UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|x| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _____________
Commission File No. 0-57495
SAVILLE SYSTEMS PLC
(Exact Name of Registrant as Specified in its Charter)
Republic of Ireland
(State or other jurisdiction of incorporation or organization)
Not Applicable
(I.R.S. Employer Identification No.)
IDA Business Park, Dangan, Galway, Ireland
(Address of principal executive
offices, including zip code)
011-353-9-152-6611
(Registrant's telephone number, including area code from the United States)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section
12(g) of the Act:
American Depository Shares, Representing Ordinary Shares, $0.0025 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |x| No | |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. |x|
The aggregate market value of voting Common Stock held by non-affiliates of the
registrant was $1,814,679,772 based on the last reported sale price of the
Common Stock on the Nasdaq consolidated transaction reporting system on March
16, 1998.
Number of shares outstanding of the registrant's class of Common Stock as of
March 16, 1998 was 35,322,234.
Documents incorporated by reference:
Proxy Statement for the 1998 Annual Meeting of Shareholders - Part III
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Saville Systems PLC (together with its subsidiaries, "Saville" or the "Company")
provides innovative, convergent customer care and billing solutions to service
providers in the global telecommunications industry. Saville's customer care and
billing solution, Convergent Billing Platform ("CBP")(TM), is available on both
DB2/400 and Oracle/UNIX platforms, and is designed to enable service providers
to bring new service offerings to the market quickly, and to bill accurately and
reliably for multiple services on one integrated invoice.
Saville offers its customers a full range of professional services. Saville
assists each customer in defining their requirements and then designs, develops
and implements a cost-effective customer care and billing solution. The customer
can either license the solution from Saville or have the solution operated in a
Company operated service bureau. In 1997, the Company introduced facilities
management services for customers who contract with Saville to manage the
operation of the licensed solution on customer-owned hardware. The Company
usually serves as a billing partner for its customers by implementing new
systems as the customer enters new service categories or geographic markets, and
by further developing and enhancing the customer's installed systems in response
to changes in the customer's service offerings, marketing strategies and network
technology. During 1997, the Company established direct sales offices for
Western and Central Europe, Latin America and the Asia Pacific region and
created several strategic marketing alliances, including with Lucent
Technologies, Cap Gemini and Coopers & Lybrand.
Saville has developed, and continuously refines, its sophisticated base software
applications, which it customizes to meet the current and evolving requirements
of its customers. During 1997, the Company had two major platform releases of
CBP. The first was in July 1997 for CBP on the DB2/400 platform and the second
was the release of the Company's UNIX-based product, CBP for Oracle in December
1997.
The Company's solutions are designed to operate in a multi-service environment,
capable of billing local exchange, long distance, wireless (cellular, paging,
satellite and Personal Communications Services ("PCS")) and data
telecommunications services. These systems are designed to support the discrete
service offerings of large telecommunications service providers, or to serve as
and billing systems of emerging and medium-sized service providers. In addition,
during 1997 the Company executed its first contract to provide a convergent
billing system to a customer in the energy industry.
In February 1998, the Company signed a letter of intent to purchase the assets
of BHA Computer Pty Ltd., an Australian telecommunications software company, for
approximately $20 million. The transaction will be accomplished in part through
the payment of cash and in part through the issuance of Ordinary Shares. The
Company also purchased an interconnect telecommunications software product from
Cap Gemini Sverige A.B., a Swedish company ("Cap Gemini Sverige") for
approximately $2.0 million in cash and a commitment of at least $2.0 million in
royalties to be paid over the next two years.
The Company was incorporated in the Republic of Ireland in June 1993 as Saville
Systems Ireland Limited, a private limited company. On November 9, 1995, the
Company was re-registered as a public limited company and changed its name to
Saville Systems PLC. Unless the context otherwise requires, references to the
"Company" or "Saville" are to Saville Systems PLC and it's consolidated
subsidiaries. The Company's principal executive office is located at IDA
Business Park, Dangan, Galway, Ireland, and its telephone number from the United
States is (011) 353-9-152-6611. The address of the Company's North American
headquarters is 1 Van de Graaff Drive, Burlington, MA 01803, and its telephone
number is (781) 270-6500.
INDUSTRY BACKGROUND
The Telecommunications Industry
The Telecommunciations Act of 1996 (the "Telecommunications Act") has increased
competition in the U.S. telecommunications services market by allowing local,
long distance and cable companies to offer competing services, provided they
meet specified regulatory benchmarks. Many service providers are competing by
offering multiple services, including combinations of local exchange, long
distance, wireless (cellular, paging, satellite and PCS) and data communications
services, to customers in a single geographic market. New service-based
technologies have substantially increased the complexity and variety of
telecommunications services, as providers seek to compete and differentiate
themselves with enhanced telecommunications service offerings.
Internationally, privatization and telecommunications liberalization are
resulting in increased international competition and the emergence of newly
authorized telecommunications service providers. When new markets are opened to
competition, local and emerging service providers within these markets typically
compete for market share with more established carriers, initially by providing
access to service and then by providing competitive prices and introducing new
features and services. In addition, technological advances and global expansion
by multinational service providers are opening markets in less developed
countries to enhanced telecommunications services and increased competition.
These trends have created the need for sophisticated and flexible customer care
and billing solutions. Telecommunications service providers can compete only if
they are able to efficiently and accurately bill their customers for the varied
services and features they provide.
Telecommunications Customer Care and Billing
Telecommunications customer care and billing involves end to end customer
management including customer acquisition, service initiation and collecting and
pricing customer telecommunications usage in order to generate residential and
business telephone invoices for local, long distance and wireless service.
Customer care and billing systems typically interact with most aspects of the
telecommunications network and generally incorporate data collection, processing
and invoice generation. The billing function continues to evolve from primarily
a service support function to a revenue enhancement tool used to differentiate
services. Within the regulated local exchange market, customer care and billing
systems support features made available by new switching technologies such as
caller ID, call waiting and voice mail. The rapid pace of technological change
coupled with the emphasis on time to market for new services and features places
a significant burden on the telecommunications service provider to install and
to modify its customer care and billing system quickly to adapt to technological
advances. This has created significant demand for software that can perform a
variety of functions in a timely, accurate, cost-effective manner for a multiple
of services.
Established telecommunications service providers have existing billing systems,
many of which are maintained in-house. Frequently, however, these systems were
designed prior to deregulation to provide a single-service billing function.
These older systems generally are difficult to maintain and modify and often do
not meet the multiple and evolving needs of the telecommunications service
provider. Many of these service providers are therefore seeking to replace or
augment their in-house billing systems through outsourced customer care and
billing solutions.
Many emerging and telecommunications service providers lack customer care and
billing systems. One of the primary challenges that these newer service
providers face is to bring new services to market quickly. They typically focus
their capital resources on developing networking and switching technologies and
on creating marketable services rather than on creating customer care and
billing systems. These providers typically seek external customer care and
billing solutions because efficient, flexible customer care and billing
solutions are often too costly and time consuming to develop internally.
THE SAVILLE SOLUTION
Saville provides advanced customer care and billing solutions that address a
spectrum of billing and customer care functions, ranging from sales support and
order processing, through actual invoice calculation and production to
management reporting and marketing analysis. The Company's customer care and
billing systems are designed to enable telecommunications service providers to
meet their primary competitive objectives, including:
Reducing costs of development, implementation, operation and enhancement of
core systems
Reducing time to market for new services and features
Improving marketing and planning through better customer information
Enhancing customer retention by providing accurate and useful information
to customers
Saville has developed, and continuously refines, its sophisticated base software
applications, which it combines and customizes to meet the current and evolving
requirements of its customers. The Company develops close, ongoing relationships
with its customers to identify customer needs, and then designs and implements a
customized customer care and billing solution that can operate on a stand-alone
basis or interface with a provider's existing billing system. Saville typically
continues to work closely with its customers after initial implementation,
particularly as customers require additional customized customer care and
billing applications that enable them to offer new features and services, expand
into additional geographic markets or operate with new network technologies and
protocols. In addition, the Company provides ongoing support, maintenance and
training related to the customer's customer care and billing system. Saville
also offers its customers the option of retaining the Company to operate all or
part of the customized customer care and billing system at a Company-maintained
service bureau.
In order to meet the significant technological challenges in developing,
implementing, and supporting telecommunications customer care and billing
software, as of December 31, 1997, 893 of Saville's 1,024 employees were
involved primarily with these activities. The experience and expertise of
Saville's personnel enable Saville to provide customer care and billing
solutions for the varied requirements of the Company's global client base, which
includes local exchange, long distance and wireless service providers, as well
as providers of other specialty applications, such as data communications and
audio- and videoconferencing services. The Company has developed relationships
with customers ranging from small service providers to industry leaders such as
AT&T, Sprint, Ameritech and GTE. Based on its experience with these customers,
the Company believes that it is a leader in providing customer care and billing
software systems for medium-sized telecommunications service providers as well
as to large telecommunications service providers that utilize the Company's
software and services to support new market expansions or as an integral
component of a larger customer care and billing system.
STRATEGY
The Company's objective is to be a market leader in providing customer care and
billing solutions to the global telecommunications industry. The critical
elements of the Company's strategy include:
Develop and Maintain Long-Term Customer Relationships. Saville seeks to
establish and maintain long-term working relationships with its customers, which
enable the Company to gain an ongoing understanding of customer needs. The
implementation of features that meet these needs makes the Company's customer
care and billing soltuion a critical component of the customer's service
offering. This customer-driven focus is key to creating a loyal customer base
and providing product direction. Approximately 54% of the services revenue
recognized during the year ended December 31, 1997 was derived from services to
customers existing in the previous year compared to 69% in the year ended
December 31, 1996.
Focus on Growth-Oriented Telecommunications Service Providers and Leverage
Existing Multi-Market Experience. The Company's marketing emphasis is on two
types of telecommunications service providers. First, the Company focuses on
existing providers who are either replacing their older customer care and
billing systems, augmenting their existing systems to support new features and
services or adding new customer care and billing systems to enable them to
expand into new geographic markets. Second, the Company focuses on emerging
providers that offer new types of services such as PCS or that are entering
existing service markets newly opened to competition. These emerging providers
require sophisticated and flexible customer care and billing solutions like the
Company's that can be deployed on a timely and cost-effective basis. In
addition, as the telecommunications industry continues to evolve, with
individual providers offering more diverse services, these providers require
increasingly flexible customer care and billing systems. The Company believes
that its experience in providing customer care and billing services to multiple
markets within the telecommunications industry, including local exchange, long
distance and wireless, provides it with a significant competitive advantage. The
Company also believes that this experience will allow it to offer convergent
billing and customer care systems in the energy industry, having executed its
first contract with an energy company in 1997.
Expand Direct Sales and Develop Strategic Relationships. The Company continues
to invest significantly in the development of a direct sales force and sales
support organization to focus on new customer opportunities around the world.
During 1997, the Company established direct sales offices for Western and
Central Europe, Latin America and the Asia Pacific region. The Company is also
seeking to create additional strategic distribution and marketing alliances as a
means of expanding new business opportunities and entering new markets. During
1997, the Company entered into several strategic marketing alliances with Lucent
Technologies, Cap Gemini and Coopers & Lybrand.
Support Leading Hardware Platforms. Saville intends to continue to develop and
support software for the IBM AS/400 platform and also hardware platforms using
vendor variants of this operating system which are widely used throughout the
telecommunications industry and which the Company believes will continue to be
leading platforms for telecommunications billing systems. During 1997, the
Company had two major platform releases of CBP. The first was in July 1997 for
CBP on the DB2/400 platform and the second was the release of the Company's
UNIX-based product, CBP for Oracle, in December 1997.
Develop or Acquire Complementary Customer Applications. The Company's long-term
strategy includes the expansion of its product offerings to include software
applications complementary to the customer care and billing system. The Company
intends to use internal research and development and strategic acquisitions of
complementary technologies and skill sets to meet these goals. For example, the
Company continues to modify its software to expand the number of features
available in its products. The Company expects that this effort will continue to
reduce the amount of customization required to meet specific customer needs and
enable customers to initiate services more rapidly. In addition, in February
1998, the Company signed a letter of intent to purchase the assets of BHA
Computer Pty Ltd., an Australian company that develops and markets customer care
and billing systems. Also in February 1998, the Company purchased an
interconnect telecommunications software product from Cap Gemini Sverige. To the
extent the Company successfully expands its suite of software products, the
Company believes that it can take advantage of its established position in the
customer care and billing systems market and leverage its existing customer
accounts and distribution channels to promote the sale of new product offerings.
PRODUCTS AND SERVICES
The Company's primary business is the development and subsequent delivery and
support or operation of customer care and billing solutions to meet its
customers' specific needs. Due to the flexibility inherent in the Company's
software and the expertise of its software development personnel, the Company is
able to develop solutions that allow service providers to offer a wide variety
of services as well as collect, process and bill for multiple services on a
single invoice.
The Company's customer relationships typically begin with the Company providing,
primarily on a time and materials basis, system analysis and design,
customization and installation services. After the system is in operation, the
Company continues the relationship by providing upgrading, ongoing system
management and system enhancement to accommodate new telecommunications services
and technologies. The customer can choose either to operate the customer care
and billing system directly, resulting in a license fee to the Company, or to
retain the Company to perform all or a substantial part of the customer's
customer care and billing operations in a Company-maintained service bureau,
resulting in ongoing processing fees. The customer can also choose a facilities
management option, whereby Saville manages the operations of the customer care
and billing solution on customer-owned hardware, on Company premises.
Software Products
In order to satisfy the evolving challenges of the converging telecommunications
market, Saville has refined its CBP solution into six integrated modules that
offer integrated sales & marketing, customer care, service delivery, billing and
receivables management. The integrated modules support the key customer asset
management process from end to end. The Company's software makes use of table
and parameter driven software, which allow many key functions to be changed
without reprogramming the software code. In February 1998, the Company purchased
an interconnect telecommunications software product from Cap Gemini Sverige. The
interconnect product allows telecommunications service providers to perform
carrier-to-carrier billing and verification.
Services
Saville provides development and enhancement services to its customers primarily
on a time and materials basis. The Company typically begins its relationship
with a customer by assisting the customer to develop a business case definition
and needs analysis and then working with the customer to design, develop and
implement customizations to the core software to meet those specific customer
needs. The Company continues its relationship with the customer through ongoing
development, maintenance, training, systems analysis and further enhancements of
installed systems to accommodate new products and technologies.
Service Bureaus
Customers may elect to contract with the Company to operate their customer care
and billing solution in a Company-maintained service bureau. In a typical
service bureau arrangement, the Company develops the customer's customer care
and billing solution and installs it in one of the Company's technical data
centers. The customer then transmits its customer usage data to the Company, or
the Company obtains the information directly from the switch. In either case,
the Company processes and rates the information using the customer care and
billing system developed for the customer and then either (i) transmits the
processed and rated information to a third party or the customer for printing
and mailing or, less frequently, (ii) prints and mails the invoice.
Customers are charged a negotiated fee for utilizing the Company's service
bureaus. This fee is typically comprised of a charge per invoice produced and a
charge per call based on the amount and type of information contained in the
bill's call detail record.
Customer Support
The Company has technical support facilities in Canada and the Republic of
Ireland. The Company is expanding its customer service and support capabilities
to provide technical support to its customers on a 24-hour per day, 7-day per
week basis. The Company believes that it is essential to provide a high level of
reliable service to customers in order to solidify customer relationships and to
be the vendor of choice when new services or system expansions are sought by its
customers.
CUSTOMERS
The Company provides its software and services to a range of telecommunications
service providers, including those providing local exchange, long distance,
wireless, and audio- and video-conferencing services. The Company's typical
customers are medium-sized telecommunications service providers that require
complete customer care and billing systems and large service providers that
require the Company's software and services to support new market expansions or
as integral components of larger customer care and billing systems. In 1997, the
Company entered into its first agreement with a customer in the energy industry.
During 1997, AT&T and GTE Communications represented approximately 22.7% and
13.3%, respectively, of the Company's total revenues. This concentration of
customers can cause the Company's revenues and earnings to fluctuate from
quarter to quarter, based on these customers' requirements and the timing of
their orders. Although the Company believes it has good relationships with its
largest customers and has in the past received a substantial portion of its
revenues from repeat business with established customers, none of the Company's
major customers has a significant obligation to purchase additional products or
services. Therefore, there can be no assurance that any of the Company's major
customers will continue to purchase new systems, systems enhancements and
services in amounts similar to previous years. A significant decrease in
business from any of its major customers could have a material adverse effect on
the Company's results of operations and financial condition. Additionally, the
acquisition by a third party of one of the Company's major customers could
result in the loss of that customer and have a material adverse effect on the
Company's results of operations and financial condition.
COMPETITION
The market for telecommunications customer care and billing systems is highly
competitive, and the Company expects this competition to increase. The Company
competes with both independent providers of customer care and billing systems
and services and with the internal billing departments of telecommunications
service providers. The Company expects that the continued growth of the
telecommunications industry will encourage new competitors to enter the
telecommunications customer care and billing market in the future.
The Company believes that the principal competitive factors in its market
include responsiveness to client needs, timeliness of implementation, quality of
service, price, project management capability and technical expertise. The
Company also believes that its ability to compete depends in part on a number of
competitive factors outside its control, including the development by others of
software that is competitive with the Company's services and products, the price
at which competitors offer comparable services and products, the extent of
competitors' responsiveness to customer needs and the ability of the Company's
competitors to hire, retain and motivate key personnel.
In addition, the Company competes with a number of companies that have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition than the Company. As a result,
the Company's competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products than can the Company.
PROPRIETARY RIGHTS AND LICENSES
The Company does not currently hold any patents and relies upon a combination of
statutory and common law copyright, trademark and trade secret laws to establish
and maintain its proprietary rights to its products. The Company believes that,
because of the rapid pace of technological change in the telecommunication and
software industries, the legal protections for its products are less significant
factors in the Company's success than the knowledge, ability and experience of
the Company's employees, the frequency of product enhancements and the
timeliness and quality of support services provided by the Company.
The Company generally enters into invention and non-disclosure agreements with
its employees, consultants, clients and potential clients and limits access to,
and distribution of, its proprietary information. Use of the Company's software
products is usually restricted to specified locations and is subject to terms
and conditions prohibiting unauthorized reproduction or transfer of the software
products. The Company also seeks to protect the source code of its software as a
trade secret and as a copyrighted work.
RESEARCH AND DEVELOPMENT
Prior to 1994, Company software was developed for customer applications, and
related expenses were included as part of cost of services in those periods. In
1994, the Company commenced internally funded research and development efforts.
Research and development expenses were $1.6 million, $4.2 million and $10.1
million in 1995, 1996 and 1997, respectively. During 1997, the Company had two
major platform releases of CBP. The first was in July 1997 for CBP on the
DB2/400 platform and the second was the release of the Company's UNIX based
product, CBP for Oracle TM in December 1997. The Company intends to continue to
increase its investment in research and development efforts in the future.
The Company is currently reviewing its products and operations to ensure that
they will not be adversely affected by year 2000 software failures, which can
arise in time-sensitive software applications that utilize a field of two digits
to define the applicable year. The Company's released software products are
currently year 2000 ready, and therefore the Company does not believe that it
will need to undertake material research and development efforts in this regard.
EMPLOYEES
As of December 31, 1997, the Company employed a total of 1,024 employees
including 24 involved in sales and marketing and related services, 893 in
consulting, implementation and client support services and 107 in management,
finance, human resources and administration. None of the Company's employees is
represented by a labor union. The Company has experienced no work stoppages and
believes that its employee relations are good.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages and positions of the current
executive officers of the Company.
<TABLE>
Name Age Position
<S> <C> <C>
Bruce A. Saville 53 Chairman of the Board of Directors
John J. Boyle, III 51 President, Chief Executive Officer
and Director
Marc J. Venator 41 Chief Operating Officer
John J. Kiley 42 Senior Vice President, Global
Sales and Marketing
Michael A. Shulist 42 Senior Vice President, Global
Consulting Services
Christopher A. Hanson 39 Chief Financial Officer
Andrew Campbell 36 Senior Vice President Global
Products
</TABLE>
Mr.Saville founded the Company in 1982 and served as the Company's President
and Chief Executive Officer until becoming the Company's Chairman of the Board
of Directors in August 1994. Mr.Saville will resign as the Company's Chairman
effective April 1, 1998.
Mr. Boyle has served as the Company's President and Chief Executive Officer
since August 1994 and will also serve as the Company's Chairman of the Board of
Directors commencing April 1, 1998. From 1981 to August 1994, Mr. Boyle served
in various management positions with CSC Intelicom, a global supplier of
information technology, most recently as Senior Vice President of Work
Process/Network Practice.
Mr. Venator served as Saville's Chief Financial Officer from April 1995 until
becoming Chief Operating Officer in March 1997. From March 1992 to April 1995,
Mr. Venator was Corporate Controller for Systems Software Associates, Inc., a
provider of applications software to industrial businesses worldwide.
Mr. Kiley has served as Senior Vice President, Global Sales and Marketing of the
Company since October 1995. From January 1994 to September 1995, Mr. Kiley
served as President and Chief Operating Officer of Performance Software, Inc., a
provider of commercial UNIX server based automated software testing products and
services. From November 1992 to November 1993, Mr. Kiley served as Vice
President, Consulting of Oracle Corp., a provider of systems integration,
application development and consulting services.
Mr. Shulist has served as Senior Vice President, Global Consulting Services of
the Company since March 1995. From June 1991 to March 1995, Mr. Shulist served
in various positions with AT&T Canada Long Distance Services Corp., a long
distance provider in Canada, most recently as Vice President of Customer and
Network Maintenance.
Mr. Hanson has served as Saville's Chief Financial Officer since March 1997.
From November 1991 to March 1997, Mr. Hanson was in charge of tax and treasury
operations at System Software Associates, Inc. most recently serving as its
Treasurer.
Mr. Campbell has served as Senior Vice President of Research and Development of
the Company since January 1997. From February 1990 to December 1996, Mr.
Campbell served in various positions with BHA Computer, an Australian-based
developer of customer care and billing software, most recently as the General
Manager for the company's projects division.
Executive officers of the Company are elected by and serve at the discretion of
the Board of Directors. There are no family relationships among any of the
executive officers or directors of the Company.
ITEM 2. PROPERTIES
The Company leases space at its office locations: The Galway office is the
Company's corporate headquarters and is used for sales and marketing, software
development and customer support. The Burlington office is the North American
headquarters and is primarily used for sales and marketing, corporate
development and finance. The Edmonton and Toronto locations are primarily used
for software development, customer support and service bureau operations. The
Company and its subsidiaries also lease additional sales offices in Miami,
Florida, Bracknell, UK, Wiesbaden, Germany and Singapore, Singapore.
The Company believes that its facilities are adequate for its current needs and
that suitable additional space will be available as required.
<PAGE>
The following shows information concerning the Company's significant leased
facilities:
<TABLE>
Location Square Footage Lease Expiration
<S> <C> <C>
Galway, Ireland 4,000 April 1, 2014
Galway, Ireland 21,966 April 1, 2017
Burlington, Massachusetts 12,417 July 31, 2002
Edmonton, Alberta 80,115 June 30, 2001
Edmonton, Alberta 34,374 December 31, 2002
Toronto, Ontario 32,874 January 31, 2005
Toronto, Ontario 51,802 June 30, 2005
Toronto, Ontario 14,400 June 30, 2006
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held an Extraordinary General Meeting of Shareholders ( "the
Meeting") on October 23, 1997. At the Meeting, the following actions were taken
(the number of shares has been retroactively adjusted for the two-for-one share
dividend in November, 1997):
1. By a vote of 32,207,648 shares for, 4,746,924 shares against and
311,350 shares abstaining, the shareholders passed a special
resolution to, among other things:
(a) authorize an increase in the Company's authorized share
capital by US $87,500 divided into 35,000,000 Ordinary
Shares of US$0.0025 each;
(b) authorize an amendment to the Articles of Association of
the Company to document the increase in share capital
described above; and
(c) authorize the Directors of the Company to exercise all the
powers of the Company to allot, free of shareholders'
preemptive rights, securities of an aggregate nominal
amount of US $140,900.36 during the period expiring on
October 22, 2002.
2. By a vote of 36,913,054 shares for, 38,538 shares against and
314,330 shares abstaining, the shareholders passed a special
resolution to, among other things, authorize an amendment to the
Articles of Association of the Company to authorize the Directors
of the Company, without shareholder approval, to capitalize
reserves of the Company for the purpose of issuing paid up Ordinary
Shares of the Company to the holders of the Company's outstanding
Ordinary Shares as the Directors of the Company determine to be
appropriate.
3. By a vote of 25,340,004 shares for 11,614,368 shares against and
311,550 shares abstaining, the shareholders authorized an amendment
to the Company's 1995 Share Option Plan increasing from 5,780,000
to 10,000,000 the number of Ordinary Shares, nominal value US
$0.0025 per share, reserved for issuance under the Plan.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
MARKET INFORMATION AND HOLDERS
American Depositary Shares ("ADSs") representing the Ordinary Shares of the
Company have been traded on the Nasdaq National Market under the symbol "SAVLY"
since November 16, 1995. Each ADS represents one Ordinary Share of the Company.
Prior to November 16, 1995, neither the ADSs nor the Company's Ordinary Shares
were publicly traded. Neither the ADSs nor the Ordinary Shares of the Company
are traded on any market, foreign or domestic, other than the Nasdaq National
Market. The following table sets forth, for the periods indicated, the high and
low sales prices of the ADSs as reported on the Nasdaq National Market,
retroactively adjusted for a two-for-one stock split in the form of a 100% share
dividend in November 1997.
<TABLE>
1997
High Low
<S> <C> <C>
First Quarter $21.73 $14.06
Second Quarter 26.25 13.56
Third Quarter 37.88 25.63
Fourth Quarter 41.50 28.00
</TABLE>
<TABLE>
1996
High Low
<S> <C> <C>
First Quarter $ 9.50 $ 6.93
Second Quarter 17.37 9.31
Third Quarter 18.50 9.00
Fourth Quarter 23.93 16.50
</TABLE>
The depositary for the American Depositary Receipts ("ADRs") representing the
ADSs is the Bank of New York (the "Depositary"), 48 Wall Street, New York, New
York 10286. On March 2, 1998, the Company had approximately 15 holders of
Ordinary Shares of record. The Bank of New York, as Depositary, is the holder of
record of the Ordinary Shares evidenced by ADSs. On March 2, 1998, the closing
price of the Company's ADSs on the Nasdaq National Market was $45.50.
DIVIDENDS
On September 25, 1995, the Company paid a cash dividend of $3.0 million on its
Ordinary Shares, which it determined to pay primarily due to the incurrence of
certain tax liabilities by its majority shareholders as a result of their
ownership interests in the Company and the Company's classification at that time
as a "Controlled Foreign Corporation." Except for such payment, Saville has
never declared or paid any cash dividends on its Ordinary Shares. The Company
currently intends to retain all future earnings to finance future operations and
therefore does not anticipate paying any cash dividends in the foreseeable
future. Moreover, under the Companies Acts of the Republic of Ireland, dividends
may only be paid out of the profits of the Company legally available for
distribution.
TAXATION
The statements of United States, Irish and Canadian tax laws set out below are
based on the laws, regulations, administrative rulings and practices of the
United States Internal Revenue Service (the "IRS"), the Revenue Commissioners of
Ireland and Revenue Canada in force and as interpreted by the relevant taxation
authorities as of December 31, 1997 and are subject to any changes in United
States, Irish or Canadian law, or in the interpretation thereof by the relevant
taxation authorities, or in the double taxation conventions between the Republic
of Ireland and the United States (the "Conventions") (the Conventions were
ratified in 1997 and 1951) and between the Republic of Ireland and Canada,
occurring after such date.
The following is a general summary of certain Republic of Ireland and United
States federal income tax consequences of the purchase, ownership and
disposition of ADSs evidenced by ADRs to U.S. Holders. For purposes of this
discussion, a "U.S. Holder" means an individual citizen or resident of the
United States for United States federal income tax purposes, corporations, or
partnerships created or organized under the laws of the United States or any
state thereof or the District of Columbia, or estates or trusts which are
residents in the United States for United States federal income tax purposes, in
each case who (i) is not also resident of, or ordinarily resident in, the
Republic of Ireland for Irish tax purposes, (ii) is not engaged in trade or
business in the Republic of Ireland through a permanent establishment and (iii)
does not own, directly, indirectly or by attribution, 10% or more of the shares
of the Company (by vote or value). This summary is of a general nature only and
does not discuss all aspects of United States and Irish taxation that may be
relevant to a particular investor. The summary deals only with ADRs held as
capital assets and does not address special classes of purchasers, such as
dealers in securities, U.S. Holders whose functional currency is not the United
States dollar and certain U.S. Holders (including, but not limited to, insurance
companies, tax-exempt organizations, financial institutions and persons subject
to the alternative minimum tax) who may be subject to special rules not
discussed below. In particular the following summary does not address the
adverse tax treatment of U.S. Holders who own, directly, or by attribution, 10%
or more of the Company's outstanding voting stock in the event that the Company
were to be classified as a "Controlled Foreign Corporation" for United States
federal income tax purposes. Although the Company was not classified as a
Controlled Foreign Corporation at December 31, 1997, there can be no assurance
that it will not be a Controlled Foreign Corporation in the future.
OWNERS OF ADSs ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES, AS WELL AS WITH RESPECT
TO THE TAX CONSEQUENCES IN THE REPUBLIC OF IRELAND AND OTHER JURISDICTIONS, OF
THE OWNERSHIP OF ADSs AND THE ORDINARY SHARES REPRESENTED THEREBY APPLICABLE IN
THEIR PARTICULAR TAX SITUATIONS.
For purposes of the Conventions and the Internal Revenue Code of 1986, as
amended (the "Code"), U.S. Holders will be treated as the owners of the Ordinary
Shares represented by ADSs evidenced by ADRs.
TAXATION OF THE COMPANY
Republic of Ireland Taxation. For Irish tax purposes, the residence of a company
is in the jurisdiction where the central management and control of the company
is located. Companies which are resident in the Republic of Ireland are subject
to Irish corporation tax on their total profits (wherever arising and,
generally, whether or not remitted to the Republic of Ireland). The question of
residence is essentially one of fact. It is the present intention of the
Company's management to manage and control the Company from the Republic of
Ireland, so that the Company will be resident in the Republic of Ireland. The
standard rate of Irish corporation tax on both trading and non-trading income
during 1997 was 36.5%. In 1980 the Irish government enacted legislation, with
the approval of the European Union, enabling companies to pay a reduced 10% rate
of tax on profits from the manufacture of goods in the Republic of Ireland and
certain other activities deemed to be the manufacture of goods. Current
legislation provides that the reduced rate will be available until 2010. Certain
activities of the Company in the Republic of Ireland currently qualify for the
10% rate. To qualify for the 10% tax rate, the Company must satisfy certain
conditions, including rendering computer services in the Republic of Ireland.
The Irish Minister of Finance announced in December 1997 that the present
trading income Irish tax rate will be reduced to 32% as of January 1, 1998 and
will be reduced gradually to a tax rate of 12.5% on trading income for taxation
years ending after 2005. Under the announced plan, the tax rate on manufacturing
income would remain at 10% until the tax relief program is due to terminate in
2010, at which time the tax rate would increase to be equal to the standard tax
rate of 12.5%. Although the Company believes that it currently satisfies these
conditions, there can be no assurance that the Company will continue to do so.
If the Company could no longer qualify for this 10% tax rate or if the tax laws
were rescinded or changed, the Company's net income could be materially
adversely affected.
United States Taxation. Under the Convention relating to income taxation (the
"Income Tax Convention"), the Company will generally not be subject to United
States federal income tax unless it engages in a trade or business in the United
States through a permanent establishment. The Company currently operates in the
United States through Saville Systems, Inc. ("Saville U.S."), its subsidiary.
The Company intends to conduct its business activities in a manner that will not
result in its being considered to be engaged in a trade or business or to have a
permanent establishment in the United States, even though Saville U.S. is a
United States taxpayer. Dividends paid by Saville U.S. to the Company will
generally be subject to United States withholding tax at the rate of 5%, which
tax should generally be creditable by the Company against Irish corporation tax.
Saville U.S. is currently subject to United States federal and state income
taxation at a rate of approximately 41%.
Canadian Taxation. The Company carries on business in Canada through Saville
Systems Canada,Ltd. ("Saville Canada"), its subsidiary. Saville Canada is
currently subject to Canadian federal and provincial taxation at a rate of
approximately 45%. Entities other than Saville Canada are subject to Canadian
taxation only with respect to income derived by them from Canada in the form of
royalties, license fees, interest, dividends and similar payments, from the
disposition of "taxable Canadian property" (as defined in the Income Tax Act
(Canada)) or from business activities carried on through permanent
establishments in Canada as determined under tax treaties entered into by Canada
with the Republic of Ireland and the United States. Dividends paid by Saville
Canada to the Company will generally be subject to Canadian withholding tax at a
rate of 15%, which tax should generally be creditable against Irish corporation
tax.
TAXATION OF DIVIDENDS
Republic of Ireland Taxation. The Company does not expect to pay cash dividends
for the foreseeable future. Persons who are neither resident nor ordinarily
resident in the Republic of Ireland do not have an Irish income tax liability on
dividends received from Irish resident companies. Although a net Irish income
tax is imposed, the income tax liability of each such person is restricted to
the amount of the Tax Credit attaching to the dividend and, as the Tax Credit is
allowed against the restricted liability, the Irish income tax liability is
fully offset by the Tax Credit. There is no Irish withholding tax on dividends
paid by an Irish resident company.
United States Taxation. For United States federal income tax purposes, the gross
amount (i.e., including the amount of Tax Credit) of any dividend paid (to the
extent of the current or accumulated earnings and profits of the Company) will
be included in gross income and treated as foreign source dividend income in the
year the shareholder becomes entitled to such dividend. The dividend will not be
eligible for the dividends-received deduction allowed to United States
corporations. The amount includable in income will be the United States dollar
value of the payment on the date of payment regardless of whether the payment is
in fact converted into United States dollars. Generally, gain or loss (if any)
resulting from currency fluctuations during the period from the date any
dividend is paid to the date such payment is converted into United States
dollars will be treated as ordinary income or loss. The IRS has ruled privately
that a U.S. Holder will be eligible for a United States foreign tax credit under
Article XIII of the Income Tax Convention for the Irish tax imposed on a
dividend paid by an Irish company. The amount of the allowable foreign tax
credit will not exceed the amount of the Irish Tax Credit described above.
Although private letter rulings are not binding authority and are directed only
to the taxpayer who requests them, they are considered persuasive in determining
the position of the IRS. If the U.S. Holder is a United States partnership,
trust or estate, the foreign tax credit will be available only to the extent
that the income derived by such partnership, trust or estate is subject to
United States tax as the income of a resident either in its hands or in the
hands of its partners or beneficiaries, as the case may be.
TAXATION OF CAPITAL GAINS
A U.S. Holder is not subject to Irish capital gains tax on the disposal of ADSs
quoted on the Nasdaq National Market. It is the intention of the Company's
management to continue the Company's quotation on the Nasdaq National Market.
Subject to the discussion below under the heading "Passive Foreign Investment
Company Considerations," a U.S. Holder will be liable for United States federal
income tax on such gains to the same extent as on any other gains from sales or
dispositions of shares. A U.S. Holder that is liable for both Irish and U.S. tax
on a gain on the disposal of the ADSs will generally be entitled, subject to
certain limitations and pursuant to the Income Tax Convention, to credit the
amount of Irish capital gains or corporation tax, as the case may be, paid in
respect of such gain against such U.S. Holder's United States federal income tax
liability. Such gain is, however, likely to be considered to be from sources
within the United States, which may effectively limit the amount of foreign tax
credit allowed to the U.S. Holder.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
The Company will be classified as a passive foreign investment company
("PFIC") for United States federal income tax purposes if either (i) 75% or
more of its gross income is passive income or (ii) on average for the
taxable year, 50% or more of its assets by value produce or are held for
the production of passive income. Based on an analysis of its income and
assets during 1997, the Company believes that it is not a PFIC. While there
can be no assurance, the Company expects, based on projections of its
income and assets and the manner in which the Company intends to manage its
business, that it will not be a PFIC. The Company will continue to monitor
its status and will, promptly following the end of each taxable year,
notify shareholders if it believes that it is properly classified as a PFIC
for that taxable year.
U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, the amount of dividends paid to U.S. Holders of ADSs, the name and
address of the recipient and the amount, if any, of tax withheld must be
reported annually to the IRS. A similar report is sent to the U.S. Holder.
Backup withholding tax at the rate of 31% will apply to certain payments made to
U.S. Holders who fail to furnish certain identifying information under the
United States information reporting rules. Amounts withheld from payments will
be allowed as a credit against such U.S. Holders' United States federal income
tax liability.
IRISH CAPITAL ACQUISITIONS TAX
Irish capital acquisitions tax ("CAT") applies to gifts and inheritances (i)
where the person making the gift or inheritance is domiciled in the Republic of
Ireland at the date of the gift or inheritance or (ii) to the extent that the
property of which the gift or inheritance consists is situated in the Republic
of Ireland at the date of the gift or inheritance. The person by whom CAT is
primarily payable is the person who receives the gift or inheritance. Persons
who are secondarily liable include the donor, an agent, personal representative,
trustee or other person in whose care the property constituting the gift or
inheritance or the income therefrom is placed. All taxable gifts and
inheritances received by an individual since June 2, 1982 are aggregated and
only the excess over a certain tax-free threshold is taxed. The tax-free
threshold is dependent on the relationship between the deceased/donor and
successor/donee and the aggregation of all previous gifts and inheritances. The
tax-free threshold amounts currently range from IR(pound) 12,560 (approximately
$17,860 at December 31, 1997) in the case of persons who are not related to one
another to IR(pound) 25,120 (approximately $35,721 at December 31, 1997) in the
case of gifts and inheritances received from a brother, sister or from a brother
or sister of a parent or from a grandparent to IR(pound) 188,400 (approximately
$267,905 at December 31, 1997) in the case of gifts and inheritances received
from a parent. Gifts and inheritances passing between spouses are exempt from
CAT. CAT is charged at progressive rates ranging in the case of gifts from 15%
to 30% and in the case of inheritances from 20% to 40%. Although ADSs may be
held by persons who are neither domiciled nor resident in the Republic of
Ireland, the underlying Ordinary Shares are deemed to be situated in the
Republic of Ireland because the Company is required to maintain its Ordinary
Share register in the Republic of Ireland. Accordingly, ADSs may be subject to
CAT notwithstanding the fact that the holder may be domiciled and/or resident
outside of the Republic of Ireland. The Convention between the United States and
the Republic of Ireland relating to estate taxes generally provides for CAT paid
on inheritances in the Republic of Ireland to be credited against tax payable in
the United States and for tax paid in the United States to be credited against
tax payable in the Republic of Ireland, based on priority rules set forth in the
Convention, in a case where an ADS is subject to both Irish CAT with respect to
inheritance and U.S. federal estate tax. The Convention does not apply to gifts.
In addition to gift and inheritance taxes, a probate tax of 2% applies to the
value of all assets passing under the will or intestacy of an Irish-domiciled
person other than to the spouse of the deceased. Where the deceased was not
domiciled in the Republic of Ireland, only assets situated in Ireland are liable
for this tax.
UNITED STATES GIFT AND ESTATE TAX
An individual U.S. Holder will be subject to United States gift and estate taxes
with respect to the ADRs in the same manner and to the same extent as with
respect to other types of personal property.
IRISH STAMP DUTY
Irish stamp duty, which is tax on certain documents, is payable on all transfers
of Ordinary Shares in companies incorporated in the Republic of Ireland wherever
the instrument of transfer may be executed. In the case of a sale, stamp duty
will be charged at the rate of IR(pound)1.00 for every IR(pound)100 (or part
thereof) of the amount of value of the consideration (i.e., purchase price).
Where the consideration for the sale is expressed in a currency other than Irish
pounds, the duty will be charged on the Irish pound equivalent calculated at the
rate of exchange prevailing on the date of the transfer. In the case of a
transfer by way of gift (subject to certain exceptions) or for a consideration
less than the market value of the shares transferred, stamp duty will be charged
at the above rate on such market value. A transfer to the Depositary or
custodian of Ordinary Shares for deposit under the Deposit Agreement in return
for ADRs will be similarly chargeable with stamp duty as will a transfer of
Ordinary Shares from the Depositary or the custodian upon surrender of an ADR
for the purpose of the withdrawal of the underlying Ordinary Shares in
accordance with the terms of the Deposit Agreement, unless, in either case, the
transfer does not relate to a sale or contemplated sale or any other change in
the beneficial ownership of such Ordinary Shares, in which case the transfer
will be chargeable with nominal duty of IR(pound)10.
Transfers of ADRs are exempt from Irish stamp duty as long as the ADSs are
quoted on the Nasdaq National Market or any recognized stock exchange in the
United States.
The person accountable for payment of stamp duty is the transferee or, in the
case of a transfer by way of gift or for a consideration less than the market
value, both parties to the transfer. Stamp duty is normally payable within 30
days after the date of execution of the transfer. Late or inadequate payment of
stamp duty will result in liability to interest, penalties and fines.
IRISH EXCHANGE CONTROL REGULATIONS
Irish exchange control regulations ceased to apply from and after December 31,
1992. Except as indicated below, there are no restrictions on non-residents of
the Republic of Ireland dealing in domestic securities, which includes shares or
depositary receipts of Irish companies such as the Company, and dividends and
redemption proceeds are freely transferable to non-resident holders of such
securities.
The Financial Transfers Act, 1992 gives power to the Minister for Finance of the
Republic of Ireland to make provision for the restriction of financial transfers
between the Republic of Ireland and other countries. Financial transfers are
broadly defined and include all transfers, which would be movements of capital
or payments within the meaning of the treaties governing the European
Communities. The acquisition or disposal of American Depositary Receipts
representing shares issued by an Irish incorporated company and associated
payments may fall within this definition. In addition, dividend, redemption and
liquidation payments in respect of shares in an Irish incorporated company would
fall within this definition. Currently, orders under this Act prohibit any
financial transfer to or by the order of or on behalf of residents of Iraq or
Libya, unless permission for the transfer has been given by the Central Bank of
Ireland.
The Company does not anticipate that orders under the Financial Transfers Act,
1992 will have a material effect on its business.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is attached as Appendix A.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is attached as Appendix B.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is attached as Appendix C.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial disclosure matters.
PART III
ITEMS 10-13.
The information required for Part III in this Annual Report on Form 10-K is
incorporated by reference from the Company's definitive proxy statement for the
Company's 1998 Annual General Meeting of Shareholders. Such information is
contained in the sections of such proxy statement captioned "Share Ownership of
Certain Beneficial Owners and Management," "Election of Directors," "Board and
Committee Meetings," "Determination of Ordinary Remuneration of Directors,"
"Executive Compensation" and "Compliance with Section 16(a) of the Exchange
Act." Information regarding executive officers of the Company is also furnished
in Part I of this Annual Report on Form 10-K under the heading "Executive
Officers of the Registrant."
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) The following documents are incorporated by reference or included as part
of this Annual Report on Form 10-K.
1. The following financial statements (and related notes) of the Company
filed as Appendix C hereto
Report of Independent Auditors on Financial
Statements.
Consolidated Balance Sheets at December 31, 1996
and 1997
Consolidated Statements of Income for the
Years Ended December 31, 1995, 1996 and 1997
Consolidated Statements of Changes in
Shareholders' Equity for the Years Ended
December 31, 1995, 1996 and 1997
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1995, 1996 and 1997
Notes to the Consolidated Financial Statements
2. Except for the schedules listed below, all schedules are omitted as the
information required is inapplicable or the information is presented in
the consolidated financial statements or the related notes.
Schedule II - Valuation and Qualifying Accounts
3. The Exhibits listed in the Exhibit Index immediately preceding the
Exhibits are filed as a part of this Annual Report on Form 10-K.
(b) No Current Reports on Form 8-K were filed by the Company during the last
quarter of the period covered by this report.
The following trademarks of the Company are mentioned in this Annual Report on
Form 10-K: "Saville Systems" and "CBP"
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 23rd day of
March, 1998.
SAVILLE SYSTEMS PLC
By: /s/ John J. Boyle, III
John J. Boyle, III, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ John J. Boyle, III President, Chief March 23, 1998
John J. Boyle, III Executive Officer and Director
(Principal Executive Officer)
/s/ Christopher A. Hanson Chief Financial Officer March 23, 1998
Christopher A. Hanson (Principal Financial and
Accounting Officer)
/s/ Bruce A. Saville Chairman of the Board March 23, 1998
Bruce A. Saville of Directors
/s/ John A. Blanchard, III Director March 23, 1998
John A. Blanchard, III
/s/ Brian E. Boyle Director March 23, 1998
Brian E. Boyle
/s/ William F. Cunningham Director March 23, 1998
William F. Cunningham
/s/ Richard A. Licursi Director March 23, 1998
Richard A. Licursi
/s/ Fergus G. McGovern Director March 23, 1998
Fergus G. McGovern
/s/ David P. Mixer Director March 23, 1998
David P. Mixer
/s/ James B. Murray, Jr. Director March 23, 1998
James B. Murray, Jr.
/s/ John W. Sidgmore Director March 23, 1998
John W. Sidgmore
<PAGE>
<TABLE>
SAVILLE SYSTEMS PLC
SCHEDULE II (VALUATION AND QUALIFYING ACCOUNTS)
Col. A Col. B Col. C Col. D Col. E
- -------------------- ---------------- ------------------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Additions Deductions
Balance at Charged to
beginning of Charged costs other Balance at end
Description period & expenses accounts of period
- -------------------- ---------------- ---------------- ------------- ---------------- -----------------
$ $ $
Allowance for
doubtful accounts
December 31, 1997 756 1,010 (79) 1,687
December 31, 1996 370 386 756
December 31, 1995 nil 370 370
</TABLE>
<PAGE>
Appendix A
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands of US dollars, except per share data)
<TABLE>
Year ended December 31 1997 1996 1995 1994 1993
- --------------------------------------------- ------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Total revenues $107,045 $53,920 $30,296 $20,073 $9,309
Net income 23,937 11,569 6,382 5,357 13
Diluted earnings per share 0.61 0.31 0.20 0.17 0.00
</TABLE>
<TABLE>
At December 31 1997 1996 1995 1994 1993
- --------------------------------------------- ------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Total assets $105,375 $56,489 $36,031 $9,857 $3,207
Long-term debt, excluding current portion 336 - 44 689 -
</TABLE>
<PAGE>
Appendix B
SAVILLE SYSTEMS PLC
Management's Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
Saville is a leading provider of customer care and billing solutions for service
providers in the telecommunications market. The Company offers an innovative
convergent billing product called Saville CBP(TM) that operates on DB2/400 and
Oracle/UNIX platforms. The Oracle/UNIX based platform of this software was
introduced to the market in December 1997. Saville offers its customers a full
range of professional services. Saville assists a customer in analyzing their
requirements and then designs, develops and implements a customer care and
billing solution. The customer can either license the solution from Saville or
the solution can be operated on a Company operated service bureau. Saville also
recently introduced facilities management services for customers who contract
with Saville to manage the operation of the customized billing software on
customer owned hardware. Saville assists its customers in addressing their
changing business needs through future enhancements and developments to their
customer care and billing solutions.
The Company's strategy is to target growth-oriented telecommunications and
energy service providers, leverage its multi-market experience and establish and
maintain long-term relationships with its customers. The successful
implementation of the Company's strategy has resulted in revenue growth over the
preceding year of 50.9%, 78.0% and 98.5% in 1995, 1996 and 1997, respectively.
The Company has been strategically expanding its direct sales force over the
past three years, which has successfully resulted in dramatic revenue growth and
expansion of its customer base. During 1997, the Company initiated 13 new
customer associations. In 1997, AT&T and GTE Communications represented
approximately 22.7% and 13.3%, respectively, of total revenue.
The Company derives revenues from services and license fees. Services revenue is
comprised of two major components: (1) consulting services and, to a lesser
extent, (2) service bureau operations. Consulting services consist primarily of
development and installation of new systems, enhancements to existing installed
systems, software maintenance and customer training. Services revenue is
recognized as the services are provided, primarily on a time and materials
basis. Service bureau revenue is earned when a customer contracts with the
Company to operate a customer designed billing system on the Company's premises.
Services revenue accounted for 82.8%, 82.5% and 79.3% of total revenues for
1995, 1996 and 1997, respectively. License fees comprise the remainder of the
Company's revenues and are recognized at the time of delivery of the product to
the customer, provided that the Company has no significant related obligations
or collection uncertainties remaining. Where there are significant obligations
that relate to the development and enhancement of the software installed,
license fees are recorded over the expected term of the initial customization
period.
Cost of services is comprised primarily of the salaries and related benefits of
software development, technical, service bureau and client service personnel. It
also includes operating costs of computer equipment, training and travel
expenses.
Cost of license fees consists of the commission expense on new license fees
earned by the Company and, to a lesser extent, royalty expense for use by the
Company of software that is incorporated into the Company's base software.
Sales and marketing expenses consist of the salaries, sales commissions and
benefits of those employees involved in this function as well as the related
travel, marketing and promotional expenses.
Research and development expenses are comprised of the salaries and related
benefits of the employees involved in product software development, computer,
travel and related expenses.
General and administrative expenses consist mainly of the salaries and related
benefits of management and administrative personnel and general office
administration expenses (rent and occupancy, telephone and other office supply
costs) of the Company. It also includes recruitment expenses, professional fees,
depreciation, and provision for doubtful collections.
The Company earns a significant portion of its taxable income in the Republic of
Ireland of which the "manufacturing income" qualifies for a reduced tax rate of
10% which is substantially lower than tax rates in the United States and Canada.
The Company anticipates that it will continue to benefit from this tax
treatment, although the extent of the benefit could vary from period to period,
and there can be no assurance that the Company's tax situation will not change.
The Irish Minister of Finance announced in December 1997 that the present
standard Irish tax rate will be reduced to 32% as of January 1, 1998 and will be
reduced gradually to a tax rate of 12.5% for taxation years ending after 2005.
Under the announced plan, the tax rate on manufacturing income would remain at
10% until the tax relief program is due to terminate in 2010, at which time the
tax rate would increase to be equal to the standard tax rate of 12.5%. If the
Company should no longer qualify for this lower tax rate or if tax laws were
rescinded or changed, the Company's net income would be materially adversely
affected
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenue represented by the items reported in the Company's Consolidated
Statements of Income.
<TABLE>
Percentage of Total Revenue
Year Ended December 31,
1997 1996 1995
- ------------------------------------- ---------- -------------- ------------
<S> <C> <C> <C>
Revenue:
Services 79.3% 82.5% 82.8%
License fees 20.7% 17.5% 17.2%
- ------------------------------------- ---------- -------------- ------------
100.0% 100.0% 100.0%
- ------------------------------------- ---------- -------------- ------------
Expenses:
Cost of services 37.0% 40.9% 40.3%
Cost of license fees 0.5% 0.6% 0.2%
Sales and marketing 5.9% 6.3% 5.0%
Research and development 9.5% 7.7% 5.3%
General and administrative 19.1% 19.9% 22.4%
- ------------------------------------- ---------- -------------- ------------
72.0% 75.4% 73.2%
- ------------------------------------- ---------- -------------- ------------
Income from operations 28.0% 24.6% 26.8%
Other income, net 2.0% 2.8% 0.7%
- ------------------------------------- ---------- -------------- ------------
Income before income taxes 30.0% 27.4% 27.5%
Provision for income taxes 7.5% 5.7% 6.2%
- ------------------------------------- ---------- -------------- ------------
Income before minority interest 22.5% 21.7% 21.3%
Minority interest share in 0.2% 0.2% 0.2%
subsidiaries' net income
- ------------------------------------- ---------- -------------- ------------
Net income 22.3% 21.5% 21.1%
- ------------------------------------- ---------- -------------- ------------
</TABLE>
YEARS ENDED DECEMBER 31, 1996 AND 1997
Revenue. Total revenue increased 98.5% from $53.9 million in 1996
to $107.0 million in 1997 due to overall increases in services revenue and
license fees, as discussed below.
Services. Services revenue increased 90.8% from $44.5 million in 1996
to $84.9 million in 1997 due to expansion of the Company's customer base and
increases in projects for existing customers. Consulting services increased
97.8% from 1996 to 1997, and service bureau revenue increased 25.1% over the
same period. The increase in services revenue in 1997 was primarily due to the
increase in consulting and implementation services provided to new customers.
Approximately 54% of the services revenue reported during the year ended
December 31, 1997 was derived from services to customers existing in the
previous year compared to 69% in the year ended December 31, 1996.
License Fees. License fees revenue increased 135.0% from $9.4 million
in 1996 to $22.2 million in 1997 due primarily to additional license fees
arrangements for CBP that were negotiated during 1997. The Company introduced
the concept of convergent customer care and billing products in 1996 and the
market acceptance of this concept created opportunities for the Company in 1997.
Cost of Services. Cost of services expense increased $17.5 million from
$22.1 million in 1996 to $39.6 million in 1997 but decreased as a percentage of
services revenue from 49.6% in 1996 to 46.7% in 1997. To support the growth of
the Company's business, increased expenditures were required in 1997 for
additional personnel and hardware infrastructure. The Company expects that the
costs related to attracting and retaining qualified personnel will continue to
increase as the market demands for those skilled employees increases. As the
Company continues to expand, it expects the costs of services to increase
accordingly.
Cost of License Fees. Cost of license fees expense increased 71.8% from
$337,000 in 1996 to $580,000 in 1997 due to an increase in commission expenses
resulting from the increase in the license fees earned by the Company.
Sales and Marketing. Sales and marketing expenses increased 85.4% from
$3.4 million in 1996 to $6.3 million in 1997 but decreased as a percentage of
total revenues from 6.3% in 1996 to 5.9% in 1997. The increase in sales and
marketing expense in 1997 resulted from the expansion of the North American
sales force and the associated expansion of infrastructure. In addition, the
Company established new sales offices in 1997 to strengthen its sales presence
in Europe, Latin America and Asia Pacific and created new alliances to further
expand the Company's market coverage in those areas. Sales and marketing
expenses are expected to increase in absolute dollars during 1998 with the
anticipated establishment of new sales offices and the continued focus of the
North American marketing efforts, but are expected to remain at similar levels
to 1997 as a percentage of total revenues.
Research and Development. Research and development expenses increased
143.3% from $4.2 million in 1996 to $10.1 million in 1997 and increased as a
percentage of revenue from 7.7% in 1996 to 9.5% in 1997. This increase was due
to development efforts by the Company in creating new and enhanced billing and
customer care products. During the year, the Company had two major platform
releases. The first was in July 1997 for CBP on the DB2/400 platform and the
second was the release of the Company's UNIX based product, CBP for Oracle(TM).
The Company intends to continue its research and development efforts in the
future. Therefore, the Company expects that, research and development expenses
will continue to increase in absolute dollars but remain at similar levels to
1997 as a percentage of total revenues.
YEARS ENDED DECEMBER 31, 1996 AND 1997 (CONTINUED)
General and Administrative. General and administrative expenses
increased 91.0% from $10.7 million in 1996 to $20.4 million in 1997 and
decreased as a percentage of revenues from 19.9% in 1996 to 19.1% in 1997,
respectively. The increase in general and administrative expenses was
attributable to the additional costs of building infrastructure during 1997 to
support the growth in the Company's employee base and the expansion of the
Company's business. Significant areas of increased spending included additional
senior and middle management, and recruiting and infrastructure costs related to
an increased number of employees.
Other income, net. Other income, net of other expenses, increased 44.5%
from $1.5 million in 1996 to $2.2 million in 1997. Increased interest income on
increased cash and short-term investment balances accounted for the majority of
the increase in other income.
Provision for income taxes. The Company recorded a tax provision of
$3.1 million in 1996 representing an effective tax rate of 20.7% compared to a
provision of $8.0 million in 1997 representing an effective tax rate of 24.8%.
The Company's effective tax rate is largely dependent on the proportion of the
Company's income earned in different tax jurisdictions. The Company is currently
eligible for a 10% tax rate on "manufacturing" income earned in the Republic of
Ireland. The standard rate of income tax that applies to non-manufacturing
income, such as income earned on the Company's cash investments, was 36% (38%
during 1996). The Company's effective tax rate reflects the tax relief on Irish
manufacturing income subject to this reduced rate of tax, which is below the
statutory rates in Ireland, Canada and the United States. The Irish Minister of
Finance announced in December 1997 that the present standard Irish tax rate will
be reduced to 32% as of January 1, 1998 and will be reduced gradually to a tax
rate of 12.5% for taxation years ending after 2005. Under the announced plan,
the tax rate on manufacturing income would remain at 10% until the tax relief
program is due to terminate in 2010, at which time the tax rate would increase
to be equal to the standard tax rate of 12.5% There can be no assurances that
the Company will continue to be eligible for the reduced tax rate for
manufacturing income in future periods.
YEARS ENDED DECEMBER 31, 1995 AND 1996
Revenue. Total revenues increased 78.0% from $30.3 million in 1995
to $53.9 million in 1996 due to overall increases in services revenue and
license fees, as discussed below.
Services. Services revenue increased 77.3% from $25.1 million in 1995
to $44.5 million in 1996 due to expansion of the Company's client base and
increases in projects for existing clients. Consulting services increased 87.2%
from 1995 to 1996, and service bureau revenues increased 22.3% over the same
period. Approximately 69.3% of the services revenue reported during the year
ended December 31, 1996 was derived from services to customers existing in 1995
compared to 84.2% in the year ended December 31, 1995. The Company attributes
this change to its continued efforts to expand its customer base.
License Fees. License fees revenue increased 81.2% from $5.2
million in 1995 to $9.4 million in 1996 due primarily to license fees for the
company's software, Saville CBP TM, that were negotiated during 1996.
Cost of Services. Cost of services expense increased $9.8 million from
$12.2 million in 1995 to $22.1 million in 1996 and increased as a percentage of
services revenue from 48.7% to 49.6%, respectively. The overall increase was
primarily due to expenditures associated with additional personnel hired during
1996 to support the growth of the Company's business.
<PAGE>
YEARS ENDED DECEMBER 31, 1995 AND 1996 (CONTINUED)
Cost of License Fees. Cost of license fees expense increased from
$65,000 in 1995 to $337,000 in 1996 due to an increase in commission expenses
resulting from the increase in the license fees earned by the Company.
Sales and Marketing. Sales and marketing expense increased 122.4% from
$1.5 million in 1995 to $3.4 million in 1996 and increased as a percentage of
total revenues from 5.0% in 1995 to 6.3% in 1996. During 1996, the Company
continued to develop its direct sales force within the United States and Europe
to support the development of new business.
Research and Development. Research and development expense increased
162.2% from $1.6 million in 1995 to $4.2 million in 1996. This increase was due
to increased development efforts by the Company in creating new and enhanced
billing and customer care products, including the Company's Convergent Billing
Platform TM (CBP), which was released on the DB2/400 platform in the first
quarter of 1996.
General and Administrative. General and administrative expense
increased 57.8% from $6.8 million in 1995 to $10.7 million in 1996 and decreased
as a percentage of revenues from 22.4% to 19.9%, respectively. The increased
expenditure was attributable to the additional costs of building infrastructure
during 1996 to support the growth in the Company's employee base and the
expansion of the Company's business. Significant areas of increased spending
included additional senior and middle management, and general expenses related
to an increased number of employees. The Company increased the allowance for
doubtful accounts by $386,000 and recorded compensation expense of $73,000 in
connection with certain options that were granted to employees in 1995 and
having an exercise price below the then fair market value.
Other income, net. Other income, net of other expenses, increased from
$208,000 in 1995 to $1.5 million in 1996. This increase was primarily the result
of interest earned on cash and cash equivalents on the net proceeds from the
Company's public offerings in November 1995 and June 1996.
Provision for income taxes. The Company recorded a tax provision of
$1.9 million in 1995 representing an effective tax rate of 22.5% compared to a
provision of $3.1 million in 1996 representing an effective tax rate of 20.7%.
The Company's effective tax rate is largely dependent on the proportion of the
Company's income earned in different tax jurisdictions. The Company is currently
eligible for a 10% tax rate on "manufacturing" income earned in the Republic of
Ireland. The rate is not available for other types of income such as income
earned by the Company on its cash investments. The eligibility for the 10% tax
rate is the reason that the Company's effective tax rate is below the Irish
standard rate of 38%, and below the statutory rates of Canada and the United
States.
<PAGE>
QUARTERLY INFORMATION
The following tables present selected unaudited consolidated financial
information for the Company's last eight quarters, as well as the percentage of
the Company's total revenues represented by each item. In the opinion of the
Company's management, this unaudited information reflects all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
this information when read in conjunction with the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this report. The Company's
operating results for any quarter are not necessarily indicative of results for
any future period.
<TABLE>
Quarter Ended
- ------------------------------ ---------------------------------------------------------------------------------------
(in thousands of U.S. March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
dollars except per share 1996 1996 1996 1996 1997 1997 1997 1997
data)
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Services $9,032 $10,237 $12,051 $13,158 $16,515 $20,088 $22,575 $25,678
License fees 1,523 2,068 2,696 3,155 3,615 5,405 6,006 7,163
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
10,555 12,305 14,747 16,313 20,130 25,493 28,581 32,841
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Expenses
Cost of services 4,478 5,112 5,932 6,536 8,037 9,448 10,852 11,266
Cost of license fees 22 26 140 149 88 128 165 198
Sales and marketing 637 819 920 1,003 1,202 1,522 1,600 1,942
Research and development 860 1,021 1,085 1,205 1,481 2,530 2,805 3,330
General and administrative 2,321 2,476 2,830 3,078 3,909 4,913 5,325 6,297
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
8,318 9,454 10,907 11,971 14,717 18,541 20,747 23,033
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from operations 2,237 2,851 3,840 4,342 5,413 6,952 7,834 9,808
Other income, net 243 383 393 472 354 559 596 645
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 2,480 3,234 4,233 4,814 5,767 7,511 8,430 10,453
Provision for income taxes 440 597 910 1,105 1,325 1,995 2,096 2,573
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before minority
interest 2,040 2,637 3,323 3,709 4,442 5,516 6,334 7,880
Minority interest share in
subsidiaries' net income (2) 75 12 55 40 75 50 70
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $2,042 $2,562 $3,311 $3,654 $4,402 $5,441 $6,284 $7,810
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Basic earnings per share $0.06 $0.07 $0.09 $0.10 $0.12 $0.15 $0.17 $0.21
Diluted earnings per $0.05 $0.07 $0.09 $0.10 $0.11 $0.14 $0.16 $0.20
share
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands)
35,153 35,183 35,542 35,952 36,209 36,449 36,965 37,356
Ordinary Shares
Ordinary Shares assuming 37,370 37,783 38,096 38,337 38,551 39,131 39,597 40,012
dilution
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<PAGE>
QUARTERLY INFORMATION (CONTINUED)
<TABLE>
Quarter Ended
- ------------------------------ ------------------------------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. Dec. 31
(percentage of total 1996 1996 1996 1996 1997 1997 30 1997 1997
revenues)
- ------------------------------ ---------- ---------- ---------- --------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Services 85.6% 83.2% 81.7% 80.7% 82.0% 78.8% 79.0% 78.2%
License fees 14.4% 16.8% 18.3% 19.3% 18.0% 21.2% 21.0% 21.8%
- ------------------------------ ---------- ---------- ---------- --------- ---------- ---------- -------- ----------
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
- ------------------------------ ---------- ---------- ---------- --------- ---------- ---------- -------- ----------
Expenses
Cost of services 42.4% 41.5% 40.2% 40.1% 39.9% 37.1% 38.0% 34.3%
Cost of license fees 0.2% 0.2% 1.0% 0.9% 0.4% 0.5% 0.6% 0.6%
Sales and marketing 6.0% 6.7% 6.2% 6.1% 6.0% 6.0% 5.6% 5.9%
Research and development 8.2% 8.3% 7.4% 7.4% 7.4% 9.9% 9.8% 10.1%
General and administrative 22.0% 20.1% 19.2% 18.9% 19.4% 19.3% 18.6% 19.2%
- ------------------------------ ---------- ---------- ---------- --------- ---------- ---------- -------- ----------
78.8% 76.8% 74.0% 73.4% 73.1% 72.8% 72.6% 70.1%
- ------------------------------ ---------- ---------- ---------- --------- ---------- ---------- -------- ----------
Income from operations 21.2% 23.2% 26.0% 26.6% 26.9% 27.2% 27.4% 29.9%
Other income, net 2.3% 3.1% 2.7% 2.9% 1.8% 2.2% 2.1% 2.0%
- ------------------------------ ---------- ---------- ---------- --------- ---------- ---------- -------- ----------
Income before income taxes 23.5% 26.3% 28.7% 29.5% 28.7% 29.4% 29.5% 31.9%
Provision for income taxes 4.2% 4.9% 6.2% 6.8% 6.6% 7.8% 7.3% 7.8%
- ------------------------------ ---------- ---------- ---------- --------- ---------- ---------- -------- ----------
Income before minority
interest 19.3% 21.4% 22.5% 22.7% 22.1% 21.6% 22.2% 24.1%
Minority interest share in
subsidiaries' net income 0.0% 0.6% 0.1% 0.3% 0.2% 0.3% 0.2% 0.2%
- ------------------------------ ---------- ---------- ---------- --------- ---------- ---------- -------- ----------
Net income 19.3% 20.8% 22.4% 22.4% 21.9% 21.3% 22.0% 23.9%
- ------------------------------ ---------- ---------- ---------- --------- ---------- ---------- -------- ----------
</TABLE>
The Company's quarterly operating results have in the past and may in the future
vary significantly. Factors that may influence the quarterly results could
include items such as, but are not limited to, increased competition, the size
and timing of significant client projects and license fees, cancellations of
significant projects by customers, changes in operating expenses, changes in
Company strategy, personnel changes, foreign currency exchange rates, and
general economic factors.
