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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
Commission file number 0-4217
ACETO CORPORATION
_______________________________________________________
(Exact name of the company as specified in its charter)
NEW YORK 11-1720520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
One Hollow Lane, Suite 201 11042
LAKE SUCCESS, NEW YORK
(Address of principal (Zip Code)
executive offices)
Company's telephone number, including area code: (516) 627-6000
Securities registered pursuant to Section 12 (b) of the Act:
TITLE OF EACH CLASS Name of each exchange
ON WHICH REGISTERED
None
___________________________________________________________________
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.01
_______________________________________________________
(Title of Class)
_______________________________________________________
[Cover page 1 of 2 pages]
Indicate by check mark whether the company (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
company was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No_____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.
6,034,717
The aggregate market value of the voting stock of the Company held by
non-affiliates of the Company as of September 1, 2000 was $44,094,414.
Documents incorporated by reference: The Company's Proxy Statement for
the annual meeting of the Company's shareholders to be held on December 7,
2000. (See Part III herein).
[Cover page 2 of 2 pages]
PART I
ITEM 1. BUSINESS
The Company, which was incorporated in 1947, is primarily engaged in the
marketing of fine and industrial chemicals used principally in the
agricultural, color producing, pharmaceutical, nutraceutical and surface
coating industries. The Company sells approximately 1,000 chemicals used in
these and other fields.
The Company is organized into six reportable segments. Net sales and gross
profit for each segment are set forth in Note 15 to the Company's consolidated
financial statements. The reportable segments are organized by products: (1)
Agrochemicals, whose products include herbicides, fungicides and insecticides,
as well as a sprout inhibitor for potatoes, (2) Industrial Chemicals, whose
products include a variety of specialty chemicals used in adhesives, coatings,
food, fragrance, cosmetics and many other areas, (3) Organic Intermediates and
Colorants, whose products include dye and pigment intermediates used in the
color-producing industries like textiles, inks, paper and coatings, as well as
intermediates used in production of agrochemicals, (4) Pharmaceutical
Biochemicals and Nutritionals products, which include the active ingredients
for generic pharmaceuticals, vitamins and nutritional supplements, (5)
Pharmaceutical Intermediates and Custom Manufacturing products, used in
preparation of pharmaceuticals, primarily by major ethical drug companies and
(6) Institutional Sanitary Supplies and Other, whose products include cleaning
solutions, fragrances and deodorants used by commercial and industrial
establishments. The Company does not allocate assets by segment as they are
not provided to the chief operating decision maker.
Most of the chemicals distributed by the Company are purchased abroad mainly
for sale throughout the United States; to a lesser extent, some chemicals are
sold abroad.
During the fiscal year ended June 30, 2000 and 1999, approximately 40% and 50%,
respectively, of the Company's purchases of chemicals came from Europe and
approximately 45% and 35%, respectively, from Asia.
There were no significant changes in the types of products sold by the Company,
markets served or methods of distribution.
The chemical industry is highly competitive. Most of the chemicals that the
Company sells are in competition with the products of chemical manufacturers,
including large chemical companies, who have substantially greater resources
than the Company. However, in the Company's opinion, based on reports from its
customers and suppliers, its competitive position is enhanced by the following:
the chemical products that it offers are prime quality products, many produced
by major chemical companies, some of whom are the largest chemical companies in
Europe and Asia, which products are offered by the Company at attractive and
competitive prices. For the most part the Company stores its inventory of
chemicals in public warehouses strategically located throughout the United
States, and can therefore fill orders rapidly from inventory. The Company has
developed ready access to key purchasing, research and technical executives of
both its customers and suppliers, and therefore one of its salient competitive
strengths is its ability to obtain quick decisions, when necessary, because of
such access. The technical support and services that the Company provides to
its customers is also a strength. The Company does not consider itself to be a
significant factor in the chemical industry taken as a whole.
One of the Company's products accounted for 15% of net sales in fiscal 1999 and
1998. No product accounted for as much as 10% of net sales in fiscal 2000.
One of the Company's customers, DuPont Pharmaceuticals Company, purchasing
primarily the aforementioned product, accounted for 16% and 15% of net sales in
fiscal 1999 and 1998, respectively. No customer accounted for as much as 10%
of net sales in fiscal 2000. One of the Company's suppliers accounted for 21%,
29%, and 25% of total purchases in fiscal 2000, 1999 and 1998, respectively.
Certain of the chemicals purchased by the Company are supplied to it on an
exclusive basis. Based on its relationships with its vendors, the Company
believes its vendors will continue to supply such chemicals on an exclusive
basis.
The Company holds no patents, trademarks, licenses, franchises or concessions
which it considers to be material to its operations.
Sales of certain of the Company's chemicals are higher in the last six months
of the fiscal year. For the most part, the Company warehouses the products
that it sells and fills orders from inventory. It, therefore, does not
consider information concerning backlogs to be applicable.
A subsidiary of the Company markets certain agricultural chemicals and
contracts for the manufacture of other agricultural chemicals which are subject
to the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). FIFRA
requires that test data be provided to the Environmental Protection Agency
(EPA) to register, obtain and maintain approved labels for pesticide products.
The EPA requires that follow-on registrants of these products compensate the
initial registrant for the cost of producing the necessary test data on a basis
prescribed in the FIFRA regulations. Follow-on registrants do not themselves
generate or contract for the data. However, when FIFRA requirements mandate
the generation of new test data to enable all registrants to continue marketing
a pesticide product, often both the initial and follow-on registrants establish
a task force to jointly undertake the testing effort. The Company is presently
a member of two such task force groups. The Company estimates the cost of test
data at the time it is first required, which estimates are amortized over a
period of up to five years, updated annually; and are included in cost of
sales.
Compliance with Federal, State and local provisions which have been enacted or
adopted regulating the discharge of materials into the environment has not had
a material effect on the capital expenditures and competitive position of the
Company. During fiscal 1993 the Company announced the closing of its
manufacturing subsidiary located in Carlstadt, New Jersey. At the same time an
environmental consultant was engaged by the Company to determine the extent of
contamination on the site and develop a plan of remediation. Based on the
initial estimates from the consultant a liability of $1.5 million was recorded
in fiscal 1993. During fiscal 1997, after additional testing was completed,
the Company received a revised estimate from the consultant. As a result, the
Company recorded an additional liability of $800,000. At June 30, 2000 and
1999, the remaining liability was $1.3 million. The Company believes it is
possible that such amount may not be sufficient to cover future environmental
remediation but does not believe there will be a material adverse effect on the
financial position or liquidity of the Company. However, depending on the
amount and timing of any required remediation over and above the liability
established, it is possible that the Company's future results could be
materially affected in a particular reporting period. Other than the
aforementioned remediation, the Company is not aware of any material
environmental liabilities.
At June 30, 2000, the Company employed approximately 125 persons, none of whom
were covered by a collective bargaining agreement.
ITEM 2. PROPERTIES
The Company's general headquarters and main sales office occupy approximately
26,000 square feet of leased space in a modern office building in Lake Success,
New York. The lease expires in April 2011.
Two of the Company's subsidiaries occupy 44,000 square feet of leased space in
an industrial park in New Hyde Park, New York. The lease expires in November
2009.
The Company's former manufacturing facility is located on an 11-acre parcel in
Carlstadt, New Jersey, owned by the Company. This parcel contains one building
with approximately 5,000 square feet of office space. The property is held for
sale.
ITEM 3. LEGAL PROCEEDINGS.
(None)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(None)
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is traded in the National Market System of
NASDAQ (Symbol: ACET) and was quoted at prices* ranging as follows:
FISCAL 2000 HIGH LOW
First Quarter 12 3/8 10 1/2
Second Quarter 12 3/32 10
Third Quarter 11 9/16 8 1/8
Fourth Quarter 11 3/16 7 3/4
FISCAL 1999 HIGH LOW
First Quarter 15 15/16 12 7/8
Second Quarter 13 7/16 10 1/8
Third Quarter 13 13/16 11 3/4
Fourth Quarter 11 15/16 10 5/16
*Represents high and low prices for actual transactions.
Cash dividends of $0.15 per common share were paid in January and June 2000 and
$0.13 per common share were paid in January and June 1999.
As of September 1, 2000, there were approximately 700 holders of record of the
Company's common stock.
Shares held by the nominee of the Depository Trust Company, the country's
principal central depository, were approximately 4,900,000 shares and counted
as owned by one holder. Additional individual holdings in street name result
in a sizable number of beneficial owners represented on our records as owned by
various banks and stockbrokers.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
YEARS ENDED JUNE 30 2000 1999 1998 1997 1996
Net sales $184,789 $169,189 $182,954 $169,387 $183,163
Net income 6,344 6,091 7,557 6,228(1)(2) 7,154
Net income per
common share $ 1.01 $ 0.90 $ 1.08 $ 0.82(1)(2) $ 0.88
- diluted (3)
Total assets 88,081 86,159 84,379 86,145 87,302
Working capital 50,270 49,459 54,423 48,927 50,907
Long-term liabilities 908 925 - 500 1,000
Redeemable preferred - 750 750 750 750
stock
Shareholders' equity 63,604 63,982 63,261 60,434 63,161
Number of common 6,035 6,416 6,699 6,981 7,782
shares outstanding
at year end (3)
Book value per
common $ 10.54 $ 9.97 $ 9.44 $ 8.66 $ 8.12
share (3)
Cash dividends per $ 0.30 $ 0.26 $ 0.25 $ 0.24 $ 0.23
common share (3)
(1) Includes an after-tax charge of $187 ($.03/share)(3)in final settlement of
a complaint by the U.S. Department of Justice sent to the Company on
February 10, 1995. The complaint alleged violation of the Resource
Conservation and Recovery Act (RCRA) by a then wholly owned subsidiary in
Waterbury, CT. This subsidiary was sold on June 19, 1996.
(2) Includes an after-tax charge of $480 ($.06/share)(3)to cover a revised
estimate for remediation of the Company's former manufacturing site in
Carlstadt, NJ.
(3) Adjusted for stock split and dividend, as appropriate.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company's primary source of liquidity is cash provided from operating
activities; $8.0 million in fiscal 2000 and $1.8 million in fiscal 1999. Cash
and short-term investments totaled $5.0 and $11.4 million and working capital
was $50.3 and $49.5 million at June 30, 2000 and 1999, respectively. In
addition, the Company's long-term investments totaled $7.3 and $11.9 million
for the same periods. These investments are highly liquid and can be used for
working capital if needed. The Company has sufficient lines of credit available
with banks, should any additional funds be required.
Certain components of working capital had significant changes. Inventory
increased $8.8 million to $38.5 million at June 30, 2000 from $29.6 million at
June 30, 1999. The primary reasons for this increase were the acquisition of
Schweizerhall Inc. (Schweizerhall) in January 2000 which added over $5 million
in inventory and a higher inventory level in our Organic Intermediates and
Colorant segment due to increasing sales. The decrease of $6.5 million in cash
and short-term investments was the result of the following initiatives: The
Company continued its stock repurchase program and purchased 567,000 shares of
common stock for $6.1 million. It also acquired certain assets of
Schweizerhall which required an initial cash outlay of $6.3 million and certain
assets of Magnum Research Corp. (Magnum) which required an initial outlay of
$0.7 million. Additional cash needed for the above mentioned initiatives
caused a decrease in long-term investments of $4.6 million. The total of
drafts and acceptances payable, accounts payable and accrued merchandise
purchases increased by $2.1 million from $13.2 million to $15.3 million
primarily due to the impact of the previously mentioned acquisitions.
