-----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, Res5XHCIQUk9w0ef5/K5aolusiaKjpX0SJz40Ae0DcmFT0ksWAlIUS+ApATriVsR uMAuKgQRp2Vc5aYr/rNwgg== 0000950117-03-003632.txt : 20030826 0000950117-03-003632.hdr.sgml : 20030826 20030818112917 ACCESSION NUMBER: 0000950117-03-003632 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 DATE AS OF CHANGE: 20030826 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TALKPOINT COMMUNICATIONS INC CENTRAL INDEX KEY: 0000944310 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 541707962 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22235 FILM NUMBER: 03852088 BUSINESS ADDRESS: STREET 1: 100 WILLIAM STREET STREET 2: 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 BUSINESS PHONE: 2129092988 MAIL ADDRESS: STREET 1: 100 WILLIAM STREET STREET 2: 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 FORMER COMPANY: FORMER CONFORMED NAME: VIDEO NETWORK COMMUNICATIONS INC DATE OF NAME CHANGE: 19991116 FORMER COMPANY: FORMER CONFORMED NAME: OBJECTIVE COMMUNICATIONS INC DATE OF NAME CHANGE: 19970122 10-Q 1 a35991.txt TALKPOINT COMMUNICATIONS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2003 [_] Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from _________ to _________ Commission file number 000-22235 TalkPoint Communications Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 54-1707962 (State or Other (I.R.S. Jurisdiction of Employer Incorporation or Identification Organization) No.) 100 William Street, 8th Floor, New York, New York 10038 (Address of Principal Executive Offices) (212) 909-2900 (Issuer's Telephone Number, Including Area Code) Video Network Communications, Inc., 50 International Drive, Portsmouth, New Hampshire 03801 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Check whether the issuer: (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[_] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No[X] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of August 14, 2003; 58,176,919 shares of common stock PART I - FINANCIAL INFORMATION Item 1. Financial Statements TALKPOINT COMMUNICATIONS INC. Consolidated Balance Sheets
June 30, December 31, 2003 2002 ------------ ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 507,647 $ 6,497,643 Accounts receivable 1,529,155 59,249 Inventories 120,000 878,070 Amount due from related party 16,629 426,971 Other current assets 42,416 44,540 ------------ ------------ Total current assets 2,215,847 7,906,473 Property and equipment, net 764,149 364,727 Trademarks and patents, net 298,353 291,646 Restricted cash 844,101 -- Other assets 57,080 37,473 ------------ ------------ Total assets $ 4,179,530 $ 8,600,319 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,097,154 $ 883,128 Deferred revenue 574,481 141 Accrued liabilities 2,255,776 1,065,862 Current portion of notes payable 20,000 20,000 Current portion of capital lease obligations 5,965 8,432 ------------ ------------ Total current liabilities 3,953,376 1,977,563 Capital lease obligations, less current portion 18,276 21,344 Long term portion of deferred rent 24,815 135,694 COMMITMENTS AND CONTINGENCIES Stockholders' equity : Preferred stock, par value $.01 -- -- Authorized shares - 2,500,000 Issued and outstanding shares - none Common stock, par value $.01 581,769 581,769 Authorized shares - 90,000,000 Issued and outstanding shares - 58,176,919 as of June 30, 2003 and December 31, 2002 Additional paid-in capital 89,698,406 89,175,653 Accumulated deficit (90,097,112) (83,291,704) ------------ ------------ Total stockholders' equity 183,063 6,465,718 ------------ ------------ Total liabilities and stockholders' equity $ 4,179,530 $ 8,600,319 ============ ============
See Notes to Consolidated Financial Statements. 1 TALKPOINT COMMUNICATIONS INC. Consolidated Statements of Operations (unaudited)
For the three months ended June 30, For the six months ended June 30, ----------------------------------- --------------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Revenues: Products $ 115,083 $ 35,500 $ 244,571 $ 351,609 Webcasting 1,191,203 -- 1,647,103 -- Services -- 136,026 141 187,363 ----------- ----------- ----------- ----------- 1,306,286 171,526 1,891,815 538,972 ----------- ----------- ----------- ----------- Cost of revenues: Products 900,415 456,178 1,073,647 697,287 Webcasting 836,392 -- 1,261,039 -- Services -- 215,653 21,804 229,704 ----------- ----------- ----------- ----------- 1,736,807 671,831 2,356,490 926,991 ----------- ----------- ----------- ----------- Gross margin (430,521) (500,305) (464,675) (388,019) ----------- ----------- ----------- ----------- Operating expenses: Research and development 255,633 509,683 885,301 1,070,571 Selling, general and administrative 1,683,226 1,006,358 3,047,624 2,347,641 Restructuring 1,666,734 -- 1,905,806 -- ----------- ----------- ----------- ----------- Total operating expenses 3,605,593 1,516,041 5,838,731 3,418,212 ----------- ----------- ----------- ----------- Income (loss) from operations (4,036,114) (2,016,346) (6,303,406) (3,806,231) Other income/(expense) Gain on extinguishment of debt -- 2,387,145 -- 2,387,145 Other, net 7,487 446 7,487 446 Interest income 3,112 -- 15,375 -- Interest expense (1,144) (581,688) (2,107) (1,350,951) ----------- ----------- ----------- ----------- Total other income/(expense) 9,455 1,805,903 20,755 1,036,640 Net loss (4,026,659) (210,443) (6,282,651) (2,769,591) ----------- ----------- ----------- ----------- Deemed dividend attributable to warrant repricing in 2002 -- (405,488) -- (405,488) Deemed dividend due to issuance of options to employees of an affiliate in 2003 (522,754) -- (522,754) -- ----------- ----------- ----------- ----------- Net loss attributable to common shareholders $(4,549,413) $ (615,931) $(6,805,405) $(3,175,079) =========== =========== =========== =========== Loss per share basic and diluted $ (0.08) $ (0.03) $ (0.12) $ (0.24) Weighted average shares outstanding - basic and diluted 58,176,919 24,613,603 58,176,919 13,435,698 =========== =========== =========== ===========
See Notes to Consolidated Financial Statements. 2 TALKPOINT COMMUNICATIONS INC. Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, ------------------------- 2003 2002 ----------- ----------- Cash flows from operating activities: Net loss $(6,282,651) $(2,769,591) Adjustments to reconcile net loss to net cash used in operating activities Gain on extinguishment of debt -- (2,387,145) Depreciation 328,037 164,941 Amortization 13,866 12,244 Amortization of debt discount -- 1,150,394 Non-cash compensation expense -- 85,000 Impairment of fixed assets 166,930 -- Write-off of excess and obsolete inventory 709,402 -- Write-off of deferred rent (118,643) -- Changes in operating assets and liabilities: Accounts receivable (1,469,906) 371,756 Prepaid expenses and other current assets (17,482) (20) Inventory 48,667 479,039 Restricted cash (844,101) -- Accounts payable 214,026 (2,291,429) Deferred revenue 574,340 131,200 Due from related party 410,342 759,719 Other liabilities 7,764 -- Accrued liabilities 1,059,914 173,431 ----------- ----------- Net cash used in operating activities (5,199,495) (4,120,461) Cash flows from investing activities: Increase in trademarks and patents (20,573) -- Purchase of property and equipment (14,394) (62,053) Payments for acquisition - net of cash acquired (750,000) (1,740,389) ----------- ----------- Net cash used in investing activities (784,967) (1,802,442) Cash flows from financing activities: Gross proceeds from issuance and sale of common stock -- 19,650,000 Costs associated with issuance and sale of common stock -- (1,612,788) Net proceeds from issuance of notes payable -- 1,049,000 Repayment of notes payable -- (28,041) Payment of long-term debt -- (1,100,000) Exercise of stock options -- 10,300 Principal payments on capital leases (5,535) (24,029) ----------- ----------- Net cash (used in) provided by financing activities (5,535) 17,944,442 ----------- ----------- Net (decrease) increase in cash and cash equivalents (5,989,996) 12,021,539 Cash and cash equivalents, at beginning of period 6,497,643 507,396 ----------- ----------- Cash and cash equivalents, at end of period $ 507,647 $12,528,935 =========== ===========
See Notes to Consolidated Financial Statements. 3 TALKPOINT COMMUNICATIONS INC. Notes to Consolidated Financial Statements (Unaudited) 1. Basis of Presentation The accompanying consolidated financial statements of TalkPoint Communications Inc. ("TalkPoint" or the "Company" formerly Video Network Communications, Inc. or "VNCI") as of June 30, 2003 and for the three and six month periods ended June 30, 2003 and 2002 have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, such financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company at June 30, 2003 and the results of operations for the three and six months ended June 30, 2003 and 2002. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2002 included in the Company's Annual Report on Form 10-KSB, as filed with the Securities and Exchange Commission (the "SEC"). The results of operations for the three and six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the entire year. The Company has suffered recurring losses from operations, has experienced recurring negative cash flow from operations, has a working capital deficiency and has a significant accumulated deficit. The Company expects to continue to incur significant operating expenses to support TalkPoint product development efforts and to enhance its TalkPoint products, Webcasting Services, sales and marketing capabilities. At this stage, it is difficult to estimate the level of the Company's sales in future periods, or when marketing initiatives will result in additional sales. Accordingly, the Company expects to continue to experience significant, material fluctuations in its revenues on a quarterly basis for the foreseeable future. The Company has required substantial funding through debt and equity financings since its inception to complete its development plans and commence full-scale operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's funding of operating losses to date and plans to ultimately attain profitability include the effects of our recent acquisition of certain Webcasting Services assets (Note 3). On August 13, 2003 the Company executed a secured credit agreement with a related party in the amount of $400,000 (Note 15). On June 17, 2003, the Company announced that its Board of Directors had approved a proposal to change the Company's name to TalkPoint Communications Inc. The Company had received written consent, in lieu of a meeting of stockholders, from the holder of a majority of its voting stock to approve such name change. The Company prepared an Information Statement pursuant to Rule 14c-2 under the Securities Exchange Act of 1934 and mailed the Information Statement to its stockholders on July 24, 2003. The name change became effective on August 13, 2003 and correspondingly our common stock now trades on the Nasdaq OTCBB under the stock symbol TLKP and warrants will trade under the symbol TLKPW. 2. Net Loss Per Share The Company computes basic and diluted earnings per share in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. Net loss per common share is based on the weighted average number of common shares and dilutive common share equivalents outstanding during the periods presented. Basic loss per share is calculated by dividing net income by the weighted average shares outstanding. Diluted loss per share reflects the dilutive effect of stock options and warrants and is presented only if the effect is not anti-dilutive. As the Company incurred losses for all periods presented, there is no difference between basic and diluted earnings per share. Outstanding options and warrants excluded from the computation of diluted earnings per share were 7,902,661 and 17,479,048 as of June 30, 2003 and 2002, respectively. 3. Purchase of Webcasting Business from Williams Communications, LLC and Williams Communications Procurement, LP and Restructuring of Existing Operations Webcasting Business - On February 14, 2003, the Company purchased from Williams Communications, LLC ("WCLLC") and Williams Communications Procurement, LP (together with WCLLC, the "Sellers"), each a wholly owned subsidiary of Wiltel Communications Group, Inc. ("WCG"), WCLLC's Webcasting business, including certain equipment and other assets used by WCLLC in this business for $750,000 in cash. The Company also incurred $130,000 in professional fees, which are included in current liabilities at June 30, 2003, and was required to post an $844,000 security deposit for an assumed lease. Moneyline Telerate Holdings ("Moneyline Telerate"), the parent company of the Company's majority stockholder, is a guarantor of the lease on office 4 space in New York City. The purchased Webcasting business includes the production and distribution of multimedia presentation materials using streaming media technology. The Company has preliminarily allocated the total purchase price of $880,000 to capital equipment. The acquisition is accounted for under the purchase method of accounting and has been included in the Company's results of operations since February 14, 2003. The acquisition of the Webcasting business enables the Company to provide a full suite of interactive multimedia services. The Webcasting product suite, including Activecast and TalkPoint, allows for a broader reach within our targeted customers and provides ubiquity with distribution of voice and video over the Internet. This service model does not require capital investment by customers. Users can leverage the services and toolset by using standard Internet browsers and media players. In addition to the tangible assets acquired, the acquisition included active customers. The Company also plans to introduce web conferencing, managed video conferencing and audio conferencing services in conjunction with its Webcasting offerings in the third quarter of 2003. Pro Forma Financial Information - On an unaudited pro forma basis, the Company's revenues for the three month period ended June 30, 2002 would have been approximately $1,979,000, assuming the acquisition of the Webcasting business had occurred on January 1, 2002. On an unaudited pro forma basis, the Company's revenues for the six month periods ended June 30, 2003 and 2002 would have been approximately $2,308,000 and $5,259,000, respectively assuming the acquisition of the Webcasting business had occurred on January 1, 2002. The Company has not presented unaudited pro forma information relative to net loss or loss per share for the periods presented. Based on information provided by Wiltel, the Company cannot presently determine the costs and expenses associated with just the Webcasting business for the three and six month periods ended June 30, 2002 as such information contains significant corporate expense allocations from WCLLC. Management of the Company believes that the presentation of pro forma net loss or loss per share, prepared including such corporate allocations, would not be meaningful. Restructuring - The Company has substantially completed a restructuring of its businesses to reflect the acquisition of Webcasting Services and the concurrent decreased emphasis on sales of video network equipment. During the last quarter of 2002, management, with the Board of Directors' approval, made a decision to shutdown and cease all operations of B2BVideo. In the first quarter of 2003, the Company initiated a restructuring of the VidPhone business to reduce expenses in anticipation of lower sales. In the first quarter, restructuring activities included the following: o The termination of 37 employees, primarily in sales, engineering and administrative capacities. o The transfer of three employees to Moneyline Networks, LLC ("Moneyline"), our majority stockholder. The employees that were transferred are primarily focused on business and channel development of our managed video service. o Transfer of direct sales responsibility for the VidPhone System to the direct sales team of the Webcasting business. o Initiation of the transfer of finance, accounting and human resource functions from Portsmouth, New Hampshire to New York, New York. This transfer was completed in April 2003. During the second quarter, the Company also accomplished the following restructuring initiatives: o The name of the Company was changed to TalkPoint Communications Inc. to signal its determination to build upon the capabilities of its easy to use, browser-based TalkPoint service suite. o The relocation of the Company's headquarters from Portsmouth, New Hampshire to New York, New York. o Transfer of two additional employees from TalkPoint to Moneyline. o During June 2003, the Company terminated five engineers at its Portsmouth, New Hampshire location, leaving only two TalkPoint employees in New Hampshire, the Vice President of Engineering and Production Manager. These individuals will coordinate the closing of the New Hampshire facility and the ongoing support for customers of the Company's VidPhone system product line. The following restructuring charges were recorded by the Company in the second quarter resulting from the Company's decision 5 during the quarter ended June 30, 2003 to no longer actively sell the VidPhone product line: o The write-off of VidPhone inventory, in excess of quantities required to support existing customers, in the amount of approximately $709,000, which has been included in cost of revenues for the three and six months ended June 30, 2003; o Severance amounts of $111,000 associated with the additional headcount reductions; o Asset impairments of approximately $161,000, relating to assets that are no longer utilized in providing services to our customers; and o An accrual for the remaining lease obligation in the amount of approximately $1,394,000 for the Portsmouth, New Hampshire facility that is not longer being used. On January 1, 2003 the Company adopted SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS No. 146"). This statement supersedes Emerging Issues Task Force ("EITF") No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity". Under this statement, a liability for a cost associated with a disposal or exit activity is recognized at fair value when the liability is incurred rather than at the date of an entity's commitment to an exit plan as required under EITF 94-3. Restructuring expenses for the three and six months ended June 30, 2003 were $1,666,734 and $1,905,806 , respectively. Restructuring expenses for the three months ended March 31, 2003, were $239,000 and consisted of severance obligations. At June 30, 2003, approximately $1,620,000 of future severance benefits and future lease payments were accrued and will be paid over the course of the terms of the related separation agreement and lease. 4. Revenue Recognition Products revenue - Revenues from sales of the Company's hardware products are recognized when the equipment has been delivered to the customer, title has passed, the equipment has been accepted by the customer, the collection of the sales price is probable and no further obligations to the customer exist. Revenues from maintenance contracts are recognized ratably over the term of the contract as services are performed. Webcasting and services revenue - The Company generates revenue from producing live and on-demand audio and video content over the Internet and providing related services, including: capture; production; live Internet delivery; and archiving and hosting. These service offerings may be bundled whereby the Company agrees to provide many or all of the services in one package. The Company also offers the individual components of the service offerings, such as capturing, producing and live Internet delivery of the content without archiving and hosting the content. Revenues for capture, production and live Internet delivery services are recognized at the time of the event. Archiving and hosting revenues are deferred and are recognized over the archiving and hosting period. When contracts contain multiple element service offerings wherein objective evidence exists for the fair value of all undelivered elements, the Company recognizes revenues for the delivered elements based upon a residual approach and defers revenues for the undelivered elements until the remaining obligations have been satisfied. When contracts contain multiple element service offerings wherein objective evidence does not exist for the fair value of all undelivered elements, the Company's revenues are deferred and recognized ratably over the service period. The Company typically charges its customers fees with fixed and variable components for these bundled service offerings. The fixed component consists of a fee based on the particular production services to be provided, an agreed upon amount of content to be stored and number of streams to be delivered. To the extent that a customer exceeds agreed upon storage and delivery amounts, the Company typically charges additional fees based on the amount by which such content stored and delivered exceeds the agreed upon amounts. Production services revenues consist of the capture and production of multimedia content. Capture involves acquiring the content either remotely through various sources or on-site through the recording of events. Production primarily involves the conversion of content into digital format, as well as other services such as editing, indexing and media integration. Sales of production services are generally sold under nonrefundable fixed price contracts. Production services are rendered over a relatively short period of time and are recognized when the production is complete. The Company recognizes revenues from production services that are not purchased in connection with archiving and hosting as the services are rendered, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Media archiving and hosting revenues are generated under contracts with fees paid by the customer on a recurring monthly basis. Such amounts are generally based upon the bandwidth provided and the amount of content to be hosted and stored. The Company normally records deferred revenue when archiving and hosting contracts are executed and recognizes archiving and hosting revenues 6 ratably over the hosting period, providing that no significant Company obligations remain and collection of the resulting receivable is probable. Deferred revenues, relating primarily to hosting and archiving, consist of billings in excess of recognized revenues, which are recognized ratably over the term of the applicable agreement, which is typically less than one year. Revenue from sales of managed network services is recognized ratably over the life of the associated network service contract, which is generally two years. Recognition of sales starts at the time of acceptance by the customer, which is 30 days after installation of the equipment. The customer has a right of return within 30 days of installation. Any losses on contracted sales are recognized in the period the loss has been determined. Service revenues associated with time and materials consulting projects are recognized at the time the services are rendered since collection is probable and we have no further obligations to the customer. For the three months ended June 30, 2003, two customers accounted for 11% and 9%, of our sales respectively. These two customers accounted for 11% and 18%, respectively, of consolidated accounts receivable at June 30, 2003. These two customers are purchasers of the Company's Webcasting Services. For the six months ended June 30, 2003, two customers accounted for 15% and 16%, of our sales respectively. During the three months ended June 30, 2002, three customers accounted for 43%, 24% and 12% of our total revenues. During the six months ended June 30, 2002, three customers accounted for 33%, 27% and 10% of our revenues. Since the addition of Webcasting Services, our customer base has significantly changed. Three customers accounted for 74%, 14%, and 12% of our accounts receivable at December 31, 2002. 5. Stock-Based Compensation The Company accounts for options granted to employees and directors in accordance with Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation expense has been recognized for options granted to employees or directors when the exercise price of the options have been in excess of or equal to the fair value of the Company's common stock on the date of grant. For options granted to non-employees, the Company recognizes compensation expense in accordance with Emerging Issues Task Force Issue 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and also amends the disclosure provision of SFAS No. 123 to require disclosure in the summary of significant accounting policies the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. The disclosure provision is required for all companies with stock-based employee compensation, regardless of whether the company utilizes the fair value method of accounting described in SFAS No. 123 or the intrinsic value method described in APB Opinion No. 25 Accounting for Stock Issued to Employees. SFAS No. 148's amendment of the transition and annual disclosure provisions of SFAS No. 123 were effective for fiscal years ending after December 15, 2002. The disclosure requirements for interim financial statements containing condensed consolidated financial statements were effective for interim periods beginning after December 15, 2002. The Company accounts for stock based compensation issued to employees utilizing the intrinsic value method prescribed by APB No. 25. During the three months ended June 30, 2003, the Company issued options to purchase 1,450,000 shares of its common stock at an exercise price of $0.43 per share to employees and options to purchase 1,725,000 shares of its common stock at an exercise price of $0.43 per share to employees of Moneyline Telerate and Moneyline, both of which are affiliates of the Company. Twenty-five percent (25%) of these options vest on the first anniversary of the grant date. The remaining seventy-five percent (75%) vest ratably on the first day of the month for the thirty-six months following the first anniversary of the grant date. The fair value of the grants to employees of affiliates was determined using a Black Scholes option-pricing model. The employees of these affiliates perform substantial duties on behalf of the Company including filling roles as the Company's Chief Financial Officer, Corporate Counsel, Deputy Corporate Counsel and Chairman of the Board. The grant date fair value of the options issued to employees of affiliates has been recorded as a deemed dividend by the Company to these affiliates pursuant to the requirements of EITF 00-23, "Issues Related to the Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44". 7 Had the compensation cost for the plans been determined based on the fair value at the grant dates for awards under the plan, consistent with the method described in SFAS No. 123, the Company's net loss and basic and diluted net loss per common share on a pro forma basis would have been:
For Three Months Ended June 30, For Six Months Ended June 30, ------------------------------- ----------------------------- 2003 2002 2003 2002 ----------- --------- ----------- ----------- Net loss attributable to common shareholders, as reported $(4,549,413) $(615,933) $(6,805,405) $(3,175,079) Deduct: stock-based employee compensation expense included in reported net loss -- -- -- -- Add: total stock-based employee compensation expense determined under fair value based method for all awards (29,633) (117,003) (53,891) (232,158) ----------- --------- ----------- ----------- Pro forma net loss $(4,579,046) $(732,934) $(6,859,296) $(3,407,237) Earnings (loss) per share: Basic and diluted - as reported $ (0.08) $ (0.03) $ (0.12) $ (0.24) Basic and diluted - pro forma $ (0.08) $ (0.03) $ (0.12) $ (0.25)
The effects on three and six month periods ended June 30, 2003 and 2002 pro forma net income and net income per share of the estimated fair value of stock options and shares are not necessarily representative of the effects on the results of operations in the future. In addition, the estimates utilize a pricing model developed for traded options with relatively short lives; our option grants typically have a life of up to ten years and are not transferable. Therefore, the actual fair value of a stock option grant may be different from our estimates. We believe that our estimates incorporate all relevant information and represent a reasonable approximation in light of the difficulties involved in valuing non-traded stock options. All stock options granted by the Company during the six months ended June 30, 2003 were granted with an exercise price per share equal to or greater than the fair value of the Company's common stock on the date of grant. On June 17, 2003, Moneyline, the holder of a majority of our outstanding common stock, acting by majority written consent, also ratified modifications to the Company's 1999 Stock Incentive Plan, which the Board of Directors recently approved. These modifications, which permit the granting of options on not more than 1,000,000 shares of our common stock to any one individual in any calendar year, were adopted in order to provide adequate flexibility with respect to incentivizing certain of our directors and members of our management. Prior to this modification, the Company's 1999 Stock Incentive Plan prohibited the granting of options on more than 500,000 shares of our common stock to any one individual in any calendar year. 6. Income taxes The Company did not record a provision for income taxes for the three and six months ended June 30, 2003 and 2002 since the Company had a significant net operating loss carryforward available to it at June 30, 2003 and the Company had a net operating loss during the period ending June 30, 2003 for which no tax benefit was recorded. The Company recorded a full valuation allowance against the net deferred tax asset generated primarily from its net operating loss carryforwards. 7. Inventories Inventories consisted of the following at:
June 30, 2003 December 31, 2002 ------------- ----------------- Raw Materials $ 4,073,182 $ 4,416,579 Impaired excess and obsolete inventory (3,953,182) (3,538,509) ----------- ----------- Carrying value $ 120,000 $ 878,070 =========== ===========
Inventory is stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Inventory consists primarily of finished goods and subassembly components. During the quarter ended June 30, 2003, the Company wrote-off $709,402 of inventories as a result of the Company's decision to discontinue active sales of its VidPhone system during the quarter. 8 8. Stock Purchase Agreement On May 16, 2002, the Company entered into a Stock Purchase Agreement (the "Agreement") with Moneyline. Pursuant to the Agreement, Moneyline purchased 25,000,000 new shares of the Company's common stock (representing approximately 51.4% of the Company's outstanding common stock at June 30, 2002) for aggregate cash consideration of $15,000,000 and received a warrant to purchase an additional 11,250,000 shares of the Company's common stock, with an exercise price of $0.60 per share and a cashless exercise mechanism. Simultaneously, certain existing and new investors purchased 7,750,000 newly issued shares of the Company's common stock at $0.60 per share, providing aggregate gross proceeds of $4,650,000 to the Company. Also as part of the above transaction, the following took place: (a) payment of $1,100,000 was made to Sanmina Corp. ("Sanmina") to extinguish a secured promissory note issued to Sanmina by the Company, with an outstanding principal balance of $2,900,000 and accrued interest of $587,145. The Company recognized a gain of $2,387,145 relating to the extinguishment of this debt during the three months ended June 30, 2002; (b) payment to Shaw Pittman LLP, a supplier of the Company, of $250,000 to settle outstanding obligations of approximately $378,000; (c) promissory notes in the aggregate principal amount of $3,723,982 and accrued interest of $143,843 were exchanged for 6,446,376 shares of the Company's common stock. Warrants to purchase an aggregate of 2,567,992 shares of common stock previously issued to the holders of promissory notes were repriced. The exercise price of such warrants, which ranged from $1.30 to $2.75 per share, was reduced to $0.60 per share. The increase in the fair value of the warrants, in the amount of $405,488 was recorded as a deemed dividend in the three months ended June 30, 2002. The Company incurred estimated costs and expenses of approximately $3,226,000 in connection with the Agreement and the acquisition of B2BVideo (discussed below). Fifty percent (50%) of these costs, which are comprised primarily of legal, investment banking and accounting fees, were allocated to the Agreement and fifty percent (50%) were allocated to the acquisition of B2BVideo. The expenses allocated to the Agreement, in the amount of approximately $1,613,000, were recorded as a reduction of additional paid-in capital in 2002. On July 9, 2002, Moneyline elected to exercise its warrant pursuant to the cashless exercise provision contained in the warrant agreement between the Company and Moneyline governing such warrant. As a result of this cashless exercise, Moneyline received 8,202,863 newly issued shares of the Company's common stock. 9. Acquisition of B2BVideo Network Corp. On May 16, 2002, the Company acquired 100% of the common stock of B2B Video, a Delaware corporation. B2BVideo was formed in December 1999 to deliver managed enterprise video services to business users. B2BVideo delivers broadcast quality video over an Internet Protocol ("IP") Multicast network for delivery to the desktop. IP Multicast enables B2BVideo to provide multiple streams of high quality video to thousands of points on the network. B2BVideo offers products and services that enable businesses to integrate all of their video applications onto a single platform for delivery of broadcast quality video to the desktop. The following consideration was issued in connection with the acquisition of B2BVideo: (a) B2BVideo's common and preferred shareholders were issued 3,000,014 shares of TalkPoint common stock; (b) Options to purchase B2BVideo Series A Preferred Stock were exchanged for options to purchase 139,123 shares of TalkPoint's common stock at strike prices ranging from $0.50 to $5.93; (c) Options to purchase 2.75 Units of B2BVideo, each Unit consisting of (A) 50,000 shares of B2BVideo Series B Preferred Stock and (B) warrants to purchase 50,000 shares of B2BVideo's common stock, were exchanged for options to purchase an aggregate of 182,977 shares of TalkPoints's common stock and warrants to purchase 46,374 shares of TalkPoint's common stock; 9 (d) Warrants to purchase 3,176,000 shares of B2BVideo common stock issued and outstanding immediately prior to the closing date were exchanged for warrants to purchase 1,214,223 shares of TalkPoint's common stock at a strike price of $0.60 per share; (e) Senior secured promissory notes of B2BVideo, with an aggregate principal balance of $2,500,000 plus accrued interest, were exchanged for 4,282,956 shares of TalkPoint's common stock and; (f) Options to purchase 681,771 shares of TalkPoint's common stock were issued to employees of B2BVideo in exchange for outstanding vested B2BVideo options. These options were 100% vested at the date of issuance. The following table sets forth in tabular format the information discussed above: Noncash: Common stock issued $4,369,782 Options issued to employees 242,185 Warrants issued 461,726 Options issued to non-employees 123,578 Cash: Payment for B2BVideo liabilities 156,355 Transaction costs 1,612,788 ---------- Total purchase price $6,966,414 ==========
The consideration issued to holders of B2BVideo's equity instruments and debt holders in connection with the acquisition of B2BVideo was valued as follows: (a) TalkPoint's Common Stock - The value of TalkPoint's common stock was determined to be $0.60 per share, the price at which TalkPoint sold its common stock to Moneyline and certain existing and new investors on May 16, 2002; (b) Options issued to B2BVideo's employees - All outstanding options held by employees to purchase B2BVideo's common stock have been exchanged for options to purchase 681,771 shares of TalkPoint's common stock. The options have varying exercise prices and were 100% vested at the date of issuance. The Company valued such stock options using the Black Scholes option-pricing model at $242,185. The calculation was based on the following assumptions: Volatility 144% Expected life 3 years Risk free interest rate 3.8% Dividend Rate None
(c) Warrants - Warrants to purchase the Company's common stock issued in connection with the acquisition were also valued using the Black Scholes option-pricing model. The warrants have varying exercise prices. The Company valued such warrants at $461,726. The calculation was based on the same assumptions as discussed in (b) above; and, (d) Options issued to non-employees - Options to purchase the Company's common stock issued in connection with the acquisition were valued using the Black Scholes option-pricing model. The options have varying exercise prices. The Company valued such options at $123,578. The calculation was based on the same assumptions discussed in (b) above. During the fourth quarter of 2002, the Company completed its review of the assets acquired and the liabilities assumed in the acquisition of B2BVideo. This review resulted in the reallocation of purchase price between fixed assets and goodwill. In addition, an 10 adjustment to reduce depreciation expense to reflect the write down of fixed assets was recorded in the Statement of Operations. The determination was made based upon an independent third party appraisal received by the Company in the fourth quarter of 2002. The final allocation of purchase price consideration to the assets acquired and liabilities assumed as of the acquisition date is as follows: Cash and cash equivalents $ 18,334 Accounts receivable 129,466 Inventories 531,662 Other current assets 3,841 Property and equipment, net 662,640 Other noncurrent assets 208,059 Accounts payable (1,075,063) Accrued liabilities (213,680) Capital lease obligations (45,134) ----------- Fair value of net assets acquired 220,125 ----------- Goodwill 6,746,289 ----------- Fair value of net assets acquired and recorded goodwill $ 6,966,414 ===========
None of the goodwill associated with the acquisition of B2BVideo will be deductible for tax purposes. The results of operations for the period ended June 30, 2002 include the operating results of B2BVideo subsequent to its date of acquisition. Prior to the acquisition of B2BVideo the Company had one reportable segment. The acquisition of B2BVideo did not create a new reportable segment as B2BVideo is also engaged in the design, development and marketing of video network systems and has economic characteristics similar to TalkPoint. During the fourth quarter of 2002, the Company recognized impairment losses of approximately $7,276,000 related to certain assets of B2BVideo. The write-down of goodwill, associated with the acquisition of B2BVideo in May 2002, accounted for approximately $6,746,000 of the charge. The remaining $530,000 of the charge related to the net book value of certain fixed and other assets. The write down of the assets to fair value was determined based upon undiscounted cash flows of the B2BVideo business. Since the acquisition in May 2002, B2BVideo has lost its only customer and has generated no sales since losing that customer in the third quarter of 2002. In addition, management of TalkPoint and Moneyline no longer views the private network built by B2BVideo as a useful component of the managed video services offering. 10. Non-cash Transactions The following non-cash financing and investing transactions occurred in the periods indicated.
Six months ended June 30, ------------------------- 2003 2002 -------- ---------- Issuance of common stock upon conversion of bridge notes and related interest $ -- $3,866,895 Notes payable issued to fund prepaid insurance -- 62,750 Issuance of common stock warrants with bridge notes -- 639,208 Acquisition of B2BVideo -- 5,197,241 Deemed dividend on repricing of warrants -- 405,488 Deemed dividend to Moneyline resulting from stock option grants to employees of an affiliate $522,754 $ --
11 11. New Accounting Pronouncements In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. This statement eliminates the automatic classification of gain or loss on extinguishment of debt as an extraordinary item of income and requires that such gain or loss be evaluated for extraordinary classification under the criteria of Accounting Principles Board No. 30 "Reporting Results of Operations." The relevant provisions of this statement were effective for the Company as of January 1, 2003. The gain resulting from early extinguishment of debt (Note 8) was reclassified from an extraordinary item to a component of operating income within the Consolidated Statements of Operations upon adoption of SFAS No. 145 on January 1, 2003. In November 2002, the Financial Accounting Standards Board ("FASB") issued Financial Interpretation No. ("FIN") 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 elaborates on the existing disclosure requirements for most guarantees. FIN 45 requires that at the time a company issues certain guarantees, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. FIN 45's disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002 and are applicable to all guarantees issued by the guarantor subject to FIN 45's scope, including guarantees issued prior to the issuance of FIN 45. The disclosure requirements of FIN 45 are applicable for financial statements of interim or annual periods ending December 31, 2002. We adopted the recognition and measurement requirements of FIN No. 45 in the first quarter of fiscal year 2003 and have included any new disclosure requirements in the Notes to the Consolidated Financial Statements. In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company is required to adopt the provisions of FIN 46 for variable interest entities created after January 31, 2003. The adoption of this pronouncement did not have a significant impact on the financial position or results of operations of the Company. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This standard amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, collectively referred to as derivatives, and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Relationship. SFAS 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships after June 30, 2003. Management believes that the adoption of this standard will not have a significant impact on the Company's financial position or results of operations. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). FASB 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of a nonpublic entity. Management believes that the adoption of this standard will not have a significant impact on the Company's financial position or results of operations. 12. Related Party Transactions On May 16, 2002, the Company entered into a Strategic Alliance Agreement and certain technology license agreements with Moneyline pursuant to which the Company will license software and network processes and sell video equipment to Moneyline. Moneyline will be the exclusive distributor of the Company's equipment to the financial services market. As of June 30, 2003, the Company transferred approximately $519,000 of demonstration and evaluation equipment to Moneyline, of which $225,000 related to the period ending March 31, 2003. The Company had also incurred, on Moneyline's behalf, approximately $178,000 in salary expenses relating to activities supporting the development of the Managed Video Services market, of which $78,000 relates to the period ending March 31, 2003. Moneyline has reimbursed the Company in the six months ended June 30, 2003 for these costs. Since its investment in the Company in May 2002, Moneyline provided certain administrative, management and sales support services to the Company. The Chief Financial Officer, Chief Counsel and Deputy Chief Counsel of Moneyline Telerate also serve as the part-time Chief Financial Officer, Chief Counsel and Deputy Chief Counsel of the Company. Moneyline's policy has been to charge back only 12 directly allocable costs of providing such support to the Company. There were no such chargebacks during the three and six month periods ended June 30, 2003. As a result of the transactions between Moneyline and the Company outlined in the preceding paragraph, the Company has a receivable from Moneyline as of June 30, 2003 of approximately $17,000. This amount was received by the Company subsequent to June 30, 2003. Moneyline Telerate is a guarantor of the lease on office space in New York City. During the three months ended June 30, 2003, the Company issued options to purchase the Company's common stock to employees of Moneyline Telerate and Moneyline. Moneyline Telerate and Moneyline are both affiliates of the Company. The grant date fair value of these options issued to employees of affiliates has been recorded as a deemed dividend from the Company to these affiliates (Note 5). 13. Reclassifications Certain reclassifications have been made to the prior period amounts to conform to the current period presentation. 14. Legal Proceedings The Company is aware of a grand jury investigation being conducted by the Antitrust Division of the United States Department of Justice with respect to funds allocated by the Schools and Libraries Universal Service Fund ("E-Rate Funds"). The Company understands that the Antitrust Division has established a task force to conduct Universal Service Fund investigations comprised of attorneys in each of the Antitrust Division's seven field offices and the National Criminal Office. The Company has received a grand jury subpoena requiring production of documents to the Department of Justice and has responded to it in full. The Company has also been informed that the investigation encompasses the conduct of certain former employees of the Company and, vicariously, the Company itself. The Company continues to cooperate with the investigation and is not in a position to predict the direction, timing or outcome of the investigation. 15. Subsequent Events On August 13, 2003 the Company entered into a secured credit agreement with Moneyline Telerate, the parent of its majority stockholder, for the sum of $400,000. Due to the ongoing investigation by the Antitrust Division of the United States Department of Justice as discussed in more detail herein, the Company's efforts to attract third party financing have been impacted and delayed such that the Company's affiliate, Moneyline Telerate Holdings, entered into this short term loan facility. The Company can draw down funds in $50,000 increments through November 30, 2003 on an as needed basis, subject to the Company's meeting certain financial performance metrics enumerated in the secured credit agreement, to fund ongoing business operations. All borrowed funds must be repaid by December 31, 2003 and TalkPoint shall pay interest on the borrowings at a rate of 8% per annum from the date of the borrowings to the maturity date. This financing is secured by TalkPoint's intellectual property, customer accounts, deposit accounts and receivables. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Certain statements contained in this Quarterly Report on Form 10-Q, other than historical financial information, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements involve known and unknown risks, uncertainties or other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by such forward-looking statements. Factors that might cause such a difference include risks and uncertainties related to our dependence on the emerging market for Webcasting Services, video broadcast, retrieval and conferencing, development of additional products, protection of our intellectual property, limited marketing experience, limited number of customers for our TalkPoint distribution equipment and the need for additional personnel, as well as risks and uncertainties associated with our growth strategy, technological changes and competitive factors affecting us. The most important of these risks are discussed in more detail below under the heading "Risk Factors," and we urge you to read these in their entirety. 13 Overview TalkPoint Communications Inc. (formerly known as Video Network Communications, Inc.) is a Delaware corporation formed in 1993 to design, develop and market full-motion, high resolution, cost-effective VidPhone system as a state-of-the art business collaboration tool. Users of the VidPhone system can view broadcast video, collaborate in multi-party videoconferences and retrieve stored video on demand. Our VidPhone system bypasses the bottleneck of local data networks to distribute video to and from desktop and laptop personal computers and conference rooms configured with VidPhone stations over the same wiring used by the telephone. During 2002 and the first quarter of 2003, the Company added numerous features to the VidPhone system to allow it to more seamlessly integrate into our managed wide area network video solution for network carriers or other channel partners. As elaborated upon below and recognizing the general economic slow down, the Company believes that the markets for its VidPhone product line are likely to develop more slowly than previously anticipated. As a result, during the first quarter of 2003, the Company took steps to diversify its revenue base by acquiring the Webcasting business of Wiltel Communications and reducing the expense base of the VidPhone business. In addition, in the second quarter of 2003 the Company decided to no longer proactively pursue new customer sales opportunities for its VidPhone product line and is currently only supporting existing customers with maintenance and upgrades. On February 14, 2003, we purchased from Williams Communications, LLC ("WCLLC") and Williams Communications Procurement, LP (together with WCLLC, the "Sellers"), each a wholly owned subsidiary of Wiltel Communications Group, Inc. ("WCG"), WCLLC's Webcasting business, including certain equipment and other assets used by WCLLC in this business for $750,000 in cash and an $844,000 security deposit (in the form of a Letter of Credit) on certain leased space. We incurred $130,000 in legal and other associated costs associated with the purchase of the Webcasting business assets. The purchased Webcasting business includes the production and distribution of multimedia presentation materials using streaming media technology. The acquisition of the Webcasting business enables us to provide a full suite of interactive multimedia services. The Webcasting product suite, including Activecast and TalkPoint, allows for a broader reach within our targeted customers and provides ubiquity with distribution of voice and video over the Internet. This service model does not require capital investment by our customers. Users can leverage the services and toolset by using standard Internet browsers and media players. In conjunction with its Webcasting offering, the Company is in the process of introducing web conferencing, managed video conferencing and audio conferencing services in the third quarter of 2003. In the first quarter of 2003, the Company initiated a restructuring of our VidPhone business to reduce the expense base in anticipation of lower sales. In the first quarter, the restructuring activities included the following: o The termination of 37 employees, primarily in sales, engineering and administrative capacities. o The transfer of three employees to Moneyline, our majority stockholder. The employees that were transferred are primarily focused on business and channel development for our managed video service. o Remaining employees will focus on operating the Webcasting business and supporting the Moneyline Strategic Alliance Agreement. o Transfer of direct sales responsibility for the VidPhone System to the direct sales team of the Webcasting business. o Election of Alexander Russo as Chairman of the Board of Directors, the appointment of Nicholas Balletta as President of the Company and his election as a director of the Company, and the appointment of Frank Joanlanne as the Senior Vice President, Webcasting Services. o Initiation of the transfer of finance, accounting and human resource functions from Portsmouth, New Hampshire to New York, New York. This transfer was completed in April 2003. During the second quarter, the Company also accomplished the following restructuring initiatives: o The name of the Company was changed to TalkPoint Communications Inc. to signal its determination to build upon the success of its easy to use, browser-based TalkPoint service suite. 14 o The relocation of the Company's headquarters from Portsmouth, New Hampshire to New York, New York. o The appointment of current President Nick Balletta to Chief Executive Officer. Mr. Balletta joined TalkPoint as part of its acquisition of WilTel Communications' Webcasting business earlier in the year. Prior to that, Mr. Balletta was President, Chief Executive Officer and co-founder of NextVenue, a provider of streaming media services to the financial community and business enterprise markets which merged with Ibeam Broadcasting Corp in October of 2000 and was acquired by WilTel in December of 2001. o The appointment of Frank Joanlanne to Executive Vice President, Sales and Marketing. Mr. Joanlanne is also a veteran of the Webcasting and online conferencing industry with over 10 years of experience in product and service marketing, sales management and customer service. o Mr. Carl Muscari, the Company's former Chief Executive Officer, will remain on the Board providing continuity and the benefit of his experience. o The transfer of two additional employees from TalkPoint to Moneyline. o On June 27, 2003, we terminated five engineers at our Portsmouth, New Hampshire location leaving only two TalkPoint employees in New Hampshire, the Vice President of Engineering and Production Manager. These individuals will coordinate the closing of the New Hampshire facility and the ongoing support for existing customers of our VidPhone system product line. The following restructuring charges were recorded by the Company in the second quarter resulting from the Company's decision during the quarter ended June 30, 2003 to no longer actively sell the VidPhone product: o The write-off of VidPhone inventory, in excess of quantities required to support existing customers, in the amount of approximately $709,000, which has been included in product cost of revenues for the three and six months ended June 30, 2003; o Severance amounts of $111,000 associated with the additional headcount reductions; o Asset impairments of approximately $161,000 relating to assets that are no longer utilized in providing services to our customers; and o An accrual for the remaining lease obligation in the amount of approximately $1,394,000 for the Portsmouth, New Hampshire facility that is no longer being used. On January 1, 2003 the Company adopted SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS No. 146"). This statement supersedes Emerging Issues Task Force ("EITF") No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity". Under this statement, a liability for a cost associated with a disposal or exit activity is recognized at fair value when the liability is incurred rather than at the date of an entity's commitment to an exit plan as required under EITF 94-3. Restructuring expenses for the three and six months ended June 30, 2003 were $2,376,000 and $2,615,000, respectively. Restructuring expenses for the three months ended March 31, 2003, were $239,000 and consisted of severance obligations. At June 30, 2003, approximately $1,620,000 of future severance benefits and future lease payments were accrued and will be paid over the course of the terms of the related separation agreement and lease. In summary, we recognized revenues of $1,306,000 and $1,892,000 in three and six month periods ended June 30, 2003, had operating losses of $4,036,000 and $6,303,000 for the three and six month periods ended June 30, 2003 and net losses of $4,549,000, $0.08 per share, and $6,805,000, or $0.12 per share, for the three and six month periods ended June 30, 2003. These financial results reflect the significant changes in the Company's direction since the end of 2002. We generated revenues primarily from the newly acquired Webcasting business and we believe that our Webcasting business will continue to grow. Implementing the changes required to pursue our new business model has been demanding. Turnover of personnel and realignment of responsibilities in the first and second quarters of 2003 were significant and management is cognizant of the ongoing, very real and challenging obstacles that still must be addressed to achieve success for our stockholders in 2003. The majority of the changes associated with our new business model have been implemented and management is focused completely on taking full advantage of the opportunities inherent in the new model. 15 With the restructuring substantially complete, with the integration of the Webcasting business and the closing in the third quarter of a $400,000 bridge financing, we believe we have cash to fund operations through the fourth quarter of 2003. We are seeking additional financing for the continued funding of operations, the development of new product enhancements and further expansion of our Webcasting and web conferencing businesses. We are pursuing existing investors and outside strategic investors. If adequate funding is not available from operations or investors or other sources of funding, we will pursue other strategic alternatives including the sale of the Company, the sale of our assets or liquidation. Significant Accounting Policies and Estimates The SEC recently issued disclosure guidance for "critical accounting policies". The SEC defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. The following listing is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America, with no need for management's judgment in their application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result. Revenue Recognition Products Revenue - Revenues from sales of our hardware products are recognized when the equipment has been delivered to the customer, title has passed, the equipment has been accepted by the customer, the collection of the sales price is probable and no further obligations to the customer exist. Revenues from maintenance contracts are recognized ratably over the term of the contract as services are performed. Webcasting and Services Revenue - We generate revenue from producing live and on-demand audio and video content over the Internet and providing related services, including: capture; production; live Internet delivery; and archiving and hosting. These service offerings may be bundled whereby the Company agrees to provide many or all of the services in one package. We also offer the individual components of the service offerings, such as capturing, producing and live Internet delivery of the content without archiving and hosting the content. Revenues for capture, production and live Internet delivery services are recognized at the time of the event. Archiving and hosting revenues are deferred and are recognized over the archiving and hosting period. When contracts contain multiple element service offerings wherein objective evidence exists for the fair value of all undelivered elements, the Company recognizes revenues for the delivered elements based upon a residual approach and defers revenues for the undelivered elements until the remaining obligations have been satisfied. When contracts contain multiple element service offerings wherein objective evidence does not exist for the fair value of all undelivered elements, the Company's revenues are deferred and recognized ratably over the service period. The Company typically charges its customers fees with fixed and variable components for these bundled service offerings. The fixed component consists of a fee based on the particular production services to be provided, an agreed upon amount of content to be stored and number of streams to be delivered. To the extent that a customer exceeds agreed upon storage and delivery amounts, we typically charge additional fees based on the amount by which such content stored and delivered exceeds the agreed upon amounts. Production services revenues consist of the capture and production of multimedia content. Capture involves acquiring the content either remotely through various sources or on-site through the recording of events. Production primarily involves the conversion of content into digital format, as well as other services such as editing, indexing and media integration. Sales of production services are generally sold under nonrefundable fixed price contracts. Production services are rendered over a relatively short period of time and are recognized when the production is complete. The Company recognizes revenues from production services that are not purchased in connection with archiving and hosting as the services are rendered, provided that no significant Company obligations remain and collection of the resulting receivable is probable. Media archiving and hosting revenues are generated under contracts with fees paid by the customer on a recurring monthly basis. Such amounts are generally based upon the bandwidth provided and the amount of content to be hosted and stored. The Company normally records deferred revenue when archiving and hosting contracts are executed and recognizes archiving and hosting revenues 16 ratably over the hosting period, providing that no significant Company obligations remain and collection of the resulting receivable is probable. Deferred revenues, relating primarily to hosting and archiving, consist of billings in excess of recognized revenues, which are recognized ratably over the term of the applicable agreement, which is typically less than one year. Revenue from sales of managed network services is recognized ratably over the life of the associated network service contract, which is generally two years. Recognition of sales starts at the time of acceptance by the customer, which is 30 days after installation of the equipment. The customer has a right of return within 30 days of installation. Any losses on contracted sales are recognized in the period the loss has been determined. Service revenues associated with time and materials consulting projects are recognized at the time the services are rendered since collection is probable and we have no further obligations to the customer. Stock-Based Compensation The Company accounts for options granted to employees and directors in accordance with Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation expense has been recognized for options granted to employees or directors when the exercise prices of the options have been in excess of or equal to the fair value of our common stock on the date of grant. For options granted to non-employees, the Company recognizes compensation expense in accordance with Emerging Issues Task Force Issue 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and also amends the disclosure provision of SFAS No. 123 to require disclosure in the summary of significant accounting policies the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. The disclosure provision is required for all companies with stock-based employee compensation, regardless of whether the company utilizes the fair value method of accounting described in SFAS No. 123 or the intrinsic value method described in APB Opinion No. 25 Accounting for Stock Issued to Employees. SFAS No. 148's amendment of the transition and annual disclosure provisions of SFAS No. 124 are effective for fiscal years ending after December 15, 2002. The disclosure requirements for interim financial statements containing condensed consolidated financial statements are effective for interim periods beginning after December 15, 2002. We account for stock based compensation issued to employees utilizing the intrinsic value method proscribed by APB No. 25. Inventories Inventory is stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Inventory consists primarily of finished goods and subassembly components. Impairment of Long-Lived Assets The Company's long-lived assets consist primarily of property and equipment. Management periodically reviews the future cash flows to be derived from its long lived assets including trademarks, patents, goodwill and fixed assets. When a material change in projected cash flows from long lived assets is apparent, an appropriate impairment of the respective asset(s) is recorded. Deferred Tax Assets The Company records a valuation allowance against deferred tax assets when the Company believes that it is more likely than not that these assets will not be realized. Because of the Company's recurring losses and negative cash flows, it has provided a valuation allowance against all deferred taxes as of June 30, 2003 and December 31, 2002. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 17 disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results will differ from those estimates. Significant accounting estimates used in the preparation of our consolidated financial statements include the fair value of acquired assets, purchase price allocations, the realizability of deferred tax assets, the carrying value of inventory and depreciation and amortization and the fair value of equity instruments issued to non-employees. Comparison of the Three Months Ended June 30, 2003 and June 30, 2002 and the Six Months Ended June 30, 2003 and June 30, 2002 As indicated in the notes to our consolidated financial statements and in the overview of operations, TalkPoint Communications' operating environment, product offerings and focus are significantly different than at the end of the June 2002 quarter. During the three months ended June 30, 2002, we completed a major financing and a merger with a video services company. Our operations were focused solely on video distribution network systems and we were just embarking on expanding those systems to include managed video services. In February of 2003, we acquired the assets of a Webcasting company and since that time we have been adapting our operations to take full advantage of the acquisition. Our financial results for the three and six month periods ended June 30, 2003 reflect the emphasis we have placed on Webcasting Services and the phase-out and discontinuance of our video distribution network systems and managed video services. Significant charges included in our operating results for the three months ended June 30, 2003 reflect the change in focus, including such items as the accrual of $1,513,000 for future rent payments on our New Hampshire facility to reflect the decision to close that facility and a charge for the write-off of inventory of $709,000. The following comparative data for the three months ended June 30, 2003 and June 30, 2002 and the six months ended June 30, 2003 and June 30, 2002 should be read with the change in business strategy and emphasis clearly in mind. Comparison of the Three Months Ended June 30, 2003 and June 30, 2002 Revenues. We recognized $1,306,000 in revenues during the three months ended June 30, 2003, compared to $172,000 in the comparable period in 2002, representing an increase of approximately $1,134,000 or 660%. Of these revenues, $115,000 relate to product sales in the three months ended June 30, 2003 compared to $36,000 recognized in the comparable period of 2002, representing an increase of $79,000 or 220%, in equipment sales. The increase in equipment sales is due to an increase in the average order size experienced in the second quarter of 2003 compared to the comparable period of 2002. In addition, second quarter revenues included $1,191,000 related to Webcasting activities. There were no revenues related to Webcasting in the second quarter of 2002. This reflects the Company's acquisition of its Webcasting assets in the first quarter of 2003 detailed above. Our revenue recognition policy states that when contracts contain multiple element service offerings and objective evidence does not exist for the fair value of all undelivered elements, the revenues from such contracts are deferred and recognized ratably over the contract period. A material number of our Webcasting contracts for the three months ending June 30, 2003 included hosting and archiving services and we have not established objective evidence for the fair value of such services when bundled with other service offerings. Accordingly, we deferred approximately $574,000 of Webcasting revenue, a majority of which will be recognized during the third quarter of 2003. In the future we plan to begin unbundling contracts, separating Webcasting production revenue from ongoing content hosting and archiving and we intend to establish objective evidence of the fair value for such services. There were no revenues related to installation, managed video or other services in the three months ending June 30, 2003 compared to $136,000 in the comparable period of 2002. We do not expect installation, managed video or other service revenue to be significant in the future. For the three months ended June 30, 2003, two customers accounted for 11% and 9%, of our sales respectively. These two customers accounted for 11% and 18%, respectively, of consolidated accounts receivable at June 30, 2003. This customer base is significantly different from our customer base in 2002 (in which three customers accounted for 43%, 24% and 12% of our total revenues in the quarter ended June 30, 2002. Three customers accounted for 74%, 14%, and 12% of our accounts receivable at December 31, 2002). We now have a significantly greater number of customers than we did in the three months ended June 30, 2002. Our current customer base is comprised of purchasers of our Webcasting Services and our customer base in 2002 was comprised of purchasers of our VidPhone system and managed video services. Cost of Revenues. Cost of revenues for the three months ended June 30, 2003 was $1,737, 000 . This represents an increase of $1,065,000 or 157%, from the $672,000 recorded in the comparable period of 2002. Cost of product revenues as a percentage of 18 product revenues was approximately 783% and 1,267% in the three months ending June 30, 2003 and 2002, respectively. The cost of product revenues for the three months ended June 30, 2003 were $900,000 versus $456,000 for the three months ended June 30, 2002. This represents an increase of $444,000 or 97%. This is primarily due to a charge for impaired inventory of $709,000, reflecting our decision made during the quarter ended June 30, 2003 to no longer actively market our VidPhone systems in the future. During the 2002 quarter we recorded a write-down of impaired inventory in the amount of $370,000. The cost of product revenues, excluding the inventory write-offs exceeded product revenues primarily due to the low volume of product sales, related employee costs, equipment and shipping, repair and storage and inventory use. The cost of Webcasting revenues in the three months ending June 30, 2003 was $836,000 representing the costs of sustaining the Webcasting network infrastructure and production costs associated with Webcasting activities. These costs include production salaries, third party production costs and network communication costs. Cost of Webcasting revenues as a percentage of Webcasting revenues was approximately 70% in the three months ending June 30, 2003. We expect that the cost of Webcasting revenues will remain constant and decline as a percentage of revenue in the future as our Webcasting revenue increase. This is mainly due to the fact that more customers will generate more sales while certain fixed costs will remain constant. There was no cost of revenues for services for the three months ended June 30, 2003 compared to $216,000 in the same period of 2002 due to our decision in the fourth quarter of 2002 to shutdown and cease all operations of B2BVideo. Gross Margin on Revenues. Gross margin on total revenues for the three months ended June 30, 2003 was approximately $(431,000) , compared to gross margin of ($500,000) for the comparable period in 2002. Excluding the inventory write-off of $709,000, discussed above, our 2003 gross margin was approximately 279,000 or 21% of revenues. This was mainly due to the performance of our Webcasting business. The negative gross margin of approximately $76,000, or negative 66%, experienced on product sales in 2003, excluding the inventory write-off of $709,000, was attributable primarily to the under-absorption of manufacturing costs due to low product revenues volume and sales of product made during the period. The negative gross margin experienced in 2002 was attributable primarily to a write-down of impaired inventory in the amount of $370,000. The gross margin percentage achieved on Webcasting revenues for the three months ended June 30, 2003 was 30%. Research and Development. Research and development costs decreased to $256,000 in the three months ended June 30, 2003, compared to $510,000 in the three months ended June 30, 2002. This decrease in research and development expenses of $254,000, or 50%, reflects our completion of the development of version 3.6 of the VidPhone operating system in the first quarter of 2003, which enables the VidPhone system to be seamlessly incorporated into a managed video solution over the wide area network. No significant improvements to the VidPhone system were undertaken in the second quarter of 2003 and none are foreseen in the future. Our current research and development efforts are focused on our Webcasting services products. Selling, General and Administrative Expenses. Selling, general, and administrative expenses increased to $1,683,000 during the three months ended June 30, 2003, from $1,006,000 during the three months ended June 30, 2002, an increase of approximately $677,000 or 67%. This increase reflects the change in our business strategy, the continuing high legal and accounting expenses associated with being a public company, continuing costs associated with the implementation of our new business strategy resulting from the acquisition of certain web casting assets in the first quarter of 2003, sales expenses associated with our Webcasting Services, printing associated with our name change, and duplication of certain general and administrative functions and costs, including facilities costs and headcount during the transition of our headquarters from Portsmouth, New Hampshire to New York. Webcasting Services are normally small contracts and the introduction of our services to new customers requires significant sales efforts to achieve initial sales. We believe that sales and marketing expenses should represent an increasing percentage of total selling, general and administrative costs going forward. Restructuring. Restructuring expenses for the three months ended June 30, 2003 were $1,666,734 and reflected our decision to close our New Hampshire facility and move our headquarters to New York City and to discontinue actively selling our VidPhone product. There were no restructuring expenses in the three months ended June 30, 2002. Restructuring expenses included an accrual for lease obligations of the New Hampshire facility, which was closed during the quarter, of a net $1,394,000; an accrual of $111,000 in severance costs related to the termination of our former Chief Executive Officer and the write-off of fixed assets that are no longer utilized to provide services to our customers of $161,000. Gain on Extinguishment of Debt. In the second quarter of 2002, a payment of $1,100,000 was made to Sanmina Corp. to extinguish a secured promissory note issued to Sanmina Corp. by us, which had an outstanding principal balance of $2,900,000 and accrued interest of $587,145. We recognized a gain of $2,387,145 relating to the extinguishment of this debt during the quarter ended June 30, 2002. No similar gain or extinguishment of debt was recognized in the quarter ended June 30, 2003. 19 Interest Expense. Interest expense of $1,200 incurred in the second quarter of 2003 was $581,000 lower than the $582,000 recorded in the same period of 2002. In the three months ending June 30, 2002 we amortized $492,000 of debt discount recorded on bridge notes and interest on notes payable was $77,000. In the second quarter of 2003 we had no outstanding debt instruments. Interest Income and Other Income. Interest and other income in the second quarter of 2003 was $11,000 compared to interest income of $600 recorded in the same period of 2002 due to the increased level of average cash balances over the period and the sale of certain previously written off fixed assets. Deemed Dividend. In the second quarter of 2003, we recognized a deemed dividend to Moneyline, an affiliate and our majority stockholder, and Moneyline Telerate, an affiliate, of $523,000 as the result of issuing stock options to employees of those affiliates. The employees of these affiliates perform substantial duties on behalf of the Company including filling roles as the Company's Chief Financial Officer, Corporate Counsel, Deputy Corporate Counsel and Chairman of the Board. The grant date fair value of these options was calculated using the Black-Scholes option-pricing model. In the second quarter of 2002, we recorded a deemed dividend of $405,000 as the result of warrant repricing in May of 2002 in conjunction with a private placement. See Note 5 - Stock Based Compensation to our interim Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. Comparison of the Six Months Ended June 30, 2003 and June 30, 2002 Revenues. We recognized $1,892,000 in revenues during the six months ended June 30, 2003 compared to $539,000 in the comparable period in 2002, representing an increase of approximately $1,353,000 or 251%. Of these revenues, $245,000 relate to product sales in the first six months of 2003 compared to $352,000 recognized in the comparable period of 2002, representing a decrease of $107,000 or 30%, in equipment sales. The decrease in equipment sales is due to a decreased emphasis by the Company on VidPhone systems sales compared to the comparable period of 2002. In the six months ended June 30, 2003, revenues of $1,647,000 related to Webcasting activities generated after the Company's acquisition of certain Webcasting assets acquired in February 2003. The Company's revenue recognition policy states that when contracts contain multiple element service offerings and objective evidence of fair value does not exist for all undelivered elements, the revenues from such contracts are deferred and recognized ratably over the contract period. A material number of our Webcasting contracts for the six months ending June 30, 2003 included hosting and archiving services. Our deferred revenue at June 30, 2003 was $574,000, a majority of which will be recognized during the third quarter of 2003. In the future we plan to begin unbundling contracts, separating Webcasting production revenue from ongoing content hosting and archiving and we intend to establish objective evidence of the fair value for such services. Revenues related to installation, managed video and other services were immaterial in the first six months of 2003 compared to $187,000 in the comparable period of 2002. The Company does not expect installation, managed video and other services revenue to be significant in the future. For the six months ended June 30, 2003, two customers accounted for 15% and 16%, of our sales respectively. These two customers accounted for 11% and 18%, respectively, of consolidated accounts receivable at June 30, 2003. This customer base is significantly different from our customer base in 2002 (During the six months ended June 30, 2002 three customers accounted for 33%, 27% and 10% of our revenues). We now have a significantly greater number of customers than we did in the three months ended June 30, 2002. Our current customer base is comprised of purchasers of our Webcasting Services and our customer base in 2002 was comprised of purchasers of our VidPhone system and managed video services. Cost of Revenues. Cost of revenues for the six months ended June 30, 2003 was $2,356,000. This represents an increase of $1,429,000 or 154%, from the $927,000 recorded in the comparable period of 2002. The cost of product revenues for the six months ending June 30, 2003 and 2002 included write-offs of impaired inventory of approximately $709,000 and $370,000, respectively. The 2003 write-off is attributable to our decision made during second quarter of 2003 to no longer actively market our VidPhone systems in the future. The cost of product revenues, excluding the inventory write-offs in 2003 and 2002, significantly exceeded the product revenues primarily due to the low volume of product sales, related employee costs, equipment and shipping and repair and storage. 20 The cost of Webcasting revenues in the first six months of 2003 was $1,261,000 representing the costs of sustaining the Webcasting network infrastructure and production costs associated with Webcasting activities. Cost of Webcasting revenues as a percentage of Webcasting revenues was approximately 77% in the six months ending June 30, 2003. The Company expects that the cost of Webcasting revenues will remain constant and decline as a percentage of revenue in the future as the Company's Webcasting revenue increases. Cost of service revenues for the six months ended June 30, 2003 was $22,000 compared to $230,000 in the same period of 2002, and reflects fewer installations and other services due to the cessation of B2BVideo operations in the fourth quarter of 2002. Gross Margin on Revenues. Gross margin on total revenues was approximately ($465,000) or negative 25% for the six month period ending June 30, 2003 compared to gross margin of ($388,000), or negative 72%, for the comparable period in 2002. Excluding the inventory write-off of $709,000, discussed above, our 2003 gross margin was approximately $245,000 or 13% of revenues, due to our Webcasting Services. . The gross margin percentage on product revenues, excluding the inventory impairment charges was negative 49%, compared to 6% realized on product revenues in the comparable period of 2002 due to a decrease in the delivery of products. The gross margin percentage achieved on Webcasting revenues was 23%. While there were no material service revenues in the six months ended June 30, 2003, there were costs allocated to service revenues. The gross margin on service revenues for the first six months of 2003 was negative $22,000 and represented the entire cost of revenues. In the six months ended June 30, 2002, the gross margin on service revenues was negative $42,000 or negative 22%. The negative gross margin of approximately $119,000 or negative 49%, excluding the inventory write-off of $709,000 experienced on product sales in 2003 was attributable primarily to the under-absorption of manufacturing costs due to low product revenues volume and sales of product made during the period. Research and Development. Research and development costs decreased to $885,000 in the six months ended June 30, 2003, compared to $1,071,000 in the six months ended June 30, 2002, a decrease of $186,000 or 17%. Of the research and development costs incurred in the six months ended June 30, 2003, approximately $93,000 was related to the operations at B2BVideo. The decrease in research and development expenses reflects our completion of the development of version 3.6 of the VidPhone operating system in the first quarter of 2003, which enables the VidPhone system to be seamlessly incorporated into a managed video solution over the wide area network. No significant improvements to the VidPhone system were undertaken in the second quarter of 2003 and none are foreseen in the future. Our current research and development efforts are focused on our Webcasting services products. Selling, General and Administrative Expenses. Selling, general, and administrative expenses increased to $3,048,000 during the six months ended June 30, 2003, from $2,348,000 during the six months ended June 30, 2002, an increase of approximately $700,000 or 30%. This increase reflects the change in our business strategy, significant increases in lease expenses due to the relocation of our headquarters from Portsmouth, New Hampshire to New York City, the acquisition of leased space in New York City, the continuing significant legal, accounting and other expenses associated with being a public company, the initial and continuing work associated with the acquisition of certain Webcasting assets in the first quarter of 2003 and sales expenses associated with our Webcasting Services General and administrative expenses were $1,929,000 for the six months ended June 30, 2003 versus approximately $977,000 for the six months ended June 30, 2002 and sales and marketing expenses were $1,119,000 and $1,022,000 for the same periods. Webcasting Services are normally small contracts and the introduction of our services to new customers requires significant sales efforts to achieve initial sales. We believe that sales and marketing expenses should represent an increasing percentage of total SG&A costs going forward. Restructuring. Restructuring expenses for the six months ended June 30, 2003 were $1,906,000 and reflected our decision to close our New Hampshire facility and move our headquarters to New York City and to discontinue actively selling our VidPhone system. There were no restructuring expenses in the six months ended June 30, 2002. Restructuring expenses in 2003 include severance compensation of $239,000 in conjunction with our restructuring initiatives in the first quarter; an accrual for lease obligations of the New Hampshire facility, which was closed during the second quarter, in the amount of $1,394,000; an accrual of $111,000 in severance costs for our former Chief Executive Officer; a write-off of fixed assets no longer utilized to provide services to our customers of $161,000. Gain on Extinguishment of Debt. In the six months ended June 30, 2002, a payment of $1,100,000 was made to Sanmina Corp. to extinguish a secured promissory note issued to Sanmina Corp. by us, which had an outstanding principal balance of $2,900,000 and accrued interest of $587,145. We recognized a gain of $2,387,145 relating to the extinguishment of this debt during the six months ended June 30, 2002. No similar gain or extinguishment of debt was recognized in the six months ended June 30, 2003. Interest Expense. Interest expense of $2,100 incurred in the first six months of 2003 was $1,349,000 lower than the $1,351,000 21 recorded in the same period of 2002. In the period ending June 30, 2002, we recognized $1,150,000 of debt discount recorded on bridge notes. No debt discount was amortized in the period ending June 30, 2003. Interest on notes payable decreased from $197,000 in the first six months of 2002 to zero in the first six months of 2003 due to the elimination of debt in conjunction with our Stock Purchase Agreement completed in May of 2002. In the period ending June 30, 2003 we had no outstanding debt instruments. Interest Income and Other Income. Interest and other income in the second quarter of 2003 was $23,000 compared to interest income of $600 recorded in the same period of 2002 due to the increased level of average cash balances over the period and the sale of certain previously written off fixed assets. Deemed Dividend. In the six months ended June 30, 2003, we recognized deemed dividends to Moneyline, an affiliate and our majority stockholder, and Moneyline Telerate, an affiliate, of $523,000 as a result of issuing stock options to employees of those affiliates. The grant date fair value of these options was calculated using the Black-Scholes option-pricing model. In the six months ended June 30, 2002, we recognized a deemed dividend of $405,000 as the result of warrant repricing in May of 2002 in conjunction with a private placement. Liquidity and Capital Resources We have an accumulated deficit of $90,097,000 from our inception through June 30, 2003. We expect to incur additional operating losses for the foreseeable future, principally as a result of expenses associated with product development efforts and anticipated sales, marketing and general and administrative expenses. During the second quarter of 2003, we satisfied our cash requirements principally from cash on hand as of March 31, 2003, which was obtained primarily from the closing of the Stock Purchase Agreement with Moneyline and other investors in May 2002 and from cash flows from operations primarily derived from Webcasting Services. We had cash and cash equivalents of $508,000 at June 30, 2003 compared to $6,498,000 at December 31, 2002, a decrease of $5,990,000 or 92%, primarily due to first and second quarter losses and $844,000 placed in restricted cash as a security deposit for our New York facility. The Company has suffered recurring losses from operations, has experienced recurring negative cash flow from operations, has a working capital deficiency and has a significant accumulated deficit. The Company expects to continue to incur significant operating expenses to support TalkPoint product development efforts and to enhance its TalkPoint product, Webcasting Services, sales and marketing capabilities. At this stage, it is difficult to estimate the level of the Company's sales in future periods, or when marketing initiatives will result in additional sales. Accordingly, the Company expects to continue to experience significant, material fluctuations in its revenues on a quarterly basis for the foreseeable future. The Company has required substantial funding through debt and equity financings since its inception to complete its development plans and support its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management's funding of operating losses to date and plans to ultimately attain profitability include the effects of our recent acquisition of certain Webcasting Services assets. (Note 3). Net cash used in operations during the six months ended June 30, 2003 was approximately $5,200,000. Accounts receivable increased by $1,470,000 during the six months ended June 30, due primarily to credit sales generated by the Webcasting business during the period, partially offset by cash collections. Inventory decreased by approximately $758,000 during the six months ended June 30, 2003, primarily due to a write-off of approximately $709,000 in the second quarter of 2003 and sales of product made during the period, offset by inventory purchases. Restricted cash increased by $844,000, the result of funding a letter of credit guarantee on a lease on our facility in New York City. Accounts payable increased by approximately $214,000 in the six months ended June 30, 2003 because of the addition of the Webcasting business. Deferred revenue increased by $574,000 as a result of sales of bundled Webcasting services. Intercompany receivables from related parties decreased by $410,000 due to Moneyline's payment of a majority of the intercompany balance owed to us. Accrued liabilities increased by $1,060,000 due to accrual for rental of the New Hampshire facility of $1,394,000; accrual of $111,000 in severance costs for Carl Muscari, our former Chief Executive Officer. Depreciation expense increased by an additional $108,000 due to accelerated depreciation on the Company's Portsmouth, New Hampshire fixed assets attributable to the VidPhone business. In addition, we wrote off approximately $167,000 in fixed assets of which $161,000 is attributable to B2B Service Bureau equipment with the remaining being the Portsmouth, New Hampshire fixed assets. 22 Cash used in investing activities during the six months ended June 30, 2003 was $785,000. We paid $750,000 for certain Webcasting business assets and we spent $21,000 in trademark and patent activity and $14,000 for other capital assets. We paid $5,500 to pay down the balance on capital leases. There were no other financing activities in the six months ended June 30, 2003. On February 14, 2003, we purchased from Williams Communications, LLC ("WCLLC") and Williams Communications Procurement, LP (together with WCLLC, the "Sellers"), each a wholly owned subsidiary of Wiltel Communications Group, Inc. ("WCG"), WCLLC's Webcasting business, including certain equipment and other assets used by WCLLC in this business for $750,000 in cash and an $844,000 security on the leased space. The Company also incurred $130,000 in professional fees, included in accrued liabilities on the June 30, 2003 balance sheet, in conjunction with this acquisition. We are required to provide an $844,000 security on leased space in the form of a letter of credit or cash deposit. The lease is guaranteed by Moneyline Telerate and we have provided the lessor with a security deposit. The deposit is recorded as restricted cash on the balance sheet and was $844,000 at June 30, 2003. As of August 12, 2003 the Company has secured financing in the form of a secured credit agreement from Moneyline Telerate in the amount of $400,000. We believe we have cash to fund operations through the fourth quarter of 2003. We are seeking additional financing for the continued funding of operations, the development of new product enhancements and further expansion of our Webcasting and web conferencing businesses. We are pursuing existing investors and outside strategic investors. If additional funding is not available, we will pursue other strategic alternatives including the sale of the Company, the sale of our assets or liquidation. Under accounting principles generally accepted in the U.S., certain obligations and commitments are not required to be included in the consolidated balance sheets and statements of operations. These obligations and commitments, while entered into in the normal course of business, may have a material impact on liquidity. We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships. Legal Proceedings The Company is aware of a grand jury investigation being conducted by the Antitrust Division of the United States Department of Justice with respect to funds allocated by the Schools and Libraries Universal Service Fund ("E-Rate Funds"). The Company understands that the Antitrust Division has established a task force to conduct Universal Service Fund investigations comprised of attorneys in each of the Antitrust Division's seven field offices and the National Criminal Office. The Company has received a grand jury subpoena requiring production of documents to the Department of Justice and has responded to it in full. The Company has also been informed that the investigation encompasses the conduct of certain former employees of the Company, and, vicariously, the Company itself. The Company continues to cooperate with the investigation and is not in a position to predict the direction, timing or outcome of the investigation. Subsequent Events On August 13, 2003 the Company entered into a secured credit agreement with Moneyline Telerate, the parent of its majority stockholder, for the sum of $400,000. Due to the ongoing investigation by the Antitrust Division of the United States Department of Justice as discussed in more detail herein, the Company's efforts to attract third party financing has been impacted and delayed such that the Company's affiliate, Moneyline Telerate Holdings, entered into this short term loan facility. The Company can draw down funds in $50,000 increments on an as needed basis, subject to the Company's meeting certain financial performance metrics enumerated in the secured credit agreement, to fund ongoing business operations. All borrowed funds must be repaid by December 31, 2003 and TalkPoint shall pay interest on the borrowings at a rate of 8% per annum from the date of the borrowings to the maturity date. This financing is secured by TalkPoint's intellectual property, customer accounts, deposit accounts and receivables. 23 On July 18, 2003, Frank Joanlanne former Executive Vice President, Sales and Marketing resigned from the Company. His replacement as Vice President, Sales and Marketing is Mark Agovino. Risk Factors A Failure to Obtain Necessary Additional Capital in the Future on Acceptable Terms Could Prevent Us from Executing Our Business Plan. We will need additional capital in the future to fund our operations, finance investments in equipment and corporate infrastructure, expand our network, increase the range of services we offer and respond to competitive pressures and perceived opportunities. Cash flow from operations and cash on hand may not be sufficient to cover our operating expenses, working capital and capital investment needs. We cannot assure you that additional financing will be available on terms acceptable to us, if at all. A failure to obtain additional funding could prevent us from making expenditures that are needed to allow us to grow or maintain our operations. Further, the secured credit agreement entered into with Moneyline Telerate Holdings contains financial performance metrics which the Company is required to meet prior to any borrowing. The Company may be unable to meet these metrics, and, therefore, may not be permitted to borrow under the loan facility. If we raise additional funds by selling equity securities, the relative equity ownership of our existing investors could be diluted or the new investors could obtain terms more favorable than previous investors. If we raise additional funds through debt financing, we could incur significant borrowing costs. The failure to obtain additional financing when required could result in us being unable to grow as required to attain profitable operations. The pending grand jury investigation being conducted by the Antitrust Division of the United States Department of Justice with respect to funds allocated by the Schools and Libraries Universal Service Fund (E-Rate Funds) may cause the Company to incur substantial legal expenses, fines and may adversely affect our ability to obtain future financing. The Company is aware of a grand jury investigation being conducted by the Antitrust Division of the United States Department of Justice with respect to funds allocated by the Schools and Libraries Universal Service Fund. The Antitrust Division has established a task force to conduct Universal Service Fund investigations comprised of attorneys in each of the Antitrust Division's seven field offices and the National Criminal Office. The Company has received a grand jury subpoena requiring production of documents to the Department of Justice, and has cooperated and responded in full. The Company has also been informed that the investigation encompasses the conduct of certain former employees of the Company, and, vicariously, the Company itself. The Company continues to cooperate with the investigation and is not in a position to predict the direction, timing or outcome of the investigation. The Company may incur extensive legal expenses, may be subject to fines and the investigation may adversely affect the ability of the Company to obtain additional financing. We Will be Focusing a Significant Amount of the Company's Resources on Building a Recently Acquired Business The Company recently reduced its VidPhone business and acquired a Webcasting business. The Company decided to no longer proactively pursue new customer sales opportunities for its VidPhone product line and is currently only supporting existing customers with maintenance and upgrades. In the future a significant amount of the Company's resources will be focused on developing the Webcasting and web conferencing business. While an experienced management team joined the Company in connection with the acquisition, the Company has limited experience running a Webcasting business and does not have a proven track record of operating this type of business profitably. We cannot assure you that we will be successful in operating this Webcasting business. Customers May Not Buy Our Products Due to Concerns Over Our Viability Due to our recurring losses from operations and lack of cash, some potential customers may decide not to purchase our Webcasting or our web conferencing services because of concerns that we may be unable to provide these services. If we are not able to alleviate concerns about our long-term viability, we may not be able to market and sell our Webcasting and web conferencing services successfully and continue operations. We Have a Limited Customer Base and Attendant Risk Concentration; We Are Dependent Upon a Few Significant Customers We have a limited customer base with two customers providing in excess of 10% of our total sales individually and over 20% of our sales collectively. We generally grant uncollateralized credit terms to our customers and have not experienced any credit-related losses. For the six months ended June 30, 2003, two customers accounted for 15% and 16% of our sales, respectively. These two customers accounted for 11% and 18%, respectively, of consolidated accounts receivable at June 30, 2003. 24 itself. The Company continues to cooperate with the investigation and is not in a position to predict the direction, timing or outcome of the investigation. The Company may incur extensive legal expenses, may be subject to fines and the investigation may continue to adversely affect the ability of the Company to obtain additional financing. We Have Accumulated a Substantial Deficit; We Have a History of Losses and Limited Revenue and Expect Losses to Continue We have incurred substantial losses from operations to date and had an accumulated deficit of $90,097,000 through June 30, 2003. There is substantial doubt about our ability to continue as a going concern. We recognized $1,306,000 and $1,892,000 in revenues for the three and six month periods ended June 30, 2003, respectively. We recognized $824,000 in revenues during the year ended December 31, 2002, compared to $12,976,000 during 2001, including approximately $6,500,000 from a data infrastructure project that was not deemed to be a recurring revenue source, and $8,769,000 in revenues during 2000. Accordingly, there is limited historical basis for you to expect that we will be able to realize sufficient operating revenues or profits in the future to support continuing operations. We have a limited backlog for revenue and we cannot predict with accuracy what our revenues will be in the future. Our ability to generate sales and to recognize operating revenues in the future will depend on a number of factors, certain of which are beyond our control, including: o current and potential customer response to our Webcasting and web conferencing product lines; o our ability to generate new sales of products and services and to secure customer acceptance; and o customer payments. We Expect to Continue to Experience Quarterly Fluctuations in Our Operating Results With the Webcasting business we have experienced seasonality with a particular slow down in the summer and holiday months. The Webcasting business is inherently an event-based business, which causes quarterly fluctuations in operating results. While Webcasting Services do not require investment by the customer, the commercial market demand for Webcasting has not yet matured sufficiently to permit us to make confident projections regarding future sales of our Webcasting product line. We May Not Be Able to Develop Direct Sales and Marketing Capabilities We are expanding our direct marketing capability to promote our Webcasting and web conferencing services. We cannot assure you that we will be able to create awareness of, and demand for, our products through our marketing efforts, or that the development of our direct marketing capabilities will lead to sales of our products and services. If we cannot successfully develop our own sales and marketing capabilities, we may not succeed in building brand-name recognition of our Webcasting and web conferencing services. Our Industry is Subject to Rapid Technological Change; If We Are Not Able to Adequately Respond to Changes, Our Products May Become Obsolete or Less Competitive and Our Operating Results May Suffer We may not be able, especially given our lack of financial resources, to respond effectively to the technological requirements of a changing market, including the need for substantial additional capital expenditures that may be required as a result of these changes. The Webcasting and web conferencing industries are characterized by rapidly changing technology and continuing process development. The future success of our business will depend in large part upon our ability to maintain and enhance our technological capabilities and successfully anticipate or respond to technological changes on a cost-effective and timely basis. In addition, our industry could in the future encounter competition from new or revised technologies that render existing technology less competitive or obsolete. Item 3. Quantitative and Qualitative Disclosures about Market Risk. We have no instruments, positions or transactions that present a market risk to the Company's financial condition in the future. 25 Item 4. Controls and Procedures The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level. During the three months ended June 30, 2003, the Company addressed the deficiencies in its internal controls over financial reporting which had been identified in its first quarter evaluation. These deficiencies were addressed through the hiring of new accounting personnel, specifically the hiring of Alan Zwerin to serve as the Company's controller. In addition, the Company completed the transfer of its accounting and financial reporting functions to its New York City headquarters from Portsmouth, New Hampshire. During the quarter the Company implemented procedures to ensure that all transactions are recorded in the Company's accounting records in a timely manner and that timely reconciliations were prepared for Company accounts. Furthermore, in the second fiscal quarter of 2003 the Company completed its conversion from Solomon accounting software to QuickBooks accounting software. The version of Solomon that had been used previously was no longer supported. The introduction of the new software necessitated the review and revision of access policies for the software and certain accounting policies and procedures. The Company will proceed with the required reviews and revisions going forward to ensure appropriate internal controls are maintained as they relate to the new accounting software. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders On June 13, 2003, the Company's Board of Directors approved a proposal to change the Company's name to TalkPoint Communications Inc. On June 17, 2003, the Company received the written consent, in lieu of a meeting of stockholders, of Moneyline, a stockholder holding approximately 57% of the Company's voting stock, to approve the name change. The Company prepared an Information Statement pursuant to Rule 14c-2 under the Securities Exchange Act of 1934 ("Rule 14c-2") and mailed the Information Statement to its stockholders on July 24, 2003. The name change became effective on August 13, 2003 upon compliance with the requirements of Rule 14c-2, including a 20-day waiting period following the mailing to stockholders and upon the filing of required documents with the office of the Secretary of State of the State of Delaware. On June 17, 2003, Moneyline, acting by majority written consent, also ratified modifications to the Company's 1999 Stock Incentive Plan which the Board of Directors recently approved. These modifications, which permit the granting of options on not more than 1,000,000 shares of our common stock to any one individual in any calendar year, were adopted in order to provide adequate flexibility with respect to incentivizing certain of our directors and members of our management. Prior to this modification, the Company's 1999 Stock Incentive Plan prohibited the granting of options on more than 500,000 shares of our common stock to any one individual in any calendar year. 26 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 2.1 Stock Purchase Agreement, dated May 16, 2001, by and among Moneyline Networks, LLC, B2BVideo Network Corp. and the Registrant (incorporated by reference from Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 28, 2002 (the "May 2002 8-K")). 2.2 Asset Purchase Agreement, dated as of January 27, 2003, by and among the Registrant, Williams Communications, LLC and Williams Communications Procurement, LP (incorporated by reference from Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2003 (the "February 2003 8-K")). 2.3 First Amendment to the Asset Purchase Agreement, dated as of February 14, 2003, by and among the Registrant, Wiltel Communications, LLC (formerly Williams Communications, LLC) and Williams Communications Procurement, LP (incorporated by reference from Exhibit 2.2 to the February 2003 8-K). 3.1+ Fifth Amended and Restated Certificate of Incorporation of the Registrant. 3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference from Exhibit 3.4 to the Registrant's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 11, 2003 (the "April 2003 10-KSB")). 4.1 Specimen certificate evidencing shares of common stock of the Registrant (incorporated by reference from the Registrant's amended Registration Statement on Form SB-2 (File No. 333-20625) filed with the Securities and Exchange Commission on March 13, 1997 (the "March 1997 SB-2/A")). 4.2 Form of Warrant issued in connection with the Series B 5% Cumulative Convertible Preferred Stock of the Registrant (incorporated by reference from Exhibit 4.11 to the Registrant's Registration Statement on Form S-3 (File No. 333-62971) filed with the Securities and Exchange Commission on September 4, 1998, as amended). 4.3 Form of Warrant for the purchase of 275,000 shares of common stock, issued to Sanmina Corporation (incorporated by reference from Exhibit 4.12 to the Registrant's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 1999 (the "March 1999 10-KSB")). 4.4 Form of Warrant for the purchase of 40,000 shares of common stock, issued to Shaw Pittman (incorporated by reference from Exhibit 4.13 to the March 1999 10-KSB). 4.5 Form of Unsecured Promissory Note, issued on February 4, 1999 to various subscribers in a private placement (incorporated by reference from Exhibit 4.14 to the Registrant's Registration Statement on Form SB-2 (File No. 333-72429) filed with the Securities and Exchange Commission on February 16, 1999). 4.6 Specimen certificate evidencing Redeemable Common Stock Purchase Warrant (incorporated by reference from Exhibit 4.16 to the Registrant's Registration Statement on Form SB-2/A (File No. 333-72429) filed with the Securities and Exchange Commission on May 13, 1999 (the "May 1999 Form SB-2/A")). 4.7 Form of Warrant Agreement (incorporated by reference from Exhibit 4.17 to the Registrant's Registration Statement on Form SB-2/A (File No. 333-72429) filed with the Securities and Exchange Commission on June 7, 1999 (the "June 1999 Form SB-2/A")). 4.8 Specimen certificate evidencing unit issued in connection with the Registrant's June 1999 public offering of units (incorporated by reference from Exhibit 4.18 to the June 1999 Form SB-2/A). 4.9 Form of First Amendment to Warrant Agreement dated August 2000 by and among the Registrant, EarlyBirdCapital, Inc. and Continental Stock Transfer & Trust Company (incorporated by reference from Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 28, 2000 (the "August 2000 8-K")). 27 4.10 Specimen certificate, as supplemented, evidencing Redeemable Stock Purchase Warrant (incorporated by reference from Exhibit 4.4 to the August 2000 8-K). 4.11 Form of Placement Agent's Purchase Option (incorporated by reference from Exhibit 4.5 to the August 2000 8-K). 4.12 Warrant to Purchase 11,250,000 Shares (Subject to Adjustment) of Common Stock of the Registrant between the Registrant and Moneyline Networks, LLC, dated as of May 16, 2002 (incorporated by reference from Exhibit 4.1 to the May 2002 8-K). 10.1 1994 Stock Option Plan (incorporated by reference from Exhibit 10.1 to the Registrant's Registration Statement on Form SB-2 (File No. 333-20625) filed with the Securities and Exchange Commission on January 29, 1997 (the "January 1997 SB-2")). 10.2 1996 Stock Incentive Plan (incorporated by reference from Exhibit 10.2 to the January 1997 SB-2). 10.3 1999 Stock Incentive Plan (incorporated by reference from Exhibit 10.15 to the Registrant's Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on November 22, 1999). 10.4 Letter Agreement, dated October 7, 1996, between Barington Capital Group and the Registrant (incorporated by reference from Exhibit 10.5 to the March 1997 SB-2/A). 10.5 Letter Agreement dated January 12, 1999, between the Registrant and Sanmina Corporation (incorporated by reference from Exhibit 10.15 to the March 1999 10-KSB). 10.6 Letter Agreement dated January 21, 1999 between the Registrant and Shaw Pittman Potts & Trowbridge (incorporated by reference from Exhibit 10.16 to the March 1999 10-KSB). 10.7 Form of Letter Agreement between the Registrant and the holders of the 5% Convertible Debentures due 2003, dated May 1999 (incorporated by reference from Exhibit 10.17 to the May 1999 Form SB-2/A). 10.8 Employment Agreement by and between the Registrant and Carl Muscari dated May 16, 2002 (incorporated by reference from Exhibit 10.15 to the April 2003 10-KSB). 10.9 Employment Agreement by and between the Registrant and Roger Booker dated November 1, 2002 (incorporated by reference from Exhibit 10.17 to the April 2003 10-KSB). 10.10 Employment Agreement by and between the Registrant and Nicholas Balletta dated February 19, 2003 (incorporated by reference from Exhibit 10.18 to the April 2003 10-KSB). 10.11 Employment Agreement by and between the Registrant and Frank Joanlanne, dated February 20, 2003 (incorporated by reference from Exhibit 10.19 to the April 2003 10-KSB). 10.12+ Letter Agreement, dated June 13, 2003, between the Registrant and Carl Muscari regarding termination of Mr. Muscari's employment with the Registrant. 10.13 Stockholders Agreement, dated May 16, 2003, by and among Moneyline Networks, LLC, the Registrant and the Management Stockholders (incorporated by reference from Exhibit 10.24 to the April 2003 10-KSB). 10.14+ Assignment and Amendment of Lease, Consent to Assignment and Release and Waiver of Claims, dated February 14, 2003, by and among WU/Lighthouse 100 William, LLC, WilTel Communications, LLC and the Registrant. 10.15+ Secured Credit Agreement, dated August 13, 2003, by and between the Registrant and Moneyline Telerate Holdings. 10.16+ Security Agreement, dated August 13, 2003, by and between the Registrant and Moneyline Telerate Holdings. 21 Subsidiaries of the Registrant (incorporated by reference from Exhibit 21 to the April 2003 10-KSB). 28 31.1+ Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2+ Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1+ Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2+ Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - ---------- + Filed Herewith. (b) Reports on Form 8-K during the quarter ended June 30, 2003. 1) On June 17, 2003, the Company filed a Current Report on Form 8-K (the "Form 8-K") announcing that Carl Muscari had resigned as Chief Executive Officer, effective immediately. Mr. Muscari, who will remain on the Company's Board of Directors, was replaced by Nicholas Balletta, who serves as Chief Executive Officer. The Company also announced that Frank Joanlanne would serve as the Company's Executive Vice President, Sales and Marketing. In addition, in the Form 8-K the Company announced that its Board of Directors approved a proposal to change the Company's name to TalkPoint Communications Inc. The Company had received written consent, in lieu of a meeting of stockholders, from the holder of a majority of its voting stock to approve such name change. The Company prepared an Information Statement pursuant to Rule 14c-2 under the Securities Exchange Act of 1934 and mailed the Information Statement to its stockholders on July 24, 2003. 29 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. TalkPoint Communications Inc. By: /s/ Nicholas Balletta ------------------------------------ Nicholas Balletta Chief Executive Officer By: /s/ Lawrence K. Kinsella ------------------------------------ Lawrence K. Kinsella Chief Financial Officer August 14, 2003 30 STATEMENT OF DIFFERENCES ------------------------ The section symbol shall be expressed as................................ 'SS' EX-3 3 ex3-1.txt EXHIBIT 3.1 FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF VIDEO NETWORK COMMUNICATIONS, INC. Video Network Communications, Inc. (the "Corporation") is a corporation organized and existing under the laws of the State of Delaware. The original Certificate of Incorporation of Objective Communications, Inc. (as later amended and restated, the "Certificate of Incorporation") was filed with the Secretary of State of the State of Delaware on October 5, 1993. This Amended and Restated Certificate of Incorporation of the Corporation (the "Amended and Restated Certificate of Incorporation"), which restates, integrates and further amends the Certificate of Incorporation in its entirety, was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware. The Corporation does hereby certify on this 13th day of August, 2003 that: ARTICLE FIRST NAME The name of the corporation is: TalkPoint Communications Inc. (the "Corporation"). ARTICLE SECOND REGISTERED OFFICE AND REGISTERED AGENT The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, Delaware, 19801, County of New Castle, Delaware, and the name of the Corporation's registered agent in the State of Delaware at such address is The Corporation Trust Company. ARTICLE THIRD PURPOSE The purpose or purposes for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOURTH CAPITAL STOCK The total number of shares which the Corporation shall have authority to issue is ninety-two million five hundred thousand (92,500,000) shares of capital stock, of which ninety million (90,000,000) shares shall be common stock, par value of $.01 per share ("Common Stock"), and two million five hundred thousand (2,500,000) shall be preferred stock, par value $.01 per share ("Preferred Stock"). ARTICLE FIFTH COMMON STOCK On February 5, 2002 (the "Effective Date"), each five (5) shares of authorized Common Stock issued and outstanding or held in the treasury of the Corporation immediately prior to the Effective Date shall automatically be reclassified and converted into one (1) validly issued, fully paid and non-assessable share of Common Stock of the Corporation, par value $0.01 (a "New Share"). Each holder of record of shares of Common Stock so reclassified and converted shall on the Effective Date automatically become the record owner of the number of New Shares as shall result from such reclassification and conversion. Each such record holder shall be entitled to receive, upon the surrender of the certificate or certificates representing the shares of Common Stock so reclassified and converted at the office of the transfer agent of the Corporation in such form and accompanied by such documents, if any, as may be prescribed by the transfer agent of the Corporation, a new certificate or certificates representing the number of New Shares of which he, she or it is the record owner after giving effect to the provisions of this Article Fifth. The Corporation shall not issue fractional New Shares. Stockholders entitled to receive fractional New Shares shall receive, in lieu thereof, cash in an amount equal to the product of (a) the number of shares of the Common Stock held by such holder immediately prior to the Effective Date which have not been classified into a whole New Share, (b) multiplied by the closing price per share of the Common Stock as reported on the Over the Counter Bulletin Board (the "OTC") (or such other quotation or listing system on which the Common Stock may then be listed or quoted) on the last business day prior to the Effective Date on which such closing price was published by the OTC. ARTICLE SIXTH PREFERRED STOCK Section A. Preferred Stock. Shares of Preferred Stock may be issued from time to time in one or more classes or series as the Board of Directors of the Corporation (the "Board"), by resolution or resolutions, may from time to time determine, each of such classes or series to be distinctly designated. The voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, if any, of each such class or series may differ from those of any and all other class or series of Preferred Stock at any time outstanding, and the Board is hereby expressly granted authority to fix or alter, by resolution or resolutions, the designation, number, voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of each such series, including, but without limiting the generality of the foregoing, the following: 2 1. The distinctive designation of, and the number of shares of Preferred Stock that shall constitute, such class or series, which number (except where otherwise provided by the Board in the resolution establishing such class or series) may be increased (but not above the total number of shares of Preferred Stock) or decreased (but not below the number of shares of such class or series then outstanding) from time to time by like action of the Board; 2. The rights in respect of dividends, if any, of such class or series of Preferred Stock, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes or any other series of the same or other class or classes of capital stock of the Corporation, and whether such dividends shall be cumulative or noncumulative; 3. The right, if any, of the holders of such class or series of Preferred Stock to convert the same into, or exchange the same for, shares of any other class or classes or of any other series of the same or any other class or classes of capital stock of the Corporation, and the terms and conditions of such conversion or exchange; 4. Whether or not shares of such class or series of Preferred Stock shall be subject to redemption, and the redemption price or prices and the times at which, and the terms and conditions on which, shares of such class or series of Preferred Stock may be redeemed; 5. The rights, if any, of the holders of such class or series of Preferred Stock upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation or in the event of any merger or consolidation of or sale of assets by the Corporation; 6. The terms of any sinking fund or redemption or purchase account, if any, to be provided for shares of such class or series of the Preferred Stock; 7. The voting powers, if any, of the holders of any class or series of Preferred Stock generally or with respect to any particular matter, which may be less than, equal to or greater than one vote per share, and which may, without limiting the generality of the foregoing, include the right, voting as a class or series by itself or together with the holders of any other class or classes or series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation (which, without limiting the generality of the foregoing, may include a specified number or portion of the then-existing number of authorized directorships of the Corporation) generally or under such specific circumstances and on such conditions as shall be provided in the resolution or resolutions of the Board adopted pursuant thereto; and 8. Such other powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof, as the Board shall determine. 3 Section B. Rights of Preferred Stock. 1. After the provisions with respect to preferential dividends on any series of Preferred Stock (fixed in accordance with the provisions of this Article Sixth), if any, shall have been satisfied and after the Corporation shall have complied with all the requirements, if any, with respect to redemption of, or the setting aside of sums as sinking funds or redemption or purchase accounts with respect to, any series of Preferred Stock (fixed in accordance with the provisions of this Article Sixth), and subject further to any other conditions that may be fixed in accordance with the provisions of this Article Sixth, then and not otherwise, the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board. 2. In the event of the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of Preferred Stock by reason thereof, the holders of Common Stock shall, subject to the additional rights, if any (fixed in accordance with the provisions of this Article Sixth), of the holders of any outstanding shares of Preferred Stock, be entitled to receive all of the remaining assets of the Corporation, tangible or intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. 3. Except as may otherwise be required by law, and subject to the provisions of such resolution or resolutions as may be adopted by the Board pursuant to this Article Sixth granting the holders of one or more series of Preferred Stock exclusive voting powers with respect to any matter, each holder of Common Stock may have one vote in respect to each share of Common Stock held on all matters voted upon by the stockholders. The number of authorized shares of Preferred Stock and each class of Common Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of shares having a majority of the total number of votes which may be cast in the election of directors of the Corporation by all stockholders entitled to vote in such an election, voting together as a single class. ARTICLE SEVENTH DURATION The Corporation is to have perpetual existence. 4 ARTICLE EIGHTH BYLAWS In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make, alter, or repeal the Bylaws of the Corporation. ARTICLE NINTH INDEMNIFICATION The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify and hold harmless any and all persons who it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those stockholders, or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, and administrators of such a person. ARTICLE TENTH BOARD OF DIRECTORS Section A. Classified Board. The Board of Directors shall be divided into three classes, as nearly equal in number as the then-authorized number of directors constituting the Board permits, with the term of office of one class expiring each year and with each director serving for a term ending at the third annual meeting of stockholders following the annual meeting at which such director was elected. One class of directors shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 1999, the second class shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 2000 and the third class shall be initially elected for a term expiring at the annual meeting of stockholders to be held in 2001. Members of each class shall hold office until their successors are elected and qualified. At each succeeding annual meeting of the stockholders of the Corporation, the successors of the class of directors whose term expires at the meeting shall be elected by a plurality vote of all votes cast at such meeting to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Any vacancy on the Board resulting from the resignation or removal of a director may be filled by the remaining members of the Board of Directors, and the director so chosen shall hold office for the remainder of the full term of the resigning or removed director's seat. Section B. Vote Required for Modification of Classified Board. Any action to amend or repeal this Article Tenth will require the affirmative vote of the holders of 66 2/3% of the outstanding shares of Common Stock, voting together as a single class, unless such action has been previously approved by a majority vote of the full Board, in which case the affirmative 5 vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon will be sufficient to amend or repeal any provision of this Article Tenth. ARTICLE ELEVENTH LIMITATION ON DIRECTOR LIABILITY A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived any improper personal benefit. If the General Corporation Law of the State of Delaware is amended after the filing of this Fifth Amended and Restated Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware. No modifications or repeal of the provisions of this Article Eleventh shall adversely affect any right or protection of any director of the Corporation existing at the date of such modification or repeal or create any liability or adversely affect any such right or protection for any acts or omissions of such director occurring prior to such modification or repeal. ARTICLE TWELFTH RIGHTS OF STOCKHOLDERS From time to time any of the provisions of this Fifth Amended and Restated Certificate of Incorporation may be amended, altered, or replaced, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article Twelfth. 6 IN WITNESS WHEREOF, the undersigned, being a duly authorized officer of the Corporation herein before named, hereby executes and acknowledges that the facts set forth herein are true under penalties of perjury on the date first written above. By: /s/ Nicholas Balletta ------------------------- Name: Nicholas Balletta Title: Chief Executive Officer EX-10 4 ex10-12.txt EXHIBIT 10.12 June 13, 2003 CONFIDENTIAL Mr. Carl Muscari 14 Gilboa Ln Nashua, NH 03062 Re: Understanding Regarding Termination of Employment with Video Network Communications, Inc. Dear Carl: This letter ("Letter Agreement") is intended to confirm our mutual understanding regarding the termination of your employment relationship with Video Network Communications, Inc. and its affiliates (collectively, the "Company"), as follows: 1. Termination Date. As discussed, your last day of employment with the Company will be June 13, 2003 (the "Termination Date"). On the Termination Date, you will resign all of your officer and director positions and will become non-executive member of the board of directors of the Company to hold such position at the discretion of the Board Directors and stockholders of the Company. 2. Payments and Benefits. In full consideration of any amounts that may be owed to you by the Company pursuant to your employment letter dated May 17, 2002 (the "Employment Letter"), or any other agreement (whether written or oral) between you and the Company, you will be entitled to receive only the following payments and benefits (in each case subject to applicable tax withholding): a. Severance Benefits. Effective May 23, 2003, you will no longer receive your salary and will instead begin receiving the following payments and benefits: The Company will (i) pay you the amount of $100,000 through normal payroll over twelve (12) months following the Termination Date, and (ii) permit you to remain on VNCI's medical benefits plan for the period during which you continue to receive the payments noted in (i) above. b. Vacation Pay. You agree that you are not due any accrued vacation. c. COBRA. Once you are no longer on the Company's payroll, you will have the right to COBRA coverage for an additional 18 months under the Company's group medical plan, in accordance with and subject to the provisions of COBRA and the Company's group medical plan. This COBRA coverage will end if you do not make monthly premium payments or, it can end earlier if you experience a "COBRA disqualifying event" (such as becoming covered by another group health plan). Specific information on your COBRA rights and election forms will be provided to you under separate cover upon your request. d. 401(k). Any vested account you may have under the Company's 401(k) plan will be distributed to you in accordance with the terms of such plan. Information regarding the 401(k) plan will be provided to you separately. Additionally, you shall be entitled to continue making contributions to the Company's 401(k) plan, in accordance with the terms of such plan, for so long as you remain on the Company's payroll. e. Conditional Severance Payment. In addition to the amounts set forth above, you shall be eligible to receive additional severance amounts of up to $100,000, conditional upon the Company's achievement of the following criterion: In each calendar quarter in which the Company achieves $250,000 of net earnings generated from Company revenue (the "Target"), you will receive a payment within 45 days of the end of such quarter in the amount of $25,000. You shall be eligible to receive such payments for a total of four calendar quarters in which the Company achieves the Target, for a maximum of $100,000, and your eligibility for these payments will continue for a period of three (3) years from the end of the current calendar quarter (the "Eligible Period"). Should the Company fail to meet the Target during the Eligible Period, you shall have no entitlement to any additional severance payments. 3. Cessation of all other Compensation and Benefits. From and after the Termination Date, you will not receive compensation, payments or benefits of any kind from the Company other than those set forth in paragraph 2 above, or as otherwise set forth herein, and you expressly acknowledge and agree that, except with respect to the payments and benefits specifically set forth in this Letter Agreement, you are not entitled to any compensation, payment or benefit whatsoever. 4. Stock Options. Pursuant and subject to the terms of the Company's 1999 Stock Option Plan, you shall be entitled to retain those of the stock options that have been granted to you by the Company that have vested as of the date hereof (your option information is annexed hereto as Exhibit 1). Notwithstanding the terms of the Stock Option Plan and your Stock Option Agreement, you shall be entitled to retain your vested stock options for a period of twelve (12) months from the date hereof, unless otherwise extended by the Board in connection with the continuation of your participation as a Board Member of the Company. 5. Return of Property. You agree that prior to the Termination Date, you will have returned to the Company any and all original and duplicate copies of all files, calendars, books, records, notes, manuals, computer disks, diskettes and any other magnetic or other media material that 2 you have in your possession or under your control belonging to the Company, or containing confidential or proprietary information concerning the Company or their clients or operations. You agree that you will also return to the Company any Company equipment, identification, keys, and card keys and any other property of the Company. Notwithstanding the foregoing, for so long as you remain a director of the Company you may continue to keep your Company provided laptop computer and email account until and unless the Company, in its sole discretion, determines otherwise. Promptly following the Company's demand, you shall return the laptop computer to the Company. 6. Employment Letter. You acknowledge that upon the Termination Date, the Employment Letter shall be of no further force and effect; provided, however, that as provided in paragraph 16 thereof, the provisions of paragraph 8 (Restrictive Covenants), 9 (Insurance and Indemnification) and 15 (Dispute Resolution) shall remain in effect in accordance with their terms. 7. Release. As provided in paragraph 7 of the Employment Letter, in order to be entitled to the severance benefits set forth in paragraph 2(a) above, you must (i) sign, date and deliver to the Company, no earlier than the Termination Date and no later than July 7, 2003, the attached Release, and not subsequently revoke such Release, and (ii) comply and continue to comply with provisions of paragraph 8 of the Employment Letter. The severance benefits set forth in paragraph 2(a) will not commence unless and until you have signed and returned the release and the period during which you may revoke the Release shall have expired, and during such period, you have not in fact revoked the Release. Once these severance benefits commence, they will continue only if you comply with condition (ii) above. 8. Board Role. In connection with your continuing role as Director of the Company, the Board may request that you engage in activities on behalf of the Company beyond your Board responsibilities. Any compensation to be paid to you for the performance of such activities will be agreed by you and the Board. While you remain on the Board, you shall not accept employment of any kind with any person or entity that is a direct competitor of the Company, unless otherwise agreed in advance by the Company in writing. For the avoidance of doubt, nothing herein shall preclude you from accepting employment with any person or entity that is not a direct competitor of the Company. 9. Miscellaneous: Choice of Law. This Letter Agreement may be executed in several counterparts, each or which shall be deemed to be an original but all of which together will constitute one and the same instrument. This Letter Agreement constitutes the entire agreement, and supersedes all prior agreements, of the parties hereto relating to the subject matter hereof, and there are no written or oral terms or representations made by either party other than those contained herein. This Letter Agreement cannot be modified, altered or amended except by a writing signed by each party. No waiver by either party of any provision or condition of this Letter Agreement at any time shall be deemed a waiver of such provision or condition at any prior or subsequent time or of any provision or condition at the same or any prior or subsequent time. This Letter Agreement and attached Release shall be governed by and construed in accordance with the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other 3 jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. 10. Notices. Signed and dated copies of this Letter Agreement, the Release, or any revocation of the Release should be sent by mail, courier, or facsimile to the Company, attention General Counsel, at 233 Broadway, N.Y, N.Y 10279, fax 212-553-9698. Please indicate your acceptance to the terms of this Letter Agreement by returning a signed and dated copy no later than July 7, 2003. Sincerely, Video Network Communications, Inc. By: /s/ Lawrence K. Kinsella ------------------------------- Lawrence K. Kinsella Chief Financial Officer ACCEPTED AND AGREED /s/ Carl Muscari - ----------------------------------- Carl Muscari Date: June 16, 2003 ----------------------------- 4 Schedule 1 Option Information
