-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CfC0Nvzws+0q3FyCCEHzKQg2ZwYnzVncTTjdiEpZnyodUOH7leclr0Xf/EkuCmi8 brYHYFb+3V3E9A0NUqdCdA== 0001018375-00-000007.txt : 20000523 0001018375-00-000007.hdr.sgml : 20000523 ACCESSION NUMBER: 0001018375-00-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000522 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTITUTIONAL EQUITY HOLDINGS INC /NV/ CENTRAL INDEX KEY: 0000852447 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES [6200] IRS NUMBER: 880317700 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-27720 FILM NUMBER: 640651 BUSINESS ADDRESS: STREET 1: 8214 WESTCHESTER STREET 2: SUITE 500 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2146923565 MAIL ADDRESS: STREET 1: 8214 WESTCHESTER STREET 2: SUITE 500 CITY: DALLAS STATE: TX ZIP: 75225 FORMER COMPANY: FORMER CONFORMED NAME: EUROMED INC DATE OF NAME CHANGE: 19951226 10-K 1 INSTITUITONAL EQUITY HOLDINGS (FORMERLY EUROMED) UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-KSB (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended: December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission File No.0-27720 INSTITUTIONAL EQUITY HOLDINGS, INC. (FORMERLY KNOWN AS EUROMED, INC.) (Exact name of registrant as specified in its charter) Nevada 88-031770 (State or other jurisdiction IRS Employer Identification No.) of incorporation or organization)
5910 North Central Expressway, Suite 1480 Dallas, TX 75206 (Address of principal executive offices) 214-237-3223 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-KSB. [x] State issuer's revenue for its most recent fiscal year: $9,709,826 The number shares outstanding of the registrant's common stock as of May 8, 2000 was: 2,289,000 shares of common stock, par value $.01 per share. 1 The aggregate market value of the voting stock held by non-affiliates of the registrant as computed by reference to the average of the closing bid and asked prices of such stock, as reported by the Bulletin Board, on May 8, 2000 ($1.00 per share) is $1,127,500. Shares of voting stock held by each officer and director and by each person who owns 10% or more of the Company's outstanding voting stock have been excluded in that such persons bay be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. 2 INSTITUTIONAL EQUITY HOLDINGS, INC. (FORMERLY KNOWN AS EUROMED, INC.) For the Year Ended December 31, 1999 Table of Contents Page Part I Item 1: Business...............................................................................................4 Item 2: Properties.............................................................................................9 Item 3: Legal Proceedings......................................................................................9 Item 4: Submission of Matters to a Vote of Security Holders....................................................9 Part II Item 5: Market for the Registrant's Common Equity and Related Stockholder Matters.............................10 Item 6: Management's Discussion and Analysis of Financial Condition and Results of Operations.................11 Item 7: Financial Statements and Supplementary Data...........................................................14 Item 8: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................15 Part III Item 9: Directors and Executive Officers of Institutional Equity Holdings, Inc................................15 Item 10: Executive Compensation................................................................................16 Item 11: Security Ownership of Certain Beneficial Owners and Management........................................18 Item 12: Certain Relationships and Related Transactions........................................................19 Part IV Item 13: Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................20
3 PART I Item 1. Business Swiss Nassau Corporation was incorporated on May 17, 1994 in the State of Nevada, with 1,000 shares of authorized common stock with no par value. On June 15,1994, all authorized shares of common stock of Swiss Nassau Corporation were issued. On October 20, 1995, Swiss Nassau Corporation changed its name into EuroMed, Inc. and increased its authorized shares to 20,000,000 shares of common stock with a new par value of $0.01 per share, and 5,000,000 preferred shares with a par value of $0.01 per share. On October 20, 1995, EuroMed, Inc. effected a 150 for 1 stock split of its common stock. On April 23, 1999, EuroMed, Inc. changed its name to Institutional Equity Holdings, Inc. (the "Company" or "IEH"). In November 1995, the Company began acquiring pharmaceutical companies operating exclusively in Europe. The Company completed the acquisitions using the net proceeds from the sale of 1,150,000 shares of its common stock (issue price was $6.50 per share) in March 1996 and the issuance of 2,700,000 shares of its common stock. Subsequent to the acquisitions, laws relating to the pricing of pharmaceuticals in Europe were changed and as a result the operations of the pharmaceutical companies owned by the Company were severely impacted, resulting in significant operating losses. The Company realized approximately $1,146,000 in cash and cancelled 2,700,000 shares of its common stock upon sale of its European subsidiaries in 1997. The Company had no business activities in the calendar year of 1998, except that on November 6, 1998 the Company's Board of Directors approved and executed the "Agreement and Plan of Reorganization" by and among the Company, Institutional Equity Corporation ("IEC", a wholly owned subsidiary of the Company and formerly known as Redstone Acquisition Corp.) and Redstone Securities, Inc. ("Redstone"), a licensed broker and dealer of securities. Effective February 16, 1999, Redstone was merged into the newly organized subsidiary IEC. The Company issued 600,000 shares of its common stock to the three principals of Redstone, Thomas Laundrie, Gary Prucell, and Richard Belz (collectively referred to as the "Redstone Shareholders") and was obligated to issue an additional 500,000 shares of its common stock (the "Restricted Shares") upon the market price of the Company's common stock reaching certain price levels or IEC reporting certain levels of net income. Notwithstanding the price levels of the common stock or net income performance levels, the Restricted Shares fully vest on February 16, 2002. Redstone has been a registered broker dealer since 1988. The Redstone Shareholders agreed to terminate their relationship with the Company in February 2000 subject to certain compensation payments, to forgo the collection of the Company's subordinate notes due the Redstone Shareholders, to assume an investment in a certain security at its book value and to modify the number of shares of the Company's common stock from 1,100,000 to 500,000 shares of fully vested common stock. The Company has a right to repurchase these shares of its common stock at a price of $2.00 per share as follows: Number of Redemption Shares Period 100,000 Calendar year 2000 100,000 Calendar year 2001 300,000 On or before February 16, 2002 IEH is a holding company whose only operating subsidiary is IEC a full service brokerage firm engaged in the purchase and sale of securities from and to the public and for its own account and investment banking activities. The Company operates in one industry segment, the financial services industry. At December 31, 1999, IEC employed 124 brokers registered with the National Association of Securities Dealers, Inc. ("NASD"). IEH also employed a support staff of 30 persons in its headquarters in Dallas, TX and in its branch offices. At December 31, 1999, IEH had 4 branch offices throughout the United States. The Company's headquarters are located at 5910 North Central Expressway, Suite 1480, Dallas, TX 75206. Its telephone number is (214) 237-3223. 4 Principal Products, Services and Markets Virtually all of IEH's business is carried on through IEC. IEC is involved in the purchase and sale of most investment securities but is not involved in commodities or futures. Three broad categories of securities activities contribute to revenues of IEC: general securities (or retail), trading and market making (or wholesale) and corporate finance/investment banking. IEC also receives revenues from gains and losses in investment accounts, from the exercise of underwriter warrants received in connection with its corporate finance activities, and from other sources. The following table indicates the approximate percentage of revenues that were accounted for by each of these categories and from investment income (including underwriter warrants) in the last five fiscal years: 1999 1998 1997 1996 1995 Commissions 89% 70% 46% 38% 29% Gain (Loss) on Firm Securities Accounts (3) 20 46 49 57 Underwriting and syndicate income 12 5 1 8 11 Other 2 5 7 5 3 100% 100% 100% 100% 100%
In this table, "Trading" includes only the net profit or loss from IEC's trading activities. See "Trading and Market Making." General Securities As a securities broker, IEC acts as agent for its customers in the purchase and sale of common and preferred stocks, options and debt securities traded on securities exchanges or in the over-the-counter ("OTC") market. A major portion of its revenues is derived from commissions from customers on these transactions. In the OTC market, transactions with customers in securities not listed on an exchange may be effected as principal, rather than agent, primarily where IEC is a market maker in that security. Customer transactions in securities are effected either on a cash or margin basis. IEC enters into dealer agreements with mutual fund management companies and publicly registered limited partnerships. Commissions on the sale of these securities are derived from the standard dealers discounts, which range from approximately one percent (1%) to eight and one-half percent (8.5%) of the purchase price of the securities, depending on the terms of the dealer agreement and the amount of the purchase. IEC does not generally sell interests in limited partnerships which are not publicly registered. Pursuant to an agreement between IEC, First Southwest Company ("FSW") and Fiserv (FIS), FSW and FIS carry all of IEC's customer securities accounts and performs the following services: (1) preparation and mailing of monthly statements to IEC customers; (2) settlement of contracts and transactions in securities between IEC and other broker-dealers and between IEC and its customers; (3) custody and safe-keeping of securities and cash, the handling of margin accounts, dividends, exchanges, rights offerings and tender offers; and (4) the execution of customer orders placed on an exchange. IEC determines the amount of commission to be charged to its customers on agency transactions and the price of securities purchased or sold in principal transactions. FSW and FIS receives compensation based on the size of the transaction, subject to certain minimum and maximum amounts. The agreements between IEC and FSW and IEC and FIS may be canceled by either party upon 60 days written notice, which period may be reduced in certain events. In the event of a liability arising from a bad debt from a customer, IEC is required to indemnify FSW or FIS against any loss. This potential liability is uninsured. 5 In addition to providing clearing services for IEC, FSW and FIS loan money to IEC in the ordinary course of IEC's business, pursuant to an arrangement under which FSW and FIS agrees to finance IEC's trading accounts. At December 31, 1999 no loans were outstanding pursuant to this arrangement. See "Item 6 - Management's Discussion and Analysis or Plan of Operation." Trading and Market Making In addition to executing trades as an agent, IEC regularly acts as a principal in executing trades in equity securities, corporate debt securities and municipal bonds. The amount of trading by IEC in the high yield bond market has not been material. At December 31, 1999, IEC made a market in approximately 55 securities of 54 issuers. Of these, two (2) were corporations for which IEC has acted as managing or co-managing underwriter of public financings. In addition, at December 31, 1999, IEC held securities of 24 companies in its investment account. In 1999, the value of securities held in the trading accounts and investment account ranged between $464,034 and $1,385,456. The level of positions carried in IEC's trading and investment accounts fluctuates significantly. The size of the securities positions at any date may not be representative of IEC's exposure on any other date, because the security positions vary substantially depending upon economic and market conditions, the allocation of capital among types of inventories, underwriting commitments, customer demands and trading volume. The aggregate value of inventories that IEC may carry is limited by certain requirements under the SEC's net capital rules. See "Net Capital Requirements." IEC's market making activities are conducted both with other dealers in the "wholesale market" and with IEC's customers. Transactions with customers are effected as principal at a net price equal to the current interdealer price plus or minus the approximate equivalent of a brokerage commission. Securities are purchased primarily to provide an inventory for customers who wish to buy, and short sales are likewise made primarily to serve customers. IEC's transactions as principal expose IEC to risk because securities positions are subject to fluctuations in market value and liquidity. Profits or losses on trading and investment positions depend upon the skills of the employees in IEC's trading department and employees responsible for taking investment positions. The trading department is headquartered in IEC's Plainview, New York office. Corporate Finance IEC raises capital through public offerings of securities for corporations that are engaged in a variety of businesses. IEC participates in underwritings of corporate securities as managing underwriter and as a syndicate member. Management of an underwriting account is generally more profitable that participation as a member of an underwriting syndicate. Revenues generated by syndicate participations have not been material. IEC generally underwrites public offerings of securities in the range of $1.5 million to $10 million on a "firm commitment" basis, which means that it agrees to purchase a specific amount of securities from the issuer at a discount after the registration statement for the offering is declared effective by the Securities and Exchange Commission (the SEC") and resells the securities to the public at a specified price. The underwriting involves risk of loss if IEC is unable to resell at a profit the securities it is committed to purchase. This risk is usually reduced by accepting other stock brokerage firms as a part of an underwriting syndicate in which each member commits to purchase a specified amount of the offering. IEC and other underwriters may also sell a portion of their commitment through a "Selling Group" of other stock brokerage firms that participate in selling the offering but are not subject to an underwriter's commitment. As an underwriter, IEC is also subject to potential liability under federal and state securities laws and other laws if the registration statement or prospectus contains a material misstatement or omission. IEC's potential liability as an underwriter is uninsured. The commitment of capital by IEC between the time a firm commitment underwriting agreement becomes effective and the time IEC resells the securities constitutes a charge against its net capital. Accordingly, IEC's participation in or initiation of underwritings maybe limited by the financial requirements of the Sec and NASD. See "Net Capital Requirements." Between January 1, 1999 and December 31, 1999 IEC acted as the managing underwriter or co-managing underwriter 6 for four (4) securities offerings, raising approximately $21,027,500 million for corporate finance clients. Of these, two (2) were initial public offerings. IEC typically receives two (2) to three (3) percent of the aggregate amount of money raised in an offering to cover non-accountable expenses and between seven (7) and ten (10) percent as compensation to underwriters, selling group members and registered representatives, although these percentages may be lower for larger transactions. Typically IEC also receives warrants to purchase securities, equal to ten (10) percent of the securities sold in the offering, for a period of five years at a price equal to one hundred twenty percent (120) percent of the public offering price, although a portion of these warrants are typically transferred as compensation to persons associated with IEC and, in certain cases, to other major underwriters in the public offering. See "Item 6 - Management's Discussion and Analysis or Plan of Operation Liquidity and Capital Resources." Branch Offices IEC personnel run IEC branch offices and IEC assumes liability for all the operating expenses of the branch. Persons in these branches are registered with IEC, and IEC assumes the compliance and regulatory obligations for these employees. As of December 31, 1999, IEC had 4 branch offices in Florida (1), New Jersey (1) and New York (2). Research IEC does not presently employ anyone to perform research. In 1999, two persons were employed to gather and analyze information that would be intended to provide IEC with an adequate basis for performing its investment banking activities and to provide customers with a regular flow of information on the companies for which IEC has in the past provided investment banking services. Regulation IEC is registered with the SEC as a broker-dealer under the Securities Exchange Act of 1934. It is also registered as a broker-dealer under laws of 48 states and Washington, D.C. IEC is a member of the NASD. The securities business is subject to extensive regulation under federal and state laws. The principal purpose of regulation and discipline of broker-dealers is the protection of customers and the securities markets rather than protection of creditors and stockholders of broker-dealers. The SEC is the federal agency charged with administration of the federal securities laws. Much of the regulation of broker-dealers, however, has been delegated to self-regulatory organizations, principally the NASD. These self-regulatory organizations adopt rules (subject to approval by the SEC), which govern the industry and conduct periodic examinations of member broker-dealers. Securities firms are also subject to regulation and examination by state securities commissions in the states in which they are registered. The regulations to which broker-dealers are subject cover all aspects of the securities business, including sales methods, trading practices among broker-dealers, capital structure of securities firms, record keeping and the conduct of directors, officers and employees. Additional legislation, changes in rules promulgated by the SEC and by self-regulatory bodies or changes in the interpretation or enforcement of existing laws and rules often affect directly the method of operation and profitability of broker-dealers. The SEC, NASD and state regulatory authorities may conduct administrative proceedings, which can result in censure, fine, suspension or expulsion of a broker-dealer, its officers or employees. Net Capital Requirements IEC is required to maintain minimum "net capital" under the SEC's net capital rule of not less than 6.67 percent of its aggregate indebtedness. As of December 31, 1999, IEC had net capital of $559,737, which exceeded its minimum requirement of $100,000 by $156,638. The ratio of aggregate indebtedness of $677,577 to net capital of $256,638 on December 31, 1999 was approximately .93 to 1. In a public offering in which IEC acts as an underwriter, IEC must 7 have sufficient net capital to cover the amount of securities underwritten, applying applicable formulas mandated by the SEC, during the period between effectiveness and the closing of the transaction (usually about one week). This results in a significant temporary increase in IEC's required net capital. In many cases, the amount of securities underwritten by IEC has been limited by its net capital. Any significant reduction in IEC's net capital, even if IEC were still in compliance with the SEC's net capital rule for its retail and trading activities, could have a material adverse impact on IEC's ability to continue its investment banking activities. Competition All aspects of IEC's business are highly competitive. In its general brokerage activities, IEC competes directly with numerous other broker-dealers, many of which are large well known firms with substantially greater financial and personnel resources than IEC. Many of IEC's competitors employ extensive advertising and actively solicit potential clients in order to increase business. In addition, brokerage firms compete by furnishing investment research publications to existing clients, the quality and breadth of which are considered important in the development of new business and the retention of existing clients. IEC also competes with a number of smaller regional brokerage firms. Some commercial banks and thrift institutions offer securities brokerage services. Many commercial banks offer a variety of investment banking services. Competition among financial services firms also exists for investment representatives and other personnel. The securities industry has become considerably more concentrated and more competitive over the last decade, as numerous securities firms have either ceased operations or have been acquired by or merged into other firms. This trend has been particularly pronounced among firms similar in size and business mix to IEC. In addition, companies not engaged primarily in the securities business, but with substantial financial resources, have acquired leading securities firms. These developments have increased competition from firms with greater capital resources than those of the Company. Various legislative and regulatory developments have tended to increase competition within the industry or reduced profits for the industry. In particular, various recent developments have tended to increase competition from commercial banks. The securities industry has experienced substantial commission discounting by broker-dealers competing for brokerage business. In addition, an increasing number of specialized firms now offer "discount" services to individual customers. These firms generally effect transactions for their customers on an "execution only" basis without offering other services such as portfolio valuation, investment recommendations and research. A growing number of discount brokerage firms offer their services over the internet, further decreasing offered commission rates and increasing ease of use for customers. The continuation of such discounting and an increase in the number of new and existing firms offering discounts could adversely affect the Company. In addition, rapid growth in the mutual fund industry is presenting potential customers of IEC with an increasing number of alternatives to traditional stock brokerage accounts. In its investment banking activities, IEC competes with other brokerage firms, venture capital firms, banks and all other sources of capital for small, growing companies. Since IEC generally manages offerings smaller than $10 million, it does not typically compete with the investment banking departments of large, well-known national brokerage firms. Nevertheless, IEC may occasionally manage larger offerings. In addition, large national and regional investment banking firms occasionally manage offerings of a size that is competitive with IEC, typically for fees and compensation less than that charged by IEC. When the market for initial public offerings is active, many small regional firms that do not typically engage in investment banking activities also begin to compete with IEC. Employees At December 31, 1999, the Company had 154 employees, of whom 30 were executives and support staff and 124 were involved in brokerage activities and compensated on a commission and/or salary basis. 8 ITEM 2. DESCRIPTION OF PROPERTY The following summarizes the properties leased by the Company as of December 31, 1999: LEASE SQUARE MONTHLY EXPIRATION OFFICE ADDRESS FOOTAGE RENTAL DATE Plainview 101 Fairchild Ave. 5,566 $ 7,145 May 2003 Plainview, New York Lynbrook 300 Merrick Road, Suite 307 3,800 $ 7,217 September 2004 Lynbrook, New York Newark 550 Broad Street 5,083 $ 7,201 July 2004 Newark, New Jersey Boca Raton 100 East Linton Blvd., 800 $ 1,343 October 2000 Suite 3013, Delray Beach, Florida Dallas 5910 N. Central Expressway 7,059 $12,353 October 2004 Dallas, Texas
ITEM 3. LEGAL PROCEEDINGS From December 31, 1999, and to May 8, 2000, the Company was involved in no litigation. The Company is a party to numerous NASD arbitrations and it is management's opinion that settlements, if any, would not have a material effect on the accompanying consolidated financial statements for the year ended December 31, 1999. In compliance with an Injunction and Civil Contempt Order of January 6,1999, Gregory Alan Gaylor, a Shareholder of the Company, signed an irrevocable proxy dated January 21, 1999, appointing Institutional Equity Holdings, Inc., as his sole proxy with respect to 125,000 shares of Institutional Equity Holdings, Inc. common stock. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIY HOLDERS No matters were submitted to a vote of security holders during the year ended December 31, 1999. 9 PART II Item 5: Market for the Registrant's Common Equity and Related Stockholder Matters The Company's common stock trades in the over-the-counter market. The Company's stock has not been actively traded. The Company's stock is quoted on the Nasdaq SmallCap Market under the symbol "IEQC" ("EMED" until the Company's name change in April 2000). Before this time, March 19, 1996 to December 30, 1996, the stock was traded on the Nasdaq National market under the symbol "EMED." The following table sets forth the high and low sales prices on the Nasdaq for the Common Stock for fiscal year 1999 and 1998.
1999 1998 Quarter High Low High Low First Quarter $2.25 $0.31 $0.53 $0.23 Second Quarter 1.87 1.00 0.97 0.53 Third Quarter 2.25 1.08 1.58 0.64 Fourth Quarter 1.62 0.75 0.81 0.41
On May 8, 2000, the Company had 54 stockholders of record of its common stock and 2,289,000 shares outstanding. The high and low closing prices for the first quarter of 2000 through May 8, 2000 were $3.63 and $1.00, respectively. Dividend Policy The Company has never paid a dividend on its common stock. Regulatory net capital requirements may limit the ability of IEC to pay dividends to IEH. IEH anticipates that, for the foreseeable future, earnings will be retained for use in its business and does not anticipate the payment of dividends. Sales of Unregistered Securities In November 1998, the Company agreed to issue 35,000 shares of its Common Stock in settlement of professional fees related to the sale of the Company's subsidiary in 1997. As of December 31, 1999, these shares of its common stock had not been issued. In February 1999, the Company as part of its acquisition of Redstone Securities, Inc. issued 600,000 shares of its common stock and agreed to issue an additional 500,000 shares of its common stock subject to certain future stock price levels and the income levels. In February 2000, the agreement with the Redstone Shareholders was modified so that they ultimately receive 500,000 shares of fully vested common stock. In April 1999, the Company sold 97,000 shares of its common stock for $1.00 per share. As of December 31, 1999, 36,000 of the shares sold in April 1999 had not been issued. In December 1999, the Company sold 250,000 shares of its common stock at a price of $1.00 per share. As of December 31, 1999, these shares of common stock had not been issued. 10 In 1999, the Company authorized the issuance of preferred stock and in private placements sold the following shares of its preferred stock: Preferred Stock Number of Price Per Total Series Shares Sold Share Value Series A 1,060,000 $2.00 $2,120,000 Series B 37,500 $2.00 $75,000
Subsequent to December 31, 1999, the Company sold an additional 37,500 shares of it's Series B Preferred Stock at $2.00 per share. ITEM 6: Management's Discussion Analysis of Financial Condition and Results of Operation Selected Financial Data The following selected consolidated financial data for each of the five years in the period ended December 31, 1999, have been derived from the audited consolidated financial statements of the Company. The selected consolidated financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto included elsewhere in this report.
YEARS ENDED DECEMBER 31, 1995* 1996* 1997* 1998 1999 Statement of Operations Data: Revenues $8,323,483 $7,254,208 $5,535,951 $4,497,780 $9,709,826 Total Expenses 7,458,128 7,203,035 5,428,074 5,126,041 12,952,709 Net Income (Loss) 865,355 51,153 107,877 (631,261) (3,330,827) Weighted Average Number of Common Shares Outstanding 1,930,000 1,930,000 1,942,000 1,942,000 2,028,000 Income (Loss) Per Share $0.45 $0.03 $0.05 $(0.32) $(1.64) Balance Sheet Data at Year End: Total Current Assets 2,652,483 2,713,563 1,643,806 1,357,182 1,889,438 Total Assets 2,791,718 2,915,808 1,808,585 1,480,508 3,835,075 Current Liabilities 1,490,043 2,677,980 1,461,880 608,056 1,786,780 Stockholders' Equity 771,675 237,820 346,705 357,452 349,252 *Amounts reflected are applicable to Redstone Securities, Inc. operations, only.
Results of Operations Year ended December 31, 1999 Compared to Year ended December 31, 1998 Revenues for the year ended December 31, 1999, increased 116% to $9,709,826 compared to $4,494,780 for the year ended December 31, 1998. In 1998, the Company had two (2) offices in New York and one (1) office in Florida. In 1999, the Company added two (2) offices in Texas and one in New Jersey; however, subsequent to their opening, offices were closed in Texas (Austin) and New Jersey (West Patterson). The new offices were the source of increased commission revenue. In 1998, the Company did not act as managing underwriter on any public or private security offerings, while in 1999, the Company was the managing underwriter for four (4) securities offerings, raising approximately $21,027,500. These underwriting activities resulted in the 413% increase in underwriting revenue. 11 Expenses for the year ended December 31, 1999, increased 153% to $12,952,709 compared to $5,126,041 for the year ended December 31, 1998. The following summarizes the changes in expenses:
1999 Percentage Increase In Percentage of Total Expenses Expenses 1998 1999 Employee Compensation 58% 66% 190% Commissions Paid to Other Broker Dealers 10 8 108 Underwriting and Syndicate Expenses - 2 1,031 General And Administrative Expenses 22 10 15 Rent, Telephone and Quotation Expense 8 8 150 Interest Expense 2 6 639 Total Expenses 100% 100% 153 Total Expenses as a Per- Centage of Revenues 114% 133%
Overall expenses increased 153% in 1999, as compared to 1998. The most significant increase in expenses was the 190% increase in salaries to $8,619,955 for the year ended December 31, 1999, compared to $2,970,207 for the year ended December 31, 1998. The employee compensation increase is attributable to the increased number of brokers and other support staff in the new offices and the increased compensation related to the underwriting activity. The brokers and officers generally received approximately sixty percent (60%) of the revenues derived from the underwritings plus an allocation of the underwriter's warrants. Included in employee compensation expense was $657,390 of expense associated with warrants, in client companies, earned by brokers participating in 1999 underwritings. The increase in commissions paid to other broker dealers and underwriting and syndicate expenses was the result of the 1999 underwritings. In March 1999, the Company entered into an agreement with an individual for delivery to the Company of a stock certificate representing 66,250 shares of common stock of Westower Corporation (which has subsequently converted into 119,912 shares of Spectrasite Holdings, Inc.). The agreement included a provision that the individual was to receive compensation equal to five percent (5%) of the average daily closing sales price of the common stock ($59,500 for 1999) and warrants to purchase 414,062 shares of the Company's common stock at an exercise price of $2.00 per share (estimated fair value of the warrants at date of issue was $571,406). The $630,906 of compensation to the individual was included in interest expense for the year ended December 31, 1999. For the year ended December 31, 1999, the Company reported a net loss of $3,330,827 compared to a loss of $631,261 for the year ended December 31, 1998. The increase in the loss was the result of the growth in employee and non-employee compensation, which could not be off set by increased revenues. 12 LIQUIDITY AND CAPITAL RESOURCES Cash used in operations was $2,434,855 for the year ended December 31, 1999, compared with cash used in operations of $361,029 for the year ended December 31, 1998. This significant increase in cash used was attributable to increases in employee and operating costs associated with the new offices. The Company is currently reassessing its staffing levels and need for branch offices. With changes being considered by management, the Company expects that it can achieve profitable operations by June 2000. In December 1999, the Company initiated its Series B Preferred Stock offering which makes provision for the sale of 750,000 shares of the Company's Series B Preferred Stock for $2.00 per share. As of May 8, 2000, the company has sold 75,000 shares of Series B Preferred Stock. The expected profits from operations in 2000, together with the proceeds from the Series B Preferred Stock offering are expected to provide adequate financial resources to finance the Company's operations in 2000. For the year ended December 31, 1999, the Company expended $308,041 for the purchase of furniture and equipment. In February 2000, the Company sold 40,000 shares of Spectrasite Holdings, Inc. for an aggregate value of approximately $830,000. The proceeds, from the sale of shares, were used to repay a $407,170 loan from a brokerage firm and to finance current operations. The shares of Spectrasite Holdings, Inc. were owned by an individual and were loaned to the Company. The Company must return these shares to the individual; therefore, the Company will be required to purchase 40,000 shares of Spectrasite Holdings, Inc. in the public market. The trading price of these shares has ranged from a high of $28.31 (March 31, 2000) to a low of $11.06 (January 3, 2000) with a trading price of $21.25 on May 8, 2000. Year 2000 Efforts In 1998 and 1999, the Company took various steps to address the issue of computer programs and embedded computer chips being unable to distinguish between the year 1900 and the year 2000 (the "Y2K" issue). The Company has no proprietary operating system or applications software, nor do any of its operations use main frame or mini-computer systems. Therefore, the company's focus with respect to the Y2K issue was: (1) its PC hardware and software purchased from third parties; and (2) external suppliers and service providers. While there is no assurance that associated problems may not arise in the future, to date the Company has not experienced any material problems relating to the Y2K issue. Inflation Because the Company's assets are primarily liquid, they are not significantly affected by inflation. The rate of inflation affects the Company's expenses, such as employee compensation, office leasing and communications costs. These costs may not readily be recoverable in the price of services offered by the Company. To the extent inflation results in rising interest rates and has other adverse effects in the securities markets and the value of securities held in inventory or IEC's investment account, it may adversely affect the Company's financial position and results of operations. 13 ITEM 7: FINANCIAL STATEMENTS (a) Financial Statements Report of Independent Certified Public Accountants F-1 Consolidated Balance Sheets as of December 31, 1998 and 1999 F-2 Consolidated Statements of Operations for the years ended December 31, 1998 and 1999 F-4 Consolidated Statements of Shareholder's Equity for the years ended December 31, 1998 and 1999 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1999 F-6 Notes to the Consolidated Financial Statements F-8
14 Killman, Murrell & Company, P.C. Certified Public Accountants 505 N. Big Spring, Suite 603 1931 E. 37th, Suite 7 14810 Le Grande Drive Midland, Texas 79701 Odessa, Texas 79762 Addison, Texas 75001 (915) 686-9381 (915) 363-0067/550-4910 (972) 991-9324 Fax (915) 684-6722 Fax (915) 363-0376 Fax (972) 991-9323
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Institutional Equity Holdings, Inc. Dallas, Texas We have audited the accompanying consolidated balance sheets of Institutional Equity Holdings, Inc. as of December 31, 1998 and 1999, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Institutional Equity Holdings, Inc. as of December 31, 1998 and 1999, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. KILLMAN, MURRELL & COMPANY, P.C. Dallas, Texas April 13, 2000 F-1 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1999 ASSETS 1998 1999 Current Assets Cash $ 118,130 $ 315,904 Trading Securities, at market 466,097 548,736 Receivables Commissions 479,931 516,762 Good Faith Deposits 100,000 150,000 Other 156,555 56,623 Prepaid Expenses 30,469 301,413 Total Current Assets 1,351,182 1,889,438 Furniture and Equipment, net of accumulated depreciation of $288,675 and $333,543, respectively 119,231 382,409 Restricted Investment, at market - 1,304,043 Other Assets 10,095 259,185 Total Assets $1,480,508 $3,835,075
The accompanying notes are an integral part of these consolidated financial statements F-2 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1999 LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1999 Current Liabilities Cash Overdraft $ 137,533 $ 31,649 Loans Payable - 527,170 Due to Broker 86,586 96,594 Securities Sold, not yet purchased 11,667 25,034 Accounts Payable and Accrued Liabilities 372,270 1,106,333 Total Current Liabilities 608,056 1,786,780 Loans Subordinated to Claims of General Creditors Officers 245,000 - Others 270,000 150,000 Restricted Investment Loan - 1,304,043 Due to Related Party - 245,000 Total Liabilities 1,123,056 3,485,823 Stockholders' Equity Undesignated Preferred Stock, par value $.01 per share; 3,190,000 shares authorized, none outstanding - - 10%Designated Series A Preferred Stock, par value $.01 per share; 1,060,000 shares authorized, issued and outstanding in 1999 - 10,600 10% Designated Series B Preferred Stock, par value $.01 per share; 750,000 shares authorized; 37,500 shares issued and outstanding in 1999 - 375 Common Stock, par value $.01 per share; 20,000,000 shares authorized; 1,965,000 and 2,312,000 issued and outstanding, respectively 19,650 23,120 Additional paid-in capital 470,052 3,778,234 Retained (deficit) - (3,330,827) 489,702 481,502 Less Treasury Shares, at cost (132,250) (132,250) Total Shareholders' Equity 357,452 349,252 Total Liabilities and Shareholders' Equity $1,480,508 $3,835,075
The accompanying notes are an integral part of these consolidated financial statements F-3 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1998 AND 1999 1998 1999 Revenues: Commission $3,194,876 $ 8,573,690 Gain (Loss) on Firm Securities Accounts 883,780 (290,682) Underwriting and Syndicate Income 225,264 1,155,840 Other Income 181,890 256,119 Interest Income 8,970 14,859 Total Revenue 4,494,780 9,709,826 Expenses: Employee Compensation 2,970,207 8,619,955 Commissions Paid to Other Broker-Dealers 493,754 1,024,590 Underwriting and Syndicate Expenses 18,448 208,671 General and Administrative Expenses 1,124,057 1,293,751 Rents, Telephone and Quotation Expenses 415,477 1,036,220 Interest Expense 104,098 769,522 Total Expenses 5,126,041 12,952,709 (Loss) Before Federal Income Tax (631,261) (3,242,883) Federal Income Tax Expense - - Preferred Stock Dividends - (87,944) Net (Loss) $(631,261) $(3,330,827) Weighted Average Number of Common Shares Outstanding 1,942,000 2,028,000 Net (Loss) Per Common Share $ (.33) $ (1.64)
The accompanying notes are an integral part of these consolidated financial statements F-4 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