Any funds required for additional acquisitions, stock buybacks, or
environmental remediation will be funded by the aforementioned sources of
liquidity.
RESULTS OF OPERATIONS:
Net Sales By Segment
Segment 2000 1999 1998
% of % of % of TOTAL
$ MILLION TOTAL $ MILLION TOTAL $ MILLION
Agrochemicals 11.4 6.2 10.4 6.2 14.6 8.0
Industrial
Chemicals 49.9 27.0 44.7 26.4 44.9 24.5
Organic
Intermediates &
Colorants 49.9 27.0 38.9 23.0 53.0 29.0
Pharmaceutical
Biochemicals &
Nutritionals 35.4 19.1 28.3 16.7 31.7 17.3
Pharmaceutical
Intermediates &
Custom Mfg. 33.2 18.0 44.3 26.2 38.4 21.0
Institutional
Sanitary
Supplies &
Other 5.0 2.7 2.6 1.5 0.4 0.2
TOTAL NET SALES
184.8 100.0 169.2 100.0 183.0 100.0
Gross Profit By Segment
Segment 2000 1999 1998
% of % of % of
$ MILLION TOTAL $ MILLION TOTAL $ MILLION TOTAL
Agrochemicals 3.9 12.2 3.7 14.1 3.7 14.0
Industrial
Chemicals 9.2 28.8 7.7 29.3 8.0 30.2
Organic
Intermediates &
Colorants 7.3 22.8 5.4 20.5 6.8 25.7
Pharmaceutical
Biochemicals &
Nutritionals 6.3 19.7 4.8 18.3 5.0 18.8
Pharmaceutical
Intermediates &
Custom Mfg. 2.7 8.4 3.3 12.5 3.0 11.3
Institutional
Sanitary
Supplies &
Other 2.6 8.1 1.4 5.3 - -
TOTAL GROSS
PROFIT 32.0 100.0 26.3 100.0 26.5 100.0
SALES AND GROSS PROFIT
In fiscal 2000 vs. 1999 net sales increased 9%. The acquisition of the
distribution business of Schweizerhall, completed in January 2000, accounted
for a majority of the 25% increase in the Pharmaceutical Biochemicals and
Nutritionals segment and a smaller portion of the 11% increase in the
Industrial Chemicals segment. The remainder of the Industrial Chemicals
increase was from a general strengthening of demand across its product lines.
The 28% increase in sales of the Organic Intermediates and Colorants segment
was due to a general rebound in demand from the very depressed levels of 1999,
coupled with new sales of agricultural intermediates. On the other hand, the
Pharmaceutical Intermediates and Custom Manufacturing segment declined 25%,
reflecting lower sales of one significant product which accounted for over 45%
of sales of this segment in 2000 and 55% in 1999. In fiscal 2001, we do not
anticipate that there will be any sales of this product.
The inclusion in the results for a full year of CDC Products Corp. (CDC) and,
for nine months, Magnum, both acquisitions in the Institutional Sanitary
Supplies and Other segment, accounted for that segment's increase.
Gross profit by segment for the entire corporation increased 22%. The
Industrial Chemicals, Organic Intermediates and Colorants, and Pharmaceutical
Biochemicals and Nutritionals segments all showed higher percentage increases
in gross profit than sales. Generally, this was the result of a corporate
focus on improved sourcing, especially from China. Also, the growth of the
Institutional Sanitary Supplies and Other segment contributed, as these
products have significantly higher gross profit percentages.
In fiscal 1999 vs. 1998 net sales decreased 8%. The Agrochemicals and Organic
Intermediates and Colorants segments showed the largest changes. The
Agrochemicals segment suffered the loss of two very low profit products.
Continued erosion in selling prices was the main factor in the sales decrease
in the Organic Intermediates and Colorants segment. The Pharmaceutical
Intermediates and Custom Manufacturing segment increased because of increased
sales of several relatively new products. The loss of sales of one biochemical
accounted for most of the 11% decrease in the Pharmaceutical Biochemicals and
Nutritionals segment. Lastly, the acquisition of CDC was the cause of the
increase in the Institutional Sanitary Supplies and Other segment.
Total gross profit by segment, corporatewide, decreased only slightly. The
Organic Intermediates and Colorants segment showed the largest decrease, and
this was in line with the sales decrease.
The aforementioned loss of sales in the agrochemicals segment had virtually no
impact on gross profit. Several segments showed slight decreases or increases
and the cumulative effect of these segments was offset by the increase in
Institutional Sanitary Supplies and Other from the CDC acquisition.
Selling, General and Administrative Expense
Selling, general and administrative expenses increased by $2.7 million to $18.0
million in fiscal 2000 compared to $15.3 million in fiscal 1999. The inclusion
of CDC and Magnum in the consolidated financial statements accounted for $1.5
million of this increase. Additional costs relating to the Schweizerhall
acquisition accounted for a large portion of the remaining increase.
Compensation expense and fringe benefits increased due to routine annual
increases. Selling expenses increased due to our expanding China office and
expenses relating to the increase in personnel from our recent acquisitions.
Bank charges increased significantly due to an informal compensating balance
agreement. A significant increase in legal fees was due to an ongoing
arbitration with the former owner of CDC. Offsetting some of these increases
was a decrease in bad debt expense.
Selling, general and administrative expenses increased by $2.5 million to $15.3
million from $12.8 million in fiscal 1999 compared to 1998. The inclusion of
CDC in the consolidated financial statements accounted for $750,000 of this
increase. A customer claim in the amount of $237,000 was recorded in March
1999. Compensation increased by $1,000,000 due to payments of bonuses, annual
salary increases and additional personnel. In addition, there were increases
in legal fees, bad debts and fringe benefits. Offsetting some of these
increases were decreases in bank charges, selling expenses and consulting fees.
INTEREST EXPENSE AND OTHER INCOME
Interest expense was $11,000, $18,000 and $59,000 in fiscal 2000, 1999 and
1998, respectively. A twelve year note, payable to the Prudential Insurance
Company of America, was paid in full in December 1998.
Interest and other income decreased by $1.3 million to $1.1 million in fiscal
2000 compared to $2.4 million in fiscal 1999. Lower cash available for
investments during the fiscal year due to the Company's continuing stock
repurchase program, along with the aforementioned acquisitions, caused a
significant decrease in interest income on investments. In addition, a loss on
marketable securities in fiscal 2000 compared to a gain in fiscal 1999,
accounted for $350,000 of this decrease. Royalty income decreased $315,000 in
comparing these two periods due to a decrease in sales of an agricultural
product sold in Europe.
Interest and other income increased slightly in fiscal 1999 compared to 1998.
Higher average cash available for investments during the fiscal year resulted
in a slight increase in investment income. Royalty income increased
significantly due to increased sales of an agricultural product in Europe.
Offsetting most of these increases was a decrease in proceeds from the sale of
inventory relating to a subsidiary sold in June 1996. Also, gains on
marketable securities decreased in fiscal 1999 compared to 1998.
TAX RATES
The effective tax rates were 37.9%, 37.5% and 35.6% in fiscal 2000, 1999 and
1998, respectively. Significant payments from the Company's non-qualified
retirement plan, which are deductible for tax purposes on the date of
distribution, caused an unusually low tax rate for the year ended June 30,
1998.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1999 and June 2000, respectively, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133" and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities". SFAS 137 and
138 amend SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," which was issued in June 1998. SFAS 137 deferred the effective
date of SFAS 133 to all fiscal quarters of fiscal years beginning after June
15, 2000. SFAS 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measures those instruments at fair value. The impact of
the adoption of this new standard will not be material.
In March 2000, the FASB issued FASB Interpretation No. (FIN) 44 "Accounting for
Certain Transactions involving Stock Compensation" an interpretation of
Accounting Principles Board Opinion No. 25 (Opinion 25). This interpretation
clarifies the application of Opinion 25 for certain issues. With certain
exceptions, FIN 44 applies prospectively to new awards, exchanges of awards in
a business combination, modifications to outstanding awards and changes in
grantee status on or after July 1, 2000. The impact of this interpretation is
not expected to be material.
MARKET RISK
The Company maintains foreign currency contracts solely to hedge open purchase
commitments. It has established policies, procedures and internal processes
governing the management of this hedging to reduce market risks inherent in
foreign exchange. Also, the Company has interest rate exposure relating to
short and long term investments and minimal exposure in the equity markets.
Any change in these markets would not materially affect the consolidated
financial position, results of operations or cash flows of the Company.
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements relating to
such matters as anticipated financial performance and business prospects. When
used in this Annual Report, the words "anticipates," "expects," "may," "intend"
and similar expressions are intended to be among the statements that identify
forward-looking statements. From time to time, the Company may also publish
forward-looking statements. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors,
including, but not limited to, foreign currency risks, political instability,
changes in foreign laws, regulations and tariffs, new technologies,
competition, customer and vendor relationships, seasonality, inventory
obsolescence and inventory availability, could cause the Company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required by this item 8 are set forth at the end of
this report. The following is the applicable supplementary data:
The following is a summary of the unaudited quarterly results of operations for
the years ended June 30, 2000 and 1999.
QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands except per share amounts)
Year Ended June 30, 2000
Quarter Ended
SEPT.30,1999 DEC.31,1999 MAR.31,2000 JUNE 30,2000
Net sales $37,818 $48,254 $55,476 $43,241
Gross profit 5,555 5,825 8,336 7,488
Net income 1,214 1,329 2,071 1,731
Net income per
common share
- diluted 0.19 0.21 0.33 0.28
Year Ended June 30, 1999
Quarter Ended
SEPT.30,1998 DEC.31,1998 MAR.31,1999 JUNE 30,1999
Net sales $36,365 $46,098 $45,420 $41,306
Gross profit 4,352 6,072 6,704 5,612
Net income 1,018 1,926 1,646 1,501
Net income per
common share
- diluted 0.15 0.28 0.25 0.23
Earnings per share calculation for each of the quarters is based on weighted
average number of shares outstanding in each period. Therefore, the sum of the
quarters in a year does not necessarily equal the year's earnings per share.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Company's proxy statement relating to the annual meeting of the
Company's shareholders to be held on December 7, 2000, which will be filed with
the Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K (the Proxy Statement), is hereby incorporated by reference.
Based solely on its review of the copies of such forms received by it,
the Company believes that during the fiscal year covered by this Form 10-K all
filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION.
The Company's Proxy Statement is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Company's Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company's Proxy Statement is hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) See Index to Consolidated Financial Statements and Schedules
included elsewhere herein.
(b) No reports on Form 8-K were filed during the three months
ended June 30, 2000.
(c) Exhibits
3(i) Restated Certificate of Incorporation (incorporated by
reference to Exhibit 4(a)(iii) to Registration
Statement No. 2-70623 on Form S-8 (S-8 2-70623)).
3(ii) Certificate of Amendment dated November 21, 1985 to
Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3(ii) to the Company's Annual
Report on Form 10-K for the fiscal year ended June
30, 1986).
3(iii)(c) By-laws, currently in effect (incorporated by reference to
Exhibit 3(iii)(c) to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1998)
(1998 10-K).
10(ii)(a) Profit Sharing Plan, as amended and restated
effective July 1, 1989 (incorporated by reference to
Exhibit 10(iii)(a) to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995).
10(iii) 401(k) Plan, effective August 1, 1997, (incorporated by
reference to Exhibit 10 (iii) to the 1998 10-K).