Name Position Plan Grant Date Expiration Options Exercise $ Vesting Schedule Vested Muscari, C. CEO 1999 09/09/99 09/08/04 77,500 $13.13 Per agreement 52,500 Muscari, C. CEO 1999 12/27/00 12/27/05 15,000 $ 5.16 3 0.3333 10,000 Muscari, C. CEO 1999 01/24/03 03/27/08 150,000 $ 0.60 3 0.3333 75,000
RELEASE I, Carl Muscari, the undersigned, irrevocably and unconditionally release, remise, and forever discharge Video Network Communications, Inc. (the "Company") and the Releasees (as defined below) from, any and all agreements, promises, liabilities, claims and demands of any kind, in law or equity, whether known or unknown, suspected or unsuspected, which I, my heirs, executors, administrators, successors or assigns ever had, or now have against the Company or any Releasee, including without limitation any and all contract claims, benefit claims, tort claims, fraud claims, claims for payments, bonuses, defamation, disparagement, or any other personal injury claims, claims relating to retirement, pension or unemployment, arising out of or relating to my status as a stockholder of the Company, my employment, compensation and benefits with the Company, and/or the termination thereof, and any and all claims of unfair or unjust dismissal or discrimination on any basis including but not limited to on the basis of age, race, gender, disability, ethnic or national origin, sexual orientation, and claims for costs, expenses and attorneys' fees with respect thereto existing, in each case arising or occurring at any time up to and including the date I execute this Release, other than those relating to my enforcement of the terms of the Letter Agreement between me and the Company, dated June 5, 2003. This Release specifically includes, without limitation, any and all claims under the Age Discrimination in Employment Act, 29 U.S.C. 'SS' 621 et seq., Title VII of the Civil Rights Act of 1964, 42 U.S.C. 'SS' 2000(e), the Americans with Disabilities Act, 42 U.S.C. 1201, et seq., the Employee Retirement Income Security Act of 1974, any and all other federal, state and/or local statutes, ordinances, regulations or common laws, and any and all claims for benefits under any compensation, bonus or benefit plan, program or policy of the Company or the Releasees. For purposes of this Letter Agreement, the term "the Company and/or Releasees" includes the Company, its direct or indirect subsidiaries, insurers, direct or indirect corporate parents, affiliates, its and their past, present and future predecessors, successors and assigns, and its and their current, former and future officers, directors, employees, stockholders, representatives, agents, and attorneys, in their official and/or individual capacities, jointly and individually. Because the Release includes a release of claims under the Age Discrimination in Employment Act, I understand that I have a period of up to 21 days to review (until July 7, 2003) and consider this Release. I agree not to sign this Release prior to my last day of employment with the Company. I further understand that once I have signed this Release, I may revoke it at any time during the 7 days following its execution by delivering a written notice of revocation during that period to Company by mail, courier, or facsimile, to the attention of Adam Ableman, Esq, at 233 Broadway, N.Y., N.Y. 10279, fax 212-553-9698. In the event that I fail to execute and return this Release by July 7, 2003, or execute it and then revoke it during the 7-day revocation period, this Release will not be effective, and I will not be entitled to the severance benefits set forth in paragraph 2(a) of the Letter Agreement. 6 I ACKNOWLEDGE THAT I HAVE READ THIS RELEASE AND I UNDERSTAND AND ACCEPT ITS TERMS /s/ Carl Muscari - ------------------------- Carl Muscari June 16, 2003 - ------------------------- Date 7 EX-10 5 ex10-14.txt EXHIBIT 10.14 Execution Copy ASSIGNMENT AND AMENDMENT OF LEASE, CONSENT TO ASSIGNMENT AND RELEASE AND WAIVER OF CLAIMS THIS ASSIGNMENT AND AMENDMENT OF LEASE, CONSENT TO ASSIGNMENT, AND RELEASE AND WAIVER OF CLAIMS AGREEMENT (this "Agreement") is made as of the 14th day of February, 2003, by and among WU/Lighthouse 100 William, L.L.C., a Delaware limited liability company ("Landlord"), WilTel Communications, LLC, a Delaware limited liability company ("Assignor"), and Video Network Communications, Inc., a Delaware corporation ("Assignee"). Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Lease (as defined below). RECITALS: WHEREAS, 100 William LLC, Landlord's predecessor-in-interest, and NextVenue, Inc., Assignor's predecessor-in-interest, entered into that certain Agreement of Lease, dated as of July 7, 1999 (the "Lease"), a copy of which is attached hereto as Exhibit A and made a part hereof, which Lease covers the entire eighth (8th) floor and a portion of the ninth (9th) floor of the building located at 100 William Street, New York, NY (the "Premises"); WHEREAS, Assignor desires to assign to Assignee, the Lease and all of Assignor's rights and obligations thereunder and all of Assignor's right, title and interest in and to the Premises, and Assignee desires to accept such assignment by Assignor and to be bound by the terms of the Lease, as amended hereby, following such assignment; WHEREAS, Assignee and Landlord desire to amend the Lease as set forth herein; and WHEREAS, Landlord and Assignor desire to release and waive all claims they may have against each other in connection with the Lease or performance thereunder and the use and occupancy of the Premises. NOW THEREFORE, in consideration of the mutual promises and covenants herein exchanged and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord, Assignor and Assignee hereby agree as follows: 1. Assignment. As of the Effective Date (as hereinafter defined), Assignor hereby conveys, assigns and transfers to Assignee all of its right, title, obligations, liabilities, duties and interest in and to the Lease and the Premises and Assignee accepts the assignment and assumes all of Assignor's right, title, obligations, liabilities, duties and interest in and to the Lease and the Premises and agrees to perform and be bound by all the duties and obligations of Assignor under the Lease and to pay and discharge all obligations of Assignor under the Lease. The Landlord hereby consents to such assignment and assumption and shall, upon and following the Effective Date, treat Assignee as the Tenant under the Lease as if Assignee had been the original signator as Tenant on the Lease. Landlord's consent shall not in any way be construed to relieve Assignee from obtaining the express written consent of Landlord to any further assignment of the Lease, except to the extent expressly provided in the Lease. 2. Amendment. Each of Landlord and Assignee hereby agrees that, as of the Effective Date, the Lease shall be amended as follows: i. Article 1(B)(iii) thereof shall be deleted in its entirety and the following shall be inserted in place thereof: "(iii) "Rent" shall mean: (a) for the period commencing on the Effective Date through and including the day immediately preceding the date on which the fourth (4th) anniversary of the Effective Date shall occur, $930,540.00 per annum, payable in equal monthly installments of $77,545.00; and (b) for the period commencing on the date on which the fourth (4th) anniversary of the Effective Date shall occur through and including the Expiration Date, $992,576.00 per annum, payable in equal monthly installments of $82,714.67." ii. Article 1(B) thereof shall be amended to add the following definition to the end thereof: "(xi) "Effective Date" shall have the meaning given to such term in that certain Assignment and Amendment of Lease, Consent to Assignment and Release and Waiver of Claims Agreement, dated as of February 14, 2003, by and among Landlord, WilTel Communications, LLC and Video Network Communications, Inc." iii. Article 36, Article 43 and Schedule B-1 thereof shall be deemed deleted therefrom and of no further force or effect. In addition, all references in the Lease to "Landlord's Core Work" or any requirement that Landlord perform Landlord's Core Work shall be deemed deleted therefrom. 3. Liability. Assignor hereby agrees to remain liable for all of its obligations arising under, or in connection with, the Lease, the Premises or Assignor's use and occupancy of the Premises arising out of events, circumstances or conditions occurring or existing on or prior to the Effective Date, regardless of whether any such liabilities arise before, on or after the Effective Date. Assignee hereby agrees to be liable for all of its obligations arising under, or in connection with, the Lease, the Premises or Assignee's use and occupancy of the Premises arising out of events, circumstances or conditions occurring or existing after the Effective Date. 2 4. Waiver and Release. As of the Effective Date, Landlord and Assignor hereby forever release and discharge the other, and their respective employees, agents, officers, directors and other representatives, from any and all undertakings, obligations, duties, actions, causes of action, claims, demands, expenses, indemnity, recoupment, offset or setoff whatsoever, which arise after the Effective Date and which is set forth in, based upon, or relates directly or indirectly to, the (i) Lease (including, among others, those obligations under Articles 12G, 12J, and 12M regarding the payment of money to Landlord or any failure of Assignee to perform in accordance with the Lease or the terms of this Agreement), except as expressly provided in this Agreement, (ii) Premises or (iii) Assignor's use and occupancy of the Premises, whether such duties or claims are known, unknown or unforeseen, absolute or contingent, accrued or unaccrued, and whether at law or in equity, whether in contract, negligence, tort, statutory or any other theory of liability and Landlord and Assignor hereby forever waive any and all such claims and defenses related to the (i) Lease, (ii) Premises or (iii) Assignor's use and occupancy of the Premises, both direct and collateral, against the other. In addition, the Landlord expressly waives its rights under Article 12C of the Lease with respect to the assignment covered by this Agreement. 5. Effective Date. The Effective Date shall be the date of the closing of the sale of Assignor's webcasting business to Assignee pursuant to that certain Asset Purchase Agreement by and among Assignee, Assignor and Williams Communications Procurement, LP. 6. Return of Letter of Credit and Transfer of Deposit. (A) Assignee shall cause a Letter of Credit (the "Assignee's LC") in the amount of $844,101.00 to be issued for the benefit of Landlord by a New York City bank acceptable to Landlord and otherwise in form and substance substantially similar to the Letter of Credit, dated January 4, 2002, issued by JP Morgan Chase (numbered P-219902) for the benefit of Landlord (the "Existing LC"). Assignee may, on the third (3rd) anniversary of the Effective Date and on each succeeding anniversary, cause the Assignee's LC to be reduced by an amount equal to $70,341.75, provided that Assignee is not then in default under any of the terms, covenants or conditions of the Lease on Assignee's part to be observed and performed. In the event that at any time Assignee shall be entitled to reduce such Assignee's LC as provided in the foregoing provisions of this Paragraph, the security shall be held as cash security then, in lieu of Assignee replacing any such Assignee's LC, Landlord shall return sums to Assignee equal to the amount by which Assignee's LC would have been reduced if it were in existence; provided, however, in no event shall the Assignee's LC or cash security ever be reduced below the sum of $140,683.50. The sum of $844,101.00 referred to in the first sentence of this Paragraph shall be deemed reduced as the foregoing provisions shall operate to so reduce Assignee's LC and/or cash security, as the case may be. (B) In addition to Assignee's LC, Assignee shall deliver to Landlord, on or prior to the Effective Date, a guaranty from Moneyline Telerate, the indirect owner of a 3 majority of the issued and outstanding stock of Assignee, in form and substance substantially similar to the form attached hereto as Exhibit B and made a part hereof. (C) Promptly following the date on which Assignee complies with the requirements of Subsections A and B above, Landlord shall return to Assignor the Existing LC. The parties agree that any deposit currently being held by Landlord other than the Existing LC shall be transferred for the benefit and use by and in favor of Assignee. 7. Fire Maintenance Agreement. As soon as practicable after the date hereof, Assignee shall enter into a maintenance contract with Firecom Case Acme, a fire safety contractor, relating to the maintenance of the sprinkler system installed within the Premises. 8. Non-Disturbance Agreement. Notwithstanding any provisions of Article 7A of the Lease to the contrary, Landlord agrees to use its reasonable efforts to cause the then lessor under any Superior Lease or the then holder of any Mortgage, as the case may be, to enter into a subordination, non-disturbance and attornment agreement, in such lessor's or holder's customary form (any such agreement, or any agreement of similar import is referred to in this Agreement as a "Non-Disturbance Agreement"), as promptly as practicable after the Effective Date. Assignee agrees to cooperate reasonably with Landlord in Landlord's obtaining any Non-Disturbance Agreement and Assignee shall provide Landlord and any such lessor or holder, as the case may be, with any information reasonably required by them in connection with obtaining any such Non-Disturbance Agreement. If Landlord is unable in good faith to obtain such Non-Disturbance Agreement from any such lessor or holder, neither the validity of the Lease (as amended by this Agreement) nor the obligations of Assignee under the Lease or this Agreement shall be affected thereby and Landlord shall not be liable to Assignee for any such lessor's or holder's refusal to deliver such Non-Disturbance Agreement. 9. No Broker. Assignor and Assignee hereby represent to Landlord that there are no brokers involved in this transaction and that there are no third parties entitled to claim any commissions or similar compensation in connection with this Agreement. 10. Landlord Consent. Assignor and Assignee hereby acknowledge and agree that the obligations arising under this Agreement are conditioned upon obtaining the consent of Landlord and Landlord's execution of this Agreement. Landlord hereby acknowledges and agrees that, upon execution and delivery of this Agreement by Assignor, Assignee and Landlord and on the occurrence of the Effective Date, no further action shall be required to effectuate the transfer and assignment of Assignor's right, title, duties and interest in and to the Lease and the Premises to Assignee. Landlord further acknowledges and agrees that all provisions and requirements in Article 12 of the Lease are hereby satisfied and waives its rights under and in respect of Articles 12C and 12D of the Lease with respect to the assignment of the Lease to Assignee hereunder. 4 11. Attorneys' Fees. Pursuant to Subsection (ix) of Article 12G of the Lease, each of Assignor and Assignee agree to pay to Landlord, within five (5) days after receipt of a bill therefor, as additional rent, one-half of Landlord's reasonable costs incurred in connection with this Agreement, including, without limitation, Landlord's reasonable counsel fees incurred in connection with the preparation and execution of this Agreement; it being understood that Assignor's and Assignee's payments, in the aggregate, shall reimburse Landlord for one hundred percent (100%) of Landlord's reasonable counsel fees. 12. No Assignment Profits: Assignor and Assignee acknowledge that Subsection (i) of Article 12J of the Lease provides that Assignor shall pay to Landlord a sum (the "Assignment Profit") equal to one hundred percent (100%) of all sums and other consideration paid to Assignor by Assignee for or by reason of such assignment (less all expenses reasonably and actually incurred by Assignor in connection with the assignment as further described in Article 12J of the Lease). Each of Assignor and Assignee hereby represent and warrant to Landlord that there is no Assignment Profit arising from or paid in connection with the execution and delivery of this Agreement. Each of Assignor and Assignee agree to provide to Landlord, promptly upon request, any information or other documentation reasonably required by Landlord to verify the accuracy of the foregoing representation and warranty. 13. Entire Agreement. This Agreement represents the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior understandings, oral or written. 14. Counterparts. This Agreement may be entered into by the exchange of counterparts (including facsimiled counterparts). If exchange is effected by a party by the use of a facsimiled counterpart, then that party must provide the original signed counterpart to the other party within seven days of exchange. 15. Governing Law. This Agreement shall be construed and governed by the laws of the State of New York, excluding its choice of law provisions. 16. Notices. All notices, requests, demands, claims and other communications required or permitted to be given hereunder or under the Lease shall be in writing and shall be sent by: (a) personal delivery or by a nationally recognized overnight courier service (effective upon delivery); (b) facsimile (effective on the next day after transmission); or (c) registered or certified mail, return receipt requested and postage prepaid (effective upon delivery), in each case addressed to the intended recipient as set forth below: 5 If to Assignee: Video Network Communications, Inc. 100 William Street, 8th Floor New York, New York 10038 Attention: Alan Zwerin Facsimile: (212) 404-1537 If to Assignor: WilTel Communications, LLC One Technology Center Tulsa, OK 74103 Attention: Candice Cheeseman, General Counsel Facsimile: (918) 547-2360 If to Landlord: c/o Lighthouse Real Estate Management, LLC 444 Merrick Road Lynbrook, New York 11563 Attention: Mr. Paul Cooper Facsimile: (516) 887-8901 with copies to Goldfarb & Fleece 345 Park Avenue New York, New York 10154 Attention: Marc J. Becker, Esq. Facsimile: (212) 751-3738 Either party may change its addresses for receiving notices by giving written notice of such change to the other party in accordance with this Section 16. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 6 IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this Agreement on the day and year first above written. WU/LIGHTHOUSE 100 WILLIAM L.L.C., a Delaware limited liability company By: LIGHTHOUSE 100 WILLIAM LLC, a Delaware limited liability company, its managing member By: 100 WILLIAM F/L PROPERTIES L.L.C., a Delaware limited liability company, its managing member By: LIGHTHOUSE 100 WILLIAM OPERATING LLC, a New York limited liability company, its manager By: /s/ Louis Sheinker ------------------------------- Name: Louis Sheinker Title: Member WILTEL COMMUNICATIONS, LLC By: /s/ Ken Kinnear -------------------------------- Name: Ken Kinnear Title: Vice President and Controller VIDEO NETWORK COMMUNICATIONS, INC. By: /s/ Alexander Russo -------------------------------- Name: Alexander Russo Title: Director and Attorney-in-Fact 7 EXHIBIT A LEASE AGREEMENT OF LEASE Between 100 WILLIAM LLC Landlord, and NEXTVENUE, INC. Tenant. Premises: The entire Eighth (8th) Floor and a portion of the Ninth (9th) Floor 100 William Street New York, New York TABLE OF CONTENTS Page No. -------- 1. BASIC LEASE TERMS........................................................1 A. Premises............................................................1 B. Definitions.........................................................1 2. USE AND OCCUPANCY........................................................3 A. Permitted Uses......................................................3 B. Use Prohibitions....................................................3 3. ALTERATIONS..............................................................3 A. Alterations Within Premises.........................................3 B. Intentionally Omitted...............................................4 C. Submission of Plans.................................................4 D. Mechanics' Liens; Labor Conflicts..................................5 4. REPAIRS - FLOOR LOAD.....................................................5 5. WINDOW CLEANING..........................................................6 6. REQUIREMENTS OF LAW......................................................6 7. SUBORDINATION............................................................7 A. Subordination.......................................................7 B. Attornment..........................................................7 8. RULES AND REGULATIONS....................................................7 9. INSURANCE................................................................8 A. Tenant's Insurance..................................................8 B. Tenant's Improvement Insurance......................................9 C. Waiver of Subrogation...............................................9 10. DESTRUCTION OF THE PREMISES; PROPERTY LOSS OR DAMAGE....................9 A. Repair of Damage....................................................9 B. Termination Option.................................................10 C. Repair Delays......................................................10 D. Provision Controlling..............................................11 E. Property Loss or Damage............................................11 11. CONDEMNATION............................................................12 A. Condemnation.......................................................12 B. Award..............................................................12 12. ASSIGNMENT AND SUBLETTING...............................................12 A. Prohibition Without Consent........................................12 B. Notice of Proposed Transfer........................................13 C. Landlord's Option..................................................13 D. Termination by Landlord............................................13 i E. Intentionally Omitted..............................................13 F. Effect of Termination..............................................13 G. Conditions for Landlord's Approval.................................14 H. Future Requests....................................................15 I. Sublease Provisions................................................16 J. Profits from Assignment or Subletting..............................16 K. Other Transfers....................................................17 L. Related Corporation................................................17 M. Assumption by Assignee.............................................17 N. Liability of Tenant................................................18 O. Listings...........................................................18 P. Intentionally Reserved.............................................18 Q. Re-entry by Landlord...............................................18 13. CONDITION OF THE PREMISES...............................................19 A. Acceptance by Tenant...............................................19 B. Tenant's Initial Alteration........................................19 14. ACCESS TO PREMISES......................................................19 15. CERTIFICATE OF OCCUPANCY................................................20 16. LANDLORD'S LIABILITY....................................................20 17. DEFAULT.................................................................20 A. Events of Default; Conditions of Limitation........................20 B. Effect of Bankruptcy...............................................21 C. Conditional Limitation.............................................22 18. REMEDIES AND DAMAGES....................................................22 A. Landlord's Remedies................................................22 B. Damages............................................................23 C. Legal Fees.........................................................24 19. FEES AND EXPENSES.......................................................25 A. Curing Tenant's Defaults...........................................25 B. Late Charges.......................................................25 20. NO REPRESENTATIONS BY LANDLORD..........................................25 21. END OF TERM.............................................................25 A. Surrender of Premises..............................................25 B. Holdover by Tenant.................................................26 22. QUIET ENJOYMENT.........................................................26 23. FAILURE TO GIVE POSSESSION..............................................26 24. NO WAIVER...............................................................26 25. WAIVER OF TRIAL BY JURY.................................................27 ii 26. INABILITY TO PERFORM....................................................27 27. BILLS AND NOTICES.......................................................28 28. ESCALATION..............................................................28 A. Defined Terms......................................................28 B. Escalation.........................................................30 C. Payment of Escalations.............................................31 D. Adjustments........................................................32 29. SERVICES................................................................33 A. Elevator...........................................................33 B. Heating............................................................33 C. Cooling............................................................33 D. After Hours and Additional Services................................34 E. Cleaning...........................................................35 F. Sprinkler System...................................................35 G. Water..............................................................35 H. Electricity Service................................................36 I. Interruption of Services...........................................37 30. PARTNERSHIP TENANT......................................................38 A. Partnership Tenants................................................38 B. Limited Liability Entity...........................................38 31. VAULT SPACE.............................................................39 32. SECURITY DEPOSIT........................................................39 33. CAPTIONS................................................................40 34. ADDITIONAL DEFINITIONS..................................................40 35. PARTIES BOUND...........................................................40 36. BROKER..................................................................40 37. INDEMNITY...............................................................40 38. ADJACENT EXCAVATION SHORING.............................................41 39. MISCELLANEOUS...........................................................41 A. No Offer...........................................................41 B. Signatories........................................................41 C. Certificates.......................................................41 D. Directory Listings.................................................42 E. Authority..........................................................42 F. Signage............................................................42 G. Consents and Approvals.............................................42 H. Intentionally Omitted..............................................43 I. Renewal Option.....................................................43 iii J. Downtown Benefits..................................................44 40. RIGHT OF FIRST OFFER....................................................44 41. SATELLITE DISHES........................................................47 A. Satellite Rent.....................................................47 B. Roof Access........................................................48 C. Tenant's Obligations...............................................48 42. TENANT'S GENERATOR......................................................50 43. DOWNTOWN BENEFITS.......................................................51 EXHIBITS Exhibit 1 Floor Plan of Premises Exhibit 2 Intentionally Deleted Exhibit 3 Current Cleaning Specifications Exhibit 4 Form of Letter of Credit SCHEDULES Schedule A Rules and Regulations Schedule B-l Landlord's Core Work Schedule B-2 Tenant's Initial Alteration Schedule C Requirements for Certificates of Final Approval Schedule D Tenant Alteration Work and New Construction Conditions and Requirement iv AGREEMENT OF LEASE, made as of this 7th day of July 1999, between 100 WILLIAM LLC, a Delaware limited liability company, having an office c/o Taconic Investment Partners, L.L.C., 1500 Broadway, Suite 1020 New York, New York 10036 ("Landlord") and NEXTVENUE, INC., a Delaware corporation, having an office at 2200 Fletcher Avenue, Fifth Floor, Fort Lee, New Jersey 07024 ("Tenant"). W I T N E S S E T H: The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby covenant as follows: 1. BASIC LEASE TERMS. A. Premises. Landlord hereby leases to Tenant and Tenant hereby hires from Landlord the entire eighth (8th) floor and a portion of the ninth (9th) floor, as more particularly shown hatched on Exhibit 1 annexed hereto and made a part hereof (the "Premises") in the building known as 100 William Street, in the Borough of Manhattan, New York County, City and State of New York (the "Building" and, together with the plot of land upon which such building stands, the "Real Property") for a term (the "Term") to commence on the "Commencement Date" (hereinafter defined), and to end on the "Expiration Date" (hereinafter defined), both dates inclusive, unless the Term shall sooner end pursuant to any of the terms, covenants or conditions of this Lease or pursuant to law at the "Rent" (hereinafter defined, which Rent shall also include any additional rent payable hereunder), which Tenant agrees to pay in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments, in advance, commencing on the Rent Commencement Date and on the first (1st) day of each calendar month thereafter during the Term (except as hereinafter otherwise provided), at the office of Landlord or such other place as Landlord may designate, without any set-off, offset, abatement or deduction whatsoever, except that the first (1st) monthly installment of Rent shall be payable on the date hereof. If the Rent Commencement Date (as hereinafter defined) shall occur on a date other than the first (1st) day of any calendar month, Tenant shall pay to Landlord, on the first (1st) day of the month next succeeding the month during which the Rent Commencement Date shall occur, an amount equal to such proportion of an equal monthly installment of Rent as the number of days from and including the Rent Commencement Date bears to the total number of days in said calendar month. Such payment, together with the sum paid by Tenant upon the execution of this Lease, shall constitute payment of the Rent for the period from the Rent Commencement Date to and including the last day of the next succeeding calendar month. B. Definitions. The following definitions contained in this subsection B of this Article 1 shall have the meanings hereinafter set forth used throughout this Lease, including, without limitation, the Exhibits, Schedules and Riders attached hereto (if any). (i) "Commencement Date" shall mean the date hereof. (ii) "Expiration Date" shall mean the date which is the ten (10) year anniversary of the Rent Commencement Date. (iii) "Rent" shall mean: (a) for the period commencing on the Rent Commencement Date through and including the day immediately preceding the date on which the fifth (5th) anniversary of the Rent Commencement Date shall occur, $844,101.00 Dollars per annum, payable in equal monthly installments of $70,341.75 Dollars each; and (b) for the period commencing on the date on which the fifth (5th) anniversary of the Rent Commencement Date shall occur through and including the Expiration Date, $906,627.00 per annum, payable in equal monthly installments of $75,552.25 each. (iv) "Tenant's Initial Alteration" shall mean the work and installations at the Premises as set forth in Schedule B-1. All of the terms, covenants and conditions of Schedule B are incorporated in this Lease by reference and shall be deemed a part of this Lease as though more fully set forth in the body of this Lease. (v) "Rent Commencement Date" shall mean the eight (8) month anniversary of the Commencement Date; provided, however, that (1) if Landlord shall not have substantially completed Landlord's Core Work on or prior to the Landlord's Core Work Anticipated Completion Date (as defined in Schedule B-l) by reasons other than force majeure and (ii) the substantial completion of Landlord's Core Work after the Landlord's Core Work Anticipated Completion Date unreasonably interferes with the commencement and/or substantial completion by or on behalf of Tenant of Tenant's Initial Alteration so as to actually have caused a material delay in the completion thereof, Tenant's Rent Commencement Date shall be extended one (1) day for each day that the commencement and substantial completion of Tenant's Initial Alteration was actually materially delayed by Landlord's failure to substantially complete Landlord's Core Work on or prior to the Landlord's Core Work Anticipated Completion Date by means other than force majeure. (vi) "Permitted Uses" shall mean executive and general offices and data center in connection with Tenant's business. Notwithstanding the foregoing, Tenant shall also be permitted to make telephone sales from the Premises incidental to the foregoing. (vii) "Base Tax Year" shall mean the fiscal year commencing July 1, 1999 and ending June 30, 2000, or such other fiscal year as shall be used by the City of New York. (viii) "Tenant's Proportionate Share" shall mean 8.389%. (ix) "Broker" shall mean, collectively, Douglas Elliman Commercial and Insignia/Edward S. Gordon, Inc. (x) "Hazardous Substances" shall mean, collectively, (a) asbestos and polychlorinated biphenyls and (b) hazardous or toxic materials, wastes and substances which are defined, determined and identified as such pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. 'SS''SS' 9601 et seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. 'SS''SS' 6901 et seq.; the Toxic Substance Control Act, 15 U.S.C. 'SS''SS' 2601 et seq.; the Water Pollution Control Act (also known as the Clean Water Act), 33 U.S.C. 'SS' 1251 et seq.; the Clean Air Act, 42 U.S.C. 'SS' 7401 et seq.; and the Hazardous Materials Transportation Act, 49 U.S.C. 'SS' 1801 et seq. Notwithstanding anything to the contrary contained in this subsection B of this Article 1, Articles 1 through 42 shall control the rights and obligations of the parties hereto except that the provisions of any Riders shall supersede any inconsistent provisions in Articles I through 42, as the case may be. 2 2. USE AND OCCUPANCY. A. Permitted Uses. Tenant shall use and occupy the Premises for the Permitted Uses, and for no other purpose. B. Use Prohibitions. Tenant hereby represents, warrants and agrees that Tenant's business is not photographic, multilith or multigraph reproductions or offset printing. Anything contained herein to the contrary notwithstanding, Tenant shall not use the Premises or any part thereof, or permit the Premises or any part thereof to be used (i) for the business of photographic, multilith or multigraph reproductions or offset printing, (ii) for a banking, trust company, depository, guarantee or safe deposit business, (iii) as a savings bank, a savings and loan association or a loan company, (iv) for the sale of travelers checks (except as may be issued by Tenant to employees of Tenant for petty cash type reimbursement), money orders, drafts, foreign exchange or letters of credit or for the receipt of money for transmission, (v) as a "retail" stock broker's or dealer's office which shall be open to the general public (except pursuant to prior appointment), (vi) as a restaurant or bar or for the sale of confectionery, soda, beverages, sandwiches, ice cream or baked goods or for the preparation, dispensing or consumption of food or beverages in any manner whatsoever except for vending machines, the type, number and location of which shall be subject to Landlord's prior approval, which approval shall not be unreasonably withheld or delayed, (vii) as a news or cigar stand, (viii) as an employment agency, labor union office, physician's or dentist's office or for the rendition of any other diagnostic or therapeutic services, dance or music studio, school (except for the training of employees of Tenant), (ix) as a barber shop, beauty salon or manicure shop (x) for the direct sale, at retail, wholesale or otherwise, of any goods or products, (xi) for a public stenographer or typist, (xii) for a telephone or telegraph agency, telephone or secretarial service for the public at large, (xiii) for a messenger service for the public at large, (xiv) for gambling or gaming activities, obscene or pornographic purposes or any sort of commercial sex establishment, (xv) for the possession, storage, manufacture or sale of alcohol, drugs or narcotics, (xvi) for the conduct of a public auction, (xvii) for the offices or business of any federal, state or municipal agency or any agency of any foreign government or (xviii) for any use that would cause the Premises to be deemed a place of public accommodation under the Americans with Disabilities Act of 1990. Nothing in this subsection B shall preclude Tenant from using any part of the Premises for photographic, multilith or multigraph reproductions in connection with, either directly or indirectly, its own business and/or activities. 3. ALTERATIONS. A. Alterations Within Premises. Except as otherwise provided herein, Tenant shall not make or perform or permit the making or performance of, any alterations, installations, improvements, additions or other physical changes in or about the Premises ("Alterations") without Landlord's prior consent. Notwithstanding the preceding sentence, Landlord's prior consent shall not be required for decorative, non-structural changes which do not cost in excess of $75,000.00 in the aggregate. Landlord agrees not to unreasonably withhold or delay its consent to any Alterations proposed to be made by Tenant to adapt the Premises for those business purposes permitted by subsection A of Article 2 hereof, which are nonstructural and which do not affect the Building's mechanical, electrical, plumbing, Class E or other Building systems or the structural integrity of the Building, provided that such Alterations are performed only by contractors or mechanics reasonably approved by Landlord, do not affect any part of the Building other than the Premises, do not adversely affect any service required to be furnished by Landlord to Tenant or to any other tenant or occupant of the Building, do not reduce the value or utility of the Building and are performed in compliance with all applicable laws. Tenant shall not perform work, without Landlord's consent, which consent Landlord may withhold in its sole discretion, which would (i) require changes to the structural components of the Building or the exterior design of the Building, (ii) require any material modification to the Building's mechanical, electrical, plumbing installations or other Building installations outside the Premises, (iii) not be in compliance with all applicable laws, rules, 3 regulations and requirements of any governmental department having jurisdiction over the Building and/or the construction of the Premises, including but not limited to, the Americans with Disabilities Act of 1990, or (iv) be incompatible with the Certificate of Occupancy for the Building. Any changes required by any governmental department affecting the construction of the Premises (other than Landlord's Core Work) shall be performed at Tenant's sole cost and expense. All Alterations shall be done at Tenant's expense and at such times and in such manner as Landlord may from time to time reasonably designate pursuant to the conditions for Alterations prescribed by Landlord for the Premises, a copy of which is annexed hereto as Schedule D and made a part hereof. Landlord shall have the right to modify such rules and regulations provided that no such modification shall materially increase Tenant's obligations or materially reduce its rights with respect to the performance of Alterations. All furniture, furnishings and movable fixtures and removable partitions installed by Tenant must be removed from the Premises by Tenant, at Tenant's expense, prior to the Expiration Date. All Alterations in and to the Premises which are made by Landlord or Tenant prior to and during the Term, or any renewal thereof, shall become the property of Landlord upon the Expiration Date or earlier end of the Term or any renewal thereof, and shall not be removed from the Premises by Tenant unless Landlord, at Landlord's option by notice to Tenant contemporaneously with Landlord's approval of such Alteration and as a condition to such approval, elects to have them removed from the Premises by Tenant, in which event the same shall be removed from the Premises by Tenant, at Tenant's expense, prior to the Expiration Date. In the event Landlord elects to have Tenant remove such Alterations, Tenant shall repair and restore in a good and workmanlike manner to Building standard original condition (reasonable wear and tear excepted) any damage to the Premises or the Building caused by such removal. Any of such fixtures or installations not so removed by Tenant at or prior to the Expiration Date or earlier termination of the Term shall become the property of Landlord, but nothing herein shall be deemed to relieve Tenant of responsibility for the cost of removal of any such fixtures or installations which Tenant is obligated to remove hereunder. B. Intentionally Omitted. C. Submission of Plans. Except as otherwise expressly set forth herein, prior to making any Alterations, Tenant (i) shall submit to Landlord or to a consultant appointed by Landlord ("Landlord's Consultant") detailed plans and specifications (including layout, architectural, mechanical, electrical, plumbing, Class E sprinkler and structural drawings stamped by a professional engineer or architect licensed in the State of New York) for each proposed Alteration and shall not commence any such Alteration without first obtaining Landlord's approval of such plans and specifications, (ii) shall pay to Landlord all reasonable costs and expenses incurred by Landlord (including the cost of Landlord's Consultant) in connection with Landlord's review of Tenant's plans and specifications, (iii) shall, at its expense, obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies, and (iv) shall furnish to Landlord duplicate original policies or certificates thereof of worker's compensation insurance (covering all persons to be employed by Tenant, and Tenant's contractors and subcontractors in connection with such Alteration) and comprehensive public liability (including property damage coverage) insurance in such form, with such companies, for such periods and in such amounts as Landlord may reasonably require, naming Landlord and its agents as additional insureds. Landlord or Landlord's Consultant shall respond to Tenant with respect to Tenant's submission of detailed plans and specifications within ten (10) business days after receipt of such submission. In the event Landlord or Landlord's Consultant does not respond within such ten (10) business day period, Tenant may send Landlord a notice stating that, if Landlord does not respond to Tenant's submission within ten (10) business days after receipt by Landlord of such notice, Tenant's submission shall be deemed approved. If Landlord or Landlord's Consultant fails to respond to such notice within ten (10) business days after receipt thereof, Landlord's consent shall be deemed given therefor. Upon completion of such Alteration, Tenant, at Tenant's expense, shall obtain certificates of final approval of such Alteration, including the "as-built" drawings showing such Alterations, required by any governmental or quasigovernmental bodies and shall furnish Landlord with copies thereof. All Alterations shall be made 4 and performed in accordance with the Rules and Regulations (hereinafter defined) and in accordance with the Americans with Disabilities Act of 1990, including, but not limited to, the accessibility provisions thereof; all construction materials and equipment to be incorporated in the Premises as a result of all Alterations shall be new and first quality; no such construction materials or equipment shall be subject to any lien, encumbrance, chattel mortgage or title retention or security agreement except for equipment owned by Tenant and subject to purchase money financing security interests of the vendors thereof. Landlord's approval of Tenant's plans, specifications and working drawings for Alterations shall create no responsibility or liability on the part of Landlord with respect to their completeness, design, sufficiency or compliance with all applicable laws, rules or regulations of governmental agencies or authorities. D. Mechanics' Liens; Labor Conflicts. Any mechanic's lien filed against the Premises, or the Real Property, for work claimed to have been done for, or materials claimed to have been furnished to, Tenant shall be discharged by Tenant within twenty (20) days after Tenant shall have received notice thereof, at Tenant's expense, by payment or filing the bond required by law. Tenant shall not, at any time prior to or during the Term, directly or indirectly employ, or permit the employment of, any contractor, mechanic or laborer in the Premises, whether in connection with any Alteration or otherwise, if, in Landlord's sole discretion, such employment will interfere or cause any conflict with other contractors, mechanics, or laborers engaged in the construction, maintenance or operation bf the Building by Landlord, Tenant or others. In the event of any such interference or conflict, Tenant, upon demand of Landlord, shall cause all contractors, mechanics or laborers causing such interference or conflict to leave the Building immediately. Landlord may, at its option, direct Tenant to cause any contractor, mechanic or laborer in the Premises to be bonded to Landlord's reasonable satisfaction. 4. REPAIRS - FLOOR LOAD. Landlord shall operate, maintain and repair the public structural and mechanical portions of the Building, both exterior and interior in conformance with standards applicable to office buildings in Manhattan and all Rules and Regulations (as hereinafter defined). Tenant shall, throughout the Term, take good care of the Premises, Tenant's Equipment (as hereinafter defined) and the fixtures and appurtenances therein and at Tenant's sole cost and expense, make all nonstructural repairs thereto as and when needed to preserve them in good working order and condition, reasonable wear and tear and damage for which Tenant is not responsible under the terms of this Lease excepted. Tenant shall pay Landlord for all replacements to the lamps, tubes, ballasts and starters in the lighting fixtures installed in the Premises at competitive prices. Notwithstanding the foregoing, all damage or injury to the Premises or to any other part of the Building, or to its fixtures, equipment and appurtenances; whether requiring structural or nonstructural repairs, caused by or resulting from acts or omissions, neglect or improper conduct of, or Alterations made by Tenant or any of Tenant's employees, invitees or licensees, shall be repaired promptly by (i) Tenant, at its sole cost and expense, to the reasonable satisfaction of Landlord or (ii) Landlord, at Tenant's expense, to the extent the repairs are structural in nature. Tenant also shall repair all damage to the Building and the Premises caused by the moving of Tenant's fixtures, furniture or equipment. All the aforesaid repairs shall be of quality and class equal to the original work or construction and shall be made in accordance with the provisions of Article 3 hereof. If Tenant fails after ten (10) days notice to proceed with due diligence to make repairs required to be made by Tenant hereunder, the same may be made by Landlord, at the expense of Tenant, and the expenses thereof incurred by Landlord shall be collectible by Landlord as additional rent promptly after rendition of a bill or statement therefor; provided however, interest shall not commence to accrue until Landlord has rendered such statement or bill. Tenant shall give Landlord prompt notice of any defective condition in any plumbing, electrical, air-cooling or heating system located in, servicing or passing through the Premises. Tenant shall not place a load upon any floor of the Premises exceeding the floor load per square foot area which such floor was .designed to carry and which is allowed by law. Landlord reserves the right to reasonably prescribe the weight and position of all safes, business machines and heavy equipment and installations. Business machines and mechanical equipment shall be placed and 5 maintained by Tenant at Tenant's expense in settings sufficient, in Landlord's reasonable judgment, to absorb and prevent vibration, noise and annoyance. Except as expressly provided in Article 10 hereof, there shall be no allowance to Tenant for a diminution of rental value and no liability on the part of Landlord by reason of inconvenience, annoyance or injury to business arising from Landlord, Tenant or others making, or failing to make, any repairs, alterations, additions or improvements in or to any portion of the Building, or the Premises, or in or to fixtures, appurtenances, or equipment thereof. If the Premises be or become infested with vermin, Landlord, at Landlord's expense (or at Tenant's expense if such infestation is caused by Tenant), shall cause the same to be exterminated from time to time to the satisfaction of Landlord and shall employ such exterminators and such exterminating company or companies as shall be approved by Landlord. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were designed or constructed, and no sweepings, rubbish, rags, acids or other substances shall be deposited therein. 5. WINDOW CLEANING. Tenant shall not clean, nor require, permit, suffer or allow any window in the Premises to be cleaned, from the outside in violation of Section 202 of the Labor Law, or any other applicable law, or of the rules of the Board of Standards and Appeals, or of any other board or body having or asserting jurisdiction. 6. REQUIREMENTS OF LAW. Tenant, at its sole expense, shall comply with all laws, statutes, orders, directives and regulations of federal, state, county, city and municipal authorities, departments, bureaus, boards, agencies, commissions and other sub-divisions thereof, and of any official thereof and any other governmental and quasi-public authority and all rules, orders, regulations or requirements of the New York Board of Fire Underwriters, or any other similar body which shall now or hereafter impose any violation, order or duty upon Landlord or Tenant with respect to the Premises as a result of the specific manner or use, occupation or alteration thereof by Tenant. Tenant shall not do or permit to be done any act or thing upon the Premises which will invalidate or be in conflict with any insurance policies covering the Building and fixtures and property therein; and shall not do, or permit anything to be done in or upon the Premises or bring or keep anything therein, except as now or hereafter permitted by the New York City Fire Department, New York Board of Fire Underwriters, New York Fire Insurance Rating Organization or other authority having jurisdiction and then only in such quantity and manner of storage as not to increase the rate for fire insurance applicable to the Building, or use the Premises in a manner which shall increase the rate of fire insurance on the Building or on property located therein, over that in similar type buildings or in effect at the Commencement Date. Any work or installations made or performed by or on behalf of Tenant or any person claiming through or under Tenant pursuant to this Article shall be made in conformity with, and subject to the provisions of, Article 3 hereof. If by reason of Tenant's failure to comply with the provisions of this Article, Landlord shall give Tenant five (5) days notice of such failure and if such failure to comply continues after such five (5) day period and if the fire insurance rate shall thereafter be higher than it otherwise would be, then Tenant shall reimburse Landlord, as additional rent hereunder, for that part of all fire insurance premiums thereafter paid by Landlord which shall have been charged because of such failure of use by Tenant, and shall make such reimbursement upon the first day of the month following such outlay by Landlord. In any action or proceeding wherein Landlord and Tenant are parties, a schedule or "make up" of rates for the Building or the Premises issued by the New York Fire Insurance Rating Organization, or other body fixing such fire insurance rates, shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to the Premises. Notwithstanding anything to the contrary, Landlord shall comply with all laws, statutes, orders, directives and regulations of governmental authorities applicable to the Building but not in respect of the Premises. 6 7. SUBORDINATION. A. Subordination. This Lease is subject and subordinate to each and every ground or underlying lease of the Real Property or the Building heretofore or hereafter made by Landlord (collectively, the "Superior Leases") and to each and every trust indenture and mortgage (collectively, the "Mortgages") which may now or hereafter affect the Real Property, the Building or any such Superior Lease and the leasehold interest created thereby, and to all renewals, extensions, supplements, amendments, modifications, consolidations, and replacements thereof or thereto, substitutions therefor and advances made thereunder, provided that the lessor under any such Superior Lease or the holder of any Mortgage, as the case may be, execute and deliver to Tenant a Non-Disturbance Agreement (as hereinafter defined). This clause shall be self-operative and no further instrument of subordination shall be required to make the interest of any lessor under a Superior Lease, or trustee or mortgagee of a Mortgage superior to the interest of Tenant hereunder. In confirmation of such subordination, however, Tenant shall execute promptly a subordination and non-disturbance agreement that Landlord may reasonably request and Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's attorney-in-fact to execute any such certificate or certificates for and on behalf of Tenant. If the date of expiration of any Superior Lease shall be the same day as the Expiration Date, the Term shall end and expire twelve (12) hours prior to the expiration of the Superior Lease. Tenant covenants and agrees that Tenant shall not do anything that would constitute a default under any Superior Lease or Mortgage, or omit to do anything that Tenant is obligated to do under the terms of this Lease so as to cause Landlord to be in default under any of the foregoing. If, in connection with the financing of the Real Property, the Building or the interest of the lessee under any Superior Lease, any lending institution shall request reasonable modifications of this Lease that do not increase the obligations of Tenant in any material way or adversely affect the rights of Tenant in any material way under this Lease, Tenant covenants to make such modifications. B. Attornment. If at any time prior to the expiration of the Term, any Mortgage shall be foreclosed or any Superior Lease shall terminate or be terminated for any reason, Tenant agrees, at the election and upon demand of any owner of the Real Property or the Building, or the lessor under any such Superior Lease, or of any mortgagee in possession of the Real Property or the Building, to attorn, from time to time, to any such owner, lessor or mortgagee, upon the then executory terms and conditions of this Lease, for the remainder of the term originally demised in this Lease, provided that such owner, lessor or mortgagee, or any person acquiring the interest of Landlord as a result of such termination, as the case may be, or receiver caused to be appointed by any of the foregoing, shall then be entitled to possession of the Premises. The provisions of this subsection B shall inure to the benefit of any such owner, lessor or mortgagee, and shall apply notwithstanding that, as a matter of law, this Lease may terminate upon the termination of any such Superior Lease, and shall be self-operative upon any such demand, and no further instrument shall be required to give effect to said provisions. Tenant, however, upon demand of any such owner, lessor or mortgagee, agrees to execute, from time to time, instruments in confirmation of the foregoing provisions of this subsection B, satisfactory to any such owner, lessor or mortgagee, acknowledging such attornment and setting forth the terms and conditions of its tenancy. Nothing contained in this subsection B shall be construed to impair any right otherwise exercisable by any such owner, lessor or mortgagee. 8. RULES AND REGULATIONS. Tenant and Tenant's contractors, employees, agents, visitors, and licensees shall comply strictly with, the Rules and Regulations annexed hereto and made a part hereof as Schedule A and such other and further reasonable Rules and Regulations as Landlord or Landlord's agents may from time to time adopt (collectively, the "Rules and Regulations"). In case Tenant disputes the reasonableness of any additional Rule or Regulation hereafter made or adopted by Landlord or Landlord's agents, the parties hereto agree to submit the question of the reasonableness of such Rule or Regulation for decision to the Chairman of the Board of Directors of the Management 7 Division of The Real Estate Board of New York, Inc., or to such impartial person or persons as he may designate, whose determination shall be final and conclusive upon the parties hereto. The right to dispute the reasonableness of any additional Rule or Regulation upon Tenant's part shall be deemed waived unless the same shall be asserted by service of a notice in writing upon Landlord within sixty (60) days after receipt by Tenant of written notice of the adoption of any such additional Rule or Regulation. Nothing in this Lease contained shall be construed to impose upon Landlord any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease, against any other tenant and Landlord shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees, except that Landlord shall not enforce any Rule or Regulation against Tenant in a discriminatory manner. Furthermore, no such additional Rule or Regulation shall materially increase any of Tenant's obligations under this Lease or interfere with, in any material way, Tenant's use of the Premises or diminish, in any material way, Tenant's rights hereunder. If there is any conflict between this Lease and the Rules and Regulations, the provisions of this Lease shall control. 9. INSURANCE. A. Tenant's Insurance. Tenant shall obtain at its own expense and keep in full force and effect during the Term, a policy of commercial general liability insurance (including, without limitation, insurance, covering tenant's contractual liability under this Lease), under which Tenant is named as the insured, and Landlord, Landlord's asset manager, Landlord's managing agent, the present and any future mortgagee of the Real Property or the Building and/or such other designees specified by Landlord from time to time, are named as additional insureds, as their interests may appear. Such policy shall contain (i) a provision that no act or omission of Tenant shall affect or limit the obligation of the insurance company to pay the amount of any loss sustained subject to customary exclusions reasonably acceptable to Landlord, (ii) a waiver of subrogation against Landlord or a consent to a waiver of right of recovery against Landlord, provided, however, such waiver of subrogation shall not be applicable to the liability section of such policy, and (iii) an agreement by the insurer that it will not make any claim against or seek to recover from Landlord for any loss, damage or claim whether or not covered under such policy. Such policy shall also contain a provision which provides the insurance company will not cancel or refuse to renew the policy, or change in any material way (except for increases in coverage) the nature or extent of the coverage provided by such policy, without first giving Landlord at least thirty (30) days written notice by certified mail, return receipt requested, which notice shall contain the policy number and the names of the insureds and policy holder. The minimum limits of liability shall be a combined single limit with respect to each occurrence in an amount of not less than $3,000,000 for injury (or death) and damage to property or such greater amount as Landlord may, from time to time, reasonably require. Tenant shall also maintain at its own expense during the Term a policy of workers' compensation insurance providing statutory benefits for Tenant's employees and employer's liability. Tenant shall provide to Landlord upon execution of this Lease and at least thirty (30) days prior to the termination of any existing policy, a certificate evidencing the effectiveness of the insurance policies required to be maintained hereunder which shall include the named insured, additional insured, carrier, policy number, limits of liability, effective date, the name of the insurance agent and its telephone number. Tenant shall provide Landlord with a certificate evidencing any such policy upon written request of Landlord. Tenant shall have the right to obtain any of the insurance required hereunder pursuant to a blanket policy covering other properties provided the blanket policy contains an endorsement that names Landlord, Landlord's asset manager, Landlord's managing agent, the present and any future mortgagee of the Real Property or the Building and/or such other designees specified by Landlord from time to time, as additional insureds, references the Premises, and guarantees a minimum limit available for the Premises equal to the amount of insurance required to be maintained hereunder. Notwithstanding anything in this Section 9 to the contrary, to the extent unavailable, Tenant shall not be required to name Landlord as an additional insured in policy or policies of workers' compensation insurance. Each policy required 8 hereunder shall contain a clause that the policy and the coverage evidenced thereby shall be primary with respect to any policies carried by Landlord, and that any coverage carried by Landlord shall be excess insurance. The limits of the insurance required under this subsection shall not limit the liability of Tenant under this Lease. All insurance required to be carried by Tenant pursuant to the terms of this Lease shall be effected under valid and enforceable policies issued by reputable and independent insurers permitted to do business in the State of New York, and rated in Best's Insurance Guide, or any successor thereto (or if there be none, an organization having a national reputation) as having a general policyholder rating of "A" and a financial rating of at least "13". In the event that Tenant fails to continuously maintain insurance as required by this subsection, Landlord may, at its option and without relieving Tenant of any obligation hereunder, order such insurance and pay for the same at the expense of Tenant. In such event, Tenant shall repay the amount expended by Landlord, with interest thereon, immediately upon Landlord's written demand therefor. B. Tenant's Improvement Insurance. Tenant shall also maintain at its own expense during the Term a policy against fire and other casualty on an "all risk" form covering all Alterations, construction and other improvements installed within the Premises, whether existing in the Premises on the date hereof or hereinafter installed by or on behalf of Landlord or Tenant, and on all furniture, fixtures, equipment, personal property and inventory of Tenant located in the Premises and any property in the care, custody and control of Tenant (fixed or otherwise) sufficient to provide 100% full replacement value of such items, which policy shall otherwise comply with the provisions of subsections A and C of this Article 9. On any such policy, Tenant shall name Landlord as a loss payee, as its interest may appear. C. Waiver of Subrogation. Subject to the provisions hereof, the parties hereto shall procure an appropriate clause in, or endorsement on, any "all-risk" property insurance covering the Premises and the Building, including its respective Alterations, construction and other improvements as well as personal property, fixtures, furniture, inventory and equipment located thereon or therein, pursuant to which the insurance companies waive subrogation or consent to a waiver of right of recovery, and each party hereby agrees that it will not make any claim against or seek to recover from the other for any loss or damage to its property or the property of others resulting from fire or other hazards covered by such "all-risk" property insurance policies to the extent that such loss or damage is actually recoverable under such policies exclusive of any deductibles. Such waiver will not apply should any loss or damage result from one of the parties gross negligence or willful misconduct. If the payment of an additional premium is required for the inclusion of such waiver of subrogation provision, each party shall advise the other of the amount of any such additional premiums and the other party shall pay the same. It is expressly understood and agreed that Landlord will not carry insurance on the Alterations, construction and other improvements presently existing or hereafter installed within the Premises or on Tenant's fixtures, furnishings, equipment, personal property or inventory located in the Premises or insurance against interruption of Tenant's business. 