The Company's expense levels are based, in part, on its expectations as to
future revenues. If revenue levels are below expectations, operating results are
likely to be adversely affected. Net income may be disproportionately affected
by a reduction in revenues because a proportionately smaller amount of the
Company's expenses varies with its revenues. As a result, the Company believes
that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indicators of future
performance.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $21.4 million from $34.4 million at December
31, 1996 to $55.8 million at December 31, 1997. The increase in cash was
primarily from cash provided by operations and, to a lesser extent, from net
proceeds received from the issuance of Ordinary Shares offset by a use of cash
in purchasing property and equipment and investing in short-term investments.
Operating activities. During the year ended December 31, 1997, $30.8
million of cash was provided by operating activities representing an increase of
$20.4 million over 1996 results. The increase was primarily due to the increased
net income during the year. Working capital components have generally increased
in relation to the continued growth in total revenues. At December 31, 1997 the
Company had deferred revenue of $3.4 million representing funds received in
advance of the completion of software customizations and installations.
Investing activities. The net cash used in investing activities during
the year ended December 31, 1997 was comprised of $7.4 million to purchase
property and equipment and $12.0 million invested in short-term investments. In
order to support the growth of the business, the Company has taken on additional
office space to house its operations. As a result, approximately $2.8 million of
leasehold improvements were purchased in 1997. As well, the Company is upgrading
its internal computer software programs to support the growth of the business
and approximately $1.7 million was capitalized during 1997 for this purpose. The
Company expects to continue to make property and equipment investments to
support its business growth.
Financing activities. The net cash provided by financing activities
during the year ended December 31, 1997 was $10.1 million consisting primarily
of net proceeds from issuance of Ordinary Shares. During 1997, the Company
issued Ordinary Shares pursuant to exercises of options under the employee stock
option plan for proceeds of approximately $9.0 million. On November 7, 1997 the
Company effected a 100% share dividend for each share outstanding for
shareholders of record on that date.
In February 1998 the Company signed a letter of intent to purchase the assets of
an Australian telecommunications software company for approximately $20 million.
The purchase price will be comprised of a combination of cash and Ordinary
Shares. The Company also purchased an interconnect telecommunications software
product from a company in Sweden for approximately $2.0 million in cash and a
commitment of at least $2.0 million in royalties to be paid over the next two
years. As of February 13, 1998, the Company had no other material commitments
for capital expenditures.
The Company and its subsidiaries have available a $15.0 million multi-currency
operating line of credit from a financial institution that expires on August 31,
1999 and bears interest at rates varying from 0.25% to 1% above the base rate.
This base rate depends on the currency of the funds drawn on the facility and
includes the Canadian U.S. Dollar Base rate, the Canadian Bank Prime rate and
LIBOR and DIBOR rates. A standby fee of 0.25% per annum is payable on the daily
unused portion of the facility. This fee totaled $13,000 for the year ended
December 31, 1997. The credit arrangement contains financial covenants relating
to minimum net worth and leverage ratios. The line of credit is unsecured,
however, if the Company does not maintain compliance with the covenants, the
financial institution has the right to register security over any outstanding
balances. The Company was in compliance with these covenants at December 31,
1997. No advances were outstanding on this facility at December 31, 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company had capital lease obligations in principal amount of $470,000 as of
December 31, 1997 ($43,000 as at December 31, 1996 and $97,000 at December 31,
1995) and subsequent to such date has incurred no additional capital lease
obligations.
As of December 31, 1997 the Company had $22.4 million in net accounts
receivable. The average days sales outstanding ("DSO") at December 31, 1997 was
approximately 62 days as compared to approximately 86 at December 31, 1996. DSO
is calculated based on the average daily sales of the immediately preceding
three-month period divided by the net trade accounts receivable balance at the
end of the period. The Company established an allowance for doubtful accounts in
1995 and continues to maintain a balance because increases in revenues that may
be caused by the expansion of the Company's customer base increases the risk
that such an allowance will be necessary. The Company considers the allowance
for doubtful accounts of $1.7 million at December 31, 1997 to be adequate for
1998.
The Company believes that existing cash balances and funds generated by
operations will be sufficient to meet its anticipated liquidity and working
capital requirements for the next twelve months.
FOREIGN CURRENCY EXPOSURE
The Company's international sales are predominately invoiced and paid in U.S.
currency with the exception of certain clients who are invoiced primarily in
Canadian dollars, Pounds Sterling and Swiss Francs. The impact of foreign
currency translation has not been material to the Company's operations.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Annual Report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements, including statements
regarding the Company's plans to expand its international and North American
sales presence, the Company's plans to continue its research and development
efforts, the Company's expectation that it will continue to make property and
equipment investments in 1998, the Company's plans for strategic acquisitions,
the expectation of value to be added by alliances with third parties, the
Company's intent to release future products and enhancements, the Company's
belief that its existing cash balance and funds generated by operations will be
sufficient to meet its anticipated liquidity and working capital requirements
for the next twelve months, the possible adverse foreign currency exposure
involved with international expansion, and the Company's general expectations of
growth. A number of uncertainties exist that could affect the Company's future
operating results, including, without limitation, the Company's ability to
retain existing customers and attract new customers, the Company's ability to
attract and retain qualified employees, the costs associated with significant
increases in number of employees, the Company's continuing ability to develop
products that are responsive to the evolving needs of its customers, increased
competition, changes in operating expenses, foreign currency exchange rates, the
Company's continued ability to take advantage of favorable tax treatment
currently available to the Company, and general economic factors.
To date, a substantial portion of the Company's total revenues has been derived
from a relatively small number of customers. This concentration of customers can
cause the Company's revenues and earnings to fluctuate from quarter to quarter,
based on these customers' requirements and the timing of their orders. A
significant decrease in business from any of its major customers would have a
material adverse effect on the Company's business, financial condition, and
results of operations.
<PAGE>
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS(CONTINUED)
The Company competes with both independent providers of systems and services
like the Company and with internal billing departments of existing
telecommunications service providers, many of which have substantially greater
financial, technical, sales, marketing and other resources, as well as greater
name recognition, than the Company. There can be no assurance that the Company
will be able to compete successfully with its existing competitors or with new
competitors.
The Company's future success depends in large part on its ability to develop new
customer relationships with successful telecommunications service providers.
There can be no assurance that the Company will be able to develop such
relationships or that the service providers that become customers of the Company
will be successful. Historically, the Company has been dependent on long-term
customer relationships and therefore, the failure of the Company's customers to
compete effectively in the telecommunications market could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Although the Company has introduced its UNIX-based CBP for Oracle product,
almost all of the Company's billing and customer care customers run the
Company's software on the DB2/400 platform, which represents a leading platform
for existing and new billing systems. If there should be a rapid shift away from
the current use of the DB2/400 platform by the telecommunications industry for
billing, the Company would be required to expend substantial capital resources
to develop new software and enhance existing software and likely experience
delays or losses in customer orders.
The Company's success will depend upon its ability to enhance its existing
products and to introduce new products and features that meet the changing
requirements of new and existing customers. The Company is currently devoting
significant resources to develop, refine and enhance its base software modules
for both its UNIX-based and DB2/400-based products. If the Company were unable,
due to resource, technological or other constraints, to adequately anticipate or
respond to such changes, or if the Company's new products, developments and
enhancements do not gain market acceptance, the Company's business, financial
condition and results of operations would be materially adversely affected.
The Company's international business is subject to risks such as fluctuations in
exchange rates, difficulties or delays in developing and supporting non-English
language versions of the Company's products, political and economic conditions
in various jurisdictions, unexpected changes in regulatory requirements, tariffs
and other trade barriers, difficulties in staffing and managing foreign
operations and longer accounts receivable payment cycles. Specifically, the Asia
Pacific region has experienced a recent downturn in economic conditions, the
continuation of which could adversely affect the Company's ability to expand
into this region.
Recently, the Company has expanded its operations rapidly, which has placed
significant demands on the Company's administrative, operational and financial
personnel and systems. Additional expansion by the Company may further strain
the Company's management, financial and other resources. There can be no
assurance that the Company's systems, procedures, controls and existing space
will be adequate to support expansion of the Company's operations. The Company's
future operating results will substantially depend on the ability of its
officers and key employees to manage changing business conditions and to
implement and improve its operational, financial control and reporting systems.
If the Company is unable to respond to and manage changing business conditions,
the quality of the Company's services, its ability to retain key personnel and
its results of operations could be materially adversely affected.
The Company's strategy includes the acquisition of businesses and technologies
that complement or augment the Company's existing business and products. In
February 1998, the Company signed a letter of intent to purchase the assets of
an Australian telecommunications software company and also purchased an
interconnect telecommunications software product from a Swedish company.
Promising acquisitions are difficult to identify and complete for a number of
reasons, including competition among prospective buyers and the need to obtain
regulatory approvals, including antitrust approvals. There can be no assurance
that the Company will be able to complete future acquisitions or that the
Company will be able to successfully integrate any acquired businesses. In order
to finance such acquisitions, it may be necessary for the Company to raise
additional funds through public or private financing. Any equity or debt
financing, if available at all, may be on terms that are not favorable to the
Company, and in the case of equity offerings, may result in dilution to the
Company's shareholders.
Fluctuations in exchange rates may have a material adverse effect on the
Company's results of operations, particularly its operating margins, and could
also result in exchange losses. The impact of future exchange rate fluctuations
on the Company's results of operations cannot be accurately predicted. To date,
the Company has not sought to hedge the risks associated with fluctuations in
exchange rates, but may undertake such transactions in the future. There can be
no assurance that any hedging techniques implemented by the Company will be
successful or that the Company's results of operations will not be materially
adversely affected by exchange rate fluctuations.
From time to time, the Company may receive threats of or become involved in
litigation in the ordinary course of its business. In June 1997, the Company
received a letter from a customer purporting to terminate its relationship with
the Company and alleging certain failures to perform by the Company. The
customer alleges damages of $12 million. The Company has denied all of these
allegations and believes that they are without merit. There can be no assurance,
however, as to the outcome of this or any other dispute that may arise.
The Company has significant operations and generates a substantial portion of
its taxable income in the Republic of Ireland, and, under an incentive tax
program due to terminate in 2010, is taxed on its "manufacturing income" at a
rate that is substantially lower than U.S. tax rates. If the Company could no
longer qualify for this lower tax rate or if the tax laws were rescinded or
changed, the Company's net income could be materially adversely affected. In
addition, if U.S., Canadian or other foreign tax authorities were to challenge
successfully the manner in which profits are recognized among the Company and
its subsidiaries, the Company's effective tax rate could increase, and its cash
flow and results of operations could be materially adversely affected.
The Company is reviewing its products and operations to ensure that they will
not be adversely affected by year 2000 software failures, which can arise in
time-sensitive software applications that utilize a field of two digits to
define the applicable year. In such applications, a date using "00" as the year
may be recognized as the year 1900 rather than the year 2000. The Company's
released software products are currently year 2000 ready, and therefore the
Company does not believe that it will need to undertake material research and
development efforts in this regard. The Company's review, correction, and
upgrade of its internal systems to ensure year 2000 readiness is ongoing. The
Company believes that any correction or upgrade necessary to make the Company's
major internal systems year 2000 ready will be completed by early 1999 and that
the cost of such actions will not have a material adverse effect on the
Company's results of operations or financial condition. There can be no
assurances, however, that there will not be a delay in, or increased costs
associated with, the implementation of such corrections or upgrades or that the
Company will suffer no material adverse effects from the year 2000 problem,
including due to the lack of readiness on the part of third party suppliers of
goods and services to the Company's operations.
<PAGE>
Appendix C
SAVILLE SYSTEMS PLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders' Equity for the
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Directors of
Saville Systems PLC
We have audited the accompanying consolidated balance sheets of Saville Systems
PLC and its subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the years in the three year period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Saville
Systems PLC and its subsidiaries at December 31, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
years in the three year period ended December 31, 1997 in conformity with
accounting principles generally accepted in the United States.
Galway, Ireland /s/ Ernst & Young
January 22, 1998 Chartered Accountants
(Except for note 13 which is as at February 13, 1998)
<PAGE>
Saville Systems PLC
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
<TABLE>
As of December 31
1997 1996
- --------------------------------------------------- ---------- ---------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents [note 3] $ 55,785 $34,395
Short-term investments [note 3] 13,015 1,000
Accounts receivable, less allowance
for doubtful accounts of $1,687 and $756,
respectively 22,373 15,308
Prepaid expenses and other assets 3,581 1,511
- --------------------------------------------------- ---------- ---------------
Total current assets 94,754 52,214
Property and equipment, net [note 4] 10,621 4,275
- --------------------------------------------------- ---------- ---------------
Total assets $105,375 $56,489
- --------------------------------------------------- ---------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable 5,336 1,711
Accrued compensation and related benefits 5,248 2,704
Accrued expenses and other liabilities 3,084 770
Income taxes payable 7,167 2,910
Deferred revenue 3,402 1,420
Current portion of long-term debt 134 43
- --------------------------------------------------- ---------- ---------------
Total current liabilities 24,371 9,558
Long-term debt [note 5] 336 -
Minority interest [note 7] 366 320
- --------------------------------------------------- ---------- ---------------
Total liabilities 25,073 9,878
- --------------------------------------------------- ---------- ---------------
Commitments and contingencies [note 6]
Shareholders' Equity: [note 7]
Ordinary Shares, nominal value $0.0025 per share
Authorized: 75,000,000 and 40,000,000
Issued and outstanding: 37,504,596
and 36,163,142 94 90
Deferred Ordinary Shares, nominal value
IR(pound)1.00 per share
Authorized, issued and outstanding: 30,000 48 48
Additional paid-in capital [note 7] 37,734 27,733
Retained earnings 42,750 18,813
Cumulative translation account [note 7] (324) (73)
- --------------------------------------------------- ----------- ---------------
Total shareholders' equity 80,302 46,611
- --------------------------------------------------- ----------- ---------------
Total liabilities and shareholders' equity $105,375 $56,489
- -------------------------------------------------------------- ---------------
</TABLE>
See accompanying notes
<PAGE>
Saville Systems PLC
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
<TABLE>
Years ended December 31
1997 1996 1995
- ---------------------------------------- ---------- --------- ---------
<S> <C> <C> <C>
REVENUE
Services $ 84,856 $44,478 $25,084
License fees 22,189 9,442 5,212
- ---------------------------------------- ---------- --------- ---------
Total revenue 107,045 53,920 30,296
- ---------------------------------------- ---------- --------- ---------
EXPENSES
Cost of services 39,603 22,058 12,221
Cost of license fees 579 337 65
Sales and marketing 6,266 3,379 1,519
Research and development 10,146 4,171 1,591
General and administrative 20,444 10,705 6,784
- ---------------------------------------- ---------- --------- ---------
Total expenses 77,038 40,650 22,180
- ---------------------------------------- ---------- --------- ---------
Income from operations 30,007 13,270 8,116
Other income, net [note 8] 2,154 1,491 208
- ---------------------------------------- ---------- --------- ---------
Income before income taxes 32,161 14,761 8,324
Provision for income taxes [note 9] 7,989 3,052 1,872
- ---------------------------------------- ---------- --------- ---------
Income before minority interest 24,172 11,709 6,452
Minority interest share in
subsidiaries' net income 235 140 70
- ---------------------------------------- ---------- --------- ---------
Net income $23,937 $11,569 $6,382
- ---------------------------------------- ---------- --------- ---------
Basic earnings per share $0.65 $0.32 $0.21
Diluted earnings per share $0.61 $0.31 $0.20
- ---------------------------------------- ---------- --------- ---------
(in thousands)
Ordinary shares 36,745 35,458 30,631
Ordinary shares assuming dilution 39,323 37,897 32,302
- ---------------------------------------- ---------- --------- ---------
</TABLE>
See accompanying notes
<PAGE>
Saville Systems PLC
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands of U.S. dollars, except number of shares)
<TABLE>
Years ended December 31
----------------------------------------------------------------------------
Share Capital Additional Retained Cumulative Total
paid-in earnings translation shareholders'
Shares Amounts capital account equity
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------- ------------ ---------- ----------- ----------- ------------ ---------------
Balance at December 31, 1994 29,800,000 $ 47 $ 1,625 $ 3,862 $ (82) $ 5,452
- ---------------------------------------- ------------ ---------- ----------- ----------- ------------ ---------------
Ordinary Shares issued 5,352,812 41 25,765 25,806
Deferred Shares issued 30,000 48 (48)
Shares issued by subsidiary companies 148 148
Public offering costs (3,914) (3,914)
Reduction in minority interest 116 116
Note receivable on sale of shares
by subsidiary prior to reorganization (100) (100)
Dividends paid (3,000) (3,000)
Net income 6,382 6,382
Foreign currency translation adjustment 34 34
- ---------------------------------------- ------------ ---------- ----------- ----------- ------------ ---------------
Balance at December 31, 1995 35,182,812 136 23,592 7,244 (48) 30,924
- ---------------------------------------- ------------ ---------- ----------- ----------- ------------ ---------------
Ordinary Shares issued 1,010,330 2 4,739 4,741
Reduction in minority interest 37 37
Repayment of note receivable 100 100
Public offering costs (735) (735)
Net income 11,569 11,569
Foreign currency translation adjustment (25) (25)
- ---------------------------------------- ------------ ---------- ----------- ----------- ------------ ---------------
Balance at December 31, 1996 36,193,142 138 27,733 18,813 (73) 46,611
- ---------------------------------------- ------------ ---------- ----------- ----------- ------------ ---------------
Ordinary Shares issued 1,311,454 4 9,069 9,073
Reduction in minority interest 189 189
Share issue costs (277) (277)
Tax benefit of employee stock 873 873
transactions
Restricted share issuance and
related compensation 30,000 1,031 1,031
Unearned compensation on restricted
share issuance (945) (945)
Compensation related to stock options 61 61
Net income 23,937 23,937
Foreign currency translation adjustment (251) (251)
- ---------------------------------------- ------------ ---------- ----------- ----------- ------------ ---------------
Balance at December 31, 1997 37,534,596 $142 $37,734 $42,750 $(324) $80,302
- ---------------------------------------- ------------ ---------- ----------- ----------- ------------ ---------------
</TABLE>
See accompanying notes
<PAGE>
Saville Systems PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
<TABLE>
Years ended December 31
1997 1996 1995
- ---------------------------------------------------------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $23,937 $11,569 $ 6,382
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,487 782 360
Allowance for doubtful accounts 1,010 386 370
Minority interest in net income 235 140 70
Loss on sale of property and equipment 90 - -
Compensation related to stock transactions 147 - -
Changes in operating assets and liabilities:
Accounts receivable (8,072) (7,521) (2,936)
Prepaid expenses and other assets (2,075) (461) (886)
Long term receivable - 741 (741)
Accounts payable 3,349 632 401
Accrued compensation and related benefits 2,544 1,177 803
Accrued royalties - (663) 348
Income taxes payable 4,257 1,682 127
Deferred revenue 1,982 1,420 -
Accrued expenses and other liabilities 1,897 474 (251)
- ---------------------------------------------------------- ---------- ----------
Net cash provided by operating activities 30,788 10,358 4,047
- ---------------------------------------------------------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of property and equipment (7,401) (2,723) (2,178)
Purchase of short-term investments (12,015) (1,000) -
- ---------------------------------------------------------- ---------- ----------
Net cash used in investing activities (19,416) (3,723) (2,178)
- ---------------------------------------------------------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loan repayments from an officer - - 50
Repayment of long-term debt (43) (54) (703)
Increase in long-term debt 470 - -
Repayments to related parties - - (14)
Proceeds from share issuance 9,073 4,841 25,880
Share issue costs (277) (735) (3,914)
Tax benefit on employee stock transactions 873 - -
Dividends - - (3,000)
- ---------------------------------------------------------- ---------- ----------
Net cash provided by financing activities 10,096 4,052 18,299
- ---------------------------------------------------------- ---------- ----------
Effect of exchange rate changes on cash (78) (14) 45
- ---------------------------------------------------------- ---------- ----------
Net increase in cash and cash equivalents 21,390 10,673 20,213
Cash and cash equivalents, beginning of year 34,395 23,722 3,509
- ---------------------------------------------------------- ---------- ----------
Cash and cash equivalents, end of year $55,785 $34,395 $23,722
- ---------------------------------------------------------- ---------- ----------
Short-term investments 13,015 1,000 -
- ---------------------------------------------------------- ---------- ----------
Cash and short-term investments $68,800 $35,395 $23,722
- ---------------------------------------------------------- ---------- ----------
Supplementary disclosure of cash
flow information:
Cash paid for interest 48 15 182
Cash paid for income taxes 2,889 1,504 1,894
Note receivable from sale (repayment)
of shares - (100) 100
</TABLE>
See accompanying notes
<PAGE>
SAVILLE SYSTEMS PLC
Consolidated Notes to Financial Statements, December 31, 1997
1. ORGANIZATION
Saville Systems PLC (the "Company") is a company incorporated under the laws of
the Republic of Ireland in 1993.
Prior to the Restructuring (as defined below), Saville Systems PLC, Saville
Systems Canada, Ltd. ("Saville Canada") and Saville Systems Inc. ("Saville
U.S.") were companies under common control and with identical share ownership
structures.
On September 27, 1995, Saville Canada and Saville U.S. (collectively, the
"Subsidiaries") became majority-owned subsidiaries of the Company (the
"Restructuring"). The Restructuring was accomplished through the contribution of
shares of the Subsidiaries to the Company by all but one of the shareholders of
the Subsidiaries who previously owned, directly or indirectly, identical
percentages of all three companies; and through the contribution of 100% of the
shares of 2916746 Canada, Inc., a Canadian holding corporation whose only
material asset was shares in Saville Canada.
The Restructuring has been accounted for in a manner similar to a pooling of
interests and accordingly the consolidated financial statements of the Company
include the results of the Company and its two subsidiaries since their
inception, which in the case of Saville Canada was 1982 and Saville U.S. was
1991. The share capital of the Subsidiaries has been presented as additional
paid-in capital in these consolidated financial statements.
An approximate 15% interest in Saville Canada and Saville U.S. was not
contributed by one of the shareholders as at the date of Restructuring and has
been presented as a minority interest. As of December 31, 1997, this minority
interest has decreased to approximately 4% (7% and 12% as of December 31, 1996
and 1995, respectively).
During 1997 the Company incorporated two wholly-owned subsidiaries, Saville C.I.
Limited and Saville Systems (UK) Limited.
The Company's principal line of business is the provision of convergent customer
care and billing solutions for the use of its customers in the global
telecommunications industry. The Company licenses the use of its software to
customers throughout the world and operates its software for certain customers
under a service bureau arrangement. The Company's principal markets are
currently located in the United States, Europe and Canada.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Principles
The consolidated financial statements have been prepared by management in
accordance with accounting principles generally accepted in the United States.
Principles of Consolidation
These consolidated financial statements include the accounts of the Company
and its subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Estimates and Assumptions
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates.
Revenue recognition
Revenue from services consists of fees for systems requirements definition,
system design and analysis, customization and installation services, ongoing
system management, system enhancements, service bureau processing and facilities
management. Services revenue is recognized as the services are performed,
primarily on a time and materials basis. Revenue from maintenance contracts is
recognized ratably over the term of the agreement, generally one year.
Revenue from the licensing of software rights is recognized at the time of
delivery of the product to the customer, provided that the Company has no
significant related obligations or collection uncertainties remaining. Where
there are significant obligations related to the development and enhancement of
the software delivered, license fees are recorded over the expected term of the
initial customization period.
Deferred revenue relates primarily to license fee revenue, which has been
paid by the customers prior to the recognition of revenue.
Foreign currency translation
The Company uses the United States dollar as the unit of measurement of its
financial statements, as a significant portion of the Company's operating and
financing activities are transacted in United States dollars. The functional
currencies of the Company's subsidiaries are their local currencies.
Transactions and balances denominated in currencies other than the
functional currencies of the Company or its subsidiaries are remeasured in the
applicable functional currency. Translation adjustments arising on such
remeasurement are included in the determination of net income.
The balance sheets of the Company's foreign subsidiaries are translated at
year-end rates of exchange and results of operations are translated at weighted
average rates of exchange for the fiscal period reported. Translation
adjustments resulting from this process are recorded in shareholders' equity as
an adjustment to the cumulative translation account.
Property and equipment
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed using either the declining balance or straight-line
method over the estimated useful life of the asset or in the case of leasehold
improvements, over the remaining lease term. Depreciation commences when the
asset is available for use.
Gains or losses resulting from sales or retirements are recorded as
incurred, at which time related costs and accumulated depreciation are removed
from the accounts. Maintenance and repairs are expensed as incurred.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases
Leases are recorded as capital or operating leases. Any lease where
substantially all of the benefits and risks related to the ownership of the
leased asset are transferred to the lessee, as defined by Statement of Financial
Accounting Standards (SFAS) No.13 "Leases" is accounted for as if the asset were
acquired and as if the obligation were assumed as of the date of lease. All
other leases are recorded as operating leases whereby the related costs are
charged to income on a straight-line basis over the term of the lease.
Software development costs
Software development costs, principally the design and development of
customer care and billing software, are expensed as incurred unless they qualify
for capitalization, as defined by SFAS No. 86, "Accounting for the Cost of
Computer Software to be Sold, Leased or Otherwise Marketed". Capitalized costs
are amortized over the economic life of the software release. To date no
software development costs have been capitalized by the Company as the
development costs incurred subsequent to establishing technological feasibility
of the related software have not been material.
Stock options
The Company records compensation expense relating to stock based
compensation to employees in accordance with Accounting Principles Board Opinion
(APB) No. 25 "Accounting for Stock Issued to Employees" and related
interpretations. Pro forma footnote disclosures, which comply with the SFAS
No.123 "Accounting for Stock Based Compensation", are provided in Note 7.
Income tax
Income taxes are accounted for in accordance with the liability method
of SFAS No. 109, "Accounting for Income Taxes." Under this method, the Company
provides deferred and prepaid taxes for temporary differences in the recognition
of assets and liabilities for financial reporting and tax accounting purposes.
Earnings per share
Basic and diluted earnings per share are computed in accordance with SFAS
No. 128 "Earnings per Share" which became effective for the Company's quarter
and year ended December 31, 1997. This statement replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share exclude any
dilutive effects of options. Diluted earnings per share is very similar to fully
diluted earnings per share. All prior period earnings per share data in these
financial statements have been restated to conform to the provisions of this
statement.
In the calculation of diluted earnings per share, Ordinary Shares assuming
dilution includes the effect of dilutive share equivalents from stock options
and no adjustments to net income.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and short-term investments
Cash equivalents include those investments that are readily convertible to
known amounts of cash, with maturities at the date purchased of less than three
months.
Cash equivalents and short-term investments held by the Company and its
subsidiaries are classified as held-to-maturity and are recorded at amortized
cost. Gains and losses on these investments are not recorded until realized.
Recently issued accounting standards
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 130 "Comprehensive Income" (`SFAS 130') and No. 131
"Disclosures about Segments of an Enterprise and Related Information" (`SFAS
131'). SFAS 130 and SFAS 131 will be effective for the Company's December 31,
1998 year end. The Company has not determined the impact, if any, of these
pronouncements on its consolidated financial statements.
The Accounting Standards Executive Committee has issued statement of
position 97-2 "Software Revenue Recognition" (`SOP 97-2'). SOP 97-2 is effective
for transactions entered into in fiscal years beginning after December 15, 1997.
The Company's current revenue recognition policies are expected to remain
largely unaffected.
Comparative figures
Certain prior year figures have been reclassified to conform to 1997
financial statement presentation.
3. CASH AND SHORT-TERM INVESTMENTS
Cash and cash equivalents as of December 31, 1997 and 1996 include
$33,606,000 and $27,458,000, respectively, of money market funds and commercial
paper investments held by the Company.
Short-term investments of $13,015,000 and $1,000,000 as of December 31,
1997 and 1996, respectively, are composed of corporate notes (1997 -
$11,015,000; 1996 - $1,000,000) and government notes (1997 - $2,000,000; 1996 -
Nil). Interest rates on these deposits range from 5% to 6% and total accrued
interest of $287,000 at December 31, 1997 is included in other assets.
All cash equivalents and investments held by the Company are recorded at
amortized cost, which approximates fair value, and mature within three months
and one year, respectively.
<PAGE>
4. PROPERTY AND EQUIPMENT
<TABLE>
As of December 31
1997 1996
- --------------------------------- -------------- -----------------
<S> <C> <C>
Furniture and equipment $ 5,168 $2,877
Computer equipment and software 3,920 1,300
Leasehold improvements 4,279 1,507
- --------------------------------- ------------- -----------------
Total cost 13,367 5,684
Less accumulated depreciation 2,746 1,409
- --------------------------------- ------------- -----------------
Net book value $10,621 $4,275
- --------------------------------- ------------- -----------------
</TABLE>
Computer equipment and software includes $1,775,000 of assets under development
to be depreciated when put in use. Of this, $470,000 is computer software under
capital lease.
5. LONG-TERM DEBT
Line of Credit
On October 23, 1997, the Company obtained a multi-currency operating line
of credit of $15 million from a financial institution. This line of credit is
available to the Company and its subsidiaries on a joint and several basis for a
period ending August 31, 1999 and bears interest at rates varying from 0.25% to
1% above the base rate. This base rate depends on the currency of the funds
drawn on the facility and includes the Canadian U.S. Dollar Base rate, the
Canadian Bank Prime rate and LIBOR and DIBOR rates.
A standby fee of 0.25% per annum is payable on the daily unused portion of
the facility. This fee totaled $13,000 for the year ended December 31, 1997.
The credit arrangement contains financial covenants relating to minimum net
worth and leverage ratios. The line of credit is unsecured, however, if the
Company does not maintain compliance with the covenants, the financial
institution has the right to register security over any outstanding balances.
The Company was in compliance with these covenants at December 31, 1997. No
advances were outstanding on this facility at December 31, 1997.
Capital Lease
The Company has obligations under a capital lease for $470,000, payable in
thirteen quarterly payments of $40,000. The lease is denominated in Canadian
dollars and bears interest at 5.4%. Principal payments of $134,000, $144,000,
$152,000 and $40,000 are due in the years 1998, 1999, 2000 and 2001,
respectively. The lease obligation at the end of 1996 of $43,000 was fully
repaid during 1997.
<PAGE>
6. COMMITMENTS AND CONTINGENCIES
The Company is committed to make operating lease payments on premises, computer
hardware and software, and equipment under agreements, which expire over the
next eight years as follows:
<TABLE>
<S> <C> <C>
1998 $ 7,395
1999 6,285
2000 3,935
2001 2,134
2002 1,751
Thereafter 2,517
- ----------------------------------------------------------------------------
$24,017
</TABLE>
Total rental expense was approximately $6,032,000, $3,582,000, and $1,950,000
for the years ended December 31, 1997, 1996 and 1995, respectively.
From time to time, the Company may receive threats of or become involved in
litigation in the ordinary course of it business. During the year, the Company
received a letter from a customer purporting to terminate its relationship with
the Company and alleging certain failures to perform by the Company. The
customer alleges damages of $12 million. The Company has denied all of these
allegations and believes that they are without merit. Management believes that
this matter will have no material adverse effect on the Company's operations or
financial position and accordingly, no provision for any liability has been made
in these financial statements.
7. SHAREHOLDERS' EQUITY
Authorized share capital
Upon incorporation, the Company's authorized share capital comprised
100,000 Ordinary Shares.
On January 20, 1995, the Company redesignated each of its Ordinary Shares
authorized and issued to be Class A voting, convertible, participating shares
and increased its authorized share capital by 100,000 Class B non-voting,
convertible, participating shares which ranked pari passu in all respects with
the Class A shares. Each fully paid Class B non-voting, convertible,
participating share could be converted at any time into a Class A voting,
convertible, participating share on the basis of one to one. Likewise, each
fully paid Class A voting, convertible, participating share could be converted
at any time into a Class B non-voting, convertible, participating share on the
basis of one to one.
In connection with the Restructuring, authorized share capital was amended
by the cancellation of 100,000 Class B shares, the redesignation of Class A
shares as Ordinary Shares with a nominal value of $0.0025 per share and the
authorization of 30,000 Deferred Shares with a nominal value of IR(pound)1.00
per share. Authorized capital was then increased to 40,000,000 Ordinary Shares.
During 1997 the shareholders authorized an amendment to the Company's
Memorandum and Articles of Association to increase the number of authorized
Ordinary Shares from 40,000,000 to 75,000,000.
<PAGE>
7. SHAREHOLDERS' EQUITY (CONTINUED)
Issued share capital
An analysis of the number of shares issued and outstanding, adjusted
retroactively for each share dividend, for the three-year period ended December
31, 1997 is as follows:
In connection with the Restructuring in 1995 Class A Shares were
redesignated as Ordinary Shares and the Company issued 30,000 Deferred Shares.
On September 27, 1995, the Company completed an 800-for-1 division of all
Ordinary Shares and subsequently declared and allotted a share dividend of 5.45
Ordinary Shares for each post-division share outstanding. The division and
dividend were approved by the shareholders by unanimous written consent on
September 27, 1995.
During the year ended December 31, 1995, the Company issued 352,812
Ordinary Shares to officers and employees for cash consideration of $805,808 and
conducted a public offering issuing 5,000,000 ordinary shares for total gross
proceeds to the Company of $25,000,000.
During the year ended December 31, 1996, the Company issued 810,330
Ordinary Shares to officers and employees for cash consideration of $2,140,816
and conducted a second public offering issuing 200,000 Ordinary Shares for total
gross proceeds to the Company of $2,600,000.
On November 17, 1997 the Company issued a two-for-one share dividend for
each share outstanding to all shareholders of record on November 7, 1997. The
dividend was approved by a vote of shareholders at an Extraordinary General
Meeting held on October 23, 1997.
During the year ended December 31, 1997, the Company issued 1,311,454
Ordinary Shares to officers and employees for cash consideration of $9,073,584
and 30,000 restricted Ordinary Shares to an officer at par value.
Additional paid-in capital
During 1995 and prior to the Restructuring described in note 1, 70.04
shares of Saville Canada and 6.135 shares of Saville U.S. were issued for
aggregate cash consideration of $174,000 and a note receivable of $100,000 to an
officer of the Company. The aggregate cash consideration, net of the note
receivable, has been reflected in these financial statements as additional
paid-in capital in the amount of $148,000 and an increase in minority interest
of $26,000.
During 1996, the note receivable issued in 1995 was repaid in full and has
been reflected as additional paid-in capital in the amount of $100,000.
During 1997, the Company recorded the effect of tax deductions available to
Saville U.S. for stock options exercised by employees. The benefits of this
deduction for tax of $873,000 are recorded as additional paid-in capital in
Saville U.S.
<PAGE>
7. SHAREHOLDERS' EQUITY (CONTINUED)
During 1997, the Company issued 30,000 restricted Ordinary Shares to an
officer of the Company at par value. These shares are subject to vesting
provisions, which restrict the holder's ability to sell such shares over a
five-year period. In connection with this issuance, the Company recorded
$1,031,000 as additional paid-in capital, based on the difference between the
par value and fair value of the shares at the measurement date. Of this amount,
the Company recorded compensation expense of $86,000 in 1997. The unearned
compensation of $945,000 is recorded as an offset to additional paid-in capital
at December 31, 1997 and will be recognized over the vesting period of the
shares.
Dividends
Shareholders are entitled to receive dividends as may be recommended by the
Board of Directors of the Company and approved by the shareholders, which will
be declared and paid in United States dollars. Under Irish Company law,
dividends are payable only out of profits available for distribution, where
profits are determined in accordance with accounting principles generally
accepted in the Republic of Ireland. The amount available for distribution to
shareholders includes only the retained earnings of the Company, and not that of
its subsidiaries, calculated in accordance with accounting principles generally
accepted in the Republic of Ireland which amounted to approximately $35,296,000
at December 31, 1997 ($16,427,000 at December 31, 1996).
Minority interest
Concurrent with the Restructuring of the Company in 1995, the minority
shareholder entered into a share restriction and contribution agreement which
prohibits the minority shareholder from transferring any securities of the
Company, unless a proportionate number of Subsidiary shares are contributed to
the Company. The minority shareholder must contribute all of its shares in the
Subsidiaries no later than September 1, 2005.
Share options
During the year ended December 31, 1995 prior to the Restructuring
described in note 1, the Company granted share 'option units' to certain
officers, directors and employees of the Company. Each option unit was comprised
of 1 Class A share of the Company, 1 common share of Saville Canada and .0875
common shares of Saville U.S. upon exercise of the option unit.
In connection with the Restructuring, each option unit outstanding at that
date was exchanged for options which entitled the holder to 2 Ordinary Shares
for each option exercised.
On August 21, 1995, the Board of Directors approved the 1995 Share Option
Plan, which provides for the grant of stock to employees, officers, directors,
consultants and advisors of the Company. These options generally expire ten
years from the date of grant and vest over periods of one to five years.
<PAGE>
7. SHAREHOLDERS' EQUITY (CONTINUED)
During 1997, the shareholders authorized an amendment to the Company's 1995
Share Option Plan to increase the number of shares authorized to be granted
under the plan from 5,960,000 to 10,000,000.
On April 25, 1996, the Board of Directors approved the 1996 Employee Share
Purchase Plan, which provides for the grant of stock to certain officers and
employees of the Company for purchase.
The following table summarizes the activity in options to December 31, 1997
after giving effect to the Restructuring:
<TABLE>
Number of Ordinary Shares
Available Unexercised Weighted average
for grant exercise price
per share
- ----------------------------- ------------ --------------- -------------------
<S> <C> <C> <C>
Balance at December 31, 1994 - 300,980 $ 0.84
Options granted - 1,081,916 1.20
Ordinary Shares authorized 5,960,000 - -
Options granted (2,411,496) 2,411,496 4.54
Options exercised - (144,210) 5.00
Options expired - (2,060) 5.00
Options cancelled 43,844 (43,844) 4.33
Balance at December 31, 1995 3,592,348 3,604,278 $ 3.22
- ----------------------------- ------------ --------------- -------------------
Ordinary Shares authorized 614,000
Options granted (257,174) 257,174 12.74
Options exercised - (810,330) 2.65
Options cancelled 49,290 (49,290) 4.33
Balance at December 31, 1996 3,998,464 3,001,832 4.17
- ----------------------------- ------------ --------------- -------------------
Ordinary Shares authorized 4,040,000
Options granted (2,844,920) 2,844,920 20.59
Options exercised - (1,311,453) 6.92
Options cancelled 255,864 (255,864) 14.72
Balance at December 31, 1997 5,449,408 4,279,435 $13.61
- ----------------------------- ------------ --------------- -------------------
</TABLE>
<PAGE>
7. SHAREHOLDERS' EQUITY (CONTINUED)
The 300,980 options having an exercise price of $0.84 per share and the
1,081,916 options having an exercise price of $1.20 per share were granted below
estimated fair market value at the date of grant and compensation expense was
recorded over their vesting periods. Compensation expense of $73,000 and $95,000
was recorded in the years ended December 31, 1996 and 1995 respectively.
During 1997, 20,000 options having an exercise price of $17.22 were granted
below estimated fair market value at the date of grant. These options were
vested upon grant and compensation expense of $61,000 was recorded in 1997.
A summary of options outstanding as of December 31, 1997 is as follows:
<TABLE>
- ------------------ ----------------- ----------------- ----------------- ----------------- -----------------
Total outstanding Range of Weighted Weighted Exercisable at Weighted
exercise prices average average December 31, average
exercise price remaining 1997 exercise price
contractual of exercisable
life (in years) options
- ------------------ ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
388,734 $ 1.20 $ 1.20 2.1 388,734 $ 1.20
1,374,957 4.33 - 5.00 4.48 7.7 818,648 4.53
53,924 7.50 - 13.32 8.64 8.1 31,256 8.22
2,047,320 14.06 - 21.50 18.48 8.6 306,230 18.74
209,000 21.75 - 32.56 29.44 9.7 - -
205,500 33.50 - 41.50 34.83 9.8 - -
- ------------------ ----------------- ----------------- ----------------- ----------------- -----------------
4,279,435 $1.20 - $41.50 $13.61 7.8 1,544,868 $ 6.58
- ------------------ ----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>
During 1997 the vesting of certain outstanding options was accelerated such
that the options to purchase 600,000 shares became fully exercisable in 1997 and
the options to purchase 1,110,000 shares will vest over two years rather than
over the original three year vesting period.
In January 1998 approximately 1,680,000 options were granted to employees
and directors that may vest earlier than the original three year vesting period
if the market price of the Company's American Depository Receipts (ADR's)
increases in specified time frames.
The Company has elected to follow APB No. 25, "Accounting for Stock Issued
to Employees" and related interpretations in accounting for its employee share
options because, as discussed below, the alternative fair value accounting
provided under SFAS No. 123, "Accounting for Stock-Based Compensation," requires
the use of option valuation models that were not developed for use in valuing
employee share options. Under APB 25, where the exercise price of the Company's
employee share options equals the market price of the underlying share on the
date of grant, no compensation expense is recognized. As noted above, certain
options have been granted with an exercise price below the market price on the
date of grant and compensation expense has been recognized for these options.
<PAGE>
7. SHAREHOLDERS' EQUITY (CONTINUED)
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee share options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following assumptions for 1997, 1996
and 1995, respectively: risk-free weighted average interest rates of 6.10%,
5.98% and 6.30% and volatility factors of the expected market price of the
Company's Ordinary Shares of .58, .69 and .84; dividend yield of 0% and a
weighted average expected life of the option of 5.2 years for grants issued in
1997 and 4 years for grants issued in 1996 and 1995. The weighted average fair
value of options granted during 1997 was $11.54 (1996 - $6.66, 1995 - $0.86).
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected share price
volatility. Because the Company's employee share options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee share options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period, which includes
actual accelerated vesting entitlements during the year.
The Company's pro forma information follows (in thousands except for
earnings per share information):
<TABLE>
Years ended December 31
1997 1996 1995
- ------------------------------------- ------------- -------------- -----------
<S> <C> <C> <C>
Pro forma net income $9,623 $10,028 $5,573
Pro forma basic earnings per share $0.26 $0.28 $0.18
Pro forma diluted earnings per share $0.25 $0.27 $0.17
</TABLE>
Cumulative translation account
Changes in the Canadian dollar exchange rate relative to the United
States dollar has caused the adjustments to the cumulative translation account.
8. OTHER INCOME
<TABLE>
Years ended December 31
1997 1996 1995
- --------------------------------------- -----------------------------------
<S> <C> <C> <C>
Interest income $2,541 $1,563 $369
Interest on long-term debt - (5) (61)
Other interest expense (61) (10) (15)
Foreign currency exchange losses, net (206) (107) (70)
Other (120) 50 (15)
- --------------------------------------- -----------------------------------
$2,154 $1,491 $208
</TABLE>
<PAGE>
9. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
Years ended December 31
1997 1996 1995
- -------------------------------------- ------------ -----------
<S> <C> <C> <C>
Current:
Ireland $3,579 $1,628 $1,165
Foreign 4,410 1,424 707
- -------------------------------------- ------------ -----------
$7,989 $3,052 $1,872
- -------------------------------------- ------------ -----------
</TABLE>
Pretax income from foreign operations amounted to $8,720,000, $3,105,000, and
$1,677,000 for the years ended December 31, 1997, 1996 and 1995 respectively.
The effective income tax rate differed from the statutory federal income tax
rate due to:
<TABLE>
Years ended December 31
1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Irish federal income tax rate 36.5% 38.0% 38.5%
Computed tax provision $11,739 $ 5,609 $ 3,205
Tax relief on Irish manufacturing operations (4,830) (2,833) (1,750)
Foreign tax rate differences 983 240 95
Change in valuation allowance in respect
of subsidiary losses - 120 152
Other 97 (84) 170
- ------------------------------------------------------------------------------
$ 7,989 $ 3,052 $ 1,872
Per share effect of the tax relief on
Irish manufacturing operations on a
diluted basis $ 0.12 $ 0.07 $ 0.05
</TABLE>
The Company has significant operations and generates a substantial portion of
its taxable income in the Republic of Ireland, and under an incentive tax
program due to terminate in 2010, is taxed on its "manufacturing income" at a
10% rate. The Irish standard rate was reduced from 40% to 38% effective April 1,
1995 and was further reduced to 36% effective April 1, 1997.
As at December 31, 1997 and 1996, the Company had no significant deferred tax
assets or liabilities.
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $6,692,000 at December 31, 1997 and $2,131,000 at December 31,
1996. Those earnings are considered to be indefinitely reinvested and,
accordingly, no provision for withholding taxes has been provided thereon. Upon
distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to withholding taxes payable of approximately $802,000
($304,000 at December 31, 1996) to various foreign governments. Determination of
the amount of the unrecognized deferred income tax liability is not practicable
because of the complexities associated with its hypothetical calculation;
however, unrecognized foreign tax credit carryforwards would be available to
reduce some portion of the liability.
<PAGE>
10. INDUSTRY AND GEOGRAPHIC INFORMATION
The Company and its subsidiaries operate primarily in one industry segment, the
development and marketing of proprietary customer administration and billing
systems. Transfers between geographic areas are accounted for using methods
designed to approximate comparable arm's length amounts. Such transfers are
eliminated in the consolidated financial statements. Identifiable assets are
those assets that can be directly associated with a particular geographic area.
The following is a summary of operations by geographic area.
<TABLE>
Adjustments
United Channel and
Ireland Canada States Islands eliminations Consolidated
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Sales to unaffiliated customers $38,425 $ 6,344 $62,276 - - $107,045
Transfers between geographic areas
28,788 50,626 - - (79,414) -
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Total revenues 67,213 56,970 62,276 - (79,414) 107,045
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Operating profit 21,357 5,610 2,515 - 525 30,007
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Identifiable assets 66,028 13,397 25,818 40,354 (40,222) 105,375
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Year ended December 31, 1996
Sales to unaffiliated customers $22,313 $ 7,009 $24,598 - - $53,920
Transfers between geographic areas
11,594 26,177 - - (37,771) -
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Total revenues 33,907 33,186 24,598 - (37,771) 53,920
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Operating profit 10,069 2,374 744 - 83 13,270
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Identifiable assets 39,350 8,041 9,320 - (222) 56,489
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Year ended December 31, 1995
Sales to unaffiliated customers $16,519 $ 9,098 $ 4,679 - - $30,296
Transfers between geographic areas
(210) 11,309 210 - (11,309) -
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Total revenues 16,309 20,407 4,889 - (11,309) 30,296
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Operating profit 6,141 1,534 357 - 84 8,116
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
Identifiable assets 27,737 5,598 2,995 - (299) 36,031
- ------------------------------------ --------- ---------- ---------- ------------ --------------- ---------------
</TABLE>
All of the sales to unaffiliated customers for Ireland are export sales for all
periods presented.
<PAGE>
11. SALES TO MAJOR CUSTOMERS AND CONCENTRATION OF
CREDIT RISK
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist primarily of trade accounts receivables, cash and cash
equivalents and short-term investments. Credit risk on trade accounts
receivables is decreasing as a result of the diversification of the Company's
revenue and product base. The Company performs ongoing credit evaluations of its
customers and does not require collateral. The Company provides an allowance for
potential credit losses and such losses were not material during the periods
reported.
During the year ended December 31, 1997, two customers of the Company
individually represented 23% and 13% of the total revenue, respectively. The
aggregate accounts receivable balance as of December 31, 1997 for these
customers was $5,438,000.
During the year ended December 31, 1996, three customers individually
represented 35%, 12% and 11% of the total revenue, respectively. The aggregate
accounts receivable balance as of December 31, 1996 for these customers was
$6,135,000.
During the year ended December 31, 1995, three customers individually
represented 37%, 16% and 11% of the total revenue, respectively. The aggregate
accounts receivable balance as of December 31, 1995 for these customers was
$4,037,000.
The Company holds a significant balance of its cash equivalents and short-term
investments with a recognized financial institution.
12. GOVERNMENT ASSISTANCE
The Company is eligible for government assistance in certain jurisdictions for
certain expenditures incurred. The Company accrues and offsets these eligible
grants against the related costs. The amounts included in income were
$1,045,000, $390,000 and $346,000 for the years ended December 31, 1997, 1996
and 1995 respectively.
The conditions of these grants require that the Company maintain in
shareholders' equity an amount equal to the amount of the grants received. The
cumulative amount subject to this restriction at December 31, 1997 is $891,000
($243,000 at December 31, 1996, Nil at December 31, 1995).
13. SUBSEQUENT EVENTS
In February 1998 the Company signed a letter of intent to purchase the assets of
an Australian telecommunications software company for approximately $20 million.
The purchase price will be comprised of a combination of cash and Ordinary
Shares.
Also in February, the Company purchased a telecommunications billing software
product for $2,000,000 in cash with a commitment of at least $2,000,000 in
royalties to be paid over the next two years.
<PAGE>
SAVILLE SYSTEMS PLC
FORM 10-K REPORT
FOR THE YEAR ENDED DECEMBER 31, 1997
INDEX TO EXHIBITS
Exhibit No. Description
*2.1 Contribution Agreement between the Registrant and certain
shareholders of the Registrant, dated as of September 27, 1995.
*2.2 Stock Restriction and Contribution Agreement between Invoice Systems
(Canada), Inc. and the Registrant, dated as of September 27, 1995.
***2.3 Amended and Restated Contribution Agreement between the Registrant,
2916746 Canada, Inc. and Columbia Saville Ireland Investors, L.P.,
dated as of November 22, 1995.
3.1 Memorandum of Association of the Registrant
3.2 Articles of Association of the Registrant
*4.1 Specimen Certificate for Ordinary Shares, $0.0025 par value, of the
Registrant.
*4.2 Deposit Agreement among the Registrant, The Bank of
New York, as Depositary, and the holders from time
to time of American Depositary Shares issued
thereunder (including as an exhibit the form of
American Depositary Receipt).
*10.1 1995 Share Option Plan
++10.2 Amendment to the 1995 Share Option Plan
**10.3 1996 Employee Share Purchase Plan
10.4 Employment Agreement between the Registrant and John J. Boyle, III,
dated as of August 1, 1997.
10.5 Stock Restriction Agreement between the Registrant and John J.
Boyle, III, dated as of December 1, 1997.
10.6 Employment Agreement between the Registrant and Bruce A. Saville,
dated as of November 1, 1997.
10.7 Letter Agreement for credit facilities between The Bank of
Nova Scotia and Saville Systems PLC, Saville Systems Canada, Ltd. and
Saville Systems, Inc. , dated as of September 4, 1997.
<PAGE>
*10.8 Lease Agreement between Barbican Properties Inc. and Saville Systems
Canada, Ltd. made as of May 1, 1995.
*10.9 Letter Agreement between Barbican Properties Inc.and Saville Systems
Canada,Ltd. dated July 19, 1995.
*10.10 Indenture between Orfus Investments and Saville Systems Canada, Ltd.
dated November 25, 1995.
*10.11 Lease between Clybaun Construction Limited, Saville Systems Ireland
Limited, Saville Systems Canada, Ltd. and Anglo Irish Bank
Corporation PLC, dated April 27, 1994.
*10.12 Deed between Saville Systems Ireland Limited and Clybaun
Construction Limited, dated April 27, 1994.
*10.13 Agreement between Saville Systems Ireland Limited, Saville Systems
Canada, Ltd. and Industrial Development Agency (Ireland), dated
June 9, 1995.
*10.14+ Intellectual Property Purchase Agreement between the Registrant and
Saville Systems Canada, Ltd. made as of July 1, 1993.
*10.15 Lease Agreement between Saville Systems Canada, Ltd. and Orfus
Investments, dated April 25, 1996.
*10.16 Indemnity Agreement between the Company and Orfus Investments,
dated April 25, 1996.
+++10.17 Lease Agreement between Saville Systems PLC and Clybaun Construction
Limited dated May 26, 1997.
10.18 Lease Agreement between Mass Mutual and Saville Systems U.S., Inc.
dated as of May 15, 1997.
10.19 Lease Agreement between Penreal Property Fund Ltd. and Saville
Systems Canada, Ltd., dated as of June 13, 1997.
10.20 Lease Agreement between 715864 Alberta Ltd. and Saville Systems
Canada, Ltd., dated as of July 17, 1997.
21.1 List of Subsidiaries
23.1 Consent of Ernst & Young
27.1 Financial Data Schedule for the year ended December 31, 1997.
27.2 Restated Financial Data Schedule, for the quarter ended
June 30, 1996.
27.3 Restated Financial Data Schedule, for the quarter ended
September 30, 1996.
27.4 Restated Financial Data Schedule, for the year ended
December 31, 1996.
27.5 Restated Financial Data Schedule, for the quarter ended
March 31, 1997.
<PAGE>
27.6 Restated Financial Data Schedule, for the quarter ended
June 30, 1997.
27.7 Restated Financial Data Schedule, for the quarter ended
September 30, 1997.
- -----------------------------------------------------
* Incorporated herein by reference to the Company's Registration Statement on
Form S-1, as amended (File No. 33-97576).
**Incorporated herein by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
***Incorporated by reference to the Company's Registration Statement on Form
S-1, as amended (File No. 333-01499)
+ Confidential treatment granted as to certain portions, which are omitted and
filed separately with the Commission.
++ Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1997.
+++Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1997.
EXHIBIT 3.1
COMPANIES ACTS, 1963 to 1990
PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
-of-
SAVILLE SYSTEMS PUBLIC LIMITED COMPANY
(as of October 23, 1997)
1. The name of the Company is "SAVILLE SYSTEMS PUBLIC LIMITED COMPANY".
2. The Company is to be a public limited company.
3. The objects for which the Company is established are:
(a) To purchase, sell, supply and deal in computer hardware, electronic
equipment, computer software, computer programmes and other articles
peripheral thereto and to act as agents, consultants, advisors,
instructors, trainers and technicians in relation to computer hardware,
electronic equipment, computer software, computer programmes and other
articles peripheral thereto.
(b) To design, modify, develop, manufacture, assemble and deal in computer
hardware, electronic equipment, computer software, computer programmes
and other articles peripheral thereto.
(c) To provide a technical and advisory service for users and potential
users of computer hardware, electronic equipment, computer software,
computer programmes and other articles peripheral thereto and to devise
and supply programmes and other software for such users.
(d) To carry on business and to act as merchants, financiers, investors (in
properties or securities) traders, shipowners, carriers, agents,
brokers, commission agents, concessionaries, distributors, importers,
consultants or exporters or in any other capacity in Ireland or in any
other part of the world and whether alone or jointly with others.
(e) To import, export, buy, sell, barter, exchange, pledge, make advance
on, take on lease or hire or otherwise acquire, alter, treat, work,
manufacture, process, dispose of, let on lease, hire or hire purchase,
or otherwise deal in and turn to account as may seem desirable goods,
articles, equipment, machinery, plant, merchandise and wares of any
description.
(f) To carry on all of the said businesses or any one or more of them as a
distinct or separate business or as the principal business of the
Company, to carry on any other business manufacturing or otherwise
which may seem to the Company capable of being conveniently carried on
in connection with the above or any one of the above or calculated
directly or indirectly to enhance the value of or render more
profitable any of the Company's property or rights.
(g) To carry on the business of financing and refinancing whether asset
based or not including, without limitation, financing and refinancing
of financial assets, with or without security and in whatever currency
including, without limitation, financing or refinancing by way of loan,
acceptance credits, commercial paper, bonds, promissory notes, bank
placements, leasing, hire-purchase, bailment, purchase and sale,
conditional sale, credit sale, assignment, novation, factoring,
discounting, securitisation, unitisation, participation,
sub-participation, or by any other means whatsoever.
(h) To purchase, acquire by any means, hold and trade, deal and participate
in, underwrite and sell or dispose of by any means securities and
financial instruments of all kinds including, without limitation,
foreign currencies, shares, stock, gilts, equities, bonds, promissory
notes, debentures, debenture stock, bonds, notes, commercial paper,
risk management instruments, money market deposits, swaps, interest
rate hedges, foreign currency hedges, floors, collars and such other
financial instruments and securities as are similar to, or are
derivatives of, any of the foregoing.
(i) As an object of the Company and as a pursuit in itself or otherwise,
and whether for the purpose of making a profit or avoiding a loss
or for any other purpose whatsoever, to engage in currency and
interest rate transactions and any other financial or other
transactions of whatever nature, including any transaction for the
purpose of, or capable of being for the purposes of, avoiding,
reducing, minimising, hedging against or otherwise managing the
risk of any loss, cost, expense or liability arising, or which may
arise, directly or indirectly, from a change or changes in any interest
rate or currency exchange rate or in the price or value of any
property, asset, commodity, index or liability or from any other risk
or factor affecting the Company's business,including but not limited
to dealings, whether involving purchases, sales or otherwise in
foreign (and Irish) currency, spot and forward exchange rate
contracts, forward rate agreements, caps, floors and collars,futures,
options, swaps, and any other currency interest rate and other
hedging arrangements and such other instruments as are
similar to, or derivatives of, any of the foregoing.
(j) To carry out any transactions or operations whatsoever which may be
lawfully undertaken and carried out by capitalists, promoters,
merchants, underwriters, financiers, or concessionaires and to carry on
a general financial business and general financial operations of all
kinds in any part of the world and to undertake or aid in any
enterprise; to undertake and execute any trusts the undertaking whereof
may seem desirable and also to undertake the office of administrator,
treasurer or registrar and to keep for any company, government,
authority or body, any register relating to any stocks, funds, shares
or securities or to undertake any duties in relation to the
registration of transfers, and the issue of certificates.
(k) To take part in the formation, management, supervision or control of
the business or operations of any company or undertaking, and for that
purpose to appoint and remunerate any directors, accountants or other
experts and agents, to transact or carry on all kinds of agency
business and in particular in relation to the investment of money sale
of property and the collection and receipt of money.
(l) To establish, regulate and discontinue franchises and agencies, and to
undertake and transact all kinds of agency and franchise business which
an ordinary individual may legally undertake.
(m) To invest the capital and other monies of the Company in the purchase
or upon the security of shares, stocks, debentures, debenture stock,
bonds, bills, mortgages, obligations and securities of any kind issued
or guaranteed by any company, corporation or undertaking of whatever
nature and wheresoever constituted or carrying on business and in the
purchase or upon the security of shares, stocks, debentures, debenture
stock, bonds, bills, mortgages, obligations, and securities of any kind
issued or guaranteed by any government, state, dominion, colony,
sovereign, ruler, commissioners, trust, public, municipal, local or
other authority or body of whatsoever nature wheresoever situated.
(n) To acquire any such shares, stocks, debentures, debenture stock, bonds,
bills, mortgages, obligations and securities by subscription, syndicate
participation, tender, purchase, exchange or otherwise, and to
subscribe for the same, either conditionally or otherwise, and to
guarantee the subscription thereof and to exercise and enforce all
rights and powers conferred by or incident to the ownership thereof.
(o) To sell, realise, vary and transpose any investments or other property
for the time being of the Company as may be deemed expedient.
(p) To buy, acquire, sell, manufacture, repair, convert, alter, take on
hire, let on hire and deal in machinery, plant, works, implements,
tools, rolling stock, goods, and things of any description.
(q) To act as managers, consultants, supervisors and agents of other
companies or undertakings and to provide for such companies or
undertakings, managerial, advisory, technical, purchasing, selling and
other services; and to enter into such agreements as are necessary or
advisable in connection with the foregoing.
(r) To establish or promote or concur in establishing or promoting any
company or companies for the purposes of acquiring all or any of the
property, rights and liabilities of the Company or for any other
purpose which may seem directly or indirectly calculated to benefit the
Company and to place or guarantee the placing of, underwrite, subscribe
for or otherwise acquire all or any part of the shares, debentures or
other securities of any such other company.
(s) To adopt such means of making known the products of the Company as may
seem expedient, and in particular by advertising in the press, by
circulars, by purchase and exhibition or works of art or interest, by
publication of books and periodicals and by granting prizes, rewards
and donations.
(t) To pay all costs, charges and expenses incurred or sustained in or
about the promotion and establishment of the Company, or which the
Company shall consider to be preliminary thereto.
(u) To develop and turn to account any land acquired by the Company or in
which it is interested and in particular by laying out and preparing
the same for building purposes, constructing, altering, pulling down,
decorating, maintaining, fitting up and improving buildings and
conveniences, and by planting, paving, draining, farming, cultivating,
letting on building lease or building agreement and by advancing money
to and entering into contracts and arrangements of all kinds with
builders, tenants and others.
(v) To acquire and undertake the whole or any part of the business,
property, goodwill and assets of any person, firm or company carrying
on or proposing to carry on any of the businesses which the Company is
authorised to carry on, or which can be conveniently carried on in
connection with the same, or may seem calculated directly or indirectly
to benefit the Company.
(w) To employ the funds of the Company in the development and expansion of
the business of the Company and all or any of its subsidiary or
associated companies and in any other company whether now existing or
hereafter to be formed and engaged in any like business of the Company
or any of its subsidiary or associated companies or of any other
industry ancillary thereto or which can conveniently be carried on in
connection therewith.
(x) To sell, improve, manage, develop, exchange, lease, mortgage,
enfranchise, dispose of, turn to account or otherwise deal with all or
any part of the property, undertaking, rights or assets of the Company
and for such consideration as the Company might think fit. Generally to
purchase, take on lease or in exchange or otherwise acquire any real
and personal property and rights or privileges.
(y) To undertake and carry on all kinds of trust and agency business and
to act as managers of any syndicate.
(z) To employ experts to investigate and examine into the conditions,
prospects, value, character and circumstances of any business concerns
and undertakings, and generally of any assets, property or rights.
(aa) To purchase, take on lease or in exchange, or otherwise acquire and
hold for investment any estate or interest in any lands, buildings,
easements, rights, privileges, concessions, grants, patents, trade
marks and any real and personal property of any kind.
(bb) To borrow and raise money and to secure or discharge in any manner any
debt or obligation of any kind of or binding on the Company and in
particular but without limitation by mortgages of or charges upon all
or any part of the undertaking, property and assets (present and
future) and the uncalled capital of the Company or by the creation and
issue on such terms and conditions as may be thought expedient of
debentures, debenture stock or other securities of any description.
(cc) To draw, make, accept, endorse, discount, negotiate, execute and issue
and to buy, sell and deal with bills of exchange, promissory notes and
other negotiable or transferable instruments. Provided always that
nothing herein contained shall empower the Company to act as stock and
share brokers or dealers.
(dd) To amalgamate or enter into partnership or any joint purpose or
profit-sharing arrangement with and to co-operate in any way with or
assist or subsidise any company, firm or person, and to purchase or
otherwise acquire and undertake all or any part of the business,
property and liabilities of any person, body or company carrying on any
business which this Company is authorised to carry on or possessed of
any investments or other property suitable for the purposes of the
Company.
(ee) To lend money and grant or provide credit and financial accommodation
to any company firm or person either with or without security and upon
such terms as may seem expedient.
(ff) To enter into any guarantee or contract of indemnity or suretyship and
in particular (without limitation) to guarantee, support or secure,
with or without consideration, whether by personal obligation or by
mortgaging or charging all or any part of the undertaking, property and
assets (present and future) and uncalled capital of the Company or by
both such methods or in any other manner, the performance of any
obligations or commitments of, and the repayment or payment of the
principal amounts of and any premiums, interest, dividends and other
moneys payable on or in respect of any securities or liabilities of any
person, firm or company.
(gg) To accept stock or shares in, or the debentures, mortgages or other
securities of any other company in payment or part payment for any
services rendered, or for any sale made to, or debt owing from any such
company, whether such shares shall be wholly or only partly paid up,
and to hold and retain or re-issue with or without guarantee, or sell,
mortgage or deal with any stock, shares, debentures, mortgages or other
securities so received, and to give by way of consideration for any of
the acts and things aforesaid, or property acquired, any stock, shares,
debentures, mortgages or other securities of this or any other company.
(hh) To procure the registration or incorporation of the Company in or
under the laws of any place outside the State.
(ii) To amalgamate with any other company.
(jj) To apply for, purchase or otherwise acquire any patents, brevets
d'invention, licences, trade marks, technology and know-how and the
like conferring any exclusive or non-exclusive or limited right to use
or any secret or other information as to any invention or technology
which may seem capable of being used, for any of the purposes of the
Company or the acquisition of which may seem calculated directly or
indirectly to benefit the Company, and to use, exercise, develop or
grant licences in respect of or otherwise turn to account the property
rights or information so acquired.
(kk) To subscribe or guarantee money for any national, charitable,
benevolent, public, general or useful object or for any exhibition, or
for any purpose which may be considered likely directly or indirectly
to further the objects of the Company or the interests of its members.
(ll) To make such provision for the education and training of employees and
prospective employees of the Company and others as may seem to the
Company to be advantageous to or calculated, whether directly or
indirectly, to advance the interests of the Company or any member
thereof.
(mm) To grant pensions or gratuities to any employees or ex-employees and to
officers and ex-officers (including directors and ex-directors) of the
Company or its predecessors in business, or the relations, connections,
or dependants of any such persons, and to establish or support
associations, institutions, clubs, funds and trusts which may be
considered calculated to benefit any such persons or otherwise advance
the interests of the Company or of its members.
(nn) To remunerate by cash payment or allotment of shares or securities of
the Company credited as fully paid-up or otherwise, any person or
company for services rendered or to be rendered to the Company, whether
in the conduct or management of its business, or in placing or
assisting to place or guaranteeing the placing of any of the shares of
the Company's capital or any debentures or other securities of the
Company, or in or about the formation or promotion of the Company.
(oo) To provide for the welfare of persons in the employment of, or holding
office under, or formerly in the employment of, or holding office
under the Company, or its predecessors in business, or any directors
or ex-directors of the Company, and the wives, widows and families,
dependants or connections of such persons, by grants of money,
pensions or other payments, and by forming and contributing to
pension,provident or benefit funds or profit sharing or
co-partnership schemes for the benefit of any such persons, and by
providing or subscribing towards places of instruction and recreation,
and hospitals,dispensaries, medical and other attendances, and other
assistance, as the Company shall think fit, and to form, subscribe to
or otherwise aid, charitable, benevolent, religious, scientific,
national, or other institutions, exhibitions or objects, which shall
have any moral or other claims to support or aid by the Company by
reason of the locality of its operations or otherwise.
