additions and
improvements in or to the Demised Premises and/or in or to the
Building or its facilities and equipment as Landlord is required
or desires to make. Landlord shall be allowed to take all
materials into and upon the Demised Premises that may be
reasonably required in connection therewith, without any liability
to Tenant (except as otherwise expressly provided in Section 13.04
of this Lease) and without any reduction of Tenant's obligations
hereunder. During the period of eighteen (18) months prior to the
Expiration Date, Landlord and its agents may exhibit the Demised
Premises to prospective tenants.
21.03. If at any time any windows of the Demised Premises are
temporarily darkened or obstructed by reason of any repairs,
improvements, maintenance and/or cleaning in or about the
Building, or if any part of the Building or the Common Areas,
other than the Demised Premises, is temporarily or permanently
closed or inoperable, the same shall not be deemed a constructive
eviction and shall not result in any reduction or diminution of
Tenant's obligations under this Lease.
21.04. Intentionally Omitted.
21.05. Landlord reserves the right, at any time and from time
to time, to make such changes, alterations, additions and
improvements in or to the Building and the fixtures and equipment
thereof as Landlord shall deem necessary or desirable; provided
same shall not unreasonably block or unreasonably interfere with
Tenant's use and occupancy of the Demised Premises.
21.06. Landlord may adopt any name for the Building. Landlord
reserves the right to change the name and/or address of the
Building at any time.
ARTICLE 22 - MECHANICS' LIENS AND OTHER LIENS
22.01. Nothing contained in this Lease shall be deemed,
construed or interpreted to imply any consent or agreement on the
part of Landlord to subject Landlord's interest or estate to any
liability under any mechanic's or other lien law. If any
mechanic's or other lien or any notice of intention to file a lien
is filed against the Land, or any part thereof, or the Demised
Premises, or any part thereof, for any work, labor, service or
materials claimed to have been performed or furnished for or on
behalf of Tenant or anyone holding any part of the Demised
Premises through or under Tenant, Tenant shall cause the same to
be canceled and discharged of record by payment, bond or order of
a court of competent jurisdiction within twenty (20) days after
notice by Landlord to Tenant.
ARTICLE 23 - NON-LIABILITY AND INDEMNIFICATION
23.01. Neither Landlord nor any partner, joint venturer,
director, officer, agent, servant or employee of Landlord shall be
liable to Tenant for any loss, injury or damage to Tenant or to
any other Person, or to its or their property, irrespective of the
cause of such injury, damage or loss, unless caused by or
resulting from the negligence of Landlord, its agents, servants or
employees in the operation or maintenance of the Land or Building
without contributory negligence on the part of Tenant or any of
its subtenants or licensees or its or their employees, agents or
contractors. Further, neither Landlord nor any partner, joint
venturer, director, officer, agent, servant or employee of
Landlord shall be liable (a) for any such damage caused by other
tenants or Persons in, upon or about the Land or Building, or
caused by operations in construction of any private, public or
quasi-public work; or (b) even if negligent, for consequential
damages arising out of any loss of use of the Demised Premises or
any equipment or facilities therein by Tenant or any Person
claiming through or under Tenant.
23.02. Intentionally Omitted.
23.03. Notwithstanding any provision to the contrary, Tenant
shall look solely to the estate and property of Landlord in and to
the Land and Building (or the proceeds received by Landlord on a
sale of such estate and property but not the proceeds of any
financing or refinancing thereof) in the event of any claim
against Landlord arising out of or in connection with this Lease,
the relationship of Landlord and Tenant or Tenant's use of the
Demised Premises or the Common Areas, and Tenant agrees that the
liability of Landlord arising out of or in connection with this
Lease, the relationship of Landlord and Tenant or Tenant's use of
the Demised Premises or the Common Areas shall be limited to such
estate and property of Landlord (or sale proceeds). No other
properties or assets of Landlord or any partner, joint venturer,
director, officer, agent, servant or employee of Landlord shall be
subject to levy, execution or other enforcement procedures for the
satisfaction of any
judgement (or other judicial process) or for the satisfaction of
any other remedy of Tenant arising out of, or in connection with,
this Lease, the relationship of Landlord and Tenant or Tenant's
use of the Demised Premises or the Common Areas and if Tenant
shall acquire a lien on or interest in any other properties or
assets by judgment or otherwise, Tenant shall promptly release
such lien on or interest in such other properties and assets by
executing, acknowledging and delivering to Landlord an instrument
to that effect prepared by Landlord's attorneys. Tenant hereby
waives the right of specific performance and any other remedy
allowed in equity if specific performance or such other remedy
could result in any liability of Landlord for the payment of money
to Tenant, or to any court or governmental authority (by way of
fines or otherwise) for Landlord's failure or refusal to observe a
judicial decree or determination, or to any third party.
ARTICLE 24 - DAMAGE OR DESTRUCTION
24.01. If the Building or the Demised Premises shall be
partially or totally damaged or destroyed by fire or other
casualty (and if this Lease shall not be terminated as in this
Article 24 hereinafter provided), Landlord shall repair the damage
and restore and rebuild the Building and/or the Demised Premises
(except for the Tenant's Property) with reasonable dispatch after
notice to it of the damage or destruction and the collection of
the insurance proceeds attributable to such damage.
24.02. Subject to the provisions of Section 24.05, if all or
part of the Demised Premises shall be damaged or destroyed or
rendered completely or partially untenantable on account of fire
or other casualty, the Rent shall be abated or reduced, as the
case may be, in the proportion that the untenantable area of the
Demised Premises bears to the total area of the Demised Premises,
for the period from the date of the damage or destruction to (a)
the date the damage to the Demised Premises shall be substantially
repaired, or (b) if the Building and not the Demised Premises is
so damaged or destroyed, the date on which the Demised Premises
shall be made tenantable; provided, however, should Tenant
reoccupy a portion of the Demised Premises during the period the
repair or restoration work is taking place and prior to the date
that the Demised Premises are substantially repaired or made
tenantable the Rent allocable to such reoccupied portion, based
upon the proportion which the area of the reoccupied portion of
the Demised Premises bears to the total area of the Demised
Premises, shall be payable by Tenant from the date of such
occupancy.
24.03. If (a) the Building or the Demised Premises shall be
totally damaged or destroyed by fire or other casualty, or (b) the
Building shall be so damaged or destroyed by fire or other
casualty (whether or not the Demised Premises are damaged or
destroyed) that its repair or restoration requires the
expenditure, as estimated by a reputable contractor or architect
designated by Landlord, of more than twenty percent (20%) (or ten
percent [10%] if such casualty occurs during the last two [2]
years of the Term) of the full insurable value of the Building
immediately prior to the casualty, or (c) the Building shall be
damaged or destroyed by fire or other casualty (whether or not the
Demised Premises are damaged or destroyed) and either the loss
shall not be covered by Landlord's insurance or the net insurance
proceeds (after deducting all expenses in connection with
obtaining such proceeds) shall, in the estimation of a reputable
contractor or architect designated by Landlord be insufficient to
pay for the repair or restoration work, then in either such case
Landlord may terminate this Lease by giving Tenant notice to such
effect within ninety (90) days after the date of the fire or
other casualty.
24.04. Tenant shall not be entitled to terminate this Lease
and no damages, compensation or claim shall be payable by Landlord
for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of
the Building pursuant to this Article 24. Landlord shall use its
best efforts to make such repair or restoration promptly and in
such manner as not unreasonably to interfere with Tenant's use and
occupancy of the Demised Premises, but Landlord shall not be
required to do such repair or restoration work except during
Business Hours on Business Days.
24.05. Notwithstanding any of the foregoing provisions of
this Article 24, if by reason of some act or omission on the part
of Tenant or any of its subtenants or its or their partners,
directors, officers, servants, employees, agents or contractors,
either (a) Landlord or any Superior Lessor or any Superior
Mortgagee shall be unable to collect all of the insurance proceeds
(including, without limitation, rent insurance proceeds)
applicable to damage or destruction of the Demised Premises or the
Building by fire or other casualty, or (b) the Demised Premises or
the Building shall be damaged or destroyed or rendered completely
or partially untenantable on account of fire or other casualty,
then, without prejudice to any other remedies which may be
available against Tenant, there shall be no abatement or reduction
of the Rent. Further, nothing contained in this Article 24 shall
relieve Tenant from any liability that may exist as a result of
any damage or destruction by fire or other casualty.
24.06. Landlord will not carry insurance of any kind on the
Tenant's Property, and, except as provided by law or by reason of
Landlord's breach of any of its obligations hereunder, shall not
be obligated to repair any damage to or replace the Tenant's
Property.
24.07. The provisions of this Article 24 shall be deemed an
express agreement governing any case of damage or destruction of
the Demised Premises and/or Building by fire or other casualty,
and any law providing for such a contingency in the absence of an
express agreement, now or hereafter in force, shall have no
application in such case.
24.08 In the event of (i) damage or destruction with respect
to the Demised Premises which prevents the use and occupancy of
more than fifty (50%) of the Demised Premises by Tenant, or (ii)
damage or destruction with respect to the Building the repair or
restoration of which requires the expenditure, as estimated by a
reputable contractor or architect designated by Landlord, of more
than twenty-five percent (25%) of the full insurable value of the
Building immediately prior to the casualty, then in either of such
events Landlord shall and Tenant (provided such damage or
destruction prevents the use and occupancy of the Demised Premises
by Tenant) shall have the right to request within thirty (30) days
after such event the Architect to determine the estimated time for
restoration. The Landlord shall cause the Architect to provide
notice to Landlord and Tenant of such determination (the
"Architect's Notice") within thirty (30) days after notice from
Landlord or Tenant requesting such determination. If the Architect
determines that the restoration of same is estimated to take more
than eighteen (18) months from the date of the casualty (or more
than six (6) months if such damage or destruction occurs in the
last year of the Term), Landlord and Tenant shall each (provided,
however that Tenant's right
shall be conditioned upon (i) Tenant not being in monetary or
material non-monetary default under this Lease beyond any
applicable notice and cure period (and in any event curing such
default(s) prior to termination) and (ii) Tenant being prevented
from using and occupying the Demised Premises for a period of not
less than eighteen (18) months as estimated by the Architect (or
more than six (6) months if such damage or destruction occurs in
the last year of the Term) have the right to terminate this
Lease, upon thirty (30) days prior written notice to the other,
given within thirty (30) days of the Architect's Notice.
Landlord's right to terminate the Lease pursuant to this Section
shall be in addition to and not in limitation of Landlord's other
rights pursuant to this Article 24. Nothing contained herein
shall be construed as limiting Landlord's right to collect the
full amount of the proceeds of rent insurance or business
interruption insurance.
ARTICLE 25 - EMINENT DOMAIN
25.01 If the whole of the Demised Premises shall be taken by
any public or quasi-public authority under the power of
condemnation, eminent domain or expropriation, or in the event of
conveyance of the whole of the Demised Premises in lieu thereof,
this Lease shall terminate as of the day possession shall be taken
by such authority. If 10% or less of the Floor Space of the
Demised Premises shall be so taken or conveyed, this Lease shall
terminate only in respect of the part so taken or conveyed as of
the day possession shall be taken by such authority. If more than
10% of the Floor Space of the Demised Premises shall be so taken
or conveyed, this Lease shall terminate only in respect of the
part so taken or conveyed as of the day possession shall be taken
by such authority, but either party shall have the right to
terminate this Lease upon notice given to the other party within
30 days after such taking possession. If more than 10% of the
Floor Space of the Building shall be so taken or conveyed,
Landlord may, by notice to Tenant, terminate this Lease as of the
day possession shall be taken. If so much of the parking
facilities shall be so taken or conveyed that the number of
parking spaces necessary, in Landlord's judgment, for the
continued operation of the Building shall not be available,
Landlord shall, by notice to Tenant, terminate this Lease as of
the day possession shall be taken. If this Lease shall continue in
effect as to any portion of the Demised Premises not so taken or
conveyed, the Rent shall be computed as of the day possession
shall be taken on the basis of the remaining Floor Space of the
Demised Premises. Except as specifically provided herein, in the
event of any such taking or conveyance there shall be no reduction
in Rent. If this Lease shall continue in effect, Landlord shall,
at its expense, but shall be obligated only to the extent of the
net award or other compensation (after deducting all expenses in
connection with obtaining same) available to Landlord for the
improvements taken or conveyed (excluding any award or other
compensation for land or for the unexpired portion of the term of
any Superior Lease), make all necessary alterations so as to
constitute the remaining Building a complete architectural and
tenantable unit, except for the Tenant's Property, and Tenant
shall make all alterations or replacements to the Tenant's
Property and decorations in the Demised Premises. All awards and
compensation for any taking or conveyance, whether for the whole
or a part of the Land or Building, the Demised Premised or
otherwise, shall be the property of Landlord, and Tenant hereby
assigns to Landlord all of Tenant's right, title and interest in
and to any and all such awards and compensation, including,
without limitation, any award or compensation for the value of the
unexpired portion of the Term. Tenant shall be entitled to claim,
prove and receive in the
condemnation proceeding such award or compensation as may be
allowed for the Tenant's Property and for loss of business, good
will, and depreciation or injury to and cost of removal of the
Tenant's Property, but only if such award or compensation shall be
made by the condemning authority in addition to, and shall not
result in a reduction of, the award or compensation made by it to
Landlord.
25.02. If the temporary use or occupancy of all or any part
of the Demised Premises shall be taken during the Term, Tenant
shall be entitled, except as hereinafter set forth, to receive
that portion of the award or payment for such taking which
represents compensation for the use and occupancy of the Demised
Premises, for the taking of the Tenant's Property and for moving
expenses, and Landlord shall be entitled to receive that portion
which represents reimbursement for the cost of restoration of the
Demised Premises. This Lease shall be and remain unaffected by
such taking and Tenant shall continue to be responsible for all of
its obligations hereunder insofar as such obligations are not
affected by such taking and shall continue to pay the Rent in full
when due. If the period of temporary use or occupancy shall extend
beyond the Expiration Date, that part of the award or payment
which represents compensation for the use and occupancy of the
Demised Premises (or a part thereof) shall be divided between
Landlord and Tenant so that Tenant shall receive (except as
otherwise provided below) so much thereof as represents
compensation for the period up to and including the Expiration
Date and Landlord shall receive so much thereof as represents
compensation for the period after the Expiration Date. All monies
to be paid to Tenant as, or as part of, an award or payment for
temporary use and occupancy for a period beyond the date to which
the Rent has been paid shall be received, held and applied by the
first Superior Mortgagee (or if there is no Superior Mortgagee, by
Landlord as a trust fund) for payment of the Rent becoming due
hereunder.
ARTICLE 26 - SURRENDER
26.01. On the Expiration Date, or upon any earlier
termination of this Lease, or upon any re-entry by Landlord upon
the Demised Premises, Tenant shall quit and surrender the Demised
Premises to Landlord "broom-clean" and in good order, condition
and repair, except for ordinary wear and tear and such damage or
destruction as Landlord is required to repair or restore under
this Lease, and Tenant shall remove all of Tenant's Property
therefrom except as otherwise expressly provided in this Lease.
26.02. . If Tenant remains in possession of the Demised
Premises after the expiration of the Term, Tenant shall be deemed
to be occupying the Demised Premises at the sufferance of Landlord
subject to all of the provisions of this Lease, except that the
monthly Fixed Rent for the first month of such holdover shall be
one hundred fifty percent (150%) of the Fixed Rent in effect
during the last month of the Term and thereafter the monthly Fixed
Rent shall be twice the Fixed Rent in effect during the last month
of the Term.
26.03. No act or thing done by Landlord or its agents shall
be deemed an acceptance of a surrender of the Demised Premises,
and no agreement to accept such surrender shall be valid unless in
writing and signed by Landlord.
ARTICLE 27 - CONDITIONS OF LIMITATION
27.01. This Lease is subject to the limitation that whenever
Tenant or any Guarantor (a) shall make an assignment for the
benefit of creditors, or (b) shall commence a voluntary case or
have entered against it an order for relief under any chapter of
the Federal Bankruptcy Code (Title 11 of the United States Code)
or any similar order or decree under any federal or state law, now
in existence, or hereafter enacted having the same general
purpose, and such order or decree shall have not been stayed or
vacated within 30 days after entry, or (c) shall cause, suffer,
permit or consent to the appointment of a receiver, trustee,
administrator, conservator, sequestrator, liquidator or similar
official in any federal, state or foreign judicial or nonjudicial
proceeding, to hold, administer and/or liquidate all or
substantially all of its assets, and such appointment shall not
have been revoked, terminated, stayed or vacated and such official
discharged of his duties within 30 days of his appointment, then
Landlord, at any time after the occurrence of any such event, may
give Tenant a notice of intention to end the Term at the
expiration of five (5) days from the date of service of such
notice of intention, and upon the expiration of said five (5) day
period, whether or not the Term shall theretofore have commenced,
this Lease shall terminate with the same effect as if that day
were the expiration date of this Lease, but Tenant shall remain
liable for damages as provided in Article 29.
27.02. This Lease is subject to the further limitations that:
(a) if Tenant shall default in the payment of any Rent for seven
(7) days after Tenant's receipt of written notice or invoice from
Landlord that same was not paid when due, or (b) if Tenant shall,
whether by action or inaction, be in default of any of its
obligations under this Lease (other than a default in the payment
of Rent) and such default shall continue and not be remedied
within twenty (20) days after Landlord shall have given to Tenant
a notice specifying the same, or, in the case of a default which
cannot with due diligence be cured within a period of twenty (20)
days and the continuance of which for the period required for cure
will not subject Landlord or any Superior Lessor to prosecution
for a crime (as more particularly described in the last sentence
of Section 12.02) or termination of any Superior Lease or
foreclosure of any Superior Mortgage, if Tenant shall not, (i)
within said twenty (20) day period advise Landlord of Tenant's
intention to take all steps necessary to remedy such default, (ii)
duly commence within said twenty (20) day period, and thereafter
diligently prosecute to completion all steps necessary to remedy
the default, and (iii) complete such remedy within a reasonable
time after the date of said notice by Landlord, or (c) if any
event shall occur or any contingency shall arise whereby this
Lease would, by operation of law or otherwise, devolve upon or
pass to any person, firm or corporation other than Tenant, except
as expressly permitted by Article 11, or (d) if Tenant shall
vacate or abandon the Demised Premises, or (e) if there shall be
any default by Tenant (or any person which, directly or
indirectly, controls, is controlled by, or is under common control
with Tenant) under any other lease with Landlord (or any person
which, directly or indirectly, controls, is controlled by, or is
under common control with Landlord) which shall not be remedied
within the applicable grace period, if any, provided therefor
under such other lease, then in any of said cases Landlord may
give to Tenant a notice of intention to end the Term at the
expiration of five (5) days from the date of the service of such
notice of intention, and upon the expiration of said five (5)
days, whether or not the Term shall theretofore have commenced,
this Lease shall terminate with the same effect as if that day
were the expiration date of this Lease, but Tenant shall remain
liable for damages as provided in Article 29.