10(iv)(a) Supplemental Executive Retirement Plan, effective
June 30, 1985, as amended and restated, effective
July 1, 1992 (incorporated by reference to Exhibit
10(iv)(a) to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993)(1993 10-K)).
10(v) 1980 Stock Option Plan (incorporated by reference to
Item 4(a)(ii) of S-8 2-70623).
10(v)(a) 1980 Stock Option Plan (as amended and restated
effective as of September 19, 1990) (incorporated
by reference to exhibit 4(c) to Registration
Statement No. 33-38679 on Form S-8).
10(v)(b) Aceto Corporation Stock Option Plan (as Amended and
Restated effective as of September 19, 1990) (and as
further Amended effective June 9, 1992) (incorporated
by reference to Exhibit 10(v)(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1992).
10(v)(c) 1998 Aceto Corporation Omnibus Equity Award Plan (incorporated
by reference to Exhibit 10(v) to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1999)
(1999 10-K).
10(vi) Lease between Aceto Corporation and M. Parisi & Son
Construction Co., Inc. for office space at One
Hollow Lane, Lake Success, New York dated May 24,
1990 (incorporated by reference to Exhibit 10(vi)
to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1990).
10(vi)(a) Lease between Aceto Corporation and M. Parisi & Son
Construction Co., Inc. for office space at One Hollow Lane,
Lake Success, NY dated April 28, 2000.
10(vi)(b) Lease between Aceto Corporation and M. Parisi & Son
Construction Co., Inc. for office space at One Hollow Lane,
Lake Success, NY dated April 28, 2000.
10(vi)(c) Lease between CDC Products Corp. and Seaboard Estates for
manufacturing and office space at 1801 Falmouth Avenue, New
Hyde Park, NY dated October 31, 1999.
10(vii) Stock Purchase Agreement among Windham Family Limited
Partnership, Peter H. Kliegman, CDC Products Corp. and
Aceto Corporation (incorporated by reference to Exhibit
10(vii) to 1999 10-K).
10(viii) Asset Purchase Agreement among Magnum Research Corporation,
CDC Products Corp., Roy Gross and Aceto Corporation.
10(ix) Asset Purchase Agreement between Schweizerhall, Inc. and
Aceto Corporation.
21 Subsidiaries of the Company.
24 Consent of KPMG LLP.
Exhibit 10 (vi)(a)
THIS AGREEMENT OF LEASE (the Lease), made this 28 day of April, 2000 by and
between M. PARISI & SON CONSTRUCTION CO., INC., a New York corporation, having
offices at 54-65 48th Street, P.O. Box 780007, Maspeth, New York (hereinafter
designated as "Landlord") and ACETO CORPORATION, a New York corporation having
an office at One Hollow Lane, Lake Success, NY 11042 (hereinafter designated
as "Tenant")
W I T N E S S E T H :
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord, in the
building known as LAKE SUCCESS PLAZA, (hereinafter referred to as the
"Building"), and located on land (hereinafter referred to as the "Land") at One
Hollow Lane, Lake Success, Nassau County, New York, 11378, that certain space,
containing approximately, without representation, 4,800 rentable square feet
(subject to a twenty percent (20%) loss factor) located on the second floor
together with all fixtures and equipment which at the commencement, or during
the term of this Lease are thereto attached (except items not deemed to be
included constitute and are hereby called "the demised premises"), which
demised premises are approximately as shown on the plan or plans or diagram or
diagrams set forth on Exhibit "A" attached hereto and made a part hereof (or
incorporated by reference into this Lease as though physically attached hereto)
and Tenant shall have the non-exclusive, revocable common or joint use of all
Common Areas as said term is hereinafter defined in and subject to the
provisions of Article 27.09, of the Land and Building (and such other
facilities as to which Tenant is entitled pursuant to the terms hereof; for a
term commencing on the Commencement Date (as herein defined), and ending on
April 30, 2011, unless sooner terminated in accordance herewith, at an annual
fixed rental rate as set forth on Schedule 1 annexed hereto and made a part
hereof. Landlord estimates, but does not warrant or represent, that Landlord's
Work (as set forth on Exhibit AD@ which is attached hereto and made a part
hereof), shall be substantially completed on or about April 12, 2001 and
Landlord shall use good faith efforts to commence and diligently complete such
work, subject to reasonable delay and force majure. Upon the date that
Landlords Work is actually substantially completed,(the Commencement Date)
Landlord and Tenant shall execute a commencement date agreement (A Commencement
Date Agreement) setting forth the Commencement Date of the term hereof, and the
date that the Tenant shall commence paying fixed annual rent as specified in
Schedule 1.
Tenant agrees to pay said fixed annual rent in lawful money of the United
States, in equal monthly installments in advance on the first day of each
calendar month during said term, at the office of Landlord or such other place
in the United States of America as Landlord may designate in writing, without
any setoff or deduction whatsoever, except that the first months rent,
irrespective of when the first months rent is due, shall be paid upon execution
of the within Lease. Should the obligation to pay rent commence on any day
other than the first day of a month, then the fixed rent for the unexpired
portion of such month shall be adjusted and pro-rated on a per diem basis.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
ARTICLE 1
Rent
1.01. Tenant shall, commencing on the Commencement Date and throughout the
term of this Lease, pay the fixed annual rent and additional rent as above and
as hereinafter provided, by good and sufficient check drawn on a bank doing
business in the State of New York which is a member of the New York Clearing
House or a successor thereto. All sums other than fixed annual rent payable by
Tenant hereunder shall be deemed additional rent and payable on demand, unless
other payment dates are hereinafter provided, and Landlord shall have the same
remedies with respect to a default in payment of any items of additional rent
as Landlord has with respect to a default in payment of fixed rent. All rent
including fixed annual rent and all items of additional rent shall be payable
without setoff or deduction whatsoever. Each of the Witnesseth paragraphs above
are herein incorporated as if set forth verbatim herein.
ARTICLE 2
Occupancy
2.01. Tenant shall use and occupy the demised premises solely for general
offices for Tenant, its subsidiaries, related companies and divisions and
permitted assignees and subtenants, and for no other purpose. Without limiting
the foregoing, Tenant shall not use or occupy the demised premises as a savings
bank, state or Federal savings and loan association, commercial bank or trust
company, or any combination of uses incidental to the foregoing.
ARTICLE 3
Alterations and Installations
3.01. Tenant shall make no alterations, installations, additions or
improvements in or to the demised premises without Landlord's prior written
consent, which consent , shall not be unreasonably withheld or delayed,
provided that Tenant otherwise complies with all other applicable terms,
covenants and conditions of this Lease, including Section 3.09. All work,
including alterations, installations, additions or improvements in and to the
demised premises shall be done only by Landlord (or Landlords affiliate) as
general contractor with such subcontractors, materialmen and mechanics selected
by Landlord (or Landlords affiliate). All such work, alterations,
installations, additions and improvements shall be done at Tenant's sole cost
and expense and at such times and in such manner so as not to unreasonably
interfere with the peaceful enjoyment of the Building by other tenants,
provided however, that nothing herein shall require Landlord (or its affiliate)
as general contractor to perform any such work during non-business hours at
night, on weekends or on holidays. Prior to commencement of such work, for all
work over the sum of $50,000, Tenant must obtain and file a Payment or Surety
and Completion Bond with Landlord, from a licensed surety company reasonably
acceptable to Landlord and such bond shall otherwise be in form and content
acceptable to Landlord.
3.02. Any mechanic's lien (a "Lien") filed against the demised premises and/or
the Land and/or the Building for work claimed to have been done for or
materials claimed to have been furnished to Tenant shall be discharged of
record by Tenant at its expense within thirty (30) days after notice, by
payment, filing of the bond required by law or otherwise. If Tenant shall elect
to discharge any such Lien by bonding, Tenant shall, within ten (10) days after
the filing of such Lien apply for and diligently prosecute an application for a
court order to remove said Lien of record within not less than thirty (30)
thereafter.
3.03. All alterations, installations, additions and improvements made and
installed and paid for by Landlord shall become and be the property of Landlord
and shall remain upon and be surrendered with the demised premises as a part
thereof at the end of the term of this Lease, excluding Tenant's modular work
stations.
3.04. All non-structural alterations, installations, additions and
improvements made and installed by Tenant, or at Tenant's expense, upon or in
the demised premises shall be removed at the end of the term of the Lease at
Tenant's expense and the demised premises restored by Tenant, and any damages
created thereby shall be repaired, all at Tenant's cost and expense.
3.05. Where furnished by or at the expense of Tenant all movable furniture,
furnishings and trade fixtures, including without limitation, murals, business
machines and equipment, counters, screens, grille work, special paneled doors,
cages, partitions, metal railings, closets, paneling, lighting fixtures and
equipment, drinking fountains, refrigerators, and any other movable property
shall remain the property of Tenant which Tenant shall be obligated to remove
at any time prior to the expiration or sooner termination of the term of this
Lease, and without limiting Tenants other obligations, Tenant shall repair all
damage occasioned by such removal, at Tenant's sole cost and expense. All such
property which is not so removed by Tenant shall, without limiting Landlords
other rights and remedies, either be retained by Landlord as Landlords property
or may be removed from the demised premises by Landlord, at Tenants sole cost
and expense.
3.06. Tenant shall keep records of Tenant's alterations, installations,
additions and improvements, and the cost thereof. Tenant shall, within 45 days
after demand by Landlord, furnish to Landlord copies of such records and cost
if Landlord shall require same in connection with any proceeding to reduce the
assessed valuation of the Building, or in connection with any proceeding
instituted pursuant to Article 9 hereof.
3.07. During the course of Tenant's alterations, Tenant will carry or cause to
be carried adequate Worker's Compensation Insurance, Builders Risk,
Comprehensive General Liability and such other insurance as may be required by
law to be carried by Landlord or Tenant or required by Article 40 hereof in
connection with such construction, and such insurance (except the Worker's
Compensation Insurance) shall name Landlord, Landlord's managing agent, and all
mortgagees and ground lessors and such other parties as Landlord shall
designate as additional insureds.
3.08. "Structural Changes" shall mean changes or repairs to the "structural
elements" of the Building, which are the foundation, floor plate, exterior or
load-bearing walls, curtain wall, roof and the Building-wide plumbing,
electrical and heating, ventilation and air conditioning systems (said heating,
ventilation and air conditioning systems are sometimes hereinafter referred to
collective as the "HVAC System").
3.09. Notwithstanding anything contained elsewhere in this Lease, if Tenant
desires to make any alterations, installations, additions or improvements,
Tenant will, without limiting Tenant's other obligations, comply with all of
the following at Tenant's sole cost and expense:
a) Tenant shall furnish Landlord with the plans of the planned alterations
prior to construction.
b) Tenant must furnish Landlord with an "as-built" plan upon the completion of
any work.
c) Tenant will obtain all governmental permits and pay all applicable
government fees, including filing fees.
d) Tenant will file appropriate plans with governmental authorities, where
applicable.
e) Tenant will perform all alterations, installations, additions and other
improvements in a good and workmanlike manner in accordance with standards at
least equivalent to the standards prevailing in the building of which the
demised premises form a part.
f) Tenant shall pay for, and shall otherwise accept full responsibility for,
any additions and changes in sprinklers, passages, legal exits, entrances,
corridors, stairs, elevators and toilets, which may be necessitated by such
alterations, installations, additions or improvements and shall not do any work
which shall adversely affect the remainder of the building of which the demised
premises form a part, provided however, that Tenant shall not have any right to
make any such alterations, installations, additions or improvements or perform
any work without Landlords express prior written consent in each instance.
g) Tenant shall not make any installation, alteration, addition or other
improvement on or through the roof, nor shall Tenant or Tenant's agents enter
upon the roof or place objects thereon without the specific prior written
permission of Landlord, who, if such permission is granted, shall specify the
time and conditions under which such entry may be obtained. Landlord may make
such rules and regulations as they deem appropriate to govern Tenant's use or
access to the roof for any purpose whatsoever.