10. DESTRUCTION OF THE PREMISES; PROPERTY LOSS OR DAMAGE. A. Repair of Damage. If the Premises (other than Alterations or Tenant's property) shall be damaged by fire or other casualty, then Landlord shall proceed to repair and restore (subject to receipt of insurance proceeds) the Premises to its condition preceding the damage, subject to the provisions of this Article 10. Landlord shall have no liability to Tenant, and Tenant shall not be entitled to terminate this Lease, if such repairs and restoration are not in fact completed within Landlord's estimated time period, so long as Landlord shall have proceeded with reasonable due diligence. Until such repairs shall be made, the Rent shall be reduced in the proportion which the area of the part of the Premises which is not usable by Tenant bears to the total area of the Premises; provided, however, should Tenant reoccupy a portion of the Premises for the conduct of its business prior to the date such repairs are 9 made, the Rent shall be reinstated with respect to such reoccupied portion of the Premises and shall be payable by Tenant from the date of such occupancy. Landlord shall use its commercially reasonable efforts to minimize interference with Tenant's use and occupancy in making any repairs pursuant to this Section. Further, should Landlord, at its sole option, make available to Tenant, during the period of such repair, other space in the Building of equal or better quality which is reasonably suitable for the temporary continuation of Tenant's business, the Rent shall be reinstated with respect to such temporarily occupied space and shall be payable by Tenant from the date such space is occupied by Tenant. Whenever in this Article 10 reference is made to restoration of the Premises (i) Tenant's obligation shall be as to all property within the Premises including Tenant's furniture, fixtures, equipment and other personal property, any and all Alterations, construction or other improvements made to the Premises by or on behalf of Tenant and any other leasehold improvements existing in the Premises on the date hereof, all of which shall be restored and replaced at Tenant's sole cost and expense and (ii) Landlord's obligation, if any, shall be as to the shell, which constitutes the structure of the Building and the mechanical, electrical, plumbing, air-conditioning and other building systems up to the point of connection into the Premises, the floor and ceiling slabs of the Premises, the exterior walls of the Premises and other core areas. Landlord's obligation to repair or rebuild, and Tenants right to rent abatement, as described in this Article 10, are only effective provided the damage or destruction is not due to the intentional or negligent acts or omissions of Tenant, its agents, employees, licensees or invitees. After substantial completion of Landlord's repair obligations set forth above, Landlord shall provide Tenant and Tenant's contractor, subcontractors and materialmen access to the Premises to perform Alterations. Such access by Tenant shall be deemed to be subject to all of the applicable provisions of this Lease, except that there shall be no obligation on the part of Tenant, solely as a result of such access, to pay any Rent or additional rent with respect to the affected portion of the Premises for any period prior to the re-occupation of any part of the Premises by Tenant for the conduct of its business. During any period of Tenant's repair and restoration following substantial completion of Landlord's repair and restoration work, Rent and additional rent shall be payable as if said fire or other casualty had not occurred. B. Termination Option. Anything in subsection A of this Article 10 to the contrary notwithstanding, if the Premises are totally damaged or are rendered wholly untenantable, and if Landlord's architect determines that it will take in excess of eight (8) months to restore the Premises, or if the Building shall be so damaged by fire or other casualty that, in Landlord's opinion, either substantial alteration, demolition or reconstruction of the Building shall be required (whether or not the Premises shall have been damaged or rendered untenantable) or the Building, after its proposed repair, alteration or restoration shall not be economically viable as an office building, then in any of such events, Landlord or Tenant, may, not later than ninety (90) days following the damage, give the other party a notice in writing terminating this Lease. In addition (i) if any material damage shall occur to the Premises or the Building during the last one (1) year of the Term, either party thereto shall have the option to terminate this Lease by written notice to the other party and in such event this Lease shall terminate on the later of the date of the notice of termination or the date Tenant vacates the Premises and removes all of its property therefrom and (ii) Landlord shall not be obligated to repair or restore the Premises or the Building if a holder of a mortgage or underlying leasehold applies proceeds of insurance to the loan or lease payment balance, and the remaining proceeds, if any, available to Landlord are insufficient to pay for such repair or restoration. If Landlord elects to terminate this Lease, the Term shall expire upon the thirtieth (30th) day after such notice is given, and Tenant shall vacate the Premises and surrender the same to Landlord. If Tenant shall not be in default under this Lease, then upon the termination of this Lease under the conditions provided for in the next preceding sentence, Tenant's liability for Rent thereafter accruing shall cease as of the day following such damage and the Rent shall be apportioned to the date that the Premises are no longer useable. C. Repair Delays. Landlord shall not be liable for reasonable delays which may arise by reason of the claim adjustment with any insurance company on the part of Landlord and/or 10 Tenant, and for reasonable delays on account of "labor troubles" or any other cause beyond Landlord's control. D. Provision Controlling. The parties agree that this Article 10 constitutes an express agreement governing any case of damage or destruction of the Premises or the Building by fire or other casualty, and that Section 227 of the Real Property Law of the State of New York, which provides for such contingency in the absence of an express agreement, and any other law of like import now or hereafter in force shall have no application in any such case. E. Property Loss or Damage. Any Building employee to whom any property shall be entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant's agent with respect to such property and neither Landlord nor its agents shall be liable for any damage to property of Tenant or of others entrusted to employees of the Building, nor for the loss of or damage to any property of Tenant by theft or otherwise. Neither Landlord nor its agents shall be liable for any injury or damage to persons or property or interruption of Tenant's business resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain or snow or leaks from any part of the Building or from the pipes, appliances or plumbing works or from the roof, street or subsurface or from any other place or by dampness or by any other cause of whatsoever nature; nor shall Landlord or its agents be liable for any such damage caused by other tenants or persons in the Building or caused by construction of any private, public or quasi-public work; nor shall Landlord be liable for any latent defect in the Premises or in the Building. Anything in this Article 10 to the contrary notwithstanding, nothing in this Lease shall be construed to relieve Landlord from responsibility directly to Tenant for any loss or damage caused directly to Tenant wholly or in part by the gross negligence or willful misconduct or willful omission of Landlord. Nothing in the foregoing sentence shall affect any right of Landlord to the indemnity from Tenant to which Landlord may be entitled under Article 37 hereof in order to recoup for payments made to compensate for losses of third parties. If at any time any windows of the Premises are temporarily closed, darkened or bricked-up for any reason whatsoever including, but not limited to, Landlord's own acts, or any of such windows are permanently closed, darkened or bricked-up if required by law or related to any construction upon property adjacent to the Real Property by Landlord or others, Landlord shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement of Rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction. Tenant shall reimburse and compensate Landlord as additional rent within fifteen (15) days after rendition of a statement for all expenditures made by, or damages or fines sustained or incurred by, Landlord due to nonperformance or noncompliance with or breach or failure to observe any term, covenant or condition of this Lease upon Tenant's part to be kept, observed, performed or complied with. Tenant shall give immediate notice to Landlord in case of fire or accident in the Premises or in the Building. Tenant shall not move any safe, heavy machinery, heavy equipment, freight, bulky matter or fixtures into or out of the Building without Landlord's prior consent which shall not be unreasonably withheld or delayed and payment to Landlord of Landlord's actual out-of-pocket costs in connection therewith. If such safe, machinery, equipment, freight, bulky matter or fixtures requires special handling, Tenant agrees to employ only persons holding a Master Rigger's License to do said work, and that all work in connection therewith shall comply with the Administrative Code of the City of New York and all other laws and regulations applicable thereto, and shall be done during such hours as Landlord may designate and, notwithstanding said consent of Landlord, Tenant shall indemnify Landlord for, and hold Landlord harmless and free from, damages sustained by persons or property and for any damages or monies paid out by Landlord in settlement of any claims or judgments, as well as for all expenses and attorneys' fees incurred in connection with the foregoing and all costs incurred in repairing any damage to the Building or appurtenances. 11 11. CONDEMNATION. A. Condemnation. If the whole of the Real Property, the Building or the Premises shall be acquired or condemned for any public or quasi-public use or purpose, this Lease and the Term shall end as of the date of the vesting of title with the same effect as if said date were the Expiration Date. If only a part of the Real Property shall be so acquired or condemned then (i) except as hereinafter provided in this subsection A, this Lease and the Term shall continue in force and effect but, if a part of the Premises is included in the part of the Real Property so acquired or condemned, from and after the date of the vesting of title, the Rent shall be reduced in the proportion which the area of the part of the Premises so acquired or condemned bears to the total area of the Premises immediately prior to such acquisition or condemnation; (ii) whether or not the Premises shall be affected thereby, Landlord, at Landlord's option, may give to Tenant, within sixty (60) days next following the date upon which Landlord shall have received notice of vesting of title, a thirty (30) days notice of termination of this Lease; and (iii) if the part of the Real Property so acquired or condemned shall contain more than twenty percent (20%) of the total area of the Premises immediately prior to such acquisition or condemnation, or if, by reason of such acquisition or condemnation, Tenant no longer has reasonable means of access to the Premises, Tenant, at Tenant's option, may give to Landlord, within sixty (60) days next following the date upon which Tenant shall have received notice of vesting of title, a thirty (30) days notice of termination of this Lease. If any such thirty (30) days notice of termination is given by Landlord or Tenant this Lease and the Term shall come to an end and expire upon the expiration of said thirty (30) days with the same effect as if the date of expiration of said thirty (30) days were the Expiration Date. If a part of the Premises shall be so acquired or condemned and this Lease and the Term shall not be terminated pursuant to the foregoing provisions of this subsection A, Landlord, at Landlord's expense, shall restore that part of the Premises not so acquired or condemned to a self-contained rental unit inclusive of Tenant's Alterations. In the event of any termination of this Lease and the Term pursuant to the provisions of this subsection A, the Rent shall be apportioned as of the date of such termination and any prepaid portion of Rent for any period after such date shall be refunded by Landlord to Tenant. B. Award. In the event of any such acquisition or condemnation of all or any part of the Real Property, Landlord shall be entitled to receive the entire award for any such acquisition or condemnation, Tenant shall have no claim against Landlord or the condemning authority for the value of any unexpired portion of the Term and Tenant hereby expressly assigns to Landlord all of its right in and to any such award. Nothing contained in this subsection B shall be deemed to prevent Tenant from making a claim in any condemnation proceedings for the then value of any furniture, furnishings and fixtures installed by and at the sole expense of Tenant and included in such taking and for Tenant's costs and expenses associated with moving, provided that such award shall not reduce the amount of the award otherwise payable to Landlord. 12. ASSIGNMENT AND SUBLETTING. A. Prohibition Without Consent. Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage, pledge, encumber or otherwise transfer this Lease, nor underlet, nor suffer, nor permit the Premises or any part thereof to be used or occupied by others (whether for desk space, mailing privileges or otherwise), without the prior written consent of Landlord in each instance. If this Lease be assigned, or if the Premises or any part thereof be underlet or occupied by anybody other than Tenant, Landlord may, after default by Tenant, collect rent from the assignee, undertenant or occupant, and apply the net amount collected to the Rent herein reserved, but no assignment, underletting, occupancy or collection shall be deemed a waiver of the provisions hereof, the acceptance of the assignee, undertenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. In the event that any such default is cured, then any sums collected from any subtenant, 12 user or occupant in excess of the Rent and additional rent and costs of collection, shall be promptly paid to Tenant after deducting any fees and expenses payable by Tenant to Landlord in connection with such default. The consent by Landlord to an assignment or underletting shall not in any way be construed to relieve Tenant from obtaining the express consent in writing of Landlord to any further assignment or underletting. In no event shall any permitted subtenant assign or encumber its sublease or further sublet all or any portion of its sublet space, or otherwise suffer or permit the sublet space or any part thereof to be used or occupied by others, without Landlord's prior written consent in each instance. Any assignment, sublease, mortgage, pledge, encumbrance or transfer in contravention of the provisions of this Article 12 shall be void. B. Notice of Proposed Transfer. If Tenant shall at any time or times during the Term desire to assign this Lease or sublet all or part of the Premises, Tenant shall give notice thereof to Landlord, which notice shall be accompanied by (i) a conformed or photostatic copy of the proposed assignment or sublease (or, in lieu thereof, a fully executed bona fide term sheet setting forth the material terms of the proposed transaction), the effective or commencement date of which shall be not less than sixty (60) nor more than one hundred and eighty (180) days after the giving of such notice, (ii) a statement setting forth in reasonable detail the identity of the proposed assignee or subtenant, the nature of its business and its proposed use of the Premises, (iii) current financial information with respect to the proposed assignee or subtenant, including, without limitation, its most recent financial report, (iv) an agreement by Tenant to indemnify Landlord against liability resulting from any claims that may be made against Landlord by the proposed assignee or subtenant or by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment or sublease and (v) in the case of a sublease, such additional information related to the proposed subtenant as Landlord shall reasonably request, if any. C. Landlord's Option. The notice containing all of the information set forth in Subsection B of this Article 12 above shall be deemed an offer from Tenant to Landlord whereby Landlord (or Landlord's designee) may, at its option, if the proposed sublease is for any portion of the Premises but substantially the remainder of the Term, terminate this Lease with respect to the portion of the Premises proposed to be sublet. Said option may be exercised by Landlord by notice to Tenant at any time within fourteen (14) days after the aforesaid notice has been given by Tenant to Landlord; and during such fourteen (14) day period Tenant shall not assign this Lease nor sublet such space to any person or entity. D. Termination by Landlord. If Landlord exercises its option to terminate this Lease in the case where Tenant desires either to assign this Lease or sublet all or substantially all of the Premises, then this Lease shall end and expire on the date that such assignment or sublet was to be effective or commence, as the case may be, and the Rent and additional rent due hereunder shall be paid and apportioned to such date. Furthermore, if Landlord exercises its option to terminate this Lease pursuant to subsection C of this Article 12, Landlord shall be free to and shall have no liability to Tenant if Landlord should lease the Premises (or any part thereof) to Tenant's prospective assignee or subtenant. E. Intentionally Omitted. F. Effect of Termination. Tenant shall complete, swear to and file any questionnaires, tax returns, affidavits or other documentation which may be required to be filed (a) with the New York State Department of Taxation and Finance in connection with Article 31-B of the Tax Law of the State of New York, (b) with the Commissioner of Finance of the City of New York or the New York State Department of Taxation and Finance in connection with Article 31 of the Tax Law of the State of New York, (c) with the Commissioner of Finance of the City of New York in connection with the New York City Real Property Transfer Tax and (d) with the appropriate governmental agency in connection 13 with any other tax which may now or hereafter be in effect. Tenant further agrees to pay any amounts which may be assessed in connection with any of such taxes and to indemnify Landlord against and to hold Landlord harmless from any claims for payment of such taxes as a result of such transactions. G. Conditions for Landlord's Approval. In the event Landlord does not exercise the recapture option provided to it pursuant to subsection C of this Article 12 and providing that Tenant is not in default of any of Tenant's obligations under this Lease (after notice and the expiration of any applicable grace period) as of the time of Landlord's consent, and as of the effective date of the proposed assignment or commencement date of the proposed sublease, Landlord's consent (which must be in writing and form reasonably satisfactory to Landlord) to the proposed assignment or sublease shall not be unreasonably withheld or delayed, provided and upon condition that: (i) Tenant shall have complied with the provisions of subsection B of this Article 12 and Landlord shall not have exercised any of its options under subsection C of this Article 12 within the time permitted therefor; (ii) In Landlord's reasonable judgment the proposed assignee or subtenant is engaged in a business or activity, and the Premises, or the relevant part thereof, will be used in a manner, which (a) is in keeping with the then standards of the Building and (b) is limited to the use of the Premises as general and executive offices; (iii) The proposed assignee or subtenant is a reputable person of good character and with sufficient financial worth considering the responsibility involved, and Landlord has been furnished with reasonable proof thereof; (iv) Neither (a) the proposed assignee or subtenant nor (b) any person which, directly or indirectly, controls, is controlled by or is under common control with, the proposed assignee or subtenant, is then an occupant of any part of the Building; (v) The proposed assignee or subtenant is not a person with whom Landlord is or has been, within the preceding three (3) month period, negotiating to lease space comparable to the offered premises in the Building; (vi) The form of the proposed sublease or instrument of assignment (a) shall be in form reasonably satisfactory to Landlord, and, without limitation, (1) shall not provide for a rental or other payment for the use, occupancy or utilization of the space demised thereby based in whole or in part on the income or profits derived by any person from the property so leased, used, occupied or utilized other than an amount based on a fixed percentage or percentages of gross receipts or sales and (2) shall provide that no person having an interest in the possession, use, occupancy or utilization of the space demised thereby shall enter into any lease, sublease, license, concession or other agreement for use, occupancy or utilization of such space which provides for a rental or other payment for such use, occupancy or utilization based in whole or in part on the income or profits derived by any person from the property so leased, used, occupied or utilized other than an amount based on a fixed percentage or percentages of gross receipts or sales, and that any such purported lease, sublease, concession or other agreement shall be absolutely void, and ineffective ab initio and (b) shall comply with the applicable provisions of this Article 12; (vii) There shall not be more than three (3) subtenants (including Landlord or its designee) of the Premises; 14 (viii) The proposed space has not been advertised for less than the then current market rent per rentable square foot for the applicable portion of the Premises as though such portion of the Premises were vacant, and the rental and other terms and conditions of the sublease are the same as those contained in the proposed sublease furnished to Landlord pursuant to subsection B of this Article 12; (ix) Within five (5) days after receipt of a bill therefor, Tenant shall reimburse Landlord for the reasonable costs that may be incurred by Landlord in connection with said assignment or sublease, including, without limitation, the costs of making investigations as to the acceptability of the proposed assignee or subtenant, and reasonable legal costs incurred by Landlord in connection with the granting of any requested consent; (x) Tenant shall not have advertised or publicized in any way the availability of the Premises without prior notice to and approval by Landlord, nor shall any advertisement state the name (as distinguished from the address) of the Building or the proposed rental; (xi) The proposed occupancy shall not, in Landlord's reasonable opinion, materially increase the office cleaning requirements or the Building's operating or other expenses or impose an extra burden upon services to be supplied by Landlord to Tenant; (xii) The proposed assignee or subtenant or its business shall not be subject to compliance with requirements of law (including related regulations) materially different than those requirements which are applicable to the named Tenant herein or which would impose additional requirements upon Landlord; and (xiii) The proposed subtenant or assignee shall not be entitled, directly or indirectly, to diplomatic or sovereign immunity and shall be subject to the service of process in, and the jurisdiction of the courts of New York State. Notwithstanding any subletting to any subtenant and/or acceptance of Rent or additional rent by Landlord from any subtenant, Tenant shall and will remain fully liable for the payment of the Rent and additional rent due and to become due hereunder and for the performance of all the covenants, agreements, terms, provisions and conditions contained in this Lease on the part of Tenant to be performed and all acts and omissions of any licensee or subtenant or anyone claiming under or through any subtenant which shall be in violation of any of the obligations of this Lease shall be deemed to be a violation by Tenant. Tenant further agrees that notwithstanding any such subletting, no other and further subletting of the Premises by Tenant or any person claiming through or under Tenant shall or will be made except upon compliance with and subject to the provisions of this Article 12. If Landlord shall decline to give its consent to any proposed assignment or sublease, or if Landlord shall exercise its option under subsection C of this Article 12, Tenant shall indemnify, defend and hold harmless Landlord against and from any and all loss, liability, damages, costs, and expenses (including reasonable counsel fees) resulting from any claims that may be made against Landlord by the proposed assignee or subtenant or by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment or sublease. H. Future Requests. In the event that (i) Landlord fails to exercise its option under subsection C of this Article 12 and consents to a proposed assignment or sublease, and (ii) Tenant fails to execute and deliver the assignment or sublease to which Landlord consented within one hundred twenty (120) days after the giving of such consent, then, Tenant shall again comply with all of the provisions and conditions of subsection B of this Article 12 before assigning this Lease or subletting all or part of the Premises. 15 I. Sublease Provisions. With respect to each and every sublease or subletting authorized by Landlord under the provisions of this Lease, it is further agreed that: (i) No subletting shall be for a term ending later than one (1) day prior to the Expiration Date of this Lease; (ii) No sublease shall be delivered, and no subtenant shall take possession of the Premises or any part thereof, until an executed counterpart of such sublease has been delivered to Landlord; (iii) Each sublease shall provide that it is subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and that in the event of termination, re-entry or dispossession by Landlord under this Lease Landlord may, at its option, take over all of the right, title and interest of Tenant, as sublessor, under such sublease, and such subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not (a) be liable for any previous act or omission of Tenant under such sublease, (b) be subject to any counterclaim, offset or defense, not expressly provided in such sublease, which theretofore accrued to such subtenant against Tenant, or (c) be bound by any previous modification of such sublease or by any previous prepayment of more than one (1) month's Rent. The provisions of this Article 12 shall be self-operative and no further instrument shall be required to give effect to this provision. J. Profits from Assignment or Subletting. If Landlord shall give its consent to any assignment of this Lease or to any sublease or if Tenant shall enter into any other assignment or sublease permitted hereunder, Tenant shall in consideration therefor, pay to Landlord, as additional rent: (i) in the case of an assignment, an amount equal to one hundred (100%) percent of all sums and other considerations paid to Tenant by the assignee for or by reason of such assignment (including, but not limited to, sums paid for the sale of Tenant's fixtures, leasehold improvements, equipment, furniture, furnishings or other personal property, less, in the case of a sale thereof, the then net unamortized or undepreciated cost thereof determined on the basis of Tenant's federal income tax returns) less all expenses reasonably and actually incurred by Tenant on account of brokerage commissions, advertising costs and leasing costs in connection with such assignment, provided that Tenant shall submit to Landlord a receipt evidencing the payment of such expenses (or other proof of payment as Landlord shall require); and (ii) in the case of a sublease, all rents, additional charges or other consideration payable under the sublease on a per square foot basis to Tenant by the subtenant which is in excess of the Rent and additional rent accruing during the term of the sublease in respect of the subleased space (at the rate per square foot payable by Tenant hereunder) pursuant to the terms hereof (including, but not limited to, sums paid for the sale or rental of Tenant's fixtures, leasehold improvements, equipment, furniture or other personal property, less, in the case of the sale thereof, the then net unamortized or undepreciated cost thereof determined on the basis of Tenant's federal income tax returns), less all expenses reasonably and actually incurred by Tenant on account of brokerage commissions, advertising costs, leasing costs and the cost of demising the premises so sublet in connection with such sublease, provided that Tenant shall submit to Landlord a receipt evidencing the payment of such expenses (or other proof of payment as Landlord shall require). The sums payable under this subsection J(ii) of this Article 12 shall be paid to Landlord as and when payable by the subtenant to Tenant. 16 K. Other Transfers. (i) If Tenant is a corporation other than a corporation whose stock is listed and traded on a nationally recognized stock exchange (hereinafter referred to as a "public corporation"), the provisions of subsection A of this Article 12 shall apply to a transfer (by one or more transfers) of a majority of the stock of Tenant as if such transfer of a majority of the stock of Tenant were an assignment of this Lease; but said provisions shall not apply to transactions with a corporation into or with which Tenant is merged or consolidated or to which substantially all of Tenant's assets are transferred, provided that in any of such events (a) 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 herein named on the date of this Lease and (b) proof satisfactory to Landlord of such net worth shall have been delivered to Landlord at least ten (10) days prior to the effective date of any such transaction. (ii) If Tenant is a partnership, the provisions of subsection A of this Article 12 shall apply to a transfer (by one or more transfers) of a majority interest in the partnership, as if such transfer were an assignment of this Lease. (iii) If Tenant is a subdivision, authority, body, agency, instrumentality or other entity created and/or controlled pursuant to the laws of the State of New York or any city, town or village of such state or of federal government ("Governmental Entity"), the provisions of subsection A of this Article 12 shall apply to a transfer (or one or more transfers) of any of Tenant's rights to use and occupy the Premises, to any other Governmental Entity, as if such transfer of the right of use and occupancy were an assignment of this Lease; but said provisions shall not apply to a transfer of any of Tenant's rights in and to the Premises to any Governmental Entity which shall replace or succeed to substantially similar public functions, responsibilities and areas of authority as Tenant, provided that in any of such events the successor Governmental Entity (a) shall utilize the Premises in a manner substantially similar to Tenant, and (b) shall not utilize the Premises in any manner which, in Landlord's judgment, would impair the reputation of the Building as a first-class office building. L. Related Corporation. Tenant may, with Landlord's consent which shall not be unreasonably withheld, permit any corporations or other business entities (but not including Governmental Entities) which control, are controlled by, or are under common control with Tenant (herein referred to as "related corporation") to sublet all or part of the Premises for any of the purposes permitted to Tenant, subject however to compliance with Tenant's obligations under this Lease. Such subletting shall not be deemed to vest in any such related corporation any right or interest in this Lease or the Premises nor shall it relieve, release, impair or discharge any of Tenant's obligations hereunder. For the purposes hereof, "control" shall be deemed to mean ownership of not less than fifty percent (50%) of all of the voting stock of such corporation or not less than fifty percent (50%) of all of the Legal and equitable interest in any other business entities. M. Assumption by Assignee. Any assignment or transfer, whether made with Landlord's consent pursuant to subsection A of this Article 12 or without Landlord's consent pursuant to subsection K of this Article 12, shall be made only if, and shall not be effective until, the assignee shall execute, acknowledge and deliver to Landlord an agreement in form and substance satisfactory to Landlord whereby the assignee shall assume the obligations of this Lease on the part of Tenant to be performed or observed and whereby the assignee shall agree that the provisions in subsection A of this Article 12 shall, notwithstanding such assignment or transfer, continue to be binding upon it in respect of all future assignments and transfers. The original named Tenant covenants that, notwithstanding any assignment or transfer, whether or not in violation of the provisions of this Lease, and notwithstanding the acceptance of Rent and/or additional rent by Landlord from an assignee, transferee or any other party, the original named Tenant shall remain fully liable for the payment of the Rent and additional rent and for the other obligations of this Lease on the part of Tenant to be performed or observed. 17 N. Liability of Tenant. The joint and several liability of Tenant and any immediate or remote successor in interest of Tenant and the due performance of the obligations of this Lease on Tenant's part to be performed or observed shall not be discharged, released or impaired in any respect by any agreement or stipulation made by Landlord extending the time, or modifying any of the obligations, of this Lease, or by any waiver or failure of Landlord to enforce any of the obligations of this Lease. O. Listings. The listing of any name other than that of Tenant, whether on the doors of the Premises or the Building directory, or otherwise, shall not operate to vest any right or interest in this Lease or in the Premises, nor shall it be deemed to be the consent of Landlord to any assignment or transfer of this Lease or to any sublease of the Premises or to the use or occupancy thereof by others. Any such listing shall constitute a privilege extended by Landlord, revocable at Landlord's will by notice to Tenant. P. Intentionally Reserved. Q. Re-entry by Landlord. If Landlord shall recover or come into possession of the Premises before the date herein fixed for the termination of this Lease, Landlord shall have the right, at its option, to take over any and all subleases or sublettings of the Premises or any part thereof made by Tenant and to succeed to all the rights of said subleases and sublettings or such of them as it may elect to take over. Tenant hereby expressly assigns and transfers to Landlord such of the subleases and sublettings as Landlord may elect to take over at the time of such recovery of possession, such assignment and transfer not to be effective until the termination of this Lease or re-entry by Landlord hereunder or if Landlord shall otherwise succeed to Tenant's estate in the Premises, at which time Tenant shall upon request of Landlord, execute, acknowledge and deliver to Landlord such further instruments of assignment and transfer as may be necessary to vest in Landlord the then existing subleases and sublettings. Every subletting hereunder is subject to the condition and by its acceptance of and entry into a sublease, each subtenant thereunder shall be deemed conclusively to have thereby agreed from and after the termination of this Lease or re-entry by Landlord hereunder of or if Landlord shall otherwise succeed to Tenant's estate in the Premises, that such subtenant shall waive any right to surrender possession or to terminate the sublease and, at Landlord's election, such subtenant shall be bound to Landlord for the balance of the term of such sublease and shall attorn to and recognize Landlord, as its landlord, under all of the then executory terms of such sublease, except that Landlord shall not (i) be liable for any previous act, omission or negligence of Tenant under such sublease, (ii) be subject to any counterclaim, defense or offset not expressly provided for in such sublease, which theretofore accrued to such subtenant against Tenant, (iii) be bound by any previous modification or amendment of such sublease unless Landlord consented to same in writing or by any previous prepayment of more than one (1) month's Rent and additional rent which shall be payable as provided in the sublease, (iv) be obligated to repair the subleased space or the Building or any part thereof, in the event of total or substantial total damage beyond such repair as can reasonably be accomplished from the net proceeds of insurance actually made available to Landlord, (v) be obligated to repair the subleased space or the Building or any part thereof, in the event of partial condemnation beyond such repair as can reasonably be accomplished from the net proceeds of any award actually made available to Landlord as consequential damages allocable to the part of the subleased space or the Building not taken or (vi) be obligated to perform any work in the subleased space of the Building or to prepare them for occupancy beyond Landlord's obligations under this Lease, and the subtenant shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such attornment. Each subtenant or licensee of Tenant shall be deemed automatically upon and as a condition of occupying or using the Premises or any part thereof, to have given a waiver of the type described in and to the extent and upon the conditions set forth in this Article 12. 18 13. CONDITION OF THE PREMISES. A. Acceptance by Tenant. Landlord agrees to perform, or to cause to be performed, Landlord's Core Work described in and in accordance with Schedule B-1 annexed hereto in accordance with the terms, conditions and provisions thereof. Tenant agrees to accept possession of the Premises in the condition which shall exist on the Commencement Date "as is", except for Landlord's Core Work, and further agrees that Landlord shall have no other obligation to perform any work or make any installations in order to prepare the Premises for Tenant's occupancy. B. Tenant's Initial Alteration. Tenant agrees to perform, or to cause contractors approved by Landlord to perform, Tenant's Initial Alteration described in Schedule B-2 annexed hereto in accordance with the terms, conditions and provisions thereof, and in accordance with all other terms, conditions and provisions contained in this Lease, including, without limitation, Schedules C and D annexed hereto. All of the terms, covenants and conditions of Schedules C and D are incorporated in this Lease as if fully set forth at length herein. 14. ACCESS TO PREMISES. Tenant shall permit Landlord, Landlord's agents and public utilities servicing the Building to erect, use and maintain, concealed ducts, pipes and conduits in and through the Premises. Landlord or Landlord's agents shall have the right to enter the Premises at all reasonable times upon reasonable prior notice except in case of emergency to (i) examine the same, (ii) to show them to prospective purchasers, mortgagees or lessees of the Building or space therein, (iii) to make such repairs, alterations, improvements or additions as Landlord may deem necessary or desirable to the Premises or to any other portion of the Building or which Landlord may elect to perform following Tenant's failure to make repairs or perform any work which Tenant is obligated to perform under this Lease upon ten (10) days prior written notice, or (iv) for the purpose of complying with laws, regulations or other requirements of government authorities. Landlord shall be allowed to take all necessary material and equipment into and upon the Premises and to store them within the Premises without the same constituting an eviction or constructive eviction of Tenant in whole or in part and the Rent shall in nowise abate while any decorations, repairs, alterations, improvements or additions are being made, by reason of loss or interruption of business of Tenant, or otherwise. During the one (1) year prior to the Expiration Date or the expiration of any renewal or extended term, Landlord may exhibit the Premises to prospective tenants thereof. If Tenant shall not be personally present to open and permit an entry into the Premises, at any time, when for any reason an entry therein shall be necessary or permissible subject to the terms and conditions of this Lease, Landlord or Landlord's agents may enter the same by a master key, or may, in an emergency, forcibly enter the same, without rendering Landlord or such agents liable therefor (if during such entry Landlord or Landlord's agents shall accord reasonable care to Tenant's property), and without in any manner affecting the obligations and covenants of this Lease. Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever, for the care, supervision or repair of the Building or any part thereof, other than as herein provided. Landlord also shall have the right at any time, without the same constituting an actual or constructive eviction and without incurring any liability to Tenant therefor, to change the arrangement and/or location of entrances or passageways, doors and doorways, and corridors, elevators, stairs, toilets or other public parts of the Building and to change the name, number or designation by which the Building is commonly known so long as Tenant continues to have access to the Premises. In addition, Tenant understands and agrees that Landlord may perform substantial renovation work in and to the public parts of the Building and the mechanical and other systems serving the Building (which work may include the replacement of the Building exterior facade and window glass, requiring access to the same from within the Premises), and that Landlord shall incur no liability to Tenant, nor shall Tenant be entitled to any abatement of Rent on account of any noise, vibration or other disturbance to Tenant's business at the Premises (provided that Tenant is not denied access to said Premises) which shall arise out of the performance by Landlord of the aforesaid renovations of the Building. Tenant understands and 19 agrees that all parts (except surfaces facing the interior of the Premises) of all walls, windows and doors bounding the Premises (including exterior Building walls, core corridor walls, doors and entrances), all balconies, terraces and roofs adjacent to the Premises, all space in or adjacent to the Premises used for shafts, stacks, stairways, chutes, pipes, conduits, ducts, fan rooms, heating, air cooling, plumbing and other mechanical facilities, service closets and other Building facilities are not part of the Premises, and Landlord shall have the use thereof, as well as access thereto through the Premises for the purposes of operation, maintenance, alteration and repair. Landlord shall, in the exercise of its rights under this Article 14, use commercially reasonable efforts to minimize disturbance to Tenant's use and occupancy of the Premises. 15. CERTIFICATE OF OCCUPANCY. Tenant shall not at any time use or occupy, the Premises in violation of the certificate of occupancy issued for the Premises or for the Building and in the event that any department of the City or State of New York shall hereafter at any time contend and/or declare by notice, violation, order or in any other manner whatsoever that the Premises are used for a purpose which is a violation of such certificate of occupancy whether or not such use shall be a Permitted Use, Tenant shall, upon five (5) days written notice from Landlord, immediately discontinue such use of the Premises. Failure by Tenant to discontinue such use after such notice shall be considered a default in the fulfillment of a covenant of this Lease and Landlord shall have the right to terminate this Lease immediately, and in addition thereto shall have the right to exercise any and all rights and privileges and remedies given to Landlord by and pursuant to the provisions of Articles 17 and 18 hereof. 16. LANDLORD'S LIABILITY. The obligations of Landlord under this Lease shall not be binding upon Landlord named herein after the sale, conveyance, assignment or transfer by such Landlord (or upon any subsequent landlord after the sale, conveyance, assignment or transfer by such subsequent landlord) of its interest in the Building or the Real Property, as the case may be, and in the event of any such sale, conveyance, assignment or transfer, Landlord shall be and hereby is entirely freed and relieved of all covenants and obligations of Landlord hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest, or between the parties and the purchaser, grantee, assignee or other transferee that such purchaser, grantee, assignee or other transferee has assumed and agreed to carry out any and all covenants and obligations of Landlord hereunder. Neither the shareholders, directors or officers of Landlord, if Landlord is a corporation, nor the partners comprising Landlord (nor any of the shareholders, directors or officers of such partners), if Landlord is a partnership (collectively, the "Parties"), shall be liable for the performance of Landlord's obligations under this Lease provided the same are assumed by such transferee or assignee. Tenant shall look solely to Landlord to enforce Landlord's obligations hereunder and shall not seek any damages against any of the Parties. The liability of Landlord for Landlord's obligations under this Lease shall not exceed and shall be limited to Landlord's interest in the Building and the Real Property and Tenant shall not look to or attach any other property or assets of Landlord or the property or assets of any of the Parties in seeking either to enforce Landlord's obligations under this Lease or to satisfy a judgment for Landlord's failure to perform such obligations. 17. DEFAULT. A. Events of Default; Conditions of Limitation. This Lease and the term and estate hereby granted are subject to the limitations that upon the occurrence, at any time prior to or during the Term, of any one or more of the following events (referred to as "Events of Default"): (i) if Tenant shall default in the payment when due of any installment of Rent or in the payment when due of any additional rent, and such default shall continue for a period of five (5) days after notice by Landlord to Tenant of such default; or 20 (ii) if Tenant shall default in the observance or performance of any term, covenant or condition of this Lease on Tenant's part to be observed or performed (other than the covenants for the payment of Rent and additional rent) and Tenant shall fail to remedy such default within twenty-five (25) days after notice by Landlord to Tenant of such default, or if such default is of such a nature that it cannot be completely remedied within said period of twenty-five (25) days and Tenant shall not commence within said period of twenty-five (25) days, or shall not thereafter diligently prosecute to completion all steps necessary to remedy such default; or (iii) if Tenant shall default in the observance or performance of any term, covenant or condition on Tenant's part to be observed or performed under any other lease with Landlord or Landlord's predecessor in interest of space in the Building and such default shall continue beyond any grace period set forth in such other lease for the remedying of such default; or (iv) if the Premises shall become deserted or abandoned for longer than one (1) year; or (v) if Tenant's interest in this Lease shall devolve upon or pass to any person, whether by operation of law or otherwise, except as may be expressly permitted under Article 12 hereof; or (vi) if Tenant shall file a voluntary petition in bankruptcy or insolvency, or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or any other present or future applicable federal, state or other statute or law, or shall make an assignment for the benefit of creditors or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or any part of Tenant's property and the same is not discontinued within thirty (30) days; or (vii) if, within thirty (30) days after the commencement of any proceeding against Tenant, whether by the filing of a petition or otherwise, seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or any other present or future applicable federal, state or other statute or law, such proceeding shall not have been dismissed, or if, within ninety (90) days after the appointment of any trustee, receiver or liquidator of Tenant, or of all or any part of Tenant's property, without the consent or acquiescence of Tenant, such appointment shall not have been vacated or otherwise discharged, or if any execution or attachment shall be issued against Tenant or any of Tenant's property pursuant to which the Premises shall be taken or occupied or attempted to be taken or occupied; then, in any of said cases, at any time prior to or during the Term, of any one or more of such Events of Default, Landlord, at any time thereafter, at Landlord's option, may give to Tenant a seven (7) days notice of termination of this Lease and, in the event such notice is given, this Lease and the Term shall come to an end and expire (whether or not the Term shall have commenced) upon the expiration of said seven (7) days with the same effect as if the date of expiration of said seven (7) days were the Expiration Date, but Tenant shall remain liable for damages as provided in Article 18 hereof. B. Effect of Bankruptcy. If, at any time (i) Tenant shall be comprised of two (2) or more persons, or (ii) Tenant's obligations under this Lease shall have been guaranteed by any person other than Tenant, or (iii) Tenant's interest in this Lease shall have been assigned, the word "Tenant", as 21 used in clauses (vi) and (vii) of subsection A of this Article 17, shall be deemed to mean any one or more of the persons primarily or secondarily liable for Tenant's obligations under this Lease. Any monies received by Landlord from or on behalf of Tenant during the pendency of any proceeding of the types referred to in said clauses (vi) and (vii) shall be deemed paid as compensation for the use and occupation of the Premises and the acceptance of any such compensation by Landlord shall not be deemed an acceptance of rent or a waiver on the part of Landlord of any rights under said subsection A. C. Conditional Limitation. Nothing contained in this Article 17 shall be deemed to require Landlord to give the notices herein provided for prior to the commencement of a summary proceeding for non-payment of rent or a plenary action for recovery of rent on account of any default in the payment of the same, it being intended that such notices are for the sole purpose of creating a conditional limitation hereunder pursuant to which this Lease shall terminate and if Tenant thereafter remains in possession after such termination, Tenant shall do so as a holdover tenant. 18. REMEDIES AND DAMAGES. A. Landlord's Remedies. (i) If Tenant shall default in the payment when due of any installment of Rent or in the payment when due of any additional rent beyond applicable notice and cure periods, or if any execution or attachment shall be issued against Tenant or any of Tenant's property whereupon the Premises shall be taken or occupied or attempted to be taken or occupied by someone other than Tenant, or if Tenant shall fail to move into or take possession of the Premises within fifteen (15) days after the Commencement Date, or if this Lease and the Term shall expire and come to an end as provided in Article 17: (a) Landlord and its agents and servants may immediately, or at any time after such Event of Default or after the date upon which this Lease and the Term shall expire and come to an end, re-enter the Premises or any part thereof, either by summary proceedings, or by any other applicable action or proceeding, (without being liable for indictment, prosecution or damages therefor), and may repossess the Premises and dispossess Tenant and any other persons from the Premises and remove any and all of their property and effects from the Premises; and (b) Landlord, at Landlord's option, may relet the whole or any part or parts of the Premises from time to time, either in the name of Landlord or otherwise, to such tenant or tenants, for such term or terms ending before, on or after the Expiration Date, at such rental or rentals and upon such other conditions, which may include concessions and free rent periods, as Landlord, in its sole discretion, may determine. Landlord shall have no obligation to relet the Premises or any part thereof and shall in no event be liable for refusal or failure to relet the Premises or any part thereof, or, in the event of any such reletting, for refusal or failure to collect any rent due upon any such reletting, and no such refusal or failure shall operate to relieve Tenant of any liability under this Lease or otherwise to affect any such liability; Landlord, at Landlord's option, may make such repairs, replacements, alterations, additions, improvements, decorations and other physical changes in and to the Premises as Landlord, in its sole discretion, considers advisable or necessary in connection with any such reletting or proposed reletting, without relieving Tenant of any liability under this Lease or otherwise affecting any such liability. (ii) Tenant hereby waives the service of any notice of intention to reenter or to institute legal proceedings to that end which may otherwise be required to be given under any present or future law. Tenant, on its own behalf and on behalf of all persons claiming through or 22 under Tenant, including all creditors, does further hereby waive any and all rights which Tenant and all such persons might otherwise have under any present or future law to redeem the Premises, or to re-enter or repossess the Premises, or to restore the operation of this Lease, after (a) Tenant shall have been dispossessed by a judgment or by warrant of any court or judge, or (b) any re-entry by Landlord, or (c) any expiration or termination of this Lease and the Term, whether such dispossess, re-entry, expiration or termination shall be by operation of law or pursuant to the provisions of this Lease. The words "re-enter", "re-entry" and "re-entered" as used in this Lease shall not be deemed to be restricted to their technical legal meanings. In the event of a breach or threatened breach by Tenant, or any persons claiming through or under Tenant of any term, covenant or condition of this Lease on Tenant's part to be observed or performed, Landlord shall have the right to enjoin such breach and the right to invoke any other remedy allowed by law or in equity as if re-entry, summary proceedings and other special remedies were not provided in this Lease for such breach. The right to invoke the remedies hereinbefore set forth are cumulative and shall not preclude Landlord from invoking any other remedy allowed at law or in equity. B. Damages. (i) If this Lease and the Term shall expire and come to an end as provided in Article 17, or by or under any summary proceeding or any other action or proceeding, or if Landlord shall re-enter the Premises as provided in subsection A of this Article 18, or by or under any summary proceeding or any other action or proceeding, then, in any of said events: (a) Tenant shall pay to Landlord all Rent, additional rent and other charges payable under this Lease by Tenant to Landlord to the date upon which this Lease and the Term shall have expired and come to an end or to the date of re-entry upon the Premises by Landlord, as the case may be; (b) Tenant also shall be liable for and shall pay to Landlord, as damages, any deficiency (referred to as "Deficiency") between the Rent reserved in this Lease for the period which otherwise would have constituted the unexpired portion of the Term and the net amount, if any, of rents collected under any reletting effected pursuant to the provisions of subsection A(i) of this Article 18 for any part of such period (first deducting from the rents collected under any such reletting all of Landlord's expenses in connection with the termination of this Lease, or Landlord's reentry upon the Premises and with such reletting including, but not limited to, all reasonable repossession costs, brokerage commissions, legal expenses, attorneys' fees and disbursements, alteration costs and other expenses of preparing the Premises for such reletting); any such Deficiency shall be paid in monthly installments by Tenant on the days specified in this Lease for payment of installments of Rent, Landlord shall be entitled to recover from Tenant each monthly Deficiency as the same shall arise, and no suit to collect the amount of the Deficiency for any month shall prejudice Landlord's right to collect the Deficiency for any subsequent month by a similar proceeding; and (c) whether or not Landlord shall have collected any monthly Deficiencies as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord, on demand, in lieu of any further Deficiencies as and for liquidated and agreed final damages, a sum equal to the amount by which the Rent reserved in this Lease for the period which otherwise would have constituted the unexpired portion of the Term exceeds the then fair and reasonable rental value of the Premises for the same period, less the aggregate amount of Deficiencies theretofore collected by Landlord pursuant to the provisions of subsection B(1)(b) of this Article 18 for the same period; if, before presentation of proof of such liquidated damages to any court, commission or 23 tribunal, the Premises, or any part thereof, shall have been relet by Landlord for the period which otherwise would have constituted the unexpired portion of the Term, or any part thereof, the amount of rent reserved upon such reletting shall be deemed, prima facie, to be the fair and reasonable rental value for the part or the whole of the Premises so relet during the term of the reletting. (ii) If the Premises, or any part thereof, shall be relet together with other space in the Building, the rents collected or reserved under any such reletting and the expenses of any such reletting shall be equitably apportioned for the purposes of this subsection B. Tenant shall in no event be entitled to any rents collected or payable under any reletting, whether or not such rents shall exceed the Rent reserved in this Lease. Solely for the purposes of this Article, the term "Rent" as used in subsection B(i) of this Article 18 shall mean the Rent in effect immediately prior to the date upon which this Lease and the Term shall have expired and come to an end, or the date of re-entry upon the Premises by Landlord, as the case may be, adjusted to reflect any increase or decrease pursuant to the provisions of Article 28 hereof for the Comparison Year (as defined in said Article 28) immediately preceding such event. Nothing contained in Article 17 or this Article 18 shall be deemed to limit or preclude the recovery by Landlord from Tenant of the maximum amount allowed to be obtained as damages by any statute or rule of law, or of any sums or damages to which Landlord may be entitled in addition to the damages set forth in subsection B(i) of this Article 18. C. Legal Fees. (i) Tenant hereby agrees to pay, as additional rent, all reasonable attorneys' fees and disbursements (and all other court costs or expenses of legal proceedings) which Landlord may incur or pay out by reason of, or in connection with: (a) any action or proceeding by Landlord to terminate this Lease; (b) any other action or proceeding by Landlord against Tenant (including, but not limited to, any arbitration proceeding); (c) any default by Tenant in the observance or performance of any obligation under this Lease (including, but not limited to, matters involving payment of rent and additional rent, computation of escalations, alterations or other Tenant's work and subletting or assignment), in the event Landlord commences any action or proceeding against Tenant; and (d) any action or proceeding brought by Tenant against Landlord (or any officer, partner or employee of Landlord) in which Tenant fails to secure a final unappealable judgment against Landlord. (ii) Tenant's obligations under this subsection C of Article 18 shall survive, the expiration of the Term hereof or any earlier termination of this Lease. This provision is intended to supplement (and not to limit) other provisions of this Lease pertaining to indemnities and/or reasonable attorneys' fees and shall not be duplicative of any other provisions hereof. (iii) Landlord hereby agrees to be liable to Tenant for all attorneys' fees and disbursements (and all other court costs or expenses of legal proceedings) which Tenant may incur or pay out by reason of or in connection with any action or proceeding by Tenant against Landlord (including, but not limited to, any arbitration proceeding) in which Tenant prevails. 24 19. FEES AND EXPENSES. A. Curing Tenant's Defaults. If Tenant shall default in the observance or performance of any term or covenant on Tenant's part to be observed or performed under or by virtue of any of the terms or provisions in any Article of this Lease beyond the expiration of applicable, notice and cure periods, Landlord may immediately or at any time thereafter on ten (10) days notice perform the same for the account of Tenant, and if Landlord makes any expenditures or incurs any obligations for the payment of money in connection therewith including, but not limited to, reasonable attorneys' fees and disbursements in instituting, prosecuting or defending any action or proceeding, such sums paid or obligations incurred with interest and costs from and after the date Tenant receives the aforesaid notice shall be deemed to be additional rent hereunder and shall be paid by Tenant to Landlord within fifteen (15) days of rendition of any bill or statement to Tenant therefor. B. Late Charges. If Tenant shall fail to make payment of any installment of Rent or any additional rent within ten (10) days after the date when such payment is due, Tenant shall pay to Landlord, in addition to such installment of Rent or such additional rent, as the case may be, as a late charge and as additional rent, a sum based on a rate equal to the lesser of (i) four percent (4%) per annum above the then current prime rate charged by Citibank, N.A. or its successor and (ii) the maximum rate permitted by applicable law, of the amount unpaid computed from the date such payment was due to and including the date of payment, but in no event shall interest be computed and payable for less than a full calendar month. Tenant acknowledges and agrees that, except as otherwise expressly provided herein, if Tenant fails to dispute any item of additional rent within sixty (60) days of receipt of a bill or notice therefor, Tenant shall be deemed to have waived its right to dispute the same. 20. NO REPRESENTATIONS BY LANDLORD. Landlord or Landlord's agents have made no representations or promises with respect to the Building, the Real Property, the Premises or Taxes (as defined in Article 28 hereof) except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth herein. All references in this Lease to the consent or approval of Landlord shall be deemed to mean the written consent of Landlord or the written approval of Landlord and no consent or appraisal of Landlord shall be effective for any purpose unless such consent or approval is set forth in a written instrument executed by Landlord. 