Preferred Stock Preferred Stock Series A Series B Common Stock Additional Retained Treasury Total Number of Number of Number of Paid-in Earnings Share Shareholders' Shares Par Value Shares Par Value Shares Par Value Capital (Deficit) Purchase Equity Balance as of December 31, 1997 - $ - - $ - 105 $ 1 $71,029 $299,675 $(24,000) $346,705 Net (loss)1998 - - - - - - - (631,261) - (631,261) Balances as of December 31, 1998, as previously reported - - - - 105 1 71,029 (331,586) (21,000) (284,556) Termination of Subchapter Selection January 1, 1999 - - - - - - (331,586) 331,586 - - Merger with EuroMed, Inc. - - - 1,964,895 19,649 730,609 - (108,250) 642,008 Balance as of December 31, 1998, as restated - - - - 1,965,000 19,650 470,052 - (132,250) 357,452 Sale of Series A Preferred Stock, net of $216,000 issuance expenses 1,060,000 10,600 - - - - 1,893,400 - - 1,904,000 Sale of Series B Preferred Stock, net of $37,500 of issuance expenses - - 37,500 375 - - 37,125 - - 37,500 Sale of Common Stock - - - - 347,000 3,470 343,530 - - 347,000 Value of Warrants and Options assigned to Brokers - - - - - - 56,220 - - 56,220 Value of Warrants Issued to Debtholder - - - - - - 571,406 - - 571,406 Officers' Subordinated Debt Contribution, net of trading security assumed - - - - - - 125,000 - - 125,000 Accrued Compensation contributed to capital - - - - - - 281,501 - - 281,501 Net (loss) 1999 - - - - - - - (3,330,827) - (3,330,827) Balance as of December 31, 1999 1,060,000 $10,600 37,500 $375 2,312,000 $23,120 $3,778,234 $(3,330,827) $(132,250)$349,252
The accompanying notes are an integral part of these consolidated financial statements F-5 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998 AND 1999 1998 1999 Cash Flows from Operating Activities: Net (Loss) $ (631,261) $(3,330,827) Adjustments to Reconcile Net (Loss) to Cash Flow from Operations: Depreciation and Amortization 34,321 110,981 Capital Contributed by Shareholder/Employee/Officer - 281,501 Interest Expense - 571,406 Broker Compensation - 56,220 Changes in Operating Assets and Liabilities: Trading Securities 604,214 (202,644) Accounts Receivables (159,195) 13,101 Prepaid Expenses (2,847) (270,944) Other Assets 1,132 (315,203) Cash Overdraft 137,533 (105,884) Due to Brokers (204,318) 10,008 Securities Sold, Not Yet Purchased 11,667 13,367 Accounts Payable and Accrued Liabilities (152,275) 734,063 Net Cash (Used In) Operating Activities (361,029) (2,434,855) Cash Flows from Investing Activities: Purchase of Furniture and Equipment - (308,041) Net Cash (Used In) Investing Activities - (308,041) Cash Flows from Financing Activities: Proceeds from Borrowings - 458,170 Payments on Borrowings (165,807) (51,000) Borrowings from Related Party - 245,000 Sale of Stock - 2,288,500 Contributed Capital - Merger with EuroMed, Inc. 750,258 - Net Assets Acquired in Merger (123,507) - Purchase of Treasury Shares (108,250) - Net Cash Provided by Financing Activities 352,694 2,940,670 Net Increase (Decrease) in Cash and Cash Equivalents (8,335) 197,774 Cash and Cash Equivalents at the Beginning of the Year 126,465 118,130 Cash and Cash Equivalents at the End of the Year $ 118,130 $ 315,904
(Continued) The accompanying notes are and integral part of these consolidated financial statements F-6 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 1998 AND 1999 1998 1999 Cash Paid During the Year: Interest $ 104,098 $ 170,066 Income Taxes $ - $ - Supplemental Schedule of Noncash Investing and Financing Activities: Increase in Restricted Investments $ - $ (1,304,043) Increase in Restricted Loans - 1,304,043 Decrease in Trading Securities - 120,000 Loans Subordinated to Claims of General Creditors-Officers - (245,000) Additional Paid-in-Capital - 125,000 $ - $ - F-7 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Swiss Nassau Corporation was incorporated on May 17, 1994 in the state of Nevada, United States of America, with authorized and issued share capital of 1,000 shares of common stock with no par value (the "Common Stock") and on June 15,1994, all authorized shares of Swiss Nassau Corporation were issued. On October 20, 1995, Swiss Nassau Corporation changed its name into EuroMed, Inc. and increased its authorized shares to 20,000,000 shares of Common Stock with a new par value of $0.01 per share, and 5,000,000 preferred shares with a par value of $0.01 per share. On October 20, 1995, EuroMed, Inc. effected a 150 for 1 stock split of its Common Stock. On April 23, 1999, EuroMed, Inc. changed its name to Institutional Equity Holdings, Inc. (the "Company" or "IEH"). In November 1995, the Company began acquiring pharmaceutical companies operating exclusively in Europe. The Company completed the acquisitions using the net proceeds from the sale of 1,150,000 shares of its common stock (issue price was $6.50 per share) in March 1996 and the issuance of 2,700,000 shares of its common stock. Subsequent to the acquisitions, laws relating to the pricing of pharmaceuticals in Europe were changed and as a result the operations of the pharmaceutical companies owned by the Company were severely impacted, resulting in significant operating losses. The Company realized approximately $1,146,000 in cash and cancelled 2,700,000 shares of its common stock upon sale of its European subsidiaries in 1997. The Company had no business activities in the calendar year of 1998, except that on November 6, 1998, the Company's Board of Directors approved and executed the "Agreement and Plan of Reorganization" by and among the Company, Institutional Equity Corporation ("IEC", a wholly owned subsidiary of the Company and formerly known as Redstone Acquisition Corp.) and Redstone Securities, Inc. ("Redstone"), a licensed broker and dealer of securities. Effective February 16, 1999, Redstone was merged into the newly organized subsidiary IEC. The Company issued 600,000 shares of its Common Stock to the three principals of Redstone, Thomas Laundrie, Gary Prucell, and Richard Belz (collectively referred to as the "Redstone Shareholders") and was obligated to issue an additional 500,000 shares (the "Restricted Shares") upon the market price of the Company's Common Stock reaching certain price levels or IEC reporting certain levels of net income. Notwithstanding the price levels of the Common Stock or net income performance levels, the Restricted Shares fully vest on February 16, 2002. Redstone has been a registered broker dealer since 1988. The Redstone Shareholders agreed to terminate their relationship with the Company in February 2000 subject to certain compensation payments, to forgo the collections of the Company's subordinate notes due the Redstone Shareholders, to assume an investment in a certain security at its book value and to modify the number of shares of the Company's common stock from 1,100,000 to 500,000 shares of fully vested common stock. The Company has a right to repurchase these shares of its common stock at a price of $2.00 per share as follows: Number of Redemption Shares Period 100,000 Calendar year 2000 100,000 Calendar year 2001 300,000 On or before February 16, 2002 (Continued) F-8 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Business (Continued) The termination of the relationship with the Redstone Shareholders is reflected in the consolidated financial statement for the year ended December 31, 1999. IEH is a holding company whose only operating subsidiary is IEC a full service brokerage firm engaged in the purchase and sale of securities from and to the public and for its own account and investment banking activities. The Company operates in one industry segment, the financial services industry. At December 31, 1999, IEC employed 124 brokers registered with the National Association of Securities Dealers, Inc. ("NASD"). Principles of Consolidation IEH is a holding company whose wholly-owned subsidiary, IEC, is a registered broker-dealer in securities under the Securities and Exchange Act of 1934, as amended. IEC renders broker-dealer services in securities on both an agency and principal basis to its customers who are fully introduced to Fiserve Correspondent Services, Inc. and First Southwest Company. IEC also acts as lead or participating underwriter for over-the-counter securities offerings. IEC conducts business throughout the United States. IEC is exempt from the reserve requirements under SEC Rule 15c8-3(k) (2) (ii), since it does not handle or carry customer securities and cash. The Company operates in one industry segment, the financial services industry. All significant intercompany balances and transactions have been eliminated in the consolidation. Revenue Recognition Securities transactions and related revenue are recorded on a trade date basis. Manager's fees, underwriter's fees, and other underwriting revenues are recognized at the time the underwriting is completed. Tax shelter revenue is recognized at the time individual tax shelter units are sold. Fair Value of Financial Instruments The carrying amounts reflected in the balance sheet for cash, cash equivalents, notes and other receivables and payables approximate their respective fair values due to the short maturities of these instruments. The fair values of trading and investing securities owned and securities sold, not yet purchased are recorded primarily at quoted prices for those or similar instruments. Changes in the market value of these securities are reflected currently in the results of operations. Furniture and Equipment Depreciation of furniture and equipment is computed generally by the straight-line method over their estimated useful lives of five (5) to ten (10) years. Leasehold improvements are amortized over the lives of their respective leases of five (5) years. (Continued) F-9 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounting for Long-Lived Assets The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting For The Impairment of Long-Lived Assets and For Long-Lived Assets To Be Disposed Of". The Company reviews long-lived assets, certain identifiable assets and any goodwill related to those assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. At December 31, 1999, the Company believes that there has been no impairment of its long-lived assets. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Taxation Income taxes are accounted for in accordance with the provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recognized or settled. The effect on tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company has recognized significant losses from its disposal of subsidiaries and general corporate expenses incurred in the United States. Realization of any portion of the deferred tax asset resulting from the net operating loss carryforward is not considered more likely than not. No deferred tax asset or valuation allowance has been estimated due to the change in ownership, which severely restricts the use of the net operating loss carryforward. At December 31, 1999, the Company has approximately $8,600,000 of net operating loss carryforwards for federal income tax purposes, which will begin to expire in 2011. Pension and Other Post-Retirement and Post-Employment Plans In 1999, the Company adopted a deferred contribution profit sharing plan (401(k) Plan). This plan allows both the Company and the employees to contribute to the plan. The Company made no contributions to the plan in 1999. Redstone at the time of its acquisition had a deferred contribution profit sharing plan (401(k) Plan). The Company made no contributions to the plan in 1998 or 1999. Advertising Costs Advertising costs are expensed as incurred. Advertising costs for the year ended December 31, 1998 and 1999, were $34,023 and $22,218, respectively. (Continued) F-10 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash Equivalents All highly liquid investments purchased with original maturities of approximately three months or less are considered to be cash equivalents. (Loss) Per Share Basic (loss) per common share has been calculated using the weighted average number of shares of common stock outstanding during the year. Diluted (loss) per common share is not disclosed because the effect of the exercise of the common stock warrants and options would be anti-dilutive. Concentration of Credit Risk The Company deposits its cash with high credit quality financial institutions. At times such deposits may be in excess of FDIC insurance limits. At December 31, 1999, the cash deposits exceeding FDIC insurance limits were $261,000. Accounts Receivable and Amount Due Broker IEC introduces all customer transactions in securities traded on U.S. securities markets to Fiserve Correspondent Service, Inc. and First Southwest Company on a fully-disclosed basis. The agreement between IEC and its clearing brokers provide that IEC is obligated to assume any exposure related to nonperformance by customers or counterparties. IEC monitors clearance and settlement of all customer transactions on a daily basis. The exposure to credit risk associated with the nonperformance of customers and counterparties in fulfilling their contractual obligations pursuant to these securities transactions can be directly impacted by volatile trading markets which may impair the customer's or counterparty's ability to satisfy their obligations to IEC. In the event of nonperformance, IEC may be required to purchase or sell financial instruments at unfavorable market prices resulting in a loss. Management does not anticipate nonperformance by customers and counterparties in the above situations. NOTE 2: RESTRICTED INVESTMENT On March 18,1999, the Company entered into an agreement with an individual for the delivery to the Company of a stock certificate representing 66,250 shares of common stock of Westower Corporation (which was subsequently converted into 119,912 shares of Spectrasite Holdings, Inc.). The agreement included the following terms: The individual will receive compensation equal to five percent (5%) of the average daily closing sales price of the common stock on the American Stock Exchange, calculated for each fiscal quarter. During 1999, the Company incurred $59,500 in interest expense under the terms of the agreement. The Company agrees not to transfer or assign the shares without the individual's prior written consent during the term of the agreement. (Continued) F-11 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 2: RESTRICTED INVESTMENT (CONTINUED) Accounts Receivable and Amount Due Broker The Company will issue to the individual a five year stock purchase warrant for 414,062 shares of common stock of the Company at an exercise price of $2.00 per share. The Company has the right to call the warrant if the trading price of the Company's common stock has equaled or exceeded $4.00 per share for ten consecutive days. See Note 13 Agreement can be terminated upon sixty (60) days' notice by either party. At December 31, 1999 the restricted investment has been pledged by the Company as security for a $407,170 loan from a brokerage firm. In February 2000, the Company sold 40,000 shares of the Spectrasite Holdings, Inc. stock for an aggregate value of approximately $830,000. The proceeds, from the sale of shares, were used to repay the $407,170 loan from a brokerage firm and to finance current operations. These shares will have to be returned to their owner by the Company, which will necessitate their purchase in the public market. The trading price of these shares at the date of repurchase will determine if a trading gain or loss is recognized. The trading price of the shares has ranged from a high of $28.31 (March 31, 2000) to a low of $11.06 (January 3,2000). The trading price at April 13, 2000 was $22.00. NOTE 3: STOCK OPTION PLANS Long-Term Incentive Plan The Company adopted its 1995 Long-Term Incentive Plan ("Plan") as of November 18, 1995. An aggregate of 300,000 shares of common stock has been authorized and reserved for issuance under the plan pursuant to the exercise of options or the grant of restricted stock awards. The Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock awards and stock appreciation rights. All of the Company's and its subsidiary's employees, independent directors and advisors are eligible to receive awards under the plan, but only employees of the Company and its subsidiaries are eligible to receive incentive stock options. The exercise price for incentive stock options granted under the Plan may be no less than the fair market value of the common stock on the day of the grant. As of December 31, 1998 and 1999, no grants have been awarded under this plan. Brokers Stock Option Plan The Company adopted its 1999 Brokers Stock Option Plan as of December 1, 1999. An aggregate of 1,000,000 shares of common stock has been reserved for issuance under the plan pursuant to the exercise of options or the grant of restricted stock awards. All brokers who have been employed by the firm prior to January 1, 2000, shall be entitled to earn options to purchase a number of shares of common stock of the Company equal to 20% of their annual gross production in commissions from the sale of securities. The exercise price of the options so earned shall be 5% over the closing bid price of the Company's common stock on the date of each broker's employment. Each option shall be exercisable for a period of three years beginning one year from the date of vesting. Options shall vest on January 1 of the year following the date of employment, and are not transferable. At December 31, 1999, 1,254,333 options were earned under this agreement. F-12 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 4: RELATED PARTY TRANSACTIONS In December 1997, the Board of Directors authorized the issuance of 100,000 warrants to purchase common stock of the Company to each of the three (3) Directors of the Company at a price of $.30. The fair value of the common shares was $.20 (Bid Price) at the date the warrants were authorized; therefore, no expense was recognized in connection with the warrant issue. As of December 31, 1999, none of these warrants had been exercised. For the year ended December 31, 1998, the three (3) Directors of the Company were paid $200,562 for services rendered to the Company. The Chief Executive Officer and other executive officers of the Company have oral agreements regarding employment, tenure and compensation, including bonuses and stock option issuance. For the year ended December 31, 1999, the Company recognized compensation expense applicable to these executive officers aggregating $1,649,917 and they were issued options to purchase 410,000 shares of the Company's common stock at prices varying from $.50 to $1.00. Included in the officers' compensation is $281,501 earned by the Chief Executive Officer, in connection with underwritings. The Chief Executive Officer agreed to forgive the $281,501 and such amount is reflected as a contribution to the Company's stockholders' equity in the accompanying consolidated financial statements for the year ended December 31, 1999. In 1999 the Chief Executive Officer loaned the Company $100,000 and was repaid. NOTE 5: LEASES Future minimum payments, by year and in the aggregate, required under non-cancelable operating leases with initial or remaining terms of one year or more consist of the following: Year Ended December 31, 2000 $ 599,671 2001 590,476 2002 594,053 2003 483,835 2004 299,273 Thereafter 61,760 $2,622,068 Certain of these leases provide for the payment of taxes and other expenses by the Company. Rental expense for the years ended December 31, 1998 and 1999, approximated $250,000 and $695,4970, respectively. F-13 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 6: WARRANTS OWNED As provided in certain underwriting agreements, the Company obtains warrants to purchase equity instruments from client companies. During the restriction periods on these warrants, the Company recognizes no value. When the restrictions expire and the underlying securities become exercisable, the Company marks the warrants to estimated fair value. In estimating fair value of the warrants, management considers the trading volume and quoted prices of the underlying securities, the number of such securities held by the public, the remaining warrant exercise period and other factors that they believe might effect the value of the warrants. The following is information with respect to these warrants: Fair Value Granted to of Retained Company Unrelated Granted to Warrants Name Received Parties Employees Retained December 31, 1999 Rampart Capital Group, Inc 40,000 5,000 22,000 13,000 $ - Streamedia Communications Inc. 120,000 45,000 35,000 40,000 $ - McGlen Internet Group, Inc. 500,000 153,000 220,000 127,000 $ -
No value has been placed on the warrants retained by the Company. However, the Company recognized $206,390 as compensation expense and fee income related to the warrants granted to employees. Such compensation expense was calculated using the Black-Scholes option-pricing model with the following assumptions: no dividends; expected volatility of 67.5% for Rampart, 82.5% for Streamedia, 88% for Glen; risk free interest rate of 6.0% and expected life of 5 years. NOTE 7: NET CAPITAL REQUIREMENT IEC is subject to the net capital rule (Rule 15c3-1) of the Securities and Exchange Commission. This rule prohibits IEC from engaging in any securities transaction at a time when its "aggregate indebtedness" exceeds fifteen times its "net capital" as those terms are defined by the rule. At December 31, 1999, IEC's net capital and required net capital were $256,638 and $100,000, respectively, and its ratio of aggregate indebtedness to net capital was 1.21 to 1. The Subsidiariy's absolute minimum net capital is $100,000. F-14 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 8: TRADING AND INVESMENT SECURITIES Trading securities and securities sold, not yet purchased, represent the market value of securities held long and short by the Company's subsidiary. The categories of trading securities and their related market values follow:
1998 1999 Long Short Long Short Common Stock $446,097 $11,667 $548,736 $25,034 Corporate Bonds - - 28,100 - U.S. Government Bonds - - 2,932 - Municipal Bonds - - 2,683 - $466,097 $11,667 $548,736 $25,034
As a securities broker-dealer, IEC is engaged in various securities trading and brokerage activities as principal. In the normal course of business, IEC has sold securities that it does not currently own and will therefore be obligated to purchase such securities at a future date. This obligation is recorded in the financial statements at the market value of the related securities. A trading loss will occur on the securities if the market price increases and a trading gain will occur if the market price decreases. Investment securities held by IEC which are readily marketable are stated at market value. NOTE 9: LOANS PAYABLE The following summarizes the loans payable at December 31, 1999: Amount 8.8% loan from brokers, secured by restricted investment, due on demand $407,170 10% Note payable to an individual, unsecured, due November 30, 1999, plus accrued interest 120,000 $527,170 F-15 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 10: PREFERRED STOCK The Company has been authorized to issue up to 5,000,000 shares of $0.01 par value preferred stock and the Board of Directors is empowered to designate the series, dividend rate and if dividends are to be cumulative, voting rights (in addition to those provided by law) and convertibility into shares of common stock. In 1999, the Board of Directors of the Company authorized the sales of the following series of preferred stock: Series A Designated 1,060,000 shares of preferred stock as Series A 10% cumulative dividend rate, payable quarterly Sale price was $2.00 per share in minimum purchase units of 12,500 shares. Convertible into common stock on a one for one basis Callable at the option of the Company after April 22, 2000 into common stock at a price of $4.00 per per share Each share of preferred stock has ten votes on matters submitted to shareholders for voting. Series B Designated 750,000 shares of preferred stock as Series B, of which 37,500 shares have been sold as of December 31, 1999 [37,500 shares sold subsequent to December 31, 1999] 10% cumulative dividend rate, payable quarterly Sales price was $2.00 per share in minimum units of 12,500 shares Convertible in to common stock on a one for one basis Callable at the option of the Company after December 1, 2000 into common stock at a price of $4.00 per share Each share of preferred stock has one vote on matters submitted to shareholders for voting F-16 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 11: SUBORDINATED LOAN 10% subordinated loan, payable to E.M.H. Enterprises, control number 10-F-SLA-10396, due April 30, 2000, in the amount of $150,000, unsecured and subordinated to claims of general creditors. The loan is subjected to terms and conditions set forth in the subordinative agreement approved by the National Association of Securities Dealers, Inc. NOTE 12: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consist of the following at December 31, 1998 and 1999: 1998 1999 Accrued Compensation $275,744 $400,000 Accounts Payable 84,526 186,632 Accrued 401(k) - 39,401 Accrued Syndicate and Underwriting Costs - 246,875 Accrued Interest 12,000 28,049 Accrued Preferred Stock Dividends - 87,944 Other - 117,432 $372,270 $1,106,333
NOTE 13: STOCK OPTIONS AND WARRANTS During 1999, the Company executed various employment agreements with brokers which gives the brokers the right to purchase shares of the Company's common stock in the form of stock options. The brokers have the right to acquire the number of shares of the Company's common stock that 20% of the brokerage fees generated by the broker divided by the strike price will purchase. The strike price of such options is the market value of the Company's common stock on the date the broker signed the employment agreement. During 1999, the Company granted two employees the right to acquire 600,000 shares of the Company's common stock at the exercise of $1.03 per share, the market value of the Company's common stock on the date of the grant. During 1999, the Company granted various brokers the right to acquire 77,250 shares of the Company's common stock at the exercise price of $2.00 per share in connection with the sale of the Series A Preferred Stock. (Continued) F-17 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 13: STOCK OPTIONS AND WARRANTS (CONTINUED) In connection with the delivery of the Westower Corporation (these shares were subsequently exchanged for Spectrasite Holdings, Inc. shares) common stock described in Note 2, the Company issued a stock purchase warrant that allows the holder the right to acquire 414,062 shares of the Company's common stock at an exercise price of $2.00 per share. The Company has recognized $571,406 in interest expense with a corresponding credit to paid-in capital, which represents the fair market value of the warrants as of March 18, 1999. The warrants were valued using the Black-Scholes options-pricing model with the following assumption: no dividends, expected volatility of 82%, risk free interest rate of 6.0% and expected life of 5years. The number of shares of the Company's common stock available under the terms of the above mentioned agreements is as follows:
Number of Securities Underlying Year Options and of Warrants Exercise Expiration Grantee Grant Granted Price Date Robert A. Shuey, III Officer 1997 100,000 $0.30 December 29, 2002 Joseph C. Crouch Officer 1999 200,000 $0.50-$1.00 June 24, 2003 Elbert G. Tindell Officer 1997 100,000 $0.30 December 29, 2002 Anthony Vaccaro Officer 1999 100,000 $1.00 January 15, 2004 William M. Mosley Officer 1999 60,000 $0.50-$1.00 January 1, 2004 Jesse Shelmire Ex Director 1997 100,000 $0.30 December 29, 2002 Various Brokers based on commissioned sales 1999 1,234,333 $1.05-$1.85 None Mike Colaiacovo, Broker 1999 300,000 $1.03 None Manuel Bello, Broker 1999 300,000 $1.03 None Todd Cornelius, Officer 1999 50,000 $1.00 January 1, 2004 Various Brokers in connection with sale of Series A Preferred stock 1999 77,500 $2.00 None S. Roy Jeffrey Warrant Issued 1999 414,062 $2.00 March 17, 2004 3,035,895
(Continued) F-18 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 13: STOCK OPTIONS AND WARRANTS (CONTINUED) The following table summarizes the activity in stock options and warrants for the years ending December 31, 1998 and 1999:
1998 1999 Weighted Weighted Average Average Underlying Exercise Underlying Exercise Shares Price Shares Price Outstanding beginning of year 300,000 $0.30 300,000 $0.30 Granted - - 2,735,895 1.32 Outstanding end of year 300,000 $0.30 3,035,895 $1.22
The Company has elected to follow APB Opinion No. 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for its plans. Accordingly, $56,220 in compensation expense was recognized in 1999 for options which were granted to employees on which the option price was less than fair market value on the date of grant. No compensation expense is recognized upon the grant of options where the option price exceeds the fair market value at the date of grant. Had compensation expense for the Company's stock options been determined based on the fair value of the options at the grant dates consistent with the methodology prescribed by FAS No. 123, "Accounting for stock based Compensation," the Company's net loss and loss per share would have been increased to the pro forma amounts indicated below: Net loss as reported $(3,330,827) Pro forma net loss (4,770,583) Loss per share as reported $(1.64) Pro forma net loss $(2.35) The fair value of each option granted is estimated on the date of grant using the Black-Scholes options-pricing model with the following assumptions: no dividends, expected volatility of 109%, risk free interest rate of 6% and expected life of 36 to 60 months. The stock based compensation for the year ended December 31, 1999, reflected in the above pro forma may not be indicative of such compensation in future periods as it only reflects options granted in the year December 31, 1999. F-19 INSTITUTIONAL EQUITY HOLDINGS, INC. (Formerly Known As EuroMed, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1999 NOTE 14: LEGAL PROCEEDINGS Many aspects of the Company's business involve substantial risks of liability, including exposure under federal and state securities laws in connection with the underwriting and distribution of securities. The Company does not presently maintain an errors and omissions insurance policy insuring it against these risks. In recent years, there has been an increasing incidence of litigation involving the securities industry, including class actions, which generally seek rescission and substantial damages. The Company requires its brokerage customers to agree to arbitration in the event of a dispute between the customer and a broker. The Company is currently a party to arbitrations and it is the opinion of management that the outcome of the arbitration will not have a material adverse effect on the Company's operating results. In compliance with an Injunction and Civil Contempt Order of January 6, 1999, Gregory Alan Gaylor, a shareholder of the Company, signed an irrevocable proxy dated January 21, 1999 appointing Institutional Equity Holdings, Inc., as his sole proxy with respect to 125,000 shares of Institutional Equity Holdings, Inc.'s Common Stock. NOTE 15: QUARTERLY FINANCIAL DATA (UNAUDITED)
Income (Loss) Before Income Taxes and Preferred Stock Net Income Earnings Revenues Dividends (Loss) Per Share 1998 December $1,173,602 $(194,044) $(194,044) $ (.10) September 375,289 (660,561) (660,561) (.34) June 1,411,990 138,931 138,931 .07 March 1,533,899 84,413 84,413 .04 1999 December $ 3,778,825 (649,841) (1,210,885) (.59) September 1,628,350 (1,189,961) (1,189,961) (.59) June 2,628,706 (172,634) (172,634) (.09) March 1,843,945 (757,347) (757,347) (.37)
F-20 ITEM 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There has been no Form 8k filed within 24 months prior to the date of the most recent consolidated financial statements reporting a change of accountants and/or reporting disagreements on any matter of accounting principle or financial statement disclosure. PART III ITEM 9. Directors and Executive Officers of Institutional Equity Holdings, Inc. Name Age Position Elbert G. Tindell 52 Chairman of the Board Robert A. Shuey, III (1 43 Chief Executive Officer and Director Joseph C. Crouch 55 Executive Vice President Anthony F. Vaccaro 28 Director William J. Rapaglia 52 Director Todd M. Cornelius 28 Vice President W. Michael Mosley 28 Vice President Michael Vinez 47 Chief Financial Officer
Elbert G. Tindell, has served as Chairman of the Board of the Company since October 15, 1997. Mr. Tindell is involved in the management and direction of public and private Companies in the United States, Asia Pacific, and Europe, specializing in the re-engineering of corporate environments through implementing capital restructuring and planning strategies. Prior to graduating from the University of North Texas, Mr. Tindell served in the United States Marine Corps from January 1967 to December 1970. Robert A. Shuey, III, is a director, CEO and a Managing Director, Investment Banking, the Company. He also serves as a member of the Board of Directors of Autobond Corporation and Transnational Financial Corporation. Mr. Shuey has been associated with the Company since January 1, 1999. Prior thereto, he was Chief Executive Officer of Tejas Securities Group, Inc. since September 1997. He has been in the investment banking business for more than the past five years, with National Securities Corporation from September 1996, until August 1997; with La Jolla Securities Corporation from April 1995, until August 1996: with Dillion Gage Securities Corporation from January 1994, until April 1995 and Dickinson & Co. from March 1993, Mr. Shuey is a graduate of Babson with a degree in Economics and Finance. Joseph C. Crouch, is Executive Vice President of IEC and President of Institutional Equity Corporation. He is a thirty-year veteran of the securities industry with the last twenty-four years in management positions. Mr. Couch joined "IEH" and Institutional Equity Corporation on January 1, 1999. Prior thereto, he was managing director and compliance officer for Tejas Securities Group, Inc. Prior positions include President of both RAS Securities and Dickinson & Company. Mr. Crouch also has been Senior Vice President at E. F. Hutton, Rotan Mosley and Rauscher Pierce. Mr. Couch attended the University of Oklahoma. 15 Anthony F. Vaccaro, Jr., has been a director of the Company since February of 1999. He is also a Vice President of investment banking at IEC. Mr. Vaccaro joined the Company in January of 1999. Prior thereto, Mr. Vaccaro was an investment banking generalist specializing in mergers and acquisitions and initial public offerings for Salomon Smith Barney in New York City. Prior to his association with Salomon Smith Barney, Mr. Vaccaro was employed by a private equity group to specialize in bridge and mezzanine financing, private placements, mergers and acquisitions, and initial public offerings in a variety of industries. Mr. Vaccaro is a graduate of Texas A&M University with a degree in Finance. William J. Rapaglia has been a director of Institutional Equity Holdings, Inc. since June of 1999. Mr. Rapaglia has over 20 years experience in real estate acquisitions, construction and development. His experience has ranged from construction management, financing, syndication's, marketing, and promotion of projects. Mr. Rapaglia is chairman and CEO of a private management company where their focus is on corporate finance, corporate financial planning, private placements, marketing and promotion of public and private companies. Mr. Rapaglia served in the United States Marine Corps from 1965 to 1969 and attended Arizona State University and the University of Tubingen in West Germany. Todd M. Cornelius is a Vice President, Investment Banking, of the Company. Mr. Cornelius joined the Company in April of 1999. Prior thereto, Mr. Cornelius was a Financial Consultant with Akzo Nobel specializing in small business expansions, mergers and general consulting. Prior to his work with Akzo Nobel, Mr. Cornelius performed underwriting and risk analysis in the energy arena for American International Group. Mr. Cornelius is a graduate of Texas A&M University with a degree in Chemical Engineering. Mr. Cornelius is currently matriculating on a Masters of Business Administration, with a concentration in Financing and Accounting, at Southern Methodist University. William M. Mosley is a Vice President, Investment Banking, of the Company. Mr. Mosley has been associated with the Company since January 1, 1999. Prior thereto, he was a Vice President of Tejas Securities Group, Inc. since January 1998. During this time he was responsible for supervising syndicate activities and all aspects of the underwriting process. Previously, Mr. Mosley was employed by Stone Media Corporation as a Senior Analyst from November 1996 to January 1998. Mr. Mosley is a graduate of Southern Methodist University with a degree in Finance. Michael E. Vinez joined the company in February 2000, as Chief Financial Officer (CFO"). Mr. Vinez previous work experience includes over twelve (12) years public accounting experience and eleven (11) years in the commercial real estate industry. He has served as CFO for two real estate development firms and as controller for a real estate management company. Mr. Vinez graduated from the University of Texas at Arlington with a BBA. He is a Texas Certified Public Accountant and holds a Texas real estate brokers license. Meetings and Committees of the Board of Directors The business of the Company is under the direction of the board of directors. The board of directors' meets on matters requiring approval of the board of directors. It also holds special meetings when an important matter requires action by the board of directors between scheduled meetings. The board of directors held no formal meetings and acted by unanimous written consent eight (8) times during 1999. ITEM 10. EXECUTIVE COMPENSATION. Summary of Cash and Certain Other Compensation The following table sets forth, for the fiscal years ending December 31, 1999 and 1998, certain information regarding the compensation earned by the Company's Chief Executive Officer and each of the Company's most highly compensated executive officers whose aggregate annual salary and bonus for fiscal 1999 exceeded $100,000, with respect to services rendered by such persons to the Company. The following table also includes individuals who have resigned or terminated employment during the fiscal year 1999 who would otherwise have been included in such table on the basis of salary and bonus for the fiscal year: 16 Management Compensation and Transactions
Summary Compensation Table Long-Term Compensation Annual Compensation Award Securities Underlying All Bonus and Other Options/ Other (3) Name/Title Year Salary Commissions Compensation (2) SARs(#) Compensation Robert A. Shuey, III 1999 - $318,500 $36,548 96,167 $243,882 President and 1998 46,350 - - - - Chief Executive Officer (4) Anthony F. Vaccaro 1999 74,359 40,000 5,218 48,083 121,940 Director and Secretary 1998 - - - - - Richard Belz (1) 1999 159,143 - - - - Director 1998 86,467 - - - - Joseph C. Crouch 1999 109,077 - 5,302 - - Vice President 1998 - - - - -
(1) Mr. Belz resigned as a director effective February 28, 2000. (2) This represents non accountable expense reimbursements of $30,000 for Mr. Shuey and payments made for group medical and life insurance in the amount of $6,548 for Mr. Shuey , $5,302 to Mr. Crouch, and $5,218 for Mr. Vaccaro in 1999. (3) The Company obtains warrants to purchase equity instruments from client companies. These amounts represent the fair value of the warrants to purchase equity instruments in client companies that the Company relinquished to these executives. The fair value was calculated using the Black-Scholes option-pricing model. (4) This table does not include $281,501 of compensation earned by Mr. Shuey, which he agreed to forgive. Section 16 Requirements Section 16(a) of the Exchange Act, requires the Company's officers and directors and persons who own more than 10% of a registered class of the Company's equity securities, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (the "SEC"). Such persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it with respect to fiscal 1999, or written representations from certain reporting persons, the Company believes that all filing requirements applicable to its officers, directors and persons who own more that 10% of a registered class of the Company's equity securities have been complied with. 17 ITEM 11. Security Ownership of Certain Beneficial Owners and Management. Principal Stockholders and Management Ownership.