ARTICLE 4
Repairs
4.01. Tenant shall, at its sole cost and expense and only using Landlord (or
its affiliate) as general contractor, take good care of the demised premises
and the furniture, fixtures, equipment and appurtenances therein, and shall
keep and maintain the demised premises and the furniture, fixtures, equipment
and appurtenances therein, including but not limited to, any and all bathrooms
and kitchens which are located within the demised premises, in a condition of
good order and repair. Without limiting the foregoing, Tenant shall make all
repairs to the demised premises, the Building and the Land, using only Landlord
(or Landlords affiliate) as general contractor including the fixtures and
appurtenances in the demised premises and including further Structural Changes
of any kind which are necessitated by the act, omission, use, occupancy,
negligence or other misconduct of Tenant, its employees, agents, contractors,
servants, licensees or invitees or which are necessitated by any breach or
default of any of the terms, covenants and conditions of this Lease, as and
when needed to keep them in good working order and condition. In addition,
Tenant shall, at Tenant's sole cost and expense, using Landlord or its
affiliate as general contractor, maintain, repair and replace all HVAC,
electric, plumbing and other systems and facilities located within the demised
premises which are supplemental or special to the Buildings standard systems,
whether installed pursuant to this Lease or otherwise. In addition, all
damages or injury to the demised premises and to its fixtures, appurtenances,
systems, facilities or in and to the Building or to its fixtures,
appurtenances, systems, facilities and caused by Tenant, its agents, employees,
contractors, servants, licensees or invitees moving property in or out of the
Building or by installation or removal of , fixtures, or other property, shall
be repaired, restored or replaced promptly by Tenant at its sole cost and
expense, using Landlord or Landlords affiliate as general contractor, which
repairs restorations and replacements shall be in quality and class equal to
the original work or installations. Without limiting Landlords other rights
and remedies, Tenant shall pay to Landlord the full cost and expense incurred
by Landlord or its affiliate as general contractor in performing such repairs,
restorations or replacements which shall be payable by Tenant to Landlord
within 15 days after rendition of a bill therefor.
4.02. Tenant shall not place a load upon any floor of the demised premises
exceeding the floor load per square foot area which such floor was designed to
carry and which is allowed by law. Landlord represents that the floor load is
sufficient for Tenant's use for general office purposes.
4.03. Business machines and mechanical equipment belonging to Tenant which
cause vibration, noise, cold or heat that may be transmitted to the Building
structure or to any leased space to such a degree as to be reasonably
objectionable to Landlord or to any other tenant in the Building shall be
placed and maintained by Tenant at its expense in settings of cork, rubber or
spring-type vibration eliminators sufficient to absorb and prevent such
vibration or noise, cold or heat. The parties hereto recognize that the
operation of elevators, air conditioning and heating equipment will cause some
vibration, noise, heat or cold which may be transmitted to other parts of the
Building and demised premises. Landlord shall be under no obligation to
endeavor to reduce such vibration, noise, heat or cold beyond what is customary
in a first class office building such as the Building.
4.04. Unless expressly provided for in this Lease, there shall be no allowance
to Tenant for a diminution of rental value and no liability on the part of
Landlord by reason of inconvenience, annoyance or injury to business arising
from the making of any repairs, alterations, additions or improvements in or to
any portion of the Building or the demised premises or in or to fixtures,
appurtenances or equipment thereof.
4.05. Landlord, at its sole cost and expense, shall maintain and make all
necessary Structural Changes to (i) the Building and the demised premises, and
(ii) the Common Areas, (hereinafter defined in Section 27.09), except that: (a)
Landlord shall not be responsible for the maintenance, repair or replacement of
any systems including but not limited to heating, ventilating and air
conditioning, electric, plumbing including bathrooms and kitchens which are
located within the demised premises and are supplemental or special to the
Building standard systems, whether installed pursuant to this Lease or
otherwise; and (b) the cost of performing any maintenance, repairs or
replacements caused or necessitated by the negligence or other misconduct of
Tenant, its employees, agents, servants, contractors, licensees or invitees or
the failure of Tenant to perform its obligations under this Lease, shall be
paid by Tenant, except to the extent of insurance proceeds, if any, actually
collected by Landlord with regard to the damage necessitating such repairs; and
(c) Landlord shall not be responsible for the maintenance, repair or
replacement of any floor coverings located in the demised premises; and (d)
Landlord shall also not be responsible for the replacement, repair or
maintenance of any electric lighting (including but not limited to tubes,
bulbs, ballasts) and any wall finish or covering within the demised premises;
and (e) Landlord shall also not be responsible for any repairs, maintenance or
replacements which are the obligation of Tenant pursuant to the terms of this
Lease.
ARTICLE 5
Requirements of Law; Fire Insurance
5.01. Tenant, at its sole cost and expense, shall comply with all law, orders
and regulations of Federal, State, County, Municipal and other local
governments, departments, commissions, authorities, and boards and with any
direction of any public officer or officers, pursuant to law, which shall
impose any violation, order or duty upon Landlord or Tenant with respect to the
demised premises and arising out of Tenant's use or manner of use or occupancy
of the demised premises (including Tenant's permitted use) or with respect to
the Building or Land, if arising out of Tenants use or manner of use or
occupancy of the demised premises or the Building (including Tenant's permitted
use) or Land.
5.02. Tenant shall not do or permit to be done any act or thing upon the
Building, which will invalidate or be in conflict with New York Standard Fire
insurance policies covering the Building, and fixtures and property therein, or
which would increase the rate of fire insurance applicable to the Building to
an amount higher than it otherwise would be; and Tenant shall neither do nor
permit to be done any act or thing upon the Land and Building which shall or
might subject Landlord to any liability or responsibility for injury to any
person or persons or to property by reason of any business or operation being
carried on upon the Building; but nothing in this Section 5.02 shall prevent
Tenant's use of the demised premises for the purposes stated in Article 2
hereof.
5.03. If, as a result of any act or omission by Tenant or violation of this
Lease, the rate of fire insurance applicable to the Building shall be increased
to an amount higher than it otherwise would be, Tenant shall reimburse Landlord
for all increases of Landlord's fire insurance premiums so caused; such
reimbursement to be additional rent payable upon the first day of the month
following any outlay by Landlord for such increased fire insurance premiums.
In any action or proceeding wherein Landlord and Tenant are parties, a schedule
or "make up" of rates for the Building or demised premises issued by the body
making fire insurance rates, shall be presumptive evidence but not conclusive
of the facts therein stated and of the several items and charges in the fire
insurance rate than applicable to said Building.
5.04. Tenant shall not use or suffer the demised premises to be used in any
manner so as to create an environmental violation or hazard, nor shall Tenant
cause or suffer to be caused any chemical contamination or discharge of a
substance of any nature which is noxious, offensive or harmful or which under
any law, rule or regulation of any governmental authority having jurisdiction
constitutes Hazardous Materials as hereinafter defined.
5.05. Tenant shall also immediately notify Landlord in writing of any
environmental concerns of which Tenant is or becomes aware and which are raised
by any private party or government agency with regard to Tenant's business at
the demised premises. Tenant shall also notify Landlord immediately of any
hazardous waste spills at the demised premises and of any other Hazardous
Materials of which Tenant becomes aware.
5.06. Not in limitation of the generality of the foregoing, but as additional
covenants, Tenant specifically agrees that (i) Tenant shall not generate,
manufacture, refine, transport, treat, store, handle, dispose or otherwise deal
with any hazardous substances or hazardous waste as now or hereafter defined by
applicable law; and (ii) Tenant shall defend, indemnify and hold Landlord
harmless against any liability, loss, cost or expense, including reasonable
attorneys' fees and costs (whether or not legal action has been instituted)
incurred by reason of the existence of or any failure by Tenant to comply with
any environmental law now or hereafter in effect. Notwithstanding the
foregoing, but without limiting Tenant's other obligations under this Article
5, Tenant shall have the limited right to bring samples of its chemical
products into the demised premises subject to the following conditions:
1. All such samples shall be stored, transported, shipped or otherwise handled
in accordance with applicable local, state and federal environmental, fire,
health and safety laws, rules and regulations.
2. No such samples shall be disposed of within or on the demised premises, the
Building or the Land, whether by use of any plumbing, trash receptacles or
otherwise. Tenant shall only dispose of such samples off-site by using only
licensed and bonded hazardous waste removal contractors.
3. The Tenant shall provide a locked storage area for said chemicals, and
Tenant shall provide access to such storage area at all times to any and all
state or local fire, police or other public safety officers.
4. Tenant shall also comply with all requirements of Landlord's insurance
carrier and will pay any increase in policy premiums to Landlord which may
result from Tenant's storage, transportation, shipment or other handling of
such chemical samples at the demised premises. If Landlord's mortgagee gives
notice that the presence of such chemical samples is a default under any
mortgage or mortgage related instrument or if Landlord's insurance carrier
gives notice to Landlord that it intends to cancel any of Landlord's insurance
policies based upon the presence of such chemical samples, then Tenant shall
cease the storage, transportation, shipment or other handling of such chemical
samples within three (3) days after receipt of written demand from Landlord.
5.07. As used herein, the term "Hazardous Materials" means and includes all
potentially hazardous materials, including without limitation radon, oil, gas
and other petroleum products, lead paint, asbestos and asbestos containing
materials.
5.08. Tenant covenants and agrees that at any and all times during the term of
this Lease it shall be responsible for compliance with any federal, state,
county, local, or municipal
law (including without limitation Local Law 76, as same now exists or may
hereafter be amended, if the Building is located in New York City), statute,
ordinance, code, regulation or administrative recommendation pertaining to
Hazardous Materials which may have been introduced by the Tenant or its agents,
employees contractors, licensees or invitees (including without limitation any
requirements pertaining to the cleanup, removal, and/or encapsulation of any
Hazardous Materials that may be in or at the demised premises or may have
emanated therefrom). Tenant shall, at its sole cost and expense, undertake any
and all steps which may be required for compliance as aforesaid. In addition,
Tenant shall be solely responsible for restoring and repairing any damage to
the demised premises caused by or resulting from such compliance, e.g. the
replacement of any ceiling tiles or insulation with comparable products not
containing any Hazardous Materials.
5.09. Tenant shall indemnify and save harmless the Landlord, Landlord's
agents, servants, and employees, from and against all claims and demands
whether for injuries to persons or loss of life, or damage to property, related
to or arising in any manner whatsoever out of the clean-up, removal and/or
encapsulation of Hazardous Materials provided same is occasioned wholly or in
part by any act or omission of (or failure to comply with legal requirements
by) Tenant, its agents, contractors, employees, servants and licensees. In the
event Landlord shall, without fault on its part, be made a party to any
litigation or administrative proceedings commenced by or against Tenant, then
Tenant shall protect and hold Landlord harmless and shall pay all costs,
expenses and reasonable attorneys fees incurred or paid by Landlord in
connection with such litigation.
