-----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, Ey/qCcEfqTMenULfbuaZMLi5lcyeXqvHw05XMOhImt0ybFqqvndpMe54uqDOOiad iV2z/eol9DRKK0VzlJV0XQ== /in/edgar/work/20000914/0000893816-00-000019/0000893816-00-000019.txt : 20000922 0000893816-00-000019.hdr.sgml : 20000922 ACCESSION NUMBER: 0000893816-00-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000731 FILED AS OF DATE: 20000914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFOCROSSING INC CENTRAL INDEX KEY: 0000893816 STANDARD INDUSTRIAL CLASSIFICATION: [7374 ] IRS NUMBER: 133252333 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20824 FILM NUMBER: 723259 BUSINESS ADDRESS: STREET 1: 2 CHRISTIE HEIGHTS STREET CITY: LEONIA STATE: NJ ZIP: 07605 BUSINESS PHONE: 2018404700 MAIL ADDRESS: STREET 1: 2 CHRISTIE HEIGHTS STREET CITY: LEONIA STATE: NJ ZIP: 07605 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER OUTSOURCING SERVICES INC DATE OF NAME CHANGE: 19930328 10-Q 1 0001.txt THIRD QUARTER 10Q U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: July 31, 2000 Commission file number: 0-20824 INFOCROSSING, INC. ------------------------------------------------- (Exact name of issuer as specified in its charter) Delaware 13-3252333 ------------------------------- ------------------ (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2 Christie Heights Street Leonia, New Jersey 07605 ----------------------------------------------------- (Address of principal executive offices) (201) 840-4700 -------------------------- (Issuer's telephone number) COMPUTER OUTSOURCING SERVICES, INC. ----------------------------------------- Former Name, if Changed Since Last Report Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] There were 5,887,611 shares of the registrant's Common Stock, $0.01 par value, outstanding as of September 13, 2000. Transitional Small Business Disclosure Form (check one): Yes [ ] No [X] PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements INFOCROSSING, INC. & SUBSIDIARIES (Formerly Computer Outsourcing Services, Inc.) CONSOLIDATED BALANCE SHEETS July 31, 2000 October 31, 1999 ---------------- ---------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and equivalents $46,980,485 $ 1,590,223 Marketable debt securities, at cost which approximates market value 5,367,016 1,673,441 Trade accounts receivable, net of allowances for doubtful accounts of $468,457 and $350,939 3,958,815 6,010,366 Prepaid and refundable income taxes 2,839,747 961,196 Deferred income taxes - 591,178 Prepaid license fees 1,082,347 915,935 Prepaid expenses and other current assets 1,092,811 587,264 ----------- ----------- 61,321,221 12,329,603 ----------- ----------- PROPERTY and EQUIPMENT, net 5,855,251 3,638,993 ----------- ----------- OTHER ASSETS: Deferred software, net 2,692,733 2,223,823 Intangibles, net 9,061,992 8,484,564 Due from related parties, net 168,092 132,314 Deferred income taxes - 235,986 Security deposits and other non-current assets 2,583,791 508,800 ----------- ----------- 14,506,608 11,585,487 ----------- ----------- TOTAL ASSETS $ 81,683,080 $ 27,554,083 =========== =========== See Notes to Consolidated Interim Financial Statements (Unaudited). INFOCROSSING, INC. & SUBSIDIARIES (Formerly Computer Outsourcing Services, Inc.) CONSOLIDATED BALANCE SHEETS July 31, 2000 October 31, 1999 ---------------- ---------------- (Unaudited) LIABILITIES and STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,491,023 $ 1,237,479 Current portion of long-term debt and capitalized lease obligations 8,012 19,017 Current portion of accrued loss on office subleases 470,745 256,429 Accrued expenses 2,166,947 1,514,514 Customer deposits and other current liabilities 83,317 137,208 ----------- ----------- 4,220,044 3,164,647 ----------- ----------- OTHER LIABILITIES: Accrued loss on office subleases 1,744,938 1,564,592 ----------- ----------- COMMITMENTS AND CONTINGENCIES Redeemable 8% Series A Cumulative Convertible Participating Preferred Stock; $0.01 par value; 300,000 shares authorized; 157,377 issued and outstanding (liquidation preference $61,109,333 at July 31, 2000) 32,108,795 - ----------- ----------- STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value; 2,700,000 shares authorized, none issued or outstanding - - Common stock, $0.01 par value; 50,000,000 shares authorized; shares issued 5,883,523 and 4,737,915, respectively 58,835 47,379 Additional paid-in capital 58,714,177 15,519,826 Retained earnings/(deficit) (4,023,819) 7,264,952 ----------- ----------- 54,749,193 22,832,157 Less 5,608 and 1,000 shares of common stock held in treasury, respectively, at cost (119,057) (7,313) Unamortized restricted stock award (11,020,833) - ----------- ----------- 43,609,303 22,824,844 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 81,683,080 $ 27,554,083 =========== =========== See Notes to Consolidated Interim Financial Statements (Unaudited). INFOCROSSING, INC. & SUBSIDIAIRES (Formerly Computer Outsourcing Services, Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Nine months ended Three Months ended July 31, July 31, ------------------------- ------------------------ 2000 1999 2000 1999 ------------ ----------- ----------- ----------- REVENUES $ 19,056,271 $26,375,499 $ 5,358,526 $ 9,072,218 ------------ ----------- ----------- ----------- COSTS and EXPENSES: Operating costs 19,293,308 17,680,781 6,804,774 6,016,716 Selling and promotion costs 2,570,320 1,959,569 836,684 674,180 General and administrative expenses 8,392,996 3,767,337 4,158,547 1,494,318 Interest income, net (785,664) (226,334) (770,348) (47,519) ------------ ----------- ----------- ----------- 29,470,960 23,181,353 11,029,657 8,137,695 ------------ ----------- ----------- ----------- Income/(loss) from operations before provision/(benefit) for income taxes (10,414,689) 3,194,146 (5,671,131) 934,523 Provision/(benefit) for income taxes (984,249) 1,224,600 - 298,200 ------------ ----------- ----------- ----------- Net income/(loss) (9,430,440) 1,969,546 (5,671,131) 636,323 Accretion and dividends on redeemable preferred stock (1,858,331) - (1,858,331) - ------------ ----------- ----------- ----------- NET INCOME/(LOSS) AVAILABLE TO COMMON STOCKHOLDERS $(11,288,771) $ 1,969,546 $(7,529,462) $ 636,323 ============ =========== =========== =========== Continued on next page. See Notes to Consolidated Interim Financial Statements (Unaudited). INFOCROSSING, INC. & SUBSIDIAIRES (Formerly Computer Outsourcing Services, Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - Continued) Nine months ended Three Months ended July 31, July 31, ------------------------ ------------------------ 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Basic earnings/(loss) per common share $ (2.24) $ 0.43 $ (1.38) $ 0.13 =========== =========== =========== =========== Weighted average number of common shares outstanding 5,038,046 4,602,693 5,448,009 4,717,212 =========== =========== =========== =========== Diluted earnings/(loss) per common share $ (2.24) $ 0.40 $ (1.38) $ 0.13 =========== =========== =========== =========== Weighted average number of common shares and equivalents outstanding 5,038,046 4,927,278 5,448,009 5,026,681 =========== =========== =========== =========== See Notes to Consolidated Interim Financial Statements (Unaudited). INFOCROSSING, INC. & SUBSIDIARIES (Formerly Computer Outsourcing Services, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) Nine months ended July 31, ------------------------------- 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income/(loss) $(9,430,440) $ 1,969,546 Adjustments to reconcile net income/(loss) to net cash used in operating activities: Depreciation and amortization 1,661,764 1,429,183 Amortization of restricted stock award 479,167 - Warrants issued in connection with termination of a credit arrangement 120,000 - Income from a non-competition, confidentiality, and conduct of business agreement - (360,000) Accrued loss on sublease 514,371 - Reduction in deferred income taxes 827,164 251,199 Decrease/(increase) in: Trade accounts receivable 2,051,551 (1,797,717) Prepaid and refundable taxes (1,878,551) - Prepaid license fees, prepaid expenses and other current assets (671,959) (440,089) Increase/(decrease) in: Accounts payable 253,544 542,838 Income taxes payable - (674,290) Accrued expenses 684,361 (1,040,010) Payments on accrued loss on office subleases (88,585) - Customer deposits and other Current liabilities (53,891) (84,248) ----------- ----------- Net cash used in operating activities (5,531,504) (203,588) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,906,480) (474,320) Disposal of property and equipment 2,750 - (Investment in)/redemption of investments in marketable debt securities (3,693,575) 1,979,265 Payment for the purchase of certain assets and the business of Enterprise Technology Group, Inc. (the "Enterprise Purchase"), Plus related expenses - (4,293,701) Increases in security deposits (2,086,185) (2,311) Payments received for Assets Held for Sale - 82,696 Increase in deferred software costs (874,276) (639,441) ----------- ----------- Net cash used in investing activities $(9,557,766) $(3,347,812) ----------- ----------- Continued on next page. See Notes to Consolidated Interim Financial Statements (Unaudited). INFOCROSSING, INC. & SUBSIDIARIES (Formerly Computer Outsourcing Services, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited - Continued) Nine months ended July 31, ------------------------------- 2000 1999 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from a private equity placement $58,430,596 $ - Proceeds from debt financing and a line of credit 7,000,000 - Repayment of debt and capital leases (7,042,933) (244,720) Advances to related parties, net of Repayments (35,778) (42,117) Purchase of treasury stock - (7,313) Proceeds from the sale of common stock 999,996 - Proceeds from the exercises of stock options and warrants 1,158,775 662,309 ----------- ----------- Net cash provided by financing activities 60,510,656 368,159 ----------- ----------- CASH FLOWS FROM DISCONTINUED OPERATION: Payment of taxes on gain and other expenses related to sale of the Payroll Division - (2,533,092) Payments on portion of accrued loss on office sublease relating to discontinued operation (31,124) - ----------- ----------- Net cash used in discontinued operation (31,124) (2,533,092) ----------- ----------- Net increase/(decrease) in cash and equivalents 45,390,262 (5,716,333) Cash and equivalents at the beginning of the period 1,590,223 9,403,006 ----------- ----------- Cash and equivalents at the end of the period $46,980,485 $ 3,686,673 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest expense $ 112,360 $ 22,922 =========== =========== Income taxes $ 55,878 $ 3,815,968 =========== =========== SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES: Stock issued for a portion of the Enterprise Purchase $ 1,135,160 $ 2,681,201 =========== =========== SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: Treasury shares received in payment of a stock option exercise $ 111,744 - =========== =========== See Notes to Consolidated Interim Financial Statements (Unaudited). INFOCROSSING, INC. & SUBSIDIARIES (Formerly Computer Outsourcing Services, Inc.) CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Unamortized Common Par Paid in Retained Treasury Restricted Shares Value Capital Earnings Stock Stock Award Total --------- ------- ----------- ----------- --------- ------------ ----------- Balance, October 31, 1999 4,737,915 $47,379 $15,519,826 $ 7,264,952 $ (7,313) - $22,824,844 Exercises of stock options 165,690 1,657 893,862 - - - 895,519 4,608 shares surrendered for stock option exercise - - - - (111,744) - (111,744) Contingent payment relating to purchase of assets 36,472 365 1,134,795 - - - 1,135,160 Exercise of warrants 75,000 750 374,250 - - - 375,000 Sale of restricted shares by the Company 68,446 684 999,312 - - - 999,996 Restricted stock award 800,000 8,000 11,492,000 - - (11,500,000) - Amortization of restricted stock award - - - - - 479,167 479,167 Issuance of warrants in connection with termination of a financing arrangement - - 120,000 - - - 120,000 Accretion and dividends on redeemable preferred stock - - - (1,858,331) - - (1,858,331) Issuance of warrants in a private placement - - 28,180,132 - - - 28,180,132 Net loss - - - (9,430,440) - - (9,430,440) --------- ------- ----------- ----------- --------- ------------ ----------- Balance, July 31, 2000 5,883,523 $58,835 $58,714,177 $(4,023,819) $(119,057) $(11,020,833) $43,609,303 ========= ======= =========== =========== ========= ============ ===========
See Notes to Consolidated Interim Financial Statements (Unaudited). INFOCROSSING, INC. & SUBSIDIAIRES (Formerly Computer Outsourcing Services, Inc.) NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The consolidated balance sheet as of July 31, 2000 and the consolidated statements of operations and cash flows for the nine and three-month periods ended July 31, 2000 and 1999 have not been audited. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows for the periods indicated have been made. The results of operations for the periods ended July 2000 and 1999 are not necessarily indicative of the operating results for the full fiscal years. Certain reclassifications have been made to the prior periods to conform to the current presentation. Certain disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-KSB for the fiscal year ended October 31, 1999. On June 5, 2000, the Company changed its name to Infocrossing, Inc. This name change was approved by the Company's Stockholders at the Annual Meeting of Stockholders held on May 8, 2000. In connection with this change, the Company's trading symbol on the Nasdaq National Market System changed from COSI to IFOX. The consolidated financial statements include the accounts of Infocrossing, Inc. and its wholly-owned subsidiaries (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated. 2. CONTINGENT PAYMENT On December 18, 1998, a subsidiary of the Company purchased certain assets and the business of Enterprise Technology Group, Incorporated ("Enterprise") for $4,000,000 in cash and 300,000 shares of the Company's common stock. Certain additional consideration in the form of cash and common stock may be payable, at various times, based upon the future performance of the acquired business (and certain other events) over the period ending December 31, 2001. Effective as of December 31, 1999, $1,135,160 in additional consideration became payable in the form of shares of the Company's common stock. This amount was added to intangible assets (goodwill), and is being amortized over the remaining life assigned to this asset (168 months at December 31, 1999). On February 17, 2000, 36,472 shares of the Company's common stock were issued in payment of the additional consideration due. 3. DEBT On October 29, 1999, the Company entered into an agreement with a bank for a line of credit of up to $5,000,000. Amounts drawn under this line were payable upon demand and accrued interest (at the Company's option) at either the Prime Rate or 1.25% over the 30, 60, or 90 day LIBOR rate. The line of credit did not have a fixed term, and was secured by a first lien on the Company's accounts receivable and certain general intangibles. On December 27, 1999, the Company borrowed $2,000,000 under the 90-day LIBOR rate option. On March 28, 2000, the Company renewed this note utilizing the 90-day LIBOR rate option. In light of the private placement of securities discussed in Note 6, the Company repaid the advance when it became due on June 27, 2000 and cancelled the line. On February 23, 2000, a subsidiary of the Company closed a transaction with three investors (the "Lenders") providing for a series of short-term convertible notes coupled with certain rights to receive equity interests in either the subsidiary or the parent. The Lenders advanced $3 million at the closing. The proceeds were to be used to develop and operate Internet Data Centers. Each note, regardless of when funded, matured on February 25, 2001 and would have borne interest at 6% for the first six months. Thereafter, interest would have increased to 13% in the seventh month and would have risen 1% for each subsequent month that the applicable note remained outstanding. At the option of a Lender, a note outstanding for more than 180 days could have been exchanged for the Company's common stock. An exchanging note holder would have received shares valued at 90% of the average closing price for the ten trading days prior to the exchange. Any or all of the outstanding notes could have been prepaid by the Company without penalty. On May 10, 2000, in connection with the private placement of securities discussed in Note 6, the Company repaid the outstanding $3 million plus accrued interest. On June 5, 2000, the Company issued warrants to the Lenders to purchase 30,000 shares of the Company's common stock at $19.25 per share as consideration for the termination of all other potential equity interests in either the parent or the subsidiary held by the Lenders. The warrants are immediately exercisable and expire on June 5, 2004. The fair value of the warrants, calculated using the Black-Scholes pricing model, is included in the statements of operations for the periods ended July 31, 2000. 4. BASIC AND DILUTED EARNINGS PER COMMON SHARE Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS 128") requires the presentation of basic and diluted earnings per share ("EPS"). Basic EPS is computed by dividing income available to common stock-holders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed using the weighted average number of common shares plus the dilutive effect of common stock equivalents. Stock options and warrants which are anti-dilutive are excluded from the computation of weighted average shares outstanding. Certain options which are currently anti-dilutive may be dilutive in the future. In determining the diluted loss per common share for the nine and three months ended July 31, 2000, common stock equivalents were ignored since the effect of including such equivalents would have been anti-dilutive. 5. STOCK OPTIONS The Company accounts for options granted under the 1992 Stock Option and Stock Appreciation Rights Plan, as amended, (the "Plan") in accordance with Accounting Principles Board Opinion No. 25 and related Interpretations in accounting for its stock options. Accordingly, no compensation cost has been recognized for stock option awards. Had the compensation cost been determined in accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the Company's pro forma income/(loss) and pro forma income/(loss) per common share for the nine-month periods ended July 31, 2000 and 1999 would be as follows:
2000 1999 -------------------------- ----------------------- Historical Pro Forma Historical Pro Forma ------------ ------------ ---------- ---------- Net income/(loss) available to common stockholders $(11,289,000) $(12,180,000) $1,970,000 $1,690,000 ============ ============ ========== ========== Net income/(loss) per diluted common share $ (2.24) $ (2.41) $ 0.40 $ 0.34 ============ ============ ========== ==========
All incentive stock options under the Plan, other than those granted to any person holding more than 10% of the total combined voting power of all classes of outstanding stock, are granted at the fair market value of the common stock at the grant date. Non-qualified options issued under the Plan have all been granted at fair market value, although the Plan permits issuance of non-qualified options at less than fair market value. The weighted average fair value of the stock options granted during the nine-month periods ended July 31, 2000 and 1999 was $3,315,000 and $519,000, respectively. The fair value of each stock option grant is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2000: a risk-free interest rate of 6.50%; expected lives of between six-months and three and one-half years; and expected volatility of 50.0%. The following weighted average assumptions were used for grants in 1999: a risk-free interest rate of 5.71%; expected lives of between six months and six years; and expected volatility of 49.5%. 6. PRIVATE PLACEMENT OF SECURITIES On April 7, 2000, the Company entered into a Securities Purchase Agreement providing for a group of investors (the "Purchasers") to purchase $60 million of the Company's securities in a private placement. The closing was subject to the satisfaction of certain conditions including approval by the Company's stockholders. The transaction was approved by the Company's Stockholders at the Annual Meeting of Stockholders held on May 8, 2000. The private placement of $60 million of securities closed on May 10, 2000. The Company issued 157,377 shares of redeemable 8% Series A Cumulative Convertible Participating Preferred Stock (the "Series A Preferred Stock") and warrants to purchase 2,531,926 shares of the Company's common stock at an exercise price of $0.01 per share. The Company primarily will use the proceeds ($58,430,596 after giving effect to costs and legal fees) from this transaction to pursue its business plan of developing and operating Internet Data Centers. The Company also repaid debt from these proceeds as described in Note 3. The carrying value of the warrants ($28,180,132) and Series A Preferred Stock ($30,250,464) were determined by apportioning an amount equal to the proceeds from the private placement multiplied by the relative value of each class of security as of the commitment date. The difference between the carrying value and the face value of the Series A Preferred Stock is being accreted as a charge against retained earnings through May 31, 2007 (the Purchasers' earliest redemption date) using the interest method. Accumulated dividends (dividends not paid on a dividend date) and dividends accruing prior to a dividend payment date also increase the carrying value of the Series A Preferred Stock through a charge to retained earnings. The significant provisions of the Series A Preferred Stock are as follows: Each share of Series A Preferred Stock maintains a liquidation preference of $381.25 per share, or an aggregate of $60 million for all 157,377 shares, plus accumulated and accrued dividends. Each share of Series A Preferred Stock bears dividends at the rate of $7.625 payable on March 1, June 1, September 1, and December 1 of each year. Such dividends will accumulate and compound quarterly at a rate of 8% per annum for approximately the first three years. Thereafter, dividends may be accumulated and compounded quarterly at 8% per annum or paid in cash, at the option of the Company. Each share of Series A Preferred Stock is convertible initially into ten shares of common stock of the Company at the option of the Purchasers, subject to adjustment provided in the Certificate of Designation. The conversion price of the Series A Preferred Stock shall be adjusted from time to time if the Company: (i) pays a stock dividend; (ii) issues or sells any shares of common stock or convertible securities at a price per share less than $14.61, as adjusted; (iii) subdivides or reclassifies its common stock; (iv) distributes assets to holders of common stock; or (v) makes a tender offer for all or any portion of its common stock. The Company has the option to redeem the Series A Preferred Stock at any time following five years from the closing date at the greater of (x) $381.25 per share plus all accrued and unpaid dividends or (y) the market value per share at the date of redemption of the common stock into which shares of the Series A Preferred Stock are convertible. The holders have a one-year right to require the Company to redeem shares of Series A Preferred Stock after seven years from the closing date for $381.25 per share, plus all accrued and unpaid dividends thereon, in certain circumstances. Each share of Series A Preferred Stock is entitled to vote on all matters on which holders of common stock are entitled to vote, with each share of Series A Preferred Stock having a number of votes equal to the number of shares of common stock into which the Series A Preferred Stock is convertible. The approval of the holders of two-third of the shares of Series A Preferred Stock is required for the Company to: (i) amend its charter or by-laws so as to adversely effect the rights or preferences of the Series A Preferred Stock; (ii) merge or transfer all or substantially of its assets, reorganize, or take any action that is expected to result in a change of control of the Company or a planned liquidation; (iii) impose material restrictions on the Company's ability to honor the rights of the holders of the Series A Preferred Stock; (iv) authorize or sell any class or series of equity securities (other than stock options pursuant to existing plans or upon the conversion of the Series A Preferred Stock or the exercise of the warrants which ranks senior to, or pari passu with, the Series A Preferred Stock); (v) subdivide or modify any outstanding shares of the Company if the rights of the holders of the Series A Preferred Stock are impaired; or (vi) pay any dividends on any class of stock (other than the Series A Preferred Stock) or redeem or repurchase any equity securities of the Company or its subsidiaries. Warrant Agreement The warrants issued to the Holders are subject to adjustment provisions that are similar to those of the Series A Preferred Stock. The warrants must be exercised before May 11, 2007. Registration Rights Agreement The sale of shares of Series A Preferred Stock, the warrants, and the shares of common stock issuable upon conversion of the Series A Preferred Stock or exercise of the Warrants are not registered under the Securities Act. The Company has entered into a Registration Rights Agreement providing for certain demand registration and unlimited piggy-back registrations, subject to certain limitations. Stockholders Agreement The investors, the Company and certain specified officers of the Company (the "Management Stockholders") entered into a Stockholders Agreement. Among other things, the Stockholders Agreement provides: (i) limitations on transfers of the Company's securities; (ii) the agreement of the parties to vote all securities to elect certain designees to the Company's Board of Directors; and (iii) that certain acts may not be taken without the prior written approval of the directors nominated by the investors. Those acts include (i) hiring or terminating any senior manager of the Company or any subsidiary; (ii) approval of the Company's annual business plan, operating budget and capital budget; (iii) any capital expenditure not reflected in the Company's annual capital budget which would cause the capital budget to be exceeded by $250,000; (iv) consolidation or merger of the Company, sale of all or substantially all of its assets, recapitalization or liquidation of the Company or other acts that could result in a change of control of the Company; (v) authorizing or issuing additional equity securities of the Company, (vi) an acquisition or divestiture in excess of $5,000,000; (vii) incurring indebtedness in excess of $2,500,000; (viii) entering into a transaction with an affiliate; or (ix) increasing the securities available under an employee benefit plan. 7. LEASING ACTIVITIES New Internet Data Centers. On June 6, 2000, the Company announced the signing of a lease on a 52,000 square foot building located in metropolitan Atlanta. The Company will redevelop this building into its second IDC. On July 25, 2000, the Company announced the signing of a lease for a 54,000 square foot building that was under construction as its third IDC, located in the Northern Virginia high tech corridor. These leases required the Company to provide security deposits aggregating approximately $2,086,000 in the form of standby letters of credit, which the Company collateralizes by means of restricted cash funds invested in certificates of deposit. The amounts of these letters of credit may be reduced, at various times and subject to various conditions, to an aggregate of approximately $725,000 by 2010. Sales Office Closed. In July 2000, the Company closed a sales office in Charlotte, NC. The activities of this office have been consolidated with those in Leonia, NJ, and the Company is actively seeking a subtenant for the space, which is not suitable for conversion into an IDC. The Company has accrued approximately $514,000 for future lease payments on this facility through the end of the lease on December 31, 2002. 8. RESTRICTED STOCK AWARD The employment agreement with the Company's CEO provides for an award of 800,000 restricted shares of common stock. Such award vests at various times during the period ending June 15, 2004. The value of these restricted shares ($11,500,000 on the grant date of June 15, 2000) will be amortized ratably over the four year vesting schedule. At the same time, the CEO also purchased 68,446 shares of common stock from the Company at $14.61 per share. As a result of the foregoing, the CEO now owns approximately 15% of the outstanding shares of the Company's common stock. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS, NINE-MONTH PERIODS ENDED JULY 31, 2000 and 1999 On December 18, 1998, the Company, through a wholly-owned subsidiary, acquired certain assets and the business of Enterprise Technology Group, Incorporated (the "Enterprise Purchase"). The Company's subsidiary, ETG, Inc. ("ETG"), provides information technology consulting services with a focus on infra-structure management solutions. With the rapid growth of the Internet, the Company formed a subsidiary during the fiscal year ended October 31, 1999 to meet the exploding requirements of enterprises to outsource their Internet activities into facilities that provide the highest degree of availability and security. The Company retooled a portion of its state-of-the-art data center into an Internet Data Center ("IDC") from which the Company will offer colocation as well as systems and network management services (collectively, the "IDC Services") to companies with mission-critical Internet requirements. On June 6, 2000, the Company announced the signing of a lease on a 52,000 square foot building located in metropolitan Atlanta. The Company will redevelop this building into its second IDC. On July 25, 2000, the Company announced the signing of a lease for a 54,000 square foot building that was under construction as its third IDC, located in the Northern Virginia high tech corridor. Subject to the availability of financing, the Company plans to develop a total of 20 IDCs over the next three years. Initially, the Company had planned to build 20 smaller IDCs over the next two years. As described in Liquidity and Capital Resources, the Company completed the sale of $60 million of securities in a private placement on May 10, 2000. The Company will require additional financing to effect its full plan of developing 20 IDCs over the next three years. During the nine-month period ended July 31, 2000, revenues decreased $7,319,000 (28%) to $19,056,000 from $26,375,000 for the nine-month period ended July 31, 1999. Since Year 2000 compliance was of paramount concern, many companies were reluctant to make any changes with respect to their information technology functions. There was a pronounced decline in requests for proposals ("RFPs") for major outsourcing contracts. With Year 2000 concerns alleviated, there appears to be renewed interest in outsourcing. The potential effect of this renewed interest may not be realized, if at all, until later in the current fiscal year, due to the lengthy sales cycle of a major outsourcing contract. Revenues also were impacted negatively as a result of the redeployment of consultants from providing services for fees to developing a comprehensive suite of IDC Services to attract clients requiring mission-critical Internet solutions. The decline in revenue also reflects the loss of a major publishing client, the absence of Year-2000 related revenues, and income received in fiscal 1999 from a covenant not to compete. As previously reported, the publishing client had given notice in 1997 of its intention to exercise an option to cancel its contract after June 30, 1999 by paying a cash penalty. The decline also reflects the Company's decision to discontinue certain low margin activities that are inconsistent with its current business strategy. Operating costs increased $1,612,000 (9%) to $19,293,000 during the period ended July 31, 2000 compared with $17,681,000 in the period ended July 31, 1999. The increase primarily consists of IDC operating costs and the development of IDC Services to be offered throughout the planned network of IDCs. Selling and promotion costs increased $610,000 (31%) to $2,570,000 during the period ended July 31, 2000 compared with $1,960,000 in the period ended July 31, 1999. The increase is attributable to a larger staff needed to market the Company's IDC Services. General and administrative expenses increased $4,626,000 to $8,393,000 for the period ended July 31, 2000 from $3,767,000 for the nine months ended July 31, 1999, reflecting higher costs associated with the Company's IDC Services activities. Current period expenses also include: $479,000 of amortization of a restricted stock award; an accrual of $514,000 of future lease costs related to a closed sales office; $457,000 of search and other professional fees incurred in connection with entering into an employment agreement with a new CEO; and $120,000 representing the value of warrants issued to extinguish certain rights held by investors in a financing arrangement. Amortization of intangibles acquired in connection with the Enterprise Purchase was $344,000 in the current period versus $267,000 for the nine months ended July 31, 1999. The Company recorded net interest income of $786,000 in the current period, compared with net interest income of $226,000 in the prior period. The increase of $560,000 reflects interest income from a significantly higher average balance of interest-earning assets during the period ended July 31, 2000, offset by interest expense on a larger average outstanding debt balance than in the period ended July 31, 1999. The Company recorded a tax benefit of $984,000 for the nine months ended July 31, 2000 versus a tax provision of $1,225,000 for the nine months ended July 31, 1999. The potential tax benefit for the period ended July 31, 2000 was reduced by a valuation allowance against net tax benefits. The valuation allowance was necessitated by the expectation of continued losses while the Company develops IDCs and IDC services. The Company recorded a net loss of $9,430,000 in the period ended July 31, 2000 versus net income of $1,970,000 for the period ended July 31, 1999. Net loss available to common stockholders after accretion, accumulated dividends, and accrued dividends on preferred stock was $11,289,000 for the nine months ended July 31, 2000. The loss per common share was $2.24 for the period ended July 31, 2000 on both a basic and diluted basis. For the nine months ended July 31, 1999, earnings per share was $0.43 and $0.40 for basic and diluted common shares, respectively. Common stock equivalents were ignored in determining the net loss per share for fiscal 2000, since the inclusion of such equivalents would be anti-dilutive. RESULTS OF OPERATIONS, THREE-MONTH PERIODS ENDED JULY 31, 2000 and 1999 Revenues declined and expenses increased during the three months ended July 31, 2000 versus the three months ended July 31, 1999 for substantially the same reasons as noted above for the changes between the nine-month periods ending on such dates. During the quarter ended July 31, 2000, revenues decreased $3,713,000 (41%) to $5,359,000 from $9,072,000 for the quarter ended July 31, 1999. Operating costs increased $788,000 (13%) to $6,805,000 during the quarter ended July 31, 2000 compared with $6,017,000 in the quarter ended July 31, 1999. Selling and promotion costs increased $163,000 (24%) to $837,000 during the quarter ended July 31, 2000 compared with $674,000 in the quarter ended July 31, 1999. General and administrative expenses increased $2,665,000 to $4,159,000 for the quarter ended July 31, 2000 from $1,494,000 for the three months ended July 31, 1999. Current quarter expenses include: $479,000 of amortization of a restricted stock award; an accrual of $514,000 of future lease costs related to a closed sales office; $457,000 of search and other professional fees incurred in connection with entering into an employment agreement with a new CEO; and $120,000 representing the value of warrants issued to extinguish certain rights held by investors in a financing arrangement. The Company recorded net interest income of $770,000 in the current quarter, compared with net interest income of $48,000 in the prior period. The increase of $723,000 reflects interest income from a significantly higher average balance of interest-earning assets during the quarter ended July 31, 2000, offset by interest expense on a larger average outstanding debt balance than in the quarter ended July 31, 1999. The Company did not record a tax benefit for the quarter ended July 31, 2000 since the ability to carry back losses to generate tax refunds is limited to amounts paid in certain prior periods. Any potential tax benefit for the period ended July 31, 2000 has been reduced by a valuation allowance against net tax benefits. The valuation allowance was necessitated by the expectation of continued losses while the Company develops IDCs and IDC services. The Company recorded a net loss of $5,671,000 in the quarter ended July 31, 2000 versus net income of $636,000 for the quarter ended July 31, 1999. Net loss available to common stockholders after accretion, accumulated dividends, and accrued dividends on preferred stock was $7,529,000 for the quarter ended July 31, 2000. The loss per common share was $1.38 for the quarter ended July 31, 2000 on both a basic and diluted basis. For the quarter ended July 31, 1999, earnings per share was $0.13 for both basic and diluted common shares. Common stock equivalents were ignored in determining the net loss per share for fiscal 2000, since the inclusion of such equivalents would be anti-dilutive. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended July 31, 2000, the Company used net cash in operating activities of approximately $5,531,000, primarily as a result of a pretax loss of $10,415,000, offset by $2,052,000 in net receipts on accounts receivable, the accrual of a lease abandonment loss approximating $514,000 and $2,141,000 in depreciation and amortization. The Company invested $2,906,000 for the purchase of equipment, IDC construction, and other fixed assets; $2,082,000 in real estate security deposits (in the form of fully-collateralized standby letters of credit); and $874,000 for product development and enhancement. The Company also increased short-term investments by $3,694,000. The principal financing activities were (1) a private placement of $60 million of convertible preferred stock and common stock warrants, (2) borrowings of $3,000,000 in convertible notes and $2,000,000 from its line of credit with a bank, and (3) sales proceeds of $2,159,000 from common stock issuances. A private placement of the Company's securities closed on May 10, 2000. The Company issued 157,377 shares of redeemable 8% Series A Cumulative Convertible Participating Preferred Stock (the "Series A Preferred Stock") and warrants to purchase 2,531,926 shares of the Company's common stock at an exercise price of $0.01 per share. The net proceeds to the Company were approximately $58,431,000 after transaction costs. Each share of Series A Preferred Stock maintains a liquidation preference of $381.25 per share, or an aggregate of $60 million for all 157,377 shares, plus accumulated and accrued dividends. Each share of Series A Preferred Stock bears dividends at the rate of $7.625 payable on March 1, June 1, September 1, and December 1 of each year. Such dividends will accumulate and compound quarterly at a rate of 8% per annum for approximately the first three years. Thereafter, dividends may be accumulated and compounded quarterly at 8% per annum or paid in cash, at the option of the Company. Each share of Series A Preferred Stock is convertible initially into ten shares of common stock of the Company at the option of the Purchasers, subject to adjustment provided in the Certificate of Designation. On October 29, 1999, the Company entered into an agreement with a bank for a line of credit of up to $5,000,000. Amounts drawn under this line were payable upon demand and accrued interest (at the Company's option) at either the Prime Rate or 1.25% over the 30, 60, or 90 day LIBOR rate. The line of credit did not have a fixed term, and was secured by a first lien on the Company's accounts receivable and certain general intangibles. On December 27, 1999, the Company borrowed $2,000,000 under the 90-day LIBOR rate option. On March 28, 2000, the Company renewed this note utilizing the 90-day LIBOR rate option. In light of the private placement of securities discussed above, the Company repaid the advance when it became due on June 27, 2000 and cancelled the line. On February 23, 2000, a subsidiary of the Company closed a transaction with three investors (the "Lenders") providing for a series of short-term convertible notes coupled with certain rights to receive equity interests in either the subsidiary or the parent. The Lenders advanced $3 million at the closing. The proceeds were to be used to develop and operate Internet Data Centers. Each note, regardless of when funded, matured on February 25, 2001 and would have borne interest at 6% for the first six months. Thereafter, interest would have increased to 13% in the seventh month and would have risen 1% for each subsequent month that the applicable note remained outstanding. At the option of a Lender, a note outstanding for more than 180 days could have been exchanged for the Company's common stock. An exchanging note holder would have received shares valued at 90% of the average closing price for the ten trading days prior to the exchange. Any or all of the outstanding notes could have been prepaid by the Company without penalty. On May 10, 2000, in connection with the private placement of securities discussed above, the Company repaid the outstanding $3 million plus accrued interest. On June 5, 2000, the Company issued warrants to the Lenders to purchase 30,000 shares of the Company's common stock at $19.25 per share as consideration for the termination of all other potential equity interests in either the parent or the subsidiary held by the Lenders. The warrants expire on June 5, 2004. The fair value of the warrants, calculated using the Black-Scholes pricing model, is included in the statements of operations for the periods ended July 31, 2000. As of July 31, 2000, the Company had cash and equivalents and highly-liquid short-term investments aggregating approximately $52,348,000. The Company believes that the combination of its cash and other liquid assets will provide adequate resources to fund its ongoing operating requirements. The Company has announced plans to develop twenty IDCs in the United States and abroad over the next three years. Initially, the Company had planned to develop 20 smaller IDCs over the next two years. The Company will require additional financing to effect its plan. OTHER MATTERS Certain of the Company's computer systems were reprogrammed to correct what is known as the Year 2000 Problem ("Y2K"). This is a condition whereby a program does not properly interpret a two-digit year, reading "00" as 1900 rather than 2000. As a result, nearly all computer systems, except for the most recent software and hardware versions, may have produced computing errors or failed to function after December 31, 1999. During December 1999, the Company completed its Y2K remediation compliance procedures. Following December 31, 1999, the Company did not encounter any significant problems due to Y2K. The problems that were encountered were few and minor in nature, and were resolved quickly with minimal or no impact on the Company. Internal and external costs specifically associated with Y2K modifications for internal purposes were expensed when incurred. The cost for this activity was approximately $300,000. NEW FINANCIAL ACCOUNTING STANDARDS Derivatives - In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), the effective date of which was deferred for all fiscal quarters of fiscal years beginning after June 15, 2000 by SFAS No. 137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of Effective Date of SFAS No. 133. SFAS 133 establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts, and for hedging activities. This statement is not expected to have a significant impact on the Company's financial position or results of operations. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. As such, final results could differ from estimates or expectations due to risks and uncertainties including, but not limited to: incomplete or preliminary information; changes in government regulations and policies; continued acceptance of the Company's products and services in the marketplace; competitive factors; new products; technological changes; the Company's dependence on third party suppliers; intellectual property rights; and other risks. For any of these factors, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. PART II - OTHER INFORMATION ITEM 4 - Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders of the Company was held on May 8, 2000, at which the following actions were taken: (1) The stockholders approved, by a vote of 3,601,859 shares to none, a resolution to change the name of the Company from Computer Outsourcing Services, Inc. to Infocrossing, Inc. (2) The stockholders approved, by a vote of 3,012,461 in favor to 589,398 against, a resolution to increase the number of authorized common shares to 50,000,000 and the number of authorized preferred shares to 3,000,000. (3) The stockholders approved, by a vote of 3,452,759 in favor to 149,100 against, a resolution to amend the Company's Certificate of Incorporation to remove restrictions on the granting of pre-emptive rights. (4) The stockholders approved, by a vote of 2,906,382 in favor to 695,477 against, the private placement of 157,377 shares of 8% Series A Cumulative Convertible Participating Preferred Stock and Warrants to purchase 2,531,926 shares of common stock for an aggregate purchase price of $60,000,000. (5) The stockholders approved, by a vote of 2,879,481 in favor to 722,378 against, a resolution to amend and restate the Company's 1992 Stock Option and Stock Appreciation Rights Plan to increase the number of shares of common stock for which options may be granted to 2,700,000, and to incorporate all prior amendments. (6) Peter DaPuzzo, Warren E. Ousley, and Howard Waltman were each elected to serve three year terms on the Company's Board of Directors, or until their successors are duly elected and qualified. In each case, the number of shares voted in favor was 3,456,447 and the number of shares withheld was 145,600. Items 1-3 above required a majority of the outstanding shares for approval. Items 5-6 and the election of Directors required a plurality of the shares cast. ITEM 6 - Exhibits and Reports on Form 8-K (a) Exhibits: 3.1A Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Company's Form 10-KSB for the period ended October 31, 1999. 3.1B Certificate of Amendment to the Company's Certificate of Incorporation, filed May 8, 2000, to increase the authorized shares and to remove Article 11, incorporated by reference to the Company's report on Form 10-Q for the period ended April 30, 2000. 3.1C Certificate of Amendment to the Company's Certificate of Incorporation, filed as of June 5, 2000, to change the name of the Company to Infocrossing, Inc., incorporated by reference to the Company's report on Form 10-Q for the period ended April 30, 2000. 3.2 Amended and Restated By-Laws, incorporated by reference to Exhibit 3.2 to the Company's Form 10-KSB for the period ended October 31, 1999. 4.1 Certificate of Designation of the Powers, Preferences and other Special Rights of Series A Cumulative Convertible Participating Preferred Stock, incorporated by reference to the Company's Proxy Statement for the Annual Meeting held on May 8, 2000. 4.2 Registration Rights Agreement by and among Computer Outsourcing Services, Inc.; DB Capital Investors, LP; the Initial Sandler Holders as defined in the agreement; and Zach Lonstein, incorporated by reference to the Company's Proxy Statement for the Annual Meeting held on May 8, 2000. 4.3 Warrant Agreement between Computer Outsourcing Services, Inc. and the Warrantholders Party thereto, incorporated by reference to the Company's Proxy Statement for the Annual Meeting held on May 8, 2000. 4.4 Stockholders Agreement by and among Computer Outsourcing Services, Inc.; DB Capital Investors, LP; the Initial Sandler Holders; and the Management and Non-Management Stockholders listed therein, incorporated by reference to the Company's Proxy Statement for the Annual Meeting held on May 8, 2000. 10.1 Loan and Security Agreement by and among Infocrossing, Inc.; Computer Outsourcing Services, Inc.; Kennedy-Wilson, Inc.; Cahill, Warnock Strategic Partners Fund, LP; and Strategic Associates, LP, incorporated by reference to Exhibit C-1 included in and 8-K filed on April 24, 2000. (a) Exhibits (continued): 10.2 Securities Purchase Agreement dated as of April 7, 2000 by and between Computer Outsourcing Services, Inc.; DB Capital Investors, LP; and certain other purchasers as named therein, incorporated by reference to the Company's Proxy Statement for the Annual Meeting held on May 8, 2000. 10.3 Employment Agreement, dated as of June 15, 2000, between the Company and Charles F. Auster. 10.4 Employment Agreement, dated as of November 1, 1999, between the Company and Zach Lonstein. 10.5 Employment Agreement, dated as of November 1, 1999, between the Company and Robert Wallach. 10.6 Office Lease Agreement dated May 22, 2000 by and between Crocker Realty Trust and the Company. 10.7 Deed of Lease between Beco-Terminal, LLC and the Company, dated July 21, 2000. 27 Financial Data Schedule, filed electronically only. (b) Reports on Form 8-K: The Company filed a Report on Form 8-K on May 24, 2000 to announce the closing of a $60 million private placement of securities. The Company filed a Report on Form 8-K on June 2, 2000 to announce its new name: Infocrossing, Inc. and its new trading symbol: IFOX. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INFOCROSSING, INC. /s/ September 14, 2000 ------------------------------------ Zach Lonstein Chairman /s/ September 14, 2000 ------------------------------------- Nicholas J. Letizia Chief Financial Officer EX-10.3 2 0002.txt EMPLOYMENT AGREEMENT - AUSTER EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of June 15, 2000, between INFOCROSSING, INC., a Delaware corporation (the "Company"), and CHARLES AUSTER, a resident of the State of New Jersey (the "Executive"). RECITALS -------- WHEREAS, the Company desires to secure the services and employment of the Executive on behalf of the Company, and the Executive desires to enter into employment with the Company, upon the terms and conditions hereinafter set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto, each intending to be legally bound hereby, agree as follows: 1. Employment; Duties. The Company hereby employs the Executive as the President and Chief Executive Officer of the Company, and the Executive accepts such employment for the Employment Term specified in Section 3 below. The Executive shall report directly to the Company's Board of Directors (the "Board") and its Chairman. During the Employment Term, the Company shall cause the Executive to be elected as a director of the Company and upon such election, the Executive agrees to so serve. The Executive shall also serve on such committees of the Board as requested by the Board. During the Employment Term, the Executive shall serve in such capacity, exercise such powers and perform such duties as are customarily and ordinarily required of chief executive officers of similar companies, and shall have such other powers and perform such other duties as may from time to time be assigned to him by the Board. 2. Performance. The Executive shall serve the Company faithfully and to the best of his ability and shall devote substantially all of his business time, energy, experience and talents to the performance of his duties hereunder; provided, however, that it shall not be a violation of this Agreement for the Executive to manage his personal finances, investments and business affairs, or to engage in or serve such civic, community, charitable, educational, or religious organizations as he may reasonably select. The Executive shall also be permitted to sit on the Board of the companies or other organizations as shown on Exhibit A attached hereto and of such other companies as the Board shall approve, such approval not to be unreasonably denied. 3. Employment Term. The Executive's employment under this Agreement shall be effective commencing June 15, 2000 (the "Commencement Date"), and, subject to termination of employment pursuant to Section 8 hereof, continue for a period of two years until June 15, 2002, provided that, on June 15, 2002, and on each subsequent second anniversary thereof, unless the Company or the Executive provides written notice to the other party of his or its intention not to renew no later than 60 days prior to June 15, 2002, or such subsequent anniversary, as applicable, and subject to termination of employment pursuant to Section 8 hereof, the term of employment under this Agreement shall be automatically renewed for an additional period of two years. The term of employment hereunder shall be the "Employment Term." 4. Compensation and Benefits. (a) Base Salary. During the Employment Term, the Company shall pay the Executive a base salary, payable in equal installments in accordance with normal Company procedures, at an annual rate of Three Hundred Seventy Five Thousand US Dollars ($375,000) (the "Base Salary"). The Base Salary shall be reviewed periodically, but not less than annually, by the Board or the Compensation Committee thereof and may be increased, but not decreased, from time to time by the Board or such Committee. (b) Performance Bonus. During the Employment Term, the Executive shall also be eligible to receive an annual performance-based cash bonus (the "Performance Bonus") of up to One Hundred Eighty Seven Thousand Five Hundred US Dollars ($187,500) based upon satisfaction of performance criteria to be mutually agreed to by the Executive and the Board (or the Compensation Committee of the Board). The determination of whether the Executive is entitled to payment of the Performance Bonus shall be made by the Board (or the Compensation Committee of the Board) in its good faith discretion. (c) Restricted Stock Award. (i) On the Commencement Date, the Company shall award the Executive Eight Hundred Thousand (800,000) shares of the Company's common stock (the "Restricted Shares"), which shares shall be nontransferable and subject to forfeiture or repurchase as described in this Section 4(c). Subject to the remaining provisions of this Section 4(c) and Sections 6 and 7 hereof, the Restricted Shares shall vest and become transferable and nonforeitable in an amount equal to 25% of the total number of Restricted Shares on the first anniversary of the Commencement Date and, with respect to the remaining 75% of the total number of Restricted Shares, shall vest monthly after such first anniversary in equal ratable amounts, such that subject to the remainder all such Restricted Shares shall be vested on June 15, 2004. Subject to Sections 6 and 7 hereof, the Restricted Shares shall become fully vested upon (1) the occurrence of a "Change of Control" (as defined below) or (2) the termination of the Executive's employment with the Company due to termination (x) by the Company other than for "Cause" (as defined below) or "Non-Performance" (as defined below) and other than his death or Disability (as defined below), or (y) by the Executive for "Good Reason" (as defined below). In addition, subject to Sections 6 and 7 hereof, (x) if the Company terminates the Executive's employment for Non-Performance, 50% of any then unvested Restricted Shares shall be forfeited and the remaining then unvested Restricted Shares shall become fully vested, and (y) if the Executive's employment with the Company terminates due to death or Disability, 25% of the Restricted Shares, or the portion theretofore vested, if greater, shall be fully vested. For avoidance of doubt, (x) non-renewal by the Company of the Employment Term (other than a non-renewal which is expressly stated to be for Cause, Non-Performance or Disability) upon the expiration of the initial term of employment shall be deemed to be a termination of the Executive's employment other than for Cause, Non-Performance or Disability for purposes of the vesting of Restricted Shares described herein, and (y) non-renewal by the Executive of the Employment Term which is expressly stated to be for Good Reason shall be treated in the same manner as if the Executive had acted to terminate the Employment Term for Good Reason immediately prior to the expiration of the Employment Term. (ii) All unvested Restricted Shares that do not vest in accordance with paragraph (i) of this Section 4(c) shall, (x) upon termination of the Executive's employment with the Company due to Non-Performance, death or Disability, be immediately deemed to be repurchased by the Company for an amount equal to the sum of (A) the pro rata portion of the principal amount of any loan described in paragraph (iii) of this Section 4(c) that is applicable to such shares in accordance with the relationship number of shares to be repurchase (or deemed repurchased) bears to the initial 800,000 Restricted Shares and (B) an amount equal to all interest actually paid on such portion of such principal amount through the date on which such portion of such principal amount is repaid, and such Restricted Shares shall be immediately deemed to revert to the Company and canceled; or (y) upon termination of the Executive's employment with the Company under for Cause or upon voluntary termination by the Executive of his employment other than for Good Reason, be immediately forfeited and be immediately deemed to revert to the Company and canceled (in case of either clause (x) or (y), without further action by the Company or the Executive). (iii) The Executive shall be personally liable for satisfaction of any taxes incurred upon the vesting of the Restricted Shares or upon such earlier date as the Executive, in his discretion, makes an election under section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), with respect to such Restricted Shares, or any portion thereof. The Company shall loan to the Executive on a full recourse basis a sum of money equal to 50 percent of any such tax payable as a result of such an election under Code section 83(b) with respect to the Restricted Shares, and any such loan shall bear interest at the rate specified by Code section 1274 and, subject to the clause (x) of the first sentence of paragraph (ii) of this Section 4(c), shall be payable at the time and to the extent that the Executive sells or otherwise transfers or obtains liquidity with respect to the Restricted Shares (based on proportion of the total number of vested Restricted Shares held by the Executive immediately prior to such event that are so sold, transferred or liquidated) and shall be subject to such other terms and conditions determined by the Company to be appropriate to comply with applicable laws and regulations. (iv) If it shall be determined that any payment to the Executive pursuant to this Agreement would be subject to any excise tax imposed by Code section 4999, or any similar tax payable under any United States federal, state or local law ("Section 280G Taxes"), then the Executive shall receive a Tax Gross-Up Payment with respect to all such Section 280G Taxes. For purposes of this Agreement, "Tax Gross-Up Payment" shall mean the an additional amount equal to the amount of the Section 280G Taxes payable in respect of any amounts (other than the Tax Gross-Up Payment) due under this Agreement. (v) For purposes of this Agreement, a "Change of Control" shall occur upon the first to occur of (x) a third party, other than Zach Lonstein, DB Capital Investors, L.P. or an affiliate thereof ("DB Capital"), or Sandler Capital Management or an affiliate thereof ("Sandler" and, together with Zach Lonstein and DB Capital, the "Control Group"), owning capital stock of the Company representing in excess of 50% of the aggregate voting power of the Company or the surviving entity, (y) (A) the Control Group, in the aggregate, owning a number shares of Common Stock of the Company (calculated on a fully diluted basis) which is less than 25% of the number shares of Common Stock of the Company (calculated on a fully diluted basis) owned by the Control Group on the date hereof, and (B) another person or "group" of persons (as defined pursuant to Section13(d) of the Securities Exchange Act of 1934, as amended) owning a greater percentage of the Common Stock of the Company (calculated on a fully-diluted basis) than does the Control Group, in the aggregate, or (z) a majority of the Board (or similar governing body) of the Company (or any successor or surviving entity) being comprised of Directors who are not Continuing Directors. For purposes of this Agreement, "Continuing Directors" shall mean, with respect to any entity, as of the date of determination, any person (x) who was a member of the Board of the Company on June 15, 2000, or (y) who was nominated for election or elected to the Board (or similar governing body) of such entity with the affirmative vote of a majority of the Continuing Directors who are members of the Board (or similar governing body) of such entity at the time of such nomination or election. (d) Employee Benefits. During the Employment Term, the Executive shall, in accordance with the applicable plan documents and applicable laws, be eligible to participate in such retirement, medical, dental and other employee benefit plans and programs and fringe benefit plans as the Company has in effect from time to time, at a level consistent with his position as a senior executive of the Company. (e) Vacation. During the Employment Term, the Executive shall be entitled to four (4) weeks paid vacation in accordance with the Company's policies. (f) Indemnification. The Company shall indemnify and hold harmless the Executive to the extent provided in the Certificate of Incorporation and the By-Laws of the Company and the Delaware General Corporation Law, as amended and as applicable, for any action or inaction taken or omitted to be taken by the Executive in good faith while serving as an officer and director of the Company. The Company shall cover the Executive under directors and officers liability insurance during the Employment Term in the same amount and to the same extent as the Company covers its other officers and directors. (g) Business Expenses. The Executive shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the performance of his duties hereunder in accordance with policies established by the Company from time to time and upon receipt of appropriate documentation. 5. Stock Investment. On or prior to the Commencement Date, the Executive shall invest ----------------- his personal funds in the purchase of 68,446 shares of the common stock of the Company at a purchase price of $14.61 per share (the "Stock Investment"). ---------------- 6. Repurchase Option. Upon the occurrence of a Change of Control or a sale or other disposition of all or substantially all of the assets of the Company (including upon a liquidation or dissolution of the Company), if the Company's common stock is valued at less than $14.61 per share (on a fully-diluted basis) in such transaction, the Company (and to the extent the Company is unable or determines not to exercise this option, DB Capital Partners, L.P. and Sandler Capital Management (or their designated affiliates) on a pro rata basis) shall have the right, but not the obligation, to purchase all of the vested Restricted Shares at an aggregate purchase price equal to the sum of (x) the amount expended by the Executive in order to pay any income taxes with respect to such vested shares and (y) an amount equal to all interest actually paid on such portion of such principal amount through the date on which such portion of such principal amount is repaid, reduced, if the Company exercises the option, by the outstanding balance of any loan referred to in Section 4(c)(iii) hereof, which shall be forgiven upon any such purchase. 7. Stockholders Agreement. The Restricted Shares shall be subject to the terms and conditions of the Amended and Restated Stockholders Agreement, dated as of June 15, 2000, by and among the Company and the stockholders signatory thereto, attached hereto as Exhibit B, as such agreement may thereafter be amended from time to time (the "Stockholders Agreement"), to which the Executive shall be a party. 8. Termination. (a) Events of Termination. The employment of the Executive hereunder and the Employment Term shall terminate as provided in Section 3 hereof or, if earlier, upon the earliest to occur of any of the following events: (i) the death of the Executive; (ii) the termination of the Executive's employment by the Company due to the Executive's Disability pursuant to Section 8(b) hereof; (iii)the termination of the Executive's employment by the Executive for Good Reason pursuant to Section 8(c) hereof, (iv) the termination of the Executive's employment by the Company for reasons other than Cause, Non-Performance or Disability upon thirty (30) days prior written notice; (v) the termination of employment by the Executive without Good Reason upon sixty (60) days prior written notice to the Company; or (vi) the termination of the Executive's employment by the Company for Cause or for Non-Performance pursuant to Section 8(d) hereof. (b) Disability. In the event of the Executive's Disability, the Company shall be entitled to terminate the Executive's employment hereunder by delivery to the Executive of a written notice of termination for Disability, effective upon the date which is stated in such notice. The term "Disability" shall mean the inability of the Executive to substantially perform his duties hereunder by reason of a medically determinable physical or mental impairment, which can reasonably be expected to continue for at least 120 days, as determined by the Board in its good faith discretion. Any dispute as to whether or not the Executive is Disabled within the meaning of the preceding sentence shall be resolved by a physician reasonably satisfactory to the Executive and the Board, and the determination of such physician shall be final and binding upon both the Executive and the Company. (c) Good Reason. (i) The Executive may terminate his employment hereunder for Good Reason by written notice to the Company given within thirty (30) days after the occurrence of a Good Reason event described in paragraph (ii) of this Section 8(c), unless such circumstances are substantially corrected prior to the date of termination specified in such notice of termination for Good Reason. Any such notice shall state the specific Good Reason event set forth in paragraph (ii) of this Section 8(c) relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination for Good Reason, and shall provide for a date of termination not less than thirty (30) nor more than sixty (60) days after the date such notice is given. (ii) For purposes of this Agreement, "Good Reason" shall mean any of the following: (1) without the express written consent of the Executive, (x) any diminution by the Company of the Executive's title or position (including, without limitation, not being the chief executive officer of the parent company if the Company becomes a nonpublic subsidiary of another entity) or (y) the assigning to the Executive of any duties inconsistent with the Executive's existing position, authority, duties or responsibilities (except, in any case, as a result of a prior termination of the Executive's employment for Cause or due to Disability); (2) at any time after a Change of Control, a reduction by the Company in the Executive's base salary or target bonus entitlements; (3) any material breach or non-observance by the Company of any material provision of this Agreement; (4) the relocation of the headquarters of the Company more than fifty (50) miles from Leonia, New Jersey or relocation of the Executive's principal work location from such location, without the Executive's express written consent; or (5) failure to elect or re-elect the Executive as a director of the Company, or any removal of the Executive from the Board. (d) Cause or Non-Performance. (i) The Executive's employment hereunder may be terminated by the Company for Cause or for Non-Performance upon delivery to the Executive of a written notice of termination for Cause or for Non-Performance that shall indicate the specific termination provision set forth in paragraph (ii) or (iii) of this Section 8(d) relied upon and shall set forth in reasonable detail the facts and circumstances which provide for a basis for such termination for Cause or Non-Performance. The effective date of such a termination for Cause or for Non-Performance shall be the date indicated in such notice; provided, however, that the Executive's employment shall not terminate if he cures the circumstances otherwise resulting in Cause or Non-Performance to the extent permitted, and within the applicable time periods provided, in paragraph (ii)(1), (ii)(4) or (iii) of this Section 8(d). (ii) For purposes of this Agreement, "Cause" shall mean (1) the Executive's willful failure to attempt to properly discharge his lawful duties, or any breach or non-observance by the Executive of any material provision of this Agreement, which is not fully rectified or cured, if susceptible to rectification or cure, within thirty (30) days after written notice is given to the Executive; (2) the Executive's conviction of, or plea of nolo contendere to, a felony or any misdemeanor constituting an act of fraud or moral turpitude; (3) addiction to, or continuing excessive use of, alcohol or drugs on the part of the Executive; (4) the Executive having excessively absented himself from his duties of employment which is not rectified by the Executive within a period of five (5) days after written notice is given to the Executive, other than absences incurred or sustained (x) by leave of the Company or (y) because of physical or mental incapacity; (5) the Executive's material breach of his fiduciary duty of care to the Company or the Executive's breach of any other fiduciary duty owed by the Executive to the Company; or (6) breach by the Executive of the non-competition/non-solicitation provisions contained in Sections 10 and 11 of this Agreement. (iii) For purposes of this Agreement, "Non-Performance" shall mean the occurrence, prior to June 15, 2002, of each of (x) the failure by the Executive, after 30 days' written notice and opportunity to cure (to the extent the circumstances are susceptible to being cured by the Executive), to cause the Company to attain in all material respects the objectives set forth in an annual operational plan to be reasonably approved by the Board and the Executive, as such annual operational plan shall be modified from time to time by mutual agreement of the Board and the Executive to take account of strategic and other material developments in the Company's operating environment and business, and (y) the failure of the ten-day floating average of the closing prices of the Company's common stock ending on the determination date to be at least equal to $43.83. 9. Severance. (a) If the Executive's employment with the Company and the Employment Term terminate by reason of termination by the Executive of his employment for Good Reason or termination by the Company of the Executive's employment, including as a result of notice of nonrenewal of the Employment Term by the Company in accordance with Section 3 hereof, and such termination is not for Cause or Non-Performance and is not due to Disability or death, the Company shall have no liability or further obligation to the Executive except as follows: the Executive shall be entitled to receive (i) within thirty (30) days of such termination of employment, any earned but unpaid Base Salary and any unreimbursed business expenses payable pursuant to Section 4(g) for the period prior to termination and any unpaid Performance Bonus for any prior completed fiscal year (the "Entitlements"); (ii) within thirty (30) days of such termination of employment, a severance payment equal to two hundred percent (200%) of the sum of (x) the Executive's then-current annual Base Salary and (y) the Performance Bonus earned by the Executive for the immediately preceding fiscal year (the "Severance Payment"); provided that, notwithstanding anything to the contrary set forth herein, prior to the first anniversary date of this Agreement, the Severance Payment shall be deemed to be $1,120,000; and (iii) at the time provided in such plan, any rights to which he is entitled in accordance with plan provisions under any employee benefit plan, program or arrangement, or any fringe benefit, incentive or stock option plan of the Company in which he participates at the time of such termination ("Rights"). As a condition of receiving the payments provided for under this Section 9(a), the Executive agrees to execute a release releasing the Company and any of its affiliates from any and all obligations and liabilities to the Executive arising from or in connection with the Executive's employment or termination of employment with the Company and any of its affiliates and any disagreements with respect to such employment, except that such release shall not release the Company from its obligation to pay the Executive the Entitlements, the Severance Payment, and the Rights provided for in this Section 9(a). (b) If during the Employment Term, the Executive's employment is terminated for any reason other than as provided in Section 9(a) (including death, termination of the Executive by the Company for Cause, Non-Performance or Disability or termination by the Executive without Good Reason or his delivery of a notice of nonrenewal in accordance with Section 3 hereof), the Company shall have no liability or further obligation to the Executive except as follows: the Executive (and his estate or designated beneficiaries under any Company-sponsored employee benefit plan in the event of his death) shall be entitled to receive any Entitlements and any Rights at the time provided in the relevant plans. 10. Covenants of the Executive. (a) During the Employment Term and, to the extent that the Executive's employment is terminated for Cause or Disability (including, without limitation, through the delivery by the Company of a notice of nonrenewal in accordance with Section 3 hereof which specifically states such grounds), or the Executive voluntarily terminates his employment other than for Good Reason, for a period of one (1) year after such termination, (i) the Executive shall not, in any jurisdiction world-wide, be employed by or participate in the ownership, management, operation or control of any business of the type and character engaged in or competitive with that conducted by the Company or any of its affiliates and (ii) the Executive shall not solicit, in competition with the Company, any person who is or was, at any time within the six (6) months prior to the Executive's termination of employment with the Company, a customer of the business conducted by the Company or any of its affiliates. During the Employment Term and for two (2) years thereafter, the Executive shall not, directly or indirectly, on his own behalf or on behalf of others, employ, solicit for employment or otherwise contract for the services of any employee of the Company or any of its affiliates at the time of this Agreement or who shall subsequently become an employee of the Company or any of its affiliates or encourage any employee or consultant of the Company or any of its affiliates to leave the employ or service of the Company, nor shall the Executive assist or encourage any person or entity to do any of the foregoing. For purposes of this Agreement, (v) the scope of businesses areas within which the Executive has agreed not to compete pursuant to clause (a)(i) of this Section 10 shall, for any challenged activity of the Executive, be determined with reference to the Company's activities during the Employment Term; (w) nothing contained herein shall prevent the Executive from becoming affiliated as an officer, director or in any other capacity with a charitable organization; (x) the Executive's ownership of securities of five percent (5%) or less of any publicly traded class of securities of a public company shall not be considered to be competition with the Company; (y) the Executive's passive ownership of equity interests in any entity (without other participation in the management or other affairs of such entity) not exceeding 20% of the outstanding capital stock of such entity, with respect to which (A) at the time of the initial investment, such ownership does not violate the terms of Section 10 of this Agreement (without reference to this clause (y)), (B) such entity engages after the date of such initial investment in activity (the "Competing Activity") which would cause the Executive's ownership of an equity interest in such entity to be violative of this Section 10, and (C) after the commencement of the Competing Activity, the Executive's ownership of equity interests in such entity (I) continues to be passive (without other participation in the management or other affairs of such entity) and (II) the Executive takes no affirmative action to increase his ownership interest in such entity; and (z) the Executive's passive ownership of equity interests in a private venture capital fund or other private investment fund (each a "Fund") which such ownership (A) does not exceed a 20% profits or voting interest in such Fund, and (B) does not entitle the Executive to manage or direct, or participate in the management or directions of, the management, business, affairs or investment decisions of such Fund (it being understood that the Executive shall not participate in the management, business, affairs or investment decisions of any such Fund). (b) During the Employment Term and thereafter, the Executive agrees to hold in strictest confidence and to not directly or indirectly publish, disseminate or otherwise disclose or allow to be disclosed, any "Confidential Information" (as defined below); provided, however, that the Executive shall have no obligation to maintain in confidence any information that is or becomes publicly available through no fault of the Executive. "Confidential Information" shall mean business or proprietary information (including, without limitation, business plans, financial information and other subject matter pertaining to any business of the Company or any of its affiliates) that is not commonly known in the industry. Confidential Information shall also include, for example and without limitation, confidential knowledge, data, financial information or data, marketing techniques and material, business plans, methods and strategies (whether or not patentable or reduced to practice), business operations and systems, software, computer code, flow charts, pricing policies, information concerning employees, customers and/or vendors, trade secrets, discoveries, inventions (whether or not patentable or reduced to practice), improvements, research, scientific engineering information, development, databases, know-how, show-how, designs, products, compositions, original works of authorship, prototypes, maskworks, physical materials, manufacturing processes and other information disclosed or submitted orally, in writing, or by any other media. The Confidential Information as set forth above may be in any form, including but not limited to, any intangible form such as unrecorded knowledge, information, ideas or concepts, or may be embodied in equipment or other tangible form such as documents, drawings, photographs, computer code, software or other printed or electronic media. (c) The Executive agrees that a breach of his obligations contained in Sections 10 or 11 of this Agreement would cause irreparable damage to the Company and any of its affiliates, the exact amount of which will be difficult to ascertain and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that if he breaches any of the covenants contained in Sections 10 or 11 of this Agreement, in addition to any other remedy which may be available at law or in equity, the Company shall be entitled to specific performance and injunctive relief, without a showing that monetary damages will not provide an adequate remedy and without being required to post a bond. (d) The Company and the Executive further acknowledge that the time, scope, geographic area and other provisions of this Section 10 have been specifically negotiated by sophisticated commercial parties and agree that all such provisions are reasonable under the circumstances of the activities contemplated by this Agreement. In the event that any provision in this Section 10 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a time period or over too great a geographical area or by reason of its being too extensive in any other respect, it shall be interpreted to extend only over the maximum period of time for which it may be enforceable and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action. (e) During the Employment Term and thereafter, the Executive and the Company and its controlled affiliates agree not to make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally or otherwise, or take any action which may, directly or indirectly, disparage or negatively reflect upon the Company or any of its controlled affiliates or their respective officers, directors, employees, advisors, businesses or reputations or the Executive and his reputation, respectively. (f) The Executive recognizes that the Company may have received, and in the future will receive from third parties, Confidential Information that subjects the Company to a duty to maintain the confidentiality of such information and to use it only for certain limited purposes. The Executive agrees that he owes the Company, during the Employment Term and thereafter, a duty to hold all such Confidential Information in the strictest confidence; provided, however, that the Executive shall have no obligation to maintain in confidence any information: (i) that is or becomes publicly available through no fault of the Executive; or (ii) that is obtained by the Executive from a third party that is lawfully in possession of such information and that provided such information to the Executive without any obligation of confidentiality or without restriction or without being in violation of any contractual or legal obligation with respect to such information. (g) The Executive agrees that, at the time of leaving the employ of the Company, the Executive will promptly deliver to the Company (and will not keep in his possession or deliver to anyone else) any and all tangible or intangible items containing materials or information belonging to the Company or any of its affiliates, including but not limited to documents, computer code, computer software, computer disks, machine readable codes, data, devices, records, photographs, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, memoranda, other documents or property (including, without limitation, materials relating to intellectual property or Confidential Information as defined in this Section 10) or reproductions of any aforementioned items. (h) The Executive agrees to reasonably cooperate with the Company, during the Employment Term and for a reasonable period of time thereafter, by making himself reasonably available to testify in matters involving the Company or any of its affiliates in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, relating to activities occurring during the Employment Term and to assist the Company or any of its affiliates, in any such action, suit or proceeding, as reasonably requested, and the Company shall pay or reimburse reasonable expenses, costs and fees incurred by the Executive to provide such cooperation (against reasonable documentation therefor in accordance with Company policies). 11. Intellectual Property Rights. (a) The Executive agrees to disclose to the Company any and all inventions, improvements, discoveries, techniques, processes, formulae, programs, methods, products and processes, artistic works and the like, and all other intellectual property relating to the business of the Company and any of its affiliates, including, but not limited to, computer programming and/or the development of software or computer applications used by the Company which are invented, discovered, performed, perfected or learned by the Executive either solely or jointly with others during the Employment Term, and same will be the sole and absolute property of the Company or any of its affiliates. The Company or any of its affiliates in their sole discretion will determine whether to seek patent, trademark, copyright or other intellectual property protection. (b) During the Employment Term and thereafter, the Executive shall execute such documents in connection with domestic and foreign intellectual property applications (including, without limitation, divisional, continuing, reissue and extension applications for patent applications) as the Company requests and shall transfer to the Company or any of its affiliates by written assignment all his right, title and interest in and to such inventions, improvements, discoveries, techniques, formulae, programs, methods, processes and other intellectual property and any such intellectual property applications and any registrations granted thereon (or patents issued thereon), including extensions, renewals and reissues thereof, and will testify in legal proceedings, sign papers, make all lawful oaths and otherwise reasonably assist the Company and any of its affiliates to perfect, maintain and enforce the same in any jurisdiction. (c) All work performed by the Executive in (i) creating, developing, modifying, enhancing and maintaining computer programs, databases and the like and/or (ii) creating, developing or modifying artistic works and/or other works to which copyright protection may attach during the course of the Executive's employment with the Company shall be considered "works made for hire" to the extent permitted under applicable copyright law and will be considered the sole property of the Company and its affiliates. To the extent such works are not considered "works made for hire," all right, title and interest to such works, including, but not limited to, the copyright, is hereby assigned to the Company or any of its affiliates and the Executive agrees to execute any necessary documents requested by the Company or any of its affiliates at any time in relation to said assignment as deemed reasonably necessary by the Company. (d) After termination of employment, the Executive will cooperate with the Company and any of its affiliates in the completion of any invention, improvement, discovery, techniques, formulae, program, method or process that is assignable or assigned hereunder to the Company or its affiliates, and in the protection and enforcement of the rights and property of the Company and its affiliates in said inventions, improvements, discoveries, techniques, formulae, programs, methods and processes, applications for patents therefor and patents granted thereon and any other intellectual property (including, without limitation, trademarks and copyrights). The Executive shall be paid reasonable compensation by the Company for the foregoing services, which "reasonable compensation" shall be determined by agreement between the Company and the Executive on a case, by case basis. (e) The Executive acknowledges and agrees that the Company or any of its affiliates is and will be the sole and absolute owner of all trademarks, service marks, domain names, patents, copyrights, trade dress, trade secrets, business names, inventions, proprietary know-how and information of any type, whether or not in writing, and all other intellectual property of the Company or any of its affiliates used in connection with their business. The Executive further acknowledges and agrees that any and all derivative works based on intellectual property subject to this Section 11, created during the Employment Term shall be exclusively owned by the Company or any of its affiliates. (f) Nothing in this Agreement shall be construed to grant the Executive any right, title or interest in, or any license (express or implied) to perform, practice, distribute, display or otherwise use any intellectual property owned or used by the Company or any of its affiliates except solely in the course of his employment with the Company. 12. Notice. Any and all notices referred to hereunder shall be sufficient if furnished in writing, delivered by hand, or sent by registered or certified mail, telex or facsimile copier to the following addresses: If to the Executive, to him at his address as set forth from time to time on the books and records of the Company, with a copy to: Benesch, Friedlander, Coplan & Aronoff LLP 2300 BP Tower 200 Public Square Cleveland, Ohio 44114-2378 Attn: Michael F. Wager, Esq. Telephone: (216) 363-4500 Fax: (216) 363-4588 If to the Company: Infocrossing, Inc. 2 Christie Heights Street Leonia, New Jersey 07605 Attn: Nicholas J. Letizia Chief Financial Officer Telephone: (202) 840-8717 Fax: (202) 840-7126 Notice shall be deemed received when actually received if by hand delivery, one business day after sending if by telex or facsimile, and three business days after sending if by mail. 13. General. (a) Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York applicable to contracts executed and to be performed entirely within said State. Any judicial proceeding brought against any of the parties to this Agreement or any dispute arising out of this Agreement which is enforceable in a court, consistent with the provisions of Section 13(f) hereof, may be brought in the courts of the State of New York or any United States District Court located in the Borough of Manhattan and, by execution and delivery of this Agreement, each of the parties to this Agreement accepts the jurisdiction of said courts, and irrevocably agrees to be bound by any final and non-appealable judgment rendered thereby in connection with this Agreement. The foregoing consent to jurisdiction shall not be deemed to confer rights on any person other than the respective parties to this Agreement. (b) Agreements and Representations of the Executive. The Executive agrees to verify any proper document required to carry out the terms of this Agreement. The Executive represents that his performance of all the terms of this Agreement will not breach any agreement to keep in confidence Confidential Information acquired by the Executive, and the Executive has not entered into, and agrees that he will not enter into, any oral or written agreement in conflict herewith. (c) Assignment, Binding Effect. The Executive may not assign his interest in or delegate his duties under this Agreement without the prior written consent of the Company. This Agreement is for the employment of the Executive, personally, and for the services to be rendered by him which must be rendered by him and no other person. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns. (d) Construction and Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired, and the parties undertake to implement all efforts which are necessary, desirable and sufficient to amend, supplement or substitute all and any such invalid, illegal or unenforceable provisions with enforceable and valid provisions which would produce as nearly as may be possible the result previously intended by the parties without renegotiation of any material terms and conditions stipulated herein. (e) Entire Agreement, Modification. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, supersedes all prior agreements and undertakings, both written and oral, and may not be modified or amended in any way except in writing signed by the parties hereto. (f) Duration, Survival. Notwithstanding the Employment Term hereunder, this Agreement shall continue for so long as any obligations remain under this Agreement. The covenants set forth in Sections 10 and 11 of this Agreement shall survive and shall continue to be binding upon the Executive as provided in Sections 10 and 11 of this Agreement. The covenants set forth in Sections 10 and 11 of this Agreement shall be deemed and construed as separate agreements independent of any other provision of this Agreement. The existence of any claim or cause of action by the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any or all such covenants. (g) Waiver. No waiver by either party hereto of any of the requirements imposed by this Agreement on, or any breach of any condition or provision of this Agreement to be performed by, the other party shall be deemed a waiver of a similar or dissimilar requirement, provision or condition of this Agreement at the same or any prior or subsequent time. Any such waiver shall be express and in writing, and there shall be no waiver by conduct. (h) Counterparts. This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one instrument. IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have hereunto executed this Agreement as of the day and year first written above. INFOCROSSING, INC. Date: By: ---------------------- ----------------------------- Name: Title: Date: -------------------------------- ---------------------- Charles Auster Exhibit A --------- DIRECTORSHIPS OF THE EXECUTIVE 1. NextSet Software, Inc. 2. BroadBeam, Inc. [NetTech Systems, Inc.] 3. NetCruise.com, Inc. EX-10.4 3 0003.txt EMPLOYMENT AGREEMENT - LONSTEIN EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, dated as of the 1st day of November, 1999 (the "Agreement"), between Computer Outsourcing Services, Inc., a Delaware corporation (the "Company"), and Zach Lonstein ("Executive"); WHEREAS, the Company and Executive are currently parties to an Employment Agreement dated as of January 1, 1995 (the "Old Employment Agreement"); WHEREAS, the Company and Executive desire to terminate the Old Employment Agreement as of the date hereof and enter into a new employment agreement; and WHEREAS, the Company and the Executive now desire to enter into the Agreement, in order to memorialize the terms and conditions of Executive's relationship with the Company. NOW, THEREFORE, in consideration of the premises and mutual covenants herein set forth, the parties hereto agree as follows: 1. Termination of Old Employment Agreement; Employment; Election to Board of Directors. ---------------------------------------------------- (1) The Old Employment Agreement is hereby terminated. (2) The Company hereby employs Executive to render services as the Chairman of the Board and Chief Executive Officer of the Company. (3) During the Term of this Agreement (as hereinafter defined), the Company shall nominate the Executive to serve as a member of the Board of Directors of the Company and the Company's Chairman of the Board to be elected at each annual meeting of stockholders of the Company (and any special meeting of stockholders at which directors are to be elected) held during each year of the Term of this Agreement. 2. Position and Duties. ------------------- 1. -5- 249832.4 The Executive shall have such responsibilities, perform such duties and have such authorities as is consistent with his position as the Chairman of the Board and Chief Executive Officer of the Company, reporting to, and subject only to the direction and control, of the Board of Directors of the Company (the "Board"). Executive hereby accepts such employment and agrees to render his services (unless prevented by sickness, injury or other incapacity) fully, faithfully, and to the best of his ability. Executive's services shall be exclusive to the Company, except that Executive may engage in charitable and community activities and give attention to his outside investment interests so long as such activities do not interfere with the performance of his duties hereunder. Executive may also serve as a member of the board of directors of other unaffiliated corporations so long as Executive's service on such boards of directors does not interfere with the ability of Executive to perform his duties hereunder. 3. Place of Employment. ------------------- The Company agrees that Executive will be located, and will render such services (subject to necessary and appropriate business related travel), at the Company's offices in Leonia, New Jersey. 4. Term. ---- The term of Executive's employment with the Company under this Agreement shall be for a continuous period of three (3) years (the "Term"). The Term shall initially commence on November 1, 1999 and end on October 31, 2002, but at the end of each day beginning with October 31, 2001, the Term shall automatically be extended by one additional day unless the Company or the Executive shall give written notice to the other of his or its intention, as the case may be, not to extend the Term; it being the intention of the parties that the Term of Executive's employment shall at all times after October 31, 2001 have an unexpired Term of one (1) year unless either party has theretofore given written notice in accordance herewith. 5. Compensation and Benefits. ------------------------- (1) Base Salary. During the first year of the Agreement, the Company shall pay to the Executive a base salary (the "Base Salary") of $375,000. For each year thereafter during the Term, the Executive's Base Salary shall be increased by an amount equal to the greater of (i) five percent (5%) or (ii) as the compensation committee of the Board shall otherwise determine, and the Base Salary as thereafter increased shall be the Base Salary for all purposes of this Agreement. Once established at any specified rate, the Executive's Base Salary shall not be reduced. The Base Salary shall be payable to the Executive in installments on the Company's normal payroll dates, but not less frequently than twice a month. (2) Bonus. During each year of the Term, the Executive shall be entitled to a bonus (the "Bonus") of the greater of (i) up to one hundred percent (100%) of the Executive's then Base Salary, or (ii) as the compensation committee of the Board shall otherwise determine, in either case such bonus shall be based upon parameters to be determined by the compensation committee of the Board during each year of the Term. The Bonus as determined for each year during the Term shall be paid to Executive not later than ninety (90) days following the end of such year. (1) (3) Withholding Taxes. Payments of Base Salary and Bonus shall be subject to all withholding taxes. (4) Options. Subject and pursuant to the terms and conditions of the Company's 1992 Stock Option and Stock Appreciation Rights Plan (the "Plan"), the Company agrees to promptly cause to be granted to the Executive the right and option to purchase up to 150,000 shares of common stock (the "Options") of the Company, par value $.01 per share ("Common Stock"), to be issued as provided in the Plan. All such Options shall be non-qualified stock options, shall have a term of ten (10) years from the date of grant, shall be exercisable for at least one (1) year after the date of the Executive's termination of employment with the Company for any reason, other than Cause (as hereinafter defined), and shall be exercisable at a price equal to the Fair Market Value (as defined in the Plan) on November 1, 1999, the date of grant. Options to purchase 50,000 shares of Common Stock shall vest immediately on the date of grant and Options to purchase the remaining 100,000 shares of Common Stock shall vest at the rate of 4,167 shares of Common Stock per month at the beginning of each month during the first two (2) years of the Term. 6. Executive Benefits. ------------------ (1) Vacation and Other Leave. Executive shall be entitled to at least six (6) weeks paid vacation, and such other holiday, sick leave, personal days and other "leave" benefits commensurate with his position as a senior executive officer of the Company and in accordance with the Company's regular policies in effect prior to the date hereof with respect to the Executive. (2) Group Medical, Life and Disability Insurance. During the Term of this Agreement, Executive shall be entitled to participate, at the Company's expense, in all of the Company's group health, life and (subject to Section 6(e)) disability insurance plans generally provided to its senior executives from time to time and shall be entitled to participate at the Company's expense in any other benefit plans that may become generally available to executives and employees of the Company; provided, that Executive and his immediate family shall be covered by the Company's health plan during the Executive's lifetime. (3) Pension and Profit Sharing Plans. During the Term of this Agreement, Executive shall be entitled to participate, at the Company's expense, in all pension, profit sharing and retirement plans now existing or hereafter established by the Company for senior executives (to the extent permitted by the terms of each such plan); provided, that such plans will remain in effect only for so long as the Board deems it to be in the best interest of the Company to do so. (1) (4) Life Insurance. The Company shall be exclusively responsible for maintaining a life insurance policy in the amount of $2 million with respect to the Executive where the Company (and/or its lenders by collateral assignment) is the beneficiary with respect to $1 million and the beneficiary or beneficiaries with respect to the other $1 million shall be designated by the Executive. Executive shall reimburse the Company for the premiums relating to $1 million of such coverage. Executive hereby consents to the maintenance by the Company of such life insurance policies and agrees to cooperate with the Company in obtaining such policies by completing necessary applications and submitting to necessary medical examinations. (5) Additional Benefits. During the Term, Executive shall also be entitled, at the expense of the Company, to all other benefits provided to him during the Company's fiscal year ended October 31, 1999, including, without limitation, a disability insurance policy with respect to Executive with terms, coverage and benefits at least equal to the policy then in effect. 