ARTICLE 28 - RE-ENTRY BY LANDLORD
28.01. If Tenant shall default in the payment of any Rent,
and such Rent shall not be paid within seven (7) days after notice
or invoice, or if this Lease shall terminate as provided in
Article 27, Landlord or Landlord's agents and employees may
immediately or at any time thereafter re-enter the Demised
Premises, or any part thereof, either by summary dispossess
proceedings or by means of any order, warrant, writ, judgment or
authority pursuant to any suitable action or proceeding at law
without being liable to indictment, prosecution or damages
therefor, and may repossess the same, and may remove any Person
therefrom, to the end that Landlord may have, hold and enjoy the
Demised Premises. Landlord shall not be entitled to use self-help
in lieu of court order, writ or judgment, except in cases of
abandonment. The word "re-enter," as used herein, is not
restricted to its technical legal meaning. If this Lease is
terminated under the provisions of Article 27, or if Landlord
shall re-enter the Demised Premises under the provisions of this
Article 28, or in the event of the termination of this Lease, or
of re-entry, by or under any summary dispossess or other
proceedings or action or any provision of law by reason of default
hereunder on the part of Tenant, Tenant shall thereupon pay to
Landlord the Rent payable up to the time of such termination of
this Lease, or of such recovery of possession of the Demised
Premises by Landlord, as the case may be, and shall also pay to
Landlord damages as provided in Article 29.
28.02. In the event of a breach or anticipated breach by
Tenant of any of its obligations under this Lease, Landlord shall
also have the right of injunction. The special remedies to which
Landlord may resort hereunder are cumulative and are not intended
to be exclusive of any other remedies to which Landlord may
lawfully be entitled at any time and Landlord may invoke any
remedy allowed at law or in equity (other than acceleration of
rent) as if specific remedies were not provided for herein;
provided however that nothing contained herein shall be construed
as limiting Landlord's right with respect to damages (other than
acceleration of rent) set forth under Article 29.
28.03. If this Lease shall terminate under the provisions of
Article 27, or if Landlord shall re-enter the Demised Premises
under the provisions of this Article 28, or in the event of the
termination of this Lease, or of re-entry, by or under any summary
dispossess or other proceeding or action or any provision of law
by reason of default hereunder on the part of Tenant, Landlord
shall be entitled to retain all monies, if any, paid by Tenant to
Landlord, whether as Advance Rent, security or otherwise, but such
monies shall be credited by Landlord against any Rent due from
Tenant at the time of such termination or re-entry or, at
Landlord's option, against any damages payable by Tenant under
Article 29 or pursuant to law.
ARTICLE 29 - DAMAGES
29.01. If this Lease is terminated under the provisions of
Article 27, or if Landlord shall re-enter the Demised Premises
under the provisions of Article 28, or in the event of the
termination of this Lease, or of re-entry, by or under any summary
dispossess or other proceeding or action or any provision of law
by reason of default hereunder on the part of Tenant, Tenant shall
pay as Additional Charges to Landlord, at the election of
Landlord:
sums equal to the Fixed Rent and the Additional Charges which
would have been payable by Tenant had this Lease not so
terminated, or had Landlord not so re-entered the Demised
Premises, payable upon the due dates therefor specified
herein following such termination or such re-entry and until
the Expiration Date, provided, however, that if Landlord
shall relet the Demised Premises during said period, Landlord
shall credit Tenant with the net rents received by Landlord
from such reletting, such net rents to be determined by first
deducting from the gross rents as and when received by
Landlord from such reletting the expenses incurred or paid by
Landlord in terminating this Lease or in re-entering the
Demised Premises and in securing possession thereof, as well
as the expenses of reletting, including, without limitation,
altering and preparing the Demised Premises for new tenants,
brokers' commissions, legal fees, and all other expenses
properly chargeable against the Demised Premises and the
rental therefrom, it being understood that any such reletting
may be for a period shorter or longer than the period ending
on the Expiration Date; but in no event shall Tenant be
entitled to receive any excess of such net rents over the
sums payable by Tenant to Landlord hereunder, nor shall
Tenant be entitled in any suit for the collection of damages
pursuant to this subsection to a credit in respect of any
rents from a reletting, except to the extent that such net
rents are actually received by Landlord. If the Demised
Premises or any part thereof should be relet in combination
with other space, then proper apportionment on a square foot
basis shall be made of the rent received from such reletting
and of the expenses of reletting.
If the Demised Premises or any part thereof should be re-let
by Landlord before presentation of proof of such damages to any
court, commission or tribunal, the amount of rent reserved upon
such re-letting shall, prima facie, be the fair and reasonable
rental value for the Demised Premises, or part thereof, so re-let
during the term of the re-letting. Landlord shall not be liable in
any way whatsoever for its failure to re-let the Demised Premises
or any part thereof, or if the Demised Premises or any part
thereof are re-let, for its failure to collect the rent under such
re-letting, and no such failure to re-let or failure to collect
rent shall release or affect Tenant's liability for damages or
otherwise under this Lease. Landlord shall use commercially
reasonable efforts to re-let the Demised Premises to mitigate
Landlord's damages. For the purposes hereof the either of
following shall create an irrebuttable presumption that Landlord
has fulfilled such obligation: (a) Landlord shall (i) include the
availability of the Demised Premises in Landlord's monthly listing
to brokers (if any), commencing with the first such report (if
any) issued following Landlord's recovery of possession of the
Demised Premises, and ending upon re-leasing of the Demised
Premises; and (ii) include the availability of the Demised
Premises in Landlord's periodic real estate guide or website (if
any), following Landlord's recovery of possession of the Demised
Premises, and ending upon re-leasing of the Demised Premises; and
(iii) shall hold an "Open House" for the Demised Premises within
forty-five (45) days of Landlord's recovery of possession of the
Demised Premises; or (b) Landlord may engage an independent
commercial real estate broker to re-let the Demised Premises, the
cost and expense of which shall be an element of Landlord's
damages in addition to any other damages recoverable pursuant to
Section 29.01 hereof. Nothing contained herein shall require
Landlord to re-let the Demised Premises prior to or with any
preference over the leasing of any other similar premises of
Landlord or any affiliate of Landlord, nor shall any rental of
such other premises reduce the damages which Landlord would be
entitled to recover from Tenant. In the event Tenant, on
behalf of itself or any and all persons claiming through or under
Tenant, attempts to raise a defense or assert any affirmative
obligations on Landlord's part to mitigate such damages or re-let
the Demised Premises other than as provided herein, Tenant shall
reimburse Landlord for any costs and expenses incurred by Landlord
as a result of any such defense or assertion, including but not
limited to Landlord's attorneys' fees incurred in connection
therewith.
29.02. Suit or suits for the recovery of such damages or, any
installments thereof, may be brought by Landlord at any time and
from time to time at its election, and nothing contained herein
shall be deemed to require Landlord to postpone suit until the
date when the Term would have expired if it had not been so
terminated under the provisions of Article 27, or under any
provision of law, or had Landlord not re-entered the Demised
Premises. Nothing herein contained shall be construed to limit or
preclude recovery by Landlord against Tenant of any sums or
damages to which, in addition to the damages particularly provided
above, Landlord may lawfully be entitled by reason of any default
hereunder on the part of Tenant. Nothing herein contained shall be
construed to limit or prejudice the right of Landlord to prove for
and obtain as damages by reason of the termination of this Lease
or re-entry of the Demised Premises for the default of Tenant
under this Lease, an amount equal to the maximum allowed by any
statute or rule of law in effect at the time, whether or not such
amount be greater than, equal to, or less than any of the sums
referred to in Section 29.01(except that Landlord shall not be
entitled to accelerate the rent); provided however that nothing
contained herein shall be construed as limiting Landlord's right
with respect to damages set forth under this Article 29.
29.03. In addition, if this Lease is terminated under the
provisions of Article 27, or if Landlord shall re-enter the
Demised Premises under the provisions of Article 28, Tenant
covenants that: (a) the Demised Premises then shall be in the same
condition as that in which Tenant has agreed to surrender the same
to Landlord at the Expiration Date; (b) Tenant shall have
performed prior to any such termination any obligation of Tenant
contained in this Lease for the making of any alteration or for
restoring or rebuilding the Demised Premises or the Building, or
any part thereof; and (c) for the breach of any covenant of Tenant
set forth above in this Section 29.03, Landlord shall be entitled
immediately, without notice or other action by Landlord, to
recover, and Tenant shall pay, as and for liquidated damages
therefor, the cost of performing such covenant (as estimated by an
independent contractor selected by Landlord).
29.04. In addition to any other remedies Landlord may have
under this Lease, and without reducing or adversely affecting any
of Landlord's rights and remedies under this Article 29, if any
Rent or damages payable hereunder by Tenant to Landlord are not
paid upon demand therefor, the same shall bear interest at the
Late Payment Rate or the maximum rate permitted by law, whichever
is less, from the due date thereof until paid, and the amounts of
such interest shall be Additional Charges hereunder.
29.05. In addition to any remedies which Landlord may have
under this Lease, if there shall be a default hereunder by Tenant
which shall not have been remedied within the applicable grace
period, Landlord shall not be obligated to furnish to Tenant or
the Demised Premises any HVAC services outside of Business Hours
or Business Days, or any extra or additional cleaning services;
and the discontinuance of any one or more such services shall be
without liability by Landlord to
Tenant and shall not reduce, diminish or otherwise affect any of
Tenant's covenants and obligations under this Lease.
ARTICLE 30 - AFFIRMATIVE WAIVERS
30.01. Tenant, on behalf of itself and any and all persons
claiming through or under Tenant, does hereby waive and surrender
all right and privilege which it, they or any of them might have
under or by reason of any present or future law, to redeem the
Demised Premises or to have a continuance of this Lease after
being dispossessed or ejected from the Demised Premises by process
of law or under the terms of this Lease or after the termination
of this Lease as provided in this Lease.
30.02. Landlord and Tenant hereby waive trial by jury in any
action, proceeding or counterclaim brought by either against the
other on any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and
Tenant, and Tenant's use or occupancy of the Demised Premises and
use of the Common Area, including, without limitation, any claim
of injury or damage, and any emergency and other statutory remedy
with respect thereto. Tenant shall not interpose any counterclaim
of any kind in any action or proceeding commenced by Landlord to
recover possession of the Demised Premises.
ARTICLE 31 - NO WAIVERS
31.01. The failure of either party to insist in any one or
more instances upon the strict performance of any one or more of
the obligations of this Lease, or to exercise any 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. The receipt by
Landlord of Fixed Rent or Additional Charges with knowledge of
breach by Tenant of any obligation of this Lease shall not be
deemed a waiver of such breach.
ARTICLE 32 - CURING DEFAULTS
32.01. If Tenant shall default in the performance of any of
Tenant's obligations under this Lease, Landlord, without thereby
waiving such default, may (but shall not be obligated to) perform
the same for the account and at the expense of Tenant, without
notice in a case of emergency, and in any other case only if such
default continues after the expiration of twenty (20) days from
the date Landlord gives Tenant notice of the default. Charges for
any expenses incurred by Landlord in connection with any such
performance by it for the account of Tenant, and charges for all
costs, expenses and disbursements of every kind and nature
whatsoever, including reasonable attorneys' fees and expenses,
involved in collecting or endeavoring to collect the Rent or any
part thereof or enforcing or endeavoring to enforce any rights
against Tenant or Tenant's obligations hereunder, under or in
connection with this Lease or pursuant to law, including any such
cost, expense and
disbursement involved in instituting and prosecuting summary
proceedings or in recovering possession of the Demised Premises
after default by Tenant or upon the expiration of the Term or
sooner termination of this Lease, and interest on all sums
advanced by Landlord under this Article at the Late Payment Rate
or the maximum rate permitted by law, whichever is less, shall be
payable by Tenant and may be invoiced by Landlord to Tenant
monthly, or immediately, or at any time, at Landlord's option, and
such amounts shall be due and payable upon demand.
32.02. If Landlord shall default in the performance of any of
Landlord's obligations under this Lease beyond any applicable
notice or cure period, Tenant, without thereby waiving such
default, may (but shall not be obligated to) perform the same for
the account and at the expense of Landlord, without notice in a
case of emergency posing a threat to life or safety, and in any
other case only if such default continues after the expiration of
thirty (30) days from the date Tenant gives Landlord notice of the
default, unless Landlord has commenced and is then diligently
pursuing such cure. In the event of an emergency (such emergency
posing a threat to life or safety) Tenant shall have the right to
perform such obligation itself and seek reimbursement from
Landlord, but Tenant shall, as soon as practicable, notify
Landlord (including, but not limited to telephonic or personal
notification) of such emergency. Any costs or expenses incurred by
Tenant in connection with any such performance by it for the
account of Landlord, and interest on all sums advanced by Landlord
under this Article at the Prime Rate as announced in the Wall
Street Journal (or a successor index reasonably selected by
Landlord), plus two percent (2%) per annum, or the maximum rate
permitted by law, whichever is less, shall be payable by Landlord
within thirty (30) days of demand and, in addition to any other
rights or remedies of Tenant under this Lease, any bills received
by Tenant for same may be sent by Tenant to Landlord for payment
by Landlord monthly, or immediately, at Tenant's option. In no
event shall the failure of Landlord to perform any repair or other
obligation which is the subject matter hereof, whether or not
requested by Tenant, be deemed to be an acknowledgment that the
Landlord had a duty or obligation to perform the same. In the
event Landlord disputes the necessity of the performance of the
repair or other obligation in question, its obligations to make
same, or the cost thereof, or if Landlord fails to pay same when
due hereunder, Tenant's remedy shall, subject to Landlord's and
Tenant's option to require arbitration of such claim under Article
36 hereof pursuant to the expedited arbitration procedures of the
American Arbitration Association or the similar rules of an
alternative dispute resolution organization reasonably designated
by Landlord, be an action at law to recover such claimed amount
and Tenant shall not, in any case, be entitled to any offsets or
deductions from Rent. Tenant shall have the right to enforce the
award in such Arbitration, if any, in a court of competent
jurisdiction. Nothing contained in this Section 32.02 shall be
construed to allow or permit Tenant to deduct or offset or reduce
any amounts due against any Rent under this Lease.
ARTICLE 33 - BROKER
33.01. Tenant and Landlord each represents to the other that
no broker except the Broker was instrumental in bringing about or
consummating this Lease and that they respectively had no
conversations or negotiations with any broker except the Broker
concerning the leasing of the Demised Premises. Tenant and
Landlord each agrees to indemnify and hold harmless the other
against and from any claims by any Person claiming to have dealt
with or on behalf of the indemnifying party for any brokerage
commissions and all costs, expenses and liabilities in connection
therewith, including, without limitation, reasonable attorneys'
fees and expenses, arising out of any conversations or
negotiations had by the indemnifying party with any broker other
than the Broker. Landlord shall pay any brokerage commissions due
the Broker pursuant to a separate agreement between Landlord and
the Broker.
ARTICLE 34 - NOTICES
34.01. Any notice, statement, demand, consent, approval or
other communication required or permitted to be given, rendered or
made by either party to the other, pursuant to this Lease or
pursuant to any applicable Legal Requirement, shall be in writing
and shall be deemed to have been properly given, rendered or made
only if hand delivered or sent by reputable, nationally recognized
overnight courier in either case providing receipted delivery or
United States registered or certified mail, return receipt
requested, addressed to the Landlord at the address hereinabove
set forth, to the attention of General Counsel with a concurrent
notice to the attention of Controller or at the address set forth
below as to Tenant, and shall be deemed to have been given,
rendered or made when delivered or refused. Either party may, by
notice as aforesaid, designate a different address or addresses
for notices, statements, demands, consents, approvals or other
communications intended for it. In addition, upon and to the
extent requested by Landlord in writing, copies of notices shall
be sent to the Superior Mortgagee. Tenant's address for notice
purposes is as follows, with a copy sent at the same time and in
the same manner to:
Kenneth Cole Services, Inc.
603 West 50th Street
New York, New York 10019
Attention: Legal Department
With a copy to:
Kenneth Cole Productions, Inc.
603 West 50th Street
New York, New York 10019
Attention: Chief Financial Officer
ARTICLE 35 - ESTOPPEL CERTIFICATES
35.01. Tenant shall, at any time and from time to time, as
requested by the Landlord, not later than the first (1st) business
day following the fifteenth (15th) day after written notice,
promptly execute and deliver to the Landlord or a Superior
Mortgagee or Superior Lessor 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 Fixed Rent and Additional Charges have been paid,
stating whether or not, to the best knowledge of the party giving
the statement, the requesting party is in default in performance
of any of its obligations under this Lease, and, if so, specifying
each such default of which the party giving the statement shall
have knowledge, and stating whether or not, to the best knowledge
of the party giving the statement, any event has occurred which
with the giving of notice or passage of time, or both, would
constitute such a default of the requesting party, and, if so,
specifying each such event; any such statement delivered pursuant
hereto shall be deemed a representation and warranty to be relied
upon by the party requesting the certificate and by others with
whom such party may be dealing, regardless of independent
investigation. Tenant also shall include in any such statement
such other information concerning this Lease as Landlord may
reasonably request.
ARTICLE 36 - ARBITRATION
36.01. Landlord may at any time request arbitration. Tenant
may at any time when not in default in the payment of any Rent
request arbitration, of any matter in dispute but only where
arbitration is expressly provided for in this Lease (i.e. Sections
6.03 and 32.02). The party requesting arbitration shall do so by
giving notice to that effect to the other party, specifying in
said notice the nature of the dispute, and said dispute shall be
determined in Newark, New Jersey, by a single arbitrator, in
accordance with the rules then obtaining of the American
Arbitration Association (or any comparable alternative dispute
resolution organization designated by Landlord and approved by
Tenant, such approval not to be unreasonably withheld or delayed).
The award in such arbitration may be enforced on the application
of either party by the order or judgment of a court of competent
jurisdiction. The fees and expenses of any arbitration shall be
borne by the parties equally, but each party shall bear the
expense of its own attorneys and experts and the additional
expenses of presenting its own proof. If Tenant gives notice
requesting arbitration as provided in this Article, Tenant shall
simultaneously serve a duplicate of the notice on each Superior
Mortgagee and Superior Lessor whose name and address shall
previously have been furnished to Tenant, and such Superior
Mortgagees and Superior Lessor shall have the right to participate
in such arbitration. Nothing contained in this section 36.01 shall
be construed to allow or permit Tenant to deduct or offset any
amounts awarded in such arbitration against any rent under this
Lease, except that Tenant shall be permitted to enforce any
judgment confirming such award against the Rent payable under this
Lease after such judgment.