5.10. Notwithstanding anything herein to the contrary, Tenant shall file no
documents or take any other action under this Article without Landlord's prior
written approval thereof, and Landlord shall also have the right to file such
documents or take such action instead or on behalf of Tenant (but still at
Tenant's sole cost and expense), and Tenant shall cooperate with Landlord in so
doing. Tenant shall also (i) furnish Landlord with copies of any documents
filed by Tenant pursuant to any environmental law; (ii) permit Landlord to be
present at any inspection, on or off site, and at any meetings and substances
dealt with by Tenant at the demised premises, as well as any additional
information available to Tenant for government filings or determinations as to
whether there has been compliance with an environmental law.
5.11. Landlord shall also have the right, but not the obligation, to enter the
demised premises at any time to conduct tests to discover the facts of any
alleged or potential environmental problem. In the event Tenant fails to
comply as aforesaid with the clean-up, removal, and/or encapsulation of
Hazardous Materials when so required within the period of time permitted or
promulgated, then in such event Landlord (or its affiliate) may undertake said
work, but shall not be obligated to do so. Should Landlord (or its affiliate)
undertake said work required by Tenant as aforesaid, then in such event,
Landlord shall render a statement to Tenant for the cost and expenses of
undertaking said work plus a charge of twenty (20%) percent for administrative
costs and expenses, which statement shall be paid by Tenant as Additional Rent
within ten (10) days of receipt thereof. Failure of Tenant to undertake
compliance as aforesaid shall constitute a material default under this Lease
for which Landlord shall have all rights and remedies, including without
limitation the right to terminate this Lease and the right to hold Tenant
responsible for the entire cost of compliance as aforesaid and for all of
Landlord's damages resulting from Tenant's failure to so comply.
5.12. The provisions of this Article shall survive the expiration or earlier
termination of this Lease, and the Tenant shall require any permitted assignee
or sub-lessee of the demised premises to agree expressly in writing to comply
with all the provisions of this Article.
ARTICLE 6
Subordination
6.01. This Lease is subject and subordinate to all ground or underlying leases
and to all mortgages which may now or hereafter affect such leases or the real
property of which demised premises form a part, and to all renewals,
modifications, consolidations, replacements and extensions thereof. This
clause shall be self-operative and no further instrument of subordination shall
be required by any mortgagee. In confirmation of such subordination, Tenant
shall execute promptly any certificate that Landlord may reasonably request.
ARTICLE 7
Loss, Damage, Reimbursement, Liability, etc.
7.01. Landlord or its agents shall not be liable for any injury or damage to
persons or property resulting from fire, explosion, falling plaster, steam,
gas, electricity, water, rain or snow or leaks from any part of the Building,
or from the pipes, appliances or plumbing works or from the roof, street or
subsurface or from any other place or by dampness or by any other cause of
whatsoever nature, unless any of the foregoing shall be caused by or due to the
negligence, breach of guarantees, act or omissions of Landlord, its agents,
servants or employees.
7.02. Tenant shall reimburse Landlord for all expense, damages or fines
incurred or suffered by Landlord, and for which Landlord has not been or will
not be reimbursed by insurance, by reason of any breach, violation or
nonperformance by Tenant, or its agents, servants or employees, of any covenant
or provision of this Lease, or by reason of damage to persons or property
caused by moving property of or for Tenant in or out of the Building, or by the
Tenant or by reason of or arising out of the carelessness, negligence or
improper conduct of Tenant, or its agents, servants or employees in the use or
occupancy of the demised premises with out prejudice to Landlord's other rights
and remedies.
7.03. Tenant shall give Landlord notice in case of fire or accidents in the
demised premises promptly after Tenant is aware of such event.
7.04. As a material inducement for Landlord to execute and deliver this Lease,
Tenant agrees to look solely to Landlord's estate and interest in the Land and
Building, or the Lease of the Building, and the demised premises, for the
satisfaction of any right or remedy of Tenant for the collection of a judgment
(or order or other judicial process) requiring, in whole or in part, the
payment of money by Landlord, in the event of any liability by Landlord
hereunder, and no other property or assets of Landlord shall be subject to
levy, execution, attachment, or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to this Lease, the
relationship of Landlord and Tenant hereunder, or Tenant's use and occupancy of
the demised premises, or for any other liability of Landlord to Tenant.
7.05. Each party hereby releases the other party (which term as used in this
paragraph includes the employees, agents, officers and directors of the other
party) from all liability whether for negligence or otherwise, in connection
with loss covered by any insurance policies which the releasor carries with
respect to the demised premises or any interest or property therein or, thereon
(whether or not such insurance is required to be carried under this Lease), but
only to the extent that such loss is collected under said insurance policies.
Such release is also conditioned upon the inclusion in the policy or policies
of a provision whereby any such release shall not adversely affect said
policies or prejudice any right of the releasor to recover thereunder. Each
party agrees that its insurance policies, aforesaid, will include such a
provision so long as the same shall be obtainable without extra cost, or if
extra cost shall be charged therefor, each party shall advise the other thereof
of the amount of the extra cost, and the other party, at its election, may pay
the same, but shall not be obligated to do so.
ARTICLE 8
Destruction - Fire or Other Cause
8.01. If the demised premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give immediate notice thereof to Landlord and this
Lease shall continue in full force and effect except as hereinafter set forth.
8.02. If the demised premises are partially damaged or rendered partially
unusable by fire or other casualty, the damages thereto shall be repaired by
and at the expense of Landlord and the rent, until such repair shall be
substantially completed, shall be apportioned from the day following the
casualty according to the part of the demised premises which is usable.
8.03. If the demised premises are totally damaged or rendered wholly unusable
by fire or other casualty, then the rent shall be proportionately paid up to
the time of the casualty and thenceforth shall cease until the date when the
demised premises shall have been repaired and restored by Landlord, subject to
Landlord's right to elect not to restore the same as hereinafter provided.
8.04. If the demised premises are rendered wholly unusable or (whether or not
the demised premises are damaged in whole or part) if the Building shall be so
damaged that Landlord shall decide to demolish it or not to rebuild it, then,
in any of such events Landlord may elect to terminate this Lease by written
notice to Tenant, given within 90 days after such fire or casualty, specifying
a date for the expiration of this Lease, which date shall not be more than 60
days after the giving of such notice, and upon the date specified in such
notice the term of this Lease shall expire as fully and completely as if such
date were the date set forth above for the termination of this Lease and Tenant
shall forthwith quit, surrender and vacate the demised premises without
prejudice however, to Landlord's rights and remedies against Tenant under the
Lease provisions in effect prior to such termination, and any rent owing shall
be paid up to such date and any rent paid for periods subsequent to such date
shall be returned to Tenant. Unless Landlord shall serve a termination notice
as provided for herein, Landlord shall make the repairs and restorations under
the conditions of 8.02 and 8.03 hereof, with all reasonable diligence, subject
to delays due to adjustment of insurance claims, labor troubles, the events set
forth or encompassed by the provisions of Article 25 and any and all other
causes beyond Landlord's control. After any such casualty, Tenant shall
cooperate with Landlord's restoration by removing from the demised premises as
promptly as reasonably possible, all of the Tenant's salvageable inventory and
movable equipment, furniture, and other property. Tenant's liability for rent
shall resume five (5) days after written notice from Landlord that the demised
premises are substantially ready for Tenant's occupancy excluding Tenant's
furniture, furnishings, fixtures, equipment, improvements or appurtenances
removable by Tenant which Landlord will not have any obligation to repair or
restore.
8.05. No damages, compensation or claim shall be payable by Landlord to Tenant
for inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the demised premises or of the Building.
8.06. Nothing contained hereinabove shall relieve Tenant from liability that
may exist as a result of damage from fire or other casualty. Notwithstanding
the foregoing, each party shall look first to any insurance in its favor before
making any claim against the other party for recovery for loss or damage
resulting from fire or other casualty, and to the extent that such insurance is
in force and collectible and to the extent permitted by law, Landlord and
Tenant hereby releases and waives all right of recovery against the other or
anyone claiming through or under each of them by way of subrogation or
otherwise. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefiting from the waiver shall pay such premium within ten (10) days
after written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that
Landlord will not carry insurance on Tenant's furniture and/or furnishings or
any fixtures or equipment, improvements, or appurtenances removable by Tenant
and agrees that Landlord will not be obligated to repair any damage thereto or
replace the same.
8.07. Tenant hereby waives the provisions of Section 227 of the Real Property
Law of the State of New York and agrees that the provisions of this Article
shall govern and control in lieu thereof.
ARTICLE 9
Eminent Domain
9.01. In the event that the whole of the demised premises shall be lawfully
condemned or taken in any manner for any public or quasi-public use or purpose,
this Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title (hereinafter referred to as the
"date of taking"), and Tenant shall have no claim against Landlord or the
condemning authority for, or make any claim for, the value of any expired term
of this Lease, nor any other claim, and the rent and additional rent shall be
apportioned as of such date.
9.02. In the event that any part of the demised premises shall be so condemned
or taken, then this Lease shall be and remain unaffected by such condemnation
or taking, except that the rent and additional rent allocable to the part so
taken shall be apportioned as of the date of taking, provided, however, that
Tenant or Landlord may each elect to cancel this Lease if more than twenty-five
(25%) percent of the demised premises shall be so condemned or taken, provided
such notice of election is given to the other party, not later than thirty (30)
days after the date when Landlord notifies Tenant of the date that title shall
vest or has vested in the condemning authority. Upon the giving of such
notice, this Lease shall terminate on the thirtieth day following the date of
such notice by Tenant. Upon such partial taking and this Lease continuing in
force as to any part of the demised premises, the rent and additional rent
shall be diminished by an amount representing the part of said rent and
additional rent properly applicable to the portion or portions of the demised
premises which may be condemned or taken. If as a result of the partial taking
(and this Lease continuing in force as to the part of the demised premises not
so taken), any part of the demised premises not taken is damaged, Landlord
agrees with reasonable promptness to commence the work necessary to restore the
damaged portion to the condition existing immediately prior to the taking, and
prosecute the same with reasonable diligence to its completion.
9.03. Nothing hereinabove provided shall preclude Tenant from appearing,
claiming, proving and receiving in the condemnation proceeding, Tenant's moving
expenses, and the value of Tenant's movable furniture, fixtures and equipment
which do not become part of the Building or property of Landlord, provided such
claims do not diminish Landlord's award.
9.04. In the event that more than twenty-five (25%) per cent of the demised
premises shall be so taken and neither Tenant nor Landlord have elected to
cancel this Lease as above provided, the entire award for partial taking shall
be paid to Landlord, and Landlord, at Landlord's own expense, shall to the
extent of the net proceeds (after deducting reasonable expenses including
attorneys' and appraisers' fees) of the award restore the unaffected part of
the Building to substantially the same condition and tenantability as existed
prior to the taking. Until said unaffected portion is restored, Tenant shall
be entitled to a proportionate abatement of rent for that portion of the
demised premises which is being restored and is not usable until the completion
of the restoration or until the said portion of the demised premises is used by
Tenant, whichever is sooner. Said unaffected portion shall be restored within
a reasonable time but not more than six (6) months after the taking provided,
however, if Landlord is delayed by strike, lockout, the elements, any of the
events set forth or encompassed by Article 25 or any other causes beyond
Landlord's control, the time for completion shall be extended for a period
equivalent to the delay. Should Landlord fail to complete the restoration
within the said six (6) months or the time as extended, Tenant may elect to
cancel this Lease and the term hereby granted in the manner and with the same
results as set forth in the next two sentences of this Section 9.04. If such
partial taking shall occur in the last two years of the term hereby granted,
either party, irrespective of the area of the space remaining, may elect to
cancel this Lease and the term hereby granted, provided such party shall,
within thirty (30) days after such taking, give notice to that effect, and upon
the giving of such notice, the rent shall be apportioned and paid to the date
of expiration of the term specified and this Lease and the term hereby granted
shall cease, expire and come to an end upon the expiration of said thirty days
specified in said notice. If either party shall so elect to end this Lease and
the term hereby granted, Landlord need not restore any part of the demised
premises and the entire award for partial condemnation shall be paid to
Landlord, and Tenant shall have no claim to any part thereof, except as to the
items set forth in Section 9.03 where same are applicable.