7. Expenses; Requisites. -------------------- (1) Reimbursement; Vouchers. The Company shall reimburse Executive for all reasonable business expenses incurred by Executive in connection with his employment hereunder. The Executive shall submit to the Company such vouchers or expense statements satisfactorily evidencing such expenses as may be reasonably requested by the Company. (2) Automobile. The Company shall, during the Term, provide Executive with the use of a current model automobile owned or leased by the Company of the same or equivalent type and class as currently provided and the Company shall pay for and/or reimburse Executive for all maintenance and repairs thereon as well as for gasoline, tolls and parking expenses for business use of such automobile for the Company, upon submission of such documentation as may be reasonably required by the Company. (3) Office; Telephone. Executive shall be furnished with office facilities and services suitable to his position as the Chairman of the Board and Chief Executive Officer of the Company, as well as at the Company's expense, business use of cellular telephone(s), beeper(s) and a second telephone line at Executive's residence. (4) Health Club. The Company shall purchase membership, at a reasonable rate, for Executive at a health club of Executive's choice and pay related expenses. 8. Confidentiality; Non-Solicitation. --------------------------------- 1. (1) During the Term of this Agreement and for two (2) years after the last day of the Term of this Agreement, Executive shall not use for competitive purposes, or divulge to any other person, firm or corporation (otherwise than in furtherance of the business purposes of the Company, or any of its subsidiary or affiliated companies), any confidential information of the Company. "Confidential Information" shall mean information contained in the current and potential customer lists, marketing and business plans and financial records of the Company, and specifications of proprietary products under development and not yet marketed or sold by the Company; provided, that confidential information shall not include (and the restrictions of this Section 8(a) shall not apply to) any information which: (i) is at the time of disclosure, part of the public domain or thereafter through no action of Executive in violation of this Agreement, becomes a part of the public domain or is generally known in the computer outsourcing industry through no violation of this Agreement; (ii) information which has been publicly disclosed by the Company or any parent, subsidiary or affiliated corporation in public announcements, press releases or in publicly available governmental filings; or (iii) is required to be disclosed by court order or compliance with governmental requirements or legal process. (2) During the Term of this Agreement, Executive shall not, on behalf of himself or any other person, firm or entity (i) solicit any person employed by the Company or any of its subsidiaries at the time of Executive's termination, for employment by Executive or any other person, firm or entity or (ii) solicit any client of the Company or any of its subsidiaries at or prior to the time of Executive's termination for the provision of computer outsourcing services by any person, firm or entity other than the Company and its subsidiaries. (3) Executive agrees that damages at law would not be an adequate remedy for violation of the covenants set forth in this Section 8 by Executive, and he therefore agrees that these covenants may be specifically enforced against him in any court of competent jurisdiction. 9. Termination. ----------- (a) Death, Disability, Expiration of Term. Executive's employment under this Agreement shall terminate upon the death or Disability (as hereinafter defined) of Executive or upon the expiration of the Term as provided herein. (1) Cause. The Board may terminate the Executive's employment for Cause. For purposes of this Agreement, the Board shall have "Cause" if: (A) the Executive is convicted of a felony; (B) the Executive willfully and continually fails to substantially perform his duties hereunder (other than as a result of incapacity due to physical or mental injury or illness), after the Board delivers a written demand for substantial performance to the Executive that specifies the manner in which the Board believes the Executive has failed substantially to perform his duties hereunder and the Executive shall not have corrected such failure within fourteen (14) business days (or, if such failure cannot be corrected immediately, commenced and is diligently pursuing the correction of such failure) after his receipt of such demand; or (C) the Executive engages in willful misconduct in the performance of his duties hereunder that is demonstrably and materially injurious to the Company. No action, or failure to act, by the Executive shall be considered "willful" if it is done by the Executive in good faith and with the reasonable belief that his action or omission was in the best interest of the Company. (2) Termination by the Executive for Good Reason. The Executive shall have the right to terminate his employment with the Company at any time for Good Reason by giving the Company notice in accordance with paragraph (e) below. Good Reason shall mean any of the following: (i) removal or failure of the Executive to continue as Chairman of the Board and Chief Executive Officer, (ii) a material diminution in the nature or scope of Executive's duties or responsibilities or the assignment of any duties or responsibilities materially inconsistent with his position as Chairman of the Board and Chief Executive Officer, (iii) the relocation of the Company's principal executive officer to a location more than 25 miles from its current location, or (iv) the failure of the Company, after five (5) days notice, to comply with any of the terms contained in Section 5 or Section 6 of the Agreement. (3) Notice of Termination. Any termination of the Executive's employment by the Company or by the Executive (other than pursuant to paragraph (a) above) shall be communicated by a written notice to the other party. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Any purported termination not satisfying the requirements of this subsection (d) shall not be effective. (4) Date of Termination. "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, or by reason of his Disability, the date all of the conditions to constitute a Disability have occurred, or, if upon expiration of the Term, the last day of the Term, (ii) if the Executive's employment is terminated for Cause, the date specified in the Notice of Termination, and (iii) if the Executive's employment is terminated by Executive for Good Reason, the date which is seven (7) days after the date on which the Notice of Termination is given. (5) Disability. For purposes of this Agreement, "Disability" shall mean if, due to illness or injury, Executive has been unable to perform his duties for a continuous period of six (6) consecutive months or more, and the Board determines in good faith that Executive has become totally disabled (which shall include a certificate from a reputable, licensed medical doctor having expertise in the disability to which Executive is subject, that Executive has become totally and permanently disabled and is not likely to be able to resume his duties to the Company for a period of at least an additional six (6) months. (1) 10. Compensation and Benefits upon Termination. ------------------------------------------ (a) Death, Disability or Expiration of Term. Upon the termination of Executive's employment because of (i) Executive's death, Executive's estate shall be entitled to receive two times his Base Salary, (ii) Executive's Disability, Executive shall be entitled to receive two times his Base Salary plus all disability benefits or (iii) the expiration of the Term, Executive shall be entitled to receive his Base Salary through the Date of Termination and in each event outlined in (i), (ii) and (iii), a pro rata portion (based upon the number of days elapsed in the year to the Date of Termination) of such bonus, if any, as the Board shall reasonably determine would have been payable to Executive in respect of the fiscal year in which Executive's employment terminates, such payments in all such events to be paid within thirty (30) days of the Date of Termination. (1) Cause. Upon the termination of Executive's Employment for Cause or upon termination by Executive without Good Reason, Executive shall be entitled to receive on the Date of Termination only his accrued and unpaid Base Salary to the Date of Termination. (2) Early Termination. Upon the termination of Executive's employment by Executive for Good Reason, the Executive shall be entitled to receive in his sole discretion either in a lump sum on the first day of the month following the Date of Termination or in equal monthly installments commencing with the month immediately following the month of the Date of Termination his Base Salary for two (2) years after the Date of Termination plus, a prorated portion (based upon the number of days elapsed in the fiscal year to the Date of Termination) of his Bonus for the fiscal year in which the Notice of Termination shall have been given, computed on the assumption that the Company's actual performance equals one hundred percent (100%) of targeted performance for such year; provided, however that regardless of any proration, Executive shall be entitled to receive at least one-half of the Bonus Executive would have received for the entire fiscal year in which Executive's employment was terminated had Executive's employment not been terminated. In addition, notwithstanding any provision in any option agreement to the contrary, ten (10) days before the Date of Termination, any unexercisable stock options shall become exercisable, and the restrictions on any restricted stock shall lapse. Further, the period of performance for any performance-related units or awards for which the performance period has not expired, shall be deemed to have expired at the end of the month preceding the Date of Termination, and Executive shall be entitled to receive the value of such units or awards at the end of such month on the basis of an equitable prorating of the performance period, performance targets and award amounts. (3) Other Benefits. In addition to the foregoing, upon termination of Executive's employment for any reason whatsoever (including Cause), Executive shall receive such other benefits, if any, as may be provided to him under the terms of any employee benefit, incentive, option, stock award and other plans or programs of the Company in which he may be, or have been, a participant. (1) (4) No Mitigation. The Executive shall have no obligation to take any action to mitigate or offset any amounts payable by the Company pursuant to this Section 10 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Agreement be reduced by any compensation earned by the Executive as the result of employment by another employer after the date of termination of the Executive's employment or otherwise. (5) Continuation of Agreement Provisions. The termination of the Executive's employment for any reason whatsoever shall not operate to terminate this Agreement as an entirety or to adversely affect the respective continuing rights and obligations of the parties under Sections 8, 11, 12 and 16 of this Agreement, all of which shall survive the effective date of such termination of employment in accordance with their respective terms. 11. Merger or Reorganization. ------------------------ This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company or by any merger or consolidation where the Company is not the surviving or resulting corporation, or upon any transfer of all or substantially all of the assets of the Company. In the event of any such merger or consolidation or transfer of assets, the provisions of this Agreement shall be binding and shall inure to the benefit of the surviving or resulting corporation or the corporation to which such assets shall be transferred, and the Company shall require the successor to the Company as the Executive's employer (whether such succession is direct or indirect, by purchase, merger, consolidation or otherwise, to all or a substantial portion of the business and/or assets of the Company) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the term "Company" shall mean the Company as hereinbefore defined and any successor to all or a substantial portion of its business and/or assets as aforesaid. 12. Arbitration. ----------- 1. Any controversy or claim arising out of or relating to this Agreement, the breach thereof or the coverage of this arbitration provision shall be settled by arbitration which shall be in accordance with the Commercial Arbitration Rules of the American Arbitration Association as such rules shall be in effect on the date of delivery of demand for arbitration. The arbitration of such issues, including the determination of the amount of any damages suffered by either party hereto by reason of the acts or omissions of the other, shall be to the exclusion of any court of law. The decision of the arbitrators or a majority of them shall be final and binding on both parties and their respective heirs, executors, administrators, successors and assigns. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. There shall be three arbitrators, one to be chosen directly by each party at will and the third arbitrator to be selected by the two arbitrators so chosen. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys and the expenses of his witnesses and all other expenses connected with the presentation of his case. All other costs of the arbitration, including the cost of the third arbitrator, the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne by the Company. Nothing contained herein shall be construed or interpreted to preclude the Company prior to, or pending the resolution of, any matter subject to arbitration from seeking injunctive relief in any court for any breach or threatened breach of any of the Executive's agreements in Section 8 hereof. 13. Non-Assignability. ----------------- The obligations of Executive hereunder are personal and may not be assigned or transferred in any manner whatsoever, nor are such obligations subject to involuntary alienation, assignment or transfer. 14. Amendment. --------- This Agreement contains the entire agreement of the parties. It may not be changed orally but only by a written agreement executed by both of the parties hereto. 15. Notices. ------- All notices which a party is required or may desire to give to the other party under or in connection with this Agreement shall be sufficient if given by addressing same to the other party as follows: If to Executive to: Zach Lonstein 910 Fifth Avenue New York, New York 10021 If to the Company to: Computer Outsourcing Services, Inc. 2 Christie Heights Street Leonia, New Jersey 07605 Attention: Secretary or at such other place as may be designed in writing by like notice. Any notice shall be deemed to have been delivered when addressed as required herein and deposited, postage prepaid, in the United States Mail. 16. Indemnification. --------------- The Company will indemnify the Executive (and his legal representatives, heirs, estate or other successors) to the fullest extent permitted (including payment of expenses in advance of final disposition of any proceeding) by the laws of the jurisdiction of the incorporation of the Company as in effect at the time of the subject act or omission, or by the certificate of incorporation and by-laws of the Company as in effect at such time or on the date of this Agreement, or by the terms of any indemnification agreement between the Company and the Executive, whichever affords or afforded greatest protection to the Executive, and the Executive shall be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and officers (and to the extent the Company maintains such an insurance policy or policies, the Executive shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for a person serving or having served in the positions and offices in which the Executive is serving or has served), against all costs, charges and expenses whatsoever incurred or sustained by him (or his legal representatives, heirs, estate or other successors) at the time such costs, charges and expenses are incurred or sustained, in connection with any action, suit or proceeding to which he (or his legal representatives, heirs, estate or other successors) may be made a party by reason of his being or having been a director, officer or employee of the Company or any subsidiary, or by reason of his serving or having served any other enterprise as a director, officer or employee at the request of the Company or any subsidiary. 17. Waiver, Modification. -------------------- No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver or similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 18. Severability. ------------ The various Sections of this Agreement are severable, and if any Sections or an identifiable part thereof is held to be invalid or unenforceable by any court of competent jurisdiction, then such invalidity or unenforceability shall not affect the validity or enforceability of the remaining Sections or identifiable parts thereof in this Agreement, and the parties hereto agree that the portion so held invalid, unenforceable or void shall, if possible, be deemed amended or reduced in scope, or otherwise be stricken from this Agreement, to the extent required for the purposes of the validity and enforcement hereof. 19. Choice of Law. ------------- This Agreement shall be governed by the laws of the State of New Jersey, without reference to such State's conflict of law rules. 20. Entire Agreement. ---------------- This Agreement sets forth the entire agreement between the parties with respect to the subject matter hereof and supersedes any and all prior agreements between the Company and the Executive, whether written or oral, relating to any or all matters covered by, and contained or otherwise dealt with, in this Agreement. No agreements or representations, oral or otherwise, express or implied, have been made by either party with respect to the subject matter of this Agreement, unless set forth expressly in this Agreement. 21. Beneficiaries; References. ------------------------- The Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive's death, and may change such election by giving the Company written notice thereof. In the event of the Executive's death, Disability or a judicial determination of his incompetence, all references in the Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date hereinabove set forth. COMPUTER OUTSOURCING SERVICES, INC. By: /s/ ----------------------------------------- Name: ZACH LONSTEIN EX-10.5 4 0004.txt EMPLOYMENT AGREEMENT - WALLACH EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, dated as of the 1st day of November, 1999 (the "Agreement"), between Computer Outsourcing Services, Inc., a Delaware corporation (the "Company"), and Robert Wallach ("Executive"); WHEREAS, the Company and the Executive now desire to enter into the Agreement, in order to memorialize the terms and conditions of Executive's relationship with the Company. NOW, THEREFORE, in consideration of the premises and mutual covenants herein set forth, the parties hereto agree as follows: 1. Employment. ---------- The Company hereby employs Executive to render services as the President and Chief Operating Officer of the Company. 2. Position and Duties. ------------------- The Executive shall have such responsibilities, perform such duties and have such authorities as is consistent with his position as the President and Chief Operating Officer of the Company, reporting to, and subject only to the direction and control of, the Chief Executive Officer of the Company and the Board of Directors of the Company (the "Board"). Executive hereby accepts such employment and agrees to render his services (unless prevented by sickness, injury or other incapacity) fully, faithfully, and to the best of his ability. Executive's services shall be exclusive to the Company, except that Executive may engage in charitable and community activities and give attention to his outside investment interests so long as such activities do not interfere with the performance of his duties hereunder. Executive may also serve as a member of the board of directors of other unaffiliated corporations so long as Executive's service on such boards of directors does not interfere with the ability of Executive to perform his duties hereunder. 3. Place of Employment. ------------------- The Company agrees that Executive will be located, and will render such services (subject to necessary and appropriate business related travel), at the Company's offices in Leonia, New Jersey. -11- 217303.8 4. Term. ---- The term of Executive's employment with the Company under this Agreement shall be for a continuous period of three (3) years (the "Term"). The Term shall initially commence on November 1, 1999 and end on October 31, 2002, but at the end of each day beginning with October 31, 2001, the Term shall automatically be extended by one additional day unless the Company or the Executive shall give written notice to the other of his or its intention, as the case may be, not to extend the Term; it being the intention of the parties that the term of Executive's employment shall at all times after October 31, 2001, have an unexpired Term of one (1) year unless either party has theretofore given written notice in accordance herewith. 5. Compensation and Benefits. ------------------------- (1) Base Salary. During the first year of the Agreement, the Company shall pay to the Executive a base salary (the "Base Salary") of $375,000. For each year thereafter during the Term, the Executive's Base Salary shall be increased by an amount equal to the greater of (i) five percent (5%), (ii) the same percentage as the base salary of Zach Lonstein has been increased for the corresponding year or (iii) as the compensation committee of the Board shall otherwise determine, and the Base Salary as thereafter increased shall be the Base Salary for all purposes of this Agreement. Once established at any specified rate, the Executive's Base Salary shall not be reduced. The Base Salary shall be payable to the Executive in installments on the Company's normal payroll dates, but not less frequently than twice a month. (2) Bonus. During each year of the Term, the Executive shall be entitled to a bonus (the "Bonus") of the greater of (i) up to one hundred percent (100%) of the Executive's then Base Salary, or (ii) as the compensation committee of the Board shall otherwise determine, in either case such bonus shall be based upon parameters to be determined by the compensation committee of the Board during each year of the term. The Bonus as determined for each year during the Term shall be paid to Executive not later than ninety (90) days following the end of such year. (1) (3) Options. Subject and pursuant to the terms and conditions of the Company's 1992 Stock Option and Stock Appreciation Rights Plan (the "Plan"), the Company agrees to promptly cause to be granted to the Executive the right and option to purchase up to 150,000 shares of common stock (the "Options") of the Company, par value $.01 per share ("Common Stock"), to be issued as provided in the Plan. All such Options shall be non-qualified stock options, shall have a term of ten (10) years from the date of grant, shall be exercisable for at least one (1) year after the date of the Executive's termination of employment with the Company for any reason other than Cause (as hereinafter defined), and shall be exercisable at a price equal to the Fair Market Value (as defined in the Plan) on November 1, 1999, the date of grant. Options to purchase 50,000 shares of Common Stock shall vest immediately on the date of grant and Options to purchase the remaining 100,000 shares of Common Stock shall vest at the rate of 4,167 shares per month at the beginning of each month during the first two (2) years of the Term. 6. Executive Benefits. ------------------ (1) Vacation and Other Leave. Executive shall be entitled to at least six weeks paid vacation, and such other holiday, sick leave, personal days and other "leave" benefits commensurate with his position as a senior executive officer of the Company and in accordance with the Company's regular policies in effect prior to the date hereof with respect to the Executive. (2) Group Medical, Life and Disability Insurance. During the Term of this Agreement, Executive shall be entitled to participate, at the Company's expense, in all of the Company's group health, life and disability insurance plans generally provided to its senior executives from time to time and shall be entitled to participate at the Company's expense in any other benefit plans that may become generally available to executives and employees of the Company. (3) Pension and Profit Sharing Plans. During the Term of this Agreement, Executive shall be entitled to participate, at the Company's expense, in all pension, profit sharing and retirement plans now existing or hereafter established by the Company for senior executives (to the extent permitted by the terms of each such plan); provided, that such plans will remain in effect only for so long as the Board of Directors deems it to be in the best interest of the Company to do so. (4) Life Insurance. The Company shall be exclusively responsible for obtaining a life insurance policy in the amount of $500,000 with respect to the Executive, and the Executive shall have the right to designate or change from time to time the beneficiary or beneficiaries. Executive shall reimburse the Company for premiums paid by the Company on such insurance. Executive hereby consents to the maintenance by the Company of such life insurance policy and agrees to cooperate with the Company in obtaining such policy by completing necessary applications and submitting to necessary medical examinations. 7. Expenses; Requisites. -------------------- (1) Reimbursement; Vouchers. The Company shall reimburse Executive for all reasonable business expenses incurred by Executive in connection with his employment hereunder. The Executive shall submit to the Company such vouchers or expense statements satisfactorily evidencing such expenses as may be reasonably requested by the Company. (1) (2) Automobile. The Company shall, during the Term, provide Executive with the use of a current model automobile owned or leased by the Company and the Company shall pay for and/or reimburse Executive for all maintenance and repairs thereon as well as for gasoline, tolls and parking expenses for business use of such automobile for the Company, upon submission of such documentation as may be reasonably required by the Company. (3) Office; Telephone. Executive shall be furnished with office facilities and services suitable to his position as the President and Chief Operating Officer of the Company, as well as at the Company's expense, business use of cellular telephone(s), beeper(s) and a second telephone line at Executive's residence. (4) Health Club. The Company shall purchase membership, at a reasonable rate, for Executive at a health club of Executive's choice and pay related expenses. 8. Board of Directors of the Company. --------------------------------- During the Term, the Company shall nominate the Executive to serve as a member of the Board of Directors of the Company to be elected at each annual meeting of stockholders of the Company (and any special meeting of stockholders at which directors are to be elected) held during each year of the Term. 9. Confidentiality; Non-Solicitation. --------------------------------- (1) During the Term of this Agreement and for two (2) years after the last day of the Term of this Agreement, Executive shall not use for competitive purposes, or divulge to any other person, firm or corporation (otherwise than in furtherance of the business purposes of the Company, or any of its subsidiary or affiliated companies), any confidential information of the Company. "Confidential Information" shall mean information contained in the current and potential customer lists, marketing and business plans and financial records of the Company, and specifications of proprietary products under development and not yet marketed or sold by the Company; provided, that confidential information shall not include (and the restrictions of this Section 9(a) shall not apply to) any information which: (i) is at the time of disclosure, part of the public domain or thereafter through no action of Executive in violation of this Agreement, becomes a part of the public domain or is generally known in the computer outsourcing industry through no violation of this Agreement; (ii) information which has been publicly disclosed by the Company or any parent, subsidiary or affiliated corporation in public announcements, press releases or in publicly available governmental filings; or (iii) is required to be disclosed by court order or compliance with governmental requirements or legal process. (1) (2) During the Term of this Agreement and for one (1) year after the last day of the Term of this Agreement, Executive shall not, on behalf of himself or any other person, firm or entity (i) solicit any person employed by the Company or any of its subsidiaries at the time of Executive's termination, for employment by Executive or any other person, firm or entity or (ii) solicit any client of the Company or any of its subsidiaries at or prior to the time of Executive's termination for the provision of computer outsourcing services by any person, firm or entity other than the Company and its subsidiaries. (3) Executive agrees that damages at law would not be an adequate remedy for violation of the covenants set forth in this Section 9 by Executive, and he therefore agrees that these covenants may be specifically enforced against him in any court of competent jurisdiction. 10. Termination. ----------- (a) Death, Disability, Expiration of Term. Executive's employment under this Agreement shall terminate upon the death or Disability (as hereinafter defined) of Executive or upon the expiration of the Term as provided herein. (1) Cause. The Board may terminate the Executive's employment for Cause. For purposes of this Agreement, the Board shall have "Cause" if: (A) the Executive is convicted of a felony; (B) the Executive willfully and continually fails to substantially perform his duties hereunder (other than as a result of incapacity due to physical or mental injury or illness), after the Board delivers a written demand for substantial performance to the Executive that specifies the manner in which the Board believes the Executive has failed substantially to perform his duties hereunder and the Executive shall not have corrected such failure within fourteen (14) business days (or, if such failure cannot be corrected immediately, commenced and is diligently pursuing the correction of such failure) after his receipt of such demand; or (C) the Executive engages in willful misconduct in the performance of his duties hereunder that is demonstrably and materially injurious to the Company. No action, or failure to act, by the Executive shall be considered "willful" if it is done by the Executive in good faith and with the reasonable belief that his action or omission was in the best interest of the Company. (2) Termination by the Company Without Cause, Termination by the Executive for Good Reason. The Board shall have the right to terminate Executive's employment prior to the expiration of the Term hereof for any reason whatsoever by giving the Executive notice in accordance with paragraph (e) below (an "Early Termination"). The Executive shall have the right to terminate his employment with the Company at any time for Good Reason by giving the Company notice in accordance with paragraph (e) below. Good Reason shall mean any of the following: (i) removal or failure of the Executive to continue as President and Chief Operating Officer, (ii) a material diminution in the nature or scope of Executive's duties or responsibilities or the assignment of any duties or responsibilities materially inconsistent with his position as President and Chief Operating Officer, (iii) the relocation of the Company's principal executive officer to a location more than 25 miles from its current location, or (iv) the failure of the Company, after five days notice, to comply with any of the terms contained in Section 5 or Section 6 of the Agreement. (1) (3) Notice of Termination. Any termination of the Executive's employment by the Company or by the Executive (other than pursuant to paragraph (a) above) shall be communicated by a written notice to the other party. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Any purported termination not satisfying the requirements of this subsection (d) shall not be effective. (4) Date of Termination. "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, or by reason of his Disability, the date all of the conditions to constitute a Disability have occurred, or, if upon expiration of the Term, the last day of the Term, (ii) if the Executive's employment is terminated for Cause, the date specified in the Notice of Termination, and (iii) if the Executive's employment is terminated upon an Early Termination or by Executive for Good Reason, the date which is seven (7) days after the date on which the Notice of Termination is given. (5) Disability. For purposes of this Agreement, "Disability" shall mean if, due to illness or injury, Executive has been unable to perform his duties for a continuous period of six (6) consecutive months or more, and the Board determines in good faith that Executive has become totally disabled (which shall include a certificate from a reputable , licensed medical doctor having expertise in the disability to which Executive is subject, that Executive has become totally and permanently disabled and is not likely to be able to resume his duties to the Company for a period of at least an additional six (6) months). 11. Compensation and Benefits upon Termination. ------------------------------------------ (a) Death, Disability or Expiration of Term. Upon the termination of Executive's employment because of (i) Executive's death, Executive's estate shall be entitled to receive two times his Base Salary, (ii) Executive's Disability, Executive shall be entitled to receive two times his Base Salary plus all disability benefits or (iii) the expiration of the Term, Executive shall be entitled to receive his Base Salary through the Date of Termination and in each event outlined in (i), (ii) and (iii), any accrued and unpaid salary a pro rata portion (based upon the number of days elapsed in the year to the Date of Termination) of such bonus, if any, as the Board shall reasonably determine would have been payable to Executive in respect of the fiscal year in which Executive's employment terminates, such payments in all such events to be paid within thirty (30) days of the Date of Termination. (1) Cause. Upon the termination of Executive's Employment for Cause or upon termination by Executive without Good Reason, Executive shall be entitled to receive on the Date of Termination only his accrued and unpaid Base Salary to the Date of Termination. (1) (2) Early Termination. Upon the Early Termination of Executive's employment or termination of Executive's employment by Executive for Good Reason, the Executive shall be entitled to receive in his sole discretion either in a lump sum on the first day of the month following the Date of Termination or in equal monthly installments commencing with the month immediately following the month of the Date of Termination his Base Salary for two (2) years after the Date of Termination plus, a prorated portion (based upon the number of days elapsed in the fiscal year to the Date of Termination) of his Bonus for the fiscal year in which the Notice of Termination shall have been given, computed on the assumption that the Company's actual performance equals one hundred percent (100%) of targeted performance for such year; provided, however that regardless of any proration Executive shall be entitled to receive at least one-half of the Bonus Executive would have received for the entire fiscal year in which Executive's employment was terminated had Executive's employment not been terminated. In addition, notwithstanding any provision in any option agreement to the contrary, ten (10) days before the Date of Termination, any unexercisable stock options shall become exercisable, and the restrictions on any restricted stock shall lapse. Further, the period of performance for any performance-related units or awards for which the performance period has not expired, shall be deemed to have expired at the end of the month preceding the Date of Termination, and Executive shall be entitled to receive the value of such units or awards at the end of such month on the basis of an equitable prorating of the performance period, performance targets and award amounts. (3) Other Benefits. In addition to the foregoing, upon termination of Executive's employment for any reason whatsoever (including Cause), Executive shall receive such other benefits, if any, as may be provided to him under the terms of any employee benefit, incentive, option, stock award and other plans or programs of the Company in which he may be, or have been, a participant. (4) No Mitigation. The Executive shall have no obligation to take any action to mitigate or offset any amounts payable by the Company pursuant to this Section 11 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Agreement be reduced by any compensation earned by the Executive as the result of employment by another employer after the date of termination of the Executive's employment or otherwise. (5) Continuation of Agreement Provisions. The termination of the Executive's employment for any reason whatsoever shall not operate to terminate this Agreement as an entirety or to adversely affect the respective continuing rights and obligations of the parties under Sections 9, 12, 13 and 17 of this Agreement, all of which shall survive the effective date of such termination of employment in accordance with their respective terms. (1) 12. Merger or Reorganization. ------------------------ This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company or by any merger or consolidation where the Company is not the surviving or resulting corporation, or upon any transfer of all or substantially all of the assets of the Company. In the event of any such merger or consolidation or transfer of assets, the provisions of this Agreement shall be binding and shall inure to the benefit of the surviving or resulting corporation or the corporation to which such assets shall be transferred, and the Company shall require the successor to the Company as the Executive's employer (whether such succession is direct or indirect, by purchase, merger, consolidation or otherwise, to all or a substantial portion of the business and/or assets of the Company) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the term "Company" shall mean the Company as hereinbefore defined and any successor to all or a substantial portion of its business and/or assets as aforesaid. 13. Arbitration. ----------- Any controversy or claim arising out of or relating to this Agreement, the breach thereof or the coverage of this arbitration provision shall be settled by arbitration which shall be in accordance with the Commercial Arbitration Rules of the American Arbitration Association as such rules shall be in effect on the date of delivery of demand for arbitration. The arbitration of such issues, including the determination of the amount of any damages suffered by either party hereto by reason of the acts or omissions of the other, shall be to the exclusion of any court of law. The decision of the arbitrators or a majority of them shall be final and binding on both parties and their respective heirs, executors, administrators, successors and assigns. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. There shall be three arbitrators, one to be chosen directly by each party at will and the third arbitrator to be selected by the two arbitrators so chosen. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys and the expenses of his witnesses and all other expenses connected with the presentation of his case. All other costs of the arbitration, including the cost of the third arbitrator, the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne by the Company. Nothing contained herein shall be construed or interpreted to preclude the Company prior to, or pending the resolution of, any matter subject to arbitration from seeking injunctive relief in any court for any breach or threatened breach of any of the Executive's agreements in Section 9 hereof. 14. Non-Assignability. ----------------- The obligations of Executive hereunder are personal and may not be assigned or transferred in any manner whatsoever, nor are such obligations subject to involuntary alienation, assignment or transfer. 15. Amendment. --------- This Agreement contains the entire agreement of the parties. It may not be changed orally but only by a written agreement executed by both of the parties hereto. 16. Notices. ------- All notices which a party is required or may desire to give to the other party under or in connection with this Agreement shall be sufficient if given by addressing same to the other party as follows: If to Executive to: Robert Wallach 1725 York Avenue New York, New York 10128 If to the Company to: Computer Outsourcing Services, Inc. 2 Christie Heights Street Leonia, New Jersey 07605 Attention: Chief Executive Officer or at such other place as may be designed in writing by like notice. Any notice shall be deemed to have been delivered when addressed as required herein and deposited, postage prepaid, in the United States Mail. 17. Indemnification. --------------- 1. The Company will indemnify the Executive (and his legal representatives, heirs, estate or other successors) to the fullest extent permitted (including payment of expenses in advance of final disposition of any proceeding) by the laws of the jurisdiction of the incorporation of the Company as in effect at the time of the subject act or omission, or by the certificate of incorporation and by-laws of the Company as in effect at such time or on the date of this Agreement, or by the terms of any indemnification agreement between the Company and the Executive, whichever affords or afforded greatest protection to the Executive, and the Executive shall be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and officers (and to the extent the Company maintains such an insurance policy or policies, the Executive shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for a person serving or having served in the positions and offices in which the Executive is serving or has served), against all costs, charges and expenses whatsoever incurred or sustained by him (or his legal representatives, heirs, estate or other successors) at the time such costs, charges and expenses are incurred or sustained, in connection with any action, suit or proceeding to which he (or his legal representatives, heirs, estate or other successors) may be made a party by reason of his being or having been a director, officer or employee of the Company or any subsidiary, or by reason of his serving or having served any other enterprise as a director, officer or employee at the request of the Company or any subsidiary. 18. Waiver, Modification. -------------------- No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver or similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 19. Severability. ------------ The various Sections of this Agreement are severable, and if any Sections or an identifiable part thereof is held to be invalid or unenforceable by any court of competent jurisdiction, then such invalidity or unenforceability shall not affect the validity or enforceability of the remaining Sections or identifiable parts thereof in this Agreement, and the parties hereto agree that the portion so held invalid, unenforceable or void shall, if possible, be deemed amended or reduced in scope, or otherwise be stricken from this Agreement, to the extent required for the purposes of the validity and enforcement hereof. 20. Choice of Law. ------------- This Agreement shall be governed by the laws of the State of New Jersey, without reference to such State's conflict of law rules. 21. Entire Agreement. ---------------- This Agreement sets forth the entire agreement between the parties with respect to the subject matter hereof and supersedes any and all prior agreements between the Company and the Executive, whether written or oral, relating to any or all matters covered by, and contained or otherwise dealt with, in this Agreement. No agreements or representations, oral or otherwise, express or implied, have been made by either party with respect to the subject matter of this Agreement, unless set forth expressly in this Agreement. 