ARTICLE 37 - MEMORANDUM OF LEASE
37.01. Tenant shall not record this Lease. However, at the
request of Landlord, Tenant shall promptly execute, acknowledge
and deliver to Landlord a memorandum of lease in respect of this
Lease sufficient for recording. Such memorandum shall not be
deemed to change or otherwise affect any of the obligations or
provisions of this Lease. Whichever party records such memorandum
of Lease shall pay all recording costs and expenses, including any
taxes that are due upon such recording.
ARTICLE 38 - INTENTIONALLY OMITTED
ARTICLE 39 - MISCELLANEOUS
39.01. Tenant expressly acknowledges and agrees that Landlord
has not made and is not 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 or in any other
written agreement(s) which may be made between the parties
concurrently with the execution and delivery of this Lease. All
understandings and agreements heretofore had between the parties
are merged in this Lease and any other written agreement(s) made
concurrently herewith, which alone fully and completely express
the agreement of the parties and which are entered into after full
investigation. Neither party has relied upon any statement or
representation not embodied in this Lease or in any other written
agreement(s) made concurrently herewith. The submission of this
Lease to Tenant does not constitute by Landlord a reservation of,
or an option to Tenant for, the Demised Premises, or an offer to
lease on the terms set forth herein and this Lease shall become
effective as a lease agreement only upon execution and delivery
thereof by Landlord and Tenant.
39.02. No agreement shall be effective to change, modify,
waive, release, discharge, terminate or effect an abandonment of
this Lease, in whole or in part, unless such agreement is in
writing, refers expressly to this Lease and is signed by the party
against whom enforcement of the change, modification, waiver,
release, discharge, termination or effectuation of abandonment is
sought.
39.03. If Tenant shall at any time request Landlord to sublet
or let the Demised Premises for Tenant's account, Landlord or its
agent is authorized to receive keys for such purposes without
releasing Tenant from any of its obligations under this Lease, and
Tenant hereby releases Landlord of any liability for loss or
damage to any of the Tenant's Property in connection with such
subletting or letting.
39.04. Except as otherwise expressly provided in this Lease,
the obligations under this Lease shall bind and benefit the
successors and assigns of the parties hereto with the same effect
as if mentioned in each instance where a party is named or
referred to; provided, however, that (a) no violation of the
provisions of Article 11 shall operate to vest any rights in any
successor or assignee of Tenant and (b) the provisions of this
Section 39.04 shall not be construed as modifying the conditions
of limitation contained in Article 27.
39.05. Except for Tenant's obligations to pay Rent, the time
for Landlord or Tenant, as the case may be, to perform any of its
respective obligations hereunder shall be extended if and to the
extent that the performance thereof shall be prevented due to any
Unavoidable Delay. Except as expressly provided to the contrary,
the obligations of Tenant hereunder shall not be affected,
impaired or excused, nor shall Landlord have any liability
whatsoever to Tenant, (a) because Landlord is unable to fulfill,
or is delayed in fulfilling, any of its obligations under this
Lease due to unavoidable delay (including but not limited to any
failure or defect in the supply, quality or
character of electricity, water or any other utility or service
furnished to the Demised Premises for any reason beyond Landlord's
reasonable control).
39.06. Any liability for payments hereunder (including,
without limitation, Additional Charges) shall survive the
expiration of the Term or earlier termination of this Lease.
39.07. In no event shall Landlord or its agents or partners,
joint ventures, directors, officers, or employees be responsible
or liable for any consequential, special damages or exemplary
damages.
39.08. If an excavation shall be made upon land adjacent to
or under the Building, or shall be authorized to be made, Tenant
shall afford to the Person causing or authorized to cause such
excavation, license to enter the Demised Premises for the purpose
of performing such work as said Person shall reasonably deem
necessary or desirable to preserve and protect the Building from
injury or damage and to support the same by proper foundations,
without any claim for damages or liability against Landlord and
without reducing or otherwise affecting Tenant's obligations under
this Lease.
39.09. Tenant shall not exercise its rights under Article 15
or any other provision of this Lease in a manner which would
violate Landlord's union contracts or create any work stoppage,
picketing, labor disruption or dispute or any interference with
the business of Landlord or any tenant or occupant of the
Building.
39.10. Tenant shall give prompt notice to Landlord of (a) any
occurrence in or about the Demised Premises for which Landlord
might be liable, (b) any fire or other casualty in the Demised
Premises, (c) any damage to or defect in the Demised Premises,
including the fixtures and equipment thereof, for the repair of
which Landlord might be responsible, and (d) any damage to or
defect in any part of the Building's sanitary, electrical,
heating, ventilating, air-conditioning, elevator or other systems
located in or passing through the Demised Premises or any part
thereof.
39.11. This Lease shall be governed by and construed in
accordance with the laws of the State of New Jersey. Tenant hereby
irrevocably agrees that any legal action or proceeding arising out
of or relating to this Lease may be brought in the Courts of the
State of New Jersey, or the Federal District Court for the
District of New Jersey, as Landlord may elect. By execution and
delivery of this Lease, Tenant hereby irrevocably accepts and
submits generally and unconditionally for itself and with respect
to its properties, to the jurisdiction of any such court in any
such action or proceeding, and hereby waives in the case of any
such action or proceeding brought in the courts of the State of
New Jersey, or Federal District Court for the District of New
Jersey, any defenses based on jurisdiction, venue or forum non
conveniens. If any provision of this Lease shall be invalid or
unenforceable, the remainder of this Lease shall not be affected
and shall be enforced to the extent permitted by law. The table of
contents, captions, headings and titles in this Lease are solely
for convenience of reference and shall not affect its
interpretation. This Lease shall be construed without regard to
any presumption or other rule requiring construction against the
party causing this Lease to be drafted. If any words or phrases in
this Lease shall have been stricken out or otherwise eliminated,
whether or not any other words or phrases have been added, this
Lease shall be construed as if the words or phrases so stricken
out or otherwise eliminated were never included in this Lease and
no implication or inference shall be drawn from the fact that said
words or phrases
were so stricken out or otherwise eliminated. Each covenant,
agreement, obligation or other provision of this Lease on Tenant's
part to be performed, shall be deemed and construed as a separate
and independent covenant of Tenant, not dependent on any other
provision of this Lease. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall
be deemed to include any other number and any other gender as the
context may require. Tenant specifically agrees to pay all of
Landlord's costs, charges and expenses, including attorneys' fees,
incurred in connection with any document review requested by
Tenant and upon submission of bills therefor. In the event
Landlord permits Tenant to examine Landlord's books and records
with respect to any Additional Charge imposed under this Lease,
such examination shall be conducted at Tenant's sole cost and
expense and shall be conditioned upon Tenant retaining an
independent accounting firm for such purposes which shall not be
compensated on any type of contingent fee basis with respect to
such examination. Wherever in this Lease or by law Landlord is
authorized to charge or recover costs and expenses for legal
services or attorneys' fees, same shall include, without
limitation, the costs and expenses for in-house or staff legal
counsel or outside counsel at rates not to exceed the reasonable
and customary charges for any such services as would be imposed in
an arms length third party agreement for such services.
39.12. Within thirty (30) days after request of Landlord,
Tenant shall furnish to Landlord a copy of its then current
financial statement certified by the Tenant's Chief Financial
Officer (and Tenant's then current audited statement if available)
which shall be employed by Landlord for purposes of financing the
Demised Premises and not distributed otherwise without prior
authorization of Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed
this Lease as of the day and year first above written.
("Landlord")
BY: 400 PLAZA DRIVE, INC.
BY:
Irwin A. Horowitz
Executive Vice President
("Tenant")
BY: KENNETH COLE SERVICES, INC.
BY:
Name:
Title: President
RIDER TO LEASE DATED FEBRUARY 21, 2004, BETWEEN 400 PLAZA DRIVE,
INC. AS LANDLORD AND KENNETH COLE SERVICES, INC., AS TENANT.
________________________________________________________________
R1. If any of the provisions of this Rider shall conflict
with any of the provisions, printed or typewritten, of this
Lease, such conflict shall resolve in every instance in favor of
the provisions of this Rider.
R2. Extension of Term. Provided Tenant is in compliance with
all of the terms and conditions contained herein, and provided
Tenant has not assigned this Lease or sublet all or any portion
of the Demised Premises and is itself in occupation and
conducting business in the whole of the Demised Premises in
accordance with the terms of this Lease, Tenant expressly
acknowledging and agreeing that the option rights contained
herein are personal to the original named Tenant, Tenant shall
have two (2) successive options to extend the Term of its lease
of the Demised Premises, from the date upon which this Lease
would otherwise expire for two separate extended periods of five
(5) years each ("Extended Period"), the first of which is called
the "First Extended Period" and the second of which is called
the "Second Extended Period", upon the following terms and
conditions:
1. If Tenant elects to exercise any one or both of said
options, it shall do so by giving notice of such election to
Landlord on or before the date which is one (1) year before the
beginning of the Extended Period for which the Term is to be
extended by the exercise of such option. Tenant agrees that it
shall have forever waived its right to exercise any such option
if it shall fail for any reason whatsoever to give such notice
to Landlord by the time provided herein for the giving of such
notice, whether such failure is inadvertent or intentional, time
being of the essence as to the exercise of each such option.
2. If Tenant elects to exercise any one or both of said
options, the Term shall be automatically extended for the
Extended Period covered by the option so exercised without
execution of an extension or renewal lease. Within ten (10) days
after request of either party following the effective exercise
of any such option, however, Landlord and Tenant shall execute,
acknowledge and deliver to each other duplicate originals of an
instrument in recordable form confirming that such option was
effectively exercised.
3. Each Extended Period shall be upon the same terms and
conditions as are in effect immediately preceding the
commencement of such Extended Period; provided, however, that
Tenant shall have no right or option to extend the Term for any
period of time beyond the expiration of the Second Extended
Period and, provided further, that in the Extended Period(s) the
Fixed Rent shall be as follows:
The Fixed Rent during the First Extended Period and
the Second Extended Period shall be Ninety-Five
percent (95%) of Fair Market Value ("FMV"). If the
parties are unable to agree on the FMV within thirty
(30) days of Tenant's exercise of its option, the
parties shall choose a licensed Real Estate Appraiser
who shall
determine the FMV. The cost of said Real Estate
Appraiser shall be borne equally by the parties. If
the parties are unable to agree on a licensed Real
Estate Appraiser within forty-five (45) days of
Tenant's exercise of its option, each party shall
select one Appraiser to appraise the FMV. All
appraisals shall be rendered within thirty (30) days
of appointment of the respective Appraiser appointed
under this paragraph. If the difference between the
two appraisals is 20% or less of the lower appraisal,
then the FMV shall be the average of the two
appraisals. If the difference between the two
appraisals is greater than 20% of the lower appraisal,
the two Appraisers shall select a third licensed Real
Estate Appraiser to appraise the FMV. The FMV shall in
such case be the average of the three appraisals. The
cost of the third appraisal shall be borne equally by
the parties.
Anything to the contrary contained herein notwithstanding, the
Fixed Rent for each Extended Period shall not be less than the
Fixed Rent for the period immediately preceding the Extended
Period for which the Fixed Rent is being calculated.
4. Any termination, expiration, cancellation or surrender
of this Lease shall terminate any right or option for the
Extended Period(s) not yet exercised.
5. Landlord shall have the right, for thirty (30) days
after receipt of notice of Tenant's election to exercise any
option to extend the Term, to reject Tenant's election if Tenant
gave such notice while Tenant was in default in the performance
of any of its obligations under the Lease, and such rejection
shall automatically render Tenant's election to exercise such
option null and void and of no effect.
6. The options provided herein to extend the Term of the
Lease may not be severed from the Lease or separately sold,
assigned or otherwise transferred.
R3. First Offer on Third Floor Space: (A) Provided Tenant
is in compliance with all of the terms and conditions contained
herein, and provided Tenant has not assigned this Lease or
sublet all or any portion of the Demised Premises and is itself
in occupation and conducting business in the whole of the
Demised Premises in accordance with the terms of this Lease,
Tenant expressly acknowledging and agreeing that the option
rights contained herein are personal to the original named
Tenant, Landlord agrees that during the Term, prior to entering
into any new lease with a prospective Tenant for any premises on
the third floor of the Building (other than extensions or
renewals of existing leases), Landlord shall first notify Tenant
in writing of its intention to lease such space (herein the
"Additional Premises") (such notice being referred to herein as
a "Landlord's Notice"). Tenant shall have a period of ten (10)
Business Days following the giving of Landlord's Notice to
notify Landlord, in writing, of its election to enter into a
lease for such Additional Premises as tenant pursuant to this
Rider Section R3. If Tenant shall notify Landlord in writing of
its election to enter into such lease as tenant for the
Additional Premises within the said ten (10) Business Day
period, Landlord shall deliver and Tenant shall execute a
modification of this Lease incorporating the Additional Premises
which were subject to Landlord's Notice into the Demised
Premises at the rent, terms and conditions set forth in this
Section R3. Time is of the essence with respect to Tenant's
exercise of its right of first offer
hereunder.
(B) If Tenant shall fail to notify Landlord in writing of its
election to enter into a modification to this Lease
incorporating the Additional Premises, within the ten (10)
Business Day period referred to in subsection (A) hereof, then
the right of first refusal granted to the tenant as set forth in
subsection (A) of this Section with respect to the additional
premises referred to in Landlord's notice, shall automatically
terminate and come to and end.
(C) If Tenant shall not elect to lease the premises referred
to in Landlord's Notice within the ten (10) Business Day period
following Landlord's Notice then, Landlord may thereafter enter
into and deliver a lease for such Additional Premises free of
the restrictions herein stated, without again being required to
offer the same to Tenant pursuant to the preceding provisions of
this Rider Section R3.
(D) This right of first offer so granted to Tenant shall
terminate and become null and void upon the expiration or sooner
termination of this Lease.
(E) In the event Tenant shall exercise its right to
incorporate the Additional Premises into the Demised Premises
pursuant to this Rider Section R3, such leasing of the
Additional Premises shall be on the same terms and conditions as
are applicable the original Demised Premises under this Lease,
except that the Fixed Rent shall be as determined pursuant to
paragraph R3 (F) and with the same Landlord's Contribution per
square foot of Floors Space for such Additional Space as was
applicable per square foot of Floor Space of the original
Demised Premises, and otherwise subject in all respects to the
terms and provisions of this Lease. If Tenant shall fail to
notify Landlord in writing of its election to enter into a
modification to its lease incorporating the Additional Premises,
within ten (10) Business Days after Landlord shall have advised
Tenant of the availability of such space in response to Tenant's
request, or if after tenant Notifies landlord Tenant shall fail
to execute a Lease modification incorporating the Additional
Premises into the Demised Premises within five (5) days after
receipt of such Lease Modification from Landlord then the right
herein granted to the Tenant as set forth in this subsection (E)
with respect to the Additional Premises identified by Landlord,
shall automatically terminate and come to and end.
(F) The Fixed Rent for the Additional Premises shall be at
One Hundred percent of (100%) of Fair Market Value ("FMV"). If
the parties are unable to agree on the FMV within thirty (30)
days of Tenant's exercise of its option to lease the Additional
Premises pursuant to this Section R3, the parties shall choose a
licensed Real Estate Appraiser who shall determine the FMV of
the Additional Premises. The cost of said Real Estate Appraiser
shall be borne equally by the parties. If the parties are unable
to agree on a licensed Real Estate Appraiser within forty-five
(45) days of Tenant's exercise of its option, each party shall
select one Appraiser to appraise the FMV. All appraisals shall
be rendered within thirty (30) days of appointment of the
respective Appraiser appointed under this paragraph. If the
difference between the two appraisals is 20% or less of the
lower appraisal, then the FMV shall be the average of the two
appraisals. If the difference between the two appraisals is
greater than 20% of the lower appraisal, the two Appraisers
shall select a third licensed Real Estate Appraiser to appraise
the FMV. The FMV
(B)
shall in such case be the average of the three appraisals. The
cost of the third appraisal shall be borne equally by the
parties. Anything to the contrary contained herein
notwithstanding, the Fixed Rent for the Additional Premises
shall not be less than the Fixed Rent per square foot per annum
for the original Demised Premises.
R4. Delivery of Demised Premises. Landlord shall use its
reasonable efforts to cause the Demised Premises to be ready for
occupancy on or about June 1, 2004. In the event Landlord does
not construct the Demised Premises to be Ready for Occupancy on
or before June 1, 2004, other than as the result of delays
caused by Tenant, its Agents or contractors, Landlord shall
during the period of such late delivery cause its affiliate to
permit Tenant to holdover in the office part of the Premises
located at 2 Emerson Lane, Secaucus, New Jersey at a rental
equal to the Fixed Rent and additional charges that payable
thereunder immediately prior to the Surrender Date thereunder
(as that term is defined therein) with respect to the office
portion thereof for such period. If the Commencement Date of
this Lease does not occur by January 1, 2005, Landlord and
Tenant shall each have the right, upon written notice to the
other given within thirty (30) days after said date, to
terminate this Lease.
R5. Twenty-Four Hour Access. Tenant, its agents and employees
shall, from and after the Ready Date, during the Term, be
permitted access to the Building twenty-four hours per day,
seven days per week, fifty-two (52) weeks per year, subject
however to any temporary closure required do to emergency or to
effect repairs or maintenance to the Building in accordance with
the terms of this Lease. Landlord shall in the event of such
temporary closure use reasonable efforts to minimize
interference by Landlord with Tenant's use of the Demised
Premises or means of ingress or egress to and from the Demised
Premises.