Amount and Nature Percent of Beneficial of Name of Beneficial Owner Ownership Class Robert A. Shuey, III 5910 North Central Expressway, Suite 1480 Dallas, Texas 75206 450,000 (1) 8.45% S. Roy Jeffery 17886-55th Avenue Surrey, B.C., V3S6C8 414,062 (2) 7.78% Thomas Laundrie 101 Fairchild Avenue Plainview, New York 11803 196,334 (3) 3.69% Gary Purcell 101 Fairchild Avenue Plainview, New York 11803 196,334 (3) 3.69% Richard Belz 101 Fairchild Avenue Plainview, New York 11803 116,333 (3) 2.18% Joseph C. Crouch 101 Fairchild Avenue Plainview, New York 11803 200,000 (4) 3.76% Elbert G. Tindell 806 S. St. Paul Dallas, Texas 75202 175,000 (1) 3.29% Anthony F. Vaccaro 5910 North Central Expressway, Suite 1480 Dallas, Texas 75206 100,000 (5) 1.88% William Rapaglia 5910 North Central Expressway, Suite 1480 Dallas, Texas 75206 58,000 1.09% William M. Mosley 5910 North Central Expressway, Suite 1480 Dallas, Texas 75206 .67,000 (6) 1.26% Todd M. Cornelius 5910 North Central Expressway, Suite 1480 Dallas, Texas 75206 52,500 .99% All officers and directors as a group (7 persons) (7)(8) 1,611,501 30.26%
18 (1) Includes warrants to purchase 100,000 shares of common stock granted on December 29, 1997 exercisable immediately at $0.30. (2) Represents options to purchase 414,062 shares at $2.00 per share until March of 2004. (3) Company has option to purchase these shares for $2.00 per share. (4) Represents options to purchase 100,000 shares of Common Stock at an exercise price of $0.50 per share granted on June 28, 1999. Mr. Crouch was granted options to purchase an additional 100,000 shares of Common Stock at an exercise price of $1.00 per share on July 24, 1998. Over a period of three years 33,333 options vest on June 26, and 33,333 options vest on July 24, with the condition that he is still employed by IEH. As of December 31, 1999, 33,333 options have vested with a purchase price of $0.05 per share, and 33,333 options have vested with an exercise price $1.00 per share. (5) Includes options to purchase 100,000 shares of Common Stock granted on January 15, 1999, exercisable immediately at $1.00 per share. (6) Includes options to purchase 50,000 shares of Common Stock granted on January 1, 1999, exercisable immediately at $0.50 per share. (7) This does not accurately represent the voting rights of management. (8) Does not include the right to vote 125,000 shares (2.07% of shares outstanding) granted to the Board of Directors by a federal judge. See "Legal Matters." Limitations on Directors' Liability The Company's Restated Articles of Incorporation provide that, to the fullest extent permitted by Nevada law, no director shall be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. By virtue of these provisions, a director of the Company is not personally liable for monetary damages for a breach of such director's fiduciary duty except for liability for (i) breach of the duty of loyalty to the Company or to its stockholders, (ii) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) dividends or stock repurchases or redemption's that are unlawful under the Nevada General Corporation Law ("NGCL") and (iv) any transaction from which such director receives an improper personal benefit. In addition, the Company's Restated Articles of Incorporation provide that if the NGCL is amended to authorize the further elimination of limitation of the liability of a director, then the liability of the directors will be eliminated or limited to the fullest extent permitted by the NGCL, as amended. ITEM 12. Certain Relationships and Related Transactions During 1999, the Company formed Micro Capital Group, L.L.C. (MICRO) a limited liability company. MICRO was formed to engage in opportunistic investment situations. MICRO is governed under the terms of an operating agreement and is managed by a Board of Managers, consisting of Robert A. Shuey III and Anthony Vaccaro who are executive officers of the Company. During 1999, MICRO loaned the Company $245,000 which balance was outstanding at December 31, 1999. Mr. Robert A. Shuey III, the Chief Executive Officer of the Company has an agreement with the Company, whereby, Mr. Shuey is entitled to receive as compensation 60% of the net underwriting fees generated by the Company. During 1999, Mr. Shuey was entitled to receive $540,000 under the terms of this agreement in addition to his regular salary and other compensation. However, Mr. Shuey forgave his right to receive $281,501 under this agreement. Such amount has been shown as compensation expense in the accompanying consolidated financial statements with a corresponding credit to additional paid-in capital. 19 PART IV ITEM 13. Exhibits, Financial Statements Schedules, and Reports on Form 8-K a. Financial Statements: See table of Contents to Financial Statements. Page F-1 filed herewith. b. Reports on Form 8-K c. Exhibit 5 Number Description of Exhibit 2.1 Agreement and Plan of Reorganization dated November 6, 1998 by and among EuroMed, Inc., Redstone Acquisition Corp. And Securities, Inc.* 3.1 Articles of Incorporation (1) 3.2 By laws of the Company (1) 3.3 Certificate of name change** 4.1 Specimen of Series A Common Stock Certificate (1) 10.1 Consulting, Management and Noncompetition Agreement, dated as of July 5, 1996, by and between Purchaser and Docts (3) 10.2 Consulting, Management and Noncompetition Agreement, dated as of July 5, 1996, by and between Purchaser and Roozekrans (3) 10.3 Consulting, Management and Noncompetition Agreement, dated as of July 5, 1996, by and between Purchaser and Hinnen (3) 10.4 Plainview Lease rider** 10.5 Lynbrook Lease** 10.6 Newark Lease** 10.7 Dallas Lease** 16.1 Letter of the Change of Certified Accountants (2) 21.1 Subsidiaries of the Registrant as revised* 23.1 Consent of Killman Murrell & Company, P.C., Certified Public Accountants* 27.1 Financial Data Schedule *
* Previously filed ** filed herein Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signs on its behalf by the undersigned, thereunto duly authorized. Institutional Equity Holdings, Inc. Dated: May 19, 2000 By: /s/Robert A. Shuey, III Chief Executive Officer Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Elbert G. Tindell May 9, 2000 Elbert G. Tindell Chairman of the Board /s/ Robert A. Shuey, III Chief Executive Officer, May 9, 2000 Robert A. Shuey, III and Director /s/Michael E.Vinez Chief Financial Officer May 9, 2000 Michael E.Vinez
20 EX-23.1 2 CONSENT EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation of our report dated April 13, 2000, which is incorporated in this Annual Report on Form 10-K. Killman, Murrell and Company, P.C. Dallas, Texas May 9, 2000 EX-3.3 3 CERTIFICATE OF NAME CHANGE Certificate of Amendment to Articles of Incorporation For Profit Nevada Corporation (Pursuant to NRS 78.385 and 78.390 After Issuance of Stock) I. Name of corporation: EuroMed, Inc. 2. The Articles have been amended as follows (provide article numbers, if available): Article First is hereby amended to change the name of the corporation from EuroMed, Inc. to Institutional Equity Holdings, Inc., as follows: "FIRST The name of the corporation is Instiututional Equity Holdings, Inc." 3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the vo*ing power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the Articles of Incorporation have voted in favor of tbe Amendment is: 1,305,400 shares out of 2,007,000 shares outstanding (65%) voted in favor of this Amendment to the Articles of Incorporation 4. Signatures: - 987 2091 Apr-26-99 3:06PM; Page 3/3 CEO/PresIdent (Acknowledgement required) STATE OF NEVADA Secretary of State hereby certify that this is a true and complete cccy at the document as tiled hi this office. APR 27 99 DEAN HELLER Secretary of State EX-10.4 4 PLAINVIEW LEASE RIDER TO LEASE, DATED JANUARY 29 1993, BETWEEN G.A.J. ASSOCIATES, AS LANDLORD. AND REDSTONE SECURITIES, INC. AS TENANT - ----------------------------------------------------------------- 37. Tenant covenants and agrees to pay to Landlord as annual base rent the following sums in equal monthly installments in advance on the first day of each month during said term payable during each of said years as follows: (1) April 1, 1993 through May 31, 1994--$63,767.76 in monthly installments of $4,554.84 (ii) June 1, 1994 through May 31, 1995--$56,844.36 in monthly installments of $4,737.03 (iii) June 1, 1995 through May 31, 1996--$59,118.24 in monthly installments of $4,926.52 (iv) June 1, 1996 through May 31, 1997 --$61,482.96 in monthly installments of $5,123.58 (v) June 1, 1997 through May 31, 1998 -- $63,942.24 in monthly installments of $5,328.52 at the office of the Landlord (101 Fairchild Avenue, Plainview, New York, 11803) or such other place as Landlord may designate in writing without offset or deduction whatsoever. 38. USE OF PREMISES --------------- Tenant shall use the premises as an office to engage in the business of securities investment banking arid financial consulting, other purpose. Notwithstanding the foregoing, the Tenant shall never permit the use, storage, sale, transfer, etc. of the following products and/or substances. foods, food oils, oils, soaps, chemical liquids or powders, gase medical equipment or medical supplies of any kind, waste materials of any kind, gasoline or petroleum products of any kind, heavy equipment, toxic or hazardous materials (as defined by OSHA) and/or waste of any kind, products or materials which shall cause any kind of odor and/or malodor to penetrate the air, fertilizers or-similar products, paints or inks of any kind, perfumes or fragrances of any kind, lotions or other liquids or powders used in barber shops and/or beauty shops, foods, flowers, raw materials, photographic developing materials and/or any other product or material which shall create a nuisance or require the Landlord to take affirmative action to make the premises suitable for said use. Tenant covenants and agrees to indemnify and save harmless, Landlord and any fee owner and any mortgagee and any lessor under any ground or underlying lease, and their respective contractors, agents and employees, licensees and invitees, from and against any and all liability (statutory or otherwise), claims, suits, demands, damages, clean--up costs, judgments, costs, interests and expenses termination of the lease of real property by reason of destruction or untenantability of the premises demised thereunder caused by fire or other casualty and agrees that the provisions of this paragraph 40 shall govern and control in lieu of any such provisions of law. 41. SECURITY AGREEMENTS ------------------- A. Tenant covenants and agrees thatno security agreement, whether by way of conditional bill of sale, chattel mortgage or instrument of similar import, shall be placed upon any improvement made by Tenant which is affixed to the realty. B. In the event that any of the machinery, fixtures, furniture and equipment installed by Tenant in the demised premises are purchased or acquired by Tenant subject to a chattel conditional sale agreement or other title retention or security agreement, Tenant undertakes and agrees: (I) that no such chattel mortgage, conditional sale agreement or other title retention or security agreement or Uniform Commercial Code filing statement shall be permitted to be filed as a lien against the building and real property, of which the demised premises for a part, and (ii) to cause to be inserted in any of the above--entitled title retention, chattel mortgage or security agreements the following provision: Notwithstanding anything to the contrary herein, this chattel mortgage, conditional sale agree-- ment, title retention agreement or security agreement shall not create or. be filed as a lien against the land, building and improvements compromising the real property in which the good, machinery, equipment, appliance or other personal property covered hereby are to be located or installed. C. If any such lien or UCC filing statement, based on an agreement as above-described, is filed the building and improvements, of which the demised premises form a part, Tenant will, upon ten (10) days prior written notice thereof from Landlord, cause such lien or notice to be removed or discharged at Tenant's cost and expense and Tenant's failure to do so shall constitute a breach of a material provision of this lease. 42. INTENTIONALLY LEFT BLANK 43. INSURANCE Tenant shall maintain commercial general liability insurance for not less than One Million ($1,000,000.00) Dollars per occurrence and One Million ($1,000,000.00) Dollars general aggregate, combined single limits of bodily injury and property damage. These limits which may create or be the foundation for any lien upon the reversion of Landlord, the premises herein demised are Landlord's building and improvements; it being agreed that should Tenant cause any alterations, changes, additions, improvements or repairs to be made to the demised premises, or a material furnished or labor performed therein or thereon, neither Landlord nor the demised premises shall, under any circumstances be liable for the payment of any material furnished to the demised premises or any part thereof; but all such alterations, changes, additions, improvements and repairs and materials and labor shall be at Tenant's expense, and Tenant shall be solely and wholly responsible to contractors, laborers and materialmen furnishing labor and material to said premises and building, Or any part thereof for or on behalf of Tenant. B. Tenant shall not suffer or permit any mechanic's liens to be filed against the fee ownership of the demised premises nor against Tenant's leasehold interest in said premises by reason of work, labor, services and materials supplied or claimed to have been supplied to Tenant or to any occupant of the demised premises. If any such mechanic's lien shall at any time be filed against the demised premises or the building or improvements thereon, Tenant shall, at its own cost and expense, cause the same to be canceled and discharged of record by surety bond or appropriate cash deposit within ten (10) days after the date of filing the same and notice thereof to Tenant, and Tenant shall indemnify and save harmless Landlord from and against any and all costs, expenses, claims, losses or damages resulting therefrom or by reason thereof, including but not limited to, the cost of reasonable attorneys fees. C. Tenant shall also defend on behalf of Landlord, at Tenant's sole cost and expense, any action, suit or proceedings which may be brought thereon or for the enforcement of such liens or orders, and Tenant shall pay any damages and satisfy and discharge any judgment entered thereon and save harmless Landlord from any claim or damage resulting therefrom, including reasonable attorney's fees. D. If Tenant shall fail to discharge such mechanic's liens within such period, then, in addition to any other right or remedy of Landlord, Landlord may, but shall not be obligated to discharge the same either by paying the amount of claim to be due or by procuring the discharge of such lien by deposit in court or bonding and, in any such event, Landlord shall be entitled, if Landlord so elects, to compel the prosecution of an action for the foreclosure of such mechanic's liens by the lienor and to pay the amount of the judgment, if any, in favor of the lienor, with interest, costs and allowances. E. Any amount paid by Landlord for any of the aforesaid charges and all reasonable legal and other expenses of Landlord, including reasonable counsel fees, in defending any such action, or in or about procuring the discharge of said lien, with all necessary disbursements in connection therewith, with interest thereon at the rate of 9% per annum from the date of payment, shall be repaid within a period of ten (10) days after written demand theref or by Landlord to Tenant and may be treated as additional rent payable within the next installments of annual basic rent. F. Prior to the commencement of any work in the demised premises by the general contractor employed by Tenant or by any subcontractors employed by such general contractor, Tenant shall: (i) furnish Landlord with Tenant's written statement setting forth the name and business address of Tenant's general contractors; and (ii) obtain and furnish to Landlord a written list of all sub--contractors employed or to be employed by Tenant's general contractor and certified by the general contractor. 45. RIGHT TO ENTRY A. Tenant shall permit Landlord to erect, use and maintain or repair pipes, cables, conduits, plumbing, vents and wiring, in, to and through the demised premises as to the extent that the Landlord may now or hereafter deem to be reasonably necessary or appropriate for the proper operation or maintenance of the building of which the demised premises are a part. All such work shall be done so far as practicable, in such manner as to avoid disruption of Tenant's use of the demised premises. Landlord shall give prior notice to Tenant of such entry, except under circumstances constituting an emergency. Tenant shall not be responsible to restore the premises on account of Landlord's work. B. Landlord, or its agents or designees, shall have the right to enter the demised premises during business hours f or the purpose of making such repairs or alterations as Landlord shall be required or shall have the right to make by the provisions of this lease. Landlord shall be allowed to take all materials into and upon the demised premises that may be required or for repairs or alterations, without constituting an eviction of Tenant in whole or in part. Landlord shall also have the right to enter the demised premises at such time as such entry may be required by circumstances of emergency effecting the demised premises of the building containing the same. In addition, Landlord, or its agents or designees, shall have the right to enter the demised premises during the business hours for the purpose of inspecting the general conditions and state of repair of the premises and the showing of the premises to any prospective purchaser or tenant. C. The rights granted to Landlord by the terms of this paragraph shall be deemed supplemental to the provisions set forth in this lease D. The foregoing shall not be deemed to impose upon Landlord any obligation for the furnishing of any service, maintenance repair, or other obligation other than as specifically set forth in this lease. 46. SUSPENSION OF SERVICES ---------------------- Anything to this lease to the contrary notwithstanding, Landlord reserves the right to suspend the services of any utilities, when necessary, by reason of accident, or repairs, alterations or improvements, necessary to be made in the demised premises, until such repairs, alterations or improvements shall have been completed, and Landlord shall have no responsibility or liability for such suspension of services provided.Landlord proceeds with diligence and continuity to complete such repairs, alterations or improvements and uses its best efforts to restore such services and soon as practicable. The foregoing shall not be deemed to impose upon Landlord any obligation for the furnishing of any service, maintenance or repair other than as specifically set forth in this lease. 47. CLEANING. REFUSE AND DELIVERIES ------------------------------- A. The demised premises shall be kept clean by Tenant at its own cost and expense and Tenant shall comply with the requirements of all governmental authorities having jurisdiction therein, including but not limited to pests control. B. Tenant, at its own cost and expense shall arrange for the removal of Tenant's refuse and rubbish, which shall be kept in covered containers, from the demised premises and shall comply with all reasonable rules and regulations of Landlord with respect thereto. Landlord shall not be required to furnish any services or equipment for the removal of such refuse and rubbish. C. Tenant, at its own cost and expense, shall maintain exterminating and pest control services in the demised premises to prevent the occurrence of any vermin of any kind or description in or about the demised premises. 48. SIGNS Tenant shall not place any sign(s) on the outside of the building or in the windows of the demised premises which may be seen from the outside of the building. Interior signs, including but not limited to door signs, shall be affixed in accordance with Landlord's written specifications. Landlord shall have the option of supplying such sign at tentant's cost and expense. 49. ADJUSTMENT OF RENT FOR INCREASES IN REAL ESTATE TAXES ----------------------------------------------------- For the purposes of this lease, it is understood and agreed that the term "real estate taxes" shall Include but not be limited to the following taxes: city, school, county, water meter chargesand sewer charges, town, village and any other taxes by whatever name given by a governmental or municipal entity, upon the land, building and improvements. B. Prorated from the time Tenant takes occupancy under the lease, Tenant agrees to pay to Landlord as additional rent during each lease year and during any renewal period of such lease (if applicable) Tenant's proportionate share (as defined in paragraph 85, infra) of all increases in real estate taxes (as defined in paragraph A above) on the land, building and improvements (of which the demised premises are a part) over and above the base rent as set forth in paragraph 37 of this rider to lease, whether such increase in real estate taxes shall be oOcasioned by an increase in assessed evaluation or an increase in tax rate, or both or for any other reason. Such additional rent shall be payable by Tenant] to Landlord during the real estate tax year in which the first installment of such increased real estate taxes becomes due and payable to such governmental authority, notwithstanding that the real estate tax year may be a fiscal year which does not coincide with the calendar lease year in which such taxes shall first become available. The taxes shall be due and payable within five (5) days after written demand theref or by Landlord. If available, a tax bill of the appropriate governmental agency or body (which will be exhibited on request) shall be sufficient evidence of the amount of the taxes and for determination of the amount to be paid by Tenant. C. Landlord's basic real estate tax liability for purposes of determining an increase in any such taxes, shall be a sum equal to the real estate taxes fixed by the aforementioned taxing authorities and applicable to the realty during the tax year: school taxes 1992/93, town taxes 1993, and other taxes 1993 and any increases in taxes shall refer to such tax years which are increases over and above the such taxes for said years. D. If the term of this lease shall end or terminate on a date other than the last day of the real estate tax or fiscal year, the additional rent, if any, payable by Tenant pursuant to the provisions of this lease, shall be apportioned as of said date of termination of this lease. Tenant's obligation to make such payment and Landlord's obligation to refund any overpayment shall survive the termination of this lease. 50. INTENTIONALLY LEFT BLANK. 51. REPAIRS A. Throughout the term of this Lease, Tenant shall take good care of the demised premises and fixtures and appurtenances therein, all at Tenantts sole cost and expense and shall make all non--structural repairs thereto, as and when needed to preserve the premises ingood condition, reasonable wear and tear and damage by fire or other casualty accepted (see also, paragraph 53, infra). B. Throughout the term of this Lease, Landlord shall make all structural repairs to the roof, exterior walls and foundation and structural components of the building of which the demised premises form a part, unless the repairs are made necessary by reason of some act or omission to act of the Tenant, its agent, servants, employees, or invitees, in which event, the Landlord would make such repairs and bill Tenant as additional rent for the cost thereof. 52. INTENTIONALLY LEFT BLANK 53. INSTALLATION AND MAINTENANCE OF HVAC UNIT ----------------------------------------- Tenant shall maintain and service the HVAC unit servicing Tenant's premises throughout the term of this lease, at its sole cost and expense. Tenant shall pay directly to the company providing the service and maintenance the cost of same. Provided Tenant has a written service contract for the service and maintenance of HVAC for the term of this lease (or a renewable contract, providing evidence of renewal to the Landlord), Landlord shall be responsible for replacement of the HVAC unit when its useable life has been exhausted and maintenance and service of same is no longer practical. If, however, Tenant shall fail to obtain a service contract and to maintain the HVAC unit properly, Tenant shall be responsible for the replacement of said unit as provided herein. 54. ASSIGNMENT OR SUBLETTING ------------------------ Without the prior written consent of the Landlord, this lease may not be assigned nor may the premises be sublet in whole or in part. Landlord agrees that it will not unreasonably withhold or delay its consent to an assignment or sublease but in determining reasonableness, there shall be taken into account: (a) the character and reputation of the proposed assignee or subtenant; (b) the specific nature of the proposed assignee or subtenant's business; (c) the financial standing of the proposed assignee or subtenant; (d) the impact of all of the foregoing upon the other tenants of the Landlord in this Building and any adjoining building and the impact of all of the foregoing upon the integrity of the building as a whole. A. In the event of any assignment where the Tenant shall receive a fee or other compensation for same, Landlord shall receive fifty (50%) percent of such fee or compensation. In the event of any subletting where the Basic Annual Rental and Additional Rental reserved in the sublease shall exceed the Basic Annual Rent and Additional Rent payable hereunder, Tenant shall pay to the Landlord fifty (50%) percent of the difference between the Basic Annual Rental and Additional Rental reserved in this lease. The said sums EX-10.5 5 LYNBROOK LEASE prospective lessees of the Premises, (b) to conduct such activities as are necessary or desirable for the operation and maintenance of, and to make repairs, alterations and improvements in, the Premises and/or the Building and their respective systems, facilities and equipment, (c) to remove any violation of Law noted or issued against the Building, the Premises or any part thereof, and (d) to read and maintain utility meters located therein. Any entry by Landlord shall be made on reasonable advance oral or written notice, except in emergency situations. Landlord shall have a pass key (or similar entry device) to the Premises and shall be allowed to bring materials and equipment into the Premises as required in connection with maintenance, repairs and alterations of the Premises and/or Building without any liability to Tenant and without any reduction of Tenant's obligations. If, during the last month of the Term, Tenant has removed all or. substantially all of Tenant's Property from the Premises, Landlord, without notice to Tenant, may immediately enter the Premises and alter, renovate and decorate the same, without liability to Tenant and without reducing or otherwise affecting Tenant's obligations hereunder. In exercising its rights under this Section 12.6, Landlord shall use reasonable efforts to avoid unreasonable interference with the normal conduct of Tenant's business in the Premises. ARTICLE XIII SUBORDINATION SECTION 13.1 Subordination. This Lease, and all rights of Tenant under it, are subordinate and subject to all present and future ground, master or operating leases of the Building and/or the Premises, and any and all present and future mortgages, security interests or other security documents upon or affecting the Building and/or the Premises, and to all advances thereunder and all renewals, replacements, modifications, amendments, consolidations and extensions thereof (all of the foregoing, collectively, the "Senior Interests," and holders of Senior Interests shall be referred to as "Senior Interest Holders"), unless any Senior Interest Holder elects, by written notice to Tenant, that this Lease shall be superior to its lease or mortgage. This Section 13.1 shall be self-operative and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall within 20 days of demand therefor execute, acknowledge and deliver any instrument that Landlord, any Senior Interest Holder or any of their respective successors in interest may (in the form required by the Senior Interest Holder requesting the same) request to evidence such subordination. Landlord represents and warrants that as of the date hereof there are no Senior Interests affecting the Building. SECTION 13.2 Attornment. Any Senior Interest Holder who ---------- succeeds to the rights of Landlord under this Lease, whether1999, between TREMONT CAPITAL CORP., a Texas corporation, having an office c/o Fairfield Financial Group, 8 Greenway Plaza, Suite 1100, Houston, Texas 77046, hereinafter called "Landlord," and REDSTONE SECURITIES, INC., a having an office at 101 Fairchild Avenue, Plainview, New York 11803, hereinafter called "Tenant."1/4 BASIC LEASE PROVISIONS: The following provisions shall be referred to in this Lease as the Basic Lease Provisions. In the event of any conflict between any Basic Lease Provision and the balance of the Lease, the latter shall control. 1. Location of Premises: A portion of the Seventh Floor depicted on Exhibit "A" 2. Rentable Area of Premises: 5,083 rentable square feet 3. Percentage Share: 1.80% 4. Term: Five (5) years 5. Renewal Option: One five (5) year renewal option. 6. Basic Annual Rent: Year 1: $86,411.00 per annum ($17.00 per square foot), payable in equal monthly installments of $7,200.92 Year 2: $86,411.00 per annum ($17.00 per square foot), payable in equal monthly installments of $7,200.92 Year 3: $87,681.75 per annum (17.25 per square foot), payable in equal monthly installments of $7,306.82 Year 4: $88,952.50 per annum ($17.50 per square foot), payable in equal monthly installments of $7,412.71 Year 5: $90,223.25 per annum ($17.75 per square foot), payable in equal through exercise of remedies or by operation of law, is sometimes referred to herein as a "Successor Landlord". Upon a Successor Landlord's succession to the rights of Landlord under this Lease, at the option of the Successor Landlord, Tenant shall attorn to and recognize the Successor Landlord as Tenant's landlord under this Lease and shall promptly execute and deliver any additional instrument that such Successor Landlord may reasonably request to evidence the attornment. Upon attornment, this Lease shall continue in full force and effect and as a direct lease between the Successor Landlord and Tenant upon all of the terms, conditions and covenants as are set forth in. this Lease, except however, such Successor Landlord shall not be (a) liable for any previous act or omission or negligence of Landlord under this Lease; (b) subject to any counterclaim, defense or offset, which theretofore shall have accrued to Tenant against Landlord; (c) bound by any previous modification or amendment of this Lease or by any previous prepayment of more than one month's rent, unless such modification or prepayment shall have been approved in writing by the Senior Interest Holders through or by reason of which the Successor Landlord shall have succeeded to the rights of Landlord under this Lease; (d) liable for any security deposited pursuant to this Lease unless such security has actually been delivered to successor Landlord; (e) obligated to repair the Premises or the Building or any part thereof, in the event of total or substantial total damage beyond such repair as can reasonably be.accomplished from the net proceeds of insurance actually made available to Successor Landlord; or (f) obligated to repair the Premises or the Building or any part thereof, in the event of partial condeirination beyond such repair as can reasonably be accomplished from the net proceeds of any award actually made available to Successor Landlord, as consequential damages allocable to the part of the Premises or the Building not taken. Nothing contained in this Section 13.2 shall be construed to impair any right or remedy otherwise exercisable by any such owner, holder or lessee. SECTION 13.3 Estoppel Statements. Tenant shall, within 10 days following receipt of Landlord's request to do so, execute, acknowledge and deliver to Landlord a statement in writing certifying to those facts for which such certification has been requested by Landlord or any current purchaser or Senior Interest Holder, including without limitation, that (a) this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and describing all such modifications), (b) the dates to which Rent, Additional Rent and other charges payable hereunder have been paid, if any, and Cc) whether or not to the best knowledge of Tenant, Landlord is in default in the performance of any covenant, agreement, obligation or condition contained in this Lease and, if so, specifying in reasonable detail each such default of which Tenant may have knowledge. Any statement delivered by Tenant pursuant to this Section may be relied upon by any current or prospective purchaser of the Building, any Senior Interest Holder and any assignees thereof. SECTION 13.4 Attorney-In-Fact. Tenant hereby constitutes and appoints Landlord attorney-in-fact for Tenant to execute any deliver any instruments and/or documents for or on behalf of Tenant which are provided under this Article XIII or otherwise in this Lease, such appointment being coupled with an interest. ARTICLE XIV ASSIGNMENTS AND SUBLEASES SECTION 14.1 Prohibition. Tenant shall not mortgage, pledge, encumber or otherwise hypothecate this Lease or the Premises or any part thereof in any manner whatsoever without complying with the provisions of this Article XIV. Tenant shall not, whether voluntarily, involuntarily, by operation of law or otherwise: (a) assign or otherwise transfer this Lease, or (b) sublet the Premises or any part thereof or permit the Premises to be used or occupied by one (1) or more Persons other than Tenant, without in each instance strictly complying with the requirements of this Article XIV. SECTION 14.2 Corporate and Partnership Transactions. If Tenant is a corporation, a dissolution of the corporation or a transfer (by one or more transactions) of a majority of the voting stock of Tenant by one or more Persons deemed insiders within the meaning of the Securities Exchange Act of 1934, as amended (other than any institutional investor holding less than 15% of the voting stock of Tenant that exercises no control over the operations or management of Tenant), shall be deemed an assignment of this Lease subject to this Article XIV, except that notwithstanding the foregoing, the merger or consolidation of Tenant with or into another corporation, more transactions, or whether one or more Persons hold the controlling interest prior to the transfer or afterwards. SECTION 14.3 Landlord's Recapture Rights. Whenever Tenant desires to sublease all or any part of the Premises for any period of time, or to assign this Lease, Tenant shall give notice othereof to Landlord, which notice shall comply with the provisions of Section 14.4 and shall contain a statement of the proposed commencement date of such sublease or assignment (the "Target Date"). The notice shall constitute an offer from Tenant (the "Offer") to Landlord, at Landlord's option, exercisable in Landlord's sole discretion, to terminate this Lease as to all of the Premises or such part thereof which Tenant desires to sublease. Landlord may exercise this option by notice to Tenant at any time within 30 Business Days after receipt of the Offer, and during this 30 Business Day period, Tenant shall not sublet the Premises or assign the Lease to any Person. The Target Date shall be not earlier than 90 days and not later than 365 days after the date of the Offer. If Landlord exercises its option to terminate this Lease, then this Lease shall terminate on the Target Date set forth in such Offer. The Rents shall .be prorated and paid through the termination date. If Landlord does not exercise its option to terminate this Lease, Tenant may sublease the Premises or assign the Lease; provided, however, that (a) Tenant must obtain Landlord's consent pursuant to Section 14.4, (b) the commencement date of such sublease or assignment shall not be earlier than the Target Date set forth in such Offer and (c) Tenant must comply with the applicable provisions of this Article XIV. SECTION 14.4 Consent by Landlord. Tenant may not enter into any sublease or assignment without the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned. Whenever Tenant seeks Landlord's consent under this Section 14.4, Tenant shall request the consent of Landlord in writing; and such request shall be accompanied by, in addition to those items required by Section 14.3, (a) an executed copy of the proposed sublease or assig-nment as to which Landlord's consent is sought and, in the case of an assignment, an executed copy of the assumption agreement required by Section 14.5, (b) a statement setting forth in reasonable detail the identity of the proposed sublessee or assignee, as the case may be, and the nature of its business, (c) financial statements or other evidence, reasonably satisfactory to Landlord, of the financial condition of the proposed sublessee or assignee and all other current financial information with respect to the proposed sublessee or assignee in Tenant's possession, and (d) any other information reasonably requested by Landlord. SECTION 14.5 Miscellaneous. No assignment of this Lease shall be valid or binding on Landlord unless and until (i) the assignee executes arid delivers to Landlord an agreement in form and substance satisfactory to Landlord, whereby the assignee assumes and agrees to be bound by all of the provisions of this Lease and to perform all of the obligations of Tenant hereunder and (ii) Tenant pays to Landlord a commission equal to the standard Long Island brokerage fee for a similar transaction. Notwithstanding any assignment or sublease to any other Person, Tenant shall remain fully liable for the payment of Rents and for the performance of all the other obligations of Tenant contained in this Lease. Any act or omission of an assignee or subtenant or any Person claiming under or through any of them that violates this Lease shall be deemed a violation of this Lease by Tenant.. The consent by Landlord to any assignment or sublease shall not relieve Tenant or any Person claiming through or under Tenant of the obligation to obtain the consent of Landlord, pursuant to the provisions of this Article XIV, to any future assignment or sublease. If Landlord declines to give its consent to any proposed assignment or sublease under circumstances where Landlord is entitled to do so under this Lease, or if Landlord exercises any of its options under Section 14.3. Tenant shall indemnify, defend (with counsel reasonably satisfactory to Landlord) and hold Landlord harmless against and from any and all loss, liability, damages, costs and expenses (including reasonable attorneys' fees and disbursements) resulting from any claims that may be made against Landlord by any Person that claims it was damaged by Landlord's actions, including any proposed assignee or sublessee, or any broker or other Person claiming a commission or similar compensation in connection with the proposed assignment-or sublease. SECTION 14.6 Additional Charges. If Landlord shall consent to any assignment or subletting of this Lease, Tenant shall, in consideration theref or, pay to. Landlord, as Additional Rent, an amount equal to 100% of the net profits of such transaction which amount shall be paid to Landlord within 10 days of Tenant's receipt thereof. ARTICLE XV DEFAULT SECTION 15.1 Events of Default. The following shall be ----------------- deemed events of default ("Events of Default"): (a) If Tenant shall fail to pay any portion of Base Rent or Additional Rent when due and such failure shall continue for 5 days; (b) If Tenant shall fail to observe and perform any provision of this Lease (other than those specifically mentioned in this Section 15.1) to be observed or performed by Tenant and such failure continues for 15 days after notice thereof by Landlord to Tenant, unless, if the nature of such failure is such that it cannot reasonably be cured within such 15 day period, (i) within that aforesaid 15 day period Tenant notifies Landlord that it intends to cure such failure and actually commences to cure such failure, and (ii) Tenant thereafter diligently proceeds to complete such cure within a reasonable time not to exceed 90 days; (c) If, in violation of Article XIV, this Lease shall be hypothecated or assigned or if the Premises shall be sublet, or if there shall be attempts at such actions; (d) If Tenant shall fail to execute, acknowledge and deliver to Landlord any statements documents or instruments required under Article XIII within the time periods specified therein; (e) If, in the event Tenant's obligations hereunder have been guaranteed, any guarantor shall breach any of its material obligations, representations, warranties, covenants or agreements under any such guaranty of this Lease, or if any case, proceeding or other action shall be commenced by or against such guarantor or Tenant under any Law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors; (f) If the Premises.shall become deserted or abandoned for a period of 10 consecutive days or if Tenant fails .to take occupancy of the Premises within 30 days of the Commencement Date, it being agreed that the fact that any of Tenant's Property remains in the Premises shall not be evidence that Tenant has not deserted or abandoned the Premises. SECTION 15.2 Remedies and Damages. 15.2.1 Termination. If any of such Events of Default shall have occurred, Landlord may, at any time thereafter, give notice to Tenant stating that this Lease and the Term shall automatically expire and terminate on the date specified in such notice, which date shall be 2 days after the giving of such notice, and upon the expiration of such 2 day period, this Lease and the Term and all rights of Tenant under this Lease shall automatically expire and terminate as if the date on which such 2 day period expires were the Expiration Date herein definitely fixed, and Tenant immediately shall quit and surrender the Premises to Landlord. 15.2.2 Surrender and Re-Entry. If (a) Tenant shall fail to pay Base Rent or Additional Rent when due and such failure shall continue for 5 days after notice thereof from Landlord to Tenant, or (b) this Lease shall expire and terminate as provided in Section 15.1, then, in either such case, Tenant shall immediately quit and peacefully surrender the Premises to Landlord, and Landlord and its agents may immediately, or at any time thereafter, without further notice, reenter the Premises, either by summary proceedings or by any other applicable action or proceeding or otherwise, and remove all Persons and property from the Premises. The terms "reenter," "re-entry" or "re-entered" as used in this Lease shall not be deemed to be restricted to their technical legal meanings. If (a) Landlord shall have re-entered the Premises as provided in this Section 15.2.2, or (b) this Lease shall have terminated and expired as provided in Section 1 5. 1, then, in either such case, Landlord may relet the Premises from time to time, .either in the name of Landlord or otherwise, to such tenant or tenants, for such term or terms ending before, on or after the then next succeeding Expiration Date, at such rental or rentals and upon such other conditions (that may include concessions and free rent periods) as Landlord may determine in its sole and absolute discretion; provided, however, that Landlord shall not be liable for refusal or failure to relet the Premises, or, in the event of any such relenting or refusal or failure to collect any rent due upon any such reletting, and no such refusal or failure shall operate to relieve Tenant of any liability under this Lease or otherwise affect any such liability. Landlord may make such repairs, replacements, alterations, additions, improvements, decorations and, other physical changes in and to the Premises as Landlord, in its sole discretion, considers advisable or necessary in connection with any such reletting or proposed reletting., without relieving Tenant of any liability under this Lease or otherwise affecting any such liability. 15.2.3 Waiver of Notice and Redemption. Tenant hereby waives (a) the service of any notice of intention to reenter; and (b) all rights of Tenant to redeem the Premises or to restore the operation of this Lease after Tenant shall have been dispossessed or ejected there from by process of law or under the terms of this Lease or after any expiration or termination of this Lease, whether such dispossess, ejection, expiration or termination shall be by operation of law or pursuant to the provisions of this Lease. 15.2.4 Damages. If this Lease and the Term shall terminate as provided in Section 15.2, or if Landlord shall re-enter the Premises as provided in Section 15.2.2 hereof, then, in either such event: o (a) Tenant shall pay to Landlord all Base Rent and Additional Rent to the date upon which this Lease and the Term shall have expired or to the date of re-entry upon the Premises by Landlord, as the case may be; (b) Tenant also shall pay to Landlord, as damages, any deficiency ("Deficiency") between the Rents for the period that otherwise would have constituted the unexpired portion of the' Term and the net amount, if any, of rents collected under any reletting effected pursuant to the provisions of Section 15.2.2 for any part of such period (first deducting from the rents collected under any such reletting all of Landlord's expenses in connection with the termination of this Lease, Landlord's re-entry upon the Premises and such reletting including all repossession costs,. brokerage commissions, attorneys' fees and disbursements, alteration costs and other expenses of preparing the Premises for such reletting); any such Deficiency shall be paid in monthly installments by Tenant on the days specified in this Lease for payment of. installments of Base Rent, and Landlord shall be. entitled to recover from Tenant each monthly Deficiency as the same shall arise, and no suit to collect the amount of the Deficiency for any month shall prejudice Landlord's right to collect the Deficiency for any subsequent month by a similar proceeding; and (c) whether or not Landlord shall have collected any monthly Deficiency as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord on demand in lieu of any further Deficiency as and for liquidated damages, a sum equal to the amount by.which the Rents for the period that otherwise would have constituted the unexpired portion of the Term exceeds the then.fair market rental value of the Premises for' the" same period (first deducting from such fair market rental o value all of Landlord's expenses in connection with the `termination of this Lease, Landlord's re-entry upon the. Premises and reletting costs, if any, including all repossession costs, brokerage commissions, attorney's fees and disbursements, alteration costs and other expenses of preparing the Premises for reletting, but only to the extent such expenses have not already been paid to Landlord through prior court proceedings or otherwise), both discounted to present value at the rate of 6% per annum, less the aggregate amount of Deficiencies theretofore collected by Landlord for the same period; provided, however, that if, before presentation of proof of such liquidated damages to any court, commission or tribunal, the Premises, or any part thereof, shall have been relet by Landlord for the period that otherwise would have constituted the unexpired portion of the Term, or any part thereof, the amount of rent reserved upon. such reletting shall be deemed, prima facie, to be the fair market rental value for the part of the Premises so relet during the term of the reletting. C Monies Received. Any monies received by Landlord from or on behalf of Tenant during the pendency of any proceedings between Landlord and Tenant shall be deemed paid as compensation for the use and occupation of the Premises, and the acceptance of any such compensation by Landlord shall not be deemed an acceptance of Rents or a waiver on the part of Landlord of any rights hereunder. SECTION 15.3 Waiver of Trial by Jury and Counterclaims. Landlord and Tenant each waive trial by jury in any action, proceeding or counterclaim brought by either of them against the other on any matters arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant or Tenant's use or occupancy of the Premises or the operation, maintenance or control of the Building. Tenant shall not interpose any counterclaim it may otherwise assert in any summary proceeding whether such summary proceeding is based on nonpayment of Rents or on Tenant's holding over after expiration of the Term or on any other basis pursuant to Article 7 of the Real Property Actions and Proceedings Law of the State of New York, unless by not interposing such counterclaim Tenant would be barred from asserting such counterclaim in a separate' action or. proceeding. SECTION 15.4 Partial Payment; No Waiver. No payment by Tenant or receipt or acceptance by Landlord of a lesser amount than the full Rents due hereunder shall be deemed to be other than a payment on account, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right' to recover the balance, treat such partial payment as a default or pursue any other remedy provided in this Lease or at law or in equity. If at any time Tenant shall pay Landlord less than the full amount of Rents then due, Landlord shall have the right to apply such payment to any item or items of Rents that Landlord, in its discretion, deems appropriate. No consent or waiver, express or implied, by Tenant or Landlord of any breach of any obligation of the other party shall be construed as a consent or waiver to or of any other breach of the same or any other obligation. The failure of Landlord or Tenant at any time to insist upon the strict performance of any obligation of the other or to exercise any right or remedy herein contained (including the right to make any demand upon Tenant for payment of any Additional Rent due hereunder) shall not be construed as a waiver or relinquishment of the performance of such obligation or of the right to exercise any right or remedy in the future. The receipt or acceptance by Landlord of Rents or the payment by Tenant of Rents with knowledge of a breach by the other party of any term of this Lease shall not be deemed a waiver of such breach. The rights and remedies of either party provided in this Lease for a breach by the other are cumulative and not exclusive, and the exercise by either party of any other right or remedy it may have shall not preclude the concurrent or subsequent exercise of any other right or remedy it may have pursuant to this Lease, at law or in equity. SECTION 15.5 Right to Cure. Landlord may, but shall not be obligated to, cure any default by Tenant under this Lease at any time after notice and the lapse of any cure period included within the conditional limitation to which such default relates, without giving further notice. Whenever Landlord so elects, all costs and expenses incurred by Landlord in curing any such default, including attorneys' fees and disbursements, together' with interest at the Interest Rate on the amount of costs and expenses so incurred commencing on the day such costs are paid by Landlord, shall be paid by Tenant to Landlord as Additional Rent within 20 days of demand. SECTION 15.6 Effect of Re-Entry. The mere re-entry or ------------------ taking possession of the Premises by Landlord shall not be construed as an election to terminate this Lease. SECTION 15.7 Payment of Landlord's Expenses All costs and expenses, including attorneys' fees (whether or not legal proceedings are instituted), involved in collecting Rents or enforcing the obligations of Tenant under this Lease, including the cost and expense of instituting and prosecuting legal proceedings or recovering possession of the Premises after breach by Tenant or upon expiration or earlier termination of this Lease, to the extent such costs and expenses have not already been paid as a Deficiency or as liquidated damages under Section 15.2.4 shall be due and payable by Tenant as Additional Rent within 20 days of demand. ARTICLE XVI MISCELLANEOUS SECTION 16.1 Ouiet Enjoyment So long as Tenant timely pays all the Rents and performs all of Tenant's other obligations hereunder within the time periods required under this Lease, Tenant shall peaceably and quietly hold and enjoy the Premises during the Term without hindrance or ejection by Landlord or any person lawfully claiming through or under Landlord, subject, nevertheless, to the provisions of this Lease. This covenant is a covenant running with the land and is subject to Article XII. SECTION 16.2 Broker. Each of Landlord and Tenant represents to the other that it has dealt with no broker in connection with this Lease other than Real Estate Strategie.s and DNC Capital Corp. (collectively, "Broker"). Each of Landlord and Tenant agrees to indemnify, defend and hold harmless the other from and against any claims, based or alleged to be based upon the acts or omissions of the indemnifying, party, for any brokerage commission or finder's fee with respect to this Lease by persons other than Broker and for all costs, expenses and liabilities incurred in connection with such claims, including attorneys' fees and disbursements arising out of a breach of the foregoing representation. SECTION 16.3 No Recording. Tenant shall not record this Lease or any memorandum thereof. SECTION 16.4 Entire Agreement. This Lease (including the Exhibits attached hereto, whether executed or not) contain all of the agreements and understandings between the parties related to the leasing of the Premises and the respective obligations of Landlord and Tenant in connection therewith. All prior agreements and understandings between the parties have merged into this Lease and such other documents referred to in this Section 16.4. SECTION 16.5 Amendments. No agreement shall be effective to amend, change, modify, waive, release, discharge, terminate or effect an abandonment of this Lease, . in. whole or in.part, unless such `agreement is in writing, refers expressly to this Lease,' and is signed by. Landlord and Tenant. SECTION 16.6 Successors. Except as otherwise expressly provided herein, the obligations of this Lease shall bind and benefit the successors and assigns of the parties hereto; provided, however, that no assignment, sublease or other transfer in violation of the provisions of Article XIV shall operate to vest any rights in any putative assignee, sublessee or transferee of Tenant. SECTION 16.7 Force Maieure. Landlord shall have no liability whatsoever to Tenant on account of the inability ------------- of Landlord to timely fulfill any of Landlord's obligations under this Lease (other than those relatingto the payment of money) by reason of any strike, lockout or other labor trouble; inability to obtain labor, materials, coal, oil, or other suitable fuel or reasonable substitutes therefor or the failure of the supply of any thereof; acts of God, fire or other casualty; governmental preemption of priorities or other controls in connection with a public emergency; governmental restrictions or requirements of Laws; enemy or hostile governmental action; civil commotion; or any other cause, whether similar or dissimilar to the above, beyond Landlord's reasonable control (the foregoing events are collectively referred to as "Force Majeure"). If this Lease specifies a `time period for performance of an obligation of Landlord, that time period shall be extended by the period of any delay in Landlord's performance caused by any of the events of Force Majeure. SECTION 16.8 Post-Termination Obligations. Upon the' expiration or earlier termination of this Lease, neither party shall have any obligation or liability to the other in respect of any period after such expiration or termination (except as otherwise expressly provided in this Section 16.8 or elsewhere in this Lease), but all obligations and liabilities under this Lease in respect of any period prior to such expiration or termination shall survive such termination or expiration. Notwithstanding the foregoing, (a) in case of any termination or expiration under Article XV, Tenant shall remain liable as provided therein, and (b) Tenant's or Landlord's accrued liability or obligations, as the case may be, under this Lease shall in all events survive the expiration or earlier termination of the Term. SECTION 16.9 Interpretation. -------------- 16.9.1 Governing Law. (a) This Lease shall be governed by, and be construed in accordance with, the laws of the State of New York without regard to the principles of conflicts of laws. To the fullest extent permitted by law, Tenant hereby unconditionally and irrevocably waives any claims to assert that the law of any other jurisdiction governs this Lease and agrees that this Lease shall be governed by and construed in accordance with the laws of the State of New York pursuant to 5-1401 of the New York General Obligations Law. (b) Any legal suit, action or proceeding against Tenant or Landlord arising out of or relating to this Lease may be instituted in any federal or state court in Nassau County, New York, pursuant to 5-1402 of the New York General Obligations Law, and Tenant hereby waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or .proceeding including, without limitation, any claim of forum non convenient pursuant to any rule of common law and/or any applicable federal or state statute, law or provision, and Tenant hereby irrevocably, submits to the jurisdiction of any such court in any suit; action or proceeding. 