22. Beneficiaries; References. ------------------------- 1. The Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive's death, and may change such election by giving the Company written notice thereof. In the event of the Executive's death, Disability or a judicial determination of his incompetence, all references in the Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date hereinabove set forth. COMPUTER OUTSOURCING SERVICES, INC. By: /s/ ---------------------------- Name: Title: EXECUTIVE By: Name: Robert Wallach EX-10.6 5 0005.txt NORCROSS LEASE OFFICE LEASE AGREEMENT PROPERTY: Bay Colony Business Center TENANT: Computer Outsourcing Services, Inc. 6620 Bay Circle Drive Norcross, Georgia 30071 LANDLORD: Crocker Realty Trust, L.P. 433 Plaza Real Suite 335 Boca Raton, FL 33432 SQUARE FOOTAGE: 52,174 R.S.F LEASE TERM: EST. COMMENCEMENT DATE: July 4, 2000 EST. TERMINATION DATE: June 30, 2015 TABLE OF CONTENTS 1. Demise of Premises .................................................3 2. Term ...............................................................4 3. Rent ...............................................................5 4. Use of Premises; Compliance with Legal Requirements ................6 5. Taxes Payable by Tenant ............................................6 6. Insurance Coverage; Waiver of Subrogation ..........................7 7. Repairs and Maintenance by Landlord ................................7 8. Repairs and Maintenance by Tenant ..................................8 9. Utilities and Janitorial Services ..................................8 10. Alterations and Improvements .......................................8 11. Trade Fixtures and Other Personal Property..........................9 12. Signs and Advertising ..............................................9 13. Landlord's Right of Entry ..........................................9 14. Casualty Damage ....................................................9 15. Condemnation ......................................................10 16. Transfers by Tenant ...............................................10 17. Transfers by Landlord .............................................11 18. Subordination .....................................................11 19. Estoppel Certificates; Financial Statements .......................12 20. Events of Default by Tenant .......................................12 21. Landlord's Remedies ...............................................12 22. Landlord's Default ................................................13 23. Tenant's Remedies .................................................13 24. Indemnification ...................................................14 25. Protection Against Liens ..........................................14 26. Holding Over ......................................................14 27. Attorneys' Fees ...................................................15 28. Waiver ............................................................15 29. Leasing Commissions ...............................................15 30. Notices ...........................................................15 31. Miscellaneous .....................................................15 32. Special Provisions ................................................16 Exhibits A Legal Description of Building Site B Floor Plan of Premises C Plan of Exterior Areas D Minimum Rent E Additional Rent Calculation F Building Rules G Special Provisions H Form of Subordination, Non-Disturbance and Attornment Agreement I Form of Guaranty J Reports K Roof Specifications L Batteries to be Removed OFFICE LEASE AGREEMENT THIS LEASE AGREEMENT (the "Lease"), made and entered into as of , 2000 by and between CROCKER REALTY TRUST, L.P., a Delaware limited partnership, doing business in Georgia as CROCKER REALTY, L.P. ("Landlord"), and COMPUTER OUTSOURCING SERVICES, INC., a ____________________ corporation ("Tenant"), WITNESSETH: 1. DEMISE OF PREMISES. Landlord hereby demises the Premises (as hereafter described) to Tenant and covenants that Tenant shall peaceably and quietly hold and enjoy the Premises throughout the term on and subject to all the provisions and conditions of this Lease; and Tenant hereby accepts such demise of the Premises from Landlord. (a) The "Premises" consist of the space containing approximately 52,174 rentable square feet located in the building containing approximately 52,174 rentable square feet and known as Bay Colony - Building 6620 (the Building), on a tract of land located at 6620 Bay Circle Drive, Norcross, GA 30071 and more particularly described on Exhibit A attached hereto (together with the Building, the "Property"). The Premises are shown highlighted on the Building plan attached hereto as Exhibit B. (b) As long as Tenant is entitled to possession of the Premises, Tenant shall have the nonexclusive right to use any parking areas, loading areas, driveways, sidewalks, and other common facilities of the Property as they may exist from time to time, provided that Tenant shall have the exclusive right to use and install on the roof of the Building and those portions of the Property exterior to the Premises (the Exterior Areas) as shown on Exhibit C for placement and operation of antenna, microwave dishes, HVAC equipment, generator systems, telecommunications conduit and other equipment necessary for the conduct of Tenant's business. subject to the prior written approval of Landlord after submission of plans therefor to Landlord, and subject to the requirements of applicable zoning and other land use ordinances, rules or regulations, and any applicable restrictive covenants (each antenna and microwave dish, including its associated parts, is referred to hereinafter as an item of such equipment; all such equipment is collectively referred to hereinafter as "Telecommunications Equipment", which may include the equipment of fiber and other telecommunications service providers that are providing services to Tenant or its customers, and such ancillary equipment and Tenant's HVAC equipment and generator systems are hereinafter collectively referred to as "Other Equipment") as may be required for the proper conduct of Tenant's business consistent with the permitted use of the Premises under Paragraph 4 below. Except as expressly provided herein, Landlord shall grant to no other party the right to use the roof of the Building for any purpose. Tenant's rights hereunder shall be subject to the limitations described in (1) and (2) below. Without limiting the foregoing, Tenant shall be entitled to use the roof and Exterior Areas for the storage and use of equipment to be used pursuant to Co-Location agreements (as defined in Paragraph 16(d) below). (1) Interference. Tenant shall operate the Telecommunications Equipment in a manner that will not cause interference with any equipment operated by other tenants or licensees of the Property, the installation of which preceded the installation of the Telecommunications Equipment of Tenant which interferes with it. All operations of Telecommunications Equipment by Tenant shall be in compliance with all Federal Communications Commission requirements. (2) Rules: --- ----- (A) No item of Telecommunications Equipment shall be larger than three (3) meters in any dimension, nor shall any item of Telecommunications Equipment or Other Equipment, when installed exceed a height of ten (10) feet above the surface of the roof of the Building; provided, however, one (1) antenna installed on the roof of the Building shall be permitted to reach a height of up to fifteen (15) feet above the surface of the roof of the Building; (B) Each item of Telecommunications Equipment and Other Equipment must be installed in a good and workmanlike manner and in accordance with all applicable laws, rules and regulations and restrictive covenants of record, and in accordance with the plans and specifications approved in advance by Landlord; (C) Tenant shall provide Landlord with reasonable advance notice of any work that will be performed on the roof of the Building and afford Landlord the opportunity to be present for all such work; provided that only subsequent notice within a reasonable time shall be required in the case of an emergency that presents immediate danger to Tenant, or its employees, invitees or personal property; (D) Tenant shall keep and maintain liability insurance and property damage insurance with respect to all Telecommunications Equipment and Other Equipment that names Landlord as an additional insured and that otherwise complies with the other terms of this Lease; (E) Tenant shall perform all work with respect to Telecommunications Equipment and Other Equipment in a lien free manner and shall bond off or discharge any other liens or encumbrances that arise out of or are related to any of the work performed on such Telecommunications Equipment or Other Equipment within thirty (30) days after the filing thereof; (F) Tenant shall be responsible for and shall pay for and repair any damage to the Premises, the Building or the Property that arises out of the installation, maintenance, replacement or repair of any Telecommunications Equipment or Other Equipment. Tenant will have the right to penetrate the roof; provided that (i) Tenant shall obtain the prior written approval of the Landlord for such penetration and for the plans for the installation of the Telecommunications Equipment or Other Equipment, (ii) such roof penetration shall not void or impair any roof warranty then in place; (iii) Tenant shall be deemed to have assumed all liability that would otherwise be the responsibility of Landlord for repairs and replacements of any portion of the roof affected by such penetration; provided that the Landlord shall also assign to the Tenant or otherwise cause the Tenant to receive the benefit, if any, of any applicable warranty; (iv) at the expiration or termination of the Term, Tenant shall be responsible for, and shall pay for any necessary repairs resulting from the removal of such Telecommunications Equipment or Other Equipment and the penetration of the roof associated therewith, and (v) if requested by Landlord, Tenant shall cause such work to be done (A) by contractors approved by Landlord, which approval shall not be unreasonably withheld by Landlord, or (B) by Landlord, with the costs and expenses incurred by Landlord in connection therewith (excluding any costs relating to defects with respect to, or damages resulting from, such installation) to be reimbursed by Tenant upon demand in one lump sum (but to be otherwise treated as additional rental hereunder). (G) Tenant hereby indemnifies Landlord against and agrees to hold Landlord harmless from and against any and all losses, costs, expenses, judgments, liabilities, suits and the like (including, without limitation court costs and attorneys' fees) arising out of or related to the use, operation, installation, repair, maintenance and replacement of all Telecommunications Equipment and Other Equipment; (H) Tenant and Landlord shall cooperate with each other to modulate the frequencies from the Telecommunications Equipment so that they are compatible with any telecommunications equipment subsequently installed on the Property so long as such can be accomplished without material out-of-pocket cost to Tenant and without material interference with Tenant's permitted use of the Premises. (I) No Telecommunications Equipment shall be used by Tenant (or the applicable telecommunications service providers or customers, as the case may be) for any purpose other than the receipt and transmission of information directly related to the conduct of business within the Premises or directly related to the business of customers and/or affiliates of the Tenant; Tenant shall not rent, lease or otherwise demise space, time or other components of any such Telecommunications Equipment to third party consumers of such services other than its own affiliates and customers ; and (J) All Telecommunications Equipment and Other Equipment (other than the antenna described in the second clause of subparagraph 2(A) above) shall be screened so as not to be visible from the ground within the Property. (c) Tenant's Proportionate Share (herein so called) is stipulated to be One hundred percent ( 100 %), for Tenant's Proportionate Share when the calculation is based upon the current rentable area of the Building and/or the Exterior Areas, and Twenty-eight and 56/100 percent ( 28.56 %) for Tenant's Proportionate Share when the calculation is based upon the current total rentable building area of the entire Property containing approximately 182,684 rentable square feet. If the rentable area of the Building or Property changes, Tenant's Proportionate Share shall be adjusted accordingly (based on an architect's certificate or other reasonable substantiation of the Building's or Property's rentable area) by an amendment to this Lease, which Landlord and Tenant agree to execute. 2. TERM. The term of this Lease shall begin on the Commencement Date estimated to be the 4th day of July , 2000 and end on the last day of the one hundred eightieth ( 180th ) full calendar month thereafter estimated to be the 30th day of June , 2015 . Thus, unless the Commencement Date falls on the first day of a calendar month, the term will also include the initial partial calendar month immediately following the Commencement Date. The "Commencement Date" shall be the later of (a) the date of substantial completion of any Tenant Improvements to be constructed by Landlord pursuant to the Special Provision attached hereto as Exhibit G, or (b) July 4, 2000. On the Commencement Date, Tenant shall execute a written agreement to confirm the actual calendar date on which the Commencement Date occurs. Tenant shall take possession of the Premises on the Commencement Date and surrender the Premises to Landlord at the expiration of the term or earlier termination of this Lease free of waste and in as good a condition as on the Commencement Date except for reasonable wear and tear and repairs that are Landlord's responsibility under this Lease. By taking possession of the Premises, Tenant shall have agreed that the Premises are suitable for their intended purpose and that the Premises and all other parts of the Property are in good and satisfactory condition, free of material defects. 3. RENT. Throughout the term of this Lease, Tenant shall pay rent to Landlord in accordance with the following provisions: (a) Tenant shall pay minimum annual rent (the "Minimum Rent") in monthly installments in advance on or before the first day of each calendar month as reflected in Exhibit D hereto. (b) Additional Rent (herein so called) shall be calculated as provided in Exhibit E hereto; provided, however, that during the first year of the Lease, the portions of Additional Rent attributed to taxes, insurance, and maintenance costs shall not collectively exceed $2.10 per rentable square foot. For each calendar year after the year in which the Commencement Date occurs, Landlord shall furnish Tenant a written estimate of Additional Rent for the applicable calendar year. Estimates of Additional Rent shall be made by Landlord on a reasonable basis determined by Landlord. Tenant shall pay estimated Additional Rent in advance on or before the first day of each month in monthly installments equal to one-twelfth (1/12) of the estimated Additional Rent for the applicable calendar year. The estimated monthly Additional Rent includes, but shall not be limited to, and shall be subject to adjustment as provided for in Exhibit E herein, costs and expenses for operating and maintaining the common areas, facilities, and equipment for the Property, costs and expenses for common area water and sewer charges, costs and expenses for common area electricity charges. Pending receipt of Landlord's written estimate of Additional Rent for any calendar year, monthly installments of estimated Additional Rent shall continue to be paid in the same amount as in the prior calendar year. By April 30 of each calendar year or as soon as possible thereafter, Landlord shall deliver to Tenant a written statement reflecting any difference between estimated Additional Rent paid and actual Additional Rent accrued for the prior calendar year (or in the case of any partial calendar year in which the term of this Lease begins or ends, a prorated portion of such Additional Rent based on actual days elapsed during the portion of term occurring in that calendar year). Tenant shall pay Landlord the total amount of any balance of Additional Rent due shown on such annual statement within thirty (30) days after receipt of the statement. Landlord shall refund any overpayment of Additional Rent by Tenant shown on such annual statement within thirty (30) days after delivery of the statement, or Landlord, at its option, may credit the amount of any such overpayment against the installment(s) of Minimum Rent and Additional Rent due for the remainder of the then current calendar year. (c) The installments of Minimum Rent and Additional Rent for any initial partial calendar month shall be prorated based on actual days elapsed, and shall be paid in advance on the Commencement Date. (d) Except as expressly provided to the contrary in this Lease, installments of Minimum Rent and Additional Rent shall be payable without notice, demand, reduction, setoff, or other defense. Installments of Minimum Rent and Additional Rent and payments of other sums owing to Landlord pursuant to this Lease shall be made to Landlord at 433 Plaza Real, Boca Raton, Florida 33432 , or at whatever other account or address that Landlord may designate from time to time by written notice to Tenant. (e) If any installment of Minimum Rent or Additional Rent, or any other sum due and payable pursuant to this Lease, remains unpaid for more than ten (10) days after the date due, Tenant shall pay Landlord a late payment charge equal to the greater of (i) Fifty and No/100 Dollars ($50.00), or (ii) five percent (5%) of the unpaid installment or other payment. The late payment charge is intended to compensate Landlord for administrative expenses associated with responding to late payment, and shall not be considered liquidated damages or interest. All rent and other sums of whatever nature owed by Tenant to Landlord under this Lease that remain unpaid for more than ten (10) days shall bear interest from the date due until paid at the lesser of (i) five percent (5%) in excess of the prime or general reference rate of interest of NationsBank of North Carolina, N.A. (or its successors) in effect from time to time, or (ii) the maximum interest rate per annum allowed by law. (f) Tenant will deliver by May 26, 2000 an Irrevocable Letter of Credit (the L/C) in the amount of Six Hundred Twenty Six Thousand Eighty-eight and 00/100 dollars ($ 626,088.00 ) (the "Deposit") as security for Tenant's performance of all obligations hereunder. The form of the letter shall be subject to the Landlord's approval. In the Event of Default by Tenant, Landlord may, at its option, draw upon the L/C on account of any rent or other sums owing by Tenant, and thereupon Tenant shall immediately increase the L/C in an amount so applied in order that Landlord will always have the full Deposit on hand throughout the term of this Lease. The Deposit shall never constitute liquidated damages in the Event of Default by Tenant. Upon full payment and performance of this Lease by Tenant (including without limitation, final payment of any Additional Rent owed by Tenant), Landlord shall return to Tenant the L/C after drawing any rental or other sums owed by Tenant pursuant to this Lease. From and after the expiration of the third year of the Lease, Tenant shall have the right to replace the L/C annually with a letter of credit reduced by 20% (based on the original amount of the L/C) but otherwise conforming in all respects to the original L/C, provided that at the end of the fifth year of the Lease, Tenant shall provide a letter of credit or cash security deposit in the amount of three (3) months' average Minimum Rent and Additional Rent, for the remainder of the Term. 4. USE OF PREMISES; Compliance with Legal Requirements. Tenant shall use the Premises only for general office or warehouse purposes, which may include the installation, operation, maintenance and replacement of communications and switch equipment and facilities (including (a) co-location of equipment owned by Business Affiliates (as defined in Section 16(d) below) and (b) such rights of Business Affiliates to use the Premises as may be set forth in Section 16(d) below) in connection with Tenant's Internet data center and communications business, and for no other purposes without the Landlord's prior written consent, which shall not be unreasonably withheld. Tenant shall not commit or allow waste to be committed in the Premises or elsewhere on the Property, and shall not do or allow to be done in the Premises or elsewhere on the Property anything that shall constitute a nuisance or detract in any way from the reputation of the Property as a first-class real estate development. Tenant shall allow no noxious or offensive odors, fumes, gases, smoke, dust, steam or vapors, or any loud or disturbing noise or vibrations to originate in or be emitted from the Premises. Tenant shall comply with all laws, ordinances, and regulations of any governmental authority relating to Tenant's use or occupancy of the Premises, with the requirements of insurance underwriters or rating bureaus applicable to the Property, and with the following requirements: (a) Tenant may, after securing any necessary permits, use Hazardous Materials at the Premises and Exterior Areas only of such types and in such quantities or concentrations as is customary for businesses similar in nature and scope to that of Tenant's business (e.g., generally available office equipment and supplies that contain small amounts of Hazardous Materials, such as copy machine toner and cleaning supplies, and diesel fuel and batteries for generator systems), so long as they are properly used and stored within the Premises, properly disposed of by Tenant at a location other than the Property, and otherwise, used, handled, stored, transported and disposed of in accordance with applicable law. Except as permitted in the preceding sentence, no use, generation, storage, treatment, transportation, or disposal of any Hazardous Material shall occur or be permitted to occur in connection with Tenant's use and occupancy of the Premises or any other portion of the Property. "Hazardous Material" shall mean any toxic or hazardous waste, material, or substance or any other substance that is prohibited, limited, or regulated as a health or environmental hazard by any governmental or quasi-governmental authority, or that even if not so regulated, could or does pose a hazard to the environment or to the health and safety of the occupants of the Building or others. (b) No portion of the Premises or the Property shall be used or occupied for anything that is extrahazardous on account of fire or other risks, that causes an increase in the premiums payable by Landlord for any of its insurance with respect to the Property, or that causes any underwriter to deny insurance coverage to Landlord. (c) Tenant shall comply with all requirements of the Americans with Disabilities Act and implementing regulations applicable to its use and occupancy of the Premises other than requirements relating solely to the physical structure of (i) the Tenant Improvements, (ii) the roof, foundation, and exterior walls of the Building, and (iii) the common use areas of the Property. (d) Tenant has previously been furnished with a copy of any applicable restrictive covenants relating to the Building, and Tenant shall abide by those restrictions in connection with its use and occupancy of the Premises. (e) Landlord shall have the right to prescribe and modify reasonable rules for the use of the Property and leased premises within the Building. A copy of Landlord's current Building rules is attached hereto as Exhibit F. In the event of any conflict with the Building rules, the provisions in the main body of this Lease control. (f) Tenant shall ensure that its agents, employees, and contractors comply with this Paragraph, and shall use reasonable efforts to ensure that its invitees and customers comply with this Paragraph. Subject to the last sentence of this paragraph, Landlord represents and warrants to Tenant that the Premises and the Building are, to the best of its actual knowledge, free of Hazardous Materials as of the date of this Lease; provided, however, such representation and warranty shall be subject to any matters disclosed in those reports described on Exhibit J attached hereto which Landlord has delivered to Tenant (the Reports). Tenant hereby acknowledges that underground storage tanks (the Tanks) are located on the Property near the Building (as more particularly described in Document 1 of Exhibit J) and Landlord has made no representation or warranty concerning the maintenance of, or the presence or absence of Hazardous Materials in and around, the Tanks. As part of Landlord's termination agreement with its prior tenant (Federated), Landlord shall remove, or cause to be removed, the Tanks on or before July 1, 2000 in accordance with applicable law. Notwithstanding any contrary provision contained herein, Landlord hereby represents that, to its knowledge, the Reports constitute all of the environmental reports concerning the Property located in Landlord's files. 5. TAXES PAYABLE BY TENANT. Tenant shall pay any documentary stamp tax, sales or use tax, excise tax, or any other tax, assessment, or charge (other than any income, franchise, or similar tax imposed directly on Landlord or Landlord's net income from the Property) required to be paid on account of (a) the execution of this Lease, (b) the use or occupancy of the Premises by Tenant, (c) the rent or other payments due hereunder, or (d) Tenant's trade fixtures, equipment, machinery, inventory, merchandise or other personal property located on the Premises and owned by or in the custody of Tenant. All such taxes, assessments, and charges shall be paid promptly as they become due prior to delinquency. Tenant shall provide Landlord with copies of paid receipts for such taxes, assessments, or charges promptly after payment of same. Tenant shall also pay on written demand from Landlord any increase in ad valorem taxes or assessments on the Property as a result of alterations, additions, or improvements made by or on behalf of Tenant other than the initial Tenant Improvements. 6. INSURANCE COVERAGE; Waiver of Subrogation. (a) Landlord shall maintain property and casualty insurance on the Building, with extended coverage or such other additional coverage as Landlord shall elect, in an amount of not less than the full replacement cost of the Building; provided, however, if the premium for any insurance carried by Landlord with respect to the Property increases as the result of Tenant's use or occupancy or as the result of any act or omission of Tenant or its agents, employees, or contractors, Tenant shall pay Landlord the amount of any such increase on written demand. Payment of such increased premiums shall not excuse any noncompliance with this Lease by Tenant that may have caused the increased premiums. (b) Tenant shall maintain and pay for property and casualty insurance with extended coverage on all trade fixtures, equipment, machinery, merchandise, or other personal property belonging to or in the custody of Tenant in the Premises or otherwise on the Property. Tenant shall maintain and pay for commercial general liability insurance (occurrence coverage) in the amount of not less than $2,000,000.00, with a company licensed to do business in the state in which the Property is located and reasonably acceptable to Landlord, naming Landlord as an additional insured, providing contractual liability coverage, and containing an undertaking by the insurer not to cancel or change coverage materially without first giving thirty (30) days' written notice to Landlord. Tenant shall furnish Landlord certificates of insurance evidencing the required commercial general liability insurance coverage prior to the Commencement Date and thereafter prior to each policy renewal date. Tenant shall be permitted to satisfy the foregoing insurance requirements through the use of blanket policies which otherwise comply with the terms hereof. (c) Each of Landlord and Tenant hereby waives all claims or other rights of recovery against the other and its agents, employees, and contractors for any loss or damage to the Premises or other portions of the Property, or to any personal property or fixtures thereon, by reason of fire or other insurable risk of loss (whether or not actually insured), regardless of cause or origin, including negligence, gross negligence, or misconduct of the other party or its agents, employees, or contractors, and covenants that no insurer shall hold any right of subrogation against such other party. Landlord and Tenant shall each advise its insurers of the foregoing waiver and such waiver shall be a part of the respective policies of property and casualty insurance maintained by Landlord and Tenant. 7. REPAIRS AND MAINTENANCE BY LANDLORD. At its own cost (and not as a cost included in the calculation of Additional Rent), Landlord shall repair only the roof, exterior walls, structural members (including foundation and subflooring) of the Premises, and central plumbing and electrical systems serving the entire Building up to the point of entry into the Premises. If Tenant gives Landlord written notice of the need for repairs, Landlord shall begin any repair work required under the terms of this Lease within thirty (30) days after its receipt of such notice, and shall diligently pursue such required repairs to completion. If repairs are required to be made by Landlord as the result of any act or omission of Tenant or its agents, employees, or contractors, then any cost of such repairs in excess of insurance proceeds actually received by Landlord shall be paid by Tenant to Landlord on written demand, and Landlord shall not be obligated to begin or continue repair work until funds for such purposes are received from insurance proceeds or from Tenant. As used in this Paragraph, "repair" includes the replacement of materials or equipment. As items whose cost is included in the calculation of Additional Rent, Landlord shall provide for: Routine repairs, service, management, operations and maintenance of the common areas, facilities, and equipment of the Property, including landscaping, irrigation systems, parking and loading areas, driveways, sidewalks, exterior lighting, common signs, garbage collection and disposal, common water, sewer, plumbing, gas, electric facilities and equipment, and other areas, facilities, or equipment shared by the various tenants of the Property. If and to the extent Landlord chooses, Landlord may furnish common area security services and equipment. Landlord has no duty to provide security for persons or property, and no duty to do so shall be deemed to have been assumed by Landlord's furnishing of security services. Tenant waives and releases all claims against Landlord and its agents, employees, and contractors to the extent based on any wrongful, negligent, or other failure to furnish security services or equipment or on any wrongful, negligent, or other act or omission in connection with any security services or equipment furnished. Tenant shall not be deemed to have been evicted as the result of, nor shall Landlord be liable for any loss or damage to the property of Tenant located in the Premises or for any loss of business or profits of Tenant or other damages of any kind arising from (i) any failure of Landlord to provide maintenance, repair, or other services to be furnished by Landlord pursuant to this Paragraph as the result of circumstances outside of Landlord's reasonable control, (ii) any interruption or unavailability of utilities or any stoppage, leaking, bursting, or other defect or failure in the utility lines, pipes, wires, and other facilities serving the Premises as the result of circumstances outside of Landlord's reasonable control, or (iii) any repairs, maintenance, alterations, or improvements to any portion of the Property made in connection with correcting any of the foregoing circumstances or providing the maintenance, repair, or other services to be furnished by Landlord pursuant to this Paragraph, provided that in connection with any such repairs or corrections Landlord shall use commercially reasonable efforts to prevent material interference to Tenant and Tenant's business. If as the result of any of the foregoing, the Premises remain untenantable for more than ten (10) days after written notice from Tenant to Landlord specifying the circumstances giving rise to such untenantability, then as Tenant's sole and exclusive remedy, Minimum Rent and Additional Rent shall abate for so long thereafter as the Premises remain untenantable in Landlord's judgement. Such abatement of Minimum Rent and Additional Rent shall not extend the term of this Lease. In exercising its rights under this Paragraph, Landlord shall use commercially reasonable efforts to not materially interfere with or disrupt the normal operation of Tenant's business. Landlord, and any third parties entering the Premises at Landlord's invitation or request shall at all times strictly observe Tenant's reasonable rules relating to security on the Premises. Except in the event of an emergency, Tenant shall have the right, in its sole discretion, to designate a representative to accompany Landlord, or any third parties, while they are on the Premises. 8. REPAIRS AND MAINTENANCE BY TENANT. Tenant shall maintain and keep in good repair all parts and components of the Premises not expressly required by this Lease to be maintained or repaired by Landlord, including without limitation, plumbing, wiring, electrical systems, HVAC systems and equipment (except for routine maintenance provided by Landlord), glass and plate glass, and equipment or machinery constituting fixtures. All maintenance and repair work performed by Tenant shall be carried out in a good an workmanlike manner in compliance with applicable building codes and other laws. As used in this Paragraph, "repair" includes the replacement of materials or equipment. Notwithstanding anything contained herein to the contrary, Tenant shall, at its sole cost and expense, maintain and keep the heating, ventilating and air conditioning systems, apparatus and equipment (the HVAC Systems) in good condition and repair during the entire term of this Lease. Within thirty (30) days of the date Tenant takes possession of the Premises, Tenant shall enter into a maintenance contract, requiring at least quarterly service with a reputable and licensed full service HVAC maintenance firm approved by Landlord, for the routine maintenance and servicing of the HVAC Systems. Tenant shall furnish Landlord with a copy of the then current maintenance contract. Landlord shall have the specific right to inspect, or have inspected, the HVAC Systems, and if in Landlord's reasonable judgement such HVAC Systems are not being properly maintained, Landlord shall have the right to give notice to Tenant of such, and Landlord may, at the expense of Tenant, undertake to make such repairs as are necessary to put the HVAC Systems in good condition. Notwithstanding anything contained herein to the contrary, Tenant shall, at its sole cost and expense, provide for the routine control and extermination, as applicable, of insects, pests, and other vermin in the premises (Pest Control). If Landlord, in its reasonable judgement, determines that Tenant's Pest Control is insufficient, Landlord may, at the expense of Tenant, undertake to contract for such services as Landlord deems necessary to correct the situation. 9. UTILITIES AND JANITORIAL SERVICES. Tenant shall contract directly with public or private utility companies to obtain, and shall pay directly any required deposits, installation and hook-up costs, and consumption or use charges for (a) electricity, gas, and telephone or other telecommunications services, (b) water and sewer service if separately metered for the Premises, (c) unless provided by Landlord as part of the common facilities of the Property, trash and waste collection and disposal service, and (d) waste collection and disposal services for waste in exceptional quantities or of a type requiring special handling or that is otherwise not suitable for collection and disposal through common facilities of the Property, if any. Tenant shall provide and pay for janitorial services of a type and frequency to keep the Premises in a clean, safe, healthful, and presentable condition. 10. ALTERATIONS AND IMPROVEMENTS. Tenant shall make no alterations, additions, or improvements to the Premises or the Property that affect the structural elements of the Building or Building systems or exterior without the prior written consent of Landlord in each instance, which consent shall not be unreasonably withheld. Tenant shall comply with all reasonable requirements of Landlord relating to approval of plans and specifications, compliance with building codes and other laws, protection of the integrity, condition, and proper functioning of the roof, walls, foundations, and other structural elements of the Building and of the Building's mechanical, electrical, and plumbing systems and equipment, employment and bonding of contractors, insurance, aesthetic considerations, and other relevant matters as determined by Landlord. All alterations, additions or improvements, including without limitation all partitions, walls, railings, carpeting, floor and wall coverings, and other fixtures (excluding Tenant's trade fixtures) made by, for, or at the direction of Tenant shall become the property of Landlord when made, and shall remain upon the Premises at the expiration or earlier termination of this Lease. Subject to the last paragraph of Paragraph 7, Landlord reserves the right to make structural and nonstructural alterations, additions, and improvements to the Property, to re-stripe parking areas and otherwise control parking and traffic movement on the Property, and to change the name or street address of the Property. 11. TRADE FIXTURES AND OTHER PERSONAL PROPERTY. Any trade fixtures installed in the Premises at Tenant's expense shall remain Tenant's personal property, and Tenant shall have the right at any time during the term of this Lease to remove such trade fixtures (provided that any damage to the Building or Premises caused by such removal shall immediately be repaired by Tenant). On or before the expiration of the term or earlier termination of this Lease, Tenant shall remove all trade fixtures and personal property from the Premises, repair any damage to the Building or Premises caused by removal of its trade fixtures and other personal property, and leave the Premises in a clean condition free of waste, refuse, or debris. If Tenant fails to do so, Landlord may retain, store, or dispose of such trade fixtures and other personal property however Landlord chooses without liability of any kind to Tenant, repair any damage to the Building or Premises caused by removal of such trade fixtures and other personal property, and clean the Premises and properly dispose of all such waste, refuse, or debris; and all costs and expenses incurred by Landlord in connection with the foregoing shall be payable by Tenant to Landlord on written demand. The following property shall be considered part of the permanent improvements to the Building owned by Landlord, not trade fixtures of Tenant, and shall not be removed from the Premises by Tenant under any circumstances: (a) HVAC systems, fixtures, or equipment (unless the same is installed by Tenant, in which event Tenant may remove same in accordance with the first sentence of this Paragraph 11); (b) lighting fixtures or equipment; (c) dock levelers; (d) carpeting, other permanent floor coverings, or raised flooring; (e) paneling or other wall coverings; (f) plumbing fixtures and equipment; and (g) permanent shelving. Notwithstanding any contrary provision herein, Landlord may designate, in connection with its review and approval of Tenant's plans, such equipment and/or improvements (including without limitation those related to HVAC) that Landlord desires for Tenant to remove upon the expiration of the term or earlier termination of this Lease, which equipment and improvements shall be treated as trade fixtures for purposes of the second and third sentences of this Paragraph 11. 12. SIGNS AND ADVERTISING. Tenant may, at its sole cost and expense, install exterior tenant identification sign on the Building. The identification signage will be of a design acceptable to Landlord in its sole discretion (taking into account signage standards applicable to the Property), and installation will be in a manner prescribed by Landlord. Landlord shall have the right to remove any unapproved signage and repair any resulting damage to the Building or Premises at the cost and expense of Tenant payable on written demand. Tenant shall not use or allow the use in or about the Premises or elsewhere on the Property of any sound production device, mechanical or moving display device, bright lights, or other advertising media that would be visible or audible from the exterior of the Building. 13. LANDLORD'S RIGHT OF ENTRY. Landlord and persons authorized by Landlord may enter the Premises at any time without notice to Tenant in the event of emergency involving possible injury to property or persons in or around the Premises or the Building. Subject to the last paragraph of Paragraph 7, Landlord and persons authorized by Landlord shall have the right to enter the Premises at all reasonable times and upon reasonable notice for the purposes of making repairs or connections, making alterations, additions, or improvements to the Building, installing utilities, providing services to the Premises or for other tenants, making inspections, or showing the Premises to prospective purchasers or lenders of the Property. During the last six (6) months of the initial or any extended term, Landlord and persons authorized by Landlord shall have the right at reasonable times and upon reasonable notice to show the Premises to prospective tenants. 14. CASUALTY DAMAGE. If any part of the Premises is damaged by fire or other casualty, Tenant shall give prompt notice to Landlord. If damage by fire or other casualty renders any substantial part of the Premises untenantable and the repair time to restore the Premises to a tenantable condition will exceed one hundred twenty (120) days (or will exceed thirty (30) days in the case of damage occurring during the last twelve (12) months of the term), or if any part of the Property is so damaged that in Landlord's judgment, substantial alteration or reconstruction is required (whether or not the Premises have been damaged by the casualty), or if any mortgagee of the Property requires application of the insurance proceeds to the reduction of the mortgage debt, or if any material uninsured loss occurs, Landlord may, at its option, terminate this Lease by so notifying Tenant in writing within sixty (60) days after the date of the casualty; provided, however, if Landlord desires to terminate this Lease as a result of an uninsured loss or mortgagee's application of insurance proceeds, Landlord shall notify Tenant of the amount of insurance proceeds available for restoration (if Landlord knows the same) and Tenant may agree to pay to Landlord, as rental hereunder, the difference between such amount and the actual costs of restoration, in which case the Lease shall not be terminated pursuant to this sentence. If the damage by fire or other casualty renders any substantial part of the Premises untenantable and if the repair time to restore the Premises to a tenantable condition will exceed one hundred twenty (120) days (or will exceed thirty (30) days in the case of damage occurring during the last twelve (12) months of the term), Tenant may elect to terminate this Lease by so notifying Landlord in writing within sixty (60) days after the date of the casualty. If the Lease is not so terminated by Landlord or Tenant, Landlord shall promptly begin and diligently pursue the work of restoring the Premises (including the initial Tenant Improvements) to substantially their former condition as soon as reasonably possible. Landlord shall not, however, be required to restore any alterations, additions, or improvements other than the initial Tenant Improvements or to spend any amount in excess of the insurance proceeds actually received by Landlord as a result of the casualty. Landlord shall allow Tenant an equitable abatement of Minimum Rent and Additional Rent during the time and to the extent the Premises are untenantable as the result of fire or other casualty, but such abatement shall not extend the term. 15. CONDEMNATION. If all or substantially all of the Property is condemned or is sold in lieu of condemnation, then this Lease shall terminate on the date the condemning authority takes possession. If less than all of the Property is so condemned or sold (whether or not the Premises are affected) and in Landlord's judgment, the Property cannot be restored to an economically viable condition, or if any mortgagee of the Property requires application of condemnation proceeds to the reduction of the mortgage debt, Landlord may terminate this Lease by written notice to Tenant effective on the date the condemning authority takes possession. If the condemnation will render any substantial part of the Premises untenantable, Tenant may terminate this Lease by written notice to Landlord effective on the date the condemning authority takes possession of the affected part of the Premises. If this Lease is not so terminated by Landlord or Tenant, Landlord shall, to the extent feasible, restore the Premises (including the initial Tenant Improvements) to substantially their former condition. Landlord shall not, however, be required to restore any alterations, additions, or improvements other than the initial Tenant Improvements or to spend any amount in excess of the condemnation proceeds actually received by Landlord. Landlord shall allow Tenant an equitable abatement of Minimum Rent and Additional Rent during the time and to the extent the Premises are untenantable as the result of any condemnation, but such abatement shall not extend the term. All condemnation awards and proceeds shall belong exclusively to Landlord, and Tenant shall not be entitled to, and expressly waives and assigns to Landlord, all claims for any compensation for condemnation; provided, however, if Tenant is permitted by applicable law to maintain a separate action that will not reduce condemnation awards or proceeds to Landlord, Tenant shall be permitted to pursue such separate action, but only for loss of business, moving expenses, and Tenant's trade fixtures. 16 TRANSFERS BY TENANT. (a) Without the prior written consent of Landlord in each instance, which consent will not be unreasonably withheld, Tenant shall not do any of the following (as used in this Paragraph, a "Transfer"): (i) assign this Lease or any estate or interest therein, whether absolutely or collaterally as security for any obligation; (ii) sublease any part of the Premises; (iii) permit any assignment of this Lease or any estate or interest therein by operation of law; (iv) subject to Paragraph 16(d) below, grant any license, concession, or other right of occupancy for any part of the Premises; or (v) subject to Paragraph 16(d) below, permit the use of the Premises by any person other than Tenant and its agents and employees. Permissible reasons for Landlord's withholding consent include (but are not limited to) the following: (vi) the proposed use of the Premises is not permitted by this Lease, would materially negatively affect insurance or environmental risks (unless Tenant or the transferee nullifies such risks), or would otherwise materially negatively impact the Property; (vii) the creditworthiness of the proposed transferee is unacceptable to Landlord in Landlord's good faith business judgment; (viii) the proposed use or occupancy would require alterations or additions to the Premises or other portions of the Property to comply with applicable laws, ordinances, and regulations (unless Tenant or the transferee in advance funds such alterations or additions and same do not materially negatively impact the Property); and (ix) if the consent of any mortgagee is required, such mortgagee refuses to consent after good faith efforts by Landlord to obtain such consent. Any attempted Transfer without Landlord's prior written consent shall be void. (b) If Tenant requests Landlord's consent to a Transfer (other than a Permitted Transfer), Landlord may either (i) approve or disapprove the Transfer, or (ii) terminate this Lease with respect to the part of the Premises included in the proposed Transfer. In connection with each Transfer request by Tenant, Tenant shall obtain and furnish to Landlord all documents, financial reports, and other information Landlord reasonably requires in order to evaluate the proposed transferee. Landlord shall advise Tenant of Landlord's decision with respect to the requested Transfer within twenty (20) days after receipt of Tenant's written Transfer request and all requested supporting materials. If Landlord refuses to consent to a requested Transfer, this Lease shall nonetheless remain in full force and effect. The consent of Landlord to one requested Transfer shall never be construed to waive the requirement for Landlord's consent to other Transfers, nor shall any consent by Landlord or Transfer by Tenant discharge or release Tenant from any obligations or liabilities to Landlord. Tenant shall remain fully responsible for all obligations and liabilities arising under this Lease following any Transfer. (c) All net cash or other proceeds of any Transfer (other than a Permitted Transfer) in excess of the Minimum Rent and Additional Rent payable under this Lease (i.e., net of reasonable brokerage commissions, legal fees, transferee improvements and other costs incurred by Tenant in connection with the Transfer) shall be paid to Landlord, and Tenant hereby assigns to Landlord all rights it might have or ever acquire to such portion of the excess net proceeds. No transferee of less than the entire Premises or Lease shall ever be entitled to exercise any extension, expansion, or other option provided in this Lease or to the return of the Deposit. If an Event of Default by Tenant occurs after any Transfer, Landlord may, at its option, collect rent directly from the transferee, and Tenant hereby authorizes any transferee to pay rent directly to Landlord at all times after receipt of written notice from Landlord. No direct collection by Landlord from any transferee shall constitute a novation or release Tenant from its obligations and liabilities under this Lease. (d) Notwithstanding any provision of this Lease to the contrary (i) an assignment or subletting of all or a portion of the Premises to an entity which is controlled by, controls, or is under common control with, Tenant, or to an entity or which results from a merger or consolidation with Tenant, or which has purchased all or a substantial part all of Tenant's assets (any such entity, an Affiliate), (ii) a transfer of all or a substantial portion of the shares in Tenant in connection with any sale, assignment, merger or other reorganization, whether by operation of law or otherwise, (iii) a transfer of all or a substantial part of the assets of Tenant, (iv) any transfer of all or a substantial portion of the shares, control, and/or assets of Tenant to any Affiliate, division, or entity controlling, controlled by or under common control with Tenant, (v) any assignment of this Lease or pledge of a legal or beneficial interest in Tenant to a lender or vendor as security for financing of Tenant's equipment (provided, however, that Landlord shall owe such vendor(s) no duties or obligations except to the extent, if any, imposed on Landlord under any document(s) executed by Landlord and such vendor(s)), and/or (vi) provided that Tenant remains in possession and control of the Premises, any Business Agreements (defined below) to the extent that any Business Affiliates (as defined below) comply in all respects with this Lease, including, without limitation, the provisions hereof related to permitted uses and legal compliance, shall be a Permitted Transfer and not be deemed a Transfer for any purpose under this Lease, provided that Tenant notifies Landlord of any such assignment or sublease and supplies Landlord with any documents or information reasonably requested by Landlord regarding such assignment or sublease to such affiliate. The term Business Agreement(s) shall mean any license, co-location agreement (defined below), or other arrangement which permits the use or occupancy of portions of the Premises by any of Tenant's subsidiaries, divisions, customers, peering partners, or providers of telecommunications services to any of the foregoing (collectively, Business Affiliates) and/or their equipment and personnel; provided, however, that such Business Affiliates (a) shall have no right to occupy the Premises, (b) shall be subject to all restrictions imposed on Tenant hereunder, and (c) shall be owed no duties from Landlord. The term Co-location agreement(s) shall mean any agreement entered into by Tenant with another party whereby Tenant is providing (whether by cable, fiber or other form of physical transmission, wireless transmission, or any other mode of transmission) (i) co-location, access, or any other form of connection to (a) the Internet, (b) any Internet successor or affiliated networking system, and/or (c) any other existing or future telecommunications, networking, or communication systems, or (ii) computer outsourcing services (e.g. housing and management of computer services for Business Affiliates, whether or not such entities are connected to the Internet or other networks or systems). Control, as used in this Subparagraph, shall mean the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities of, or possession of the right to vote, in the ordinary direction of its affairs, of more than fifty percent (50%) of the voting interest in, any person or entity. 