9.05. In the event all or any part of the demised premises shall be taken for
a temporary use or occupancy, (a) the Lease term shall not be reduced or
affected in any way except as provided in (d) below, (b) Tenant shall continue
to be responsible for all of its obligation hereunder and shall continue to pay
all rents and additional rents when due, (c) Tenant shall be entitled to
receive that portion of the award which represents reimbursement for the cost
of restoration of the demised premises, compensation for the use and occupancy
of the demised premises and for any taking of Tenant's property, except that,
if the temporary period of taking shall extend beyond the expiration of the
term of this Lease, the portion of the award representing compensation for the
use and occupancy of the demised premises shall be apportioned between Landlord
and Tenant as of said expiration date of said term and Landlord shall receive
that portion of the award which represents reimbursements for the cost of
restoration of the demised premises, and (d) if the date of taking shall occur
during the last three (3) years of the term of this Lease, Tenant may elect to
cancel this Lease by notice of election given by Tenant to Landlord not later
than thirty (30) days after the date when Landlord notifies Tenant of the date
that title shall vest or has vested in the condemning authority. Upon the
giving of such notice, this Lease shall terminate on the thirtieth day
following the date of such notice and the rent and additional rent shall be
apportioned as of such termination date, with Landlord and not Tenant, to
receive the portion of the award which represents reimbursement for the cost of
restoration of the demised premises and the portion of the award representing
compensation for the use and occupancy of the demised premises for the time
subsequent to the cancellation date.
9.06. In the event more than one-third (1/3) of the parking spaces shall be so
condemned or taken which parking spaces formulate part of the overall Land, and
the Landlord is not able to provide on-premises parking equal to two-thirds
(2/3) of the original parking areas, then in that event the Tenant may elect to
cancel this Lease and the terms hereby granted in accordance with the
provisions of Section 9.02 applicable to condemnation of more than twenty-five
(25%) percent of the demised premises. Landlord shall give notice to Tenant
within sixty (60) days of the date of such taking as to whether or not Landlord
will in fact restore sufficient parking facilities as herein set forth. If
Tenant does not elect to cancel this Lease, as aforesaid, then there shall be
no reduction or abatement in rent and this Lease shall otherwise remain in full
force and effect.
ARTICLE 10
Assignment and Subletting
10.01. Tenant, for itself, its heirs, distributees, executors, administrators,
legal representatives, successors and assigns, expressly covenants that it
shall not assign, mortgage or encumber this Lease, nor underlet, or suffer or
permit the demised premises or any part thereof to be used or occupied by
others, without the prior written consent of Landlord in each instance. If
this Lease be assigned, or if the demised premises or any part thereof be
underlet or occupied by anyone other than Tenant, Landlord may, after default
by Tenant, collect rent from the assignee, undertenant or occupant, and apply
the net amount collected to the rent herein reserved, but no assignment,
underletting, occupancy or collection or the acceptance of the assignee,
undertenant or occupant as tenant, shall be deemed a waiver of the provisions
hereof or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained; it being expressly understood
and agreed that Tenant shall remain fully liable for the performance and
observance of all terms, covenants and conditions of this Lease, including
without limitation, timely payment of all rent and items of additional rent.
The consent by Landlord to an assignment or underletting shall not in any wise
be construed to relieve Tenant from obtaining the express consent in writing of
Landlord to any further assignment or underletting. In no event shall any
permitted sublessee assign or encumber its sublease or further sublet all or
any portion of its sublet space, or otherwise suffer or permit the sublet space
or any part thereof to be used or occupied by others, without Landlord's prior
written consent in each instance.
10.02. If Tenant desires to assign this Lease or to sublet all or any portion
of the demised premises, it shall first submit in writing to Landlord the
description of the space and the terms for which Tenant intends to assign or
sublease and shall offer in writing, (i) with respect to a prospective
assignment, to assign this Lease to Landlord without any payment of monies or
other consideration therefor, or, (ii) with respect to prospective subletting,
to sublet to Landlord or its designee the portion of the demised premises
involved ("Leaseback Area") for the term intended by Tenant in its offer and at
the lower of (a) Tenant's proposed subrental or (b) at the same rate of fixed
rent and additional rent and otherwise on the same terms, covenants and
conditions (including provisions relating to escalation rents), as are
contained herein and as are applicable to the portion of the demised premises
to be covered by such subletting. The offer shall specify the date when the
Leaseback Area will be made available to Landlord which date shall be in no
event earlier than sixty (60) days nor later than one hundred eighty (180) days
following the acceptance of the offer by the Landlord. If an offer of sublease
is made, it shall in addition specify the duration of the term of the proposed
sublease as fixed by Tenant, except that if the proposed sublease will result
in all or substantially all of the demised premises being sublet, then Landlord
shall have the option to extend the term of this sublease to the term of the
underlying Lease, less one day. Landlord shall have a period of fifteen (15)
days from the receipt of such offer to either accept or reject the same. If
Landlord shall accept such offer Tenant shall then execute and deliver to
Landlord, or to anyone designated or named by Landlord of reasonable credit
standing, an assignment or sublease, as the case may be, in either case in a
form reasonably satisfactory to Landlord's counsel.
10.02.1 If a sublease is so made to Landlord or its designee, it shall
expressly:
(a) permit Landlord to make further subleases of all or any part of the
Leaseback Area and (at no cost or expense to Tenant) to make and authorize any
and all changes, alterations, installations and improvements in such space as
Landlord may deem necessary for such subletting, at Landlord's expense;
(b) provide that Tenant will at all times permit reasonably appropriate means
of ingress to and egress from the Leaseback Area;
(c) negate any intention that the estate created under such sublease be merged
with any other estate held by either of the parties;
(d) provide that Landlord shall accept the Leaseback Area "as is" except that
Landlord, at Tenant's expense, shall perform all such work physically to
separate the Leaseback Area from the remainder of the demised premises and to
permit lawful occupancy, it being intended that Tenant shall have no other cost
or expense in connection with the subletting of the Leaseback Area;
(e) provide that at the expiration or sooner termination of the term of such
sublease Tenant will accept the Leaseback Area in its then existing condition,
subject to the obligations of Landlord to make such repairs thereto as may be
necessary to preserve the Leaseback Area in good order and condition, ordinary
wear and tear expected.
10.02.2 Landlord, or its designee, as the case may be, shall indemnify and
save Tenant harmless from all obligations under this Lease as to the Leaseback
Area during the period of time it is so sublet except for any obligations which
are not performed by Landlord, or its designee, as such subtenant by reason of
the acts or omissions of Tenant, its agents, employees, contractors, servants,
licensees or invitees. Performance by Landlord, or its designee, under a
sublease of the Leaseback Area shall be deemed performance by Tenant of any
similar obligation contained in this Lease, and Tenant shall not be liable for
any default under this Lease or deemed to be in default hereunder if such
default is occasioned by or arises from any act or omission of the Landlord
under such sublease or is occasioned by or arises from any act or omission of
any occupant holding under or pursuant to any such sublease with Landlord or
its designee.
10.03. If Landlord shall not have accepted Tenant's offer, as provided in
Section 10.02, then Landlord will not unreasonably withhold or delay its
consent to Tenant's request for consent to such assignment or subletting. Any
such consent of Landlord shall be subject to the terms of this Article and
conditional upon there being no default by Tenant (which Tenant has not timely
cured or in good faith has commenced to cure and is diligently prosecuting the
cure thereof) during the period commencing on the date that Tenant shall have
made the offer as set forth in 10.02 to Landlord up to and including the date
of the commencement of the term of the proposed sublease or the effective date
of any such proposed assignment. In the event Tenant does not successfully
sublet or assign the space so designated in 10.02 within six (6) months, then
the Landlord's rights in 10.02 shall re-occur before Tenant may sublet or
assign such space.
10.04. If Tenant requests Landlord's consent to a specific assignment or
subletting, it shall submit in writing to Landlord (which writing shall be in
addition to the writing required pursuant to Section 10.02 hereof) (i) the name
and address of the proposed assignee or sublessee, (ii) a counterpart of the
proposed agreement or assignment or sublease, (iii) reasonably satisfactory
information as to the nature and character of the business of the proposed
assignee or sublessee, and as to the nature of its proposed use of the space,
and (iv) banking, financial or other credit information relating to the
proposed assignee or sublessee reasonably sufficient to enable Landlord to
determine the financial responsibility and character of the proposed assignee
or sublessee. The proposed sublessee or assignee must have a net worth equal
to not less than fifty (50%) percent of the net worth of Tenant.
10.05. Upon receiving Landlord's written consent, a duly executed copy of the
sublease or assignment shall be delivered to Landlord within ten (10) days
after execution thereof. Any such sublease shall provide that the sublessee
shall comply with all applicable terms and conditions of this Lease to be
performed by the Tenant hereunder. Any such assignment of Lease shall contain
an assumption by the assignee of all of the terms, covenants and conditions of
this Lease to be performed by the Tenant.
10.06. Anything herein contained to the contrary notwithstanding:
(a) Tenant shall not advertise (but may list with brokers) its space for
assignment or subletting at a rental rate lower than the rental rate then being
paid by Tenant to Landlord.
(b) The transfer of a majority of the issued and outstanding capital stock of
any corporate tenant or subtenant of this Lease or a majority of the total
interest in any partnership tenant or subtenant, or a majority of the
membership interests in a limited liability company, tenant or subtenant or a
majority of the total beneficial interests in any other form of tenant or
subtenant, however accomplished, and whether in a single transaction or in a
series of related or unrelated transactions, shall be deemed an assignment of
this Lease. The transfer of outstanding capital stock of any corporate tenant,
for purposes of this Article, shall not include sale of such stock by persons
other than those deemed "insiders" within the meaning of the Securities
Exchange Act of 1934 as amended and which sale is effected through "over-the-
counter market" or through any recognized stock exchange. In no event shall
there be an assignment or subletting it being understood and agreed that any
assignment or subletting must be to a bona fide operating entity for a bona
fide business purpose and which proposed assignment or subletting is not
designed to circumvent the restrictions on assignment and subletting set forth
in this Lease to a "shell" corporation - said assignment must be to the
operating entity.
(c) In addition to the restrictions set forth in this Article 10, no
assignments or subletting shall be made:
(i) To any person or entity which shall at that time be a tenant, subtenant or
other occupant of any part of the Building of which the demised premises form a
part, or any person or entity who has been dealing or negotiating with (or has
previously dealt or negotiated with) the Landlord or a broker for space in the
Building, or any person or entity with whom Landlord has been in negotiations
during the preceding one (1) year for any space in any Building owned or
managed by Landlord or its representatives.