(pp) To do all or any of the things and matters aforesaid in any part of the
world, and either as principals, agents, contractors, trustees or
otherwise, and by or through trustees, agents or otherwise, and either
alone or in conjunction with others.
(qq) To obtain any Ministerial order or licence or any provisional order or
Act of the Oireachtas or Charter for enabling the Company to carry any
of its objects into effect, or for effecting any modification of the
Company's constitution, or for any other purpose which may seem
expedient, and to oppose any proceedings or applications which may seem
calculated directly or indirectly to prejudice the Company's interests.
(rr) To enter into any arrangement with any government or local or other
authority that may seem conducive to the Company's objects or any of
them, and to obtain from any such government, or authority, any rights,
privileges and concessions which the Company may think it desirable to
obtain, and to carry out, and to exercise and comply with the same.
(ss) To distribute in specie or otherwise as may be resolved, any assets of
the Company among its members, and particularly the shares, debentures
or other securities of any other company formed to take over the whole
or any part of the assets or liabilities of this Company.
(tt) To do all such other things as may be considered to be incidental
or conducive to the above objects or any of them.
And it is hereby declared that the objects of the Company as specified in each
of the foregoing paragraphs of this Clause (except only if and so far as
otherwise expressly provided in any paragraph) shall be separate and distinct
objects of the Company and shall not be in anywise limited by reference to any
other paragraph or the order in which the same occur or the name of the Company
nor shall any express statement in any object that it is an object of the
Company be taken to mean or imply that any object not expressly stated to be
such is not an object of the Company.
4. The liability of the members is limited.
5. The share capital of the Company is US$187,500 and IR(pound)30,000 divided
into 75,000,000 shares of US$0.0025 each and 30,000 shares of IR(pound)
1 each.
We, the several persons whose names, and addresses are subscribed, wish to be
formed into a Company in pursuance of this Memorandum of Association, and we
agree to take the number of shares in the capital of the Company set opposite
our respective names.
<PAGE>
Names, Addresses and Descriptions Number of
of Subscribers
Shares taken
by each Subscriber.
Robert Burke One
33 Brook Court
Monkstown
Co Dublin
Solicitor
Olivia McCann One
Wakefield House
York Road
Dun Laoghaire
Co Dublin
Solicitor
Total Shares taken: Two
Dated the 14th day of June 1993.
Witness to the above signatures:- Liam Carney
Solicitor
2 Harbourmaster Place
Custom House Dock
Dublin 1
EXHIBIT 3.2
COMPANIES ACTS, 1963 TO 1990
A PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
SAVILLE SYSTEMS PUBLIC LIMITED COMPANY
(as of October 23, 1997)
PART I - PRELIMINARY
1. Interpretation.
(a) In these Articles:
"the Acts" means the Companies Acts, 1963 to 1990;
"the 1963 Act" means the Companies Act, 1963;
"the 1983 Act" means the Companies (Amendment) Act, 1983;
"the 1990 Act" means the Companies Act, 1990;
"these Articles" means these articles of association as
altered from time to time;
"the Auditors" means the auditors for the time being of
the Company;
"the Company" means the company (Registration number
204196) whose name appears in the heading to these
Articles;
"Clear Days" means in relation to the period of a notice,
that period excluding the day when the notice is given or
deemed to be given and the day for which it is given or on
which it is to take effect;
"the Directors" means the directors for the time being
of the Company or any of them acting as the board of
directors of the Company;
"the Holder" means, in relation to any share, the
member whose name is entered in the Register as the
holder of the share;
"the Office" means the registered office for the time
being of the Company;
"the Register" means the register of members to be kept as
required by the Acts;
"the Seal" means the common seal of the Company or (where
relevant) the official securities seal kept by the Company
pursuant to the Acts;
"the Secretary" means the secretary of the Company and
any person appointed to perform the duties of the
Secretary of the Company;
"the State" means the Republic of Ireland;
"Stock Exchange Nominee" bears the meaning given to such
expression by section 1 of the Companies (Amendment) Act,
1977;
"warrant to subscribe" means a warrant or certificate or
similar document indicating the right of the registered
holder thereof (other than under a share option scheme for
employees) to subscribe for shares in the Company.
(b) Expressions in these Articles referring to writing shall be construed,
unless the contrary intention appears, as including references to printing,
lithography, photography and any other modes of representing or reproducing
words in a visible form. Expressions in these Articles referring to execution of
any document shall include any mode of execution whether under seal or under
hand.
(c) Unless specifically defined herein or the context otherwise requires, words
or expressions contained in these Articles shall bear the same meaning as in the
Acts but excluding any statutory modification thereof not in force when these
Articles become binding on the Company.
(d) The headings and captions included in these Articles are inserted for
convenience of reference only and shall not be considered a part of or affect
the construction or interpretation of these Articles.
(e) References in these Articles to any enactment or any section or provision
thereof shall mean such enactment, section or provision as the same may be
amended from time to time and be for the time being in force.
(f) In these Articles the masculine gender shall include the feminine and
neuter, and vice versa, and the singular number shall include the plural, and
vice versa, and words importing persons shall include firms or companies.
(g) Unless the contrary intention appears, any reference to an Article shall be
construed as a reference to an Article of these Articles and any reference in an
Article to a paragraph or sub-paragraph shall be construed as a reference to a
paragraph of the Article or (as the case may be) a sub-paragraph of the
paragraph in which the reference is contained.
(h) References in these Articles to pounds or pence or "IR(pound)" or "p" shall
mean the currency, for the time being, of the Republic of Ireland.
(i) The regulations contained in Table A in the First Schedule to the 1963 Act
shall not apply to the Company.
PART II - SHARE CAPITAL AND RIGHTS
2. Share capital.
(A) The capital of the Company is US$187,500 and IR(pound)30,000 divided into
75,000,000 Ordinary Shares of US$0.0025 each and 30,000 Deferred Shares of
IR(pound)1 each;
(B) The rights attached to the Deferred Shares shall be as follows:
(i) on a repayment of capital in a liquidation the Holders of Deferred Shares
shall be entitled, after the repayment to the Holders of Ordinary Shares of the
amount paid up thereon together with, in the case of each of such Holders, an
additional sum of US$100,000 for every US$0.000025 paid up on each Ordinary
Share held by such Holder, to repayment of the amount paid up on each Deferred
Share held by such Holder but shall not be entitled to participate in any
surplus remaining after such payment, which surplus shall belong to the Holders
of Ordinary Shares according to the amounts paid up thereon;
(ii) save as aforesaid, the Holders of the Irish Pound Deferred Shares shall not
be entitled to any dividend or other distribution of any kind;
(iii) the Irish Pound Deferred Shares shall not entitle the Holders thereof to
receive notice of or to attend or vote at general meetings of the Company.
(C)
(i) The Company may at any time or times acquire all or any of the fully
paid Deferred Shares otherwise than for valuable consideration in accordance
with Section 41(2) of the 1983 Act and without the sanction of the Holders
thereof. If at any time the Company determines to acquire less than all of the
Deferred Shares in issue at such time, it shall acquire from each Holder of such
Deferred Shares the same proportion of his holding thereof (as nearly as may be
without creating fractions) as the proportion which by the total number of such
shares proposed to be acquired by the Company bears to the total number thereof
in issue. In order to acquire Deferred Shares as aforesaid the Company shall
give written notice to each Holder of Deferred Shares specifying the number of
Deferred Shares which the Company proposes to acquire from him and the date (the
"Acquisition Date") on which such acquisition is to take effect, and such
acquisition shall take effect on the date so specified. If so required by the
Company, each Holder of Deferred Shares shall, if he has not already done so,
deposit with the Secretary at the Office by such date as the Company shall
specify the certificate(s) representing the Deferred Shares acquired or to be
acquired from him or, if such certificate had been lost or destroyed, produce to
the Company satisfactory evidence as to such loss or destruction and an
indemnity in respect thereof in a form satisfactory to the Directors. If
appropriate, the Company shall despatch certificates for any balance of the
Deferred Shares represented by the certificates deposited with the Secretary as
aforesaid but not acquired by the Company. For the purpose of any such
acquisition, the Company shall be deemed to have irrevocable authority from each
Holder of Deferred Shares to appoint any person to execute on behalf of such
Holder at any time on or after the Acquisition Date a transfer of any Deferred
Shares acquired by the Company from such Holder to the Company or such other
person as the Company may nominate. In accordance with subsection (3) of Section
43 of the 1983 Act, the Company shall, not later than three years after any
acquisition by it of any Deferred Shares as aforesaid, cancel such shares
(except those which it shall have previously disposed of or those in which the
Company shall have previously disposed of an interest) and reduce the amount of
the share capital by the nominal value of the shares so cancelled, and the
Directors may take such steps as are requisite to enable the Company to carry
out its obligations under that subsection without complying with Sections 72 and
73 of the 1963 Act.
(ii) Neither the acquisition by the Company otherwise than for valuable
consideration of all or any of the Deferred Shares nor the cancellation thereof
by the Company in accordance with paragraph 2(C)(i) of this Article shall
constitute a variation or abrogation of the rights or privileges attached to the
Deferred Shares, and accordingly the Deferred Shares or any of them may be so
acquired and cancelled without any such consent or sanction on the part of the
Holders thereof as is referred to in Article 5.
3. Rights of shares on issue.
(a) Without prejudice to any special rights conferred on the Holders of any
existing shares or class of shares and subject to the provisions of the Acts,
any share may be issued with such rights or restrictions as the Company may by
ordinary resolution determine.
(b) Without prejudice to the power conferred on the Company by paragraph (a) of
this Article, the Directors on the allotment and issue of any shares may impose
restrictions on the transferability or disposal of the shares comprised in a
particular allotment as may be considered by the Directors to be in the best
interests of the shareholders as a whole.
4. Redeemable shares.
Subject to the provisions of the Acts, any shares may be issued on the terms
that they are, or are liable at the option of the Company or the Holder, to be
redeemed on such terms and in such manner as may be provided by these Articles.
Subject as aforesaid, the Company may cancel any shares so redeemed or may hold
them as treasury shares and re-issue any such treasury shares as shares of any
class or classes or cancel them.
5. Variation of rights.
(a) Whenever the share capital is divided into different classes of shares, the
rights attached to any class may be varied or abrogated with the consent in
writing of the Holders of three-fourths in nominal value of the issued shares of
that class, or with the sanction of a special resolution passed at a separate
general meeting of the Holders of the shares of the class, and may be so varied
or abrogated either whilst the Company is a going concern or during or in
contemplation of a winding-up. The quorum at any such separate general meeting,
other than an adjourned meeting, shall be two persons holding or representing by
proxy at least one-third in nominal value of the issued shares of the class in
question and the quorum at an adjourned meeting shall be one person holding
shares of the class in question or his proxy.
(b) The rights conferred on Holders of Deferred Shares shall not be deemed to be
varied or abrogated by the creation or issue of further shares ranking in
priority to such shares or by the alteration of the rights attaching to any
other class of shares of the Company. In addition, neither the passing by the
Company of any special resolution for the cancellation of all or any of the
Deferred Shares for no consideration by means of a reduction of capital
requiring the confirmation of the Court nor the obtaining by the Company nor the
making by the Court of an order confirming any such reduction of capital nor the
making effective of such an order shall constitute a variation or abrogation of
the rights attaching to the Deferred Shares, and, accordingly, the Deferred
Shares may at any time be cancelled for no consideration by means of a reduction
of capital effected in accordance with the Acts without any such sanction on the
part of the Holders of the Deferred Shares as is referred to in paragraph (a).
(c) The rights conferred upon the Holders of the shares of any class issued with
preferred or other rights shall not, unless otherwise expressly provided by
these Articles or the terms of the issue of the shares of that class, be deemed
to be varied by the creation or issue of further shares ranking pari passu
therewith or subordinate thereto.
6. Trusts not recognised.
Except as required by law, no person shall be recognised by the Company as
holding any share upon any trust, and the Company shall not be bound by or be
compelled in any way to recognise (even when having notice thereof) any
equitable, contingent, future or partial interest in any share or any interest
in any fractional part of a share or (except only as by these Articles or by law
otherwise provided) any other rights in respect of any share except an absolute
right to the entirety thereof in the Holder: this shall not preclude the Company
from requiring the members or a transferee of shares to furnish the Company with
information as to the beneficial ownership of any share when such information is
reasonably required by the Company.
7. Disclosure of interests.
(a) Notwithstanding the provisions of the immediately preceding Article, the
Directors, at any time and from time to time if, in their absolute discretion,
they consider it to be in the interests of the Company to do so, may give a
notice to the Holder or Holders of any share (or any of them) requiring such
Holder or Holders to notify the Company in writing within such period as may be
specified in such notice (which shall not be less than twenty-eight days from
the date of service of such notice) of full and accurate particulars of all or
any of the following matters, namely:-
(i) his interest in such share;
(ii) if his interest in the share does not consist of
the entire beneficial interest in it, the
interests of all persons having any beneficial
interest in the share (provided that one joint
Holder of a share shall not be obliged to give
particulars of interests of persons in the share
which arise only through another joint Holder);
and
(iii) any arrangements (whether legally binding or
not) entered into by him or any person having
any beneficial interest in the share whereby it
has been agreed or undertaken or the Holder of
such share can be required to transfer the share
or any interest therein to any person (other
than a joint Holder of the share) or to act in
relation to any meeting of the Company or of any
class of shares of the Company in a particular
way or in accordance with the wishes or
directions of any other person (other than a
person who is a joint Holder of such share).
(b) If, pursuant to any notice given under paragraph (a), the person stated to
own any beneficial interest in a share or the person in favour of whom any
Holder (or other person having any beneficial interest in the share) has entered
into any arrangements referred to in sub-paragraph (a) (iii), is a body
corporate, trust, society or any other legal entity or association of
individuals and/or entities, the Directors, at any time and from time to time
if, in their absolute discretion, they consider it to be in the best interests
of the Company to do so, may give a notice to the Holder or Holders of such
share (or any of them) requiring such Holder or Holders to notify the Company in
writing within such period as may be specified in such notice (which shall not
be less than twenty-eight days from the date of service of such notice) of full
and accurate particulars of the names and addresses of the individuals who
control (whether directly or indirectly and through any number of vehicles,
entities or arrangements) the beneficial ownership of all the shares, interests,
units or other measure of ownership of such body corporate, trust, society or
other entity or association wherever the same shall be incorporated, registered
or domiciled or wherever such individuals shall reside provided that if at any
stage of such chain of ownership the beneficial interest in any share shall be
established to the satisfaction of the Directors to be in the ownership of any
body corporate any of whose share capital is listed or dealt in or quoted on any
bona fide stock exchange, unlisted securities market or over-the-counter
securities market, it shall not be necessary to disclose details of the
individuals ultimately controlling the beneficial interests in the shares of
such body corporate.
(c) The Directors, if they think fit, may give notices under paragraphs (a) and
(b) at the same time on the basis that the notice given pursuant to paragraph
(b) shall be contingent upon disclosure of certain facts pursuant to a notice
given pursuant to paragraph (a).
(d) The Directors may require (before or after the receipt of any written
particulars under this Article) any such particulars to be verified by statutory
declaration.
(e) The Directors may serve any notice pursuant to the terms of this Article
irrespective of whether or not the Holder on whom it shall be served may be
dead, bankrupt, insolvent or otherwise incapacitated and no such incapacity or
any unavailability of information or inconvenience or hardship in obtaining the
same shall be a satisfactory reason for failure to comply with any such notice
provided that if the Directors in their absolute discretion think fit, they may
waive compliance in whole or in part with any notice given under this Article in
respect of a share in any case of bona fide unavailability of information or
genuine hardship or where they otherwise think fit but no such waiver shall in
any way prejudice or affect any non-compliance not so waived whether by the
Holder concerned or any other joint Holder of the share or by any person to whom
a notice may be given at any time.
(f) For the purpose of establishing whether or not the terms of any notice
served under this Article shall have been complied with the decision of the
Directors in this regard shall be final and conclusive and shall bind all
persons interested.
(g) The provisions in this Article are in addition to, and do not limit, any
other right or power of the Company, including any right vested in or power
granted to the Company by the Acts.
8. Allotment of shares.
(a) Subject to the provisions of these Articles relating to new shares, the
shares shall be at the disposal of the Directors and (subject to the provisions
of the Acts) they may allot, grant options over or otherwise dispose of them to
such persons on such terms and conditions and at such times as they may consider
to be in the best interests of the Company and its shareholders, but so that no
share shall be issued at a discount and so that, except as permitted by the
Acts, no share shall be allotted unless paid up at least as to one-quarter of
the nominal amount of the share and the whole of any premium on it.
(b) The Company may issue warrants to subscribe (by whatever name they are
called) to any person to whom the Company has granted the right to subscribe for
shares in the Company (other than under a share option scheme for employees)
certifying the right of the registered holder thereof to subscribe for shares in
the Company upon such terms and conditions as the right may have been granted.
9. Payment of commission.
The Company may exercise the powers of paying commissions conferred by the Acts.
Subject to the provisions of the Acts, any such commission may be satisfied by
the payment of cash or by the allotment of fully or partly paid shares or partly
in one way and partly in the other. On any issue of shares the Company may also
pay such brokerage as may be lawful.
10. Payment by instalments.
If by the conditions of allotment of any share the whole or part of the amount
or issue price thereof shall be payable by instalments, every such instalment
when due shall be paid to the Company by the person who for the time being shall
be the Holder of the share.
PART III - SHARE CERTIFICATES
11. Issue of certificates.
Every member (except a Stock Exchange Nominee in respect of whom the Company is
not by law required to complete and have ready for delivery a certificate) shall
be entitled without payment to receive within two months after allotment or
lodgement of a transfer to him of the shares in respect of which he is so
registered (or within such other period as the conditions of issue shall
provide) one certificate for all the shares of each class held by him or several
certificates each for one or more of his shares upon payment for every
certificate after the first of such reasonable sum as the Directors may
determine provided that the Company shall not be bound to issue more than one
certificate for shares held jointly by several persons and delivery of a
certificate to one joint Holder shall be a sufficient delivery to all of them.
The Company shall not be bound to register more than four persons as joint
Holders of any share (except in the case of executors or trustees of a deceased
member). Every certificate shall be sealed with the Seal and shall specify the
number, class and distinguishing numbers (if any) of the shares to which it
relates and the amount or respective amounts paid up thereon.
12. Balance and exchange certificates.
(a) Where some only of the shares comprised in a share certificate are
transferred the old certificate shall be cancelled and a new certificate for the
balance of such shares shall be issued in lieu without charge.
(b) Any two or more certificates representing shares of any one class held by
any member at his request may be cancelled and a single new certificate for such
shares issued in lieu, without charge unless the Directors otherwise determine.
If any member shall surrender for cancellation a share certificate representing
shares held by him and request the Company to issue in lieu two or more share
certificates representing such shares in such proportions as he may specify, the
Directors may comply, if they think fit, with such request.
13. Replacement of certificates.
If a share certificate is defaced, worn out, lost, stolen or destroyed, it may
be replaced on such terms (if any) as to evidence and indemnity and payment of
any exceptional expenses incurred by the Company in investigating evidence or in
relation to any indemnity as the Directors may determine but otherwise free of
charge, and (in the case of defacement or wearing out) on delivery up of the old
certificate.
PART IV - LIEN ON SHARES
14. Extent of lien.
The Company shall have a first and paramount lien on every share (not being a
fully paid share) for all moneys (whether presently payable or not) payable at a
fixed time or called in respect of that share. The Directors, at any time, may
declare any share to be wholly or in part exempt from the provisions of this
Article. The Company's lien on a share shall extend to all moneys payable in
respect of it.
15. Power of sale.
The Company may sell in such manner as the Directors determine any share on
which the Company has a lien if a sum in respect of which the lien exists is
presently payable and is not paid within fourteen Clear Days after notice
demanding payment, and stating that if the notice is not complied with the
shares may be sold, has been given to the Holder of the share or to the person
entitled to it by reason of the death or bankruptcy of the Holder.
16. Power to effect transfer.
To give effect to a sale the Directors may authorise some person to execute an
instrument of transfer of the shares sold to, or in accordance with the
directions of, the purchaser. The transferee shall be entered in the Register as
the Holder of the shares comprised in any such transfer and he shall not be
bound to see to the application of the purchase moneys nor shall his title to
the shares be affected by any irregularity in or invalidity of the proceedings
in reference to the sale, and after the name of the transferee has been entered
in the Register, the remedy of any person aggrieved by the sale shall be in
damages only and against the Company exclusively.
17. Proceeds of sale.
The net proceeds of the sale, after payment of the costs, shall be applied in
payment of so much of the sum for which the lien exists as is presently payable
and any residue (upon surrender to the Company for cancellation of the
certificate for the shares sold and subject to a like lien for any moneys not
presently payable as existed upon the shares before the sale) shall be paid to
the person entitled to the shares at the date of the sale.
PART V - CALLS ON SHARES AND FORFEITURE
18. Making of calls.
Subject to the terms of allotment, the Directors may make calls upon the members
in respect of any moneys unpaid on their shares and each member (subject to
receiving at least fourteen Clear Days' notice specifying when and where payment
is to be made) shall pay to the Company as required by the notice the amount
called on his shares. A call may be required to be paid by instalments. A call
may be revoked before receipt by the Company of a sum due thereunder, in whole
or in part and payment of a call may be postponed in whole or in part. A person
upon whom a call is made shall remain liable for calls made upon him
notwithstanding the subsequent transfer of the shares in respect of which the
call was made.
19. Time of call.
A call shall be deemed to have been made at the time when the resolution of the
Directors authorising the call was passed.
20. Liability of joint Holders.
The joint Holders of a share shall be jointly and severally liable to pay all
calls in respect thereof.
21. Interest on calls.
If a call remains unpaid after it has become due and payable the person from
whom it is due and payable shall pay interest on the amount unpaid from the day
it became due until it is paid at such rate, not exceeding 15 per cent per annum
as the Directors may determine, but the Directors may waive payment of the
interest wholly or in part.
22. Instalments treated as calls.
An amount payable in respect of a share on allotment or at any fixed date,
whether in respect of nominal value or as an instalment of a call, shall be
deemed to be a call and if it is not paid the provisions of these Articles shall
apply as if that amount had become due and payable by virtue of a call.
23. Power to differentiate.
Subject to the terms of allotment, the Directors may make arrangements on the
issue of shares for a difference between the Holders in the amounts and times of
payment of calls on their shares.
24. Interest on moneys advanced.
The Directors, if they think fit, may receive from any member willing to advance
the same all or any part of the moneys uncalled and unpaid upon any shares held
by him, and upon all or any of the moneys so advanced may pay (until the same
would, but for such advance, become payable) interest at such rate, not
exceeding (unless the Company in general meeting otherwise directs) ten per
cent. per annum, as may be agreed upon between the Directors and the member
paying such sum in advance.
25. Notice requiring payment.
(a) If a member fails to pay any call or instalment of a call on or before the
day appointed for payment thereof, the Directors, at any time thereafter during
such times as any part of the call or instalment remains unpaid, may serve a
notice on him requiring payment of so much of the call or instalment as is
unpaid together with any interest which may have accrued.
(b) The notice shall name a further day (not earlier than the expiration of
fourteen Clear Days from the date of service of the notice) on or before which
the payment required by the notice is to be made, and shall state that in the
event of non-payment at or before the time appointed the shares in respect of
which the call was made will be liable to be forfeited.
(c) If the requirements of any such notice as aforesaid are not complied with
then, at any time thereafter before the payment required by the notice has been
made, any shares in respect of which the notice has been given may be forfeited
by a resolution of the Directors to that effect. The forfeiture shall include
all dividends or other moneys payable in respect of the forfeited shares and not
paid before forfeiture. The Directors may accept a surrender of any share liable
to be forfeited hereunder.
(d) On the trial or hearing of any action for the recovery of any money due for
any call it shall be sufficient to prove that the name of the member sued is
entered in the Register as the Holder, or one of the Holders, of the shares in
respect of which such debt accrued, that the resolution making the call is duly
recorded in the minute book and that notice of such call was duly given to the
member sued, in pursuance of these Articles, and it shall not be necessary to
prove the appointment of the Directors who made such call nor any other matters
whatsoever, but the proof of the matters aforesaid shall be conclusive evidence
of the debt.
26. Power of disposal.
A forfeited share may be sold or otherwise disposed of on such terms and in such
manner as the Directors think fit and at any time before a sale or disposition
the forfeiture may be cancelled on such terms as the Directors think fit. Where
for the purposes of its disposal such a share is to be transferred to any
person, the Directors may authorise some person to execute an instrument of
transfer of the share to that person. The Company may receive the consideration,
if any, given for the share on any sale or disposition thereof and may execute a
transfer of the share in favour of the person to whom the share is sold or
disposed of and thereupon he shall be registered as the Holder of the share and
shall not be bound to see to the application of the purchase money, if any, nor
shall his title to the share be affected by any irregularity or invalidity in
the proceedings in reference to the forfeiture, sale or disposal of the share.
27. Effect of forfeiture.
A person whose shares have been forfeited shall cease to be a member in respect
of the forfeited shares, but nevertheless shall remain liable to pay to the
Company all moneys which, at the date of forfeiture, were payable by him to the
Company in respect of the shares, but his liability shall cease if and when the
Company shall have received payment in full of all such moneys in respect of the
shares.
28. Statutory declaration.
A statutory declaration that the declarant is a Director or the Secretary of the
Company, and that a share in the Company has been duly forfeited on the date
stated in the declaration, shall be conclusive evidence of the facts therein
stated as against all persons claiming to be entitled to the share.
29. Non-payment of sums due on share issues.
The provisions of these Articles as to forfeiture shall apply in the case of
non-payment of any sum which, by the terms of issue of a share, becomes payable
at a fixed time, whether on account of the nominal value of the share or by way
of premium, as if the same had been payable by virtue of a call duly made and
notified.
PART VI - CONVERSION OF SHARES INTO STOCK
30. Conversion of shares into stock.
The Company by ordinary resolution may convert any paid up shares into stock and
reconvert any stock into paid up shares of any denomination.
31. Transfer of stock.
The Holders of stock may transfer the same or any part thereof, in the same
manner, and subject to the same regulations, as and subject to which the shares
from which the stock arose might have been transferred before conversion, or as
near thereto as circumstances admit; and the Directors may fix from time to time
the minimum amount of stock transferable but so that such minimum shall not
exceed the nominal amount of each share from which the stock arose.
32. Rights of stockholders.
(a) The Holders of stock shall have, according to the amount of stock held by
them, the same rights, privileges and advantages in relation to dividends,
voting at meetings of the Company and other matters as if they held the shares
from which the stock arose, but no such right, privilege or advantage (except
participation in the dividends and profits of the Company and in the assets on
winding up) shall be conferred by an amount of stock which, if existing in
shares, would not have conferred that right, privilege or advantage.
(b) Such of these Articles as are applicable to paid up shares shall apply to
stock, and the words "share" and "shareholder" therein shall include "stock" and
"stockholder".
PART VII - TRANSFER OF SHARES
33. Form of instrument of transfer.
Subject to such of the restrictions of these Articles and to such of the
conditions of issue as may be applicable, the shares of any member may be
transferred by instrument in writing in any usual or common form or any other
form which the Directors may approve.
34. Execution of instrument of transfer.
The instrument of transfer of any share shall be executed by or on behalf of the
transferor and, in cases where the share is not fully paid, by or on behalf of
the transferee. The transferor shall be deemed to remain the Holder of the share
until the name of the transferee is entered in the Register in respect thereof.
35. Refusal to register transfers.
(a) The Directors in their absolute discretion and without assigning any reason
therefor may decline to register :-
(i) any transfer of a share which is not fully paid;
(ii) any transfer to or by a minor or person of unsound mind.
(b) The Directors may decline to recognise any instrument of transfer unless :-
(i) the instrument of transfer is accompanied by the certificate of the shares
to which it relates and such other evidence as the Directors may reasonably
require to show the right of the transferor to make the transfer (save where the
transferor is a Stock Exchange Nominee);
(ii) the instrument of transfer is in respect of one class of share only;
(iii) the instrument of transfer is in favour of not more than four transferees;
and
(iv) it is lodged at the Office or at such other place as the Directors may
appoint.
36. Procedure on refusal.
If the Directors refuse to register a transfer then, within two months after the
date on which the transfer was lodged with the Company, they shall send to the
transferee notice of the refusal.
37. Closing of transfer books.
The registration of transfers of shares or of transfers of any class of shares
may be suspended at such times and for such periods (not exceeding thirty days
in each year) as the Directors may determine.
38. Absence of registration fees.
No fee shall be charged for the registration of any instrument of transfer or
other document relating to or affecting the title to any share.
39. Retention of transfer instruments.
The Company shall be entitled to retain any instrument of transfer which is
registered, but any instrument of transfer which the Directors refuse to
register shall be returned to the person lodging it when notice of the refusal
is given.
40. Renunciation of allotment.
Nothing in these Articles shall preclude the Directors from recognising a
renunciation of the allotment of any shares by the allottee in favour of some
other person.
PART VIII - TRANSMISSION OF SHARES
41. Death of member.
If a member dies the survivor or survivors where he was a joint Holder, and his
personal representatives where he was a sole Holder or the only survivor of
joint Holders, shall be the only persons recognised by the Company as having any
title to his interest in the shares; but nothing herein contained shall release
the estate of a deceased member from any liability in respect of any share which
had been jointly held by him.
42. Transmission on death or bankruptcy.
A person becoming entitled to a share in consequence of the death or bankruptcy
of a member may elect, upon such evidence being produced as the Directors may
properly require, either to become the Holder of the share or to have some
person nominated by him registered as the transferee. If he elects to become the
Holder he shall give notice to the Company to that effect. If he elects to have
another person registered he shall execute an instrument of transfer of the
share to that person. All of these Articles relating to the transfer of shares
shall apply to the notice or instrument of transfer as if it were an instrument
of transfer executed by the member and the death or bankruptcy of the member had
not occurred.
43. Rights before registration.
A person becoming entitled to a share by reason of the death or bankruptcy of a
member (upon supplying to the Company such evidence as the Directors may
reasonably require to show his title to the share) shall have the rights to
which he would be entitled if he were the Holder of the share, except that,
before being registered as the Holder of the share, he shall not be entitled in
respect of it to attend or vote at any meeting of the Company or at any separate
meeting of the Holders of any class of shares in the Company, so, however, that
the Directors, at any time, may give notice requiring any such person to elect
either to be registered himself or to transfer the share and, if the notice is
not complied with within ninety days, the Directors thereupon may withhold
payment of all dividends, bonuses or other moneys payable in respect of the
share until the requirements of the notice have been complied with.
PART IX - ALTERATION OF SHARE CAPITAL
44. Increase of capital.
(a) The Company from time to time by ordinary resolution may increase the share
capital by such sum, to be divided into shares of such amount, as the resolution
shall prescribe.
(b) Subject to the provisions of the Acts, the new shares shall be issued to
such persons, upon any such terms and conditions and with any such rights and
privileges annexed thereto as the general meeting resolving upon the creation
thereof may direct.
(c) Except so far as otherwise provided by the conditions of issue or by these
Articles, any capital raised by the creation of new shares shall be considered
part of the pre-existing ordinary capital and shall be subject to the provisions
herein contained with reference to calls and instalments, transfer and
transmission, forfeiture, lien and otherwise.
45. Consolidation, sub-division and cancellation of capital.
The Company, by ordinary resolution, may:-
(a) consolidate and divide all or any of its share capital into shares of larger
amount;
(b) subject to the provisions of the Acts, subdivide its shares, or any of them,
into shares of smaller amount, so however that in the sub-division the
proportion between the amount paid and the amount, if any, unpaid on each
reduced share shall be the same as it was in the case of the share from which
the reduced share is derived (and so that the resolution whereby any share is
sub-divided may determine that, as between the Holders of the shares resulting
from such sub-division, one or more of the shares may have, as compared with the
others, any such preferred, deferred or other rights or be subject to any such
restrictions as the Company has power to attach to unissued or new shares); or
(c) cancel any shares which, at the date of the passing of the resolution, have
not been taken or agreed to be taken by any person and reduce the amount of its
authorised share capital by the amount of the shares so cancelled.
46. Fractions on consolidation.
Subject to the provisions of these Articles, whenever as a result of a
consolidation of shares any members would become entitled to fractions of a
share, the Directors may sell, on behalf of those members, the shares
representing the fractions for the best price reasonably obtainable to any
person and distribute the proceeds of sale in due proportion among those members
(except that the Directors may in such event determine that amounts of or
equivalent to IR(pound)3 or less shall not be so distributed but shall be
retained for the benefit of the Company), and the Directors may authorise some
person to execute an instrument of transfer of the shares to, or in accordance
with the directions of, the purchaser. The transferee shall not be bound to see
to the application of the purchase money nor shall his title to the shares be
affected by any irregularity in or invalidity of the proceedings in reference to
the sale.
47. Reduction of capital.
The Company, by special resolution, may reduce its share capital, any capital
redemption reserve fund or any share premium account in any manner and with, and
subject to, any incident authorised, and consent required, by law.
48. Purchase of shares.
Subject to the provisions of the Acts and of these Articles, the Company may
purchase all or any of its own shares of any class, including any redeemable
shares. The Company shall not exercise any authority granted under Section 215
of the 1990 Act to make market purchases of its own shares unless the authority
required by such Section shall have been granted by a special resolution of the
Company. The Company shall not be required to select the shares to be purchased
rateably or in any other particular manner as between the holders of shares of
the same class or as between the holders of shares of different classes. Subject
as aforesaid, the Company may cancel any shares so purchased or may hold them as
treasury shares and reissue any such treasury shares as shares of any class or
classes or cancel them. Notwithstanding anything to the contrary contained in
these Articles, the rights attached to any class of shares shall be deemed not
to be varied by anything done by the Company pursuant to this Article.
PART X - GENERAL MEETINGS
49. Annual general meetings.
The Company shall hold in each year a general meeting as its annual general
meeting in addition to any other meeting in that year and shall specify the
meeting as such in the notices calling it. Not more than fifteen months shall
elapse between the date of one annual general meeting and that of the next.
50. Extraordinary general meetings.
All general meetings other than annual general meetings shall be called
extraordinary general meetings.
51. Convening general meetings.
The Directors may convene general meetings. Extraordinary general meetings may
also be convened on such requisition, or in default may be convened by such
requisitionists, and in such manner as may be provided by the Acts. If at any
time there are not within the State sufficient Directors capable of acting to
form a quorum, any Director or any two members of the Company may convene an
extraordinary general meeting in the same manner as nearly as possible as that
in which general meetings may be convened by the Directors.
52. Notice of general meetings.
(a) Subject to the provisions of the Acts allowing a general meeting to be
called by shorter notice, an annual general meeting and an extraordinary general
meeting called for the passing of a special resolution shall be called by at
least twenty-one Clear Days' notice and all other extraordinary general meetings
shall be called by at least fourteen Clear Days' notice.
(b) Any notice convening a general meeting shall specify the time and place of
the meeting and, in the case of special business, the general nature of that
business and, in reasonable prominence, that a member entitled to attend and
vote is entitled to appoint a proxy to attend, speak and vote in his place and
that a proxy need not be a member of the Company. It shall also give particulars
of any Directors who are to retire by rotation or otherwise at the meeting and
of any persons who are recommended by the Directors for appointment or
re-appointment as Directors at the meeting, or in respect of whom notice has
been duly given to the Company of the intention to propose them for appointment
or re-appointment as Directors at the meeting. Subject to any restrictions
imposed on any shares, the notice shall be given to all the members and to the
Directors and the Auditors.
(c) The accidental omission to give notice of a meeting to, or the non-receipt
of notice of a meeting by, any person entitled to receive notice shall not
invalidate the proceedings at the meeting.
(d) Where, by any provision contained in the Acts, extended notice is required
of a resolution, the resolution shall not be effective (except where the
Directors of the Company have resolved to submit it) unless notice of the
intention to move it has been given to the Company not less than twenty-eight
days (or such shorter period as the Acts permit) before the meeting at which it
is moved, and the Company shall give to the members notice of any such
resolution as required by and in accordance with the provisions of the Acts.
PART XI - PROCEEDINGS AT GENERAL MEETINGS
53. Quorum for general meetings.
(a) No business other than the appointment of a chairman shall be transacted at
any general meeting unless a quorum of members is present at the time when the
meeting proceeds to business. Except as provided in relation to an adjourned
meeting, three persons entitled to vote upon the business to be transacted, each
being a member or a proxy for a member or a duly authorised representative of a
corporate member, shall be a quorum.
(b) If such a quorum is not present within half an hour from the time appointed
for the meeting, or if during a meeting a quorum ceases to be present, the
meeting shall stand adjourned to the same day in the next week at the same time
and place, or to such time and place as the Directors may determine. If at the
adjourned meeting such a quorum is not present within half an hour from the time
appointed for the meeting, the meeting, if convened otherwise than by resolution
of the Directors, shall be dissolved, but if the meeting shall have been
convened by resolution of the Directors, two persons entitled to be counted in a
quorum present at the meeting shall be a quorum.
54. Special business.
All business shall be deemed special that is transacted at an extraordinary
general meeting. All business that is transacted at an annual general meeting
shall also be deemed special, with the exception of declaring a dividend, the
consideration of the accounts, balance sheets and reports of the Directors and
Auditors, the election of Directors in the place of those retiring, the fixing
of the remuneration of the Directors, the re-appointment of the retiring
Auditors and the fixing of the remuneration of the Auditors.
55. Chairman of general meetings.
(a) The chairman of the board of Directors or, in his absence, the deputy
chairman (if any) or, in his absence, some other Director nominated by the
Directors shall preside as chairman at every general meeting of the Company. If
at any general meeting none of such persons shall be present within fifteen
minutes after the time appointed for the holding of the meeting and willing to
act, the Directors present shall elect one of their number to be chairman of the
meeting and, if there is only one Director present and willing to act, he shall
be chairman.
(b) If at any meeting no Director is willing to act as chairman or if no
Director is present within fifteen minutes after the time appointed for holding
the meeting, the members present and entitled to vote shall choose one of the
members personally present to be chairman of the meeting.
56. Directors' and Auditors' right to attend general meetings.
A Director shall be entitled, notwithstanding that he is not a member, to attend
and speak at any general meeting and at any separate meeting of the Holders of
any class of shares in the Company. The Auditors shall be entitled to attend any
general meeting and to be heard on any part of the business of the meeting which
concerns them as the Auditors.
57. Adjournment of general meetings.
The chairman, with the consent of a meeting at which a quorum is present, may
(and if so directed by the meeting, shall) adjourn the meeting from time to time
(or sine die) and from place to place, but no business shall be transacted at
any adjourned meeting other than business which might properly have been
transacted at the meeting had the adjournment not taken place. Where a meeting
is adjourned sine die, the time and place for the adjourned meeting shall be
fixed by the Directors. When a meeting is adjourned for fourteen days or more or
sine die, at least seven Clear Days' notice shall be given specifying the time
and meeting and the general nature of the business to be transacted. Save as
aforesaid it shall not be necessary to give any notice of an adjourned meeting.
58. Determination of resolutions.
At any general meeting a resolution put to the vote of the meeting shall be
decided on a show of hands unless before, or on the declaration of the result
of, the show of hands a poll is duly demanded. Unless a poll is so demanded a
declaration by the chairman that a resolution has been carried or carried
unanimously, or by a particular majority, or lost, or not carried by a
particular majority and an entry to that effect in the minutes of the meeting
shall be conclusive evidence of the fact without proof of the number or
proportion of the votes recorded in favour of or against the resolution. The
demand for a poll may be withdrawn before the poll is taken but only with the
consent of the chairman, and a demand so withdrawn shall not be taken to have
invalidated the result of a show of hands declared before the demand was made.
59. Entitlement to demand poll.
Subject to the provisions of the Acts, a poll may be demanded:-
(a) by the chairman of the meeting;
(b) by at least three members present (in person or by proxy) having the right
to vote at the meeting;
(c) by any member or members present (in person or by proxy) representing not
less than one-tenth of the total voting rights of all the members having the
right to vote at the meeting; or
(d) by a member or members present (in person or by proxy) holding shares in the
Company conferring the right to vote at the meeting being shares on which an
aggregate sum has been paid up equal to not less than one-tenth of the total sum
paid up on all the shares conferring that right.
60. Taking of a poll.
(a) Save as provided in paragraph (b) of this Article, a poll shall be taken in
such manner as the chairman directs and he may appoint scrutineers (who need not
be members) and fix a time and place for declaring the result of the poll. The
result of the poll shall be deemed to be the resolution of the meeting at which
the poll was demanded.
(b) A poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith. A poll demanded on any other question
shall be taken either forthwith or at such time (not being more than thirty days
after the poll is demanded) and place as the chairman of the meeting may direct.
The demand for a poll shall not prevent the continuance of a meeting for the
transaction of any business other than the question on which the poll was
demanded. If a poll is demanded before the declaration of the result of a show
of hands and the demand is duly withdrawn, the meeting shall continue as if the
demand had not been made.
(c) No notice need be given of a poll not taken forthwith if the time and place
at which it is to be taken are announced at the meeting at which it is demanded.
In any other case at least seven Clear Days' notice shall be given specifying
the time and place at which the poll is to be taken.
61. Votes of members.
Votes may be given either personally or by proxy. Subject to any rights or
restrictions for the time being attached to any class or classes of shares, on a
show of hands every member present in person and every proxy shall have one
vote, so, however, that no individual shall have more than one vote, and on a
poll every member shall have one vote for every share carrying voting rights of
which he is the Holder. On a poll a member entitled to more than one vote need
not cast all his votes or cast in the same way all the votes cast by him.
62. Chairman's casting vote.
Where there is an equality of votes, whether on a show of hands or on a poll,
the chairman of the meeting at which the show of hands takes place or at which
the poll is demanded shall be entitled to a casting vote in addition to any
other vote he may have.
63. Voting by joint Holders.
Where there are joint Holders of a share, the vote of the senior who tenders a
vote, whether in person or by proxy, in respect of such share shall be accepted
to the exclusion of the votes of the other joint Holders; and for this purpose
seniority shall be determined by the order in which the names of the Holders
stand in the Register in respect of the share.
64. Voting by incapacitated Holders.
A member of unsound mind, or in respect of whom an order has been made by any
court having jurisdiction (whether in the State or elsewhere) in matters
concerning mental disorder, may vote, whether on a show of hands or on a poll,
by his committee, receiver, guardian or other person appointed by that court and
any such committee, receiver, guardian or other person may vote by proxy on a
show of hands or on a poll. Evidence to the satisfaction of the Directors of the
authority of the person claiming to exercise the right to vote shall be
deposited at the Office, or at such other place as is specified in accordance
with these Articles for the deposit of instruments of proxy, not less than
forty-eight hours before the time appointed for holding the meeting or adjourned
meeting at which the right to vote is to be exercised and in default the right
to vote shall not be exercisable.
65. Default in payment of calls.
Unless the Directors otherwise determine, no member shall be entitled to vote at
any general meeting or any separate meeting of the Holders of any class of
shares in the Company, either in person or by proxy, or to exercise any
privilege as a member in respect of any share held by him unless all moneys then
payable by him in respect of that share have been paid.
66. Restriction of voting and other rights.
(a) If at any time the Directors shall determine that a Specified Event (as
defined in paragraph (g)) shall have occurred in relation to any share or shares
the Directors may serve a notice to such effect on the Holder or Holders
thereof. Upon the expiry of 14 days from the service of any such notice (in
these Articles referred to as a "Restriction Notice"), for so long as such
Restriction Notice shall remain in force:-
(i) no Holder or Holders of the share or shares specified in such Restriction
Notice (in these Articles referred to as "Specified Shares") shall be entitled
to attend, speak or vote either personally, by representative or by proxy at any
general meeting of the Company or at any separate general meeting of the Holders
of the class of shares concerned or to exercise any other right conferred by
membership in relation to any such meeting; and
(ii) the Directors shall, where the Specified Shares represent not less than
0.25 per cent of the class of shares concerned, be entitled:-
A. to withhold payment of any dividend or other amount payable (including shares
issuable in lieu of dividends) in respect of the Specified Shares; and/or
B. to refuse to register any transfer of the Specified Shares or any
renunciation of any allotment of new shares or debentures made in respect
thereof unless such transfer or renunciation is shown to the satisfaction of the
Directors to be an arm's length transfer or a renunciation to another beneficial
owner unconnected with the Holder or any person appearing to have an interest in
the Specified Shares (subject always to the provisions of paragraph (h)).
(b) A Restriction Notice shall be cancelled by the Directors as soon as
reasonably practicable, but in any event not later than forty-eight hours, after
the Holder or Holders concerned shall have remedied the default by virtue of
which the Specified Event shall have occurred. A Restriction Notice in respect
of any Specified Share shall automatically cease to have effect in respect of
any share transferred to a bona fide unconnected third party upon registration
of the relevant transfer provided that a Restriction Notice shall not cease to
have effect in respect of any transfer where no change in the beneficial
ownership of the Specified Share shall occur and for this purpose it shall be
assumed that no such change has occurred where a transfer form in respect of the
Specified Share is presented for registration having been stamped at a reduced
rate of stamp duty by virtue of the transferor or transferee claiming to be
entitled to such reduced rate as a result of the transfer being one where no
beneficial interest passes.
(c) The Directors shall cause a notation to be made in the Register against the
name of any Holder or Holders in respect of whom a Restriction Notice shall have
been served indicating the number of Specified Shares specified in such
Restriction Notice and shall cause such notation to be deleted upon cancellation
or cesser of such Restriction Notice.
(d) Any determination of the Directors and any notice served by them pursuant to
the provisions of this Article shall be conclusive as against the Holder or
Holders of any share and the validity of any notice served by the Directors in
pursuance of this Article shall not be questioned by any person.
(e) If, while any Restriction Notice shall remain in force in respect of any
Specified Shares, any further shares shall be issued in respect thereof pursuant
to a capitalisation issue under these Articles, the Restriction Notice shall be
deemed also to apply to such Holder or Holders in respect of such further shares
which shall as from the date of issue thereof form part of the Specified Shares
for all purposes of this Article.
(f) On the cancellation of any Restriction Notice, the Company shall pay to the
Holder (or, in the case of joint Holders, the first named Holder) on the
Register in respect of the Specified Shares as of the record date for any such
dividend so withheld, all such amounts as have been withheld pursuant to the
provisions of this Article subject always to the provisions of Article 112 which
shall be deemed to apply, mutatis mutandis, to any amount so withheld.
(g) For the purpose of these Articles the expression "Specified Event" in
relation to any share shall mean either of the following events:-
(i) the failure of the Holder or Holders thereof to pay any call or instalment
of a call in the manner and at the time appointed for payment thereof;
(ii) the failure by the Holder thereof or any of the Holders thereof to comply,
to the satisfaction of the Directors, with all or any of the terms of Article 7
in respect of any notice or notices given to him or any of them thereunder; or
(iii) the failure by the Holder thereof or any of the Holders thereof to comply,
to the satisfaction of the Directors, with the terms of any notice given to him
or any of them pursuant to the provisions of Section 81 of the 1990 Act.
(h) For the purposes of paragraph (a)(ii)B, the Directors shall be required to
accept, as an arm's length transfer to another beneficial owner, any transfer
which is presented for registration in pursuance of:-
(i) any bona fide sale made on any bona fide stock exchange, unlisted securities
market or over-the-counter exchange; or
(ii) the acceptance of any general offer made to all the Holders of any class of
shares in the capital of the Company.
67. Time for objection to voting.
No objection shall be raised to the qualification of any voter except at the
meeting or adjourned meeting at which the vote objected to is tendered and every
vote not disallowed at such meeting shall be valid. Any such objection made in
due time shall be referred to the chairman of the meeting whose decision shall
be final and conclusive.
68. Appointment of proxy.
(a) Every member entitled to attend and vote at a general meeting may appoint a
proxy to attend, speak and vote on his behalf. The instrument appointing a proxy
shall be in writing in any usual form or in any other form which the Directors
may approve and shall be executed by or on behalf of the appointor. The
signature on such instrument need not be witnessed. A body corporate may execute
a form of proxy under its common seal or under the hand of a duly authorised
officer thereof. A proxy need not be a member of the Company.
(b) The Directors may, if they think fit, at any time and from time to time
permit the appointment and revocation of proxies to be made or transmitted by
telex or facsimile upon and subject to such terms and conditions as the
Directors shall determine, and the provisions of paragraph (a) and of Articles
70 and 71 shall be deemed not to apply to any appointment or revocation of a
proxy made or transmitted in accordance with any such permission to the extent
that those provisions are inconsistent with that permission.
69. Bodies corporate acting by representatives at meetings.
Any body corporate which is a member of the Company may by resolution of its
Directors or other governing body authorise such person as it thinks fit to act
as its representative at any meeting of the Company or of any class of members
of the Company and the person so authorised shall be entitled to exercise the
same powers on behalf of the body corporate which he represents as that body
corporate could exercise if it were an individual member of the Company.
70. Deposit and effect of proxy instruments.
(a) The instrument appointing a proxy and any authority under which it is
executed (or a copy of such authority, certified notarially or in some other way
approved by the Directors), shall be deposited at the Office or (at the option
of the member) at such other place or one of such other places (if any) as may
be specified for that purpose in or by way of note to the notice convening the
meeting (or any instrument of proxy sent out by the Company in relation to the
meeting) not less than forty-eight hours before the time appointed for the
holding of the meeting or adjourned meeting or (in the case of a poll taken
otherwise than at or on the same day as the meeting or adjourned meeting) for
the taking of the poll at which it is to be used, and in default shall not be
treated as valid. Provided that:-
(i) in the case of a meeting which is adjourned to, or a poll which is to be
taken on, a date which is less than seven days after the date of the meeting
which was adjourned or at which the poll was demanded, it shall be sufficient if
the instrument of proxy and any such authority and certification thereof as
aforesaid is lodged with the Secretary at the commencement of the adjourned
meeting or the taking of the poll; and
(ii) an instrument of proxy relating to more than one meeting (including any
adjournment thereof) having once been so delivered for the purposes of any
meeting shall not require to be delivered again for the purposes of any
subsequent meeting to which it relates.
(b) Deposit of an instrument of proxy in respect of a meeting shall not preclude
a member from attending and voting at the meeting or at any adjournment thereof.
The instrument appointing a proxy shall be valid, unless the contrary is stated
therein, as well for any adjournment of the meeting as for the meeting to which
it relates.
71. Effect of revocation of proxy or of authorisation.
(a) A vote given or poll demanded by a proxy or the duly authorised
representative of a body corporate shall be valid notwithstanding the previous
death or insanity of the principal, or the revocation of the instrument of proxy
or of the authority under which the instrument of proxy was executed or of the
resolution authorising the representative to act or the transfer of the share in
respect of which the instrument of proxy or the authorisation of the
representative to act was given, provided that no intimation in writing of such
death, insanity, revocation or transfer shall have been received by the Company
at the Office, or at such other place or one of such other places (if any) at
which the instrument of proxy could have been duly deposited, at least one hour
before the commencement of the meeting or adjourned meeting at which the
instrument of proxy is used or at which the representative acts.
(b) The Directors may send, at the expense of the Company, by post or otherwise,
to the members instruments of proxy (with or without stamped envelopes for their
return) for use at any general meeting or at any class meeting, either in blank
or nominating any one or more of the Directors or any other persons in the
alternative. If for the purpose of any meeting invitations to appoint as proxy a
person or one of a number of persons specified in the invitations are issued at
the expense of the Company, such invitations shall be issued to all (and not to
some only) of the members entitled to be sent a notice of the meeting and to
vote thereat by proxy.
72. Members resolutions in writing.
Subject to Section 141 of the 1963 Act, a resolution in writing signed by all
the members for the time being entitled to receive notice of and to attend and
vote at general meetings (or being bodies corporate, by their duly authorised
representatives) shall be as valid as if the same had been passed at a general
meeting of the company duly convened and held and may consist of several
documents in the like form each signed by one or more of such members.
PART XII - DIRECTORS
73. Number of Directors.
Unless otherwise determined by the Company in general meeting, the number of
Directors shall not be more than twelve nor less than two. The continuing
Directors may act notwithstanding any vacancy in their body, provided that if
the number of the Directors is reduced below the prescribed minimum the
remaining Director or Directors shall appoint forthwith an additional Director
or additional Directors to make up such minimum or shall convene a general
meeting of the Company for the purpose of making such appointment. If there be
no Director or Directors able or willing to act then any two shareholders may
summon a general meeting for the purpose of appointing Directors.
74. Share qualification.
A Director shall not require a share qualification.
75. Ordinary remuneration of Directors.
The ordinary remuneration of the Directors shall be determined from time to time
by an ordinary resolution of the Company and shall be divisible (unless such
resolution shall provide otherwise) among the Directors as they may agree, or,
failing agreement, equally, except that any Director who shall hold office for
part only of the period in respect of which such remuneration is payable shall
be entitled only to rank in such division for a proportion of the remuneration
related to the period during which he has held office.
76. Special remuneration of Directors.
Any Director who holds any executive office (including for this purpose the
office of chairman or deputy chairman of the board of Directors) or who serves
on any committee, or who otherwise performs services which in the opinion of the
Directors are outside the scope of the ordinary duties of a Director, may be
paid such extra remuneration by way of salary, commission or otherwise as the
Directors may determine.
77. Expenses of Directors.
The Directors may be paid all travelling, hotel and other expenses properly
incurred by them in connection with their attendance at meetings of Directors or
committees of Directors or general meetings or separate meetings of the Holders
of any class of shares or of debentures of the Company or otherwise in
connection with the discharge of their duties.
PART XIII - POWERS OF DIRECTORS
78. Directors' powers.
Subject to the provisions of the Acts, the memorandum of association of the
Company and these Articles and to any directions given by the members given by
ordinary resolution, not being inconsistent with these Articles or with the
Acts, the business of the Company shall be managed by the Directors who may do
all such acts and things and exercise all the powers of the Company as are not
by the Act or by these Articles required to be done or exercised by the Company
in general meeting. No alteration of the memorandum of association of the
Company or of these Articles and no such direction shall invalidate any prior
act of the Directors which would have been valid if that alteration had not been
made or that direction had not been given. The powers given by this Article
shall not be limited by any special power given to the Directors by these
Articles and a meeting of Directors at which a quorum is present may exercise
all powers exercisable by the Directors.
79. Power to delegate.
Without prejudice to the generality of the last preceding Article, the Directors
may delegate any of their powers to any managing Director or any Director
holding any other executive office and to any committee consisting of one or
more Directors together with such other persons (if any) as may be appointed to
such committee by the Directors provided that a majority of the members of each
committee appointed by the Directors shall at all times consist of Directors and
that no resolution of any such committee shall be effective unless a majority of
the members of the committee present at the meeting at which it was passed are
Directors. Any such delegation may be made subject to any conditions that the
Directors may impose, and either collaterally with or to the exclusion of their
own powers and may be revoked. Subject to any such conditions, the proceedings
of a committee with two or more members shall be governed by the provisions of
these Articles regulating the proceedings of Directors so far as they are
capable of applying.
80. Appointment of attorneys.
The Directors, from time to time and at any time by power of attorney under
seal, may appoint any company, firm or person or fluctuating body of persons,
whether nominated directly or indirectly by the Directors, to be the attorney or
attorneys of the Company for such purposes and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the Directors under
these Articles) and for such period and subject to such conditions as they may
think fit. Any such power of attorney may contain such provisions for the
protection of persons dealing with any such attorney as the Directors may think
fit and may authorise any such attorney to delegate all or any of the powers,
authorities and discretions vested in him.
81. Local management.
Without prejudice to the generality of Article 78, the Directors may establish
any committees, local boards or agencies for managing any of the affairs of the
Company, either in the State or elsewhere, and may appoint any persons to be
members of such committees, local boards or agencies and may fix their
remuneration and may delegate to any committee, local board or agent any of the
powers, authorities and discretions vested in the Directors with power to
sub-delegate and any such appointment or delegation may be made upon such terms
and subject to such conditions as the Directors may think fit, and the Directors
may remove any person so appointed, and may annul or vary any such delegation,
but no person dealing in good faith with any such committee, local board or
agency, without notice of any such removal, annulment or variation shall be
affected thereby.
82. Borrowing powers.
The Directors may exercise all the powers of the Company to borrow or raise
money and to mortgage or charge its undertaking, property, assets, and uncalled
capital or any part thereof and, subject to the Acts, to issue debentures,
debenture stock and other securities whether outright or as collateral security
for any debt, liability or obligation of the Company or of any third party,
without any limitation as to amount.
83. Execution of negotiable instruments.
All cheques, promissory notes, drafts, bills of exchange and other negotiable
instruments and all receipts for moneys paid to the Company shall be signed,
drawn, accepted, endorsed or otherwise executed, as the case may be, by such
person or persons and in such manner as the Directors shall determine from time
to time by resolution.
PART XIV - APPOINTMENT AND RETIREMENT OF DIRECTORS
84. Classes of Directors.
(a) The Board of Directors shall be and is divided into three classes
("Classes"), namely Class I, Class II and Class III. No one Class shall have
more than one Director more than any other Class. If a fraction is contained in
the quotient arrived at by dividing by three the number of Directors holding
office at any time, then, if such fraction is one-third, the extra Director
shall be a member of Class II, and if such fraction is two-thirds, one of the
two extra Directors shall be a member of Class I and the other shall be a member
of Class II, unless otherwise provided from time to time by resolution adopted
by the Board of Directors.
(b) The Directors holding office at the date of adoption of these Articles (the
"initial Directors") shall be allocated amongst the Classes as follows:
Class I: William F. Cunningham
David P. Mixer
Fergus McGovern
Class II: John A. Blanchard
Brian E. Boyle
Richard A. Licursi
John W. Sidgmore
Class III: John J. Boyle
James B. Murray
Bruce A. Saville.
(c) Unless they or any of them shall have vacated office previously in
accordance with the provisions of these Articles, the Directors in each Class
shall retire from office at the third annual general meeting following the
annual general meeting at which Directors in that Class were last elected;
provided that each initial Director in Class I shall retire from office at the
annual general meeting next following the end of the Company's financial year
ending December 31, 1995; each initial Director in Class II shall retire from
office at the annual general meeting next following the end of the Company's
financial year ending December 31, 1996; and each initial Director in Class III
shall retire from office at the annual general meeting next following the
financial year ending December 31, 1997.
(d) A Director who retires at an annual general meeting may offer himself for
re-election. The Company may, at the meeting at which a Director retires as
aforesaid, fill the vacated office by electing a person thereto, and in default
the retiring Director shall, if offering himself for re-election, be deemed to
have been re-elected unless at such meeting it is expressly resolved not to fill
such vacated office or unless a resolution for the re-election of such Director
has been put to the meeting and lost. A Director who retires at an annual
general meeting and is not re-elected shall retain office until the meeting
appoints someone in his place or, if it does not do so, until the end of the
meeting.
(e) A retiring Director who is re-elected shall remain allocated to the Class to
which he was allocated prior to his retirement. A person who is elected a
Director in place of a retiring Director or who is appointed a Director to fill
a casual vacancy or in place of a Director removed from office under Article 88
shall be allocated to the Class to which the retiring Director, the vacating
Director or, as the case may be, the Director so removed had been allocated.
Subject to Article 84(a), a person who is appointed a Director under Article 73
or as an additional Director under Article 86 shall, if appointed by the
members, be allocated to such Class as the members may determine at the meeting
at which he is appointed or, failing such determination, as the Directors shall
determine, and shall, if appointed by the Directors, be appointed to such Class
as they shall determine.
85. Eligibility for appointment.
(a) No person shall be elected or appointed a Director at any general meeting
unless he is recommended by the Directors or, not less than six nor more than
twenty Clear Days before the date appointed for the meeting, notice executed by
a member qualified to vote at the meeting has been given to the Company of the
intention to propose that person for election or appointment stating the
particulars which, if he were so elected or appointed, would be required to be
included in the Company's register of Directors together with notice executed by
that person of his willingness to be elected or appointed.
(b) No Director shall be required to retire on account of age.
86. Appointment of additional Directors.
Subject to any such appointment not causing the number of Directors fixed by or
in accordance with these Articles to be exceeded and subject as otherwise
provided by these Articles:
(a) the Company by ordinary resolution may appoint a person who is willing to
act to be a Director either to fill a casual vacancy or as an additional
Director; and
(b) the Directors may appoint a person who is willing to act to be a Director
either to fill a casual vacancy or as an additional Director.
PART XV - DISQUALIFICATION AND REMOVAL OF
DIRECTORS
87. Disqualification of Directors.
The office of a Director shall be vacated ipso facto if:-
(a) he ceases to be a Director or is prohibited from being a Director, by virtue
of any provision of the Acts or if the court makes a declaration in respect of
him under Section 150 of the 1990 Act;
(b) he becomes bankrupt or makes any arrangement or composition with his
creditors generally;
(c) in the opinion of a majority of his co-Directors, he becomes incapable by
reason of mental disorder of discharging his duties as a Director;
(d) (not being a Director holding for a fixed term an executive office in his
capacity as a Director) he resigns his office by notice to the Company;
(e) he is convicted of an indictable offence, unless the Directors otherwise
determine;
(f) he shall have been absent for more than six consecutive months without
permission of the Directors from meetings of the Directors held during that
period and the Directors pass a resolution that by reason of such absence he has
vacated office;
(g) he is required in writing by all his co-Directors to resign.
88. Removal of Directors.
The Company, by ordinary resolution of which extended notice has been given in
accordance with the provisions of the Acts, may remove any Director before the
expiry of his period of office notwithstanding anything in these Articles or in
any agreement between the Company and such Director and may, if thought fit, by
ordinary resolution appoint another Director in his stead. Nothing in this
Article shall be taken as depriving a person removed hereunder of compensation
or damages payable to him in respect of the termination of his appointment as
Director or of any appointment terminating with that of Director.
PART XVI - DIRECTORS' OFFICES AND INTERESTS
89. Executive offices.
(a) The Directors may appoint one or more of their body to the office of
Managing Director or Joint Managing Director or to any other executive office
under the Company (including, where considered appropriate, the office of
chairman) on such terms and for such period as they may determine and, without
prejudice to the terms of any contract entered into in any particular case, may
revoke any such appointment at any time.
(b) A Director holding any such executive office shall receive such
remuneration, whether in addition to or in substitution for his ordinary
remuneration as a Director and whether by way of salary, commission,
participation in profits or otherwise or partly in one way and partly in
another, as the Directors may determine.
(c) The appointment of any Director to the office of chairman or Managing or
Joint Managing Director shall determine automatically if he ceases to be a
Director but without prejudice to any claim for damages for breach of any
contract of service between him and the Company.
(d) The appointment of any Director to any other executive office shall not
determine automatically if he ceases from any cause to be a Director unless the
contract or resolution under which he holds office shall expressly state
otherwise, in which event such determination shall be without prejudice to any
claim for damages for breach of any contract of service between him and the
Company.
(e) A Director may hold any other office or place of profit under the Company
(except that of Auditor) in conjunction with his office of Director, and may act
in a professional capacity to the Company, on such terms as to remuneration and
otherwise as the Directors shall arrange.
90. Directors' interests.
(a) Subject to the provisions of the Acts, and provided that he has disclosed to
the Directors the nature and extent of any material interest of his, a Director
notwithstanding his office:-
(i) may be a party to, or otherwise interested in, any transaction or
arrangement with the Company or any subsidiary or associated company thereof or
in which the Company or any subsidiary or associated company thereof is
otherwise interested;
(ii) may be a Director or other officer of, or employed by, or a party to any
transaction or arrangement with, or otherwise interested in, any body corporate
promoted by the Company or in which the Company or any subsidiary or associated
company thereof is otherwise interested; and
(iii) shall not be accountable, by reason of his office, to the Company for any
remuneration or other benefit which he derives from any such office or
employment or from any such transaction or arrangement or from any interest in
any such body corporate and no such transaction or arrangement shall be liable
to be avoided on the ground of any such interest or benefit.
(b) No Director or intending Director shall be disqualified by his office from
contracting with the Company either as vendor, purchaser or otherwise, nor shall
any such contract or any contract or arrangement entered into by or on behalf of
the other Company in which any Director shall be in any way interested be
avoided nor shall any Director so contracting or being so interested be liable
to account to the Company for any profit realised by any such contract or
arrangement by reason of such Director holding that office or of the fiduciary
relationship thereby established. The nature of a Director's interest, whether
direct or indirect, must be declared by him at the meeting of the Directors at
which the question of entering into the contract or arrangement is first taken
into consideration, or if the Director was not at the date of that meeting
interested in the proposed contract or arrangement at the next meeting of the
Directors held after he became so interested, and in a case where the Director
becomes interested in a contract or arrangement after it is made at the first
meeting of the Directors held after he becomes so interested.
(c) A copy of every declaration made and notice given under this Article shall
be entered within three days after the making or giving thereof in a book kept
for this purpose. Such book shall be open for inspection without charge by any
Director, Secretary, Auditor or member of the Company at the Office and shall be
produced at every general meeting of the Company and at any meeting of the
Directors if any Director so requests in sufficient time to enable the book to
be available at the meeting.
(d) For the purposes of this Article:-
(i) a general notice given to the Directors that a Director is to be regarded as
having an interest of the nature and extent specified in the notice in any
transaction or arrangement in which a specified person or class of persons is
interested shall be deemed to be a disclosure that the Director has an interest
in any such transaction of the nature and extent so specified; and
(ii) an interest of which a Director has no knowledge and of which it is
unreasonable to expect him to have knowledge shall not be treated as an interest
of his.
91. Restriction on Directors' voting.
(a) Save as otherwise provided by these Articles, a Director shall not vote at a
meeting of the Directors or a committee of Directors on any resolution
concerning a matter in which he has, directly or indirectly, an interest which
is material (otherwise than by virtue of his interests in shares or debentures
or other securities of, or otherwise in or through, the Company) or a duty which
conflicts or may conflict with the interests of the Company. A Director shall
not be counted in the quorum present at a meeting in relation to any such
resolution on which he is not entitled to vote.