R6. Landlord's Environmental Covenant. Landlord represents
that to the best of Landlord's knowledge, as of the date hereof,
the Demised Premises, the Building and the Land are in
substantial compliance with applicable Environmental Laws (as
hereinafter defined), except for any non-compliance caused by or
attributable to the acts or omissions of Tenant or its agents,
employees, contractors, or invitees, or arising out of the
performance or existence of Tenant's Work. In the event any
Hazardous Materials (as hereinafter defined) are discovered to
exist in violation of any applicable Environmental Laws, in, on,
or under the Land, the Building, or the Demised Premises during
the Term of this Lease, which was present on the Demised
Premises on the Commencement Date which is not due to the fault,
act, or omission of Tenant or its agents, employees,
contractors, or invitees, or arisen out of Tenant's Work,
Landlord shall cause such Hazardous Materials to be removed or
remediated at Landlord's cost and expense, in accordance with
all applicable Legal Requirements and indemnify Tenant for any
fines or penalties imposed upon it by the governmental agency
having jurisdiction of the matter. As used herein "Hazardous
Materials" means (i) any dangerous, toxic or hazardous
pollutants, contaminants, chemicals, wastes, materials or
substances, as defined in or governed by the provisions of any
federal, state or local law, statute, code, ordinance,
regulation, requirements or rules relating thereto (hereinafter
collectively, "Environmental Laws"), and also including urea-
formaldehyde, polychlorinated biphenyls, asbestos, asbestos-
containing materials, nuclear fuel or waste, and petroleum
products, or any other waste, material, substance, pollutant or
contaminant which would
R4.
subject the owner of any property or the tenant of all or any
part of the Building, Demised Premises or the Land to any
damages, penalties or liabilities under any applicable
Environmental Laws.
IN WITNESS WHEREOF, Landlord and Tenant have duly
executed this Rider to Lease as of the day and year first
above written.
("Landlord")
400 Plaza Drive, Inc.
By:
Irwin A. Horowitz
Executive Vice President
("Tenant")
Kenneth Cole Services, Inc.
By:
Name:
Title:
EXHIBIT A
EXHIBIT B
EXHIBIT C
(LANDLORD'S WORK)
Landlord agrees that provided (a) none of the events
listed in Section 27.01has occurred, Landlord shall perform
the work identified as Landlord's Work on the Work Letter
attached hereto as Exhibit C-1.
EXHIBIT D
EXHIBIT E
EXHIBIT F
EXHIBIT G
EXHIBIT H
_________________________________________________________________
EXHIBIT 10.21
SALE-PURCHASE AGREEMENT
between
SAAR COMPANY, LLC.
Seller,
and
KENNETH COLE PRODUCTIONS, INC.
Purchaser.
Premises:
601 and 615 West 50th Street
New York, New York
_________________________________________________________________
____
SALE-PURCHASE AGREEMENT
THIS SALE-PURCHASE AGREEMENT (this "Agreement"), is made as of
this 23rd day of April, 2004 (the "Effective Date"), between SAAR
COMPANY, LLC, a limited liability company organized under the
laws of the State of New York, having an office c/o APF
Properties, 25 West 45th Street, New York, New York 10036
("Seller"), and KENNETH COLE PRODUCTIONS, INC., a corporation
organized under the laws of the State of New York, having an
office at 603 West 50th Street, New York, New York 10019
("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is the owner of the Premises (as
hereinafter defined); and
WHEREAS, Seller desires to sell, and Purchaser desires to
purchase, the Premises, on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements hereinafter set forth, and for other good and
valuable consideration, the mutual receipt and legal sufficiency
of which are hereby acknowledged, Seller and Purchaser hereby
agree as follows:
1. Sale-Purchase.
1.1. Seller agrees to sell and convey to
Purchaser, and Purchaser agrees to purchase from Seller, upon the
terms and conditions hereinafter set forth, the following
(collectively, the "Premises"): (a) all that certain plot, piece
and parcel of land located in the County of New York and the
State of New York, described in Exhibit A attached hereto and
made a part hereof, together with any easements and
appurtenances, pertaining thereto (the "Land"), which Land is
located at 601 and 615 West 50th Street, New York, New York; (b)
all buildings and improvements located on the Land and all of
Seller's right, title and interest in and to any and all fixtures
attached thereto and all machinery, equipment, appliances and
personal property owned by Seller and used in connection with the
Premises (collectively, the "Improvements"); (c) any Contracts
(as hereinafter defined); (d) to the extent assignable, and
subject to the terms hereof, all licenses, permits, certificates
of occupancy and approvals used in or relating to the ownership
or occupancy of the Improvements (the "Permits"); (e) to the
extent assignable, all warranties and guaranties, if any,
relating to the Improvements (the "Warranties"); and (f) all
leases, licenses and other agreements (written or oral) for the
occupancy of the retail, office or any other space within the
Improvements (the "Leases"), that are, subject to the terms of
this Agreement, described in the rent roll (the "Rent Roll")
attached hereto as Exhibit B, and all security deposits held by
Seller pursuant to the Leases.
2.Purchase Price; Letter of Credit.
2.1 The purchase price for the Premises (the
"Purchase Price") is Twenty Four Million and 00/100 Dollars
($24,000,000.00) and shall be payable at or before 1:00 P.M. (New
York time) on the Closing Date (as hereinafter defined), as
adjusted for prorations and apportionments as herein provided, by
wire transfer of immediately available federal funds to an
account or accounts designated by Seller (such funds, the
"Closing Funds").
2.2. Simultaneously with the execution and
delivery of this Agreement by Purchaser, a Letter of Credit (as
hereinafter defined) in the amount of Three Million Six Hundred
Thousand and 00/100 Dollars ($3,600,000) (as the same may be
amended, replaced, renewed, extended or drawn down from time to
time pursuant the provisions of this Section 2, the "Letter of
Credit"), shall be delivered to Pryor Cashman Sherman & Flynn,
LLP, 410 Park Avenue, New York, New York 10022 ("Escrow Agent")
and held and disbursed by Escrow Agent in accordance with the
terms, covenants and conditions of this Agreement. Purchaser
shall cause the Letter of Credit to be maintained in accordance
with the provisions of this Section 2 and which Letter of Credit
shall be delivered to and applied by Seller in the event of a
Purchaser Default (as such term is defined in Section 10 below)
hereunder. As used herein, "Letter of Credit" shall mean a
letter of credit which shall be (i) unconditional and
irrevocable, (ii) issued by a reputable New York bank reasonably
satisfactory to Seller or bank that is a member of the New York
Clearing House Association, (iii) payable at a branch located in
New York City, (iv) payable to Seller (or, at Seller's option, to
a qualified intermediary (a "Qualified Intermediary") appointed
pursuant to Seller's rights under Section 12) solely upon
presentation of a sight draft, (v) transferable by the
beneficiary without additional charge, (vi) payable in multiple
drafts, and (vii) for a term of not less than one (1) year and
expressly provide that the Letter of Credit shall automatically
be renewed for successive one-year periods unless (A) the issuer
shall have provided the beneficiary with written notice of such
non-renewal at least thirty (30) days prior to the expiration
date of the Letter of Credit and (B) at least fifteen (15) days
prior to the expiration of said Letter of Credit, Purchaser shall
deliver to Escrow Agent a supplemental or new letter of credit
meeting the requirements of this Section 2.
2.3 Notwithstanding anything to the contrary
contained herein, Purchaser acknowledges and agrees that the (a)
Seller's receipt of notice from the issuing bank that the Letter
of Credit will not be renewed without Purchaser delivering a
supplemental or new letter of credit meeting the requirements of
this Section 2; or (b) a Purchaser Default under this Agreement
shall be deemed a material default hereunder on the part of
Purchaser, in which event Escrow Agent is authorized and directed
to deliver the Letter of Credit to Seller, and Seller shall be
entitled to draw down the Letter of Credit and retain the
proceeds of the draw and exercise its rights and remedies
hereunder, including, without limitation, pursuant to Section
10.1 hereof.
3. Assignment of Contracts. At Closing, Seller
shall assign to Purchaser and Purchaser shall assume all of the
contracts described on Exhibit C attached hereto (together with
any Approved New Contracts (as hereinafter defined) and that
certain Management & Leasing Agreement by and between Newmark &
Company Real Estate, Inc. and SAAR Company, LLC (the "M & L
Agreement"), a copy of which was previously provided to
Purchaser, if Purchaser provides Seller with notice within 10
days after receipt of the Initial Scheduled Closing Date Notice
(as hereinafter defined) that it elects to assume the M & L
Agreement. In the event Purchaser does not provide Seller with
such notice in the manner set forth above, Seller agrees to cause
such M & L Agreement to be terminated on or prior to the Closing
Date, the "Contracts").
4. Closing Date. The consummation of the
transactions contemplated hereby (the "Closing"), shall take
place at the New York City office of Purchaser's lender or, if
none, at the offices of Seller's attorneys, Pryor Cashman Sherman
& Flynn LLP, 410 Park Avenue, New York, New York 10022 at 1:00
P.M. (New York City time), or by escrow, or through customary
closing arrangements reasonably acceptable to Seller and to
Purchaser on the date (such date, the "Closing Date") that is not
later than sixty (60) days after Seller shall deliver notice
(such notice, the "Initial Scheduled Closing Date Notice") to
Purchaser setting forth that the Closing shall occur on the date
set forth in such Initial Scheduled Closing Date Notice, which
scheduled Closing Date shall in no event be later than the date
which is twenty-four (24) months following the Effective Date
(the "Outside Date"). If Seller shall fail to deliver the
Initial Scheduled Closing Date Notice, the Closing Date shall be
on the Outside Date, time being of the essence. Notwithstanding
the foregoing provisions of this Section 4, Seller shall have the
right, by delivering notice to Purchaser on or before the
scheduled Closing Date, to adjourn the Closing one or more times
(but for not more than sixty (60) days in the aggregate) to a
date selected by Seller which shall not be sooner than three (3)
business days after any adjourned scheduled Closing Date or later
than the Outside Date. It is expressly agreed by Seller and
Purchaser that time is of the essence with respect to Purchaser's
obligation to close this transaction on the Closing Date. For
the avoidance of doubt (a) Purchaser acknowledges that if Seller
adjourns the Closing Date pursuant to any right of adjournment
granted hereunder, then time shall be of the essence with respect
to Purchaser's obligation to close this transaction on such
adjourned Closing Date, and (b) Seller acknowledges that if
Seller shall fail to deliver the Initial Scheduled Closing Date
Notice, the Closing Date shall be on the Outside Date, time being
of the essence.
5. Condition of Premises.
5.1. Other than as expressly set forth in this
Agreement, Seller specifically disclaims any warranty, guaranty
or representation of any kind or character, express or implied,
with respect to the Premises, including, but not limited to,
warranties or representations as to matters of title, zoning, tax
consequences, physical or environmental conditions, availability
of access, ingress or egress, operating history or projections,
valuation, governmental approvals, governmental regulations or
any other matter or thing relating to or affecting the Premises,
including, without limitation, (a) the nature and condition of
the Premises, including, without limitation, the water, soil and
geology or any other matter affecting the stability or integrity
of the Premises, and the suitability thereof and of the Premises
for any and all activities and uses which Purchaser may elect to
conduct thereon, and the existence of any Hazardous Materials
thereon, (b) the compliance of the Premises with any law, rule,
regulation or ordinance to which the Premises is or may be
subject, (c) the condition of title to the Premises or the nature
and extent of any right of way, lease, license, reservation or
contract, (d) the profitability or losses or income or expenses
relating to the Premises and the businesses conducted in
connection therewith, (e) the value of the Premises, (f) the
existence, quality, nature or adequacy of any utility servicing
the Premises, (g) the physical condition of the Premises or the
condition of any mechanical or other systems on the Premises, (h)
the legal or tax consequences of this Agreement or the
transactions contemplated hereby, (i) the value, condition,
habitability, merchantability, marketability, profitability,
suitability or fitness for a particular use or purpose of the
Premises, (j) the manner or quality of the construction or
materials incorporated into any of the Premises and (k) the
manner, quality, state of repair or lack of repair of the
Premises. Purchaser represents, warrants and acknowledges that
it is the tenant under the KCP Lease (as hereinafter defined) and
is a knowledgeable purchaser of real estate and that, except for
Seller's representations set forth in Section 11, it is
purchasing the Premises solely in reliance on its own expertise
and investigations and those of Purchaser's agents and that,
prior to the date hereof, Purchaser has been in possession of a
portion of the Premises pursuant to the KCP Lease and has had a
full and complete opportunity to conduct such investigations,
examinations, inspections and analysis of the Premises as
Purchaser, in its sole and absolute discretion, may determine,
and will rely upon same. In consideration of the agreements of
Seller herein, Purchaser expressly acknowledges that, other than
as expressly set forth in this Agreement, Seller makes no
representations or warranties, express or implied, or arising by
operation of law, including, but not limited to, any warranty of
value, condition, habitability, merchantability, marketability,
profitability, suitability or fitness for a particular purpose or
use of the Premises. In consideration of the agreements of
Seller in this Agreement, Purchaser (i) acknowledges that, other
than as set forth in this Agreement, it has not relied upon,
either directly or indirectly, any representation or warranty of
or any statements, information or other material provided by
Seller or any agent of Seller, (ii) assumes the risk that adverse
matters, including, but not limited to, adverse physical and
environmental conditions, may not have been revealed by
Purchaser's inspections and investigations, (iii) acknowledges
that, other than as set forth in the Agreement, Seller is
conveying to Purchaser and Purchaser is accepting the Premises
owned by Seller "AS IS, WHERE IS," with all faults, (iv)
acknowledges and agrees that there are no oral agreements,
warranties, or representations, collateral to or affecting the
Premises by Seller, any agent of Seller or any third party and
(v) acknowledges that, except as expressly set forth in this
Agreement, Seller has not made an independent investigation or
verification of the accuracy or completeness of any documents,
studies, surveys, information or materials which were prepared by
parties other than Seller and which were provided, or made
available, to Purchaser or the methods employed by the preparers
of such items. For purposes of this Agreement, the term
"Hazardous Materials" means any substance which is or contains:
(i) any "hazardous substance" as now or hereafter defined in
Section 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Section 9601 et seq.), or any regulations promulgated thereunder;
(ii) any "hazardous waste" as now or hereafter defined in the
Recourse Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.) or regulations promulgated thereunder; (iii) any
substance regulated by the Toxic Substances Control Act
(15 U.S.C. Section 2601 et. seq.); (iv) gasoline, diesel fuel or
other petroleum hydrocarbons; (v) asbestos and asbestos
containing materials, in any form, whether friable or nonfriable;
(vi) polychlorinated biphenyls; (vii) radon gas and (viii) any
additional substances or materials which are now or hereafter
classified or considered to be hazardous or toxic under
Environmental Requirements or the common law, or any other
applicable law related to the Premises. Hazardous Materials
shall include, without limitation, any substance, the presence of
which on the Premises: (A) requires reporting, investigation or
remediation under Environmental Requirements; (B) causes or
threatens to cause a nuisance on the Premises or adjacent
property or poses or threatens to pose a hazard to health or
safety of persons on the Premises or adjacent property or
(C) which, if emanated or migrated from the Premises, could
constitute a trespass. For purposes of this Agreement, the term
"Environmental Requirements" means all laws, ordinances,
statutes, codes, rules, regulations, agreements, judgments,
orders and decrees now or hereafter enacted, promulgated, or
amended, of the United States, the states, the counties, the
cities or any other political subdivisions in which the Premises
is located and any other political subdivision, agency or
instrumentality exercising jurisdiction over Seller, the Premises
or the use of the Premises relating to pollution, the protection
or regulation of human health, natural resources or the
environment, or the emission, discharge, release or threatened
release of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or waste or Hazardous Materials
into the environment (including, without limitation, ambient air,
surface water, ground water or land or soil). By executing this
agreement, except as set forth in this agreement, Purchaser
affirms and agrees that (a) there are no representations or
warranties, express, implied, statutory, or by operation of law,
with respect to the Premises or any component thereof, (b)
Purchaser has been given the opportunity to inspect the Premises
and each component thereof and has determined to purchase the
Premises and each component thereof based on such inspection, and
(c) upon closing, except as otherwise expressly provided herein,
Purchaser shall assume the risk that adverse matters, including,
but not limited to, construction defects and adverse physical
conditions, may not have been revealed by Purchaser's
investigations, and purchaser, on closing, shall be deemed to
have waived, relinquished, and released Seller from and against
any and all claims, demands, causes of action (including, without
limitation, causes of action in tort, losses, damages,
liabilities, costs, and expenses (including, without limitation,
attorneys' fees and court costs) of any and every kind or
character, known or unknown, that Purchaser might have asserted
or alleged against Seller at any time by reason of or arising out
of any latent or patent construction defects or physical
conditions, violations of any applicable laws and any and all
other acts, omissions, events, circumstances, or matters
regarding the Premises.
5.2. Except as otherwise expressly set forth in
this Agreement and in the Assignment and Assumption of Leases (as
defined in Section 7.1), Purchaser, for itself and any successors
and assigns of Purchaser, waives its right to recover from, and
forever releases and discharges, and covenants not to sue,
Seller, any of Seller's affiliates, and any Seller Exculpated
Party with respect to any and all suits, actions, proceedings,
investigations, demands, claims, liabilities, fines, penalties,
liens, judgments, losses, injuries, damages, expenses or costs,
including, without limitation, attorneys' and experts' fees and
costs of investigation and remediation costs (collectively,
"Claims"), whether direct or indirect, known or unknown, foreseen
or unforeseen, that may arise on account of or in any way be
connected with the Premises including, without limitation, the
physical, environmental and structural condition of the Premises
or any law or regulation applicable thereto, including, without
limitation, any Claim or matter (regardless of when it first
appeared) relating to or arising from (a) the use, presence,
discharge or release of Hazardous Materials on, under, in, above
or about the Premises, (b) any patent or latent defects or
deficiencies with respect to the Premises, (c) any and all
matters related to the Premises or any portion thereof, including
without limitation, the condition and/or operation of the
Premises and each part thereof, and (d) the presence, release
and/or remediation of asbestos and asbestos containing materials
in, on or about the Premises regardless of when such asbestos and
asbestos containing materials were first introduced in, on or
about the Premises. Purchaser hereby waives and agrees not to
commence any action, legal proceeding, cause of action or suits
in law or equity, of whatever kind or nature, directly or
indirectly, against any of Seller, any of Seller's affiliates or
any Seller Exculpated Party or their agents in connection with
the Claims described above. Purchaser elects to and does assume
all risk for such claims heretofore and hereafter arising,
whether now known or unknown by Purchaser. Purchaser shall fully
assume any such liability or obligation, including, without
limitation, the cost of any cleanup, remediation or removal of
any hazardous substances or other Environmental Conditions.