21. END OF TERM. A. Surrender of Premises. Upon the expiration or other termination of the Term, Tenant shall quit and surrender to Landlord the Premises, broom clean, in good order and condition, ordinary wear and tear and damage for which Tenant is not responsible under the terms of this Lease excepted, and Tenant shall remove all of its property pursuant to Article 3 hereof. Tenant's obligation to observe or perform this covenant shall survive the expiration or sooner termination of the Term. If the last day of the Term or any renewal thereof falls on Saturday or Sunday this Lease shall expire on the business day immediately preceding. In addition, the parties recognize and agree that the damage to Landlord resulting from any failure by Tenant to timely surrender possession of the Premises as aforesaid will be substantial, will exceed the amount of the monthly installments of the Rent theretofore payable hereunder, and will be impossible to accurately measure. Tenant therefore agrees that if possession of the Premises is not surrendered to Landlord within twenty-four (24) hours after the Expiration Date or sooner termination of the Term, in addition, to any other rights or remedies Landlord may have hereunder or at law, Tenant shall pay to Landlord for each month and for each portion of any month during which Tenant holds over in the Premises after the Expiration Date or sooner termination of this Lease, a sum equal to two (2) times the aggregate of that portion of the Rent and the additional rent which was payable under this Lease during the last month of the Term. Nothing herein contained shall be deemed to permit Tenant to retain possession of the Premises without Landlord's consent, which may be withheld in Landlord's 25 sole discretion, after the Expiration Date or sooner termination of this Lease and no acceptance by Landlord of payments from Tenant after the Expiration Date or sooner termination of the Term shall be deemed to be other than on account of the amount to be paid by Tenant in accordance with the provisions of this Article 21, which provisions shall survive the Expiration Date or sooner termination of this Lease. B. Holdover by Tenant. If Tenant shall hold-over or remain in possession of any portion of the Premises beyond the Expiration Date of this Lease, notwithstanding the acceptance of any Rent and additional rent paid by Tenant pursuant to subsection A above, Tenant shall be subject not only to summary proceeding and all damages related thereto, but also to any direct damages arising out of lost opportunities (and/or new leases) by Landlord to re-let the Premises (or any part thereof). All damages to Landlord by reason of such holding over by Tenant may be the subject of a separate action and need not be asserted by Landlord in any summary proceedings against Tenant. 22. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that upon Tenant paying the Rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the Premises subject, nevertheless, to the terms and conditions of this Lease including, but not limited to, Article 16 hereof and to all Superior Leases and Mortgages. 23. FAILURE TO GIVE POSSESSION. Tenant waives any right to rescind this Lease under Section 223-a of the New York Real Property Law or any successor statute of similar import then in force and further waives the right to recover any damages which may result from Landlord's failure to deliver possession of the Premises on the date set forth in Article 1 hereof for the commencement of the Term. If Landlord shall be unable to give possession of the Premises on such date, and provided Tenant is not responsible for such inability to give possession, the Rent reserved and covenanted to be paid herein shall not commence until the possession of the Premises is given or the Premises are available for occupancy by Tenant, and no such failure to give possession on such date shall in any way affect the validity of this Lease or the obligations of Tenant hereunder or give rise to any claim for damages by Tenant or claim for rescission of this Lease, nor shall same be construed in anyway to extend the Term. If permission is given to Tenant to enter into the possession of the Premises or to occupy premises other than the Premises prior to the Commencement Date, Tenant covenants and agrees that such occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this Lease, except the covenant to pay Rent. 24. NO WAIVER. If there be any agreement between Landlord and Tenant providing for the cancellation of this Lease upon certain provisions or contingencies and/or an agreement for the renewal hereof at the expiration of the Term, the right to such renewal or the execution of a renewal agreement between Landlord and Tenant prior to the expiration of the Term shall not be considered an extension thereof or a vested right in Tenant to such further term, so as to prevent Landlord from canceling this Lease and any such extension thereof during the remainder of the original Term; such privilege, if and when so exercised by Landlord, shall cancel and terminate this Lease and any such renewal or extension previously entered into between Landlord and Tenant or the right of Tenant to any such renewal or extension; any right herein contained on the part of Landlord to cancel this Lease shall continue during any extension or renewal hereof; any option on the part of Tenant herein contained for an extension or renewal hereof shall not be deemed to give Tenant any option for a further extension beyond the first renewal or extended term. No act or thing done, by Landlord or Landlord's agents during the Term shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such surrender shall be valid unless in writing and signed by Landlord. No employee of Landlord or of Landlord's agents shall have any power to accept the keys of the Premises prior to the termination of this Lease. The delivery of keys to any employee of Landlord or of Landlord's agents shall not operate as a termination of this Lease or a surrender of the Premises. In the event Tenant at any time desires to have Landlord sublet 26 the Premises for Tenant's account, Landlord or Landlord's agents are authorized to receive said keys for such purpose without releasing Tenant from any of the obligations under this Lease, and Tenant hereby relieves Landlord of any liability for loss of or damage to any of Tenant's effects in connection with such subletting. The failure of Landlord to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease, or any of the Rules and Regulations set forth herein or hereafter adopted by Landlord, shall not prevent a subsequent act, which would have originally constituted a violation, from having all force and effect of an original violation. The receipt by Landlord of Rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach. The failure of Landlord to enforce any of the Rules and Regulations set forth, or hereafter adopted, against Tenant and/or any other tenant in the Building shall not be deemed a waiver of any such Rules and Regulations. No provision of this Lease shall be deemed to have been waived by Landlord or Tenant unless such waiver be in writing signed by Landlord or Tenant, as the case may be. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly Rent herein stipulated shall be deemed to be other than on account of the earliest stipulated Rent, or as Landlord may elect to apply same, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as 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 pursue any other remedy in this Lease provided. This Lease contains the entire agreement between the parties and all prior negotiations and agreements are merged in this Lease. Any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. 25. WAIVER OF TRIAL BY JURY. It is mutually agreed by and between Landlord and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, and/or any claim of injury or damage, or for the enforcement of any remedy under any statute, emergency or otherwise. It is further mutually agreed that in the event Landlord commences any summary proceeding (whether for nonpayment of rent or because Tenant continues in possession of the Premises after the expiration or termination of the Term), Tenant will not interpose any counterclaim (except for mandatory or compulsory counterclaims) of whatever nature or description in any such proceeding. Notwithstanding the foregoing, Tenant shall not be prevented from bringing a separate action with respect to any claim hereunder. 26. INABILITY TO PERFORM. This Lease and the obligation of Tenant to pay Rent and additional rent hereunder and perform all of the other covenants and agreements hereunder on the part of Tenant to be performed shall in nowise be affected, impaired or excused because Landlord is unable to fulfill any of its obligations under this Lease expressly or impliedly to be performed by Landlord or because Landlord is unable to make, or is delayed in making any repairs, additions, alterations, improvements or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of strikes or labor troubles or by accident or by any cause whatsoever reasonably beyond Landlord's control, including, but not limited to, laws, governmental preemption in connection with a National Emergency or by reason of any rule, order or regulation of any federal, state, county or municipal authority or any department or subdivision thereof or any government agency or by reason of the conditions of supply and demand which have been or are affected by war or other emergency (collectively, "Unavoidable Delays"). Landlord shall, subject to the terms of this Lease, fulfill its obligations with commercially reasonable due diligence as soon as such Unavoidable Delays cease to exist. 27 27. BILLS AND NOTICES. Except as otherwise expressly provided in this Lease, any bills, statements, notices, demands, requests or other communications given or required to be given under this Lease shall be deemed sufficiently given or rendered if in writing, sent by registered or certified mail (return receipt requested) or overnight courier addressed (i) to Tenant (a) at Tenant's address set forth in this Lease if mailed prior to Tenant's taking possession of the Premises, or (b) at the Building if mailed subsequent to Tenant's taking possession of the Premises, or (c) at any place where Tenant or any agent or employee of Tenant may be found if mailed subsequent to Tenant's vacating, deserting, abandoning or surrendering the Premises, in any case, with a courtesy copy to Tenant's attorneys, Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, Attention: Fred B. White, III, Esq., or (ii) to Landlord at Landlord's address set forth in this Lease with a courtesy copy to Landlord's attorneys, Solomon and Weinberg LLP, 70 East 55th Street, New York, New York 10022, Attention: Jay Stark, Esq., or (iii) to such other address as either Landlord or Tenant may designate as its new address for such purpose by notice given to the others in accordance with the provisions of this Article 27. Tenant hereby acknowledges and agrees that any such bill, statement, demand, notice, request or other communication may be given by Landlord's agent on behalf of Landlord. Any such bill, statement, demand, notice, request or other communication shall be deemed to have been rendered or given on the date when it shall have been mailed as provided in this Article 27. Notwithstanding anything contained in this Article 27 to the contrary, bills and statements issued by Landlord may be sent by the method(s) set forth hereinabove, without copies to any other party. This notice provision has been specifically negotiated between the parties hereto. 28. ESCALATION A. Defined Terms. In a determination of any increase in the Rent under the Provisions of this Article 28, Landlord and Tenant agree as follows: (i) "Taxes" shall mean the aggregate amount of real estate taxes and any special assessments (exclusive of penalties and interest thereon) imposed upon Real Property (including, without limitation, (a) assessments made upon or with respect to any "air rights", (b) assessments made in connection with the Downtown Business Improvement District and (c) any assessments levied after the date of this Lease for public benefits to the Real Property or the Building (excluding an amount equal to the assessments payable in whole or in part during or for the Base Tax Year (as defined in Article 1 of this Lease)), which assessments, if payable in installments, shall be deemed payable in the maximum number of permissible installments (in the manner in which such taxes and assessments are imposed as of the date hereof); provided, that if because of any change in the taxation of real estate, any other tax or assessment (including, without limitation, any occupancy, gross receipts, or rental income, franchise, transit or other tax) is imposed upon Landlord or the owner of the Real Property or the Building or the occupancy, rents or income therefrom, in substitution or in addition to, any of the foregoing Taxes, such other tax or assessment shall be deemed part of the Taxes. With respect to any Comparison Year (hereinafter defined) all expenses, including reasonable attorneys' fees and disbursements, experts' and other witnesses' fees, incurred in contesting the validity or amount of any Taxes or in obtaining a refund of Taxes shall be considered as part of the Taxes for such year. Anything contained herein to the contrary notwithstanding, Taxes shall not be deemed to include (w) any taxes on Landlord's income, (x) franchise taxes, (y) estate or inheritance taxes or (z) any similar taxes imposed on Landlord. (ii) "Assessed Valuation" shall mean the amount for which the Real Property is assessed pursuant to applicable provisions of the New York City Charter and of the Administrative Code of the City of New York for the purpose of imposition of Taxes. 28 (iii) "Tax Year" shall mean the period July 1 through June 30 (or such other period as hereinafter may be duly adopted by the City of New York as it fiscal year for real estate tax programs) any portion of which occurs during the Term. (iv) "Base Taxes" shall mean the Taxes payable for the Base Tax Year. (v) "Comparison Year" shall mean (a) with respect to Taxes, any Tax Year, subsequent to the Base Tax Year, and (b) with respect to Operating Expenses (hereinafter defined) any calendar year subsequent to the Base Expense Year (hereinafter defined), for any part or all of which there is an increase in the Rent pursuant to subsection B of this Article 28. (vi) (a) "Operating Expenses" shall mean the aggregate of those costs and expenses (and taxes, if any, thereof) paid or incurred by or on behalf of Landlord (whether directly or through independent contractors) in respect of the operation, maintenance and management of the land and/or the Building and the sidewalks and areas adjacent thereto (hereinafter called "Operation of the Property") which, in accordance with the accounting practices used by Landlord (and which is in accordance with sound management principles respecting the operation of non-institutional first class office buildings in New York City) are properly chargeable to the Operation of the Property together with and including (without limitation) the financial expenses incurred in connection with the Operation of the Property such as increases in ground rent, if any, insurance premiums, reasonable attorneys' fees and disbursements (exclusive of any such fees and disbursements incurred in applying for any abatement of Taxes) and auditing the other professional fees and expenses, but specifically excluding (1) Taxes, (2) franchise, transfer gains, estate or income taxes imposed upon Landlord, (3) mortgage interest and amortization, (4) leasing and brokerage commissions and similar fees, (5) the cost of tenant installations and decorations incurred in connection with preparing space for a new tenant and any other contribution by Landlord to the cost of other tenant's improvements, (6) ground rent, if any, other than increases therein, (7) capital improvements (including, without limitation, any capital improvement required by a change in laws), except, however, that (A) if any capital improvement results in reducing Operating Expenses (as, for example, a labor-saving improvement), then with respect to the Comparison Year in which the improvement is made and each subsequent Comparison Year during the Term the amount by which the Operating Expenses have been reduced shall be deemed deducted from the Base Operating Expenses (hereinafter defined) and (B) if Landlord is not furnishing any particular work or service (the cost of which if performed by Landlord would constitute an Operating Expense) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be determined to be increased by an amount equal to the additional Operating Expenses which reasonably would have been incurred during such period by Landlord if it had at its own expense furnished such work or services to such tenant, (8) refinancing fees and any interest payments or late penalties, (9) depreciation and amortization of any building and equipment (except as set forth herein), (10) operating expenses of any associated garage or retail space, (11) charitable contributions, (12) costs for sculptures, paintings and other objects of art located within or outside of the Building, (13) off-site management and overhead, (14) all amounts paid to subsidiaries or affiliates of the Landlord for services on or to the building that are in excess of competitive costs for such services, (15) any payments under a ground lease or a master lease relating to the Premises, if any, (16) special services performed by Landlord for individual tenants, (17) costs which are covered by and reimbursed under any contractor, manufacturer or supplier warranty or service contract, (18) the cost of any judgment, settlement, or 29 arbitration award resulting from any liability of Landlord, (19) the cost arising from any commercial concession operated by Landlord, including any compensation paid to clerks, attendants or other persons in such concessions, (20) the cost relating to any management office for the Building including rent, or for any other management office in the Building (except for the salaries of Building employees), (21) any costs, fees, dues contributions or similar expenses for industry associations or similar organizations in which the Building is a member, (22) the entertainment expenses and travel expense of Landlord, its employees, agents partners and affiliates, (23) any costs for which Landlord has been reimbursed or receives a credit refund or discount, (24) lease takeover costs and costs incurred by Landlord in connection with enforcement of other leases or subleases in the Building and legal fees incurred in connection with any negotiation of any space lease in the Building, (25) the cost of providing any service customarily provided by a managing agent and the cost of which is customarily included in management fees (i.e., bookkeeping and accounting costs), (26) the cost of any separate electrical meter cost or any survey Landlord may provide to any of the tenants in the Building, (27) costs relating to withdrawal liability or unfunded pension liability under the Multi-Employer Pension Plan Act or similar law, (28) any expense for which Landlord is otherwise compensated through the proceeds of insurance or is otherwise compensated by any tenant of the Building for services in excess of the services Landlord is obligated to furnish to Tenant hereunder, and (29) advertising and promotional expenditures. (b) In determining the amount of Operating Expenses for the Base Year or any Comparison Year, if less than ninety-five percent (95%) of the Building rentable area shall have been occupied by tenant(s) at any time during any such Base Year or Comparison Year, Operating Expenses shall be determined for such Base Year or Comparison Year to be an amount equal to the like expenses which would normally be expected to be incurred had such occupancy been ninety-five percent (95%) throughout such Base Year or Comparison Year. (c) If any capital improvement is made during the Base Year or any Comparison Year, then the useful life amortization, with interest, of the cost of such improvements shall be deemed an Operating Expense in each of the Comparison Years during which such amortization occurs. (vii) "Base Operating Expenses" shall mean the Operating Expenses for the Base Expense Year. (viii) "Landlord's Statement" shall mean an instrument or instruments containing a comparison of any increase or decrease in the Rent for the preceding Comparison Year pursuant to the provisions of this Article 28. (ix) "Base Expense Year" shall be deemed to mean the 1999 calendar year. B. Escalation. (i) If the Taxes payable for any Comparison Year (any part or all of which falls within the Term) shall represent an increase above the Base Taxes, then the Rent for such Comparison Year and continuing thereafter until a new Landlord's Statement is rendered to Tenant, shall be increased by Tenant's Proportionate Share of such increase. The Taxes shall be initially computed on the basis of the Assessed Valuation in effect at the time Landlord's Statement is rendered (as the Taxes may have been settled or finally adjudicated prior to such time) regardless of any then pending application, proceeding or appeal respecting the reduction of any such Assessed Valuation but shall be subject to subsequent adjustment as provided in subsection D(i) of this Article 28. 30 (ii) If the Operating Expenses for any Comparison Year (any part or all of which falls within the Term) shall be greater than the Base Operating Expenses, then the Rent for such Comparison Year and continuing thereafter until a new Landlord's Statement is rendered to Tenant, shall be increased by Tenant's Proportionate Share of such increase. C. Payment of Escalations. (i) At any time during or after any Comparison Year Landlord shall render to Tenant, either in accordance with the provisions of Article 27 hereof or by personal delivery at the Premises, a Landlord's Statement or Statements showing separately or together (a) a comparison of the Taxes payable for the Comparison Year with the Base Taxes, (b) a comparison of the Operating Expenses for the Comparison year with the Base Operating Expenses, and (c) the amount of the increase in the Rent resulting from each of such comparisons. Landlord's failure to render a Landlord's Statement during or with respect to any Comparison Year shall not prejudice Landlord's right to render a Landlord's Statement during or with respect to any subsequent Comparison Year, and shall not eliminate or reduce Tenant's obligation to pay increases in the Rent pursuant to this Article 28 for such Comparison Year. (ii) (a) Tenant's obligations with respect to increases in Operating Expenses and Taxes, shall be payable by Tenant on the first day of the month following the furnishing to Tenant of a Landlord's Statement with respect to Operating Expenses and/or Taxes, as applicable, in an amount equal to one-twelfth (1/12th) of such increase in the Rent multiplied by the number of months (and any fraction thereof) of the Term then elapsed since the commencement of the Comparison Year for which the increase in Operating Expenses and/or Taxes, as the case may be, is applicable, together with a sum equal to one-twelfth (1/12th) of such increase with respect to the month, following the furnishing to Tenant of a Landlord's Statement; and thereafter, commencing with the next succeeding monthly installment of Rent and continuing monthly thereafter until rendition of the next succeeding Landlord's Statement, the monthly installments of Rent shall be increased by an amount equal to one-twelfth (1/12th) of such increase in Operating Expenses and/or Taxes, as the case may be. Any increase in the Rent shall be collectible by Landlord in the same manner as Rent. (b) If during the Term of this Lease, Taxes are required to be paid (either to the appropriate taxing authorities or as to tax escrow payments to a mortgagee or ground lessor) in full or in monthly, quarterly, or other installments, on any other date or dates than as presently required, then, at Landlord's option, Tenant's Proportionate Share with respect to Taxes shall be correspondingly accelerated or revised so that Tenant's Proportionate Share is due at least thirty (30) days prior to the date payments are due to the taxing authorities or the superior mortgagee or ground lessor, as the case may be. (c) Following each Landlord's Statement, a reconciliation shall be made as follows: Tenant shall be debited with any increase in the Rent shown on such Landlord's Statement and credited with the aggregate, if any, paid by Tenant on account in accordance with the provisions of subsection C(ii)(a) for the Comparison Year in question; Tenant shall pay any net debit balance to Landlord within twenty (20) days next following rendition by Landlord, either in accordance with the provisions of Article 27 hereof or by personal delivery to the Premises, of an invoice for such net debit balance; any net credit balance shall be applied against the next accruing monthly installment of Rent. 31 (iii) (a) As used in this subsection C(iii), the words "Tentative Monthly Expense Charge" shall mean a sum equal to one-twelfth (1/12th) of Tenant's Proportionate Share multiplied by the difference between (i) the Base Operating Expenses and (ii) one hundred and six percent (106%) of the Operating expenses for (1) the Base Expense Year with respect to the first Comparison Year during the Term or (2) the immediately preceding Comparison Year with respect to the second Comparison Year and each Comparison Year thereafter during the Term. (b) At any time in any Comparison Year (any part or all of which falls within the term), Landlord, at its option, in lieu of the payments required under subsection C(ii)(a) of this Article 28 with respect to Operating Expenses only, may demand and collect from Tenant, as additional rent, a sum equal to the Tentative Monthly Expense Charge multiplied by the number of months in said Comparison Year preceding the demand, and thereafter; commencing with the month in which the demand is made and continuing thereafter for each month remaining in said Year, the monthly installments of Rent shall be deemed increased by the Tentative Monthly Expense Charge. Any amount due to Landlord under this subsection C(iii)(b) or subsection C(iii)(a) above may be included by Landlord in any Landlord's Statement rendered to Tenant as provided in subsection C(i) of this Article 28. (c) After the end of the Comparison Year in which a demand is made pursuant to the provisions of subsection C(iii)(b) of this Article 28 and at any time that Landlord renders a Landlord's Statement or Statements to Tenant as provided in subsection C(i) of this Article 28 in respect of Operating Expenses, the amounts, if any, collected by Landlord from Tenant under subsection C(iii)(b) hereof on account of Tentative Monthly Expense Charge shall be adjusted, and, if the amount so collected is less than or exceeds the amount actually due under said Landlord's Statement for the Comparison Year, a reconciliation shall be made in the same manner as provided in subsection C(ii)(c) of this Article 28. D. Adjustments. (i) (a) In the event that, after a Landlord's Statement has been sent to Tenant, an Assessed Valuation which had been utilized in computing the Taxes for a Comparison Year is reduced (as a result of settlement, final determination of legal proceedings or otherwise), and as a result thereof a refund of Taxes is actually received by or on behalf of Landlord, then, promptly after receipt of such refund, Landlord shall send Tenant a statement adjusting the Taxes for such Comparison Year (taking into account the expenses mentioned in the last sentence of subsection A(i) of this Article 28) and setting forth Tenant's Proportionate Share of such refund and Tenant shall be entitled to receive such Tenant's Proportionate Share by way of a credit against the Rent next becoming due after the sending of such Statement; provided, however, that Tenant's Proportionate Share of such refund shall be limited to the amount, if any, which Tenant had theretofore paid to Landlord as Increased Rent for such Comparison Year on the basis of the Assessed Valuation before it had been reduced. (b) In the event that, after a Landlord's Statement has been sent to Tenant, the Assessed Valuation which had been utilized in computing the Base Taxes is reduced (as a result of settlement, final determination of legal proceedings or otherwise), then, and in such event: (1) the Base Taxes shall be retroactively adjusted to reflect such reduction, (2) the monthly installment of Rent shall be increased accordingly, and (3) all retroactive additional rent resulting from such retroactive adjustment shall be forthwith payable when billed by Landlord. Landlord promptly shall send to Tenant a statement setting forth the basis for such retroactive adjustment and additional rent payments. In the event the Assessed Valuation which has been utilized in computing the Base Taxes is 32 increased solely as a result of the sale, transfer or conveyance of the Real Property, neither Base Taxes nor the monthly installment of Rent shall be increased as a result thereof. (ii) Any Landlord's Statement sent to Tenant shall be conclusively binding upon Tenant unless, within sixty (60) days after such statement is sent, Tenant shall (a) pay to Landlord the amount set forth in such statement, without prejudice to Tenant's right to dispute same, and (b) send a written notice to Landlord objecting to such statement and specifying the respects in which such statement is claimed to be incorrect. If such notice is sent, the parties recognize the unavailability of Landlord's books and records because of the confidential nature thereof and hence agree that either party may refer the decision of the issues raised to a reputable independent firm of certified public accountants selected by Tenant and reasonably acceptable to Landlord, and the decision of such accountants shall be conclusively binding upon the parties. The fees and expenses involved in such decision shall be borne by the unsuccessful party (and if both parties are partially unsuccessful, the accountants shall apportion the fee and expenses between the parties based on the degree of success of each party). (iii) Anything in this Article 28 to the contrary notwithstanding, under no circumstances shall the rent payable under this Lease be less than the Rent set forth in Article 1 hereof. (iv) The expiration or termination of this Lease during any Comparison Year for any part or all of which there is an increase in the Rent under this Article shall not affect the rights or obligations of the parties hereto respecting such increase and any Landlord's Statement relating to such increase may, on a pro rata basis, be sent to Tenant subsequent to, and all such rights and obligations shall survive, any such expiration or termination. Any payments due under such Landlord's Statement shall be payable within twenty (20) days after such statement is sent to Tenant. If any payments are due from Landlord to Tenant, the same shall be paid within thirty (30) days following the Expiration Date. 29. SERVICES A. Elevator. Landlord shall provide passenger elevator facilities on business days from 8:00 A.M. to 6:00 P.M. and shall have one passenger elevator in the bank of elevators servicing the Premises available at all other times. Landlord shall provide freight elevator services on an "as available" basis for incidental use and for deliveries by Tenant from 8:00 A.M. through 12:00 Noon and from 1:00 P.M. through 5:00 P.M. on business days only. Any extended or weekend use may be arranged with Landlord's prior consent which shall not be unreasonably withheld or delayed and Tenant shall pay as additional rent all building standard charges therefor (provided that during Tenant's Initial Alteration and move-in only, such charges shall be at Landlord's actual costs therefor). Use of freight elevators on weekends must be in increments of four (4) hours. B. Heating. Landlord shall furnish heat to the Premises when and as required by law, on business days from 8:00 AM. to 6:00 P.M. Landlord shall not be responsible for the adequacy, design or capacity of the heating distribution system if the normal operation of the heat distribution system serving the Building shall fail to provide heat at reasonable temperatures or any reasonable volumes or velocities in any parts of the Premises by reason of any rearrangement of partitioning or other Alterations made or performed by or on behalf of Tenant or any person claiming through or under Tenant. C. Cooling. Landlord, at Landlord's expense, shall furnish air-cooling on business days from 8:00 A.M. to 6:00 P.M. as required for the comfortable occupancy of the Premises, but in no 33 event less than from May 15 through October 15 of each year during the Term, when, in the judgment of Landlord, reasonably exercised, it may be required for the comfortable occupancy of the Premises, and shall ventilate the Premises on business days and for similar hours during other months of the year. Anything in this subsection C to the contrary notwithstanding, Landlord shall not be responsible if the normal operation of the Building air-cooling system shall fail to provide cooled air at reasonable temperatures, pressures or degrees of humidity or any reasonable volumes or velocities in any parts of the Premises by reason of (i) human occupancy factors and any machinery or equipment installed by or on behalf of Tenant or any person claiming through or under Tenant that have an electrical load in excess of the average electrical load for the Building air-cooling system as required under this Lease or (ii) any rearrangement of partitioning or other Alterations made or performed by or on behalf of Tenant or any person claiming through or under Tenant unless same is specifically required by Landlord solely for Landlord's convenience and not in connection with any applicable governmental laws, ordinances, rules or regulations. Tenant agrees to keep and cause to be kept closed all of the windows in the Premises whenever the air-cooling system is in operation and agrees to lower and close the blinds when necessary because of the sun's position whenever the air-cooling system is in operation. Tenant at all times agrees to cooperate fully with Landlord and to abide by the regulations and requirements which Landlord may reasonably prescribe for the proper functioning and protection of the air-cooling system. Landlord, throughout the Term, shall have free access to any and all mechanical installations of Landlord, including, but not limited to, air-cooling, fan, ventilating, machine rooms and electrical closets. Tenant may, subject to the terms and conditions of this Lease, including, without limitation, this Article 9 and Article 3 hereof, install air conditioning in the Premises for the data center, at Tenant's sole cost and expense, provided the installation and maintenance of same is, in all respects, reasonably satisfactory to Landlord and, subject to Landlord's prior written approval, which shall not be unreasonably withheld or delayed, vent such air conditioning through any existing louvers along Platt Street exposure. In addition to the foregoing, Tenant may install vents on the eighth (8th) floor of the Building along the Platt Street exposure reasonably sufficient to service Tenant's air conditioning requirements, the number, design and location of which shall be subject to Landlord's prior written approval, which approval shall not be unreasonably withheld or delayed. D. After Hours and Additional Services. The Rent does not include any charge to Tenant for the furnishing of any additional passenger elevator facilities, any freight elevator facilities (other than as contemplated in Article 29 subsection A) or for the service of heat, cooled air or mechanical ventilation to the Premises during periods other than the hours and days set forth in subsections A and B of this Article 29 for the furnishing and distributing of such facilities or services (referred to as "Overtime Periods"). Accordingly, if Landlord shall furnish any (i) passenger elevator facilities to Tenant during Overtime Periods or freight elevator facilities, except as provided in subsection A of this Article 29, or (ii) heat to the Premises during Overtime Periods, then Tenant shall pay Landlord additional rent for such facilities or services at the standard rates then fixed by the Landlord for the Building or, if no such rates are then fixed, at reasonable rates. Neither the facilities nor the services referred to in this Article 29D shall be furnished to Tenant or the Premises if Landlord has not received advance notice from Tenant specifying the particular facilities or services requested by Tenant at least twenty-four (24) hours prior to the date on which the facilities or services are to be furnished; or if Tenant is in default under or in breach of any of the terms, covenants or conditions of this Lease beyond the expiration of any applicable notice and cure periods; or if Landlord shall determine, in its sole and exclusive discretion, reasonably exercised, that such facilities or services are requested in connection with, or the use thereof shall create or aid in a default under or a breach of any term, covenant or condition of this Lease. All of the facilities and services referred to in this Article 29D are conveniences and are not and shall not be deemed to be appurtenances to the Premises, and the failure of Landlord to furnish any or all of such facilities or services shall not constitute or give rise to any claim of an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of Rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Landlord or its 34 agents by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business or otherwise. Landlord shall have no obligation to (i) furnish cooled air or ventilation to the Premises during Overtime Periods or (ii) supply condenser water to the Premises for supplemental air cooling systems. E. Cleaning. Landlord, at Landlord's expense, shall cause the Premises (with the exception of the data center, the cleaning of which shall be the sole responsibility of Tenant) to be kept clean in building standard manner. Tenant shall pay to Landlord the cost of removal of any of Tenant's refuse and rubbish from the Premises and the Building to the extent that the same exceeds the refuse and rubbish usually attendant upon the use of such Premises as executive and general offices. Bills for the same shall be rendered by Landlord to Tenant at such time as Landlord may elect and shall be due and payable when rendered and the amount of such bills shall be deemed to be, and be paid as additional rent. Tenant shall, however, have the option of independently contracting for the removal of such refuse and rubbish in the event that Tenant does not wish to have same done by employees of Landlord. Under such circumstances, however, the removal of such refuse and rubbish by others shall be subject to such rules and regulations, as in the judgment of Landlord, are necessary for the proper operation of the Building. Attached hereto as Exhibit 3 are the current cleaning specifications for the Building, but Landlord reserves the right to amend same from time to time in a commercially reasonable manner. F. Sprinkler System. If there now is or shall be installed in the Building a "sprinkler system", and such system or any of its appliances shall be damaged or injured or not in proper working order by reason of any act or omission of Tenant, Tenant's agents, servants, employees, licensees or visitors, Tenant shall forthwith restore the same to good working condition at its own expense; and if the New York Board of Fire Underwriters or the New York Fire Insurance Rating Organization or any bureau, department or official of the state or city government, shall require or recommend that any changes, modifications, alterations or additional sprinkler heads or other equipment be made or supplied by reason of Tenant's business, or the location of the partitions, trade fixtures, or other contents of the Premises, Tenant shall, at Tenant's expense, promptly make and supply such changes, modifications, alterations, additional sprinkler heads or other equipment. G. Water. If Tenant requires, uses or consumes water for any purpose in addition to ordinary drinking, cleaning, pantry or lavatory purposes, Landlord may install a water meter and thereby measure Tenant's water consumption for all purposes. In such event (i) Tenant shall pay Landlord for the cost of the meter and the cost of the installation thereof and through the duration of Tenant's occupancy Tenant shall keep said meter and installation equipment in good working order and repair at Tenant's own cost and expense in default of which Landlord may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant; (ii) Tenant agrees to pay for water consumed, as shown on said meter as and when bills are rendered, and on default in making such payment Landlord may pay such charges and collect the same from Tenant; and (iii) Tenant covenants and agrees to pay the sewer rent, charge or any other tax, rent, levy or charge which now or hereafter is assessed, imposed or shall become a lien upon the Premises or the realty of which they are part pursuant to law, order or regulation made or issued in connection with any such metered use, consumption, maintenance or supply of water, water system, or sewage or sewage connection or system. The bill rendered by Landlord for the above shall be based upon Tenant's consumption and shall be payable by Tenant as additional rent within twenty (20) days of rendition. Any such costs or expenses incurred or payments made by Landlord for any of the reasons or purposes hereinabove stated shall be deemed to be additional rent payable by Tenant and collectible by Landlord as such. Independently of and in addition to any of the remedies reserved to Landlord hereinabove or elsewhere in this Lease, Landlord may sue for and collect any monies to be paid by Tenant or paid by Landlord for any of the reasons or purposes hereinabove set forth. 35 H. Electricity Service. (i) With respect to the portion of the Premises located on the eighth (8th) floor of the Building, Landlord shall provide to the perimeter of such portion of the Premises, at a location reasonably determined by Landlord, 325 amperes (during the first year of the Term, however, Landlord shall provide to the perimeter of such portion of the Premises, at a location reasonably determined by Landlord, 525 amperes) of electrical load for the servicing of all of Tenant's electrical needs within such portion of the Premises, including, without limitation, any air-cooling equipment located in, or exclusively servicing such portion of the Premises. With respect to the portion of the Premises located on the ninth (9th) floor of the Building, Landlord shall provide to the perimeter of such portion of the Premises, at a location reasonably determined by Landlord, 100 amperes of electrical load for the servicing of all of Tenant's electrical needs within such portion of the Premises, including, without limitation, any air-cooling equipment located in, or exclusively servicing such portion of the Premises. Landlord's designated agent shall install a submeter to measure Tenant's consumption of electrical energy in the Premises, but excluding Building HVAC. Tenant shall pay Landlord for any and all costs incurred in connection with the installation of such submeter upon the submission by Landlord of a bill for such costs. The cost of electricity utilized by Tenant shall be paid for by Tenant to Landlord as additional rent and shall be calculated at Landlord's cost for submetered electrical energy, plus (a) Landlord's charge for overhead and supervision in the amount of four percent (4%) of the total electric bill and (b) any taxes or other charges in connection therewith. If any tax shall be imposed upon Landlord's receipts from the sale or resale of electrical energy to Tenant, the pro rata share applicable to the electrical energy service received by Tenant shall be passed on to, included in the bill of, and paid by Tenant if and to the extent permitted by law. Landlord shall bill Tenant, monthly, for the cost if its consumption of electricity in the Premises and Tenant shall pay the amount thereof at the time of payment of each installment of Rent. If either the quantity or character of electrical services is changed by the public utility or other company supplying electrical service to the Building or is no longer available or suitable for Tenant's requirements, no such change, unavailability or unsuitability shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Landlord, or its agents, by reason of inconvenience or annoyance to Tenant, or injury to or interruption or Tenant's business, or otherwise. (ii) If Tenant requires additional electrical energy beyond the amperage specified above for any reason whatsoever, including, without limitation, the use of additional business machines, office equipment or other appliances in the Premises which utilize electrical energy, Tenant shall request such additional electrical energy from Landlord in each instance. If Landlord agrees to provide the same, any additional feeders or risers which are required to supply Tenant's additional electrical requirements, and all other equipment proper and necessary in connection with such feeders or risers, shall be installed by Landlord upon Tenant's request, at the sole cost and expense of Tenant (including, without limitation, a connection fee of Three Hundred Fifty and 00/100 ($350.00) Dollars per kilovolt ampere), provided that, in Landlord's reasonable judgment, such additional feeders or riders are necessary and are permissible under applicable laws and insurance regulations and the installation of such feeders or risers will not cause permanent damage or injury to the Building or the Premises or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations or interfere with or disturb other tenants or occupants of the Building. Tenant covenants that at no time shall the use of electrical energy in the Premises exceed the capacity of the existing feeders or wiring installations then serving the Premises or provide Tenant with greater than 325 amperes (during the first year of the Term, however, Landlord shall redistribute 525 amperes) of electrical load deemed to be in the Premises. Tenant shall not make or perform, or permit the making or performance of, any alterations to wiring installations or other electrical facilities in or serving the Premises without the prior consent of Landlord in each instance and without paying Landlord's customary charges therefor. Any such Alterations, additions or consent by Landlord shall be subject to the provisions of this Lease, including, but not limited to, the provisions of Article 3 hereof. 36 (iii) Landlord reserves the right to discontinue furnishing electricity to Tenant in the Premises on not less than ninety (90) days notice to Tenant. Landlord shall not elect to discontinue furnishing electricity to Tenant unless Landlord concurrently elects to discontinue furnishing electricity to all other tenants in the Building or if Tenant has defaulted on payment of amounts owed under this Section 29H. If Landlord exercises such right to discontinue, or is compelled to discontinue furnishing electricity to Tenant, this Lease shall continue in full force and effect and shall be unaffected thereby, except only that from and after the effective date of such discontinuance, Landlord shall not be obligated to furnish electricity to Tenant. If Landlord so discontinues furnishing electricity to Tenant, Tenant shall arrange to obtain electricity directly from the public utility or other company servicing the Building. Such electricity may be furnished to Tenant by means of the then existing electrical facilities serving the Premises to the extent that the same are available, suitable and safe for such purposes. All meters and all additional panel boards, feeders, risers, wiring and other conductors and equipment which may be required to obtain electricity, of substantially the same quantity, quality and character, shall be installed by Landlord at Tenant's sole cost and expense. Landlord shall not voluntarily discontinue furnishing electricity to Tenant until Tenant is able to receive electricity directly from the public utility or other company servicing the Building. (iv) Landlord shall not be liable to Tenant in any way for any interruption, curtailment or failure or defect in the supply or character of electricity furnished to the Premises by reason of any requirement, act or omission of Landlord or of any public utility or other company servicing the Building with electricity or for any other reason except Landlord's negligence or willful misconduct. (v) In the event that the submeter to be installed in the Premises in accordance with the provisions of Subsection H(i) of this Article 29 is not installed, activated and fully operational on or before the Commencement Date (and irrespective of whether or not Rent shall be payable for such period), Tenant will pay, monthly, as additional rent the sum of ($1.00 times rentable square feet) divided by 12 (the "Interim Electrical Charge" ) on the Commencement Date and on the first day of each calendar month thereafter until such time as the submeter is installed, activated and fully operational. If the Commencement Date occurs on a date other than the first day of a calendar month, the Interim Electrical Charge for such month shall be an amount equal to such proportion of the Interim Electrical Charge as the number of days from and including the Commencement Date to the last day of the calendar month in which the Commencement Date occurs bears to the total number of days in such calendar month. If the first day that the electrical submeter becomes activated and fully operational occurs on a date other than the first day of a calendar month, the Tenant shall pay for such month an amount equal to such proportion of the Interim Electrical Charge as the number of days from the beginning of such calendar month through and including the date that such electrical submeter becomes operational bears to the total number of days in such calendar month plus the cost of electricity as determined by the submeter, for the remainder of such month. I. Interruption of Services. Landlord reserves the right to stop service of the HVAC system and all other Building systems when necessary, by reason of accident or emergency, or for repairs, additions, alterations, replacements or improvements in the judgment of Landlord desirable or necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed (which repairs shall be performed in accordance with Section 4 of this Lease). Landlord shall have no responsibility or liability for interruption, curtailment or failure to supply cooled or outside air, heat, elevator, plumbing or electricity when prevented by Unavoidable Delays or by any legal requirement, or its right to stop services. Tenant acknowledges that the Building HVAC system may contain freon or other chlorofluorocarbons ("CFC's") and that future federal, state or city regulations may 37 require the removal of CFC's as well as the alteration or replacement of equipment utilizing CFC's. In connection therewith (i) Landlord reserves the right to stop service of the HVAC system or any other mechanical systems containing CFC's for such duration as may be necessary to convert any such systems to eliminate the use of CFC's and (ii) to enter upon the Premises, as necessary to install replacement equipment within the Premises required by any such change. The exercise of such right or such failure by Landlord, shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any compensation or to any abatement or diminution of Rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Landlord or its agents by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business, or otherwise. If, however, there occurs a cessation of the services to be provided by Landlord hereunder as a result of Landlord's acts, and solely as a result thereof Tenant completely ceases to occupy the Premises entirely (that is, Tenant completely vacates the entire Premises) for more than fifteen (15) consecutive days, the Rent shall thereafter abate until the earlier to occur of (a) the date such interrupted service is resumed and (b) the date Tenant re-occupies any portion of the Premises (in which event the Rent shall thereafter be payable in its entirety). 30. PARTNERSHIP TENANT. A. Partnership Tenants. If Tenant is a partnership (or is comprised of two (2) or more persons, individually and as co-partners of a partnership) or if Tenant's interest in this Lease shall be assigned to a partnership (or to two (2) or more persons, individually and as co-partners of a partnership) pursuant to Article 12 (any such partnership and such persons are referred to in this Article 30 as a "Partnership Tenant"), the following provisions of this Article 30 shall apply to such Partnership Tenant: (i) the liability of each of the parties comprising a Partnership Tenant shall be joint and several, and (ii) each of the parties comprising a Partnership Tenant hereby consents in advance to, and agrees to be bound by, any written instrument which may hereafter be executed, changing, modifying or discharging this Lease, in whole or in part, or surrendering all or any part of the Premises to Landlord, and by any notices, demands, requests or other communications which may hereafter be given by a Partnership Tenant or by any of the parties comprising a Partnership Tenant, and (iii) any bills, statements, notices, demands, requests or other communications given or rendered to a Partnership Tenant and to all such parties shall be binding upon a Partnership Tenant and all such parties, and (iv) if a Partnership Tenant shall admit new partners, all of such new partners shall, by their admission to a Partnership Tenant, be deemed to have assumed performance of all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed, and (v) a Partnership Tenant shall give prompt notice to Landlord of the admission of any such new partners, and upon demand of Landlord, shall cause each such new partner to execute and deliver to Landlord an agreement in form satisfactory to Landlord, wherein each such new partner shall assume performance of all the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed (but neither Landlord's failure to request any such agreement nor the failure of any such new partner to execute or deliver any such agreement to Landlord shall vitiate the provisions of subdivision (iv) of subsection A of this Article 30). B. Limited Liability Entity. Notwithstanding anything to the contrary contained herein, if Tenant is a limited or general partnership (or is comprised of two (2) or more persons, individually or as co-partners), the change or conversion of Tenant to (i) a limited liability company, (ii) a limited liability partnership, or (iii) any other entity which possesses the characteristics of limited liability (any such limited liability company, limited liability partnership or entity is collectively referred to as a "Limited Liability Successor Entity"), shall be prohibited unless the prior written consent of Landlord is obtained, which consent may be withheld in Landlord's sole discretion. Notwithstanding the foregoing, Landlord's consent shall not be required provided that: 38 (a) The Limited Liability Successor Entity succeeds to all or substantially all of Tenant's business and assets; (b) The Limited Liability Successor Entity shall have a net worth, determined in accordance with generally accepted accounting principles, consistently applied, of not less than the greater of the net worth of Tenant on (1) the date of execution of this Lease, or (2) the day immediately preceding the proposed effective date of such conversion; (c) Tenant is not in default of any of the terms, covenants or conditions of this Lease on the proposed effective date of such conversion; (d) Tenant shall cause each partner of Tenant to execute and deliver to Landlord an agreement (or in the event the governing partnership agreement requires less than all of the partners, to so execute and deliver such lesser number of partners), in form and substance satisfactory to Landlord, wherein each such partner agrees to remain personally liable for all of the terms, covenants and conditions of this Lease that are to be observed and performed by the Limited Liability Successor Entity; and (e) Tenant shall reimburse Landlord within ten (10) business days following demand by Landlord for any and all reasonable costs and expenses that may be incurred by Landlord in connection with said conversion of Tenant to a Limited Liability Successor Entity, including, without limitation, any attorney's fees and disbursements. 31. VAULT SPACE. Any vaults, vault space or other space outside the boundaries of the Real Property, notwithstanding anything contained in this Lease or indicated on any sketch, blueprint or plan, are not included in the Premises. Landlord makes no representation as to the location of the boundaries of the Real Property. All vaults and vault space and all other space outside the boundaries of the Real Property which Tenant may be permitted to use or occupy is to be used or occupied under a revocable license, and if any such license shall be revoked, or if the amount of such space shall be diminished or required by any Federal, State or municipal authority or by any public utility company, such revocation, diminution or requisition shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Landlord. Any fee, tax or charge imposed by any governmental authority for any such vaults, vault space or other space shall be paid by Tenant. 32. SECURITY DEPOSIT. In order to secure Tenant's obligations under this Lease, simultaneously with the execution of this Lease, Tenant shall deliver to Landlord an irrevocable letter of credit in the amount of $844,101.00 in form and substance acceptable to Landlord in its sole discretion and issued by a New York City bank acceptable to Landlord (the "L/C"). Landlord may draw down on the L/C from time to time to reimburse itself upon an Event of Default. Drawings may be made by sight draft and partial drawings shall be permitted. The L/C shall be substantially in the form of Exhibit 4 annexed hereto and provide for a twelve month-expiry, and shall contain a so-called "evergreen" clause so that, unless the issuing bank notifies Landlord, in writing, of its intention not to renew the L/C at least forty-five (45) days prior to the stated expiry thereof, the L/C shall be renewed automatically for a period of twelve months. If the issuing bank so notifies Landlord or if, with Landlord's consent, the L/C does not contain an "evergreen" clause and Tenant fails to provide a renewal letter of credit in the form and amount of the original L/C at least forty-five (45) days prior to the stated expiry thereof, Landlord may draw down on the L/C and hold the cash proceeds of same as security for Tenant's obligations under this Lease. Tenant may, on the second (2nd) anniversary of the Rent Commencement Date, and, on each succeeding anniversary of the Rent Commencement Date, cause the L/C to be reduced by an amount 39 equal to $70,341.75, provided (a) that in no event shall Tenant ever have the right to reduce the L/C to an amount less than $140,683.50 and (b) Tenant's right to reduce the amount of the L/C as provided for herein shall terminate upon an Event of Default. Tenant shall be liable for any fees which may be payable in connection with a transfer of the L/C by Landlord. 33. CAPTIONS. The Captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Lease nor the intent of any provision thereof. 34. ADDITIONAL DEFINITIONS. A. The term "office" or "offices", wherever used in this Lease, shall not be construed to mean premises used as a store or stores, for the sale or display, at any time, of goods, wares or merchandise, of any kind, or as a restaurant, shop, booth, bootblack or other stand, barber shop, or for other similar purposes or for manufacturing. B. The words "reenter" and "reentry" as used in this Lease are not restricted to their technical legal meaning. C. The term "rent" as used in this Lease shall mean and be deemed to include Rent, any increases in Rent, all additional rent and any other sums payable hereunder. D. The term "business days" as used in this Lease shall exclude Saturdays, Sundays and all days observed by the State or Federal Government as legal holidays and union holidays for those unions that materially affect the delivery of services in the Building. 35. PARTIES BOUND. The covenants, conditions and agreements contained in this Lease shall bind and inure to the benefit of Landlord and Tenant and their respective heirs, distributees, executors, administrators, successors, and, except as otherwise provided in this Lease, their assigns. 36. BROKER A. Tenant represents and warrants that Tenant has dealt directly with (and only with), the Broker (as defined in Article 1 herein) as broker in connection with this Lease, and that insofar as Tenant knows no other broker negotiated this Lease or is entitled to any commission in connection therewith, and the execution and delivery of this Lease by Landlord shall be conclusive evidence that Landlord has relied upon the foregoing representation and warranty. B. Landlord represents and warrants that Landlord has dealt directly with (and only with), the Broker (as defined in Article I herein) as broker in connection with this Lease, and that insofar as Landlord knows no other broker negotiated this Lease or is entitled to any commission in connection therewith, and the execution and delivery of this Lease by Tenant shall be conclusive evidence that Tenant has relied upon the foregoing representation and warranty. 37. INDEMNITY. Tenant shall not do or permit any act or thing to be done upon the Premises which may subject Landlord to any liability or responsibility for injury, damages to persons or property or to any liability by reasons of any violation of law or of any legal requirement of any public authority, but shall exercise such control over the Premises as to fully protect Landlord against any such liability. Tenant agrees to indemnify and save harmless Landlord from and against (i) all claims of whatever nature against Landlord arising from any act, omission or negligence of Tenant, its contractors, licensees, agents, servants, employees, invitees or visitors, (ii) all claims against Landlord arising from any accident, injury or damage whatsoever caused to any person or to the property of any person and 40 occurring during the Term in or about the Premises, (iii) all claims against Landlord arising from any accident, injury or damage to any person, entity or property, occurring outside of the Premises but anywhere within or about the Real Property, where such accident, injury or damage results or is claimed to have resulted from an act or omission of Tenant or Tenant's agents, employees, invitees or visitors, and (iv) any breach, violation or nonperformance of any covenant, condition or agreement in this Lease set forth and contained on the part of Tenant to be fulfilled, kept, observed and performed and (v) any claim, loss or liability arising or claimed to arise from Tenant, or any of Tenant's contractors, licensees, agents, servants, employees, invitees or visitors causing or permitting any Hazardous Substance to be brought upon, kept or used in or about the Premises or the Real Property or any seepage, escape or release of such Hazardous Substances. As used herein and in all other provisions in this Lease containing indemnities made for the benefit of Landlord, the term "Landlord" shall mean 100 William LLC and its respective parent companies and/or corporations, their respective controlled, associated, affiliated and subsidiary companies and/or corporations and their respective members, officers, partners, agents, consultants, servants, employees, successors and assigns. This indemnity and hold harmless agreement shall include indemnity from and against any and all liability, fines, suits, demands, costs and expenses of any kind or nature incurred in or in connection with any such claim or proceeding brought thereon, and the defense thereof. Landlord shall indemnify and save Tenant, its shareholders, directors, officers, partners, employees and agents harmless from and against all claims against Tenant, its shareholders, directors, officers, partners, employees and agents arising from any gross negligence or willful misconduct of Landlord. 38. ADJACENT EXCAVATION SHORING. If an excavation shall be made upon land adjacent to the Premises, or shall be authorized to be made, Tenant, upon reasonable prior notice, shall afford to the person causing or authorized to cause such excavation, license to enter upon the Premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the Building from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Landlord, or diminution or abatement of Rent, provided Tenant continues to have access to the Premises. 