(b) A Director shall be entitled (in the absence of some other material interest
than is indicated below) to vote (and be counted in the quorum) in respect of
any resolution concerning any of the following matters, namely:-
(i) the giving of any security, guarantee or indemnity to him in respect of
money lent by him to the Company or any of its subsidiary or associated
companies or obligations incurred by him at the request of or for the benefit of
the Company or any of its subsidiary or associated companies;
(ii) the giving of any security, guarantee or indemnity to a third party in
respect of a debt or obligation of the Company or any of its subsidiary or
associated companies for which he himself has assumed responsibility in whole or
in part and whether alone or jointly with others under a guarantee or indemnity
or by the giving of security;
(iii) any proposal concerning any offer of shares or debentures or other
securities of or by the Company or any of its subsidiary or associated companies
for subscription, purchase or exchange in which offer he is or is to be
interested as a holder of securities or as a participant in the underwriting or
sub-underwriting thereof;
(iv) any proposal concerning any other company in which he is interested,
directly or indirectly and whether as an officer or shareholder or otherwise
howsoever, provided that he is not the Holder of or beneficially interested in
1% or more of the issued shares of any class of such company or of the voting
rights available to members of such company (or of a third company through which
his interest is derived) (any such interest being deemed for the purposes of
this Article to be a material interest in all circumstances);
(v) any proposal concerning the adoption, modification or operation of a
superannuation fund or retirement benefits scheme under which he may benefit and
which has been approved by or is subject to and conditional upon approval for
taxation purposes by the appropriate Revenue authorities;
(vi) any proposal concerning the adoption, modification or operation of any
scheme for enabling employees (including full time executive Directors) of the
Company and/or any subsidiary thereof to acquire shares in the Company or any
arrangement for the benefit of employees of the Company or any of its
subsidiaries under which the Director benefits or may benefit;
(vii) the granting of any such indemnity, or the discharge of the cost of any
such insurance cover, as is referred to in Article 130.
(c) Where proposals are under consideration concerning the appointment
(including fixing or varying the terms of appointment) of two or more Directors
to offices or employments with the Company or any company in which the Company
is interested, such proposals may be divided and considered in relation to each
Director separately and in such case each of the Directors concerned (if not
debarred from voting under sub-paragraph (b) (iv) of this Article) shall be
entitled to vote (and be counted in the quorum) in respect of each resolution
except that concerning his own appointment.
(d) If a question arises at a meeting of Directors or of a committee of
Directors as to the materiality of a Director's interest or as to the right of
any Director to vote and such question is not resolved by his voluntarily
agreeing to abstain from voting, such question may be referred, before the
conclusion of the meeting, to the chairman of the meeting and his ruling in
relation to any Director other than himself shall be final and conclusive.
(e) For the purposes of this Article, an interest of a person who is the spouse
or a minor child of a Director shall be treated as an interest of the Director
and, in relation to an alternate Director, an interest of his appointor shall be
treated as an interest of the alternate Director.
(f) The Company by ordinary resolution may suspend or relax the provisions of
this Article to any extent or ratify any transaction not duly authorised by
reason of a contravention of this Article.
92. Entitlement to grant pensions.
The Directors may provide benefits, whether by way of pensions, gratuities or
otherwise, for any Director, former Director or other officer or former officer
of the Company or to any person who holds or has held any employment with the
Company or with any body corporate which is or has been a subsidiary or
associated company of the Company or a predecessor in business of the Company or
of any such subsidiary or associated company and to any member of his family or
any person who is or was dependent on him and may set up, establish, support,
alter, maintain and continue any scheme for providing all or any such benefits
and for such purposes any Director accordingly may be, become or remain a member
of, or rejoin, any scheme and receive or retain for his own benefit all benefits
to which he may be or become entitled thereunder. The Directors may pay out of
the funds of the Company any premiums, contributions or sums payable by the
Company under the provisions of any such scheme in respect of any of the persons
or class of persons above referred to who are or may be or become members
thereof.
PART XVII - PROCEEDINGS OF DIRECTORS
93. Convening and regulation of Directors' meetings.
(a) Subject to the provisions of these Articles, the Directors may regulate
their proceedings as they think fit. A Director may, and the Secretary at the
request of a Director shall, call a meeting of the Directors. Any Director may
waive notice of any meeting and any such waiver may be retrospective. If the
Directors so resolve, it shall not be necessary to give notice of a meeting of
Directors to any Director who, being a resident of the State, is for the time
being absent from the State.
(b) Notice of a meeting of the Directors shall be deemed to be duly given to a
Director if it is given to him personally or by word of mouth or sent in writing
by delivery, post, cable, telegram, telex, telefax, electronic mail or any other
means of communication approved by the Directors to him at his last known
address or any other address given by him to the Company for this purpose.
94. Quorum for Directors' meetings.
(a) The quorum for the transaction of the business of the Directors may be fixed
by the Directors and unless so fixed at any other number shall be two.
(b) The continuing Directors or a sole Director may act notwithstanding any
vacancies in their number but if the number of Directors is less than the number
fixed as the quorum, they may act only for the purpose of filling vacancies or
of calling a general meeting.
95. Voting at Directors' meetings.
Questions arising at any meeting of Directors shall be decided by a majority of
votes. Where there is an equality of votes, the chairman of the meeting shall
have a second or casting vote.
96. Telecommunication meetings.
Any Director may participate in a meeting of the Directors or any committee of
the Directors by means of conference telephone or other telecommunications
equipment by means of which all persons participating in the meeting can hear
each other speak and such participation in a meeting shall constitute presence
in person at the meeting.
97. Chairman of board of Directors.
Subject to any appointment to the office of chairman of the board of Directors
made pursuant to these Articles, the Directors may elect a chairman of their
meetings and determine the period for which he is to hold office, but if no such
chairman is appointed or elected or if at any meeting any such chairman is
unwilling to act or is not present within five minutes after the time appointed
for holding the same the Directors present may choose one of their number to be
chairman of the meeting.
98. Validity of acts of Directors.
All acts done by any meeting of the Directors or of a committee of Directors or
by any person acting as a Director, notwithstanding that it be afterwards
discovered that there was some defect in the appointment of any such Director or
person acting as aforesaid, or that they or any of them were disqualified from
holding office or had vacated office, shall be as valid as if every such person
had been duly appointed and was qualified and had continued to be a Director and
had been entitled to vote.
99. Directors' resolutions or other documents in writing.
A resolution or other document in writing signed by all the Directors entitled
to receive notice of a meeting of Directors or of a committee of Directors shall
be as valid as if it had been passed at a meeting of Directors or (as the case
may be) a committee of Directors duly convened and held and may consist of
several documents in the like form each signed by one or more Directors.
PART XVIII - THE SECRETARY
100. Appointment of Secretary.
The Secretary shall be appointed by the Directors for such term, at such
remuneration and upon such conditions as they may think fit and any Secretary so
appointed may be removed by them. Anything required or authorised by the Acts or
these Articles to be done by the Secretary may be done, if the office is vacant
or there is for any other reason no Secretary readily available and capable of
acting, by or to any assistant or acting Secretary or, if there is no assistant
or acting secretary readily available and capable of acting, by or to any
officer of the Company authorised generally or specially in that behalf by the
Directors: Provided that any provision of the Acts or these Articles requiring
or authorising a thing to be done by or to a Director and the Secretary shall
not be satisfied by its being done by or to the same person acting both as a
Director and as, or in the place of, the Secretary.
PART XIX - THE SEAL
101. Use of Seal.
The Directors shall ensure that the Seal (including any official securities seal
kept pursuant to the Acts) shall be used only by the authority of the Directors
or of a committee authorised by the Directors.
102. Seal for use abroad.
The Company may exercise the powers conferred by the Acts with regard to having
an official seal for use abroad and such powers shall be vested in the
Directors.
103. Signature of sealed instruments.
Every instrument to which the Seal shall be affixed shall be signed by a
Director and shall also be signed by the Secretary or by a second Director or by
some other person appointed by the Directors for the purpose save that as
regards any certificates for shares or debentures or other securities of the
Company the Directors may determine by resolution, either generally or in any
particular case and subject to such restrictions as the Directors may determine,
that such signatures or either of them shall be dispensed with, or be printed
thereon or affixed thereto by some method or system of mechanical signature.
PART XX - DIVIDENDS AND RESERVES
104. Declaration of dividends.
Subject to the provisions of the Acts, the Company by ordinary
resolution may declare dividends in accordance with the respective
rights of the members, but no dividend shall exceed the amount
recommended by the Directors.
105. Interim and fixed dividends.
Subject to the provisions of the Acts, the Directors may declare and
pay interim dividends if it appears to them that they are justified by
the profits of the Company available for distribution. If the share
capital is divided into different classes, the Directors may declare
and pay interim dividends on shares which confer deferred or
non-preferred rights with regard to dividend as well as on shares
which confer preferential rights with regard to dividend, but subject
always to any restrictions for the time being in force (whether under
these Articles, under the terms of issue of any shares or under any
agreement to which the Company is a party, or otherwise) relating to
the application, or the priority of application, of the Company's
profits available for distribution or to the declaration or as the
case may be the payment of dividends by the Company. Subject as
aforesaid, the Directors may also pay at intervals settled by them any
dividend payable at a fixed rate if it appears to them that the
profits available for distribution justify the payment. Provided the
Directors act in good faith they shall not incur any liability to the
Holders of shares conferring preferred rights for any loss they may
suffer by the lawful payment of an interim dividend on any shares
having deferred or non-preferred rights.
106. Payment of dividends.
(a) Except as otherwise provided by the rights attached to shares, all
dividends shall be declared and paid according to the amounts paid up
or credited as paid up on the shares on which the dividend is paid.
Subject as aforesaid, all dividends shall be apportioned and paid
proportionately to the amounts paid or credited as paid on the shares
during any portion or portions of the period in respect of which the
dividend is paid; but, if any share is issued on terms providing that
it shall rank for dividend as from a particular date, such share shall
rank for dividend accordingly. For the purposes of this Article, no
amount paid on a share in advance of calls shall be treated as paid on
a share.
(b) If several persons are registered as joint Holders of any share,
any one of them may give effectual receipts for any dividend or other
moneys payable on or in respect of the share.
107. Deductions from dividends.
The Directors may deduct from any dividend or other moneys payable to
any member in respect of a share any moneys presently payable by him
to the Company in respect of that share.
108. Dividends in specie.
A general meeting declaring a dividend or bonus may direct, upon the
recommendation of the Directors, that it shall be satisfied wholly or
partly by the distribution of assets (and, in particular, of paid up
shares, debentures or debenture stock of any other company or in any
one or more of such ways) and the Directors shall give effect to such
resolution. Where any difficulty arises in regard to the
distribution, the Directors may settle the same as they think
expedient and in particular may issue fractional certificates and fix
the value for distribution of such specific assets or any part
thereof in order to adjust the rights of all the parties and may
determine that cash payments shall be made to any members upon the
footing of the value so fixed and may vest any such specific assets
in trustees upon trust for the persons entitled to the dividend as
the Directors think expedient, and generally may make such
arrangements for the allotment, acceptance and sale of such specified
assets or fractional certificates, or any part thereof, and otherwise
as they think fit.
109. Method of payment of dividends.
Any dividend or other moneys payable in respect of any share may be
paid by cheque or warrant sent by post, at the risk of the person or
persons entitled thereto, to the registered address of the Holder or,
where there are joint Holders, to the registered address of that one
of the joint Holders who is first named on the Register or to such
person and to such address as the Holder or joint Holders may in
writing direct. Every such cheque or warrant shall be made payable to
the order of the person to whom it is sent and payment of the cheque
or warrant shall be a good discharge to the Company. Any joint Holder
or other person jointly entitled to a share as aforesaid may give
receipts for any dividend or other moneys payable in respect of the
share. For the avoidance of doubt, a dividend may be paid by the
Company by way of a cheque which is crossed or which indicates by an
appropriate means that the cheque shall be lodged only to the account
of the payee. The Directors may also, in circumstances which they
consider appropriate, arrange for payment of dividends by electronic
funds transfer, bank transfer or by any other method selected by the
Directors from time to time and in such event the debiting of the
Company's account in respect of the appropriate amount shall be
deemed a good discharge of the Company's obligations in respect of
any payment made by any such methods.
110. Dividends not to bear interest.
No dividend or other moneys payable in respect of a share shall bear
interest against the Company unless otherwise provided by the rights
attached to the share.
111. Payment to Holders on a particular date.
Any resolution declaring a dividend on shares of any class, whether a
resolution of the Company in general meeting or a resolution of the
Directors, may specify that the same may be payable to the persons
registered as the Holders of such shares at the close of business on
a particular date, notwithstanding that it may be a date prior or
subsequent to that on which the resolution is passed, and thereupon
the dividend shall be payable to them in accordance with their
respective holdings so registered, but without prejudice to the
rights inter se of transferors and transferees of any such shares in
respect of such dividend. The provisions of this Article shall apply,
mutatis mutandis, to distributions and any allotment or issue of
shares or other securities or any grant of any other entitlement to
be effected in pursuance of these Articles. Any dividend, interest or
other sum payable which remains unclaimed for one year after having
been declared may be invested or otherwise made use of by the
Directors for the benefit of the Company until claimed.
112. Unclaimed dividends.
If the Directors so resolve, any dividend which has remained
unclaimed for twelve years from the date of its declaration shall be
forfeited and cease to remain owing by the Company. The payment by
the Directors of any unclaimed dividend or other moneys payable in
respect of a share into a separate account shall not constitute the
Company a trustee in respect thereof.
113. Reserves.
Before recommending any dividend, whether preferential or otherwise,
the Directors may carry to reserve out of the profits of the Company
such sums as they think proper. All sums standing to reserve may be
applied from time to time in the discretion of the Directors for any
purpose to which the profits of the Company may be properly applied
and at the like discretion may be either employed in the business of
the Company or invested in such investments as the Directors may
lawfully determine. The Directors may divide the reserve into such
special funds as they think fit and may consolidate into one fund any
special funds or any parts of any special funds into which the
reserve may have been divided as they may lawfully determine. Any sum
which the Directors may carry to reserve out of the unrealised
profits of the Company shall not be mixed with any reserve to which
profits available for distribution have been carried. The Directors
may also carry forward, without placing the same to reserve, any
profits which they may think it prudent not to divide.
PART XXI - ACCOUNTS
114. Accounts.
(a) The Directors shall cause proper books of account to be kept
relating to:-
(i) all sums of money received and expended by the Company and the
matters in respect of which the receipt and expenditure takes place;
and
(ii) all sales and purchases of goods by the Company; and
(iii) the assets and liabilities of the Company.
Proper books shall not be deemed to be kept if there are not kept such
books of account as are necessary to give a true and fair view of the
state of the Company's affairs and to explain its transactions.
(b) The books of account shall be kept at the Office or, subject to
the provisions of the Acts, at such other place as the Directors think
fit and shall be open at all reasonable times to the inspection of the
Directors.
(c) The Directors shall determine from time to time whether and to
what extent and at what times and places and under what conditions or
regulations the accounts and books of the Company or any of them shall
be open to the inspection of members, not being Directors. No member
(not being a Director) shall have any right of inspecting any account
or book or document of the Company except as conferred by the Acts or
authorised by the Directors or by the Company in general meeting.
(d) In accordance with the provisions of the Acts, the Directors shall
cause to be prepared and to be laid before the annual general meeting
of the Company from time to time such profit and loss accounts,
balance sheets, group accounts and reports as are required by the Acts
to be prepared and laid before such meeting.
(e) A copy of every balance sheet (including every document required
by law to be annexed thereto) which is to be laid before the annual
general meeting of the Company together with a copy of the Directors'
report and Auditors' report shall be sent, not less than twenty-one
Clear Days before the date of the annual general meeting, to every
person entitled under the provisions of the Acts to receive them; and
the required number of copies of these documents shall be forwarded at
the same time to the appropriate section of The Stock Exchange.
(f) Auditors shall be appointed and their duties regulated in
accordance with the Acts.
PART XXII - CAPITALISATION OF PROFITS OR RESERVES
115. Capitalisation of distributable profits and reserves.
The Directors may resolve that any sum for the time being standing to
the credit of any of the Company's reserves (including any capital
redemption reserve fund or share premium account) or to the credit of
the profit and loss account be capitalised and applied on behalf of
the members who would have been entitled to receive that sum if it had
been distributed by way of dividend and in the same proportions either
in or towards paying up amounts for the time being unpaid on any
shares held by them respectively, or in paying up in full unissued
shares or debentures of the Company of a nominal amount equal to the
sum capitalised (such shares or debentures to be allotted and
distributed credited as fully paid up to and amongst such Holders in
the proportions aforesaid) or partly in one way and partly in another,
so, however, that the only purposes for which sums standing to the
credit of the capital redemption reserve fund or the share premium
account shall be applied shall be those permitted by the Acts.
116. Capitalisation of non-distributable profits and reserves.
The Directors may resolve that it is desirable to capitalise any part
of the amount for the time being standing to the credit of any of the
Company's reserve accounts or to the credit of the profit and loss
account which is not available for distribution by applying such sum
in paying up in full unissued shares to be allotted as fully paid
bonus shares to those members of the Company who would have been
entitled to that sum if it were distributable and had been
distributed by way of dividend (and in the same proportions) and the
Directors shall give effect to such resolution.
117. Implementation of capitalisation issues.
Whenever such a resolution is passed in pursuance of either of the
two immediately preceding Articles the Directors shall make all
appropriations and applications of the undivided profits resolved to
be capitalised thereby and all allotments and issues of fully paid
shares or debentures, if any, and generally shall do all acts and
things required to give effect thereto with full power to the
Directors to make such provisions as they shall think fit for the
case of shares or debentures becoming distributable in fractions
(and, in particular, without prejudice to the generality of the
foregoing, either to disregard such fractions or to sell the shares
or debentures represented by such fractions and distribute the net
proceeds of such sale to and for the benefit of the Company or to and
for the benefit of the members otherwise entitled to such fractions
in due proportions) and to authorise any person to enter on behalf of
all the members concerned into an agreement with the Company
providing for the allotment to them respectively, credited as fully
paid up, of any further shares or debentures to which they may become
entitled on such capitalisation or, as the case may require, for the
payment up by the application thereto of their respective proportions
of the profits resolved to be capitalised of the amounts remaining
unpaid on their existing shares and any agreement made under such
authority shall be binding on all such members.
PART XXIII - NOTICES
118. Notices in writing.
Any notice to be given, served or delivered pursuant to these
Articles shall be in writing.
119. Service of notices.
(a) A notice or document (including a share certificate) to be
given, served or delivered in pursuance of these Articles
may be given to, served on or delivered to any member by
the Company:
(i) by handing same to him or his authorised agent;
(ii) by leaving the same at his registered address;or
(iii) by sending the same by the post in a pre-paid
cover addressed to him at his registered
address.
(b) Where a notice or document is given, served or delivered
pursuant to sub-paragraph (a) (i) or (ii) of this Article,
the giving, service or delivery thereof shall be deemed to
have been effected at the time the same was handed to the
member or his authorised agent, or left at his registered
address (as the case may be).
(c) Where a notice or document is given, served or delivered
pursuant to sub-paragraph (a) (iii) of this Article, the
giving, service or delivery thereof shall be deemed to
have been effected at the expiration of twenty-four hours
after the cover containing it was posted. In proving
service or delivery it shall be sufficient to prove that
such cover was properly addressed, stamped and posted.
(d) Every legal personal representative, committee, receiver,
curator bonis or other legal curator, assignee in
bankruptcy or liquidator of a member shall be bound by a
notice given as aforesaid if sent to the last registered
address of such member, notwithstanding that the Company
may have notice of the death, lunacy, bankruptcy,
liquidation or disability of such member.
120. Service on joint Holders.
A notice may be given by the Company to the joint Holders of a share
by giving the notice to the joint Holder whose name stands first in
the Register in respect of the share and notice so given shall be
sufficient notice to all the joint Holders.
121. Service on transfer or transmission of shares.
(a) Every person who becomes entitled to a share shall be
bound by any notice in respect of that share which, before
his name is entered in the Register in respect of the
share, has been duly given to a person from whom he
derives his title provided that the provisions of this
paragraph shall not apply to any notice served under
Article 66 unless, under the provisions of Article 66(b),
it is a notice which continues to have effect
notwithstanding the registration of a transfer of the
shares to which it relates.
(b) Without prejudice to the provisions of these Articles
allowing a meeting to be convened by newspaper
advertisement a notice may be given by the Company to the
persons entitled to a share in consequence of the death or
bankruptcy of a member by sending or delivering it, in any
manner authorised by these Articles for the giving of
notice to a member, addressed to them at the address, if
any, supplied by them for that purpose. Until such an
address has been supplied, a notice may be given in any
manner in which it might have been given if the death or
bankruptcy had not occurred.
122. Signature to notices.
The signature to any notice to be given by the Company may be written
or printed.
123. Deemed receipt of notices.
A member present, either in person or by proxy, at any meeting of the
Company or the Holders of any class of shares in the Company shall be
deemed to have received notice of the meeting and, where requisite,
of the purposes for which it was called.
PART XXIV - WINDING UP
124. Distribution on winding up.
If the Company shall be wound up and the assets available for
distribution among the members as such shall be insufficient to repay
the whole of the paid up or credited as paid up share capital, such
assets shall be distributed so that, as nearly as may be, the losses
shall be borne by the members in proportion to the capital paid up or
credited as paid up at the commencement of the winding up on the
shares held by them respectively. And if in a winding up the assets
available for distribution among the members shall be more than
sufficient to repay the whole of the share capital paid up or
credited as paid up at the commencement of the winding up, the excess
shall be distributed among the members in proportion to the capital
at the commencement of the winding up paid up or credited as paid up
on the said shares held by them respectively. Provided that this
Article shall not affect the rights of the Holders of shares issued
upon special terms and conditions.
125. Distribution in specie.
If the Company is wound up, the liquidator, with the sanction of a
special resolution of the Company and any other sanction required by
the Acts, may divide among the members in specie or kind the whole or
any part of the assets of the Company (whether they shall consist of
property of the same kind or not) and, for such purpose, may value
any assets and determine how the division shall be carried out as
between the members or different classes of members. The liquidator,
with the like sanction, may vest the whole or any part of such assets
in trustees upon such trusts for the benefit of the contributories
as, with the like sanction, he determines, but so that no member
shall be compelled to accept any assets upon which there is a
liability.
PART XXV - MISCELLANEOUS
126. Minutes of meetings.
The Directors shall cause minutes to be made of the following matters,
namely :-
(a) of all appointments of officers and committees made by the
Directors and of their salary or remuneration;
(b) of the names of Directors present at each meeting of the Directors
and of the names of any Directors and of all other members thereof
present at each meeting of any committee appointed by the Directors;
and
(c) of all resolutions and proceedings of all meetings of the Company
and of the Holders of any class of shares in the Company and of the
Directors and of committees appointed by the Directors.
Any such minute as aforesaid, if purporting to be signed by the
chairman of the meeting at which the proceedings were had, or by the
chairman of the next succeeding meeting, shall be receivable as prima
facie evidence of the matters stated in such minute without any
further proof.
127. Inspection and secrecy.
The Directors shall determine from time to time whether and to what
extent and at what times and places and under what conditions or
regulations the accounts and books of the Company or any of them
shall be open to the inspection of members, not being Directors, and
no member (not being a Director) shall have any right of inspecting
any account or book or document of the Company except as conferred by
the Acts or authorised by the Directors or by the Company in general
meeting. No member shall be entitled to require discovery of or any
information respecting any detail of the Company's trading, or any
matter which is or may be in the nature of a trade secret, mystery of
trade, or secret process which may relate to the conduct of the
business of the Company and which in the opinion of the Directors it
would be inexpedient in the interests of the members of the Company
to communicate to the public.
128. Destruction of records.
The Company shall be entitled to destroy all instruments of transfer
which have been registered at any time after the expiration of six
years from the date of registration thereof, all notifications of
change of address at any time after the expiration of two years from
the date of recording thereof and all share certificates and dividend
mandates which have been cancelled or ceased to have effect at any
time after the expiration of one year from the date of such
cancellation or cessation. It shall be presumed conclusively in
favour of the Company that every entry in the Register purporting to
have been made on the basis of an instrument of transfer or other
document so destroyed was duly and properly made and every instrument
duly and properly registered and every share certificate so destroyed
was a valid and effective document duly and properly cancelled and
every other document hereinbefore mentioned so destroyed was a valid
and effective document in accordance with the recorded particulars
thereof in the books or records of the Company. Provided always
that:-
(a) the provision aforesaid shall apply only to the
destruction of a document in good faith and without notice
of any claim (regardless of the parties thereto) to which
the document might be relevant;
(b) nothing herein contained shall be construed as imposing
upon the Company any liability in respect of the
destruction of any document earlier than as aforesaid or
in any other circumstances which would not attach to the
Company in the absence of this Article; and
(c) references herein to the destruction of any document
include references to the disposal thereof in any manner.
129. Untraced shareholders.
(a) The Company shall be entitled to sell at the best price
reasonably obtainable any share of a Holder or any share
to which a person is entitled by transmission if and
provided that:-
(i) for a period of twelve years no cheque or warrant sent by the
Company through the post in a pre-paid letter addressed to the Holder
or to the person entitled by transmission to the share at his address
on the Register or at the last known address given by the Holder or
the person entitled by transmission as that to which cheques and
warrants are to be sent has been cashed and no communication has been
received by the Company from the Holder or the person entitled by
transmission (provided that during such twelve year period at least
three dividends shall have become payable in respect of such share);
(ii) at the expiration of the said period of twelve years by
advertisement in a national daily newspaper published in the State and
in a newspaper circulating in the area in which the address referred
to in sub-paragraph (a) (i) of this Article is located the Company has
given notice of its intention to sell such share;
(iii) during the further period of three months after the date of the
advertisement and prior to the exercise of the power of sale the
Company has not received any communication from the Holder or person
entitled by transmission; and
(iv) the Company has first given notice in writing of its intention to
sell such shares to the appropriate section of every stock exchange or
securities market on which shares of the relevant class are for the
time dealt in or quoted.
(b) To give effect to any such sale the Company may appoint
any person to execute as transferor an instrument of
transfer of such share and such instrument of transfer
shall be as effective as if it had been executed by the
Holder or the person entitled by the transmission to such
share. The transferee shall be entered in the Register as
the Holder of the shares comprised in any such transfer
and he shall not be bound to see to the application of the
purchase moneys nor shall his title to the shares be
affected by any irregularity in or invalidity of the
proceedings in reference to the sale.
(c) The Company shall account to the Holder or other person
entitled to such share for the net proceeds of such sale
by carrying all moneys in respect thereof to a separate
account which shall be a permanent debt of the Company and
the Company shall be deemed to be a debtor and not a
trustee in respect thereof for such Holder or other
person. Moneys carried to such separate account may be
either employed in the business of the Company or invested
in such investments as the Directors may think fit, from
time to time.
130. Indemnity.
Subject to the provisions of and so far as may be admitted by the
Acts, but without prejudice to any indemnity to which he or they may
otherwise be entitled, every Director and other officer of the
Company and the Auditors shall be indemnified out of the assets of
the Company against any liability, loss or expenditure incurred by
him or them in the execution or discharge of his or their duties or
the exercise of his or their powers or otherwise in relation to or in
connection with his or their duties, powers or office including
(without prejudice to the generality of the foregoing) any liability
incurred by him or them in defending any proceedings, whether civil
or criminal, which relate to anything done or omitted to be done or
alleged to have been done or omitted to be done by him or them as
officers or employees of the Company and in which judgment is given
in his or their favour or in which he or they are acquitted or which
are otherwise disposed of without any finding or admission of guilt
or breach of duty on his or their part, or incurred by him or them in
connection with any application under any statute for relief from
liability in respect of any such act or omission in which relief is
granted to him or them by the Court. To the extent permitted by law,
the Directors may arrange insurance cover at the cost of the Company
in respect of any liability, loss or expenditure incurred by any
Director, officer or the Auditors of the Company in relation to
anything done or alleged to have been done or omitted to be done by
him or them as Director, officer or Auditors.
EXHIBIT 10.2
SAVILLE SYSTEMS PLC
AMENDMENT TO 1995 SHARE OPTION PLAN
Adopted by the Board of Directors on April 24, 1997
Approved by the Shareholders on April __, 1998
Section 4 as amended and restated. Section 4 of the 1995 Share Option Plan of
Saville Systems PLC shall be deleted in its entirety and the following shall be
substituted in its place:
4. Stock Subject to the Plan.
Subject to adjustment as provided in Section 15 below, the maximum
number of Ordinary Shares which may be issued and sold under the Plan is
5,000,000 shares. If an option granted under the Plan shall expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject to such option shall again be available for subsequent option grants
under the Plan. If shares issued upon exercise of an option under the Plan are
tendered to the Company in payment of the exercise price of an option granted
under the Plan, such tendered shares shall again be available for subsequent
option grants under the Plan; provided, that in no event shall such shares be
made available for issuance to Reporting Persons or pursuant to exercise of
Incentive Stock Options.
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of August 1, 1997, by and between
SAVILLE SYSTEMS PLC (the "Company"), a public limited company incorporated
under the laws of the Republic of Ireland, and its subsidiaries, SAVILLE
SYSTEMS, INC. ("SSUS") and SAVILLE SYSTEMS CANADA, LTD. ("SSC")
(collectively, the "Companies"), and JOHN J. BOYLE, III, a resident of New
Hampshire (the "Executive");
WITNESSETH:
WHEREAS, each of the Companies wishes to employ the Executive as its
Chief Executive Officer, to serve in such capacity for all three companies
simultaneously; and
WHEREAS, the Executive wishes to be employed in this capacity by the
Companies, on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual obligations set forth
herein, the parties hereto hereby agree as follows:
1 Engagement. Each Company hereby employs the Executive, effective on the date
first above written to serve as follows: (a) the Executive shall serve as Chief
Executive Officer of the Companies as of the date first above written through
April 1, 1998, (b) the Executive shall serve as President and Chief Executive
Officer and Chairman of the Boards of Directors of the Companies from April 1,
1998 through July 31, 1999, and (c) the Executive shall serve as a Director of
the Companies through the period of time covered by clauses (a) and (b) above
and through August 1, 2002. The period from the date first above written through
July 31, 1999 is hereinafter referred to as the "Term." The Executive hereby
accepts such employment for such Term, on the terms and conditions hereinafter
set forth.
2 Duties. During that part of the Term during which the Executive is the Chief
Executive Officer, the Executive shall be responsible for the overall management
and operations of the Companies and shall have such duties and responsibilities
as may be assigned to him by the Board of Directors of the Company (the
"Board"). The Executive shall use his best efforts and shall act in good faith
in performing all duties reasonably required to be performed under this
Agreement. The Executive's principal place of business shall be in or near
Boston, Massachusetts, at the office of SSUS located there.
3 Availability. While employed by the Companies during the Term pursuant to this
Agreement, the Executive shall devote his entire working time, attention and
energies to the Companies' business and shall not be engaged in any other
business activity without the express approval of the Board.
4 Expenses. Each Company shall reimburse the Executive, with reasonable
promptness upon presentation of itemized vouchers, for all ordinary and
necessary business expenses incurred by the Executive in the performance of his
duties hereunder to such Company. Air travel by the Executive for any Company
shall be by business class for international flights, by first class for U.S.
domestic flights with a scheduled duration of three hours or longer, and
otherwise by coach class; provided, however, that the Companies will, when
possible, provide the Executive with frequent flyer (or similar program) upgrade
coupons to enable the Executive to upgrade to first class on an as available
basis.
5 Compensation. As compensation for the services to be rendered hereunder, the
Companies agree as follows: a. The Companies will pay to the Executive, in
bi-weekly installments, an annual base salary of $350,000 for the one year
period commencing August 1, 1997. Such salary shall be subject to adjustment
thereafter as determined by the Board. The base salary will be allocated among
the Companies as determined by the Board from time to time. The Company shall
not be obligated to pay the Executive a salary after the last day of the Term.
b. The Executive shall have the right to participate in an incentive bonus plan
to be established by the Companies, pursuant to which the Executive will be
eligible to receive an aggregate bonus within 60 days after the end of each
calendar year during the Term equal to up to 100% of his base salary during such
year, and within 60 days after the end of the Term with respect to the partial
year ending on the last day of the Term, with the amount or the bonus to which
he is entitled determined by the Compensation Committee of the Board based upon
performance by the Executive and the Companies. At least one-half of such bonus
shall be payable based upon the Companies meeting financial performance
projections adopted by the Board with respect to the fiscal year for which such
bonus applied. c. The Companies shall provide the Executive either with an
automobile for use by the Executive or a reasonable allowance established by the
Board to enable the Executive to obtain the use of an automobile and liability
insurance therefor. d. The Executive shall be entitled to participate in the
benefits package of the Companies for United States employees, including
comprehensive health insurance. The Executive shall be entitled to three weeks
of paid vacation per year.
6 Restricted Ordinary Shares. The Company shall issue restricted Ordinary Shares
to the Executive in accordance with the terms specified in a Stock Restriction
Agreement to be entered into between the Executive and the Company. Such Stock
Restriction Agreement shall provide for vesting of such shares over the minimum
period that the Executive has agreed to continue to serve as a Director of the
Company, which minimum period ends on August 1, 2002.
7 Ownership of Material Information. All right, title and interest of every kind
and nature whatsoever in and to discoveries, inventions, improvements, patents
(and applications therefor), copyrights, ideas, processes, developments,
know-how, laboratory notebooks, creations, properties and all other proprietary
rights arising from, or in any way related to, the Executive's employment
hereunder, whether developed by the Executive independently or jointly with
others ("Intellectual Property"), shall become and remain the exclusive property
of the Companies, and the Executive shall have no interest therein. The
Executive shall promptly disclose to the Companies and assign or transfer to the
Companies all rights in any Intellectual Property. If any Company elects to seek
patent or other protection with respect to any Intellectual Property, the
Executive shall, at such Company's expense, take all actions reasonably
requested by such Company to obtain such protection for the benefit of such
Company and to fully vest in such Company and its successors and assigns full
right and title to such Intellectual Property. Upon the termination of the
Executive's employment by the Companies for any reason, the Executive shall
return to each Company all property of such Company, including all copies of or
relating to any Intellectual Property, in the possession or under the control of
the Executive.
8 Confidentiality. The Executive shall not, during the term of his employment by
the Companies pursuant to this Agreement or thereafter, disclose to anyone
(except to the extent reasonably necessary for the Executive to perform his
duties hereunder or as may be required by law) any confidential information
concerning the business or affairs of any Company (or of any affiliate or
subsidiary of any Company), including but not limited to lists of and records
relating to customers, business plans, business negotiations, market
information, financial and cost information, and scientific and technical
information (whether of any Company or entrusted to any Company by a third party
under a confidentiality agreement or understanding) which the Executive shall
have acquired in the course of, or incident to, the performance of his duties
pursuant to the terms of this Agreement or pursuant to any prior dealings with
any Company or any affiliate or subsidiary of any Company. The Executive shall
hold in strictest confidence, as a fiduciary, any and all such confidential
information, and shall comply with all instructions of the Companies for
preservation of the confidentiality of such information. In the event of a
breach or threatened breach by the Executive of the provisions of this Section
8, the Companies shall be entitled to an injunction restraining the Executive
from disclosing, in whole or in part, such information or from rendering any
services to any person, firm, corporation, association or other entity to whom
such information has been disclosed or is threatened to be disclosed. Nothing
herein shall be construed as prohibiting the Companies from pursuing any other
remedies available to the Companies for such breach or threatened breach,
including the recovery of damages from the Executive. Nothing herein shall be
construed as prohibiting the Executive from disclosing to anyone any information
which is, or which becomes, available to the public (other than by reason of a
violation of this Section 8) or which is a matter of general business knowledge
or experience. a. Termination for Cause. The Companies may terminate their
employment of the Executive under this Agreement for cause in the event that the
Board determines that the Executive (i) has materially breached his obligations
to any Company under this Agreement or has refused or failed to perform
satisfactorily the duties properly assigned to him in accordance with the terms
of this Agreement, provided that the employment of the Executive shall not be
terminated under this clause (i) unless the Executive is given notice in writing
that the conduct in question constitutes grounds for termination under this
Section 9 and the Executive is allowed at least twenty (20) days to remedy the
refusal or failure, (ii) has been convicted of a crime of moral turpitude
(whether or not in conjunction with the performance by the Executive of his
duties under this Agreement), or (iii) has through willful misconduct or gross
negligence engaged in an act or course of conduct that causes material injury to
any Company (or any affiliate or subsidiary of any Company) (each of the reasons
specified in clauses (i) through (iii) hereof being referred to herein as
"Cause"). b. Upon a termination of employment under Section 9(a), the Companies
shall be relieved of all further obligations under this Agreement.
Notwithstanding such termination of employment, the Executive shall continue to
be bound by the provisions of Sections 7, 8, 12 17.
9 Termination Without Cause.
a. If the employment of the Executive is terminated by the Companies during the
Term of this Agreement other than (i) pursuant to Section 9(a) or Section 11 or
(ii) by virtue of the resignation of the Executive, or if the responsibilities
and duties of the Executive are, other than for Cause, materially diminished or
changed in a manner that materially impairs the Executive's ability to function
as Chief Executive Officer of the Companies, the Executive shall be entitled to
receive, upon such termination, a severance payment in an amount equal to the
aggregate of the cash consideration to which the Executive would be entitled
hereunder if he remained employed by the Companies for the lesser of (i) one
year or (ii) the period from the date of termination to end of the Term, in each
case computed on the assumption is that the Employee would be entitled to the
full amount of the incentive bonus provided for in Section 5(b). Such severance
payment shall be payable in equal monthly installments over the period during
which the Employee would be entitled to receive such cash consideration if still
employed by the Companies. b. Termination of employment under this Section 10
shall not terminate the Executive's obligations under Sections 7, 8 and 12.
10 Death or Inability to Perform of the Executive. In the event that the
Executive, during the period while employed under this Agreement, shall die or
at any time become unable to carry out his duties under this Agreement, the
Companies may terminate this Agreement and be relieved of all further
obligations hereunder. Termination of employment under this Section 11 shall not
terminate the Executive's obligations under Sections 7, 8 and 12.
11 Non-Competition.
a. The Executive hereby agrees that, except as provided in Section 12(b), during
the term of his employment by the Companies pursuant to this Agreement and for a
period of one year following the termination for any reason of his employment
under this Agreement, he will not, directly or indirectly and in any way,
whether as principal or as director, officer, employee, consultant, agent,
partner or stockholder to another entity (other than by the ownership of a
passive investment interest of not more than 5% in a company with publicly
traded equity securities), (i) own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation or control of any business competing with any business of the
Companies in which the Executive participated during the two years immediately
preceding such termination, (ii) interfere with, solicit on behalf of another or
attempt to entice away from the Companies (or any affiliate or subsidiary of any
Company) (x) any project, financing or customer that any Company (or any
affiliate or subsidiary of any Company) has under contract (including
unfulfilled purchase orders), or any letter of supply or other supplier contract
or arrangement entered into by any Company (or any affiliate or subsidiary of
any Company), and all extensions, renewals and resolicitations of such contracts
or arrangements, (y) any contract, agreement or arrangement that any Company (or
any affiliate or subsidiary of any Company) is actively negotiating with any
other party, or (z) any prospective business opportunity that any Company (or
any affiliate or subsidiary of any Company) has identified at the time of
termination as being actively pursued by such Company, or (iii) for himself or
another, hire, attempt to hire, or assist in or facilitate in any way the hiring
of any employee of the Companies (or any affiliate or subsidiary of any
Company), or any employee of any person, firm or other entity, the employees of
which any Company (or any affiliate or subsidiary of any Company) has agreed not
to hire or endeavor to hire. b. In the event that prior to the end of the Term
the Executive's employment is terminated by the Company pursuant to Section
10(a), the Executive shall have the option, exercisable at any time by notice to
the Company, to be relieved of his obligations under clause (i) of Section
12(a), but not clauses (ii) and (iii) of Section 12(a). Upon the giving of such
notice by the Executive, the Company shall be relieved and discharged of all
payment obligations to the Executive arising under Section 10(a) and payable on
or after the date of such notice. c. Because of the Executive's knowledge of the
Companies' business, in the event of the Executive's actual or threatened breach
of the provisions of this Section 12, the Companies shall be entitled to, and
the Executive hereby consents to, an injunction restraining the Executive from
any of the foregoing. However, nothing herein shall be construed as prohibiting
the Companies from pursuing any other available remedies for such breach or
threatened breach, including the recovery of damages from the Executive. The
Executive agrees that the provisions of this Section 12 are necessary and
reasonable to protect the Companies in the conduct of its business. If any
restriction contained in this Section 12 shall be deemed to be invalid or
unenforceable by reason of the extent, duration or geographic scope thereof,
then the extent, duration, and geographic scope of such restriction shall be
deemed to be reduced to the fullest extent, duration and geographic scope
permitted by law and enforceable.
12 Capacity. The Executive represents and warrants to the Companies that he is
not now under any enforceable obligation, of a contractual nature or otherwise,
to any person, firm, corporation, association or other entity that is
inconsistent or in conflict with this Agreement or which would prevent, limit or
impair in any way the performance by him of his obligations hereunder.
13 Withholding. The Executive acknowledges that salary and all other
compensation payable under this Agreement shall be subject to withholding for
income and other applicable taxes to the extent required by applicable law, as
determined by the Companies in their reasonable judgment.
14 Waivers and Amendments. No act, delay, omission or course of dealing on the
part of any party hereto in exercising any right, power or remedy hereunder
shall operate as, or be construed as, a waiver thereof or otherwise prejudice
such party's rights, powers and remedies under this Agreement. This Agreement
may be amended only by a written instrument signed by the Executive and a duly
authorized officer of each Company.
15 Notice. Any and all notices referred to herein shall be sufficient if
furnished in writing and delivered by hand, by facsimile transmission or by
overnight delivery service maintaining records of receipt, to the respective
parties at the following addresses:
If to the Companies:
Saville Systems
One Van De Graaff Drive
Burlington, Massachusetts 01803
Facsimile: 781-270-6501
If to the Executive:
Mr. John J. Boyle, III
3 Hancock Street
Portsmouth, NH 03801
or to such other address or addresses as any party may from time to time
designate by notice given to the others as aforesaid. Notices shall be effective
when delivered.
1 Arbitration; Jurisdiction. Except for disputes arising under or in connection
with Sections 7, 8, and 12, all disputes arising under or in connection with
this Agreement or concerning in any way the Executive's employment shall be
submitted exclusively to arbitration in Boston, Massachusetts, under the
Commercial Arbitration Rules of the American Arbitration Association then in
effect, and the decision of the arbitrator shall be final and binding upon the
parties. Judgment upon the award rendered may be entered and enforced in any
court having jurisdiction. The parties hereto consent to personal jurisdiction
of any state or Federal court sitting in the District of Massachusetts, in order
to enforce any arbitration judgment or the rights of the Companies under
Sections 7, 8 and 12, and waive any objection that such forum is inconvenient.
Each party hereby consents to service of process in any such action by U.S. mail
or other commercially reasonable means of receipted delivery. This Agreement
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to the choice of law provisions
thereof.
2 Assignability. The rights and obligations contained herein shall be binding on
and inure to the benefit of the successors and assigns of the Companies. The
Executive may not assign any of his rights or obligations hereunder without the
express written consent of the Companies.
3 Miscellaneous. This Agreement sets forth all, and is intended by each party to
be an integration of all, of the promises, agreements and understandings between
the parties hereto with respect to the subject matter hereof. This Agreement may
be executed in multiple counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one agreement binding on
the parties hereto. Each provision of this Agreement shall be considered
severable and if for any reason any provision that is not essential to the
effectuation of the basic purpose of the Agreement is determined to be invalid
or contrary to any existing or future law, such invalidity shall not impair the
operation of or affect those provisions of this Agreement that are valid.
4 Headings; Construction. Headings contained in this Agreement are inserted for
reference and convenience only and in no way define, limit, extend or describe
the scope of this Agreement or the meaning or construction of any of the
provisions hereof. As used herein, unless the context otherwise requires, the
single shall include the plural and vice versa, words of any gender shall
include words of any other gender, and "or" is used in the inclusive sense.
5 Survival of Terms. If this Agreement is terminated for any reason, the
provisions of Sections 7, 8, 12 and 17 shall survive and the Executive and the
Companies, as the case may be, shall continue to be bound by the terms thereof
to the extent provided therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SAVILLE SYSTEMS PLC
SAVILLE SYSTEMS CANADA, LTD.
SAVILLE SYSTEMS, INC.
/s/ John J. Boyle, III By: /s/ Bruce A. Saville
John J. Boyle, III Name: Bruce A. Saville
Title: Chairman
EXHIBIT 10.5
STOCK RESTRICTION AGREEMENT
AGREEMENT made this 1st day of December, 1997, between Saville Systems
PLC, (the "Company"), and John J. Boyle, III (the "Director").
For valuable consideration, receipt of which is acknowledged, the
parties hereto agree as follows:
1 Purchase of Shares. The Company shall issue and sell to the Director, and the
Director shall purchase from the Company, subject to the terms and conditions
set forth in this Agreement, 30,000 Ordinary Shares (the "Shares") $0.0025
nominal value per share, of the Company ("Ordinary Shares"), at a purchase price
of $0.0025 per share. The aggregate purchase price for the Shares shall be paid
by the Director by check payable to the order of the Company or such other
method as may be acceptable to the Company. Upon receipt of payment by the
Company for the Shares, the Company shall issue to the Director one or more
certificates in the name of the Director for that number of Shares purchased by
the Director. The Director agrees that the Shares shall be subject to the
Purchase Option set forth in Section 2 of this Agreement and the restrictions on
transfer set forth in Section 4 of this Agreement.
2 Capital Contribution Obligation.
(a) In the event that the Director ceases to serve as a director of the Company
for any reason or no reason, with or without cause, prior to August 1, 2002, the
Director shall, immediately upon ceasing to so serve, contribute to the capital
of the Company for no additional consideration that number of the Shares as is
set forth in the second column of the table set forth below opposite the period
in which the Director ceases to be a director.
If Cessation of Employment Percentage of Shares
Occurs: Subject to Purchase Option
Before August 1, 1998 30,000
On or after August 1, 1998 24,000
but before August 1, 1999
On or after August 1, 1999 18,000
but before August 1, 2000
On or after August 1, 2000 12,000
but before August 1, 2001
On or after August 1, 2001 6,000
but before August 1, 2002
On or after August 1, 2002 - 0 -
(b) In the event that the Director ceases to serve as a director the Company by
reason of death or disability, the number of the Shares then required to be
contributed pursuant to Section 2(a) above shall be reduced by fifty percent
(50%). For this purpose, "disability" shall mean the inability of the Director,
due to a medical reason, to carry out his duties as a director of the Company
for a period of six consecutive months.
(c) For purposes of this Agreement, the Company shall include serving as a
director of a parent or subsidiary of the Company.
3 Restrictions on Transfer.
(a) Except as otherwise provided in subsection (b) below, the Director shall
not, during the period of time from the date of this Agreement through August 1,
2002, sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by
operation of law or otherwise (collectively "transfer"), any of the Shares, or
any interest therein, unless and until such Shares are no longer subject to the
capital contribution requirement set forth in Section 2 above.
(b) Notwithstanding the foregoing, the Director may transfer Shares to or for
the benefit of any spouse, child or grandchild, or to a trust for their benefit,
provided that such Shares shall remain subject to this Agreement (including
without limitation the restrictions on transfer set forth in this Section 4 and
the capital contribution requirement set forth in Section 2 above) and such
permitted transferee shall, as a condition to such transfer, deliver to the
Company a written instrument confirming that such transferee shall be bound by
all of the terms and conditions of this Agreement.
4 Effect of Prohibited Transfer. The Company shall not be required (a) to
transfer on its books any of the Shares which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (b) to treat as owner of such Shares or to pay dividends to any transferee to
whom any such Shares shall have been so sold or transferred.
5 Restrictive Legend. All certificates representing Shares shall have affixed
thereto a legend in substantially the following form, in addition to any other
legends that may be required under federal or state securities laws:
"The shares of stock represented by this certificate are subject to restrictions
on transfer and an option to purchase set forth in a certain Stock Restriction
Agreement between the corporation and the registered owner of these shares (or
his predecessor in interest), and such Agreement is available for inspection
without charge at the office of the Secretary of the corporation."
6 Investment Representations. The Director represents, warrants and covenants as
follows:
(a) The Director is purchasing the Shares for his own account for investment
only, and not with a view to, or for sale in connection with, any distribution
of the Shares in violation of the Securities Act of 1933 (the "Securities Act"),
or any rule or regulation under the Securities Act.
(b) The Director has had such opportunity as he has deemed adequate to obtain
from representatives of the Company such information as is necessary to permit
him to evaluate the merits and risks of his investment in the Company.
(c) The Director has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of the Shares
and to make an informed investment decision with respect to such purchase.
(d) The Director can afford a complete loss of the value of the Shares and is
able to bear the economic risk of holding such Shares for an indefinite period.
(e) The Director understands that (i) the Shares have not been registered under
the Securities Act and are "restricted securities" within the meaning of Rule
144 under the Securities Act, (ii) the Shares cannot be sold, transferred or
otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (iii) in any
event, the exemption from registration under Rule 144 will not be available for
at least one year and even then will not be available unless a public market
then exists for the Ordinary Shares, adequate information concerning the Company
is then available to the public, and other terms and conditions of Rule 144 are
complied with; and (iv) there is now no registration statement on file with the
Securities and Exchange Commission with respect to any stock of the Company and
the Company has no obligation or current intention to register the Shares under
the Securities Act.
(f) A legend substantially in the following form will be placed on the
certificate representing the Shares:
"The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended, and may not be sold, transferred or
otherwise disposed of in the absence of an effective registration statement
under such Act or an opinion of counsel satisfactory to the corporation to the
effect that such registration is not required."
7 Adjustments for Share Splits, Share Dividends, etc.
(a) If from time to time during the term of this Agreement there is any share
split-up, share dividend, stock distribution or other reclassification of the
Ordinary Shares of the Company, any and all new, substituted or additional
securities to which the Director is entitled by reason of his ownership of the
Shares shall be immediately subject to the capital contribution requirements set
forth in Section 2 above, the restrictions on transfer and other provisions of
this Agreement in the same manner and to the same extent as the Shares.
(b) If the Shares are converted into or exchanged for, or shareholders of the
Company receive by reason of any distribution in total or partial liquidation,
securities of another corporation, or other property (including cash), pursuant
to any merger of the Company or acquisition of its assets, then the rights of
the Company under this Agreement shall inure to the benefit of the Company's
successor and this Agreement shall apply to the securities or other property
received upon such conversion, exchange or distribution in the same manner and
to the same extent as the Shares.
8 Withholding Taxes.
(a) The Director acknowledges and agrees that the Company has the right to
deduct from payments of any kind otherwise due to the Director any federal,
state or local taxes of any kind required by law to be withheld with respect to
the purchase of the Shares by the Director.
(b) If the Director elects, in accordance with Section 83 (b) of the Internal
Revenue Code of 1986, as amended, to recognize ordinary income in the year of
acquisition of the Shares, the Company will require at the time of such election
an additional payment for withholding tax purposes based on the difference, if
any, between the purchase price for such Shares and the fair market value of
such Shares as of the day immediately preceding the date of the purchase of such
Shares by the Director.
9 Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, and each other provision of this Agreement shall be severable
and enforceable to the extent permitted by law.
10 Waiver. Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Board of Directors of the
Company.
11 Binding Effect. This Agreement shall be binding upon and inure to the benefit
of the Company and the Director and their respective heirs, executors,
administrators, legal representatives, successors and assigns, subject to the
restrictions on transfer set forth in Section 4 of this Agreement.
12 No Rights To Employment. Nothing contained in this Agreement shall be
construed as giving the Director any right to be retained, in any position, as
an employee of the Company.
13 Notice. All notices required or permitted hereunder shall be in writing and
deemed effectively given upon personal delivery or upon deposit in the United
States Post Office, by registered or certified mail, postage prepaid, addressed
to the other party hereto at the address shown beneath his or its respective
signature to this Agreement, or at such other address or addresses as either
party shall designate to the other in accordance with this Section 14.
14 Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural, and vice
versa.
15 Entire Agreement. This Agreement constitutes the entire agreement between the
parties, and supersedes all prior agreements and understandings, relating to the
subject matter of this Agreement.
16 Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Director.
17 Governing Law. This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SAVILLE SYSTEMS PLC
By: /s/ Bruce A. Saville
/s/ John J. Boyle, III Bruce A. Saville, Chairman of
John J. Boyle, III the Board of Directors
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") dated as of November 1,
1997, is entered into by and among SAVILLE SYSTEMS PLC (the "Company"), a public
limited company organized under the laws of the Republic of Ireland and its
subsidiaries, SAVILLE SYSTEMS CANADA, LTD. and SAVILLE SYSTEMS, INC.
(collectively, the "Companies"), and Bruce A. Saville, a resident of Edmonton,
Alberta, Canada (the "Executive").
WITNESSETH
WHEREAS, the Companies desire to employ the Executive in accordance
with the terms and subject to the conditions provided herein;
NOW, THEREFORE, in consideration of the foregoing premises, the
respective covenants and agreements of the parties herein contained, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Employment. The Companies shall each employ the Executive, and the
Executive hereby agrees to serve the Companies, on the terms and conditions
set forth herein.
2. Term.
(a) The Companies shall each employ the Executive for a one-year period
commencing as of the date hereof, unless sooner terminated as provided herein
(the "Term"). (b) The expiration or termination of this Agreement shall not
relieve any party of any obligations that may have accrued hereunder prior to
such expiration or termination. The provisions of Sections 5, 6, 7, 14, 16 and
17 shall survive the expiration or termination of this Agreement except as
otherwise specifically provided in such sections.
3. Position and Duties. During the Term, the Executive shall serve as Chairman
of the Board of Directors of the Company (the "Board") until March 31, 1998 and
thereafter shall serve in such capacity as the Board shall determine for the
remainder of the Term. The Executive shall have such duties as may be prescribed
by the Board from time to time. The Executive shall use his best efforts to
promote and develop the business of each Company; shall devote all of his
working time and effort exclusively to the businesses and affairs of the
Companies; shall act in good faith in performing all duties required to be
rendered under this Agreement; and shall conduct himself in a manner consistent
with the best interest of the Companies. The Executive agrees to abide by the
rules, regulations, instructions, personnel practices and policies of the
Companies and any changes therein which may be adopted from time to time by the
Companies. The Executive acknowledges receipt of copies of all such rules and
policies committed to writing as of the date of this Agreement.
4. Compensation.
(a) Base Salary. The Executive shall receive, in bi-monthly installments, an
annual base salary of One Hundred Twenty Thousand United States Dollars (U.S.
$120,000) commencing on the commencement of the Term. Such salary shall be
subject to adjustment thereafter as determined by the Board, in its sole
discretion, may from time to time determine (the "Base Salary"). Any such
increases shall take into account corporate and individual performance, general
business conditions, and such other factors as the Board in its sole discretion
may determine to be relevant. Any increase in Base Salary or other compensation
shall in no way limit or reduce any other obligation of the Companies hereunder.
The Base Salary will be allocated among the Companies to reflect the relative
contributions provided by the Executive to the Companies, as determined by the
Board from time to time. (b) Vacation. Executive shall be entitled to the same
vacation benefits as are generally available to other senior executives of the
Companies, but in no event to less than four (4) weeks per year. The Executive
shall also be entitled to all paid holidays given to the Canadian senior
executive officers of the Companies, as determined by the Board in its sole
discretion. (c) Participation in Benefit Plans. During the Term, Executive shall
be eligible to participate in all employee benefit plans and arrangements now in
effect or which may hereafter be established that are generally applicable to
other Canadian senior executive officers of the Companies, including but not
limited to, all life, group insurance and medical care plans and all disability,
retirement and other employee benefit plans of the Companies that are available
to Canadian senior executive officers. (d) Expenses. During the Term, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
travel, entertainment and other expenses incurred by him in connection with, or
related to, the performance of his duties, responsibilities or services
hereunder, upon presentation by the Executive of documentation, expense
statements, vouchers and/or such other supporting information as the Companies
may request, provided however that such amounts must be in accordance with
budgets approved by the Board. (e) Secretarial Services, Office Space. During
the Term, the Companies will provide secretarial services and office space
commensurate with the needs and requirements of the position and duties of
Executive specified herein, as determined by the Board in its sole discretion.
5. Unauthorized Disclosure.
(a) Executive agrees that all Confidential Information (as hereinafter defined)
is and shall be the exclusive property of the Companies to be used only in the
performance of his duties for the Companies. Executive shall not, without the
written consent of the Board or a person authorized thereby, knowingly or
negligently disclose to any person, other than as required by law or court
order, or other than to an authorized employee of the Companies, or to a person
to whom disclosure is necessary or appropriate in connection with the
performance by the Executive of his duties as an executive of the Companies, any
Confidential Information obtained by him while in the employ of the Companies.
Executive shall be allowed to disclose Confidential Information to his attorney
solely for the purpose of ascertaining whether such information is confidential
within the intent of this Agreement; provided, however, that Executive (i)
discloses to his attorney the provisions of this Section 5 and (ii) agrees not
to waive the attorney-client privilege with respect thereto. (b) For the
purposes hereof, "Confidential Information" shall mean any confidential or
secret information, know-how or data of the Companies, whether or not in
writing, including, but not limited to, inventions, products, processes,
methods, techniques, formulas, compositions, compounds, projects, developments,
plans, research data, clinical data, financial data, personnel data, computer
programs and customer and supplier lists, and Intellectual Property (as
hereinafter defined) of the Companies; provided, however, that the term
"Confidential Information" shall not include any information that (A) is now in
or subsequently enters the public domain through means other than direct or
indirect disclosure by any party hereto in violation of the terms of this
Agreement, or (B) is lawfully communicated to Executive by a third party, free
of any confidential obligation, subsequent to the time of communication thereof
by, through or on behalf of the Companies, or (C) is required by any
governmental or regulatory authority having jurisdiction or by court order to be
disclosed, provided, however that the Executive provides prior written notice to
the Companies of such disclosure and takes all reasonable and lawful actions to
avoid and/or minimize the extent of such disclosure. Executive agrees that his
obligation not to disclose or use such Confidential Information extends to such
types of information, know-how, records, and tangible property of customers of
the Companies, or suppliers of the Companies or other third parties who may have
disclosed or entrusted the same to the Companies or to the Executive in the
course of the Companies' business.
6. Intellectual Property. In consideration for the Base Salary, the sufficiency
of which is hereby acknowledged and agreed, the Executive and the Companies
hereby covenant and agree as follows: (a) All Intellectual Property (as
hereinafter defined) developed by the Executive in connection with services
rendered by the Executive for or on behalf of the Companies or its customers, or
from the use of premises or property owned, leased, licensed or contracted for
by any of the Companies, both prior to and subsequent to the date of this
Agreement, shall be the property of the Companies. The Executive hereby assigns
to the Companies any and all rights, title and interests he now has or may
hereafter acquire in and to such Intellectual Property and all related patents,
patent applications, copyrights and copyright applications. The Executive hereby
agrees as to all such Intellectual Property, to make prompt and full disclosure
of all such Intellectual Property and to assist the Companies in every proper
way, at the Companies' sole cost and expense, both during and after his
employment, to obtain from time to time, maintain and enforce, patents,
copyrights, trade secrets and other rights and protections relating to said
Intellectual Property in and to all countries, and, to that end, the Executive
shall execute all documents including, without limitation, copyright
applications, patent applications, declarations, oaths, formal assignments,
assignment of priority rights and powers of attorney, which the Companies deem
necessary or desirable for use in applying for and obtaining such patents,
copyrights, trade secrets and other rights and protections on and enforcing such
Intellectual Property, together with any assignments thereof to the Companies or
persons designated by it. The Executive shall not, prior to or subsequent to the
expiration or termination of this Agreement, use such Intellectual Property or
disclose to any other person, confidential aspects of such Intellectual Property
without the prior written consent of the Companies. (b) Executive hereby waives,
in favor of the Companies, and the successors, assigns, and licensees thereof,
all of the Executive's moral rights prescribed by the Copyright Act of Canada or
any other applicable law in respect of the Intellectual Property so developed by
the Executive in connection with services rendered as provided in the
immediately preceding paragraph (a). (c) For purposes of this Section 6,
"Intellectual Property" shall mean all intellectual and industrial property,
whether now or later created, developed or produced, including, but not limited
to, discoveries, developments, designs, improvements, inventions, formulae,
processes, techniques, data, computer programs, computer related know how,
hardware and firmware, patents, copyrights, trademarks and trade secrets, and
other rights and protections in connection therewith, and all documentation with
respect thereto, whether patentable or not, however recorded, which documents
the design and details of any of the foregoing, contains a description thereof,
or explains the utilization thereof.
7. Non-Competition.
(a) While the Executive is employed by the Companies hereunder or is receiving
any compensation pursuant hereto, and for one year after the later of the
termination of his employment with the Companies or the termination of any
payments of compensation hereunder (the "Non-Compete Period"), the Executive
shall not compete with any business then conducted by the Companies without the
prior written consent of the Board; except that, notwithstanding this Section 7,
the Executive may perform any duties on behalf of the Companies as the Board
shall direct. For purposes of this Agreement, the term "compete" shall mean
engaging in a business as a more than five (5%) percent direct or indirect
stockholder, an officer, a director, an employee, a partner, an agent, a
consultant, or in any other individual or representative capacity (unless the
Executive's duties, responsibilities, and activities, including supervisory
activities, for or on behalf of such business are not related in any way to such
"competitive" activity) if it involves: (i) engaging in the business of (A)
developing, marketing, supporting, maintaining, licensing or selling billing,
record-keeping, customer support and/or interface software for
telecommunications or other utility-type services in the telecommunications or
other utility-type industries generally, anywhere in the world or (B)
developing, marketing and/or providing service bureau services with respect to
the rating, processing and billing of telecommunications or other utility-type
services anywhere in the world or (C) the provisions of software development
services and expertise to the blood industry in Canada (the "Business"); (ii)
rendering services or advice pertaining to the Business to, or on behalf of, any
person, firm, or corporation which is in competition with the Companies or any
of its subsidiaries during the Non-Compete Period; (iii) engaging in, or
entering into services or advice pertaining to, any other line of business (A)
that the Companies actively conduct or which the Executive knows the Companies
are contemplating conducting and (B) that competes with any of the Companies in
the same geographic area as such line of business is then conducted or is
contemplated to be conducted; or (iv) employing or soliciting for employment any
employees of the Companies. (b) In the event that the restrictions against
engaging in a competitive activity contained in this Section 7 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of their extending for too great a period of time or over too great a
geographical area or by reason of their being too extensive in any other
respect, this Section 7 shall be interpreted to extend only over the maximum
period of time for which it may be enforceable, over the maximum geographical
areas as to which it may be enforceable and to the maximum extent in all other
respects as to which it may be enforceable, all as determined by such court in
such action. (c) The Executive acknowledges that a breach of the restrictions
against engaging in a competitive activity contained in this Section 7 will
cause irreparable damage to the Companies, the exact amount of which will be
difficult to ascertain, and that the remedies at law for any such breach will be
inadequate. Accordingly, the Executive and the Companies agree that if the
Executive breaches the restrictions against engaging in a competitive activity
contained in this Section 7, then the Companies shall be entitled to equitable
relief, including, but not limited to, injunctive relief, without posting bond
or other security. In addition to, and not in lieu of, such equitable relief,
the Companies and the Executive agree that if the Executive breaches the
restrictions against engaging in a competitive activity contained in this
Section 7, the Companies shall have a right of setoff against any amounts owing
hereunder for the resulting damages.
8. Termination.
(a) The Companies may terminate their employment of the Executive under this
Agreement in the event of the Executive's death or retirement and in any case in
which the Board determines that the Executive: (i) has willfully refused or
willfully failed to perform his obligations under this Agreement or the duties
properly assigned to him in accordance with the terms of this Agreement and such
refusal or failure is detrimental to the interests of the Companies, provided
that, the employment of the Executive shall not be terminated under this Section
8(a) unless the Executive is given notice that the conduct in question
constitutes grounds for termination under this Section 8(a) and the Executive is
allowed thirty (30) days to remedy the refusal or failure; (ii) has been
convicted of an indictable offense (whether or not in connection with the
performance by the Executive of his duties under this Agreement) which would
have a material impact on the business of the Companies (or any subsidiary of
the Companies); (iii) has through willful misconduct or gross negligence,
engaged in an act or course of conduct that causes material injury to the
Companies (or subsidiary of the Companies); (iv) is willfully in breach of
Section 7 of this Agreement; (v) has during his employment with the Companies
knowingly engaged in any act or course of conduct that would result in the
revocation, or jeopardize the renewal of, any licenses, permits, consents,
authorizations, agreements or approvals necessary for the Companies to conduct
their business or that would have a material adverse effect on the Companies; or
(vi) as a result of his physical or mental illness, has become unable to perform
his duties hereunder ("Disability") for a period amounting to eighteen (18)
weeks in any six-month period; provided, however, that if, after recovery from
his Disability, the Executive is capable of performing his duties and desires to
resume his duties, the Executive and the Companies shall execute a new
Employment Agreement, substantially in the same form as this one, for the
remaining period of time for which this original Agreement would have been
effective. (b) Upon termination of this Agreement, the Companies shall be
relieved of all obligations under this Agreement. Termination under this Section
8 will not terminate the Executive's obligations under Sections 5, 6 or 7 except
to the extent provided therein.
9. Notice and Date of Termination. Any termination by the Companies shall be
communicated by a written notice (the "Notice of Termination"). The Notice of
Termination shall indicate the specific termination provision in this Agreement
claimed to provide a basis for termination of the Executive's employment. The
date of termination will be (a) if the Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is duly given, or (b)
if the Executive's employment is terminated for any other reason, the date on
which a Notice of Termination is duly given (the "Date of Termination").