5.3. Purchaser, with the assistance of an
attorney, has fully reviewed the disclaimers and waivers set
forth in this Agreement, including, without limitation, those set
forth in this Section 5, and understands their significance and
effect. Purchaser acknowledges and agrees that the disclaimers
and other agreements set forth in this agreement, including,
without limitation, those set forth in this Section 5, are an
integral part of this Agreement, and that Seller would not have
agreed to sell the Premises to Purchaser for the Purchase Price
without the disclaimers and other agreements set forth in this
Agreement, including, without limitation, those set forth in this
Section 5. To the extent permitted by law, Purchaser hereby
agrees, represents and warrants that Purchaser realizes and
acknowledges that factual matters now unknown to it may have
given or may hereafter give rise to causes of action, claims,
demands, debts, controversies, damages, costs, losses and
expenses which are presently unknown, unanticipated and
unsuspected, and Purchaser further agrees, represents and
warrants that the waivers and releases herein have been
negotiated and agreed upon in light of that realization and that
Purchaser nevertheless hereby intends to release, discharge and
acquit Seller from any such unknown causes of action, claims,
demands, debts, controversies, damages, costs, losses and
expenses which might in any way be included as a material portion
of the consideration given to Seller by Purchaser in exchange for
Seller's performance hereunder. The terms and conditions of this
Section 5 will expressly survive the Closing and will not merge
with the provisions of any closing documents.
6. Apportionments.
6.1. The following are to be apportioned as of
the Closing Date:
(i) Real property taxes and assessments
(including, without limitation, any assessments relating to
Permitted Exceptions (as hereinafter defined), business
improvement district assessments or similar charges), water rates
and charges, and sewer taxes not otherwise payable directly to
the taxing authority by the tenant under the Leases. If any of
the foregoing are not finally fixed by the Closing Date, the
apportionments thereof made at the Closing shall be based on such
of the foregoing as is assessed for the preceding fiscal year or
applicable billing period, or on estimated water and sewer
charges and after same are finally fixed, Seller and Purchaser
shall, within thirty (30) days after same are fixed, make a
recalculation of same, and Seller or Purchaser, as the case may
be, shall promptly make an appropriate settlement with the other
based upon such recalculation.
(ii) Fixed, escalation, additional and
percentage rent, parking fees and charges and all other charges
under the Leases (including, without limitation, electricity and
utility surcharges, administrative fees in connection with
security deposits held by Seller under the Leases), if, as and
when collected in accordance with Section 6.6 of this Agreement
(all of the foregoing being collectively referred to as "Rents").
(iii) Charges under any Contracts.
(iv) Annual license, permit, franchise
and inspection fees.
(v) Deposits, if any, on account with
utility companies servicing the Premises (and Seller and
Purchaser each agrees to cooperate to effectuate the transfer of
any such deposits), provided that, at Seller's option, Seller
will obtain a refund of any such utility deposits in effect and
Purchaser shall provide Purchaser own utility deposits directly
to the applicable utility companies.
(vi) All other items customarily
apportioned in connection with the sale of similar properties
located in the City of New York.
6.2. If the Premises shall be or shall have
been affected by any bond or special assessment prior to the
Closing Date, such bond or special assessment due and relating to
the period of time prior to the Closing Date shall be paid by
Seller and such bond or special assessment due or relating to the
period of time from and after the Closing Date shall be paid by
Purchaser. If any bond or special assessment on the Premises is
payable in installments, then the installment for the current
period shall be prorated (with Purchaser assuming the obligation
to pay any installments due from and after the Closing Date). If
the Premises or any part thereof shall be or shall have been
affected by any bond or special assessment on or subsequent to
the Closing Date, whether or not payable in annual installments,
the entire amount of such assessment shall be paid by Purchaser.
6.3. If there are any water meters on the
Premises, Seller shall furnish readings, and the unfixed water
rates and charges and sewer taxes and rents, if any, based
thereon for the intervening time, shall be apportioned on the
basis of such last readings. If there is any fuel on hand,
Seller shall furnish a reading, and the unfixed charges for such
fuel, for the period from the date of such reading until the
Closing Date shall be apportioned based upon such reading.
6.4. The amount of any unpaid taxes,
assessments, water charges, sewer taxes and rents and vault
charges and taxes which Seller is obligated to pay and discharge
may, at the option of Seller, be allowed to Purchaser out of the
balance of the Purchase Price, provided that official bills
therefor with interest and penalties thereon are furnished by
Seller at the Closing. If there are any other liens or
encumbrances which Seller is paying and discharging pursuant to
Section 8 of this Agreement, Seller may use any portion of the
Purchase Price to satisfy the same, provided that a nationally
recognized title insurance company selected by Purchaser (the
"Title Company") shall be willing to insure Purchaser against
collection of such liens and/or encumbrances (with no additional
charge), in which event such liens and encumbrances shall not be
objections to title.
6.5. (i) To the extent that Purchaser receives
Rents (including monthly payments of escalation and percentage
rents and "pass throughs") after the Closing Date attributable to
the period prior to Closing, Purchaser shall render an accounting
to Seller with respect thereto, and the amount of such Rents
shall be applied in the following order of priority: (x) first,
to the calendar month in which the Closing occurs, (y) second, to
any calendar month or months following the calendar month in
which the Closing occurred until such tenant is current on post-
Closing Rents, and (z) third, to the calendar months preceding
the Closing Date until such tenant is current on pre-Closing
Rents. Notwithstanding the foregoing, Seller shall receive a
credit at closing in an amount equal to any rent arrears or other
amounts due Seller, as landlord, under that certain lease, dated
December 17, 1998, by and between Seller, as landlord, and
Purchaser, as tenant (the "KCP Lease").
(ii) Purchaser shall use commercially
reasonable efforts to collect any and all Rents which are
attributable to the period of Seller's ownership of the Premises,
however, Purchaser shall have no obligation to commence
litigation with respect to same.
6.6. Prior to the Closing, Purchaser and Seller
shall, if practicable, cooperate to arrange for utility services
to the Premises to be discontinued in Seller's name, as of the
day immediately prior to the Closing Date, and to be reinstated
in Purchaser's name, as of the Closing Date.
6.7. Subject to the provisions of Section 26.1
of this Agreement, in the event the Closing occurs, the
provisions of this Section 6 shall survive the Closing Date for
one (1) year and either party shall have the right prior to
expiration of such one (1) year period to require that errors
related to computations and calculations under this Section 6 be
corrected and the parties agree that any errors not raised prior
to the expiration of such one (1) year period shall be deemed to
be waived. The respective indemnification obligations of Seller
and Purchaser, if any, contained in this Section 6 shall survive
the Closing for such one (1) year period.
6.8 Seller shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding
affecting real estate taxes assessed against the Premises for any
fiscal period in which the Closing is to occur or any subsequent
fiscal period without the prior written consent of Purchaser,
which consent shall not be unreasonably withheld. Real estate
tax refunds and credits received after the Closing Date which are
attributable to the fiscal tax year during which the Closing Date
occurs shall be apportioned between Seller and Purchaser, after
deducting the reasonable expenses of collection thereof, which
obligation shall survive the Closing. Real estate tax refunds and
credits received after the Closing Date which are attributable to
the fiscal tax year(s) after the fiscal tax year during which the
Closing Date occurs shall be paid to Purchaser, after deducting
(or after reimbursing Seller) the reasonable expenses of
collection thereof incurred by Seller, which obligation shall
survive the Closing. Real estate tax refunds and credits received
after the Closing Date which are attributable to the fiscal tax
year(s) preceding the fiscal tax year in which the Closing Date
occurs shall belong and be paid to Seller, which obligation shall
survive the Closing.
7. Closing Documents.
7.1. At the Closing, Seller shall deliver to
Purchaser the following: (a) a statutory form of bargain and
sale deed without covenants, executed by Seller, in the form
attached hereto as Exhibit D (the "Deed"); (b) an assignment and
assumption of the Leases, in the form attached hereto as Exhibit
E (the "Assignment and Assumption of Leases"), executed by
Seller; (c) an assignment and assumption of Contracts, in the
form attached hereto as Exhibit F and made a part hereof (the
"Assignment and Assumption of Contracts"); (d) a "non-foreign
person affidavit" that meets the requirements of Section
1445(b)(2) of the Internal Revenue Code of 1986, as amended, in
the form attached hereto as Exhibit G and made a part hereof,
executed by Seller; (e) a signed notice to the tenants of the
Premises, in the form attached hereto as Exhibit H and made a
part hereof (the "Notice to Tenants"), executed by Seller; (f) a
signed notice to the third parties under the Contracts, in the
form attached hereto as Exhibit I and made a part hereof (the
"Notice to Contract Parties"), executed by Seller; (g) all
forms, affidavits and certificates required to be filed in
connection with the imposition and/or payment of any and all
applicable federal, state, county, municipal and other transfer
taxes with respect to the transactions set forth herein,
(collectively, the "Conveyance Tax Documents"), in proper form
for submission, prepared, executed and acknowledged by Seller;
(h) such documents (such as limited liability company
resolutions, corporate resolutions or partnership authorizations
and certified limited liability company, corporate or partnership
organizational documents) as are reasonably required by the Title
Company to evidence the authorization of the transactions
contemplated by this Agreement; (i) to the extent same are in
the possession of Seller, Seller's executed counterparts of the
Leases or if not in the possession of Seller, certified true
copies thereof; (j) to the extent same are in the possession of
Seller, all plans and specifications with respect to the
Premises; (k) to the extent the same are in the possession of
Seller and are transferable to Purchaser, all original licenses,
certificates and permits pertaining to the Premises and required
for the use or occupancy thereof and all Warranties and equipment
manuals; (l) keys to all entrance doors to, and equipment and
utility rooms located in, the Premises; and (m) such other
documents, instruments and/or deliveries as are required to be
delivered by Seller pursuant to the terms of this Agreement.
7.2. At the Closing, Purchaser shall deliver to Seller
the following: (a) the Closing Funds; (b) the Assignment and
Assumption of Leases, executed by Purchaser; (c) the Assignment
and Assumption of Contracts, executed by Purchaser; (d) the
Notice to Tenants, executed by Purchaser; (e) the Notice to
Contract Parties, executed by Purchaser; (f) the Conveyance Tax
Documents, executed and acknowledged by Purchaser, each in proper
form for submission; (g) such documents (such as limited
liability company resolutions, corporate resolutions or
partnership authorizations and certified limited liability
company, corporate or partnership organizational documents) as
are reasonably required by the Title Company evidencing the
authorization of the purchase of the Premises by Purchaser and
the delivery by Purchaser of all of the Closing documents
required by this Agreement; (h) such other documents as may
reasonably be requested by the Title Company to evidence the
authorization by Purchaser's managers, members, partners, joint
venturers, shareholders and other controlling entities of
Purchaser, of the acquisition of the Premises by Purchaser; and
(i) such other documents, instruments and/or deliveries as are
required to be delivered by Purchaser pursuant to the terms of
this Agreement.
7.3. The acceptance of transfer of title to the
Premises by Purchaser shall be deemed to be full performance and
discharge of any and all obligations on the part of Seller to be
performed pursuant to the provisions of this Agreement, except
where such agreements and obligations are specifically stated to
survive the Closing.
8. Title Insurance and Survey Matters.
8.1. At the Closing, Seller shall deliver to
Purchaser the Deed, subject only to the Permitted Exceptions (as
hereinafter defined). Purchaser has obtained and provided Seller
with a copy of a title insurance commitment (the "Title
Commitment") issued by Tri-State Title Agency, LLC.
8.2. (a) As used herein, the term "Permitted
Exceptions" with regard to the Premises means: (i) all matters
set forth in Exhibit K annexed hereto; (ii) all encroachments,
overlaps or other matters which may be disclosed by an accurate
survey or physical inspection of the Premises provided the same
do not prohibit the present use of the Property or render title
unmarketable; (iii) any exceptions, exclusions and other matters
waived in writing by Purchaser in accordance with the terms
hereof; (iv) all title matters reflecting the existence or terms
of the Leases shown on the Rent Roll; (v) liens for real estate
taxes not yet due and payable that are apportioned as provided in
Section 6, including special assessments and special improvement
district or local improvement district bonds; (vi) any and all
present and future laws, ordinances, restrictions, requirements,
resolutions, orders, rules and regulations of any governmental
authority, as now or hereafter existing or enforced (including,
without limitation, those related to zoning and land use); (vii)
any lien or encumbrance encumbering the Premises as to which the
Seller delivers to Purchaser or Title Company at or prior to the
Closing, proper instruments, in recordable form, canceling such
lien or encumbrance, together with funds to pay the cost of
recording and canceling the same, and to which the Title Company
omits as an exception from coverage on an owner's policy of title
insurance (the "Title Policy") to be obtained by Purchaser;
(viii) Uniform Commercial Code filings that have expired or
terminated by operation of law on or prior to the Closing Date;
(ix) such other exceptions as the Title Company shall commit to
insure over, without any additional cost to Purchaser whether
such insurance is made available in consideration of payment,
bonding or indemnity by Seller or otherwise, provided the same is
reasonably acceptable to Purchaser's lender; and (x) all matters,
whether or not of record, to the extent caused by Purchaser or
its agents, representatives or contractors (whether in its
capacity as purchaser hereunder or as the tenant under the KCP
Lease). Permitted Exceptions shall expressly exclude any and all
Seller Encumbrances (as hereinafter defined).
(b) As used herein, the term "Seller Encumbrance"
shall mean, with respect to the Premises, (i) any mortgage or
deed of trust or other monetary lien voluntarily granted or
expressly assumed by Seller and encumbering the Premises, or
(ii) any and all judgments or mechanics' or suppliers' liens
encumbering the Premises arising from work performed or materials
furnished at the Premises by or on behalf of Seller and not
caused by Purchaser. Seller covenants and agrees that all Seller
Encumbrances must be satisfied by the Seller on or prior to the
Closing Date, or, if not so satisfied, shall be satisfied at the
Closing out of the proceeds otherwise payable to Seller, failing
which Seller shall be in default.
(c) If title to the Premises becomes encumbered by any
matter the existence of which is first evidenced in an update to
the Title Commitment first received after the Effective Date
(including, without limitation, an attachment or lis pendens
(filed by a party other than Purchaser either in its capacity as
purchaser hereunder or in its capacity as tenant under the KCP
Lease) or any other title exception) other than a Permitted
Exception (a "Title Defect"), Purchaser shall notify Seller of
the same within five (5) days after Purchaser discovers the
existence of such Title Defect. Seller shall use its
commercially reasonable efforts to satisfy or cure any Title
Defect the existence of which is first evidenced in an update to
the Title Commitment first received after the Effective Date;
provided; however, that Seller shall have no obligation to spend
more than $100,000 in connection therewith (other than those that
constitute a Seller's Encumbrance which is governed by Section
8.2(b) above, and other than those that are caused by Purchaser
which shall not be deemed a Title Defect). If such a Title
Defect exists and Seller shall be required to use its
commercially reasonable efforts to satisfy or cure the same
(subject to the $100,000 maximum amount Seller is required to
spend in connection therewith provided for in the preceding
sentence), or if Seller, in its sole discretion, otherwise
attempts a cure of same, then so long as such encumbrance or
exception can reasonably be cured within thirty (30) days of the
Closing Date, Seller shall have the right to extend the Closing
Date for a period of up to thirty (30) days exercisable by
written notice to the Purchaser received by Purchaser by 5:00
P.M. on the last Business Day prior to the Closing Date (an
"Extension Notice") in order to provide additional time for such
cure. During such extended period, Seller shall continue to use
commercially reasonable efforts consistent with the foregoing
provisions of this Section 8.2 to satisfy such matters. This
Section 8.2(c) shall be inapplicable to Seller Encumbrances which
shall be governed by Section 8.2(b). If Seller elects or is
unable to cure any such Title Defect (other than a Seller
Encumbrance which is governed by Section 8.2(b) above, and other
than those that are caused by Purchaser which shall not be deemed
a Title Defect) the existence of which is first evidenced in an
update to the Title Commitment first received after the Effective
Date, Seller shall so notify Purchaser and Purchaser shall have
the right, at its option exercisable within ten (10) days after
Seller's notice is given, to either (a) terminate this Agreement,
in which event the provisions of Section 9 shall apply and, in
addition, Seller shall reimburse Purchaser an amount, not to
exceed $50,000 in the aggregate, equal to its actual out-of-
pocket costs and expenses incurred to perform its tests,
investigations and studies of or related to the physical and
environmental condition of the Premises (hereinafter collectively
called the "Tests and Studies"), obtain a title search of the
Premises (but not any premium charge), obtain any survey, and for
its legal fees incurred in connection with this transaction (but
not in excess of the $50,000 aggregate reimbursement for all of
such items); or (b) to close title to the Property subject to
such Title Defect without any abatement or diminution of the
Purchase Price. Purchaser's failure to make either election
within such ten (10) day period shall be deemed to be an election
by Purchaser to close title to the Property subject to such Title
Defect without any abatement or diminution of the Purchase Price.
Notwithstanding anything to the contrary contained herein, any
lis pendens or mechanic's liens filed against the Property which
result from the performance of any of the Work (as hereinafter
defined) in accordance with Section 24 hereof, shall not be
deemed to be a "Title Defect" hereunder.
9. Disposition of Letter of Credit. If Purchaser is
entitled to and does elect to terminate this Agreement in
accordance with the provisions of Sections 8, 10, 11, or 14 of
this Agreement, then provided no Purchaser Default has occurred,
Escrow Agent shall return to Purchaser the Letter of Credit.
Upon such return, this Agreement shall terminate and neither
party to this Agreement shall have any further rights or
obligations hereunder, except for the Surviving Obligations (as
hereinafter defined), which shall survive such termination.
10. Defaults.
10.1 Purchaser's Default. If Purchaser shall default
hereunder, which default, failure or refusal shall continue for
ten (10) days after notice of such default, failure or refusal is
given to Purchaser, or if Purchaser shall default, fail or refuse
to perform Purchaser's obligation to purchase the Premises in
accordance with this Agreement, which default, failure or refusal
shall continue for five (5) business days after notice of such
default, failure or refusal is given to Purchaser (collectively,
a "Purchaser Default"), then Seller, as Seller's sole remedy
(except as provided in this Section 10), shall have the right to
retain the Letter of Credit (including, without limitation, the
proceeds thereof) as and for Seller's liquidated damages and not
a penalty (the parties hereto acknowledging that it would be
difficult or impossible to accurately ascertain the amount of
Seller's damages). Notwithstanding the foregoing, the liquidated
damages limitation set forth above shall have no application to
any claim made by Seller against Purchaser based on Purchaser's
obligations in respect of the Surviving Obligations, and in the
event Seller has a claim against Purchaser based on any such
Surviving Obligation, Seller shall be entitled to recover damages
for such claim in addition to its right to retain the Letter of
Credit as hereinabove provided.