17 TRANSFERS BY LANDLORD. Landlord shall have the unrestricted right to sell, assign, mortgage, encumber, or otherwise dispose of all or any part of the Property or any interest therein. Upon sale or other disposition of the Property to a party who assumes the obligations of Landlord under this Lease, Landlord shall be released and discharged from obligations and liabilities thereafter accruing under this Lease (including liability for the return of any Deposit if the same has been delivered to such party), and Tenant shall look solely to Landlord's successor for performance of the Lease thereafter (including the return of any Deposit if the same has been delivered to such party). Tenant's obligations under this Lease shall not be affected by any sale, assignment, mortgage, encumbrance, or other disposition of the Property by Landlord, and Tenant shall attorn to anyone who thereby becomes the successor to Landlord's interest in this Lease. 18 SUBORDINATION. This Lease is subject and subordinate to any and all mortgages now or hereafter encumbering the Property. Such subordination shall be self-operative without the necessity of any further instrument, but if requested by Landlord, Tenant shall promptly execute and deliver to Landlord any instrument Landlord may reasonably request to evidence the subordination of this Lease to such mortgages or to acknowledge the assignment of this Lease as additional security for such mortgages. If any person acquires the Property through the exercise of remedies provided in a mortgage, Tenant shall automatically attorn to and become the tenant of the new owner of the Property, except that the new owner shall not be bound by any payment of rent for more than one (1) month in advance or liable for any act or omission of Landlord that occurred prior to the date the new owner acquired title and possession of the Property. Upon request by such a new owner, Tenant shall execute an instrument confirming the attornment provided in this Paragraph. Notwithstanding any provision of this Lease to the contrary, Landlord hereby represents and warrants that it shall, within thirty (30) days of the execution and delivery of this Lease by Tenant, obtain from the holder of a mortgage, ground lease or any other interest in the Premises, Building and/or Property superior to Tenant (a Mortgagee), a non-disturbance agreement providing, among other things, that (a) Tenant will not be named or joined in any proceeding to enforce the Mortgagee's interest unless required by law in order to perfect the proceeding; (b) enforcement of the Mortgagee's interest shall not terminate the Lease or disturb Tenant in the possession and use of the Premises (except in the case where Tenant is in default under the Lease beyond any applicable notice and cure period); and (c) any party succeeding to the interest of Landlord as a result of the enforcement of the holder's interest shall be bound to Tenant under all the terms, conditions and covenants of the Lease for the balance of the term thereof, with the same force and effect as if such party were the original Landlord under this Lease. In addition, Tenant's subordination to any future Mortgagee hereunder is expressly conditioned on execution and delivery of a non-disturbance agreement as set forth above. Landlord and Tenant agree that any non-disturbance agreement in form and substance substantially similar to the form attached hereto as Exhibit H shall satisfy the requirements of this Paragraph. 19 ESTOPPEL CERTIFICATES; Financial Statements. Within ten (10) days after a written request by Landlord, Tenant shall deliver an estoppel certificate in a form supplied by or acceptable to Landlord certifying any facts that are then true with respect to this Lease, including without limitation that this Lease is in full force and effect, that no default exists on the part of Tenant or, to Tenant's knowledge, on the part of Landlord, that Tenant is in possession, that Tenant has commenced the payment of rent, and that Tenant, to its knowledge, has no defenses or offsets with respect to payment of rent under this Lease. Likewise, within ten (10) days after a written request by Tenant, Landlord shall deliver to Tenant an estoppel certificate covering such matters of fact with respect to Landlord's obligations under the Lease as are reasonably requested by Tenant. If Landlord intends to sell the Property or obtain a loan secured by the Property, then within ten (10) days of Landlord's written request, Tenant shall furnish Landlord its most recent available audited or unaudited financial statements. 20 EVENTS OF DEFAULT BY TENANT. Each of the following constitutes an Event of Default by Tenant (herein so called): (a) Tenant fails or refuses to pay any installment of Minimum Rent, Additional Rent, or any other sum payable under this Lease when due, and the failure or refusal continues for at least five (5) days after receipt of written notice of such failure, provided that Landlord shall not be required to give more than two (2) such notices of payment default within any consecutive twelve (12) month period (with any subsequent late payment within such period an automatic default). (b) Tenant fails or refuses to comply with any provision of this Lease not requiring the payment of money, and the failure or refusal continues for at least thirty (30) days after receipt of written notice from Landlord; provided, however, if any failure by Tenant to comply with this Lease cannot be corrected within such 30-day period solely as a result of nonfinancial circumstances outside of Tenant's control, and if Tenant has commenced substantial corrective actions within such 30-day period and is diligently pursuing such corrective actions, such 30-day period shall be extended for such additional time as is reasonably necessary to allow completion of actions to correct Tenant's noncompliance. (c) Tenant's leasehold estate is taken on execution or other process of law in any action against Tenant (other than a Permitted Transfer). (d) Tenant fails or refuses to take occupancy of the Premises upon the Commencement Date, or Tenant ceases to do business in, or abandons any substantial part of, the Premises, and concurrently fails to comply with any other material obligation or covenant under this Lease (e.g., payment of rent, maintenance of the Premises or maintenance of insurance). (e) Tenant or any guarantor of this Lease files a petition under any chapter of the United States Bankruptcy Code, as amended, or under any similar law or statute of the United States or any state, or a petition is filed against Tenant or any such guarantor under any such statute and not dismissed with prejudice within twenty (20) days of filing, or a receiver or trustee is appointed for Tenant's leasehold estate or for any substantial part of the assets of Tenant or any such guarantor and such appointment is not dismissed with prejudice within sixty (60) days, or Tenant or any such guarantor makes an assignment for the benefit of creditors. 21 LANDLORD'S REMEDIES. If an Event of Default by Tenant occurs, Landlord shall be entitled then or at any time thereafter to do any one or more of the following at Landlord's option: (a) Enter the Premises if need be, and take whatever curative actions are necessary to rectify Tenant's noncompliance with this Lease; and in that event Tenant shall reimburse Landlord on written demand for any expenditures by Landlord to effect compliance with Tenant's obligations under this Lease. (b) Terminate this Lease, in which event Tenant shall immediately surrender possession of the Premises to Landlord, or without terminating this Lease, terminate Tenant's right to possession of the Premises; and in either case, Landlord may re-enter and take possession of the Premises, evict Tenant and all parties then in occupancy or possession, and if permitted under applicable law, change the locks on the doors of the Premises without making keys to the changed locks available to Tenant. (c) If Landlord has terminated this Lease, recover all Minimum Rent, Additional Rent, and other sums owing and unpaid under this Lease as of the date of termination plus damages measured by the present value of the difference in the rental value of the Premises if this Lease had been fully performed for the balance of the term and the rental value of the Premises following the Event of Default by Tenant (taking into account probable remodeling, lease commission, allowance, inducement, and other costs of reletting). (d) If Landlord has not terminated this Lease (whether or not Landlord has terminated Tenant's right to possession of the Premises or actually retaken possession), recover (in one or more suits from time to time or at any time before or after the end of the term) all Minimum Rent, Additional Rent, and other sums then or thereafter owing and unpaid under this Lease, together with all costs, if any, incurred in reletting the Premises (including remodeling, lease commission, allowance, inducement, and other costs), less all rent, if any, actually received from any reletting of the Premises during the remainder of the term. Landlord shall have the right following an Event of Default by Tenant to relet the Premises on Tenant's account without terminating the Lease, any such reletting to be on such terms as Landlord considers reasonable under the circumstances. Landlord may, at its option and without terminating this Lease, also declare the difference, if any, between (i) the entire amount of the rental which would become due and payable during the remainder of the term of this Lease, discounted to present value using a discount rate equal to the prime rate of the Atlanta office of Bank of America (the "Prime Rate") in effect as of the date of such declaration, and (ii) the fair rental value of the Leased Premises during the remainder of the term of this Lease (taking into account, among other factors, the anticipated duration of the period the Premises will be unoccupied prior to reletting and the anticipated cost of reletting the Leased Premises), also discounted to present value using a discount rate equal to the Prime Rate in effect as of the date of such declaration, to be due and payable immediately, in which event such sum shall be due and payable immediately and Tenant agrees to pay to Landlord the same at once, together with all rental and other sums theretofore due, it being understood and agreed that such payment shall be and constitute Landlord's liquidated damages, Landlord and Tenant acknowledging and agreeing that it is difficult or impossible to determine the actual damages Landlord would suffer from Tenant's breach hereof and that the agreed upon liquidated damages are not punitive or penalties and are just, fair and reasonable, all in accordance with O.C.G.A. `13-6-7. (e) Recover all costs of retaking possession of the Premises and any other damages incidental to the Event of Default by Tenant. (f) Terminate all of Tenant's rights to any allowances or under any renewal, extension, expansion, refusal, or other options granted to Tenant by this Lease. (g) Exercise any and all other remedies available to Landlord at law or in equity, including injunctive relief of all varieties. If Landlord elects to retake possession of the Premises without terminating this Lease, it may nonetheless at any subsequent time elect to terminate this Lease and exercise the remedies provided above on termination of the Lease. Nothing done by Landlord or its agents shall be considered an acceptance of any attempted surrender of the Premises unless Landlord specifically so agrees in writing. No re-entry or taking of possession of the Premises by Landlord, nor any reletting of the Premises, shall be considered an election by Landlord to terminate this Lease unless Landlord gives Tenant written notice of termination. 22 LANDLORD'S DEFAULT. It shall be an Event of Default by Landlord (herein so called) only if Landlord fails to comply with any provision of this Lease and the failure continues for at least thirty (30) days after written notice from Tenant to Landlord (with a copy to Landlord's mortgagee if Tenant has been notified in writing of the identity and address of such mortgagee); provided, however, if any failure by Landlord to comply with this Lease cannot be corrected within such 30-day period solely as a result of nonfinancial circumstances outside of the control of Landlord, and if substantial corrective actions have commenced within such 30-day period and are being diligently pursued, such 30-day period shall be extended for such additional time as is reasonably necessary to allow completion of actions to correct Landlord's noncompliance. 23 TENANT'S REMEDIES. Except as otherwise provided in this Lease, in the Event of Default by Landlord, Tenant shall be entitled to any remedies available at law or in equity. Notwithstanding anything in this Lease to the contrary, Landlord shall never be liable in the Event of Default by Landlord, under any promise of indemnity in this Lease, or under any other provision of this Lease for any loss of business or profits of Tenant or other consequential damages or for punitive or special damages of any kind. None of Landlord's officers, employees, agents, directors, shareholders, or partners shall ever have any liability to Tenant under or in connection with this Lease. Tenant agrees to look solely to Landlord's interest in the Property for the recovery of any judgment against Landlord, and Landlord shall never be personally liable for any judgment. In the event that Landlord fails to comply with its obligations to repair under Paragraph 7 within the period set forth in Paragraph 22, Tenant shall have the right, upon reasonable prior notice to Landlord, to make such repairs as are reasonably necessary to promote the tenantability of the Premises and protect Tenant's business operations and equipment. Landlord shall reimburse Tenant's reasonable costs (but in no event for any Excess Costs (as hereinafter defined) incurred in connection with any such repair by Tenant within thirty (30) days of receipt of invoices and necessary lien waivers therefor. Landlord acknowledges that the watertighness of the Building is of paramount importance to Tenant and agrees that it shall repair any leaks as quickly as possible, and that, notwithstanding the foregoing, Tenant may, immediately following notice to Landlord, use commercially reasonable efforts to correct such leaks and make such other repairs as Tenant deems necessary, in its reasonable business judgment, to avert damage to its operations and equipment. Notwithstanding any contrary provision herein, in the event that Tenant commences performance of any repairs under this Paragraph, then (i) Tenant shall be obligated to prosecute such performance to full completion in a good and workmanlike manner in accordance with applicable laws, codes and ordinances and shall be solely responsible for any and all costs and expenses associated with repairing any defective work so performed by Tenant, (ii) such commencement shall be deemed to be a cure of Landlord's failure to perform such obligations, (iii) Landlord shall have no further duties or liabilities (except with respect to reimbursing Tenant for Tenant's performance) in connection with such obligations, (iv) Tenant shall be and remain solely liable for any failure by Tenant to complete such performance, (v) Tenant shall utilize its best efforts to contact and utilize a contractor to make the repair that is included on Landlord's approved contractor list, and (vi) Tenant agrees to pay any and all costs and expenses of the repair that exceed those that would have been incurred by Landlord in diligently and competently prosecuting such repair (excluding necessary weekend and overtime surcharges)(such costs, the Excess Costs). 24 INDEMNIFICATION. (a) Tenant shall indemnify and hold Landlord and its officers, employees, agents, directors, shareholders, and partners harmless against any loss, liability, damage, fine or other governmental penalty, cost, or expense (including attorneys' fees and costs of litigation), or any claim therefor, resulting from: (i) Tenant's noncompliance with or violation of any law, ordinance, or other governmental regulation applicable to Tenant or its use and occupancy of the Premises; (ii) the use, generation, storage, treatment, or transportation, or the disposal or other release into the environment, of any Hazardous Material by Tenant or its employees, agents, or contractors or as the result of Tenant's use and occupancy of the Premises; or (iii) injury to persons or loss or damage to property to the extent caused by any negligent or wrongful act or omission of Tenant or its employees, agents, and contractors, but only to the extent the loss or damage would not be covered by property and casualty insurance of the type and amount required to be carried by Landlord pursuant to this Lease (whether or not actually so carried). (b) Landlord shall indemnify and hold Tenant and its officers, employees, agents, directors, shareholders, and partners harmless against any loss, liability, damage, fine or other governmental penalty, cost, or expense (including attorneys' fees and costs of litigation), or any claim therefor, resulting from: (i) Landlord's noncompliance with or violation of any law, ordinance, or other governmental regulation applicable to Landlord, but only to the extent such noncompliance or violation is not based on the use or occupancy of the Premises by Tenant or on any other act or omission of Tenant or its employees, agents, or contractors; (ii) the use, generation, storage, treatment, or transportation, or the disposal or other release into the environment, of any Hazardous Material by Landlord or its employees, agents, or contractors; or (iii) injury to persons or loss or damage to property (other than trade fixtures or personal property owned by, or in the custody of Tenant) to the extent caused by any negligent or wrongful act or omission of Landlord or its employees, agents, and contractors (other than any negligent or wrongful omission to furnish security services or equipment or any negligent or wrongful act or omission in connection with any security services or equipment furnished). Nothing herein shall create any liability on the part of Landlord for any acts or omissions by other tenants or occupants of the Property or their agents, employees, contractors, or invitees. 25 PROTECTION AGAINST LIENS. Tenant shall do all things necessary to prevent the filing of any mechanics', materialmen's, or other type of lien or claim against Landlord or the Property by, against, through, or under Tenant or its contractors (other than security interests described in clause (v) of Paragraph 16(d) above). If any such lien or claim is filed, Tenant shall either cause the same to be discharged within twenty-five (25) days after filing, or if Tenant in its discretion and in good faith determines that such lien or claim should be contested and if all required consents or approvals of Landlord's mortgagee are obtained, Tenant shall furnish such security as may be necessary to prevent any foreclosure proceedings against the Property during the pendency of such contest. If Tenant fails to discharge such lien or claim within such 25-day period or fails to furnish such security, then Landlord may at its election, in addition to any other right or remedy available to it, discharge the lien or claim by paying the amount alleged to be due or by giving appropriate security. If Landlord discharges or secures such lien or claim, then Tenant shall reimburse Landlord on written demand for all sums paid and all costs and expenses (including reasonable attorneys' fees) so incurred by Landlord. 26 HOLDING OVER. If Tenant remains in possession of any part of the Premises after the expiration of the term of this Lease, whether with or without Landlord's consent, Tenant shall be only a tenant at will, the monthly installments of Minimum Rent payable during such holdover period shall be one hundred fifty percent (150%) of the monthly installments of Minimum Rent payable immediately preceding such expiration, and all Additional Rent and other sums payable under this Lease shall continue to be due and payable. The acceptance of any rent or other payments from Tenant with respect to any holdover period shall not serve to extend the term or waive any rights of Landlord, but Landlord may at any time refuse to accept rent or other payments from Tenant, and may re-enter the Premises, evict Tenant and all parties then in occupancy or possession, take possession of the Premises, and if permitted under applicable law, change the locks on the doors of the Premises without making keys to the changed locks available to Tenant. Tenant shall indemnify and hold Landlord harmless against any loss, liability, damage, cost, or expense (including attorneys' fees and costs of litigation), or any claim therefor, related to Tenant's holding over, including liabilities to any person to whom Landlord may have leased any part of the Premises. 27 ATTORNEY'S FEES. If an Event of Default by Tenant or an Event of Default by Landlord occurs, the nondefaulting party shall be entitled to recover reasonable attorneys' fees and other expenses of litigation incurred in exercising and enforcing its remedies under this Lease. 28 WAIVER. The failure of a party to insist upon the strict performance of any provision of this Lease or to exercise any remedy for an event of default shall not be construed as a waiver. The waiver of any noncompliance with this Lease shall not prevent subsequent similar noncompliance from being or becoming an event of default. No waiver shall be effective unless expressed in writing signed by the waiving party. No waiver shall affect any condition other than the one specified in the waiver and then only for the time and in the manner stated. Landlord's receipt of any rent or other sums with knowledge of noncompliance with this Lease by Tenant shall not be considered a waiver of the noncompliance. No payment by Tenant of a lesser amount than the full amount then due shall be considered to be other than on account of the earliest amount due. No endorsement or statement on any check or any letter accompanying any check or payment shall be considered an accord and satisfaction, and Landlord may accept any check or payment without prejudice to Landlord's right to recover the balance owing and to pursue any other available remedies. 29 LEASING COMMISSIONS. Each of Landlord and Tenant represents and warrants to the other that it has not dealt with anyone claiming any entitlement to any commission in connection with this leasing transaction except: N/A representing Landlord and Insignia/ESG representing Tenant, the "Broker(s)", whose commission will be paid by Landlord pursuant to a separate written agreement. Each of Landlord and Tenant agrees to indemnify and hold the other harmless against any loss, liability, damage, cost, or expense (including attorneys' fees and costs of litigation), or any claim therefor, for any leasing or other commissions, fees, charges, or payments resulting from or arising out of their respective actions in connection with this Lease except as to Broker(s). Landlord shall indemnify and hold Tenant harmless against payment of any leasing commission due Broker(s) in connection with this Lease. 30 NOTICES. Any written notice may be given by (a) depositing the notice in the United States mail, postpaid and certified and addressed to the party at its notification address under this Lease with return receipt requested, (b) delivering the same in person or by commercial messenger or overnight private delivery service to the party at its notification address under this Lease, or (c) by facsimile transmission to the party at its notification address under this Lease. Unless actually received earlier, written notice deposited in the mail in the manner described above shall be effective on the third business day after it is so deposited, even if not received. Written notice given in person or by commercial messenger, overnight private delivery, or facsimile transmission in the manner described above shall be effective as of the time of receipt at the destination address as evidenced by a receipt signed by an employee of Tenant, by any confirmation of delivery provided by the messenger or delivery service, or by facsimile confirmation of transmission. The notification addresses of the parties are specified on the signature page of this Lease. Each party shall have the right to change its address by not less than ten (10) days' prior written notice to the other party. 31 MISCELLANEOUS. (a) If requested by Landlord, Tenant shall furnish appropriate evidence of the valid existence and good standing of Tenant and the authority of any parties signing this Lease to act for Tenant. If requested by Tenant, Landlord shall furnish appropriate evidence of the valid existence and good standing of Landlord and the authority of any parties signing this Lease to act for Landlord. (b) This document embodies the entire contract between the parties, and supersedes all prior agreements and understandings between the parties related to the Premises, including all lease proposals, letters of intent, and similar documents. All representations, warranties, or agreements of an inducement nature, if any, are merged with, and stated in this document. This Lease may be amended only by a written instrument executed by both Landlord and Tenant. (c) The relationship created by this Lease is that of landlord and tenant. Landlord and Tenant are not partners or joint venturers, and neither has any agency powers on behalf of the other. Tenant is not a beneficiary of any other contract or agreement relating to the Property to which Landlord may be a party, and Tenant shall have no right to enforce any such other contract or agreement on behalf of itself, Landlord, or any other party. (d) No consent or approval by Landlord shall be effective unless given in writing signed by Landlord or its duly authorized representative. Any consent or approval by Landlord shall extend only to the matter specifically stated in writing. (e) Whenever this Lease requires Tenant to pay or reimburse Landlord for costs or expenses in connection with any matter, such payment or reimbursement shall include costs and expenses payable by Landlord for related legal, architectural, engineering, and other consulting services as well as a ten percent (10%) administrative processing fee to compensate Landlord for its additional administrative and overhead costs. Whenever this Lease requires Landlord's consent to or approval of any item, Landlord may condition such consent or approval on payment or reimbursement of all costs and expenses incurred by Landlord (including legal, architectural, engineering, and other consulting services) as well as reasonable administrative processing fee to compensate Landlord for its additional administrative and overhead costs. (f) The captions appearing in this Lease are included solely for convenience and shall never be given any effect in construing this Lease. (g) This Lease is being executed in multiple counterparts, each of which shall be considered an original for all purposes. (h) If any provision of this Lease is invalid or unenforceable, the remainder of this Lease shall not be affected. Each separate provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. (i) This Lease binds not only Landlord and Tenant, but also their respective heirs, personal representatives, successors, and assigns (to the extent assignment is permitted by this Lease). (j) This Lease is governed by the laws of the state in which the Property is located. (k) All references to "business days" in this Lease shall refer to days that national banks are open for business in the city where the Property is located. Time is of the essence of this Lease. (l) All references to "mortgage(s)" in this Lease shall include deeds of trust, deeds to secure debt, other security instruments, and any ground or other lease under which Landlord may hold title to the Property as lessee. All references to "mortgagee(s)" in this Lease shall include trustees, beneficiaries, secured parties, ground or other lessors, and other parties secured by any mortgage. (m) Any liability or obligation of Landlord or Tenant arising during or accruing with respect to the term of this Lease shall survive the expiration or earlier termination of this Lease, including without limitation, obligations and liabilities relating to (i) the final adjustment of estimated installments of Additional Rent to actual Additional Rent owed, (ii) the condition of the Premises or the removal of Tenant's property, and (ii) indemnity and hold harmless provisions of this Lease. (n) Tenant agrees not to record this Lease. Tenant may record a memorandum of this Lease in a form approved by Landlord in writing prior to recording provided Tenant pays all taxes, recording fees, or other governmental charges incident to such recording. The memorandum shall not disclose the rent payable under this Lease and shall expressly provide that it shall be of no further force or effect after the last day of the term or on filing by Landlord of an affidavit that this Lease has expired or been terminated. Additionally, Tenant shall not disclose the terms of this Lease to any third party except (i) legal counsel to Tenant, (ii) any assignee of Tenant's interest in this Lease or sub-tenant of Tenant, (iii) as required by applicable law or by subpoena or other similar legal process, or (iv) for financial reporting purposes. (o) Landlord has delivered a copy of this Lease solely for Tenant's review, and such delivery does not constitute an offer to Tenant or an option reserving the Premises. This Lease shall not be effective until a counterpart executed by both Landlord and Tenant is delivered by Landlord to Tenant. (p) Tenant's interest in this Lease is a usufruct, not subject to levy and sale and not assignable except as expressly stated in this Lease to the contrary, rather than estate or interest in land. 32 SPECIAL PROVISIONS. Any special provisions are attached to this Lease as Exhibit G. IN WITNESS WHEREOF, the parties have caused this Lease to be executed pursuant to authority duly given as of the day and year first above written. [Signatures on following page] TENANT: LANDLORD: COMPUTER OUTSOURCING SERVICES, INC., CROCKER REALTY TRUST, L.P., a Delaware a corporation limited partnership, doing business in ---------------------- Georgia as CROCKER REALTY. L.P. By: CRT-GP, LLC, a Delaware limited liability company, its sole general partner By: Crocker Operating Partnership, L.P., a Delaware limited partnership, its sole member By: Name: Title By: Crocker Realty Trust, Inc., a Maryland corporation, its sole general partner [CORPORATE SEAL] By: ---------------------------------- Name: Christopher L. Becker Title: Vice President [CORPORATE SEAL] Tenant's Notification Address: Landlord's Notification Address: - ----------------------------- ------------------------------- c/o Crocker Realty Trust, L.P. 433 Plaza Real, Suite 335 Boca Raton, Florida 33432 Facsimile: (561) 394-7712 Facsimile: Copy to: Crocker Realty, L.P. 2675 Paces Ferry Road Suite 320 Atlanta, Georgia 30339 Attention: Christopher L. Becker Facsimile: (770) 435-7080 EXHIBIT A Legal Description of Building Site and Property EXHIBIT B Floor Plan of Premises EXHIBIT C Plan of Exterior Areas EXHIBIT D Minimum Rent From Through Rate Annual Amount Monthly Installment - ---------- ------------ -------- -------------- -------------------- 07/01/00 06/30/01 $14.50 $756,523.00 $63,043.58 07/01/01 06/30/02 $14.86 $775,305.64 $64,608.80 EXHIBIT E Additional Rent Calculation 1. Operating Expenses (herein so called) shall consist of all costs and expenses of Landlord or its property management company ("Manager") accrued each calendar year for the management, operation, repair, and maintenance of the Property, including without limitation, costs and expenses for the following in connection with the Property: (a) Wages, salaries and compensation (including fringe benefits) paid or incurred for employees of Landlord or Manager up to and including the level of Property manager or the equivalent, provided that if such employees provide services with respect to other premises, such amounts shall be fairly allocated amongst all such premises. (b) Materials, supplies, replacement parts, equipment, and tools (whether purchased or leased). (c) Services rendered by third parties, including services to be provided by Landlord pursuant to the terms of the Lease. The costs of services rendered by Landlord, Manager or the affiliates of either shall not include costs representing an amount paid to Landlord, Manager or their affiliates which is in excess of the market rate which would have been paid in the absence of such relationship. (d) Utility costs and services, including electricity, gas, telephone, sewage, refuse or garbage collection, fire protection, and security services (if furnished). (e) Insurance premiums and policy deductibles paid, including property and casualty, rent loss, and public liability insurance. (f) Management fees and expenses. (g) Accounting services. (h) Assessments, fees, or similar charges for the Property's fair share of the cost of operating and maintaining common areas and facilities of the business park in which the Property is located. (i) Expenditures required to be capitalized in accordance with generally accepted accounting principles that are either required under any governmental law or regulation that was not applicable to the Property at the time the Building was constructed or that are intended to reduce Operating Expenses; provided that such capitalized costs shall be amortized over a reasonable period (as determined in accordance with generally accepted accounting principles) with interest thereon at the prime rate of NationsBank of North Carolina, N.A. (or its successor), in effect at the time such capital improvements were made. Notwithstanding the foregoing, Operating Expenses shall not include: (i) depreciation or amortization (except as otherwise provided above), (ii) debt service, interest or ground lease payments, (iii) leasing commissions or brokerage fees, (iv) repairs to the Building and any demised premises where the occurrence causing the damage or loss necessitating repair is reimbursed by insurance carried by Landlord or that would have been reimbursed by insurance as would normally be carried by a reasonably prudent operator, (v) renovating space for new tenants or in renovating space vacated by any tenant, (vi) Landlord's cost of utilities separately charged to tenants and Landlord's payroll, material, and contract cost of other services separately charged to tenants, (vii) costs incurred by Landlord for Tenant's alterations, (viii) any cost of painting and decorating the premises of other tenants, and (ix) costs required to be capitalized in accordance with generally accepted accounting principles (except as described above). 2. Taxes (herein so called) for each calendar year shall consist of all real estate taxes, assessments (whether for drainage, sewage, or other public improvements), taxes on rent or on occupancy or use of the Property, and similar governmental impositions now or hereafter levied or assessed, whether general or special, and whether imposed by any governmental entity or special taxing or assessment district (excluding, however, any income, franchise, or similar tax imposed directly on Landlord or Landlord's net income from the Property), together with all costs incurred by Landlord in contesting same. 3. In calculating Operating Expenses, all costs shall be determined on an annualized basis, and costs that vary with occupancy (such as janitorial service and utilities) shall be appropriately adjusted to reflect Operating Expenses at one hundred (100%) percent occupancy of the Building for a full calendar year. If the rentable area of the Building changes, subsequent calculations of Additional Rent shall be adjusted accordingly based on an architect's certificate or other reasonable substantiation of the Building's rentable area. 4. Tenant shall have the right, upon reasonable notice, to audit the books and records of Landlord relating to determination of Additional Rent within thirty (30) days after receipt of Landlord's calculation of Additional Rent. In the event that such audit reflects a discrepancy, and Landlord does not provide evidence to the contrary, an adjustment shall immediately be made to correct such discrepancy. The cost of the audit shall be at the expense of Tenant, unless the audit reveals a discrepancy in Landlord's favor of more than five percent (5%), in which event Landlord shall reimburse Tenant for the reasonable and actual expenses incurred by Tenant in connection with the audit. EXHIBIT F Building Rules and Regulations 1. Sidewalks, doorways, vestibules, halls, stairways, elevator lobbies and other similar areas in the common areas of the Property shall not be used for the storage of materials or disposal of trash, obstructed by tenants or others, or used by tenants or others for any purpose other than entrance to and exit from tenant premises. 2. Plumbing fixtures shall be used only for the purposes for which they are designed, and no sweepings, rubbish, rags, or other unsuitable materials shall be disposed into them. Damage resulting to any such fixtures from misuse by a tenant shall be the liability of said tenant. 3. Landlord's property manager shall have the authority to approve the proposed weight and location of any safes and heavy furniture and equipment, which shall if determined to be necessary by Landlord's property manager, stand on supporting devices approved by Landlord's property manager in order to distribute the weight. 4. Each tenant shall keep its premises neat and clean. No exterior storage of materials, equipment, supplies, or other property shall be permitted. All trash shall be properly disposed of in appropriate containers or receptacles. Specifically, and without limitations, no exterior storage of pallets or shipping containers is permitted. 5. No birds, fish or other animals shall be brought into or kept in, on or about the Building (except for seeing-eye dogs). 6. Each tenant shall comply with all security procedures (if any) both during business hours and after hours and on weekends. Landlord's property manager will provide each tenant with prior notice of any such security procedures and any changes thereto promptly. Tenants shall lock all exterior doors after working hours. 7. No flammable or explosive fluids or materials shall be kept or used within the Building except in areas approved by Landlord, and each tenant shall comply with all applicable building and fire codes relating thereto. 8. The location of any vending machines must be approved by Landlord's property manager. 9. All locks for doors in each tenant's premises shall be Building Standard except as otherwise permitted by Landlord and no tenant shall place any additional lock or locks on any door in its premises without Landlord's property manager's written consent. All requests for duplicate keys shall be made to Landlord's property manager. 10. No machinery of any kind may be operated that would overload, damage, or otherwise exceed design capacities for the Building's mechanical, electrical, and plumbing systems and equipment. 11. Canvassing, peddling, soliciting and distribution of hand bills on the Property (except for activities within a tenant's premises that involve only such tenant's employees) is prohibited. Each tenant is requested to notify Landlord (or Landlord's property manager) if such activities occur. 12. The tenant will be responsible for contacting Landlord's property manager in advance for clearance of tenant contractors. All tenants shall refer all contractors, contractors' representatives, and installation technicians rendering any service to them to Landlord for Landlord's supervision, approval, and control. 13. Each tenant and their contractors are responsible for removal of trash resulting from large deliveries or move-ins. Such trash must be removed from the Building and Building facilities may not be used for dumping. If such trash is not promptly removed, Landlord (or Landlord's property manager) may cause such trash to be removed at the tenant's sole cost and expense plus a reasonable additional charge to be determined by Landlord to cover Landlord's administrative costs in connection with such removal. 14. Tenants may not install, leave or store equipment, supplies, furniture or trash in the common areas of the Property (other than the Exterior Areas). 15. Each tenant shall provide Landlord's property manager with names and telephone numbers of individuals who should be contacted in an emergency. 16. Electric current shall not be used for space heaters, cooking or heating devices or similar appliances without Landlord's prior written permission. 17. No vehicles shall be parked except in designated areas. No vehicles may be stored or abandoned on the Property. All loading and unloading shall occur only at designated loading docks or areas. All persons on the property shall comply with traffic control and parking signs. 18. Except as provided in Paragraph 1 of the Lease, no antennas (including microwave or satellite dish antennas) shall be placed on the roof of the Building or elsewhere on the Property without the prior written consent of Landlord. Landlord reserves the right to amend and add to these rules as Landlord considers appropriate for the safety, care, maintenance, operation, and cleanliness of the Building, and for the preservation of good order therein. If any of these rules directly contradicts the other terms of the Lease, such other terms shall prevail. EXHIBIT G Special Provisions 1. Landlord, at its own cost and expense, agrees to replace, prior July 10, 2000, the entire roof of the Premises with a new watertight roof system pursuant to the specifications attached hereto as Exhibit K. 2. Landlord shall, at its own cost and expenses, remove, or cause to be removed, from the Property those batteries designated on Exhibit L attached hereto. 3. Landlord has made no representations or promise as to the condition of the Premises. Except as set forth in this Exhibit G, Landlord shall not perform any alterations, additions, or improvements, in order to make the Premises suitable and ready for occupancy and use by Tenant. Tenant has inspected the Premises, is fully familiar with the physical condition of the Premises, and shall accept the Premises as-is, where is, and without any warranty, express or implied, or representation as to fitness or suitability 4. Tenant shall have access to the Premises and Exterior Areas 24 hours per day, 365 days per year. Tenant shall have the right to secure its property in the Exterior Areas by means of a fence or other appropriate measures behind the Building where not visible to the public, provided that any such installation shall comply with all applicable laws, ordinances, codes and rules and regulations. 5. Infocrossing, Inc. (Guarantor) shall guaranty the performance of Tenant's obligations hereunder pursuant to a guaranty to be executed by Guarantor of the form attached hereto as Exhibit I. 6. Following Landlord's written confirmation to Tenant of Federated's vacation of the Premises, Tenant shall be entitled to access to the Premises upon its execution and delivery of the Lease for purposes of measuring the space to design the Tenant Improvements, demolish the space to a shell and core condition and thereafter construct the Tenant Improvements. Tenant agrees that (i) it shall not interfere, or permit its agents, employees or contractors, to interfere with, any construction work being performed by, or on behalf of, Landlord; (ii) Landlord shall have no responsibility or liability for any loss of or damage to any of Tenant's property installed or left upon the Premises (except such as results from the negligence or willful misconduct of Landlord or its agents, employees or contractors); (iii) all provisions of this Lease, other than the obligation of Tenant to pay Rent, shall be binding upon Tenant at such time; (iv) Tenant's agents, employees and contractors shall work in harmony and shall not interfere with Landlord, Landlord's contractor or any subcontractor in the construction of other improvements to the Building; and (v) before entering upon the Premises, Tenant shall cause Landlord to be insured from the date of such entry with satisfactory proof that all agents or employees of Tenant or any of its contractors or subcontractors entering upon the Premises are appropriately covered by workers' compensation insurance. Tenant shall not undertake the installation of the Tenant Improvements using contractors or employees that interfere with or disrupt harmonious labor relations for the Building as a whole, including work being performed by Landlord. 7. Notwithstanding the provisions of Paragraph 16(d) of the Lease, Tenant may form an operating subsidiary (Subsidiary), and transfer its interest hereunder to Subsidiary, provided that (i) prior to such transfer, Tenant shall execute a guaranty of a form acceptable to Landlord, and (ii) such Subsidiary is entirely controlled by Tenant or Landlord is otherwise satisfied, in its sole discretion, with the relationship between Tenant and Subsidiary. 8. With respect to the generators and raised flooring currently located in the Premises for the use of Federated (the Federated Equipment), Tenant may notify Landlord of any items of such Federated Equipment which Tenant desires to use following Federated's surrender of the Premises, which notice shall be effective if received by Landlord reasonably in advance of Federated's surrender. Landlord shall use commercially reasonable efforts to enforce the obligations of Federated to retain in the Premises following the termination of Federated's lease those items of the Federated Equipment for which Tenant timely notifies Landlord in accordance with the immediately preceding sentence. 