39. MISCELLANEOUS. A. No Offer. This Lease is offered for signature by Tenant and it is understood that this Lease shall not be binding upon Landlord unless and until Landlord shall have executed and delivered a fully executed copy of this Lease to Tenant. B. Signatories. If more than one person executes this Lease as Tenant, each of them understands and hereby agrees that the obligations of each of them under this Lease are and shall be joint and several, that the term "Tenant" as used in this Lease shall mean and include each of them jointly and severally and that the act of or notice from, or notice or refund to, or the signature of, any one or more of them, with respect to the tenancy and/or this Lease, including, but not limited to, any renewal, extension, expiration, termination or modification of this Lease, shall be binding upon each and all of the persons executing this Lease as Tenant with the same force and effect as if each and all of them had so acted or so given or received such notice or refund or so signed. C. Certificates. From time to time, within ten (10) days next following request by Landlord or the mortgagee of a Mortgage, Tenant shall deliver to Landlord or such mortgagee, as the case may be, a written statement executed and acknowledged by Tenant, in form satisfactory to Landlord or such mortgagee (i) stating that this Lease is then in full force and effect and has not been modified (or if modified, setting forth all modifications), (ii) setting forth the date to which the Rent, additional rent and other charges hereunder have been paid, together with the amount of fixed base monthly Rent then payable, (iii) stating whether or not, to the best knowledge of Tenant, Landlord is in default under this 41 Lease, and, if Landlord is in default, setting forth the specific nature of all such defaults, (iv) stating the amount of the security deposit under this Lease, (v) stating whether there are any subleases affecting the Premises, (vi) stating the address of Tenant to which all notices and communications under the Lease shall be sent, the Commencement Date and the Expiration Date, and (vii) as to any other matters requested by Landlord or such mortgagee. Tenant acknowledges that any statement delivered pursuant to this subsection C may be relied upon by any purchaser or owner of the Real Property or the Building, or Landlord's interest in the Real Property or the Building or any Superior Lease, or by any mortgagee of a Mortgage, or by any assignee of any mortgagee of a Mortgage, or by any lessor under any Superior Lease. D. Directory Listings. Landlord agrees to provide Tenant, at Landlord's sole cost and expense, with two (2) listings of Tenant's name on the directory in the lobby of the Building. Upon written request by Tenant, Landlord agrees to provide Tenant with additional listings on such directory, at Tenant's sole cost and expense, provided Tenant shall be limited to a number of listings determined by multiplying Tenant's Proportionate Share by the total number of spaces for listings on such directory. E. Authority. If Tenant is a corporation or partnership, each individual executing this Lease on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and validly existing entity qualified to do business in the State of New York and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is authorized to do so. Without in any way limiting the liability of Tenant with respect to its obligations under this Lease, the officers, directors and shareholders of Tenant shall not be personally liable for any of Tenant's obligations under this Lease except for such officers, directors and shareholders fraud, gross negligence or willful misconduct. F. Signage. Tenant shall not exhibit, inscribe, paint or affix any sign, advertisement, notice or other lettering on any portion of the Building or the outside of the Premises without the prior written consent of Landlord in each instance. A plan of all signage or other lettering proposed to be exhibited, inscribed, painted or affixed shall be prepared by Tenant in conformity with building standard signage requirements and submitted to Landlord for Landlord's consent. If the proposed signage is acceptable to Landlord, Landlord shall approve such signage or other lettering by written notice to Tenant. All signage or other lettering which has been approved by Landlord shall thereafter be installed by Landlord at Tenant's sole cost and expense. Payment of all charges therefor shall be deemed additional rent hereunder. In the event Landlord requires payment in advance for the installation of any such signage or other lettering, no installation shall be commenced by Landlord until Landlord has received payment in full. Upon installation of any such signage or other lettering, such signage or lettering shall not be removed, changed or otherwise modified in any way without Landlord's prior written approval. The removal, change or modification of any signage or other lettering theretofore installed shall be performed solely by Landlord at Tenant's sole cost and expense. Tenant shall not exhibit, inscribe, paint or affix on any part of the Premises or the Building visible to the general public any signage or lettering including the words "temporary" or "personnel". Any signage, advertisement, notice or other lettering which shall be exhibited, inscribed, painted or affixed by or on behalf of Tenant in violation of the provisions of this section may be removed by Landlord and the cost of any such removal shall be paid by Tenant as additional rent. G. Consents and Approvals. Wherever in this Lease Landlord's consent or approval is required, if Landlord shall delay or refuse such consent or approval, Tenant in no event shall be entitled to make, nor shall Tenant make, any claim, and Tenant hereby waives any claim for money damages (nor 42 shall Tenant claim any money damages by way of set-off, counterclaim or defense) based upon any claim or assertion by Tenant that Landlord unreasonably withheld or unreasonably delayed its consent or approval. Tenant's sole remedy shall be an action or proceeding to enforce any such provision, for specific performance, injunction or declaratory judgment. H. Intentionally Omitted I. Renewal Option. 1. Provided that (i) both at the time of the exercise of the option hereinafter set forth and at the time of commencement of the Renewal Term (as hereinafter defined) this Lease is in full force and effect, and provided further that no Event of Default is continuing hereunder and (ii) Tenant has neither assigned its interest under this Lease or subleased all or any portion of the Premises nor offered to so assign this Lease or sublease all or any portion of the Premises, and (iii) Tenant is in occupancy of the entire Premises for the purpose of conducting its own business, Tenant is hereby granted the option to renew the Term of this Lease for one (1) period of sixty (60) months (the "Renewal Term"). The Renewal Term is to commence immediately upon the expiration of the initial Term. Once Tenant has served a Renewal Notice (as hereinafter defined) upon Landlord, Tenant shall be bound for the entire applicable Renewal Term by the terms and conditions of this Lease, as the same is modified pursuant to this Article 39. Tenant shall exercise the option to renew only by delivering irrevocable written notice of such election (a "Renewal Notice" ) to Landlord not less than one (1) year prior to the expiration of the initial Term. In the event that Landlord does not receive the Renewal Notice within such notice period (time being of the essence with respect thereto), then such option to renew the Term shall, upon the expiration of such time period, become null and void and be of no further force or effect and Tenant shall, at the request of Landlord, execute an instrument in form and substance acceptable to Landlord confirming such facts. 2. The Renewal Term shall be upon the same terms and conditions of this Lease, except that (a) the Rent during the Renewal Term shall be payable at an annual rate per rentable square foot equal to the greater of (1) ninety-five (95%) percent of the annual fair market rental rate for the Premises for the Renewal Term ("FMR"), as such FMR is determined (x) by agreement between Landlord and Tenant on or before the date (the "FMR Agreement Date" ) which is sixty (60) days prior to the end of the initial Term or (y) in the absence of such agreement, by the Three Appraiser Method set forth in Section 3 of this Section I, or (2) the Rent in effect during the last year of the initial Term; (b) Tenant shall have no option to renew this Lease beyond the expiration of the Renewal Term; and (c) the Premises shall be delivered in their existing condition (on an "as is" basis) at the time the Renewal Term commences. Landlord and Tenant shall attempt to negotiate in good faith a mutually acceptable determination of the FMR prior to the FMR Agreement Date. FMR, as used herein, shall be deemed to be the fair market rental rate (i.e., the rental rate payable by a willing tenant to a willing landlord for like and comparable space), determined as of the date which is six (6) months prior to the Expiration Date, for the Premises. 3. The "Three Appraiser Method" shall operate as follows: FMR shall be based upon the then current fair market rental rate for comparable space in comparable buildings in the downtown, New York, New York area (i.e., the rental rate payable by a willing tenant to a willing landlord for like and comparable space), using as a comparison, transactions for the six (6) months prior to the commencement of such Renewal Term, which shall be determined by each of two (2) real estate appraisers, one of whom shall be named by Landlord and the other of whom shall be named by Tenant. Each of the appraisers shall be licensed or certified, as appropriate, in New York as a real estate appraiser, specializing in first-class office buildings in the New York, New York area, having no less than ten (10) years experience in such field, and generally recognized as ethical and reputable within the field (each, a 43 "Qualified Appraiser"). Landlord and Tenant agree to make their appointments within five (5) business days after the FMR Agreement Date, if the parties have not theretofore agreed upon the FMR. Each Qualified Appraiser shall submit his determination of the FMR within fifteen (15) days after the date of his selection. If the positive difference between the two determinations of the FMR is less than or equal to ten (10%) percent of the higher of the two determinations, then, for the purposes of Section 2(a)(l) above, the FMR shall be the higher of such two determinations of the FMR. If the positive difference between the two determinations of the FMR is greater than ten (10%) percent of the higher of the two determinations, then the two (2) Qualified Appraisers selected by Landlord and Tenant shall select a third Qualified Appraiser within five (5) days after they both have rendered their FMR determinations, and within fifteen (15) days after the date of his selection, the third Qualified Appraiser shall submit his determination of the FMR and, for the purposes of Section 2(a)(l) above, the FMR shall be the avenge of the three (3) determinations made by the three (3) Qualified Appraisers. Landlord and Tenant shall each pay the fee of the Qualified Appraiser selected by it, and they shall equally share the payment of the fee of the third Qualified Appraiser, if the selection of same is required hereunder. 4. Except for the renewal option set forth in this Section I, this Lease may only be extended beyond the Expiration Date by the parties executing an extension agreement signed by both parties making specific reference to this Lease. J. Downtown Benefits. Landlord shall reasonably cooperate with Tenant, at no cost or expense or liability to Landlord, in connection with Tenant's applying for any property related benefits from the City of New York to which Tenant may be entitled as a result of Tenant's leasing the Premises. All such benefits acquired by Tenant shall be for the account of Tenant only. 40. RIGHT OF FIRST OFFER. (i) Provided (1) this Lease shall then be in full force and effect, (2) Tenant shall not be in material default hereunder beyond any applicable notice and/or cure period, and (3) Tenant shall be in actual occupancy of at least ninety (90%) percent of the Premises (items (1), (2), and (3) hereinafter shall be collectively referred to as the "Offer Space Conditions"), in the event that Landlord shall desire to lease the balance of the ninth (9th) floor in the Building (the "Offer Space"), Tenant shall have the single, non-recurring right ("Right of First Offer") to have Landlord submit written notice (the "Lease Notice") to Tenant of Landlord's desire to lease the Offer Space as to the space offered, which Lease Notice shall be deemed an offer to Tenant to lease the Offer Space. (ii) The Lease Notice shall set forth (1) a description of the Offer Space, the number of rentable square feet attributable to the Offer Space as determined by Landlord (the "Deemed Rentable Square Footage" ) and Tenant's Proportionate Share attributable to the Offer Space (the "Deemed Tenant's Proportionate Share"), (2) the fixed annual rent and all additional rent (including the base amount or base years, if any, for taxes, operating expenses and other escalations) at which Landlord proposes to lease the Offer Space (collectively, the "Offer Rental"), (3) the term for which Landlord proposes to lease the Offer Space (including renewal options, if any, it being understood that, unless expressly set forth in the Lease Notice, the renewal options provided in Article 39 hereof shall not be applicable to the Offer Space), (4) the condition in which Landlord proposes to deliver the Offer Space, (5) the tenant inducements (such as, by way of example only, work letters, work allowances and free rent periods) that Landlord proposes to offer in connection with the leasing of the Offer Space, (6) the date upon which Landlord anticipates the Offer Space could be delivered to Tenant (the "Offer Space Scheduled Date"), and (7) such other terms as Landlord may propose upon which Landlord would be willing to lease the Offer Space to a third party tenant. The Lease Notice shall 44 constitute an offer by Landlord to Tenant to lease all and not less than all of the Offer Space identified in the Lease Notice. The parties hereto agree that in no event, unless Landlord was grossly negligent or intentionally lied to Tenant, shall the Deemed Rentable Square Footage constitute or imply any representation by Landlord whatsoever as to the actual size of the Offer Space. (iii) Tenant shall have thirty (30) days following Landlord's giving of the Lease Notice to deliver to Landlord written notice (the "Election to Lease Notice" ) of Tenant's desire to lease from Landlord the Offer Space for the Offer Rental and on such other terms as may be set forth in the Lease Notice. Time shall be of the essence with respect to said 30-day period and the failure or refusal of Tenant for any reason whatsoever to deliver to Landlord the Election to Lease Notice in the time and manner herein prescribed shall be deemed an irrevocable waiver of Tenant's Right of First Offer as to the particular transaction and any future lease of the Offer Space, whereupon Tenant's Right of First Offer shall lapse, and be of no further force or effect. (iv) If Tenant shall timely and in the manner herein prescribed deliver its Election to Lease Notice and provided the Offer Space Conditions are satisfied, then, on the date on which Landlord delivers vacant possession of the Offer Space to Tenant (the "Offer Space Effective Date"), the Offer Space shall become, and be deemed to comprise, part of the Premises as if originally included in the demise hereunder, upon the same terms, covenants and provisions of this lease, except (1) the Rent shall be increased by the Offer Rental, (2) Tenant's Proportionate Share shall be increased by the Deemed Tenant's Proportionate Share and (3) as may be otherwise set forth in the Offer. Landlord shall use reasonable efforts to deliver vacant possession of the Offer Space to Tenant on or prior to the Offer Space Scheduled Date; provided, however, it is expressly understood that the Offer Space Scheduled Date shall not be binding upon Landlord and if Landlord is unable to deliver possession of the Offer Space to Tenant for any reason on or prior to such date, the Offer Space Effective Date shall be the date on which Landlord is able to so deliver possession and Landlord shall not be subject to any liability and this Lease shall not be impaired under such circumstances. Tenant hereby waives any right to rescind this Lease under the provisions of Section 223(a) of the Real Property Law of the State of New York, and agrees that the provisions of this Article are intended to constitute "an express provision to the contrary" within the meaning of said Section 223(a). Notwithstanding the foregoing, if Landlord is unable to deliver vacant possession of the Offer Space to Tenant on or prior to the six (6) month anniversary of the Offer Space Scheduled Date, Tenant shall have the right, as and for its sole remedy, by written notice to Landlord given within ten (10) days after the five (5) month anniversary of the Offer Space Scheduled Date, to rescind its Election to Lease Notice. Upon Landlord's receipt of Tenant's notice to rescind (provided that Landlord shall not theretofore have delivered to Tenant vacant possession of the Offer Space), the provisions of this Section 40 shall automatically cease to apply to the Offer Space and Landlord shall cease to have any further obligations to Tenant with respect to the Offer Space, but the foregoing shall not affect Tenant's rights or obligations under the Lease with respect to any other portion of the Premises. (v) If Tenant shall notify Landlord of Tenant's waiving of its Right of First Offer, or if Tenant is deemed to have waived its Right of First Offer, then the following shall apply: (1) Tenant shall, immediately upon demand therefor by Landlord, execute, in form for recording and as otherwise reasonably required by Landlord, an instrument ("Waiver") confirming the waiver of and extinguishing the Right of First 45 Offer and expressly reciting that the Waiver is given pursuant to Article 40 of this Lease. If Tenant shall fail or refuse for any reason to execute the Waiver within two (2) Business Days after demand therefor by Landlord, then Landlord may execute the Waiver on Tenant's behalf, without waiving any of Landlord's rights and remedies to recover damages. Nothing herein shall be in derogation of Landlord's right to damages (and/or to seek equitable relief, e.g., an action to compel specific performance) which may be incurred by Landlord in such event if another transaction is discontinued or terminated, with or without an agreement having been entered into, as a result of or attributable to Tenant's failure or refusal to have executed and delivered the Waiver; and (2) Landlord shall have a period of three hundred sixty-five (365) days from the date of Landlord's receipt of the Waiver executed by Tenant, to execute a lease for the Offer Space for not less than eighty-five (8 5%) percent of the Net Effective Offer Rental (as hereinafter defined) and on such other terms and conditions as are substantially the same as, but not substantially more favorable to the proposed lessee than, those contained in the Lease Notice. The term "Net Effective Offer Rental " shall mean the net present value, determined as of the commencement date of the proposed lease using a discount rate of 10%, of the aggregate of all rent and additional rent for taxes, operating expenses and electricity charges payable under the proposed lease discounted from the date that any such payment would have been made under the proposed lease to the commencement date of such proposed lease, after deducting therefrom the amount of all tenant inducements (such as, by way of example only, work allowances, work letters and rent abatements) that are (or will be) granted to the tenant thereunder, discounted, using a discount rate of 10%, from the date that such tenant inducements were to have been given under the proposed lease to the commencement date of such proposed lease. If a lease for the Offer Space is not executed within the said 365-day period, then the Right of First Offer accorded to Tenant in this Section 40 shall be deemed revived and reinstated with respect to any subsequent desire of Landlord to lease the Offer Space subsequent to said 365-day period, but in no event be deemed to revive the particular Right of First Offer theretofore waived or deemed waived by Tenant. Notwithstanding the foregoing, in the event that Landlord shall submit a new Lease Notice to Tenant within the 365-day period applicable to a previous Waiver by Tenant and Tenant shall also waive or be deemed to have waived its Right of First Offer as to the new Lease Notice, then the provisions of the first two (2) full sentences of this Section 40(v)(2) above shall be deemed to apply to the terms and conditions of the new Lease Notice, and the terms of this sentence shall always be applicable to the most recent Lease Notice with respect to which Tenant shall have waived or been deemed to have waived its Right of First Offer. (vi) Any breach by Tenant of its obligations under this Section 40 shall entitle Landlord to any and all remedies available to Landlord at law and in equity. (vii) The Right of First Offer herein set forth is available only to the Tenant first named in the heading of this Lease (i.e., NextVenue, Inc.), and reference in this Section 40 to "Tenant" shall mean, and the rights accorded in this Section 40 shall be available only to, NextVenue, Inc.; and to no other person, party or entity whatsoever including, without limitation, any assignee, licensee or subtenant of NextVenue, Inc. (viii) Notwithstanding the foregoing, Tenant's Right to First Offer shall not apply to, and the term Offer Space shall not include, any space (1) which is subject to (w) a lease which grants the tenant thereunder any rights of renewal or extension as to such space, (x) a right, 46 option or obligation to lease such space hereafter acquired by any other tenant or person, if such right, option or obligation arises pursuant to an option or right to renew or extend the term of such lease contained in any lease or a so-called "must-take" provision contained in any lease (i.e., a provision whereby such tenant or person is obligated to take the space in question upon the occurrence of certain events enumerated in such lease), (y) an expansion option contained in any lease, or (z) an offer space or available space option contained in any such lease, or (2) which Landlord intends to offer to the existing tenant of such space notwithstanding the absence of any renewal or extension rights in such tenant's existing lease. (ix) Tenant and Landlord, respectively, shall indemnify, defend and hold harmless the other from any claims for any brokerage commissions or real estate consultant fees and all costs, expenses and liabilities in connection therewith, including, without limitation, reasonable attorneys' fees and expenses, arising out of any conversations or negotiations had by Tenant or Landlord, respectively, with any broker or real estate consultant other than Broker and any one claiming by, through or under Broker in connection with the granting of the Right of First Offer, the exercise thereof and consummation of the transaction(s) contemplated thereby. (x) Landlord and Tenant shall, upon the request of the other party, execute, acknowledge and deliver to the other party an instrument or instruments in form reasonably satisfactory to both parties confirming the addition of the Offer Space to the Premises, the Offer Space Effective Date, the increase in the Rent, the increase in Tenant's Proportionate Share and any other terms or conditions in respect of the Offer Space, but any failure of the parties to execute, acknowledge and deliver such instrument(s) shall not affect the validity of the leasing of the Offer Space or any of the provisions of this Section 40. 41. SATELLITE DISHES. Tenant shall have the non-exclusive right to install, inspect, adjust and maintain one or more satellite dishes (collectively, "Satellite Dishes" ) on the Building rooftop at Tenant's sole risk, cost and expense (said right is hereinafter referred to as "Tenant's Satellite Right" ) provided the installation, inspection, adjustment and maintenance of said Satellite Dishes does not involve any penetration of the roof surface and such installation is otherwise, in all respects, satisfactory to Landlord and its roofing contractor (it being agreed that Tenant may, subject to Landlord's reasonable approval, run a conduit from the roof to the Premises). The dimensions and performance characteristics of said Satellite Dishes shall be subject to Landlord's reasonable approval. A. Satellite Rent. In consideration of Landlord's granting to Tenant Tenant's Satellite Right, Tenant shall pay to Landlord, in addition to all Rent and additional rent payable by Tenant under this Lease, an amount equal to the product of (x) $13.50 and (y) the total number of square feet of space utilized by Tenant in connection with Satellite Dishes ( "Satellite Rent"). Satellite Rent shall be payable by Tenant on the first day of each month for each month that a Satellite Dish is on the roof of the Building. Satellite Rent shall be increased as of the second and each succeeding anniversary of the Rent Commencement Date (each, an "Adjustment Date" ) to an amount equal to the greater of (a) the product of (i) the Satellite Rent payable immediately prior to the applicable Adjustment Date multiplied by (ii) 1.03, and (b) the product of (i) the Satellite Rent payable immediately prior to such Adjustment Date multiplied by (ii) a fraction (which shall in no event be less than 1/1), the numerator of which is the CPI Index (as hereinafter defined) for the calendar month which is three (3) months immediately preceding the month in which the applicable Adjustment Date occurs and the denominator of which is the CPI Index for the calendar month which is fifteen (15) months immediately preceding the month in which the applicable Adjustment Date occurs (the resultant fraction for the purposes of such calculation being carried to five (5) decimal places). In no event shall the Satellite Rent be reduced on any Adjustment Date below the Satellite Rent payable immediately prior to such Adjustment Date. For purposes of this Lease, the "CPI Index " shall mean the Consumer Price Index for all Urban Consumers, All Items, U.S. 47 City average (1967=100), published by the Bureau of Labor Statistics of the U.S. Department of Labor (the "Bureau") or a successor or substitute index appropriately adjusted. The CPI Index using the 1967 reference base shall be used as long as such index is published by the Bureau. If the CPI Index using the 1967 reference base ceases to be published by the Bureau, all CPI Index numbers used in the calculations provided for herein shall be adjusted to the new reference base, the adjustment factor provided by the Bureau being conclusive., If at any time a change occurs in the terms, items or structure of the CPI Index, the new and updated CPI Index (with the appropriate reference base year) shall immediately upon its introduction be adopted for use in the calculations provided for herein. If a correction is made to a previously published CPI Index, the Satellite Rent payable by Tenant hereunder shall be recalculated in accordance with such correction and Tenant shall pay to Landlord, promptly upon demand, the amount of the deficiency, if any in Satellite Rent theretofore paid by Tenant and Landlord shall credit Tenant against future payments of Satellite Rent the amount of the excess Satellite Rent paid by Tenant, if any. If no CPI Index (including a successor or substitute index) is available, a reliable governmental or other publication, selected by Landlord, evaluating the information theretofore used in determining the CPI Index shall be used in determining the adjustment of Satellite Rent as of succeeding Adjustment Dates. B. Roof Access. Landlord and Tenant agree that Tenant's Satellite Right will necessitate that Tenant have access to the rooftop of the Building. To the extent that Tenant's Satellite Right expands the area of the Building to which Tenant has access (the "new access areas"), then Landlord and Tenant agree that any and all provisions of the Lease that apply to the Premises, including, but not limited to, the Rules and Regulations, shall also apply to the new access areas, except as modified herein and except to the extent that said Lease provisions place any additional responsibilities on the Landlord with respect to the new access areas. The precise location of the Satellite Dishes shall be subject to the sole discretion of Landlord. Landlord shall also have the express right to reject the proposed size and design of any or all of the Satellite Dishes. C. Tenant's Obligations. (i) Increase in Landlord's Insurance Cost. If the rate of any insurance carried by Landlord is increased as a result of the exercise of Tenant's Satellite Right, then Tenant will pay to Landlord, as additional rent, not later than thirty (30) days before the date Landlord is obligated to pay a premium on the insurance or within ten (10) days after Landlord delivers to Tenant a certified statement from Landlord's insurance carrier stating that the rate increase was caused by Tenant's Satellite Right, whichever date is later, a sum equal to the difference between the original premium and the increased premium resulting solely from the installation of the Satellite Dishes. (ii) Rooftop Access. Landlord has not made any representations or promises pertaining to physical condition of the Building's rooftop or its suitability for the installation and maintenance of the Satellite Dishes. Tenant, for the purpose of this Article 41 and its right to rooftop access hereunder, accepts the rooftop in its "as is" condition. Without in any way limiting Landlord's rights under this Lease, Landlord shall use commercially reasonable efforts to minimize interference with Tenant's rights under this Article 41. (iii) Compliance With Laws. Tenant represents that it has obtained, or will have obtained prior to installation, any and all necessary licenses, approvals, permits, etc., necessary for the installation, maintenance and operation of Tenant's Satellite Dishes. Tenant's Satellite Right shall not in any way conflict with any applicable law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted. Tenant will, at its sole cost and expense, promptly comply or take all action necessary to enable the Building to comply with all laws, statutes, ordinances, governmental rules or regulations, or requirements of 48 any board of fire insurance underwriters or other similar bodies now or hereafter constituted relating to or affecting Tenant's Satellite Right. Tenant shall and hereby does indemnify and hold Landlord harmless from and against any loss, cost (including reasonable attorneys' fees incurred in defending Landlord), damage or liability arising out of any violations of said laws, statutes, ordinances, rules or regulations. Tenant shall, at its sole cost and expense, make any repairs to the rooftop which are necessitated by the installation, maintenance or operation of the Satellite Dishes. Such repairs shall be governed by the provisions of Section 4 hereof. Landlord may, at its option, after notice to Tenant, cause such repairs to be made at the sole cost and expense of Tenant. (iv) Operation. Tenant's Satellite Right shall, in all material respects, be exercised: (1) in such manner as will not create any hazardous condition or interfere with or impair the operation of the heating, ventilation, air conditioning, plumbing, electrical, fire protection, life, safety, public utilities or other systems or facilities in the Building or the Premises or any other tenant in the Building; (2) in compliance with all applicable laws, codes and regulations; (3) in such a manner as will not directly or indirectly interfere with, delay, restrict or impose any expenses, work or obligations upon Landlord in the use or operation of the Building; (4) at Tenant's cost, including the cost of repairing all damage attributable to the installation, inspection, adjustment, maintenance, removal or replacement of the Satellite Dishes. In connection with the installation of the Satellite Dishes, Tenant shall provide to Landlord: (aa) a letter from a structural engineer reasonably acceptable to Landlord certifying that the installation of the Satellite Dishes was properly performed and that the integrity of the Building structure has not been adversely affected in any material way by reason of such installation; and (bb) written approval of Landlord's roofing contractor of the manner of installation which shall not be unreasonably withheld or delayed. (v) Insurance. Tenant will, at all times during the term of this Lease, and at its cost and expense, ensure that the insurance policies to be maintained by Tenant under Section 9 hereof are properly endorsed to reflect the Satellite Dishes and Tenant's Satellite Right. Tenant agrees to pay the premiums therefor and to deliver copies of said policies and/or endorsements thereto to Landlord on the first day of the term of this Lease, and the failure of Tenant to either obtain said insurance or deliver copies of said policies or certificates thereof to Landlord shall be a default under this Lease. (vi) Indemnity. Tenant shall and hereby does indemnify and hold harmless Landlord against and from any and all claims arising from the Tenant's use of the new access areas and Tenant's installation, inspection, adjustment and maintenance of the Satellite Dishes. Tenant assumes all risk of damage to property or injury to persons, in, upon or about the new access areas as a result of Tenant's installation, inspection, adjustment and maintenance of the Satellite Dishes. (vii) Landlord's Recapture. In conjunction with the Lease, Landlord may, by giving thirty (30) days notice to Tenant, elect to retain or dispose of in any manner the Satellite Dishes (the "Satellite Recapture Right" ) if Tenant does not remove said Satellite Dishes from the rooftop on the Lease Expiration Date or earlier termination of this Lease. If Landlord notifies Tenant of its intent to exercise the Satellite Recapture Right and Tenant does not remove the Satellite Dishes by the Expiration Date, title to the Satellite Dishes shall, on expiration of the thirty (30) day period, vest in Landlord. Additionally, Tenant shall be liable to Landlord for any of Landlord's costs for storing, removing and disposing of said Satellite Dishes. This provision shall survive the expiration or termination of this Lease. 49 (viii) Non-Exclusivity. By granting the Tenant's Satellite Right, Landlord does not covenant or agree that it has not conveyed or will not convey in the future similar rights to other parties desiring to install communications devices on the roof of the Building. In addition, Landlord makes no representation whatsoever as to the suitability of the rooftop for installation of the Satellite Dishes in terms of the quality of reception of the Satellite Dishes, and does not warrant that the Satellite Dishes will be free from interference from other devices placed upon the Building or other buildings in the area. (ix) Default. Tenant's Satellite Right shall terminate in the event of an Event of Default under the Lease. 42. TENANT'S GENERATOR. (a) Subject to the provisions of Article 3, Landlord will grant to Tenant, for Tenant's own use and not for resale purposes, a non-exclusive license for an area to be designated by Landlord in Landlord's reasonable discretion, for the construction, installation, operation and use by Tenant of a 600 kilowatt diesel-powered electric generator and other related equipment, including, but not limited to, mountings and supports (collectively such equipment being hereinafter referred to, individually or collectively, as "Tenant's Equipment"), at a location designated by Landlord. Tenant will have full control over the maintenance and operation of Tenant's Equipment and may, subject to Landlord's reasonable approval as to dimensions and location, install a 3,000 gallon diesel fuel tank. Tenant will reimburse Landlord for the actual cost of any diesel fuel used as measured by a fuel meter. In connection with the foregoing, and subject to the rights of other tenants in the Building, Landlord shall make available to Tenant access to the applicable area, for the construction, installation, maintenance, repair, operation and use of Tenant's Equipment. If Tenant requires riser space for electrical conduits connecting Tenant's Equipment to the Premises, then, subject to the rights of other tenants in the Building, and subject to the provisions of Article 3 hereof, Landlord shall make available to Tenant, for Tenant's use solely in connection with Tenant's Equipment, sufficient space in the Building, at a location reasonably determined by Landlord, for the installation of a riser. All work in connection with the installation of such riser, including core drilling, if required, shall be performed at Tenant's sole cost and expense, including the cost of a fire watch and related supervisory costs relating to any core drilling, which shall be performed in such a manner and at such times as Landlord shall prescribe. References herein to Tenant's Equipment shall be deemed to include such riser and the electrical conduits appurtenant thereto. Without in any way limiting Landlord's approval rights contained in this Article 42 or anywhere else in this Lease, Landlord conditionally approves (i) the farthest west parking space in the parking garage for the location of Tenant's Equipment and (ii) a separate room within the basement of the Building which room is due east of the fuel oil tank currently located thereat for the location of the aforementioned 3,000 gallon diesel fuel tank. With respect to each of the aforementioned spaces, Landlord shall deliver same "AS IS", without in any way being obligated to prepare such spaces for Tenant's use thereof or make any alterations to such spaces whatsoever. (b) The installation of Tenant's Equipment shall constitute an Alteration and shall be performed at Tenant's sole cost and expense in accordance with and subject to the provisions of Article 3 hereof. All of the provisions of this Lease shall apply to the installation, use and maintenance of Tenant's Equipment, including all provisions relating to compliance with legal requirements and insurance requirements, insurance, indemnity, repairs and maintenance. The license granted to Tenant in this Article 42 shall not be assignable by Tenant separately from this Lease. Tenant's Equipment shall be treated for all purposes of this Lease as Tenant's Property. Tenant shall pay to Landlord monthly, as Additional Rent upon demand, the amount, determined by Landlord in its reasonable discretion, by which Taxes imposed upon the Building have been increased on account of Tenant's installation of Tenant's Equipment. 50 (c) Tenant shall have reasonable access at all times to, and Landlord shall not interfere with, the use of the Equipment so as to cause the functioning thereof to be materially interrupted or impaired. Tenant shall use Tenant's Equipment so as not to cause any interference to Landlord's use of the Building or the Real Property, including the use by Landlord or other tenants or occupants of the Building of equipment and facilities thereon, or damage to or interference with the operation of the Building or systems. If Tenant's Equipment interferes with or disturbs the reception or transmission of communication signals by or from any antennas, satellite, dishes or similar equipment installed by Landlord or any other tenant in the Building on or before the installation by Tenant of Tenant's Equipment, or if Tenant's Equipment interferes with the operation of the Building or the Building systems, then Tenant, at its sole cost and expense, shall relocate Tenant's Equipment to another area designated by Landlord. (d) Tenant acknowledges and agrees that the privileges granted Tenant under this Article 42 shall merely constitute a license and shall not, now or at any time after the installation of Tenant's Equipment, be deemed to grant Tenant a leasehold or other real property interest in the Building or any portion thereof. The license granted to Tenant in this Article 42 shall co-exist with the Lease, and shall not be revoked so long as this Lease has not been terminated and shall automatically terminate and expire upon the expiration or earlier termination of this Lease and the termination of such license shall be self-operative and no further instrument shall be required to effect such termination. 43. DOWNTOWN BENEFITS. Notwithstanding anything to the contrary contained herein, in the event Tenant has not qualified for benefits under any New York City downtown incentive program on or before thirty (30) days from the date hereof, Tenant may, by written notice (the "Benefits Notice" ) to Landlord no later than thirty-five (35) days from the date hereof (the "Contingency Expiration Date"), TIME BEING OF THE ESSENCE WITH RESPECT THERETO, terminate this Lease, whereupon all obligations and liabilities of both Landlord and Tenant shall be extinguished, except for those obligations and liabilities which expressly survive the termination of this Lease, provided, however, Tenant reimburses Landlord immediately for all costs and expenses incurred by Landlord in connection with the preparation and negotiation of this Lease, Landlord's Core Work and Tenant's Initial Alteration, including, without limitation, fees of attorneys, contractors and architects and costs and expenses associated with applications for building permits and design approvals (as evidenced by copies of invoices or receipts or other reasonably satisfactory documentation). Tenant acknowledges and agrees that Landlord may, without notice to Tenant, and without in any way limiting the amount which may be payable to Landlord hereunder, draw down the L/C to reimburse Landlord for any such amounts which may be payable to Landlord hereunder. In the event Landlord does not receive the Benefits Notice on or before the Contingency Expiration Date, then such right to terminate the Lease shall become null and void and of no further force and effect. Tenant shall use its best efforts to promptly and diligently pursue any such benefits. [NO FURTHER TEXT ON THIS PAGE] 51 IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this Lease as of the day and year first above written. LANDLORD: 100 WILLIAM LLC, a Delaware limited liability company By: Taconic Investment Partners, L.L.C., Authorized signatory By: /s/ Paul Pariser ---------------------------------- Name: Paul Pariser Title: Principal TENANT: NEXTVENUE, INC., a Delaware corporation By: /s/ Nicholas Balletta -------------------------------------- Name: Nicholas Balletta Title: President 13-4032787 ------------------------------------------ Tenant's Tax I.D. Number 52 EXHIBIT 1 Floor Plan of Premises [MAP] [MAP] EXHIBIT 2 Intentionally Deleted EXHIBIT 3 Current Cleaning Specifications 100 William Street Cleaning of the building located at 100 William Street, New York New York including office space, entrance lobby, sidewalks, public halls, stairways, fire tower, lavatories, passageways, elevator cabs, as provided for below. This does not include vault areas, elevator shafts, elevator pits, kitchen or dining rooms. GENERAL CLEANING - Nightly Dust sweep flooring with specially treated cloths to Insure dust free floors. Wash ceramic tile, marble and terrazzo flooring in building entrance foyers. Carpet sweep carpeted areas and rugs four nights each week and vacuum once each week, moving light furniture other than desks, file cabinets, etc. Sweep stairways; wash as necessary, ashtrays, receptacles, etc.; damp dust as necessary. Clean cigarette urns and replace sand or water necessary. Remove wastepaper and waste materials to a designated area in the premises. Waste or rubbish bags shall be supplied to us. Dust and wipe clean furniture, fixtures, desk equipment, telephones and windowsills with specially treated cloths. Dust baseboards, chair rails, trim louvres, pictures, charts etc. within reach. Wash drinking fountains and coolers. Keep lockers and service closet rooms in clean and orderly condition. LAVATORIES - Nightly Sweep and wash flooring with approved germicidal detergent solution. Wash and polish mirrors, powder shelves, bright work, etc., including flushometers, piping and toilet seat hinges. Wash both sides of toilet seats, wash basins, bowls and urinals with approved germicidal detergent solution. Dust partitions, tile walls, dispensers and receptacles. Empty and clean towels and sanitary disposal receptacles. Remove wastepaper and refuse to a designated area in the premises, using special janitor carriages. Fill toilet tissue dispenses with supplies furnished by the Contractor. ENTRANCE LOBBY - Nightly Sweep and wash flooring; vacuum carpeting. Spray buff lobby nightly. If floor mats have been used during the day, they shall be washed. Clean cigarette urns and replace sand or water as necessary. Floors in elevator cabs will be properly maintained. If carpeted remove soluble spots which safely respond to standard spotting procedure without risk of injury to color or fabric. Dust and rub down mail chutes and mail depositories. Dust and rub down elevator doors, walls, metal work and saddles in elevator cabs. Dust walls up to twelve (12) feet and keep from fingermarks, smudges, etc. PUBLIC AREAS - Periodic Cleaning Elevator, stairway, office and utility doors on each floor will be checked for general cleanliness, removing fingermarks as necessary. Remove fingermarks from metal partitions and other similar surfaces as necessary. Wipe clean interior building metals necessary. PUBLIC AREAS - High Dusting Do high dusting every 3 months, which includes the following: Dust pictures, frames, charts, graphs and similar wall hangings not reached in nightly cleaning. Dust exterior of light fixtures. Dust overhead pipes, sprinklers, etc. Dust window frames. PUBLIC WAXING - QUARTERLY All public corridors shall be scrubbed and waxed quarterly. Dust vertical surfaces such as partitions, ventilating louvres, etc. not reached in nightly cleaning. Upon completion of the foregoing work assignments, lights shall be extinguished, windows closed, doors locked, premises secured, and left in a neat and orderly condition. LAVATORIES - Periodic Cleaning Machine scrub flooring with approved germicidal detergent solution, bi-monthly. Wash partitions, tile walls and enamel surfaces with approved germicidal detergent solution once a month. Dust exterior of lighting fixtures once a month. High dusting once a month. ENTRANCE LOBBY - Periodic Cleaning Machine scrub flooring, one time each month and apply wax. Clean lights, globes and fixtures as necessary. Dust down walls once a month. Rub down metal and other high level bright work as necessary. DAY SERVICES - DUTIES OF DAY PORTERS Police areas in lobby. Police elevator cabs in main level Fill toilet tissue dispensers in lavatories supplies furnished by the Contractor. Clean basement corridors and utility areas. Police employee's locker rooms so that they are kept in clean condition. Sweep and hose sidewalks, weather permitting; shovel snow when necessary. Set out rubber mats on rainy days; keep in clean condition. Sweep and dust stairways and fire tower; dust handrails; spindles; newels and stair stringers, wash stairs as necessary. Keep frames of entrance doors in clean condition. Clean standpipes and sprinkler connections as necessary. If directed by building management, equipment rooms, fan rooms, etc. shall be swept regularly. Wipe down exterior metal work, marble, etc. of building entrances as necessary. It is assumed that store or ground floor tenants will pay for exterior maintenance. WINDOW CLEANING 1. Clean all entrance doors five times a week, Monday through Friday, and transoms, once a week. 2. Clean all perimeter office windows, both exterior and interior four times a year. 3. All window cleaning will be performed during the regular working hours of 7:00 a.m. to 3:30 p.m., Monday through Friday, excluding Saturdays and Sundays, and Union Holidays. 4. No exterior window washing will be done on days of rain, sleet, or snow, but will be performed as soon as possible thereafter. SCHEDULE OF CLEANING: Night cleaning service shall be rendered five nights each week, Monday through Friday, except on union and legal holidays. Day services shall be rendered five days each week, Monday through Friday, except on union and legal holidays. EXHIBIT 4 Form of Letter of Credit [BANK LETTERHEAD] 100 William LLC c/o _______________________ ___________________________ ___________________________ Re: Irrevocable Clean Standby Letter of Credit By order of our client, ____________________, we hereby open our irrevocable clean standby Letter of Credit No. ___ in your favor for an amount not to exceed in the aggregate __________ ($________) Dollars effective immediately. Funds under this Letter of Credit are available to you against your sight draft on us mentioning thereon our Credit No. ________________________. This Letter of Credit shall expire on _________________, ________, 2000; provided, however, that it is a condition of this Letter of Credit that it shall be deemed automatically extended, from time to time, without amendment, for one year from the expiry date hereof and from each and every future expiry date, unless at least forty-five (45) days prior to any expiry date we shall notify you by registered or certified mail (return receipt requested) or overnight courier service delivered to the above indicated address that we elect not to consider this Letter of Credit renewed for any such additional period. Upon receipt of such notice, but on or before the then expiration date, you may draw the full amount hereunder by means of your sight draft drawn on us, accompanied by your written statement purportedly signed by one of your authorized representatives reading as follows: "We are in receipt of written notice from you of your election not to renew your Letter of Credit No. _____________, and we have not received an acceptable replacement Letter of Credit as of the date of our drawings." This Letter of Credit is transferable in full, not in part, without any fees or charges and may be transferred one or more times upon receipt of your written instructions. [Insert standard provision for the right to transfer the letter of credit in accordance with the Uniform Customs and Practice for Documentary Credits referred to below.] We hereby agree with you that all drafts drawn with the terms of this Letter of Credit will be duly honored upon presentment and delivery to our office at on or prior to the expiry date, or as the same may from time to time be extended. Partial drawings are permitted. Except as otherwise specified herein, this Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500. Very truly yours, [Name of Bank] By: SCHEDULE A RULES AND REGULATIONS I. The rights of each tenant in the Building to the entrances, corridors and elevators of the Building are limited to ingress to and egress from such tenant's premises and no tenant shall use, or permit the use of the entrances, corridors, or elevators for any other purpose. No tenant shall invite to its premises, or permit the visit of persons in such numbers or under such conditions as to interfere with the use and enjoyment of any of the plazas, entrances, corridors, elevators and other facilities of the Building by other tenants. No tenant shall encumber or obstruct, or permit the encumbrances or obstruction of any of the sidewalks, plazas, entrances, corridors, elevators, fire exits or stairways of the Building. Landlord reserves the right to control and operate the public portions of the Building, the public facilities, as well as facilities furnished for the common use of the tenants, in such manner as Landlord deems best for the benefit of the tenants generally. II. Landlord may refuse admission to the Building outside of ordinary business hours to any person not known to the watchman in charge or not having a pass issued by Landlord or not properly identified, and may require all persons admitted to or leaving the Building outside of ordinary business hours to register. Tenants' employees, agents and visitors shall be permitted to enter and leave the Building whenever appropriate arrangements have been previously made between Landlord and the tenant with respect thereto. Each tenant shall be responsible for all persons for whom it requests such permission and shall be liable to Landlord for all acts of such persons. Any person whose presence in the Building at any time shall, in the judgment of Landlord, be prejudicial to the safety, character, reputation or interests of the Building or its tenants may be denied access to the Building or may be ejected therefrom. In case of invasion, riot, public excitement or other commotion Landlord may prevent all access to the Building during the continuance of the same, by closing the doors or otherwise, for the safety of the tenants and protection of property in the Building. Landlord may require any person leaving the Building with any package or other object to exhibit a pass from the tenant from whose premises the package or object is being removed, but the establishment and enforcement of such requirement shall not impose any responsibility on Landlord for the protection of any tenant against the removal of property from the premises of any tenant. Landlord shall, in no way, be liable to any tenant for damages or loss arising from the admission, exclusion or ejection of any person to or from a tenant's premises or the Building under the provisions of this rule. III. No tenant shall obtain or accept for use in its premises ice, drinking water, towels, barbering, boot blacking, floor polishing, lighting maintenance, cleaning or other similar services from any persons not authorized by Landlord in writing to furnish such services. Such services shall be furnished only at such hours, in such places within the tenant's premises and under such regulation as may be fixed by Landlord. IV. No window or other air-conditioning units shall be installed by any tenant, and only such window coverings as are supplied or permitted by Landlord shall be used in a tenant's premises. V. There shall not be used in any space, nor in the public halls of the Building, either by any tenant or by jobbers, or other in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards. VI. All entrance doors in each tenant's premises shall be left locked when the tenant's premises are not in use. Entrance doors shall not be left open at any time. All windows in each tenant's premises shall be kept closed at all times and all blinds therein above the ground floor shall be lowered when and as reasonably required because of the position of the sun, during the operation of the Building air-conditioning system to cool or ventilate the tenant's premises. VII. No noise, including the playing of any musical instruments, radio or television, which, in the judgment of Landlord, might unreasonably disturb other tenants in the Building, shall be made or permitted by any tenant. No dangerous, inflammable, combustible or explosive object, material or fluid shall be brought into the Building by any tenant or with the permission of any tenant. VIII. All damages resulting from any misuse of the plumbing fixtures shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees, shall have caused the same. IX. Each tenant shall be required to use Landlord's designated locksmith and may only install such locks and other security devices as Landlord approves. Each tenant shall furnish Landlord with keys to its respective premises so that Landlord may have access thereto for the purposes set forth in the Lease. No additional locks or bolts of any kind shall be placed upon any of the doors or windows in any tenant's premises and no lock on any door therein shall be changed or altered in any respect. Duplicate keys for a tenant's premises and toilet rooms shall be procured only from Landlord, which may make a reasonable charge therefore. Upon the termination of a tenant's lease, all keys of the tenant's premises and toilet rooms shall be delivered to Landlord. X. Each tenant, shall, at its expense, provide artificial light in the premises for Landlord's agents, contractors and employees while performing janitorial or other cleaning services and making repairs or alterations in said premises. XI. No tenant shall install or permit to be installed any vending machines. XII. No animals or birds, bicycles, mopeds or vehicles of any kind shall be kept in or about the Building or permitted therein. XIII. No furniture, office equipment, packages or merchandise will be received in the Building or carried up or down in the elevator, except between such hours as shall be designated by Landlord. Landlord shall prescribe the charge for freight elevator use and the method and manner in which any merchandise, heavy furniture, equipment or safes shall be brought in or taken out of the Building, and also the hours at which such moving shall be done. No furniture, office equipment, merchandise, large packages or parcels shall be moved or transported in the passenger elevators at any time. XIV. All electrical fixtures hung in offices or spaces along the perimeter of any tenant's Premises must be fluorescent, of a quality, type, design and bulb color approved by Landlord unless the prior consent of Landlord has been obtained for other lamping. XV. The exterior windows and doors that reflect or admit light and air into any premises or the halls, passageways or other public places in the Building, shall not be covered or obstructed by any tenant, nor shall any articles be placed on the windowsills. XVI. Canvassing, soliciting and peddling in the Building is prohibited and each tenant shall cooperate to prevent same. XVII. No tenant shall do any cooking, conduct any restaurant, luncheonette or cafeteria for the sale or service of food or beverages to its employees or to others, except as expressly approved in writing by Landlord. In addition, no tenant shall cause or permit any odors of cooking or other processes or any unusual or objectionable odors to emanate from the premises. The foregoing shall not preclude tenant from having food or beverages delivered to the premises, provided that no cooking or food preparation shall be carried out at the premises. XVIII. No tenant shall generate, store, handle, discharge or otherwise deal with any hazardous or toxic waste, substance or material or oil or pesticide on or about the Real Property. SCHEDULE B-1 LANDLORD'S CORE WORK I. Landlord agrees, at its sole cost and expense and without charge to Tenant, to do the following work in the Premises, all of which shall be of design, capacity, finish and color of the building standard adopted by Landlord for the Building hereinafter called "Building Standard": Demolish and remove existing tenant improvements with floors left broom clean: Replace and repair any broken window panes. Provide panel and hook-up points to Class E system, with the hook-up panels no further than one floor from the Premises. Deliver HVAC in good working condition. Provide tenant with a duly completed ACP-5 Form which will be sufficient for the tenant to perform alterations in accordance with "final plans." Repair/refurbish all convector covers. Cosmetically repair/refurbish men's and women's rest rooms. Install a demising wall and a wall for a common corridor on the ninth (9th) floor of the Premises. III. Landlord shall perform Landlord's Core Work simultaneously with Tenant's Initial Alteration and shall endeavor to substantially complete same on or before the date which is thirty (30) days after the Contingency Expiration Date (the "Landlord's Core Work Anticipated Completion Date"). Tenant and Landlord, respectively, shall not interfere with the other's performance of Landlord's Core Work and Tenant's Initial Alteration, as the case may be, and shall coordinate Tenant's Initial Alteration and Landlord's Core Work, respectively, so that it does not interfere with the performance of the other party's work. SCHEDULE B-2 TENANT'S INITIAL ALTERATION I. Tenant shall perform or cause the performance of Alterations in and to the Premises to prepare same for Tenant's initial occupancy thereof ("Tenant's Initial Alteration"), which Tenant's Initial Alteration shall include, without limitation, the following installations in and to the common areas on the ninth (9th) floor: wall-to-wall carpeting, ceilings and lighting fixtures. All Alterations to be performed by Tenant shall be, at a minimum, of a quality and standard equivalent to the standards for construction reasonably set by Landlord, from time to time, for the Building, and shall be subject to the prior approval of Landlord as set forth in Article 3 hereof. Tenant shall submit to Landlord or, at Landlord's direction, Landlord's Consultant, complete and detailed architectural, mechanical and engineering plans and specifications prepared by an architect or engineer licensed in the State of New York and reasonably approved by Landlord, which plans and specifications shall be stamped and certified by such architect or engineer, showing Tenant's Initial Alteration, which plans and specifications shall be prepared by Tenant, at Tenant's own cost and expense. Tenant's plans and specifications shall include all information necessary to reflect Tenant's requirements for the design and installation of any supplemental air-cooling equipment, ductwork, heating, electrical, plumbing and other mechanical systems and all work necessary to connect any nonstandard facilities to the Building's base mechanical, electrical and structural systems. Tenant's submission shall include not less than three (3) sets of sepias and five (5) sets of black and white prints. II. Tenant shall not perform work which would (a) require changes to structural components of the Building or the exterior design of the Building, (b) require any material modification to the Building's mechanical installations or other Building installations outside the Premises, (c) not be in compliance with all applicable laws, rules, regulations and requirements of any governmental department having jurisdiction over the Building and/or the construction of the Premises, including but not limited to, the Americans with Disabilities Act of 1990, or (d) be incompatible with the Certificate of Occupancy for the Building. Any changes required by any governmental department affecting the construction of the Premises shall be performed at Tenant's sole cost. III. At the time that Tenant submits its plans and specifications to Landlord for Landlord's approval, such plans and specifications must be transmitted to Landlord with a cover letter specifically stating that "the enclosed plans and specifications are being transmitted to Landlord for its review and approval pursuant to the terms of the Lease." Landlord or Landlord's Consultant shall respond to Tenant's request for approval of any plans and specifications described in subsection I above within ten (10) business days following the submission of such plans and specifications prepared in accordance with the terms hereof. In the event Landlord or Landlord's Consultant shall disapprove of all or a portion of any of Tenant's plans and specifications, such disapproval shall be set forth in writing and shall include the reasons therefor in reasonable detail, in which event Tenant shall revise such plans and specifications and resubmit same to Landlord within five (5) business days thereafter, time being of the essence. Landlord or Landlord's Consultant shall respond to Tenant's request for consent of any such revised plans within five (5) business days following resubmission. The approval of plans and specifications by Landlord or Landlord's Consultant (hereinafter referred to as the "Final Plans") together with Tenant's satisfactory compliance with the requirements set forth in items (1) through (4) of Schedule D annexed hereto, shall be deemed an authorization for Tenant to proceed with Tenant's Initial Alteration, which shall be performed in accordance with the provisions of Article 3 and Schedule D of this Lease. Tenant shall reimburse Landlord for any reasonable fees of Landlord's Consultant incurred in connection with Tenant's Initial Alteration. Neither the recommendation or designation of an architect or engineer nor the approval of the final plans and specifications by Landlord or Landlord's Consultant shall be deemed to create any liability on the part of Landlord with respect to the design or specifications set forth in the Final Plans. IV. Landlord agrees to reimburse Tenant for the cost of Tenant's Initial Alteration, as approved by Landlord or Landlord's Consultant and made by Tenant within eight (8) months of the Commencement Date to the extent of the lesser of (i) $1,050,945.00 or (ii) the actual cost to Tenant for Tenant's Initial Alteration ("Landlord's Contribution"). Provided this Lease is in full force and effect and Tenant is not in default hereunder, Landlord's Contribution shall be paid by progress payments as follows: on or before the first (1st) day of each calendar month, Tenant may submit to each of Landlord and Landlord's Consultant an application and certificate for payment (standard AIA Form G702) for that portion of Tenant's Initial Alteration previously completed, which application and certificate for payment must be accompanied by (a) all information and documents required thereunder and (b) a partial lien waiver executed by the general contractor (the "General Contractor") and its subcontractors employed in connection with Tenant's Initial Alteration covering work previously paid for out of prior progress payments. Provided Landlord's architect verifies in writing that the work described in any such application and certificate for payment has been completed in accordance with the Final Plans, Landlord, on or about the thirtieth (30th) day of such calendar month shall remit to Tenant ninety percent (90%) of the amount so requisitioned by Tenant or such other amount as is approved by Landlord, based on the portion of Tenant's Initial Alteration which has been completed, with ten (10%) percent to be retained until final payment of Landlord's Contribution is due pursuant to the terms of this Subsection IV. Provided this Lease is in full force and effect and Tenant is not in default hereunder, Landlord shall pay the balance of Landlord's Contribution to Tenant within thirty (30) days of submission by Tenant of (a) paid receipts (or such other proof of payment as Landlord shall reasonably require) for work done in connection with Tenant's Initial Alteration, (b) a written statement from Tenant's architect or engineer that the work described on any such invoices has been completed in accordance with the Final Plans, (c) a lien waiver executed by the General Contractor, (d) proof reasonably satisfactory to Landlord that Tenant has complied with all of the conditions set forth in this Schedule B (as applicable), which shall include, without limitation, submission of all of the items described on Schedule D annexed hereto and made a part hereof and (e) two (2) complete sets of "as-built" Final Plans. Tenant may use no more than 15% of Landlord's Contribution towards soft costs incurred in respect of Tenant's Initial Alteration. SCHEDULE C REQUIREMENTS FOR "CERTIFICATES OF FINAL APPROVAL" 1. All required Building Department Forms must be properly filled out and completed by the approved architect/engineer of record or Building Department expediter, as required. 2. All forms are to be submitted to the Landlord for the owner's review and signature prior to submission of final plans and forms to the New York City Building Department, as required. 3. All pertinent forms and filed plans are to be stamped and sealed by a licensed architect and/or professional engineer, as required. All controlled inspections are to be performed by the architect/engineer of record unless approved otherwise by the Landlord. 4. A copy of all approved forms, permits and approved Building Department plans (stamped and signed by the New York City Building Department) are to be submitted to the building office prior to start of work. 5. Copies of all completed inspection reports and Building Department Sign-offs are to be submitted to the building office immediately following completion of construction, as required. 6. All claims, violations or discrepancies with improperly filed plans, applications, or improperly completed work shall become the sole responsibility of the applicant to resolve, as required. 7. All charges to previously approved plans and applications must be filed under an amended application, as required. The Landlord reserves the right to withhold approvals to proceed with changes until associated plans are properly filed with the New York City Buildings Department, as required. 8. The architect/engineer of record accepts full responsibility for any and all discrepancies or violations which arise out of non-compliance with all local laws and building codes having jurisdiction over the work. 9. The Landlord reserves the right to reject any and all work requests and new work applications that are not properly filed or accompanied by approved plans and building permits. 10. All ACP's and asbestos inspections must be conducted by a licensed and fully qualified asbestos inspection agency approved by the Landlord. Checklist of "Certificates of Final Approval" required to be furnished by Tenant pursuant to Article 3 (Alterations) of Lease. These forms must be furnished by the Architect/ Engineer of record or Building Department expediter (filing agency) and approved by the Landlord prior to submitting all plans and forms to the New York City Building Department for final approval. These forms must be furnished in order for Tenant to receive "Landlord's Contribution."