10.2 Seller's Default. If Seller shall default
hereunder and fail or refuse to convey title to the Premises to
Purchaser in accordance with the terms of this Agreement, which
default, failure or refusal shall continue for ten (10) days
after notice of such default, failure or refusal is given to
Seller (a "Seller Default") then Purchaser, as Purchaser's sole
remedy (Purchaser specifically waiving any right to bring an
action for monetary damages, including, without limitation,
consequential, speculative or punitive damages), may either:
(a) deliver written notice to Seller that Purchaser
elects to terminate this Agreement, in which event the provisions
of Section 9 of this Agreement shall apply to such termination
and, in addition, Seller shall reimburse Purchaser an amount, not
to exceed $50,000 in the aggregate, equal to its actual out-of-
pocket costs and expenses incurred to perform its Tests and
Studies, obtain a title search of the Premises (but not any
premium charge), obtain any survey, and for its legal fees
incurred in connection with this transaction (but not in excess
of the $50,000 aggregate reimbursement for all of such items); or
(b) provided that Purchaser is ready, willing and able
to consummate the Closing and no Purchaser Default has occurred
under this Agreement, bring an action against Seller to seek
specific performance of Seller's obligations hereunder within
forty-five (45) days following the earlier of (x) the scheduled
Closing Date or (y) the date Purchaser notifies Seller of
Seller's breach. Notwithstanding the foregoing, in the event it
is determined by a court of competent jurisdiction that Seller's
Default is willful and intentional and Purchaser cannot obtain
specific performance due to Seller's willful and intentional
Default, then Purchaser shall have the right to recover from
Seller Purchaser's actual damages (including any anticipated loss
of profit Purchaser can prove) resulting from Seller's willful
and intentional Default.
If Purchaser believes that a Seller Default has occurred
prior to the Closing Date, then Purchaser shall be required to
elect one of the remedies set forth in either Section 10.2 (a) or
Section 10.2 (b) prior to the Closing Date and if Purchaser fails
to make such an election same shall conclusively mean that
Purchaser has determined to proceed under Section 10.2 (a) of
this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, if Purchaser becomes aware that a
Seller Default has occurred under this Agreement prior to the
Closing Date and nonetheless proceeds to Closing, then same shall
be deemed to be a waiver by Purchaser of any further right to
make a claim arising out of such Seller Default. For the
avoidance of doubt, Purchaser and Seller acknowledge that a
breach of Seller's Representations that is alleged by Purchaser
under this Agreement shall not be deemed to fall within this
Section 10 (it being acknowledged that Purchaser's remedies in
respect thereof are as set forth in Section 11 of this
Agreement). If, prior to Closing, Seller shall default in its
capacity as landlord under the KCP Lease, Purchaser's sole
recourse shall be limited to pursuing the rights and remedies to
which it is entitled in its capacity as tenant under and pursuant
to the KCP Lease.
10.3 Notwithstanding anything to the contrary contained
herein, no dispute with, default by or claim against Seller, in
its capacity as landlord under the KCP Lease, shall give rise to
a default on the part of Seller hereunder or affect any of
Purchaser's obligations hereunder including, without limitation,
its obligation to pay the Purchase Price and otherwise perform
its obligations hereunder. Nothing contained in this Agreement
shall, however, release Seller or Purchaser of their respective
obligations under or pursuant to the KCP Lease accruing prior to
the Closing or, if the Closing shall fail to occur, after the
Closing, and either party shall have the right to maintain a
separate claim under the KCP Lease for any breach with respect
thereto.
11. Representations.
11.1. Seller hereby represents and warrants to Purchaser
that, as of the Effective Date:
(a) Seller is a limited liability company duly
organized and in good standing under the laws of the State of New
York, and is (or will be as of the Closing Date) in good standing
under the laws of the State where the Premises are located;
(b) the execution, delivery and performance of
this Agreement by Seller (i) are within Seller's limited
liability company powers and (ii) have been duly authorized by
all necessary limited liability company action;
(c) to Seller's knowledge, except as set forth
on Exhibit J, there is no litigation pending with respect to the
Premises;
(d) Seller has not received any written notice
from any governmental agency or official to the effect that any
condemnation proceeding is contemplated in connection with the
Premises. To Seller's knowledge, no condemnation proceeding is
threatened against the Premises;
(e) Seller has not filed any petition in
bankruptcy or other insolvency proceedings or proceedings for
reorganization of Seller or for the appointment of a receiver or
trustee for all or any substantial part of Seller's property, nor
has Seller made any assignment for the benefit of its creditors
or filed a petition for an arrangement, or entered into an
arrangement with creditors or filed a petition for an arrangement
with creditors or otherwise admitted in writing its inability to
pay its debts as they become due;
(f) No authorization, consent or approval of
any governmental authority is required for the execution and
delivery by Seller of this Agreement or the performance of its
obligations hereunder;
(g) Seller is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Internal Revenue Code of
1986;
(h) Neither the execution, delivery or
performance of this Agreement nor compliance herewith
(i) conflicts or will conflict with or results or will result in
a breach of or constitutes or will constitute a default under
(A) the organizational documents of Seller, (B) to Seller's
knowledge, any law or any order, writ, injunction or decree of
any court or governmental authority applicable to Seller, or
(C) any agreement or instrument to which Seller is a party or by
which it or the Premises is bound or (ii) results in the creation
or imposition of any lien, charge or encumbrance upon its
property pursuant to any such agreement or instrument;
(i) There are no employees of Seller in
respect to the operation of the Premises for which Purchaser
shall be responsible or liable for after the Closing except as
described in Section 11.1(n) below;
(j) Seller has delivered to Purchaser or made
available to Purchaser true and complete copies of all Contracts
(including all amendments or supplements thereto); provided,
however, that Seller shall not be deemed to be in breach of this
Agreement if it unintentionally fails to provide to Purchaser any
Contract which is terminable by Seller at no cost or expense
(other than payment for services or materials through the date of
termination) upon not more than thirty (30) days' written notice
or in the event of a sale of the Premises;
(l) Seller has delivered to Purchaser or made
available to Purchaser true and complete copies of all the Leases
(including all amendments, modifications and lease guaranties, if
any, thereto) and there are no leases, licenses or other
occupancy agreements applicable to the Premises except for the
Leases, except for subleases to which Seller is not a party.
Except for Seller's rights and as provided in the Leases and in
subleases to which Seller is not a party, there are no occupancy
rights with respect to the Premises;
(m) To Seller's knowledge, the only tax
certiorari proceedings pending affecting the Premises are listed
on Exhibit M annexed hereto;
(n) Intentionally Omitted; and
(o) There are no leasing commission agreements
affecting the Premises.
11.2. Purchaser hereby represents and warrants to Seller
that, as of the Effective Date:
(a) Purchaser is a corporation, validly
existing, duly organized and in good standing under the laws of
the State of New York;
(b) the execution, delivery and performance of
this Agreement by Purchaser (i) are within Purchaser's corporate,
partnership, limited liability company or other applicable
powers, and (ii) have been duly authorized by all necessary
corporate, partnership, limited liability company or other
applicable action;
(c) Purchaser is not acquiring the Premises
with the assets of an employee benefit plan as defined in Section
3(3) of ERISA and the transaction which is the subject of this
Agreement is not a prohibited transaction under Section 406 of
ERISA;
(d) There are no actions, suits or proceedings
(including, but not limited to, bankruptcy) pending or, to the
knowledge of Purchaser, threatened against Purchaser or affecting
Purchaser which, if determined adversely to Purchaser, would
adversely affect its ability to perform its obligations
hereunder;
(e) No authorization, consent or approval of
any governmental authority is required for the execution and
delivery by Purchaser of this Agreement or the performance of its
obligations hereunder;
(f) Purchaser has not filed any petition in
bankruptcy or other insolvency proceedings or proceedings for
reorganization of Purchaser or for the appointment of a receiver
or trustee for all or any substantial part of Purchaser's
property, nor has Purchaser made any assignment for the benefit
of its creditors or filed a petition for an arrangement, or
entered into an arrangement with creditors or filed a petition
for an arrangement with creditors or otherwise admitted in
writing its inability to pay its debts as they become due; and
(g) Neither the execution, delivery or
performance of this Agreement nor compliance herewith
(i) conflicts or will conflict with or results or will result in
a breach of or constitutes or will constitute a default under
(A) the organizational documents of Purchaser, (B) to Purchaser's
knowledge, any law or any order, writ, injunction or decree of
any court or governmental authority applicable to Purchaser, or
(C) any agreement or instrument to which Purchaser is a party or
by which it is bound, or (ii) results in the creation or
imposition of any lien, charge or encumbrance upon its property
pursuant to any such agreement or instrument.
11.3. (a) Each of the representations and warranties
set forth in Section 11.1 of this Agreement (collectively,
"Seller's Representations") shall be deemed to have been remade
at and as of the Closing Date with the same force and effect as
if first made on and as of the Closing Date; provided, that, at
the Closing, Seller may submit to Purchaser one (1) or more
schedules, certified by Seller as true and correct as of the
Closing Date, which modify or update any of Seller's
Representations, or any exhibits referred to therein (provided,
however, that Seller's right to update such schedule(s) shall not
be construed to permit Seller to breach any covenant or other
obligation of Seller set forth elsewhere in this Agreement), to
reflect matters, if any, which arise subsequent to the Effective
Date, and Seller's Representations shall be deemed to have been
remade with the changes, if any, set forth in such schedule or
schedules; provided, however, if prior to Closing, Seller's
Representations, as made as of the Effective Date, are determined
to be untrue in any material respect as of the Effective Date or
if Seller's Representations, as remade on the Closing Date, shall
result in Seller's Representations made as of the Effective Date
being untrue in any material respect as of the Closing Date, then
Purchaser may, at Purchaser's option and as Purchaser's sole
remedy (Purchaser specifically waiving any right to bring any
action against Seller for damages arising therefrom), either (i)
terminate this Agreement by notice in writing to Seller, in which
event (subject to the provisions of this Section 11.3) the
provisions of Section 9 of this Agreement shall apply to such
termination and, in addition, Seller shall reimburse Purchaser an
amount, not to exceed $50,000 in the aggregate, equal to its
actual out-of-pocket costs and expenses incurred to perform its
Tests and Studies, obtain a title search of the Premises (but not
any premium charge), obtain any survey, and for its legal fees
incurred in connection with this transaction (but not in excess
of the $50,000 aggregate reimbursement for all of such items), or
(ii) waive the same and accept title to the Premises without any
abatement of the Purchase Price; provided, further, however,
notwithstanding the foregoing provisions of this Section 11.3(a),
Purchaser shall have no right to terminate this Agreement
pursuant to the provisions of this Section 11.3(a) as a result of
the untruth of any Seller's Representation if, within ten (10)
days after the delivery of Purchaser's notice terminating this
Agreement, Seller delivers written notice to Purchaser of
Seller's intention to cure such untrue Seller Representation,
which cure may include Seller's election to indemnify Purchaser
for any reasonable out-of-pocket costs and expenses incurred as a
result of any such untrue Seller's Representation, in which event
Purchaser's notice of termination shall be without effect and
Seller shall cause such untrue Seller's Representation to be
corrected at or before Closing (and Seller shall be entitled to
adjourn the Closing Date one or more times hereof to effectuate
such cure), and if Seller fails to effectuate such cure on or
before the Closing Date (as same may have been adjourned), then
Purchaser shall have the right at Closing, as Purchaser's sole
remedy (Purchaser specifically waiving any right to bring an
action against Seller for damages arising therefrom), to either
act under clause (i) or clause (ii) above in which event the
provisions of this Section 11.3(a) pertaining to such election
shall apply.
(b) If (i) prior to the Closing Date,
Purchaser delivers notice to Seller that any of Seller's
Representations are false in any material respect as hereinabove
provided and/or (ii) on the date to which Seller adjourns the
Closing pursuant to Section 11.3(a) above, Purchaser delivers
notice to Seller that Seller has failed to cure the relevant
untrue Seller's Representations, then Purchaser shall be required
to elect one of the remedies set forth in clause (i) or clause
(ii) of Section 11.3(a) above prior to the Closing Date and if
Purchaser fails to make such an election by the Closing Date same
shall conclusively mean that Purchaser has determined to proceed
under clause (ii) of Section 11.3(b) above.
(c) Notwithstanding anything to the contrary
contained in this Agreement, if Purchaser becomes aware that any
of Seller's Representations are untrue in any material respect
prior to the Closing Date and nonetheless proceeds to Closing
without making a claim under this Section 11.3, then same shall
be deemed to be a waiver by Purchaser of any further right to
make a claim arising out of such untrue nature of such Seller's
Representation(s).
(d) For purposes of Section 11.3(a) hereof,
Purchaser shall have no right to terminate this Agreement as a
result of any modification to or updating of Seller's
Representations to reflect changes after the Effective Date to
the schedule of litigation set forth in Exhibit J to reflect any
additions or deletions other than litigation that, if adversely
determined, would affect title to the Premises or subject
Purchaser to any liability (it being expressly acknowledged and
agreed that (A) subject to subsection (B) below, the risk of
changes after the Effective Date to the schedule of litigation
for any reason, including, without limitation, landlord/tenant
litigation and claims covered by insurance, after the Effective
Date is Purchaser's risk (meaning that no such change is intended
to grant Purchaser any right to terminate this Agreement or
obtain any damages from Seller), and (B) changes after the
Effective Date to the schedule of litigation for matters
affecting title to the Premises or subject Purchaser to any
liability is Seller's risk (meaning that any such changes to the
schedule of litigation shall only entitle Purchaser to terminate
this Agreement (if at all) subject to and in accordance with the
provisions of this Section 11.3 but no such changes to the
schedule of litigation shall, if not cured by Seller, entitle
Purchaser to bring any action against Seller or constitute a
breach of any representation or warranty of Seller, including,
without limitation, any Seller's Representation)); provided,
however, that Purchaser shall not have the right to terminate
this Agreement as a result of any modification to or updating of
the schedule of litigation to reflect any additions or deletions
that, if adversely determined, would affect title to the Premises
or subject Purchaser to any liability if Seller delivers notice
to Purchaser that it will indemnify Purchaser for all losses,
costs, liabilities, damages and expenses in connection therewith
(it being acknowledged, however, that Seller has no obligation to
provide such indemnification). If Seller elects to indemnify
Purchaser as provided in the preceding sentence, Seller shall
also provide Purchaser at Closing with reasonably adequate
security (which reasonably adequate security shall include the
deposit of money in escrow) for the performance of Seller's
obligations to Purchaser pursuant to such indemnity.
11.4. Seller's Representations (as modified or updated
by Seller in accordance with the provisions of Section 11.3 of
this Agreement) shall survive the Closing for a period of six (6)
months. Each of the representations and warranties set forth in
Section 11.2 of this Agreement (collectively, "Purchaser's
Representations") shall be deemed to have been remade at and as
of the Closing Date with the same force and effect as if first
made on and as of the Closing Date. Purchaser's Representations
shall survive the Closing for a period of six (6) months.
11.5. If any of Purchaser's Representations or Seller's
Representations is discovered to be untrue in any material
respect after Closing, and a claim is asserted within the time
periods set forth in Section 11.4 of this Agreement, then Seller
or Purchaser, as the case may be, shall, subject to the
provisions of Sections 19 and 27.1 of this Agreement, have the
right to pursue any and all remedies available against Purchaser
or Seller, as the case may be, as a result of such inaccuracy.
11.6. For purposes of this Agreement, the term "to the
knowledge of Seller" and words of similar import, shall mean the
actual knowledge of Kenneth Aschendorf without any obligation to
make inquiry of any kind.
12. Tax-Deferred Exchange.
12.1 Purchaser acknowledges that Seller hereby reserves
the right to utilize the transaction contemplated by this
Agreement as part of a tax-free exchange under Section 1031 of
the Internal Revenue Code (referred to herein as a "1031
Exchange"), as amended. Purchaser shall reasonably cooperate with
Seller and any Qualified Intermediary selected by Seller, at no
cost or liability to Purchaser other than those normal closing
costs which would be incurred by Purchaser in purchasing the
Premises pursuant to this Agreement in the absence of an
exchange, in Seller's efforts to effectuate and coordinate the
Closing as part of such a tax free exchange. This cooperation may
include Purchaser signing all necessary documents, including an
exchange agreement to be drafted by Seller's attorney and
approved by Purchaser's attorney prior to Closing, which approval
shall not be unreasonably withheld, conditioned or delayed.
Seller may assign this Agreement and its rights hereunder to any
Qualified Intermediary for the purpose of completing a tax-free
exchange under Section 1031 of the Internal Revenue Code, as
amended. In the event of such an assignment, the documents and
instruments to be delivered by Purchaser at the Closing shall, at
such Qualified Intermediary's option, be delivered to such
Qualified Intermediary or its designee.
12.2 Seller acknowledges that Purchaser hereby reserves
the right to utilize the transaction contemplated by this
Agreement as part of a 1031 Exchange. Seller shall reasonably
cooperate with Purchaser and any qualified intermediary selected
by Purchaser, at no cost or liability to Seller other than those
normal closing costs which would be incurred by Seller in selling
the Premises pursuant to this Agreement in the absence of an
exchange, in Purchaser's efforts to effectuate and coordinate the
Closing as part of such a tax free exchange. This cooperation may
include Seller signing all necessary documents approved by
Seller's attorney, which approval shall not be unreasonably
withheld, conditioned or delayed.
13. Brokers. Purchaser represents and warrants that
Purchaser has not dealt with any broker, agent, finder or similar
party in connection with the transaction contemplated hereby
other than Newmark & Company. ("Broker"), and Purchaser hereby
indemnifies and holds harmless Seller and each Seller Exculpated
Party (as hereinafter defined) from any liability, cost or
expense (including, without limitation, reasonable attorneys'
fees and costs of enforcement of the foregoing indemnity) arising
out of the falsity of the foregoing representation. Seller
represents and warrants that Seller has not dealt with any
broker, agent, finder or similar party in connection with the
transaction contemplated hereby other than Broker, and Seller
hereby indemnifies and holds harmless Purchaser from any
liability, cost or expense (including, without limitation,
reasonable attorneys' fees and costs of enforcement of the
foregoing indemnity) arising out of the falsity of the foregoing
representation. Purchaser agrees to pay Broker a commission
pursuant to a separate agreement. The provisions of this Section
13 shall survive the Closing or any earlier termination of this
Agreement.