(ii) By the legal representatives of Tenant or by any person to whom Tenant's
interest under this Lease passes by operation of law, except in compliance with
the provisions of this Article;
(iii) To any person or entity for the conduct of business which is not in
keeping with the standards and the general character of the Building of which
the demised premises form a part.
(iv) To any person or entity for the practice of medicine in any field.
10.07. Tenant may, with Landlord's prior written consent, which shall not be
unreasonably withheld, provided that Tenant otherwise complies with all other
terms, covenants and conditions of this Article 10, assign or transfer its
entire interest in this Lease and the leasehold estate hereby created or sublet
the whole of the demised premises to a successor entity (Successor Entity) of
Tenant (as hereinafter defined); provided, however, that (i) Tenant shall not
be in default in any of the terms, covenants and conditions of this Lease, (ii)
the proposed occupancy shall not increase the office cleaning requirements or
impose an extra burden upon the building equipment or building services and
(iii) the proposed subtenant or assignee shall not be entitled, directly or
indirectly, to diplomatic or sovereign immunity and shall be subject to the
service of process in, and the jurisdiction of the courts of New York State. A
"Successor Entity", as used in this Article 10 shall mean (a) a corporation,
partnership, limited liability company or other business entity into which or
with which Tenant, its permitted successors or assigns, is merged or
consolidated, in accordance with applicable statutory provisions for the merger
or consolidation of corporations or other business entities, or (b) a
corporation, partnership, limited liability company or other business entity
acquiring this Lease and the term hereof and estate hereby granted, together
with the goodwill and all or substantially all of the other property and
assets, its permitted successors or assigns, and assuming all or substantially
all of the liabilities of Tenant, its permitted successors and assigns, or (c)
any permitted successor to a Successor Entity becoming such by either of the
methods described in subdivisions (a) and (b) above; provided that, immediately
after giving effect to any such merger or consolidation, or such acquisition
and assumption, as the case may be, the business entity surviving such merger
or created by such consolidation or acquiring such assets and assuming such
liabilities, as the case may be, shall have assets, capitalization and a net
worth, as determined in accordance with generally accepted accounting
principles, at least equal to the assets, capitalization and net worth,
similarly determined, of Tenant, its permitted successors or assigns,
immediately prior to such merger or consolidation or such acquisition and
assumption, as the case may be. The acquisition by Tenant, its permitted
successors or assigns, of all or substantially all of the assets, together with
the assumption of all or substantially all of the obligations and liabilities
of any business entity, shall be deemed to be a merger for the purposes of this
Article.
10.08. In the event that Tenant sells, sublets, assigns or transfers this
Lease and at anytime receives periodic rent and/or other consideration which
exceeds that which Tenant would at that time be obligated to pay to Landlord,
Tenant shall pay to Landlord 50% of the gross increase, exclusive of the costs
of any improvements, in such rent as such rent is received by Tenant and 50% of
any other consideration received by Tenant for such subtenant of any other
consideration received by Tenant from such subtenant in connection with such
sublease or in the case of an assignment of this Lease by Tenant, Landlord
shall receive 50% of any consideration paid to Tenant by, such assignee in
connection with such assignment.
ARTICLE 11
Access to Demised Premises
11.01. Tenant shall permit Landlord to erect, use and maintain pipes, ducts
and conduits in and through the demised premises, provided the same are
installed concealed behind walls and ceilings of the demised premises and are
installed by such methods and at such locations as will not materially
interfere with or impair Tenant's layout or use of the demised premises or
damage the appearance thereof. Landlord or its agents or designees shall have
the right, upon reasonable notice, (except in the event of an emergency) but
only upon request (except in the event of an emergency) made to Tenant or any
authorized employee of Tenant at the demised premises to enter the demised
premises, other than vaults or other enclosures where money, securities or
other valuables or confidential documents are kept, at reasonable times during
business hours, for the making of such repairs or alterations as Landlord shall
be required or shall have the right to make by the provisions of this Lease or
any other lease in the Building and, subject to the foregoing, shall also have
the right to enter the demised premises for the purpose of inspecting them or
exhibiting them to prospective purchasers or lessees of the entire Building or
to prospective mortgagees of the fee or of the Landlord's interest in the
property of which the demised premises are a part or to prospective assignees
of any such mortgages or to the holder of any mortgage on the Landlord's
interest in the property, its agents or designees. Landlord shall be allowed
to take all material into and upon the demised premises that may be required
for the repairs or alterations above mentioned as the same is required for such
purpose without the same constituting an eviction of Tenant in whole or in
part, and the rent reserved shall in no wise abate, except as otherwise
provided in this Lease, while said repairs or alterations are being made, by
reason of loss or interruption of the business of Tenant because of the
prosecution of any such work, provided Landlord shall exercise reasonable
diligence so as to minimize the disturbance.
11.02. Landlord may, upon reasonable notice to the Tenant, during the six (6)
months prior to the expiration of the term of this Lease, exhibit the demised
premises to prospective tenants.
11.03. If Tenant shall not be personally present to open and permit an entry
into the demised premises at any time when for any reason an entry therein
shall be urgently necessary by reason of fire or other emergency, Landlord or
Landlord's agents may forcibly enter the same without rendering Landlord or
such agents liable therefor (if during such entry Landlord or Landlord's agents
shall accord reasonable care to Tenants property) and without in any manner
affecting the obligations and covenants of this Lease.
ARTICLE 12
Certificates of Occupancy
12.01. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the Building. Landlord
represents to the best of its knowledge that the certificate of occupancy for
the Building permits the use of the demised premises for the purposes specified
in this Lease. Landlord will make no changes to the Building which will result
in the change to the Certificate of Occupancy for the Building that would
prevent the Tenant from using the demised premises for the use specified in
this Lease
ARTICLE 13
Bankruptcy
13.01. Subject to the provisions of Section 13.03 and the applicable
bankruptcy statutes, if at any time prior to the date herein fixed as the
commencement of the term of this Lease there shall be filed by or against
Tenant in any court pursuant to any statute either of the United States or of
any State a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or a trustee of all or a portion of Tenant's
property, or if Tenant makes an assignment for the benefit of creditors, or
petitions for or enters into an arrangement with creditors, this Lease shall
ipso facto be cancelled and terminated, in which event neither Tenant nor any
person claiming through or under Tenant or by virtue of any statute or of an
order of any court shall be entitled to possession of the demised premises and
Landlord, in addition to the other rights and remedies given by Section 13.04
hereof and by virtue of any other provision herein or elsewhere in this Lease
contained or by virtue of any statute of rule of law, may retain as liquidated
damages any rent, security, deposit or monies received by it from Tenant or
others in behalf of Tenant upon the execution thereof.
13.02. Subject to the provisions of Section 13.03, if at the date fixed as the
commencement of the term of this Lease or if at any time during the term hereby
demised there shall be filed by or against Tenant in any court pursuant to any
statute either of the United States or of any State a petition in bankruptcy or
insolvency or for reorganization of the appointment of a receiver or trustee of
all or a portion of Tenant's property, or if Tenant makes an assignment for the
benefit of creditors, or petitions for or enters into an arrangement with
creditors, Landlord may at Landlord's option, serve upon Tenant or any such
trustee, receiver, or assignee, a notice in writing stating that this Lease and
the term hereby granted shall cease and expire on the date specified in said
notice, which date shall be not less than ten (10) days after the serving of
said notice and this Lease and the term hereof shall then expire on the date so
specified as if that date had originally been fixed in this Lease as the
expiration date of the term herein granted. Thereupon, neither Tenant nor any
person claiming through or under Tenant by virtue of any statute or of an order
of any court shall be entitled to possession or to remain in possession of the
demised premises but shall forthwith quit and surrender the demised premises,
and Landlord, in addition to the other rights and remedies Landlord has by
virtue of any other provision herein or elsewhere in this Lease contained or by
virtue of any statute or rule of law, may retain as liquidated damages any
rent, security, deposit or monies received by it from Tenant or others in
behalf of Tenant.
13.03. In the event that at any times mentioned in either Sections 13.01 and
13.02 there shall be instituted against Tenant an involuntary proceeding for
bankruptcy, insolvency, reorganization or any other relief described in
Sections 13.01 or 13.02, Tenant shall have ninety (90) days in which to vacate
or stay the same before this Lease shall terminate or before Landlord shall
have any right to terminate this Lease, provided the rent and additional rent
then in arrears, if any, are paid within fifteen (15) days after the
institution of such proceeding, and further provided that the rent and
additional rent which shall thereafter become due and payable are paid when
due, and Tenant shall not otherwise be in default in the performance of the
terms and covenants of this Lease.
13.04. In the event of the termination of this Lease pursuant to Sections
13.01, 13.02 or 13.03 hereof, Landlord shall forthwith, notwithstanding any
other provisions of this Lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the then fair and reasonable rental value of the demised premises for the same
period. If the demised premises or any part thereof be re-let by Landlord for
the unexpired term of this Lease, or any part thereof, before presentation of
proof of such liquidated damages to any court, commission or tribunal, the
amount of rent reserved upon such re-letting shall be prima facie evidence of
the fair and reasonable rental value for the part or the whole of the premises
so re-let during the term of the re-letting. Nothing herein contained shall be
limit or prejudice the right of Landlord to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time, and governing the
proceedings in which such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.
ARTICLE 14
Default
14.01. If Tenant defaults any of the terms, covenants and conditions of this
Lease, including the covenants for the payment of rent or additional rent, or
if the demised premises become vacant or deserted, or if any execution or
attachment shall be issued against Tenant or any of Tenants property whereupon
the demised premises shall be taken or occupied by someone other than Tenant;
or if this lease be rejected under the applicable bankruptcy code; or if Tenant
shall fail to move into or take possession of the premises within thirty (30)
days after the commencement of the term of this lease, then, in any one or more
of such events, upon Owner serving a written ten (10) days notice upon Tenant
specifying the nature of said default and upon the expiration of said ten (10)
days, if Tenant shall have failed to comply with or remedy such default of if
the said default or omission complained of shall be a non-monetary and is of a
nature that the same cannot be completely cured or remedied within said ten
(10) day period, and if Tenant shall not have diligently commenced curing such
non-monetary default within such ten (10) day period, and shall not thereafter
with reasonable diligence and in good faith proceed to remedy or cure such non-
monetary default, provided however, that in no event shall Tenant have in
excess of thirty (30) days to complete the cure of any such non-monetary
default which is of such a nature that same cannot be completely cured within
said ten (10) day period, then, in any one or more of such events, Owner may
serve a written ten (10) days notice of cancellation of this lease upon Tenant,
and upon the expiration of said ten (10) days this lease and the term
thereunder shall end and expire as fully and completely as if the expiration of
such ten (10) day period were the day herein definitely fixed for the end and
expiration of this lease and the term thereof and Tenant shall then quit and
surrender the demised premises to Owner, but Tenant shall remain liable as
hereinafter provided.