16.9.2 Invalidity. If any provision of this Lease or the application thereof to any Person or circumstance shall be invalid or unenforceable, the remainder of this Lease and the application of that provision to other Persons or circumstances shall not be affected but rather shall be enforced to the fullest extent permitted by law. 16.9.3 Covenants. Each provision of this Lease on Tenant's part to be performed shall be deemed and construed as a separate and independent covenant of Tenant, not dependent on any other provision or covenant. 16.9.4 Number and Gender. All words used or defined in this Lease or the Exhibits hereto, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require. 16.9.5 Exhibits. All exhibits, schedules and riders appended to this Lease are incorporated herein and by this reference made a part hereof. References to "Exhibits" or "Schedules" shall be to Exhibits and Schedules attached to this Lease except where the context requires otherwise. SECTION 16.10 Submission of Lease. The submission of this Lease to Tenant or its broker, agent or attorney for review or signature does not constitute an offer to Tenant to lease the Premises or the granting of an option to do so. This instrument shall have no binding force or effect until its execution and unconditional delivery by both Landlord and Tenant. SECTION 16.11 Notices. Consents andApprovals. In order to be effective, any notice, demand, consent or approval ("Notice") hereunder shall be in writing (except as otherwise expressly stated herein) and signed by the party giving such Notice. Any Notice in writing shall be personally delivered, sent by a nationally recognized courier service, or.mailed by registered or certified mail, return receipt requested, addressed, (a) if to Tenant, at the Address of Tenant or Such other address as Tenant shall have last designated by notice as provided in this Section 16.1 1 to Landlord, and (b) if to Landlord, to the Address of Landlord, or at such other address as Landlord shall have last designated by Notice as provided in this Section 16.11 to Tenant, in any case, with a copy to Rubin Baum Levin Constant & Friedman, 30 Rockefeller Plaza, New York, N.Y. 10112, Attn.: David A. Mandel, P.C., and with a. copy to Landlord's Agent or to such `other address as such party shall have last designated by notice in writing to the party. giving the notice. Notices in writing shall be deemed given when personally delivered or.upon receipt (or refusal of receipt) if mailed or sentby a courier service. SECTION 16.12 Directory Listings. Landlord, at Tenant's request, shall maintain Tenant's name on the directory board located in the lobby of the Building. SECTION 16.13 Sicinage. Tenant shall have the right to install appropriate sig-nage identifying Tenant or any subtenant permitted under Article XIV, in keeping with the nature of the Building, on the doors to the Premises. SECTION 16.14 Security Deposit. Tenant shall deposit the Security DepoSit with Landlord on the signing of this Lease as security for the faithful performance and observance by Tenant of the provisions of this Lease. If Tenant defaults, after the giving of any required notice and the expiration of any required grace period, in any of its obligations under this Lease, Landlord may apply or retain the whole or any part of the Security Deposit to the extent required for the payment of any Rents as to which Tenant is in default or for any sum that Landlord may expend or may be required to expend by reason of Tenant's default under this Lease. If Tenant shall comply wjth all of its obligations under this Lease, the Security Deposit shall be returned to Tenant without interest and less any expenses incu.rred but not paid by Tenant in accordance with this Lease, within 60 days after the expiration of the Term and after delivery of possession of the entire Premises to Landlord. Upon a sale or transfer of the Building or any other transaction set forth in Section 12.2. Landlord shall have the right to transfer the Security Deposit to the vendee, lessee or transferee and Landlord shall thereupon be released by tenant from all liability for the return of the Security Deposit; and Tenant shall look solely to the new landlord for the return of the Security Deposit. The provisions hereof shall apply to every transfer or assignment made of the Security Deposit to a new landlord. Tenant shall not assign or encumber or attempt to assign or encumber the Security Deposit, and neither Landlord nor its successors or assigns shall ,be bound by any such assignment. encumbrance, attempted assignment or attempted encumbrance. 16.14.1 Restoration/Reduction of Security. It is understood and agreed that the amount of Tenant's Security Deposit throughout the term of this Lease shall at all times be equal to 2 monthly installments of Base Rent, as the same shall increase each Lease Year of the Term. If Landlord is required to apply or draw upon all or any part of the Security Deposit to cure any default by Tenant under this Lease, Tenant shall, within 10 days of notice or demand by Landlord, reStore such Security Deposit to an amount equal to 2 monthly installments of Base Rent then due under this Lease. SECTION 16.15 Building Security. Landlord shall be the sole determinant of the type and amount of security services to be provided in the Building. In all events and notwithstanding any provision of this Lease to the contrary, Landlord and the Landlord Parties shall not be liable to Tenant and Tenant hereby waives any claim against Landlord, for (a) any unauthorized or criminal entry of third parties into the Premises or the Building, or (b) any damage to persons or property in or about the Premises or the Building by' or from any unauthorized or criminal acts of third parties, regardless of any action, inaction, failure, breakdown, malfunction of the security services provided or any negligence on the part of Landlord or any Landlord Party. SECTION 16.16 Relocation. Landlord expressly reserves the right at Landlord's sole cost and expense to remove Tenant from the Premises and to relocate Tenant in. some other space of Landlord's choosing of approximately the same dimensions and size within the Building, which other space shall be improved and decorated by Landlord at Landlord's expense Landlord shall have the right, in Landlord's sole discretion, to use such decorations and materials from the existing Premises, or other materials so that the space in which Tenant is relocated shall be comparable in its interior design and decoration to the Premises from which Tenant is removed. Nothing herein contained shall be construed to relieve Tenant or imply that Tenant is relieved of the liability for or obligation to pay any Additional Rent due by reason of the provisions of Section 2.3 of this Lease, the provisions of which paragraph shall be applied to the space in which Tenant is relocated on the same basis as said provisions were applied to the Premises from which Tenant is removed. Tenant agrees that Landlord's exercise of its election to remove and relocate Tenant shall not terminate this Lease or release Tenant, in whole or in part, from Tenant's obligations to pay any Rents and perform the covenants and agreements hereunder for the full Term IN WITNESS WHEREOF, Landlord and Tenant have hereunto executed this Lease by their respective duly authorized representatives as of the day and year first above written. LANDLORD: Lighthouse 300 Limited Partnership By: By: TENANT: Redstone Securities, Inc. EXHIBIT B Definitions Whenever used in this Lease. The following terms shall have the indicated meanings: Address of Landlord: As defined in Section 1.1. ------------------- Address of Tenant: As defined in Section 1.1. ----------------- Additional Rent: As defined in Section 3.2. --------------- Alteration: The installation, relocation or removal of any Improvement. An Alteration may include (a) repair work performed by Tenant pursuant to Article VIII or (b) compliance work performed by Tenant pursuant to Section if such work involves the installation, relocation or removal of any Improvement. Base Rent: As defined in Section 1.1. --------- Building: The office building, other improvements and underlying land known as 300 Merrick Road, LyniDrook, New York. -------- Building Service Systems: All mechanical, electrical, plumbing, gas, telecommunication, sanitary, sprinkler, HVAC, security, life safety, elevator and other systems or facilities that service the Building up to the point of localized distribution to the Premises (if and to the extent any such systems or facilities service the Premises) and excluding any systems or facilities located in the Premises or extending beyond such point of localized distribution. Building Standards: Such standards as Landlord may adopt and generally enforce uniformly from time to time to govern ------------------ the technical aspects of alterations to the Premises. Business Days: Monday through Friday, other than Federal or New York State or union legal holidays. ------------- Business Hours: As defined in Section 6.2. -------------- Commencement Date: As defined in Section 1.1. ----------------- Common Areas: As defined in Section 8.3. ------------ Deficiency: As defined in Section 15.2.4. ---------- Electric Inclusion Amount: As defined in Section Eminent Domain: As defined in Section 10.1. - -------------- Force Majeure As defined in Section 16.7. ------------- GAAP: Generally accepted accounting principles, consistently applied. ---- Hazardous Materials: Any element, compound, chemical mixture, contaminant, pollutant, material, waste or other ------------------- substance which is defined, determined or identified as a "hazardous substance", hazardous waste or hazardous material under any federal, state or local statute, regulation or ordinance applicable to the Premises, as well as any amendments and successors to such statutes and regulations, as may be enacted and promulgated from time to time, including, without limitation, the following: (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (codified in scattered sections of 26 u.s.c., 33 U.S.C., 42 U.S.C. and 42 U.S.C.ss.9601 et seq.); (ii) the Resource Conservation and Recovery Act of 1976 (42 U.S.C.ss.6901 et seq.); (iii) the Hazardous Materials Transportation Act (49 U.S.C.ss.1801 et seq.); (iv) the Toxic Substances Control Act (15 U.S.C.ss.2601 et seq); (v) the Clean Water Act (33 U.S.C.ss.1251 et seq.); (vi) the Clean Air Act (42 U.S.C.ss.7401 et seq); (vii) the Safe Drinking Water Act (21 U.S.C.ss.349; 42 U.S.C.ss.201 andss.300f et seq); (viii) the National Environmental Policy Act of 1969 (42 U.S.C.ss. 3421); (ix) the Superfund Amendment and Reauthorization Act of 1986 (codified in scattered sections of 10 U.S.C., 29 U.S.C., 33 U.S.C. and 42 U.S.C.); (x) Title III of the Superfund Amendment and Reauthorization Act (40 U.S.C.ss.1101 et seq.) and (xi) the Environmental Conservation Law of the State of New York (modified in section 17 1/2 of McKinney's 1984). HVAC: Heating, ventilation and air conditioning. ---- Improvement: Any fixed improvement in, to or upon the Premises made by or for any tenant or occupant. ----------- Insurance Requirements: As defined in Exhibit D. ---------------------- Interest Rate: As defined in Section 3.5. ------------- Land: The real property upon which the Building is situated. ---- Landlord: As defined in the introductory paragraph of this Lease. -------- Landlord Parties: Landlord, any Senior Interest Holder, Landlord' s Agent, the managing agent for the Building, and any partner, principal, director, officer, agent or employee of any of the foregoing. Landlord's Agent: Lighthouse Real Estate Management LLC, c/o Sheinker. Wasserstein Realty Services, Inc., 581 Sixth Avenue, 4th Floor, New York, New York 10011 Landlord's Electrical Consultant: As defined in Section 6.1. Landlord's Work As defined in Exhibit E. -------------------------------- --------------- Law(s): The terms "law," "laws, "provisions of law," "requirements of law," and words of similar import shall mean present and future laws, statutes (including the Americans with Disabilities Act, 42 U.S.C. ss. 12,101 et seq.), ordinances, codes (including building and fire codes), rules (including the rules and requirements of the Occupational Safety and Health Administration relating to indoor air quality codified at 29 CFR parts 1910, 1915, 1926 and 1928), regulations, requirements, decrees, orders and directives of any or all of the federal, state, county and city governments and all agencies, authorities, bureaus, courts, departments, subdivisions, or offices thereof, and of any other governmental, public or quasi-public authorities (including the board of fire underwriters or other insurance body) having jurisdiction over the Building or the Premises, and the direction of any public officer pursuant to law, whether now or hereafter in force. References to :specific statutes include (a) successor statutes of similar purpose and import, and (b) all rules, regulations and orders made thereunder. Lease Year: Any calendar year all or any part of which falls within the Term. ---------- Measurement Standards: The measurement standards applicable to any particular space set forth in the Recommended Method of Floor Measurement For Office Buildings and Stores published by the Real Estate Board of New York and effective January 1, 1987. Mechanics Lien: Any mechanics or other lien or encumbrance filed, claimed or asserted in connection with any Alteration or any other work, labor, services or materials done for or supplied to Tenant or any Person claiming through or under Tenant. Notice: As defined in Section 16.11. ------ Objection Notice: As defined in Section 4.5. ---------------- Offer: As defined in Section 14.3. ----- Person: A natural person, firm, corporation, partnership, joint venture, trust (including any ------ beneficiary thereof, association, unincorporated association or other form of business or legal entity, as the case may be. Premises: As defined in Section 1.1. - -------- Prohibited Use: Any use or occupancy of the Premises (other than a Permitted Use) that, in the sole opinion of Landlord, as the case may be, (1) violates any certificate of occupancy in force for the Premises or the Building; (2) causes or is likely to cause damage to the Building, the Premises or any equipment, facilities or other systems therein; (3) impairs the character, reputation, image or appearance of the Building; (4) interferes with the proper, efficient and economic maintenance, operation and repair of the Building or its equipment, facilities or systems, including without limitation, the Building Service Systems; (5) constitutes a nuisance, annoyance or inconvenience to other tenants or occupants of the Building or interferes with or disrupts the use or occupancy of any area of the Building (other than the Premises) by other tenants or occupants; (6) results in demonstrations, bomb threats or other events that require evacuation of or increased security for the Building or otherwise disrupts the use, occupancy or quiet enjoyment of the Building by other tenants and occupants; (7) interferes with the transmission or reception of microwave, television, radio or other communication signals by antennae located on the roof of, or elsewhere in, the Building: (8) violates any provision of any financing documents from time to time encumbering the Building, all covenants, conditions and restrictions affecting the building or any modifications, amendments, substitutions, replacements, Supplements or additions to any of the foregoing; or (9) violates any requirement or condition of any insurance policy maintained by Landlord in connection with the Building or of the standard fire insurance policy issued for office buildings in the County of Nassau or the rules and regulations of the New York Board of Fire Underwriters or Insurance Services Office (or similar bodies). In addition to the foregoing, a Prohibited Use also includes the use of any part of the Premises for: (i) a restaurant or bar; (ii) the preparation, consumption, storage, manufacture or sale of food, beverages, liquor, tobacco or drugs (excluding the sale, storage and consumption of food or beverages from or in connection with vending machines installed for use by Tenant's employees); (iii) the business of photocopying, multiplying or offset printing (but Tenant may use part of the Premises for photocopying in connection with its own business); (iv) a typing or stenography business; (v) a school or classroom; (vi) cooking, lodging or sleeping; (vii) the operation of retail facilities of a savings and loan association or retail facilities of any financial, lending, securities brokerage or investment activity; (viii) medical or dental offices or laboratories; (ix) a barber, beauty or manicure shop; (x) an employment agency, executive search firm or similar enterprise; (xi) a consulate; (xii) the manufacture, retail sale, storage of merchandise or auction of merchandise, goods or property of any kind; or (xiii) any immoral or illegal purposes. Rents: As defined in Section 3 3. - ----- Rules and Regulations: As defined in Section 5 3. --------------------- Security Deposit: As defined in Section 1.1. ---------------- Senior Interest Holders: As defined in Section 13.1. ----------------------- Senior Interests: As defined in Section 13.1. ---------------- Substantially Completed: Such completion as (excluding any alterations or work to be performed by Tenant) which would enable Tenant to reasonably and conveniently use and occupy the Premises for the conduct of its ordinary business, even though minor details, decorations, and/or mechanical adjustments may remain to be completed by Landlord to Landlord's Work. Target Date: As defined in Section 14.3. ----------- Taxable Property: As defined in Section 4.1.5. ---------------- Tax Statement: As defined in Section 4.1.4. ------------- Tax Year: As defined in Section 4.1.1. -------- Taxes: As defined in Section 4.1.3. ----- Tenant: As defined in the introductory paragraph of this Lease. ------ Tenant's Improvements: Improvements made to the Premises by Tenant. --------------------- Tenant's Property: As defined in Section 8.2. ----------------- Tenant's Share: As defined in Section 1.1. -------------- Tenant's Tax Payment: As defined in Section 4.2. -------------------- Term: As defined in Section 1.1. - ---- EXHIBIT C Rules and Requlations 1. The sidewalks, areas, entrances, vestibules, passages, corridors, halls, elevators and stairways shall not be encumbered nor obstructed by any of the tenants, their agents, clerks, servants or visitors, or be used by them for any other purpose than for ingress and egress to and from their respective premises. Landlord reserves the right to restrict and regulate the use of aforementioned public areas of the Building by the tenants, their employees, guests, contractors and customers and by persons making deliveries to tenants, including but not limited to the right to allocate certain elevators for delivery service, and the right to designate which Building entrances shall be used by persons making deliveries in the Building. 2. The doors, skylights, and windows that reflect or admit light into passageways or into any place in the Building shall not be covered or obstructed by any tenant. 3. The water-closets, wash-closets, urinals and other water apparatus shall not be used for any purposes other than those for which they were constructed and no sweepings, rubbish, rags, ashes, chemicals, refuse from electric batteries, or other substances shall be thrown therein. No tenant shall lay linoleum or other similar floor covering so that the same shall come in direct contact with the floor covering of the Premises, and if linoleum or other similar floor covering is desired to be used, an interlining of builder's deadening felt shall be first affixed to the floor by a paste, or other material, which may easily be removed with water, the use of cement or other similar adhesive material being expressly prohibited 4. No tenant shall mark, paint, drill into, drive nails into, or in any way damage, mutilate or deface any walls, ceilings, partitions, floors, wood, stone or iron work of the Building, except in connection with Alterations. 5. No sign, advertisement or notice shall be inscribed, painted, affixed or displayed on any of the windows or doors or on any other part of the outside or the inside of the Building No awnings or other projections shall be attached to the outside walls or windows of the Building without the prior consent of Landlord. No curtains, blinds, shades, or screens shall be attached to or hung in, or used in connection with, any window or door of the premises demised to any tenant or occupant, without the prior consent of Landlord. Such awnings, projections, curtains, blinds, shades, screens or other fixtures must be of a quality, type, design and color, and attached in a manner approved by Landlord. No sign, advertisement, object, notice or other lettering shall be exhibited, inscribed, painted or affixed on any part of the outside or inside of the premises demised to any tenant or occupant or of the Building without the prior consent of Landlord. Interior signs on door and directory tablets, if any, shall be of a size, color and style approved by Landlord. 6. No tenant shall do anything or permit anything to be done, in its Premises, or bring or keep anything therein or in the Building, that will in any way obstruct or interfere with the rights of other tenants, or in any way injure or annoy them, or those having business with them. Tenants, their agents, clerks, servants or visitors, shall not make or cause any improper noises in the Building, or interfere in any way with other tenants, or those having business with them. 7. No freight, furniture, or bulky matter of any description will be received into the Building, or carried up or down, except during hours and in the manner designated by Landlord, which may involve overtime work for Landlord's employees, agents or contractors. Tenants shall reimburse Landlord for costs incurred by Landlord, including the cost of such overtime work. The moving of safes shall occur at such times as Landlord shall designate upon previous notice to Landlord or Landlord's agent; and the persons employed to move the safes in and out of the Premises must be acceptable to Landlord in its sole discretion. No tenant shall use the passenger elevators for the hauling and removal of materials or debris and the same shall be done only after Business Hours and only via the designated freight elevator. 8. Tenants shall not install any locks or bolts on any doors nor make any changes in existing locks unless Tenant promptly provides Landlord with a key or combination thereto. All keys shall be keyed to the building master. Each tenant must, upon the termination of the tenancy, restore to Landlord all the keys (or other similar access devices) of offices, rooms and toilet-rooms which shall have been furnished to Tenant or that Tenant shall have had made, and in the event of loss of any keys so furnished shall pay Landlord therefor. 9. Tenant shall not use the Premises for the manufacturing or storage of merchandise or for lodging. 10. Nothing shall be swept or thrown by the tenants or by their agents, clerks, servants or visitors into the corridors, halls, stairways, elevators, or light shafts, or upon the skylights of the Building, or into or upon any heating or ventilating registers, or plumbing apparatus in the Building, or upon adjoining buildings or upon the street. No awnings or other projections shall be attached to the outside walls of the Building. 11. No animals (except seeing eye dogs) or birds shall be kept in or about the Premises. 12. Tenants shall not bring into the Building or keep to use in the Building any Hazardous Material. 13. No tenant shall cause or permit any odors of cooking or other processes or any unusual or objectionable odors to emanate from the Premises. No tenant shall install or permit the installation or use of any machine dispensing goods for sale, including without limitation foods, beverages, cigarettes or cigars; or permit the delivery of any food or beverage to the Premises. No food or beverages shall be carried in the public halls and elevators of the Building except in closed containers. 14. Tenants shall not obtain any towel supply service or ice service except from Persons approved by Landlord, nor obtain drinking water for delivery on the Premises from any source not approved by Landlord. Canvassing, peddling and soliciting are prohibited in the Building and Tenant shall cooperate to prevent the same. 15. Telegraph, telephone and other wires and instruments shall not be introduced by Tenant without previous notice to Landlord and with its reasonable approval. 16. Landlord reserves the right to exclude from the Building between the hours of 6:00 o'clock p.m. and 8:00 o'clock a.m. on weekdays, on Saturdays, Sundays and legal holidays, all Persons who do not present a pass to the Building signed by Landlord or Landlord's agent. Landlord or its agent will furnish passes to Persons for whom any tenant requests same in writing. Each tenant shall be responsible for all Persons for whom he requests such pass and shall be liable to Landlord for all acts of such Persons. Landlord may require all such Persons to sign a register on entering and leaving the Building. 17. Landlord shall not be responsible to Tenant for the non-observance or violation of these rules and regulations by any other tenant or occupant. 18. Landlord may from time to time adopt additional systems and procedures to improve the security or safety of the Building, any persons occupying, using or entering the same, or any equipment, finishing or contents thereof, and Tenant shall comply with Landlord's reasonable requirements relative thereto. 19. Tenant shall conduct all aspects of its operations so as to preserve labor harmony and to insure that the security and operations of the Building shall not be disrupted. 20. Landlord reserves the right to rescind, alter, waive or add, as to one or more or all tenants, any rule or regulation at any time prescribed for the Building when, in the judgment of Landlord, Landlord deems it necessary or desirable for the reputation, safety, character, security, care, appearance or interests of the Building or the Premises, the preservation of good order therein, the operation or maintenance of the Building, the equipment thereof, or the comfort of tenants or others in the Building. No rescission, alteration, waiver or addition of any rule or regulation in respect of one tenant shall operate as a rescission, alteration or waiver in respect of any other tenant. 21. Tenant shall not place a load upon any floor of the Premises that exceeds 50 pounds live load per square foot (except in locations expressly indicated by Landlord in writing to have been reinforced to bear greater live loads) . Business machines and mechanical equipment used in the Premises that cause vibrations or noise that may be transmitted to any other space in the Building to such a degree as to be reasonably objectionable to Landlord or to any tenants or occupants of the Building shall be placed and maintained by Tenant, at its expense, in settings of cork, rubber or spring-type vibration eliminators sufficient, in Landlord's judgment, to eliminate such vibrations or noise. 22. Tenant shall neither contract for, nor employ, any labor in connection with the maintenance or cleaning of, or providing of any other services to, the Premises (but excluding Tenant's Property) without the prior consent of Landlord in its sole discretion (Landlord may withhold any such consent on the ground that use of such service provider would disturb labor harmony in the Building.) 23. All removals from the Building, or the carrying in or out of the Building or the premises demised to any tenant, of any safes, freights, furniture or bulky matter of any description must take place at such time and in such manner as Landlord or its agents may determine, from time to time. Landlord reserves the right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of the Building Rules or the provisions of such tenant's lease. 24. No tenant or occupant shall engage or pay any employees in the Building, except those actually working for such tenant or occupant in the Building, nor advertise for laborers giving an address at the Building. 25. Each tenant, before closing and leaving the premises demised to such tenant at any time, shall see that all entrance doors are locked, all windows are closed and all lights are turned off. 26. The requirements of tenants will be attended to only upon application at the office of Landlord. Building employees shall not be required to perform, and shall not be requested by any tenant or occupant to perform, any work outside cf their regular duties, unless under specific instructions from the office of Landlord. 26. There shall not be used in the Building, either by any tenant or occupant or by their agents or contractors, in the delivery or receipt of merchandise, freight or other matter, any hand trucks or other means of conveyance except those equipped with rubber tires, rubber side guards and such other safeguards as Landlord may require. The following requirements (collectively, the `Insurance Requirements") shall be complied with by Tenant at all times during the Term: 1. Insurance to be Maintained by Tenant. At all times during the Tern, Tenant shall maintain, at Tenant's expense., the following insurance coverage: (a) fire and extended coverage property insurance covering all physical loss to the Improvements, Alterations and Tenant's Property in the Premises for their full replacement value; (b) broad form commercial general liability insurance (including protective liability coverage on operations of independent contractors engaged in construction and blanket contractual liability insurance), written on A per occurrence basis with an aggregate limit of not less than $5,000,000, a per occurrence limit of not less than $1,000,000, and with other limits reasonably satisfactory to Landlord; (c) business interruption insurance covering risk of loss due to the occurrence of any of the hazards covered by the insurance to be maintained by Tenant described in Paragraph 1(a) with coverage in a face amount of not less than the aggregate amount, for a period of 12 months following the insured-against peril, of 100% of all Rents to be paid by Tenant under this Lease; (d) worker's compensation insurance and employer's liability coverage in statutory limits, and New York State disability insurance as required by Law, covering all employees; and (e) such other coverage as Landlord may reasonably require with respect to the Premises, its use and occupancy and the. conduct or operation of business therein. Landlord may, from time to time, but not more frequently than once every year, adjust the minimum limits set forth above. 2. Insurer and Policy Requirements. All insurance policies to be maintained under Paragraph I (a) shall be issued by companies of recognized responsibility, licensed to do business in the State of New York, reasonably acceptable to Landlord, and maintaining a. rating of A-/VI or better in Best's Insurance Reports-Property-Casualty (or an equivalent rating in any successor index adopted by Best's or its successor), o(b) shall provide that they may not be cancelled or modified unless Landlord and all additional insureds and loss payees thereunder are given at least 30 days prior written notice of such cancellation or modification, (c) shall name, as additional insureds, Landlord, Landlord's Agent and any Senior Interest Holder whose name and address shall have been furnished to Tenant, and (d) shall be primary and non-contributory in all respects. All policies providing fire and extended coverage property insurance coverage pursuant to Paragraph 1(a) shall name, as loss payees, Landlord, each Senior Interest Holder and Tenant, as their interests may appear. 3. Evidence of Coverage; Renewals. Prior to the Commencement Date or, in the case of insurance required during the performance of Alterations, prior to the commencement of the Alterations, Tenant shall deliver to Landlord certificates of insurance for the insurance coverage required by Paragraph I and, if required by Landlord, copies of the policies theref or, in each case, in form and providing for deductibles reasonably satisfactory to Landlord. Tenant shall procure and pay for renewals of such insurance from time to time before the expiration thereof, and Tenant shall deliver to Landlord certificates of renewal at least 30 days before the expiration of any existing policy. If Tenant fails to procure or maintain any insurance required by this Lease and to pay all premiums and charges theref or, Landlord may (but shall not be obligated to) pay the same, and Tenant shall reimburse Landlord, within 20 days after demand, for all such sums paid by Landlord. Any such payment shall not cure or waive any default by Tenant in the performance of its obligations hereunder, nor shall the foregoing right of Landlord to make such payment in any way limit, reduce, diminish or impair the rights of Landlord under the terms of this Lease or at Law or in equity arising as a result of any such default. 4. Additional Insurance; Blanket Insurance. Tenant shall not carry separate or additional insurance, concurrent in form or contributing in the event of any loss or damage with any insurance required to be obtained by Tenant under this Lease unless the parties required by Paragraph 2 to be named as additional insureds or loss payees thereunder are so named.. Tenant may carry any insurance coverage required of it hereunder pursuant to blanket policies of insurance so long as the coverage afforded Landlord and the other additional insureds or loss payees, as the case may be hereunder shall not be less than the coverage that would be provided by direct policies. EX-10.6 6 LEASE FOR NEWARK BASIC LEASE PROVISIONS: The following provisions shall be referred to in this Lease as the Basic Lease Provisions. In the event of any conflict between any Basic Lease Provision and the balance of the Lease, the latter shall control. 1. Location of Premises: A portion of the Seventh Floor depicted on Exhibit "A" 2. Rentable Area of Premises: 5,083 rentable square feet 3. Percentage Share: 1.80% 4. Term: Five (5) years 5. Renewal Option: One five (5) year renewal option. 6. Basic Annual Rent:Year 1: $86,411.00 per annum ($17.00 per square foot), payable in equal monthly installments of $7,200.92 Year 2: $86,411.00 per annum ($17.00 per square foot), payable in equal monthly installments of $7,200.92 Year 3: $87,681.75 per annum ($17.25 per square foot), payable in equal monthly installments of $7,306.82 Year 4: $88,952.50 per annum ($17.50 per square foot), payable in equal monthly installments of $7,412.71 Year 5: $90,223.25 per annum $17.75 per square foot), payable in equal Group 1100 TENANT: 14. All payments under this Lease shall be payable and delivered to: Alexander Summer, LLC, as Agent for Tremont Capital Corporation, c/a Tremont Capital Corporation, East 80 Route 4, Paramus, New Jersey 07652, or such other payee or address as Landlord may designate from time to time. (A) Landlord hereby leases to Tenant, and Tenant hereby hires from Landlord, subject to all of the terms and conditions hereinafter set forth, those certain premises (the "Premises") as set forth in Item 1 of the Basic Lease Provisions and as shown in the drawing(s) attached hereto as Exhibit "A"; said Premises being located on the floor(s) indicated in that certain office building o (the "Building") situated on certain land, which said land together with the Building are collectively hereinafter referred to as the "Property," being located at 550 Broad Street, in the City of Newark, County of Essex, State of New Jersey. (B) The term of this Lease shall be as shown in Item 4 of the Basic Lease Provisions. The Lease shall commence on the Commencement Date as shown in Item 7 of the Basic Lease Provisions, or upon such earlier date as Tenant takes possession or commences use of the Premises for any purpose, other than as set forth in Paragraph 6 below. Such date of commencement, hereinafter the "Commencement Date," and the date of expiration, hereinafter the "Expiration Date," shall be confirmed by Landlord by means of a "Commencement Date Memorandum" in form substantially similar to Exhibit "C." (C) Landlord hereby grants Tenant the right to extend the term of this Lease for one (1) five (5) year period. To exercise such right, Tenant shall send to Landlord a renewal notice on or before the 180th day preceding the Expiration Date. Tenant's renewal notice shall be null and void if (i) as of either the date of the delivery of the renewal notice or as of the commencement of the renewal term, Tenant is in default of any of its obligations under this Lease beyond any applicable notice and grace period, or (ii) Tenant has assigned its interest under this Lease or has sublet more than 50% of the rentable area of the Premises. All terms and conditions of this Lease shall apply to the renewal period, except that the annual fixed rental shall be equal to the then fair market rental value of the Premises as determined below. Tenant shall deliver to Landlord the name of an arbitrator appointed by Tenant. Within ten (10) days after receipt of Tenant's notice, Landlord shall appoint a second person as an arbitrator on its behalf. If the arbitrators' determination of the renewal term rental rate for the Premises varies by more than five percent (5%), then the arbitrators shall appoint a third person who shall select the Lease is in effect during such partial month bears to the number of days in that calendar month, and such Basic Monthly Rental Installment shall be paid at the commencement of such partial month. The Basic Annual Rent includes $1.25 for electrical energy for ordinary business use as described in Paragraph 9. (B) In addition to the Basic Annual Rent stipulated herein, Tenant covenants and agrees to pay in U.S. currency, without deduction, offset, or abatement, to Landlord a& additional rent, hereinafter "Additional Rent," all other sums and charges which are to be paid by Tenant pursuant to the terms of this Lease. Except as otherwise provided in this Lease, Additional Rent shall be due and payable on the first day of the month following the date on which Tenant is given notice that Additional Rent is due. (C) The Basic Annual Rent plus Additional Rent are sometimes collectively referred to as "Rent." PARAGRAPH 3 ADDITIONAL RENT FOR TAXES AND OPERATING EXPENSES, ------------------------------------------------- ETC.: ---- (A) Commencing with the Commencement Date, Tenant agrees to pay as items of Additional Rent for the Premises, Tenant's "Percentage Share" (being the percentage indicated in Item 3 of Basic Lease -Provisions) of all increases in "Property Operating Expenses" and "Property Taxes" (each as hereinafter defined) over the base year set forth in Item 11 of the Basic Lease Provisions incurred by Landlord in the operation of the Property. For purposes of this paragraph, during each year actual occupancy of the Building is less than ninety--five percent (95%), Landlord will adjust the costs of all Property Operating Expenses to assume ninety-five percent (95%) occupancy of the Building. (B) The items of Additional Rent contemplated under subparagraph 3(A) shall be determined in accordance with the following procedures: (i)Each December during the term herof or as soon thereafter as practical, Landlord shall give Tenant written notice of Landlord's estimate of any amounts payable under subparagraph 3(A) above for the ensuing calendar year, together with a copy of any tax bill upon which Landlord's estimate of Property Taxes is based. On or before the first day of each month during the ensuing calendar year, Tenant shall pay Landlord without further notice one--twelfth (1/12) of such estimated amounts, provided that if such notice is not given in December, Tenant shall continue to pay on the basis of the then applicable rental until the month after such notice is given. If at any time or times it appears to Landlord that the increased amounts payable under subparagraph 3 (A) for the current calendar year will exceed its, estimate, Landlord may, by notice to Tenant, revise its estimate for such year (i) The term "Property Operating Expenses" as used herein shall include all costs of operation, management, and maintenance of the Property calculated on an accrual basis for each calendar year as determined by generally accepted accounting principles consistently applied. Property Operating Expenses shall, by way of illustration but not limitation, include water and sewer charges; insurance premiums; license, permit and inspection fees; fuel; heat; light; power provided any portion of the Property other than those portions leased to any tenant (including Tenant); janitorial and security services; labor; salaries; air conditioning; landscaping; maintenance and repair of the Building, ice and snow removal; supplies; materials; equipment; tools; repair or replacement of equipment, machinery and other items of Landlord's property; the reasonable property management fees and costs including, but not limited to, reasonable office rent for the on--site property management office; and the cost incurred in contesting- the validity or an assessment of Property Taxes. Property Operating Expenses shall also include, but not be limited to, the cost of any capital improvements made to the Property by Landlord that reduce operating expenses or that are required under any governmental law or regulation not previously applicable to the Property or not in effect at the time it was constructed. Such capital cost shall be amortized over the useful life thereof, as determined in accordance with generally accepted accounting principles, consistently applied ("GAAP") with a return on capital at the then current prime interest rate of the largest national bank in New York City plus two percent (2%) or at such higher rate as may have been paid by Landlord on the funds borrowed for the purpose of providing such capital improvements. Only the amortized portion of such capital expenditures for any calendar year shall be included in Property Operating Expenses for such calendar year. Property Operating Expenses shall not include (a) depreciation; (b) interest and amortization on debt; (c) all other capital expenses; (d) costs of correcting latent defects; (e) costs which are reimbursed by insurance proceeds or eminent domain awards; (f) costs of any special service to another tenant not furnished to tenants generally and (g) costs of collecting rent from other tenants and of enforcing lease rights against other tenants. (ii) The term "Property Taxes" as used herein shall include all real estate taxes or personal property taxes and other taxes, charges and assessments, unforeseen as well as foreseen, which are levied with respect to the Property and any improvements, fixtures and equipment and other property of Landlord, real or personal, located in the Building or on the Property and used in connection with the operation of the Property for each calendar year and shall include any tax, surcharge or assessment which shall be levied in addition to or in lieu of real estate or personal property taxes, other than taxes covered in Paragraph 11, and shall also include any rental, excise, sales, transaction, privilege, or other tax or levy, however denominated, imposed upon or measured by the rental reserved hereunder or on Landlord's business of leasing the Premises and Property, excepting only net income taxes. Property Taxes shall be based upon the actual assessed value of the Building, based upon Landlord's tax bill for the Building. In the event tax assessment is not detailed, sufficiently or, in the event either party shall dispute the tax assessor's determination of full assessment value, then Landlord and Tenant shall look to the following two alternatives in the order given to determine assessed value: (i) notes and records of tax assessor and (ii) any reasonable method upon which the parties may agree. (D) Unless Tenant takes written exception to any item in the statement referred to in subparagraph 3(B) (ii) within ninety (90) days after the furnishing of the statement, such statement shall be considered as final and accepted by Tenant. Any amount due Landlord as shown on any such statement shall be paid by Tenant within thirty (30) days after it is furnished to Tenant of any original letter of credit delivered by Tenant to Landlopd with respect to this Lease, or the expiration of any replace~6nt letter of credit, Tenant shall deliver to Landlord either ~ an extension of such original or replacement letter of creditXrom the issuing bank so long as such bank has a rating of A o~/~etter by -Moody or any successor thereto or iii) -a replaceme_ letter of credit issued by a commercial bank having an of _e within New Jersey (which bank shall have a rating of A or b~ter ~ Moody or (B) -any successor thereto) containing the same ter~%as snch - -letter of credit, except that the face amount of such Jitter of credit shall be in the amount set forth in subparagraph,~) below. In addition, if Moody (or any successor) lowers the p~ting of the issuing bank of the letter of credit~ then held by ;4fldlord below A, then Tenant shall deliver to Landlord, within, thirty (30) days after the lowering of the rating, a replace the letter of credit issued by a commercial bank having an off)4~ within New Jersey (which bank shall have a rating of A oy' better by Moody or any successor thereto) containing the sag~ terms and for the face amount then required under subparagraph (D) . In the event Tenant fails to deliver said extension~ replacement letter of credit on or before the date set forth _ove, Landlord shall have the right to draw down the entire a~6unt of the letter of credit. To exercise such right, (i) Landlord shall present the letter of credit to the issuing bank at the office in New Jersey set forth on the letter of credit and,'(ii) Landlord shall deliver to the issuing bank a statement Landlord stating that Landlord is entitled to draw down ~ letter of credit pursuant to the provisions of Landlord, Tenant shall obtain either (i) a new letter o redit from the issuing bank containing the same terms an r the same face amount as the letter of credit then hel Landlord which names the new Landlord as the benefici or (ii) the written consent of the issuing bank to the gnment of the then existing letter of credit from the exis Landlord to the new landlord in form and substance reason satisfactory to the new landlord. If Tenant obtains a new ter of credit, Landlord shall surrender the existing letter credit to Tenant simultaneously with its receipt of the ne etter of credit; the parties agree to coordinate such deli y and surrender so that it is done on the effective date of sole cost and expense of Tenant. Tenant will pay for any repairs to the Building or the Property made necessary by any negligence or willful acts or omissions of Tenant or its assignees, subtenants, employees or their respective agents or other persons permitted in the Building or on the Property by Tenant, or any of them. Tenant will also maintain the Premises in good order and repair, and, upon termination of this Lease, Will leaVe the Premises in -accordance with the provisions of Paragraph 26 hereof. PARAGRAPH 6 IMPROVEMENTS AND ALTERATIONS: ---------------------------- (A) Landlord shall construct improvements to the Premises in preparation for Tenant's occupancy (the "Initial Improvements") in accordance with those plans and specifications attached hereto as Exhibit "B", which have been reviewed and approved by Landlord and Tenant, as same may be amended from time to time, as hereinafter provided (the "Construction Documents") (C) Landlord shall pay all costs in connection with constructing the Intitial Improvements. (C) Landlord covenants to complete the Initial Improvements in a good and workman like manner and shall use reasonable speed and diligence in completing the work, subject to Tenant Delays (as defined below) and force majeure (as set forth in Paragraph 40) (D)The Premises shall be conclusively deemedavailable for Tenant's occupancy on the date that the following conditions have been met: (a) a certificate of occupancy (whether or not subject to conditions), permitting occupancy of the Premises has been issued by the applicable governmental authority; and (b) the Initial Improvements have been substantially completed in accordance with the Construction Documents (excluding any details of construction, decoration or mechanical adjustment which do not materially interfere with Tenant's use of the Premises) (E) If there occurs a Tenant Delay (as defined below), the Commencement Date shall be the date which the conditions set forth in subparagraph (D) would have otherwise been satisfied but -for such Tenant Delay. The term "Tenant Delay" shall mean any delay in the completion of the Initial Improvements or in the satisfaction of any conditions set forth in subparagraph (D) above which is due to any act or omission of Tenant, its agents, employees or contractors, including, without limitation any work performed by Tenant within the Premises prior to the Commencement Date of the Initial Improvements or any other work being performed by Landlord in the Building, (b) that Tenant shall comply promptly with all reasonable procedures and regulations prescribed by Landlord from time to time for coordinating such work and activities with any other activity or work in the Premises or the Building, (c) that, prior to such access, Tenant shall deliver to Landlord policies of insurance required by Landlord,.