9. Landlord shall deliver to Guarantor copies of any default notice delivered by Landlord to Tenant at the following address (or at such other address as Guarantor may notify Landlord pursuant to Paragraph 30 of the Lease) : Infocrossing, Inc. Guarantor shall be afforded the same cure period from and after notice as is afforded Tenant hereunder. As used in this Paragraph 9, Guarantor shall mean and refer to Guarantor and, in the event that Tenant executes the guaranty contemplated by Paragraph 7 above, Tenant. EXHIBIT H Form of Subordination, Non-Disturbance and Attornment Agreement EXHIBIT I Form of Guaranty EXHIBIT J Reports 1. Compliance Evaluation for an Emergency Generator Underground Storage Tank, dated October 6, 1999 2. Letter from Federated Systems Group dated June 22, 1999 3. Phase I Environmental Site Assessment Update dated February 13, 1998 4. Phase I Environmental Site Assessment Update dated October 31, 1996 5. Report of Phase II Subsurface Investigation dated July 17, 1995 6. Asbestos Operations and Maintenance Program for Bay Colony Business Center EXHIBIT K Roof Specifications EXHIBIT L Batteries to be Removed All batteries located on the Premises except those specified in a written notice to the Landlord at least 24 hours before Landlord's removal contractor enters the Premises to remove such batteries. EX-10.7 6 0006.txt STIRLING LEASE DEED OF LEASE between BECO-TERMINAL LLC ("Landlord") and INFOCROSSING, INC. ("Tenant") TABLE OF CONTENTS Page ARTICLE 1 PREMISES.......................................................1 ARTICLE 2 TERM...........................................................1 ARTICLE 3 RENEWAL OPTIONS................................................2 ARTICLE 4 ACCEPTANCE OF THE PREMISES BY TENANT...........................3 ARTICLE 5 RENTAL.........................................................4 ARTICLE 6 IMPOSITIONS....................................................5 ARTICLE 7 UTILITIES.....................................................6 ARTICLE 8 USE............................................................7 ARTICLE 9 LAWS, ORDINANCES, AND REQUIREMENTS OF PUBLIC AUTHORITIES.......7 ARTICLE 10 ALTERATIONS...................................................9 ARTICLE 11 LIENS........................................................11 ARTICLE 12 REPAIRS......................................................11 ARTICLE 13 INSURANCE....................................................12 ARTICLE 14 DAMAGE BY FIRE OR OTHER CASUALTY.............................14 ARTICLE 15 CONDEMNATION.................................................15 ARTICLE 16 ASSIGNMENT AND SUBLETTING....................................16 ARTICLE 17 INDEMNIFICATION..............................................22 ARTICLE 18 SURRENDER OF THE PREMISES....................................22 ARTICLE 19 ESTOPPEL CERTIFICATES........................................23 ARTICLE 20 SUBORDINATION................................................24 ARTICLE 21 DEFAULT AND REMEDIES.........................................26 ARTICLE 22 WAIVER BY TENANT.............................................29 ARTICLE 23 SECURITY DEPOSIT.............................................29 ARTICLE 24 ATTORNEYS' FEES AND LEGAL EXPENSES...........................31 ARTICLE 25 NOTICES......................................................31 ARTICLE 26 HAZARDOUS SUBSTANCES.........................................32 ARTICLE 27 SIGNS........................................................33 ARTICLE 28 WAIVER OF LIEN ON PERSONAL PROPERTY..........................33 ARTICLE 29 WAIVER OF JURY TRIAL; COUNTERCLAIMS..........................34 ARTICLE 30 MISCELLANEOUS................................................34 ARTICLE 31 OMITTED......................................................40 ARTICLE 32 BACKUP ELECTRICAL GENERATORS.................................40 ARTICLE 33 NET LEASE....................................................40 Exhibits: Exhibit A Description of the Land Exhibit B Rules and Regulations Exhibit C Form of Commencement Date Certificate Exhibit D Description of Landlord's Work Exhibit D-1 Site Plan Exhibit E ALTA Endorsement Exhibit F Letter of Credit BASIC LEASE INFORMATION Date of Lease: July __, 2000. Landlord: BECO-TERMINAL LLC, a Virginia limited liability company. Tenant: INFOCROSSING, INC., a Delaware corporation. Premises: The one-story building (the "Building") to be located at 45580 Terminal Drive, Sterling, Loudoun County, Virginia together with the land on which the Building shall be constructed, which land is more particularly described on Exhibit A attached hereto (the "Land"). The Premises are shown on the site plan attached hereto as Exhibit D-1. Commencement Date: The "Commencement Date" specified in Section 2.01 of the Lease. Expiration Date: The last day of the month in which occurs the 15 year anniversary of the Commencement Date, subject to the terms of Article 3 of the Lease. Annual Base Rent: Subject to adjustment pursuant to Article 3 of the Lease, the Annual Base Rent payable by Tenant shall be as follows: A. For the period commencing (the "Rent Commencement Date") on the 10th day immediately following the Commencement Date through the last day of the First (1st) Lease Year, $29.50 per rentable square foot of the Building. B. For each Lease Year during the Term (and any Renewal Term) after the first (1st) Lease Year, the Annual Base Rent per rentable square foot of the Building shall increase by three percent (3%) of the Annual Base Rent per rentable square foot in effect for the immediately preceding Lease Year as same may have been previously increased. Lease Year: The 12-month period beginning on the Commencement Date, and each anniversary thereof; provided, however, that if the Commencement Date occurs on a day other than the first day of a calendar month, then the first Lease Year shall commence on the Commencement Date and end 12 months after the first day of the first full month following the Commencement Date. Rentable Area of the Building: 54,400 rentable square feet, which rentable square footage shall be certified to Tenant by Landlord's licensed architect and adjusted, if necessary, in accordance with BOMA standards. Renewal Options: Two (2) additional periods of Five (5) years each. Security Deposit: $1,460,000.00 subject to the terms of Sections 23.02 and 23.03 below. Landlord's Address for Notices: BECO-Terminal LLC c/o BECO Management, Inc. 11140 Rockville Pike, Suite 300 Rockville, Maryland 20852 Attn: President (o) 301-816-1500 (fax) 301-816-1501 With a copy to: BECO-Terminal I LLC c/o BECO Management, Inc. 11140 Rockville Pike, Suite 300 Rockville, Maryland 20852 Attn: General Counsel (o) 301-816-1500 (fax) 301-816-1501 Tenant's Address for Notices: INFOCROSSING, INC. 2 Christie Heights Street Leonia, NJ 07605 Attn: Zach Lonstein, Chairman (o) 201-840-4710 with a copy to Tenant at the above address Attention: General Counsel Broker: None Permitted Use: General office or warehouse purposes which may include the installation, operation, repair, maintenance and replacement of communications and switch equipment and facilities including (a) colocation of equipment owned by Colocates (as defined in Section 16.07) and (b) rights of Colocates to use the Premises in connection with Tenant's internet data center and communications business, subject to compliance with the terms of this Lease. Tenant shall have access to the Premises at all times 24 hours a day, 7 days a week, 365 days a year, subject to the terms of this Lease. Landlord represents that its fee title insurance policy for the Land contains the ALTA 3 endorsement that is attached hereto as Exhibit E. Following completion of the exterior of the Building and the parking facilities (which need not be striped for these purposes) to be constructed on the Land, and all other zoning requirements and requirements of the title insurance company's underwriters have been satisfied, Landlord will obtain a zoning endorsement 3.1 from its title insurance company. The foregoing Basic Lease Information is hereby incorporated into and made a part of the Lease. Each reference in the Lease to any information and definitions contained in the Basic Lease Information shall mean and refer to the information and definitions hereinabove set forth. VIRGINIA LEASE 1 DEED OF LEASE THIS DEED OF LEASE (this "Lease"), dated as of the date specified in the Basic Lease Information, is made by and between Landlord and Tenant. This Lease is made upon the following terms, covenants, conditions, provisions and agreements, all of which Tenant or Landlord, as the case may be, covenants and agrees to keep, observe and perform. ARTICLE 1 PREMISES Landlord leases the Premises to Tenant, and Tenant leases the Premises from Landlord, for the Term (as defined in Article 2). ARTICLE 2 TERM Section 2.01. The term of this lease (the "Term") shall begin on the date Landlord has tendered possession of the Premises to Tenant with the Landlord's Work (as defined in Section 4) substantially completed (the "Commencement Date"), and unless sooner terminated, shall end at 11:59 p.m. on the Expiration Date. Tenant shall have access to the Premises to perform Tenant's initial construction from and after Landlord's closing in of the Building and completion of those items of Landlord's Work which will not be materially adversely affected by the performance by Tenant of its initial construction, upon prior notice to Landlord, subject to compliance with all of the terms of this Lease as if the Commencement Date had occurred (except with respect to the payment of Annual Base Rental, Impositions, and utilities, except to the extent Tenant has caused same to be provided or utilized or Tenant has requested same). In the event a "Tenant Delay" (as hereinafter defined) delays substantial completion of Landlord's Work, then substantial completion of Landlord's Work shall be deemed accelerated by one day for each day of such Tenant Delay. Tenant Delay shall mean any delay which results from any act or omission of Tenant, its agents, employees or contractors, including delays due to changes in or additions to, or interference with any work to be done by Landlord, or delays by Tenant in submission of information approving working drawings or estimates or giving authorizations or approvals, as reasonably determined in good faith by Landlord's licensed architect. Section 2.02. Provided Tenant performs all of Tenant's obligations under this Lease, including the payment of Rental (as defined in Article 5), Tenant shall, during the Term, enjoy the Premises without disturbance from Landlord or any other persons claiming or acting by, through, or under Landlord; subject, however, to the terms of this Lease. This covenant and all other covenants of Landlord now or hereafter in this Lease shall be binding upon Landlord and its successors only with respect to breaches based on Landlord's acts or omissions occurring during its and their respective ownership of Landlord's interest hereunder. Section 2.03. Landlord shall notify Tenant of the Commencement Date, as such date is determined in accordance with the terms set forth in Section 2.01, and within fifteen (15) days after delivery of such notice Landlord and Tenant shall execute a written instrument substantially in the form of Exhibit C, attached hereto, confirming such date as the Commencement Date. Any failure of the parties to execute such written instrument shall not affect the validity of the Commencement Date as determined as aforesaid. Section 2.04. In the event the Commencement Date has not occurred on or before February 1, 2001 (the "Outside Date") as such date may be extended on a day for day basis to and including June 1, 2001 (the "Final Outside Date"), for circumstances outside Landlord's reasonable control, including any Tenant Delays, Tenant may cancel this Lease upon notice to Landlord provided and on condition that (i) a material Event of Default is not then existing, (ii) Tenant notified Landlord of such cancellation within 30 days after the Final Outside Date, as such date may be extended by a Tenant Delay only, as aforesaid (time being of the essence with respect to such notice). For greater clarity the Final Outside Date may be extended on a day for day basis as a result of Tenant Delays only. In the event Tenant terminates this Lease pursuant to this Section 2.04, Landlord shall return to Tenant the first month's rent check and Security Deposit (or portion thereof which has not been applied by Landlord pursuant to the terms of this Lease) delivered to Landlord prior thereto, within thirty (30) days after the effective date of termination, and the Tenant has vacated the Premises and removed its property therefrom. ARTICLE 3 RENEWAL OPTIONS Section 3.01. Tenant shall have and is hereby granted two (2) successive options to renew or extend the Term (the "Renewal Term") for additional periods of five (5) years each (the "Renewal Periods"). The First Renewal Term shall commence on the day immediately following the Expiration Date and shall expire on the 5th anniversary of the Expiration Date, and if applicable the second and final Renewal Term shall commence on the day following the 5th anniversary of the Expiration Date and end on the 10th anniversary of the Expiration Date. Each renewal option shall be exercisable by Tenant by giving written notice of the exercise of such renewal option to Landlord at least twelve (12) months prior to the expiration of (i) the initial Term, in the case of the first such renewal option, and (ii) the first Renewal Period, in the case of the second such renewal option (time being of the essence with respect to the delivery of said notice). Except as otherwise expressly provided herein, each Renewal Period shall be upon the same terms, covenants and conditions as set forth herein with respect to the Term, including, without limitation, the payment of Annual Base Rent and Additional Rent hereunder. All references in this Lease to the Term shall be construed to mean the initial Term and the Renewal Period or Periods, unless the context clearly indicates that another meaning is intended. For purposes of this Lease, no distinction is made between the terms "extend" and "renew," or any variations thereof. Section 3.02. The Annual Base Rent payable for the Premises during the Renewal Periods shall be as stated in the Basic Lease Information. Section 3.03. Neither of the Renewal Options referred to in Section 3.01 above may be exercised by Tenant if, at the time specified in Section 3.01 for exercising such option, (i) this Lease shall not be in full force or effect (ii) a monetary or material non-monetary Event of Default (as defined in Section 21.01) shall have occurred and shall be continuing or (iii) this Lease has been assigned or more than 50% of the Premises has been sublet, except for an assignment or subletting to a "Related Entity" (as hereinafter defined) or as otherwise provided in Section 16.07. If Tenant shall fail to exercise either Renewal Option during the time or in the manner provided in Section 3.01 for the exercise thereof, or if at the time specified for the exercise of such Renewal Option Tenant shall not be entitled to exercise such option because of the provisions of this Section, then, and in either such event, such Renewal Option, and any additional Renewal Option, shall be absolutely void and of no force or effect. In addition, if Tenant failed to timely exercise the first Renewal Option, then Tenant shall have no right to exercise the second Renewal Option. ARTICLE 4 ACCEPTANCE OF THE PREMISES BY TENANT Landlord shall perform the work described in Exhibit D attached hereto and the items of work set forth on plans and specifications (with handwritten notations) prepared by Landlord's architect for the Building (a copy of which has been delivered to Tenant) which do not conflict with the items set forth on Exhibit D (the "Landlord's Work"). Except as otherwise expressly provided herein, Tenant agrees to accept the Premises, Building and Land in its "as is" condition. Landlord shall not modify Landlord's Work beyond a de minimis extent without Tenant's prior approval which shall not be unreasonably withheld or delayed. Such consent shall not be withheld to changes required by applicable laws or regulations in the event that same will not materially adversely affect Tenant's Permitted Use of the Premises. Tenant shall respond to requests for approval to any such modifications within ten (10) Business Days after receipt of applicable plans or specifications therefor. Except with respect to the performance of Landlord's Work and as otherwise expressly set forth in the Lease, Tenant acknowledges that Landlord has not made, nor shall Landlord be deemed to have made, any warranty or representation, express or implied, with respect to the Premises, including any warranty or representation as to its fitness for use or purpose, design or condition for any particular use or purpose, availability of data cabling or connections or as to value, merchantability, quality, description, durability or operation, it being agreed that all risks incident thereto are to be borne by Tenant. On the Commencement Date, Landlord's Work shall be lien free and Landlord shall have paid all applicable governmental taxes then due by Landlord with respect to Landlord's Work, subject to Landlord's good faith right to contest bills and other charges incurred in connection with Landlord's Work. Upon request, Landlord shall deliver to Tenant a copy of the final Building drawings and plans used by Landlord to construct the Building, and a set of "as-built" drawings upon completion of Landlord's Work. In the event of any defect or deficiency in the Premises of any nature, whether patent or latent, Landlord shall not (except as otherwise expressly provided herein) have any responsibility or liability with respect thereto or for any incidental or consequential damages (including strict liability in tort). Subject to Landlord's representations herein, taking possession of the Premises by Tenant shall be conclusive evidence that Tenant: (a) accepts the Premises as suitable for the purposes for which they are leased; (b) accepts the Building and every part and appurtenance thereof as being in a good and satisfactory condition; and (c) waives any defects in the Premises or the Building except latent defects in Landlord's Work. Subject to Landlord's representations herein, Landlord shall not be liable, except for gross negligence or willful misconduct, to Tenant or any of Tenant's agents, employees, licensees, servants, or invitees for any injury or damage to person or property due to the condition or design of or any defect in the Building or its mechanical systems and equipment which may exist or occur; and Tenant, for itself and its agents, employees, licensees, servants, and invitees, expressly assumes (except as otherwise expressly provided herein) all risks of injury or damage to person or property, either proximate or remote, resulting from the condition of the Premises or the Building. Landlord represents that (i) Landlord's Work shall be performed in compliance with all applicable laws, codes and regulations (ii) the Premises shall be delivered in material compliance with all applicable laws, codes, and regulations (except to the extent non-compliance results from the acts or omissions of Tenant, its agents, employees or contractors) and free of Hazardous Materials (as hereinafter defined) except those materials which are customary for the type of Building constructed and equipment installed therein or thereon or which were brought on the Land by or on behalf of Tenant, its agents, employees or contractors and (iii) all off-site improvements on the Land necessary for Tenant to obtain its certificate of occupancy as stated below, shall have been completed. ARTICLE 5 RENTAL Section 5.01. Commencing on the Rent Commencement Date, Tenant shall pay to Landlord monthly, in advance, without demand, on the first day of each calendar month during the Term, an annual rental ("Annual Rental") in an amount equal to 1/12 of the Annual Base Rent specified in the Basic Lease Information. The first monthly installment of Annual Base Rent shall be payable in advance by Tenant on the date of execution of this Lease. If the Commencement Date is a date other than the first day of a calendar month, then the monthly installment of Rental for the first month for which rent is owing, being a fractional month, shall be appropriately prorated based on the number of days in such month, and shall be paid to Landlord in addition to the Annual Rental for the 12-month period commencing on the first day of the month following the month in which the Commencement Date occurs. If the Expiration Date is a date other than the last day of a calendar month, then the monthly installment of Rental for the last month for which rent is owing, being a fractional month, shall be appropriately prorated. Section 5.02. All Rental shall be paid to Landlord by Tenant when due, without deduction, offset or counterclaims (except as otherwise expressly provided for herein), in lawful money of the United States, at Landlord's Address for Notices as specified in the Basic Lease Information, or such other place as Landlord may from time to time designate in writing. The term "Rental" as used herein means the then applicable Annual Rental and all other sums payable by Tenant under this Lease. All installments of Rental within five (5) days after same is due shall bear interest from the date due until paid at a rate per annum equal to fifteen percent (15%); provided, however, that any interest payable pursuant to this Section 5.02 shall never exceed the Highest Lawful Rate. The term "Highest Lawful Rate" as used herein shall mean the maximum rate of interest from time to time permitted to be charged under applicable law to Tenant with respect to the indebtedness for which such interest is charged under this Lease. Section 5.03. If Tenant fails to make any payment of Rental within five (5) days after the date on which such payment is due, Tenant shall also pay to Landlord on demand a late payment service charge (to cover Landlord's administrative and overhead expenses of processing late payments) equal to five percent (5%) of such unpaid sum. Such payments shall not excuse the untimely payment of rent. Section 5.04. No payment by Tenant or receipt by Landlord of a lesser amount than the amounts herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or letter accompanying a check for payment of 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 of such rent or to pursue any other remedy provided in this Lease. Tenant shall pay Landlord upon demand the sum of Fifty Dollars ($50.00) for each of Tenant's checks returned to Landlord not paid for insufficient funds or other reasons not the fault of Landlord, to cover Landlord's costs in handling such returned items, and, upon request by Landlord, Tenant shall pay all future sums due hereunder to Landlord in the form of certified or cashier's checks or money orders. The foregoing returned check charge represents the parties' reasonable estimate as of the date hereof of the extra expenses that Landlord will incur in processing returned checks, the exact amount of such charges being difficult to ascertain, and such charge shall not be considered interest. ARTICLE 6 IMPOSITIONS Section 6.01. Tenant shall pay all Impositions (as defined in Section 6.02 herein) attributable to the Term (and Renewal Term(s), as applicable), as additional rent hereunder before any fine, penalty, interest or cost may be added for non-payment. Tenant agrees to furnish to Landlord, within thirty (30) days after written demand therefor, proof of the payment of all Impositions which are payable by Tenant as provided in this Article 6. In the event that any Imposition becomes due and payable during the Term and may be legally paid in installments, Tenant shall have the option to pay such assessment (including without limitation all assessments for public improvements or benefits) in installments, and in such event, Tenant shall be liable only for those installments which become due and payable during the Term, with appropriate proration in the case of fractional years. Any Impositions which are attributable in part to the Term shall be equitably apportioned between Landlord and Tenant. Section 6.02. As used herein, the term "Impositions" means all taxes, assessments, and other governmental charges applicable to the Land, the Building, or any portion thereof, or to any personal property used in connection therewith, whether federal, state, county, municipal or other authority, water and sewer rents, rates and charges, vault taxes, excises, levies, license fees, permit fees, inspection fees and other authorization fees and other charges or other costs of any nature whatsoever, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character (including all interest and penalties thereon unless attributable to the acts of Landlord), which at any time during or in respect of the Term may be assessed against, levied upon, confirmed or imposed on, or in respect of or to be a lien upon (i) the Premises or any part thereof, or any estate, right or interest therein, (ii) occupancy, use or possession of or activity conducted on the Premises or any part thereof, (iii) any Rental or other sum reserved or payable by Tenant hereunder, or (iv) this Lease, or Landlord in respect of this Lease or the Premises. Impositions shall not include Landlord's income, succession or other taxes personal to Landlord and not applicable to the Land or Building, or any recordation or other similar charges. Section 6.03. Tenant shall, at Tenant's cost, provide for adequate management of the Building and Land. Any firms, vendors or contractors hired or used by Tenant to maintain the generators and electrical equipment, connections and facilities (as applicable) are subject to Landlord's reasonable approval. Section 6.04. Notwithstanding the foregoing, Impositions billed directly to Landlord shall be payable by Landlord to the applicable third party, provided Tenant shall reimburse Landlord for the cost thereof or amount payable by Landlord to such third party within thirty (30) days after demand (which demand shall be accompanied by reasonable substantiation of such Imposition amount). Landlord shall provide Tenant with a copy of Landlord's payment within 30 days after same is paid. Landlord shall not bill Tenant more than 30 days in advance of the date the applicable payment is due to the particular third party. ARTICLE 7 UTILITIES Section 7.01. Except as otherwise expressly provided below, Tenant shall cause to be provided to the Building all applicable utility services necessary for the operation of Tenant's business therein throughout the Term and Tenant shall timely pay for the cost of such services directly to the service provider. Subject to Section 7.02, Tenant shall pay as additional rent hereunder all utility charges imposed upon Landlord, with respect to utilities furnished, available or applicable to the Premises and the Lease Term (including, without limitation charges from the local electrical provider) whether accruing or imposed upon Landlord prior to or after the Commencement Date) within thirty (30) days after substantiated demand. Subject to the terms of Section 7.02, utility charges that Tenant shall be responsible for paying shall include, without limitation, all up-front fees, construction and equipment fees, reservation fees, excess and minimum usage fees, hook-up charges, charges for installation or modification of vault rooms and/or transformer panels, monthly fees, and charges for use. Tenant hereby acknowledges and agrees that to the extent Landlord has the right to assign to Tenant Landlord's interest in the electric services agreement to be entered into between the applicable electrical service provider and Landlord with respect to the furnishing of electricity to the Building for Tenant's consumption, at Landlord's request, Tenant shall promptly execute any reasonable and customary agreement provided by Landlord to effectuate such transfer and Tenant's failure to execute such documentation shall constitute a material default hereunder (after applicable notice and cure rights have expired). Landlord shall cooperate with Tenant (at no cost or expense to Landlord) in connection with Tenant's efforts to obtain, at Tenant's sole expense, excess power and/or a redundant power supply to the Building from the local utility as reasonably required by Tenant for its business operations from the Building. Section 7.02. In connection with Landlord's Work, Landlord shall, at Landlord's sole cost, (i) be responsible for reserving from the applicable service provider, 6.5 MVA of electric power to serve the Building and (ii) provide sewer and plumbing connections to the Building and electric connections for 6.5 MVA of power to the Building distribution boards as specified in Exhibit D otherwise or to a location mutually agreed upon by Landlord and Tenant. Landlord shall also pay the up-front fees applicable to the 6.5 MVA designated to serve the Building. ARTICLE 8 USE The Premises shall be used only for the Permitted Use (as defined in the Basic Lease Information) and for no other purpose. Tenant agrees to use and maintain the Premises in a clean, careful, safe, lawful, and proper manner. Tenant shall not use the Premises, nor suffer the Premises to be used (i) to create any nuisance or trespass; (ii) to annoy or embarrass Landlord; or (iii) for any disruptive, harassing or outrageous conduct. Tenant shall not commit waste, overload the floors or structure of the Building beyond the capacity shown on Exhibit D. Use of the Premises is subject to all covenants, conditions and restrictions of record. Tenant shall not permit any objectionable odors or noises to emanate from the Premises. ARTICLE 9 LAWS, ORDINANCES, AND REQUIREMENTS OF PUBLIC AUTHORITIES Section 9.01. Subject to Tenants' right to occupy the Premises for the Permitted Use in accordance with the terms of this Lease, Tenant shall not use or occupy or permit the Premises to be used or occupied, nor do or permit anything to be done in or on the Premises, in whole or in part, in a manner which would in any way violate any certificate of occupancy affecting the Premises, or make void or voidable, or except to a de minimis extent, increase the rate of any insurance then in force with respect thereto, or which may make it difficult or impossible to obtain fire other insurance thereon required to be furnished by Tenant hereunder, or will cause or be apt to cause structural injury to the Building or any part thereof, or as will constitute a public or private nuisance. Any certificate of occupancy or similar permit required with respect to Landlord's Work shall be obtained by Landlord prior to Tenant's occupancy of the Premises for the conduct of its business, but after substantial completion of Tenant's initial work (unless Landlord is unable to obtain same as a result of the acts or omissions of Tenant, or its agents, employees or contractors), then as soon as reasonably practicable, at Landlord's expense. Tenant shall obtain at its expense any certificate of occupancy or similar permit or certificate that may be required for Tenant to lawfully occupy and conduct business from the Premises. Copies of such permits and certificates shall be delivered to Landlord upon receipt by Tenant. Section 9.02. Except with respect to violations existing as of the Commencement Date, Tenant shall, at its sole expense, (i) comply with all laws, orders, ordinances, and regulations of Federal, state, county, municipal and other authorities having jurisdiction over the Premises ("Legal Requirements"), applicable to the Premises, Building, Land and/or Tenants' use and occupancy thereof, (ii) comply with any direction made pursuant to law by any public officers requiring abatement of any nuisance, or which imposes upon Landlord or Tenant any duty or obligation arising from Tenant's occupancy or use of the Premises, alterations or equipment installed therein or thereon by Tenant, and/or from conditions which have been created by or at the insistence of Tenant, and (iii) indemnify Landlord and hold Landlord harmless from any loss, cost, claim, or expense which Landlord may incur or suffer by reason of Tenant's failure to comply with its obligations under clauses (i) or (ii) above and the provisions of Article 26 below. If Tenant receives notice of any such direction or of violation of any such law, order, ordinance, or regulation, it shall promptly notify Landlord thereof. Tenant shall not be responsible for complying with violations arising from the performance by Landlord of Landlord's Work or in connection with Hazardous Materials existing on the Land or in the Building as of the Commencement Date, and subject to the limitations contained in this Lease, Landlord shall be responsible for same, and shall indemnify Tenant and hold Tenant harmless against any loss, cost, claim or expense which Tenant incurs as a result of such non-compliance by Landlord. Notwithstanding the foregoing, to the extent that Tenant's aforesaid compliance obligations do not arise out of the acts or omissions of Tenant, its agents, employees or contractors, or alterations, improvements, additions or equipment installed by Tenant in or about the Premises, or Land, and such compliance requires changes to the structural components of the Building, Tenant shall be responsible for an amount equal to the cost of such compliance multiplied by the fraction the numerator of which is the number of months then remaining in the Lease Term (as same may have been renewed at the time the improvement is completed) and the denominator of which is the total number of months in the Lease Term, unless such compliance occurs during a Renewal Term, then the denominator shall be 180, and Landlord shall be responsible for the balance, which shall be payable by Landlord within 30 days after demand and reasonable substantiation of Tenant's payment therefor. This Section 9.02 is subject to the provisions of Article 14. ARTICLE 10 ALTERATIONS Section 10.01. Tenant may not, at any time during the Term, without Landlord's prior written consent (except as otherwise expressly provided below), make any alterations to the Premises. Landlord shall not unreasonably withhold its consent to any proposed alteration, provided, however, that Landlord may withhold, condition or delay its consent in its sole and absolute discretion to any proposed alteration which in Landlord's reasonable judgment may adversely (except to a de minimis extent) affect the structure or safety of the Building or adversely (except to a de minimis extent) affect the electrical, HVAC, plumbing, mechanical or fire and life safety systems or the functioning thereof. Landlord's consent shall not be required for interior non-structural alterations not materially affecting Building systems and costing less than $250,000 in the aggregate per project; provided, however, Tenant must provide Landlord with at least ten (10) days prior written notice of any such alterations. Landlord shall respond to requests for consent within ten (10) Business Days after receipt of final (reasonably detailed) plans and specifications with respect to the alterations in question. If Tenant desires to make any alterations in or to the Premises, Tenant shall, prior to beginning any such work, deliver to Landlord all plans or drawings and specifications therefor (provided, however, with respect to alterations not requiring Landlord's consent, then only to the extent same have been prepared). Upon Tenant's receipt of Landlord's written approval and upon Tenant's paying to Landlord the actual reasonable charge incurred by Landlord, if any, for the review of such plans and specifications by third party consultants, Tenant may proceed to the construction of the alterations provided that the alterations are in strict compliance with the plans and specifications submitted to Landlord and with the provisions of this Article 10. Any change to the approved plans and specifications shall require Landlord's prior written consent which shall not be unreasonably withheld, conditioned or delayed. Tenant agrees to indemnify and hold Landlord harmless against and from any and all claims, damages, costs and fines arising out of or connected with such alterations (except to the extent attributable to Landlord's acts (which does not include approving such alteration and reviewing plans in connection therewith) or to any requirements of Landlord) and Tenant shall procure at its own expense such governmental approvals and permits as may be required for such alterations, and Tenant shall provide Landlord with copies of all such approvals and permits prior to commencing work. All alterations shall be made at Tenant's expense, by contractors which have been approved by Landlord (to the extent Landlord's approval is required as set forth above, for the alteration in question), which approval shall not be unreasonably withheld, conditioned or delayed, and Tenant shall pay all bills from contractors and subcontractors promptly when due. All such construction, alterations, and maintenance work done by, or for, Tenant shall (i) be performed in such a manner as to maintain harmonious labor relations in the Building and the Project and to minimize interference with work performed by Landlord in the Building, (ii) comply with all building, safety, fire, plumbing, electrical, and other codes and governmental and customary insurance requirements, (iii) be completed promptly and in a good and workmanlike manner, and (iv) be performed in compliance with Article 11 hereof. Landlord may as a condition to approving any alteration, require Tenant to remove same at the expiration of the Term, except with respect to customary interior, non-structural alterations. Provided no Event of Default is then occurring, Tenant may remove the following items of improvements, equipment and/or property of Tenant or Collocates (unless installed by Landlord, at Landlord's expense) from the Building, at Tenant's sole expense all HVAC units on the Premises, including, without limitation, fan units located outside the Building; generators and associated paralleling synchronous switching equipment; FM 200 and gas canisters; power distribution modules; batteries for uninterrupted power system (UPS batteries), UPS modules; overhead cable management system; all personalty, including without limitation all equipment mounting racks and cabinets, partition wall (cages), furnishings and any other items constituting leasehold improvements which Landlord and Tenant agree shall be removable, subject to compliance with the other provisions of this Lease, including, without limitation, repairing any damage to the Building caused by or arising from such removal. Section 10.02. After the completion of any alterations to the Premises, Tenant shall deliver to Landlord either (i) a certificate signed by Tenant stating that such alterations have been completed in accordance with the plans and specifications previously delivered to Landlord or (ii) a copy of "as-built" plans and specifications with respect to such alterations. Section 10.03. The Premises and all installations thereto and equipment installed therein shall at all times be free of liens for labor and materials supplied or claimed to have been supplied to the Premises, subject to the terms of Article 28 below. Section 10.04. Tenant agrees to furnish Landlord, before any contractor commences work on the Premises, certificates of Workmen's Compensation insurance and general liability insurance with combined single limit of not less than Three Million Dollars ($3,000,000.00) for the benefit of Landlord and such other insurance as Landlord may reasonably require, provided same is consistent with insurance obligations of comparable tenants in comparable buildings in the vicinity of the Building. All such insurance shall be in addition to the insurance required under Article 13 and shall be with companies of recognized responsibility reasonably satisfactory to Landlord. Tenant shall provide evidence reasonably satisfactory to Landlord that all premiums for such insurance have been paid in full. Section 10.05. All alterations, leasehold improvements, and other physical additions made or installed by or for Tenant in or to the Premises, including without limitation, generators, fuel tanks and HVAC equipment, shall not be removed without Landlord's prior written consent (except to the extent same are being upgraded or replaced with other comparable equipment) and shall, except as provided above in Section 10.01 or in this Section 10.05, be surrendered to Landlord at the expiration of the Term. At the expiration of the Term, Tenant shall remove Tenant's furniture, furnishings, personal property, and movable trade fixtures, together with those alterations, improvements and/or additions that Landlord may designate for removal upon approval of the plans therefor (where Tenant is required to submit plans depicting such alterations, improvements and/or additions to Landlord for consent), and Tenant shall repair in a good and workmanlike manner any damage to the Building and/or Premises caused by such removal. ARTICLE 11 LIENS Subject to Article 28 below, Tenant shall keep the Premises free from any liens arising from any work performed, materials furnished, or obligations incurred by or at the request of Tenant. All persons either contracting with Tenant or furnishing or rendering labor and materials to Tenant shall be notified in writing by Tenant that they must look only to Tenant for payment. Nothing contained in this Lease shall be construed as Landlord's consent to any contractor, subcontractor, laborer, or materialman for the performance of any labor or the furnishing of any materials for any specific improvement, alteration, or repair of, or to, the Premises, nor as giving Tenant any right to contract for, or permit the performance of, any services or the furnishing of any materials that would result in any liens against the Premises. If any lien is filed against the Premises or Tenant's leasehold interest therein, arises out of any purported act or agreement of Tenant, Tenant shall discharge (by bonding over or other appropriate means of legal discharge) the same within thirty (30) days after notice from Landlord or such lien or whichever occurs first, of its filing. If Tenant fails to discharge such lien within such period, then, in addition to any other right or remedy of Landlord, Landlord may, at its election, discharge the lien by paying the amount claimed to be due, by obtaining the discharge by deposit with a court or a title company, or by bonding. Tenant shall pay on demand any amount paid by Landlord for the discharge or satisfaction of any such lien, and all reasonable attorneys' fees and other costs and expenses of Landlord incurred in defending any such action or in obtaining the discharge of such lien, together with all necessary disbursements in connection therewith. ARTICLE 12 REPAIRS Section 12.01. Except as otherwise provided herein, Tenant shall, at its sole expense, keep the Premises and every part thereof, including without limitation, the structure (including the roof) and the mechanical, electrical and plumbing systems of the Building (including generators), the heating, ventilating and air-conditioning systems (the "HVAC") serving the Building, and the parking area of the Building, in good condition and repair at all times during the Term. Landlord shall be responsible for repairing at its own cost latent defects in (i) Landlord's Work and (ii) other repairs made by Landlord pursuant to the terms of this Lease, to the extent same adversely affect (beyond a de minimis extent) Tenant's use of the Premises for the Permitted Use. If Tenant fails to make such repairs or perform other obligations under this Lease after notice and expiration of applicable cure periods (except no notice is required in cases of emergency), Landlord, at its option, may make such repairs or perform such other obligations, and Tenant shall pay Landlord on demand Landlord's actual costs in making such repairs or perform such other obligations plus ten percent (10%) of such costs for Landlord's overhead. Except as otherwise expressly provided in this Lease, Landlord shall not be required to maintain, repair or rebuild, or to make any alteration to the Premises or any part thereof, whether ordinary or extraordinary, structural or non-structural, foreseen or unforeseen, or to maintain the Premises or any part thereof in any way. Except as otherwise expressly provided in this Lease to the contrary, Landlord has no obligation and has made no promise to alter, remodel, improve, repair, redecorate, or paint the Premises or any part thereof. Notwithstanding the foregoing, except with respect to latent defects, Landlord shall repair Landlord's Work, the cost of which shall be (i) entirely paid by Tenant to the extent the repair arises out of the acts or omissions of Tenant, its agents, employees or contractors, or alterations, improvements, additions or equipment installed by Tenant in or about the Premises, or Land, otherwise (ii) the amount payable by Tenant shall equal the cost of such repair multiplied by the fraction the numerator of which is the number of months then remaining in the Lease Term (as same may have been renewed at the time the repair is completed) and the denominator of which is the total number of months in the Lease Term (unless such repair occurs during a Renewal Term then the denominator shall be 180), and Tenant shall pay Landlord for the cost of such repair within thirty (30) days after substantiated demand. Section 12.02. Tenant hereby covenants that, throughout the Term, it shall maintain, at its sole cost and expense, service contracts for the maintenance and repair of all HVAC equipment and all generators in or about the Building. Tenant shall, upon Landlord's request, provide copies of all service contracts affecting the generator(s), and any applicable renewal contracts thereto, to Landlord, within thirty (30) days of receipt of such service contracts. All service contracts shall be in form and substance reasonably acceptable to Landlord. Section 12.03. Landlord agrees to assign to or cause Tenant to benefit from any warranties provided to Landlord in connection with Landlord's Work, including warranties on the roof, generator, Liebert units and electrical distribution switchboards installed by Landlord, as Tenant may deem reasonably necessary to effectuate its repair obligations pursuant to the terms of this Lease. ARTICLE 13 INSURANCE Section 13.01. During the Term, Tenant, at its sole expense, shall obtain and keep in force the following insurance: (a) All-Risk insurance upon (i) the Tenant's improvements, alterations, additions, fixtures, equipment (including generators installed by Landlord) and Tenant's property, (ii) all property of every description and kind owned by Tenant and located in the Building or for which Tenant is legally liable and (iii) installations by or on behalf of Tenant, including without limitation, furniture, fittings, installations, furnishings, movable trade fixtures and personal property, and alterations (collectively referred to as "Tenant Insured Items"), in an amount not less than one hundred percent (100%) of the full replacement value thereof, with an endorsement insuring against code compliance. All such insurance policies contain a waiver of subrogation in favor of Landlord. Landlord shall be required to carry all-risk insurance solely on Landlord's Work (except the generator installed by Landlord) in an amount not less than 100% of the full replacement value thereof within an endorsement insuring against code compliance. Tenant shall pay the reasonable cost of Landlord's insurance premiums applicable to the aforementioned all-risk policy within thirty (30) days after demand. (b) Commercial general liability insurance coverage, including personal injury, bodily injury, broad form property damage, operations hazard, owner's protective coverage, contractual liability, and products and completed operations liability, in limits not less than $3,000,000 inclusive. All such insurance policies shall name Tenant as named insured thereunder and shall name Landlord and Landlord's mortgagees (and, if requested by Landlord, ground or primary lessors) as additional insureds thereunder, all as their respective interests may appear. (c) Worker's Compensation and Employer's Liability insurance as required by law. (d) Business interruption insurance covering the risks described in Article 14 in an amount not less than the Annual Base Rent and the estimated Impositions and additional rent hereunder for twelve (12) months. (e) Any other form or forms of commercially reasonable insurance as Landlord may reasonably require from time to time in form, in amounts and for insurance risks against which a prudent tenant of comparable size and in a comparable business would protect itself. All Tenant's insurance policies which may be blanket policies (provided the limits of coverage for the Premises are satisfied) shall be issued by insurers that are reasonably acceptable to Landlord and in form reasonably satisfactory to Landlord. Landlord's insurance policies covering Landlord's Work shall be consistent with customary policies of comparable owners of comparable buildings in the immediate vicinity insuring similar items and with the requirements of Section 13.01. Tenant will deliver standard insurance industry certificates of insurance to Landlord as soon as practicable after the placing of the required insurance, but not later than ten (10) days prior to the date Tenant takes possession of all or any part of the Premises. All policies shall be written as primary insurance coverage and contain an undertaking by the insurers to notify the other and the other's named mortgagees securing an interest in the Premises or items installed therein, as the case may be (and, if applicable, ground lessors) in writing, by certified or registered United States mail, return receipt requested, not less than thirty (30) days before any material adverse change, reduction in coverage, cancellation, or other termination thereof. Landlord shall furnish Tenant with proof of Landlord's insurance coverage within 30 days after written request by Tenant (provided requests shall not be made more than once a year). Section 13.02. Tenant will not keep, use, sell, or offer for sale in or upon the Premises any article which may be prohibited by any insurance policy in force covering the Project and the Leasehold Improvements which shall be used by Tenant other than in connection with Tenant's Permitted Use in accordance with the terms of this Lease. Tenant shall promptly comply with all reasonable requirements of the insurance authority or any present or future insurer relating to the Premises and/or Building, provided that with respect to Landlord's insurer, such requirements shall not materially increase Tenant's obligations under this Lease, to the extent Tenant is in compliance with the material terms of this Lease. Section 13.03. If Landlord's all-risk insurance policy described above shall be canceled or cancellation shall be threatened or the coverage thereunder reduced or threatened to be reduced in any way because of the use of the Premises or any part thereof by Tenant or any assignee or subtenant of Tenant or by anyone Tenant permits on the Premises (except with respect to the Permitted Use in accordance with the terms of this Lease) and if Tenant fails to remedy the condition giving rise to such cancellation, threatened cancellation, reduction of coverage, or threatened reduction of coverage within 48 hours after notice thereof, Landlord may, at its option, enter upon the Premises and attempt to remedy such condition, and Tenant shall promptly pay the reasonable cost thereof to Landlord as additional Rental. Landlord shall not be liable for any damage or injury caused to any property of Tenant or of others located on the Premises resulting from such entry. If Landlord is unable, or elects not, to remedy such condition or if Tenant fails to maintain any insurance required by this Lease, then in either such event Landlord shall have all of the remedies provided for in this Lease in the event of a default by Tenant. If Landlord fails to carry the insurance required herein, Tenant may (but shall not be obligated to) upon prior notice to Landlord and Landlord's failure to furnish Tenant with proof of coverage within 30 days after such notice, obtain such insurance at Tenant's cost. Section 13.04. All policies covering real or personal property or equipment which Tenant and Landlord obtain affecting the Premises or the Building shall include a clause or endorsement denying the insurer any rights of subrogation against the other to the extent rights have been waived by the insured before the occurrence of injury or loss and the parties hereby waive all such rights against the other with respect to their work and installations. Landlord and Tenant shall not be liable for or responsible to, and hereby releases the other, and its partners, employees, officers, directors and agents from any and all liability and responsibility to the other, or any person claiming by, through or under them, by way of subrogation or otherwise for any damage or loss to Landlord's or Tenant's property, as applicable, due to hazards covered (or which should be covered) by policies of insurance