14. Condemnation and Destruction.
14.1. If, prior to the Closing Date, a Non-Material
Taking (as hereinafter defined) occurs, then (i) Seller shall
notify Purchaser of such fact, (ii) Purchaser shall not have any
right or option to terminate this Agreement and this Agreement
shall continue in effect, (iii) at the Closing, Purchaser shall
accept the Premises subject to such Non-Material Taking or so
much of the Premises as remains after such Non-Material Taking,
as the case may be, with no abatement of the Purchase Price, and
(iv) at the Closing, Seller shall assign and turn over to
Purchaser, and Purchaser shall be entitled to receive and keep,
all of Seller's interest in and to all awards for such Non-
Material Taking. If, prior to the Closing Date, a Material
Taking (as hereinafter defined) occurs, then (a) Seller shall
notify Purchaser of such fact and (b) Purchaser shall have the
right to terminate this Agreement by delivering a written notice
of such termination to Seller on or before the earlier of the
Closing Date or the date ten (10) days after it receives such
notice from Seller. If Purchaser fails to exercise such
termination right within such ten (10) day (or shorter) period,
Purchaser shall be deemed to have waived such termination right,
in which event (x) Purchaser shall not have any right or option
to terminate this Agreement due to such Material Taking and this
Agreement shall continue in effect, (y) at the Closing, Purchaser
shall accept the Premises subject to such Material Taking or so
much of the Premises as remains after such Material Taking, as
the case may be, with no abatement of the Purchase Price, and (z)
at the Closing, Seller shall assign and turn over to Purchaser,
and Purchaser shall be entitled to receive and keep, all of
Seller's interest in and to all awards for such Material Taking.
If Purchaser delivers a notice of termination within such ten
(10) day (or shorter) period, the provisions of Section 9 of this
Agreement shall apply to such termination.
14.2. If, prior to the Closing Date, a Non-Material
Casualty (as hereinafter defined) occurs, then (i) Seller shall
notify Purchaser of such fact, (ii) Purchaser shall not have any
right or option to terminate this Agreement and this Agreement
shall continue in effect, (iii) at the Closing Purchaser shall
accept the Premises in the then "as is" condition of such
Premises with no abatement of the Purchase Price, and (iv) at the
Closing, Seller shall assign and turn over to Purchaser, and
Purchaser shall be entitled to receive and keep, all of Seller's
interest in and to all insurance proceeds payable in connection
with such Non-Material Casualty, and Purchaser shall receive a
credit against the Purchase Price at the Closing in the amount of
any loss deductible payable in connection with such insurance
proceeds. If, prior to the Closing Date, a Material Casualty (as
hereinafter defined) occurs, then (a) Seller shall notify
Purchaser of such fact and (b) Purchaser shall have the right to
terminate this Agreement by delivering notice of such termination
to Seller on or before the earlier of the closing date or the
date ten (10) days after it receives such notice from Seller. If
Purchaser fails to exercise such termination right within such
ten (10) day (or shorter) period, Purchaser shall be deemed to
have waived such termination right, in which event (x) Purchaser
shall not have any right or option to terminate this Agreement
due to such Material Casualty and this Agreement shall continue
in effect, (y) at the Closing Purchaser shall accept the Premises
in the then "as is" condition of the Premises with no abatement
of the Purchase Price, and (z) at the Closing, Seller shall
assign and turn over to Purchaser, and Purchaser shall be
entitled to receive and keep, all of Seller's interest in and to
all insurance proceeds payable in connection with such Material
Casualty, and Purchaser shall receive a credit against the
Purchase Price at the Closing in the amount of any loss
deductible payable in connection with such insurance proceeds.
If Purchaser delivers a notice of termination within such ten
(10) day (or shorter) period, then the provisions of Section 9 of
this Agreement shall apply to such termination.
14.3. Notwithstanding anything to the contrary set forth
in this Section 14, Seller shall have no obligation to repair any
damage or destruction to the Premises caused by any Casualty or
to otherwise restore the Premises after any Taking, and Seller
shall have no other obligation or liability of any kind or nature
in respect of any Casualty or Taking affecting the Premises,
other than provided in Sections 14.1 and 14.2 above.
14.4. As used herein, "Casualty" means the destruction
of all or a portion of the Premises by fire or other casualty;
"Material Casualty" means a Casualty affecting more than twenty
(20%) of the Premises; "Material Taking" means a Taking affecting
more than twenty percent (20%) percent of the Premises; "Non-
Material Casualty" means any Casualty other than a Material
Casualty; "Non-Material Taking" means any Taking other than a
Material Taking; and "Taking" means any taking of any portion of
the Premises by condemnation or eminent domain.
15. Approval of Leases. Seller has represented to
Purchaser that the only Lease other than the KCP Lease affecting
the Premises is the lease for the garage space (the "Garage
Premises") in the Premises more particularly described on the
Rent Roll (the "Garage Lease") and that, pursuant to the terms of
Section 65 of the KCP Lease, Purchaser has the right of first
refusal to lease the Garage Premises from the Seller if the
Garage Lease is terminated upon or prior to the expiration of its
stated lease term. Notwithstanding anything to the contrary
contained in this Agreement (including, without limitation,
Section 10.3) or the KCP Lease, if the Garage Lease shall be
terminated at any time prior to the Closing Date for any reason,
then neither Seller's nor Purchaser's rights or obligations under
this Agreement shall be affected, but Purchaser shall be deemed
to have leased the Garage Premises from Seller, effective upon
the date the tenant under the Garage Lease vacates and surrenders
possession of the Garage Premises, upon the same terms and
conditions (including, without limitation, the rent and lease
term) contained in the Garage Lease for the balance of the Garage
Lease term (the "Garage Lease Terms"). In order to confirm such
lease, Seller and Purchaser shall execute and deliver to each
other an amendment to the KCP Lease incorporating the Garage
Lease Terms. If Purchaser shall fail to pay or perform any of
its obligations as the tenant pursuant to the Garage Lease Terms,
which failure shall continue beyond the expiration of any
applicable cure period provided for under the KCP Lease, then
Purchaser shall be deemed to have defaulted in its capacity as
tenant under the KCP Lease (as amended to incorporate the Garage
Lease Terms) and Seller shall be entitled to exercise all of its
rights and remedies in its capacity as the landlord under the KCP
Lease. From and after the date the tenant under the Garage Lease
vacates and surrenders possession of the Garage Premises, all
references elsewhere in this Agreement to the KCP Lease shall be
deemed to mean the KCP Lease as amended by the Garage Lease
Terms.
16. Approval of Contracts. From and after the
Effective Date through the Closing Date, if Seller desires to
enter into any new Contract affecting any portion of the Premises
(a "Proposed New Contract"), other than a new Contract which will
not be binding upon Purchaser after the Closing Date. Seller
shall deliver written notice to Purchaser requesting Purchaser's
consent to such Proposed New Contract, which decision shall be at
Purchaser's sole discretion. Within five (5) Business Days after
Seller delivers such request to Purchaser, Purchaser shall
deliver written notice to Seller approving or disapproving such
Proposed New Contract. If Purchaser fails to deliver notice
disapproving a Proposed New Contract within the five (5) Business
Day period set forth above, Purchaser shall be deemed to have
approved such Proposed New Contract. If Purchaser shall approve
a Proposed New Contract (or shall be deemed to have approved
same), then Seller shall have the right to execute such Proposed
New Contract and upon such execution and delivery, the same shall
be deemed to be an "Approved New Contract" for purposes of this
Agreement. If Purchaser shall disapprove a Proposed New
Contract, then Seller shall not enter into such Proposed New
Contract. Notwithstanding the foregoing, Seller shall have the
right, without the necessity of obtaining the approval of
Purchaser, to execute any new Contract affecting the Premises if
and to the extent that such new Contract will not be binding upon
Purchaser after the Closing Date, the same shall be deemed to be
an "Approved New Contract" for purposes of this Agreement.
17. Seller's Covenants. Seller covenants and agrees
as follows:
17.1. Between the Effective Date and the Closing Date,
Seller will provide or cause to be provided substantially such
services with respect to the Premises that have been provided by
Seller in the past in accordance with Seller's customary
practice.
17.2. Between the Effective Date and the Closing Date,
Seller will maintain casualty and liability insurance with
respect to the Premises (which insurance may be effected under a
blanket policy or policies of insurance) in accordance with
Seller's past practice. Seller's current insurance coverage is
set forth on the insurance certificates attached hereto as
Exhibit L.
17.3. Between the Effective Date and the Closing Date,
Seller will cause to be performed all normal operational repairs
required to be made to the Premises in order to maintain the
Premises in substantially the condition of the Premises as of the
Effective Date, reasonable wear and tear and natural
deterioration and damage by fire or other casualty or
condemnation excepted.
17.4 Between the Effective Date and the Closing Date,
Seller shall not willfully breach any of the Seller's
Representations contained in Section 11.1.
18. Closing Costs. Purchaser, on the one hand, and
Seller, on the other hand, shall each pay their own legal fees
related to the negotiation and preparation of this Agreement and
all documents required to consummate the transaction contemplated
hereby. Seller shall pay (i) all recording fees associated with
Seller Encumbrances and any Title Defects Seller elects or is
required to cure, (ii) all sales and use taxes applicable to the
sale of any personal property,(iii) all recording fees to
discharge Seller Encumbrances and any Title Defects Seller elects
or is required to cure, and (iv) all documentary transfer taxes,
deed stamps or similar amounts. Purchaser shall pay (A) all
costs associated with its due diligence, including the cost of
its Tests and Studies, (B) all survey costs, (C) all mortgage
taxes, (D) all recording fees (other than to discharge Seller
Encumbrances and any Title Defects Seller elects or is required
to cure) and (E) the premium for the Title Policy or title
commitment(s) obtained by Purchaser.
19. Non-Liability. Notwithstanding anything to the
contrary contained in this Agreement, no director, officer,
employee, shareholder, member, manager, partner or agent of
Seller nor any of the directors, officers, employees,
shareholders, members, managers, partners, joint venturers or
agents of any of the directors, officers, employees,
shareholders, members, managers, partners, joint venturers or
agents of Seller nor any other person, partnership, limited
liability company, corporation, joint venture or trust, as
principal of Seller, whether disclosed or undisclosed (each, a
"Seller Exculpated Party" and, collectively, the "Seller
Exculpated Parties") shall have any personal obligation or
liability hereunder, and Purchaser shall not seek to assert any
claim or enforce any of Purchaser's rights hereunder against any
Seller Exculpated Party.
20. Violations.
(i) Notwithstanding anything to the contrary contained
herein, Seller shall convey, and Purchaser shall accept,
marketable and insurable title to the Premises, as of the Closing
Date, free and clear of all violations of law or municipal
ordinances, orders or requirements issued by the departments of
buildings, fire, labor, health or other federal, state, county,
municipal or other departments and governmental agencies having
jurisdiction against or affecting the Premises, and any
outstanding work orders ("Violations") other than those caused by
Purchaser or which are the responsibility of the Purchaser to
cure in its capacity as tenant under the KCP Lease. If any
Violation which Seller is obligated to cure as provided for above
can reasonably be cured within ninety (90) days after the Closing
Date, Seller shall have the right to extend the Closing Date for
a period of up to ninety (90) days exercisable by delivering an
Extension Notice. If any Violation which Seller is obligated to
cure as provided for above is not cured as of the Closing Date,
or is not capable of being cured within ninety (90) days after
the Closing Date, or is not cured as of the end of such ninety
(90) day extension if Seller elects to exercise such extension
then, in any such event, Seller shall cause Purchaser to close
title to the Premises subject to such Violations, and Seller
shall grant Purchaser a credit against the Purchase Price at
Closing in an amount equal to the Violations Cure Amount (as
hereinafter defined).
(ii) For purposes of Section 20(i) above, the "Violations
Cure Amount" shall mean the estimated amount required to cure
such Violations. If Seller and Purchaser cannot agree upon the
Violations Cure Amount within ten (10) days prior to Closing,
Seller shall obtain and submit to Purchaser three (3) bids
submitted by independent contractors to perform the work
necessary to cure such Violations, and the average of such three
(3) bids shall be deemed to be the Violations Cure Amount.
21. Successors and Assigns. The provisions hereof
shall inure to the benefit of, and shall be binding upon, the
heirs, executors, administrators, successors and assigns of the
respective parties; provided, however, Purchaser may not assign
this Agreement or any of Purchaser's rights hereunder without the
prior written consent of Seller, but Purchaser may, upon notice
to Seller given not less than ten (10) days prior to the Closing
Date, assign this Agreement to any subsidiary or affiliate of
Purchaser controlled by, controlling, or under common control
with, Purchaser (with "control" being defined as ownership of
more than fifty (50%) percent), but such assignment shall not
relieve or release the Purchaser named in this Agreement from any
of the obligations or liabilities of the Purchaser under this
Agreement theretofore or thereafter accruing.
22. No Recording. Seller shall not record or attempt
to record this Agreement or any memorandum or notice thereof, and
any such recording or any attempt to do so shall constitute a
Purchaser Default hereunder.
23. Confidentiality. Unless and until the Closing
occurs hereunder, (a) neither Purchaser nor Seller will make, or
permit anyone to make on their behalf, any public statement or
public comment with respect to this Agreement, the transactions
contemplated hereby, that is intended for public distribution or
made to any newspaper, trade publication, or other print or other
media, without the approval by the other party as to such
disclosure and the information to be disclosed, which approval
shall not be unreasonably withheld or delayed, and (b) Purchaser
and its agents shall maintain the confidentiality of all
documents, instruments and information obtained by Purchaser or
such agents hereunder or otherwise in connection with the
proposed acquisition of the Premises and shall not, without
Seller's prior written consent, which consent shall not be
unreasonably withheld or delayed, disclose any of such
information to any other person or use any of such information
for any purpose other than as contemplated herein.
Notwithstanding the foregoing, Purchaser may disclose any of such
information to its proposed investors and lenders and its
officers, directors, employees, agents, attorneys, accountants,
consultants and other professionals to whom such disclosure is
reasonably necessary for the consummation of the transactions
contemplated hereby, provided that each such person maintains
such information in a confidential manner.
24. Purchaser's Work. (a) Subject to the terms of
this Section 24, commencing within ninety (90) days of the
Effective Date (unless such commencement is delayed due to a
force majeure, in which event commencing as soon after such force
majeure as practicable), Purchaser shall, with reasonable due
diligence, perform (or cause to be performed) certain maintenance
and repair work generally described within the scope of work
contained in item numbers 1-10 of Section A ("Structural
Repairs") of the engineering evaluations prepared by Cornerstone
Architects, dated March 23, 2004, attached hereto as Schedule N
(hereinafter collectively called the "Work"); provided, however,
that prior to performing any of the Work, Purchaser shall obtain
Seller's prior written approval of all plans and specification
with respect to such Work, which approval shall not be
unreasonably withheld, conditioned or delayed.
(b) Purchaser's access to the Premises and the
performance of any of the Work shall be strictly in accordance
with the terms and conditions of the KCP Lease (including,
without limitation, Section 42 thereof), and the terms thereof
applicable to the tenant thereunder shall be applicable to
Purchaser hereunder as if the terms of such lease were
incorporated herein. In furtherance of the foregoing, Purchaser
shall (i) repair and restore any portion of the Premises
disturbed by Purchaser during the performance of any of the Work
to the same condition as existed prior to such disturbance; (ii)
prior to any entry upon the Premises Purchaser or Purchaser's
contractors, for the purpose of performing any of the Work,
deliver (or caused to be delivered with respect to its
contractors) to Seller adequate proof that Purchaser (and/or its
contractors, as applicable) has obtained insurance in amounts
required under the KCP Lease covering any risk of damage or
personal injury occasioned by Purchaser's (and/or its
contractors, as applicable) entry onto the Premises and/or the
performance of the Work, which insurance shall name Seller as an
additional insured; and (iii) indemnify, defend and hold Seller
harmless from and against any and all claims, suits, damages,
liabilities, costs and expenses (including, without limitation,
reasonable attorneys fees) arising out of or relating to its
entry upon the Premises and/or the performance of or in
connection with any of the Work. Notwithstanding the foregoing,
in no event shall Purchaser's failure to perform the Work in
accordance with the terms of this Section 24 be deemed a default
by Purchaser under this Agreement; provided, however, that in
such event, Seller shall have no obligation to pay to Purchaser
the Reimbursable Amount (as hereinafter defined) and Seller's
remedies shall be as set forth in Section 24(d) below.
(c) Upon Purchaser's completion of the Work in a lien-
free manner in accordance with all laws and regulations and the
terms set forth in the KCP Lease (including, without limitation
Section 42 thereof with respect to "Tenant Changes" (as such term
is defined in the KCP Lease)), Purchaser shall deliver to Seller
(i) lien waivers evidencing the lien-free completion of such
Work, (ii) a certificate from Purchaser's architect or general
contractor certifying that the Work has been completed in
accordance with all laws and in accordance with the plans and
specifications approved by Seller, and (iii) a written request
(collectively, the "Reimbursement Request"), for $60,000.00 (such
amount, the "Reimbursable Amount"). Upon receipt of the
Reimbursement Request, Seller shall promptly reimburse Purchaser
for the Reimbursable Amount. In no event shall Seller be
obligated to reimburse Purchaser for more than the Reimbursable
Amount. In the event that Seller fails to reimburse Purchaser
the Reimbursable Amount within thirty (30) days of its receipt
from Purchaser of a Reimbursement Request (such amount, the
"Unreimbursed Portion"), if the Closing shall not theretofore
have occurred, Purchaser shall be entitled to receive a credit
against the Purchase Price equal to the Unreimbursed Portion plus
interest thereon accruing at a rate of three percent (3%) per
annum from the date of the Reimbursement Request.
(d) A failure by Purchaser to comply with the terms of
this Section 24 shall, subject to the applicable notice and cure
periods provided in the KCP Lease, entitle Seller to exercise its
rights and remedies under the KCP Lease in Seller's capacity as
landlord thereunder to the same extent as if Purchaser were in
default under the KCP Lease in Purchaser's capacity as tenant
thereunder.
(e) Notwithstanding anything to the contrary contained
herein, (i) neither Purchaser's performance of the Work, nor
Seller's reimbursement to Purchaser of the Reimbursable Amount
shall impact in any way the obligation of Purchaser or Seller to
consummate the closing of the transaction as required under this
Agreement, (ii) Seller shall have no obligation to perform, or
pay for the performance of, any of the Work or any other repairs
or improvements to the Property, except as specifically provided
for in this Agreement (provided, subject to Section 24(e)(iv)
below, that the forgoing is not intended to relieve Seller, in
its capacity as landlord under the KCP Lease, of any of its
repair or maintenance obligations set forth in the KCP Lease),
other than Seller's obligation to pay the Reimbursable Amount in
connection with Purchaser's performance of the Work, (iii) Seller
makes no representation or warranties regarding the accuracy of
the Cornerstone Report attached hereto as Exhibit N as to the
scope or estimated cost of the Work set forth therein and (iv)
Purchaser shall be responsible for, and the Work shall be deemed
to include, the repair of any condition at the Property uncovered
or caused by Purchaser's performance of the Work and Seller shall
have no obligation to perform or pay for same.