- (d) that Tenant shall indemnify and hold harmless Landlord from and against any and all claims arising from any negligence, acts or omissions of Tenant or its architects, engineers, contractors, decorators, servants, agents or employees for any reason whatsoever arising out of Tenant's access to or being in the Building or in connection with any work to be performed for Tenant by anyone other than Landlord, and (e) comply with all the provisions of the Lease, other than its obligation to pay Base Annual Rent or Additional Rent. (I) Landlord shall have the right at any time to change the arrangement and/or location of entrances or passageways, doors and doorways, and corridors, (provided that such changes do not unreasonably impair Tenant's access to the Premises) elevators, stairs, toilets, or other public parts of the Building or Property, and, upon giving Tenant reasonable notice thereof, to change the name, number or designation by which the Building or the Property is commonly known. (J) If there is no default by Tenant under this Lease, Tenant may, subject to subparagraph 6(K), upon prior notice to Landlord and submission of plans and specifications to Landlord, but without Landlord's prior consent, make interior non--structural additions or improvements to or alterations to the Premises having an aggregate cost not to exceed $15,000.00 so long as the same do not affect, alter, interfere with or disrupt any of the electrical, mechanical, plumbing, heating, air-- conditioning, ventilating or other systems of the Demised Premises and/or the Building, nor affect the outside appearance or roof or any structural element of the Building. Each such addition, improvement or alteration (a) must not, individually or in the aggregate, lessen the fair market renal value (as defined in Paragraph 44) of the Premises and/or the Building, (b) shall be completed expeditiously in a good and workmanlike manner, and in compliance with all applicable legal and insurance requirements and (c) shall be cothpleted free and clear of all liens. (K) Tenant shall not make any addition, improvement or alteration of the Premises having an aggregate- cost in excess of $15,000, or affecting, altering, interfering with or disrupting any of the electrical, mechanical, plumbing or other system of the Premises and/or the Building or affecting the outside appearance or roof or any structural element of the Premises and/or the Building ("Major Work") unless Tenant submits to Landlord- detailed plans and specifications therefor and Landlord approves such plans and specifications in writing (which approval, shall be at Landlord's sole discretion, except that, in the case of alterations that do not affect any of the electrical, mechanical, plumbing or other systefa of the Premises -and/or the Building or affecting the outside appearance or roof o-r any structural element of the Premises and/or the Building such consent shall not be unreasonably withheld) (L) All additions, improvements and alterations of the Premises shall, upon installation, become the property of Landlord and shall be deemed part of, and shall be surrendered with, the Premises, unless, with respect to improvements other than the Initial Improvements Landlord, by notice given to Tenant at the time that it consents to such improvements (or, if no such consent is required, within thirty (30) days after receipt of plans therefor), elects to relinquish Landlord's right thereto. If Landlord elects to relinquish Landlord's right to any such addition, improvement or alteration, Tenant shall remove said addition, improvement or alteration, shall promptly repair any damage to the Premises caused by said removal and shall restore the Premises to the condition existing prior to the installation of said addition, improvement or alteration; all such work shall be done prior to the Expiration Date. (M) Tenant may install or place or reinstall or replace and remove from the Premises any trade equipment, machinery and personal property belonging to Tenant, provided, that (a) Tenant shall repair all damage caused by such removal and (b) Tenant shall not install any equipment, machinery or other items upon the roof or the exterior of the Building or make any openings on or about the roof or the exterior of the Building. Such trade equipment, machinery and personal property shall not become the property of Landlord. (N) Any work performed by Tenant, whether prior, on or subsequent to the Commencement Date, shall be in harmony with any other work in the Building and shall not result in work stoppages or picketing at the Building; and Tenant, at its own expense, shall immediately take whatever steps are necessary to avoid such work stoppage or picketing. (0) Tenant shall comply with all of the obligations of Tenant set forth in "Exhibit D" in performing any addition improvement or --------- alteration in the Premises. in this paragraph hereinafter referred to as "lien" or "liens") arising out of any work performed, materials furnished, or obligations incurred by or for Tenant. In the event that Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to be released of record by payment or posting of a proper .bond, Landlord shall have, in addition to all other remedies provided herein or by law, the right, but- not the obligation, to cause the same to be released by such means as it shall deem proper, including payment of or defense against the claim giving rise to such lien. All sums paid by Landlord and all expenses (including, without limitation, reasonable attorneys' fees) incurred by it in connection therewith, shall create automatically an obli9ation of Tenant to pay to Landlord an equivalent amount as Additional Rent, which Additional Rent shall be payable by Tenant upon Landlord's demand, with interest at the maximum rate per annum permitted by law, until paid. To the extent permitted by law, Tenant shall require all Tenant's contractors and materialmen to waive any and all rights they may have to file any liens. PARAGRAPH 8 USE OF THE PREMISES: ------------------- (A) Tenant shall use the Premises only as set forth in Item 10 of the Basic Lease Provisions and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord. Tenant shall comply with all laws, and shall not use or occupy the Premises in violation of law or of the certificate of occupancy issued for the Building, and shall immediately discontinue any use of the Premises which is declared by Landlord or any governmental authority having jurisdiction to be a violation of law or of said certificate of occupancy. Tenant shall comply with any direction of any governmental authority having jurisdiction which shall, by reason of the nature of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupancy thereof. Tenant shall not do or permit to be done anything which will invalidate or increase the cost of any fire, extended coverage or any other insurance policy covering the Building, the Property and/or property located therein and shall comply with all rules, orders, regulations and requirements of the appropriate fire rating bureau or any other organization performing a similar function. Tenant shall upon demand reimburse Landlord for the full amount of any additional premium charged for such policy, by reason of Tenant's failure to comply with the provisions of this paragraph. Such reimbursement shall not be Landlord's exclusive remedy. In addition, Tenant shall not use, or suffer or permit the Premises or any part thereof to be used in a manner which would (i) overload the electrical, mechanical or other systems of the Building, (ii) exceed the floor load per square foot which the floor was designed to carry, (iii) in any way impair or (B) interfere with the proper and economic heating and air conditioning of the Building, and (iv) impair or exceed the design criteria, the structural integrity, character or appearance of the Building or any system or component thereof. of the Initial Improvements or any other work being performed by Landlord in the Building, (b) that Tenant shall comply promptly with all reasonable procedures and regulations prescribed by Landlord from time to time for coordinating such work and activities with any other activity or work in the Premises or the Building, (c) that, prior to such access, Tenant shall deliver to Landlord policies of insurance reqiiiired by Landlord, (d) that Tenant shall indemnify and hold harmless Landlord from and against any and all claims arising from any negligence, acts or omissions of Tenant or its architects, engineers, contractors, decorators, servants, agents or employees for any reason whatsoever arising out of Tenant's access to or being in the Building or in connection with any work to be performed for Tenant by anyone other than Landlord, and (e) comply with all the provisions of the Lease, other than its obligation to pay Base Annual Rent or Additional Rent. (I) Landlord shall have the right at any time to change the arrangement and/or location of entrances or passageways, doors and doorways, and corridors, (provided that such changes do not unreasonably impair Tenant's access to the Premises) elevators, stairs, toilets, or other public parts of the Building or Property, and, upon giving Tenant reasonable notice thereof, to change the name, number or designation by which the Building or the Property is commonly known. (J) If there is no default by Tenant under this Lease, Tenant may, subject to subparagraph 6(K), upon prior notice to Landlord and submission of plans and specifications to Landlord, but without Landlord's prior consent, make interior non--structural additions or improvements to or alterations to the Premises having an aggregate cost not to exceed $15,000.00 so long as the same do not affect, alter, interfere with or disrupt any of the electrical, mechanical, plumbing, heating, air-- conditioning, ventilating or other systems of the Demised Premises and/or the Building, nor affect the outside appearance or roof or any structural element of the Building. Each such addition; improvement or alteration (a) must not, individually or in the aggregate, lessen the fair market renal value (as defined in Paragraph 44) of the Premises and/or the Building, (b) shall be completed expeditiously in a good and workmanlike manner, and in compliance with all applicable legal and insurance requirements and (c) shall be cothpleted free and clear of all liens. (K) Tenant shall not make any addition, improvement or alteration of the Premises having an aggregate cost in excess of $15,000, or affecting, altering, interfering with or disrupting any of the electrical, mechanical, plumbing or other system of the Premises and/or the Building or affecting the outside appearance or roof or any structural element of the Premises and/or the Building ("Major Work") unless Tenant submits to Landlord detailed plans and specifications therefor arid Landlord approves such plans and specifications in writing (which approval, shall be at Landlord's sole discretion, except that, in the case of alterations that do not affect any of the electrical, mechanical, plumbing or other systefa of the Premises and/or the Building or affecting the outside appearance or roof or any structural element of the Premises and/or the Building, such consent shall not be unreasonably withheld) . - (L) All additions, improvements and alterations of the Premises shall, upon installation, become the property of Landlord and shall be deemed part of, and shall be surrendered with, the Premises, unless, with respect to improvements other than the Initial Improvements Landlord, by notice given to Tenant at the time that, it consents to such improvements (or, if no such consent is required, within thirty (30) days after receipt of plans therefor), elects to relinquish Landlord's right thereto. If Landlord elects to relinquish Landlord's right to any such addition, improvement or alteration, Tenant shall remove said addition, improvement or alteration, shall promptly repair any damage to the Premises caused by said removal and shall restore the Premises to the condition existing prior to the installation of said addition, improvement or alteration; all such work shall be done prior to the Expiration Date. CM) Tenant may install or place or reinstall or replace and remove from the Premises any trade equipment, machinery and personal property belonging to Tenant, provided, that (a) Tenant shall repair all damage caused by such removal and (b) Tenant shall not install any equipment, machinery or other items upon the roof or the exterior of the Building or make any openings on or about the roof or the exterior of the Building. Such trade equipment, machinery and personal property shall not become the property of Landlord. (N) Any work performed by Tenant, whether prior, on or subsequent to the Commencement Date, shall be in harmony with any other work in the Building and shall not result in work stoppages or picketing at the Building; and Tenant, at its own expense, shall immediately take whatever steps are necessary to avoid such work stoppage or picketing. (0) Tenant shall comply with all of the obligations of Tenant set forth in "Exhibit D" in performing any addition, improvement or alteration in the Premises. PARAGRAPH 7 LIENS: Tenant shall keep the Premises free from any mechanics notices of intention, liens or encumbrances (collectively in this paragraph hereinafter referred to as "lien" or "liens") arising out of any work performed, materials furnished, or obligations incurred by or for Tenant. In the event that Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein or by law, the right, but' not the obligation, to cause the same to be released by such means as it shall deem proper, including payment of or defense against the claim giving rise to such lien. All sums paid by Landlord and all expenses (including, without limitation, reasonable attorneys' fees) incurred by it in connection therewith, shall create automatically an obli9ation of Tenant to pay to Landlord an equivalent amount as Additional Rent, which Additional Rent shall be payable by Tenant upon Landlord's demand, with interest at the maximum rate per annum permitted by law, until paid. To the extent permitted by law,, Tenant shall require all Tenant's contractors and materialmen to waive any and all rights they may have to file any liens. PARAGRAPH 8 USE OF THE PREMISES: ------------------- (A) Tenant shall use the Premises only as set forth in Item 10 of the Basic Lease Provisions and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord. Tenant shall Comply with all laws, and shall not use or occupy the Premises in violation of law or of the Certificate of occupancy issued for the Building, and shall immediately discontinue any use of the Premises which is declared by Landlord or any governmental authority having jurisdiction to be a violation of law or of said certificate of occupancy. Tenant shall comply with any direction of any governmental authority having jurisdiction which shall, by reason of the nature of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupancy thereof. Tenant shall not do or permit to be done anything which will invalidate or increase the cost of any fire, extended coverage or any other insurance policy covering the Building, the Property and/or property located therein and shall comply with all rules, orders, regulations and requirements of the appropriate fire rating bureau or any other organization performing a similar function. Tenant shall upon demand reimburse Landlord for the full amount of any additional premium charged for such policy, by reason of Tenant's failure to comply with the provisions of this paragraph. Such reimbursement shall not be Landlord's exclusive remedy. In addition, Tenant shall not use, or suffer or permit the Premises or any part thereof to be used in a manner which would (i) overload the electrical, mechanical or other systems of the Building, (ii) exceed the floor load per square foot which the floor was designed to carry, (iii) in any way impair or interfere with the proper and economic heating and air conditioning of the Building, and (iv) impair or exceed the design criteria, the structural integrity, character or appearance of the Building or any system or component thereof. (B) With respect to Tenant's use and occupancy of the Premises, Tenant shall not store, use, or'dispose of any. hazardous materials, in, on, under or about the Premises or the Property. Tenant shall, at Tenant's own expense, comply with the Environmental Cleanup Responsibility Act, N.J.S.A. l3:lk--6 et seq., and all other applicable federal, state, and local laws, promulgated with respect to hazardous substances and the regulations promulgated thereunder (the "Hazardous Substances Laws") . Tenant shall, at Tenant's own expense, make all submissions to, provide all information to, and comply with all requirements of, the New Jersey Department of Environmental Protection or its replacement and any similar federal, state or local department, agency, bureau or division which is charged with the enforcement of laws regulating hazardous wastes (the "Hazardous Substances Agencies") and promptly comply with Landlord's requirements in connection therewith. Should any Hazardous Substance Agency determine that a Cleanup Plan be prepared and that a cleanup be undertaken because of any spills or discharges of hazardous substances or wastes at the Building or land in or on which the Premises is located which were caused by Tenant or its officers, employees, agents, contractors or invitees, then Tenant shall, at Tenant's own expense, prepare and execute a Cleanup Plan which shall be approved by such Hazardous Substance Agency and complete the cleanup. Tenant shall defend, indemnify and hold harmless Landlord from and against all claims, costs, and liabilities, including attorneys' fees, arising out of or in connection with Tenant's breach of its obligations under this Paragraph 8. Tenant's obligations under this paragraph 8 shall survive the expiration or earlier termination of this Lease. PARAGRAPH 9 UTILITIES AND SERVICES: ---------------------- (`A) Provided that Tenant is not in default hereunder, Landlord agrees to furnish or cause to be furnished to the Premises the following utilities and services, subject to the conditions and standards set forth below and elsewhere herein: (i) Landlord shall provide automatic elevator facilities from 8:00 a.m. to 6:00 p.m., Monday through Friday (legal holidays listed in Exhibit "E" "Legal Holidays" excepted), and shall have at least one elevator available for use at all other times. From 8:00 a.m. to 6:00 p.m., Monday through Friday (Legal Holidays excepted), Landlord shall, subject to interruptions beyond Landlord's control and subject to subparagraph 3(E), furnish heat or air--conditioning subject to any governmental `requirements change the electric provider to the Building at any time. Landlord may, upon sixty (60) days notice to Tenant, discontinue furnishing electricity to the Premises, but only if Landlord discontinues furnishing such electricity, to substantially all `of the tenants in the Building, whereupon Tenant shall have no further obligation to pay Tenant's Electric Charge as set forth in Paragraph 3(E) above. If Landlord so discontinues furnishing electricity to the Premises, Tenant shall arrange to obtain same from the public utility serving the Building and for that purpose utilize the then existing electrical systems, feeders, risers and wiring. All meters and additional panel boards, feeders, risers and wiring and other conductors and equipment which may be required for Tenant to obtain electrical energy directly from public Utility, shall be installed by Landlord at Tenant's expense. (iv) Landlord shall, subject to interruptions beyond Landlord's control and other provisions hereunder, furnish the Building with water for air--conditioning, drinking and lavatory purposes only. (v) Landlord shall provide janitorial services to the Building and Premises, in accordance with Exhibit "F" provided that the Premises are kept in good order by Tenant. Tenant shall pay to Landlord the cost of removal of any of Tenant's refuse and rubbish to the extent that the same exceeds the refuse and rubbish usually attendant upon the use of the Premises as offices. (vi) Landlord shall replace, as necessary, the fluorescent tubes in the standard lighting fixtures installed by Landlord. Tenant agrees to reimburse Landlord upon demand for the reasonable and competitive cost of such fluorescent tubes ,and the labor and overhead for their installation. (B) Landlord may impose a reasonable charge, which Tenant hereby agrees to pay upon demand, for any utilities and services provided by Landlord by reason of any use of the Premises at any time other than the hours of 8:00 a.m. to 6:00 p.m. Monday through Friday (excluding Legal Holidays), or any use beyond that which Landlord agrees to furnish as described above, or special electrical, cooling and ventilating needs created in certain areas by telephone equipment, computers and other similar equipment or uses. To the extent Tenant"s electrical `usage design e,xceeds the electrical current design capacity of the Building, then Tenant will pay all costs of providing additional required electrical service. (C) Tenant agrees to cooperate fully at all times with Landlord and to abide by all regulations and requirements which Landlord may prescribe for the use of the above utilities and services. Any failure to pay any costs as described above shall constitute a breach of the obligation to pay Rent under this Lease and shall entitle Landlord to the rights herein granted for such breach. (D) Landlord shall not be liable for, and Tenant shall not be entitled to, any abatement or reduction of Rent by reason of Landlord's failure to furnish any of the foregoing services, nor shall any such failure, stoppage or interruption of any such service be construed either as an eviction of Tenant, or relieve Tenant from the obligation to perform any covenant or agreement. However, in the event of any failure, stoppage or interruption thereof, Landlord shall use reasonable diligence to have service resumed promptly. (E) Notwithstanding anything herein to the contrary, Landlord reserves the right from time to time to make reasonable modifications to the above provisions for utilities and services; provided, such modifications do not diminish the level or quality of service below that level or quality which is consistent with a first class office building. PARAGRAPH 10 RULES AND REGULATIONS: Tenant agrees to abide by all rules and `regulations of the Building and Property Rules and Regulations") imposed by Landlord as set forth in Exhibit "G" attached hereto, and as the same may be changed from time to time upon reasonable notice to Tenant. Landlord shall not enforce these Rules and Regulations arbitrarily among tenants. Landlord shall not be liable for the failure of any tenant, its agents or employees to conform to the Rules and Regulations. PARAGRAPH 11 TAXES ON TENANT'S PROPERTY: - -------------------------- (A) Tenant shall be liable for and shall pay not later than ten (10) days before delinquency, all taxes, levies and assessments levied against any personal property or trade fixtures placed by Tenant in or about the Premises. If any such taxes, levies and assessments on Tenant's personal property or trade fixtures are levied against Landlord or Landlord's property or if the assessed value of the Building or the Property is increased by the inclusion therein of a value placed upon such personal property or trade fixtures of Tenant and if Landlord pays the taxes, levies and assessments based upon such' increased -assessment, Tenant shall, within five days after demand therefore, repay to Landlord the taxes, levies and assessments so levied against Landlord, or the proportion of such taxes, levies and assessments resul-ting from such increase in the assessment, together with interest thereon at the default rate determined in accordance with paragraph 36 of this Lease. (B) If the Tenant Improvements, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements conforming to building standard (as determined by Landlord) are assessed, then the real property taxes and assessments levied against Landlord or the Property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of subparagraph 11(A). If the records of the tax assessor are available and sufficiently detailed to serve as a basis for determining whether said Tenant Improvements are assessed at a higher valuation than building standard, such records shall be binding on both Landlord and Tenant; otherwise, the actual cost of construction shall be the basis for such determination. PARAGRAPH 12 INTENTIONALLY OMITTED. PARAGRAPH 13 FIRE OR CASUALTY: ---------------- (A) In the event that the Property (regardless of whether the Premises or access thereto is affected) is so damaged or destroyed to the extent of more than one--third (1/3) of its replacement- cost, or to any substantial extent by a casuality not covered by Landlord's insurance or during the last two years of this Lease, Landlord, upon giving thirty (30) days notice to Tenant, may elect to terminate this Lease. (B) In the event the Premises are completely destroyed or so badly damagedthat, in Landlord's reasonable opinion, repairs to the Premises cannot be completed within two hundred seventy (270) days from the date of damage or destruction, Landlord will so notify Tenant, in which event this Lease may be terminated by either Landlord or Tenant by giving thirty (30) days advance written notice, said notice to be given within 15 days following receipt of Landlord's notice. In the event Tenant shall fail to terminate this Lease as provided in this subparagraph (B) then, Tenant shall thereafter have no further right to so terminate based upon the provisions of this subparagraph (B). (C) If this Lease is not terminated as provided in Subparagraph 13 (A) and 13 (B) , or if the damage or destruction `is other than as provided in Subsection 13 (a) and 13(b)., then Landlord shall commence within ninety (90) days after such damage or destruction to rebuild, repair or restore the Premises and access thereto to substantially the same condition as when the-same were delivered to Tenant, excluding any improvements owned by Tenant, and the Lease shall continue in full force and effect. (D) If this Lease is terminated as provided above, Tenant's obligation to pay Rent hereunder shall cease as of the date of damage or destruction if Premises are rendered untenantable. (E) Landlord shall in no event be obligated to make any repairs or replacement of any fixtures, furniture, equipment or other property (real or personal) owned by Tenant. If the lease is not terminated but the Premises are rendered totally untenantable, Rent shall abate during the period of such untenantability. Tenant acknowledges (1) that Landlord shall not obtain insurance of any kind on Tenant Improvements, alterations, additions and improvements to the Premises owned by Tenant or on Tenant's furniture, fixtures, equipment and other personal property, (ii) that it is Tenant's obligation to obtain such insurance at Tenant's sole cost and expense, and (iii) that Landlord shall not be obligated to repair any damage thereto or replace the same. The provisions of this Paragraph 13 shall be considered an express agreement governing any case of damage or destruction of the Premises by fire or other casualty, and any law of the State of New Jersey, providing for such a contingency in the absence of an express agreement, and any other law of like import, now or hereafter in force, shall have no application in such case. PARAGRAPH 14 EMINENT DOMAIN: In case the whole of the premises, or such part thereof as shall substantially interfere with Tenant's use and occupancy thereof, shall be taken by any lawful power or authority by exercise of the power of eminent domain, this Lease shall terminate effective as of the date possession is required to be surrendered to said authority. In the event of any taking (in whole or part) of the Property whether or not the Premises or access thereto are affected thereby, which taking in Landlord's judgment will render continued operation of the Property economically unfeasible, Landlord shall have the right to terminate this Lease. Except as provided herein, Tenant shall not, because of any taking, assert any claim against Landlord or the taking authority for any compensation because of such taking, and Landlord shall be entitled to receive the entire amount of any award without deduction for any estate or interest of Tenant. In the event the amount of property or the type of estate taken shall not substantially interfere with Tenant's use of the Premises, and Landlord does not terminate this Lease, Landlord shall proceed to restore the Premises (to the extent permitted by the taking) to substantially their condition prior to such partial taking, and a proportionate allowance shall be made to Tenant (D) At any time within thirty (30) days after Landlord's receipt of the information specified in subparagraph (C) above, Landlord may by written notice to Tenant, elect (I) to take from Tenant a sublease of the Premises or the portion thereof proposed to be subleased by Tenant, or to take an assignment of Tenant's leasehold estate hereunder, or such part thereof as shall be specified in said notice, upon the same terms as those offered to the proposed subtenant or assignee, as the case may be; (ii) to give Tenant written consent to the proposed assignment or sublease, provided that the Rent payable monthly by the Tenant to the Landlord under the terms of this Lease shall be increased by a sum equal to all rental and other considerations received by Tenant from its subtenant or assignee in excess of the Rent payable by Tenant under the terms of this Lease, net of Tenant's reasonable and customary costs incurred in connection with procuring such assignment or sublease; (iii) to terminate this Lease as to the portion (including all) of the Premises proposed to be subleased or assigned, with a proportionate abatement in the Rent payable hereunder; or (iv) to deny consent, in writing, to Tenant's proposed sublet or assignment. (E) Landlord shall not unreasonably exercise its rights under subparagraph (D) (iv) above, provided, all the following conditions are present: (j) Tenant shall send notice to Landlord, in writing, including all the information specified in subparagraph (C) above; (ii) the subtenant or assignee is of high quality, character and financial stability consistent with the high standards of the Building as determined by Landlord in Landlord's reasonable business judgment; (iii) the proposed subtenant or assignee is not a party then occupying space in the Building or party who has negotiated with Landlord for comparable space in the Building for a comparable term as the term hereof, within the six (6) month period preceding the date of Tenant's notice pursuant to this subparagraph (E); (iv) Tenant shall not have publicly advertised the availability for assignment, sublease or occupancy of all or any part of the Premises at a rental rate lower than the rate at which Landlord is then offering to lease similar space in the Building, (v) the proposed assignee or subtenant is not a governmental agency or body, or school, (vi) the assignee or subtenant does not engage in the business of leasing or subleasing executive suites, and (vii) in the case of a sublease, the space to be subleased is more than 50% of the Premises. (F) If `Tenant is a corporation, an unincorporated association or partnership, the transfer, assignment or hypothecation of any stock or interest in such corporation, association or partnership, in the aggregate in excess of twenty--five (25%) percent, shall be deemed an assignment within the meaning and provisions of this Paragraph 15, except that Tenant shall have the ri'ght to assign this Lease or sublease the Premises, without Landlord's consent, to any entity that is controlled by, under common control with, or controls Tenant. As used herein, the term "control" shall mean the power to direct the' affairs of such entity or the power to vote a majority of the equity interests of such entity. (G) Tenant shall not be entitled to make, nor shall Tenant make, any claim, and Tenant hereby waives any claims, for money damages (nor shall Tenant claim any money damages by way of set-off, counterclaim, or defense) based upon any claim or assertion by Tenant that Landlord' has unreasonably delayed its consent or approval to a proposed assignment or subletting as provided for in this paragraph. Tenant's sole remedy shall be an action or proceeding to enforce any such provision, or for Specific performance, injunction, or declaratory judgment. PARAGRAPH 16 LANDLORD'S ACCESS TO PREMISES: Landlord reserves and shall at any and all reasonable times and upon advance notice to Tenant (except in the case of an emergency) have the right to enter the Premises to inspect the same, to supply janitor service and any other service to be provided by Landlord to Tenant hereunder, to show said Premises to prospective purchasers, mortgagees, or tenants, to alter or repair the Premises or any portion of the Building or Property, all without being deemed guilty of an eviction of Tenant and without abatement of Rent, and may for that purpose erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, provided that Landlord shall take reasonable steps to minimize interference with Tenant's business. Notwithstanding anything to the contrary contained in the immediately preceding sentence, Landlord `--shall not be required to incur any additional expense, or employ after hours labor to satisfy Landlord's obligations under this Paragraph 16. Tenant hereby waives any claim for damages or any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant's vaults and safes, and Landlord shall have the right to use any and all means which Landlord may deem proper tO open said doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by Landlord by any of said means shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of the Premises, or any eviction of Tenant from the Premises or any portion thereof. No provision of this Lease shall be construed as obligating Landlord to perform any repairs, alterations or decoration except as otherwise expressly agreed to be performed by Landlord. PARAGRAPH 17 SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATES: ------------------------------------------------ (A) This Lease is junior, subject, and subordinate to all ground leases, mortgages, deeds of trust, and other security instruments of any kind now covering the Property or any portion thereof. Landlord reserves the right to place liens or encumbrances on the Property or any part thereof or interest therein superior in lien and effect to this Lease. This Lease, at the option of Landlord, shall be subject and subordinate to any and all such liens or encumbrances now or hereafter imposed by Landlord without the necessity of the execution and delivery of any further instruments on the part of Tenant to effectuate such subordination. Notwithstanding the foregoing, Tenant covenants and agrees to execute and deliver upon request such further instruments evidencing such subordination of this Lease as may be requested by Landlord. (B) Tenant shall at any time and from time to time upon not less than ten (10) days prior notice by Landlord, execute, acknowledge and deliver to Landlord a statement in writing and in form and substance satisfactory to Landlord certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), and the dates to which the Basic Annual Rent, Additional Rent and other charges have been paid in advance, if any, and stating whether or not to the best knowledge of Tenant, Landlord is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default of which Tenant may have knowledge and such other matters as may be reasonably requested by Landlord or any lender or purchaser of the Property. Any such statement delivered pursuant to this Paragraph 17 may be relied upon by any prospective purchaser of the fee of the Building or the Property or any mortgagee, ground lessor or other encuxnbrancer thereof or any assignee of any such person. Tenant shall also, at any time, and from time to time, upon not less than ten (10) days prior notice by Landlord execute and deliver to Landlord forms and documents as may be necessary for compliance with any applicable law, statute, ordinance, rule or regulation. (C) Tenant agrees that in the event that any holder of any ground or underlying lease, mortgage, deed of trust, or other encumbrance encumbering any part of the Property succeeds to Landlord's interest in the Premises, Tenant shall pay to such holder,all rents subsequently payable under this Lease and shall, upon request of any such person or party succeeding to Landlord's interest, automatically become the Tenant of and attorn to such successor in interest without change in the terms or provisions of this Lease. Such successor in interest shall not be bound by (i) any payment of Basic Monthly Rental Installments for more t,han one month in advance,' or (ii) any amendment modification of this Lease made without the written consent of such successor in interest. Upon request by such successor in interest and without cost to Landlord or such successor in interest, Tenant shall execute, acknowledge, and deliver an instrument or instruments confirming the attornment PARAGRAPH 18 SALE BY LANDLORD: In the event of a sale or conveyance by Landlord of the Property or any part thereof, subject to the provisions of Paragraph 4 above, the same shall operate to release Landlord from any and all liability under this Lease accruing after the date of such conveyance of title. PARAGRAPH 19 INDEMNIFICATION AND INSURANCE: ----------------------------- (A) Tenant shall indemnify, hold Landlord harmless from and defend Landlord against any and all claims, losses, costs, damages, expenses or liabilities, including without limitation reasonable attorneys' fees, for any injury or damages to any person or property whatsoever, arising out of or in connection with (I) any act, neglect, fault, or omission of Tenant, its agents, servants, employees or invitees, (ii) any act or occurrence within the Premises, or (iii) any default by Tenant under the provisions of this Lease. This indemnity shall not require any payment by Landlord as a condition precedent to recovery. In addition, if any person not a party to this Lease shall institute any other type of action against Tenant in which Landlord shall be made a party defendant, Tenant shall indemnify, hold Landlord harmless from and defend Landlord from all liabilities and costs by reason thereof. For the purposes of this subparagraph 19(A), the term "Landlord" shall also include as indemnitees, as the case may be, Landlord's servants employees, officers, agents, and/or contract managers. (B)Tenant hereby agrees to maintain in full force and effect at all times during the term of this Lease, at its own expense, for the protection of Tenant and Landlord as their interests may appear, policies of insurance issued by a responsible carrier or carriers acceptable to Landlord (with deductible amounts acceptable to Landlord) which afford the following coverages: (ii) Comprehensive General ---Not Less than $5,000,000 Liability Insurance combined single limit for Including Blanket bodily injury, property Contractual Liability, Broad damage and fire damage Form Property Damage, Personal Injury, Fire Damage (iii) Automobile liability for ----Not less than $1,000 000, 000 owned, non--owned, or hired combined single limit for vehicles operated on the bodily injury and property Property damage Landlord, and any other person or entity reasonably designated by Landlord, shall be named as an additional insured on all policies listed under (ii) and (iii) (iv) All Risk Property Coverage in an amount sufficient to cover the full cost of replacement of all improvements and betterments to the Premises owned by Tenant and all of Tenant's fixtures and other personal property. (C) Tenant shall deliver to Landlord at least thirty (30) days prior to the time such insurance is first required to be carried by Tenant, and thereafter at least thirty (30) days prior to expiration of each such policy, certificates of insurance evidencing the above coverage with limits not less than those specified above. Such certificate, with the exception of Worker's Compensation, shall expressly provide that the interest of Landlord therein shall not be affected by any breach by Tenant of any provision of any such policy. Further, all certificates shall expressly provide that no less than thirty (30) days prior written notice shall be given Landlord in the event of material alterations to or cancellation of the coverages evidenced by such certificates. (D) Upon demand, Tenant shall provide Landlord, at Tenant's expense, with such increased amount of existing insurance, and such other insurance in such limits as Landlord may reasonably require and such other hazard insurance as the nature and condition of the Premises may require in the judgment of Landlord, to afford Landlord adequate protection for said risks. (D) If on account of the failure of Tenant to comply with the provisions of this Paragraph 19, Landlord is adjudged a co-insurer by its insurance carrier, then any loss or damage Landlord shall sustain by reason thereof shall be borne by Tenant and shall be immediately paid by Tenant upon receipt of a bill therefor and evidence of such loss. (F) Landlord makes no representation that the limits of liability specified to be carried by Tenant under the terms of this Lease are adequate to protect Tenant against Tenant's undertaking under this Paragraph 19. In the event Tenant believes that any such insurance coverage called for under this Lease is insufficient, Tenant shall provide, at its own expense, such additional insurance as Tenant deems adequate. PARAGRAPH 20 WAIVER OF SUBROGATION: Tenant and Landlord each agree that the respective insurance carried by it against loss or damage by fire or other casualty shall contain a clause whereby the insurer waives its right of subrogation against the other party. Pursuant to the foregoing, Landlord and Tenant hereby waive all claims for recovery from the other party for any loss or damage to any of its property insured under valid and collectible insurance policies to the extent of any recovery collectible under such insurance. PARAGRAPH 2]. NO WAIVER: No failure by Landlord to insist upon the strict performance of any covenant, agreement, term or condition of this Lease, or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial Rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such covenant, agreement, term or condition. Landlord's waiver, if any, shall only be as expressly stated in writing and signed by Landlord. No consent or waiver by Landlord to or of any breach of any covenant, condition or duty of Tenant shall be construed as a' consent or waiver to or of any other breach of the same ,or any other covenant, condition or duty, unless expressly stated otherwise in writing and signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent and additional charges payable hereunder shall be deemed to be other than a payment on account of the earliest stipulated Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment for Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance o'f such Rent or pursue any other remedy provided herein or by law. PARAGRAPH 22 DEFAULT: ------- (A) The occurrence of any of the following shall constitute a material default and breach of this Lease by Tenant: (i) Any failure by Tenant to pay the Rent or to make any other payment required to be made by Tenant hereunder; (ii) The abandonment of the Premises by Tenant; (iii) Any failure by Tenant to observe and perform any of its other obligations under this Lease, where such failure continues for ten (10) days (except where a different period of time is specified in this, Lease) after federal, state or other law for the relief of debtors; (vii) Tenant fails to obtain the dismissal, within thirty (30) days after the commencement thereof of any ` bankruptcy, reorganization or insolvency proQeeding, or other proceeding under any law for the relief of debtors, instituted against it by one or more third parties, or fails caused directly or indirectly by Tenant's failure to perform its obligations under this Lease including, but not limited to, reasonable attorneys' fees and costs; plus (iv) , ` at Landlord's election, such other amounts if any, shall be held by Landlord and applied in payment of future Rent as the same may become due and payable hereunder. Should any such reletting result in the payment of rentals less than the Rent payable by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord. Tenant shall also pay Landlord as soon as ascertained, any costs and expenses incurred-by Landlord in such reletting or in making such alterations and repairs not covered by the rentals received from such reletting. (A) On the expiration or the sooner termination hereof, Tenant shall peaceably surrender the Premises broom clean, in good order, condition and repair. On or before the last day of the Lease term or the sooner termination herof, Tenant shall at its expense remove its trade fixtures, signs and other personal property from the Premises. Any property not removed shall be deemed abandoned and may either be retained by Landlord as its property, or disposed of, without accountability and at Tenant's expense, in such manner as Landlord may determine. If the Premises are not surrendered at the end of the Lease term or the sooner termination Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in so surrendering the Premises, including, without limitation, claims made by any succeeding tenants founded on such delay. Tenant shall promptly surrender all keys for the Premises and Building restrooms to Landlord at the place then fixed for payments of Rent. Tenant's covenants hereunder shall survive the expiration or termination of this Lease. (B) If Tenant holds over after the expiration or sooner termination hereof without the express written consent of Landlord, Tenant shall become a Tenant at sufferance only at two times the greater of (i) the Rent due hereunder or (ii) the then prevailing market rate rent, as determined by Landlord in its sole and absolute discretion, plus all items of Additional Rent provided herein, and otherwise upon the terms, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of Rent after such expiration or earlier termination shall not constitute a consent to a holdover hereunder or result in a renewal. The foregoing provisions of this paragraph are in addition to and do not affect Landlord's rights of reentry or any other rights of Landlord hereunder or as otherwise provided by law. PARAGRAPH 27 CONDITION OF PREMISES: Landlord's responsibility with respect to the condition of the Premises is set forth in Landlord's Work Letter. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Building or the Property or with respect to the suitability of any part of the Property for the conduct of Tenant's business. The taking of possession of the Premises by Tenant shall conclusively establish that the Building and the Premises were at such time in good order and repair. PARAGRAPH 28 QUIET POSSESSION: Upon Tenant's paying the rent reserved hereunder and observing and performing all of the covenants, conditions and provisions on Tenant's part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof, subject to all of the provisions `of this Lease. This covenant shall be binding upon any landlord hereunder only during its respective ownership of the Premises. PARAGRAPH 29 LIMITATION OF LANDLORD'S LIABILITY: ---------------------------------- (A) Landlord'and its employees' and-agents shall not be liable for any damage to Tenant's property entrusted to employees of Landlord or its agents, nor for any loss or interruption of Tenant's possession, nor for loss of or damage to any property by theft or otherwise, nor for any injury or damage to property resulting from fire, explosion falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building or from the pipes, appliances or plumbing works therein or from the roof, street or sub-surface or from any other place or resulting from dampness or any other cause whatsoever in the Building or the Property. Landlord and its employees and agents shall not be liable for any property loss resulting from any latent defect in the Premises or in the Building. Tenant shall give prompt notice to Landlord in case of fire, accidents or defects in the Premises or in the Building. (B) Tenant shall look solely to Landlord's estate and property in the Property (or the proceeds thereof) for th,e satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default by Landlord hereunder, and no other property or assets of Landlord or Landlord's partners or members shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to either this Lease, the relationship of Landlord and Tenant hereunder, or Tenant's use and occupancy of the Premises. PARAGRAPH 30 GOVERNING LAW: This Lease shall be governed by. and construed pursuant to the law of the State of New -------------- Jersey. PARAGRAPH 31 COMMON FACILITIES: Tenant shall have the non-exclusive right in common with others, to the use or "common entrances, lobbies, elevators, stairs and other common facilities in and adjacent to the Building or Property, as may be provided by Landlord from time to time for general use, subject to such rules and regulations as may be adopted by the Landlord including, but not limited to, the right to close from time to time all or any portion of said common facilities to such extent as may be legally sufficient, in Landlord's sole opinion, to prevent a dedication thereof or the accrual of rights to any person or to the public, therein. PARAGRAPH 32 SUCCESSORS AND ASSIGNS: Except as otherwise provided in this Lease, all of the covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. However, the obligations of Landlord under this Lease shall not be binding upon Landlord. herein named with respect to any period subsequent to the transfer of its interest in the Property as owner or lessee thereof, and in the event of sudh transfer said obligations shall thereafter be binding upon each transferee of the interest of Landlprd herein named as such owner or lessee of the `Property, but only with respect to the period commencing with its respective transfer in and ending with a subsequent transfer out, and such transferee, by accepting such interest, shall be deemed to have assumed such obligations except only as may be expressly otherwise provided in this Lease. Any lease of all or substantially all of Landlord's interest in the Property as owner or lessee thereof shall be deemed a transfer, to the tenant under such lease, within the meaning of Paragraph 32. PARAGRAPH 33 BROKERS: ------- (A) Tenant represents and agrees that it has not directly or indirectly dealt with any real estate broker(s) other than the firm(s) specified in Item 9 of the Basic Lease Provisions in connection with this transaction. Tenant agrees to defend, indemnify and hold Landlord harmless from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of Tenant with' any other broker or brokers. (C) Landlord represents and agrees that it has not directly or indirectly dealt with any real estate broker(s) other than the firm(s) specified in Item 9 of the Basic Lease Provisions in connection with this transaction. Landlord agrees to defend, indemnify and hold Tenant harmless from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of Landlord with any other broker or brokers. Landlord agrees to pay any commissions or fees payable to the real estate broker specified in Item 9 of the Basic Lease Provisions pursuant `to- the terms of a separate (A) On the expiration or the sooner termination hereof, Tenant shall peaceably surrender the Premises broom clean, in good order, condition and repair. On or before the last day of th.e Lease term or the sooner termination hereof, Tenant shall at its expense remove its trade fixtures, signs and other personal property from the Premises. Any property not removed shall be deemed abandoned and may either be retained by Landlord as its property, or disposed of, without accountability and at Tenant's expense, in such manner as Landlord may determine. If the Premises are not surrendered at the end of the Lease term or the sooner termination Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in so surrendering the Premises, including, without limitation, claims made by any succeeding tenants founded on such delay. Tenant shall promptly surrender all keys for the Premises and Building restrooms to Landlord at the place then fixed for payments of Rent. Tenant's covenants hereunder shall survive the expiration or termination of this Lease. (B) If Tenant holds over after the expiration or sooner termination hereof without the express written consent of Landlord, Tenant shall become a Tenant at sufferance only at two times the greater of (i) the Rent due hereunder or (ii) the then prevailing market rate rent, as determined by Landlord in its sole and absolute discretion, plus all items of Additional Rent provided herein, and otherwise upon the ternis, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of Rent after such expiration or earlier termination shall not constitute a consent to a holdover hereunder or result in a renewal. The foregoing provisions of this paragraph are in addition to and do not affect Landlord's rights of reentry or any other rights of Landlord hereunder or as otherwise provided by law. PARAGRAPH 27 CONDITION OF PREMISES: Landlord's responsibility with respect to the condition of the Premises is set forth in Landlord's Work Letter. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Building or the Property or with respect to the suitability of any part of the Property for the conduct of Tenant's business. The taking of possession of the Premises by Tenant shall conclusively establish that the Building and the Premises were at such time in good order and repair. PARAGRAPH 28 QUIET POSSESSION Upon Tenant's paying the rent reserved hereunder and observing and performing all of the covenants, conditions and provisions on Tenant's part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof, subject to all of the provisions of this Lease. This covenant shall be binding upon any landlord hereunder only during its respective ownership of the Premises. PARAGRAPH 29 LIMITATION OF LANDLORD'S LIABILITY: ---------------------------------- (A) Landlordand its employees andagents shall not be liable for any damage to Tenant's property entrusted to employees of Landlord or its agents, nor for any loss or interruption of Tenant's possession, nor for loss of or damage to any property by theft or otherwise, nor for any injury or damage to property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building or from the pipes, appliances or plumbing works therein or from the roof, street or sub-surface or from any other place or resulting from dampness or any other cause whatsoever in the Building or the Property. Landlord and its employees and agents shall not be liable for any property loss resulting from any latent defect in the Premises or in the Building. Tenant shall give prompt notice to Landlord in case of fire, accidents or defects in the Premises or in the Building. (B) Tenant shall look solely to Landlord's estate and property in the Property (or the proceeds thereof) for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default by Landlord hereunder, and no other property or assets of Landlord or Landlord's partners or members shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to either this Lease, the relationship of Landlord and Tenant hereunder, or Tenant's use and occupancy of the Premises. PARAGRAPH 30 GOVERNING LAW: This Lease shall be governed by and construed pursuant to the law of the State of New Jersey. ------------- PARAGRAPH 31 COMMON FACILITIES: Tenant shall have the non-exclusive right in common with others, to the use or common entrances, lobbies, elevators, stairs and other common facilities in and adjacent to the Building or Property, as may be provided by Landlord from time to time for general use, subject to such rules and regulations as may be adopted by the Landlord including, but not limited to, the right to close from time to time all or any portion of said common facilities to such extent as may be legally sufficient, in Landlord's sole opinion, to prevent a dedication thereof or the accrual of rights to any person or to the public therein. PARAGRAPH 32 SUCCESSORS AND ASSIGNS: Except as otherwise provided in this Lease, all of the covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. However, the obligations of Landlord under this Lease shall not be binding upon Landlord. herein named with respect to any period subsequent to the transfer of its interest in the Property as owner or lessee thereof, and in the event of sudh transfer osaid obligations shall thereafter be binding upon each transferee of the interest of Landlprd herein named as such owner or lessee of the Property, but only with respect to the period commencing with its respective transfer in and ending with a subsequent transfer out, and such transferee, by accepting such interest, shall be deemed to have assumed such obligations except only as may be expressly otherwise provided in this Lease. Any lease of all or substantially all of Landlord's interest in the Property as owner or lessee thereof shall be deemed a transfer, to the tenant under such lease, within the meaning of Paragraph 32. PARAGRAPH 33 BROKERS: ------- (A) Tenant represents and agrees that it has not directly or indirectly dealt with any real estate broker(s) other than the firm(s) specified in Item 9 of the Basic Lease Provisions in connection with this transaction. Tenant agrees to defend, indemnify and hold Landlord harmless from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of Tenant with any other broker or brokers. (B) Landlord represents and agrees that it has not directly or indirectly dealt with any real estate broker(s) other than the firm(s) specified in Item 9 of the Basic Lease Provisions in connection with this transaction. Landlord agrees to defend, indemnify and hold Tenant harmless from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of Landlord with any other broker or brokers. Landlord agrees to pay any commissions or fees payable to the real estate broker specified in Item 9 of the Basic Lease Provisions pursuant to the terms of a separate agreement. (C) If, after the date hereof, either Landlord or Tenant shall employ, retain or consult with any real estate broker or brokers other than the firms specified in Item 9 of the Basic Lease Provisions in connection with any matters pertaining to this Lease, the Premises or the Property, the employing party hereby agrees to pay the broker or brokers and the employing party hereby agrees to defend, indemnify and to hold harmless the other party hereto from and against any claims for brokerage commission or finder's fee arising out of or based on any alleged actions of the employing party with respect to said broker or brokers not specified in Item 9. (A) Tenant shall not, without the written consent of Landlord, use the name of the Building or the Property for any purpose other than as the address of the business to be conducted by Tenant in the Premises, and in no event shall Tenant acquire any rights in or to such names. Landlord reserves the right, to change the name and/or address of the Building or Property at. any time and from time to time, and agrees to give reasonable notice of same to Tenant. (B) It is understood and agreed that the architectural design, aesthetic appeal and use of the Building and the Property are and shall remain always in the sole control of Landlord. Therefore, notwithstanding anything to the contrary contained herein, Landlord does hereby reserve the right from time to time and at any timeto make changes and additions, without restriction, to the Building and the Property, improvements or other areas, including without limitation, eliminating land, adding other lands, decreasing or changing the Building and the Property, which are deemed desirable by Landlord, and the making of such changes or additions shall not invalidate or affect this Lease or any rights hereunder nor constitute an eviction of Tenant or a breach of this Lease, nor give rise to any claim for damages. Notwithstanding the foregoing provisions, Landlord represents and confirms that no such changes will unreasonably and substantially interfere with Tenant's use and occupancy of the Premises or Tenant's access to the Building. PARAGRAPH 35 EXAMINATION OF LEASE: Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for lease, and it is not effective as a lease or otherwise until execution by and delivery to both Landlord and Tenant. PARAGRAPH 36 ADDITIONAL CHARGES: Unless prohibited by law, if any amount due hereunder is not paid by Tenant when due, Landlord may impose a late charge of four (4%) percent of the amount past due, and a charge for reasonable legal fees and costs. In addition to the foregoing, any amount due from Tenant to Landlord which is not paid within thirty (30) days after due, in addition to other remedies available to Landlord shall, at Landlord's Option, bear interest which shall be at the lesser of (i) eighteen (18%) percent per annum or (ii) the maximum lawful rate per annum, from the date such payment is due until the date actually paid, but the payment of such interest shall not excuse or cure the default. PARAGRAPH 37 DEFINED TERMS AND ADDITIONAL HEADINGS: The words "Landlord" and "Tenant" as used herein shall, as the case may be, include the plural as well as the singular. If more than one person or entity is named as Tenant the obligations of such persons or entities are joint and several. The marginal headings and titles to the Paragraphs of this Lease are not a part of this Lease and shall have no effect upon. the construction or interpretation of any part hereof. This Lease shall be construed without regard to any presumption or other rule requiring construction against the party causing this Lease to be drafted. because Landlord is unable to fulfill any of its obligations under this Lease, if Landlord is prevented or delayed from so doing by reason of any cause beyond Landlord's reasonable control including, but not limited to, Acts of God, strikes, labor troubles, shortage of materials, governmental preemption in connection with a national emergency or by reason of any rule, order or regulations of any governmental agency or by reason of war, hostilities or similar emergency; provided that Landlord shall in each instance exercise reasonable diligence to effect performance as soon as possible. It is agreed that Landlord shall not be required to incur any overtime or additional expenses in Landlord's reasonable diligence to effect the performance of any of Landlord's obligations hereunder. PARAGRAPH 41 NO LIGHT AIR OR VIEW EASEMENT: Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to the Building shall in no way affect this Lease or impose any liability on Landlord. PARAGRAPH 42 AUTHORITY AND SIGNATORIES: If Tenant executes this Lease in other than individual capacity, each of the persons executing this Lease on behalf of Tenant does hereby personally covenant and warrant that Tenant is a duly authorized and existing entity as herein represented, that Tenant was and is qualified to do business in the State of New Jersey, that the Tenant has full right and authority to enter into this Lease, and that each person signing on behalf of the Tenant is authorized to do so. Upon Landlord's request, the Tenant's signatories hereto will furnish satisfactory evidence of Tenant's authorization, and their personal authority on behalf of Tenant, to execute this Lease. PARAGRAPH 43 MISCELLANEOUS: ------------- (A) If Landlord is unable to deliver possession of the Premises to Tenant as of the Commencement Date as a result of the existing tenant holding over or for any other reason, such failure shall, not affect the validity of this Lease and Landlord shall not be liable for any damages which Tenant may incur as a result of the delay in -the Commencement Date. In such event, the Commencement Date shall occur on the date Landlord is able to deliver possession of the Premises to Tenant. (B) Landlord represents that the elevators, HVAC system and other building systems are Year 2000 compliant. (C) Tenant shall be entitled to 5 unassigned parking spaces in the parking lot located at McCarter Highway, across from the Building, provided, that (i) Tenant is not in default under this Lease, and (ii) Tenant pays to the parking lot operator Landlord's cost for such spaces, which is currently $55.00 per car per month. Tenant recognizes that Landlord's agreement with the parking lot operator is an annual agreement, and may be . canceled pursuant to the terms thereof upon 120 days' notice. The provisions of this section shall automatically be terminated and of no further force and effect if such agreement is canceled or terminated for any reason. Any default by Tenant under such agreement shall be a default under this Lease. (D) Landlord agrees to install within the Building, at Landlord's sole cost and expense, a satellite dish serving the Premises, providing Direct TV or comparable service. Tenant shall be responsible for contracting with the satellite TV provider for the actual TV service, and shall pay all charges in connection therewith. Landlord reserves the right to replace the satellite TV provider with another satellite TV or cable provider in connection with providing such service to the Building generally. IN WITNESS WHEREOF, the parties hereto have executed this Lease, consisting of the foregoing and Paragraphs 1 through 45 which follow, together with Exhibits "A" through "H", inclusive, incorporated herein by this reference as of the date first above written. LANDLORD: TREMONT CAPITAL CORP. By:__ Name: COMMENCEMENT DATE MEMORANDUM THIS AGREEMENT made as of of _______ between TREMONT CAPITAL CORP., a Texas corporation, having an office c/o Fairfield Financial Group, 8 Greenway Plaza, Suite 1100, Houston, Texas 77046, ("Landlord"), and REDSTONE SECURITIES, INC., a ________________ corporation, having an office at 101 Fairchild Avenue, Plainview, New York 11803 ("Tenant") W I T N E S S E T H: WHEREAS, Landlord and Tenant entered into a Lease dated August ____, 1999 ("Lease") setting forth the terms of occupancy by Tenant for the a portion of the Seventh floor at 550 Broad Street, Newark, New Jersey; and WHEREAS, the Lease is for an initial term of 5 years with the "Commencement Date" of the term being defined in Basic Lease Provisions; and WHEREAS, it has been determined in accordance with these provisions that __________ , 1999 is the Commencement Date of the initial term of the Lease. NOW, THEREFORE, in consideration of the premises and the covenants hereinafter set forth, it is agreed: 1. The Commencement Date of the initial term of the Lease is ___________--, 1999 and the Expiration Date thereof is , 2004. 2. This agreement is executed by the parties for purposes of providing a record of the commencement and termination RULES AND REGULATIONS 1. The sidewalks, and public portions, of the Building, such as entrances, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any tenant or used for any purpose other than ingress and egress to and from the demised premises ("demised premises" in this Exhibit D shall mean the "Premises" as set forth in the Lease) 2. No awniiigs or other projections shall be attached to the outside walls of the Building. No curtains, blinds, shades, louvered openings or screens shall be attached to or hung in, or used in connection with, any window or door of the demised premises, without the prior written consent of Landlord, unless installed by Landlord. 3. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any tenant on any part of the outside of the demised premises or Building or on corridor walls. Signs on entrance door or doors shall conform to building standard signs, samples of which are available on request. Signs on doors shall, at the tenant's expense, be inscribed, painted or affixed for each tenant by sign makers approved by Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove same without any liability, and may charge the expense incurred by such removal to the tenant or tenants violating this rule. Landlord shall provide for Tenant's use, Tenant's percentage share of the space within any building directory. 4. The sashes, sash doors, skylights, windows, heating, ventilating and air conditioning vents and door that reflect or adniit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by any tenant, nor shall any bottles, parcels, or other articles be placed outside of the demised premises. 5. No show cases or other articles shall be put in front of or affixed to any part of the exterior of the Building, nor placed in the public halls, corridors or vestibules without the prior written consent of Landlord. 6. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees, shall have caused the same. 7. No tenant shall in any way deface any part of the demised premises or the Building. No tenant shall lay linoleum, or other similar floor covering,' so that the same shall come in direct contact with the floor of the demised Premises, and, if linoleum or other similar floor covering is desired to be used, an interlining of builder's deadening felt shall be first affixed to the-floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited. 8. No bicycles, vehicles or animals of any kind (except seeing eye dogs) shall be brought into or kept in or about the Premises. 9. No cooking shall be done or permitted by Tenant in the Premises except in conformity to law and then only in the cafeteria kitchen. No tenant shall cause or permit any unusual or objectionable odors to be produced upon or permeate from the Premises. 10. No space in the Building shall be used for manufacturing or distribution or for the storage of merchandise, or for the sale at auction or otherwise of merchandise, goods or property of any kind. 11. No tenant shall make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with occupants of the Building or neighboring buildings or premises or those having business with them whether by the use of any musical instrument, radio, or in any other way. 12. No tenant, nor any of the tenant's servants, employees, agents, visitors or licensees, shall at any time bring or keep upon the premises any inflammable, combustible or explosive fluid, or chemical substance, other than reasonable amounts of cleaning fluids and solvents required in the normal operation of tenant's business offices. 13. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any tenant, nor shall any changes be made in existing locks or the mechanism thereof, without the prior written approval of the Landlord and unless and until a duplicate key is delivered to Landlord. Each tenant must,. upon the termination of his tenancy, restore to the Landlord all keys of offices and toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys, so furnished, such tenant shall pay to Landlord the cost thereof. 14. All removals, or the carrying in or out of any safes, freight, furniture or bulky matter of any description must take place during the hours which Landlord or its agent may determine from time to time. Landlord reserves the right to inspect all freight to be brought into the Building and to exclude from the Building `all freight which violates any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. 15. No tenant shall occupy or permit any portion of the premises demised to it to be occupied as, by or for a public stenographer or typist, barber shop, bootblacking, beauty shop or manicuring, beauty parlor, telephone or telegraph agency, employment agency, public restaurant or bar, commercial document reproduction or offset printing service, public vending machines, retail, wholesale or discount shop for sale of merchandise, retail service shop, labor union, school or classroom, governmental or quasi--governmental bureau, department or agency, including an autonomous governmental corporation, a firm the principal business of which is real estate brokerage, or a company engaged in the business of renting office or desk space; or for a public finance (personal loan) business, or for manufacturing. No tenant shall engage or pay any employees on the demised premises, except those actually working for such tenant on said premises, nor advertise for laborers giving an address at said Premises. Nothing herein shall be interpreted to prevent Tenant from making up at the Premises payroll and payroll checks for employees at other location. 16. Landlord shall have the right to prohibit any advertising by any tenant mentioning the Building which, in Landlord's reasonable opinion, tends to impair the reputation of the Building or its desirability as a building for offices, and upon written notice from Landlord, tenant shall refrain from and discontinue such advertising. 17. In order that the Building can and will maintain a. uniform appearance from the outside, each Tenant in building perimeter areas shall (a) use only building standard lighting, as defined in Work Letter, in areas where lighting is visible from outside of the Building and (b) use only four inch (4") horizontal blinds in window areas which are visible from the outside of the Building. 18. Landlord reserves the right to exclude from the Building between the hours of 6:00 p.m. and 8:00 a.m. and at all hours on non--business days all persons who do not present a pass to the Building signed by a tenant. Each tenant shall be responsible for all persons for whom such pass is issued and shall be liable to Landlord for all acts of such persons. 19. The premises shall not be used for lodging or sleeping or for any immoral or illegal purpose. 20. AL' Landlord's" option, tenants shall purchase from Landlord or its designee all lighting tubes, lamps, bulbs and ballasts used in the demised premises and tenants' shall pay Landlord's actual competitive and reasonable costs including reasonable overhead and profit for providing and installing same, on demand. 21. Canvassing, soliciting and peddling in the Building are prohibited and each tenant shall cooperate to prevent the same. 22. There shall not be used in any space, or in the public halls of any building, either by any tenant or by jobbers or others, in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards. No hand trucks shall be used in passenger elevators. 23. Tenants, in order to obtain maximum effectiveness of the cooling system, shall lower and/or close venetian or vertical blinds or drapes when sun's rays fall directly on windows of demised Premises. 24. Replacement of ceiling tiles if removed by Tenant or its contractors in both the demised premises and the public corridors, will be charged to Tenant on a per tile basis. Landlord's charge will be actual competitive costs plus reasonable overhea'd and profit. 25. All paneling, grounds or other wood products which are incorporated in construction of fire rated assembly shall be of fire retardant materials. Before installation of any such materials, certification of the materials' fire retardant characteristics shall be submitted to Landlord, or its agents, in a manner satisfactory to the Landlord. 26. Tenant shall not in any way obstruct or interfere with the' rights of other tenants or occupants of the Building or the Property or injure or annoy them, or use or allow the Premises to be used for any unlawful or objectionable purpose, nor shall Tenant cause, maintain, or permit any nuisance in, on, or about the Premises. Tenant shall not commit or suffer to be committed any, waste in or upon the Premises. 27. It is understood and agreed that Tenant shall not place a load on any floor of the premises exceeding the floor load 5 per square foot area which such floor was designed to carry and which is allowed by law. Landlord reserves the right to prescribe the weight and position of all safes, vaults, and other equipment which must be placed so as to distribute the weight. Business machines and mechanical equipment shall be placed and maintained by the Tenant, at Tenant's expense, in settings sufficient in the Landlord's judgment to absorb and preverit vibrations, noise and annoyance. 19. Whenever and to the extent that the above rules conflict with any of the rights or obligations of Tenant pursuant to the provisions of the Paragraphs of the Lease, the provisions of the Paragraphs shall govern The Cleaning Services will be made to the entire Building as indicated including office space, entrance lobby, public corridors, elevator cabs, staifways and. lavatories NIGHTLY SERVICES: - ---------------- 1. Dust, sweep floors. 2. Sweep all stairways. 3. Wipe drinking fountains. 4. Empty wastebaskets of normal general office wastepaper. 5. Clean cigarette urns and ash trays. 6. Remove normal general office wastepaper and waste materials to a designated area in the premises.. 7. Vacuum carpeted areas and rugs. 8. Damp mop floors. 9. Clean elevator cab. WEEKLY SERVICES: - --------------- 1. Dust furniture, fixtures, desk equipment, telephones and window sills. 2. Dust baseboards, chair rails, trim, doors, etc., within reach. 3. Clean entrance door glass. B I-WEEKLY SERVICES: - - ----------------- 1. Clear stairways, office and utility doors. MONTHLY SERVICES: - ---------------- 1. Wash partitions, tile walls and enamel surfaces. OCCASIONAL SERVICES: - ------------------- 1. Dust pictures, frames, charts and similar wall hangings not reached in nightly cleaning. 2. Dust exterior of lighting fixtures. 3. Dust venetian blinds. 4. Dust vertical surfaces such as partitions, ventilating louvers, etc., not reached in nightly2. Wash and polish mirrors, powder shelves, bright work, etc. 3. Clean and sanitize commodes, toilet seats, wash basins and urinals. 4. Dust partitions, tile walls, dispensers, doors and receptacles. 5. Empty and clean towel and sanitary disposal receptacles. 6. Remove wastepaper and refuse to a designated area in the premises. 7. Fill toilet tissue, soap and towel dispensers with supplies. OCCASIONAL SERVICE - RESTROOM AREA: - ---------------------------------- 1. High dust walls and ceilings. 2. Dust exterior of lighting fixtures. ENTRANCE LOBBIES & PUBLIC AREAS, AS REQUIRED: - -------------------------------------------- 1. Sweep and wash flooring and vacuum carpeting.. 2. Clean cigarette urns. 3. Dust and clean electric fixtures and any other' fittings in public corridors. 4. Exterior windows and glass and interior glass doors and partition glass will be washed inside and outside as required, but not more than three (3) times per year. OUTSIDE SERVICE, AS REQUIRED: ---------------------------- 1. Sweep driveways and curbs. 2. Sweep and clean sidewalks. 3. Remove snow from driveways, sidewalks, steps and parking areas. EX-10.7 7 DALLAS LEASE PREMPLACE LIMITED PARTNERSHIP, AS LANDLORD, AND INSTITUTIONAL EQUITY HOLDINGS, INC., AS TENANT DATED AUGUST 18, 1999 PREMIER PLACE DALLAS, TEXAS BASIC LEASE INFORMATION Lease Date: August 18, 1999 Landlord: PREM1LACE LIMITED PARTNERSHIP, a Delaware limited partnership Tenant: INSTITUTIONAL EQUITY HOLDINGS, INC., a Nevada corporation Premises: Suite No. 1480, containing 7,059 rentable square feet, in the office building commonly known as Premier Place (the "Buildin2"), and whose street address is 5910 North Central Expressway, Dallas, Texas 75206. The Premises are outlined on the plan attached to the Lease as Exhibit A. The land on --------- which the Building is located (the "Land") is described on Exhibit B. The term "Building" includes the - --------- related land, driveways, parking facilities, and similar improvements. Term: Approximately 62 months, commencing on the Commencement Date and ending at 5:00 pm. local time on the last day of the 62nd full calendar month following the Commencement Date, subject to adjustment and earlier termination as provided in the Lease. Commencement Date: The earliest of(a) the date on which Tenant occupies any portion of the Premises and begins conducting business therein, (b) the date on which the Work (as defined in Exhibit D hereto) in the Premises is Substantially Completed (as defined in Exhibit D hereto), or (c) the date on which the Work in the Premises would have been Substantially Completed but for the occurrence of any Tenant Delay Days (as defmed in Exhibit D hereto). ------- - Subject to the abatement of Basic Rent as provided in Exhibit I hereto, Basic Rent shall be the following amounts for the following periods of time As used herein, the term "Lease Month" shall mean each calendar month during the Term (and if the Commencement Date does not occur on the first day of a calendar month, the period from the Commencement Date to the first day of the next calendar month shall be included in the first Lease Month for purposes of determining the duration of the Term and the monthly Basic Rent rate applicable for such partial month). Security Deposit: $112,353.25. Basic Rent, Tenant's Proportionate Share of Taxes and Electrical Costs, Tenant's share of Additional Rent, and all other sums that Tenant may owe to Landlord or otherwise be required to pay under the Lease. THIS LEASE AGREEMENT (this "Lease") is entered into as of August 18, 1999, between PREMPLACE LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), and INSTITUTIONAL EQUITY HOLDINGS, INC., a Nevada corporation ("Tenant"). 1. Definitions and Basic Provisions. The definitions and basic provisions set forth in the Basic Lease Information (the "Basic Lease Information") executed by Landlord and Tenant contemporaneously herewith are incorporated herein by reference for all purposes. Additionally, the following terms shall have the following meanings when used in this Lease: "Affiliate" means any person or entity which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the party in question; "Buildin2's Structure" means the Building's exterior walls, roof, elevator shafts, footings, foundations, structural portions of load-bearing walls, structural floors and subfloors, and structural columns and beams; "Building's Systems" means the Building's HYAC, life-safety, plumbing, electrical, and mechanical systems; "including" means including, without limitation; "Laws" means all federal, state, and local laws, rules and regulations, all court orders, governmental directives, and governmental orders, and all restrictive covenants affecting the Building, and "Law" shall mean any of the foregoing; and "Tenant Party" means any of the following persons: Tenant; any assignees claiming by, through, or under Tenant; any subtenants claiming by, through, or under Tenant; and any of their respective agents, contractors, employees, and invitees. 2. Lease Grant. Subject to the terms of this Lease, Landlord leases to Tenant, and Tenant leases from ------------ Landlord, the Premises. 3. Tender of Possession. Landlord and Tenant presently anticipate that possession of the Premises will be tendered to Tenant (with the Work to be performed by Landlord therein, if any, Substantially Completed) on or about September 15, 1999 (the "Estimated Delivery Date"). If Landlord is unable to tender possession of the Premises in such condition to Tenant by the Estimated Delivery Date, then (a) Landlord shall not be in default hereunder or be liable for damages therefor, and (b) Tenant shall accept possession of the Premises when Landlord tenders possession thereof to Tenant. By occupying the Premises, Tenant shall be deemed to have accepted the Premises in their condition as of the date of such occupancy, subject to the performance of punch-list items that remain to be performed by Landlord, if any. Tenant shall execute and deliver to Landlord, within ten days after Landlord has requested the same, a letter substantially in the form of Exhibit E hereto confirming (1) the Commencement Date and the expiration date of the initial Term, (2) that Tenant has accepted the Premises, and (3) that Landlord has performed all of its obligations with respect to the Premises (except for punch-list items specified in such letter). Occupancy of the Premises by Tenant prior to the Commencement Date shall be subject to all of the provisions of this Lease excepting only those requiring the payment of Basic Rent, Additional Rent, Taxes and Electrical Costs (each as defmed herein). 4. Rent. (a) Payment. Tenant shall timely pay to Landlord Rent, without notice, demand, deduction or set off (except as otherwise expressly provided herein), at Landlord's address provided for in this Lease or as otherwise specified by Landlord and shall be accompanied by all applicable state and local sales or use taxes. Basic Rent, adjusted as herein provided, shall be payable monthly in advance. The first monthly installment of Basic Rent shall be payable contemporaneously with the execution of this Lease; thereafter Basic Rent shall be payable on the first day of each month beginning on the first day of the second full calendar month of the Term. The monthly Basic Rent for any partial month at the beginning of the Term shall equal the product of 1/365 of the annual Basic Rent in effect during the partial month and the number of days in the partial month from and after the Commencement Date, and shall be due on the Commencement Date. (b) Operating Costs: Taxes: Electrical Costs. ---------------------------------------- (1) Tenant shall pay to Landlord the amount (per each rentable square foot in the Premises) ("Additional Rent") by which the annual Operating Costs (defined below) per rentable square foot in the Building exceed the Expense Stop (per rentable square foot in the Building). Landlord may make a good faith estimate of the Additional Rent to be due by Tenant for any calendar year or part thereof during the Term. During each calendar year or partial calendar year of the Term (after the base year, if the Expense Stop is calculated on a base year basis), Tenant shall pay to Landlord, in advance concurrently with each monthly installment of Basic Rent, an amount equal to the estimated Additional Rent for such calendar year or part thereof divided by the number of months therein. From time to time, Landlord may estimate and re-estimate the Additional Rent to be due by Tenant and deliver a copy of the estimate or re-estimate to Tenant. Thereafter, the monthly installments of Additional Rent payable by Tenant shall be appropriately adjusted in accordance with the estimations so that, by the end of the calendar year in question, Tenant shall have paid all of the Additional Rent as estimated by Landlord. Any amounts paid based on such an estimate shall be subject to adjustment as herein provided when actual Operating Costs are available for each calendar year. (b) (2) The term Operating Costs" shall mean all expenses and disbursements (subject to the l imitations set forth below) that ----- Landlord incurs in connection with the ownership, operation, and maintenance of the Building, determined in accordance with sound accounting principles consistently applied, including the following costs: (A) wages and salaries (including management fees) of all on-site employees at or below the grade of senior building manager engaged in the operation, maintenance or security of the Building (together with Landlord's reasonable allocation of expenses of off-site employees at or below the grade of senior building manager who perform a portion of their services in connection with the operation, maintenance or security of the Building), including taxes, insurance and benefits relating thereto; (B) all supplies and materials used in the operation, maintenance, repair, replacement, and security of the Building; (C) costs for improvements made to the Building which, although capital in nature, are expected to reduce the normal operating costs (including all utility Costs) of the Building, as amortized using a commercially reasonable interest rate over the time period reasonably estimated by Landlord to recover the costs thereof taking into consideration the anticipated cost savings, as determined by Landlord using its good faith, commercially reasonable judgment, as well as capital improvements made in order to comply with any Law hereafter promulgated by any governmental authority or any interpretation hereafter rendered with respect to any existing Law, as amortized using a commercially reasonable interest rate over the useful economic life of such improvements as determined by Landlord in its reasonable discretion; (D) cost of all utilities, except Electrical Costs and the cost of other utilities reimbursable to Landlord by the Building's tenants other than pursuant to a provision similar to this Section 4(b); (E) insurance expenses; (F) repairs, replacements, and general maintenance of the Building; and (G) service or maintenance contracts with independent contractors for the operation, maintenance, repair, replacement, or security of the Building (including alarm service, window cleaning, and elevator maintenance). Operating Costs shall not include costs for (i) capital improvements made to the Building, other than capital improvements described in Section 4.(b)(2)(C) and except for items which are generally considered maintenance and repair items, such as painting of common areas, replacement of carpet in elevator lobbies, and the like; (ii) repair, replacements and general maintenance paid by proceeds of insurance or by Tenant or other third parties; (iii) interest, amortization or other payments on loans to Landlord; (iv) depreciation; (v) leasing commissions; (vi) legal expenses for services, other than those that benefit the Building tenants generally (e.g., tax disputes); (vii) renovating or otherwise improving space for occupants of the Building or vacant space in the Building; (viii) Taxes; and (ix) federal income taxes imposed on or measured by the income of Landlord from the operation of the Building. If the Expense Stop is calculated on a base year basis, Operating Costs for the base year only shall not include market-wide labor-rate increases due to extraordinary circumstances, including boycotts and strikes; utility rate increases due to extraordinary circumstances, including conservation surcharges. boycotts, embargos or other shortages; or amortized costs relating to capital improvements. (3) Tenant shall also pay its Proportionate Share of any increase in Taxes for each year and partial year falling within the Term over the Taxes for the Base Tax Year. Tenant shall pay its Proportionate Share of Taxes in the same manner as provided above for Additional Rent with regard to Operating Costs. "Taxes" shall mean taxes, assessments, and governmental charges or fees whether federal, state, county or municipal, and whether they be by taxing districts or authorities presently taxing or by others, subsequently created or otherwise, and any other taxes and assessments (including non-governmental assessments for common charges under a restrictive covenant or other private agreement that are not treated as part of Operating Costs) now or hereafter attributable to the Building (or its operation), excluding, however, penalties and interest thereon and federal and state taxes on income (if the present method of taxation changes so that in lieu of the whole or any part of any Taxes, there is levied on Landlord a capital tax directly on the rents received therefrom or a franchise tax, assessment, or charge based, in whole or in part, upon such rents for the Building, then all such taxes, assessments, or charges, or the part thereof so based, shall be deemed to be included within the term "Taxes" for purposes hereof). Taxes shall include the costs of consultants retained in an effort to lower taxes and all costs incurred in disputing any taxes or in seeking to lower the tax valuation of the Building. For property tax purposes, Tenant waives all rights to protest or appeal the appraised value of the Premises, as well as the Building, and all rights to receive notices of reappraisement as set forth in Sections 41.413 and 42.015 of the Texas Tax Code. (4) Tenant shall also pay to Landlord Tenant's Proportionate Share of the cost of all electricity used by the Building ("Electrical Costs"). Such amount shall be payable in monthly installments on the Commencement Date and on the first day of each calendar month thereafter. Each installment shall be based on Landlord's estimate of the amount due for each month. From time to time during any calendar year, Landlord may estimate or re-estimate the Electrical Costs to be due by Tenant for that calendar year and deliver a copy of the estimate or re-estimate to Tenant. Thereafter, the monthly installments of Electrical Costs payable by Tenant shall be appropriately adjusted in accordance with the estimations. (5) By April 1 of each calendar year, or as soon thereafter as practicable, Landlord shall furnish to Tenant a statement of Operating Costs and Electrical Costs for the previous year, in each case adjusted as provided in Section 4(b)(6), and of the Taxes for the previous year (the "Operating Costs and Tax Statement"). If the Operating Costs and Tax Statement reveals that Tenant paid more for Operating Costs or Electrical Costs than the actual amount for the year for which such statement was prepared, or more than its actual share of Taxes for such year, then Landlord shall common with other tenants, provided that Landlord may reasonably limit the number of operating elevators during non-business hours and holidays; and(S) electrical current during normal business hours for equipment that does not require more than 110 volts and whose electrical energy consumption does not exceed normal office usage. Landlord shall maintain the common areas of the Building in reasonably good order and condition, except for damage caused by a Tenant Party. If Tenant desires any of the services specified in Section 7.(a)(2): (A) at any time other than between 7:00 a.m. and 6:00 p.m. on weekdays and between 8:00 a.m. and 1:00 p.m. on Saturday (in each case other than holidays), or (B) on Sunday or holidays, then such services shall be supplied to Tenant upon the written request of Tenant delivered to Landlord before 3:00 p.m. on the business day preceding such extra usage, and Tenant shall pay to Landlord the cost of such services within 30 days after Landlord has delivered to Tenant an invoice therefor. The costs incurred by Landlord in providing after-hour HVAC service to Tenant shall include costs for electricity, water, sewage, water treatment, labor, metering, filtering, and maintenance reasonably allocated by Landlord to providing such service. (b) Excess Utility Use. Landlord shall not be required to furnish electrical current for equipment that requires more than 110 volts or other equipment whose electrical energy consumption exceeds normal office usage. If Tenant's requirements for or consumption of electricity exceed the electricity to be provided by Landlord as described in Section 7(a), Landlord shall, at Tenant's expense, make reasonable efforts to supply such service through the then-existing feeders and risers serving the Building and the Premises, and Tenant shall pay to Landlord the cost of such service within 30 days after Landlord has delivered to Tenant an invoice therefor. Landlord may determine the amount of such additional consumption and potential consumption by any verifiable method, including installation of a separate meter in the Premises installed, maintained, and read by Landlord, at Tenant's expense. Tenant shall not install any electrical equipment requiring special wiring or requiring voltage in excess of 110 volts or otherwise exceeding Building capacity unless approved in advance by Landlord. The use of electricity in the Premises shall not exceed the capacity of existing feeders and risers to or wiring in the Premises. Any risers or wiring required to meet Tenant's excess electrical requirements shall, upon Tenant's written request, be installed by Landlord, at Tenant's cost, if, in Landlord's judgment, the same are necessary and shall not cause permanent damage to the Building or the Premises, cause or create a dangerous or hazardous condition, entail excessive or unreasonable alterations, repairs, or expenses, or interfere with or disturb other tenants of the Building. If Tenant uses machines or equipment in the Premises which affect the temperature otherwise maintained by the air conditioning system or otherwise overload any utility, Landlord may install supplemental air conditioning units or other supplemental equipment in the Premises, and the cost thereof, including the cost of installation, operation, use, and maintenance, shall be paid by Tenant to Landlord within 30 days after Landlord has delivered to Tenant an invoice therefor. (c) Restoration of Services; Abatement. Landlord shall use reasonable efforts to restore any service required of it that becomes unavailable; however, such unavailability shall not render Landlord liable for any damages caused thereby, be a constructive eviction of Tenant, constitute a breach of any implied warranty, or, except as provided in the next sentence, entitle Tenant to any abatement of Tenant's obligations hereunder. If, however, Tenant is prevented from using the Premises for more than five consecutive business days because of the unavailability of any such service and such unavailability was not caused by a Tenant Party, then Tenant shall, as its exclusive remedy be entitled to a reasonable abatement of Rent for each consecutive day (after such five-day period) that Tenant is so prevented from using the Premises. (a) Improvements Alterations. Improvements to the Premises shall be installed at Tenant's expense ------------------------- only in accordance with plans and specifications which have been previously submitted to and approved in writing by Landlord, which approval shall be governed by standards in the following sentence. No alterations or physical additions in or to the Premises may be made without Landlord's prior written consent, which shall not be unreasonably withheld or delayed; however, Landlord may withhold its consent to any alteration or addition that would adversely affect (in the reasonable discretion of Landlord) (1) the Building's Structure or the Building's Systems (including the Building's restrooms or mechanical rooms), (2) the exterior appearance of the Building, or (3) the appearance of the Building's common areas or elevator lobby areas. Tenant shall not paint or install lighting or decorations, signs, window or door lettering, or advertising media of any type on or about the Premises without the prior written consent of Landlord, which shall not be unreasonably withheld or delayed; however, Landlord may withhold its consent to any such painting or installation which would affect the appearance of the exterior of the Building or of any common areas of the Building. All alterations, additions, and improvements shall be constructed, maintained, and used by Tenant, at its risk and expense, in accordance with all Laws; Landlord's consent to or approval of any alterations, additions or improvements (or the plans therefor) shall not constitute a representation or warranty by Landlord, nor Landlord's acceptance, that the same comply with sound architectural and/or engineering practices or with all applicable Laws, and Tenant shall be solely responsible for ensuring all such compliance. (b) Repairs Maintenance. Tenant shall maintain the Premises in a clean, safe, and operable condition, and shall not permit or allow to remain any waste or damage to any portion of the Premises. Tenant shall repair or replace, subject to Landlord's direction and supervision, any damage to the Building caused by a Tenant Party. If Tenant fails to make such repairs or replacements within 15 days after the occurrence of such damage, then Landlord may make the same at Tenant's cost. If any such damage occurs outside of the Premises, then Landlord may elect to repair such damage at Tenant's expense, rather than having Tenant repair such damage. The cost of all repair or replacement work performed by Landlord under this Section S shall be paid by Tenant to Landlord within 30 days after Landlord has invoiced Tenant therefor. (c) Performance of Work. All work described in this Section 8 shall be performed only by Landlord or by contractors and subcontractors approved in writing by Landlord. Tenant shall cause all contractors and subcontractors to procure and maintain insurance coverage naming Landlord as an additional insured against such risks, in such amounts, and with such companies as Landlord may reasonably require. All such work shall be performed in accordance with all Laws and in a good and workmanlike manner so as not to damage the Building (including the Premises, the Building's Structure and the Building's Systems). All such work which may affect the Building's Structure or the Building's Systems must be approved by the Building's engineer of record, at Tenant's expense and, at Landlord's election, must be performed by Landlord's usual contractor for such work. (d) Mechanic's Liens. Tenant shall not permit any mechanic's liens to be filed against the Premises or the Building for any work performed, materials furnished, or obligation incurred by or at the request of Tenant. If such a lien is filed, then Tenant shall, within ten days after Landlord has delivered notice of the filing thereof to Tenant (or such earlier time period as may be necessary to prevent the forfeiture of the Building or any interest of Landlord therein or the imposition of a civil or criminal fine with respect thereto), either (1) pay the amount of the lien and cause the lien to be released of record, or (2) diligently contest such lien and deliver to Landlord a bond or other security reasonably satisfactory to Landlord. If Tenant fails to timely take either such action, then Landlord may pay the lien claim, and any amounts so paid, including expenses and interest, shall be paid by Tenant to Landlord within ten days after Landlord has invoiced Tenant therefor. All materialmen, contractors, artisans, mechanics, laborers and any other persons now or hereafter contracting with Tenant or any contractor or subcontractor of Tenant for the furnishing of any labor, services, materials, supplies or equipment with respect to any portion of the Premises, at any time from the date hereof until the end of the Term, are hereby charged with notice that they look exclusively to Tenant to obtain payment for same. Nothing herein shall be deemed a consent by Landlord to any liens being placed upon the Building or Landlord's interest therein due to any work performed by or for Tenant. 