obtained or which should be or have been obtained pursuant to this Lease (and with respect to Landlord, hazards that would be covered by customary insurance carried by comparable owners of comparable buildings in the vicinity of the Building), to the extent of the injury or loss covered or which should have been covered thereby, assuming that any deductible shall be deemed to be insurance coverage. ARTICLE 14 DAMAGE BY FIRE OR OTHER CASUALTY Section 14.01. If the Building and/or the Premises or any portion thereof is damaged by any casualty which is or would be covered by customary comprehensive all risk commercial insurance policies carried by prudent tenants net leasing comparable buildings, Tenant shall promptly notify Landlord of the same and Tenant shall promptly and diligently repair such damage and restore and rebuild the Building and/or Premises in compliance with applicable codes and to substantially the same condition as the Premises were in immediately prior to such damage, except as otherwise set forth below. Notwithstanding the foregoing, in the event the Landlord's Work is damaged by any casualty which is or would be carried by customary comprehensive all risk insurance policies carried by prudent owners of comparable buildings, Landlord shall promptly and diligently repair such damage to Landlord's Work in compliance with applicable codes and to substantially the same condition as immediately prior to such damage, except as otherwise provided below. Such repair and restoration work shall be diligently commenced and prosecuted by Tenant and Landlord, as applicable, until full completion thereof, and shall be performed substantially in accordance with the provisions of Articles 10 and 11. In the event the insurance proceeds available to Tenant or Landlord (if applicable) are not adequate to pay for the full cost of the repair and restoration work required to be performed by such party, then such deficiency shall be paid by the party obligated to perform the work. In no event shall either party be required to pay, in respect of such repair and restoration, an amount in excess of the insurance proceeds it would have received had such party carried the insurance required by Articles 13. Tenant and Landlord shall apply all insurance proceeds received with respect to any insurance required to be maintained by Tenant and Landlord hereunder for the purpose of fully repairing and replacing the damage required to be repaired by such party, as aforesaid. Section 14.02. Notwithstanding any damage or destruction caused by a casualty described in Section 14.01, all Rental payable hereunder shall continue to be paid without deduction or abatement except with respect to the damaged portion of the premises (unless such damage is attributable to the misconduct of Tenant, its agents, employees or contractors), from and after substantial completion by Landlord of Landlord's Work. In addition, no damages, compensation, or claim shall be payable by Landlord for inconvenience, loss of business, or annoyance arising from any repair or restoration of any portion of the Premises or for any other reason. Section 14.03. Notwithstanding the foregoing, in the event a casualty damaging 50% or more of the Building occurs within the last five (5) Lease Years of the Term, as same may be extended as provided herein, then either Landlord or Tenant upon notice to the other given within sixty (60) days after the occurrence of the casualty may cancel this lease effective thirty (30) days after the delivery of such termination notice (time being of the essence of the delivery of said notice), but such termination shall not be effective if Tenant exercises any Renewal Option within thirty (30) days of the notice of termination. ARTICLE 15 CONDEMNATION Section 15.01. In the event the whole, or substantially the whole of the Premises are taken or condemned for any public purpose or Tenant terminates this Lease upon notice delivered to Landlord within thirty (30) days after a taking of a material portion of the Premises stating that the remaining portion of the Premises is not usable for the Permitted Use as reasonably determined by Tenant (time being of the essence of the delivery of said notice), this Lease shall terminate as of the date of such taking; provided, however, that those provisions of this Lease which are designated to cover matters of termination and the period thereafter shall survive the termination hereof. For purposes of this Article 15, the term "substantially the whole of the Premises" shall mean: (i) fifty percent (50%) or more of the rentable area of the Building, or (ii) fifty percent (50%) or more of the parking spaces in the parking area on the Premises, or (iii) any portion of the Premises if Tenant does not have access to the Building as a result of such taking or condemnation. Section 15.02. In the event that a portion, but less than substantially the whole, of the Premises should be taken or condemned for any public purpose, then this Lease shall terminate as of the date of such taking as to the portion of the Premises so taken, and this Lease shall remain in full force and effect as to the remainder of the Premises. In such event, the Annual Base Rent will be diminished by an amount representing the part of such amounts properly applicable to the portion of the Building so taken. The parties will repair the remaining portion of the Premises to the extent of Landlord's Work and Tenant's work, respectively. Section 15.03. In the event of the termination of this Lease pursuant to the provisions of Sections 15.01, this Lease and the Term and the estate hereby granted shall expire as of the date of such termination in the same manner and with the same effect as if that were the date set for the normal expiration of the Term, and Rental shall be apportioned as of the date of termination. The provisions of this Section 15.03 shall apply in the same manner to any partial termination of this Lease pursuant to the provisions of this Article 15. Section 15.04. Except as otherwise provided in this Section 15.04 below, Landlord shall be entitled to receive the entire award in any condemnation proceeding or action for taking, without deduction therefrom for any estate vested in Tenant by this Lease; provided that nothing herein contained shall prohibit Tenant from seeking in a separate action (if such separate action is allowed under applicable law, otherwise in the same action), the value of Tenant's leasehold improvements incorporated in the Building and/or on the Land and paid for by Tenant, and/or Tenant's moving expenses, and/or (to the extent Landlord's award is not or will not be reduced thereby) for an award of rent differential as between this Lease and the lease, if any, for replacement premises. ARTICLE 16 ASSIGNMENT AND SUBLETTING Section 16.01. Tenant may not sell, assign, transfer, or hypothecate this Lease or any interest herein (either voluntarily or by operation of law, including, if Tenant is a corporation, limited liability company or partnership, the sale or transfer of a controlling interest in Tenant) or sublet the Premises or any part thereof without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Any attempted assignment or subletting of the Premises in violation of the foregoing sentence shall be void. Without limiting the other instances in which it may be reasonable for Landlord to withhold its consent to an assignment or subletting, Landlord and Tenant acknowledge that it will be reasonable for Landlord to withhold its consent in any of the following instances: (i) in Landlord's reasonable judgment, the financial worth of the proposed assignee or subtenant (of at least 50% of the Premises) does not meet the credit standards applied by Landlord for other tenants under leases with comparable terms; (ii) the proposed use of the Premises by, the proposed subtenant or assignee is inconsistent with the Permitted Use; (iii) Landlord has experienced previous defaults by or is in litigation with the proposed assignee or subtenant; or (iv) Tenant is in material or monetary default of any obligation of Tenant under this Lease, or Tenant has been in monetary default under this Lease on three (3) or more occasions during the previous twelve (12) months preceding the date that Tenant requests consent. Section 16.02. If the rental rate agreed upon between Tenant and its subtenant under any approved sublease of the Premises (or any part thereof) is greater than the rental rate that Tenant must pay Landlord hereunder for that portion of the Premises that is subject to such sublease, or if any consideration shall be received by Tenant in connection with any approved assignment or sublease (in addition to rental as provided in such proposed sublease), then fifty percent (50%) of such excess rental or consideration, as the case may be (or both), after deducting reasonable and customary brokerage fees, work allowances or other rent concession, the reasonable cost of janitorial services provided to any such subtenant and the unamortized cost of equipment installed in the Building by Tenant, at Tenant's sole cost, which equipment is used to a material extent by the subtenant or assignee (as applicable) (reasonable proof of such expenses shall be submitted to Landlord promptly upon request), shall be considered additional Rental owed by Tenant to Landlord, and shall be paid by Tenant to Landlord, in the case of excess rentals, in the same manner that Tenant pays Annual Base Rent, and, in the case of any other consideration, immediately upon receipt thereof by Tenant. If Tenant notifies Landlord of Tenant's desire to assign this Lease or sublet all or any part of the Premises, Tenant shall pay to Landlord as additional Rental with the next due monthly Rental a reasonable fee, determined by Landlord, for Landlord's reasonable costs and expenses in reviewing and evaluating such proposed sublease or assignment. In the case of a permitted sublease, the sublease agreement shall require the subtenant, upon receipt of notice from Landlord that a monetary or material non-monetary Event of Default has occurred and is continuing, to pay all subrent directly to Landlord (which amount paid to Landlord will be offset against Rental owed by Tenant hereunder). No assignment or subletting by Tenant shall relieve Tenant of Tenant's obligations under this Lease. Section 16.03. Landlord may sell, transfer, assign, and convey, all or any part of the Premises and any and all of its rights under this Lease, and in the event Landlord assigns its rights under this Lease, Landlord shall be released from any and all obligations hereunder, which such successor expressly assumes, in which event Tenant agrees to look solely to Landlord's successor in interest for performance of such obligations. Section 16.04 In connection with any request by Tenant pursuant to this Article for Landlord's consent to assign this Lease or to sublet all or any part of the Premises, Landlord shall have the following rights, any of which Landlord may exercise by notice given to Tenant within thirty (30) days after Landlord receives a written request by Tenant for consent to an assignment or subletting accompanied by the information required by Section 16.10: (i) with respect to a proposed assignment of the Lease, the right to terminate this Lease on a date specified in Landlord's notice, which date shall not be less than thirty (30) nor more than ninety (90) days after the date of Tenant's request for consent; (ii) with respect to a proposed subletting of the entire Premises, the right to terminate this Lease on a date specified in Landlord's notice, which date shall not be less than thirty (30) nor more than ninety (90) days after the date of Tenant's request for consent; or (iii) with respect to a proposed subletting of less than the entire Premises for substantially the remainder of the term of this Lease, the right to terminate this Lease as to the portion of the Premises affected by such subletting on a date specified in Landlord's notice, which date shall not be less than thirty (30) nor more than ninety (90) days after the date of Tenant's request for consent, in which case Tenant shall promptly execute and deliver to Landlord an appropriate modification of this Lease in form reasonably satisfactory to Landlord in all respects. If this Lease is terminated as to only a part of the Premises, the Annual Base Rent shall be adjusted in proportion to the portion of the Premises affected by such termination and Landlord shall bear all cost and expense of constructing a legal demising wall along with a commercially reasonable separation of utilities to the extent reasonably practicable, between the Premises and the sublet area. If Landlord exercises any of its rights under this subsection, Tenant shall not be liable for any obligations under the Lease with respect to the terminated portion of the Premises accruing from and after the termination of this Lease. Landlord may (but is not required to) thereafter lease the Premises, or any part thereof, to Tenant's proposed assignee or subtenant, as the case may be, without thereby incurring any liability to Tenant. If Landlord does not exercise its rights under this subsection 16.04, Tenant may, for a period of 120 days after the date of Tenant's notice, assign this Lease or sublet all or any part of the Premises, free of the restrictions set forth in this subsection, but subject to all other provisions of this Article. If Tenant does not enter into the proposed sublease within the 120-day period, Tenant shall not assign this Lease or sublet all or any portion of the Premises without again notifying Landlord and giving Landlord the rights provided in this subsection. Section 16.05. (a) If Tenant is a corporation, the transfer by one or more transfers, directly or indirectly, by operation of law or otherwise, of a majority of the stock of Tenant shall be deemed a voluntary assignment of this Lease; provided, however, that the provisions of this Article 16 shall not apply to the transfer of shares of stock of Tenant if and so long as Tenant is publicly traded on a nationally recognized stock exchange. For purposes of this Section 16.05 the term "transfers" shall be deemed to include the issuance of new stock or of treasury stock which results in a majority of the stock of Tenant being held by a person or persons that do not hold a majority of the stock of Tenant on the date hereof. If Tenant is a partnership, the transfer by one or more transfers, directly or indirectly, by operation of law or otherwise, of a majority interest in the partnership shall be deemed a voluntary assignment of this Lease. If Tenant is a limited liability company, trust, or any other legal entity (including a corporation or a partnership), the transfer by one or more transfers, directly or indirectly, of control of such entity, however characterized, shall be deemed a voluntary assignment of this Lease. The provisions of Sections 16.01, 16.02, and 16,04 shall not apply to transactions with an entity into or with which Tenant is merged or consolidated or to which substantially all of Tenant's assets or stock are transferred so long as (i) such transfer was made for a legitimate independent business purpose and not for the purpose of transferring this Lease, (ii) the successor to Tenant has a net worth computed in accordance with generally accepted accounting principles at least equal to the net worth of Tenant immediately prior to such merger, consolidation or transfer, and (iii) proof satisfactory to Landlord of such net worth is delivered to Landlord at least 10 days prior to the effective date of any such transaction. Tenant may also, upon prior notice to Landlord, permit any person which controls, is controlled by, or is under common control with Tenant (a "Related Entity" ) to sublet all or part of the Premises or be an assignee of Tenant's interest in this Lease for any Permitted Use for so long as such person remains a Related Entity, provided the Related Entity is using the Premises in a manner consistent with the terms of this Lease. For purposes of this Section 16.05 "control" shall mean the ownership of a majority of the interest in the entity, in question, and the power and authority to direct the management and operation of such entity. (b) The limitations set forth in this Section 16.05 shall apply to subtenant(s), assignee(s) and guarantor(s) of this Lease, if any, and any transfer by any such entity in violation of this Section 16.05 shall be a transfer in violation of Section 16.01. Section 16.06. Any material modification or amendment, and any extension of a sublease (other than with a Related Entity) and/or any other agreement by which a landlord (or its affiliate) of a building other than the Building agrees to assume or perform the obligations of Tenant under this Lease shall be deemed a sublease for the purposes of Article 16 hereof; provided, however, all such modifications, amendments and extensions shall be delivered to Landlord promptly after the execution thereof. Section 16.07. This Article 16 shall not apply to any collocation license, service or similar arrangement (which may be called a sublease agreement) Tenant enters into with a third party, including any customer, vendor or connectivity provider (collectively, "Collocates"), provided and on condition (i) the Collocates connect in any manner into or utilize any equipment of Tenant, and/or (ii) Tenant receives and/or provides connectivity or customary professional collocation supervisory services to or from such Collocates (which is material to their use of the Premises, such as for example only, and without limitation, systems and network management services, software management services and information technology and management services), subject to compliance with all of the terms and conditions of this Lease; and (iii) such use complies with all applicable laws. The Collocates shall be entitled to use the Premises in a manner consistent with the terms of this Lease. It is acknowledged that Landlord does not have any direct contractual relationship with the Collocates, and none of the Collocates shall become subtenants or assignees or acquire any other rights under this Lease without the prior written consent of Landlord, which may be granted or withheld in Landlord's reasonable discretion. Tenant acknowledges and agrees that Tenant shall be responsible for compliance by the Collocates with the terms and conditions of this Lease, and Tenant agrees to indemnify, defend and hold Landlord harmless from and against all claims, actions, judgments, liability, costs or expenses (including reasonable attorneys' fees and costs) incurred by Landlord arising out of or in connection with the use or occupancy of the Premises or any portion of the Building by any of the Collocates, or their employees, contractors, invitees or guests. Section 16.08. If, without Landlord's consent (when consent is required pursuant to the terms hereof), this Lease is assigned, or any part of the Premises is sublet or occupied by anyone other than Tenant or this Lease or the Premises or any of Tenant's Property is encumbered (by operation of law or otherwise), except pursuant to Section 28 hereof, Landlord may collect rent from the assignee, subtenant or occupant, and apply the net amount collected to the Rental herein reserved. No such collection of rent shall be deemed to be (i) a waiver of the provisions of this Article 16, (ii) an acceptance of the assignee, subtenant or occupant as tenant, or (iii) a release of Tenant from the performance of Tenant's covenants hereunder. Tenant shall remain fully liable for the obligations under this Lease. Section 16.09. Landlord's consent to any assignment or subletting shall not relieve Tenant from the obligation to obtain Landlord's express consent to any further assignment or subletting. In no event shall any permitted subtenant assign or encumber its sublease or further sublet any portion of its sublet space, or otherwise suffer or permit any portion of the sublet space to be used or occupied by others, except in accordance with the terms of this Lease. Section 16.10. If Tenant desires to assign this Lease or sublet all or any portion of the Premises, Tenant shall give notice thereof to Landlord, which notice shall be accompanied by (a) with respect to an assignment of this Lease, the date Tenant desires the assignment to be effective, and (b) with respect to a sublet of all or a part of the Premises, (i) the material business terms on which Tenant would sublet such premises, (ii) a description of the portion of the Premises to be sublet, (c) the name and pertinent financial information of the proposed assignee or subtenant, and (d) any other information Landlord may reasonably require. Section 16.11. Each sublease shall be subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, it being the intention of Landlord and Tenant that Tenant shall assume and be liable to Landlord for any and all acts and omissions of all subtenants and anyone claiming under or through any subtenants which, if performed or omitted by Tenant, would be a default under this Lease; and Tenant and each subtenant shall be deemed to have agreed that upon the occurrence and during the continuation of an Event of Default hereunder, provided Landlord terminates the Lease, in accordance with Article 21 below, Landlord may, at its option, collect rent under such sublease, from such subtenant and such subtenant shall, at Landlord's option and upon notice from Landlord, attorn to Landlord pursuant to the then executory provisions of this Lease other than the monetary terms of this Lease, which monetary terms shall be governed by the terms of such sublease, except that Landlord shall not be (A) liable for any previous act or omission of Tenant under such sublease, (B) subject to any counterclaim, offset or defense, which theretofore accrued to such subtenant against Tenant, (C) bound by any previous modification of such sublease not consented to by Landlord, or by any prepayment of more than one month's rent and additional rent under such sublease, (D) bound to return such subtenant's security deposit, if any, except to the extent that Landlord shall receive actual possession of such deposit and such subtenant shall be entitled to the return of all or any portion of such deposit under the terms of its sublease, or (E) obligated to make any payment to or on behalf of such subtenant, or to perform any work in the subleased space or the Building, or in any way to prepare the subleased space for occupancy, beyond Landlord's obligations under this Lease. The provisions of this Section 16.11. shall be self-operative, and no further instrument shall be required to give effect to this provision, provided that the subtenant shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such subordination and attornment. Section 16.12. Notwithstanding any assignment or subletting or any acceptance of Rental by Landlord from any assignee or subtenant, Tenant shall remain fully liable for the payment of all Rental due and for the performance of all other terms, covenants and conditions contained in this Lease on Tenant's part to be observed and performed, and any default under any term, covenant or condition of this Lease by any subtenant or assignee or anyone claiming under or through any subtenant or assignee shall be deemed to be a default under this Lease by Tenant. Tenant shall indemnify, defend, protect and hold harmless Landlord from and against any and all losses resulting from any claims that may be made against Landlord by the proposed assignee or subtenant or anyone claiming under or through any subtenant or by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment or sublease, irrespective of whether Landlord shall give or decline to give its consent to any proposed assignment or sublease, or if Landlord shall exercise any of its options under this Article 16, unless attributable to the gross negligence or willful misconduct of Landlord. Section 16.13. If Landlord consents to a proposed assignment or sublease and Tenant fails to execute and deliver to Landlord such assignment or sublease within 120 days after the giving of such consent, then Tenant shall again comply with all of the provisions and conditions of this Article 16 hereof before assigning this Lease or subletting all or part of the Premises. Section 16.14. Landlord shall not be required to respond to a request for consent to a proposed assignment or sublease unless and until Tenant submits to Landlord the information stated in Section 16.10. Landlord shall respond to requests for approval of the form of sublease or assignment within 15 days after submission thereof, provided such form shall be submitted on or after submission of the information in Section 16.10 and prior to consummation of the sublease or assignment, in question. Tenant shall either before or after Landlord consents to such a request, deliver to Landlord not later than 30 days after Tenant enters into an assignment or sublease agreement, a copy of a fully executed and delivered assignment and assumption agreement or sublease, which is in form and substance similar to the form of assignment and sublease and information consented to by the Landlord in all material respects. Section 16.15. The joint and several liability of Tenant and any successors-in-interest of Tenant and the due performance of Tenant's obligations under this Lease shall not be discharged, released or impaired by any agreement or stipulation made by Landlord, or any grantee or assignee of Landlord, extending the time, or modifying any of the terms and provisions of this Lease, or by any waiver or failure of Landlord, or any grantee or assignee of Landlord, to enforce any of the terms and provisions of this Lease. ARTICLE 17 INDEMNIFICATION Except as otherwise expressly provided to the contrary in this Lease, Tenant waives all claims against Landlord for damage to any property or injury to, or death of, any person in, upon or about the Premises, arising at any time and from any cause other than by reason of the gross negligence or willful misconduct of Landlord, and Tenant shall indemnify Landlord and shall hold Landlord harmless from any damage to any property or injury to, or death of, any person arising from the use or occupancy of the Premises by Tenant or any acts or omissions of Tenant or its agents, employees, representatives, contractors or invitees in, on or about the Premises or breach of this Lease by Tenant, except such as is caused solely by the gross negligence or willful misconduct of Landlord, its agents or employees. Without limiting the generality of the foregoing, Landlord shall not be liable for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain, flood, snow, or leaks from any part of the Premises or from the pipes, appliances, equipment, plumbing works, roof, or subsurface of any floor or ceiling, or from the street or any other place, or by dampness or by any other cause whatsoever unless caused by the gross negligence or willful misconduct of Landlord, its agents, employees or contractors. Landlord shall not be liable for any such damage caused by occupants of property adjacent to the Premises, or by the public, or caused by any private, public, or quasi-public construction or other work, including, but not limited to, any construction, modification, or operation of underground, ground-level, or above-ground pedestrian tunnels, bridges, walkways, or similar items. Tenant's foregoing indemnity obligation shall include reasonable attorneys' fees, investigation costs, and all other reasonable costs and expenses incurred by Landlord from the first notice that any claim or demand has been made or may be made. The provisions of this Article 17 shall survive the termination of this Lease with respect to any damage, injury, or death occurring before such termination. If Landlord is made a party to any litigation commenced by or against Tenant relating to this Lease or to the Premises, and provided that in any such litigation Landlord is not finally adjudicated to be at fault, then Tenant shall pay all costs and expenses, including reasonable attorneys' fees and court costs, incurred by or imposed upon Landlord because of any such litigation (but not including attorneys' fees of Landlord's separate counsel hired to defend Landlord in such action), and the amount of all such costs and expenses, including reasonable attorneys' fees and court costs, shall be a demand obligation owing by Tenant to Landlord. Tenant shall defend any such action with counsel reasonably satisfactory to Landlord. ARTICLE 18 SURRENDER OF THE PREMISES Section 18.01. Upon the expiration of the Term or other termination of this Lease for any cause whatsoever, Tenant shall peacefully vacate and surrender the Premises in as good order and condition, reasonable use and wear thereof excepted, subject to the terms of this Lease. Section 18.02. Should Tenant continue to hold the Premises after the termination of this Lease, whether the termination occurs by lapse of time or otherwise, such holding over, unless otherwise agreed to by Landlord in writing, shall constitute and be construed as a tenancy at will at a daily Rental equal to 1/30th of an amount equal to one and one-half with respect to the first 60 days of a holdover, and thereafter, two times the monthly Rental payable by Tenant as of the date of termination and subject to all of the other terms set forth herein except any right to renew this Lease, but the foregoing shall not constitute a consent by Landlord to such holding over and shall not prevent Landlord from exercising any of its remedies under this Lease or applicable law by reason of such holding over. Section 18.03. On or before the Expiration Date, Tenant shall remove, at Tenant's expense, all of its furniture, furnishings, personal property, movable trade fixtures, and those alterations, improvements and additions Landlord requested Tenant to remove pursuant to Section 10.06, and Tenant shall promptly repair all damage done to the Premises by such removal. Any items not so removed at the Expiration Date shall, at Landlord's option, be deemed abandoned and shall thereupon become the property of Landlord. If Tenant fails to remove any furniture, furnishings, personal property, movable trade fixtures, and those alterations, improvements and additions Landlord requested Tenant to remove pursuant to Section 10.06, then in addition to any other remedy available to Landlord hereunder or at law or equity, Landlord may do so at Tenant's expense, and Tenant shall reimburse Landlord on demand for the actual cost incurred by Landlord (plus a fee of ten percent (10%)) of the cost therefor to compensate Landlord for its administrative costs and overhead), and Landlord shall have the right to look to the Security Deposit for such reimbursement. ARTICLE 19 ESTOPPEL CERTIFICATES Section 19.01. Tenant agrees to furnish no later than fifteen (15) days after a request therefor by Landlord, any ground lessor, or the holder of any deed of trust or mortgage covering the Building, the Land, or any interest of Landlord therein or any purchaser of Landlord's interest, a certificate signed by Tenant certifying (to the extent same is true) that this Lease is in full force and effect and unmodified; that the Term has commenced and the full Rental is then accruing hereunder; that Tenant has accepted possession of the Premises; that no Rental under this Lease has been paid more than thirty (30) days in advance of its due date; that the address for notices to be sent to Tenant is as set forth in this Lease (or has been changed by notice duly given and is as set forth in the certificate); that Tenant, as of the date of such certificate, has no knowledge of any charge, lien, or claim of offset under this Lease or otherwise against Rentals or other charges due or to become due hereunder; that Landlord is not then in default under this Lease; and such other matters as may be reasonably requested by Landlord or any such ground lessor, holder of such deed of trust or mortgage or purchaser. If Tenant is unable to so certify as to one or more of the foregoing items, Tenant shall specify its reason therefor in writing. Any such certificate may be relied upon by any prospective purchaser, ground lessor, mortgagee, or any beneficiary under any deed of trust on the Building or the Land or any part thereof. Tenant's failure to timely execute and deliver an estoppel certificate pursuant to this Section 19 after notice and the expiration of an additional five (5) days, shall constitute an Event of Default. Section 19.02. Landlord agrees to furnish no later than fifteen (15) days after a request therefor by Tenant, in connection with a financing of equipment or leasehold improvements installed in the Building, certificate signed by Landlord certifying (to the extent same is true) that this Lease is in full force and effect and unmodified; that the Term has commenced and the full Rental is then accruing hereunder; that no Rental under this Lease has been paid more than thirty (30) days in advance of its due date; that the address for notices to be sent to Landlord is as set forth in this Lease (or has been changed by notice duly given and is as set forth in the certificate); that Landlord, as of the date of such certificate, has no knowledge of any charge, lien, or claim of offset under this Lease or otherwise against Rentals or other charges due or to become due hereunder; and that an Event of Default is not pending (or if pending specifying such default), and such other matters as may be reasonably requested by Tenant's lender. If Landlord is unable to so certify as to one or more of the foregoing items, Landlord shall specify its reason therefor in writing. Any such certificate may be relied upon by any prospective lender of Tenant, as aforesaid. ARTICLE 20 SUBORDINATION Section 20.01. Landlord shall obtain a non-disturbance agreement from all holders of a Superior Instrument in such holders' standard form with such reasonable modifications as shall be mutually satisfactory to the parties thereto acting in good faith. This Lease is subject and subordinate to any first deeds of trust, first mortgages or other first security instruments (collectively, "Superior Instruments") which may from time to time during the Term cover the Building and/or the Land, or any interest of Landlord therein, and to any advances made on the security thereof, and to any refinancings, increases, renewals, modifications, consolidations, replacements, and extensions of any such future Superior Instruments. Within twenty (20) days after demand, Tenant shall execute, acknowledge, and deliver to Landlord any further instruments and certificates evidencing such subordination as Landlord or the holder of any Superior Instrument may reasonably request. As of the date hereof there is no Superior Instrument covering the Land and/or Building. Section 20.02. Notwithstanding the generality of the foregoing provisions of Section 20.01 hereof, any holder of a Superior Instrument shall have the right, unilaterally, at any time, to subordinate fully or partially any such Superior Instrument to this Lease on such terms and subject to such conditions as such holder of a Superior Instrument may consider appropriate. Upon request, Tenant shall execute an instrument confirming any such full or partial subordination by any holder of a Superior Instrument. At any time, before or after the institution of any proceedings for the foreclosure of any Superior Instrument, or sale of the Building and/or Land under any Superior Instrument, or upon the termination of any ground lease, Tenant shall attorn to such purchaser upon any such sale or the grantee under any deed in lieu of such foreclosure or to any ground lessor in the event of a termination of a ground Lease, as the case may be, and shall recognize such ground purchaser, grantee or ground lessor, as the case may be, as Landlord under this Lease, subject to the terms of Section 20.01 above. Tenant hereby waives the right, if any, to elect to terminate this Lease or to surrender possession of the Premises in the event of the judicial or nonjudicial foreclosure of any deed of trust, mortgage, or security agreement (or any transfer in lieu thereof) or termination of a ground lease. The foregoing agreement of Tenant to attorn shall survive any such foreclosure sale, trustee's sale, or conveyance in lieu thereof, or termination of a ground lease. Tenant shall, upon demand at any time, before or after any such foreclosure sale, trustee's sale, or conveyance in lieu thereof, or termination of a ground lease, execute, acknowledge, and deliver to Landlord's mortgagee or any successor thereof or any then owner of the Premises or to the ground lessor (as the case may be), any written instruments and certificates evidencing such attornment as such mortgagee, successor, owner or ground lessor may reasonably require. Section 20.03. Should any ground lease be terminated, or any deed of trust, mortgage, or security instrument be foreclosed, the liability of the ground lessor, mortgagee, trustee, or purchaser, as the case may be, as "Landlord" hereunder, shall exist only with respect to the acts or omissions of such person or entity occurring while it was the owner of the Land and/or Building, subject to the other provisions of this Section 20.03. Further, Tenant agrees that any such ground lessor, mortgagee, trustee, or purchaser shall not be liable for or subject to (i) any Rental paid more than thirty (30) days in advance of its due date; (ii) any amendment or modification of this Lease made without the prior written approval of such ground lessor, mortgagee, trustee, or purchaser where Tenant has previously been notified in writing of the need for such approval; (iii) any default by or any claim against any prior Landlord; (iv) subject to any defense, claim, counterclaim, or offset which Tenant may have against Landlord, unless such offset is one which Tenant is expressly permitted pursuant to the terms of this Lease, (v) bound by any obligation to make any payment to Tenant which was required to be made prior to the time such successor landlord succeeded to Landlord's interest; and (vi) bound by any obligation to perform any work or to make any improvements to the Premises except repair and compliance obligations accruing from and after succession pursuant to Paragraphs 9, 12, 14 and 15 hereof. Nothing herein shall derogate from the obligation of any successor to Landlord to cure any default of Landlord that continues to exist when such successor succeeds to Landlord's interest in the Premises (other than as expressly provided otherwise in Section 20.03(v)). Section 20.04. As long as any holder of a Superior Instrument shall exist, Tenant shall not seek to terminate this Lease by reason of any act or omission of Landlord (a) until Tenant shall have given notice of such act or omission to all holders of a Superior Instrument, for which names and addresses have been provided to Tenant and (b) until a reasonable period of time shall have elapsed following the giving of notice of such default and the expiration of any applicable notice or grace periods (provided such holder proceeds with reasonable promptness to effectuate a cure of such default and the holder is using reasonable diligence to remedy such condition) during which period such holder of a Superior Instrument shall have the right, but not the obligation, to remedy such act or omission and thereafter diligently proceed to so remedy such act or obligation. If any holder of a Superior Instrument elects to remedy such act or omission of Landlord, Tenant shall not seek to terminate this Lease so long as such holder of a Superior Instrument is proceeding with reasonable diligence to effect such remedy, except where Tenant is permitted to terminate this lease pursuant to the express provisions hereof. ARTICLE 21 DEFAULT AND REMEDIES Section 21.01. The occurrence of any one or more of the following events shall constitute an "Event of Default" under this Lease: (a) if Tenant shall fail to pay any Rental or other sums payable by Tenant hereunder as and when such Rental or other sums become due and payable and such failure shall continue for more than five (5) business days after written notice of such non-payment; (b) if Tenant shall fail to perform or observe any covenant or obligation hereunder and such failure shall continue for more than thirty (30) days after notice; or, if such failure is not of an emergency nature, does not endanger the health, safety or welfare of the Premises (or any portion thereof) or the occupants thereof, and is curable but cannot reasonably be cured within such thirty (30) day period, Tenant shall have a reasonable extension of such cure period, up to a maximum extension of one hundred twenty (120) days, so long as Tenant commences to correct same within said thirty (30) day period and thereafter diligently prosecutes the correction of same to completion; (c) if any petition is filed by or against Tenant or any guarantor of Tenant's obligations under this Lease under any section or chapter of the present or any future Federal Bankruptcy Code or under any similar law or statute of the United States or any state thereof (which, in the case of an involuntary proceeding, is not permanently discharged, dismissed, stayed, or vacated, as the case may be, within sixty (60) days of its commencement), or if any order for relief shall be entered against Tenant or any guarantor of Tenant's obligations under this Lease in proceedings filed under any section or chapter of the present or any future Federal Bankruptcy Code or under any similar law or statute of the United States or any state thereof; (d) if Tenant or any guarantor of Tenant's obligations under this Lease becomes insolvent or makes a transfer in fraud of creditors; (e) if Tenant or any guarantor of Tenant's obligations under this Lease makes an assignment for the benefit of creditors; or (f) if a receiver, custodian, or trustee is appointed for Tenant or any guarantor of Tenant's obligations under this Lease or for any of the assets of Tenant or any guarantor of Tenant's obligations under this Lease, which appointment is not vacated within sixty (60) days of the date of such appointment. Section 21.02. If an Event of Default occurs, then at any time thereafter while Tenant remains in default, Landlord may do any one or more of the following, thirty (30) days after notice of its intent to do so, during which period Tenant shall have the opportunity to file for injunctive relief: (a) With respect to a monetary or a material non-monetary Event of Default, terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord after Landlord obtains a judgment for possession (or similar judicial order). For purposes of this Section 21.02, a "material non-monetary default" shall relate to an Installation Requirement (as hereinafter defined), or an incurable default, or a default or breach of Tenant's obligations under Articles 9, 11, 18, 20 or 26 hereof, or a breach of Section 16.01 hereof, and shall have a material adverse effect on the Building, Land and/or Landlord, and Landlord's notice of material non-monetary default shall clearly indicate thereon that a "material non-monetary" default has occurred. If Tenant fails to do so, Landlord may, without notice and without prejudice to any other remedy Landlord may have, enter upon and take possession of the Premises and expel or remove Tenant and its effects without being liable to prosecution or any claim for damages therefor; and Tenant shall indemnify Landlord for all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Premises or otherwise, including any loss of Rental for the remainder of the Term. (b) Terminate this Lease, as aforesaid in paragraph (a) above for a monetary or material non-monetary Event of Default, in which event Tenant's Event of Default should be considered a total breach of Tenant's obligations under this Lease and Tenant immediately shall become liable for such damages for such breach in an amount, equal to the total of (1) the costs of recovering the Premises; (2) the unpaid Rental earned as of the date of termination, plus interest thereon at a rate per annum from the due date equal to twelve percent (12%), provided, however, that such interest shall never exceed the Highest Lawful Rate; (3) the amount of the excess of (i) the total Rental and other benefits which Landlord would have received under this Lease for the remainder of the Term, at the rates then in effect (reduced by the rent received by Landlord under a lease with a new tenant covering the balance of this Lease term), together with all other expenses incurred by Landlord in connection with Tenant's default, over (ii) the Fair Market Value Rate of the balance of the Term as of the time of such breach, discounted at the rate of six percent (6%) per annum to the then-present value; and (4) all other sums of money and damages owing by Tenant to Landlord. The term "Fair Market Value Rate" as used herein means the fair market value rental rate for a comparable lease term commencing at a comparable time for the leasing of space of comparable size similarly situated to the Premises, or in buildings of equivalent quality and located in the business district in which the Building is located. (c) After obtaining a judgment for possession (or similar judicial order) for a monetary or a material non-monetary Event of Default, enter upon and take possession of the Premises as Tenant's agent, without terminating this Lease and without being liable to prosecution or any claim for damages therefor, and Landlord may relet the Premises as Tenant's agent and receive the rental therefor, in which event Tenant shall pay to Landlord on demand any and all costs of releasing, renovating, repairing, and altering the Premises (including but not limited to advertising costs, commissions, finders fees and other similar costs) for a new tenant or tenants and any deficiency that may arise by reason of such reletting, provided, however, that Landlord shall have no duty to relet the Premises and Landlord's failure to relet the Premises shall not release or affect Tenant's liability for Rental or for damages. (d) Do whatever Tenant is obligated to do under this Lease (including, without limitation, making payments to third parties) and enter the Premises without being liable to prosecution or any claim for damages therefor to accomplish this purpose. Tenant shall reimburse Landlord within ten (10) days after demand for any expenses which Landlord incurs in thus effecting compliance with this Lease on Tenant's behalf (plus a fee of fifteen percent (15%) of the cost therefor to compensate Landlord for its administrative costs and overhead), and Landlord shall not be liable for any damages suffered by Tenant from such action, unless caused by the gross negligence or willful misconduct of Landlord. Section 21.03. No act or thing done by Landlord or its agents during the Term shall constitute an acceptance of an attempted surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless made in writing and signed by Landlord. No re-entry or taking possession of the Premises by Landlord shall constitute an election by Landlord to terminate this Lease, unless a written notice of such intention is given to Tenant. Notwithstanding any such reletting or re-entry or taking possession, Landlord may at any time thereafter terminate this Lease for a previous default. Landlord's acceptance of Rental following an event of default hereunder shall not be construed as a waiver of such event of default. No waiver by Landlord or Tenant of any breach of this Lease by the other shall constitute a waiver of any other violation or breach of any of the terms hereof. Forbearance by Landlord or Tenant to enforce one or more of the remedies herein provided (or otherwise) upon a breach hereof shall not constitute a waiver of any other breach of the Lease. Section 21.04. No provision of this Lease shall be deemed to have been waived by Landlord or Tenant unless such waiver is in writing and signed by the party to be charged. Nor shall any custom or practice which may evolve between the parties in the administration of the terms of this Lease be construed to waive or lessen the party's right to insist upon strict performance of the terms of this Lease. The rights granted to Landlord and Tenant in this Lease shall be cumulative of every other right or remedy which Landlord and Tenant may otherwise have at law or in equity or by statute, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. Section 21.05. If Landlord shall have failed to commence to perform its repair or other material obligations under this Lease and as a consequence of such failure, Tenant or its business operations from the Premises is adversely affected in a material fashion, and such failure of performance continues, for a period of thirty (30) days after written notice thereof from Tenant to Landlord (unless any such non-monetary default cannot be cured within said 30 days period, then provided Landlord has not promptly commenced and diligently pursued such cure), Tenant may, at its option and without prejudice to any other right and remedy available to Tenant hereunder, at law or in equity, upon notice to Landlord undertake all reasonable action to cure Landlord's default and Landlord shall, within thirty (30) days following demand therefor, reimburse Tenant for all reasonable out-of-pocket sums expended or obligations incurred by Tenant in connection therewith. If Landlord shall fail to pay Tenant such amounts within such thirty (30) day period, Landlord shall pay Tenant interest thereon at the rate for late payments specified in Section 5.02 above, and if such amounts remain unpaid after sixty (60) days, Tenant may offset such amounts against the Annual Base and additional rent thereafter coming due hereunder. ARTICLE 22 WAIVER BY TENANT To the extent permitted by applicable law, Tenant waives (except as otherwise expressly provided in this Lease) for itself and all claiming by, through, and under it, including creditors of all kinds: (a) any right and privilege which it or any of them may have under any present or future constitution, statute, or rule of law to redeem the Premises or to have a continuance of this Lease for the Term after termination of Tenant's right of occupancy by order or judgment of any court