10. Compensation Upon Termination or During Disability.
(a) If the Executive's employment is terminated due to his death, Executive's
estate or other legal representative shall be entitled to receive any
installment of the Base Salary and any accrued reimbursable expenses due in the
month of death. In the event of the Executive's death, the rights and benefits
of the Executive under employee benefit and fringe benefit plans and programs of
the Companies will be determined in accordance with the terms and provisions of
such plans and programs. (b) During any period that the Executive fails to
perform his duties hereunder due to Disability, the Executive shall continue to
receive the Base Salary during such period of Disability. If the Executive's
employment is terminated due to Disability, the obligation of the Companies to
pay the Base Salary shall terminate. If the Executive's employment is terminated
due to Disability, the rights and benefits of the Executive under employee
benefit and fringe benefit plans and programs of the Companies will be
determined in accordance with the terms and provisions of such plans and
programs. (c) If the Executive's employment shall be terminated for a reason
other than Disability, death or retirement, the Companies shall pay the
Executive his full Base Salary and any accrued reimbursable expenses through the
Date of Termination; provided, that, all of such payments shall be subject to
the Companies' right of setoff pursuant to Section 7(c) hereof. Any rights and
benefits the Executive may have under employee benefit and fringe benefit plans
and programs of the Companies will be determined in accordance with the terms of
such plans and programs. (d) If the Executive's employment pursuant hereto is
terminated due to retirement or as a result of the expiration of the Term of
this Agreement, the Executive shall be entitled to receive the Base Salary
installments up to and including the calendar month of termination. The
Companies shall also permit the Executive to continue to participate in the
employee benefit and fringe benefit plans and programs of the Companies beyond
such termination at the sole cost and expense of the Executive, to the extent
the Companies reasonably determines such continuation is permitted by, and is
customary with respect to, the employee benefit and fringe benefit plans and
programs.
11.Representations and Warranties.
(a) The Executive represents and warrants to the Companies that he is under no
contractual or other restriction or obligation which would prevent the
performance of his duties hereunder, or interfere with the rights of the
Companies hereunder. (b) Each of the Companies represents and warrants to the
Executive that (i) it has all requisite power and authority to execute, deliver,
and perform this Agreement, (ii) all necessary corporate proceedings of each of
the Companies have been duly taken to authorize the execution, delivery, and
performance of this Agreement, and (iii) this Agreement has been duly
authorized, executed, and delivered by the Companies, is the legal, valid and
binding obligation of the Companies, and is enforceable against the Companies in
accordance with its terms.
12. Successors; Binding Agreement. As used in this Agreement, "Companies" shall
mean the Companies as hereinbefore defined and any successor to substantially
all of the business and/or assets of such Companies which executes and delivers
an agreement to assume and be bound by the terms hereof or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law. For purposes of this Section 12, "substantially all of the business and/or
assets of the Companies" shall include any portion of the business of the
Companies which shall have contributed eighty percent (80%) or more of the
revenues of the Companies as a whole during the last fiscal year prior to any
such sale, merger or consolidation, or which shall have comprised eighty percent
(80%) or more of the assets of the Companies as a whole immediately prior to any
such sale, merger or consolidation.
13. Assignment. The Executive may not assign this Agreement or any part hereof
without the prior written consent of each of the Companies, which consent may be
withheld by any of the Companies for any reason it deems appropriate.
14. Notice. For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given (a) on the date of delivery when delivered by hand, (b) on the
date of transmission when sent by facsimile transmission during normal business
hours with telephone confirmation of receipt, (c) one day after dispatch when
sent by overnight courier maintaining records of receipt, or (d) three days
after dispatch when sent by registered or certified mail, postage prepaid,
return receipt requested, all addressed as follows:
If to the Companies:
Saville Systems, Inc.
One Van de Graaff Drive
Burlington, MA 01803
If to the Executive:
Bruce A. Saville
4445 Calgary Trail
Suite 209
Edmonton, Alberta CANADA T6H 5R7
Telecopier: (403) 430-2149
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
1. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by the Executive and such officer or director as may be specifically
designated by the Board. No delay or omission by the Companies in exercising any
right under this Agreement shall operate as a waiver of that or any other right.
A waiver or consent given by the Companies on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver of
any right on any other occasion. Except where the context otherwise requires,
wherever used the singular shall include the plural, the plural the singular,
the use of any gender shall be applicable to all genders and the word "or" is
used in the inclusive sense. Headings contained in this Agreement are inserted
for reference and convenience only and in no way define, limit, extend or
describe the scope of this Agreement or the meaning or construction of any of
the provisions hereof.
2. Governing Law; Arbitration; Jurisdiction.
(a) This Agreement shall be governed by,and construed and enforced in accordance
with,the laws of the Province of Alberta,Canada without regard to the conflict
of law provisions thereof. (b) Any and all disputes,controversies or claims
between or among the parties hereto, arising under, out of or in any way
relating to this Agreement except with respect to the Companies' right to seek
injunctive relief with respect to Sections 5, 6, and 7 as provided under Section
17 hereof, shall be referred to arbitration and finally settled by arbitration.
Either party may elect to commence the arbitration but in any event such
election will only be effective if made by written notice to the other party
hereto. Subject to the provisions hereinafter set forth, the arbitration will be
conducted and determined in accordance with the rules of the International
Commercial Arbitration Act, R.S.O. 1990, c.I.9. The procedure shall be modified
as follows: (i) The arbitration will be conducted with three (3) arbitrators.
The Companies and Executive each shall appoint one (1) arbitrator and the two
(2) arbitrators thus appointed shall appoint the third arbitrator. If the two
(2) arbitrators fail to agree on the third arbitrator within thirty (30) days of
their appointment, the appointment shall be made, upon request of a party, by
the Alberta Court of Justice (General Division); (ii) The decision of the
arbitrators shall be final and binding and neither party shall appeal the
decision on any basis to any court; (iii) Upon failure, refusal or inability of
any arbitrator to act, his or her successor shall be appointed in the manner as
provided above; and (iv) The arbitrators shall render the decision and award in
writing with counterpart copies to all parties. The arbitrators shall have no
right to modify the terms of this Agreement except to the extent specifically
provided hereunder. The costs of the arbitration, including the fees and
expenses of counsel, expert and witness fees, and costs of the arbitrators shall
be in the discretion of the arbitrators, who shall have the power to make any
award which is just in the circumstances. (c) The arbitration proceeding shall
take place in the City of Edmonton, Alberta, Canada and shall be conducted in
the English language. The arbitrators shall apply the laws of the Province of
Alberta, Canada, without reference to the conflicts of laws thereof. (d) Any
suit, action or proceeding instituted by either party hereto, including, but not
limited to, any proceeding to enforce an award of damages by the arbitrators,
may be brought in the courts of the Province of Alberta, and except to the
extent as otherwise provided in this Section 16, said courts will have exclusive
jurisdiction with respect to all actions, suits, motions, issues or other
matters whatsoever arising out of this Agreement.
3. Injunctive Relief; Cumulative Rights. The Companies and the Executive agree
that, without limitation of the rights of the Companies with respect to any
other breach of this Agreement, the harm to the Companies arising from any
breach by the Executive of Sections 5, 6, and 7 of this Agreement could not
adequately be compensated for by monetary damages, and accordingly the Companies
shall, in addition to any other remedies available to them at law or in equity,
be entitled to obtain preliminary and permanent injunctive relief against such
breach. The Executive agrees that the various provisions of this Agreement shall
be construed as cumulative, and no one of them is exclusive of the other, or
exclusive of any rights allowed by law.
4. Validity. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
5. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
6. Withholding. Anything in this Agreement to the contrary notwithstanding, all
payments required to be made by the Companies hereunder to the Executive shall
be subject to the withholding of such amounts relating to taxes as the Companies
may reasonably determine they should withhold pursuant to any applicable law or
regulation. In lieu of withholding such amounts, in whole or in part, the
Companies may, in their sole discretion, accept other provisions for payment of
taxes and withholdings as required by law, provided they are satisfied that all
requirements of law affecting its responsibilities to withhold have been
satisfied.
7. Expenses. Each party to this Agreement hereby indemnifies the other party for
such reasonable attorneys' fees as are necessary and actually incurred by such
party to enforce the terms of this Agreement.
8. Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and related
transactions contemplated hereby and supersedes all prior oral or written
agreements, commitments or understandings with respect to the matters provided
for herein.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
SAVILLE SYSTEMS PLC
SAVILLE SYSTEMS, INC.
SAVILLE SYSTEMS CANADA, LTD.
By: /s/ John J. Boyle, III
Name: John J. Boyle, III
Title: President
EXHIBIT 10.7
Scotiabank
The Bank of Nova Scotia
10050 Jasper Avenue Edmonton Alberta T5J 1V7
August 27, 1997
Saville Systems PLC
Saville Systems Canada, Ltd.
Saville Systems, Inc., on a Joint & Several Basis
Dear Sirs:
We are pleased to confirm that subject to acceptance by you, the Bank of Nova
Scotia (the "Bank") will make available to Saville Systems PLC, Saville Systems
Canada, Ltd. and Saville Systems, Inc. on a joint & several basis (the
"Borrower"), credit facilities on the terms and conditions set out in the
attached Terms and Conditions Sheet and Schedule "A".
If the arrangements set out in this letter and in the attached Terms and
Conditions Sheet and Schedule "A" (collectively the "Commitment Letter") are
acceptable to you, please sign the enclosed copy of this letter in the space
indicated below and return the letter to us by the close of business on
September 5, 1997 after which date this offer will lapse.
This Commitment Letter replaces all previous commitments issued by the Bank to
the Borrower.
Yours very truly,
/s/J.M. Kozell /s/ G.R. Flumerfelt
J.M. Kozell FOR: K.B. Kalansky
Account Manager Vice-President & Centre Manager
The arrangements set out above and in the attached Terms and Conditions Sheet
and Schedule "A"(collectively the "Commitment Letter") are hereby acknowledged
and accepted by:
Saville Systems PLC Saville Systems, Inc.
Name Name
By: /s/Christopher A. Hanson By: /s/Christopher A. Hanson
Title: CFO Title: CFO
Date: 9/4/97 Date: 9/4/97
Saville Systems Canada, Ltd.
Name
By: /s/Christopher A. Hanson
Date: 9/4/97
<PAGE>
TERMS AND CONDITIONS
CREDIT NUMBER: 01 AUTHORIZED AMOUNT: $15,000,000
TYPE
Operating
PURPOSE
General operating requirements
CURRENCY
US dollar and/or Canadian dollar equivalent thereof and/or Irish punt
equivalent thereof.
AVAILMENT
The Borrower may avail the Credit by way of direct advances evidenced
by Demand Promissory Notes and/or Bankers' Acceptances in Canadian
dollars (in multiples of $100,000 and having terms of maturity of 30 to
180 days without grace) and/or Standby Letters of Credit and/or Letters
of Guarantee.
The maximum availment under Standby Letters of Credit and Letters of
Guarantee is US $1,000,000 and/or the CDN dollar equivalent thereof.
INTEREST RATE/FEES/COMMISSION
(US dollars): The Bank's U.S. Dollar Base Rate in Canada, from time to
time, plus 0.25% per annum with interest payable monthly.
(US dollars): The Bank's London Interbank Offer Rate (LIBOR), plus 1%
per annum for periods of 1, 2, 3 or 6 months, the rate to be
established two (2) business days prior to each drawdown or rollover
(Interest Adjustment Date) with interest payable monthly in arrears.
(CDN dollars): The Bank's Prime Lending Rate from time to time, plus
0.25% per annum, with interest payable monthly.
(CDN dollars): The Bank's Corporate Bankers' Acceptance Fee, (subject
to revision at any time), plus 0.25% per annum, subject to a minimum
fee of $100 per transaction, payable at the time of each acceptance.
(IEP): The Bank's Dublin Interbank Offer Rate (DIBOR), plus 1% per
annum for periods of 1, 2, 3 or 6 months, the rate to be established
two (2) business days prior to each drawdown or rollover (Interest
Adjustment Date) with interest payable monthly in arrears.
(L/G's & Standby L/C's): 1% per annum, calculated on the issue amount,
based on increments of 30 days or multiples thereof, from date of
issuance to expiry date. Periods of less than 30 days will be counted
as a thirty day increment. The amount is subject to the Bank's minimum
Standby fee as well as revision at any time and is payable upon
issuance.
STANDBY FEE
A Standby Fee of 0.25% per annum on the daily unused portion of the
Credit payable in USD is payable monthly commencing the earlier of all
security being in place or 30 days from acceptance of this commitment.
<PAGE>
DRAWDOWN
Advances are to be made in minimum multiples of US $50,000 and/or CDN
dollar equivalent thereof and/or Irish punt equivalent thereof.
REPAYMENT
The credit is for a period of 2 years until August 31, 1999. The
Borrower has the option, provided 60 days prior to August 31, 1998
written notice has been presented to the Bank to request the Bank to
extend the Operating Facility for a further period of 2 years. Any
extension is subject to the Bank's approval.
GENERAL SECURITY
The following security, evidenced by documents in form satisfactory to
the Bank is to be provided prior to any advances or availment being
made under the Credit(s):
General Security Agreement from each of Saville Systems PLC, Saville
Systems Canada, Ltd. and Saville Systems, Inc. over all present and
future personal property with appropriate insurance coverage, loss if
any, payable to the Bank.
The General Security agreements will be held in unregistered form. The
Bank reserves the right to register the General Security Agreements
should either:
The consolidated * working capital ratio decrease below 2.0:1.
or
The consolidated ratio of Debt:Tangible Net Worth (TNW) ** increase
above 1.2:1.
*Consolidated includes Saville Systems PLC, Saville Systems Canada,
Ltd. and Saville Systems, Inc.
**TNW is defined as the sum of share capital, earned and contributed
surplus less (i) amounts due from officers/affiliates, (ii)
investments in affiliates and (iii) intangible assets as defined by
the Bank.
Negative Pledge affirming assets will not be further encumbered,
without the Bank's prior written consent.
Bankers' Acceptance Agreement
Reimbursement Agreement for Standby Letter of Credit.
CONDITIONS PRECEDENT
The following conditions have to be met, in form and substance
satisfactory to the Bank, prior to any advances or availments being
made under the credit:
Due Diligence process by the Bank including a review of existing
contracts and licence agreements. Receipt of written legal and tax
opinions on the structure of the credit facility and security. Receipt
of a Business Plan including projections for fiscal 1997 and a capital
expenditure budget. Receipt of an organization chart and family tree
for the Saville Group.
<PAGE>
GENERAL CONDITIONS
Until all debts and liabilities under the Credits have been discharged
in full, the following conditions will apply in respect of the Credits:
Operating loans, Bankers' Acceptances, Standby Letters of Credit and
Letters of Guarantee are not to exceed at any time the "Borrowing
Base" which is defined as the aggregate of 80% of good quality
accounts receivable (excluding accounts over 90 days accounts due by
employees, offsets and inter-company accounts) plus combined cash
holdings or cash equivalents held on deposit with The Bank of Nova
Scotia, or its affiliates, less security interest or charges held by
other parties and specific payables which have or may have priority
over the Bank's security.
The consolidated ratio of current assets to current liabilities is to
be maintained at all times at 1.5:1 or better.
The consolidated ratio of Debt (including deferred taxes) to Tangible
Net Worth (TNW) is not to exceed 1.5:1.
Guarantees or other contingent liabilities are not to be entered into
in excess of the aggregate of $1,000,000 per annum without the Bank's
prior written consent.
The Borrower will not grant or permit a Purchase Money Security
Interest to any supplier or creditor.
Additional terms and conditions in Schedule A are to apply.
GENERAL BORROWER REPORTING CONDITIONS
Until all debts and liabilities under the Credit(s) have been
discharged in full, the Borrower will provide the Bank with the
following:
Annual Audited Consolidated Financial Statements, within 120 days of
the Borrower's fiscal year end, duly signed.
Annual Unconsolidated Financial Statements, for each of Saville
Systems PLC, Saville Systems Canada, Ltd. and Saville Systems, Inc.
prepared under Review Engagement, within 120 days of the Borrower's
fiscal year end.
Quarterly Consolidated Interim Financial Statements within 45 days of
period end.
A Statement of Security quarterly, to include information on
inventory, accounts receivable and accounts payable, within 45 days of
period end.
SCHEDULE A
ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO ALL CREDITS
Calculation and Payment of Interest
1. Interest on loans/advances made in Canadian dollars will be calculated on a
daily basis and payable monthly on the 22nd day of each month (unless
otherwise stipulated by the Bank). Interest shall be payable not in advance
on the basis of a calendar year for the actual number of days elapsed both
before and after demand of payment of default and/or judgment.
Interest on Overdue Interest
2. Interest on overdue interest shall be calculated at the same rate as
interest on the loans/advances in respect of which interest is overdue, but
shall be compounded monthly and be payable on demand, both before and after
demand and judgment.
Indemnity Provision
3. If the introduction of or any change in, or in the interpretation of, or
any change in its application to the Borrower of, any law or regulation, or
compliance with any guideline from any central bank or other governmental
authority (whether or not having the force of law) has the effect of
increasing the cost to the Bank of performing its obligations hereunder or
otherwise reducing its effective return hereunder or on its capital
allocated in support of the credit(s), then upon demand from time to time
the Borrower shall compensate the Bank for such cost or reduction pursuant
to a certificate reasonably prepared by the Bank.
(a) Prepayment without fee
In the event of the Borrower becoming liable for such costs, the
Borrower shall have the right to cancel without fee all or any
unutilized portion of the affected credit (other than any portion in
respect of which the Borrower has requested utilization of the credit
in which case cancellation may be effected upon indemnification of the
Bank for any costs incurred by the Bank thereby), and to prepay,
without fee the outstanding principal balance thereunder other than the
face amount of any document or instrument issued or accepted by the
Bank for the account of the Borrower, such as a Letter of Credit, a
Guarantee or a Bankers' Acceptance.
Calculation and Payment of Bankers' Acceptance Fee
1. The fee for the acceptance of each Bankers' Acceptance will be payable on
the face amount of each Bankers' Acceptance at the time of acceptance of
each draft calculated on the basis of a calendar year for the actual number
of days elapsed from and including the date of acceptance to the due date
of the draft.
Calculation and Payment of Standby Fee
2. Standby fees shall be calculated daily and payable monthly on the basis of
a 360 year day for U.S. dollar credits.
Environment
3. The Borrower agrees:
(a) to obey all applicable laws and requirements of any federal,
provincial, or any other governmental authority relating to the
environment and the operation of the business activities of the
Borrower;
(b) to allow the Bank access at all reasonable times to the business
premises of the Borrower to monitor and inspect all property and
business activities of the Borrower;
(c) to notify the Bank from time to time of any business activity conducted
by the Borrower which involves the use or handling of hazardous
materials or wastes or which increases the environmental liability of
the Borrower in any material manner;
(d) to notify the Bank of any proposed change in the use or occupation of
the property of the Borrower prior to any change occurring;
(e) to provide the Bank with immediate written notice of any environmental
problem and any hazardous materials or substances which have an adverse
effect on the property, equipment or business activities of the
Borrower and with any other environmental information requested by the
Bank from time to time;
(f) to conduct all environmental remedial activities which a commercially
reasonable person would perform in similar circumstances to meet its
environmental responsibilities and if the Borrower fails to do so, the
Bank may perform such activities; and
(g) to pay for any environmental investigations, assessments or remedial
activities with respect to any property of the Borrower that may be
performed for or by the Bank from time to time.
If the Borrower notifies the Bank of any specified activity or change or
provides the Bank with any information pursuant to subsections (c), (d), or (e),
or if the Bank receives any environmental information from other sources, the
Bank, in its sole discretion, may decide that an adverse change in the
environmental condition of the Borrower or any of the property, equipment, or
business activities of the Borrower has occurred which decision will constitute,
in the absence of manifest error, conclusive evidence of the adverse change.
Following this decision being made by the Bank, the Bank shall notify the
Borrower of the Bank's decision concerning the adverse change.
If the Bank decides or is required to incur expenses in compliance or to verify
the Borrower's compliance with applicable environmental or other regulations,
the Borrower shall indemnify the Bank in respect of such expenses, which will
constitute further advances by the Bank to the Borrower under this Agreement.
Evidence of Indebtedness
1. The Bank's accounts, books and records constitute, in the absence of
manifest error, conclusive evidence of the advances made under this Credit,
repayments on account thereof and the indebtedness of the Borrower to the
Bank.
Acceleration
2. All indebtedness and liability of the Borrower to the Bank not payable on
demand, shall, at the option of the Bank, become immediately due and
payable, the security held by the Bank shall immediately become
enforceable, and the obligation of the Bank to make further advances or
other accommodation available under the Credits shall terminate, if any one
of the following Events or Default occurs:
(i) the Borrower fails to make when due, whether on demand or at a
fixed payment date, by acceleration or otherwise, any payment
of interest, principal, fees, commissions or other amounts
payable to the Bank;
(ii) there is a breach by the Borrower of any other term or
condition contained in this Commitment Letter or in any other
agreement to which the Borrower and the Bank are parties;
(iii) any default occurs under any security listed in this
Commitment Letter under the headings "Specific Security" or
"General Security" or under any other credit, loan or security
agreement to which the Borrower is a party;
(iv) any bankruptcy, re-organization, compromise, arrangement,
insolvency or liquidation proceedings or other proceedings for
the relief of debtors are instituted by or against the
Borrower, and if instituted against the Borrower, are allowed
against or consented to by the Borrower or are not dismissed
or stayed within 60 days after such institution;
(v) a receiver is appointed over any property of the Borrower or
any judgment or order or any process of any court becomes
enforceable against the Borrower or any property of the
Borrower or any creditor takes possession of any property of
the Borrower;
(vi) any material adverse change occurs in the financial condition
of the Borrower;
(vii) any material adverse change occurs in the environmental
condition of:
(A) the Borrower; or
(B) any property, equipment, or business activities of the Borrower.
/s/ Bruce A. Saville
Bruce A. Saville
EXHIBIT 10.18
Mass Mutual
Office Lease
By And Between
Mass Mutual and
Saville Systems U.S., Inc.
For: Suite #500 & #501
Landmark One
1 Van de Graaff Drive
Burlington, MA
A "Mass Mutual" Property
<PAGE>
MM Equity No. 9615
OFFICE LEASE
THIS LEASE, made as of this 15 day of May , 1997 by and between MASSACHUSETTS
MUTUAL LIFE INSURANCE COMPANY, a Massachusetts corporation ("Landlord") through
its agent CORNERSTONE REAL ESTATE ADVISERS, INC., having an address at One
Financial Plaza, Suite 1700, Hartford, Connecticut 061032604 and SAVILLE SYSTEMS
U.S., INC., a Massachusetts company ("Tenant") having its principal office at 25
Mall Road, Sixth Floor, Burlington, Massachusetts 01803.
INDEX
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Article Title Page
<S> <C> <C>
1 Basic Provisions 2
2 Premises, Term and Commencement Date 4
3 Rent 4
4 Taxes and Operating Expenses 4
5 Landlord's Work, Tenant's Work, Alterations and Additions 6
6 Use 7
7 Services 7
8 Insurance 9
9 Indemnification 9
10 Casualty Damage 10
11 Condemnation 10
12 Repair and Maintenance 11
13 Inspection of Premises 11
14 Surrender of Premises 12
15 Holding Over 12
16 Subletting and Assignment 12
17 Subordination, Attornment and Mortgagee Protection 13
18 Estoppel Certificate 13
19 Defaults 14
20 Remedies of Landlord 14
21 Quiet Enjoyment 15
22 Accord and Satisfaction 15
23 Security Deposit 15
24 Brokerage Commission 16
25 Force Majeure 16
26 Parking 17
27 Hazardous Materials 17
28 Additional Rights Reserved by Landlord 18
29 Defined Terms 19
30 Miscellaneous Provisions 22
31 Special Provisions 25
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EXHIBITS
Exhibit A Plan Showing Property and Premises 28
Exhibit B Landlord's Work Letter 29
Exhibit C Tenant's Work 33
Exhibit D Building's Rules and Regulations;Janitorial Specifications 34
Exhibit E Commencement Date Confirmation 37
<PAGE>
ARTICLE 1.
BASIC PROVISIONS
A. Tenant's Trade Name: Saville Systems U.S., Inc.
B. Tenant's Address: Suite 500 & 501
One Van de Graaff Drive
Burlington, Massachusetts 01803
C. Office Building Name: Landmark One
Address: One Van de Graaff Drive
Burlington, Massachusetts 01803
D. Premises: Suite/Unit No.: 500 & 501
Square feet (Rentable): 12,417 rsf
E. Landlord: Massachusetts Mutual Life Insurance
Company
F. Landlord's Address: c/o Cornerstone Real Estate Advisers,Inc.
311 S. Wacker Drive
Suite 980
Chicago, Illinois 60606
G. Building Manager/Address: Peter Elliot LLC
980 Washington Street
Dedham, Massachusetts 02026
H. Commencement Date: July 15, 1997
I. Expiration Date: July 31, 2002
J. Security Deposit: $49,668.00
K. Monthly Rent: Year l:$24,834.00, Year 2:$25,351.38,
Year 3:$25,868.75, Year 4:$26,386.13,
Year 5:$26,903.50
L. Operating Expenses Base: Actual 1996 Calendar Year
M. Tax Base: Actual 1997 Fiscal Year
N. Tenant's Pro Rata Share: 7.70 %. Tenant's Pro Rata Share shall be
determined by and adjusted by Landlord from time to time (but shall not be
readjusted sooner than the commencement of the second Lease year), by dividing
the Tenant's Rentable Square Feet of the Premises by the rentable area of the
Building and multiplying the resulting quotient, to the second decimal place, by
one hundred.
O. Normal Business Hours of Building:
Monday through Friday: 8:00 a.m. to 6:00 p.m.
Saturday: 8:00 a.m. to 1:00 p.m.
Sunday: N/A am. to N/A p.m.
P. Brokers: Peter Elliot LLC / Spaulding & Slye
Q. Parking Fee: 41 unreserved spaces at no charge
R. Tenant's Original
Electrical Factor: $.90 per rentable square foot per year
$931.28 per month
$11,175.30 per year
The foregoing provisions shall be interpreted and applied in accordance with the
other provisions of this Lease set forth below. The capitalized terms, and the
terms defined in Article 29, shall have the meanings set forth herein or therein
(unless otherwise modified in the Lease) when used as capitalized terms in other
provisions of the Lease.
ARTICLE 2.
PREMISES, TERM AND COMMENCEMENT DATE
Landlord hereby leases and demises to the Tenant and Tenant hereby takes and
leases from Landlord that certain space identified in Article 1 and shown on a
plan attached hereto as Exhibit A ("Premises") for a term ("Term") commencing on
the Commencement Date and ending on the Expiration Date set forth in Article 1,
unless sooner terminated as provided herein, subject to the provisions herein
contained. The Commencement Date set forth in Article 1 shall be advanced to
such earlier date as Tenant commences occupancy of the Premises for the conduct
of its business. Such date shall be confirmed by execution of the Commencement
Date Confirmation in the form as set forth in Exhibit E. If Landlord delays
delivering possession of the Premises or substantial completion of any
Landlord's Work under Exhibit B, this Lease shall not be void or voidable,
except as provided in Article 5, and Landlord shall have no liability for loss
or damage resulting therefrom.
ARTICLE 3.
RENT
A. Monthly Rent. Tenant shall pay Monthly Rent in advance on or before the first
day of each month of the Term. If the Term shall commence and end on a day other
than the first day of a month, the Monthly Rent for the first and last partial
month shall be prorated on a per diem basis. Upon the execution of this Lease,
Tenant shall pay one installment of Monthly Rent for the first full month of the
Term and a prorated Monthly Rent for any partial month which may precede it.
B. Additional Rent. All costs and expenses which Tenant assumes or agrees to pay
and any other sum payable by Tenant pursuant to this Lease, including, without
limitation, its share of Taxes and Operating Expenses, shall be deemed
Additional Rent.
C. Rent. Monthly Rent, Additional Rent, Taxes and Operating Expenses and any
other amounts which Tenant is or becomes obligated to pay Landlord under this
Lease are herein referred to collectively as "Rent", and all remedies applicable
to the nonpayment of Rent shall be applicable thereto. Landlord may apply
payments received from Tenant to any obligations of Tenant then accrued, without
regard to such obligations as may be designated by Tenant.
D. Place of Payment, Late Charge, Default Interest. Rent and other charges
required to be paid under this Lease, no matter how described, shall be paid by
Tenant to Landlord at the Building Manager's address listed in Article 1, or to
such other person and/or address as Landlord may designate in writing, without
any prior notice or demand therefor and without deduction or set-off or
counterclaim and without relief from any valuation or appraisement laws. In the
event Tenant fails to pay Rent due under this Lease within ten (1O) days of due
date of said Rent, Tenant shall pay to Landlord a late charge of ten percent
(10%) on the amount overdue. Any Rent not paid when due shall also bear interest
at the Default Rate.
ARTICLE 4.
TAXES AND OPERATING EXPENSES
A. Payment of Taxes and Operating Expenses. It is agreed that during each Lease
Year beginning with the first month of the second Lease Year and each month
thereafter during the original Lease Term, or any extension thereof, Tenant
shall pay to Landlord as Additional Rent, at the same time as the Monthly Rent
is paid, an amount equal to one-twelfth (1/12) of Landlord's estimate (as
determined by Landlord in its reasonable discretion)of Tenant's Pro Rata Share
of any projected increase in the Taxes or Operating Expenses for the particular
Lease Year in excess of the Tax Base or Operating Expenses Base, as the case may
be (the "Estimated Escalation Increase"). A final adjustment (the "Escalation
Reconciliation") to be made between the parties as soon as practicable following
the end of each Lease Year, but in no event later than ninety (90) days after
the end of each Lease Year. In computing the Estimated Escalation Increase for
any particular Lease Year, Landlord shall take into account any prior increases
in Tenant's Pro Rata Share of Taxes and Operating Expenses. If during any Lease
Year the Estimated Escalation Increase is less than the Estimated Escalation
Increase for the previous Lease Year on which Tenant's share of Taxes and
Operating Expenses were based for said year, such Additional Rent payments,
attributable to Estimated Escalation Increase, to be paid by Tenant for the new
Lease Year shall be decreased accordingly; provided, however, in no event will
the Rent paid by Tenant hereunder ever be less than the Monthly Rent plus all
other amounts of Additional Rent.
As soon as practicable following the end of each Lease Year,but no later than 90
days following the end of each Lease Year, Landlord shall submit to Tenant a
statement setting forth the Estimated Escalation Increase, if any. Beginning
with said statement for the second Lease Year, it shall also set forth the
Escalation Reconciliation for the Lease Year just completed. To the extent that
the Operating Expense Escalation is different from the Estimated Escalation
Increase upon which Tenant paid Rent during the Lease Year just completed,
Tenant shall pay Landlord the difference in cash within thirty (30) days
following receipt by Tenant of such statement from Landlord, or receive a credit
on future Rent owing hereunder (or cash if there is no future Rent owing
hereunder) as the case may be. Until Tenant receives such statement, Tenant's
Rent for the new Lease Year shall continue to be paid at the rate being paid for
the particular Lease Year just completed, but Tenant shall commence payment to
Landlord of the monthly installment of Additional Rent on the basis of said
statement beginning on the first day of the month following the month in which
Tenant receives such statement. In addition to the above, if, during any
particular Lease Year, there is a change in the information on which Landlord
based the estimate upon which Tenant is then making its estimated payment of
Taxes and Operating Expenses so that such Estimated Escalation Increase
furnished to Tenant is no longer accurate, Landlord shall be permitted to revise
such Estimated Escalation Increase by notifying Tenant, and there shall be such
adjustments made in the Additional Rent on the first day of the month following
the serving of such statement on Tenant as shall be necessary by either
increasing or decreasing, as the case may be, the amount of Additional Rent then
being paid by Tenant for the balance of the Lease Year (but in no event shall
any such decrease result in a reduction of the rent below the Monthly Rent plus
all other amounts of Additional Rent). Landlord's and Tenant's responsibilities
with respect to the Tax and Operating Expense adjustments described herein shall
survive the expiration or early termination of this Lease.
If the Building is not fully occupied during any particular Lease Year,
Landlord may adjust those Operating Expenses which are affected by Building
occupancy for the particular Lease Year, or portion thereof, as the case may be,
to reflect an occupancy of not less than ninety-five percent (95%) of all such
rentable area of the Building.
B. Disputes Over Taxes or Operating Expenses. If Tenant disputes the amount of
an adjustment or the proposed estimated increase or decrease in Taxes or
Operating Expenses, Tenant shall give Landlord written notice of such dispute
within thirty (30) days after Landlord gives notice to Tenant of such adjustment
or proposed increase or decrease. Tenant's failure to give such notice shall
waive its right to dispute the amounts so determined. If Tenant timely objects,
Tenant shall have the right to engage its own accountants ("Tenant's
Accountants") for the purpose of verifying the accuracy of the statement in
dispute, or the reasonableness of the adjustment or estimated increase or
decrease. If Tenant's Accountants determine that an error has been made,
Landlord and Tenant's Accountants shall endeavor to agree upon the matter,
failing which Landlord and Tenant's Accountants shall jointly select an
independent certified public accounting firm (the "Independent Accountant")
which firm shall conclusively determine whether the adjustment or estimated
increase or decrease is reasonable, and if not, what amount is reasonable. Both
parties shall be bound by such determination. If Tenant's Accountants do not
participate in choosing the Independent Accountant within 20 days notice by
Landlord, then Landlord's determination of the adjustment or estimated increase
or decrease shall be conclusively determined to be reasonable and Tenant shall
be bound thereby. All costs incurred by Tenant in obtaining Tenant's Accountants
and the cost of the Independent Accountant shall be paid by Tenant unless
Tenant's Accountants disclose an error, acknowledged by Landlord (or found to
have conclusively occurred by the Independent Accountant), of more than seven
percent (7%) in the computation of the total amount of Taxes or Operating
Expenses as set forth in the statement submitted by Landlord with respect to the
matter in dispute; in which event Landlord shall pay the reasonable costs
incurred by Tenant in obtaining such audits. Tenant shall continue to timely pay
Landlord the amount of the prior year's adjustment and adjusted Additional Rent
determined to be incorrect as aforesaid until the parties have concurred as to
the appropriate adjustment or have deemed to be bound by the determination of
the Independent Accountant in accordance with the preceding terms. Landlord's
delay in submitting, any statement contemplated herein for any Lease Year shall
not affect the provisions of this paragraph, nor constitute a waiver of
Landlord's rights as set forth herein for said Lease Year or any subsequent
Lease Years during the Lease Term or any extensions thereof.
ARTICLE 5.
LANDLORD'S WORK, TENANT'S WORK,
ALTERATIONS AND ADDITIONS
A. Landlord's Work. Landlord shall construct the Premises in accordance with
Landlord's obligations as set forth in the work letter attached hereto as
Exhibit B, and hereinafter referred to as "Landlord's Work." Landlord will
deliver the Premises to Tenant with all of Landlord's Work completed (except for
minor and non-material punch list items which in Landlord's reasonable judgment
will not delay completion of Tenant's Work, as defined in subparagraph B of this
Article) on or before the date specified in Exhibit B and Tenant agrees
thereupon to commence and complete Tenant's Work on or before the Commencement
Date. If Landlord is delayed in completing Landlord's Work by strike, shortages
of labor or materials, delivery delays or other matters beyond the reasonable
control of Landlord, then Landlord shall give notice thereof to Tenant and the
date on which Landlord is to turn the Premises over to Tenant for Tenant's Work
and the Commencement Date shall be postponed for an equal number of days as the
delay as set forth in the notice. Providing, however, if such delays exceed one
hundred and twenty (120) days, then either Landlord or Tenant upon notice to the
other shall have the right to terminate this Lease without liability to either
party. If the Commencement Date is postponed as aforesaid, Tenant agrees upon
request of Landlord to execute a writing confirming the Commencement Date on
such form as set forth in Exhibit E attached hereto.
B. Tenant's Work. On and after the date specified in the immediately preceding
subparagraph A for delivery of the Premises to Tenant for Tenant's Work, Tenant,
at its sole cost and expense, shall perform and complete all other improvements
to the Premises (herein called "Tenant's Work") including, but not limited to,
all improvements, work and requirements required of Tenant under the foregoing
work letter. Tenant shall complete all of Tenant's Work in good and workmanlike
manner, fully paid for and free from liens, in accordance with the plans and
specifications approved by Landlord and Tenant as provided in Exhibit C, on or
prior to the scheduled Commencement Date. Tenant shall also have the right
during this period to come onto the Premises to install its fixtures and prepare
the Premises for the operation of Tenant's business. Notwithstanding the fact
that foregoing activities by Tenant will occur prior to the scheduled
Commencement Date, Tenant agrees that all of Tenant's obligations provided for
in this Lease shall apply during such period with the exception of any
obligation to pay Rent.
C. Alterations. Except as provided in the immediately preceding subparagraph,
Tenant shall make no structural alterations or additions to the Premises in
excess of $10,000.00 without the prior written consent of the Landlord, which
consent Landlord shall not unreasonably withhold or delay.
D. Liens. Tenant shall give Landlord at least ten (10) days prior written notice
(or such additional time as may be necessary under applicable laws) of the
commencement of any Tenant's Work, to afford Landlord the opportunity of posting
and recording notices of non-responsibility. Tenant will not cause or permit any
mechanic's, materialman's or similar liens or encumbrances to be filed or exist
against the Premises or the Building or Tenant's interest in this Lease in
connection with work done under this Article or in connection with any other
work. Tenant shall remove any such lien or encumbrance by bond or otherwise
within twenty (20) days from the date Tenant receives notice of their existence.
If Tenant falls to do so, Landlord may pay the amount or take such other action
as Landlord deems necessary to remove any such lien or encumbrance, without
being responsible to investigate the validity thereof. The amounts so paid and
costs incurred by Landlord shall be deemed Additional Rent under this Lease and
payable in full upon demand.
E. Compliance with ADA. Notwithstanding anything to the contrary contained in
this Lease, Landlord and Tenant agree that responsibility for compliance with
the Americans With Disabilities Act of 1990 (the "ADA") shall be allocated as
follows: (i) Landlord shall be responsible for compliance with the provisions of
Title III of the ADA for all Common Areas, including exterior and interior areas
of the Building not included within the Premises or the premises of other
tenants; (ii) Landlord shall be responsible for compliance with the provisions
of Title III of the ADA for any construction, renovations, alterations and
repairs made within the Premises if such construction, renovations, alterations
or repairs are made by Landlord (iii) Tenant shall be responsible for compliance
with the provisions of Title III of the ADA for any construction, renovations,
alterations and repairs made within the Premises if such construction,
renovations, alterations and repairs are made by Tenant, its employees, agents
or contractors, at Tenant's expense or at the direction of Tenant.
ARTICLE 6.
USE
A. Use. Tenant shall use the Premises for general office purposes and related
uses, and for no other purpose whatsoever, subject to and in compliance with all
other provisions of this Lease, including, without limitation the Building's
Rules and Regulations attached as Exhibit D hereto. Tenant and its invitees
shall also have the non-exclusive right, along with other tenants of the
Building and others authorized by Landlord, to use the Common Areas subject to
such reasonable rules and regulations as Landlord in its discretion may impose
from time to time.
B. Restrictions. Tenant shall not at any time use or occupy, or suffer or permit
anyone to use or occupy, the Premises or do or permit anything to be done in the
Premises which: (a) causes or is liable to cause injury to persons, to the
Building or its equipment, facilities or systems; (b) impairs or tends to impair
the character, reputation or appearance of the Building as a first class office
building; (c) impairs or tends to impair the proper and economic maintenance,
operation and repair of the Building or its equipment, facilities or systems; or
(d) annoys or inconveniences or tends to annoy or inconvenience other tenants or
occupants of the Building
C. Compliance with Laws. Tenant shall keep and maintain the Premises, its use
thereof and its business in compliance with all governmental laws, ordinances,
rules and regulations. Tenant shall comply with all Laws relating to the
Premises and Tenant's use thereof, including without limitation, Laws in
connection with the health, safety and building codes, and any permit or license
requirements. Landlord makes no representation that the Premises are suitable
for Tenant's purposes.
ARTICLE 7.
SERVICES
A. Climate Control. Landlord shall furnish heat or air conditioning to the
Premises during Normal Business Hours of Building as set forth in Article 1 as
required in Landlord's reasonable judgment for the comfortable use and
occupation of the Premises consistent with standards for other first-class
office buildings.If Tenant requires heat or air conditioning at any other time,
Landlord shall use reasonable efforts to furnish such service upon reasonable
notice from Tenant, and Tenant shall pay all of Landlord's reasonable charges
therefor within 15 days of invoice.
The performance by Landlord of its obligations under this Article is subject to
Tenant's compliance with the terms of this Lease including any connected
electrical load established by Landlord. Tenant shall not use the Premises or
any part thereof in a manner exceeding the heating, ventilating or
air-conditioning ("HVAC") design conditions (including any occupancy or
connected electrical load conditions), including the rearrangement of
partitioning which may interfere with the normal operation of the HVAC
equipment, or the use of computer or data processing machines or other machines
or equipment in excess of that normally required for a standard office use of
the Premises. If any such use requires changes in the HVAC or plumbing systems
or controls servicing the Premises or portions thereof in order to provide
comfortable occupancy, such changes may be made by Landlord at Tenant's expense
and Tenant agrees to promptly pay any such amount to Landlord as Additional
Rent.
B. Elevator Service. If the Building is equipped with elevators, Landlord,
during Normal Business Hours of Building, shall furnish elevator service to
Tenant to be used in common with others. At least one elevator shall remain in
service during all other hours. Landlord may designate a specific elevator for
use as a service elevator.
C. Janitorial Services. Landlord shall provide janitorial and cleaning services
to the Premises, substantially as described in Exhibit D attached hereto. Tenant
shall pay to Landlord on demand the reasonable costs incurred by Landlord for
(i) any cleaning of the Premises in excess of the specifications in Exhibit D
for any reason including, without limitation, cleaning required because of (A)
misuse or neglect on the part of Tenant or Tenant's agents, contractors,
invitees, employees and customers, (B) the use of portions of the Premises for
special purposes requiring greater or more difficult cleaning work than office
areas, (C) interior glass partitions or unusual quantities of interior glass
surfaces, and (D) non-building standard materials or finishes installed by
Tenant or at its request; and (ii) removal from the Premises of any refuse and
rubbish of Tenant in excess of that ordinarily accumulated in general office
occupancy or at times other than Landlord's standard cleaning times.
D. Water and Electricity. Landlord shall make available domestic water in
reasonable quantities to the common areas of the Building (and to the Premises
if so designated in Exhibit B) and cause electric service sufficient for
lighting the Premises and for the operation of Ordinary Office Equipment.
"Ordinary Office Equipment" shall mean office equipment wired for 120 volt
electric service and rated and using less than 6 amperes or 750 watts of
electric current or other office equipment approved by Landlord in writing, such
approval not to be unreasonably withheld or delayed. Landlord shall have the
exclusive right to make any replacement of lamps, fluorescent tubes and lamp
ballasts in the Premises. Landlord may adopt a system of revamping and ballast
replacement periodically on a group basis in accordance with good management
practice. Tenant's use of electric energy in the Premises shall not at any time
exceed the capacity of any of the risers, piping, electrical conductors and
other equipment in or serving the Premises. In order to insure that such
capacity is not exceeded and to avert any possible adverse effect upon the
Building's electric system, Tenant shall not, without Landlord's prior written
consent in each instance*, connect appliances or heavy duty equipment, other
than ordinary office equipment, to the Building's electric system or make any
alteration or addition to the Building's electric system. Should Landlord grant
its consent in writing, all additional risers, piping and electrical conductors
or other equipment therefor shall be provided by Landlord and the cost thereof
shall be paid by Tenant within 15 days of Landlord's demand therefor. As a
condition to granting such consent, Landlord may require Tenant to agree to an
increase in Monthly Rent to offset the expected cost to Landlord of such
additional service, that is, the cost of the additional electric energy to be
made available to Tenant based upon the estimated additional capacity of such
additional risers, piping and electrical conductors or other equipment. If
Landlord and Tenant cannot agree thereon, such cost shall be determined by an
independent electrical engineer, to be selected by Landlord and paid equally by
both parties.
E. Separate Meters. If the Premises are separately metered for any utility,
Tenant shall pay a utility charge to Landlord (or directly to the utility
company, if possible) based upon the Tenant's actual consumption as measured by
the meter. Landlord also reserves the right to install separate meters for the
Premises to register the usage of all or any one of the utilities and in such
event Tenant shall pay for the cost of utility usage as metered to the Premises
and which is in excess of the usage reasonably anticipated by Landlord for
normal office usage of the Premises. Tenant shall reimburse Landlord for the
cost of installation of meters if Tenant's actual usage exceeds the anticipated
usage level by more than 10 percent. In any event, Landlord may require Tenant
to reduce its consumption to the anticipated usage level. The term "utility" for
purposes hereof may refer to but is not limited to electricity, gas, water,
sewer, steam, fire protection system, telephone or other communication or alarm
service, as well as HVAC, and all taxes or other charges thereon.
F. Interruptions. Landlord does not warrant that any of the services referred to
above, or any other services which Landlord may supply, will be free from
interruption and Tenant acknowledges that any one or more of such services may
be suspended by reason of accident, repairs, inspections, alterations or
improvements necessary to be made, or by strikes or lockouts, or by reason of
operation of law, or causes beyond the reasonable control of Landlord. Any
interruption or discontinuance of service shall not be deemed an eviction or
disturbance of Tenant's use and possession of the Premises, or any part thereof,
nor render Landlord liable to Tenant for damages by abatement of the Rent or
otherwise, nor relieve Tenant from performance of Tenant's obligations under
this Lease. Landlord shall however, exercise reasonable diligence to restore any
service so interrupted and will use reasonable efforts to minimize
interference with conduct of Tenant's business in the Premises, and provide
notice when practicable.
G. Utilities Provided by Tenant. Tenant shall make application in Tenant's own
name for all utilities not provided by Landlord and shall: (i) comply with all
utility company regulations for such utilities, including requirements for the
installation of meters, and (ii) obtain such utilities directly from, and pay
for the same when due directly to, the applicable utility company. The term
"utilities" for purposes hereof shall include but not be limited to electricity,
gas, water, sewer, steam, fire protection, telephone and other communication and
alarm services, as well as HVAC, and all taxes or other charges thereon. Tenant
shall install and connect all equipment and lines required to supply such
utilities to the extent not already available at or serving the Premises, or at
Landlord's option shall repair, alter or replace any such existing items. Tenant
shall maintain, repair and replace all such items, operate the same, and keep
the same in good working order and condition. Tenant shall not install any
equipment or fixtures, or use the same, so as to exceed the safe and lawful
capacity of any utility equipment or lines serving the same. The installation
alteration, replacement or connection of any utility equipment and lines shall
be subject to the requirements for alterations of the Premises set forth in
Article 5. Tenant shall ensure that all Tenant's HVAC equipment, is installed
and operated at all times in a manner to prevent roof leaks, damage, or noise
due to vibrations or improper installation, maintenance or operation.
ARTICLE 8.
INSURANCE
A. Required Insurance. Tenant shall maintain insurance policies, with
responsible companies licensed to do business in the state where the Building is
located and reasonably satisfactory to Landlord, naming Landlord, Landlord's
Building Manager, Cornerstone Real Estate Advisers, Inc., Tenant and any
Mortgagee of Landlord of which Tenant is given notice ,as their respective
interests may appear, at its own cost and expense including (i) "all risk"
property insurance which shall be primary on the lease improvements referenced
in Article 5 and Tenant's property, including its goods, equipment and
inventory, in an amount adequate to cover their replacement cost; (ii) business
interruption insurance, (iii) comprehensive general liability insurance on an
occurrence basis with limits of liability in an amount not less than $1,000,000
(One Million Dollars) combined single limit for each occurrence. The
comprehensive general liability policy shall include contractual liability which
includes the provisions of Article 9 herein.
On or before the Commencement Date of the Lease, Tenant shall furnish to
Landlord and its Building, Manager, certificates of insurance evidencing the
aforesaid insurance coverage, including naming, Landlord, Cornerstone Real
Estate Advisers, Inc. and Landlord's Building Manager as additional insureds.
Renewal certificates must be furnished to Landlord at least thirty (30) days
prior to the expiration date of such insurance policies showing the above
coverage to be in full force and effect.
All such insurance shall provide that it cannot be canceled except upon thirty
(30) days prior written notice to Landlord. Tenant shall comply with all rules
and directives of any insurance board, company or agency determining rates of
hazard coverage for the Premises, including but not limited to the installation
of any equipment and/or the correction of any, condition necessary to prevent
any increase in such rates, unless the same constitutes Landlord s obligation
under the Lease, including without limitation, Article 12.
B. Waiver of Subrogation. Landlord and Tenant each agree that neither Landlord
nor Tenant will have any claim against the other for any loss, damage or injury
which is covered by insurance carried by either party and for which recovery
from such insurer is made, notwithstanding the negligence of either party in
causing the loss. This release shall be valid only if the insurance policy in
question permits waiver of subrogation or if the insurer agrees in writing that
such waiver of subrogation will not affect coverage under said policy. Each
party agrees to use its best efforts to obtain such an agreement from its
insurer if the policy does not expressly permit a waiver of subrogation.
C. Waiver of Claims. Except for claims arising from Landlord's willful
misconduct that are not covered by Tenant's insurance required hereunder, Tenant
waives all claims against Landlord for injury or death to persons, damage to
property or to any other interest of Tenant sustained by Tenant or any party
claiming, through Tenant resulting from: (i) any occurrence in or upon the
Premises, (ii) leaking of roofs, bursting, stoppage or leaking of water, gas,
sewer or steam pipes or equipment, including sprinklers, (iii) wind, rain, snow,
ice, flooding, freezing, fire, explosion, earthquake, excessive heat or cold, or
other casualty, (iv) the Building, Premises, or the operating and mechanical
systems or equipment of the Building, being defective, or failing, and (v)
vandalism, malicious mischief, theft or other acts or omissions of any other
parties including without limitation, other tenants, contractors and invitees at
the Building. Tenant agrees that Tenant's property loss risks shall be borne by
its insurance, and Tenant agrees to look solely to and seek recovery only from
its insurance carriers in the event of such losses. For purposes hereof, any
deductible amount shall be treated as though it were recoverable under such
policies. see ARTICLE 8.D, page 9a
ARTICLE 9.
INDEMNlFICATION
Tenant shall indemnify and hold harmless Landlord and its agents, successors and
assigns, including its Building Manager, from and against all injury, loss,
costs, expenses, claims or damage (including reasonable attorney's fees and
<PAGE>
ARTICLE 8. INSURANCE new paragraph D.
Landlord shall procure and maintain throughout the term of the Lease a policy or
policies of commercial property insurance, issued on an "all risk" basis
insuring the full replacement cost of the Building and improvements thereto and
the value of the improvements to the Premises together with the furniture,
equipment, supplies and other property owned, leased, held or used by Landlord
in connection with the operation and maintenance of the Building, and workman's
compensation insurance as required by applicable law. Landlord shall also
procure and maintain throughout the term of the Lease a policy or policies of
commercial general liability insurance written on an occurrence basis and
insuring Landlord against any and all liability for injury or death of person or
persons and for damage to property occasioned by or arising out of any
construction being done on the Building, (except in the Premises) or arising out
of the condition, use or occupancy of the Building, or in any way occasioned by
or arising out of the activities of Landlord, its agents, contractors,
employees, guests or licensees in the Building, the limits of such policy or
policies to be in combined single limits for both damaged property and personal
liability in amounts not less than Five Million dollars for each occurrence.
Landlord shall also carry such other types of insurance in form and amount which
shall be comparable to those carried by other landlords comparable office
buildings in the Burlington office market. All insurance policies procured and
maintained by Landlord shall be carried with companies licensed to do business
in the State of Massachusetts and shall be non-cancelable and not subject to
material change as to required amounts of coverage.
<PAGE>
disbursements) to any person or property arising from, related to, or in
connection with any use or occupancy of the Premises by or any act or omission
(including, without limitation, construction and repair of the Premises arising
out of Tenant's Work or subsequent work) of Tenant, its agents, contractors,
employees, customers, and invitees, which indemnity extends to any and all
claims arising from any breach or default in the performance of any obligation
on Tenant's part to be performed under the terms of this Lease. This
indemnification shall survive the expiration or termination of the Lease Term.
Landlord shall not be liable to Tenant for any damage by or from any act or
negligence of any co-tenant or other occupant of the Building, or by any owner
or occupants of adjoining or contiguous property. Landlord shall not be liable
for any injury or damage to persons or property resulting in whole or in part
from the criminal activities or willful misconduct of others. To the extent not
covered by all risk property insurance, Tenant agrees to pay for all damage to
the Building, as well as all damage to persons or property of other tenants or
occupants thereof, caused by the negligence, fraud or willful misconduct of
Tenant or any of its agents, contractors, employees, customers and invitees.
Nothing contained herein shall be construed to relieve Landlord from liability
for any personal injury resulting from its gross negligence, fraud or willful
misconduct.
ARTICLE 10.
CASUALTY DAMAGE
Tenant shall promptly notify Landlord or the Building Manager of any fire or
other casualty to the Premises or to the extent it knows of damage, to the
Building. In the event the Premises or any substantial part of the Building is
wholly or partially damaged or destroyed by fire or other casualty which is
covered by Landlord's insurance, the Landlord will proceed to restore the same
to substantially the same condition existing, immediately prior to such damage
or destruction unless such damage or destruction is incapable of repair or
restoration within, one hundred eighty (180) days, in which event Landlord or
tenant may, at their option and by written notice given to the other within
sixty (60) days of such damage or destruction, declare this Lease terminated as
of the happening of such damage or destruction. If in Landlord's reasonable
opinion the net insurance proceeds recovered by reason of the damage or
destruction will not be adequate to complete the restoration of the Building,
Landlord shall have the fight to terminate this Lease and all unaccrued
obligations of the parties hereto by sending a notice of such termination to
Tenant. To the extent after fire or other casualty that Tenant shall be deprived
of the use and occupancy of the Premises or any portion thereof as a result of
any such damage, destruction or the repair thereof, providing Tenant did not
cause the fire or other casualty, Tenant shall be relieved of the same ratable
portion of the Monthly Rent hereunder as the amount of damaged or useless space
in the Premises bears to the rentable square footage of the Premises until such
time as the Premises may be restored.* Landlord shall reasonably determine the
amount of damaged or useless space and the square footage of the Premises
referenced in the prior sentence. Provided if as a result of partial damage or
restriction, in access to Building or elimination of parking, Tenant cannot
reasonably use the Premises, Tenant shall be relieved of the Monthly Rent
hereunder until repairs to the Premises are completed.
ARTICLE 11.
CONDEMNATION
In the event of a condemnation or taking of the entire Premises by a public or
quasi-public authority, this Lease shall terminate as of the date title vests in
the public or quasi-public authority. In the event of a taking, or condemnation
of fifteen percent (15%) or more (but less than the whole) of the Building and
without regard to whether the Premises are part of such taking, or condemnation,
Landlord may elect to terminate this Lease by giving notice to Tenant within
sixty (60) days of Landlord receiving notice of such condemnation. All
compensation awarded for any condemnation shall be the property of Landlord,
whether such damages shall be awarded as a compensation for diminution in the
value of the leasehold or to the fee of the Premises, and Tenant hereby assigns
to Landlord all of Tenant's right, title and interest in and to any and all such
compensation. Providing, however that in the event this Lease is terminated,
Tenant shall be entitled to make a separate claim for the taking of Tenant's
personal property (including, fixtures paid for by Tenant), and for costs of
moving. Notwithstanding anything herein to the contrary, any condemnation award
to Tenant shall be available only to the extent such award is payable separately
to Tenant and does not diminish the award available to Landlord or any Lender of
Landlord.
<PAGE>
ARTICLE 12.
REPAIR AND MAINTENANCE
A. Tenant's Obligations. Tenant shall keep the Premises in good working order,
repair (and in compliance with all Laws now or hereafter adopted) and condition
(which condition shall be neat, clean and sanitary, and free of pests and
rodents) and shall make all necessary non-structural repairs thereto and any
repairs to non-Building standard mechanical, HVAC, electrical and plumbing
systems or components in or serving the Premises. Tenant's obligations hereunder
shall include but not be limited to Tenant's trade fixtures and equipment,
security systems, signs, interior decorations, floor-coverings, wall-coverings,
entry and interior doors, interior glass, light fixtures and bulbs, keys and
locks, and alterations to the Premises whether installed by Tenant or Landlord.
B. Landlord's Obligations. Landlord shall make all necessary structural repairs
to the Building, and any necessary repairs or maintenance to the Building
standard mechanical, HVAC, electrical, and plumbing systems in or servicing the
Common Areas or the Premises (the cost of which shall be included in Operating,
Expenses under Article 4), excluding repairs required to be made by Tenant
pursuant to this Article. Landlord shall have no responsibility to make any
repairs unless and until Landlord receives written notice of the need for such
repair. Landlord shall not be liable for any failure to make repairs or to
perform any maintenance unless such failure shall persist for an unreasonable
time after written notice of the need for such repairs or maintenance is
received by landlord from Tenant. Landlord shall make every reasonable effort to
perform all such repairs or maintenance in a reasonable period of time and in
such a manner (in its judgment) so as to cause minimum interference with Tenant
and the Premises but Landlord shall not be liable to Tenant for any interruption
or loss of business pertaining to such activities. Landlord shall have the right
to require that any damage caused by the willful misconduct of Tenant or any of
Tenant's agents, contractors, employees, invitees or customers, be paid for and
performed by the Tenant (without limiting, Landlord's other remedies herein).
C. Signs and Obstructions. Tenant shall not obstruct or permit the obstruction
of light, halls, Common Areas, roofs, parapets, stairways or entrances to the
Building or the Premises and will not affix, paint, erect or inscribe any sign,
projection, awning, signal or advertisement of any kind to any part of the
Building or the Premises, including the inside or outside of the windows or
doors, without the written consent of Landlord. Landlord shall have the right to
withdraw such consent at any time and to require Tenant to remove any sign,
projection, awning, signal or advertisement to be affixed to the Building or the
Premises. If such work is done by Tenant through any person, firm or corporation
not designated by Landlord, or without the express written consent of Landlord,
Landlord shall have the right to remove such signs, projections, awnings,
signals or advertisements without being liable to the Tenant by reason thereof
and to charge the cost of such removal to Tenant as Additional Rent, payable
within ten (10) days of Landlord's demand therefor.
D. Outside Services. Tenant shall not permit, except by Landlord or a person or
company reasonably satisfactory to and approved by Landlord which approved shall
not be unreasonably withheld or delayed. (i) the extermination of vermin in, on
or about the Premises; (ii) the servicing, of heating, ventilating and air
conditioning equipment; (iii) the collection of rubbish and trash other than in
compliance with local government health requirements and in accordance with the
rules and regulations established by Landlord, which shall minimally provide
that Tenant's rubbish and trash shall be kept in containers located so as not to
be visible to members of the public and in a sanitary and neat condition; or
(iv) window cleaning, janitorial services or similar work in the Premises.
ARTICLE 13.
INSPECTION OF PREMISES
Tenant shall permit the Landlord, the Building Manager and its authorized
representatives to enter the Premises to show the Premises to prospective
tenants during the last 6 months of the Term and to prospective buyers
throughout the Term during Normal Business Hours of Building after notice to
Tenant and at other reasonable times to inspect the Premises and to make such
repairs, improvements, alterations or additions in the Premises or in the
Building, of which they are a part as Landlord may deem necessary or appropriate
after notice to Tenant except in an emergency.
ARTICLE 14.
SURRENDER OF PREMISES
Upon the expiration of the Term, or sooner termination of the Lease, Tenant
shall quit and surrender to Landlord the Premises, broom clean, in good order
and condition, normal wear and tear and damage by fire and other casualty
excepted. All leasehold improvements and other fixtures, such as light fixtures
and HVAC equipment, wall coverings, carpeting and drapes, in or serving the
Premises, whether installed by Tenant or Landlord, shall be Landlord's property
and shall remain, all without compensation, allowance or credit to Tenant. Any
property not removed shall be deemed to have been abandoned by Tenant and may be
retained or disposed of by Landlord at Tenant's expense free of any and all
claims of Tenant, as Landlord shall desire. All property not removed from the
Premises by Tenant may be handled or stored by Landlord at Tenant's expense and
Landlord shall not be liable for the value, preservation or safekeeping thereof.
At Landlord's option all or part of such property may be conclusively deemed to
have been conveyed by Tenant to Landlord as if by bill of sale without payment
by Landlord. The Tenant hereby waives to the maximum extent allowable the
benefit of all laws now or hereafter in force in this state or elsewhere
exempting property from liability for rent or for debt.
ARTICLE 15.
HOLDING OVER
Tenant shall pay Landlord 150% of the amount of Rent then applicable prorated on
a per diem basis for each day Tenant shall retain possession of the Premises or
any part thereof after expiration or earlier termination of this Lease, together
with all actual damages sustained by Landlord on account thereof. The foregoing
provisions shall not serve as permission for Tenant to hold-over, nor serve to
extend the Term (although Tenant shall remain bound to comply with all
provisions of this Lease until Tenant vacates the Premises) and Landlord shall
have the right at any time thereafter to enter and possess the Premises and
remove all property and persons therefrom.
ARTICLE 16.
SUBLETTING AND ASSIGNMENT
Tenant shall not, without the prior written consent of Landlord which consent
shall not be unreasonably withheld or delayed, list the Premises or any part
thereof as available for assignment or sublease with any broker or agent or
otherwise advertise, post, communicate or solicit prospective assignees or
subtenants through any direct or indirect means, nor assign this Lease or any
interest thereunder, or sublet Premises or any part thereof, or permit the use
of Premises by any party other than Tenant. In the event that during the term of
this Lease, Tenant desires to sublease or assign and introduces Landlord to a
proposed replacement tenant for Tenant for all or a portion of the Premises,
which replacement tenant has a good reputation, is of financial strength at
least equal to that of Tenant (as determined by Landlord in its reasonable
discretion) and has a use for Premises and a number of employees reasonably
consistent with that of Tenant's operation, the Landlord may consider such
replacement tenant and notify Tenant with reasonable promptness as to Landlord's
choice, at Landlord's sole discretion, of the following:
(1) That Landlord consents to a subleasing of the Premises or assignment of the
lease to such replacement tenant provided that Tenant shall remain fully liable
for all of its obligations and liabilities under this Lease and provided further
that Landlord shall be entitled to 50% of any profit obtained by Tenant from
such subletting or assignment after Tenant's reasonable pre-approved expenses
incurred in such subletting or;
(2) In the case of an assignment that upon such replacement tenant's entering
into a mutually satisfactory new Lease for the Premises with Landlord, then
Tenant shall be released from all further obligations and liabilities under this
Lease (excepting, only any unpaid rentals or any unperformed covenants then past
due under this Lease or any guarantee by Tenant of replacement tenant's
obligations); or
(3) That Landlord declines to consent to such sublease or assignment due to
insufficient or unsatisfactory documentation furnished to Landlord to establish
Tenant's reputation, financial strength and proposed use of and operations upon
Premises; or
(4) That Landlord elects to cancel the Lease and recapture the Premises (in the
case of an assignment) or that Landlord elects to cancel the Lease as to
the portion thereof that Tenant had wished to sublease. In either such
event Tenant shall surrender possession of the Premises, or the portion
thereof which is the subject of Tenant's request on the date set forth in a
notice from Landlord in accordance with the provisions of this lease
relating to the surrender of the Premises. If this Lease shall be canceled
as to a portion of the Premises only, the Rent payable by Tenant hereunder
shall be abated proportionately according to the ratio that the area of the
portion of the Premises surrendered (as computed by Landlord) bears to the
area of the Premises immediately prior to such surrender. If Landlord shall
cancel this Lease, Landlord may relet the Premises, or the applicable
portion of the Premises, to any other party (including, without limitation,
the proposed assignee or subtenant of Tenant), without any liability to
Tenant.
Notwithstanding anything to the contrary contained herein, Tenant shall have the
right at any time during the term of this Lease to assign this Lease or sublet
all or any portion of the Premises to any entity (i) owned or controlled by
Tenant or which shall hold a majority of Tenant's stock or which is under common
ownership or control with Tenant; (ii) which is the result of any merger,
consolidation or reorganization of Tenant; or (iii) which shall purchase
substantially all of the assets of Tenant (collectively, "Business Assignment")
provided that any such entity assumes the obligations of Tenant under the Lease
in writing and a copy thereof is promptly delivered to Landlord.
Except in the case of a Business Assignment, in no event may Tenant assign any
options to sublessee(s) or assignee(s) hereunder, all such options being deemed
personal to SAVILLE SYSTEMS U.S., INC. only. Consent by Landlord hereunder shall
in no way operate as a waiver by Landlord of, or to release or discharge Tenant
from, any liability under this Lease or be construed to relieve Tenant from
obtaining Landlord's consent to any subsequent assignment, subletting, transfer,
use or occupancy.
ARTICLE 17.