9. . Tenant shall continuously occupy and use the Premises only for the Permitted Use and shall comply with all Laws relating to the use, condition, access to, and occupancy of the Premises. The population density within the Premises as a whole shall at no time exceed one person for each 300 rentable square feet in the Premises. Tenant shall not conduct second or third shift operations within the Premises; however, Tenant may use the Premises after normal business hours, so long as Tenant is not generally conducting business from the Premises after normal business hours. The Premises shall not be used for any use which is disreputable, creates extraordinary fire hazards, or results in an increased rate of insurance on the Building or its contents, or for the storage of any Hazardous Materials (other than typical office supplies photocopier toner] and then only in compliance with all Laws). Tenant shall not use any substantial portion of the Premises for a "call center," any other telemarketing use, or any credit processing use. If, because of a Tenant Party's acts, the rate of insurance on the Building or its contents increases, then such acts shall be an Event of Default, Tenant shall pay to Landlord the amount of such increase on demand, and acceptance of such payment shall not waive any of Landlord's other rights. Tenant shall conduct its business and control each other Tenant Party so as not to create any nuisance or unreasonably interfere with other tenants or Landlord in its management of the Building. 10. Assignment and SubIetting (a) Transfers. Except as provided in Section 10(g), Tenant shall not, without the prior written consent of Landlord, (1) assign, transfer, or encumber this Lease or any estate or interest herein, whether directly or by operation of law, (2) permit any other entity to become Tenant hereunder by merger, consolidation, or other reorganization, (3) if Tenant is an entity other than a corporation whose stock is publicly traded, permit the transfer of an ownership interest in Tenant so as to result in a change in the current control of Tenant, (4) sublet anyportion ofthe Premises, (5) grant any license, concession, or otherright of occupancy of any portion of the Premises, or 6 permit the use of the Premises by any parties other than Tenant (any of the events listed in Section I0(a)(l) through lO.(a)(6) being a "Transfer"). (b) Consent Standards. Landlord shall not unreasonably withhold its consent to any assignment or subletting of the Premises, provided that the proposed transferee (A) is creditworthy, (B) has a good reputation in the business community, (C) will use the Premises for the Permitted Use (thus, excluding, without limitation, uses for credit processing and telemarketing) and will not use the Premises in any manner that would conflict with any exclusive use agreement or other similar agreement entered into by Landlord with any other tenant of the Building, (D) is not a governmental entity, or subdivision or agency thereof, and (E) is not another occupant of the Building or person or entity with whom Landlord is negotiating to lease space in the Building; otherwise, Landlord may withhold its consent in its sole discretion. (c) Request for Consent. If Tenant requests Landlord's consent to a Transfer, then, at least 15 business days prior to the effective date of the proposed Transfer, Tenant shall provide Landlord with a written description of all terms and conditions of the proposed Transfer, copies of the proposed documentation, and the following information about the proposed transferee: name and address; reasonably satisfactory information about its business and business history; its proposed use of the Premises; banking, financial, and other credit information; and general references sufficient to enable Landlord to determine the proposed transferee's creditworthiness and character. Concurrently with Tenant's notice of any request for consent to a Transfer, Tenant shall pay to Landlord a fee of $1,000 to defray Landlord's expenses in reviewing such request, and Tenant shall also reimburse Landlord immediately upon request for its reasonable attorneys' fees incurred in connection with considering any request for consent to a Transfer. (d) Conditions to Consent. If Landlord consents to a proposed Transfer, then the proposed transferee --------------------- shall deliver to Landlord a written agreement whereby it expressly assumes Tenant's obligations hereunder; however, any transferee of less than all of the space in the Premises shall be liable only for obligations under this Lease that are properly allocable to the space subject to the Transfer for the period of the Transfer. No Transfer shall release Tenant from its obligations under this Lease, but rather Tenant and its transferee shall be jointly and severally liable therefor. Landlord's consent to any Transfer shall not waive Landlord's rights as to any subsequent Transfers. If an Event of Default occurs while the Premises or any part thereof are subject to a Transfer, then Landlord, in addition to its other remedies, may collect directly from such transferee all rents becoming due to Tenant and apply such rents against Rent. Tenant authorizes its transferees to make payments of rent directly to Landlord upon receipt of notice from Landlord to do so following the occurrence of an Event of Default hereunder. Tenant shall pay for the cost of any demising walls or other improvements necessitated by a proposed subletting or assignment. (e) Cancellation. Landlord may, within 30 days after submission of Tenant's written request for Landlord's consent to an assignment or subletting, cancel this Lease as to the portion of the Premises proposed to be sublet or assigned as of the date the proposed Transfer is to be effective. If Landlord cancels this Lease as to any portion of the Premises, then this Lease shall cease for such portion of the Premises and Tenant shall pay to Landlord all Rent accrued through the cancellation date relating to the portion of the Premises covered by the proposed Transfer. Thereafter, Landlord may lease such portion of the Premises to the prospective transferee (or to any other person) without liability to Tenant. (t) Additional Compensation. Tenant shall pay to Landlord, immediately upon receipt thereof, the excess of (1) all compensation received by Tenant for a Transfer less the costs reasonably incurred by Tenant with unaffiliated third parties in connection with such Transfer (i.e., brokerage commissions, tenant finish work, and the like) over (2) the Rent allocable to the portion of the Premises covered thereby. (g) Perirntted Transfers. Notwithstanding Section 10(a), Tenant may Transfer all or part of its interest in this Lease or all or part of the Premises (a "Permitted Transfer") to the following types of entities (a `Permitted Transferee") without the written consent of Landlord: (1) an Affiliate of Tenant; (2) any corporation, limited partnership, limited liability partnership, limited liability company or other business entity in which or with which Tenant, or its corporate successors or assigns, is merged or consolidated, in accordance with applicable statutory provisions governing merger and consolidation of business entities, so long as (A) Tenant's obligations hereunder are assumed by the entity surviving such merger or created by such consolidation; and (B) the Tangible Net Worth of the surviving or created entity is not less than the Tangible Net Worth of Tenant as of the date hereof; or (3) any corporation, limited partnership, limited liability partnership, limited liability company or other business entity acquiring all or substantially all of Tenant's assets if such entity's Tangible Net Worth after such acquisition is not less than the Tangible Net Worth of Tenant as of the date hereof. Tenant shall promptly notify Landlord of any such Permitted Transfer. Tenant shall remain liable for the performance of all of the obligations of Tenant hereunder, or if Tenant no longer exists because of a merger, consolidation, or acquisition, the surviving or acquiring entity shall expressly assume in writing the obligations of Tenant hereunder. Additionally, the Permitted Transferee shall comply with all of the terms and conditions of this Lease, including the Permitted Use, and the use of the Premises by the Permitted Transferee may not violate any other agreements affecting the Premises, the Building, Landlord or other tenants of the Building. At least 30 days after the effective date of any Permitted Transfer, Tenant agrees to furnish Landlord with copies of the instrument effecting any of the foregoing Transfers and documentation establishing Tenant's satisfaction of the requirements set forth above applicable to any such Transfer. The occurrence of a Permitted Transfer shall not waive Landlord's rights as to any subsequent Transfers. Tangible Net Worth" means the excess of total assets over total liabilities, in each case as determined in accordance with generally accepted accounting principles consistently applied ("GAAP"), excluding, however, from the determination of total assets all assets which would be classified as intangible assets under GAAP including goodwill, licenses, patents, trademarks, trade names, copyrights, and franchises. Any subsequent Transfer by a Permitted Transferee shall be subject to the terms of this Section 10. 11. Insurance Waivers: Subrogation: Indemnity. ----------------------------------------- (a) Tenant's Insurance. Tenant shall maintain throughout the Term the following insurance policies: (1) commercial general liability insurance in amounts of $3,000,000 per occurrence or, following the expiration of the initial Term, such other amounts as Landlord may from time to time reasonably require, insuring Tenant, Landlord, Landlord's agents and their respective Affiliates against all liability for injury to or death of a person or persons or damage to property arising from the use and occupancy of the Premises, (2) insurance covering the full value of Tenant's property and improvements, and other property (including property of others) in the Premises, (3) contractual liability insurance sufficient to cover Tenant's indemnity obligations hereunder (but only if such contractual liability insurance is not already included in Tenant's commercial general liability insurance policy), (4) worker's compensation insurance, and(S) business interruption insurance. Tenant's insurance shall provide primary coverage to Landlord when any policy issued to Landlord provides duplicate or similar coverage, and in such circumstance Landlord's policy will be excess over Tenant's policy. Tenant shall furnish to Landlord certificates of such insurance and such other evidence satisfactory to Landlord of the maintenance of all insurance coverages required hereunder, and Tenant shall obtain a written obligation on the part of each insurance company to notify Landlord at least 30 days before cancellation or a material change of any such insurance policies. All such insurance policies shall be in form, and issued by companies, reasonably satisfactory to Landlord. (b) Landlord's Insurance. Throughout the Term of this Lease, Landlord shall maintain, as a minimum, the following insurance policies: (1) fire and extended risk insurance for the Building's replacement value and (2) commercial general liability insurance in an amount of not less than $3,000,000. The cost of all insurance carried by Landlord with respect to the Building shall be included in Operating Costs. (c) No Subrogation. Landlord and Tenant each waives any claim it might have against the other for any injury to or death of any person or persons or damage to or theft, destruction, loss, or loss of use of any property (a Loss to the extent the same is insured against under any insurance policy that covers the Building, the Premises, Landlord's or Tenant's fixtures, personal property, leasehold improvements, or business, or, in the case of Tenant's waiver, is required to be insured against under the terms hereof, regardless of whether the negligence of the other party caused such Loss. Each party shall cause its insurance carrier to endorse all applicable policies waiving the carrier's rights of recovery under subrogation or otherwise against the other party. (d) Indemnity. Subject to Section 1 ]~.(c.), Tenant shall defend, indemnify, and hold harmless Landlord and its representatives and agents from and against all claims, demands, liabilities, causes of action, suits,judgments, damages, and expenses (including attorneys' fees) arising from (1) any Loss arising from any occurrence on the Premises or (2) Tenant's failure to perform its obligations under this Lease, even though caused or alleged to be caused by the negligence or fault of Landlord or its agents (other than a Loss arising from the sole or gross negligence of Landlord or its agents), and even though any such claim, cause of action, or suit is based upon or alleged to be based upon the strict liability of Landlord or its agents. This indemnity is intended to indemnify Landlord and its agents against the consequences of their own negligence or fault as provided above when Landlord or its agents are jointly, comparatively, contributively, or concurrently negligent with Tenant. Subject to Section 11 (c), Landlord shall defend, indenmify, and hold harmless Tenant and its agents from and against all claims, demands, liabilities, causes of action, suits, judgments, and expenses (including attorneys' fees) for any Loss arising from any occurrence in the Building's common areas, even though caused or alleged to be caused by the negligence or fault of Tenant or its agents (other than a Loss arising from the sole or gross negligence of Tenant or its agents), and even though any such claim, cause of action, or suit is based upon or alleged to be based upon the strict liability of Tenant or its agents. This indemnity is intended to indemnify Tenant and its agents against the consequences of their own negligence or fault as provided above when Tenant or its agents are jointly, comparatively, contributively, or concurrently negligent with Landlord. The indemnities set forth in this Section 11 .(d) shall survive termination or expiration of this Lease and shall not terminate or be waived, diminished or affected in any manner by any abatement or apportionment of Rent under any provision of this Lease. If any proceeding is filed for which indemnity is required hereunder, the indemnifying party agrees, upon request therefor, to defend the indemnified party in such proceeding at its sole cost utilizing counsel satisfactory to the indemnified party. 12. Subordination: Attornment Notice to Landlord's Mortgagee (a) Subordination. This Lease shall be subordinate to any deed of trust, mortgage, or other security instrument (each, a Mortgage or any ground lease, master lease, or primary lease (each, a "Primary Lease"), that now or hereafter covers all or any part of the Premises (the mortgagee under any such Mortgage or the lessor under any such Primary Lease is referred to herein as a "Landlord's Mortgagee Landlord shall use reasonable efforts to obtain a subordination, non-disturbance and attomment agreement from the current Landlord's Mortgagee, in the form of Exhibit J hereto or another form reasonably acceptable to Tenant and Landlord's Mortgagee, within 30 days from the date hereof; however, Landlord's failure to deliver such agreement shall not constitute a default by Landlord hereunder nor affect the subordination of the Lease as provided in this Section; and further provided that any costs associated with obtaining such subordination, non-disturbance and attomment agreement shall be paid by Tenant within 15 days after Landlord's written request therefor. Any Landlord's Mortgagee may elect, at any time, unilaterally, to make this Lease superior to its Mortgage, Primary Lease, or other interest in the Premises by so notifying Tenant in writing. The provisions of this Section shall be self-operative and no further instrument of subordination shall be required; however, in confirmation of such subordination, Tenant shall execute and return to Landlord (or such other party designated by Landlord) within ten days after written request therefor such documentation, in recordable form if required, as a Landlord's Mortgagee may reasonably request to evidence the subordination of this Lease to such Landlord's Mortgagee's Mortgage or Primary Lease (including a subordination, non-disturbance and attornment agreement) or, if the Landlord's Mortgagee so elects, the subordination of such Landlord's Mortgagee's Mortgage or Primary Lease to this Lease. (b) Attornment. Tenant shall attorn to any party succeeding to Landlord's interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, upon such party's request, and shall execute such agreements confirming such attornment as such party may reasonably request. (c) Notice to Landlord's Mortgagee Tenant shall not seek to enforce any remedy it may have for any default on the part of Landlord without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail, to any Landlord's Mortgagee whose address has been given to Tenant, and affording such Landlord's Mortgagee a reasonable opportunity to perform Landlord's obligations hereunder. (d) Landlord's Mortgagee's Protection Provisions. If Landlord's Mortgagee shall succeed to the interest of Landlord under this Lease, Landlord's Mortgagee shall not be: (1) liable for any act or omission of any prior lessor (including Landlord); (2) bound by any rent or additional rent or advance rent which Tenant might have paid for more than the current month to any prior lessor (including Landlord), and all such rent shall remain due and owing, notwithstanding such advance payment; (3) bound by any security or advance rental deposit made by Tenant which is not delivered or paid over to Landlord's Mortgagee and with respect to which Tenant shall look solely to Landlord for refund or reimbursement; (4) bound by any termination, amendment or modification of this Lease made without Landlord's Mortgagee's consent and written approval, except for those terminations, amendments and modifications permitted to be made by Landlord without Landlord's Mortgagee's consent pursuant to the terms of the loan documents between Landlord and Landlord's Mortgagee; (5) subject to the defenses which Tenant might have against any prior lessor (including Landlord), and (6) subject to the offsets which Tenant might have against any prior lessor (including Landlord) except for those offset rights which (A) are expressly provided in this Lease, (B) relate to periods of time following the acquisition of the Building by Landlord's Mortgagee, and (C) Tenant has provided written notice to Landlord's Mortgagee and provided Landlord's Mortgagee a reasonable opportunity to cure the event giving rise to such offset event. Landlord's Mortgagee shall have no liability or responsibility under or pursuant to the terms of this Lease or otherwise after it ceases to own an interest in the Building. Nothing in this Lease shall be construed to require Landlord's Mortgagee to see to the application of the proceeds of any loan, and Tenant's agreements set forth herein shall not be impaired on account of any modification of the documents evidencing and securing any loan. 13. Rules and Regulations Tenant shall comply with the rules and regulations of the Building which are attached hereto as Exhibit C. Landlord may, from time to time, change such rules and regulations for the safety, care, or cleanliness of the Building and related facilities, provided that such changes are applicable to all tenants of the Building, will not unreasonably interfere with Tenant's use of the Premises and are enforced by Landlord in a non-discriminatory manner. Tenant shall be responsible for the compliance with such rules and regulations by each Tenant Party. 14. Condemnation. ------------ (a) Total Taking. If the entire Building or Premises are taken by right of eminent domain or conveyed in lieu thereof (a "Taking"), ------------ this Lease shall terminate as of the date of the Taking. subordination, non-disturbance and attomment agreement) or, if the Landlord's Mortgagee so elects, the subordination of such Landlord's Mortgagee's Mortgage or Primary Lease to this Lease. (b) Attornment. Tenant shall attorn to any party succeeding to Landlord's interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, upon such party's request, and shall execute such agreements confirming such attornment as such party may reasonably request. (c) Notice to Landlord's Mortgagee Tenant shall not seek to enforce any remedy it may have for any default on the part of Landlord without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail, to any Landlord's Mortgagee whose address has been given to Tenant, and affording such Landlord's Mortgagee a reasonable opportunity to perform Landlord's obligations hereunder. (d) Landlord's Mortgagee's Protection Provisions. If Landlord's Mortgagee shall succeed to the interest of Landlord under this Lease, Landlord's Mortgagee shall not be: (1) liable for any act or omission of any prior lessor (including Landlord); (2) bound by any rent or additional rent or advance rent which Tenant might have paid for more than the current month to any prior lessor (including Landlord), and all such rent shall remain due and owing, notwithstanding such advance payment; (3) bound by any security or advance rental deposit made by Tenant which is not delivered or paid over to Landlord's Mortgagee and with respect to which Tenant shall look solely to Landlord for refund or reimbursement; (4) bound by any termination, amendment or modification of this Lease made without Landlord's Mortgagee's consent and written approval, except for those terminations, amendments and modifications permitted to be made by Landlord without Landlord's Mortgagee's consent pursuant to the terms of the loan documents between Landlord and Landlord's Mortgagee; (5) subject to the defenses which Tenant might have against any prior lessor (including Landlord), and (6) subject to the offsets which Tenant might have against any prior lessor (including Landlord) except for those offset rights which (A) are expressly provided in this Lease, (B) relate to periods of time following the acquisition of the Building by Landlord's Mortgagee, and (C) Tenant has provided written notice to Landlord's Mortgagee and provided Landlord's Mortgagee a reasonable opportunity to cure the event giving rise to such offset event. Landlord's Mortgagee shall have no liability or responsibility under or pursuant to the terms of this Lease or otherwise after it ceases to own an interest in the Building. Nothing in this Lease shall be construed to require Landlord's Mortgagee to see to the application of the proceeds of any loan, and Tenant's agreements set forth herein shall not be impaired on account of any modification of the documents evidencing and securing any loan. 13. Rules and Regulations Tenant shall comply with the rules and regulations of the Building which are attached hereto as Exhibit C. Landlord may, from time to time, change such rules and regulations for the safety, care, or cleanliness of the Building and related facilities, provided that such changes are applicable to all tenants of the Building, will not unreasonably interfere with Tenant's use of the Premises and are enforced by Landlord in a non-discriminatory manner. Tenant shall be responsible for the compliance with such rules and regulations by each Tenant Party. 14. Condemnation. ------------ (a) Total Taking. If the entire Building or Premises are taken by right of eminent domain or conveyed in lieu thereof (a "Taking"), ------------ this Lease shall terminate as of the date of the Taking. (b) Partial TakinQ - Tenant's Rights. If any part of the Building becomes subject to a Taking and such Taking will prevent Tenant from conducting its business in the Premises in a manner reasonably comparable to that conducted immediately before such Taking for a period of more than 180 days, then Tenant may terminate this Lease as of the date of such Taking by giving written notice to Landlord within 30 days after the Taking, and Basic Rent and Additional Rent shall be apportioned as of the date of such Taking. If Tenant does not terminate this Lease, then Rent shall be abated on a reasonable basis as to that portion of the Premises rendered untenantable by the Taking. (c) Partial Taking - Landlord's Rights. If any material portion, but less than all, of the Building becomes subject to a Taking, or if Landlord is required to pay any of the proceeds arising from a Taking to a Landlord's Mortgagee, then Landlord may terminate this Lease by delivering written notice thereof to Tenant within 30 days after such Taking, and Basic Rent and Additional Rent shall be apportioned as of the date of such Taking. If Landlord does not so terminate this Lease, then this Lease will continue, but if any portion of the Premises has been taken, Rent shall abate as provided in the last sentence of Section 14(b). (d) Award. If any Taking occurs, then Landlord shall receive the entire award or other compensation for the Land, the Building, and other improvements taken; however, Tenant may separately pursue a claim (to the extent it will not reduce Landlord's award) against the condemnor for the value of Tenant's personal property which Tenant is entitled to remove under this Lease, moving costs, loss of business, and other claims it may have. 15. Fire or Other Casualty. ---------------------- (a) Repair Estimate. If the Premises or the Building are damaged by fire or other casualty (a "Casualty"), Landlord shall, within 90 days after such Casualty, deliver to Tenant a good faith estimate (the "Damage Notice") of the time needed to repair the damage caused by such Casualty. (b) Tenant's Rights. If a material portion of the Premises is damaged by Casualty such that Tenant is prevented from conducting its business in the Premises in a maimer reasonably comparable to that conducted irmnediately before such Casualty and Landlord estimates that the damage caused thereby cannot be repaired within 210 days after the Casualty (the "Repair Period"), then Tenant may terminate this Lease by delivering written notice to Landlord of its election to terminate within 30 days after the Damage Notice has been delivered to Tenant. (c) Landlord's Rights. If a Casualty damages the Premises or a material portion of the Building and (1) Landlord estimates that the damage to the Premises cannot be repaired within the Repair Period, (2) the damage to the Premises exceeds 50% of the replacement cost thereof (excluding foundations and footings), as estimated by Landlord, and such damage occurs during the last two years of the Term, (3) regardless of the extent of damage to the Premises, Landlord makes a good faith determination that restoring the Building would be uneconomical, or (4) Landlord is required to pay any insurance proceeds arising out of the Casualty to a Landlord's Mortgagee, then Landlord may terminate this Lease by giving written notice of its election to terminate within 30 days after the Damage Notice has been delivered to Tenant. (d) Repair Obligation If neither party elects to terminate this Lease following a Casualty, then Landlord shall, within a reasonable time after such Casualty, begin to repair the Premises and shall proceed with reasonable diligence to restore the Premises to substantially the same condition as they existed immediately before such Casualty; however, Landlord shall only be required to reconstruct the Premises to the extent of any improvements existing therein on the date of the damage that were installed by Landlord as part of Landlord's Work (if any) described in Exhibit D ("Landlord's Contribution"), and Landlord's obligation to repair or restore the Premises shall be limited to the extent of the insurance proceeds actually received by Landlord for the Casualty in question. Tenant shall be responsible for repairing or replacing its furniture, equipment, fixtures, alterations and other improvements which Landlord is not obligated to restore, and shall use the proceeds of its insurance for such purpose. Tenant shall pay the difference betweenthetotal cost ofreconstructingthe Premises and Landlord's Contribution ("Tenant's Contribution"). Prior to Landlord's commencement of reconstruction, Tenant shall place Landlord's estimate of Tenant's Contribution in escrow with Landlord (or furnish Landlord other commercially reasonable assurances of payment thereof). (e) Abatement of Rent. If the Premises are damaged by Casualty, Rent for the portion of the Premises rendered untenantable by the damage shall be abated on a reasonable basis from the date of damage until the completion of Landlord's repairs (or until the date of termination of this Lease by Landlord or Tenant as provided above, as the case may be), unless a Tenant Party caused such damage, in which case, Tenant shall continue to pay Rent without abatement. 16. Personal Property Taxes. Tenant shall be liable for all taxes levied or assessed against personal property, furniture, or fixtures placed by Tenant in the Premises. If any taxes for which Tenant is liable are levied or assessed against Landlord or Landlord's property and Landlord elects to pay the same, or if the assessed value of Landlord's property is increased by inclusion of such personal property, furniture or fixtures and Landlord elects to pay the taxes based on such increase, then Tenant shall pay to Landlord, within 30 days following written request, the part of such taxes for which Tenant is primarily liable hereunder; however, Landlord shall not pay such amount if Tenant notifies Landlord that it will contest the validity or amount of such taxes before Landlord makes such payment, and thereafter diligently proceeds with such contest in accordance with Law and if the non-payment thereof does not pose a threat of loss or seizure of the Building or interest of Landlord therein or impose any fee or penalty against Landlord. 17. Events of Default. Each of the following occurrences shall be an "Event of Default": --------- ------- -------- -------- (a) Payment Default. Tenant's failure to pay Rent within five days after Landlord has delivered written notice to Tenant that the same is due; however, an Event of Default shall occur hereunder without any obligation of Landlord to give any notice if Tenant fails to pay Rent when due and, during the 12 month interval preceding such failure, Landlord has given Tenant written notice of failure to pay Rent on one or more occasions; (b) Abandonment. Tenant (1) abandons or vacates the Premises or any substantial portion thereof or ----------- (2) fails to continuously operate its business in the Premises; (c) Estoppel. Tenant fails to provide any estoppel certificate after Landlord's written request thereforpursuant to Section 25 (c) and such failure shall continue for five days after Landlord's second written notice thereof to Tenant; (d) Other Defaults. Tenant's failure to perform, comply with, or observe any other agreement or --------------- obligation of Tenant under this Lease and the continuance of such failure for a period of more than 30 days after Landlord has delivered to Tenant written notice thereof; and (e) Insolvency. The filing of a petition by or against Tenant (the term "Tenant" shall include, for the purpose of this Section 1.7. ---------- ------ (e), any guarantor of Tenant's obligations hereunder) (I) in any bankruptcy or other insolvency proceeding; (2) seeking any relief under any state or federal debtor relief law; (3) for the appointment of a liquidator or receiver for all or substantially all of Tenant's property or for Tenant's interest in this Lease; or (4) for the reorganization or modification of Tenant's capital structure; however, if such a petition is filed against Tenant, then such filing shall not be an Event of Default unless Tenant fails to have the proceedings initiated by such petition dismissed within 90 days after the filing thereof. 18. Remedies. Upon any Event of Default, Landlord may, in addition to all other rights and remedies afforded -------- Landlord hereunder or by law or equity, take any one or more of the following actions: (a) Termination of Lease. Terminate this Lease by giving Tenant written notice thereof, in which event Tenant shall pay to Landlord the sum of(l) all Rent accrued hereunder through the date of termination, (2) all amounts due under Section would have been required to pay for the remainder of the Term discounted to present value at a per annum rate equal to the "Prime Rate" as published on the date this Lease is terminated by The Wall Street Journal, Southwest Edition, in its listing of' `Money Rates" minus one percent, minus (B) the then present fair rental value of the Premises for such period, similarly discounted; (b) Termination of Possession. Terminate Tenant's right to possess the Premises without terminating this Lease by giving written notice thereof to Tenant, in which event Tenant shall pay to Landlord (1) all Rent and other amounts accrued hereunder to the date of termination of possession, (2) all amounts due from time to time under Section 19(a), and (3) all Rent and other net sums required hereunder to be paid by Tenant during the remainder of the Term, diminished by any net sums thereafter received by Landlord through reletting the Premises during such period, after deducting all costs incurred by Landlord in reletting the Premises. Landlord shall use reasonable efforts to relet the Premises on such terms as Landlord in its sole discretion may determine (including a term different from the Term, rental concessions, and alterations to, and improvement of, the Premises); however, Landlord shall not be obligated to relet the Premises before leasing other portions of the Building. Landlord shall not be liable for, nor shall Tenant's obligations hereunder be diminished because of, Landlord's failure to relet the Premises or to collect rent due for such reletting. Tenant shall not be entitled to the excess of any consideration obtained by reletting over the Rent due hereunder. Reentry by Landlord in the Premises shall not affect Tenant's obligations hereunder for the unexpired Term; rather, Landlord may, from time to time, bring an action against Tenant to collect amounts due by Tenant, without the necessity of Landlord's waiting until the expiration of the Term. Unless Landlord delivers written notice to Tenant expressly stating that it has elected to terminate this Lease, all actions taken by Landlord to dispossess or exclude Tenant from the Premises shall be deemed to be taken under this Section 18(b). If Landlord elects to proceed under this Section 18(b), it may at any time elect to terminate this Lease under Section 1 8(a); or (c) Alteration of Locks. Additionally, with or without notice, and to the extent permitted by Law, Landlord may alter locks or other security devices at the Premises to deprive Tenant of access thereto, and Landlord shall not be required to provide a new key or right of access to Tenant. 19. Payment by Tenant: Non-Waiver Cumulative Remedies. ------- -------------------------------- -------- (a) Payment by Tenant. Upon any Event of Default, Tenant shall pay to Landlord all costs incurred by Landlord (including court costs and reasonable attorneys' fees and expenses) in (1) obtaining possession of the Premises, (2) removing and storing Tenant's or any other occupant's property, (3) repairing, restoring, altering, remodeling, or otherwise putting the Premises into condition acceptable to a new tenant, (4) if Tenant is dispossessed of the Premises and this Lease is not terminated, reletting all or any part of the Premises (including brokerage commissions, cost of tenant fmish work, and other costs incidental to such reletting), (5) performing Tenant's obligations which Tenant failed to perform, and (6) enforcing, or advising Landlord of, its rights, remedies, and recourses arising out of the Event of Default. To the full extent permitted by law, Landlord and Tenant agree the federal and state courts of the state in which the Premises are located shall have exclusive jurisdiction over any matter relating to or arising from this Lease and the parties' rights and obligations under this Lease. (b) No Waiver. Landlord's acceptance of Rent following an Event of Default shall not waive Landlord's rights regarding such Event of Default. No waiver by Landlord of any violation or breach of any of the terms contained herein shall waive Landlord's rights regarding any future violation of such term. Landlord's acceptance of any partial payment of Rent shall not waive Landlord's rights with regard to the remaining portion of the Rent that is due, regardless of any endorsement or other statement on any instrument delivered in payment of Rent or any writing delivered in connection therewith; accordingly, Landlord's acceptance of a partial payment of Rent shall not constitute an accord and satisfaction of the full amount of the Rent that is due. (c) Cumulative Remedies. Any and all remedies set forth in this Lease: (1) shall be in addition to any and all other remedies Landlord may have at law or in equity, (2) shall be cumulative, and (3) may be pursued successively or concurrently as Landlord may elect. The exercise of any remedy by Landlord shall not be deemed an election of remedies or preclude Landlord from exercising any other remedies in the future. 20. Landlord's Lien. In addition to any statutory landlord's lien, now or hereafter enacted, Tenant grants to Landlord, to secure performance of Tenant's obligations hereunder, a security interest in all goods (including equipment and inventory), fixtures, and other personal property of Tenant situated on the Premises, and all proceeds thereof (the "Collateral"), and the Collateral shall not be removed from the Premises without the prior written consent of Landlord (other than in Tenant's ordinary course of business) until all obligations of Tenant have been fully performed. Upon the occurrence of an Event of Default, Landlord may, in addition to all other remedies, without notice or demand except as provided below, exercise the rights afforded to a secured party under the Uniform Commercial Code of the state in which the Premises are located (the "UCC"). To the extent the UCC requires Landlord to give to Tenant notice of any act or event and such notice cannot be validly waived before a default occurs, then five-days' prior written notice thereof shall be reasonable notice of the act or event. Tenant grants to Landlord a power of attorney to execute and file any financing statement or other instrument necessary to perfect Landlord's security interest under this Section 20, which power is coupled with an interest and is irrevocable during the Term. Landlord may also file a copy of this Lease as a financing statement to perfect its security interest in the Collateral. Within ten days following written request therefor, Tenant shall execute fmancing statements to be filed of record to perfect Landlord's security interest in the Collateral. 21. Surrender of Premises. No act by Landlord shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless it is in writing and signed by Landlord. At the expiration or termination of this Lease, Tenant shall deliver to Landlord the Premises with all improvements located therein in good repair and condition, free of Hazardous Materials placed on the Premises during the Term, broom-clean, reasonable wear and tear (and condemnation and Casualty damage not caused by Tenant, as to which Sections 14 and 15 shall control) excepted, and shall deliver to Landlord all keys to the Premises. Provided that Tenant has performed all of its obligations hereunder, Tenant may remove all unattached trade fixtures, furniture, and personal property placed in the Premises or elsewhere in the Building by Tenant (but Tenant may not remove any such item which was paid for, in whole or in part, by Landlord or any wiring or cabling unless Landlord requires such removal). Additionally, at Landlord's option, Tenant shall remove such alterations, additions, improvements, trade fixtures, personal property, equipment, wiring, cabling, and furniture as Landlord may request; however, Tenant shall not be required to remove any addition or improvement to the Premises if Landlord has specifically agreed in writing that the improvement or addition in question need not be removed. Tenant shall repair all damage caused by such removal. All items not so removed shall, at Landlord's option, be deemed to have been abandoned by Tenant and may be appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord without notice to Tenant and without any obligation to account for such items; any such disposition shall not be considered a strict foreclosure or other exercise of Landlord's rights in respect of the security interest granted under Section 20. The provisions of this Section 21 shall survive the end of the Term. 22. Holding Over, if Tenant fails to vacate the Premises at the end of the Term, then Tenant shall be a tenant at sufferance and, in addition to all other damages and remedies to which Landlord may be entitled for such holding over, (a) Tenant shall pay, in addition to the other Rent, Basic Rent equal to the greater of (1) 150% of the Basic Rent payable during the last month of the Term, or (2) 125% of the prevailing rental rate in the Building for similar space, and (b) Tenant shall otherwise continue to be subject to all of Tenant's obligations under this Lease. The provisions of this Section 22 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law, If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys' fees) and liability resulting from such failure, including any claims made by any succeeding tenant founded upon such failure to surrender, and any lost profits to Landlord resulting therefrom. 