or by any legal process or writ, under the terms of this Lease, or after the termination of the Term as herein provided; (b) the benefits of any present or future constitution, statute, or rule of law which exempts property from liability for debt or for distress for rent; and (c) the provisions of law relating to notice and/or delay in levy of execution in case of eviction of a tenant for nonpayment of rent. ARTICLE 23 SECURITY DEPOSIT Section 23.01. Tenant shall be required to deliver the Security Deposit to Landlord (and shall use best efforts to deliver same within 5 business days after delivery to Tenant of a fully executed Lease) in the form of a clean, irrevocable, non-documentary and unconditional letter of credit in the amount of the Security Deposit set forth in the Basic Lease Information (the "Letter of Credit" ) issued by and drawable upon any commercial bank, trust company, national banking association or savings and loan association with offices in the United States (the "Issuing Bank" ), which has outstanding unsecured, uninsured and unguaranteed indebtedness, or shall have issued a letter of credit or other credit facility that constitutes the primary security for any outstanding indebtedness that has combined capital, surplus and undivided profits of not less than $500,000,000 and is reasonably satisfactory to Landlord. In the event Tenant fails to timely deliver such Security Deposit to Landlord, as aforesaid, Landlord may, at its sole option, terminate this Lease upon notice to Tenant, at anytime thereafter, provided such termination notice is sent prior to Landlord's receipt of such Security Deposit. The Letter of Credit shall (a) name Landlord as beneficiary, (b) be in the amount of the Security Deposit, (c) have a term of not less than one year, from the date hereof, (d) permit multiple drawings for all or part of the Letter of Credit and drawings by overnight courier, (e) be fully transferable by Landlord to Landlord's successor or assignee of its interest in Premises without the payment of any fees or charges by Landlord or such transferee, and (f) otherwise be in form and content satisfactory to Landlord or in conformity with Exhibit F attached hereto. If upon any transfer of the Letter of Credit, any fees or charges shall be so imposed, then such fees or charges shall be payable solely by Tenant with respect to Landlord named herein and the Letter of Credit shall so specify. The Letter of Credit shall provide that it shall be deemed automatically renewed, without amendment, for consecutive periods of one year during the Term commencing with the original expiration date of such letter of credit. through the date that is at least 60 days after the Expiration Date, unless the Issuing Bank sends a notice (the "Non-Renewal Notice" ) to Landlord by certified mail, return receipt requested, not less than 60 days next preceding the then expiration date of the Letter of Credit stating that the Issuing Bank has elected not to renew the Letter of Credit in which event, Landlord shall have the right, upon receipt of the Non-Renewal Notice, to draw the full amount of the Letter of Credit, by sight draft on the Issuing Bank, and shall thereafter hold or apply the cash proceeds of the Letter of Credit pursuant to the terms of this Article. The Letter of Credit shall state that drafts drawn under and in compliance with the terms of the Letter of Credit will be duly honored upon presentation to the Issuing Bank accompanied by a certification from an officer of Landlord, its member, or agent that Landlord is entitled to draw the proceeds requested pursuant to the terms of this Lease. The Letter of Credit shall be subject in all respects to the International Standby Practices set by the International Chamber of Commerce. In the event Landlord draws down all or a part of the proceeds of the letter of credit, then Tenant shall within thirty (30) days after demand either furnish to Landlord an amendment to such letter of credit or a new letter of credit complying with the terms hereof, so the Security Deposit being held by Landlord is the full amount required under the terms of this Lease. Tenant shall cooperate with Landlord during the Term in effectuating the intent and purpose of this Article 23, and Landlord's right with respect to the Letter of Credit. Section 23.02. If (i) no Event of Default then exists, (ii) Landlord has not previously drawn down all or a portion of the Security Deposit and (iii) Tenant complies with the provisions of this Section 23.02, (A) on the 1st anniversary of the Commencement Date, provided all usage fees accrued as of such date have been paid to the local utility, the Security Deposit shall be reduced to $1,373,334.00; (B) on the 2nd anniversary of the Commencement Date, provided all usage fees accrued as of such date have been paid to the local utility and the Security Deposit shall have been previously reduced, the Security Deposit shall be reduced to $1,286,668.00; (C) on the 3rd anniversary of the Commencement Date, provided all usage fees accrued as of such date have been paid to the local utility, and the Security Deposit shall have previously been reduced, the Security Deposit shall be reduced to $1,200,000.00; (D) on the 5th anniversary of the Commencement Date, the Security Deposit shall be reduced to $800,000.00, and (E) provided the Security Deposit shall have previously been reduced pursuant to the preceding clause (i), on the 10th anniversary of the Commencement Date the Security Deposit shall be reduced to $400,000.00. The Security Deposit shall be reduced as follows: (A) if the Security Deposit is in the form of cash, Landlord shall, within 10 Business Days following notice by Tenant to Landlord that Tenant is entitled to reduce the Security Deposit pursuant to this Section 23.02, deliver to Tenant the amount by which the Security Deposit is reduced, or (B) if the Security Deposit is in the form of a Letter of Credit, Tenant shall deliver to Landlord an amendment to the Letter of Credit (which amendment shall comply in all respects with the provisions of Section 23.01), reducing the amount of the Letter of Credit by the amount of the permitted reduction, and Landlord shall execute the amendment and such other documents as are reasonably necessary to reduce the amount of the Letter of Credit in accordance with the terms hereof. If Tenant delivers to Landlord an amendment to the Letter of Credit in accordance with the terms hereof, Landlord shall, within 10 Business Days after delivery of such amendment, either (1) provide its reasonable objections to such amendment or (2) execute and deliver within 10 Business Days such amendment of the Letter of Credit in accordance with the terms hereof. Section 23.03. Within thirty (30) days after the Expiration Date (or the sooner termination of this Lease) and delivery of possession of the Premises to Landlord as required by this Lease, Landlord shall return the Security Deposit to Tenant (or the unapplied portion thereof, to the extent Landlord applied same pursuant to the terms of this Lease). ARTICLE 24 ATTORNEYS' FEES AND LEGAL EXPENSES Tenant hereby agrees to pay, as additional rent, all reasonable attorneys' fees and disbursements which Landlord may incur or pay out by reason of, or in connection with any Event of Default (including, but not limited to, matters involving: payment of rent or additional rent; alterations or assignment or subletting), unless Tenant prevails in any action or proceeding in connection therewith. In the event either party initiates judicial or other legal proceedings under or with respect to this Lease, against the other, the party prevailing in any such proceeding shall be entitled to reimbursement of its reasonable attorneys' fees and other related expenses incurred in connection therewith, in addition to all other rights, awards and remedies permitted hereunder, at law or in equity. Landlord's and Tenant's obligations under this Section shall survive the expiration of the Term or any other termination of this Lease. This Section is intended to supplement (and not to limit) other provisions of this Lease pertaining to indemnities and/or attorney's fees. Such attorney's fees and disbursements shall include services performed by in-house counsel used by Landlord or Tenant, as applicable, the fees for which shall be calculated at an hourly rate of $210.00 per hour, which hourly rate shall increase by five percent (5%) for each twelve-month period after the date of this Lease, and which rate the parties hereby agree is reasonable. ARTICLE 25 NOTICES No notice, and no request, consent, approval, waiver or other communication which may be or is required or permitted to be given under this Lease shall be effective unless the same is given in the manner set forth in this Section 25. Each notice given pursuant to this Lease shall be given in writing and shall be (i) delivered in person, (ii) sent by nationally recognized overnight courier service, or (iii) sent by certified mail, return receipt requested, first class postage prepaid, to Landlord or Tenant and/or any party or parties they designate in writing, provided not more than three parties shall be entitled to notice at any one time, as the case may be, at their respective notice addresses as set forth in the Basic Lease Information, or at any such other address or addresses (not to exceed three) that may be given by one party to the other by notice pursuant to this Section 25. Such notices, if given as prescribed in this Section 25, shall be deemed to have been given (a) at the time of receipt or refusal of delivery if made in person, (b) on the next business day if deposited with a nationally recognized overnight courier service in time for next day delivery, or (c) on the third business day following the date of mailing if mailed. During any interruption or threatened interruption of substantial delay in postal services, all notices shall be delivered personally or by nationally recognized overnight courier service. ARTICLE 26 HAZARDOUS SUBSTANCES Section 26.01. The term "Hazardous Substance" as used in this Lease shall mean any product, substance, chemical, material or waste whose presence, nature, quantity and/or intensity of existence, use, manufacture, disposal, transportation, spill, release or affect, either by itself or in combination with other materials expected to be on the Premises, is defined as a hazardous material or substance pursuant to any applicable federal, state or local law regulation. Except for small quantities of ordinary office supplies and except for other materials which are customary in connection with the Permitted Use and the business conducted by Tenant from the Premises in compliance with the terms of this Lease (provided same are maintained and used in compliance with all applicable laws), Tenant shall not cause or permit any Hazardous Substance to be brought, kept, or used in or about the Premises by Tenant, its agents, employees, contractors or invitees, without obtaining Landlord's prior written consent. Section 26.02. If Tenant or Landlord knows, or has reasonable cause to believe, that a Hazardous Substance, or a condition involving or resulting from same, has come to be located in, on or under or about the Premises, the knowledgeable party shall immediately give written notice of such fact to the other. Tenant and Landlord shall also immediately give the other (without demand) a copy of any statement, report, notice, registration, application, permit, license, given to or received from, any governmental authority or private party, or persons entering or occupying the Premises, concerning the presence, spill, release, discharge of or exposure to any Hazardous Substance or contamination in, on or about the Premises. Section 26.03. Landlord and Landlord's employees, agent, contractors and lenders shall have the right to enter the Premises at any time in the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Tenant with this Section 26. Landlord shall have the right to employ experts and/or consultants in connection with its examination of the Premises and with respect to the installation, operation, use, monitoring, maintenance, or removal of any Hazardous Substance on or from the Premises. The reasonable costs and expenses of any such inspections shall be paid by the party requesting same, unless a contamination, caused or materially contributed by Tenant, is found to exist or be imminent, or unless the inspection or ordered by governmental authority as the result of any such existing or imminent violation or contamination caused by Tenant or anyone for whom Tenant is responsible. In any such case, Tenant shall upon request reimburse Landlord for the reasonable cost and expense of such inspection. ARTICLE 27 SIGNS No sign, advertisement or notice shall be inscribed, painted, affixed or displayed on or about the exterior portion of the Premises, including without limitation, on the windows or exterior walls of the Building without the prior written consent of Landlord (which consent shall not be unreasonably withheld, conditioned or delayed, provided an Event of Default does not then exist), and then in such places, numbers, sizes, color and style as are approved in writing in advance by Landlord and which conform to all applicable laws, regulations, rules and ordinances. If any such sign, advertisement or notice is exhibited without Landlord's prior written approval, Landlord shall have the right to remove the same and Tenant shall be liable for any and all expenses incurred by Landlord by said removal. Tenant will maintain its permitted signs (if any), decorations, lettering, advertising matter and such other things as may be approved in good condition and repair, and in compliance with all applicable statutes, regulations and rules, at all times. Landlord may prohibit any advertisement of Tenant in or on the Premises which in Landlord's reasonable opinion tends to impair the reputation of the Building or the Premises, and upon written notice from Landlord, Tenant shall refrain from and discontinue such advertisement. ARTICLE 28 WAIVER OF LIEN ON PERSONAL PROPERTY Tenant shall have the right from time to time to grant security interests in or otherwise finance Tenant's leasehold improvements, furniture, fixtures, equipment and other personal property. Landlord hereby waives all lien rights, statutory and otherwise, which it may now or hereafter have against all leasehold improvements, furniture, fixtures, equipment and other personal property of Tenant located in, on or about the Premises. Landlord shall from time to time within twenty (20) days of written request by Tenant, execute such Landlord lien waivers, subordinations and other related, customary and reasonable documents as will permit Tenant to grant such security interests and as may be reasonably required by any lender of Tenant, provided such documents are reasonably satisfactory to Landlord. Landlord shall give such lenders for which Landlord executed lien waivers notice of the termination of Tenant's right to possess the Premises and the lender shall have the right, but not the obligation, to (i) remove the secured property from the Premises within 30 days after notice and/or (ii) assume all of Tenant's obligations and liabilities under the Lease, and Landlord shall recognize such lender, as tenant under the Lease, pursuant to an agreement mutually satisfactory to Landlord and lender (and which does not impose greater obligations on the lender than that of Tenant under the Lease, nor change the Lease, except for such minor or non-material modifications as the parties, acting in good faith, may agree upon), provided Lender gives notice thereof to Landlord within 30 days after notice of termination by Landlord. Lender agrees to repair in a first-class manner any physical damage to the Premises and/or Land caused by such removal and, if Landlord is then in possession of the Premises, Landlord shall provide reasonable access to the lender accordingly. Tenant shall have the right to add lender as a party to receive notices under this Lease pursuant to Article 25 above. No Landlord lien shall at any time attach to the equipment or property of Tenant's collocation and other customers, and Landlord hereby waives any and all lien rights, statutory or otherwise, which Landlord may now or hereafter have against such equipment or property. ARTICLE 29 WAIVER OF JURY TRIAL; COUNTERCLAIMS LANDLORD AND TENANT EACH HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY CLAIM, ACTION, PROCEEDING OR COUNTERCLAIM BY EITHER PARTY AGAINST THE OTHER ON ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT AND/OR TENANT'S USE OR OCCUPANCY OF THE PREMISES. TENANT SHALL NOT IMPOSE ANY COUNTERCLAIM OR COUNTERCLAIMS IN A SUMMARY PROCEEDING OR OTHER ACTION BASED ON TERMINATION OR HOLDOVER EXCEPT WITH RESPECT TO CLAIMS WHICH MAY NOT BE BROUGHT BY TENANT IN A SEPARATE ACTION. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY TENANT AND TENANT ACKNOWLEDGES THAT NEITHER LANDLORD NOR ANY PERSON ACTING ON BEHALF OF LANDLORD HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. TENANT FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY AND ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION AND AS EVIDENCE OF THE SAME HAS EXECUTED THIS LEASE. ARTICLE 30 MISCELLANEOUS Section 30.01. Brokers. Except for the Broker(s) listed in the Basic Lease Information, if any, Landlord and Tenant each represent and warrant that it has not entered into any agreement with, nor otherwise had any dealings with, any broker or agent in connection with the negotiation or execution of this Lease which could form the basis of any claim by any such broker or agent for a brokerage fee or commission, finder's fee, or any other compensation of any kind or nature in connection herewith, and Landlord and Tenant each agree to indemnify and hold the other harmless from any costs (including, but not limited to, court costs, investigation costs, and attorneys' fees), expenses, or liability for commissions or other compensation claimed by any broker or agent with respect to this Lease which arise out of any agreement or dealings, or alleged agreement or dealings, between such party and any such agent or broker. Section 30.02. Severability. Every agreement contained in this Lease is, and shall be construed as, a separate and independent agreement. If any term of this Lease or the application thereof to any person or circumstances shall be invalid and unenforceable, the remainder this Lease, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected. Section 30.03. No Merger. There shall be no merger of this Lease or of the leasehold estate hereby created with the fee estate in the Premises or any part thereof by reason of the fact that the same person may acquire or hold, directly or indirectly, this Lease or the leasehold estate hereby created or any interest in this Lease or in such leasehold estate as well as the fee estate in the Premises or any interest in such fee estate. In the event of a voluntary or other surrender of this Lease, or a mutual cancellation hereof, Landlord may, at its option, terminate all subleases, or treat such surrender or cancellation as an assignment of such subleases. Section 30.04. Limitation of Liability. Any and all covenants, undertakings and agreements herein made on the part of Landlord are made and intended not as personal covenants, undertakings and agreements or for the purpose of binding Landlord personally or the assets of Landlord except Landlord's interest in the Premises, but are made and intended for the purpose of binding only the Landlord's interest from time to time in the Premises. No personal liability or personal responsibility is assumed by, nor shall at any time be asserted or enforceable against, Landlord or its agents, beneficiaries, partners, or their partners, members, managers, officers, employees, directors or shareholders on account of this Lease or on account of any covenant, undertaking, or agreement of Landlord in this Lease contained, all such liability being specifically waived by Tenant. Wherever in this Lease Landlord's consent or approval is required, if Landlord refuses to grant such consent or approval, whether or not Landlord expressly agreed that such consent or approval would not be unreasonably withheld, conditioned or delayed, Tenant shall not make, and Tenant hereby waives, any claim for money damages (including any claim by way of set-off, counterclaim or defense) based upon Tenant's claim or assertion that Landlord unreasonably withheld, conditioned or delayed its consent or approval. Tenant's sole remedy shall be an action or proceeding to enforce such provision, by specific performance, injunction or declaratory judgment. In no event shall Landlord or Tenant be liable to the other, and each party hereby waives any claim for, any indirect, consequential or punitive damages, including loss of profits or business opportunity, arising under or in connection with this Lease, even if due to the gross negligence or willful misconduct of such party or of its agents or employees. Section 30.05. Article Headings. The article headings contained in this Lease are for convenience only and shall not enlarge or limit the scope or meaning of the various and several articles hereof. Words of any gender used in this Lease shall include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. Section 30.06. Joint and Several Obligations. If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several, and all agreements and covenants herein contained shall be binding upon the respective heirs, personal representatives, successors, and, to the extent permitted under this Lease, assigns of the parties hereto. Section 30.07. No Representations. Neither Landlord nor Landlord's agents or brokers have made any representations or promises with respect to the Premises except as herein expressly set forth and all reliance with respect to any representations or promises is based solely on those contained herein. No rights, easements, or licenses are acquired by Tenant under this Lease by implication or otherwise except as expressly set forth in this Lease. Section 30.08. Entire Agreement. This Lease sets forth the entire agreement between the parties and cancels all prior negotiations, arrangements, brochures, agreements, and understandings, if any, between Landlord and Tenant regarding the subject matter of this Lease. No amendment or modification of this Lease shall be binding or valid unless expressed in a writing executed by both parties hereto. Section 30.09. Authority. The persons executing this Lease on behalf of Landlord and Tenant represent and warrant respectively that Landlord and Tenant have complied with all applicable laws, rules, and governmental regulations relative to its right to do business in the state in which the Premises are located, that such entity has the full right and authority to enter into this Lease, and that all persons signing on behalf of the Landlord and Tenant were authorized to do so by any and all necessary or appropriate corporate actions. Landlord represents that it is the fee owner of the Land and will be the fee owner of the Building upon completion of Landlord's Work. Section 30.10. Lender Protection. If, in connection with obtaining debt or equity financing for the Premises (including a sale leaseback) any lender, investor or ground lessor shall request reasonable modifications to this Lease as a condition to such financing, Tenant will not unreasonably withhold, delay, or defer its consent thereto, provided that such modifications do not increase the obligations of Tenant hereunder or adversely affect either the leasehold interest hereby created or Tenant's use and enjoyment of the Premises. Section 30.11. Governing Law. This Lease shall be governed by and construed under the laws of the state in which the Premises are located. Any action brought to enforce or interpret this Lease shall be brought in the court of appropriate jurisdiction in the state in which the Premises are located. Should any provision of this Lease require judicial interpretation, it is agreed that the court interpreting or considering same shall not apply the presumption that the terms hereof shall be more strictly construed against a party by reason of the rule or conclusion that a document should be construed more strictly against the party who itself or through its agent prepared the same, it being agreed that all parties hereto have participated in the preparation of this Lease and that legal counsel was consulted by each party hereto before the execution of this Lease. Section 30.12. Intentionally Omitted. ------------- ---------------------- Section 30.13. Landlord Access. Landlord and its agents, employees, invitees and contractors may enter the Building and Premises at all reasonable hours to exhibit the same to prospective purchasers or mortgagees or within the last 12 months of the Lease term prospective tenants, to periodically at reasonable intervals inspect the Building and Premises to see that Tenant is complying with all its obligations hereunder, to make repairs to the Building or Premises or for any other purpose expressly contemplated under this Lease. Landlord shall (except in the event of any emergency, or if Landlord's presence is requested by Tenant) give Tenant at least 24 hour prior notice of such access and, during access, agrees to use reasonable efforts (without the obligation to incur overtime labor) to minimize any interference with Tenant's business operations. Section 30.14. Exhibits. The exhibits referred to in the Basic Lease Information are by this reference incorporated fully herein. The term "this Lease" shall be considered to include all such exhibits. Section 30.15. Rules and Regulations. Tenant shall, and shall cause its employees, contractors and agents to, comply with and observe all reasonable rules and regulations concerning the use, management, operation, safety and good order of the Premises which may from time to time be promulgated by Landlord, provided that such rules and regulations are not inconsistent with the provisions of this Lease and do not (i) interfere (beyond a de minimis extent) with Tenant's use of the Premises or (ii) increase monetary obligations of Tenant hereunder; and Tenant is provided with notice thereof. Initial Rules and Regulations, which shall be effective until amended by Landlord, are attached hereto as Exhibit B. Tenant shall be deemed to have received notice of any amendment to the Rules and Regulations when a copy of such amendment has been delivered to Tenant at the Premises or has been delivered to Tenant in the manner prescribed in Article 25 herein. Section 30.16. Survival. All of Tenant's duties and obligations provided for herein, including any and all indemnifications of Landlord and the Premises, to the extent that the same shall not be fulfilled during the Term hereof, and Landlord's rights and remedies in respect of such unfulfilled duties and obligations, shall survive and remain in full force and effect notwithstanding the expiration or sooner termination of the Term of this Lease. Section 30.17. Financial Statements. Tenant, upon written request by Landlord in connection with a (i) proposed sale of Landlord's interest in the Land or Building or (ii) financing thereof, or (iii) Tenant default under the Lease will provide Landlord with a copy of its current audited financial statements, and related footnotes, prepared in accordance with generally accepted accounting principles (except with respect to an assignee which is a wholly-owned subsidiary of the Tenant and which assignee does not have separate audited financial statements). Such financial statements must be either certified by a certified public accountant or sworn to as to their accuracy by Tenant's most senior official or its chief financial officer. The financial statements provided must be the most recent financial statements in Tenant's possession, but as of a date not more than sixteen (16) months prior to the date of request. Section 30.18. Unavoidable Delay. In the event Landlord or Tenant is in any way delayed, interrupted or prevented from performing any of its obligations under this Lease (except with respect to monetary obligations), and such delay, interruption or prevention is due to fire, act of God, governmental act or failure to act, strike, labor dispute, inability to procure materials, or any other cause beyond such party's reasonable control (whether similar or dissimilar), then the time for performance of the affected obligation(s) shall be excused for the period of the delay and extended for a period equivalent to the period of such delay, interruption or prevention. Section 30.19. Recording of Lease. This Lease shall not be recorded, however, either party may, at its expense, upon prior written request, record a memorandum or short form of Lease in the land or other records of the County in which the Premises is located and the non-requesting party shall cooperate with the requesting party in connection therewith (unless Landlord's lender does not permit same or recordation may adversely affect Landlord (as reasonably determined by Landlord), then no such memorandum or short form of Lease shall be recorded). The requesting party shall bear all taxes and fees in connection with any permitted recordation. Section 30.20. Roof and Other Installation Rights. (a) During the Lease Term, provided an Event of Default does not then exist, Tenant is hereby granted, subject to compliance with the terms of this Lease, including, without limitation Articles 9, 10 and 12 hereof and the provisions of this Section 30.20 and such other reasonable requirements (the "Installation Requirements") as shall be imposed by Landlord, (i) to protect the physical integrity of the Building and Land and the equipment and installations thereon, (ii) to protect the health or safety of occupants or visitors, or (iii) to comply with applicable laws, the right to install, secure, maintain, replace and operate on the roof of the Building and/or on the Land immediately adjacent to the Building (to the extent space is available and legally permissible for such use) (the "Installation Site") generators, Antennae and other equipment installed in conformity with the terms of this Lease in connection with the Permitted Use, whether or not owned by Tenant, but for the benefit of Tenant's business in the Premises (collectively the "Installation Site Equipment"). The specifications and location of the Installation Site Equipment shall be subject to Landlord's reasonable approval, provided Landlord shall only take into consideration in deciding whether to approve same, the Installation Requirements. (b) Tenant shall diligently service, repair, paint and maintain the Installation Site Equipment, as applicable, including, without limitation, all electrical wires, guide wires and conduits related thereto. (c) In the performance of any installation, alteration, repair, maintenance, removal and/or any other work with respect to the Installation Site or the Installation Site Equipment, Tenant shall comply with all of the applicable provisions of this Lease, and the provisions of this Article shall be applicable to the Installation Site as if the Installation Site was part of the demised premises. (d) Any and all taxes, filing fees, charges or license fees imposed upon Landlord by virtue of the existence and/or use of the Installation Site Equipment (including those shown to be specifically related to any increase in the assessed valuation of the Building and/or Land attributable to the Installation Site Equipment), whether imposed by any local, state and/or federal government or any agency thereof, shall be exclusively borne by Tenant. Landlord agrees to cooperate reasonably with Tenant in any necessary applications for any necessary license or permits provided Landlord incurs no expense or liability in so doing. (e) On or before the termination of this Lease, Tenant shall at Landlord's request, remove the Installation Site Equipment and any and all appurtenant cables, wires, and other equipment and repair and restore the Roof and any other damage caused to the Building and/or Land. Such repair and restoration work shall proceed with due diligence and dispatch and shall be completed on or before to the Expiration Date. Any holes, damage or injury in or to the Installation Site and/or Building and/or Land arising out of or connected to the removal of the Installation Site Equipment and any or all appurtenant cables, wires, and other equipment shall be promptly and duly repaired and restored by Tenant at Tenant's sole cost and expense. (f) Throughout the duration of this Lease, Tenant shall inspect the Installation Site Equipment at least once a month. Tenant shall be solely responsible for preserving the water tight integrity of the Roof as may be caused by, or relates to, the installation, maintenance, operation and repair of the Installation Site Equipment. Tenant shall be responsible for all leaks in the Roof arising out of or connected to its installation. Tenant's Installation Site Equipment shall not exceed the applicable load-bearing capacity of the Installation Site, and shall not adversely affect Landlord's roof warranties. (g) Except as otherwise expressly provided herein (including as provided in Exhibit D), Tenant agrees that Landlord has made no warranties or representations as to the condition or suitability of the Installation Site, the Building and/or Land (or the electricity available to the Installation Site) for the installation, use, maintenance or operation of the Installation Site Equipment, and Tenant agrees to accept same in its "as is" condition and without any work or alterations to be made by Landlord. Section 30.21. Tenant Representative. Tenant hereby designates the President (currently Charles Auster) ("Tenant's Representative") (telephone no. 201-840-4981) with whom Landlord may speak or direct correspondence relating to the Premises, this Lease or Tenant's business operations conducted from the Premises. Tenant shall ensure that Tenant's Representative shall be available to speak with Landlord on reasonable prior notice, either by telephone or in person, to speak or meet with Landlord regarding the Premises, this Lease or Tenant's business operations conducted from the Premises. If such Tenant Representative ceases to be an officer of Tenant, Tenant shall appoint a successor Tenant Representative acceptable to Landlord, and Tenant shall provide Landlord with the information for such successor Tenant Representative as described above in this Section 30.21. ARTICLE 31 OMITTED ARTICLE 32 BACKUP ELECTRICAL GENERATORS Provided Tenant and the generators (and all improvements and equipment associated therewith) comply with all applicable laws, and subject to Landlord's prior approval of all plans and specifications and other improvements and equipment associated therewith, as stated in Article 10 above Landlord shall permit Tenant to install, at Tenant's sole cost and expense, backup electrical generators on the roof of the Building (and if permitted by applicable laws, the Land) (in which event same shall constitute Roof Equipment). Tenant recognizes that Landlord shall seek to minimize the potential interference that the operation of the generators may cause occupants of adjacent buildings, and, if required by law, such testing to be performed during hours other than 8:00 a.m.-6:00 p.m. Monday through Friday, except federal holidays. Tenant shall maintain the generators (including any generators installed by Landlord) and all improvements and equipment associated therewith in good condition and repair, and in compliance with all applicable statutes, regulations and rules, at all times. ARTICLE 33 NET LEASE Tenant acknowledges and agrees that it is intended that this is a net lease of the Building that is completely carefree to Landlord, except as expressly set out in this Lease; that Landlord is not responsible during the Term for any costs, charges, expenses, and outlays of any nature whatsoever arising from or relating to the Premises, or the use and occupancy thereof, or the contents thereof, or the business carried on therein, except as expressly set out in this Lease; and Tenant shall pay all charges, expenses, costs, and outlays of every nature and kind relating to the Premises except as expressly set out in this Lease. Landlord is not and shall not be required to render any services of any kind to Tenant, except as otherwise specifically set forth in this Lease. EXECUTED under seal as of the date first written above. LANDLORD WITNESS/ATTEST BECO-TERMINAL LLC, a Virginia limited liability company By: Data Centers Now LLC, a Delaware limited liability company By: (SEAL) -------------------------------------------- Print Name: Christopher Epstein Hereford Title: President TENANT WITNESS/ATTEST INFOCROSSING, INC. By: (SEAL) -------------------------------------------------- Print Name: Title: STATE OF ) -------------------------------------------- ) TO WIT: COUNTY OF ) ------------------------------------------- I, _________________________________, a Notary Public of the State and County aforesaid, do certify that ___________________________, the person whose name is signed to the foregoing Deed of Lease on behalf of the LANDLORD thereunder, personally appeared before me, the said person being personally well-known to me as (or satisfactorily proven to me to be) the person named herein, and acknowledged the same before me in my County aforesaid as his/her act and deed on behalf of and with the authority of the LANDLORD thereunder, and delivered the same as such. Given under my hand and official seal this ______ day of ________________, 20_____. [Notary Seal] Notary Public My Commission Expires:_____________________ STATE OF ) -------------------------------------------- ) TO WIT: COUNTY OF ) ------------------------------------------- I, _________________________________, a Notary Public of the State and County aforesaid, do certify that ___________________________, the person whose name is signed to the foregoing Deed of Lease on behalf of the TENANT thereunder, personally appeared before me, the said person being personally well-known to me as (or satisfactorily proven to me to be) the person named herein, and acknowledged the same before me in my County aforesaid as his/her act and deed on behalf of and with the authority of the TENANT thereunder, and delivered the same as such. Given under my hand and official seal this ______ day of ________________, 20_____. [Notary Seal] Notary Public My Commission Expires:_____________________ VIRGINIA LEASE A-1 EXHIBIT A DESCRIPTION OF THE LAND All the following described parcel or tract of land together with all improvements and appurtenances located thereon, situate, lying and being off Shaw Road and Terminal Drive, County of Loudoun, Virginia, Lot 1, Commonwealth Center, as the same is duly dedicated, platted and recorded in Deed Book 828 at page 653, among the Land Records of Loudoun County, Virginia, containing 4.2229 acres. Less and Except that portion of the property conveyed to the Commonwealth Transportation Commissioner by Certificate of Taking in Deed Book 952 at page 1010 and final order recorded in Deed Book 1027 at Page 1540 and in Deed book 1029, at Page 10, among the aforesaid land records. VIRGINIA LEASE B-1 EXHIBIT B RULES AND REGULATIONS (BUILDING LEASE) a. All waste paper, refuse and garbage shall be kept in containers on or about the Building and/or the Premises in a reasonably neat and orderly fashion and such refuse shall be removed by Tenant at Tenant's sole expense. b. Any advertisement or other marketing activity of Tenant (except for address references only) using the name of the Building shall be subject to Landlord's approval. c. Absent the specific prior written approval of Landlord, and except as expressly stated in Permitted Uses, no space in the Building or Premises shall be used for manufacturing or for the sale of merchandise, goods, or property of any kind. d. No portion of the Premises may be used for lodging or sleeping or for any immoral or illegal purpose. e. Tenant shall not exceed the capacity of the electrical facilities then serving the Premises. f. If Tenant shall fail to correct or cure a violation of a rule or regulation in this Exhibit E after the notice period referred to in the Lease with respect to a similar type of default, same shall constitute an Event of Default under the Lease. VIRGINIA LEASE C-1 EXHIBIT C DECLARATION BY LANDLORD AND TENANT AS TO LEASE COMMENCEMENT DATE THIS DECLARATION is hereby attached to and made a part of the Lease dated the day of , 20____, entered into by and between BECO-TERMINAL I LLC, as Landlord, and INFOCROSSING, INC., as Tenant. All terms used in this Declaration have the same meaning as they have in the Lease. 1. Landlord and Tenant do hereby declare that possession of the Premises was accepted by Tenant on the ____ day of ______________, 20___; 2. As of the date hereof, the Lease is in full force and effect, and Landlord has fulfilled all of its obligations under the Lease required to be fulfilled by Landlord on or prior to said date; and 3. The Lease Commencement Date is hereby established to be _________, 20__, and subject to Tenant's right to extend the Term of the Lease pursuant to Section ___ of the Lease, the Expiration Date is ____________________, 20___. LANDLORD WITNESS/ATTEST BECO-TERMINAL LLC By: Data Centers Now LLC By: [Example Only-Do Not Sign] (SEAL) -------------------------------------------- Print Name: Christopher Epstein Hereford ----------------------------------- Title: President --------------------- TENANT WITNESS/ATTEST INFOCROSSING, INC. By: [Example Only-Do Not Sign] (SEAL) ---------------------------------------------- Print Name: Title: VIRGINIA LEASE D-3 EXHIBIT D DESCRIPTION OF LANDLORD'S WORK Cyber Fortress TM I 45580 Terminal Drive Dulles, Loudoun County, Virginia ARCHITECTURAL & STRUCTURAL Fortress Construction o Single-story, steel and reinforced concrete tilt-up facility containing 54,400 rentable square feet Exterior walls o 7.25" thick, reinforced 4000psi concrete tilt-up panels designed to resist 150 mph wind resistance Exterior Glass o Building facade has no window penetrations. Exterior spandrel glass to be placed over concrete panels at entrance Ceiling Height o 18' clear throughout (slab to bottom of joist) Column Spacing o 30'x 40' (nominal) Floor Load o 350 lbs per square foot live load Roof Design o Deck: Lightweight reinforced concrete o Roof System: Built-up roof system (Factory Mutual specifications) rated to 150 mph wind resistance with twenty year manufacturer's warranty, over 2" polyisocyanurate and1/2" recovery board o Drainage: Roof water to be conveyed via external scuppers and downspouts. The structure is entirely free of internal roof drains ELECTRICAL Primary & Alternative Electrical Services/Density o Electrical service delivered via Virginia Power, Circuit 705, Sterling Park substation, Sterling, Virginia o Initial installation of 6,500 amps/480v/ 3 Phase of electrical service o Design provisions and conduits in place for future installation of redundant alternate power feed sourced from Virginia Power (Tenant responsible at Tenant's sole expense for installation of redundant power feed) o Initial installation of two (2) 3000 amp distribution switchboards complete with "rack in" breakers. Landlord shall, outside of Landlord's Work, install two additional 3000 amp distribution switch boards complete with "rack in" breakers upon Tenant's request and designation of location. Generator Provisions o Above roof, column supported steel generator dunnage capable of four (4) 2,000 kW generators o Initial installation of one (1) 2,000 kW Caterpillar generator set with enclosure on paralleling switchgear capable of providing modular expandability to three (3) additional 2000 kW generators (Installation of such three additional generators shall be the responsibility of Tenant at Tenant's sole expense) o Initial installation of (1) 20,000 gallon underground fuel storage tank; fuel line; designated fuel pump room; duplex fuel pump; day tank and connections to the pre-installed generator Lightning Protection o Installation of redundant Active and Passive lightning protection systems Grounding System o Provisions for Equi potential signal ground grid (Exterior ground ring; connection to steel, water service, entrance gear and provisions for Tenant's connections) COMMUNICATIONS Fiber Optics o Two (2) diverse Points of Entry with initial installation of twelve (12) 4" conduits at each POE o "Room Ready" Demarcation Area for telecommunications pre-installation o Design provisions for triple overhead racks (Hanging weight up to 100lbs/LF) Satellites o Designated roof-top satellite bay MECHANICAL Air Conditioning o Landlord shall outside Landlord's Work, at Landlord's cost, install one (1) Liebert CRAC and Direct Expansion Cooling Unit in Demarcation Room outside (Location of Demarcation Room to be determined by Tenant and installed by Landlord following completion of Landlord's Work) o Design provisions for independent Direct Expansion Cooling Units and CRAC units (Tenant shall be responsible for installing air conditioning equipment at Tenant's sole expense) FIRE PROTECTION Fire Detection o Design provisions for high sensitivity smoke detection (Tenant shall be responsible for installing all fire protection devices, at Tenant's sole expense) RESTROOMS o Rough-in of two ADA compliant restroom facilities SECURITY o Outside Landlord's Work, Landlord shall, at Landlord's cost, install perimeter fencing, ballards and controlled access parking and loading areas as reasonably directed by Tenant, provided the cost incurred by Landlord in connection therewith does not exceed $200,000. o Exterior door is ballistic grade glass PARKING o 153 striped spaces as set forth on the site plan depicting the Land and improvements to be constructed thereon as presently contemplated, which site plan is attached hereto as Exhibit D-1 VIRGINIA LEASE D-1-1 EXHIBIT D-1 SITE PLAN ATTACHED VIRGINIA LEASE E-1 EXHIBIT E ALTA ENDORSEMENT ATTACHED THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: ____________________ VIRGINIA LEASE F-2 EXHIBIT F LETTER OF CREDIT STANDBY LETTER OF CREDIT NO. DATE OF ISSUE: ________________ ISSUING BANK: APPLICANT: BENEFICIARY: AMOUNT/CURRENCY: DATE AND PLACE OF EXPIRY: GENTLEMEN: We hereby issue this Irrevocable Letter of Credit No. ________ in your favor, for the account of Infocrossing, Inc. in the aggregate amount of USD _________ available by your draft(s) drawn on us at sight, accompanied by the following: 1. Beneficiary's written dated certification on their letterhead signed by an authorized signatory, being an officer or member of beneficiary or its member, reading as follows: "We hereby certify that we are entitled under the terms and conditions of the Lease Agreement dated ____________ between Infocrossing, Inc. and _______________ to, and hereby draw upon this Letter of Credit in the amount of USD ___________." 2. The original of this Letter of Credit and amendment(s), if any. It is a condition of this Letter of Credit that it shall be automatically extended without amendment for period(s) of one year each from the current or any future expiration date unless at least sixty (60) days prior to the then current expiration date we shall notify the Beneficiary in writing, via registered mail, at the above listed address of our intention not to renew this Letter of Credit for such additional period. Any such notice shall be effective when sent by us and upon such notice to you, you may draw at any time prior to the then current expiration date, up to the full amount then available hereunder against your draft(s) drawn on us at sight accompanied by the original of this Letter of Credit and all amendments thereto, together with the certification above described. This Letter of Credit is transferable to Beneficiary's successor owner of the Premises in full and not in part. Any transfer made hereunder must conform strictly to the terms hereof and to the conditions of the Uniform Customs and Practices for Documentary Credits (1993) fixed by the International Chamber of Commerce, Publication No. 500. Should you wish to effect a transfer under this Credit, such transfer will be subject to the return to us of the original credit instrument, accompanied by our form of transfer, properly completed and signed by an authorized signatory of your firm, bearing your banker's stamp and signature authentication, subject to payment of our customary transfer charges of 1/4 of 1% minimum of $200.00, provided that, in the case of the initial transfer of the Letter of Credit by BECO-TERMINAL, LLC, such payment shall be for the account of Applicant. Partial drawings are permitted. Draft must state "Drawn under Fleet Bank NA Standby L/C No. _____ dated _______." Draft(s) and documents may be presented at our offices at One Fleet Way, Scranton, PA 18507, Attn: Trade Services Dept. - Standby Unit. We hereby agree with you that your draft drawn under and in compliance with the terms of this Letter of Credit shall be duly honored upon due presentation to us, together with the certification above described. We agree that the drawings under this Letter of Credit will be paid from our own funds and that the obligation of Fleet Bank NA under this Letter of Credit is the sole obligation of Fleet Bank NA and shall not be contingent upon reimbursement with respect thereto. This Letter of Credit is subject to the Uniform Customs and Practices for Documentary Credit (1993), the International Chamber of Commerce, Publication No. 500. --------------------------------------------------------- Authorized Signature THIS DOCUMENT CONSISTS OF 2 PAGE(S). EX-27 7 0007.txt FDS --
5 This schedule contains summary financial information extracted from the Company's quarterly report on Form 10-Q for the period ended July 31, 2000, and is qualified in its entirety by reference to such financial statement. 893816 INFOCROSSING, INC. 1 9-MOS OCT-31-2000 NOV-01-1999 JUL-31-2000 46,980,485 5,367,016 4,427,272 468,457 0 61,321,221 12,104,075 6,248,824 81,683,080 4,220,044 8,012 32,108,795 0 58,835 43,550,468 81,683,080 0 19,056,271 0 19,293,308 10,963,316 141,338 112,360 (10,414,689) (984,249) (9,430,440) 0 0 0 (11,288,771) (2.24) (2.24)
-----END PRIVACY-ENHANCED MESSAGE-----