SUBORDINATION, ATTORNMENT AND MORTGAGEE PROTECTION
This Lease is subject and subordinate to all Mortgages now or hereafter placed
upon the Building, and all other encumbrances and matters of public record
applicable to the Building including without limitation, any reciprocal easement
or operating, agreements, covenants, conditions and restrictions and Tenant
shall not act or permit the Premises to be operated in violation thereof. If any
foreclosure or power of sale proceedings are initiated by any Lender or a deed
in lieu is granted (or if any ground lease is terminated), Tenant agrees, upon
written request of any such Lender or any purchaser at such foreclosure sale, to
attorn and pay Rent to such party and to execute and deliver any instruments
necessary or appropriate to evidence or effectuate such attornment. In the event
of attornment, no Lender shall be: (i) liable for any act or omission of
Landlord, or subject to any offsets or defenses which Tenant might have against
Landlord (prior to such Lender becoming Landlord under such attornment), (ii)
liable for any security deposit not actually received by such Lender or bound by
any prepaid Rent not actually received by such Lender, or (iii) bound by any
future modification of this Lease amending any material business term hereof,not
consented to by such Lender. Any Lender may elect to make this Lease prior to
the lien of its Mortgage, and if the Lender under any prior Mortgage shall
require, this Lease shall be prior to any subordinate Mortgage; such elections
shall be effective upon written notice to Tenant. Tenant agrees to give any
Lender by certified mail, return receipt requested, a copy of any notice of
default served by Tenant upon Landlord, provided that prior to such notice
Tenant has been notified in writing, (by way of service on Tenant of a copy of
an assignment of leases, or otherwise) of the name and address of such Lender.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time permitted Landlord for cure under this Lease, any such Lender
whose address has been so provided to Tenant shall have an additional period of
thirty (30) days in which to cure (or such additional time as may be required
due to causes beyond such Lender's control, including time to obtain possession
of the Building, by power of sale or judicial action or deed in lieu of
foreclosure so long as Lender diligently pursues such cure). The provisions of
this Article shall be self-operative; however, Tenant shall execute such
documentation as Landlord or any Lender may request from time to time in order
to confirm the matters set forth in this Article in recordable form. To the
extent not expressly prohibited by Law, Tenant waives the provisions of any Law
now or hereafter adopted which may give or purport to give Tenant any right or
election to terminate or otherwise adversely affect this Lease or Tenant's
obligations hereunder if such foreclosure or power of sale proceedings are
initiated, prosecuted or completed.
ARTICLE 18.
ESTOPPEL CERTIFICATE
Tenant or Landlord shall from time to time, upon written request by the other or
Lender, deliver to the other or Lender, within fifteen (15) days after from
receipt of such request, a statement in writing certifying: (i) that this Lease
is unmodified and in full force and effect (or if there have been modifications,
identifying such modifications and certifying that the Lease, as modified, is in
full force and effect); (ii) the dates to which the Rent has been paid; (iii)
that Landlord is not in default under any provision of this Lease (or if
Landlord is in default, specifying each such default); and,
Notwithstanding the above, Landlord agrees that as an express condition of
Tenant's subordination, Landlord shall obtain from the applicable Lender, a
written subordination and non-disturbance agreement for the benefit of Tenant.
Said subordination and non-disturbance agreement shall be in the Lender's
standard form and shall provide, among other provisions, that so long as this
Lease shall be in full force and effect that in the event it should become
necessary to foreclose the Mortgage, the Lender thereunder will not join the
Tenant in summary or foreclosure proceedings or otherwise interrupt Tenant's
quiet use, enjoyment, or possession of the Premises pursuant to the Lease, so
long as the Tenant is not in default under any of the terms, covenants or
conditions of the Lease.
<PAGE>
(iv) the address to which notices to Tenant shall be sent; it being understood
that any such statement so delivered may be relied upon in connection with any
lease, mortgage or transfer.
Tenant's failure to deliver such statement within such time shall be conclusive
upon Tenant that: (i) this Lease is in full force and effect and not modified
except as Landlord may represent; (ii) not more than one month's Rent has been
paid in advance; (iii) there are no defaults by Landlord; and, (iv) notices to
Tenant shall be sent to Tenant's Address as set forth in Article 1 of this
Lease. Notwithstanding, the presumptions of this Article, Tenant shall not be
relieved of its obligation to deliver said statement.
ARTICLE 19.
DEFAULTS
If Tenant: (i) fails to pay when due any instalment or other payment of Rent for
more than 10 days after notice but in no event more than 2 times in any 12 month
period or to keep in effect any insurance required to be maintained; or (ii)
vacates or abandons the Premises without providing Landlord with at least 30
days' prior written notice. Such notice shall indicate Tenant's reason for
vacating or abandoning the Premises , or (iii) becomes insolvent, makes an
assignment for the benefit of creditors, files a voluntary bankruptcy or an
involuntary petition in bankruptcy is filed against Tenant which petition is not
dismissed within sixty (60) days of its filing, or (iv) fails to perform or
observe any of the other covenants, conditions or agreements contained herein on
Tenant's part to be kept or performed and such failure shall continue for thirty
(30) days after notice thereof given by or on behalf of Landlord or such longer
period as may reasonably be required provided that Tenant diligently pursues
such cure, or (v) if the interest of Tenant shall be offered for sale or sold
under execution or other legal process if Tenant makes any transfer, assignment,
conveyance, sale, pledge, disposition of all or a substantial portion of
Tenant's property without providing Landlord at least 30 days prior written
notice then any such event or conduct shall constitute a"default" hereunder.
If Tenant shall file a voluntary petition pursuant to the United States
Bankruptcy Reform Act of 1978, as the same may be from time to time be amended
(the "Bankruptcy Code"), or take the benefit of any insolvency act or be
dissolved, or if an involuntary petition be filed against Tenant pursuant to the
Bankruptcy Code and said petition is not dismissed within sixty (60)days after
such filing, or if a receiver shall be appointed for its business or its assets
and the appointment of such receiver is not vacated within sixty (60) days after
such appointment, or if it shall make an assignment for the benefit of its
creditors, then Landlord shall have all of the rights provided for in the event
of nonpayment of the Rent.
If any alleged default on the part of the Landlord hereunder occurs, Tenant
shall give written notice to Landlord in the manner herein set forth and shall
afford Landlord a reasonable opportunity to cure any such default. In addition,
Tenant shall send notice of such default by certified or registered mail,
postage prepaid, to the holder of any Mortgage whose address Tenant has been
notified of in writing, and shall afford such Mortgage holder a reasonable
opportunity to cure any alleged default on Landlord's behalf consistent with
Article 17. In no event will Landlord be responsible for any damages incurred by
Tenant, including but not limited to, lost profits or interruption of business
as a result of any alleged default by Landlord hereunder.
ARTICLE 20.
REMEDIES OF LANDLORD
The remedies provided Landlord under this Lease are cumulative.
(a) Upon the occurrence of any default, Landlord may serve notice on Tenant that
the Term and the estate hereby vested in Tenant and any and all other rights of
Tenant hereunder shall cease on the date specified in such notice and on the
specified date this Lease shall cease and expire as fully and with the effect as
if the Term had expired for passage of time.
(b) Without terminating, this Lease in case of a default or if this Lease shall
be terminated for default as provided herein, Landlord may re-enter the
Premises, remove Tenant, or cause Tenant to be removed from the Premises in such
manner as Landlord may deem advisable, with or without legal process, and using,
such reasonable force as may be necessary. In the event of re-entry without
terminating this Lease, Tenant shall continue to be liable for all Rents and
other charges accruing, or coming due under this Lease.
(c) If Landlord, without terminating this Lease, shall re-enter the Premises or
if this Lease shall be terminated as provided in paragraph (a) above:
(i) All Rent due from Tenant to Landlord shall thereupon become due and
shall be paid up to the time of re-entry, dispossession or expiration,
together with reasonable costs and expenses (including, without
limitation, attorney's fees) of Landlord;
(ii) Landlord, without any obligation to do so, may relet the Premises
or any part thereof for a term or terms which may at Landlord's option
be less than or exceed the period which would otherwise have
constituted the balance of the Term and may grant such concessions in
reletting as Landlord, in the exercise of its reasonable business
judgment, deems desirable. In connection with such reletting, Tenant
shall be liable for all costs of the reletting including, without
limitation, rent concessions, leasing, commissions, legal fees and
alteration and remodeling costs; and
(iii) If Landlord shall have terminated this Lease, Tenant shall also
be liable to Landlord for all damages provided for in law and under
this Lease resulting from Tenant's breach including, without
limitation, the difference between the aggregate rentals reserved under
the terms of this Lease for the balance of the Term together with all
other sums payable hereunder as Rent for the balance of the Term, less
the fair rental value of the Premises for that period determined as of
the date of such termination. For purposes of this paragraph, Tenant
shall be deemed to include any guarantor or surety of the Lease.
(d) Tenant hereby waives all right to trial by jury in any claim, action
proceeding or counterclaim by either Landlord or Tenant against each other or
any matter arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, and/or Tenant's use or occupancy of the
Premises.
(e) In addition to the above, Landlord shall have any and all other rights
provided a Landlord under law or equity for breach of a lease or tenancy by a
Tenant.
(f) Notwithstanding anything, in this Article to the contrary, Landlord agrees
to use commercially reasonable efforts to mitigate its damages under this Lease.
ARTICLE 21.
QUIET ENJOYMENT
Landlord covenants and agrees with Tenant that so long as Tenant pays the Rent
and observes and performs all the terms, covenants, and conditions of this Lease
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, and Tenant's possession will not be disturbed by anyone claiming, by,
through, or under Landlord.
ARTICLE 22.
ACCORD AND SATISFACT1ON
No payment by Tenant or receipt by Landlord of an amount less than full payment
of Rent then due and payable shall be deemed to be other than on account of the
Rent then due and payable, 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
provided for in this Lease or available at law or in equity.
ARTICLE 23.
SECURITY DEPOSIT
To secure the faithful performance by Tenant of all of the covenants, conditions
and agreements set forth in this Lease to be performed by it, including, without
limitation, foregoing such covenants, conditions and agreements in this Lease
which become applicable upon its termination by re-entry or otherwise, Tenant
has deposited with Landlord the sum shown in Article 1 as a "Security Deposit"
on the understanding:
<PAGE>
(a) that the Security Deposit or any portion thereof may be applied to the
curing of any default that may exist, without prejudice to any other remedy or
remedies which the Landlord may have on account thereof, and upon such
application Tenant shall pay Landlord on demand the amount so applied which
shall be added to the Security Deposit so the same will be restored to its
original amount;
(b) that should the Premises be conveyed by Landlord, the Security Deposit or
any balance thereof shall be turned over to the Landlord's grantee, and if the
same be turned over as aforesaid, Tenant hereby releases Landlord from any and
all liability with respect to the Security Deposit and its application or
return, and Tenant agrees to look solely to such grantee for such application or
return; and,
(c) that Landlord may commingle the Security Deposit with other funds and not be
obligated to pay Tenant any interest;
(d) that the Security Deposit shall not be considered as advance payment of Rent
or a measure of damages for any default by Tenant, nor shall it be a bar or
defense to any actions by Landlord against Tenant;
(e) that if Tenant shall faithfully perform all of the covenants and agreements
contained in this Lease on the part of the Tenant to be performed, the Security
Deposit or any then remaining, balance thereof, shall be returned to Tenant,
without interest, within thirty (30) days after the expiration of the Term.
Tenant further covenants that it will not assign or encumber the money deposited
herein as a Security Deposit and that neither Landlord nor its successors or
assigns shall be bound by any such assignment, encumbrance, attempted assignment
or attempted encumbrance.
ARTICLE 24.
BROKERAGE COMMISSION
Landlord and Tenant represent and warrant to each other that neither has dealt
with any broker, finder or agent except for the Broker(s) identified in Article
1. Landlord and Tenant represent and warrant to the other that (except with
respect to the Broker identified in Article I and with whom Landlord has entered
into a separate brokerage agreement pursuant to which Landlord will pay the
commission of such Broker) no broker, agent, commission salesperson, or other
person has represented Landlord or Tenant in the negotiations for and
procurement of this Lease and the Premises and, except as set forth herein, that
no commissions, fees, or compensation of any kind are due and payable in
connection herewith to any broker, agent commission salesperson, or other
person. Landlord and Tenant agree to indemnify and hold harmless the other party
from any and all claims, suits, or judgments (including, without limitation,
reasonable attorneys' fees and court costs incurred in connection with any such
claims, suits, or judgments, or in connection with the enforcement of this
indemnity) for any fees, commissions, or compensation of any kind which arise
out of or are in any way connected with any claimed agency relationship with the
indemnifying party which is not referenced in Article 1 or any breach of the
representation or warranty contained in this Article.
<PAGE>
ARTICLE 25.
FORCE MAJEURE
Landlord shall be excused for the period of any delay in the performance of any
obligation hereunder when prevented from so doing by a cause or causes beyond
its control, including all labor disputes, civil commotion, war, war-like
operations, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls, fire or other casualty,
inability to obtain any material, services or financing, or through acts of God.
Tenant shall similarly be excused for delay in the performance of any obligation
hereunder; provided:
(a) nothing contained in this Section or elsewhere in this Lease shall be deemed
to excuse or permit any delay in the payment of the Rent, or any delay in the
cure of any default which may be cured by the payment of money;
(b) no reliance by Tenant upon this Section shall limit or restrict in any way
Landlord's right of self-help as provided in this Lease; and
(c) Tenant shall not be entitled to rely upon this Section unless it shall first
have given Landlord notice of the
<PAGE>
existence of any force majeure preventing the performance of an obligation of
Tenant within *five days after the Commencement of the force majeure. *ten
ARTICLE 26.
PARKING
(a) Landlord hereby grants to Tenant the right, in common with others authorized
by Landlord, to use the parking facilities owned by Landlord and shown on
Exhibit A, if any. Landlord, at its sole election, may designate the types and
locations of parking spaces within the parking facilities which Tenant shall be
allowed to use. Landlord shall have the right, at Landlord's sole election, to
change said types and locations from time to time; provided, however, such
designation shall be uniformly applied and shall not unfairly favor any tenant
in the Building.
(b) Commencing on the Commencement Date, Tenant shall pay Landlord the Parking
Fee, if any, shown in Article 1, as Additional Rent, payable monthly in advance
with the Monthly Rent. If there is a Parking, Fee shown in Schedule 1, then
thereafter, and throughout the Term, the parking rate for each type of parking
space provided to Tenant hereunder shall be the prevailing parking rate, as
Landlord may designate from time to time, at Landlord's sole election, for each
such type of parking space. In addition to the right reserved hereunder by
Landlord to designate the parking rate from time to time, Landlord shall have
the right to change the parking rate at any time to include therein any amounts
levied, assessed, imposed or required to be paid to any governmental authority
on account of the parking, of motor vehicles, including all sums required to be
paid pursuant to transportation controls imposed by the Environmental Protection
Agency under the Clean Air Act of 1970, as amended, or other-wise required to be
paid by any governmental authority with respect to the parking, use, or
transportation of motor vehicles, or the reduction or control of motor vehicle
traffic, or motor vehicle pollution.
(c) If requested by Landlord, Tenant shall notify Landlord of the license plate
number, year, make and model of the automobiles entitled to use the parking
facilities and if requested by Landlord, such automobiles shall be identified by
automobile window stickers provided by Landlord, and only such designated
automobiles shall be permitted to use the parking, facilities. If Landlord
institutes such an identification procedure, Landlord may provide additional
parking, spaces for use by customers and invitees of Tenant on a daily basis at
prevailing parking rates, if any. At Landlord's sole election, Landlord may make
validation stickers available to Tenant for any such additional parking spaces,
provided, however, if Landlord makes validation stickers available to any other
tenant in the Building, Landlord shall make such validation stickers available
to Tenant.
(d) The parking facilities provided for herein are provided solely for the
accommodation of Tenant and Landlord assumes no responsibility or liability of
any kind whatsoever from whatever cause with respect to the automobile parking
areas, including adjoining streets, sidewalks, driveways, property and
passageways, or the use thereof by Tenant or tenant's employees, customers,
agents, contractors or invitees.
ARTICLE 27.
HAZARDOUS MATERIALS
A. Definition of Hazardous Materials. The term "Hazardous Materials" for
purposes hereof shall mean any chemical, substance, materials or waste or
component thereof which is now or hereafter listed, defined or regulated as a
hazardous or toxic chemical, substance, materials or waste or component thereof
by any federal, state or local governing or regulatory body having jurisdiction,
or which would trigger any employee or community "right-to-know" requirements
adopted by any such body, or for which any such body has adopted any
requirements for the preparation or distribution of a materials safety data
sheet ("MSDS").
B. No Hazardous Materials. Tenant shall not transport, use, store, maintain,
generate, manufacture, handle, dispose, release or discharge any Hazardous
Materials. However, the foregoing provisions shall not prohibit the
transportation to and from, and use, storage, maintenance and handling, within
the Premises of Hazardous Materials customarily used in the business or activity
expressly permitted to be undertaken in the Premises under Article 6, provided:
(a) such Hazardous Materials shall be used and maintained only in such
quantities as are reasonably necessary for such permitted use of the Premises
and the ordinary course of Tenant's business therein, strictly in accordance
with applicable Law, highest prevailing, standards, and the manufacturers'
instructions therefor, (b) such Hazardous Materials shall not be disposed of,
released or discharged in the Building, and shall be transported to and from the
Premises in compliance with all applicable Laws, and as Landlord shall
reasonably require, (c) if any applicable Law or Landlord's trash removal
contractor requires that any such Hazardous Materials be disposed of separately
from ordinary trash, Tenant shall make arrangements at Tenant's expense for such
disposal directly with a qualified and licensed disposal company at a lawful
disposal site (subject to scheduling and approval by Landlord), and (d) any
remaining such Hazardous Materials shall be completely, properly and lawfully
removed from the Building, upon expiration or earlier termination of this Lease.
C. Notices To Landlord. Tenant shall promptly notify Landlord of: (i) any
enforcement cleanup or other regulatory action taken or threatened by any
governmental or regulatory authority with respect to the presence of any
Hazardous Materials on the Premises or the migration thereof from or to other
property, (ii) any demands or claims made or threatened by any party relating to
any loss or injury resulting from any Hazardous Materials on the Premises, (iii)
any release, discharge or non-routine, improper or unlawful disposal or
transportation of any Hazardous Materials on or from the Premises or in
violation of this Article, and (iv) any matters where Tenant is required by Law
to give a notice to any governmental or regulatory authority respecting any
Hazardous Materials on the Premises. Landlord shall have the right (but not the
obligation) to join and participate, as a party, in any legal proceedings or
actions affecting the Premises initiated in connection with any environmental,
health or safety law. At such times as Landlord may reasonably request, Tenant
shall provide Landlord with a written list, certified to be true and complete,
identifying any Hazardous Materials then used, stored, or maintained upon the
Premises, the use and approximate quantity of each such materials, a copy of any
MSDS issued by the manufacturer therefor, and such other information as Landlord
may reasonably require or as may be required by Law.
D. Indemnification of Landlord. If any Hazardous Materials are released,
discharged or disposed of by Tenant or any other occupant of the Premises, or
their employees, agents, invitees or contractors, on or about the Building in
violation of the foregoing provisions, Tenant shall immediately, properly and in
compliance with applicable Laws clean up, remediate and remove the Hazardous
Materials from the Building, and any other affected property and clean or
replace any affected personal property (whether or not owned by Landlord), at
Tenant's expense (without limiting Landlord's other remedies therefor). Tenant
shall further be required to indemnify and hold Landlord, Landlord's directors,
officers, employees and agents harmless from and against any and all claims,
demands, liabilities, losses, damages, penalties and judgments directly or
indirectly arising out of or attributable to a violation of the provisions of
this Article by Tenant, Tenant's occupants, employees, contractors or agents.
Any clean up, remediation and removal work shall be subject to Landlord's prior
written approval (except in emergencies), and shall include, without limitation,
any testing, investigation, and the preparation and implementation of any
remedial action plan required by any governmental body having jurisdiction or
reasonably required by Landlord. If Landlord or any Lender or governmental body
arranges for any tests or studies showing that this Article has been violated,
Tenant shall pay for the costs of such test. The provisions of this Article
shall survive the expiration or earlier termination of this Lease.
Landlord shall indemnify and hold Tenant, its officers, employees and agents
harmless from and against any and all claims, demands, liabilities, losses,
damages, penalties and judgments directly or indirectly arising out of or
attributable to (i) the presence as of the date hereof any Hazardous Material on
the Property in violation of any existing law, or (ii) a release, disposal or
discharge of Hazardous Material in violation of law by Landlord, or its
employees, contractors or agents. The provisions of this subparagraph shall
survive the expiration or earlier termination of this Lease.
ARTICLE 28.
ADDITIONAL RIGHTS RESERVED BY LANDLORD
In addition to any other rights provided for herein, Landlord reserves the
following rights, exercisable without liability to Tenant for damage or injury
to property, person or business and without effecting an eviction, constructive
or actual, or disturbance of Tenant's use or possession or giving rise to any
claim:
(a) To name the Building, and to change the name or street address of the
Building;
(b) To install and maintain all signs on the exterior and interior of the
Building;
(c) To designate all sources furnishing sign painting or lettering for use in
the Building,:
(d) During the last ninety (90) days of the Term, if Tenant has vacated the
Premises, to decorate, remodel, repair alter or otherwise prepare the Premises
for occupancy, without affecting Tenant's obligation to pay
<PAGE>
Rent for the Premises;
(e) To have pass keys to the Premises and all doors therein, excluding Tenant's
vaults and safes;
(f) On reasonable prior notice to Tenant, to exhibit the Premises to any
prospective purchaser, Lender, mortgagee, or assignee of any mortgage on the
Building or Land and to others having an interest therein at any time during the
Term, and to prospective tenants during the last six months of the Term;
(g) After reasonable notice except in an emergency to take any and all measures,
including entering the Premises for the purpose of making inspections, repairs,
alterations, additions and improvements to the Premises or to the Building
(including for the purpose of checking, calibrating, adjusting and balancing
controls and other parts of the Building Systems), as may be necessary or
desirable for the operation, improvement safety, protection or preservation of
the Premises or the Building, or in order to comply with all Laws, orders and
requirements of governmental or other authority, or as may otherwise be
permitted or required by this Lease; provided, however, that Landlord shall
endeavor to minimize interference with Tenant's use of the Premises during the
progress of any work on the Premises or at the Building, Landlord will attempt
not to inconvenience Tenant, but shall not be liable for inconvenience,
annoyance, disturbance, loss of business, or other damage to Tenant by reason of
performing any work or by bringing or storing materials, supplies, tools or
equipment in the Building or Premises during the performance of any work, and
the obligations of Tenant under this Lease shall not thereby be affected in any
manner whatsoever;
(h) To relocate various facilities within the Building and on the land of which
the Building is a part if Landlord shall determine such relocation to be in the
best interest of the development of the Building and Property, provided that
such relocation shall not materially restrict access to the Premise or otherwise
have a material adverse impact on the Premises;and
(i) To install vending machines of all kinds in the Building and to receive all
of the revenue derived Premises therefrom, provided, however, that no vending
machines shall be installed by Landlord in the Premises unless Tenant so
requests.
ARTICLE 29.
DEFINED TERMS
A. "Building," shall refer to the Building named in Article 1 of which the
leased Premises are a part (including all modifications, additions and
alterations made to the Building during the term of this Lease), the real
property on which the same is located, all plazas, common areas and any other
areas located on said real property and designated by Landlord for use by all
tenants in the Building. A plan showing, the Building is attached hereto as
Exhibit A and made a part hereof and the Premises is defined in Article 2 and
shown on said Exhibit A by cross-hatched lines.
B. "Common Areas" shall mean and include all areas, facilities, equipment,
directories and signs of the Building (exclusive of the Premises and areas
leased to other Tenants) made available and designated by Landlord for the
common and joint use and benefit of Landlord, Tenant and other tenants and
occupants of the Building including, but not limited to, lobbies, public
washrooms, hallways, sidewalks, parking areas, landscaped areas and service
entrances. Common Areas may further include such areas in adjoining, properties
under reciprocal easement agreements, operating agreements or other such
agreements now or hereafter in effect and which are available to Landlord,
Tenant and Tenant's employees and invitees. Landlord reserves the right in its
sole discretion and from time to time, to construct, maintain, operate, repair,
close, limit, take out of service, alter, change, and modify all or any part of
the Common Areas.
C. "Default Rate" shall mean fifteen percent(15%) per annum, or the highest rate
permitted by applicable law, whichever shall be less. If the application of the
Default Rate causes any provision of this Lease to be usurious or unenforceable,
the Default Rate shall automatically be reduced so as to prevent such result.
D. "Hazardous Materials" shall have the meaning, set forth in Article 27.
E. "Landlord" and "Tenant" shall be applicable to one or more parties as the
case may be, and the singular shall include the plural, and the neuter shall
include the masculine and feminine; and if there be more than one, the
obligations thereof shall be joint and several. For purposes of any provisions
indemnifying or limiting the liability of Landlord, the term "Landlord" shall
include Landlord's present and future partners, beneficiaries, trustees,
officers, directors, employees, shareholders, principals, agents, affiliates,
successors and assigns.
F. "Law" or "Laws" shall mean all federal, state, county and local governmental
and municipal laws, statutes, ordinances, rules, regulations, codes, decrees,
orders and other such requirements, applicable equitable remedies and decisions
by courts in cases where such decisions are binding precedents in the state in
which the Building is located, and decisions of federal courts applying the Laws
of such state.
G. "Lease" shall mean this lease executed between Tenant and Landlord, including
any extensions, amendments or modifications and any Exhibits attached hereto.
H. "Lease Year" shall mean each calendar year or portion thereof during the
Term.
I. "Lender" shall mean the holder of a Mortgage at the time in question, and
where such Mortgage is a ground lease, such term shall refer to the ground
lessee.
J. "Mortgage" shall mean all mortgages, deeds of trust, ground leases and other
such encumbrances now or hereafter placed upon the Building, or any part thereof
with the written consent of Landlord, and all renewals, modifications,
consolidations, replacements or extensions thereof, and all indebtedness now or
hereafter secured thereby and all interest thereon.
K. "Operating Expenses" shall mean all operating expenses of any kind or nature
which are necessary, ordinary or customarily incurred in connection with the
operation, maintenance or repair of the Building, as determined by Landlord.
Operating Expenses shall include, but not be limited to:
1.1 costs of supplies, including, but not limited to, the cost of
revamping all Building, standard lighting, as the same may be required from time
to time;
1.2 costs incurred in connection with obtaining and providing energy
for the Building, including, but not limited to, costs of propane, butane,
natural gas, steam, electricity, solar energy and fuel oils, coal or any other
energy sources;
1.3 costs of water and sanitary and storm drainage services;
1.4 costs of janitorial and security services;
1.5 costs of general maintenance and repairs, including costs under
HVAC and other mechanical maintenance contracts and maintenance, repairs and
replacement of equipment and tools used in connection with operating the
Building;
1.6 costs of maintenance and replacement of landscaping,;
1.7 insurance premiums, including fire and all-risk coverage, together
with loss of rent endorsements, the part of any claim required to be paid under
the deductible portion of any insurance policies carried by Landlord in
connection with the Building (where Landlord is unable to obtain insurance
without such deductible from a major insurance carrier at reasonable rates),
public liability insurance and any other insurance carried by Landlord on the
Building, or any component parts thereof (all such insurance shall be in such
amounts as may be required by any holder of a Mortgage or as Landlord may
reasonably determine);
1.8 labor costs for personnel on-site and directly engaged in maintenance
or management of the Building including wages and other payments,costs to
Landlord of worker's compensation and disability insurance, payroll taxes,
welfare fringe benefits, and all legal fees and other costs or expenses incurred
in resolving any labor dispute;
1.9 reasonable professional building management fees required for
management of the Building;
1.10 legal, accounting, inspection, and other consultation fees
(including, without limitation, fees charged by consultants retained by Landlord
for services that are designed to produce a reduction in Operating Expenses or
to reasonably improve the operation, maintenance or state of repair of the
Building) incurred in the ordinary course of operating the Building or in
connection with making the computations required hereunder or in any audit of
operations of the Building;
1.11 the costs of capital improvements or structural repairs or
replacements made in or to the Building in order to conform to changes,
subsequent to the date of this Lease, in any applicable laws, ordinances, rules,
regulations or orders of any governmental or quasi-governmental authority having
jurisdiction over the Building (herein "Required Capital Improvements") or the
costs incurred by Landlord to install a new or replacement capital item for the
purpose of reducing Operating Expenses (herein "Cost Savings improvements"), and
a reasonable reserve for all other capital improvements and structural repairs
and replacements reasonably necessary to permit Landlord to maintain the
Building in its current class. The expenditures for Required Capital
Improvements and Cost Savings Improvements shall be amortized over the useful
life of such capital improvement or structural repair or replacement (as
reasonably determined by Landlord in accordance with GAAP ). All costs so
amortized shall bear interest on the amortized balance at the rate of twelve
Prime Rate plus 2% per annum or such higher rate as may have been paid by
Landlord on funds borrowed for the purpose of constructing these capital
improvements.
In making any computations contemplated hereby, Landlord shall also be permitted
to make such adjustments and modifications to the provisions of this paragraph
and Article 4 as shall be reasonable and necessary to achieve the
intention of the parties hereto.
L. "Rent" shall have the meaning specified therefor in Article 3.
M. "Tax" or "Taxes" shall mean:
1.1 all real property taxes and assessments levied against the Building
by any governmental or quasi-governmental authority. The foregoing shall include
all federal, state, county, or local governmental, special district, improvement
district, municipal or other political subdivision taxes, fees, levies,
assessments, charges or other impositions of every kind and nature, whether
general, special, ordinary or extraordinary, respecting the Building, including
without limitation, real estate taxes, general and special assessments, interest
on any special assessments paid in installments, transit taxes, water and sewer
rents, taxes based upon the receipt of rent, personal property taxes imposed
upon the fixtures, machinery, equipment, apparatus, appurtenances, furniture and
other personal property used in connection with the Building which Landlord
shall pay during any calendar year, any portion of which occurs during the Term
(without regard to any different fiscal year used by such government or
municipal authority except as provided below). Provided, however, any taxes
which shall be levied on the rentals of the Building shall be determined as if
the Building were Landlord's only property, and provided further that in no
event shall the term "taxes or assessment," as used herein, include any net
federal or state income taxes levied or assessed on Landlord, unless such taxes
are a specific substitute for real property taxes. Such term shall, however,
include gross taxes on rentals. Expenses incurred by Landlord for tax
consultants and in contesting the amount or validity of any such taxes or
assessments shall be included in such computations.
1.2 all "assessments", including so-called special assessments, license
tax, business license fee, business license tax, levy, charge, penalty or tax
imposed by any authority having the direct power to tax, including any city,
county, state or federal Government, or any school, agricultural, lighting,
water, drainage, or other improvement or special district thereof, against the
Premises of the Building or any legal or equitable interest of Landlord therein.
For the purposes of this lease, any special assessments shall be deemed payable
in such number of installments as is permitted by law, whether or not actually
so paid. If as of the Commencement Date the Building has not been fully assessed
as a completed project, for the purpose of computing the Operating Expenses for
any adjustment required herein or under Article 4, the Tax shall be adjusted by
Landlord, as of the date on which the adjustment is to be made, to reflect full
completion of the Building including all standard Tenant finish work if the
method of taxation of real estate prevailing to the time of execution hereof
shall be, or has been altered, so as to cause the whole or any part of the taxes
now, hereafter or theretofore levied, assessed or imposed on real estate to be
levied, assessed or imposed on Landlord, wholly or partially, as a capital levy
or otherwise, or on or measured by the rents received therefrom, then such new
or altered taxes attributable to the Building shall be included within the term
real estate taxes, except that the same shall not include any enhancement of
said tax attributable to other income of Landlord. All of the preceding clauses
K (1.1 and 1.2) are collectively referred to as the "Tax" or "Taxes".
All other capitalized terms shall have the definition set forth in the Lease.
ARTICLE 30.
MISCELLANEOUS PROVISIONS
A. RULES AND REGULATIONS.
Tenant shall comply with all of the rules and regulations promulgated by
Landlord from time to time for the Building. A copy of the current rule and
regulations is attached hereto as Exhibit D.
B. EXECUTION OF LEASE.
If more than one person or entity executes this Lease as Tenant, each such
person or entity shall be jointly and severally liable for observing and
performing each of the terms, covenants, conditions and provisions to be
observed or performed by Tenant.
C. NOTICES.
All notices under this Lease shall be in writing and will be deemed sufficiently
given for all purposes if, to Tenant, by delivery to Tenant at the Premises
during the hours the Building, is open for business or by certified mail, return
receipt requested or by overnight delivery service (with one acknowledged
receipt), to Tenant at the address set forth below, and if to Landlord, by
certified mail, return receipt requested or by overnight delivery service (with
one acknowledged receipt), at the addresses set forth below.
Landlord: at address shown in Article 1, item F.
with copy to: Legal Department
Cornerstone Real Estate Advisers, Inc.
One Financial Plaza, Suite 1700
Hartford, Connecticut 06103-2604
with an additional copy to: Building Manager at address shown in Article 1,
item G.
Tenant: at address shown in Article 1, item B.
with copy to: Melvin R. Shuman, Esq.
Hale and Dorr
60 State Street, Boston, MA 02109
D. TRANSFERS.
The term "Landlord" appearing herein shall mean only the owner of the Building,
from time to time and, upon a sale or transfer of its interest in the Building,
the then Landlord and transferring party shall have no further obligations or
liabilities for matters accruing after the date of transfer of that interest and
Tenant, upon such sale or transfer, shall look solely to the successor owner and
transferee of the Building for performance of Landlord's obligations hereunder.
E. RELOCATION.
(Deleted)
F. TENANT FINANCIAL STATEMENTS.
Upon the written request of Landlord, Tenant shall submit financial statements
for its most recent financial reporting period and for the prior Lease Year.
Landlord shall make such request no more than twice during any Lease Year. All
such financial statements shall be certified as true and correct by the
responsible officer or partner of Tenant and if Tenant is then in default
hereunder, the financial statements shall be certified by an independent
certified public accountant.
G. RELATIONSHIP OF THE PARTIES.
Nothing contained in this Lease shall be construed by the parties hereto, or by
any third party, as constituting the parties as principal and agent, partners or
joint venturers, nor shall anything herein render either party (other than a
guarantor) liable for the debts and obligations of any other party, it being
understood and agreed that the only relationship between Landlord and Tenant is
that of Landlord and Tenant.
H. ENTIRE AGREEMENT: MERGER
This Lease embodies the entire agreement and understanding, between the parties
respecting the Lease and the Premises and supersedes all prior negotiations,
agreements and understandings between the parties, all of which are merged
herein. No provision of this Lease may be modified, waived or discharged except
by an instrument in writing, signed by the party against which enforcement of
such modification, waiver or discharge is sought.
I. NO REPRESENTATION BY LANDLORD.
Neither Landlord nor any agent of Landlord has made any representations,
warranties, or promises with respect to the Premises or the Building except as
expressly set forth herein.
J. LIMITATION OF LIABILITY.
Notwithstanding, any provision in this Lease to the contrary, under no
circumstances shall Landlord's liability or that of its directors, officers,
employees and agents for failure to perform any obligations arising out of or in
connection with the Lease or for any breach of the terms or conditions of this
Lease (whether written or implied) exceed Landlord's equity interest in the
Building. Any judgments rendered against Landlord shall be satisfied solely out
of proceeds of sale of Landlord's interest in the Building. Except for such
proceeds, no personal judgment shall lie against Landlord upon extinguishment of
its rights in the Building, and any judgments so rendered shall not give rise to
any right of execution or levy against Landlord's assets. The provisions hereof
shall inure to Landlord's successors and assigns including any Lender. The
foregoing provisions are not intended to relieve Landlord from the performance
of any of Landlord's obligations under this Lease, but only to limit the
personal liability of Landlord in case of recovery of a judgment against
Landlord; nor shall the foregoing, be deemed to limit Tenant's rights to obtain
injunctive relief or specific performance or other remedy which may be accorded
Tenant by law or under this Lease. If Tenant claims or asserts that Landlord has
violated or failed to perform a covenant under the Lease, Tenant's sole remedy
shall be an action for specific performance, declaratory judgment or injunction
and in no event shall Tenant be entitled to any money damages in any action or
by way of set off, defense or counterclaim and Tenant hereby specifically waives
the right to any money damages or other remedies for any such violation or
failure.
K. MEMORANDUM OF LEASE.
Neither party, without the written consent of the other, will execute or record
any this Lease or any summary or memorandum of this Lease in any public
recorders office.
L. NO WAIVERS: AMENDMENTS.
Failure of Landlord to insist upon strict compliance by Tenant of any condition
or provision of this Lease shall not be deemed a waiver by Landlord of that
condition. No waiver shall be effective against Landlord unless in writing and
signed by Landlord. Similarly, this Lease cannot be amended except by a writing
signed by Landlord and Tenant.
M. SUCCESSORS AND ASSIGNS.
The conditions, covenants and agreements contained herein shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
N. GOVERNING LAW.
This Lease shall be governed by the law of the State where the Building is
located.
O. EXHIBITS.
All exhibits attached to this Lease are a part hereof and are incorporated
herein by reference and all provisions of such exhibits shall constitute
agreements, promises and covenants of this Lease.
P. CAPTIONS.
The captions and headings used in this Lease are for convenience only and in no
way define or limit the scope, interpretation or content of this Lease.
Q. COUNTERPARTS.
This Lease may be executed in one (1) or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
ARTICLE 31.
SPECIAL PROVISIONS
A. OPTION TO EXTEND.
(a) Tenant shall have one (1) option to extend this Lease in accordance with the
provisions of this paragraph for an additional term of five (5) years on all of
the same terms and conditions of this lease with the exception of base rent
payable under Article 1 K. hereof which shall be Landlord's then prevailing base
rent being charged by Landlord for space in the Building reasonably comparable
to the Premises. Provided, however, Tenant may not exercise the foregoing option
to extend if it shall be in default under the Lease and any attempted exercise
while in default shall be null and void and of no effect. If Tenant elects to
exercise the foregoing option to extend, it shall give Landlord written notice
of its election to do so on or before eight (8) months prior to the normal
expiration date of the Lease, but not prior to twelve (12) months prior to the
normal expiration date of the Lease, time being of the essence, which notice
shall also request that Landlord furnish Tenant with the base rent of the
extended term which shall be derived using Landlord's then prevailing rate for
space in the Building comparable to the Premises. Landlord shall furnish Tenant
with the base rent figure for the term extension within ten (10) days of receipt
of Tenant's notice of exercise. Provided, however, in the event Landlord and
Tenant have not signed an amendment to this Lease for any reason confirming the
extended term of the Lease and setting forth the base rent for the term by no
less than six (6) months prior to the normal expiration date of the Lease, time
being of the essence, then Tenant's extension of the Lease shall be deemed null
and void and this Lease shall expire on its initial expiration date as if the
above extension option had not been exercised. Tenant agrees to execute such
additional documents, if any, as Landlord may reasonably require regarding such
extension. Tenant has no other options to extend this Lease except as set forth
in this paragraph.
B. RIGHT OF FIRST OFFER
During the term of this lease but subject to the prior rights of any other
party, if any, tenant is hereby granted a Right of First Offer on the fifth
(5th) floor space which may from time to time become vacant (the "ROFO Space").
Before Landlord markets any portion of the ROFO Space to any party other than
the then current occupant, if any, or those having a prior right, Landlord will
notify Tenant of the availability and description of the ROFO Space and the
basic terms under which Landlord is going to market the ROFO Space and Tenant
will have the first opportunity to lease such ROFO Space prior to other third
parties. Within seven (7) days of such notice, time being of the essence, Tenant
shall give Landlord a notice that it either does or does not wish to enter into
a Lease with Landlord for the ROFO Space. In the event that Tenant's notice
provides that it does not wish to enter into a Lease for the ROFO Space or if
Tenant fails to give Landlord the notice of its desires respecting the ROFO
Space within the foregoing required seven (7) day period, then Landlord shall be
entitled to proceed to market and/or lease the ROFO Space to a third party free
and clear of Tenant's right of first offer and such right shall be deemed
terminated with respect to the ROFO Space described in the notice from Landlord.
In the event that Tenant gives Landlord a notice as required in the preceding
paragraph that it wishes to lease the ROFO Space from Landlord, then Tenant
shall have thirty (30) days from the date of the notice within which to sign a
new lease covering the ROFO Space or to amend this Lease by adding the ROFO
Space. In the event Tenant fails to sign such a lease or amendment to this Lease
within said thirty (30) day period, time being of the essence, then Landlord
shall be entitled to proceed to market and/or lease the ROFO Space to a third
party free and clear of such right and such right shall be deemed terminated
with respect to the ROFO Space described in the notice from Landlord.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have
duly executed this Lease with the Exhibits attached hereto, as of this 15 day of
May ,1997 .
Attest or Witness: LANDLORD:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: CORNERSTONE REAL ESTATE
ADVISERS, INC., its agent
By: /s/Heather D. Stastny By: /s/Robert Whitney
Name: Robert Whitney
Title: Vice President
Attest or Witness: TENANT:
SAVILLE SYSTEMS U.S., INC.
By: /s/Lisa Miller By: /s/Christopher A. Hanson
Name: Christopher A. Hanson
Title: CFO
Date: May 15, 1997
<PAGE>
Certificate of Tenant
(If A Corporation or Partnership)
I, John J. Boyle, III, Secretary or General Partner of SAVILLE SYSTEMS U.S.,
INC., Tenant, hereby certify that the officers executing the foregoing Lease on
behalf of Tenant is/are duly authorized to act on behalf of and bind the Tenant.
(Corporate Seal) John J. Boyle, III
Secretary or General Partner
Date:
EXHIBIT A
Plan Showing Property and Premises
<PAGE>
EXHIBIT B
Landlord's Work Letter
Allowance
May 15, 1997
Re: SAVILLE SYSTEMS U.S., INC.
Suite #500 & #501
1 Van de Graaff Drive
Burlington, Massachusetts 01803
Simultaneously with the execution of this Work Letter Agreement, you ("Tenant")
and Massachusetts Mutual Life Insurance Company ("Landlord") are entering into a
lease (the "Lease") pertaining to the space referred to above (the "Premises").
In consideration of the covenants contained in this Work Letter Agreement and in
the Lease, Landlord and Tenant agree as follows:
TENANT'S PLANS
1. Tenant desires Landlord to perform certain leasehold improvement work (the
"Work") in the Premises pursuant to a plan (the "Plan") for the Work prepared by
MPA Architects, dated May 8, 1997, a copy of which is attached hereto as
Schedule 1. Not later than two (2) weeks from the signing of the lease, Tenant
shall furnish to Landlord all construction drawings, including a final telephone
layout and special electrical connection requirements, if any. The Work and all
plans, drawings and specifications to be furnished by Tenant shall be subject to
Landlord's and Landlord's architect/engineer's approval, such approval not to be
unreasonably withheld or delayed. Approval by Landlord of the Work and the Plan
shall not constitute any warranty by Landlord to Tenant of the adequacy of the
design for Tenant's intended use of the Premises nor shall Landlord's approval
of the Plan create any liability or responsibility on the part of Landlord for
compliance with applicable statutes, ordinances, regulations, laws, codes and
industry standards relating to handicap discrimination (including, without
limitation, the Americans with Disabilities Act). All Tenant Improvement
drawings to be prepared by the Tenant's architect from the CAD drawings
submitted by Cubellis & Associates will remain the property of the Landlord.
WORKING DRAWINGS
(Deleted)
PERFORMANCE OF THE WORK
3 . Except as hereinafter provided to the contrary, Landlord shall perform the
Work shown on the Plan and Working Drawings in a good and workmanlike manner
using (except as may be stated or shown in the Plan or the Working Drawings)
building standard materials and quantities ("Building Standards"). Landlord
shall pay for a portion of the cost of the Work in an amount not to exceed
$15.00 per rentable square foot of the Premises (the "Allowance") and Tenant
shall pay for any and all costs and expenses associated with the Work
(including, without limitation, such additional expenses which result from any
special work, materials, finishes or installations required by Tenant,
unforeseen field conditions, or from any delays in the Work occasioned by
Tenant) in excess of the Allowance. Tenant shall not be entitled to any credit
or payment from Landlord for any portion of the Allowance not utilized by
Tenant.
PAYMENT
4. Prior to commencing the Work, Landlord will submit to Tenant a written
statement of the cost of that portion of the Work to be paid for by Tenant,
which cost shall include a 15% add-on charge for Landlord's field supervision,
administration and overhead. Tenant agrees, within three (3) days after
submission to it of such statement of cost, to execute and deliver to Landlord,
in the form then in use by Landlord, an authorization to proceed with that
portion of the Work to be paid for by Tenant, and Tenant shall also then pay to
Landlord the amount set forth in Landlord's statement within thirty (30) days of
submission of such statement. Delays in the performance of the Work resulting
from the failure of Tenant to comply with the provisions of the preceding
sentence shall be deemed to be delays caused by Tenant. No Work shall be
commenced until Tenant has fully complied with the preceding portions of this
Paragraph 4.
<PAGE>
SUBSTANTIAL COMPLETION
5. Landlord shall cause the Work to be "substantially completed" on or before
the date described in Article 1.H. of Basic Provisions in the Lease, subject to
delays described in Article 5. of the Lease and delays described in Paragraph 6
of this Work Letter Agreement. The Work shall be considered "substantially
completed" for all purposes under this Work Letter Agreement and the Lease if
and when Landlord's architect issues a written certificate to Landlord and
Tenant, certifying that the Work has been completed (except for minor finish-out
and "punchlist" items which Landlord shall endeavor to complete as soon as
practicable) in substantial compliance with the Plan and, if applicable, the
Working Drawings, and a Certificate of Occupancy has been issued, or when Tenant
first takes occupancy of the Premises, whichever first occurs. If the Work is
not substantially completed on or before the date described in Article 1.H. of
Basic Provisions in the Lease, the Commencement Date shall be extended (subject
to Paragraph 6 below) to the date on which the Work is substantially completed
and the expiration date described in Article 1.I. of Basic Provisions in the
Lease shall be extended by an equal number of days.
TENANT DELAYS
6. There shall be no extension of the date described in Article 1.H. of Basic
Provisions in the Lease (as permissibly extended under Paragraph 5 above) to the
extent that the Work has not been substantially completed on said date by reason
of any delay attributable to Tenant, including without limitation:
(i) the failure of Tenant to furnish all plans, drawings, specifications, finish
details or the other information required under Paragraph 1 above on or before
the date stated in Paragraph 1;
(ii) the failure of Tenant to comply with the requirements of Paragraph 4 above;
(iii) Tenant's requirements for special work or materials, finishes, or
installations other than the Building Standards;
(iv) the performance of any other work in the Premises by any person, firm or
corporation employed by or on behalf of Tenant, or any failure to complete or
delay in completion of such work; or
(v) any other act or omission of Tenant.
ADDITIONAL WORK
7. Upon Tenant's request and submission by Tenant (at Tenant's sole cost and
expense) of the necessary information and/or plans and specifications for work
other than the Work specified in the Plan and Working Drawings (the "Additional
Work"), Landlord may, at its election, perform the Additional Work, at Tenant's
sole cost and expense. Prior to commencing any Additional Work requested by
Tenant, Landlord shall submit to Tenant a written statement of the cost of such
Additional Work which cost shall include a 15% add-on charge for Landlord's
field supervision, administration and overhead and a proposed Tenant Extra Order
(the "TEO") for Additional Work in the standard form then in use by Landlord. If
Tenant shall fail to enter into said TEO within one (1) week after Tenant's
receipt thereof, Landlord shall proceed to do only the Work specified in the
Plan and Working Drawings. Tenant agrees to pay to Landlord, concurrently with
its execution of the TEO, the entire cost of the Additional Work as shown in the
statement delivered by Landlord.
TENANT ACCESS
8. Landlord, in Landlord's reasonable discretion and upon reasonable request by
Tenant, and subject to Landlord's approval, not to be unreasonably withheld or
delayed, may grant to Tenant and Tenant's agents a license to enter the Premises
prior to the date designated in the Lease for the commencement of the Term in
order that Tenant may do other work required by Tenant to make the Premises
ready for Tenant's use and occupancy. It shall be a condition to the grant by
Landlord and continued effectiveness of such license that:
(a) Tenant shall give to Landlord not less than five (5) days prior written
notice of its request to have such access to the Premises, which notice shall
contain and/or shall be accompanied by: (i) a description of and schedule for
the work to be performed by those persons and entities for whom and which such
access is being requested; (ii) the names and addresses of all contractors,
subcontractors and material suppliers for whom and which such early access is
being requested and the approximate number of individuals, itemized by trade,
who will be present in the Premises; (iii) copies of all contracts pertaining to
the performance of the work for which such early access is being requested; (iv)
copies of all plans and specifications pertaining to the work for which such
access is being requested; (v) copies of all licenses and permits required in
connection with the performance of the work for which such access is being
requested; (vi) certificates of insurance (in amounts and with insured parties
satisfactory to Landlord) and instruments of indemnification against all claims,
costs, expenses, damages and liabilities which may arise in connection with such
work; and (vii) assurances of the availability of funds sufficient to pay for
all such work. All of the foregoing shall be subject to Landlord's approval,
which shall not be unreasonably withheld or delayed.
(b) Such, early access shall be subject to reasonable scheduling by Landlord.
(c) Tenant's agents, contractors, workmen, mechanics, suppliers and invitees
shall work in harmony and not interfere with Landlord and Landlord's agents in
performing the Work any Additional Work in the Premises, Landlord's work in
other premises and in common areas of the Building, or the general operation of
the Building. If at any time such entry shall cause or threaten to cause such
disharmony, Landlord may withdraw such license upon twenty-four (24) hours'prior
written notice to Tenant Any such entry into and occupation of the Premises by
Tenant shall be deemed to be under all of the terms, covenants, conditions and
provisions of the Lease, excluding only the covenant to pay Rent and
specifically including the provisions of Section 10 thereof. Landlord shall not
be liable for any injury, loss or damage which may occur to any of Tenant's work
or installations made in the Premises or to property placed therein prior to the
commencement of the Term, the same being at Tenant's sole risk and liability.
Tenant shall be liable to Landlord for any damage to the Premises or to any
portion of the Work caused by Tenant or any of Tenant's employees, agents,
contractors, workmen or suppliers. In the event the performance of the work by
Tenant, its agents, employees or contractors causes extra out-of-pocket costs to
Landlord or requires the use of elevators during hours other than 8:00 a.m. to
4:30 p.m. on Monday through Friday (except holidays), Tenant shall reimburse
Landlord for the entire extra cost and the cost incurred by Landlord for the
engineers or operators under applicable union regulations or contracts.
9. The terms and provisions of the Lease, insofar as they are applicable to this
Work Letter Agreement, are hereby incorporated herein by reference.
10. All amounts payable by Tenant to Landlord hereunder shall be deemed to be
Rent under the Lease and upon any default in the payment of same, Landlord shall
have all of the rights and remedies provided for in the Lease.
<PAGE>
TENANT: LANDLORD:
SAVILLE SYSTEMS U.S., INC. MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: CORNERSTONE REAL ESTATE
ADVISERS, INC., its agent
By: /s/Christopher A. Hanson By: /s/Robert Whitney
------------------------ -----------------
Name: Christopher A. Hanson Name: Robert Whitney
Title: CFO Title: Vice President
Date: May 15, 1997 Date: May 19, 1997
<PAGE>
EXHIBIT C
Tenant's Work
(Intentionally Left Blank)
<PAGE>
EXHIBIT D
Building's Rules and Regulations
and Janitorial Specifications
1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways,
corridors or halls of the Building shall not be obstructed or encumbered or used
for any purpose other than ingress and egress to and from the premises demised
to any tenant or occupant.
2. No awnings or other projection shall be attached to the outside walls or
windows of the Building without the prior consent of Landlord. No curtains,
blinds, shades, or screens shall be attached to or hung in, or used in
connection with, any window or door of the premises demised to any tenant or
occupant, without the prior consent of Landlord. Such awnings, projections,
curtains, blinds, shades, screens or other fixtures must be of a quality, type,
design and color, and attached in a manner, approved by Landlord.
3. No sign, advertisement, object, notice or other lettering shall be exhibited,
inscribed, painted or affixed on any part of the outside or inside of the
premises demised to any tenant or occupant of the Building without the prior
consent of Landlord. Interior signs on doors and directory tables, if any, shall
be of a size, color and style approved by Landlord.
4. The sashes, sash doors, skylights, windows, and doors that reflect or admit
light and air into the halls, passageways or other public places in the Building
shall not be covered or obstructed, nor shall any bottles, parcels, or other
articles be placed on any window sills.
5. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the halls, corridors,
vestibules or other public parts of the Building.
6. The water and wash closets and other plumbing fixtures shall not be used for
any purposes other than those for which they were constructed, and no sweepings,
rubbish, rags, or other substances shall be thrown therein. No tenant shall
bring or keep, or permit to be brought or kept, any inflammable, combustible,
explosive or hazardous fluid, materials, chemical or substance in or about the
premises demised to such tenant.
7. No tenant or occupant shall mark, paint, drill into, or in any way deface any
part of the Building or the premises demised to such tenant or occupant. No
boring, cutting or stringing of wires shall be permitted, except with the prior
consent of Landlord, and as Landlord may direct. No tenant or occupant shall
install any resilient tile or similar floor covering in the premises demised to
such tenant or occupant except in a manner approved by Landlord.
8. No bicycles, vehicles or animals of any kind shall be brought into or kept in
or about the premises demised to any tenant. No cooking shall be done or
permitted in the Building by any tenant without the approval of the Landlord. No
tenant shall cause or permit any unusual or objectionable odors to emanate from
the premises demised to such tenant.
9. No space in the Building shall be used for manufacturing, for the storage of
merchandise, or for the sale of merchandise, goods, or property of any kind at
auction, without the prior consent of Landlord.
10. No tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with other tenants or occupants of the Building
or neighboring buildings or premises whether by the use of any musical
instrument, radio, television set or other audio device, unmusical noise,
whistling, singing or in any other way. Nothing shall be thrown out of any doors
or window.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows, nor shall any changes be made in locks or the mechanism
thereof. Each tenant must, upon the termination of its tenancy, restore to
Landlord all keys of stores, offices and toilet rooms, either furnished to, or
otherwise procured by, such tenant.
12. All removals from the Building, or the carrying in or out of the Building or
the premises demised to any tenant, of any safes, freight, furniture or bulky
matter of any description must take place at such time and in such manner as
Landlord or its agents may determine, from time to time. Landlord reserves the
right to inspect all freight to be brought into the Building and to exclude from
the Building all freight which violates any of the Rules and Regulations or the
provisions of such tenant's lease.
13. No tenant shall use or occupy, or permit any portion of the premises demised
to such tenant to be used or occupied, as an office for a public stenographer or
typist, or to a barber or manicure shop, or as an employment bureau. No tenant
or occupant shall engage or pay any employees in the Building, except those
actually working for such tenant or occupant in the Building, nor advertise for
laborers giving an address at the Building.
14. No tenant or occupant shall purchase spring water, ice, food, beverage,
lighting maintenance, cleaning towels or other like service, from any company or
person not approved by Landlord. No vending machines of any description shall be
installed, maintained or operated upon the premises demised to any tenant
without the prior consent of Landlord.
15. Landlord shall have the right to prohibit any advertising by any tenant or
occupant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a building for offices, and upon notice from
Landlord, such tenant or occupant shall refrain from or discontinue such
advertising.
16. Landlord reserves the right to exclude from the Building, between the hours
of 6:00 P.M. and 8:00 A.M. on business days and at all hours on Saturdays,
Sundays and holidays, all persons who do not present a pass to the Building
signed by Landlord. Landlord will furnish passes to persons for whom any tenant
requests such passes. Each tenant shall be responsible for all persons for whom
it requests such passes and shall be liable to Landlord for all acts of such
persons.
17. Each tenant, before closing and leaving the premises demised to such tenant
at any time, shall see that all entrance doors are locked and all windows
closed. Corridor doors, when not in use, shall be kept closed.
18. Each tenant shall, at its expense, provide artificial light in the premises
demised to such tenant for Landlord's agents, contractors and employees while
performing janitorial or other cleaning services and making repairs or
alterations in said premises.
19. No premises shall be used, or permitted to be used for lodging or sleeping
or for any immoral or illegal purposes.
20. The requirements of tenants will be attended to only upon application at the
office of Landlord. Building, employees shall not be required to perform, and
shall not be requested by any tenant or occupant to perform and work outside of
their regular duties, unless under specific instructions from the office of
Landlord.
21. Canvassing, soliciting and peddling in the Building are prohibited and each
tenant and occupant shall cooperate in seeking their prevention.
22. There shall not be used in the Building, either by any tenant or occupant or
by their agents or contractors, in the delivery or receipt of merchandise,
freight, or other matter, any hand trucks or other means of conveyance except
those equipped with rubber tires, rubber side guards and such other safeguards
as Landlord may require.
23. If the Premises demised to any tenant become infested with vermin, such
tenant, at its sole cost and expense, shall cause its premises to be
exterminated, from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefor as shall be approved by Landlord.
24. No premises shall be used, or permitted to be used, at any time, without the
prior approval of Landlord, as a store for the sale or display of goods, wares
or merchandise of any kind, or as a restaurant, shop, booth, bootblack or other
stand, or for the conduct of any business or occupation which predominantly
involves direct patronage of the general public in the premises demised to such
tenant, or for manufacturing or for other similar purposes.
25. No tenant shall clean any window in the Building from the outside.
26. No tenant shall move, or permit to be moved, into or out of the Building or
the premises demised to such tenant, any heavy or bulky matter, without the
specific approval of Landlord. If any such matter requires special handling;
only a qualified person shall be employed to perform such special handling. No
tenant shall place, or permit to be placed, on any part of the floor or floors
of the premises demised to such tenant, a load exceeding the floor load per
square foot which such floor was designed to carry and which is allowed by law.
Landlord reserves the right to prescribe the weight and position of safes and
other heavy matter, which must be placed so as to distribute the weight.
27. Landlord shall provide and maintain an alphabetical directory board in the
first floor (main lobby) of the Building and no other directory shall be
permitted without the prior consent of Landlord. Each tenant shall be allowed
one line on such board unless otherwise agreed to in writing.
28. With respect to work being performed by a tenant in its premises with the
approval of Landlord, the tenant shall refer all contractors, contractors'
representatives and installation technicians to Landlord for its supervision,
approval and control prior to the performance of any work or services. This
provision shall apply to all work performed in the Building including
installation of telephones, telegraph equipment, electrical devices and
attachments, and installations of every nature affecting floors, walls,
woodwork, trim, ceilings, equipment and any other physical portion of the
Building.
29. Landlord shall not be responsible for lost or stolen personal property,
equipment, money, or jewelry from the premises of tenants or public rooms
whether or not such loss occurs when the Building, or the premises are locked
against entry.
30. Landlord shall not permit entrance to the premises of tenants by use of pass
keys controlled by Landlord, to any person at any time without written
permission from such tenant, except employees, contractors, or service personnel
directly supervised by Landlord and employees of the United States Postal
Service.
31. Each tenant and all of tenant's employees and invitees shall observe and
comply with the driving and parking signs and markers on the Land surrounding
the Building, and Landlord shall not be responsible for any damage to any
vehicle towed because of noncompliance with parking regulations.
32. Without Landlord's prior approval, no tenant shall install any radio or
television antenna, loudspeaker, music system or other device on the roof or
exterior walls of the Building or on common walls with adjacent tenants.
33. Each tenant shall store all trash and garbage within its premises or in such
other areas specifically designated by Landlord. No materials shall be placed in
the trash boxes or receptacles in the Building unless such materials may be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage and will not result in a violation of any law or ordinance
governing such disposal. All garbage and refuse disposal shall be only through
entryways and elevators provided for such purposes and at such times as Landlord
shall designate.
34. No tenant shall employ any persons other than the janitor or Landlord for
the purpose of cleaning its premises without the prior consent of Landlord. No
tenant shall cause any unnecessary labor by reason of its carelessness or
indifference in the preservation of good order and cleanliness. Janitor service
shall include ordinary dusting and cleaning by the janitor assigned to such work
and shall not include beating of carpets or rugs or moving of furniture or other
special services. Janitor service shall be furnished Mondays through Fridays,
legal holidays excepted; janitor service will not be furnished to areas which
are occupied after 9:30 P.M. Window cleaning shall be done only by Landlord, and
only between 6:00 A.M and 5:00 P.M.
<PAGE>
EXHIBIT E
Commencement Date Confirmation
DECLARATION BY LANDLORD AND TENANT AS TO DATE OF DELIVERY AND
ACCEPTANCE OF POSSESSION OF PREMISES
Attached to and made a part of the Lease dated the 15th day of May 1997 entered
into and by MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY as LANDLORD, and SAVILLE
SYSTEMS US, INC. as TENANT.
LANDLORD AND TENANT do hereby declare that possession of the Premises was
accepted by TENANT on 15th day of May, 1997. The Premises required to be
constructed and finished by LANDLORD in accordance with the provisions of the
Lease have been satisfactorily completed by LANDLORD and accepted by TENANT, the
Lease is now in full force and effect, and as of the date hereof, LANDLORD has
fulfilled all of its obligations under the Lease. The Lease Commencement Date is
hereby established as July 15, 1997. The Term of this Lease shall terminate on
July 31, 2002.
LANDLORD:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: CORNERSTONE REAL ESTATE
ADVISERS, INC., its agent
By: /s/Robert Whitney
Name Typed: Robert Whitney
Title: Vice President
Date: May 19, 1997
TENANT:
SAVILLE SYSTEMS US, INC.
By: /s/Christopher A. Hanson
Name Typed: Christopher A. Hanson
Title: CFO
Date: May 15, 1997
<PAGE>
GUARANTY OF LEASE
In consideration of and as an inducement to Massachusetts Mutual Life Insurance
Company (hereinafter "Landlord") to enter into that certain Lease Agreement
(herein the "Lease") of even date herewith with Saville Systems U.S., Inc.
(hereinafter "Tenant") respecting space in the property commonly known as
Landmark One and located at One Van de Graaff Drive, Burlington, Massachusetts,
01803, the undersigned(s) hereby unconditionally guarantee to Landlord and the
successors and assigns of Landlord's interest under the Lease and/or this
Guaranty (i) the full and prompt payment of all rent and other charges from as
and when the same become due and payable under the Lease, and (ii) the full and
punctual performance and observance of all of the covenants, conditions and
agreements provided in said Lease to be performed or observed by Tenant. If, at
any time, default shall be made by Tenant in the payment, performance or
observance of any of the obligations, terms, covenants or conditions in the
Lease on Tenant's part to be paid, kept, performed or observed, which default
continues after the giving of any required notice and the expiration of any
applicable grace period, the undersigned(s) upon demand by Landlord will
forthwith pay, keep perform and observe the same in the place and stead of
Tenant.
In connection with the giving of the foregoing guarantees, the undersigned(s)
hereby agree as follows:
1. Any act of Landlord, or the successors or assigns of Landlord, consisting of
a waiver of any of the terms or conditions of the Lease, or the giving of any
consent to any manner or thing relating to the Lease, or the granting of any
indulgences or extensions of time to Tenant, may be done without notice to the
undersigned(s) and without releasing the obligations of the undersigned(s)
hereunder;
2. The obligations of the undersigned(s) shall not be released by Landlord's
receipt, application or release of security given for the payment, performance
or observance of any covenants or conditions in the Lease on the part of Tenant
to be paid, performed or observed;
3. The undersigned(s) hereby waive notice of any and all defaults under the
Lease by Tenant including, without limitation, notice of non-payment and
non-performance and non-observance of any term, covenant or condition by Tenant
under the Lease. The undersigned(s) specifically agree that the continuing
validity and enforceability of this Guaranty and the obligations and liabilities
of the undersigned(s) hereunder shall not be terminated, affected or impaired by
reason of the assertion or enforcement by Landlord against Tenant of any of the
rights or remedies reserved to Landlord pursuant to the provisions of the Lease
or under law;
4. The undersigned(s) covenant and agree (a) that this Guaranty shall remain and
continue in full force and effect as to any and all modifications, renewals and
extensions of the Lease, and during any period when Tenant occupies the Premises
whether as a holdover tenant or otherwise to the same extent as if such renewal,
modification, occupancy or extension were in effect at the time of execution of
this guaranty, and (b) the liability of the undersigned(s) shall be deemed
modified in accordance with terms of such modification, renewal, extension or
occupancy, all of the foregoing whether or not the undersigned has received any
notice thereof either before, at the time of or after the same is made and
whether or not the undersigned(s) consent or agree or have consented or agreed
thereto (all such notices and any requirements for undersigned(s) consent and/or
agreement being hereby specifically waived);
5 The liability of the undersigned(s) under this Guaranty shall in no way be
affected or impaired by (a) the release or discharge of the Tenant in any
creditors' receivership, bankruptcy or other proceedings, (b) the impairment,
limitation or modification of the liability of the Tenant or the estate of the
Tenant in bankruptcy, or of any remedy for the enforcement of the Tenant's
obligations and liabilities under the Lease, resulting from the operation of any
present or future provision of the Bankruptcy Code or other statute or from the
decision of any court, (c) the rejection or disaffirmance of the Lease in any
such proceedings, (d) the assignment or transfer of the Lease by Tenant, or (e)
the cessation from any cause whatsoever of the liability of the Tenant;
6. Until all the covenants and conditions in the Lease on the Tenant's part to
be performed and observed are fully performed and observed, the undersigned(s):
(a) shall have no right of subrogation against Tenant by reason of any payments
or acts of performance by the undersigned(s), in compliance with the obligations
of the undersigned(s) hereunder: (b) waive any right to enforce any remedy which
the undersigned(s) now or hereafter has or may have against Tenant by reason of
any one or more payments or acts of performance in compliance with the
obligations of the undersigned(s) hereunder; and, (c) subordinates any liability
or indebtedness of Tenant now or hereafter held by the undersigned(s) to the
obligations of Tenant now or hereafter held by the undersigned(s) to the
obligations of Tenant to Landlord under the Lease;
7. The undersigned(s) agree that if more than one person executes this guaranty
or one or more counterparts hereof, their liability shall be joint and several
and each of the undersigned(s)' liability hereunder shall remain in full force
and effect whether or not anyone else executes this guaranty or a counterpart
hereof. References in this Guaranty to the "undersigned(s)" shall mean and
include the undersigned(s) collectively and each of the undersigned(s) in their
individual capacities. The undersigned(s) represent and warrant to Landlord that
this Guaranty has been duly authorized and constitutes the valid and binding
obligation of the undersigned(s). In any action or proceeding brought by
Landlord to enforce this Guaranty, the undersigned(s) to the maximum extent
permitted by law shall and do hereby waive trial by jury;
8. This Guaranty may not be changed, modified, discharged or terminated orally
or in any manner other than by an agreement in writing signed by the
undersigned(s) and Landlord. In all cases, notices may be given to the
undersigned(s) at the addresses set forth below under their respective
signatures and such notice will be deemed to have been sufficiently given for
all purposes if hand delivered or, if sent by prepaid certified mail, return
receipt requested, as of the date of mailing. By a notice similarly given to
Landlord c/o Cornerstone Real Estate Advisers, 311 S. Wacker Drive, Suite 980,
Chicago, Illinois 60606, attention: Asset Manager, the undersigned(s) may change
their address for notice purposes.