23. Certain Rights Reserved by Landlord. Provided that the exercise of such rights does not unreasonably ---------------------------- -------- interfere with Tenant's occupancy of the Premises, Landlord shall have the following rights: (a) Building Operations To decorate and to make inspections, repairs, alterations, additions, changes, or improvements, whether structural or otherwise, in and about the Building, or any part thereof; to enter upon the Premises (after giving Tenant reasonable notice thereof, which may be oral notice, except in cases of real or apparent emergency, in which case no notice shall be required) and, during the continuance of any such work, to temporarily close doors, entryways, public space, and corridors in the Building; to interrupt or temporarily suspend Building services and facilities; to change the name of the Building; and to change the arrangement and location of entrances or passageways, doors, and doorways, corridors, elevators, stairs, restrooms, or other public parts of the Building; (b) Security. To take such reasonable measures as Landlord deems advisable for the security of the Building and its occupants; evacuating the Building for cause, suspected cause, or for drill purposes; temporarily denying access to the Building; and closing the Building after normal business hours and on Sundays and holidays, subject, however, to Tenant's right to enter when the Building is closed after normal business hours under such reasonable regulations as Landlord may prescribe from time to time; (c) Prospective Purchasers and Lenders. To enter the Premises at all reasonable hours to show the ----------- --------------- ------- Premises to prospective purchasers or lenders; and (d) Prosnective Tenants. At any time during the last 12 months of the Term (or earlier if Tenant has notified Landlord in writing that it does not desire to renew the Term) or at any time following (f) Notices. All notices and other communications given pursuant to this Lease shall be in writing and shall be (1) mailed by first class, United States Mail, postage prepaid, certified, with return receipt requested, and addressed to the parties hereto at the address specified in the Basic Lease Information, (2) hand delivered to the intended address, (3) sent by a nationally recognized overnight courier service, or (4) sent by facsimile transmission during normal business hours followed by a confirmatory letter sent in another manner permitted hereunder. All notices shall be effective upon delivery to the address of the addressee. The parties hereto may change their addresses by giving notice thereof to the other in conformity with this provision. (g) Separability. If any clause or provision of this Lease is illegal, invalid, or unenforceable under present or future laws, then the remainder of this Lease shall not be affected thereby and in lieu of such clause or provision, there shall be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible and be legal, valid, and enforceable. (h) Amendments: and Binding Effect. This Lease may not be amended except by instrument in writing signed by Landlord and Tenant. No provision of this Lease shall be deemed to have been waived by Landlord unless such waiver is in writing signed by Landlord, and no custom or practice which may evolve between the parties in the administration of the terms hereof shall waive or diminish the right of Landlord to insist upon the performance by Tenant in strict accordance with the terms hereof. The terms and conditions contained in this Lease shall inure to the benefit of and be binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise herein expressly provided. This Lease is for the sole benefit of Landlord and Tenant, and, other than Landlord's Mortgagee, no third party shall be deemed a third party beneficiary hereof. (i) quiet Enjoyment Provided Tenant has performed all of its obligations hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance from Landlord or any party claiming by, through, or under Landlord, but not otherwise, subject to the terms and conditions of this Lease. (j) No Merger. There shall be no merger of the leasehold estate hereby created with the fee estate in the Premises or any part thereof if the same person acquires or holds, directly or indirectly, this Lease or any interest in this Lease and the fee estate in the leasehold Premises or any interest in such fee estate. (k) No Offer. The submission of this Lease to Tenant shall not be construed as an offer, and Tenant shall not have any rights under this Lease unless Landlord executes a copy of this Lease and delivers it to Tenant. (1) Entire A2reement. This Lease constitutes the entire agreement between Landlord and Tenant regarding the subject matter hereof and supersedes all oral statements and prior writings relating thereto. Except for those set forth in this Lease, no representations, warranties, or agreements have been made by Landlord or Tenant to the other with respect to this Lease or the obligations of Landlord or Tenant in connection therewith. The normal rule of construction that any ambiguities be resolved against the drafting party shall not apply to the interpretation of this Lease or any exhibits or amendments hereto. (m) Waiver of Jury Trial. To the maximum extent permitted by law, Landlord and Tenant each waive right to trial by jury in any --------- ---------- litigation arising out of or with respect to this Lease. (n) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the --------- --- state in which the Premises are located. (n) Recording. Tenant shall not record this Lease without the prior written consent of Landlord, which consent --------- (p) Joint and Several Liability. If Tenant is comprised of more than one party, each such party shall be jointly and severally liable for Tenant's obligations under this Lease. All unperformed obligations of Tenant at the end of the Term shall survive. (q) Financial Reports. Within 15 days after Landlord's request, Tenant will furnish Tenant's most recent audited financial statements (including any notes to them) to Landlord, or, if no such audited statements have been prepared, such other financial statements (and notes to them) as may have been prepared by an independent certified public accountant or, failing those, Tenant's internally prepared financial statements. If Tenant is a publicly traded corporation, Tenant may satisfy its obligations hereunder by providing to Landlord Tenant's most recent annual and quarterly reports. Tenant will discuss its financial statements with Landlord and, following the occurrence of an Event of Default hereunder, will give Landlord access to Tenant's books and records in order to enable Landlord to verify the financial statements. Landlord will not disclose any aspect of Tenant's financial statements that Tenant designates to Landlord as confidential except (1) to Landlord's Mortgagee or prospective mortgagees or purchasers of the Building, (2) in litigation between Landlord and Tenant, and (3) if required by court order. Tenant shall not be required to deliver the financial statements required under this Section 25(q) more than once in any 12-month period unless requested by Landlord's Mortgagee or a prospective buyer or lender of the Building or an Event of Default occurs. (r) Landlord's Fees. Whenever Tenant requests Landlord to take any action not required of it hereunder or give any consent required or permitted under this Lease, Tenant will reimburse Landlord for Landlord's reasonable, out-of-pocket costs payable to third parties and incurred by Landlord in reviewing the proposed action or consent, including reasonable attorneys', engineers' or architects' fees, within 30 days after Landlord's delivery to Tenant of a statement of such costs. Tenant will be obligated to make such reimbursement without regard to whether Landlord consents to any such proposed action. (s) Telecommunications. Tenant and its telecommunications companies, including local exchange telecommunications companies and alternative access vendor services companies, shall have no right of access to and within the Building, for the installation and operation of telecommunications systems, including voice, video, data, Internet, and any other services provided over wire, fiber optic, microwave, wireless, and any other transmission systems ("Telecommunications Services"), for part or all of Tenant's telecommunications within the Building and from the Building to any other location without Landlord's prior written consent. All providers of Telecommunications Services shall be required to comply with the rules and regulations of the Building, applicable Laws and Landlord's policies and practices for the Building. Tenant acknowledges that Landlord shall not be required to provide or arrange for any Telecommunications Services and that Landlord shall have no liability to any Tenant Party in connection with the installation, operation or maintenance of Telecommunications Services or any equipment or facilities relating thereto. Tenant, at its cost and for its own account, shall be solely responsible for obtaining all Telecommunications Services. (t) Confidentiality. Tenant acknowledges that the terms and conditions of this Lease are to remain confidential for Landlord's --------------- benefit, and may not be disclosed by Tenant to anyone, by any manner or means, directly or indirectly, without Landlord's prior written consent. The consent by Landlord to any disclosures shall not be deemed to be a waiver on the part of Landlord of any prohibition against any future disclosure. (u) Authority. Tenant (if a corporation, partnership or other business entity) hereby represents and warrants to Landlord that Tenant is a duly formed and existing entity qualified to do business in the state in which the Premises are located, that Tenant has full right and authority to execute and deliver this Lease, and that each person signing on behalf of Tenant is authorized to do so. Landlord hereby represents and warrants to Tenant that Landlord is a duly formed and existing entity qualified to do business in the state in which the Premises are located, that Landlord has full right and authority to execute and deliver this Lease, and that each person signing on behalf of Landlord is authorized to do so. (v) Hazardous Materials. The term "Hazardous Materials" means any substance, material, or waste which is now or hereafter classified or considered to be hazardous, toxic, or dangerous under any Law relating to pollution or the protection or regulation of human health, natural resources or the environment, or poses or threatens to pose a hazard to the health or safety of persons on the Premises or in the Building. Tenant shall not use, generate, store, or dispose of, or permit the use, generation, storage or disposal of Hazardous Materials on or about the Premises or the Building except in a manner and quantity necessary for the ordinary performance of Tenant's business, and then in compliance with all Laws. If Tenant breaches its obligations under this Section 25(v), Landlord may immediately take any and all action reasonably appropriate to remedy the same, including taking all appropriate action to clean up or remediate any contamination resulting from Tenant's use, generation, storage or disposal of Hazardous Materials. Tenant shall defend, indemnify, and hold harmless Landlord and its representatives and agents from and against any and all claims, demands, liabilities, causes of action, suits, judgments, damages and expenses (including reasonable attorneys' fees and cost of clean up and remediation) arising from Tenant's failure to comply with the provisions of this Section 25(v). This indemnity provision shall survive termination or expiration of this Lease. (w) List of Exhibits. All exhibits and attachments attached hereto are incorporated herein by this ---- -- -------- reference. Exhibit A - Outline of Premises Exhibit B - Description of the Land Exhibit C - Building Rules and Regulations Exhibit D - Tenant Finish-Work Exhibit B - Form of Confirmation of Commencement Date Letter Exhibit F - Form of Tenant Estoppel Certificate Exhibit G - Parking Exhibit H - Renewal Option Exhibit I - Rent Abatement Provisions Exhibit J - Form of Subordination, Non-Disturbance and Attomment Agreement 26. Other Provisions. ---------------- (a) Temporary Occupancy Licenses. Notwithstanding Section 10 of the Lease to the contrary, Tenant may grant temporary occupancy licenses to companies and individuals with whom Tenant conducts business with to occupy up to 10% of the Premises (based upon the number of rentable square feet existing therein as of the date hereof). Tenant shall remain primarily liable for all of the obligations of the "Tenant" under the Lease and Tenant shall insure that all such parties comply with all of the terms and conditions of the Lease. If such parties unreasonably interfere with Landlord or other tenants of the Building, as determined in Landlord's reasonable discretion, Landlord may at any time terminate the right granted to Tenant under this Section 26(a) upon 10 days prior written notice thereof. OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT ABATEMENT, DEMAND, SETOFF OR DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED. Dated as of the date first above written its general partner vice INSTITUTUIONAL EQUITY HOLDINGS, INC., a Nevada corporation BEING a tract or parcel of land situated in the City of Dallas, Dallas County, Texas; and being part of Block 5185 of the City of Dallas and being that same tract of land conveyed to Trailwood Land Company dated December 21, 1972; and being more particularly described as follows: BEGINNING at an iron rod for corner at the intersection of the southwesterly line of Twin Sixties Drive (60 feet wide) and the southeasterly line of North Central Expressway (U. S. 75: 220 feet wide); THENCE South 6601500 East along the southwest line of said Twin Sixties Drive and along its projected line in all a distance of 730.84 feet to an iron rod for corner in the northwesterly line of a 60 foot Texas Nebraska and Oklahoma R.R. ROW.; THENCE is a southwesterly direction along said Railroad R.O.W. and along a curve to the right whose tangent bears South 41 25~34" West having a radius of 1115.92 feet, a central angle of 5 O4~56" and an arc length of 110.67 feet to an iron rod and the end of said curve; THENCE South 47(degree)06'30' West continuing along the northwesterly line of said Railroad R.O.W. a distance of 12.80 feet to an iron rod for corner and the beginning to a curve to the left; THENCE conthuing in a southwesterly direction along the northwesterly line of said R.R. R.O.W. and along said curve to the left whose tangent bears South 53(degree)25'53 West and having a radius of 2914.93 feet, a central angle of 1(degree)53'50 and an arc length of 96.53 feet to the end of said curve and an iron rod for corner; THENCE North 66(degree) 15'00" West a distance of 640.59 feet to an iron rod for corner in the southeasterly line of said North Central Expressway; THENCE North 23(degree)45' East along the southeasterly line of North Central Expressway a distance of 200.00 feet to the POINT OF BEGINNING and containing 3.1697 acres, more or less. BUILDING RULES AND REGULATIONS The following rules and regulations shall apply to the Premises, the Building, the parking garage associated therewith, and the appurtenances thereto: 1. Sidewalks, doorways, vestibules, halls, stairways, and other similar areas shall not be obstructed by tenants or used by any tenant for purposes other than ingress and egress to and from their respective leased premises and for going from one to another part of the Building. 2. Plumbing, fixtuzes and appliances shall be used only for the purposes for which designed, and no sweepings, rubbish, rags or other unsuitable material shall be thrown or deposited therein. Damage resulting to any such fixtures or appliances from misuse by a tenant or its agents, employees or invitees, shall be paid by such tenant. 3. No signs, advertisements or notices shall be painted or affixed on or to any windows or doors or other part of the Building without the prior written consent of Landlord. No nails, hooks or screws (other than those which are necessary to hang paintings, prints, pictures, or other similar items on the Premises' interior walls) shall be driven or inserted in any part of the Building except by Building maintenance personnel. No curtains or other window treatments shall be placed between the glass and the Building standard window treatments. 4. Landlord shall provide and maintain an alphabetical directory for all tenants in the main lobby of the Building. 5. Landlord shall provide all door locks in each tenant's leased premises, at the cost of such tenant, and no tenant shall place any additional door locks in its leased premises without Landlord's prior written consent. Landlord shall furnish to each tenant a reasonable number of keys to such tenant's leased premises, at such tenant's cost, and no tenant shall make a duplicate thereof. 6. Movement in or out of the Building of furniture or office equipment, or dispatch or receipt by tenants of any bulky material, merchandise or materials which require use of elevators or stairways, or movement through the Building entrances or lobby shall be conducted under Landlord's supervision at such times and in such a maimer as Landlord may reasonably require. Each tenant assumes all risks of and shall be liable for all damage to articles moved and injury to persons or public engaged or not engaged in such movement, including equipment, property and personnel of Landlord if damaged or injured as a result of acts in connection with carrying out this service for such tenant. 7. Landlord may prescribe weight limitations and determine the locations for safes and other heavy equipment or items, which shall in all cases be placed in the Building so as to distribute weight in a manner acceptable to Landlord which may include the use of such supporting devices as Landlord may require. ALL damages to the Building caused by the installation or removal of any property of a tenant, or done by a tenant's property while in the Building, shall be repaired at the expense of such tenant. 8. Corridor doors, when not in use, shall be kept closed. Nothing shall be swept or thrown into the corridors, halls, elevator shafts or stairways. No birds or animals (other than seeing-eye dogs) shall be brought into or kept in, on or about any tenant's leased premises. No portion of any tenant's leased premises shall at any time be used or occupied as sleeping or lodging quarters. 9. Tenant shall cooperate with Landlord's employees in keeping its leased premises neat and clean, Tenants shall not employ any person forthe purpose of such cleaning other than the Building's cleaning and maintenance personnel. 10. To ensure orderly operation of the Building, no ice, mineral or other water, towels, newspapers, etc. shall be delivered to any leased area except by persons approved by Landlord. 11. Tenant shall not make or permit any vibration or improper, objectionable or unpleasant noises or odors in the Building or otherwise interfere in any way with other tenants or persons having business with them. 12. No machinery of any kind (other than normal office equipment) shall be operated by any tenant on its leased area without Landlord's prior written consent, nor shall any tenant use or keep in the Building any flammable or explosive fluid or substance (other than typical office supplies toner] used in compliance with all Laws). 13. Landlord will not be responsible for lost or stolen personal property, money or j ewehy from tenant's leased premises or public or common areas regardless of whether such loss occurs when the area is locked against entry or not. 14. No vending or dispensing machines of any kind may be maintained in any leased premises without the prior written permission of Landlord. 15. Tenant shall not conduct any activity on or about the Premises or Building which will draw pickets, demonstrators, or the like. 16. All vehicles are to be currently licensed, in good operating condition, parked for business purposes having to do with Tenant's business operated in the Premises, parked within designated parking spaces, one vehicle to each space. No vehicle shall be parked as a "billboard" vehicle in the parking lot. Any vehicle parked improperly may be towed away. Tenant, Tenant's agents, employees, vendors and customers who do not operate or park their vehicles as required shall subject the vehicle to being towed at the expense of the owner or driver. Landlord may place a "boot" on the vehicle to immobilize it and may levy a charge of $50.00 to remove the "boot." Tenant shall indemnify, hold and save harmless Landlord of any liability arising from the towing or booting of any vehicles belonging to a Tenant Party. 17. No tenant may enter into phone rooms, electrical rooms, mechanical rooms, or other service areas of the Building unless accompanied by Landlord or the Building manager. TENANT FINISH-WORK: ALLOWANCE (Landlord Performs the Work) 1. Acceptance of Premises. Except as set forth in this Exhibit, Tenant accepts the Premises in their "AS-IS" ------------- -------- ----- condition on the date that this Lease is entered into. 2. Space Plans. (a) Preparation and Delivery. On or before August 5, 1999, Landlord shall deliver to Tenant a space plan prepared by Business Interiors or another design consultant selected by Landlord (the "Architect") depicting improvements to be installed in the Premises (the "Space Plans"). (b) Approval Process. Tenant shall notify Landlord whether it approves of the submitted Space Plans within three business days after Landlord's submission thereof If Tenant disapproves of such Space Plans, then Tenant shall notify Landlord thereof specifying in reasonable detail the reasons for such disapproval, in which case Landlord shall, within three business days after such notice, revise such Space Plans in accordance with Tenant's objections and submit to Tenant for its review and approval. Tenant shall notify Landlord in writing whether it approves of the resubmitted Space Plans within one business day after its receipt thereof This process shall be repeated until the Space Plans have been fmally approved by Tenant and Landlord. If Tenant fails to notify Landlord that it disapproves of the initial Space Plans within three business days (or, in the case of resubmitted Space Plans, within one business day) after the submission thereof, then Tenant shall be deemed to have approved the Space Plans in question. 3. Working Drawings. ------- -------- (a) Preparation and Delivery. On or before August 16, 1999, Landlord shall deliver final working drawings of all improvements to be installed in the Premises and deliver the same to Tenant for its review and approval (which approval shall not be unreasonably withheld, delayed or conditioned). Such working drawings shall be prepared by Interprise, the Design Group, or another design consultant selected by Landlord (whose fee shall be included in the Total Construction Costs ). (b) Approval Process. Tenant shall notify Landlord whether it approves of the submitted working drawings within three business days after Landlord's submission thereof If Tenant disapproves of such working drawings, then Tenant shall notify Landlord thereof specifying in reasonable detail the reasons for such disapproval, in which case Landlord shall, within three business days after such notice, revise such working drawings in accordance with Tenant's objections and submit the revised working drawings to Tenant for its review and approval. Tenant shall notify Landlord in writing whether it approves of the resubmitted working drawings within one business day after its receipt thereof This process shall be repeated until the working drawings have been finally approved by Landlord and Tenant. If Tenant fails to notify Land]ord that it disapproves of the initial working drawings within three business days (or, in the case of resubmitted working drawings, within one business day) after the submission thereof, then Tenant shall be deemed to have approved the working drawings in question. Any delay caused by Tenant's unreasonable withholding of its consent or delay in giving its written approval as to such working drawings shall constitute a Tenant Delay Day (defmed below). If the working drawings are not fully approved (or deemed approved) by both Landlord and Tenant by the tenth business day after the delivery of the initial draft thereof to Tenant, then each day after such time period that such working drawings are not fully approved (or deemed approved) by both Landlord and Tenant shall constitute a Tenant Delay Day. (c) Landlord's Approval: Performance of Work. If any of Tenant's proposed construction work will ------------------------------------------- affect the Building's Structure or the Building's Systems, then the working drawings pertaining thereto must be approved by the Building's engineer of record. Landlord's approval of such working drawings shall not be unreasonably withheld, provided that (1) they comply with all Laws, (2) the improvements depicted thereon do not adversely affect (in the reasonable discretion of Landlord) the Building's Structure or the Building's Systems (including the Building's restrooms or mechanical rooms), the exterior appearance of the Building, or the appearance of the Building's common areas or elevator lobby areas, (3) such working drawings are sufficiently detailed to allow construction of the improvements in a good and workmanlike manner, and (4) the improvements depicted thereon conform to the rules and regulations promulgated from time to time by Landlord for the construction of tenant improvements (a copy of which has been delivered to Tenant). As used herein, "Working Drawijws" shall mean the final working drawings approved by Landlord, as amended from time to time by any approved changes thereto, and "Work" shall mean all improvements to be constructed in accordance with and as indicated on the Working Drawings, together with any work required by governmental authorities to be made to other areas of the Building as a result of the improvements indicated by the Working Drawings. Landlord's approval of the Working Drawings shall not be a representation or warranty of Landlord that such drawings are adequate for any use or comply with any Law, but shall merely be the consent of Landlord thereto. Tenant shall, at Landlord's request, sign the Working Drawings to evidence its review and approval thereof After the Working Drawings have been approved, Landlord shall cause the Work to be performed in substantial accordance with the Working Drawings. 4. Bidding of Work. Prior to commencing the Work, Landlord shall competitively bid the Work to three contractors approved by Landlord. If the estimated Total Construction Costs are expected to exceed the Construction Allowance, Tenant shall be allowed to review the submitted bids from such contractors to value engineer any of Tenant's requested alterations. In such case, Tenant shall notify Landlord of any items in the Working Drawings that Tenant desires to change within two business days after Landlord's submission thereof to Tenant. If Tenant fails to notify Landlord of its election within such two business day period, Tenant shall be deemed to have approved the bids. Within five business days following Landlord's submission to Tenant of the initial construction bids to Tenant under the foregoing provisions (if applicable), Tenant shall have completed all of the following items: (a) finalized with Landlord's representative and the proposed contractor, the pricing of any requested revisions to the bids for the Work, and (b) approved in writing any overage in the Total Construction Costs in excess of the Construction Allowance, failing which each day after such five business day period shall constitute a Tenant Delay Day. 5. Change Orders. Tenant may initiate changes in the Work. Each such change must receive the prior written approval of Landlord, such approval not to be unreasonably withheld or delayed; however, (a) if such requested change would adversely affect (in the reasonable discretion of Landlord) (1) the Building's Structure or the Building's Systems (including the Building's restrooms or mechanical rooms), (2) the exterior appearance of the Building, or (3) the appearance of the Building's common areas or elevator lobby areas, or (b) if any such requested change might delay the Commencement Date, Landlord may withhold its consent in its sole and absolute discretion. Tenant shall, upon completion of the Work, furnish Landlord with an accurate architectural "as-built" plan of the Work as constructed, which plan shall be incorporated into this Exhibit D by this reference for all purposes. If Tenant requests any changes to the Work described in Tenant's Space Plans or the Working Drawings, then such increased costs and any additional design costs incurred in connection therewith as the result of any such change shall be added to the Total Construction Costs. 6. Definitions. As used herein, a "Tenant Delay Day" shall mean each day of delay in the performance of the Work that occurs (a) because of Tenant's failure to timely deliver or approve any required documentation such as the Space Plans or Working Drawings, (b) because of any change by Tenant to the Space Plans or Working Drawings, (c) because of any specification by Tenant of materials or installations in addition to or other than Landlord's standard finish-out materials, or (d) because a Tenant Party otherwise delays completion of the Work. As used herein "Substantial Completion," "Substantially Completed," and any derivations thereof mean the Work in the Premises is substantially completed (as reasonably determined by Landlord) in substantial accordance with the Working Drawings. Substantial Completion shall have occurred even though minor details of construction, decoration, landscaping and mechanical adjustments remain to be completed by Landlord. 7. Walk-Through: Punchlist. When Landlord considers the Work in the Premises to be Substantially Completed, Landlord will notify Tenant and within three business days thereafter, Landlord's representative and Tenant's representative shall conduct a walk-through of the Premises and identify any necessary touch-up work, repairs and minor completion items that are necessary for final completion of the Work. Neither Landlord's representative nor Tenant's representative shall unreasonably withhold his or her agreement on punchlist items. Landlord shall use reasonable efforts to cause the contractor performing the Work to complete all punchlist items within 30 days after agreement thereon; however, Landlord shall not be obligated to engage overtime labor in order to complete such items. 8. Excess Costs. The entire cost of performing the Work (including design of the Work and preparation of the Working Drawings, costs of construction labor and materials, electrical usage during construction, additional janitorial services, general tenant signage, related taxes and insurance costs, and the construction supervision fee referenced in Section 10 of this Exhibit, all of which costs are herein collectively called the "Total Construction Costs") in excess of the Construction Allowance (hereinafter defined) shall be paid by Tenant. Upon approval of the Working Drawings and selection of a contractor, Tenant shall promptly (a) execute a work order agreement prepared by Landlord which identifies such drawings and itemizes the Total Construction Costs and sets forth the Construction Allowance, and (b) pay to Landlord 50% of the amount by which Total Construction Costs exceed the Construction Allowance. Upon Substantial Completion of the Work and before Tenant occupies the Premises to conduct business therein, Tenant shall pay to Landlord an amount equal to the Total Construction Costs (as adjusted for any approved changes to the Work), less (1) the amount of the advance payment already made by Tenant, and (2) the amount of the Construction Allowance. In the event of default of payment of such excess costs, Landlord (in addition to all other remedies) shall have the same rights as for an Event of Default under the Lease. 9. Construction Allowance. Landlord shall provide to Tenant a construction allowance not to exceed $14.00 per rentable square foot in the Premises (the "Construction Allowance") to be applied toward the Total Construction Costs, as adjusted for any changes to the Work. The Construction Allowance shall not be disbursed to Tenant in cash, but shall be applied by Landlord to the payment of the Total Construction Costs, if, as, and when the cost of the Work is actually incurred and paid by Landlord. The Construction Allowance must be used within six months following the Commencement Date or shall be deemed forfeited with no further obligation by Landlord with respect thereto. 10. Construction Management. Landlord or its Affiliate or agent shall supervise the Work, make disbursements required to be made to the contractor, and act as a liaison between the contractor and Tenant and coordinate the relationship between the Work, the Building and the Building's Systems. In consideration for Landlord's construction supervision services, Tenant shall pay to Landlord a construction supervision fee equal to three percent of the Total 11. Construction Renresentatives. Landlord's and Tenant's representatives for coordination of construction and approval of change orders will be as follows, provided that either party may change its representative upon written notice to the other: - Jones Lang LaSalle C/O Lisa Donovan 5910 N. Central Expressway, Suite 1130 Dallas, Texas 75206 Telephone: Telecopy: Tenant's Renresentative: - ----------------------- Institutional Equity Holdings, Inc. do Mike Mosley 8214 Weschester, Suite 500 Dallas, Texas 75225 Telephone: Telecopy: 12. Miscellaneous. To the extentnot inconsistent with this Exhibit, Section S.(a) and Section 21 of this Lease shall govern ------------- the performance of the Work and Landlord's and Tenant's respective rights and obligations regarding the improvements installed pursuant thereto. Tenant and coordinate the relationship between the Work, the Building and the Building's Systems. In consideration for Landlord's construction supervision services, Tenant shall pay to Landlord a construction supervision fee equal to three percent of the Total Construction Costs. 11. Construction Renresentatives. Landlord's and Tenant's representatives for coordination of construction and approval of change ---------------------------- orders will be as follows, provided that either party may change its representative upon written notice to the other: Institutional Equity Holdings, Inc. 5910 N. Central Expressway, Suite 1480 Dallas, Texas 75206 Re: Lease Agreement (the "Lease") dated August 18, 1999, between PremPlace Limited Partnership, a Delaware limited partnership ("Landlord"), and Institutional Equity Holdings, Inc., a Nevada corporation ("Tenant"). Capitalized terms used herein but not defined shall be given the meanings assigned to them in the Lease. Ladies and Gentlemen: Landlord and Tenant agree as follows: 1. Condition of Premises. Tenant has accepted possession of the Premises pursuant to the Lease. Any improvements required by the tenns of the Lease to be made by Landlord have been completed to the full and complete satisfaction of Tenant in all respects except for the punchlist items described on Exhibit A hereto (the "Punchlist Items"), and except for such Punchlist Items, Landlord has fulfilled all of its duties under the Lease with respect to such initial tenant improvements. Furthermore, Tenant acknowledges that the Premises are suitable for the Permitted Use. 2. Commencement Date, The Commencement Date of the Lease is ----------------- 3. Exniration Date. The Term is scheduled to expire on the last day of the month of the Term, which date ---------- ---- 6. Binding Effect: Governing Law. Except as modified hereby, the Lease shall remain in full effect and this ------- - ------------------ --- letter shall be binding upon Landlord and Tenant and their respective successors and assigns. If any inconsistency exists or arises between the terms of this letter and the terms of the Lease, the terms of this letter shall prevail. This letter shall be governed by the laws of the state in which the Premises are located. Please indicate your agreement to the above matters by signing this letter in the space indicated below and returning an executed original to us. Agreed and accepted: Sincerely, JONES LANG LASALLE By: Name: Title: INSTITUTIONAL EQUITY HOLDINGS, INC., a Nevada corporation By : Robert A. Shuey, III, 4. Chief Executive Officer FORM OF TENANT ESTOPPEL CERTIFICATE The undersigned is the Tenant under the Lease (defined below) between_______________________ a ____________________, as Landlord, and the undersigned as Tenant, for the Premises on the ___________ floor(s) of the office building located at ____________________, __________ and commonly known as ___________________________ and hereby certifies as follows: 1. The Lease consists of the original Lease Agreement dated as of ___________, 199 between Tenant and Landlord predecessor-in-interest] and the following amendments or modifications thereto (if none, please state "none"): The documents listed above are herein collectively referred to as the "Lease" and represent the entire agreement between the parties with respect to the Premises. All capitalized terms used herein but not defined shall be given the meaning assigned to them in the Lease. 2. The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Section 1 above. 3. The Term commenced on __________________, 199 and the Term expires, excluding any renewal options, on _____________________, 200, and Tenant has no option to purchase all or any part of the Premises or the Building or, except as expressly set forth in the Lease, any option to terminate or cancel the Lease. 4. Tenant currently occupies the Premises described in the Lease and Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows (if none, please state "none"): 5. All monthly installments of Basic Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through _________. The current monthly installment of Basic Rent is $ 6. All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder. In addition, Tenant has not delivered any notice to Landlord regarding a default by Landlord thereunder. 7. As of the date hereof, there are no existing defenses or offsets, or, to the undersigned's knowledge, claims or any basis for a claim, that the undersigned has against Landlord and no event has occurred and no condition exists, which, with the giving of notice or the passage of time, or both, will constitute a default under the Lease. 8. No rental has been paid more than 30 days in advance and no security deposit has been delivered to Landlord except as provided in the Lease. 9. If Tenant is a corporation, partnership or other business entity, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the state in which the Premises are located and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so. 10. There are no actions pending against Tenant under any bankruptcy or similar laws of the United States or any state. 11. Other than in compliance with all applicable laws and incidental to the ordinary course of the use of the Premises, the undersigned has not used or stored any hazardous substances in the Premises. 12. All tenant improvement work to be performed by Landlord under the Lease has been completed in accordance with the Lease and has been accepted by the undersigned and all reimbursements and allowances due to the undersigned under the Lease in connection with any tenant improvement work have been paid in full. Tenant acknowledges that this Estoppel Certificate may be delivered to Landlord, Landlord's Mortgagee or to a prospective mortgagee or prospective purchaser, and their respective successors and assigns, and acknowledges that Landlord, Landlord's Mortgagee and/or such prospective mortgagee or prospective purchaser will be relying upon the statements contained herein in disbursing loan advances or making a new loan or acquiring the property of which the Premises are a part and that receipt by it of this certificate is a condition of disbursing loan advances or making such loan or acquiring such property. Executed as of , 199. ---------------------------- TENANT: a By: Name:. Title: PARKING Tenant shall use two reserved designated parking spaces and 19 undesignated parking spaces in the parking garage/area associated with the Building (the "Parking Area during the initial Term subject to such terms, conditions and regulations as are from time to time applicable to patrons of the Parking Area at no additional cost to Tenant. Tenant may, by delivering written notice of its election to do so, convert up to ten of the undesignated parking spaces in the Parking Area to reserved parking spaces in the Parking Area during the initial Term subject to such terms, conditions and regulations as are from time to time applicable to patrons of the Parking Area at a rate equal to $50.00 per reserved vehicular parldng space month (plus all applicable taxes). Subject to availability, Tenant may, by delivering written notice of its election to do so, convert additional undesignated parking spaces in the Parking Area to reserved parking spaces in the Parking Area during the initial Term at a rate equal to $50.00 per reserved vehicular parking space per month. If, for any reason, Landlord is unable to provide all or any portion of the parking spaces to which Tenant is entitled hereunder, then Tenant's obligation to pay for such spaces shall be abated for so long as Tenant does not have the use thereof; this abatement shall be in full settlement of all claims that Tenant might otherwise have against Landlord because of Landlord's failure or inability to provide Tenant with such parking spaces RENEWAL OPTION Provided no Event of Default exists and Tenant is occupying the entire Premises at the time of such election, Tenant may renew this Lease for one additional period of five years, by delivering written notice of the exercise thereof to Landlord not earlier than 12 months nor later than nine months before the expiration of the Term. On or before the commencement date of the extended Term, Landlord and Tenant shall execute an amendment to this Lease extending the Term on the same terms provided in this Lease, except as follows: (a) Basic Rent shall be adjusted to $24.00 per rentable square foot in the Premises; (b) Landlord shall provide a construction allowance of $4.00 per rentable square foot in the Premises to be applied toward tenant improvements, and Landlord shall not provide to Tenant any other allowances (e.g., moving allowance, construction allowance, and the like) or other tenant inducements; (c) Tenant shall have no further renewal option unless expressly granted by Landlord in writing; and (d) Tenant shall pay for the parking spaces which it is entitled to use at the rates from time to time charged to patrons of the Parking Area and/or any other parking area associated with the Building during the extended Term (plus all applicable taxes). Tenant's rights under this Exhibit shall terminate if(l) this Lease or Tenant's right to possession of the Premises is terminated, (2) Tenant assigns any of its interest in this Lease or sublets any portion of the Premises, (3) Tenant fails to timely exercise its option under this Exhibit, time being of the essence with respect to Tenant's exercise thereof, or (4) Landlord determines, in its sole but reasonable discretion, that Tenant's financial condition or creditworthiness has materially deteriorated since the date of this Lease Basic Rent shall be conditionally abated during the first 60 days of the Term. Commencing with the 61st day of the Term, Tenant shall make Basic Rent payments as otherwise provided in the Lease. Notwithstanding such abatement of Basic Rent (a) all other sums due under the Lease, including Additional Rent and Tenant's share of Taxes shall be payable as provided in the Lease, and (b) any increases in Basic Rent set forth in the Lease shall occur on the dates scheduled therefor. The abatement ofEasic Rent provided for in this Exhibit is conditioned upon Tenant's full and timely performance of all of its obligations under the Lease. If at any time during the Term an Event of Default by Tenant occurs, then the abatement of Basic Rent provided for in this Exhibit shall immediately become void, and Tenant shall promptly pay to Landlord, in addition to all other amounts due to Landlord under this Lease, the full amount of all Basic Rent herein abated. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT This Subordination, Non-Disturbance and Attomment Agreement (this "AQreement"), is entered into as of August 18, 1999, by and between INSTITUTIONAL EQUITY HOLDINGS, INC., a Nevada corporation ("Tenant"), having an office at 5910 N. Central Expressway, Suite 1480, Dallas, Texas 75206, and BANKERS TRUST COMPANY (successor-in-interest to Bankers Trust Company of California, N.A. and together with its successors and assigns, "Lender"), as Trustee under that certain Trust and Servicing Agreement dated as of November 1, 1994, for Kidder Peabody Mortgage Acceptance Corp. I, Mortgage Pass-Through Certificates, Series 1994-C3, by and through GMAC Commercial Mortgage Corporation, its Master Servicer under said Pooling and Servicing Agreement, having an office at 650 Dresher Road, Horsham, Pennsylvania 19044. WITNIESSETH: Lender is now the owner and holder of a deed of trust or mortgage (the "Mort~a~e"), covering, among other things, the real property commonly known and described as Premier Place, and further described on Exhibit A attached hereto and made a part hereof for all purposes, and the building and improvements thereon (collectively, the "Mort~a~ed Pronerty"), securing the payment of a loan (the "Loan") made by Lender to Landlord; and Tenant is the owner of the lessee's or tenant's interest under that certain Lease Agreement dated August 18, 1999 (the "Lease"), by and between Tenant and PRIEMIPLACE LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), as landlord, covering 7,059 square feet of rentable area (the "Premises") in the improvements constituting a part of the Mortgaged Property; and Tenant and Lender desire to enter into the following agreements with respect to the priority of the Lease and Mortgage; and NOW, THEREFORE, for and in consideration of the premises and mutual covenants hereinafter set forth, Lender and Tenant hereby agree as follows: 1. Defined Terms. Capitalized terms used herein but not defmed herein shall have the meanings given to such terms ------- ----- in the Lease. 2. Subordination. Tenant covenants and agrees with Lender that, except as hereinafter set forth, all of Tenant's rights, title and interest in and to the Mortgaged Property, the Premises, the Lease and the leasehold estate created thereunder are and shall be subject, subordinate and inferior to the lien and security interests of the Mortgage and to any and all increases, renewals, modifications, extensions and substitutions thereof. 3. Non-disturbance. In the event of any foreclosure under the Mortgage, or if conveyance or transfer of the Mortgaged Property shall be made in lieu of foreclosure (any such foreclosure or conveyance or transfer in lieu of foreclosure being herein collectively referred to as "Foreclosure"), then the Lease shall not be terminated as a result of such Foreclosure, but rather shall continue in full force and effect in accordance with the provisions thereof, and the rights of Tenant under the Lease shall not be interfered with or disturbed by any party owning the Mortgaged Properly or an interest therein as a result of such Foreclosure, or by such party's successors and assigns (any such party and its successors and assigns being herein called "Such Owner"); provided, that Such Owner shall not be (a) liable for any act or omission of, or subject to any rights or setoff, claims or defenses otherwise assertable by Tenant against, any prior owner of the Mortgaged Property (including, without limitation, Landlord), (b) obligated to complete the construction of any improvements under the Lease, (c) bound by any rents paid more than one month in advance to any prior owner, (d) liable for any security deposit not paid over to Such Owner by Landlord, or (e) bound by any modification, amendment, extension or cancellation of the Lease not consented to in writing by Lender; and further provided, that nothing herein shall negate the right of Such Owner to exercise the rights and remedies, including termination of the Lease, of Landlord under the Lease upon the occurrence of an Event of Default by Tenant under the Lease and in accordance therewith and as to any Event of Default by Tenant under the Lease existing at the time of Foreclosure, such Foreclosure shall not operate to waive or abate any action initiated by Landlord under the Lease to terminate the same on account of such Event of Default. 4. Attorument. Tenant agrees that in the event of Foreclosure, Tenant will attorn to Such Owner, and Tenant affirms its obligations under the Lease to Such Owner and agrees to pay all rentals and charges then due, or to become due, under the Lease to Such Owner, all without change in the terms or provisions of the Lease. Upon request by Such Owner or Tenant, Such Owner and Tenant shall execute and deliver an instrument or instruments confirming the non-disturbance and attomment herein provided for. Tenant agrees that, notwithstanding any contrary provisions of the Lease, the liability of Such Owner and any successor or assign of Such Owner shall be limited to his or its interest in the Mortgaged Property, and no other assets of Such Owner other than his or its interest in the Mortgaged Properly, shall be affected by reason of any liability which Such Owner or his or its successor in interest may have under the Lease. 5. Notices. ------- (a) Tenant covenants and agrees with Lender that Tenant shall send to Lender at the address set forth below a copy of any notice of default, notice of intention to terminate or notice of termination given by Tenant to Landlord under the Lease, and, in the case of a notice of default, Lender shall have the right to cure any such default on the part of Landlord within the same period granted to Landlord under the Lease. Tenant agrees to accept any such cure by Lender to the same extent as if such cure had been tendered or performed by Landlord. (b) All notices, demands, requests, consents and approvals which may or are required to be given by either party to the owner under this Agreement shall be in writing and shall be deemed given, delivered and received either (1) when hand delivered (including by a recognized delivery service providing a receipt therefor) or when received pursuant to any delivery by telex, telefax, telecopier, telegram or overnight mail service, or (2) the next business day following the date deposited in the United States mail, certified or registered mail, postage prepaid, addressed in either case as follows: If to Lender: Bankers Trust Company c/o GMAC Commercial Mortgage Corporation 650 Dresher Road Horsham, Pennsylvania 19044 Attention: Executive Vice President - Servicing Administration If to Tenant: Prior to the Term Commencement Date: ----------------------------------- Institutional Equity Holdings, Inc. 8214 Weschester, Suite 500 Dallas, Texas 75225 Attention: Mike Mosley or Robert Shuey, III Telephone: _________________________ Telecopy: __________________________ After the Term Commencement Date: - ----- --------------------- ---- Institutional Equity Holdings, Inc. 5910 N. Central Expressway, Suite 1480 Dallas, Texas 75206 Attention: Mike Mosley or Robert Shuey, Ill Telephone: ____________________________ Telecopy: ___________________________ Each party may designate such other parties or addresses to which such notices may be sent by providing notice of the same in writing to the other party, effective 15 days from the date of such party or address change notice is given in accordance with this paragraph. 6. Payment of Rents. If the Lender notifies the Tenant of a default under the Mortgage and demand is made that Tenant pay its rent and all other sums due under the Lease to Lender, Tenant shall honor such demand and pay its rent and all other sums due under the Lease directly to Lender or such other person as it is directed pursuant to such notice. In connection therewith, the Landlord, by its execution of this Agreement hereby acknowledges and agrees that in the event of a default under the Mortgage, the Tenant may pay all rents and all of the sums due under the Lease directly to the Lender or such other person upon such notice from the Lender that the Landlord is in default. If the Tenant shall make payments to the Lender or such other person following receipt of notice that the Landlord is in default, the Landlord hereby waives any claims against the Tenant for the amount of such payments made by the Tenant to the Lender or such other person. 7. Landlord's Consent. Landlord is joining herein solely for the purpose of consenting hereto and agreeing that Tenant may rely upon any and all notices from Lender or Such Owner relating to the rights of Lender or Such Owner hereunder or under the Mortgage or any related assignment of leases in favor of Lender. 8. Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. Upon request by Such Owner or Tenant, Such Owner and Tenant shall execute and deliver an instrument or instruments further confirming the nondisturbance and attornment provided for in this Agreement. 9. Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the state --------- --- in which the Mortgaged Property is located. IN WITNESS WHEREOF, the parties day and year firm above written. TENANT: hereto have caused this Agreement to be duly executed the INSTITUTIONAL EQUITY HOLDINGS, INC., a Nevada corporation By: Name: Title: Address: 5910 N. Central Expwy., Suite 1480 Dallas, Texas 75206 BANKERS TRUST COMPANY, as Trustee By: GMAC COMMERCIAL MORTGAGE CORP., as Master Servicer By:. Name: Title: 118 Welsh Road Horsham, PA 19044 Attention: KPAC 1994 - C3 (QRP) The foregoing Paragraph 7 thereof. LANDLORD: Agreement is hereby consented and agreed to by the undersigned as set forth in PREMPLACE LIMITED PARTNERSHIP By: New Premplace Corp., its general partner By: Name: Title: COMMONWEALTH OF PENNSYLVANIA ss. ss. COUNTY OF MONTGOMERY ss. Notary Public in and for the State of. My Commission Expires: This instrument was acknowledged before me on ______________, 1999, by _____________________ ___________ Vice President of GMAC Commercial Mortgage Corporation, a California corporation, in its capacity as Master Servicer for ________________________, on behalf of said corporation. Notary Public in and for the Commonwealth of Pennsylvania My Commission Expires: March 3. 2000 Mr. Michael Vinez Institutional Equity Corporation 5910 North Central Expressway Suite 1480 Dallas, Texas 75206 Dear Michael: Enclosed please find one (1) copy of the final Tenant Improvement Tracking Sheet for the Iiistitutional Equity project that itemizes the cost for Construction, Space Plans, Engineering, and Management Fees. As shown, the remaining balance is $17,145.60. Upon review and approval please forward a check to BT-PREMIPLACE at 5910 N. Central Expressway, Suite 1130, Dallas, Texas 75206 by March 10 2000. In addition, I have not received the Acceptance of Premises or the Estoppel Certificate that was delivered to your office in January. Please forward this pertinent information with the construction check to may attention for the Landlord file. After both Exhibits have been fully executed 1 will return one to you for your records. Should you have any questions please contact me at 214-891-6863. Very trul yours, Lori Sexton Assistant General Manager Leasing and Management Jones Lang LaSalle Americas, Inc. [GRAPHIC OMITTED][GRAPHIC OMITTED] ------------------------------------------------------------------ ARCHON GROUP, L.P. ------------------------------------------------ ----------------------------------------------------------------- ITenant Improvements - Payment Requests Tracking Sheet ----------------------------------------------------------------- Portfolio: ARCHON GROUP, L.P. Tenant Name: INSTITUTIONAL EQUITY ---------------------------------------------------------------- ----------------------------------------------------------------- Asset Number: Suite Number: 1480 ------------------------------------------------------------------ ------------------------------------------------------------------ Property Name: PREMIER PLACE Request Date: 03-Mar-DO ----------------------------------------------------------------- ----------------------------------------------------------------- Property Manager: LORI SEXTON General Dennehy & Associates ------------------------------------------------------------------ ------------------------------------------------------------------ Asset Manager: ----------------------------------------------------------------- ---------------------------------------------------------------- CommentsCheck Request Attached? YES 1.1. ALLOWANCE 7,509 rsf x $14.00= Invoice Copies Attached? YES $ 105,126.OO Lein Waivers Attached? NO ----------------------------------------------------------------- - ----------------------------------------------------------------- - W-9 Attached? NO (Old Vendor) --------------------------------------------------- ------------------------------------------------------------- Description Invoice Amount Tenant Balance Remaining Overage ------------------------------------------------------------- $ 105,126.00 ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Interprise 40443 09/03/$9 75.00 $ 105,051,00 ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Interprise 41391 11/03/$9 5,729.76 $ 99,321.24 ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Schmidt&Stacy 15903dt 11/0$/99 2,134.69 $ 97,156.55 ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Interprise 41699 11/29/$9 289.20 $ 96,897.35 ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Dennehy 4188 11/29/$9 102,830.00 $ (5,932.65) ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Dennehy 5009 12/28/$9 1219.00 $ (7,151.65) ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Dennehy 5017 01/06/$000 11,561.00 $ (18,712.65) ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Interprise 42172 01/06$2000 1,260.66 $ (19,973.31) ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- B.J. Glass 43 01/18 $ 291.33 $ (20,264.64) ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Credit for abandoned cable $ $ (19,014.64) ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Change order - Dennehy Add Bun Warmer $ 766.00 $ (19,780.64) ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Change order - Dennehy Misc Electrical $ 337.00 $ $ (20,117.64) ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Management Fees $ 6,262.18 $ (26,379.82) ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Less Check Paid $ 9,234.22 ---------------------------------------------------------- ---------------------------------------------------------- Balance amount Payable $ (17,145.60) -------------------------------------------------------------------------------------------------------------
EX-27 8 FDS --
5 (Replace this text with the legend) 0000852447 EUROMED INC 1 $US YEAR DEC-31-1999 JAN-1-1999 DEC-31-1999 1 315,904 548,736 723,385 0 0 1,889,438 715,952 (333,543) 3,835,075 1,786,780 0 0 10,975 23,120 315,157 3,835,075 9,709,826 9,709,826 0 12,183,187 0 0 769,522 (3,330,827) 0 (3,330,827) 0 0 0 (3,330,827) (1.64) (1.64)
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