Purchaser's obligation to indemnify Seller as set forth in
Section 24(b) above and Seller's obligation to reimburse
Purchaser for the Reimbursable Amount in connection with the
performance of the Work as set forth in Section 24(c) above,
shall survive the Closing or the earlier termination of this
Agreement.
25. Submission to Jurisdiction. This Agreement shall
be governed by and construed under the internal laws of the State
of New York, without regard to the principles of conflicts of
law. For the purposes of any suit, action or proceeding
involving this Agreement, Purchaser and Seller hereby expressly
submit to the jurisdiction of all federal and state courts
sitting in the State of New York and consent that any order,
process, notice of motion or other application to or by any such
court or a judge thereof may be served within or without such
court's jurisdiction by registered mail or by personal service,
provided that a reasonable time for appearance is allowed, and
Purchaser and Seller agree that such courts shall have the
exclusive jurisdiction over any such suit, action or proceeding
commenced by any party. Purchaser and Seller hereby irrevocably
waive any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of
or relating to this Agreement brought in any federal or state
court sitting in the State of New York and hereby further
irrevocably waive any claim that any such suit, action or
proceeding brought in any such court has been brought in an
inconvenient forum.
26. Survival; Maximum Liability of Seller for
Obligations Surviving Closing.
26.1. Except as otherwise specifically herein provided,
no representation, warranty, covenant or obligation of Seller or
Purchaser set forth in (a) this Agreement or (b) any Seller
Document or Purchaser Document (as hereinafter defined), shall
survive the Closing and the delivery of the Deed. For purposes of
this Agreement, a "Seller Document" means any document or
instrument executed and delivered by Seller to Purchaser in
connection herewith, including, without limitation, the Deed, the
Assignment and Assumption of Leases, and the Assignment and
Assumption of Contracts, and a "Purchaser Document" means any
document or instrument executed and delivered by Purchaser to
Seller in connection herewith, including, without limitation, the
Assignment and Assumption of Leases, and the Assignment and
Assumption of Contracts.
26.2. Notwithstanding anything to the contrary set forth
in this Agreement, the maximum amount of liability that Seller
shall have under any circumstance for any obligation of Seller
under this Agreement that is stated to survive the Closing
(including, without limitation, any obligation arising out of any
Seller's Representation that survives the Closing, any
indemnification or other obligation contained herein that is
specifically stated to survive the Closing, any liability under
any other document or instrument delivered by Seller in
connection with the Closing, and any proration obligation of
Seller) shall not exceed a total aggregate amount of $3,600,000;
provided, however, that Seller shall have no liability whatsoever
with respect to any such obligations, unless the aggregate amount
of all such claims exceeds $50,000 (the "Threshold Amount").
Purchaser shall not make any claim or deliver any notice with
respect to a claim pursuant to this Section 26.2 unless it in
good faith believes the claims would exceed the Threshold Amount.
27. Waiver of Jury Trial. The parties hereto hereby
waive trial by jury in any action, proceeding or counterclaim
(whether in contract or tort) brought by either of the parties
hereto against the other in respect of any matter arising out of
or in connection with this Agreement. The provisions of this
Section 27 shall survive the closing or earlier termination of
this agreement.
28. Miscellaneous Provisions.
(a) If litigation or an arbitration proceeding arises
out of this Agreement, the prevailing party shall be entitled to
receive from the non-prevailing party an amount equal to the
prevailing party's costs incurred in such litigation, including,
without limitation, the prevailing party's reasonable attorneys'
fees, costs and disbursements. The provisions of this Section
28(a) shall survive the Closing or any earlier termination of
this Agreement.
(b) All notices, demands or requests made
pursuant to, under or by virtue of this Agreement must be in
writing and sent to the party to which the notice, demand or
request is being made by (i) certified or registered mail, return
receipt requested, (ii) by nationally recognized overnight
courier delivery, or (iii) by hand delivery as follows:
To Seller:
SAAR Company, LLC
c/o APF Properties
25 West 45th Street
New York, New York 10036
Attention: Mr. Kenneth Aschendorf
with copy to:
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Wayne B. Heicklen, Esq.
To Purchaser:
Kenneth Cole Productions, Inc.
603 West 50th Street
New York, New York 10019
Attention: General Counsel
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attention: Andrew W. Bank, Esq.
or to such other address as is specified by a party by notice to
the other party given in accordance with the provisions of this
Section 28 (b). Any notice given in accordance with the
provisions of this Section 28 (b) shall be deemed given (i) three
(3) Business Days after mailing (if sent by certified mail), (ii)
one (1) Business Day after deposit of same with a nationally
recognized overnight courier service (if delivered by nationally
recognized overnight courier service), or (iii) on the date
delivery is made (if delivered by hand). Notices shall be
effective if given by the attorneys' for each party.
(c) This Agreement and the exhibits attached hereto
contains all of the terms agreed upon by and between Purchaser
and Seller with respect to the subject matter hereof, and all
agreements heretofore had or made by and between Purchaser and
Seller are merged in this Agreement which alone fully and
completely expresses the agreement of Purchaser and Seller with
respect to the transaction set forth in this Agreement.
(d) This Agreement may not be changed, modified or
terminated, except by an instrument executed by the parties
hereto who are or will be affected by the terms of such
instrument.
(e) No waiver by either Purchaser or Seller of
any failure or refusal to comply with Purchaser's or Seller's, as
applicable, obligations under this Agreement shall be deemed a
waiver of any other or subsequent failure or refusal to so
comply.
(f) If any term or provision of this Agreement
or the application thereof to any person or circumstances shall,
to any extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision to
persons or circumstances other than such persons or circumstances
as to which such term or provision is held invalid or
unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
(g) The headings of the various paragraphs of this
Agreement have been inserted only for the purposes of
convenience, and are not part of this Agreement and shall not be
deemed in any manner to modify, explain or restrict any of the
provisions of this Agreement.
(h) This Agreement shall be governed by, and shall be
interpreted, construed and enforced in accordance with, the laws
of the state where the Premises are located without regard to the
rules regarding conflicts of law in such laws of such state.
(i) This Agreement does not constitute an offer to
sell or to purchase and shall not bind Seller or Purchaser unless
and until Seller and Purchaser, in their sole discretion, elect
to be bound hereby by executing and delivering to the other an
executed counterpart hereof.
(j) As used herein: "Business Day" shall mean
any day other than (a) a Saturday or a Sunday, (b) a national
holiday, or (c) a day on which banks are not required to be open
for business within the State of New York; "Surviving
Obligations" shall mean the obligations of Purchaser and/or
Seller pursuant to this Agreement (including, without limitation,
pursuant to Sections 13, and 22) that are expressly stated to
survive the termination of this Agreement.
(j) Purchaser and Seller hereby acknowledge
and agree that, except as expressly set forth herein to the
contrary, there are no third party beneficiaries to this
Agreement, and, accordingly, except as expressly set forth herein
to the contrary, no third party (including, without limitation,
any Broker) shall have the right to enforce this Agreement for
the benefit of such third party or against the interests of
Purchaser or Seller. Either of Seller or Purchaser is hereby
authorized to file a copy of this Section in any proceeding
brought by any such third party against Seller or Purchaser in
connection with this Agreement as conclusive evidence of the
parties intentions.
(k) In the event the provisions of this
Agreement provide for the performance of an obligation by
Purchaser or Seller on a day other than a Business Day, then the
time for the performance of such obligation shall be
automatically adjourned to the first (1st) Business Day
immediately succeeding the day on which such obligation would
otherwise be required to be performed. In the event the
provisions of this Agreement provide that Purchaser or Seller
shall have the right to adjourn the performance of an obligation
by Purchaser or Seller, as applicable, to a day that is other
than a Business Day, then Purchaser or Seller, as applicable,
shall have the right to adjourn the time for the performance of
such obligation to the first (1st) Business Day immediately
succeeding the day on which such adjourned obligation would
otherwise be required to be performed.
(l) This Agreement may be executed in more
than one counterpart, each of which, when taken together, shall
be deemed to be one (1) instrument. This Agreement may be
executed by facsimile transmission.
(m) Ambiguities in this Agreement shall not be
construed against the party drafting this Agreement,
notwithstanding any contrary rule of construction or
interpretation at law or in equity.
(n) Purchaser and Seller acknowledge and agree
that the relationship between Purchaser and Seller is solely a
commercial relationship, and the execution of this Agreement by
Purchaser and Seller shall not create (and neither Purchaser nor
Seller intends to create) any relationship of principal and agent
between Purchaser and Seller, or any partnership or joint
venture relationship between Purchaser and Seller. Neither
Purchaser nor Seller shall be deemed to be a fiduciary of the
other party.
29. Escrow Provisions. The Letter of Credit shall
be held by the Escrow Agent, in trust, on the terms hereinafter
set forth and subject to the respective rights of the parties as
to the delivery of the Letter of Credit as set forth elsewhere in
this Agreement.
(a) The Escrow Agent will deliver the Letter of Credit
to Seller or to Purchaser, as the case may be, under the
following conditions:
(i) the Letter of Credit shall be delivered
to Purchaser on the Closing Date, in the event Purchaser
shall pay the Purchase Price and the Closing shall occur
pursuant to this Agreement; or
(ii) the Letter of Credit shall be delivered
to Seller upon receipt of written demand therefor
(hereinafter called "Seller's Demand for Letter of Credit"),
stating that an event described in Section 2.3 has occurred
or a Purchaser's Default has occurred provided, however,
that the Escrow Agent shall not honor such demand until at
least five (5) days after the Escrow Agent shall have
delivered a copy of Seller's Demand for Letter of Credit to
Purchaser in accordance with the provisions of subsection
(b) below, nor thereafter if the Escrow Agent shall have
received a Notice of Objection (as such term is defined in
subsection (b) below) from Purchaser within such five (5)
day period; or
(iii) the Letter of Credit shall be paid to
Purchaser upon receipt of written demand therefor
(hereinafter called "Purchaser's Demand for Letter of
Credit") stating that this Agreement has been terminated in
accordance with the provisions of Sections 8, 11, or 14
hereof, or that a Seller's Default has occurred and
Purchaser has elected to terminate this Agreement pursuant
to Section 10.2(a) hereof provided, however, that except if
due to a termination pursuant to Section 5 above, the Escrow
Agent shall not honor such demand until at least five (5)
days after the Escrow Agent shall have delivered a copy of
Purchaser's Demand for Letter of Credit to Seller in
accordance with the provisions of subsection (b) of this
Section, nor thereafter if the Escrow Agent shall have
received a Notice of Objection from Seller within such five
(5) day period.
(b) Within two (2) business days following delivery to
Escrow Agent of Seller's Demand for or Purchaser's Demand for
Letter of Credit, as the case may be, the Escrow Agent shall
deliver a copy thereof to the other party. The other party shall
have the right to object to the delivery of the Letter of Credit
by sending written notice (hereinafter called a "Notice of
Objection") of such objection to the Escrow Agent, which Notice
of Objection shall be deemed null and void and ineffective if
such Notice of Objection is not received by the Escrow Agent
within the time periods prescribed in subsection (a) of this
Section. Such notice shall set forth the basis for objecting to
the delivery of the Letter of Credit. Upon receipt of a Notice
of Objection, the Escrow Agent shall promptly send a copy thereof
to the party who sent the Demand for Letter of Credit.
(c) In the event the Escrow Agent shall have received
a Notice of Objection within the time period prescribed in
subsection (b) of this Section, the Escrow Agent shall (i)
continue to hold the Letter of Credit until the Escrow Agent has
received written notice from both Seller and Purchaser directing
the delivery of the Letter of Credit, in which case the Escrow
Agent shall then deliver the Letter of Credit in accordance with
such direction, or (ii) in the event of litigation between Seller
and Purchaser, deliver the Letter of Credit to the clerk of the
court in which said litigation is pending, or (iii) take such
affirmative steps as the Escrow Agent may, at the Escrow Agent's
option, elect in order to terminate the Escrow Agent's duties
including, but not limited to, depositing the Letter of Credit in
any court which the Escrow Agent shall select in New York, and
commencing an action for interpleader, the costs thereof to be
borne by whichever of Seller or Purchaser is the losing party.
(d) It is agreed that the duties of the Escrow Agent
are only as herein specifically provided, and subject to the
provisions of this Section, are purely ministerial in nature, and
the Escrow Agent shall incur no liability whatsoever except for
willful misconduct or gross negligence, as long as the Escrow
Agent has acted in good faith. Seller and Purchaser each release
the Escrow Agent from any act done or omitted to be done by the
Escrow Agent in good faith in the performance of its duties
hereunder.
(e) The Escrow Agent is acting as a stakeholder only
with respect to the Letter of Credit. Seller and Purchaser each
agree, jointly and severally, to fully indemnify and hold the
Escrow Agent harmless from and against all liabilities, damages,
costs and expenses (including, without limitation, reasonable
attorneys fees) incurred by the Escrow Agent with respect to the
performance of its duties hereunder. Upon making delivery of the
Letter of Credit in the manner herein provided, the Escrow Agent
shall have no further liability hereunder.
(f) The Escrow Agent has executed this Agreement in
order to confirm that the Escrow Agent is holding and will hold
the Letter of Credit in escrow, pursuant to the provisions
hereof.
(g) Escrow Agent shall not be prohibited from
representing Seller in the event there is any dispute arising out
of or relating to this Agreement or the disposition of the Letter
of Credit.
30. Seller's Mortgage. Seller shall, upon the
request of Purchaser, use its commercially reasonable efforts to
cause Seller's mortgagee to assign to Purchaser's mortgagee at
Closing any mortgage then affecting the Premises provided,
however, that (a) Seller shall not be required to incur any cost
or expense in connection therewith, (b) such transaction shall
have no adverse effect upon Seller's 1031 Exchange, (c) Seller
shall be released from all liabilities arising out of or relating
to Seller's mortgage as of the Closing, and (d) Seller shall be
paid by Purchaser one-half (50%) of any mortgage tax savings
associated with such assignment. For example, if the outstanding
principal amount of Seller's mortgage that is being assigned is
$10,000,000, and Purchaser's mortgage is $20,000,000, then
Purchaser shall pay Seller at Closing one-half (50%) of the
difference between the mortgage tax that would have been imposed
upon the recording of a $20,000,000 mortgage and a $10,000,000
mortgage. Seller's failure to cause its mortgagee to assign
Seller's mortgage to Purchaser's mortgagee shall not affect or
release Purchaser from any of its obligations under this
Agreement.
31. Employees; Indemnification. (a) Except as
set forth in clause (b)(ii) below, Purchaser shall have no
obligation hereunder to hire any employees, including, without
limitation, the building superintendent (the "Superintendent"),
currently employed by Seller at the Premises and Purchaser shall
not be bound by or obligated to assume the current Commercial
Building Agreement between Local 32B-32J Service Employees
International Union AFL-CIO and The Realty Advisory Board on
Labor Relations, Inc. (the "Union Contract"), governing the
wages, hours, terms and conditions of employment of the
Superintendent currently employed by the Seller at the Premises.
(b) In consideration of Purchaser's obligations and
undertakings in this Section 31 and at Purchaser's request,
Seller hereby agrees to terminate, or cause the termination of,
the employment of the Superintendent on or prior to the Closing
Date in accordance with the terms herein. In the event that
Seller's out-of-pocket costs and expenses (including, without
limitation, any termination or severance payments which are
required to be paid pursuant to the terms of the Union Contract)
associated with such termination (collectively, the "Termination
Expenses") do not exceed $15,000, Seller shall effectuate such
termination without further notice to Purchaser and Purchaser
shall reimburse Seller at the Closing for the actual amount of
the Termination Expenses incurred by Seller in connection with
the termination of the employment of the Superintendent up to
$15,000. In the event that Seller reasonably determines that the
Termination Expenses will exceed $15,000, Seller shall give
Purchaser at least five (5) Business Days notice (the
"Termination Expense Notice") of same prior to effectuating such
termination and Purchaser shall then have five (5) Business Days
after Seller has delivered the Termination Expense Notice to
notify Seller that either Seller shall (i) effectuate such
termination, in which event Purchaser shall reimburse Seller at
the Closing for the actual amount of the Termination Expenses
incurred by Seller in connection with the termination of the
employment of the Superintendent; or (ii) not effectuate such
termination, in which event Purchaser shall retain the
Superintendent at the then existing wages, hours and working
conditions provided under the Union Contract. A failure to
timely reply to the Termination Expense Notice by Purchaser as
set forth above shall be deemed an election by Purchaser under
clause (ii) above. In the event that Purchaser delivers a notice
in accordance with clause (ii) above, Purchaser shall acknowledge
in writing at the Closing that Purchaser (x) has requested that
Seller not terminate the employment of the Superintendent at
Closing and (y) will retain and employ the Superintendent at the
then existing wages, hours and working conditions provided under
the Union Contract.
(c) Purchaser hereby agrees to, and shall upon demand,
indemnify, defend, hold harmless and reimburse Seller, its
shareholders, officers, partners, members, employees and agents
from and against and for any and all liabilities, obligations,
penalties, fines, suits, claims, demands, actions, costs and
expenses of any kind or nature including without limitation
reasonable attorneys' fees which may be incurred by, imposed upon
or asserted against Seller as a result of Purchaser's failure to
retain and/or employ the Superintendent from and after the
Closing Date in the event that Purchaser requests that Seller not
effectuate the termination of the Superintendent in accordance
with clause (ii) of Section 31(b) above. The foregoing
indemnification shall survive the Closing.
(d) The obligations of Purchaser to reimburse Seller
for the Termination Expenses shall survive the termination of
this Agreement (and Purchaser shall be obligated to reimburse
Seller for same promptly upon demand therefor) in the event that
(i) Seller effectuates the termination of the employment of the
Superintendent in accordance with the terms of this Section 31
and (ii) the Closing does not occur for any reason other than as
a result of either (x) a Seller Default or (y) the exercise by
Purchaser of an express termination right set forth herein.
[The rest of this page is intentionally blank.]
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the Effective Date.
SELLER:
SAAR COMPANY, LLC, a New York limited
liability company
By: _________________________
Name:
Title:
Federal I.D. No. 13-3831570
PURCHASER:
KENNETH COLE PRODUCTIONS, INC., a New York
corporation
By: _________________________
Name:
Title:
Federal I.D. No. 13-3131650
Section 29 Agreed to:
ESCROW AGENT
PRYOR CASHMAN SHERMAN & FLYNN, LLP
By:__________________________________