9. The Guarantor irrevocably and unconditionally (a) agrees that any suit,
action or legal proceeding arising out of this Guaranty may be brought in the
courts of record of the State of Massachusetts in Middlesex County or in any of
the courts of the United States; (b) consents to the jurisdiction of each court
in any such suit, action, or proceeding; and (c) waives any objection which it
may have to the laying of venue of any such suit, action, or proceeding in any
of such courts. For such time as any of the obligations hereunder shall be
unpaid in whole, or in part, the Guarantor appoints the Tenant as its agent to
accept and acknowledge on the Guarantor's behalf service of any and all process
in any such suit, action, or proceeding brought in any such court. The Guarantor
agrees and consents that any such service of process upon such agents and
written notice of such service to the Guarantor in the manner set forth in
Section 8 hereof shall be taken and held to be valid personal service upon the
Guarantor whether or not the Guarantor shall then be doing, or at any time shall
have done, business within the State of Massachusetts. Such agents shall not
have the power or authority to enter into any appearance or to file any
pleadings in connection with any suit, action, or other legal proceedings
against the Guarantor or to conduct the defense of any suit, action, or any
other legal proceeding, except as expressly authorized by the Guarantor.
Executed this 15th day of May 1997.
Guarantor:
Saville Systems PLC
By: /s/Christopher A. Hanson
Name Typed: Christopher A. Hanson
Title: CFO
Address: 25 Burlington Mall Rd.
Burlington, MA 01803
<PAGE>
NOTICE OF LEASE
Notice is hereby given, pursuant to the provisions of Chapter 183A, Section 4 of
the Massachusetts General Laws, of the following Lease:
LANDLORD: Massachusetts Mutual Life Insurance Company
c/o Cornerstone Real Estate Advisors, Inc.
311 S. Wacker Drive, Suite 980
Chicago, Illinois 60606
TENANT: Saville Systems U.S., Inc.
Suite 500 and 501
1Van de Graaff Drive
Burlington, Massachusetts 01803
DATE OF EXECUTION: May 15, 1997
PREMISES: Suite/Unit No.: 500 & 501, consisting of 12,417
rentable square feet and shown on a plan attached
hereto as Exhibit A in the Building known as Landmark
One (the "Building') located at One Van de Graaff
Drive, Burlington, Massachusetts. For Landlord's
title, see Middlesex South Registry of Deeds, Book___
, Page _.
TERM: July 15, 1997 through July 31, 2002, provided that
the Commencement Date shall be advanced to such
earlier date as Tenant commences occupancy of the
Premises for the conduct of its business, and
provided further that the Term Commencement Date
and Expiration Date shall be postponed for an equal
number of days as the delay of Landlord in completing
improvements to the premises for Tenant's initial
occupancy caused by strike, shortages of labor or
materials, delivery delays or other matters beyond
the reasonable control of Landlord as set forth in
a notice from Landlord to Tenant of such delay.
OPTION TO EXTEND: Tenant shall have one option to extend the Lease for
an additional term of five (5) years on the terms and
conditions set forth in the Lease.
RIGHT OF FIRST
OFFER: Under the term of the Lease but subject to the prior
rights of any other party, if any, Tenant has a right
of first offer on all space on the fifth (5th) floor
of the Building on the terms and conditions set forth
in the Lease.
<PAGE>
WITNESS the execution hereof under seal this 15 day of May, 1997.
LANDLORD:
Massachusetts Mutual Life Insurance
Company
By: Cornerstone Real Estate Advisers, Inc.,
its agent
By: /s/Robert Whitney
Name: Robert Whitney
Title: Vice President
TENANT:
Saville Systems U.S., Inc.
By: /s/Christopher A. Hanson
Name: Christopher A. Hanson
Title: CFO
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
, ss: May 19 1997
Then personally appeared the above-named Robert Whitney, the Vice
President of Cornerstone Real Estate Advisers, Inc., agent of Massachusetts
Mutual Life Insurance Company, and acknowledged the foregoing to be the free act
and deed of Cornerstone Real Estate Advisers, Inc. on behalf of Massachusetts
Mutual Life Insurance company, before me,
/s/Heather D. Stastny
Notary Public
My Commission Expires: 05/02/00
"OFFICIAL SEAL"
HEATHER D. STASTNY
NOTARY PUBLIC STATE OF ILLINOIS
MY COMMISION EXPIRES 05102100
COMMONWEALTH OF MASSACHUSETTS
, ss: May 15 1997
Then personally appeared the above-named Chris Hanson, the CFO of
Saville Systems U.S., Inc. and acknowledged the foregoing to be the free act and
deed of said corporation, before, me,
/s/Elizabeth Anika Bales
Notary Public
My Commission Expires: Oct. 9 2003
<PAGE>
ACKNOWLEDGMENT
CORPORATE ACKNOWLEDGMENT
STATE OF: Massachusetts
COUNTY OF: Middlesex
On this 15 day of May, 1997, before me, a Notary Public in and for said State,
personally appeared Chris Hanson, known to me to be the person described in and
who executed such instrument as Chief Financial Officer of Saville Systems US,
Inc. , a Delaware corporation, and who acknowledged the execution of such
instrument as such officer for and on behalf of and as the free act and deed of
such corporation, and the seal affixed thereto is the true and genuine corporate
seal of such corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year set forth above.
/s/Elizabeth Anika Bales
Notary Public
My Commission Expires: Oct. 9 2003
EXHIBIT 10.19
INDUSTRIAL
LEASE AGREEMENT
730 COCHRANE DRIVE
MARKHAM, ONTARIO
BETWEEN
PENREAL PROPERTY FUND LTD.
(THE LANDLORD)
AND
SAVILLE SYSTEMS CANADA, LTD.
(THE TENANT)
Lease Commencement: July 1, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE DESCRIPTION
1. DEFINITIONS
1.1. ADDITIONAL RENT
1.2. ALTERATIONS
1.3. ARCHITECT
1.4. BUILDING
1.5. BUSINESS TAX
1.6. CAPITAL TAX
1.7. CHANGE OF CONTROL
1.8. COMMENCEMENT DATE
1.9. COMMON AREAS
1.10. GROSS RENTABLE AREA
1.11. GROSS RENTABLE AREA OF THE BUILDING
1.12. "INCLUDING" AND "INCLUDES
1.13. INDEMNIFIER
1.14. LANDS
1.15. LEASEHOLD IMPROVEMENTS
1.16. MORTGAGE
1.17. MORTGAGEE
1.18. NET RENT
1.19. OFFER TO LEASE
1.20. OPERATING COSTS
1.21. PERSON
1.22. PREMISES
1.23. PROPERTY
1.24. PROPORTIONATE SHARE
1.25. RENT
1.26. RENTAL YEAR
1.27. RULES AND REGULATIONS
1.28. SALES TAX
1.29. STRUCTURAL REPAIRS
1.30. TAXES
1.31. TENANT
1.32. TERM
1.33. TRANSFER
1.34. TRANSFEREE
2. TERM AND USE
2.1. GRANT AND PREMISES
2.2. TERM
2.3. CONSTRUCTION OF PREMISES
2.4. USE
2.5. TENANT'S COVENANTS AS TO USE AND OCCUPANCY
2.6. ENVIRONMENTAL
3. RENT
3.1. COVENANT TO PAY
3.2. NET RENT
3.3. ADDITIONAL RENT
3.4. RENTAL DEPOSIT
3.5. SECURITY DEPOSIT
3.6. PAYMENT OF TAXES AND OPERATING COSTS
3.7. RENT & ADDITIONAL RENT PAST DUE
3.8. NET LEASE
3.9. UTILITIES
3.10. HEATING, VENTILATING AND (IF APPLICABLE) AIR-CONDITIONING UNITS
4. MAINTENANCE, REPAIRS AND COMMON AREAS
4.1. TENANT'S OBLIGATIONS
4.2. LANDLORD'S OBLIGATIONS
4.3. APPROVAL OF TENANT'S ALTERATIONS
4.4. REPAIR WHERE TENANT AT FAULT
4.5. REMOVAL OF IMPROVEMENTS AND FIXTURES
4.6. LIENS
4.7. NOTICE BY TENANT
4.8. NO LANDLORD'S LIABILITY
5. CONTROL OF PROPERTY BY LANDLORD
5.1. ALTERATIONS BY LANDLORD
5.2. RIGHT OF EXAMINATION
5.3. RIGHT TO SHOW PREMISES
5.4. ENTRY NOT FORFEITURE
5.5. MAINTENANCE SCHEDULE
6. INSURANCE AND INDEMNITY
6.1. TENANT'S INSURANCE
6.2. LANDLORD'S INSURANCE
6.3. INDEMNIFICATION OF THE LANDLORD
6.4. LOSS OR DAMAGE
6.5. INCREASE IN INSURANCE PREMIUMS
6.6. CANCELLATION OF INSURANCE
7. ASSIGNMENT AND SUBLETTING
7.1. TRANSFERS
7.2. LANDLORD'S RIGHT TO TERMINATE
7.3. CONDITIONS OF TRANSFER
7.4. CHANGE OF CONTROL
7.5. NO ADVERTISING
7.6. ASSIGNMENT BY THE LANDLORD
7.7. PERMITTED TRANSFERS
8. DAMAGE, DESTRUCTION AND EXPROPRIATION
8.1. LANDLORD'S OPTION
8.2. DAMAGE To PREMISES
8.3. LANDLORD'S PLANS
8.4. ARCHITECT'S CERTIFICATE
9. DEFAULT
9.1. DEFAULT AND REMEDIES
9.2. DISTRESS
9.3. COSTS
9.4. ALLOCATION OF PAYMENTS
9.5. SURVIVAL OF OBLIGATIONS
9.6. ADDITIONAL RENT DEEMED RENT
9.7. LANDLORD'S RIGHT To PERFORM
10. STATUS STATEMENT; ATTORNMENT AND SUBORDINATION
10.1. STATUS STATEMENT
10.2. SUBORDINATION
10.3. ATTORNMENT
10.4. EXECUTION OF DOCUMENTS
11. GENERAL PROVISIONS
11.1. QUIET ENJOYMENT
11.2. RULES AND REGULATIONS
11.3. DELAY
11.4. OVERHOLDING
11.5. WAIVER
11.6. REGISTRATION
11.7. NOTICES
11.8. SUCCESSORS & ASSIGNS
11.9. JOINT AND SEVERAL LIABILITY
11.10.CONSENT
11.11.SIGNS
11.12.ACCORD AND SATISFACTION
11.13.OCCUPANCY PERMIT
11.14.SCHEDULES
11.15.ENTIRE AGREEMENT
SCHEDULE "A" LEGAL DESCRIPTION AND SITE PLAN
SCHEDULE "B" RULES AND REGULATIONS
SCHEDULE "C" SPECIAL PROVISIONS
<PAGE>
INDUSTRIAL
LEASE AGREEMENT
730 COCHRANE DRIVE
THIS LEASE is dated the 13th day of June, 1997.
BETWEEN: PENREAL PROPERTY FUND LTD. (HEREINAFTER CALLED
THE "LANDLORD")
c/o Penreal Advisors Ltd.
10 Carlson Court, Suite 500
Etobicoke, Ontario
M9W 6L2
OF THE FIRST PART
AND: SAVILLE SYSTEMS CANADA, LTD. (HEREINAFTER CALLED
THE "TENANT")
730 Cochrane Drive
Unit 2
Markham, Ontario
L3R 8E1
OF THE SECOND PART
ARTICLE 1
1. DEFINITIONS
In this lease and in the schedules attached to this lease:
1.1. ADDITIONAL RENT
"Additional Rent" means all sums of money required to be paid by the Tenant
under this lease (except Net Rent).
1.2. ALTERATIONS
"Alterations" means all repairs, replacements, alterations or additions to the
Premises by or on behalf of the Tenant which are made after the completion of
the initial Leasehold Improvements, being that work which is required to be
completed to make the Premises ready for the initial use and occupancy of the
Tenant, which work is scheduled to be completed on or about January, 1998
("Initial Leasehold Improvements").
1.3. ARCHITECT
"Architect" means the accredited, independent architect from time to time named
by the Landlord.
1.4. BUILDING
"Building" means the industrial building located on the Lands and municipally
known as:
730 COCHRANE DRIVE (HEREINAFTER CALLED
THE "BUILDING")
Markham, Ontario
1.5. BUSINESS TAX
"Business Tax" means all business taxes attributable to the business of the
Tenant or any other occupant of the Premises.
1.6. CAPITAL TAX
"Capital Tax" means the amount imputed by the Landlord to the Property for
taxes, rates, duties and assessments imposed from time to time upon the Landlord
and payable by the Landlord on account of the capital invested in the Property.
1.7. CHANGE OF CONTROL
"Change of Control" means, in the case of any corporation or partnership, the
change in the effective control of such corporation or partnership unless such
change occurs as a result of trading in the shares of a corporation listed on a
recognized stock exchange in Canada or the United States.
1.8. COMMENCEMENT DATE
"Commencement Date" means the commencement of the Term under Section 2.2.
1.9. COMMON AREAS
"Common Areas" means those areas, facilities, and improvements designated from
time to time by the Landlord for the common use of all tenants.
1.10. GROSS RENTABLE AREA
"Gross Rentable Area" means, with respect to rentable premises in the Building,
the area in square feet of all space in such premises, and measured from the
exterior face of all exterior walls, doors and windows, to the centre line of
partitions separating rentable premises from each other and to the outside of
partitions separating rentable premises from interior enclosed corridors in the
Building (if any). Such area of rentable premises shall include all areas such
as enclosed vestibules and enclosed or roofed shipping and receiving areas,
whether or not recessed within the boundary line of exterior walls and a
proportionate share of any interior Common Areas, as well as any mezzanine or
second floor space.
1.11. GROSS RENTABLE AREA OF THE BUILDING
"Gross Rentable Area of the Building" means the sum of the aggregate Gross
Rentable Area of all premises in the Building which are leased or designated for
lease.
1.12. "INCLUDING" AND "INCLUDES"
"Including" and "includes" means, where the context permits, "including, without
limitation" and "includes, without limitation", respectively.
1.13. INDEMNIFIER
"Indemnifier" means the Person, if any, who has executed or agreed to execute
an Indemnity Agreement.
1.14. LANDS
"Lands" means the lands situated in Markham, in the Province of Ontario, on
which the Building is located, as more particularly described in Schedule "A",
as such lands may be expanded or reduced from time to time.
1.15. LEASEHOLD IMPROVEMENTS
"Leasehold Improvements" means leasehold improvements in the Premises determined
according to common law.
1.16. MORTGAGE
"Mortgage" means an encumbrance given by the Landlord against the Landlord's
interest in the Lands or Property.
1.17. MORTGAGEE
"Mortgagee" means the holder of, or secured party under, any Mortgage.
1.18. NET RENT
"Net Rent" means the annual rent payable by the Tenant under Section 3.2.
1.19. OFFER TO LEASE
"Offer to Lease" means the agreement between the Landlord and Tenant with
respect to the Premises, dated the 13th day of May, 1997, as amended by
agreements dated May 30, 1997, June 9, 1997 and June 12, 1997.
1.20. OPERATING COSTS
"Operating Costs" means the total of all costs paid or payable by the Landlord
or by others in maintaining, operating and managing the Property, calculated as
if the Building were 100% occupied by tenants during the Term including, without
limitation and without duplication, the aggregate of:
(a) the total annual costs of insurance carried in respect of the Property;
(b) cleaning, snow removal from the Common Areas, garbage and waste
collection and disposal, landscaping and parking areas and janitorial
service, if required;
(c) lighting, electricity and public utilities servicing the Common Areas
and all utilities not separately metered to tenants;
(d) policing, security and supervision, accounting, auditing and related
expenses;
(e) amounts paid to third parties and salaries of personnel employed to
maintain the Lands and operate and maintain the Building, including
contributions and premiums for fringe benefits, unemployment insurance,
and workers' compensation insurance, pension plan contributions and
uniforms;
(f) the cost of equipment and signs, including Building directory board and
identification and the repair and maintenance thereof,
(g) the cost of building supplies and materials used by the Landlord in the
maintenance and repair of the Common Areas;
(h) all repairs and replacements to and maintenance and operation of the
Building and Common Areas, including the Heating, Ventilating and
Air-Conditioning System ("HVAC"), where applicable, preventative
maintenance and inspection, engineering, service contracts, legal and
consulting services and all repairs and/or replacements relating to the
elevators, if any, located in the Building;
(i) depreciation or amortization of the costs, including repair and
replacement of the maintenance, cleaning and operating equipment and
facilities, roof, HVAC, master utility meters and all other fixtures,
equipment and facilities that are part of Common Areas unless they are
charged fully in the Rental Year in which they are incurred, all in
accordance with generally accepted accounting principles;
(j) interest calculated at 2% above the prime rate, announced by the
Landlord's bank, upon the undepreciated or unamortized part of the
costs referred to in (i) above;
(k) Capital Tax;
(l) all costs incurred in contesting or appealing Taxes or related
assessments, including legal, appraisal and other professional fees,
administration and overhead costs; and
(m) a management fee equal to 4% of the net rent and additional rent to the
Landlord, or at the Landlord's option 15% of additional Rent (Realty
Taxes plus Operating Costs)
To the extent that any Operating Costs should be allocated, in the reasonable
opinion of the Landlord, to a particular tenant or group of tenants, the
Landlord may so allocate and the Tenant will pay those costs, as so allocated.
Operating Costs shall not include:
(a) All amounts which otherwise would be included in Operating Costs which
are recovered by the Landlord from tenants as a result of any act,
omission, default or negligence of such tenants;
(b) Such of the Operating Costs as are recovered from insurance proceeds;
(c) Interest on debt and capital retirement of debt;
(d) Tenant inducement payments, leasehold improvement allowances and
rent-free periods, if any, granted to the tenants of the Building; and
(e) Brokerage fees and commissions and other similar costs incurred by the
Landlord in leasing premises in the Building.
The Landlord warrants and represents that Additional Rent for the calendar year
1997 is estimated to be $2.30 per square foot of the Gross Rentable Area of the
Premises.
1.21. PERSON
"Person" means any person, firm, partnership or corporation, or any group or
combination of persons, firms, partnerships or corporations.
1.22. PREMISES
"Premises" means the premises leased to the Tenant under Section 2. 1.
1.23. PROPERTY
"Property" means the Lands and Building.
1.24. PROPORTIONATE SHARE
"Proportionate Share" means a fraction which has as its numerator the Gross
Rentable Area of the Premises and as its denominator the Gross Rentable Area of
the Building.
1.25. RENT
"Rent" means the aggregate of Net Rent and Additional Rent.
1.26. RENTAL YEAR
"Rental Year" means a period of 12 consecutive full calendar months, the first
Rental Year beginning on the Commencement Date if such date is the first day of
a calendar month; if not, then the first Rental Year shall commence upon the
first day of the calendar month next following the month in which the
Commencement Date occurs. Each succeeding Rental Year shall commence upon the
anniversary date of the first Rental Year.
1.27. RULES AND REGULATIONS
"Rules and Regulations" means the rules and regulations under Section 11.2.
1.28. SALES TAX
"Sales Tax" means any sales tax, goods and services tax, value added tax, or any
other tax imposed on the Landlord with respect to Rent, or in respect of the
rental of the Premises, whether characterized as a sales tax, goods and services
tax, value added tax, business transfer tax or otherwise.
1.29. STRUCTURAL REPAIRS
"Structural Repairs" means repairs to the foundation, wall and roof support
columns, roof joists and the roof deck of the Building.
1.30. TAXES
"Taxes" means all taxes, levies, charges, school and local improvement rates and
assessments whatsoever (including municipal and other property taxes) assessed
or charged against the Property or any part of it (including Common Areas) or
against the Landlord on account of its ownership of the Property by any lawful
taxing authority and including any amounts assessed or charged in substitution
for or in lieu of any such taxes, but excluding only such taxes as capital gains
taxes, corporate, income, profit or excess profit taxes to the extent such taxes
are not levied in lieu of any of the foregoing against the Property or the
Landlord in respect thereof. Taxes shall in every instance be calculated on the
basis of the Building being assessed as fully leased and operational.
1.31. TENANT
"Tenant" includes every Person mentioned as Tenant in this lease.
1.32. TERM
"Term" means the term of this lease under Section 2.2 and all renewals and
extensions.
1.33. TRANSFER
"Transfer" means an assignment of this lease or a sublease of any part of the
Premises; any transaction whereby the rights of the Tenant are transferred or by
which any right of use of any part of the Premises is conferred upon anyone; any
encumbrance of this lease or other arrangement under which either this lease or
the Premises become security; and includes any transaction whatsoever (including
expropriation, receivership proceedings, seizure by legal process and transfer
by operation of law), which has changed the identity of the Person having lawful
use of any part of the Premises.
1.34. TRANSFEREE
"Transferee" means the Person to whom a Transfer is or is to be made.
ARTICLE 2
2. TERM AND USE
2.1. GRANT AND PREMISES
The Landlord leases the Premises to the Tenant for the Term. The Premises
are shown outlined on the site plan attached as Schedule "A" and are presently
known as 730 COCHRANE DRIVE Unit No. 2 of the Building. The Gross Rentable
Area of the Premises is approximately 14,400 square feet.
2.2. TERM
The Term of this lease is 8 years commencing on July 1, 1997 and expiring on
June 30, 2005.
2.3. CONSTRUCTION OF PREMISES
The provisions of the Offer to Lease relating to construction of the Premises,
specifically, paragraphs 6, 7, 9 and 15 of the Offer to Lease shall remain in
effect and shall not merge upon execution of this lease.
2.4. USE
The Tenant shall use and occupy the Premises only for general offices and as a
data centre and for no other purpose. The Tenant, shall comply with all laws,
rules and regulations of authorities and with any certificate of occupancy. The
Tenant shall not use or permit to be used any part of the Premises for any
dangerous, noxious, or offensive business and will not cause or maintain any
nuisance in the Premises and no machinery shall be used on the Premises which
shall cause any undue vibration in the Premises, and if the Landlord shall
complain that any machinery or operation thereof in the Premises is a nuisance,
the Tenant will immediately cease such nuisance. The Tenant has satisfied itself
that the contemplated use of the Premises complies with all relevant
governmental authorities.
2.5. TENANT'S COVENANTS AS TO USE AND OCCUPANCY
The Tenant shall, at its cost, comply with all provisions of law including,
without limiting the generality of the foregoing, the requirements of all
governmental laws, by-laws or regulations now or hereafter in force (whether or
not same shall require alterations). The Tenant will further comply with all
police, fire, health and sanitary regulations imposed by any governmental
authorities or made by any insurers.
2.6. ENVIRONMENTAL
(a) The Tenant will not bring upon, permit or use any substance, defined or
designated as a hazardous or toxic waste, hazardous or toxic material, a
hazardous, toxic or radioactive substance or other similar term, by any
applicable governmental law, regulation, by-law or ordinance now or hereafter in
effect, or any substance or material, the use or disposition of which is
regulated by any such law, regulation, by-law or ordinance (hereinafter called
"Toxic Materials") in, on or under the Premises or the Lands and the Tenant will
promptly comply with all laws, by-laws and ordinances, and with all orders,
decrees or judgements of governmental authorities or courts having jurisdiction,
relating to the use, collection, storage, treatment, control, removal or clean
up of Toxic Materials in, on, under the Premises or the Lands if the Premises or
the Lands become contaminated with Toxic Materials as a result of operations or
activities on the Premises or the Lands or incorporated in any Leasehold
Improvements. The Landlord may, enter upon the Premises and take such actions
and incur such costs to effect such compliance as it deems advisable and the
Tenant shall reimburse the Landlord on demand for the full amount of all costs
incurred in connection with such compliance.
(b) Indemnity: The Tenant shall indemnify and save harmless the Landlord, its
directors, employees, officers, shareholders and any other Person for whom it is
or they are in law responsible, from and against all losses, costs, damages,
liabilities, expenses, fees, fines, penalties and charges whatsoever incurred
with respect to or as a result of any breach by the Tenant of its covenant
aforesaid or otherwise arising out of the use made of the Premises by the Tenant
or any other occupant thereof. The liability of the Tenant shall not be affected
by or limited to contaminants within the knowledge or control of the Tenant and
the Tenant's liability shall extend to all contaminants on or in the Premises,
Building or Lands created during the Term, no matter how caused, except those
created or caused by the Landlord or those for whom it is in law responsible.
The foregoing obligations of indemnification and all of the other obligations of
the Tenant under this Section 2.6 shall survive the expiration or early
termination of this lease and shall remain in full force and effect until
complied with. Failure by the Tenant to comply with its obligations under this
Section 2.6 shall constitute a default under this lease. If the Tenant fails to
comply with any of its obligations under this Section 2.6, the Landlord may (but
shall not be obliged to) comply with same at the Tenant's sole cost and the
Tenant shall pay such cost, together with an additional sum of 15% of such cost
for the Landlord's overhead, to the Landlord forthwith on demand.
ARTICLE 3
3. RENT
3.1. COVENANT TO PAY
(a) The Tenant shall pay Rent from the Commencement Date without prior demand
and without any deduction, abatement, set-off or compensation. If the first or
last Rental Year of the Term comprises less than 12 calendar months, then Net
Rent and Additional Rent for such Rental Years shall be prorated on a per diem
basis, based upon a period of 365 days. The Tenant shall deliver post-dated
cheques to the Landlord prior to each Rental Year for Net Rent and estimated
Additional Rent as required by the Landlord.
(b) Notwithstanding anything contained in the foregoing to the contrary, the
Tenant shall not be required to submit post-dated cheques to the Landlord unless
it shall be late with the payment of Rent on two occasions during the Term. Upon
the second late payment of Rent the Tenant shall forthwith deliver to the
Landlord post-dated cheques for the remaining months of that year and,
thereafter, the Tenant shall deliver post-dated cheques to the Landlord in
accordance with Section 3. 1 (a).
3.2. NET RENT
The Tenant shall pay Net Rent for each year of the Term as set out below, which
shall be payable in each year of the Term in equal monthly instalments in
advance on the first day of each calendar month of each year of the Term:
<TABLE>
RENTAL PERIOD ANNUAL RENTAL MONTHLY RENTAL RATE PER SQ.FT.
<S> <C> <C> <C>
July 1, 1997 to $68,400.00 $5,700.00 $4.75
November 30, 2000
December 1, 2000 to $97,200.00 $8,100.00 $6.75
June 30, 2002
July 1, 2002 to $104,400.00 $8,700.00 $7.25
June 30, 2005
</TABLE>
3.3. ADDITIONAL RENT
Except as otherwise provided in this lease, all Additional Rent shall be payable
by the Tenant to the Landlord within 5 business days after receipt of demand by
the Tenant.
3.4. RENTAL DEPOSIT
The Landlord acknowledges receipt of a cheque in the amount of $9,052.20 from
the Tenant, to be applied as a deposit against Rent accruing due in the first
month of the Term.
3.5. SECURITY DEPOSIT
The Tenant shall deposit with the Landlord on the execution of this lease a
security deposit (the "Security") in the amount of $10,670.04, to be held by the
Landlord, without interest. as security for the performance by the Tenant of the
terms of this lease. In the event of default by the Tenant under this lease, the
Landlord may at its option, without prejudice to any of its other rights, apply
all or part of the Security to compensate it for any loss as a result of such
default. If all or any part of the Security is so applied, the Tenant shall, on
demand, restore the Security to its original amount. On termination of this
lease, if the Tenant is not then in default, the Security will be returned to
the Tenant. If the Landlord sells its interest in the Premises, it may deliver
the Security to the purchaser, and the Landlord will be released from any
further liability with respect to the Security or its return to the Tenant.
3.6. PAYMENT OF TAXES AND OPERATING COSTS
(a) The Tenant shall pay to the Landlord the Tenant's Proportionate Share
of Operating Costs.
(b) The Tenant shall pay to the Landlord, when due, all Taxes in respect of the
Premises, including any Taxes charged in respect of any Common Areas. In
addition, the Tenant shall pay its Proportionate Share of Taxes, if any,
separately charged against Common Areas. The Tenant's obligation to pay Taxes in
respect of the Premises shall be determined on the basis of a separate bill, if
available. If the relevant taxing authority does not issue a separate bill for
Taxes in connection with the Premises, then the Tenant's obligation in respect
of Taxes shall be computed by applying the relevant tax rate to a separate
assessment of the Premises, if any. If there is neither a separate bill for
Taxes for the Premises nor a separate assessment of the Premises, then Taxes
charged in respect of the Premises shall be determined by the Landlord, acting
reasonably, on the basis of then current established principles of assessment
used by the relevant assessing authorities.
(c) Notwithstanding any other provision of this lease, if Taxes in respect of
the Building, Lands or Premises shall be increased by reason of any
installations made in or alterations made to the Premises, the Tenant shall pay
the entire amount of such increase. If the Tenant designates that Taxes shall go
to support separate schools, the Tenant shall pay to the Landlord the difference
between the rate for separate and public schools as Additional Rent, forthwith
upon presentation of an invoice therefor, in addition to the amounts otherwise
payable by the Tenant hereunder.
(d) The Tenant shall pay when due all Business Tax and Sales Tax. Sales Tax
shall be deemed to be a tax and not Additional Rent, but the Landlord shall have
the same remedies as it has in respect of a default in the payment of Additional
Rent,
(e) The Landlord may, on prior notice to the Tenant and at the Tenant's cost,
contest any Taxes and appeal any Tax assessments; withdraw any such contest or
appeal; and agree with the taxing authorities on any settlement or compromise
with respect to Taxes. The Tenant will co-operate with the Landlord in respect
of any such contest or appeal and will provide the Landlord with all relevant
information, documents and consents required. The Tenant will not contest any
Taxes.
(f) The Tenant shall have the right and privilege of appealing assessments or
applying for a reduction of any Taxes, provided that it shall first either pay
the Taxes under protest, or, if such payment is not required by law or can be
withheld without subjecting the Premises to sale or forfeiture proceedings or
without resulting in a default under or breach of any Mortgage, either (i)
furnish to the Landlord satisfactory security for the payment of the Taxes by
bond, irrevocable bank letter of credit or otherwise in case of failure of such
appeal or application, or (ii) provide the Landlord with evidence reasonably
satisfactory to the Landlord of the Tenant's ability to pay the amount of the
Taxes under protest, together with any interest, penalties or other changes
payable in connection therewith. The Tenant may take such action in its own
name, or, if required and upon giving the Landlord satisfactory indemnity in
respect of such action and all costs relating thereto, in the name of the
Landlord, and the Landlord agrees to join in such proceedings, sign such
documents and otherwise co-operate in such proceedings as reasonably requested
by the Tenant, all at the cost and expense of the Tenant. The Tenant shall
diligently prosecute any such appeal, application or proceedings and shall
immediately after the final determination of such appeal, application or
proceedings, pay the amount of the Taxes which were the subject of such
proceedings as so determined, as and when they become due and payable, together
with any interest, penalties or other charges which are payable in connection
with the Taxes.
(g) The amount of Taxes and Operating Costs payable to the Landlord may be
estimated by the Landlord for such period (not to exceed 12 months) as the
Landlord determines from time to time, and the Tenant agrees to pay to the
Landlord the amounts so estimated in equal instalments in advance on the first
day of each month during such period. Notwithstanding the foregoing, the
Landlord may charge the Tenant for Taxes over 9 months and when bills for all or
any portion of such amounts are received, the Landlord may bill the Tenant for
the Tenant's Proportionate Share thereof and the Tenant shall pay the Landlord
such amounts so billed after crediting against such amount any monthly payments
of estimated Taxes and Operating Costs previously made by the Tenant.
(h) Within a reasonable period of time after the end of the period for which
estimated payments have been made, the Landlord shall submit to the Tenant a
statement setting forth the actual amounts payable by the Tenant on account of
Taxes and Operating Costs, with adjustments (if any) to be made forthwith.
3.7. RENT & ADDITIONAL RENT PAST DUE
If the Tenant fails to pay, when the same is due and payable, any Rent, such
unpaid amount shall bear interest from the due date thereof to the date of
payment at 18% per annum.
3.8. NET LEASE
This lease is a completely carefree net lease to the Landlord, except as
expressly set out in this lease, The Landlord is not responsible for any
expenses of any nature arising from or relating to the Premises or their use or
occupancy, or their contents or the business carried on therein. The Tenant
shall pay all charges of every nature and kind relating to the Premises except
as expressly set out in this lease.
3.9. UTILITIES
The Tenant shall pay to the Landlord, or as it directs, all gas, electricity,
water, steam and other utility charges applicable to the Premises as separately
metered (which meters the Tenant shall pay for) or on the basis of the Tenant's
Proportionate Share. The Landlord shall be entitled to allocate to the Premises
an additional charge, as determined by the Landlord's engineer, for any excess
supply of utilities to the Premises. Charges for utilities shall be payable in
equal instalments in advance on the first day of each month.
3.10. HEATING, VENTILATING AND (IF APPLICABLE) AIR-CONDITIONING UNITS
The Landlord warrants that the heating and air-conditioning (if any) units
located in the Premises (the "Units") will be in good working order on the
Commencement Date. The Tenant shall 30 days prior to the expiration of the Term
provide the Landlord with a certificate from a recognized, reputable heating and
air-conditioning contractor approved by the Landlord, stating that the Units are
in good working order, reasonable wear and tear only excepted. If such
certificate is not provided, the Landlord may use the Security towards payment
for any repairs necessary to put the Units into good working order. The Tenant
shall, throughout the Term, at its cost, keep in force a maintenance contract
for the Units with a heating and air-conditioning contractor acceptable to the
Landlord and the Tenant shall produce a copy of such contract to the Landlord
within 30 days of the Commencement Date. Notwithstanding the foregoing the
Landlord may, at its option, take out any such preventative maintenance
contract, in which case the Tenant shall pay, as Additional Rent all costs
incurred by the Landlord.
ARTICLE 4
4. MAINTENANCE, REPAIRS AND COMMON AREAS
4.1. TENANT'S OBLIGATIONS
The Tenant covenants that at its cost:
(a) it shall repair, maintain and keep the Premises (including, without
limitation Leasehold Improvements, the Units and all plate glass) in good
condition and repair and in accordance with all laws, directions, rules and
regulations of all governmental agencies having jurisdiction and without
limitation, will make all repairs and replacements to all of the Premises,
including replacement to all equipment and base building facilities and all
Structural Repairs unless specifically excepted herein. For greater clarity, it
is understood and agreed by the parties that any Structural Repairs shall be
performed by the Landlord at the Tenant's sole cost and expense. The Tenant
covenants to heat the Premises to a temperature sufficient to prevent all pipes,
plumbing fixtures and equipment from bursting or suffering damage;
(b) it shall keep all entrance-ways and all steps and platforms leading thereto
and the Lands clear of all snow, ice and debris;
(c) it shall repair the Premises according to notice in writing from the
Landlord; and
(d) upon the expiration or earlier termination of the Term, the Tenant will
peaceably surrender and deliver up the Premises to the Landlord in a good state
of repair and maintenance, excepting only reasonable wear and tear not
inconsistent with the maintenance of the Building.
4.2. LANDLORD'S OBLIGATIONS
The Landlord covenants that it will at its cost make:
(a) structural repairs to the Premises, including roof, walls and floors caused
by or resulting from inherent structural defects or weaknesses; and
(b) repairs to be performed by the Landlord pursuant to Section 8.2 to the
extent of the insurance proceeds available.
The Landlord will perform any structural repairs required to be performed by it
under the terms of this lease upon written notice from the Tenant. Such repairs
shall be commenced promptly by the Landlord, acting as would a prudent landlord,
and the Landlord shall act diligently to minimize disruption to the Tenant's
operation of the Premises.
4.3. APPROVAL OF TENANT'S ALTERATIONS
(a) No Alterations shall be made to the Premises without the Landlord's prior
written approval, such approval not to be unreasonably withheld or delayed. All
Alterations shall be performed:
(i) by contractors and workmen approved by the Landlord;
(ii) in a good and workmanlike manner;
(iii)in accordance with drawings and specifications approved by
the Landlord;
(iv) in accordance with all applicable laws and regulations; and
(v) subject to such indemnification against liens as the Landlord
reasonably requires.
The Landlord's reasonable cost of supervising all such work and to have
such plans and specifications reviewed by the Architect shall be paid
by the Tenant.
(b) If any Alterations affect the structure of the Building or any of the base
building systems, such work shall at the option of the Landlord be performed by
the Landlord at the Tenant's cost as per (a) above, together with a sum equal to
15% of said cost representing the Landlord's overhead.
(c) The Tenant shall not place anything on or make any openings in the roof
without the prior written consent of the Landlord, which consent may be withheld
or given on such terms as the Landlord may determine. On termination of this
lease, the Tenant shall repair any damage caused to the Building as a result of
having placed anything on or having made openings in or having attached anything
to the roof and shall restore the roof to its former condition, all to the
satisfaction of the Landlord.
4.4. REPAIR WHERE TENANT AT FAULT
Notwithstanding any other provisions of this lease, if the Building or any part
thereof is damaged as a result of the act or omission of the Tenant or those for
whom it is in law responsible, the cost of the resulting repairs, plus a sum
equal to 15% of such cost representing the Landlord's overhead if such resulting
repairs are performed by or on behalf of the Landlord, shall be paid by the
Tenant to the Landlord.
4.5. REMOVAL OF IMPROVEMENTS AND FIXTURES
All Leasehold Improvements shall immediately upon their placement become the
Landlord's property without compensation to the Tenant. Except as otherwise
agreed by the Landlord in writing, no Leasehold Improvements or trade fixtures
of the Tenant shall be removed from the Premises either during or at the
expiration or sooner termination of the Term except that:
(a) the Tenant may, during the Term, in the usual course of its business, remove
its trade fixtures in order to replace or upgrade them, provided that the Tenant
is not in default under this lease, and
(b) the Tenant shall, at the expiration or earlier termination of the Term, at
its cost, remove all of its trade fixtures and such of the Leasehold
Improvements as the Landlord shall require to be removed, and to restore the
Premises to the condition in which they existed as at the Commencement Date, to
the extent required by the Landlord. The Tenant shall at its cost repair any
damage caused to the Building by such removal. If the Tenant does not remove its
trade fixtures as aforesaid, they shall, at the option of the Landlord, become
its property and may be removed and disposed of by the Landlord in such manner
as it deems advisable.
4.6. LIENS
The Tenant shall promptly pay for all materials supplied and work done in
respect of the Premises so as to ensure that no lien is registered against the
Lands. The Tenant shall discharge any lien within 5 business days from the
Landlord's notice, failing which the Landlord may at its option discharge the
same, with all costs, including solicitor's fees (on a solicitor/client basis)
incurred by the Landlord to be paid by the Tenant to the Landlord within 5
business days after demand.
4.7. NOTICE BY TENANT
The Tenant shall notify the Landlord of any damage in any part of the Premises
or the Property, which comes to the attention of the Tenant.
4.8. NO LANDLORD'S LIABILITY
The Landlord is not liable for any damage caused to the Tenant by reason of
failure of any equipment or facilities serving the Building or the Property,
interruption or discontinuance of any utility services or delays in the
performance of any work for which the Landlord is responsible. Upon reasonable
prior notice to the Tenant except in the case of an emergency when no notice
shall be required, the Landlord may stop, interrupt or reduce any services,
systems or utilities provided to, or serving, the Building or the Premises, for
the purpose of performing repairs, alterations or maintenance or to comply with
laws or regulations or binding requirements of its insurers or for causes beyond
the Landlord's reasonable control or as a result of the Landlord exercising any
rights reserved to it pursuant to this lease. The Landlord shall not be in
breach of its covenant for quiet enjoyment or liable for any loss, costs or
damages, whether direct or indirect, incurred by the Tenant due to any of the
foregoing, but the Landlord shall use reasonable efforts to restore the
services, utilities or systems so stopped, interrupted or reduced as soon as is
reasonably possible.
ARTICLE 5
5. CONTROL OF PROPERTY BY LANDLORD
5.1 ALTERATIONS BY LANDLORD
The Landlord may:
(a) alter, add to, subtract from, construct improvements to,
re-arrange, build additional storeys on and construct additional
facilities in, adjoining or proximate to the Property;
(b) relocate the facilities and improvements in or comprising the
Property or erected on the Lands;
(c) do such things on or in the Property as required to comply with
any laws, by-laws, regulations,orders or directives affecting the Lands
or any part of the Property; and
(d) do such other things on or in the Property as the Landlord, in
the use of good business judgment determines to be advisable,
provided that notwithstanding anything contained in this Section 5.1 access to
the Premises shall be available at all times. The Landlord shall not be in
breach of its covenant for quiet enjoyment or liable for any loss, costs or
damages, whether direct or indirect, incurred by the Tenant due to any of the
foregoing. The Landlord shall exercise its rights under this Section 5.1, to the
extent possible in the circumstances, in such manner so as to minimize
interference with the Tenant's use and enjoyment of the Premises.
5.2. RIGHT OF EXAMINATION
The Landlord may at all reasonable times enter the Premises to examine them and
to make such repairs, alterations or improvements thereto as the Landlord
considers necessary. The Landlord reserves to itself the right to use the
exterior walls, the roof, and the right to install, maintain, use and repair
pipes, ducts, conduits, vents, wires and other installations leading in,
through, over, or under the Premises and for this purpose, the Landlord may take
all material into and upon the Premises which is required therefor. The Tenant
shall not unduly obstruct any pipes, conduits or mechanical or other electrical
equipment so as to prevent reasonable access thereto. The Landlord shall
exercise its rights under this Section 5.2, to the extent possible in the
circumstances, in such manner so as to minimize interference with the Tenant's
use and enjoyment of the Premises.
5.3. RIGHT TO SHOW PREMISES
The Landlord and its agents have the right to enter the Premises at all
reasonable times on reasonable prior notice to show the Premises to prospective
purchasers or Mortgagees and, during the last six months of the Term (or the
last six months of any renewal term if this lease is renewed), to show them to
prospective tenants. The Tenant may provide a representative to accompany the
Landlord when showing the Premises as aforesaid.
5.4. ENTRY NOT FORFEITURE
No entry into the Premises by the Landlord pursuant to a right granted by this
lease shall constitute a breach of any covenant for quiet enjoyment, or (except
where expressed by the Landlord in writing or otherwise intended) shall
constitute a re-entry or forfeiture.
5.5. MAINTENANCE SCHEDULE
As soon as reasonably possible after execution of this lease, the Tenant shall
provide the Landlord with a schedule ("Schedule") indicating times during which
the Landlord would be able to conduct maintenance and/or stop services with a
minimum of disturbance to the Tenant's operations in the Premises. Except in the
case of an emergency, in exercising its rights under Sections 4.8, 5.1 and 5.2
the Landlord shall, to the extent reasonably possible under the circumstances,
adhere to the Schedule. If, as a result of adhering to the Schedule, the
Landlord incurs an additional cost for the performance of any service and/or
maintenance outside of normal business hours, the Tenant shall reimburse the
Landlord for such additional cost, forthwith upon demand.
ARTICLE 6
6. INSURANCE AND INDEMNITY
6.1. TENANT'S INSURANCE
(a) The Tenant will, throughout the Term, at its cost take out and maintain, in
the name of the Tenant and the Landlord and the Mortgagee as loss payee, when
applicable, as their respective interests may appear, the following insurance,
which will contain the Mortgagee's standard mortgage clause and will contain a
waiver of any subrogation rights which the Tenant's insurers may have against
the Landlord and against those for whom it is in law responsible:
(i) insurance upon all property owned by the Tenant or for which the Tenant
is legally liable, and which is located in the Premises including, without
limitation, alterations, trade fixtures, and Leasehold Improvements, as well as
inventory in an amount of at least 90% of the full replacement cost, with
coverage against at least the perils of fire and standard extended coverage,
including sprinkler leakages (where applicable), flood and collapse;
(ii) if applicable, broad form boiler and machinery insurance on a blanket
repair and replacement basis with limits for each accident in an amount of at
least 90% of the full replacement cost of all boilers, pressure vessels, heating
and air-conditioning equipment and miscellaneous electrical apparatus owned or
operated by the Tenant or by others (other than the Landlord) on behalf of the
Tenant;
(iii)standard extra expense insurance;
(iv) comprehensive general liability insurance, including personal injury
liability, contractual liability, non-owned automobile liability, employers'
liability and owners' and contractors' protective insurance coverage with
respect to the Premises and the Tenant's use of the Common Areas. Such policies
shall (1) be written on a comprehensive basis with inclusive limits of not less
than $2,000,000.00 for bodily injury to any one or more Persons, or property
damage, and such higher limits as the Landlord, acting reasonably, requires from
time to time; and (2) contain a severability of interests clause and a cross
liability clause;
(v) Tenant's legal liability insurance for the actual cash value of the
Premises, including loss of use thereof,
(vi) if applicable, standard owner's form automobile policy providing third
party liability insurance with $2,000,000.00 inclusive limits, and accident
benefits insurance, covering all licensed vehicles owned or operated by or on
behalf of the Tenant; and
(vii) any other of insurance as the Tenant or the Landlord, acting
reasonably, requires from time to time in form, in amounts and for insurance
risks against which a prudent tenant would insure.
(b) All policies:
(i) will be taken out with insurers acceptable to the Landlord, acting
reasonably;
(ii) will be in a form satisfactory from time to time to the Landlord,
acting reasonably;
(iii) will be non-contributing with, and will apply only as primary and not
as excess to any other insurance available to the Landlord or the Mortgagee; and
(iv) will not be invalidated as respects the interests of the Landlord and
of the Mortgagee by reason of any breach or violation of any warranties,
representations, declarations or conditions contained in the policies. All
policies will contain an undertaking by the insurers to notify the Landlord and
the Mortgagee in writing by registered mail at least thirty (30) days before any
material change, cancellation or termination of them.
(c) Certificates of insurance will be delivered to the Landlord before the
Tenant obtains possession of the Premises for any purpose. No review or approval
of any insurance certificate by the Landlord diminishes its rights or the
Tenant's obligations in this lease.
(d) If the Tenant fails to take out or keep in force any required insurance or
should any of that insurance not be approved by the Landlord, and should the
Tenant not commence to diligently rectify (and afterwards to proceed diligently
to rectify) the situation within 48 hours after notice by the Landlord, the
Landlord may, without obligation, effect such insurance at the Tenant's cost and
all costs of the Landlord will be immediately paid by the Tenant to the Landlord
as Additional Rent, together with a fee of 15% representing the Landlord's
overhead. This right is without prejudice to the other rights and remedies of
the Landlord under this lease.
6.2. LANDLORD'S INSURANCE
The Landlord will carry the following:
(a) insurance on the Building (excluding foundations and excavations) and the
machinery, boilers, and equipment contained in it and owned by the Landlord
(excluding any property with respect to which the Tenant or other occupants are
required to insure under Section 6.1 or similar Sections) against damage by fire
and extended perils coverage in those reasonable amounts and with those
reasonable reductions that would be carried by a prudent owner of a reasonably
similar project, having regard to size, age and location, but shall be insured
for the full replacement cost;
(b) comprehensive public liability and property damage insurance with respect to
the Landlord's operations in the Premises, in the Building and on the Lands, in
those reasonable amounts for personal and bodily injury or death and damage to
property of others; and
(c) those other forms of insurance which the Landlord considers advisable.
Despite this Section 6.2, and regardless of any contribution by the Tenant to
the costs of insurance premiums, (i) the Tenant is not relieved of any liability
arising from or contributed to by its negligence or its wilful acts or
omissions, and (ii) no insurable interest is conferred upon the Tenant under any
policies of insurance carried by the Landlord and the Tenant has no right to
receive any proceeds of any such insurance policies.
6.3. INDEMNIFICATION OF THE LANDLORD
Notwithstanding any other provision of this lease, the Tenant shall indemnify
the Landlord and save it harmless from and against any and all loss (including
loss of Rent), claims, actions, damages, liability and expense in connection
with loss of life, personal injury, damage to property or any other loss or
injury whatsoever arising from or out of this lease, or any occurrence in, upon
or at the Premises, or the occupancy or use by the Tenant of the Premises or any
part thereof, or occasioned wholly or in part by any act or omission of the
Tenant or by anyone permitted to be on the Premises by the Tenant. If the
Landlord shall, without fault on its part, be made a party to any litigation
commenced by or against the Tenant, then the Tenant shall protect, indemnify and
hold the Landlord harmless and shall pay all expenses and reasonable legal fees
incurred (on a solicitor/client) basis or paid by the Landlord in connection
with such litigation. The Tenant shall also pay all expenses and legal fees (on
a solicitor/client basis) that may be incurred or paid by the Landlord in
enforcing the terms of this lease, unless a court shall decide otherwise.
6.4. LOSS OR DAMAGE
The Landlord shall not be liable for any death or injury arising from or out of
any occurrence in, upon, at or relating to the Property or damage to property of
the Tenant or of others located on the Premises or elsewhere in the Property,
nor shall it be responsible for any loss of or damage to any property of the
Tenant or others from any cause, whether or not any such death, injury, loss or
damage results from the negligence of the Landlord, its agents, employees,
contractors, or others for whom it may, in law, be responsible. Without
limitation, the Landlord shall not be liable for any injury or damage to Persons
or property resulting from any cause whatsoever. All property of the Tenant
shall be so kept at the risk of the Tenant only and the Tenant releases and
agrees to indemnify the Landlord and save it harmless from any claims arising
out of any damage to the same, including any subrogation claims by the Tenant's
insurers.
6.5. INCREASE IN INSURANCE PREMIUMS
No article shall be kept in the Premises which is prohibited by any insurance
policy against the Building. If anything is done in the Building which increased
the insurance with respect to the Building, the Tenant shall pay any such
increase in premium. In determining whether increased premiums result from the
use of the Premises, a schedule issued by the Landlord's insurer shall be final
and binding.
6.6. CANCELLATION OF INSURANCE
If any insurance policy upon the Building or any part thereof shall be cancelled
or threatened to be cancelled or the coverage thereunder reduced by reason of
the use of the Premises, and if the Tenant fails to remedy such condition within
48 hours after notice, the Landlord may, at its option, at the Tenant's cost,
either:
(a) re-enter the Premises forthwith; or
(b) enter upon the Premises and remedy the condition giving rise to such
cancellation, threatened cancellation or reduction.
The Landlord shall not be liable for any damage or injury caused to any property
located on the Premises as a result of any such entry,
ARTICLE 7
7. ASSIGNMENT AND SUBLETTING
7.1. TRANSFERS
The Tenant shall not permit any Transfer without the prior written consent of
the Landlord, which consent shall not be unreasonably withheld, but shall be
subject to the Landlord's rights under Section 7.2. Notwithstanding any
statutory provision to the contrary, the Landlord may take into account the
following factors in deciding whether to grant or withhold its consent:
(a) whether such Transfer is breach of any covenants or restrictions made or
granted by the Landlord;
(b) whether in the Landlord's opinion, the financial background, business
history and capability of the proposed Transferee is satisfactory; and
(c) if the Transfer is to an existing tenant of the Landlord.
Consent by the Landlord to any Transfer if granted shall not constitute a waiver
of the necessity for such consent to any subsequent Transfer. This prohibition
against Transfer shall include a prohibition against any Transfer by operation
of law and no Transfer shall take place by reason of the failure of the Landlord
to give notice as required by Section 7.2.
7.2. LANDLORD'S RIGHT TO TERMINATE
If the Tenant intends to effect a Transfer, the Tenant shall give written notice
to the Landlord specifying the identity of the proposed Transferee and provide
such financial, business or other information relating to the Transferee and its
principals as the Landlord requires, together with copies of any Transfer
documents. The Landlord shall, within 30 days after having received such notice
and all requested information, notify the Tenant either that:
(a) it consents or does not consent to the Transfer; or
(b) it elects to cancel this lease as to the whole or part, as the case may be,
of the Premises affected by the proposed Transfer, in preference to giving such
consent.
If the Landlord elects to terminate this lease, it shall stipulate in its notice
the termination date, which date shall be no less than 30 days nor more than 90
days following the giving of such notice of termination. If the Landlord elects
to cancel this lease, the Tenant may notify the Landlord within 10 days
thereafter of the Tenant's intention either to refrain from such Transfer or to
accept the cancellation. If the Tenant fails to deliver such notice within such
period of 10 days or notifies the Landlord that it accepts the Landlord's
termination, this lease will as to the whole or affected part of the Premises,
as the case may be, be terminated on the date of termination stipulated by the
Landlord in its notice. If the Tenant advises the Landlord it intends to refrain
from such Transfer, then the Landlord's election to terminate this lease shall
become void in such instance.
7.3. CONDITIONS OF TRANSFER
(a) Any consent by the Landlord shall be subject to the Tenant and Transferee
executing an agreement with the Landlord agreeing that the Transferee will be
bound by all of the terms of this lease as if such Transferee had originally
executed this lease as tenant.
(b) Notwithstanding any Transfer, the Tenant shall be jointly and severally
liable with the Transferee under this lease and shall not be released from
performing any of the terms of this lease.
(c) If the net rent and additional rent to be paid by the Transferee exceeds the
Net Rent and Additional Rent, such excess shall be paid to the Landlord. If the
Tenant receives from any Transferee, either directly or indirectly, any
consideration other than rent or additional rent for such Transfer, the Tenant
shall forthwith pay to the Landlord such consideration.
(d) The Tenant will pay all legal costs and the Landlord's administration fee to
review or prepare any Transfer documents.
(e) The Landlord's consent to any Transfer shall be subject to the condition
that if the net rent and additional rent payable by the Transferee shall not be
less than the Net Rent and Additional Rent payable by the Tenant under this
lease as at the effective date of the Transfer.
7.4. CHANGE OF CONTROL
If the Tenant is at any time a corporation or partnership, any actual or
proposed Change of Control in such corporation or partnership shall be deemed to
be a Transfer and subject to all of the provisions of this Article 7. The Tenant
shall make available to the Landlord or its representatives all of its corporate
or partnership records, as the case may be, for inspection at all reasonable
times, in order to ascertain whether there has been any Change of Control.
7.5. NO ADVERTISING
The Tenant shall not advertise or permit to be advertised that the Premises are
available for Transfer unless the complete text of any such advertisement is
first approved in writing by the Landlord. No such advertisement shall contain
any reference to the rental rate of the Premises.
7.6. ASSIGNMENT BY THE LANDLORD
The Landlord shall have the unrestricted right to sell, lease, convey or
otherwise dispose of the Property or any part thereof and this lease, including
the right to mortgage this lease. To the extent that the purchaser or assignee
from the Landlord assumes the obligations of the Landlord under this lease, the
Landlord shall thereupon and without further agreement be released of all
liability under this lease.
7.7. PERMITTED TRANSFERS
Notwithstanding anything contained in Article 7 of this lease to the contrary,
the Tenant shall be entitled to Transfer this lease without the consent of the
Landlord to any affiliated body corporate of the Tenant (as that term is defined
by the Ontario Business Corporations Act, R.S.O. 1990, as amended or replaced),
the foregoing to be referred to as a "Permitted Transferee". The Tenant shall
provide prior written notice to the Landlord of its intent to effect such a
Transfer and shall provide the Landlord with the name(s) of the Permitted
Transferee as well as the proposed effective date of such Transfer and any such
Transfer shall otherwise be in accordance with Article 7. For greater certainty,
the parties acknowledge and agree that the Landlord shall have no right to
terminate the lease upon Transfer to a Permitted Transferee.
ARTICLE 8
8. DAMAGE, DESTRUCTION AND EXPROPRIATION
8. 1. LANDLORD'S OPTION
If the Premises are at any time damaged or destroyed as a result of fire or
other perils in respect of which the Landlord is required to insure against, and
if as a result of such occurrences:
(a) 50% or more of the Premises are rendered wholly unfit for occupancy;
(b) the cost of repairing or rebuilding the Premises exceeds 25% or more of
the replacement cost thereof; and
(c) in the opinion of the Architect the Premises cannot be repaired with
reasonable diligence within 180 days of the happening of such damage or
destruction.
Then, in each case, the Landlord may, at its option and upon notice to the
Tenant, terminate this lease. In such event, this lease shall terminate as of
the date of such damage or destruction and the Rent shall be apportioned and
paid in full to the date of termination. The Tenant will execute whatever
documents may be required by the Landlord in order that all proceeds of
insurance relating to the Leasehold Improvements shall be released to the
Landlord.
If in the opinion of the Architect, to be rendered within 30 days of the
happening of the damage or destruction, such damage or destruction to the
Premises cannot be repaired with reasonable diligence within 365 days of
occurrence, then either the Landlord or the Tenant may terminate this lease on
notice to the other. In such event, this lease shall terminate as of the date of
such damage or destruction and the Rent shall be apportioned and paid in full to
the date of termination. The Tenant will execute whatever documents may be
required by the Landlord in order that all proceeds of insurance relating to the
Leasehold Improvements shall be released to the Landlord.
8.2. DAMAGE TO PREMISES
If the Landlord does not elect to terminate this lease in accordance with
Section 8.1, then the Landlord shall commence with all reasonable diligence to
repair the Premises to the extent only of its obligations under this lease and
exclusive of any work performed in and to the Premises by or on behalf of the
Tenant (the "Landlord's Work of Reconstruction"). The Tenant will be entitled to
receive all proceeds of insurance which has been taken out by the Tenant
relating to the Leasehold Improvements provided the Tenant shall commence will
all reasonable diligence to repair and/or replace same and all such work shall
be conducted in accordance with Article 4 of this lease. In the event that the
cost of the repair and/or replacement of the Leasehold Improvements exceeds the
amount of insurance proceeds, the Tenant shall bear the cost of such excess. In
the event that the cost of repair and/or replacement is less than the amount of
insurance proceeds received by the Tenant, the amount of such excess shall
forthwith be paid to the Landlord.
From the date of the happening of such damage or destruction and until the
completion of the Landlord's Work of Reconstruction, the Net Rent shall abate:
(a) in its entirety if, in the opinion of the Architect, the Premises are
rendered wholly untenantable; or
(b) proportionately (to the portion of the Premises rendered untenantable),
if in the opinion of the Architect, the Premises are rendered untenantable only
in part, subject, in either case, to the extent of the insurance proceeds
actually received by the Landlord.
8.3. LANDLORD'S PLANS
If the Landlord elects to repair the Premises, the Landlord shall be entitled to
use plans and specifications and working drawings in connection therewith other
than, but similar to those used in the original construction of the Premises.
8.4. ARCHITECT'S CERTIFICATE
The decision of the Architect as to:
(a) the time within which the Premises can or cannot be repaired;
(b) the extent of the damage or destruction to the Premises;
(c) the cost of repairing the Premises; and
(d) the date on which the Landlord's Work of Reconstruction is
completed, shall, in each case, be final and binding upon the parties
hereto.
ARTICLE 9
9. DEFAULT
DEFAULT AND REMEDIES
If and whenever:
(a) any Net Rent is in arrears whether or not any demand for payment has
been made by the Landlord;
(b) any Additional Rent is in arrears and is not paid within 5 days after
written demand by the Landlord;
(c) the Tenant has breached any of its obligations in this lease (other
than the payment of Rent) and the Tenant fails to remedy such breach within 15
days of written notice of such breach by the Landlord to the Tenant (or such
shorter period as may be provided in this lease) or if such breach cannot
reasonably be remedied within 15 days of notice as aforesaid or such shorter
period, the Tenant fails to commence to remedy and thereafter proceed diligently
to remedy such breach, in each case after notice in writing from the Landlord;
(d) the Tenant or any Indemnifier becomes bankrupt or insolvent or takes
the benefit of any statute for bankrupt or insolvent debtors or makes any
proposal, assignment or arrangement with its creditors, or any steps are taken
or proceedings commenced by any Person for the dissolution, winding-up or other
termination of the Tenant's existence or the liquidation of its assets;
(e) a trustee, receiver, receiver/manager or like Person is appointed with
respect to the business or assets of the Tenant or any Indemnifier;
(f) the Tenant makes a sale in bulk of all or a substantial portion of its
assets other than in conjunction with a Transfer approved by the Landlord;
(g) this lease or any of the Tenant's assets are taken under a writ of
execution;
(h) the Tenant purports to make a Transfer not in compliance with this
lease;
(i) the Tenant abandons or attempts to abandon the Premises or disposes of
its goods so that there would not after such disposal be sufficient goods of the
Tenant on the Premises subject to distress to satisfy Rent for at least 3
months, or the Premises become vacant and unoccupied for a period of 5
consecutive days or more without the consent of the Landlord; or
(j) any of the Landlord's policies of insurance with respect to the
Building or any part thereof are actually or threatened to be cancelled or
adversely changed as a result of any use or occupancy of the Premises;
then without prejudice to any other rights which it has pursuant to this lease
or at law, the Landlord shall have the following rights and remedies, which are
cumulative and not alternative:
(i) to terminate this lease;
(ii) to enter the Premises as agent of the Tenant and to relet the Premises
for whatever term, and on such terms as the Landlord in its discretion may
determine and to receive the Rent therefor and as agent of the Tenant to take
possession of any property of the Tenant on the Premises, to store such property
at the expense and risk of the Tenant or to sell or otherwise dispose of such
property in such manner as the Landlord may see fit without notice to the
Tenant;
(iii) to remedy or attempt to remedy any default of the Tenant under this
lease for the account of the Tenant and to enter upon the Premises for such
purposes;
(iv) to recover from the Tenant all damages and expenses incurred by the
Landlord as a result of any breach by the Tenant including, if the Landlord
terminates this lease, any deficiency between those amounts which would have
been payable by the Tenant for the portion of the Term following such
termination and the net amounts actually received by the Landlord during such
period of time with respect to the Premises; and
(v) to recover from the Tenant the full amount of the current month's Rent
together with the next 3 months' instalments of Rent; all of which shall accrue
on a day-to-day basis and shall immediately become due and payable as
accelerated Rent.
9.2. DISTRESS
Notwithstanding any provision of this lease or any provision of applicable
legislation, none of the goods of the Tenant on the Premises at any time during
the Term shall be exempt from levy by distress for Rent in arrears, and the
Tenant waives any such exemption. If the Landlord makes any claim against the
goods and chattels of the Tenant by way of distress, this provision may be
pleaded as an estoppel against the Tenant in any action brought to test the
right of the Landlord to levy such distress.
9.3. COSTS
The Tenant shall pay to the Landlord on demand all costs incurred by the
Landlord, including lawyers' fees, on a solicitor/client basis, incurred by the
Landlord in enforcing any of the obligations of the Tenant under this lease.
9.4. ALLOCATION OF PAYMENTS
The Landlord may at its option apply sums received from the Tenant against any
amounts due and payable by the Tenant under this lease in such manner as the
Landlord sees fit.
9.5. SURVIVAL OF OBLIGATIONS
All obligations of the Tenant under this lease which remain unfulfilled at the
determination of this lease and the Landlord's rights in respect of any failure
by the Tenant to perform any of its obligations under this lease shall survive
and remain in full force and effect notwithstanding the expiration or earlier
termination of the Term.
9.6. ADDITIONAL RENT DEEMED RENT
All Additional Rent shall be deemed to be rent and the Landlord shall have all
rights against the Tenant for default in the payment of Additional Rent as for
default in the payment of Net Rent, except as otherwise herein provided.
9.7. LANDLORD'S RIGHT TO PERFORM
In addition to all other remedies the Landlord may have by this lease, at law or
in equity, if the Tenant does not perform any of its obligations hereunder, the
Landlord may, at its option, but without any obligation, perform any of such
obligations of the Tenant, after 5 days' notice to the Tenant or in the event of
an emergency, without notice, and in such event, the cost of performing any of
such obligations, plus an administrative charge of 15% of such cost, shall be
payable by the Tenant to the Landlord forthwith on demand.
ARTICLE 10
10. STATUS STATEMENT; ATTORNMENT AND SUBORDINATION
10.1. STATUS STATEMENT
Within 10 days after written request by the Landlord, the Tenant shall deliver
to the Landlord, in a form supplied by the Landlord, a certificate as to the
status of this lease, the amount of Rent then being paid and the dates to which
it has been paid and any other matters pertaining to this lease as to which the
Landlord shall request such certificate.
10.2. SUBORDINATION
This lease and all rights of the Tenant shall be subject and subordinate to any
and all Mortgages from time to time in existence against the Property or any
part thereof. On request, the Tenant shall subordinate this lease and its rights
under the lease to any and all Mortgages and to all advances made under such
Mortgages. The form of such subordination shall be made as required by the
Landlord or any Mortgagee.
At the Tenant's request and sole cost and expense, the Landlord shall use
commercially reasonable efforts to obtain an agreement from any Mortgagee
agreeing to allow the Tenant to remain in quiet possession of the Premises so
long as the Tenant is not in default under the terms of this lease.
10.3. ATTORNMENT
The Tenant shall promptly on request attorn to any Mortgagee, or to the
registered owners of the Property, or the lessee under any lease of all or
substantially all of the Property made by the Landlord or otherwise affecting
the Property, or the purchaser on any foreclosure or sale under proceedings
taken under any Mortgage, and shall recognize such Mortgagee, owner, lessee or
purchaser as the Landlord under this lease.
10.4. EXECUTION OF DOCUMENTS
The Tenant irrevocably constitutes the Landlord the agent and attorney of the
Tenant for the purposes of executing any agreement, certificate, attornment or
subordination required by this lease and for registering postponements in favour
of any Mortgagee if the Tenant fails to execute such documents within 10 days
after request by the Landlord.
ARTICLE 11
11. GENERAL PROVISIONS
11.1. QUIET ENJOYMENT
If the Tenant pays Rent and fully observes and performs all of its obligations
under this lease, the Tenant shall, subject to the provisions of this lease, be
entitled to peaceful and quiet enjoyment of the Premises for the Term without
interruption or interference by the Landlord or any Person claiming through the
Landlord.