14.01.1 Reference is made to that certain other lease agreement which Landlord
and Tenant entered into in October 1990 covering certain space in the Building
which was modified by that certain modification of lease dated as of April 14,
1997 (collectively, the Existing Lease). Reference is further made to that
certain other lease agreement of even date entered into by and between Landlord
and Tenant covering the same premises demised under the Existing Lease (Other
Lease). A default by Tenant under the Existing Lease and/or a default by
Tenant under the Other Lease shall, at the option of Landlord, constitute a
default under this Lease. A default under this Lease by Tenant shall, at the
option of Landlord, constitute a default under the Existing Lease and/or the
Other Lease. Without limiting the foregoing, in the event that this Lease
terminates by reason of Tenant's default or otherwise, including by reason of
fire or other casualty or condemnation, then at Landlord's option, the Existing
Lease and/or the Other Lease shall also terminate and in the event that the
Existing Lease shall terminate by reason of Tenants default thereunder or
otherwise, including by reason of fire, casualty or condemnation, then at
Landlords option this Lease and/or the Other Lease shall also terminate and in
the event that the Other Lease shall terminate by reason of Tenants default
and/or otherwise, including by reason of fire, casualty or condemnation, then
at Landlords option this Lease and/or the Existing Lease shall also terminate,
without prejudice to Landlords other rights and remedies at law and in equity.
14.02. If the notices provided for in Section 14.01 hereof shall have been
given, and the term shall expire as aforesaid, or if Tenant shall default in
the payment of the rent reserved herein or any item of additional rent herein
provided or any part of either or in making any other payment herein provided
for, then and in any of such events Landlord may, without notice, re-enter the
demised premises, and dispossess Tenant, the legal representatives of Tenant or
other occupant of the demised premises, by summary proceedings and lawfully
remove their effects and hold the premises as if this Lease had not been made,
and Tenant hereby waives the service of notice of intention to re-enter or to
institute legal proceedings to that end.
14.03. Notwithstanding the provisions of Section 14.01 hereof, Tenant, at its
own cost and expense may contest, in any manner permitted by law (including
appeals to a court, or governmental department or authority having jurisdiction
in the matter), the validity or the enforcement of any governmental act,
regulation or directive with which Tenant is required to comply pursuant to
this Lease, and may defer compliance therewith provided that:
(a) such non-compliance shall not subject Landlord or any of its directors,
officers, employees or shareholders to criminal prosecution, criminal or civil
penalty or subject the Land and/or Building at One Hollow Road, Lake Success,
New York, to lien or sale;
(b) such non-compliance shall not be in violation of any mortgage, or of any
ground or underlying lease and/or any mortgage affecting the Building or Land;
(c) Tenant shall first deliver to Landlord a surety bond issued by a surety
company licensed in the State of New York or other security satisfactory to
Landlord in an amount satisfactory to Landlord, indemnifying and protecting
Landlord against any loss or injury by reason of such non-compliance; and
(d) Tenant shall promptly and diligently prosecute such contest.
(e) Tenant shall pay any and all costs and expenses associated with such
contest and shall reimburse Landlord for its reasonable attorneys fees
associated with the Landlord's review of or participation in Tenant's contest.
Landlord shall reasonably cooperate with Tenant, including the execution of
such documents as are reasonably necessary under the circumstances, provided
that Landlord agrees with the accuracy of such documents and that no provision
of this Lease is violated thereby.
ARTICLE 15
Remedies of Landlord; Waiver of Redemption
15.01. In case of any such re-entry, expiration and/or dispossess by summary
proceedings or otherwise as set forth in Article 14 hereof (a) the rent shall
become due thereupon and be paid up to the time of such re-entry, dispossess
and/or expiration, together with such expenses as Landlord may incur for legal
expenses, reasonable attorneys' fees, brokerage, and/or putting the demised
premises in good order, or for preparing the same for re-rental; (b) Landlord
may re-let the demised premises or any part or parts thereof, either in the
name of Landlord or otherwise, for a term or terms, which may at Landlord's
option be less than or exceed the period which would otherwise have constituted
the balance of the term of this Lease and may grant concessions or free rent;
and/or (c) Tenant shall also pay Landlord as liquidated damages for the failure
of Tenant to observe and perform said Tenant's covenants herein contained, any
deficiency between the rent hereby reserved and/or covenanted to be paid and
the net amount, if any, of the rents collected on account of the lease or
leases of the demised premises for each month of the period which would
otherwise have constituted the balance of the term this Lease. The failure of
Landlord to re-let the demised premises or any part or parts thereof shall not
release or affect Tenant's liability for damages. In computing such liquidated
damages there shall be added to the said deficiency such expenses as Landlord
may incur in connection with re-letting, such as legal expenses, reasonable
attorneys' fees, brokerage and for keeping the demised premises in good order
or for preparing the same for re-letting. Any such liquidated damages shall be
paid in monthly installments by Tenant on the rent days specified in this Lease
and any suit brought to collect the amount of the deficiency for any month
shall not prejudice in any way the rights of Landlord to collect the deficiency
for any subsequent month by a similar proceeding. Landlord, at Landlord's
option, may make such alterations, repairs, replacements and/or decorations in
the demised premises as Landlord, in Landlord's sole judgment, considers
advisable and necessary for the purpose of re-letting the demised premises; and
the making of such alterations and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Landlord
shall in no event be liable in any way whatsoever for the failure or refusal to
re-let the demised premises or any parts thereof, or, in the event that the
demised premises are re-let, for failure to collect the rent thereof under such
re-letting. In the event of a breach, or threatened breach by Tenant of any of
the covenants or provisions hereof, Landlord shall have the right to invoke any
remedy allowed at law or in equity as if re-entry, summary proceedings and
other remedies were not herein provided for. Mention in this Lease of any
particular remedy, shall not preclude Landlord from any other remedy, in law or
in equity. Without limiting Landlord's other rights and remedies, if Tenant
shall at any time default hereunder, and if Landlord shall institute an action
or summary proceedings against Tenant based upon such default, or if Landlord
is otherwise involved in any litigation against Tenant, then Tenant will
reimburse Landlord for the reasonable attorneys fees, costs and disbursements
incurred by Landlord.
15.02. Tenant hereby expressly waives any and all rights of redemption granted
by or under any present or future laws in the event of Tenant being evicted or
dispossessed for any cause, or in the event of Landlord obtaining possession of
demised premises, by reason of the violation by Tenant of any of the covenants
and conditions of this Lease or otherwise.
ARTICLE 16
Fees and Expenses; Interest
16.01. If Tenant shall default in the observance or performance of any term or
covenants on Tenant's part to be observed or performed under or by virtue of
any of the covenants, terms or provisions in any Article of this Lease, then,
without limiting Landlord's other rights and remedies (a) Landlord may remedy
such default for the account of Tenant, immediately and without notice in case
of emergency, or in any other case only provided that Tenant shall fail to
remedy such default with all reasonable dispatch after Landlord shall have
notified Tenant in writing of such default and the applicable grace period for
curing such default shall have expired; and (b) if Landlord makes any
expenditures or incurs any obligations for the payment of money in connection
with such default including, but not limited to, reasonable attorneys' fees in
instituting, prosecuting or defending any action or proceeding, such sums paid
or obligations incurred, with interest, shall be deemed to be additional rent
hereunder and shall be paid by Tenant to Landlord upon rendition of a bill to
Tenant therefor.
16.02. Without limiting Landlord's other rights and remedies, if Tenant is
late in making any payment due to Landlord from Tenant under this Lease, then
interest per annum ("interest") calculated at the rate of three percent (3%)
above the prime rate of interest charged by The Chase Manhattan Bank in New
York City shall become due and owing to Landlord on such payment from the
date when it was due (or the maximum amount as may then be legally permitted by
law whichever is lower).
16.03. If Landlord shall default in the observance or performance of any term
or covenants on Landlord's part to be observed or performed under or by virtue
of any of the covenants, terms or provisions in any Article of this Lease, and
if Landlord shall fail to commence to cure such default within forty-five (45)
days after receipt of written demand from Tenant (or if such default cannot be
cured within forty-five days, then Landlord shall have a reasonable period of
time after receipt of written notice from Tenant to cure such default), and
thereafter continue to prosecute such default, then Tenant may remedy such
default for the account of Landlord. If Tenant makes any reasonable
expenditures or incurs any obligations for the payment of money in connection
with the cure of such default, such sums paid or obligations incurred, shall
be deemed to be due by Landlord to Tenant within rendition of a bill in
reasonable detail to Landlord therefor.
ARTICLE 17
No Representations by Landlord
17.01. Landlord or Landlord's agents have made no representations or promises
with respect to the Building or demised premises except as herein expressly set
forth.
ARTICLE 18
End of Term
18.01. Upon the expiration or other termination of the term, Tenant shall quit
and surrender to Landlord the demised premises, broom clean, in good order and
condition, ordinary wear and tear and damage for which Tenant is not
responsible under the terms of this Lease excepted, Tenant's obligation to
observe or perform this covenant shall survive the expiration or sooner
termination of the term of this Lease. Tenant agrees to indemnify and save
Landlord harmless from all costs, claims, loss or liability resulting from
delay by Tenant in so surrendering the demised premises, including, without
limitation, any claims made by any succeeding tenant founded on such delay. If
the last day of the Term or any renewal thereof falls on Saturday or Sunday
this Lease shall expire on the business day immediately preceding. Tenant
expressly waives, for itself and for any person claiming through or under
Tenant, any rights which Tenant or any such person may have under the
provisions of Section 2201 of the New York Civil Practice Law and Rules and of
any successor law of like import then in force in connection with any holdover
summary proceedings which Landlord may institute to enforce the foregoing
provisions of this Article 18. In addition, the parties recognize and agree
that the damage to Landlord resulting from any failure by Tenant to timely
surrender possession of the demised premises as aforesaid will be substantial,
will exceed the amount of the monthly installments of the fixed annual rent
theretofore payable hereunder, and will be impossible to accurately measure.
Tenant therefor agrees that if possession of the demised premises is not
surrendered to Landlord within twenty-four (24) hours after the expiration date
or a sooner termination of the Term, in addition to any other rights or remedy
Landlord may have hereunder or at law Tenant shall pay to Landlord for each
month and for each portion of any month during which Tenant holds over in the
demised premises after the Expiration Date or sooner termination of this Lease,
a sum equal to two (2) times the fixed rent and all items of additional rent
which was payable under this Lease during the last month of the Term. Nothing
herein contained shall be deemed to permit Tenant to retain possession of the
demised premises after the Expiration Date or sooner termination of this Lease
and no acceptance by Landlord of payments from Tenant after the expiration or
sooner termination of the Lease shall be deemed to be other than on account of
the amount to be paid by Tenant in accordance with the provisions of this
Article 18, which provisions shall survive the expiration or sooner termination
of this Lease.
ARTICLE 19
Quiet Enjoyment
19.01. Landlord covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing and performing all the terms, covenants
and conditions, on Tenant's part to be observed and performed, Tenant may
peaceably and quietly enjoy the premises hereby demised, subject nevertheless,
to the terms and conditions of this Lease, and to any ground leases, underlying
leases and mortgages hereinbefore mentioned to which this Lease is subordinate.
ARTICLE 20
Definitions
20.01. The term "Landlord" as used in this Lease means only the owner, or the
mortgagee in possession, for the time being of the Land and Building (or the
owner of a lease of the Building or of the Land and Building), so that in the
event of any transfer of title to the Land and Building or said lease, or in
the event of a lease of the Building, or of the Land and Building, upon
notification to Tenant of such transfer or lease the said transferor Landlord
shall be and hereby is entirely freed and relieved of all existing or future
covenants, obligations and liabilities of Landlord hereunder, and it shall be
deemed and construed as a covenant running with the Land without further
agreement between the parties or their successors in interest, or between the
parties and the transferee of title to the Land and Building or said lease, or
the said lessee of the Buildi