Form Description ---- ----------- ______* PW- 1 Building Notice Application (Plan work approval application) ______* PW-l B Plumbing/Mechanical Equipment Application and Inspection Report ______* PW- 1 Statement Form B ______* TR- 1 Amendment Controlled Inspection Report ______ PW-2 Building Permit Form (All Disciplines) ______ B Form 708 Building Permit "Card" ______* TR- 1 Certification of Completed Inspection and Certified Completion Letter by Architect/Engineer of record or Building Department expediter ______ PW-3 Cost Affidavit Form ______ PW-4 Equipment Use Application Form ______* PW-6 Revised Certificate of Occupancy for change in use (if applicable) ______ Form ACP7 New York City Department of or Environmental Protection Asbestos Form ACPS Inspection Report as prepared by a licensed and approved asbestos inspection agency Building Department Equipment Use Permits for all new HVAC equipment installed under this application Revised Certificate of Occupancy for change in use (if applicable)
*These items must be perforated (with the date and New York City Building Department Stamp) to signify New York City Building Department Approval. All forms must bear proper approvals and sign-offs prior to authorization given by the Landlord to proceed with the work. SCHEDULE D TENANT ALTERATION WORK AND NEW CONSTRUCTION CONDITIONS AND REQUIREMENTS 1. No Alterations are permitted to commence until original Certificates of Insurance, required from Tenant's general contractor (the "General Contractor") and all subcontractors complying with the attached requirements are on file with the Building office. 2. All New York City Building Department applications with assigned BN# and permits must be on file with the Building office prior to starting work. A copy of the building permit must also be posted on the job site by the General Contractor. The General Contractor shall make all arrangements with Landlord's expediter for final inspections and signoffs prior to substantial completion. 3. The General Contractor shall comply with all Federal, State and local laws, building codes, OSHA requirements, and all laws having jurisdiction over the performance and handling of the Alterations. 4. The existing "Class E" fire alarm system (including all wiring and controls), if any, must be maintained at all times. Any additions or alterations to the existing system shall be coordinated with the Building office as required. All final tie-in work is to be performed by Landlord's fire alarm vendor and coordinated by the General Contractor. All costs for the tie-ins are reimbursable to Landlord by Tenant. 5. All wood used, whether temporary or not, such as blocking, form work, doors, frames, etc. shall be fire rated in accordance with the New York City Building and Fire Code requirements governing this work. 6. Building standby personnel (i.e. Building operating engineer and/or elevator operator), required for all construction will be at Landlord's discretion. Freight elevators used for overtime deliveries must be scheduled in writing with Landlord at least 24 hours in advance, as required. All costs associated are reimbursable to Landlord by Tenant. 7. The General Contractor shall comply with the Rules and Regulations of the Building elevators and the manner of handling materials, equipment and debris to avoid conflict and interference with Building operations. All bulk deliveries or removals will be made prior to 8:00 a.m. and after 5:00 p.m. or on weekends, as required. 8. No exterior hoisting will be permitted. All products or materials specified are to be assembled on-site, and delivered to the site in such a manner so as to allow unobstructed passage through the Building's freight elevator, lobbies, corridors, etc. The General Contractor will be responsible for protection of all finished spaces, as required. 9. All construction personnel must use the freight elevator at all times. Any and all tradesman found riding the passenger elevators without prior approval from Landlord will be escorted out of the Building and not be allowed re-entry without written approval from the Building office. 10. During the performance of Alterations, Tenant's construction supervisor or job superintendent must be present on the job site at all times. 11. During the performance of Alterations, all demolition work shall be performed after 6:00 p.m. during the week or on weekends. This would include carting or rubbish removal as well as performing any operations that would disturb other Building tenants or other occupants (drilling, chopping, grinding, recircuiting, etc.). 12. No conduits or cutouts are permitted to be installed in the floor slab without prior written approval from Landlord. Landlord reserves the right to restrict locations of such items to areas that will not interfere with the Building's framing system or components. No conduits or cutouts are permitted outside of Tenant's Premises. 13. Plumbing connections to Building supply, waste and vent lines are to be performed after normal working hours, and coordinated with the Building manager, and are to include the following minimum requirements: A. Separate shutoff valves for all new hot and/or cold water supply lines (including associated access doors). B. Patch and repair of existing construction on floor below, immediately following completion of plumbing work (to be performed after normal working hours, as required). 14. The General Contractor must coordinate all work to occur in public spaces, core areas and other tenant occupied spaces with Landlord, and perform all such work after normal working hours (to include associated patch and repair work). The General Contractor shall provide all required protection of existing finishes within the affected area(s). 15. The General Contractor must perform all floor coring, drilling or trenching after normal business hours, and obtain Landlord's permission and approval of same prior to performing such work. 16. Convector mounted outlets and associated conduits, wiring, boxes, etc., shall be located and installed in areas where they will not hinder the operation or maintenance of existing fan coil units or prevent removal or replacement of access panels or removable covers. 17. The General Contractor shall be responsible for all final tests, inspections and approvals associated with all modifications, deletions or additions to Building Class "E" systems and equipment. 18. Recircuiting of existing power/lighting panels and circuits affecting Building and/or tenant operations are to be performed after normal business hours and coordinated with the Building office in advance, as required. 19. All burning and welding to be performed in occupied or finished areas shall be performed after normal business hours and coordinated with the Building office in advance, as required. Proper ventilation of the work area will be required in order to perform this work. 20. The General Contractor shall provide Taconic Investment Partners, L.L.C. and the Building office with all approved submittal and closeout documents as well as all required final inspections and Building Department sign-offs just prior to or immediately following completion of construction. 21. Any and all alterations to the Building sprinkler system (including draining of system) are to be performed after normal business hours and coordinated with the Building office, as required. All costs associated with the shut down, drain and refill of the sprinkler system are reimbursable to Landlord. 22. The General Contractor shall be responsible for any and all daily cleanup required to keep the job site clean throughout the entire course of the Alterations. No debris shall be allowed to accumulate in any public spaces. 23. The General Contractor shall be responsible for proper protection of all existing finishes and construction for Alterations to be performed in common Building areas. All Alterations to be performed in occupied areas outside of the Premises shall be performed after normal business hours and coordinated with the Building office, as required; 24. The General Contractor shall perform any and all hoisting associated with the Alterations after normal business hours. The General Contractor will obtain all required permits and insurance to perform work of this nature. The General Contractor shall specify hoisting methods and provide all required permits and insurance to Taconic Investment Partners, L.L.C. and the Building office prior to commencement of Alterations. 25. Union labor shall be used by all contractors and subcontractors performing any and all Alterations within the Building. All contractors and subcontractors shall perform all work in a professional manner, and shall work in close harmony with one another as well as with the Building management and maintenance personnel. 26. The General Contractor shall forward complete copies of all approved contractor submittal, and Building and Fire Department sign-offs and Statement of Responsibility forms, to the Building office immediately following completion of construction. INSURANCE REQUIREMENTS Prior to commencement of the Work and until completion and final acceptance of the same, the Contractor and each and every Subcontractor of the Contractor shall, at its sole expense, maintain the following insurance on its own behalf, and furnish to the Owner certificates of insurance evidencing same and reflecting the effective date of such coverage as follows: The term "Contractor & Subcontractor" as used in this Insurance Rider, shall mean and include Contractors and Subcontractors of every tier. A. Worker's Compensation and Occupational Disease Insurance in accordance with applicable law or laws. B. Employer's Liability Insurance with Limits of Liability of at least Five Hundred Thousand ($500,000.00) Dollars. C. Commercial General Liability Insurance written on an occurrence basis with a combined Personal Injury, Bodily Injury and Property Damage limit of at least One Million ($1,000,000.00) Dollars per occurrence and Five Million ($5,000,000.00) Dollars combined single limit umbrella policy, including the following perils: 1. Broad Form Blanket Contractual Liability for liability assumed under this Agreement and all other contracts relative to the Work. 2. Premises/Operations. 3. Completed Operations/Products Liability with a two (2) year extension beyond completion and acceptance of the Work. 4. Broad Form Property Damage. 5. "XC&U" Perils, where applicable. 6. Personal Injury Liability (A, B & C). 7. Independent Contractors. 8. Elevator Collision Insurance, where applicable. 9. Endorsements (GL2010) and Certificates of Insurance must be furnished reflecting the inclusion of the interests of the following parties as additional insureds: 100 William LLC c/o Taconic Investment Partners, L.L.C. 1501 Broadway New York, New York Taconic Investment Partners, L.L.C. 1501 Broadway New York, New York 10080 10. Endorsements must be furnished that "The General Aggregate limit applies separately to each project" unless a "comprehensive" general liability policy is being provided. 11. Coverage is to be endorsed to reflect that insurance is to be primary for the Contractor, the Owner and all other additional insureds. 12. Coverage is to be provided on an "occurrence" basis, if available. If not available, coverage on a "claims made" basis will be acceptable provided that both the retroactive date and available limits remaining are properly indicated and if the policy form is acceptable to the Owner. 13. A copy of policy endorsement(s) and any other documents required to verify such insurance are to be submitted with the appropriate certificate(s). D. Comprehensive Automobile Liability Insurance covering the use of all owned, non-owned, and hired vehicles with a combined bodily injury and property damage limit of at least One Million ($1,000,000.00) Dollars. E. Where an off site property exposure exists, the Contractor, at its sole expense, shall furnish to the Owner a certificate of insurance and other required documentation evidencing that the Contractor is maintaining "All Risk" Property Insurance on all materials, equipment and supplies stored off site which are intended to become a permanent part of the Project Site, while off site and while in transit, until actually delivered to the Project Site. Coverage is to be provided on a replacement cost basis. In addition, such coverage shall provide for the interest of 685 Acquisition LLC and Emmes Asset Management Corp. to be named as loss payees and shall contain a provision requiring the insurance carriers to waive their rights of subrogation against all additional insureds named in this Rider. F. All of the above insurance shall each contain the following working verbatim "This insurance will not be canceled, materially changed or not renewed without at least a thirty (30) day advance written notice to 100 William LLC, c/o Taconic Investment Partners, L.L.C., 1501 Broadway, New York, New York, by certified mail-return receipt requested, with a copy to the Owner's counsel, Solomon and Weinberg LLP, 70 East 55th Street, New York, New York 10022, Attention: Craig H. Solomon, Esq. G. The amount of insurance contained in aforementioned insurance coverages, shall not be construed to be a limitation of the liability on the party of the Contractor or any of its Subcontractors. H. The Contractor shall file certificates of insurance prior to the commencement of the Work with the Owner which shall be subject to the Owner's approval of adequacy of protection and the satisfactory character of the insurer. In the event of failure of the Contractor to furnish and maintain said insurance and to furnish satisfactory evidence thereof, the Owner shall have the right (but not the obligation) to take out and maintain the same for all parties on behalf of the Contractor who agrees to furnish all necessary information thereof and to pay the cost thereof to the Owner immediately upon presentation of a bill. I. Owner and its agents are not responsible for any temporary structures on or around the Project Site or any of contractor's tools and equipment or any material, equipment or supplies located away from or in transit to the Project Site. NOTE: In addition to the standard policy exclusions: 1. No coverage is provided for temporary structures and the Contractors or Subcontractors tools and equipment. 2. No coverage is provided for losses resulting from flood and earthquake. 3. No coverage is provided for any material, equipment, or supplies located away from or in transit to the Project Site. J. Any type of insurance or any increase of limits of liability not described above which the Contractor requires for its own protection or on account of statute shall be its own responsibility and at its own expense. K. The carrying of the insurance described shall in no way be interpreted as relieving the Contractor of any responsibility of liability under this Agreement. L. Any policies effected by the Contractor or any of its Subcontractors on their owned and/or rented equipment and materials shall contain a provision requiring the insurance carriers to waive their rights of subrogation against the Owner and all other indemnities named in this Agreement. M. Should the Contractor engage a Subcontractor, the same conditions apply under this Agreement to each Subcontractor. FIRST AMENDMENT TO AGREEMENT OF LEASE This First Amendment dated as of January 20, 2000 between Lighthouse 100 William LLC, as Landlord, and NextVenue, Inc., as tenant WHEREAS, Landlord's predecessor and Tenant have entered into a certain Agreement of Lease dated as of July 7, 1999 (the "Lease") covering the entire eighth (8th) floor and a portion of the ninth (9th) floor (the "Premises") of the building located at 100 William Street, New York, N.Y.; and WHEREAS, Landlord and Tenant desire to amend the Lease to supplement Article 42 thereof with respect to Tenant's right to install a generator at the Building upon the terms and conditions hereinafter set forth; and NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Recitals. The foregoing recitations are true and correct and by this reference are incorporated herein. 2. Conflict. In the event of a conflict between the terms of this First Amendment and the Lease, the terms of this First Amendment shall be controlling to the extent of any such conflict. 3. Terms. Unless specifically defined herein, capitalized terms used herein shall have the same meaning as ascribed to them in the Lease. 4. Generator. Supplementing Article 42 of the Lease, Tenant shall have the right to install a generator in the parking garage of the Building in the area designated on Exhibit "A" annexed hereto subject to the following terms and conditions: (i) all testing of the generator shall occur on non-business days in the presence of Landlord or its representative and Tenant shall pay any reasonable out-of-pocket overtime charges actually incurred by Landlord in order to have its representative present at such testing; (ii) Tenant shall be responsible, at its sole cost and expense, to maintain and repair the generator and shall cause the same to be removed from the Premises at the expiration of the Term; (iii) any contract entered into by Tenant to maintain or repair the generator shall be subject to the prior written approval of Landlord, which in any event shall not be unreasonably withheld and given within (or not given, as the case may be) seven (7) days after Landlord's receipt thereof; (iv) Landlord shall provide, at Tenant's expense, the additional risers required to allow for 800 amps of service to the 8th floor (it being understood that the total cost for the same shall be the cost of installation plus a connection fee of $166,260 payable as follows: $96,260 upon execution of this First Amendment and $70,000 on the first anniversary of this First Amendment); (v) Tenant shall install the generator, Tenant's Equipment and the fuel tank during Overtime Periods and shall pay Landlord for the reasonable out-of-pocket cost actually paid by Landlord of any building services or employees used in connection therewith; and (vi) Tenant shall pay as Additional Rent the sum of $3,000 per month commencing on the Rent Commencement Date through and including the month in which the generator is removed from the Premises. 5. Downtown Benefits. Supplementing paragraph 39 (J) of the Lease, Landlord and Tenant acknowledge the following: (a) an application for abatement of real property taxes will be made for the Premises on behalf of Tenant; (b) the Rent including amounts payable by the Tenant for real property taxes will accurately reflect any abatement of real property taxes; (c) at least $10 per square foot in the Title 4 abatement zone, or at least $5 per square foot or $25 per square foot in the Title 4A abatement zone must be spent on improvements to the Premises and the common areas, the amount being dependent upon the length of the Lease and whether it is a new, renewal or expansion lease; (d) all abatements granted will be revoked if, during the benefit period, real estate taxes, water or sewer charges or other lienable charges are unpaid for more than one year, unless such delinquent amounts are paid as provided in the relevant law. 6. Broker. Landlord and Tenant represent and warrant to each other that they have not dealt with any broker in connection with this First Amendment. 7. Ratification. Except as specifically and expressly modified hereby, the Lease is ratified and confirmed in all respects and shall remain binding on and inure to the benefit of the parties hereto, and their permitted successors and assigns. IN WITNESS WHEREOF, the parties hereto have signed and sealed this First Amendment to Lease as of the day and year first above written. LANDLORD: LIGHTHOUSE 100 WILLIAM LLC By: Lighthouse 100 William Operating L.L.C. By: ----------------------------------- TENANT: NEXTVENUE, NC. By: ------------------------------ NEW YORK CITY INDUSTRIAL DEVELOPMENT AGENCY AND iBEAM BROADCASTING CORPORATION ---------- FIRST AMENDMENT TO LEASE AGREEMENT ---------- Affecting the leasehold known by the Street Address 100 William Street in the County of New York and State of New York which is also known as Block 68, Lot 36 and Section 1 on the Official Tax Map of the City of New York Dated as of April 1,2001 New York City Industrial Development Agency NextVenue Inc. Project THIS FIRST AMENDMENT TO THE LEASE AGREEMENT, made and entered into as of April 1, 2001, by and between NEW YORK CITY INDUSTRIAL DEVELOPMENT AGENCY, a corporate governmental agency constituting a body corporate and politic and a public benefit corporation of the State of New York, duly organized and existing under the laws of the State of New York (the "Agency"), having its principal office at 110 William Street, New York, New York 10038, party of the first part, and iBEAM BROADCASTING CORPORATION, a corporation organized and existing under and by virtue of the laws of the State of Delaware, having, offices at 100 William Street, New York, New York 10038 (the "Company"), party of the second part (capitalized terms used but not defined in the recitals to this Agreement shall have the respective meanings assigned such terms in the Lease Agreement (defined below)) amending and restating the LEASE AGREEMENT, dated as of April 1, 2000, by and between the Agency and NextVenue, Inc. (the "Lease Agreement"): WITNESSETH: WHEREAS, pursuant to the Lease Agreement, the Agency agreed to provide certain financial assistance to NextVenue, Inc. in exchange for a commitment by NextVenue to retain certain employees and operations within the City of New York; WHEREAS, NextVenue has been acquired by the Company and in conjunction with such acquisition, the Company will maintain certain operations and employees at NextVenue's current offices at 100 William Street in New York, New York; and WHEREAS, the Company desires to receive the financial assistance provided to NextVenue, Inc. pursuant to the Lease Agreement; and WHEREAS, in consideration of such financial assistance, the Company has agreed to maintain certain levels of employment and maintain its financial services and corporate enterprise operations within the City of New York; and NOW, THEREFORE, in consideration of the premises and the respective representations hereinafter contained, the parties hereto agree as follows: Section 1. The Agency hereby consents to the acquisition of NextVenue by the Company and authorizes the grant of financial assistance to the Company in accordance with the Lease Agreement as amended herein. Section 2. The Company agrees to maintain its financial services and corporate enterprise operations at the Project Personalty Location. Section 3. The definition of "Company Business" set forth in Section 1.1 of the Lease Agreement shall be amended and replaced in its entirety as follows: Company Business shall mean use as offices for its provision of streaming video content and services for the financial services industry, and all executive functions and/or positions directing such activity. Section 4. The definition of "Base Employment Number" set forth in Section 1.1 of the Lease Agreement shall be amended and replaced in its entirety as follows: Base Employment Number shall mean for each Semiannual Period, 82 plus the total number of Growth Credit Employees claimed by the Company during the Project Term; provided however, that for the purpose of calculating the Base Employment Reduction and Base Employment Reduction Percentage in connection with a Relocation Reduction, the Base Employment Number shall be reduced by the aggregate number of Eligible Employees no longer employed by the Company Group as a result of Non-Relocation Reductions continuing from the immediately preceding Semiannual Period. IN WITNESS WHEREOF, each of the undersigned by its duly authorized officers has executed and delivered this First Amendment as of the date hereof. NEW YORK CITY INDUSTRIAL DEVELOPMENT AGENCY By: /s/ Carolyn A. Edwards ----------------------------------------- Carolyn A. Edwards Deputy Executive Director iBEAM BROADCASTING CORPORATION By: /s/ Daniel Sroka ----------------------------------------- Name: Daniel Sroka Title: Vice President and General Counsel EXHIBIT B GUARANTY Execution Copy AGREEMENT AND GUARANTEE KNOW ALL MEN BY THESE PRESENTS THAT WHEREAS: 1. WU/Lighthouse 100 William, L.L.C., a Delaware limited liability company (referred to herein as "Owner"), having its principal office at c/o Lighthouse Real Estate Management, LLC, 444 Merrick Road, Lynbrook, New York 11563, Attention: Mr. Paul Cooper, concurrently with the delivery of this instrument has entered into that certain Assignment and Amendment of Lease, Consent to Assignment and Release and Waiver of Claims Agreement, dated as of February 14, 2003 (the "Assignment and Amendment"), by and among Owner, WilTel Communications, LLC ("Assignor") and Video Network Communications, Inc., a Delaware corporation ("Tenant"), pursuant to which, among other things, Assignor assigned to Tenant, Tenant assumed, and Owner consented to the assignment of, all of Assignor's rights and obligations under that certain Agreement of Lease, dated as of July 7, 1999 (as amended, the "Lease"), by and between 100 William LLC, Owner's predecessor-in-interest, and NextVenue, Inc., Assignor's predecessor-in-interest, as amended thereby, which Lease and Assignment and Amendment are hereby incorporated in this instrument by reference (the premises demised in the Lease and the Assignment and Amendment is referred to herein as the "Demised Premises"); and 2. The undersigned, Moneyline Telerate (referred to herein as "Guarantor"), having an office at 233 Broadway, Borough of Manhattan, City, County and State of New York, is the indirect owner of a majority of the issued and outstanding stock of Tenant; and 3. Guarantor acknowledges that Owner would not enter into the Assignment and Amendment unless this Agreement and Guarantee accompanied the execution and delivery of the Assignment and Amendment. NOW, THEREFORE, in consideration of the execution and delivery of the Assignment and Amendment by Owner and Tenant, and of other good and valuable consideration, the receipt and sufficiency whereof is hereby acknowledged by Guarantor; FIRST: The undersigned Guarantor does hereby: A. Covenant and agree with Owner that if Tenant or its successors shall default at any time during the term demised in the Lease in the payment of rent, increases thereof, additional rent, or other charges payable by Tenant under the Lease, or in the observance or performance of any of the terms, covenants or conditions of the Lease on Tenant's part to be observed or performed, beyond the applicable grace period provided in the Lease for the curing of such default, then Guarantor will, on demand, well and truly observe and perform said terms, covenants and conditions and pay to Owner the rent, increases thereof, additional rent and other charges payable by Tenant under the Lease, or any arrears thereof that may remain due to Owner, and all damages payable pursuant to the Lease that may arise in consequence of Tenant's insolvency or such default in the observance or performance of any of said terms, covenants or conditions; and B. Covenant and agree with Owner that any suit or proceeding brought against Guarantor to collect the amount of any Deficiency referred to in Article 18(B) of the Lease for any month or months shall not prejudice in any way the rights of Owner to collect any such Deficiency for any subsequent month or months in any similar suit or proceeding; and C. Covenant and agree with Owner that Guarantor may, at Owner's option, be joined in any action or proceeding commenced by Owner against Tenant in connection with or based upon the Lease or any term, covenant or condition thereof, and that recovery may be had against Guarantor in such action or proceeding or in any independent action or proceeding against Guarantor without Owner, or its assigns, first asserting, prosecuting or exhausting any remedy or claim against Tenant or its successors or against any security of Tenant held by Owner under the Lease; and D. Covenant and agree with Owner that this Agreement and Guarantee shall remain and continue in full force and effect notwithstanding any modifications or amendments of the Lease or release or discharge of Tenant (other than a full release and complete discharge of all of Tenant's obligations under the Lease) to all of which Guarantor hereby consents in advance; and E. Covenant to indemnify and save Owner harmless of and from all cost, liability, damage and expense, including, but not limited to, reasonable counsel fees, arising in connection with (i) Tenant's default under the Lease or Tenant's insolvency, to the extent of Tenant's obligations under the Lease, or (ii) Guarantor's default hereunder; and F. Covenant and agree with Owner that the validity hereunder shall in no way be terminated, affected or impaired by reason of any action which Owner may take or fail to take against Tenant or by reason of any waiver of, or failure to enforce, any of the rights or 2 remedies reserved to Owner in the Lease; that the failure or refusal of Owner to relet the Demised Premises or any part or parts thereof in the event that Owner shall obtain possession of the Demised Premises after Tenant's insolvency or default shall not release Guarantor's liability hereunder, nor shall Owner be liable in any way whatsoever for failure to relet the Demised Premises, or, in the event that the Demised Premises is relet, for failure to collect rent under any such reletting; and that Owner at Owner's option, may make such alterations, repairs, replacements and/or decorations in the Demised Premises as Owner, in Owner's sole judgment, considers advisable and necessary for the purpose of reletting the Demised Premises and the making of such alterations and/or decorations shall not operate or be construed to release Guarantor from liability hereunder; and G. Waive notice of the acceptance of this Agreement and Guarantee and of any and all defaults by Tenant in the payment of rent, additional rent, or other charges, and of any and all defaults by Tenant in the performance of any of the terms, covenants or conditions of the Lease on Tenant's part to be observed or performed, and of any and all notices or demands which may be given by Owner to Tenant, whether or not required to be given to Tenant under the terms of the Lease; and H. Waive a trial by jury of any and all issues arising in any action or proceeding between the parties, upon, under or in connection with this Agreement and Guarantee or of any of its provisions, directly or indirectly, or any and all negotiations in connection therewith; and I. Acknowledge that this Guarantee is a guarantee of payment and not of collection in respect to any obligations which may accrue to Owner from Tenant under the provisions of the Lease; and J. Covenant to and agree with Owner that the validity hereunder shall in no way be terminated, affected or otherwise impaired by reason of any assignment or transfer of Tenant's interest in the Lease, unless otherwise expressly agreed to in writing by Owner and Guarantor; provided, however, that this Agreement and Guarantee shall terminate automatically and have no further force or effect upon the assignment of the Lease (in accordance with the terms and conditions set forth in the Lease and the Assignment and Amendment, including the required prior consent of Owner to such assignment) to an unrelated third party that assumes all of the obligations under the Lease; and K. Covenant to and agree with Owner that in the event of termination of the Lease by reason of the occurrence of any of the events set forth in Article 17 of the Lease, or in the event of the disaffirmance or rejection of the Lease in any proceeding of the type referred to in Article 17 or in any similar proceeding, Guarantor shall, upon written request of Owner, given by certified mail, return receipt requested, within thirty (30) days next following any such termination, disaffirmance or rejection (and actual notice thereof to Owner in the event of a disaffirmance or rejection or in the event of a termination other than by act of Owner) pay to Owner all rent, increases thereof, additional rent and other charges due and owing from Tenant to Owner under the Lease to and including the date of such termination, disaffirmance or rejection. Notwithstanding any such termination, disaffirmance or rejection of the Lease, 3 Guarantor shall remain obligated to comply with, and fully perform, all of Tenant's obligations under the Lease as if Guarantor was the tenant under the Lease, and, in the event Guarantor shall default in such obligations, then, in addition to all other remedies by reason of such default, either at law or in equity, Owner shall have the same rights and remedies against Guarantor as if Guarantor was the tenant under the Lease. L. Covenant to and agree with Owner that no failure to exercise and no delay in exercising, on the part of Owner, of any right, power or privilege under this Agreement and Guarantee or at law shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other power or right. The rights and remedies provided in this Agreement and Guarantee are cumulative and not exclusive of any rights or remedies provided by law. M. Covenant that if a claim is ever made upon Owner or any holder of the mortgages now or hereafter in effect which may affect the Real Property (as defined in the Lease) or affect the ground or underlying leases now or hereafter in effect affecting the Real Property for repayment or recovery of any amount or amounts received by Owner or any such holder of such mortgage in payment or on account of the liabilities and obligations guaranteed hereunder and Owner or such holder of the mortgage repays to or for the benefit of the undersigned or Tenant or any of their respective creditors all or part of such amount by reason of (i) any judgment, decree or order or any court or administrative body having jurisdiction over Owner or such holder of such mortgage or any of its property, or (ii) any settlement or compromise of any such claim effected by Owner or such holder of such mortgage with any such claimant (including Tenant), then and in such event the undersigned shall be and remain liable under this Agreement and Guarantee for the amount so repaid or recovered to the same extent as if such amount had never originally been received by Owner or such holder of such mortgage. In addition, the undersigned hereby waives any claim, right or remedy which the undersigned may now have or hereafter acquires against Tenant that arises hereunder or as a result of the performance of the undersigned hereunder, including, without limitation, any claim, right or remedy of subrogation or reimbursement until all of the Guarantor's obligations hereunder have been paid in full. N. Guarantor acknowledges that this Agreement and Guarantee and the Guarantor's obligations under this Agreement and Guarantee are, and shall at all times continue to be, absolute and unconditional in all respects, and shall at all times be valid and enforceable irrespective of any other agreements or circumstances of any nature whatsoever which might otherwise constitute a defense to this Agreement and Guarantee and the obligations of Guarantor under this Agreement and Guarantee or the obligations of any other person or party (including, but not limited to, the Tenant) relating to this Agreement and Guarantee or the obligations of the Guarantor hereunder or otherwise with respect to the Lease. Guarantor agrees that this Agreement and Guarantee sets forth the entire agreement and understanding of Owner and Guarantor, and Guarantor absolutely, unconditionally and irrevocably waives any and all right to assert any (i) set off or (ii) counterclaim or cross claim that is unrelated to the claims brought by Owner against Tenant or Guarantor (except that the aforesaid waiver shall not apply to any so-called "mandatory" counterclaims or cross claims the failure of which to assert in connection with Owner's claims would prejudice or preclude Guarantor from making any such 4 counterclaim or cross claim) of any nature whatsoever with respect to this Agreement and Guarantee or the obligations of Guarantor under this Agreement and Guarantee or the obligations of any other person or party (including, without limitation, Tenant) relating to this Agreement and Guarantee or the obligations of Guarantor under this Agreement and Guarantee or otherwise with respect to the Lease in any action or proceeding brought by Owner to enforce the obligations of Guarantor under this Agreement and Guarantee. Guarantor acknowledges that no oral or other agreements, understandings, representations or warranties exist with respect to this Agreement and Guarantee or with respect to the obligations of Guarantor under this Agreement and Guarantee except as specifically set forth in this Agreement and Guarantee. Notwithstanding anything to the contrary contained herein, nothing herein shall be deemed or construed to limit in any way Guarantor's right to defend against the substance, nature or extent of any claim hereunder for failure to pay or perform any of Guarantor's obligations hereunder. O. Covenant and agree that for so long as this Agreement and Guarantee shall remain and continue in full force and effect, within one hundred twenty (120) days following the end of each fiscal year of Guarantor occurring during such time period, Guarantor shall deliver to the holder(s) of the then existing mortgage(s) affecting the building in which the Demised Premises is located an annual financial statement of Guarantor, prepared by a certified public accountant in accordance with generally accepted accounting principles applied on a consistent basis. SECOND: The provisions of this Agreement and Guarantee shall be binding upon said Guarantor, its successors and assigns and shall inure to the benefit of Owner, its successors and assigns, and shall not be deemed waived or modified unless specifically set forth in writing, executed by Owner and delivered to Guarantor. THIRD: A. (1) Guarantor hereby submits itself to the jurisdiction of the State of New York in any action or proceeding arising out of or under the Lease or this Agreement and Guarantee, and agrees that this Agreement and Guarantee shall be governed, construed and interpreted in accordance with the laws of the State of New York which shall apply in any such action or proceeding. (2) All judicial actions, suits or proceedings brought against Guarantor with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement and Guarantee or for recognition or enforcement of any judgment rendered in any such proceedings may be brought in any State or federal court of competent jurisdiction in the City of New York. By execution and delivery of this Agreement and Guarantee, Guarantor accepts, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any final judgment rendered 5 thereby in connection with this Agreement and Guarantee from which no appeal has been taken or is available. Guarantor hereby irrevocably waives any objection to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have to the bringing of any such action or proceeding in any such jurisdiction. Nothing herein shall limit the right of Owner to bring any action, suit or proceeding against Guarantor in the court of jurisdiction. Guarantor acknowledges that final judgment against it in any action, suit or proceeding referred to in this Article THIRD shall be conclusive and may be enforced in any other jurisdiction, by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and of the amount of any such judgment against Guarantor. B. Guarantor hereby irrevocably appoints, authorizes, empowers and designates the General Counsel of Guarantor as its lawful agent upon whom service of any legal process may be made in the State of New York, in a like manner and with like effect as if the same were served personally upon Guarantor within the jurisdiction of the State of New York. C. Guarantor agrees that any bills, statements, notices, demands, requests or other communications given or required to be given to Guarantor under this Agreement and Guarantee at Owner's election, shall be addressed to Guarantor care of said agent at said address. Guarantor may designate, from time to time, a successor agent under this paragraph by giving notice thereof to Owner, at the above address by certified mail, return receipt optional, and any such successor shall thereupon become the agent for all purposes of this Article. FOURTH: The officer executing this Agreement and Guarantee on behalf of the undersigned Guarantor represents to Owner that said officer has been duly authorized by the undersigned Guarantor to execute and deliver this Agreement and Guarantee on behalf of the undersigned Guarantor and that execution and delivery of this Agreement and Guarantee is a proper and authorized act of the undersigned Guarantor and does not violate the Certificate of Incorporation or the By-Laws of the undersigned Guarantor or the Delaware General Corporation Law. (signature page follows) 6 IN WITNESS WHEREOF, the undersigned Guarantor has signed and sealed this Agreement and Guarantee this 14th day of February, 2003. MONEYLINE TELERATE By: /s/ Alexander Russo -------------------------------- Name: Alexander Russo Title (Guarantee) UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT (Within New York State) State of New York ) :ss.: County of New York ) On the 14th day of February, in the year 2003, before me, the undersigned, personally appeared Alex Russo, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. /s/ Audrey Leff ----------------------------------- (Signature and Office of individual taking acknowledgment) (Guarantee) STATEMENT OF DIFFERENCES ------------------------ The section symbol shall be expressed as............................... 'SS' EX-10 6 ex10-15.txt EXHIBIT 10.15 EXECUTION COPY SECURED CREDIT AGREEMENT THIS SECURED CREDIT AGREEMENT, dated as of August 13, 2003 (this "Agreement"), is by and among TalkPoint Communications Inc. (formerly Video Network Communications, Inc.), a Delaware corporation (the "Borrower"), and Moneyline Telerate Holdings, a Delaware corporation (the "Lender"). WHEREAS, the Borrower wishes to obtain financing and the Lender desires to provide such financing to the Borrower. NOW, THEREFORE, in consideration of the mutual covenants and agreements and the representations and warranties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I LOANS 1.1 Commitment. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Borrower herein set forth, the Lender agrees to make loans to the Borrower (each such loan, a "Loan") from time to time on any business day during the period from September 1, 2003 to November 30, 2003 (the "Commitment Termination Date") in an aggregate principal amount not to exceed at any time $400,000 (the "Commitment"). Amounts repaid in respect of Loans may not be reborrowed. The Loans shall be repaid in full on the Maturity Date (as defined in Section 1.7 below). The Commitment shall automatically terminate at 5:00 p.m. (New York City time) on the Commitment Termination Date. 1.2 Loans. Each Loan shall be made as part of a borrowing (a "Borrowing"). Each Borrowing of Loans shall be made upon the Borrower's irrevocable written notice signed by its chief executive officer or chief financial officer and delivered to the Lender in the form attached hereto as Exhibit A (a "Notice of Borrowing") (which notice must be received by the Lender prior to 12:00 noon (New York City time) one business day prior to the requested date of the Borrowing (the "Borrowing Date")) specifying the amount of the Borrowing, the number and location of the account in New York City to which funds are to be disbursed and the Borrowing Date, which shall be a business day. The Lender shall make each Loan to be made by it hereunder on the proposed Borrowing Date by wire transfer of immediately available funds to such account as the Borrower may designate in the applicable Notice of Borrowing. The Loans comprising any Borrowing shall be in an aggregate principal amount that that is not less than $50,000. 1.3 Issuance of Notes. The Borrower shall execute and deliver to the Lender on the date of each Loan a promissory note in the form of Exhibit B hereto (a "Note") dated the date of such Loan in the aggregate principal amount of such Loan. 1.4 Interest on Loans. Each Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to 8%. All computations of interest shall be made on the basis of year of 365 or 366 days, as the case may be, and actual days elapsed. Interest on each Loan shall be paid on the Maturity Date. 1.5 Default Interest. Upon the occurrence and during the continuance of an Event of Default, interest will accrue on the unpaid principal amount of all Loans, all unpaid interest on any Loan and any other amounts payable hereunder, to the extent permitted by law, at a rate per annum of 12%. 1.6 Payments. (a) Repayment. The Borrower shall repay the Lender in full on the Maturity Date the aggregate principal amount of all Loans outstanding on such date, together with all accrued and unpaid interest thereon. (b) Prepayment. The Borrower may, upon at least one business day's prior written notice to the Lender, at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty. (c) Manner and Time of Payment. All payments by the Borrower of principal, interest and fees hereunder shall be made without defense, set off or counterclaim, and in same day funds and delivered to the Lender not later than 5:00 p.m. (New York City time) on the date due at the address indicated for the Lender in Section 6.1 for the account of the Lender. Funds received by the Lender after that time shall be deemed to have been paid by the Borrower on the next succeeding business day. (d) Payments on Non-Business Days. Whenever any payment to be made hereunder or under any Loan shall be stated to be due on a day which is not a business day, the payment shall be made on the next succeeding business day and such extension of time shall be included in the computation of the payment of interest hereunder or under such Note. 1.7 Maturity Date. The maturity date (the "Maturity Date") shall be the earliest to occur of (a) December 31, 2003, (b) the date on which Moneyline Telerate Holdings owns less than five percent (5%) of the outstanding shares of common stock of the Borrower and (c) the date on which the Borrower receives funding (whether debt, equity or a combination thereof) in one transaction or a series of transactions in an aggregate amount of at least $400,000. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE BORROWER 2.1 Representations and Warranties of the Borrower. The Borrower hereby represents and warrants to the Lender as follows: (a) Organization. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. (b) Authority. The Borrower has full corporate power and authority to enter into this Agreement and the Security Agreement, dated as of the date hereof (the "Closing Date"), by and between the Borrower and the Lender, substantially in the form and to the effect of Exhibit C hereto (as such agreement may be amended, modified or restated from time to time (the "Security Agreement"), to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Security Agreement by the Borrower, and the performance by the Borrower of its obligations hereunder and thereunder, have been duly authorized by all necessary corporate action by the Borrower. This Agreement and the Security Agreement have been duly and validly executed and delivered by the Borrower and, upon the execution and delivery hereof by the other parties hereto and thereto, will constitute the legal, valid and binding -2- obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except to the extent that such validly binding effect and enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors' rights generally from time to time in effect, and by general equitable principles. (c) Subsidiaries. The Borrower does not own or control, directly or indirectly, any interest in any other Person and is not a participant in any joint venture, partnership or similar arrangement. (d) No Violation, Etc. The execution and delivery by the Borrower of this Agreement and the Security Agreement do not, and the performance by the Borrower of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby do not and will not conflict with, result in any violation of or default under, or result in any person or entity having the right to terminate or modify, (i) any note, bond, mortgage, license, lease, contract, commitment, agreement or arrangement to which the Borrower is a party or by which any of its properties or assets are bound or (ii) any judgment, order or decree, or statute, law, ordinance, rule or regulation, applicable to the Borrower or to any of the property or assets of the Borrower or (iii) the Borrower's certificate of incorporation or by-laws. No consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, is required to be obtained or made by the Borrower in connection with the execution and delivery of the Agreement and the Security Agreement or the consummation of the transactions contemplated hereby or thereby. (e) Indebtedness. There is no outstanding Indebtedness of the Borrower, other than trade payables and accrued expenses arising in the ordinary course of business on ordinary terms, none of which is currently past due. "Indebtedness" of the Borrower means, without duplication, (i) all obligations of the Borrower for borrowed money, (ii) all obligations of the Borrower evidenced by bonds, debentures, notes or similar instruments, (iii) all obligations of the Borrower under conditional sale or other title retention agreements relating to property acquired by the Borrower, (iv) all obligations of the Borrower in respect of the deferred purchase price of property or services, (v) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by the Borrower, whether or not the Indebtedness secured thereby has been assumed, (vi) all guarantees by the Borrower of Indebtedness of others, (vii) all capital lease obligations of the Borrower, (viii) all obligations, contingent or otherwise, of the Borrower as an account party in respect of letters of credit and letters of guaranty and (ix) all obligations, contingent or otherwise, of the Borrower in respect of bankers' acceptances. The Indebtedness of the Borrower shall include the Indebtedness of any other entity (including any partnership in which the Borrower is a general partner) to the extent the Borrower is liable therefor as a result of the Borrower's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that the Borrower is not liable therefor. (f) Legal Proceedings. Except for the grand jury investigation concerning funds allocated by the Schools and Libraries Universal Service Fund for certain California schools disclosed in the Borrower's Form 10-KSB for the fiscal year ended December 31, 2002, there are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against the Borrower, other than those that could not reasonably be expected to have a material adverse effect on the business, financial condition or assets of the Borrower. (g) Compliance with Laws and Orders. Except as disclosed in Section 2(f), the Borrower is not, and has not received any notice that it is, in violation of or default under, any law, statute, rule or regulation of any governmental authority or instrumentality, domestic or foreign, except to the extent that -3- any such violation or default would not have a material adverse effect on the business, financial condition or assets of the Borrower. (h) Solvency. As of the Closing Date, the Borrower: (i) is not insolvent; and (ii) does not intend to incur, or believe that it will incur, debts that would be beyond its ability to pay as such debts matured. (i) No Default. No event has occurred and is continuing that constitutes, or with notice or lapse of time or both would constitute, an Event of Default. ARTICLE III CONDITIONS TO LOAN 3.1 Conditions to All Borrowings. The obligation of the Lender to make any Loan (including its initial Loan) is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date: (a) Notice of Borrowing. The Lender shall have received a Notice of Borrowing. (b) Continuation of Representations and Warranties. Each of the representations and warranties made by the Borrower in this Agreement shall be true and correct in all material respects (if not qualified by materiality or material adverse effect) and in all respects (if qualified by materiality or material adverse effect) on and as of the Borrowing Date as though such representation or warranty was made on and as of the Borrowing Date. (c) No Existing Default. No Event of Default (nor any event or circumstance that with notice or lapse of time or both would constitute an Event of Default) shall exist or shall result from such Borrowing. (d) Revenue and EBITDA. The total revenue and EBITDA of the Borrower, as determined in accordance with U.S. generally accepted accounting principles, for each of the calendar months set forth below that has ended prior to the relevant Borrowing Date was equal to or greater than the amount set forth below:
Month Revenue EBITDA - -------------- -------- --------- August 2003 $425,000 ($281,000) September 2003 $614,000 ($116,000) October 2003 $714,000 ($75,000) November 2003 $755,000 ($12,000)
"EBITDA", for any period, means the Borrower's earnings before interest, income taxes, depreciation and amortization excluding extraordinary gains and losses Each Notice of Borrowing submitted by the Borrower hereunder shall constitute a representation and warranty by the Borrower hereunder, as of the date of each such notice and as of each Borrowing Date, that the conditions in this Section 3.1 are satisfied. -4- ARTICLE IV COVENANTS So long as any Loan is outstanding or any other obligation of the Borrower hereunder shall remain unpaid or unsatisfied: 4.1 Indebtedness. The Borrower shall not directly or indirectly create, incur, assume, extend the maturity of, or otherwise become directly or indirectly liable with respect to, any Indebtedness other than (a) Indebtedness under this Agreement and the Security Agreement and (b) trade payables and accrued expenses arising in the ordinary course of business on ordinary terms. 4.2 Liens. The Borrower shall not directly or indirectly, create, incur, assume or permit to exist any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind (collectively, "Liens") upon or with respect to any of its assets, whether now owned hereafter acquired or any income or profits therefrom, or assign or otherwise convey any right to receive income to secure any Indebtedness, other than (a) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with U.S. generally accepted accounting principles (consistently applied), (b) any minor imperfection of title or similar lien which individually or in the aggregate with other such liens does not impair the value or marketability of the property subject to such lien or interfere with the use of such property in the conduct of the business of the Borrower and which do not secure obligations for money borrowed and (c) Liens created under the Security Agreement (collectively, "Permitted Liens"). 4.3 Merger, Consolidation, Sale of Assets. The Borrower shall not (a) liquidate, wind-up or dissolve, (b) consolidate or merge with or into any other corporation, limited liability company, general partnership, limited partnership, limited liability partnership, proprietorship, other business organization, trust, union, association or governmental or regulatory entity (each, a "Person"), (c) permit any other Person to consolidate with or merge with or into it or participate in a share exchange with it or (d) sell, lease, transfer, contribute or otherwise dispose of any of its assets to any other Person (other than sales of inventory and worn out and obsolete assets in the ordinary course of business). 4.4 Loans and Investments. The Borrower shall not (a) make any loan, advance or capital contribution, (b) extend credit to any Person or (c) purchase or otherwise acquire, hold or invest in, or make any commitment to purchase or otherwise acquire, hold or invest in, any debentures, notes and other evidences of Indebtedness, stocks, securities (including rights to purchase and securities convertible into or exchangeable for other securities), interests in joint ventures and general and limited partnerships, mortgage loans and other investment or portfolio assets (owned of record or beneficially by Borrower), or make or keep outstanding any advance or loans (collectively, "Investment Assets"), except that the Borrower may invest in (i) direct obligations of, obligations fully guaranteed by, and repurchase agreements fully secured by, the United States of America or any agency thereof and (ii) certificates of deposit of any commercial bank which is a member of the Federal Reserve System. 4.5 Dividends, Etc. The Borrower shall not declare or pay any cash or asset dividend on any of its shares or make any other distribution or disposition of any assets to stockholders in respect of its shares (or otherwise), or make, or commit to make, any payment on account of the purchase, redemption or other retirement of any of its shares or warrants or options therefor. 4.6 Subsidiaries. The Borrower shall not organize or cause to exist any subsidiary of the Borrower. -5- 4.7 Sale and Leaseback. The Borrower shall not enter into any arrangement with any Person providing for the leasing by such Borrower of real or personal property that has been or is to be sold or transferred by the Borrower to such Person. 4.8 Certain Limitations. The Borrower shall not enter into any agreement with any Person (other than the Lender pursuant to this Agreement) that prohibits or limits the ability of the Borrower to create, incur, assume or suffer to exist any Lien upon any of the assets or revenues of the Borrower, whether now owned or hereafter acquired. 4.9 Compliance with Budget; Funding Certain Losses. The Lender shall have authority to approve expenditures of the Borrower, including, without limitation, expenditures in connection with employees, consultants or agents of the Borrower, equal to the respective boards of directors of the Borrower. 4.10 Conflicting Agreements. The Borrower shall not enter into any agreements or arrangements that could reasonably be considered to be not in the normal course of business and which by their terms (or reasonably foreseeable effect) materially restrict or materially adversely affect the Borrower's right and ability to meet its obligations to the Lender hereunder. 4.11 Affiliate Transactions. The Borrower shall not enter into any transaction with any Affiliate (other than the Lender). "Affiliate" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, that Person; for the purpose of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by contract or otherwise. 4.12 Change in Nature of Business. The Borrower shall not engage in any business other than the business currently conducted by the Borrower and activities reasonably related thereto. 4.13 Use of Proceeds. The Borrower will use the proceeds of the Loans for working capital and general purposes of the Borrower. ARTICLE V EVENTS OF DEFAULT If any of the following conditions or events ("Events of Default") shall occur and be continuing: 5.1 Failure To Make Payments When Due. Failure to pay any installment of principal or interest of any Loan when due, whether at stated maturity, by acceleration, by notice of prepayment, or otherwise; or 5.2 Default in Other Agreements. Any event or condition occurs that results in any Indebtedness of the Borrower in excess of $25,000 becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of such Indebtedness or any trustee or agent on its or their behalf to cause any such Indebtedness to become due, or to require the prepayment repurchase, redemption or defeasance thereof, prior to its scheduled maturity; or -6- 5.3 Breach of Certain Covenants and Agreements. Failure of the Borrower to perform or comply with (a) any term or condition contained in Article III or Article IV or (b) any other term contained in this Agreement or the Security Agreement and such failure shall not have been remedied or waived within five (5) days after receipt of written notice from the Lender of such default; or 5.4 Breach of Warranty. Any representation or warranty made by the Borrower in this Agreement or the Security Agreement or in any statement or certificate at any time given by the Borrower pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect (if not qualified by materiality or material adverse effect) and in any respect (if qualified by materiality or material adverse effect) on the date when made; or 5.5 Involuntary Bankruptcy; Appointment of Receiver, Etc. (a) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Borrower in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed, or any other similar relief shall be granted and remain unstayed under any applicable federal or state law; or (b) an involuntary case is commenced against the Borrower under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the Borrower or over all or a substantial part of any of their respective assets, shall have been entered; or an interim receiver, trustee or other custodian of the Borrower for all or a substantial part of their respective assets is involuntarily appointed, or a warrant of attachment, execution or similar process is issued against any substantial part of the assets of the Borrower and the continuance of any such events in this clause (b) for sixty (60) days unless dismissed, bonded, stayed, vacated or discharged; or 5.6 Voluntary Bankruptcy; Appointment of Receiver, Etc. The Borrower shall have an order for relief entered with respect to it or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or making possession by a receiver, trustee or other custodian for all or a possession by a receiver, trustee or other custodian for all or a substantial part of its assets or the making by the Borrower of any assignment for the benefit of creditors the admission by the Borrower in writing of its inability to pay its debts as such debts become due; or the board of directors of the Borrower (or any committee thereof) adopts any resolution or otherwise authorizes action to approve any of the foregoing; or 5.7 Judgments and Attachments. Any money judgment, writ or warrant of attachment, or similar process involving in any individual case or in the aggregate at any time an amount in excess of $25,000 (not covered by insurance) for the Borrower shall be entered or filed against the Borrower or any of its assets; or 5.8 Other Agreements. Any material provision of this Agreement or the Security Agreement shall cease to be a valid and binding obligation against the Borrower. THEN, (a) upon the occurrence of any Event of Default described in the foregoing Section 5.5, 5.6 or 5.7, the unpaid principal amount of and accrued interest on each Loan shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Borrower, and the obligations of the Lender hereunder shall thereupon terminate and (b) upon the occurrence of any other Event of Default, the Lender may, by written notice to the Borrower, declare the Loans to be, and the same shall forthwith become, due and payable, together with accrued interest thereon, and the obligations of the Lender hereunder shall -7- thereupon terminate. ARTICLE VI MISCELLANEOUS 6.1 Notices. Except as otherwise provided herein, all notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission or mailed by prepaid first class certified mail, return receipt requested, or mailed by overnight courier prepaid, to the parties at the following addresses or facsimile numbers: (a) if to the Borrower, to: TalkPoint Communications Inc. 100 William Street 8th Floor New York, NY 10038 Attention: Nicholas Balletta Fax: (212) 909-2901 (b) if to the Lender to: Moneyline Telerate Holdings 233 Broadway New York, New York 10279 Attention: Adam Ableman, Esq. Fax: (212) 553-2598 with a copy to: Morgan, Lewis & Bockius LLP 101 Park Avenue New York, New York 10178 Attention: Ira White, Esq. Fax: (212) 309-6001 All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section, be deemed given upon receipt, (iii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given on the earlier of the third business day following mailing or upon receipt and (iv) if delivered by overnight courier to the address as provided in this Section, be deemed given on the earlier of the first business day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving written notice specifying such change to the other party hereto. 6.2 Entire Agreement. This Agreement and the Security Agreement supersede all prior discussions and agreements between the parties with respect to the subject matter hereof and thereof and -8- contain the sole and entire agreement between the parties hereto with respect to the subject matter hereof and thereof. 6.3 Further Assurances; Post-Closing Cooperation. At any time or from time to time after the execution and delivery of this Agreement, the Borrower shall execute and deliver to the Lender such other documents and instruments, provide such materials and information and take such other actions as the Lender may reasonably request more effectively to vest title to the Notes in the Lender and otherwise to cause the Borrower to fulfill its obligations under this Agreement and the Security Agreement. 6.4 Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Agreement or of any Notes, or consent to any departure by the Borrower therefrom, shall in any event be effective without the written concurrence of the Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any further notice or demand in similar or other circumstances. 6.5 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitation of, another covenant shall not avoid the occurrence of an Event of Default if such action is taken or condition exists. 6.6 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights, and this Agreement does not confer any such rights, upon any other Person. 6.7 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by the Borrower without the prior written consent of the Lender and any attempt to do so will be void. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 6.8 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 6.9 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. 6.10 Usury. All agreements between the Borrower and the Lender, whether now existing or hereafter arising and whether written or oral, are expressly limited so that in no contingency or event whatsoever shall the amount paid, or agreed to be paid, to the Lender for the use, forbearance or detention of the money to be loaned hereunder or otherwise, exceed the maximum amount permissible under applicable law. If, from any circumstances whatsoever, fulfillment of any provision of any Note, at the -9- time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any such circumstances the Lender shall ever receive anything of value as interest or deemed interest by applicable law under any Note an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under such Note or on account of any other indebtedness of the Borrower to the Lender relating to such Note, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such Note, such excess shall be refunded to the Borrower. 6.11 Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. 6.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. [Signature Page to Follow] -10- IN WITNESS WHEREOF, the parties hereto have caused this Secured Credit Agreement to be executed and delivered as of the date first above written. BORROWER: TALKPOINT COMMUNICATIONS INC. By: /s/ Nicholas Balletta ------------------------------ Name: Nicholas Balletta Title: Chief Executive Officer LENDER: MONEYLINE TELERATE HOLDINGS By: /s/ Lawrence K. Kinsella ------------------------------ Name: Lawrence K. Kinsella Title: Chief Financial Officer -11- EXHIBIT A NOTICE OF BORROWING Date: ______________, 2003 Moneyline Telerate Holdings 233 Broadway New York, New York 10279 Ladies and Gentlemen: Reference is made to that certain Secured Credit Agreement dated as of August 13, 2003 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among TalkPoint Communications Inc., as borrower, and Moneyline Telerate Holdings, as lender, the terms defined therein being used herein as therein defined. The undersigned hereby gives you notice irrevocably, pursuant to Section 1.2 of the Credit Agreement, of the Borrowing specified below: 1. The business day of the proposed Borrowing is _____________, _____. 2. The aggregate amount of the proposed Borrowing is $____________. 3. The bank account to which funds are to be disbursed is as follows: ---------------------- ---------------------- ---------------------- The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) each of the representations and warranties made by the Borrower in the Credit Agreement shall be true and correct in all material respects (if not qualified by materiality or material adverse effect) and in all respects (if qualified by materiality or material adverse effect) on and as of the Borrowing Date as though such representation or warranty was made on and as of the Borrowing Date; (b) no Event of Default (nor any event or circumstance that with notice or lapse of time or both would constitute an Event of Default) has occurred or is continuing, or would result from such proposed Borrowing; and (c) The total revenue and EBITDA of the Borrower, as determined in accordance with U.S. generally accepted accounting principles, for each of the calendar months set forth below that has ended prior to the relevant Borrowing Date was equal to or greater than the amount set forth below:
Month Revenue EBITDA - -------------- -------- --------- August 2003 $425,000 ($281,000) September 2003 $614,000 ($116,000)
A-1 October 2003 $714,000 ($75,000) November 2003 $755,000 ($12,000)
TALKPOINT COMMUNICATIONS INC. By: ------------------------------ Name: Title: A-2 EXHIBIT B PROMISSORY NOTE $__________ August ___, 2003 New York, New York FOR VALUE RECEIVED, TalkPoint Communications Inc. (formerly Video Network Communications, Inc.) (the "Borrower"), hereby promises to pay to Moneyline Telerate Holdings (the "Lender"), at 233 Broadway, New York, New York 10279, the principal sum of $_________________, in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money and funds, for the period commencing on the date of such Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement. The date and amount of each Loan made by the Lender to the Borrower, and each payment made on account of the principal of such Loan, shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by the Lender on the schedule attached to this Note or any continuation of such schedule, provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower to make a payment when due of any amount owing under the Credit Agreement or under this Note in respect of the Loans made by the Lender. This Note is one of the Notes referred to in the Secured Credit Agreement dated as of August 13, 2003 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") between TalkPoint Communications Inc., as borrower, and Moneyline Telerate Holdings, as lender, and evidences Loans made by the Lender under the Credit Agreement. Capitalized terms used but not defined in this Note have the respective meanings assigned to them in the Credit Agreement. The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events and for prepayments of Loans upon the terms and conditions specified in the Credit Agreement. This Note is secured by and entitled to the benefits of the Security Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. TALKPOINT COMMUNICATIONS INC. By: ------------------------------ Name: Title: B-1 EXHIBIT C SECURITY AGREEMENT SECURITY AGREEMENT dated as of August 13, 2003 (as amended, supplemented or otherwise modified, renewed or replaced from time to time, the "Security Agreement") between TALKPOINT COMMUNICATIONS INC. (formerly Video Network Communications, Inc.), a Delaware corporation (the "Grantor") and MONEYLINE TELERATE HOLDINGS, a Delaware corporation (the "Secured Party"). Introductory Statement Reference is hereby made to the Secured Credit Agreement, dated as of August 13, 2003, between TalkPoint Communications Inc., as borrower, and Moneyline Telerate Holdings, as lender (as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time, the "Credit Agreement"). To provide security to the Secured Party for the obligations of the Grantor under the Credit Agreement, the Grantor desires to grant to the Secured Party a security interest in the Collateral pursuant to the terms hereof. Accordingly, the parties hereto agree as follows: 1. Definitions. When used in this Security Agreement: "Account Debtor" means any Person who is obligated or indebted to a Grantor with respect to any Account. "Accounts" means all accounts, as defined in the UCC, now owned or hereafter acquired by the Grantor, including, without limitation, all of the Grantor's rights to payment for goods sold or leased or services performed by the Grantor, whether now in existence or arising from time to time hereafter, including without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (i) all security pledged, assigned, hypothecated or granted to or held by the Grantor to secure the forgoing, (ii) all guarantees, endorsements, and indemnifications on, or of, any of the foregoing, (iii) all powers of attorney for the execution of any indebtedness or security or other writing in connection therewith, (iv) all books, records, ledger cards and invoices relating thereto, (v) all evidences of filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (vi) all credit information, reports and memoranda relating thereto and (vii) all other writings in any way related to the foregoing. "Applicable Law" shall mean all provisions of statutes, rules, regulations and orders of the United States, any state thereof or municipality therein or of any foreign governmental body or of any regulatory agency applicable to the Person in question, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party. "Collateral" means each of the following types or items of personal property of the Grantor, whether now owned or hereafter acquired, wherever located: (i) all Accounts, (ii) all Intellectual C-1 Property, (iii) all Deposit Accounts, (iv) all monies now or at any time or times hereafter in the possession or under the control of the Grantor or the Secured Party, and (v) all products and Proceeds of the property described in clauses (i) through (iv) above. "Copyrights" means any United States or foreign copyrights now or hereafter owned by the Grantor, including any registrations of any Copyrights in the United States Copyright Office or the equivalent thereof in any foreign country and any application for a United States or foreign copyright registration now or hereafter made by the Grantor with the United States Copyright Office or the equivalent thereof in any foreign country and any licenses with respect to any of the foregoing. "Deposit Account" has the meaning given to such term under Article 9 of the UCC. "Event of Default" means the occurrence of an Event of Default (as defined in the Credit Agreement). "Governmental Authority" means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision. "Intellectual Property" means all Copyrights, Marks and Patents now owned or hereafter acquired by the Grantor, and all corporate or other business records, inventions, designs, blueprints, plans, trade names, trade secrets, goodwill, registrations, service marks, logos, licenses, franchises and customer lists. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind whatsoever (including, without limitation, any conditional sale or other title retention agreement, any lease in the nature of security, and the filing of, or agreement to give, any financing statement under the UCC or the Uniform Commercial Code or other Applicable Law of any jurisdiction). "Marks" means all right, title and interest of the Grantor now owned or hereafter acquired in and to any United States or foreign trademarks, service marks, and trade names, including any registration of any trademarks and service marks in the United States Patent and Trademark Office or the equivalent thereof in any foreign country, any application for a United States or foreign trademark now or hereafter made by the Grantor with the United States Patent and Trademark Office or the equivalent thereof in any foreign country and any trade dress including logos and/or designs used by the Grantor in the United States or any foreign country and any licenses with respect to any of the foregoing. "Obligations" means all indebtedness, liabilities and other obligations of the Grantor under the Credit Agreement and this Agreement, each whether now existing or hereafter arising, direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due, acquired outright, conditionally or as collateral security from another, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, and of all agreements, documents and instruments evidencing any of the foregoing or under which any of the foregoing may have been issued, created, assumed or guaranteed. The term "Obligations" includes, without limitation, the obligations to pay principal, breakage costs, interest (including, without limitation, interest accruing after the commencement of any bankruptcy, insolvency, reorganization, or similar proceedings with regard to the Grantor, whether or not determined to be an allowed claim in any such proceeding), charges, costs, expenses and fees including, without limitation, the disbursements and reasonable fees of counsel to the Secured Party and all renewals extensions, restructurings, refinancings or refundings thereof in a nature of a "workout" or otherwise. C-2 "Patents" means any United States or foreign patent to which the Grantor now or hereafter have title and any divisions or continuations thereof, as well as any application for a United States or foreign patent now or hereafter made by the Grantor and any licenses with respect to any of the foregoing. "Person" means any natural person, corporation, division of a corporation, limited liability company, partnership, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof. "Proceeds" has the meaning given to such term under Article 9 of the UCC and shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty with respect to the Collateral, (ii) any or all payments made or due and payable to the Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral and (iii) any and all other amounts paid or payable from time to time under or in connection with the Collateral. "UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York. Terms not otherwise defined herein or in the Loan Agreement shall have, where appropriate, their respective definitions as set forth in the UCC. 2. Grant of Security Interest. As security for the payment and performance when due of the Obligations, the Grantor hereby grants to the Secured Party a security interest in, and Lien on, all of its right, title and interest in and to all of the Collateral. 3. Covenants of the Grantor. The Grantor hereby covenants and agrees with the Secured Party that: (a) The Grantor shall not change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name (other than the name "Video Network Communications Inc.") unless (i) it shall have given the Secured Party thirty (30) days' prior written notice of its intention to do so which clearly describes such new name and the jurisdictions in which such new name will be used and provides the Secured Party with any other information in connection therewith as the Secured Party may request and (ii) it shall have taken all actions requested by the Secured Party to maintain the security interest granted to the Secured Party under this Security Agreement fully perfected; (b) The Grantor shall not change its corporate structure or its domicile of incorporation by redomiciliation, redomestication or otherwise unless (i) it shall have given the Secured Party thirty (30) days' prior written notice of its intention to do so which clearly describes such change and identifies the new jurisdiction and provides the Secured Party with any other information in connection therewith as the Secured Party may request and (ii) it shall have taken all actions requested by the Secured Party to maintain the security interest granted to the Secured Party under this Security Agreement fully perfected; and (c) The Grantor shall not establish any new location for its chief executive office or the location of its books, records and other documents relating to or evidencing Accounts or Intellectual Property unless (i) the Grantor provides the Secured Party thirty (30) days prior written prior written notice of its intention to move to such new location, clearly describing such new location, and provides the Secured Party with any other information in connection therewith as the Secured Party may request C-3 and (ii) it shall have taken all actions requested by the Secured Party to maintain the security interest granted to the Secured Party under this Security Agreement fully perfected. 4. The Secured Party's Rights Exclusive of an Event of Default. The Grantor hereby agrees to permit representatives of the Secured Party, upon reasonable notice to the Grantor and during normal business hours, to access its records in connection with the Collateral at such reasonable times and as often as may be reasonably requested by the Secured Party. The Secured Party, from time to time and at its option, may take any other action which the Secured Party reasonably deems necessary for the maintenance or preservation of any of the Collateral or its interests therein. The Secured Party shall have the right to designate any officer, employee or attorney to execute, sign, endorse, assign, transfer or deliver in the name of the Grantor, or in its name, any documents or certificates necessary to evidence, perfect and realize upon the security interest granted herein. 5. The Secured Party's Rights and Remedies Upon an Event of Default. (a) Collections, etc. Upon the occurrence and during the continuance of an Event of Default, the Secured Party may, in its sole discretion, in its name, in the name of the Grantor or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or settlement deemed desirable with respect to the Collateral, but shall be under no obligation so to do, or the Secured Party may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, or release any of the Collateral, without thereby incurring responsibility to, or discharging or otherwise affecting any liability of the Grantor. The Secured Party will not be required to take any steps to preserve any rights against prior parties with rights in or to the Collateral. If the Grantor fails to make any payment or to take any action required hereunder with respect to the Collateral, the Secured Party may make such payments and take all such actions as the Secured Party reasonably deems necessary to protect the security interests of the Secured Party in the Collateral and/or the value thereof, and the Secured Party is hereby authorized (without limiting the general nature of the authority hereinabove conferred) to pay, purchase, contest or compromise any Liens which in the judgment of the Secured Party appears to be equal to, prior to or superior to the security interests of the Secured Party in the Collateral. (b) Possession, Sale of Collateral, etc. Upon the occurrence and during the continuance of an Event of Default, in addition to any rights and remedies the Secured Party may have under Applicable Law, the Secured Party shall have all the rights and remedies available to it under the UCC, whether or not the UCC applies to the Collateral. The Secured Party may take such measures as it may deem necessary or proper for the care or protection of the Secured Party's rights and remedies hereunder, including the right to sell or cause to be sold, whenever the Secured Party shall decide, in one or more sales or parcels, at such prices as the Secured Party may deem best, and for cash or on credit or for future delivery, without assumption of any credit risk, all or any portion of the Collateral, at any broker's board or at a public or private sale, without any demand of performance or notice of intention to sell or of the time or place of sale (except 10 days' written notice to the Grantor of the time and place of any such sale or sales and such other notices as may be required by Applicable Law and cannot be waived), and any Person may be the purchaser of all or any portion of the Collateral so sold and thereafter hold the same absolutely, free (to the fullest extent permitted by Applicable Law) from any claim or right of whatever kind, including any equity of redemption, of the Grantor, any such demand, notice, claim, right or equity being hereby expressly waived and released to the fullest extent permitted by Applicable Law. At any sale or sales made pursuant to this Section 5(b), the Secured Party may bid for or purchase, free (to the fullest extent permitted by Applicable Law) from any claim or right of whatever kind, including any equity of redemption, of the Grantor any such demand, notice, claim, right or equity being hereby expressly waived and released, any part of or all of the Collateral offered for sale, and may make C-4 any payment on account thereof by using any claim for moneys then due and payable to the Secured Party by the Grantor hereunder as a credit against the purchase price. The Secured Party shall in any such sale make no representations or warranties with respect to the Collateral or any part thereof, and the Secured Party shall not be chargeable with any of the obligations or liabilities of the Grantor. The Grantor hereby agrees (i) that it will indemnify and hold the Secured Party harmless from and against any and all claims with respect to the Collateral asserted before the taking control of the relevant Collateral by the Secured Party pursuant to this Section 5(b), or arising out of any act of, or omission to act on the part of, any Person (other than the Secured Party) prior to such taking of actual possession or control by the Secured Party, or arising out of any act on the part of the Grantor or their respective agents before or after the commencement of such actual possession or control by the Secured Party; and (ii) the Secured Party shall have no liability or obligation to the Grantor arising out of any such claim except for acts of willful misconduct or gross negligence or not taken in good faith. In any action hereunder, the Secured Party shall be entitled to the appointment of a receiver, without notice, to take possession of all or any portion of the Collateral and to exercise such powers as the court shall confer upon the receiver. Notwithstanding the foregoing, upon the occurrence and during the continuation of an Event of Default, the Secured Party shall be entitled to apply, without prior notice to the Grantor, except as may be required by Applicable Law, any cash or cash items constituting Collateral in the possession of the Secured Party to payment of the Obligations then due and payable. (c) Notification to Account Debtors. Upon the occurrence and during the continuance of an Event of Default, the Secured Party may notify any Persons in any way liable on any Accounts to make remittances to the Secured Party of all sums due or to become due thereon and to collect and enforce payment of all Accounts directly from the Persons liable thereon, by legal proceedings or otherwise, and generally exercise all of the Grantor's rights and remedies with respect to collection thereof. (d) Application of Proceeds. The Grantor further agrees that the Secured Party may apply any proceeds from the disposition of any of the Collateral first towards payment of any costs, fees and expenses accrued but unpaid of the Secured Party included within the Obligations, second towards payment of interest on the Loan, and third towards payment of principal. (e) Power of Attorney. Upon the occurrence and during the continuance of an Event of Default (i) the Grantor does hereby irrevocably make, constitute and appoint the Secured Party or any of its officers or designees its true and lawful attorney-in-fact with full power in the name of the Secured Party or such other Person to endorse any notes, checks, drafts, money orders or other evidences of payment relating to the Collateral that may come into the possession of the Secured Party, and to do any and all other acts necessary or proper to carry out the intent of this Security Agreement and the grant of the security interests hereunder, and the Grantor hereby ratifies and confirms all acts that the Secured Party or its substitute shall properly do by virtue hereof and (ii) the Grantor hereby further irrevocably makes, constitutes and appoints the Secured Party or any of its officers or designees its true and lawful attorney-in-fact in the name of the Secured Party or its name (A) to enforce all of its rights under and pursuant to all agreements with respect to the Collateral, all for the sole benefit of the Secured Party, (B) to enter into and perform such agreements as may be necessary in order to carry out the terms, covenants and conditions of this Security Agreement that are required to be observed or performed by it, (C) to execute such other and further mortgages, pledges and assignments of the Collateral, and related instruments or agreements, as the Secured Party may reasonably require for the purpose of perfecting, protecting, maintaining or enforcing the security interests granted to the Secured Party and (D) to do any and all other things necessary or proper to carry out the intention of this Security Agreement and the grant of the security interests hereunder and the Grantor hereby ratifies and confirms in advance all that the C-5 Secured Party as such attorney-in-fact or its substitute shall properly do by virtue of this power of attorney. 6. Financing Statements, etc. The Grantor hereby authorizes the Secured Party to file financing statements and any amendments thereto or continuations thereof and any other appropriate security documents or instruments, and to give any notices reasonably necessary or desirable to perfect the Lien and security interests of the Secured Party in the Collateral. 7. Further Assurances. (a) The Grantor agrees that it will from time to time, on request of the Secured Party and at its own cost and expense: (i) duly and promptly execute and deliver, or cause to be duly executed and delivered, any and all further instruments as may be appropriate in the reasonable judgment of the Secured Party to carry out the provisions and purposes of this Security Agreement, including, without limitation, a copyright security agreement, a patent and trademark security agreement and account control agreements; (ii) duly and promptly execute and deliver, or cause to be executed and delivered, such further instruments as may be appropriate in the reasonable judgment of the Secured Party, to provide the Secured Party with a perfected Lien in the Collateral and any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement or other statement) for filing under the provisions of the Uniform Commercial Code of any jurisdiction and the rules and regulations thereunder, or any Applicable Law of the United States or any other jurisdiction which the Secured Party may deem reasonably necessary or advisable, and perform or cause to be performed such other ministerial acts which are necessary or advisable, from time to time, in order to grant and maintain in favor of the Secured Party the Lien and security interest in the Collateral contemplated hereunder; and (iii) promptly undertake to deliver or cause to be delivered to the Secured Party from time to time, such other documentation, consents, authorizations and approvals in form and substance reasonably satisfactory to the Secured Party, as the Secured Party shall deem reasonably necessary or advisable to perfect or maintain the Liens of the Secured Party. (b) The Grantor hereby agrees to pay any and all stamp, registration, recordation and similar taxes, fees or charges, reasonable fees and expenses of the Secured Party's counsel and of any agents therefor and to indemnify the Secured Party and its agents against any and all liabilities with respect to or resulting from any delay in the payment or omission to pay any such taxes, fees or charges, which may be payable or determined to be payable in connection with the execution, delivery, performance or enforcement of this Security Agreement and any other document or instrument executed in connection herewith or the perfection of any rights or security interests hereunder. 8. Notices. If any notification of intended disposition of any of the Collateral or of any other act by the Secured Party is required by law and a specific time period is not stated therein or herein, such notification given at least ten (10) days before such disposition or act shall be deemed reasonably and properly given. Notices and other communications provided for herein shall be in the manner and at the addresses set forth in, and otherwise in accordance with, Section 6.1 of the Credit Agreement. 9. Non-Waiver of Rights and Remedies. No delay or failure on the part of the Secured Party in the exercise of any right or remedy shall operate as a waiver thereof, no single or partial exercise by the Secured Party of any right or remedy shall preclude other or further exercises thereof or the exercise of any other right or remedy and no course of dealing between the parties shall operate as a waiver of any right or remedy of the Secured Party. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. C-6 10. Termination. The security interests granted hereunder shall terminate when all the Obligations have been fully and indefeasibly paid and performed. At such time and upon request by the Grantor, and at the sole expense of the Grantor, the Secured Party shall take all reasonable action and do all things reasonably necessary, including executing UCC termination statements, to terminate the security interest granted to it hereunder (without representation or warranty by the Secured Party of any nature whatsoever and wholly without recourse to the Secured Party). 11. Governing Law. This Security Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to contracts to be fully performed within the State of New York. 12. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE GRANTOR HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS SECURITY AGREEMENT OR THE SUBJECT MATTER HEREOF OR ANY OTHER CREDIT DOCUMENT, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE GRANTOR ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE SECURED PARTY THAT THE PROVISIONS OF THIS SECTION 12 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE SECURED PARTY HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS. THE SECURED PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GRANTOR TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY. 13. SERVICE OF PROCESS. THE GRANTOR HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS SECURITY AGREEMENT OR THE SUBJECT MATTER HEREOF BROUGHT BY THE SECURED PARTY OR ANY OF ITS SUCCESSORS OR ASSIGNS. THE GRANTOR, TO THE EXTENT PERMITTED BY APPLICABLE LAW, (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS SECURITY AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, AND (B) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY. THE GRANTOR HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN PURSUANT TO SECTION 8 HEREOF. THE GRANTOR AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE SECURED PARTY. FINAL JUDGMENT AGAINST A GRANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (A) BY SUIT, C-7 ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF THE GRANTOR THEREIN DESCRIBED OR (B) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT THE SECURED PARTY MAY AT ITS OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST ANY GRANTOR OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE THE GRANTOR OR SUCH ASSETS MAY BE FOUND. 14. Severability. This Security Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Security Agreement shall be prohibited by or invalidated under Applicable Law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Security Agreement and the parties hereto agree to negotiate in good faith a provision to replace the ineffective provision, such provision to be as similar in effect and intent to the ineffective provision as permissible. 15. Continuation and Reinstatement. This Security Agreement shall remain in full force and effect and continue to be effective in the event any petition is filed by or against any of the Grantor for liquidation or reorganization, or in the event any of the Grantor becomes insolvent or makes an assignment for the benefit of creditors or in the event a receiver or trustee is appointed for all or any significant part of a Grantor's assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to Applicable Law, rescinded or reduced in amount, or must otherwise be restored or returned by the Secured Party, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 16. Amendment. No amendment, modification or waiver of any provision of this Security Agreement or consent to any departure herefrom shall be effective, irrespective of any course of dealing, unless the same shall be in writing and signed by the Secured Party. 17. Successors and Assigns. All references herein to any of the parties to this Security Agreement shall be deemed to include the successors and assigns of such party; provided, however, that the Grantor may not assign any of their rights or obligations hereunder without the prior written consent of the Secured Party, and all covenants, promises and agreements by or on behalf of the Grantor which are contained herein shall inure to the benefit of the successors and assigns of the Secured Party. 18. Remedies Not Exclusive. The remedies conferred upon or reserved to the Secured Party in this Security Agreement are intended to be in addition to, and not in limitation of, any other remedy or remedies available to the Secured Party. Without limiting the generality of the foregoing, the Secured Party shall have all rights and remedies of a secured party under Article 9 of the UCC, the Uniform Commercial Code in effect in any jurisdiction or any other Applicable Law. 19. Counterparts. This Security Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall constitute an original for all purposes, but all such counterparts taken together shall constitute the same instrument. C-8 IN WITNESS WHEREOF, each of the Grantor and the Secured Party have caused this Security Agreement to be duly executed as of the day and year first above written. GRANTOR: TALKPOINT COMMUNICATIONS INC. By: ------------------------------ Name: Title: SECURED PARTY: MONEYLINE TELERATE HOLDINGS By: ------------------------------ Name: Title: C-9 EX-10 7 ex10-16.txt EXHIBIT 10.16 EXECUTION COPY SECURITY AGREEMENT SECURITY AGREEMENT dated as of August 13, 2003 (as amended, supplemented or otherwise modified, renewed or replaced from time to time, the "Security Agreement") between TALKPOINT COMMUNICATIONS INC. (formerly Video Network Communications, Inc.), a Delaware corporation (the "Grantor") and MONEYLINE TELERATE HOLDINGS, a Delaware corporation (the "Secured Party"). Introductory Statement Reference is hereby made to the Secured Credit Agreement, dated as of August 13, 2003, between TalkPoint Communications Inc., as borrower, and Moneyline Telerate Holdings, as lender (as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time, the "Credit Agreement"). To provide security to the Secured Party for the obligations of the Grantor under the Credit Agreement, the Grantor desires to grant to the Secured Party a security interest in the Collateral pursuant to the terms hereof. Accordingly, the parties hereto agree as follows: 1. Definitions. When used in this Security Agreement: "Account Debtor" means any Person who is obligated or indebted to a Grantor with respect to any Account. "Accounts" means all accounts, as defined in the UCC, now owned or hereafter acquired by the Grantor, including, without limitation, all of the Grantor's rights to payment for goods sold or leased or services performed by the Grantor, whether now in existence or arising from time to time hereafter, including without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (i) all security pledged, assigned, hypothecated or granted to or held by the Grantor to secure the forgoing, (ii) all guarantees, endorsements, and indemnifications on, or of, any of the foregoing, (iii) all powers of attorney for the execution of any indebtedness or security or other writing in connection therewith, (iv) all books, records, ledger cards and invoices relating thereto, (v) all evidences of filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (vi) all credit information, reports and memoranda relating thereto and (vii) all other writings in any way related to the foregoing. "Applicable Law" shall mean all provisions of statutes, rules, regulations and orders of the United States, any state thereof or municipality therein or of any foreign governmental body or of any regulatory agency applicable to the Person in question, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party. "Collateral" means each of the following types or items of personal property of the Grantor, whether now owned or hereafter acquired, wherever located: (i) all Accounts, (ii) all Intellectual Property, (iii) all Deposit Accounts, (iv) all monies now or at any time or times hereafter in the possession or under the control of the Grantor or the Secured Party, and (v) all products and Proceeds of the property described in clauses (i) through (iv) above. "Copyrights" means any United States or foreign copyrights now or hereafter owned by the Grantor, including any registrations of any Copyrights in the United States Copyright Office or the equivalent thereof in any foreign country and any application for a United States or foreign copyright registration now or hereafter made by the Grantor with the United States Copyright Office or the equivalent thereof in any foreign country and any licenses with respect to any of the foregoing. "Deposit Account" has the meaning given to such term under Article 9 of the UCC. "Event of Default" means the occurrence of an Event of Default (as defined in the Credit Agreement). "Governmental Authority" means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision. "Intellectual Property" means all Copyrights, Marks and Patents now owned or hereafter acquired by the Grantor, and all corporate or other business records, inventions, designs, blueprints, plans, trade names, trade secrets, goodwill, registrations, service marks, logos, licenses, franchises and customer lists. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind whatsoever (including, without limitation, any conditional sale or other title retention agreement, any lease in the nature of security, and the filing of, or agreement to give, any financing statement under the UCC or the Uniform Commercial Code or other Applicable Law of any jurisdiction). "Marks" means all right, title and interest of the Grantor now owned or hereafter acquired in and to any United States or foreign trademarks, service marks, and trade names, including any registration of any trademarks and service marks in the United States Patent and Trademark Office or the equivalent thereof in any foreign country, any application for a United States or foreign trademark now or hereafter made by the Grantor with the United States Patent and Trademark Office or the equivalent thereof in any foreign country and any trade dress including logos and/or designs used by the Grantor in the United States or any foreign country and any licenses with respect to any of the foregoing. "Obligations" means all indebtedness, liabilities and other obligations of the Grantor under the Credit Agreement and this Agreement, each whether now existing or hereafter arising, direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due, acquired outright, conditionally or as collateral security from another, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, and of all agreements, documents and instruments evidencing any of the foregoing or under which any of the foregoing may have been issued, created, assumed or guaranteed. The term "Obligations" includes, without limitation, the obligations to pay principal, breakage costs, interest (including, without limitation, interest accruing after the commencement of any bankruptcy, insolvency, reorganization, or similar proceedings with regard to the Grantor, whether or not determined to be an allowed claim in any such proceeding), charges, costs, expenses and fees including, without limitation, the disbursements and reasonable fees of counsel to the Secured Party and all renewals extensions, restructurings, refinancings or refundings thereof in a nature of a "workout" or otherwise. "Patents" means any United States or foreign patent to which the Grantor now or hereafter have title and any divisions or continuations thereof, as well as any application for a United 2 States or foreign patent now or hereafter made by the Grantor and any licenses with respect to any of the foregoing. "Person" means any natural person, corporation, division of a corporation, limited liability company, partnership, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof. "Proceeds" has the meaning given to such term under Article 9 of the UCC and shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty with respect to the Collateral, (ii) any or all payments made or due and payable to the Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral and (iii) any and all other amounts paid or payable from time to time under or in connection with the Collateral. "UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York. Terms not otherwise defined herein or in the Loan Agreement shall have, where appropriate, their respective definitions as set forth in the UCC. 2. Grant of Security Interest. As security for the payment and performance when due of the Obligations, the Grantor hereby grants to the Secured Party a security interest in, and Lien on, all of its right, title and interest in and to all of the Collateral. 3. Covenants of the Grantor. The Grantor hereby covenants and agrees with the Secured Party that: (a) The Grantor shall not change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name (other than the name "Video Network Communications Inc.") unless (i) it shall have given the Secured Party thirty (30) days' prior written notice of its intention to do so which clearly describes such new name and the jurisdictions in which such new name will be used and provides the Secured Party with any other information in connection therewith as the Secured Party may request and (ii) it shall have taken all actions requested by the Secured Party to maintain the security interest granted to the Secured Party under this Security Agreement fully perfected; (b) The Grantor shall not change its corporate structure or its domicile of incorporation by redomiciliation, redomestication or otherwise unless (i) it shall have given the Secured Party thirty (30) days' prior written notice of its intention to do so which clearly describes such change and identifies the new jurisdiction and provides the Secured Party with any other information in connection therewith as the Secured Party may request and (ii) it shall have taken all actions requested by the Secured Party to maintain the security interest granted to the Secured Party under this Security Agreement fully perfected; and (c) The Grantor shall not establish any new location for its chief executive office or the location of its books, records and other documents relating to or evidencing Accounts or Intellectual Property unless (i) the Grantor provides the Secured Party thirty (30) days prior written prior written notice of its intention to move to such new location, clearly describing such new location, and provides the Secured Party with any other information in connection therewith as the Secured Party may request and (ii) it shall have taken all actions requested by the Secured Party to maintain the security interest granted to the Secured Party under this Security Agreement fully perfected. 3 4. The Secured Party's Rights Exclusive of an Event of Default. The Grantor hereby agrees to permit representatives of the Secured Party, upon reasonable notice to the Grantor and during normal business hours, to access its records in connection with the Collateral at such reasonable times and as often as may be reasonably requested by the Secured Party. The Secured Party, from time to time and at its option, may take any other action which the Secured Party reasonably deems necessary for the maintenance or preservation of any of the Collateral or its interests therein. The Secured Party shall have the right to designate any officer, employee or attorney to execute, sign, endorse, assign, transfer or deliver in the name of the Grantor, or in its name, any documents or certificates necessary to evidence, perfect and realize upon the security interest granted herein. 5. The Secured Party's Rights and Remedies Upon an Event of Default. (a) Collections, etc. Upon the occurrence and during the continuance of an Event of Default, the Secured Party may, in its sole discretion, in its name, in the name of the Grantor or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or settlement deemed desirable with respect to the Collateral, but shall be under no obligation so to do, or the Secured Party may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, or release any of the Collateral, without thereby incurring responsibility to, or discharging or otherwise affecting any liability of the Grantor. The Secured Party will not be required to take any steps to preserve any rights against prior parties with rights in or to the Collateral. If the Grantor fails to make any payment or to take any action required hereunder with respect to the Collateral, the Secured Party may make such payments and take all such actions as the Secured Party reasonably deems necessary to protect the security interests of the Secured Party in the Collateral and/or the value thereof, and the Secured Party is hereby authorized (without limiting the general nature of the authority hereinabove conferred) to pay, purchase, contest or compromise any Liens which in the judgment of the Secured Party appears to be equal to, prior to or superior to the security interests of the Secured Party in the Collateral. (b) Possession, Sale of Collateral, etc. Upon the occurrence and during the continuance of an Event of Default, in addition to any rights and remedies the Secured Party may have under Applicable Law, the Secured Party shall have all the rights and remedies available to it under the UCC, whether or not the UCC applies to the Collateral. The Secured Party may take such measures as it may deem necessary or proper for the care or protection of the Secured Party's rights and remedies hereunder, including the right to sell or cause to be sold, whenever the Secured Party shall decide, in one or more sales or parcels, at such prices as the Secured Party may deem best, and for cash or on credit or for future delivery, without assumption of any credit risk, all or any portion of the Collateral, at any broker's board or at a public or private sale, without any demand of performance or notice of intention to sell or of the time or place of sale (except 10 days' written notice to the Grantor of the time and place of any such sale or sales and such other notices as may be required by Applicable Law and cannot be waived), and any Person may be the purchaser of all or any portion of the Collateral so sold and thereafter hold the same absolutely, free (to the fullest extent permitted by Applicable Law) from any claim or right of whatever kind, including any equity of redemption, of the Grantor, any such demand, notice, claim, right or equity being hereby expressly waived and released to the fullest extent permitted by Applicable Law. At any sale or sales made pursuant to this Section 5(b), the Secured Party may bid for or purchase, free (to the fullest extent permitted by Applicable Law) from any claim or right of whatever kind, including any equity of redemption, of the Grantor any such demand, notice, claim, right or equity being hereby expressly waived and released, any part of or all of the Collateral offered for sale, and may make any payment on account thereof by using any claim for moneys then due and payable to the Secured Party by the Grantor hereunder as a credit against the purchase price. The Secured Party shall in any such sale make no representations or warranties with respect to the Collateral or any part thereof, and the Secured Party shall not be chargeable with any of the obligations or liabilities of the Grantor. The Grantor hereby agrees (i) that it will indemnify and hold the Secured Party harmless from and against any and all claims 4 with respect to the Collateral asserted before the taking control of the relevant Collateral by the Secured Party pursuant to this Section 5(b), or arising out of any act of, or omission to act on the part of, any Person (other than the Secured Party) prior to such taking of actual possession or control by the Secured Party, or arising out of any act on the part of the Grantor or their respective agents before or after the commencement of such actual possession or control by the Secured Party; and (ii) the Secured Party shall have no liability or obligation to the Grantor arising out of any such claim except for acts of willful misconduct or gross negligence or not taken in good faith. In any action hereunder, the Secured Party shall be entitled to the appointment of a receiver, without notice, to take possession of all or any portion of the Collateral and to exercise such powers as the court shall confer upon the receiver. Notwithstanding the foregoing, upon the occurrence and during the continuation of an Event of Default, the Secured Party shall be entitled to apply, without prior notice to the Grantor, except as may be required by Applicable Law, any cash or cash items constituting Collateral in the possession of the Secured Party to payment of the Obligations then due and payable. (c) Notification to Account Debtors. Upon the occurrence and during the continuance of an Event of Default, the Secured Party may notify any Persons in any way liable on any Accounts to make remittances to the Secured Party of all sums due or to become due thereon and to collect and enforce payment of all Accounts directly from the Persons liable thereon, by legal proceedings or otherwise, and generally exercise all of the Grantor's rights and remedies with respect to collection thereof. (d) Application of Proceeds. The Grantor further agrees that the Secured Party may apply any proceeds from the disposition of any of the Collateral first towards payment of any costs, fees and expenses accrued but unpaid of the Secured Party included within the Obligations, second towards payment of interest on the Loan, and third towards payment of principal. (e) Power of Attorney. Upon the occurrence and during the continuance of an Event of Default (i) the Grantor does hereby irrevocably make, constitute and appoint the Secured Party or any of its officers or designees its true and lawful attorney-in-fact with full power in the name of the Secured Party or such other Person to endorse any notes, checks, drafts, money orders or other evidences of payment relating to the Collateral that may come into the possession of the Secured Party, and to do any and all other acts necessary or proper to carry out the intent of this Security Agreement and the grant of the security interests hereunder, and the Grantor hereby ratifies and confirms all acts that the Secured Party or its substitute shall properly do by virtue hereof and (ii) the Grantor hereby further irrevocably makes, constitutes and appoints the Secured Party or any of its officers or designees its true and lawful attorney-in-fact in the name of the Secured Party or its name (A) to enforce all of its rights under and pursuant to all agreements with respect to the Collateral, all for the sole benefit of the Secured Party, (B) to enter into and perform such agreements as may be necessary in order to carry out the terms, covenants and conditions of this Security Agreement that are required to be observed or performed by it, (C) to execute such other and further mortgages, pledges and assignments of the Collateral, and related instruments or agreements, as the Secured Party may reasonably require for the purpose of perfecting, protecting, maintaining or enforcing the security interests granted to the Secured Party and (D) to do any and all other things necessary or proper to carry out the intention of this Security Agreement and the grant of the security interests hereunder and the Grantor hereby ratifies and confirms in advance all that the Secured Party as such attorney-in-fact or its substitute shall properly do by virtue of this power of attorney. 6. Financing Statements, etc. The Grantor hereby authorizes the Secured Party to file financing statements and any amendments thereto or continuations thereof and any other appropriate security documents or instruments, and to give any notices reasonably necessary or desirable to perfect the Lien and security interests of the Secured Party in the Collateral. 5 7. Further Assurances. (a) The Grantor agrees that it will from time to time, on request of the Secured Party and at its own cost and expense: (i) duly and promptly execute and deliver, or cause to be duly executed and delivered, any and all further instruments as may be appropriate in the reasonable judgment of the Secured Party to carry out the provisions and purposes of this Security Agreement, including, without limitation, a copyright security agreement, a patent and trademark security agreement and account control agreements; (ii) duly and promptly execute and deliver, or cause to be executed and delivered, such further instruments as may be appropriate in the reasonable judgment of the Secured Party, to provide the Secured Party with a perfected Lien in the Collateral and any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement or other statement) for filing under the provisions of the Uniform Commercial Code of any jurisdiction and the rules and regulations thereunder, or any Applicable Law of the United States or any other jurisdiction which the Secured Party may deem reasonably necessary or advisable, and perform or cause to be performed such other ministerial acts which are necessary or advisable, from time to time, in order to grant and maintain in favor of the Secured Party the Lien and security interest in the Collateral contemplated hereunder; and (iii) promptly undertake to deliver or cause to be delivered to the Secured Party from time to time, such other documentation, consents, authorizations and approvals in form and substance reasonably satisfactory to the Secured Party, as the Secured Party shall deem reasonably necessary or advisable to perfect or maintain the Liens of the Secured Party. (b) The Grantor hereby agrees to pay any and all stamp, registration, recordation and similar taxes, fees or charges, reasonable fees and expenses of the Secured Party's counsel and of any agents therefor and to indemnify the Secured Party and its agents against any and all liabilities with respect to or resulting from any delay in the payment or omission to pay any such taxes, fees or charges, which may be payable or determined to be payable in connection with the execution, delivery, performance or enforcement of this Security Agreement and any other document or instrument executed in connection herewith or the perfection of any rights or security interests hereunder. 8. Notices. If any notification of intended disposition of any of the Collateral or of any other act by the Secured Party is required by law and a specific time period is not stated therein or herein, such notification given at least ten (10) days before such disposition or act shall be deemed reasonably and properly given. Notices and other communications provided for herein shall be in the manner and at the addresses set forth in, and otherwise in accordance with, Section 6.1 of the Credit Agreement. 9. Non-Waiver of Rights and Remedies. No delay or failure on the part of the Secured Party in the exercise of any right or remedy shall operate as a waiver thereof, no single or partial exercise by the Secured Party of any right or remedy shall preclude other or further exercises thereof or the exercise of any other right or remedy and no course of dealing between the parties shall operate as a waiver of any right or remedy of the Secured Party. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. 10. Termination. The security interests granted hereunder shall terminate when all the Obligations have been fully and indefeasibly paid and performed. At such time and upon request by the Grantor, and at the sole expense of the Grantor, the Secured Party shall take all reasonable action and do all things reasonably necessary, including executing UCC termination statements, to terminate the security interest granted to it hereunder (without representation or warranty by the Secured Party of any nature whatsoever and wholly without recourse to the Secured Party). 6 11. Governing Law. This Security Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to contracts to be fully performed within the State of New York. 12. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE GRANTOR HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS SECURITY AGREEMENT OR THE SUBJECT MATTER HEREOF OR ANY OTHER CREDIT DOCUMENT, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE GRANTOR ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE SECURED PARTY THAT THE PROVISIONS OF THIS SECTION 12 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE SECURED PARTY HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS. THE SECURED PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE GRANTOR TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY. 13. SERVICE OF PROCESS. THE GRANTOR HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS SECURITY AGREEMENT OR THE SUBJECT MATTER HEREOF BROUGHT BY THE SECURED PARTY OR ANY OF ITS SUCCESSORS OR ASSIGNS. THE GRANTOR, TO THE EXTENT PERMITTED BY APPLICABLE LAW, (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS SECURITY AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, AND (B) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY. THE GRANTOR HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN PURSUANT TO SECTION 8 HEREOF. THE GRANTOR AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE SECURED PARTY. FINAL JUDGMENT AGAINST A GRANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (A) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF THE GRANTOR THEREIN DESCRIBED OR (B) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT THE SECURED PARTY MAY AT ITS OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST ANY GRANTOR OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE THE GRANTOR OR SUCH ASSETS MAY BE FOUND. 7 14. Severability. This Security Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Security Agreement shall be prohibited by or invalidated under Applicable Law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Security Agreement and the parties hereto agree to negotiate in good faith a provision to replace the ineffective provision, such provision to be as similar in effect and intent to the ineffective provision as permissible. 15. Continuation and Reinstatement. This Security Agreement shall remain in full force and effect and continue to be effective in the event any petition is filed by or against any of the Grantor for liquidation or reorganization, or in the event any of the Grantor becomes insolvent or makes an assignment for the benefit of creditors or in the event a receiver or trustee is appointed for all or any significant part of a Grantor's assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to Applicable Law, rescinded or reduced in amount, or must otherwise be restored or returned by the Secured Party, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 16. Amendment. No amendment, modification or waiver of any provision of this Security Agreement or consent to any departure herefrom shall be effective, irrespective of any course of dealing, unless the same shall be in writing and signed by the Secured Party. 17. Successors and Assigns. All references herein to any of the parties to this Security Agreement shall be deemed to include the successors and assigns of such party; provided, however, that the Grantor may not assign any of their rights or obligations hereunder without the prior written consent of the Secured Party, and all covenants, promises and agreements by or on behalf of the Grantor which are contained herein shall inure to the benefit of the successors and assigns of the Secured Party. 18. Remedies Not Exclusive. The remedies conferred upon or reserved to the Secured Party in this Security Agreement are intended to be in addition to, and not in limitation of, any other remedy or remedies available to the Secured Party. Without limiting the generality of the foregoing, the Secured Party shall have all rights and remedies of a secured party under Article 9 of the UCC, the Uniform Commercial Code in effect in any jurisdiction or any other Applicable Law. 19. Counterparts. This Security Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall constitute an original for all purposes, but all such counterparts taken together shall constitute the same instrument. 8 IN WITNESS WHEREOF, each of the Grantor and the Secured Party have caused this Security Agreement to be duly executed as of the day and year first above written. GRANTOR: TALKPOINT COMMUNICATIONS INC. By: /s/ Nicholas Balletta ---------------------------------------- Name: Nicholas Balletta Title: Chief Executive Officer SECURED PARTY: MONEYLINE TELERATE HOLDINGS By: /s/ Lawrence K. Kinsella ---------------------------------------- Name: Lawrence K. Kinsella Title: Chief Financial Officer 9 EX-31 8 ex31-1.txt EXHIBIT 31.1 EXHIBIT 31.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Nicholas Balletta, certify that: 1. I have reviewed this quarterly report on Form 10-Q of TalkPoint Communication Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. August 14, 2003 /s/ Nicholas Balletta ------------------------------------ Name: Nicholas Balletta Title: Chief Executive Officer 1 EX-31 9 ex31-2.txt EXHIBIT 31.2 EXHIBIT 31.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Lawrence K. Kinsella, certify that: 1. I have reviewed this quarterly report on Form 10-Q of TalkPoint Communications Inc. (the "registrant"): 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have significant role in the registrant's internal control over financial reporting. August 14, 2003 /s/ Lawrence K. Kinsella --------------------------------------- Name: Lawrence K. Kinsella Title: Chief Financial Officer 1 EX-32 10 ex32-1.txt EXHIBIT 32.1 Exhibit 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. 'SS' 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of TalkPoint Communications Inc. (the "Company") hereby certifies, to such officer's knowledge, that: (i) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30,2003 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 14, 2003 /s/ Nicholas Balletta ----------------------------------- Nicholas Balletta Chief Executive Officer The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. 1 EX-32 11 ex32-2.txt EXHIBIT 32.2 Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. 'SS' 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of TalkPoint Communications Inc. ("the Company") hereby certifies, to such officer's knowledge, that: (i) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 14, 2003 /s/ Lawrence K. Kinsella ------------------------------- Lawrence K. Kinsella Chief Financial Officer The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. 1 -----END PRIVACY-ENHANCED MESSAGE-----