11.2. RULES AND REGULATIONS
The Tenant shall comply with all Rules and Regulations, and amendments to them,
adopted by the Landlord from time to time including those set out in Schedule
"B", so long as such Rules and Regulations arc not inconsistent with and do not
contradict this lease. The Rules and Regulations may differentiate between
different types of businesses in or other tenants or users of the Building and
the Landlord shall not be responsible to the Tenant for any non-observance of
such Rules or Regulations by any other tenant of the Building.
11.3. DELAY
Except as expressly provided in this lease, whenever the Landlord or Tenant is
delayed in the fulfilment of any obligation under this lease, other than the
payment of Rent, by an unavoidable occurrence which is not the fault of the
party delayed in performing such obligation, then the time for fulfilment of
such obligation shall be extended during the period in which such circumstances
operate to delay the fulfilment of such obligation.
11.4. OVERHOLDING
If the Tenant remains in possession of the Premises without the Landlord's
consent after the end of the Term, there shall be no tacit renewal of this lease
or the Term, and the Tenant shall be deemed to be occupying the Premises as a
Tenant from month to month at a monthly net rent equal to twice the monthly
amount of Net Rent payable during the last month of the Term, and otherwise upon
the same terms as set out in this lease, if applicable to a monthly tenancy. If
the Landlord and the Tenant execute an agreement whereby the Term of this lease
is extended ("Agreement"), the over holding rent paid by the Tenant according to
this Section 11.4 from the expiry date of this lease until the date the
Agreement is executed shall be credited toward the rent to be paid by the Tenant
pursuant to the Agreement.
11.5. WAIVER
If either the Landlord or Tenant excuses or condones any default by the other of
any obligation under this lease, this shall not be a waiver of such obligation
in respect of any continuing or subsequent default and no such waiver shall be
implied.
11.6. REGISTRATION
Neither the Tenant nor anyone claiming under the Tenant shall register this
lease or any Transfer without the prior written consent of the Landlord. If the
Tenant or any permitted Transferee wishes to register a document, then the
Landlord shall at the request and expense of the Tenant execute a notice lease
in such form as approved by the Landlord and without disclosure of any terms
which the Landlord does not desire to have disclosed. If the Lands comprise more
than one parcel of land, the Landlord may direct the Tenant or Transferee as to
the parcel or parcels against which registration may be effected.
11.7. NOTICES
Any notice, consent or other instrument which may be or is required to be given
under this lease shall be in writing and shall be delivered in person or sent by
registered mail postage prepaid addressed, if to the Landlord, at 10 Carlson
Court, Suite 500, Etobicoke, Ontario, M9W 6L2; and if to the Tenant, at the
Premises. Any such notice or other instrument shall be deemed to have been given
and received on the day upon which personal delivery is made or, if mailed, 3
business days following the date of mailing. Either party may give notice to the
other of any change of address and, after the giving of such notice, the address
so specified shall be used for the giving of notices. If postal service is
interrupted or substantially delayed, all notices or other instruments shall be
delivered in person.
11.8. SUCCESSORS & ASSIGNS
The rights and liabilities created by this lease extend to and bind the
successors and assigns of the Landlord and the permitted successors and assigns
of the Tenant. No rights, however, shall enure to the benefit of any Transferee
unless the provisions of Article 7 are complied with.
11.9. JOINT AND SEVERAL LIABILITY
If there is at any time more than one Tenant of more than one Person
constituting the Tenant, their covenants shall be considered to be joint and
several and shall apply to each and every one of them. If the Tenant is or
becomes a partnership, each Person who is a member, or shall become a member, of
such partnership or its successors shall be and continue to be jointly and
severally liable for the performance of all covenants of the Tenant pursuant to
this lease, whether or not such Person ceases to be a member of such partnership
or its successor.
11.10. CONSENT
Whenever in this lease the consent or approval of the Landlord is required, such
consent or approval will not be unreasonably withheld or delayed unless
specifically stated to the contrary.
11.11. SIGNS
The Tenant will not paint, fix, display, or cause to be painted, fixed or
displayed, any sign, picture, advertisement notice, lettering or decoration on
any part of the exterior of the Premises, except with the written permission of
the Landlord, consistent with the Landlord's sign criteria. The Tenant shall
cause any signs erected on any part of the exterior or the interior of the
Premises to be installed: (i) in compliance with all requirements of all
governmental authorities having jurisdiction with respect thereto; (ii) at the
sole cost of the Tenant; (iii) in a good and workmanlike manner; and (iv) in
accordance with plans and specifications that comply with the Landlord's
reasonable regulations. The sign shall be maintained by the Tenant at its sole
cost and expense and the Tenant shall pay for any electricity consumed by such
sign.
At the expiration or earlier termination of the Term, the Tenant shall remove
any such signs or other advertising material, as aforesaid, from the Premises at
the Tenant's expense and shall promptly repair all damage caused by any such
installation or removal.
11.12. ACCORD AND SATISFACTION
No payment by the Tenant or receipt by the 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, nor shall any endorsement or statement on any
cheque or any letter accompanying any cheque or payment as rent be deemed an
accord and satisfaction, and the Landlord may accept such cheque or payment
without prejudice to the Landlord's right to recover the balance of such rent or
pursue any other remedy provided for in this lease.
11.13. OCCUPANCY PERMIT
The Tenant shall, at its own cost, be responsible to apply to the City in which
the Lands are located for an Occupancy Permit, upon possession of the Premises,
if required by such City.
11.14. SCHEDULES
The parties agree that Schedules "A", "B" and "C" annexed hereto form part of
this Lease and any provisions thereof shall be enforceable in the same manner as
the provisions of this Lease.
11.15. ENTIRE AGREEMENT
This lease and the schedules and riders, if any, attached set forth the entire
agreement between the Landlord and Tenant concerning the Premises. There are no
agreements or understandings between them other than as set out in this lease.
This lease and its schedules and riders, if any, may not be modified except by
agreement in writing executed by the Landlord and Tenant.
IN WITNESS WHEREOF the Landlord and Tenant have signed this lease.
The Landlord:
PENREAL PROPERTY FUND LTD.
Per: /s/Gary Usling
(Authorized signatory)
Per: /s/Francis Navaratnam
(Authorized signatory) c/s
The Tenant:
SAVILLE SYSTEMS CANADA, LTD.
Per: /s/Christopher A. Hanson
(Authorized Signatory)
Per: /s/C. Jane Lewchuk
(Authorized Signatory) c/s
SCHEDULE'A'
LEGAL DESCRIPTION AND SITE PLAN
The Tenant acknowledges that the purpose of this Schedule is solely to show the
approximate location of the Premises and it is not intended to be a
representation or warranty as to the exact location thereof.
LEGAL DESCRIPTION
Lots 12 and 13 and parts of Lots 10 and 11 Registered Plan 65M-2326 Town of
Markham, Regional Municipality of York.
SCHEDULE "B"
RULES AND REGULATIONS
1. The Tenant shall not do or permit anything to be done in the Premises, or
bring or keep anything therein which will in any way increase the risk of fire
or the rate of fire insurance on the Premises or on property kept therein, or
obstruct or interfere with the rights of other tenants or in any way injure or
annoy them, or violate or act at variance with the laws relating to fires or
with the regulations of the Fire Department or any governmental authority, or
with any insurance upon the Premises, or violate or act in conflict with any
statutes, rules and ordinances governing health standards or with any other
statute or municipal bylaw.
2. No inflammable oils or other inflammable, dangerous or explosive materials
save those approved in writing by the Landlord's insurers shall be kept or
permitted to be kept in the Premises.
3. The Tenant shall not place or maintain any supplies, inventory, equipment or
other articles or things of any kind whatsoever anywhere exterior to the
Building and shall not use any portion of the Lands for outside storage save and
except for the diesel generator required for the back-up electrical system for
the data centre portion of the Premises. The installation and maintenance of the
diesel generator must be in compliance with all applicable governmental laws,
by-laws and regulations and must be approved by the Landlord.
4. The Tenant shall not allow any accumulation of debris, garbage, trash or
refuse either in or outside of the Premises or Building or on the Lands and all
of same shall be kept in appropriate vermin-proof containers until removed. All
garbage, trash, rubbish and refuse shall be removed by the Tenant at its expense
on a regular basis. If the Tenant uses perishable articles or generates wet
garbage, the Tenant shall provide refrigerated storage facilities suitable to
the Landlord.
5. The Tenant shall maintain the Premises free of insects, rodents, vermin and
other pests and shall, if required at any time by the Landlord, take out and
maintain at its expense an appropriate pest and vermin control contract with
respect to the Premises with a person or corporation duly qualified to perform
such services.
6. The Tenant shall not cause or permit: any waste or damage to the Premises;
any overloading of the floors or the utility, electrical or mechanical
facilities of the Building; any nuisance in the Premises; or any use or manner
of use causing a hazard.
7. Except for the proper use of blinds and drapes, the Tenant shall not cover,
obstruct or affix any object or material to any of the skylights or windows of
the Premises which will either reflect or admit light into any part of the
Building including, but without limitation, the application of solar films. The
Landlord acknowledges that, as part of its Initial Leasehold Improvements, the
Tenant will be constructing a structure within the existing structure of the
Premises and, as such, the skylights or windows existing in the Premises as of
the date of this lease may be obscured.
8. The Tenant shall not use or permit the use of any objectionable advertising
medium such as, but without limitation, loudspeakers, phonographs, public
address systems, sound amplifiers, radio broadcast or television apparatus on
the Premises which is in any manner audible or visible outside of the Building.
9. Subject to the Tenant's right to use the diesel generator in the case of
power failure, the Tenant shall not permit or allow any odours, vapour, steam,
water, vibrations, noises or other undesirable effects to emanate from the
Premises or any equipment or any installation in the Premises which in the
Landlord's reasonable opinion are objectionable or cause any interference with
the safety, comfort or convenience of the Building to the Landlord or the
occupants or tenants thereof or their agents, servants, invitees or employees.
10. Subject to the Tenant's right to mount a microwave antenna as part of its
Initial Leasehold Improvements approved by the Landlord, the Tenant shall not
mount or place an antenna of any nature on the exterior of the Building or on
the Lands.
11. Subject to the Tenant's approved construction plans for its Initial
Leasehold Improvements, which include proposed coring for drainage, the Tenant
shall not deface or mark any part of the Building and shall not make
unreasonable use of nails, spikes, hooks or screws in the walls, floors,
ceilings or woodwork of any part of the Building or bore, drill or cut into the
walls, floors, ceilings or woodwork of any part of the Building in any manner.
12. If the Tenant requires telegraphic or telephonic connections the Landlord,
in its discretion, may direct the electricians as to where and how wires are to
be introduced into the Building. Subject to the Tenant's approved construction
plans for its Initial Leasehold Improvements, which include the relocation of
gas and water lines, no gas pipes or electric wiring will be permitted which has
not been ordered or authorized by the Landlord.
13. The water closets and other apparatus shall not be used for any purpose
other than those for which they were intended and no sweepings, rubbish, rags,
ashes or other substances shall be thrown into them. Any damage resulting from
misuse shall be borne by the Tenant.
14. No-one shall use the Premises for sleeping apartments or residential
purposes or for the storage of personal effects or articles other than those
required for business purposes.
15. No cooking or heating of foods or liquids (other than the heating of water
or coffee in coffee makers or kettles or the heating of food in a microwave
oven) shall be permitted in the Premises without the written consent of the
Landlord.
16. No animals or birds shall be brought into any part of the Building without
the consent of the Landlord.
17. When required by any governmental authority having jurisdiction the Tenant
will provide facilities or accommodation for garbage and waste and its disposal
and pick up in accordance with such requirements.
18. The Tenant shall have the right to use designated portions of the parking
areas on the Lands for the parking of passenger vehicles. Such parking areas
shall be used only for the parking of passenger vehicles and no part of the
parking areas, driveway, shipping areas or other parts of the Lands except as
designated by the Landlord, shall be used for the storage, repair and washing of
trucks, trailers, vans or similar vehicles. The Landlord shall have no
obligation to supervise police and control the use of the parking areas and, if
any portion of the parking areas has been designated for the Tenant's use. The
Tenant shall not park any vehicle or permit any vehicle to be parked overnight
at the Premises unless the occupant of the vehicle is working in the Premises
overnight.
19. All tenants must observe strict care not to allow their windows or doors to
remain open so as to admit rain or snow or so as to interfere with the heating
of the Building. Any injury or damage caused to the Building or its
appointments, furnishing heating and other appliances or to any other tenant by
reason of windows or doors being left open so as to admit rain or snow or by
interferences with or neglect of the heating appliances or by reason of the
tenant or other person or servant, subject to it, shall be made good by the
tenant in whose premises the neglect, interference or misconduct occurred.
SCHEDULE "C"
SPECIAL PROVISIONS
Expansion Space
Provided the Tenant has not been in habitual default and is not then in default
under the terms of the lease and Saville Systems Canada, Ltd. is the Tenant and
is itself in occupation of and conducting business in the whole of the Premises
then, during the Term of the lease (including any extensions or renewals
thereof) if any space in the Building becomes available for re-leasing from the
Landlord ("Expansion Space"), the Landlord shall so notify the Tenant and the
Tenant shall have 5 days from receipt of such notice within which to confirm in
writing to the Landlord that it elects to exercise its right to lease the
Expansion Space. If the Tenant exercises its right hereunder it will have 15
days from the date of exercise within which to enter into a lease with the
Landlord on the Landlord's standard form of net industrial lease in effect for
the Building to confirm the terms of the leasing of the Expansion Space on terms
and conditions which are acceptable to both the Landlord and the Tenant, both
parties acting reasonably. If the Tenant fails to exercise its right within the
stipulated 5 day period, this option to lease Expansion Space shall be null and
void and of no further force or effect.
Protective Covenant
Provided the Tenant is not in default under the terms of the lease and Saville
Systems Canada, Ltd. is the Tenant and is itself in occupation of and conducting
business in the whole of the Premises, then the Landlord agrees that it shall
ensure the integrity of the future business uses are restricted to the class and
use of the tenant base existing as at the Commencement Date. In any event, the
Landlord shall not lease space adjacent to the Premises to a tenant whose
business includes heavy use of machinery which could be expected to produce
excessive vibration or businesses which use explosive or corrosive chemical
products.
Option to Extend
Provided:
1 . the Tenant is not then and has not been in default under the terms of
the lease;
2. Saville Systems Canada, Ltd. is the Tenant and is itself in occupation
of and conducting business in the whole of the Premises;
3. the Tenant has provided written notice to the Landlord no later than 6
months prior to the expiry of the initial Term of its intention to exercise the
within option to extend,
then the Tenant shall have a one time only option to extend the initial Term of
the lease for a further period of 5 years, such extension to begin upon the
expiration of the initial Term and the lease, and all of its terms shall
continue in force during such extension except that:
(a) the Tenant shall not be entitled to any further rent-free period,
Landlord's work, or financial inducement;
(b) the Tenant shall not have any further option to extend the Term
following the exercise, if any, of the foregoing option to extend; and
(c) during the extension, the Tenant shall pay a net rent to be agreed upon
by the Landlord and the Tenant prior to the commencement of such extension,
based on the fair market rental rate for comparable premises, calculated in a
comparable manner on a comparable net lease basis for comparable buildings in
the vicinity of the Building. In the event that such rental rate has not been
agreed upon by the parties 3 months prior to the commencement of the extension
then the net rental rate shall be determined by arbitration under the
Arbitration Act, 1991 of Ontario, as amended or replaced.
Failing written notification to the Landlord in accordance with paragraph 3
above, the foregoing option to extend shall be null and void.
The Landlord may require the Tenant to execute a lease amending agreement or, at
its option, its then standard net industrial lease in effect for the Building,
in order to confirm the terms of the foregoing option to extend.
Corporate Identification
The Tenant shall, at its own cost and expense, have the right to install its
sign graphics on the west wall of the Premises provided that such sign conforms
to all applicable governmental laws, by-laws, rules and regulations and the
Landlord's sign criteria for the Building.
EXHIBIT 10.20
715864 ALBERTA LTD.
(as Landlord)
- and -
SAVILLE SYSTEMS CANADA LTD.
(as Tenant)
- and -
SAVILLE SYSTEM PLC
(as Indemnifier)
<PAGE>
INDEX
ARTICLE CAPTION PAGE NO.
1. DEFINITIONS
1.00 (a) Additional Rent 1
1.00 (b) Business Hours 1
1.00 (c) Business Transfer Tax 1
1.00 (d) Common Areas 1
1.00 (e) Development 2
1.00 (f) Fiscal Year 2
1.00 (g) Hazardous and Dangerous Substances 2
1.00 (h) Land 2
1.00 (i) Landlord 2
1.00 (j) Landlord's Architect 2
1.00 (k) Lease 2
1.00 (l) Leased Premises 3
1.00 (m) Lease Year 3
1.00 (n) Minimum Rent 3
1.00 (o) Operating Costs 3
1.00 (p) Proportionate Share 4
1.00 (q) Rent 4
1.00 (r) Rentable Area 4
1.00 (s) Stipulated Rate of Interest 4
1.00 (t) Taxes 4
1.00 (u) Term 4
1.00 (v) Useable Area 4
2. DEMISE 4
3. HABENDUM
3.00 Term 5
3.01 Holding Over 5
4. RENT
4.00 Minimum Rent 5
4.01 Additional Rent 6
4.02 Payment of Additional Rent 6
4.03 Accrual of Rent 6
4.04 Place of Rent Payment 6
4.05 Net Lease 7
4.06 Security Deposit 7
4.07 Delay in Occupancy 7
5. GENERAL COVENANTS
5.00 Landlord's General Covenants 7
5.01 Tenant's General Covenants 8
6. DEVELOPMENT SERVICES, COMMON AREA UTILITIES
AND EXPENSE
6.00 Heating, Ventilating and Air-Conditioning 8
6.01 Common Areas 8
6.02 Caretaking 9
6.03 Electricity, Replacement of Lamps
Utilities and Services 9
7. USE AND OCCUPANCY OF LEASED PREMISES
7.00 Use of Leased Premises 9
7.01 Occupancy of Leased Premises 9
7.02 Nuisance 9
7.03 Compliance with Laws 10
7.04 Improvements, Alterations, Fixtures 10
7.05 Insurance 11
7.06 Rules and Regulations 13
7.07 Signs 14
7.08 Heavy Objects 14
7.09 Hazardous and Dangerous Substances 14
7.10 No Defacing 14
7.11 Additional Services 14
8. REPAIRS
8.00 Tenant's Repairs 15
8.01 Maintenance by Tenant 15
8.02 Repair Where Tenant is at Fault 16
8.03 Repair on Termination 16
8.04 Notice of Accident, Defects, etc. 16
8.05 Renovation 16
8.06 Total or Partial Destruction of
Leased Premises 17
9. TAXES
9.00 Tenant's Taxes 17
9.01 Payment of Taxes by Tenant 17
9.02 Increases in Taxes 18
9.03 Payment of Taxes by Landlord 18
9.04 Payment of Business Transfer Tax 18
9.05 Changes in Taxes 18
10. LICENSES, ASSIGNMENTS AND SUBLETTINGS
10.00 Licenses, Etc. 18
10.01 Consent Required 18
10.02 Conditions of Consent 19
10.03 Landlord's Option 19
10.04 Share Transfer 19
11. DEVELOPMENT TITLE
11.00 Subordination 20
11.01 Tenant Acknowledgements 20
11.02 Mechanics' and Other Liens 20
11.03 No Registration 20
12. LIABILITIES
12.00 Excuse for Non-Performance by
Landlord or Tenant 21
12.01 Claims for Compensation 21
12.02 Theft 21
12.03 Premises Not Available 22
12.04 Condemnation and Expropriation 22
13. ACCESS
13.00 Access by Landlord 22
13.01 Exhibit Leased Premises 22
14. TENANT'S DEFAULT
14.00 Re-Entry 22
14.01 Bankruptcy, Etc. 22
14.02 Premises Vacated or Improperly Used 23
14.03 Distress 23
14.04 Rental Arrears 23
14.05 Landlord's Right to Perform 23
14.06 Alternative Remedies 23
14.07 Waiver 23
14.08 Costs 24
15. INDEMNIFIER 24
16. GENERAL PROVISIONS
16.00 Lease Entire Agreement 25
16.01 Modification to the Agreement 25
16.02 Laws of Alberta to Govern 25
16.03 No Partnership 25
16.04 Notices 26
16.05 Captions 26
16.06 Time of the Essence 26
16.07 Managing Agent 26
16.08 Brokerage 26
16.09 Interpretation, Landlord and Tenant 26
16.10 Right to Relocate 27
16.11 Change and Addition to the Development 27
16.12 Energy Conservation 27
16.13 Additional Terms and Conditions 27
17. SCHEDULES
"A" FLOOR PLAN SHOWING LEASED PREMISES
"B" ADDITIONAL TERMS AND CONDITIONS
"C" RULES AND REGULATIONS
"D" LEGAL DESCRIPTION
"E" OFFER TO LEASE
<PAGE>
THIS INDENTURE made:
BETWEEN:
715864 ALBERTA LTD.
(hereinafter called the "Landlord")
OF THE FIRST PART
- and -
SAVILLE SYSTEMS CANADA LTD.
(hereinafter called the "Tenant")
OF THE SECOND PART
- and -
SAVILLE SYSTEMS PLC
(hereinafter called the ("Indemnifier")
OF THE THIRD PART
WITNESSETH THAT:
WHEREAS the Landlord has agreed to lease to the Tenant and the Tenant
has agreed to lease from the Landlord the hereinafter described
"Leased Premises" forming part of a development (the "Development")
municipally known as 6020 - 104 Street, in the City of Edmonton, in
the Province of Alberta. The legal description of the Development is
annexed hereto as Schedule "D".
In consideration of the rents, covenants and agreements hereinafter
contained and by the parties to be respectively paid, observed and
performed, the parties hereby agree as follows:
ARTICLE I DEFINITIONS
1.00 Definitions
In this Lease:
(a) "Additional Rent" shall mean the sums of money payable to the
Landlord as specified in Section 4.01 infra, as well as any
other sums, amounts, costs or charges as are required to be
paid by the Tenant under any provision of this Lease, save for
Minimum Rent and New Minimum Rent;
(b) Deleted
(c) "Business Transfer Tax" shall mean all services, business
transfer, transaction value, ad valorem, sales or other taxes
by whatever name, imposed by and payable to the federal,
provincial or municipal authority, if any, and assessed upon
or as a direct result of the payment of the Minimum Rent and
Additional Rent hereunder as often as such taxes become due
and whether or not such taxes are applicable on the date the
execution of this Lease or become applicable thereafter;
(d) "Common Areas" shall mean those areas, facilities, utilities,
improvements, equipment and installations in or adjacent
to the Development which serve or are for the benefit of the
Development and which from time to time, are not designated
or intended by the Landlord to be leased to tenants of the
Development and shall include without limitation, all areas,
facilities, utilities, improvements, equipment and
installations provided or designated (and which may be changed
from time to time) by the Landlord for the use or benefit of
the tenants, their employees, customers and other invitees
in common with others entitled to the use or benefit thereof
in the manner and for the purposes permitted by this Lease,
but excluding all areas used in the computation of the Useable
Area of the Development;
Without limiting the generality of the foregoing, the Common
Areas include any of the following from time to time provided
by the Landlord: the roof, exterior weather walls, exterior
and interior structural elements and bearing walls in the
buildings and improvements comprising the Development; truck
courts; driveways; truck-ways; delivery passages; package
pick-up stations; loading docks and related areas; pedestrian
side-walks; landscaped and planted areas; all open and
enclosed malls, courts and arcades; public seating and service
areas; corridors; bus kiosks, if any, roadways and stops,
equipment, furniture, furnishings and fixtures; stairways,
ramps, elevators and other transportation equipment and
systems; tenant common and public washrooms, electrical,
telephone, meter, valve, mechanical, mail, storage, service
and janitor rooms and galleries; music, fire prevention,
security and communications systems; general signs; columns;
pipes; electrical, plumbing, drainage, underground parking
lot, pedway, mechanical and all other installations or
services located therein or related thereto as well as the
structures housing same that are not for the exclusive use of
a tenant;
(e) "Development" shall mean floors main through 3 of the
development plus all Common Areas, located on the Land on
Schedule "D" and such additions, deletions, alterations, and
improvements as may be made thereto from time to time by and
with the discretion of the Landlord;
(f) "Fiscal Year" means a period of twelve (12) calendar months,
commencing January 1st annually unless otherwise changed by
the Landlord;
(g) "Hazardous and Dangerous Substances" shall include and mean
any contaminant, pollutant, dangerous substance, toxic
substance, hazardous waste, flammable explosive, radioactive
material, urea formaldehyde foam insulation, asbestos, P.C.B.
and any other substances or materials declared or defined to
be hazardous or toxic contaminants in/or pursuant to any
applicable Federal, Provincial or municipal statute or by-law.
(h) "Land" shall mean the lands in the City of Edmonton described
in Schedule "D" together with any other land or interest in
land and any easement which may be designated from time to
time by the Landlord for use as an expansion of the
Development pursuant to Section 16.11 infra;
(i) "Landlord" shall include the Landlord, its successors and
assigns and those in law for whom it is responsible;
(j) "Landlord's Architect" shall mean that architect or engineer
from time to time appointed by the Landlord;
(k) "Lease" shall mean this lease as from time to time amended in
writing and agreed to by all parties hereto;
(l) "Leased Premises" shall mean that portion of the Development
leased to the Tenant as referred to in Section 2.00 infra,
the boundaries of which are outlined in red on Schedule "A"
annexed hereto, having a Rentable Area of approximately
twenty-eight thousand five hundred and eighty three (28,583)
square feet and a Useable Area of approximately twenty-six
thousand six hundred and twenty four (26,624) square feet
and located on all three (3) floors of the Development. If
the Leased Premises are entirely self-enclosed, the boundaries
of the Leased Premises extend from the top surface of the
structural subfloor to the bottom surface of the structural
ceiling. If the Leased Premises have no ceiling abutting the
demising walls, but rather are open to the ceiling of the
Development, the boundaries of the Leased Premises extend
from the top surface of the structural subfloor to the height
of the demising walls. The boundaries shown on Schedule
"A" exclude the exterior faces of all adjoining walls,
corridor walls and outside walls;
(m) "Lease Year" shall mean a period of twelve (12) consecutive
calendar months. The first Lease Year shall commence on the
Term Commencement Date if that date occurs on the first day of
a calendar month, but if it does not so occur, the first Lease
Year shall commence on the first day of the calendar month
next following the date of commencement of the Term. Each
succeeding Lease Year shall commence on the anniversary date
of the first day of the first Lease Year;
(n) "Minimum Rent" shall mean the Rent specified in Section 4.00
infra;
(o) "Operating Costs" shall mean all costs properly
attributable to the maintenance, cleaning, repairs,
replacement and such costs that are properly
attributable to the Development under generally accepted
accounting principles, including without limiting the
generality of the foregoing: the cost of interior and
exterior landscaping; the cost of exterior window
cleaning; the cost of snow removal; the cost of
garbage disposal; the cost of repairing damaged
components of the Development; the cost of heating,
ventilating and air-conditioning the Development; the cost
of providing warm and cold water; the cost of providing
electricity not otherwise chargeable to tenants; the cost
of insuring the Development with any form of insurance which
the Landlord or any mortgagee of the Landlord reasonably
requires from time to time for insurable risks and in amounts
against which the Landlord acting prudently would insure;
the cost of telephone and utilities not otherwise
chargeable to tenants; the cost of all elevator and
escalator maintenance and operating expenses; the cost of
onsite personnel, including salaries, wages and fringe
benefits; the cost of providing security; the cost of
supplies and materials; the cost of non-capital repairs
and replacement (except to the extent the same are paid by
insurance); the cost of third party legal fees including the
lawyers' disbursements on a solicitor and client basis to
the extent that such fees and disbursements relate to building
operational matters and are not recoverable from another
tenant, otherwise than pursuant to a clause identical or
similar to the within clause; depreciation on the cost of
improvements determined by the Landlord's auditor to be
properly chargeable to the capital account provided that
such improvements reduce or avoid Operating Costs or
improve the safety of the users of the Development;
property management fees as assessed by the owner and/or
agent thereof; the cost of third party accounting services
and operational auditing fees.
In the event of any dispute by the Tenant of the amount of
such Operating Costs, an opinion of the Landlord's auditors
shall be conclusive as to the amount thereof for any period to
which such opinion relates. "Operating Costs" shall exclude
however, interest on debt, capital retirement of debt, the
cost of work done under warranty for which and to the extent
of any credit received by the Landlord;
(p) "Proportionate Share" shall mean one hundred (100%) percent.
(q) "Rent" shall mean the aggregate of the Minimum Rent,
New Minimum Rent and Additional Rent;
(r) "Rentable Area" shall mean the Rentable Area of the Leased
Premises as determined in accordance with the standard method
for measuring floor area in office buildings as sanctioned by
the Building Owners and Managers Association International
(BOMA) as of June 7th, 1996 (hereinafter referred to as the
"BOMA Standard"); provided however no change in the BOMA
Standard shall alter the within definition;
(s) "Stipulated Rate of Interest" shall mean the prime rate of
interest charged from time to time by The Royal Bank of Canada
at its head office in Canada to its most preferred borrowers,
plus five percent (5%) per annum.
(t) "Taxes" shall mean all taxes, rates, duties, charges,
assessments, impositions and levies whatsoever, including,
without any limitation, local improvement taxes, school taxes,
Business Transfer Tax and capital taxes, any tax, duty, levy,
assessment, rate and charge in the nature of or similar to a
value added tax, sales tax or goods and services tax, whether
extraordinary or ordinary or foreseen or unforeseen, and
which may be imposed by any federal, provincial,
metropolitan or municipal government, agency, or commission
or other lawful taxing authority against the Development or
against any part thereof,including the Land and any buildings,
structures or improvements (including without limitation
all improvements, equipment and fixtures of the Tenant) now
or hereafter levied thereon and including any costs incurred
by the Landlord in the event it contests or appeals the same.
"Taxes" shall also include any and all taxes, rates, duties,
charges, assessments, impositions or levies, whether within
the contemplation of the parties or not, which may be
imposed in addition to or in lieu of Taxes as hereinbefore
defined. "Taxes" shall not include any income, profits or
excess profits tax assessed upon the Landlord nor any tax
assessed upon the Tenant pursuant to Section 9.03 infra;
(u) "Term" shall mean the term of this Lease as specified in
Section 3.00 infra;
(v) "Useable Area" shall mean the Useable Area of the Leased
Premises as defined and determined in accordance with the BOMA
Standard; provided however, no change in the BOMA Standard
shall alter the within definition.
(w) "Offer to Lease" shall mean that certain Offer to Lease dated
the 17th day of July, 1997 between the Landlord and the Tenant
in respect of the Leased Premises, a copy of which is attached
hereto as Schedule "E".
ARTICLE II DEMISE
2.00 Demise
The Landlord hereby demises unto the Tenant and the Tenant
hereby leases from the Landlord the Leased Premises for the Term and upon and
subject to the covenants, conditions and agreements herein expressed.
ARTICLE III HABENDUM
3.00 Term
TO HAVE AND TO HOLD the Leased Premises for and during a term of five (5) years
(the "Term"), to be computed from the 1st day of January, 1998 (the "Term
Commencement Date") or one hundred and five (105) days after execution of this
Lease by the Tenant, whichever occurs later.
3.01 Holding Over
If at the expiration of the Term or Renewal Term or the
earlier termination of the Lease the Tenant shall remain in possession of the
Leased Premises with or without the consent of the Landlord and without any
further written agreement, the Tenant shall be a tenant from month to month and
no other tenancy shall be created by implication of law or otherwise. Under such
circumstances, the Tenant covenants to pay a minimum rent (the "New Minimum
Rent") monthly in advance at the monthly rate of one-eleventh (1/11th) of the
Annual Minimum Rent paid during that Lease Year in effect on that day
immediately preceding the date of termination, plus Additional Rent and the
Tenant further covenants to otherwise remain subject to the same terms and
conditions as herein contained, (except any provision for renewal) and nothing,
including the acceptance of any New Minimum Rent by the Landlord, shall extend
this Lease except through a specific agreement in writing between the Landlord
and the Tenant. The Tenant hereby authorizes the Landlord to apply any monies
received from the Tenant in payment of the New Minimum Rent. In the event the
Landlord and Tenant enter into an extension of the existing Lease or a new
lease, all amounts paid as New Minimum Rent shall be applied against amounts
first becoming due under the extended or new lease.
ARTICLE IV RENT
4.00 Minimum Rent
YIELDING AND PAYING THEREFOR unto the Landlord, without any
deduction, abatement, set-off or diminution whatsoever an Annual Minimum Rent
(the "Minimum Rent"), payable in equal consecutive monthly installments in
lawful money of Canada, in advance punctually on the first day of each month
throughout the Term, (except for the first payment of Minimum Rent which shall
be paid on the Term Commencement Date and adjusted on a per diem basis to
reflect any occupancy for a part month). The Minimum Rent for the following
various periods of the Term is based on a Rentable Area of twenty-eight thousand
five hundred and eighty three (28,583) square feet and an amount per square foot
of Rentable Area of the Leased Premises as follows:
Minimum Rent Per
Rent Sq. Ft. of Rent- Monthly Total Minimum
Period able Area Installments for the Period
1st Lease Year $2.43 per annum $5,788.06 $69,456.72
2nd Lease Year $2.93 per annum $6,979.02 $83,748.24
3rd Lease Year $3.43 per annum $8,169.97 $98,039.64
4th Lease Year $3.93 per annum $9,360.93 $112,331.16
5th Lease Year $4.43 per annum $10,551.89 $126,622.68
4.01 Additional Rent
AND FURTHER YIELDING AND PAYING to the Landlord, yearly and
every year during the Term as additional rent (the "Additional Rent") for each
Fiscal Year or portion thereof, the aggregate of:
(a) The amount of any Taxes payable by the Tenant to the Landlord
pursuant to Article IX infra;
(b) The amount of any payments required to be made to the Landlord
on account of the cost of utilities supplied to the Leased
Premises together with the cost of lamp and bulb replacements,
as determined pursuant to Section 6.03 infra;
(c) The Tenant's Proportionate Share of the Operating Costs;
(d) The cost of providing caretaking and cleaning services to the
Leased Premises pursuant to Section 6.02(b) infra; and
(e) Any other sums of money required to be paid by the Tenant
under this Lease, save and except only Minimum Rent and New
Minimum Rent.
4.02 Payment of Additional Rent
The Additional Rent specified in Section 4.01 supra, shall be
paid without set-off or diminution and adjusted with reference to each Fiscal
year. After the Term Commencement Date, the Landlord shall advise the Tenant in
writing of its estimate of the Additional Rent attributable to the Tenant during
the then current Fiscal Year or remaining portion thereof, which calculation
commences upon the Term Commencement Date. On or before the Commencement of each
succeeding Fiscal Year, the Landlord shall advise the Tenant in writing of its
estimate of the Additional Rent for such Fiscal Year or a broken portion
thereof. Such estimate shall be a reasonable estimate and based wherever
possible upon previous operating expenses. The Additional Rent shall be paid in
equal monthly installments in advance on the first day of each and every month
during the Term, based on the Landlord's estimate as aforesaid. From time to
time the Landlord may re-estimate, on a reasonable basis, the amount of
Additional Rent for any Fiscal Year or portion thereof, in which case the
Landlord shall advise the Tenant in writing of such re-estimate and establish
new equal monthly installments for the remaining balance of such Fiscal year or
broken portion thereof such that, after giving credit for the installments paid
by the Tenant on the basis of the previous estimate or estimates, all the
Additional Rent will have been paid during such Fiscal Year or portion thereof.
Within one hundred and eighty (180) days after the end of each Fiscal Year or
portion thereof (or with respect to any component of Additional Rent which
cannot be computed within such one hundred an eighty (180) day period, within
thirty (30) days after the Landlord has received the information necessary to
compute such component of Additional Rent), the Landlord shall submit to the
Tenant a detailed statement (to be prepared by a certified accountant or other
independent qualified financial person) of the actual Additional Rent payable in
respect of such Fiscal Year or portion thereof and a calculation of that amount
(the "Excess Amount"), by which the Additional Rent paid by the Tenant exceeds
or falls short of the Additional Rent payable by the Tenant for such Fiscal
Year.
Within thirty (30) days after the receipt of such statement
the Tenant shall pay to the Landlord the Excess Amount if the amount is owing to
the Landlord or, the Landlord shall credit to the Tenant an amount equal to the
Excess Amount, if applicable. In the event the Tenant disputes the amount of the
Additional Rent payable by the Tenant, the opinion of the Landlord's auditors
shall be conclusive as to the amount thereof for any period to which such
opinion relates.
4.03 Accrual of Rent
"Rent" shall be considered as accruing from day to day
hereunder and where it is necessary to calculate such Rent for an irregular
period of less than one year or less than one calendar month, an appropriate
apportionment and adjustment shall be made.
Where the calculation of Rent cannot be made until after the
termination of this Lease, the obligation of the Tenant to pay this Rent shall
survive the termination hereof and such amount shall be payable by the Tenant
upon demand by the Landlord.
4.04 Place of Rent Payment
(a) All Rent hereunder shall be payable in lawful money of Canada
and shall be paid to the Landlord or to that party as the
Landlord may direct from time to time. The Landlord hereby
authorizes and directs the Tenant to pay the Rent to:
Brookfield Management Services Western Ltd.
#200, 10130 - 103 Street
Edmonton, Alberta
T5J 3N9
4.05 Net Lease
The Tenant acknowledges and agrees that it is intended that
this Lease shall be a net lease for the Landlord and that the Landlord shall not
be responsible during the Term except as set out herein, for any cost, charge,
expense or outlay of any nature whatsoever arising from or relating to the
Leased Premises, the Development, impositions, costs and expenses of every
nature and kind relating to the Leased Premises whether or not specifically
provided herein.
4.06 Deposit
The Landlord acknowledges and agrees having received the sum
of seventy thousand and eighty-seven dollars and ninety ($70,087.90) cents to be
applied towards the Minimum Rent, estimated Tenant's share of Operating Costs
including G.S.T. and repayment of Leasehold Improvement Allowance first accruing
due under the Lease. The Tenant acknowledges and agrees that in the event the
Tenant is in default of any of the terms and covenants to be performed hereunder
by the Tenant, the Landlord shall be at liberty to apply the Deposit or any
portion thereof to cure such default. The Deposit shall be held by the
Landlord's leasing agent in an interest bearing account with interest to be
credited to the Tenant and applied along with the Deposit.
4.07 Delay in Occupancy
(a) If any delay occurs in the completion of the Landlord's Work
so that the Tenant's Work is not completed on or before the
Term Commencement Date, then the payment of Rent by the Tenant
shall abate for a period equal to the delay in the completion
of the Tenant's Work caused by the delay in the completion of
the Landlord's Work (but only to the extent such delay was not
caused or contributed to by any act or omission of the Tenant,
or its agents, servants or employees). The abatement of Rent
shall be accepted by the Tenant as full compensation for this
delay and without any further right of damages, costs or
expenses.
(b) Subject to Section 4.07(a), if the Tenant does not occupy the
Leased Premises and carry on its permitted use within thirty
(30) days after the Term Commencement Date, in addition to any
other remedy contained herein, the Landlord may terminate this
Lease.
ARTICLE V GENERAL COVENANTS
5.00 Landlord's General Covenants
The Landlord covenants with the Tenant:
(a) for quiet enjoyment
5.01 Tenant's General Covenants
The Tenant covenants with the Landlord:
(a) to pay Rent; and
(b) to observe and perform all the covenants and obligations of the
Tenant herein.
ARTICLE VI DEVELOPMENT SERVICES, COMMON
AREA UTILITIES AND EXPENSES
6.00 Heating, Ventilating and Air-Conditioning
The Landlord covenants that it will operate as reasonably
necessary heating, ventilating and air-conditioning equipment and systems (the
"HVAC") serving the Leased Premises. In the event that the HVAC is damaged or
destroyed and in the opinion of the Landlord requires repair, inspection,
overhauling or replacement, the Landlord shall carry out this work with all
reasonable speed. The Landlord shall not be responsible for the failure of the
HVAC to perform its function if such failure shall result from any rearrangement
of partitioning in the Leased Premises or changes or alterations thereto, or the
failure on the part of the Tenant to shade windows which are exposed to the sun,
or from any use of electrical power by the Tenant in excess of three (3) watts
per square foot of Useable Area and provided further that the Landlord shall not
be liable for direct, indirect or consequential damage or damage for personal
discomfort or illness of the Tenant, or its clerks, servants, employees,
invitees, clients, customers or other persons or damage to the Tenant's property
by reason of the operation or non-operation of the HVAC, nor shall the Rent
abate during any such non-operation. The Tenant's interior office layout,
submitted to the Landlord for approval pursuant to Section 7.04 infra, shall be
modified by the Tenant if necessary, in accordance with the reasonable
requirements of the Landlords engineers in order to secure maximum efficiency of
the HVAC serving the Leased Premises. The Tenant covenants to keep all vents
serving the HVAC within the Leased Premises free and clear of all obstructions
and objects. The Tenant acknowledges that it may take up to one (1) year from
the Term Commencement Date to balance properly the HVAC.
6.01 Common Areas
(a) Subject to the rules and regulations hereinafter mentioned,
the Landlord covenants to allow the Tenant, in common with
other tenants of the Office section,and its or their agents,
clerks, servants and all other persons seeking communication
with it or them, the free use during Business Hours of the
Common Areas. The Landlord covenants to operate, maintain,
clean, light, heat, ventilate and air-condition the
Common Areas as may be reasonably necessary having regard
to the age, nature, location and character of the Development.
It is agreed that the Tenant and all other persons hereby
permitted to use such Common Areas shall do so at their sole
risk and under no circumstance shall the Landlord be liable
for any damages or injury resulting to any persons or property
within such Common Areas, or occasioned to any person or
property by the use of the elevator, or any of its
appurtenances except as may result from the negligence of
the Landlord, its agents, servants or employees. The
Landlord shall maintain, repair and/or replace the
elevators in the Development whenever required in the
reasonable opinion of the Landlord. The Tenant acknowledges
that there shall be no liability on the Landlord for any
claim in respect of any failure by the Landlord to provide
elevator service during any power failure or other cause
beyond the control of the Landlord, nor by reason of the
carrying out of any repair, maintenance or replacement of the
elevators or escalator, nor shall there be any abatement or
reduction in the Rent;
(b) The Common Areas shall at all times be subject to the
exclusive control and management of the Landlord. The Landlord
shall be entitled to construct, alter, maintain, operate and
police the same; to close a portion of same temporarily for
the purposes of maintenance and repair or to prevent the
acquisition of public or private rights-of-way or easements;
to employ all personnel and to make all rules and regulations
pertaining to and necessary for the proper operation and
maintenance thereof; and to do and perform such other acts
therein and with respect thereto as the Landlord shall
determine all without any abatement of Rent.
6.02 Caretaking
(a) The Landlord covenants to cause, from time to time and in
accordance with normal office cleaning standards and
intervals, the floors of the Leased Premises to be swept, the
interior surface of the exterior windows to be cleaned, the
desks, tables, other furniture any broadloom to be vacuumed.
Any additional cleaning of the Leased Premises shall be
performed by the Tenant at its expense. The Tenant
acknowledges that the Landlord will be relieved from the
foregoing obligation in respect to any part of the Leased
Premises to which access is not granted nor available to the
person or persons employed or retained to perform such work;
(b) The Tenant covenants to pay to the Landlord the cost of
providing the caretaking and cleaning services mentioned in
Section 6.02(a). The Landlord, acting reasonably, shall make
an allocation of that portion of such cost which is reasonably
attributable to the Leased Premises if such cost relates to an
area larger than the Leased Premises. In the event of any
dispute by the Tenant of the amount of this cost, an opinion
of the Landlord's auditors shall be conclusive as to the
amount thereof for any period to which such opinion relates.
6.03 Electricity, Replacement of Lamps, Utilities and Services
---------------------------------------------------------
The Landlord shall, subject to interruptions beyond its
control, permit the Tenant to have access to and to use the utility services
(including electricity and water) serving the Development, provided that the
Tenant does not overload the capacity of any of the said utilities and provided
that the Tenant pays all costs and expenses resulting therefrom including the
cost of every utility consumed in or by the Leased Premises.
ARTICLE VII USE AND OCCUPANCY OF LEASED PREMISES
7.00 Use of Leased Premises
The Leased Premises shall be used continuously during the Term
for general purposes relating to general office space, data centre or other use
permitted under municipal by-laws. The Tenant and those in law for whom it is
responsible shall not carry on nor permit to be carried on/in, or about the
Leased Premises any other trade business or prohibited activities which include
manufacturing, transportation, storage or disposal of any hazardous substance
except in strict compliance with all applicable laws, by-laws, and regulations
and with the prior written consent of the Landlord, which request may be
withheld if the financial interest, physical assets or safety of the inhabitants
and or visitors appears to be or is threatened to be at risk from such activity
in the opinion of the Landlord or its agents.
7.01 Occupancy of Leased Premises
The Tenant shall examine the Leased Premises and the Tenant's
taking of possession shall be conclusive that at the time thereof, the Leased
Premises were fully complete, in good order and in a condition satisfactory to
the Tenant.
7.02 Nuisance
In the Development the Tenant shall not carry on any business
nor do or suffer any act or thing which in the opinion of the Landlord
constitutes a nuisance or would result in a nuisance, or which would be
offensive or an annoyance to the Landlord or to the other tenants occupying the
Development, nor do or suffer any waste or damage, disfiguration or injury to
the Leased Premises, nor permit or suffer any overloading of the floors.
7.03 Compliance with Laws
(a) The Tenant will promptly comply with and conform to the
requirements of every applicable law, by-law, regulation, ordinance
and order at any time or from time to time in force during the Term
affecting the Leased Premises or the machinery, equipment and other
facilities located in the Leased Premises. The Tenant will not use the
Leased Premises, whether within the use hereinbefore permitted or not,
which would or may impose upon the Landlord any obligation to modify,
extend, alter or replace any part of the Leased Premises nor any of
the machinery, equipment or other facilities located in the Leased
Premises, except where previously agreed to by the Landlord in
writing. In the event that the Tenant shall at any time or from time
to time without the prior written consent of the Landlord, do or
permit to be done or omit to do any act or thing which could result in
any such obligation being imposed upon the Landlord, the Landlord may
at its option either do or cause to be done the necessary work in
order to comply with such obligation at the expense of the Tenant, or
forthwith by notice in writing to the Tenant, terminate this Lease. In
the event that the Landlord undertakes any of this work, the cost
thereof plus an administrative charge of fifteen percent (15%) of such
cost shall be payable by the Tenant to the Landlord forthwith upon
demand as Additional Rent. In the event of the termination of this
Lease pursuant to the provisions of this Section 7.03, in addition to
its other obligations hereunder on termination, the Tenant shall pay
Rent to the date of surrender of possession, as well as reimburse the
Landlord for any cost or penalty for which the Landlord is liable
under any statute, law, by-law, regulation, ordinance, order or
requirement;
7.04 Improvements, Alterations, Fixtures
(a) Save and except for the Leasehold Improvements and Base Building
Modifications contemplated by Sections 5 and 6 of Schedule "B"; it is
agreed that the Tenant will not, without the prior written consent of
the Landlord, not to be unreasonably withheld or delayed, make, erect
or install any partition, leasehold improvement, alteration, or
fixture (including trade fixtures) in or about the Leased Premises. If
the Tenant desires to make, erect or install any such partition,
leasehold improvement, alteration or fixture, the Tenant shall, at the
time of its application for the Landlords consent, inform the Landlord
and furnish plans and specifications of the necessary work. Any work
by the Tenant shall be performed expeditiously and in a good and
workmanlike manner by competent workmen who hold compatible labour
affiliations to workmen employed by the Landlord and its contractors,
in accordance with the approved plans and specifications and in
accordance with all regulatory authorities. The Tenant shall in the
performance of its work ensure the progress and completion thereof
without undue delay. The Tenant shall promptly on the completion of
any improvement or alteration provide the Landlord with two (2)
complete sets of "as-built" drawings for same. The Tenant shall not
mortgage or otherwise encumber its leasehold improvements;
In the event any alteration, addition, improvement or installation has
been made without the written consent of the Landlord, the Landlord
may require the Tenant to restore the Leased Premises to such an
extent as the Landlord deems expedient.
(b) Upon the expiration or other termination of this Lease, all
alterations, additions or improvements which may have been
made or installed by the Tenant upon the Leased Premises,
(whether with or without the Landlord's consent) and which are
attached to the floors, walls, or ceilings (including
carpeting and light fixtures), shall remain upon and be
surrendered with the Leased Premises as a part thereof without
disturbance, molestation or injury and shall be and become the
absolute property of the Landlord;
(c) Deleted
(d) Notwithstanding Section 7.04(b) supra, but subject to Section
7.04(c) supra, and provided the Tenant has paid the Rent, and
performed and observed all the covenants and conditions herein
contained, the Tenant shall at the expiration or other sooner
termination of this Lease have the right to remove its trade fixtures,
but shall make good the damage caused to the Leased Premises and the
Development which may result from such installation and removal
including the restoration of the Leased Premises to the same condition
that they were in before any partition, leasehold improvement,
alteration or fixture was made, erected or installed, such work to be
done by or at the direction of the Landlord.
7.05 Insurance
(a) The Tenant shall throughout the Term and during any other time
the Tenant occupies the Leased Premises or a part thereof, at
its sole cost and expense, take out and keep in full force and
effect, the following insurance:
(i) "all risks" insurance upon property of every kind and description
owned by the Tenant, or for which the Tenant is legally liable, or
installed by or on behalf of the Tenant and which is located within
the Development including, without limitation, stock-in-trade,
furniture, fittings, installations, alterations, additions,
partitions, fixtures, plateglass, Tenant's improvements and all parts
of the Leased Premises which the Tenant is obligated to keep in repair
under Article 8 infra, in an amount not less than the full replacement
cost thereof. If there is a dispute as to the amount which comprises
full replacement cost, the decision of the Landlord or its mortgagee
shall be conclusive. This policy shall also contain flood, seepage and
sewer back-up coverage;
(ii) when applicable, broad form comprehensive boiler and machinery
insurance on a blanket repair and replacement basis with limits for
each accident in an amount not less than the full replacement cost of
the property out-lined in 7.05(a) (i) supra and of all boilers,
pressure vessels, HVAC and miscellaneous electrical apparatus, owned
or operated by the Tenant or by others (other than the Landlord) on
behalf of the Tenant in the Leased premises, or relating to or serving
the Leased Premises;
(iii) public liability and property damage insurance as required by
Section 7.05(b) infra;
(iv) "all risks" Tenant's legal liability insurance in an amount not
less than the full replacement cost of the Leased Premises;
(v) standard owner's form automobile policy providing not less than
third party liability insurance with $2,000,000 inclusive limits and
accident benefits coverage where compulsory by law, covering all
licensed vehicles owned or operated by or on behalf of the Tenant;
(vi) "all risks" business interruption insurance in a form and in an
amount acceptable to the Landlord;
(vii) rental income insurance for a period of not less than 12 months;
and
(viii) any other form of insurance as the Tenant or Landlord may
reasonably require from time to time in form, in amounts and for
insurance risks against which a prudent tenant under similar
circumstances would insure;
(b) Further to Section 7.05(a) (iii) supra, the Tenant shall take out
and keep in full force throughout the Term comprehensive general
liability insurance including but not limited to personal injury
liability, contractual liability, contingent employer's liability,
non-owned automobile liability and owners and contractors' protective
insurance coverage with respect to the Leased Premises and the
Tenant's use of the Development. This coverage shall include the
activities and operations conducted by the Tenant and any other person
on the Leased Premises and by the Tenant and any other person
performing work on behalf of the Tenant and those for whom the Tenant
is in law responsible. Such policies shall be written with inclusive
limits of not less than $2,000,000. For each occurrence involving
bodily injury, death or property damage or for such higher limits as
the Landlord may reasonably require from time to time;
(c) Each insurance policy referred to in 7.05(a) and (b) supra, shall
name the Landlord and any person, firm or corporation designated by
the Landlord as additional named insureds as their interest may appear
and such policies will contain where appropriate;
(i) the standard mortgage clause that may be required by the
Landlord's mortgagee;
(ii) a waiver of any subrogation rights which the Tenant's insurers
may have against the Landlord;
(iii) a severability of interests clause or a cross liability clause;
(iv) waiver in favour of the Landlord and its mortgagee of any breach
of warranty clause such that the insurance policies in question shall
not be invalidated with respect to their interest, by reason of any
breach or violation of any warranty, representation, declaration or
condition contained in the policies; and
(v) a clause stating that the Tenant's insurance policy will be
considered as the primary insurance and shall not call into
contribution any other insurance that may be available to the
Landlord;
(d) All policies shall be taken out with insurers acceptable to the
Landlord and shall be in a form satisfactory from time to time to the
Landlord. The Tenant agrees that certificates of insurance acceptable
to the Landlord or if required by the Landlord or its mortgagee,
certified copies of each such insurance policy, will be delivered to
the Landlord as soon as practicable after the placing of the required
insurance. All policies shall contain an undertaking by the insurers
to notify the Landlord and its mortgagee in writing, of any material
change, cancellation or termination of any provision of any policy,
not less than thirty (30) days prior to the material change,
cancellation or termination thereof. The Tenant also agrees that if
the Tenant fails to take out or keep in force any policy of insurance
referred to in Sections 7.05(a) or (b) supra, the Landlord shall have
the right but not the obligation to pay the premium and in that event
the Tenant will repay to the Landlord the amount so paid as the
premium plus fifteen percent (15%) for overhead forthwith upon demand
as Additional Rent;
The acquisition and maintenance by the Tenant of the insurance
policies as required pursuant to Sections 7.05(a) and (b) supra, shall
in no manner whatsoever limit or restrict the liability of the Tenant
under this Lease.
(e) The Landlord will take out and keep in full force and effect
throughout the Term, with responsible insurance companies and in
amounts that would be carried by a prudent owner, the following:
(i) "all risks" insurance and where applicable, boiler
and machinery insurance, on the real and personal
property of the Landlord comprising and incidental to
the Development but specifically excluding any
property with respect to which the Tenant and other
tenants are obligated to insure pursuant to Section
7.05(a) supra, or similar sections in their
respective leases;
(ii) public liability and property damage insurance with
respect to the Landlord's operations in the
Development; and
(iii) such other forms of insurance as the Landlord or its
mortgagee may reasonably consider advisable from time
to time.
The Tenant agrees that the cost of this insurance will be
included in Operating Costs, but subject to the deduction of
any amount recovered by the Landlord under the provisions of
Section 7.05(e) infra.
Notwithstanding any contribution by the Tenant to the cost of
insurance premiums provided herein, the Tenant acknowledges
and agrees that no insurable interest is conferred upon the
Tenant under any policies of insurance carried by the Landlord
and the Tenant has no right to receive any proceeds of any
such insurance policies carried by the Landlord.
(f) The Tenant agrees that it will not keep nor suffer to be kept
anything, or use, sell or offer for sale any article or merchandise
in, upon, or about the Leased Premises that may contravene or be
prohibited by any of the Landlord's insurance policies with respect to
any part of Development or which will prevent the Landlord from
procuring insurance policies with companies acceptable to the
Landlord. If the occupancy of the Leased Premises, the conduct of
business in the Leased Premises, or any act or omission of the Tenant
in the Leased Premises or any other portion of Development, causes or
results in any increase in premiums for any of the Landlord's
insurance policies, the Tenant shall pay the premium increase as
Additional Rent forthwith upon the rendering by the Landlord of an
invoice for the additional premium. In determining whether increased
premiums are the result of the Tenant's use of the Leased Premises or
any other portion of the Development, a statement issued by the
organization establishing the insurance rate on the Development will
be conclusive evidence of the items and changes which constitute the
increased premium;
(g) If any insurance policy on the Development or any part thereof is
cancelled or threatened by the insurer to be cancelled or the coverage
thereunder reduced or threatened to be reduced by the insurer, by
reason of the use of occupancy of the Leased Premises or any part
thereof by the Tenant or by any assignee or subtenant of the Tenant,
or by anyone permitted by the Tenant to be upon the Leased Premises
and if the Tenant fails to remedy the condition giving rise to this
cancellation, threatened cancellation, reduction, or threatened
reduction of coverage within twenty-four (24) hours after notice
thereof by the Landlord, the Landlord may, at its option, and without
liability to the Tenant, either:
(i) re-enter the Leased Premises forthwith and thereupon the
provisions of Article 14 will apply or
(ii) enter the Leased Premises and remedy the condition giving rise to
the cancellation or reduction or threatened cancellation or reduction
and the Tenant will pay to the Landlord the cost thereof on demand as
Additional Rent, plus an administration charge of 15% of such cost.
The Tenant agrees that the Landlord will not be liable for damage or
injury caused to property of the Tenant or others located on the
Leased premises as a result of the entry or a breach of any covenant
for quiet enjoyment contained in this Lease;
(h) The Tenant will indemnify the Landlord and save it harmless from
and against any and all claims, actions, damages, liabilities and
expenses including lawyer's and other professional fees, in connection
with loss of life, personal injury, damage to property, and/or any
other loss or injury whatsoever arising from or out of the occupancy
or use by the Tenant of the Leased Premises or any other part of
Development occasioned wholly or in part by any act or omission of the
Tenant, its officers, agents contractors, employees, sublessees,
licensees, concessionaires or by anyone permitted by the Tenant to be
in the Development or the Leased Premises. The Tenant will also pay
all costs, expenses and legal fees on a solicitor and client basis
incurred by the Landlord in enforcing the covenants and agreements in
this Lease. This Section 7.05(h) shall survive the termination of the
Lease.
7.06 Rules and Regulations
The Tenant covenants to comply with the rules and regulations
annexed hereto and marked Schedule "C", and to cause such rules and regulations
to be observed and performed by everyone for whom the Tenant is in law
responsible. The Landlord shall have the right from time to time and at any time
during the Term to make any and all reasonable amendments, deletions and
additions to such rules and regulations, including rules and regulations
relating to the use of the Common Areas. Such rules and regulations, together
with all reasonable amendments, deletions and additions made thereto by the
Landlord and of which notice has been given to the Tenant, shall be read as part
of this Lease and shall be observed, performed and complied with throughout the
Term in the same manner as all of the other conditions, provisions, agreements
and obligations herein contained.
7.07 Deleted
7.08 Heavy Objects
The Tenant will not bring upon the Leased Premises articles or
fixtures which, because of their size shall load any floor beyond its
weight-carrying capacity as determined by the Landlord. No safe or heavy article
or any item that might injure or destroy any part of the Development shall be
brought into the Development without the consent of the Landlord, which consent
may not be unreasonably withheld and the Landlord shall in all cases retain the
power to prescribe the weight and indicate the place where the said item will
stand. If any damage is caused to the Development by any article brought into
the Development by or on behalf of the Tenant, the Tenant shall forthwith upon
demand, pay to the Landlord as Additional Rent, the Landlord's cost of repairing
the damage plus an administrative charge equal to fifteen percent (15%) of such
cost.
7.09 Hazardous and Dangerous Substances
No hazardous, dangerous or explosive material or products
shall be brought into, kept on, disposed of, in the Development, Leased Premises
or Common Areas by the Tenant or those in law for whom it is responsible. In
addition, the Tenant shall be responsible at its expense for the clean up and
removal and/or decontamination of the affected areas or fixtures caused by any
hazardous and dangerous substance, at the request of the Landlord and/or
Governmental Authority.
7.10 No Defacing
Subject to the Leasehold Improvements and Base Building
Modifications, the Tenant shall not drill into, nor in any way deface the walls,
ceilings, partitions, floors, wood, stone or ironwork within the Leased Premises
without the prior written consent of the Landlord, which consent may not be
unreasonably withheld. Boring, cutting or stringing of wires or pipes shall not
be done except with the prior written consent of the Landlord and as it may
direct. In the event of any violation of the provisions hereof, the Landlord may
in addition to any other remedy it has hereunder, repair the damage and the
Tenant shall pay the cost thereof plus an administrative charge of twenty
percent (20%) of such cost to the Landlord, forthwith upon demand as Additional
Rent.
7.11 Additional Services
The cost of Additional Service provided to the Tenant shall be
paid to the Landlord upon the Tenant receiving invoices for such additional
service. "Additional Service" means any service and/or supervision requested by
the Tenant and supplied by the Landlord and not otherwise provided as a regular
service under this Lease. By way of example, Additional Service includes; the
steam cleaning of carpets, moving furniture and making repairs or alterations to
the Tenant's leasehold improvements. The amount charged to the Tenant for an
Additional Service shall include all direct costs incurred by or on behalf of
the Landlord in rendering the Additional Service plus fifteen percent (15%) of
the aforementioned cost to cover the Landlord's overhead. The amount payable for
Additional Service shall be paid as Additional Rent forthwith upon demand.
ARTICLE VIII REPAIRS
8.00 Tenant's Repairs
The Tenant covenants to maintain, repair and keep tidy to a
first class condition the Leased Premises (including without limiting the
generality of the foregoing, replacing damaged glass, repairing damage caused by
trespassers and repairing plumbing in the Leased Premises) as determined by the
Landlord. The Tenant shall take all preventative measures and obey all operating
instructions of the Landlord relative thereto and shall not permit waste. The
Tenant shall make all repairs and maintenance (including periodic painting and
decoration) with all due diligence.
Subject to the foregoing, the Landlord covenants and agrees to
operate and maintain the Development as would a prudent owner having regard to
the quality, size and location of the Development.
8.01 Maintenance by Tenant
(a) The Tenant covenants that the Landlord may enter the Leased
Premises upon twenty-four (24) hours written notice to determine the
condition of the Leased Premises. The Tenant will forthwith repair any
damage or undertake that maintenance required, as directed by the
Landlord. In the event the Tenant fails to make such repair or
maintenance, or repair or maintain to the satisfaction of the
Landlord, the Landlord on not less than five (5) days' notice to the
Tenant or, in the event of an emergency forthwith without notice, may
make the repairs or perform the maintenance without liability to the
Tenant for any loss or damage that may occur to the Tenant's
merchandise, fixtures, or other property or to the Tenant's business.
Upon completion thereof the Tenant will pay the Landlord's cost of the
repair or maintenance on demand as Additional Rent. The Tenant agrees
that the maintenance or repair by the Landlord pursuant to this
Section 8.01 is not a re-entry nor a breach of quiet enjoyment
contained in this Lease. The failure by the Landlord to give direction
to repair or to maintain shall not relieve the Tenant from its
obligation to repair or to maintain;
(b) (i) The Tenant shall not make any repair, alteration,
replacement, decoration or improvement or perform
maintenance to any part of the Leased Premises
without first obtaining the Landlord's written
approval or direction. The Tenant shall submit to the
Landlord;
(A) details of the proposed work including drawings
and specifications prepared by qualified
architects or engineers and conforming to good
engineering practice;
(B) such indemnification against liens, costs,
damages and expenses as the Landlord requires;
and
(C) evidence satisfactory to the Landlord that the
Tenant has obtained at its expense, all
necessary consents, permits, licences and
inspections from all governmental and
regulatory authorities having jurisdiction.
(ii) All repairs, maintenance, replacements, alterations,
decorations or improvements by the Tenant to the
Leased Premises approved by the Landlord shall be
performed;
(A) at the sole cost of the Tenant;
(B) by competent workmen whose labour union
affiliations are compatible with others
employed by the Landlord and its contractors;
(C) in a good and workmanlike manner;
(D) in accordance with the drawings and
specifications approved by the Landlord; and
(E) subject to the reasonable regulation, control
and inspection of or by the Landlord.
(iii) Any such repair, replacement, alteration, decoration,
maintenance or improvement made by the Tenant without
the prior written consent of the Landlord or which is
not made in accordance with the drawings and
specifications approved by the Landlord shall, if
requested by the Landlord, be promptly removed by the
Tenant at the Tenant's expense and the Leased
Premises restored to their previous condition;
(c) Subject to the Leasehold Improvements and Base Building
Modifications, notwithstanding anything contained in this Lease, if
any repair, alteration, decoration, addition, maintenance or
improvement to the Leased Premises approved by the Landlord, affects
the structure of the Leased Premises or any part of Development such
work shall be performed only by the Landlord, at the Tenant's sole
cost and expense. Upon completion thereof, the Tenant shall pay to the
Landlord as Additional Rent upon demand, both the Landlord's cost
relating to the repair, alteration, decoration, addition, maintenance
or improvement including the fees of any architectural and engineering
consultants plus a sum equal to fifteen percent (15%) of the total
cost thereof, as the Landlord's overhead. No repair, alteration,
addition, decoration, maintenance or improvement to the Leased
Premises by or on behalf of the Tenant shall be permitted which may
weaken or endanger the structure or adversely affect the condition or
operation of the Leased Premises or the Development or diminish the
value thereof, or, in the Landlord's opinion, restrict, reduce or
adversely affect the coverage, height, density, parking or use of the
Development.
8.02 Repair Where Tenant is at Fault
-------------------------------
If any part of the Development (other than the Leased
Premises) including without limitation, the common loading areas, the HVAC, the
water pipes, sprinkler system pipes, drainage pipes, electric lighting or other
equipment of the Development, the roof or exterior walls of the Development
requires repair or becomes damaged or destroyed through the negligence,
carelessness or willful act or omission of the Tenant, or those in law for whom
it is responsible, or all other persons conducting business upon or from the
Leased Premises, or through it or them, the cost of the necessary repairs,
replacements or alterations plus fifteen percent (15%) of the aggregate costs
for overhead will be borne by the Tenant, and the Tenant will pay this amount to
the Landlord on demand as Additional Rent.
8.03 Repair on Termination
Upon the expiration of the Term or earlier termination of the
Lease, the Tenant covenants to surrender the Leased Premises in a vacant
broom-swept condition in substantially the same condition as the Leased Premises
were in upon delivery of possession and completion of the Leasehold Improvements
and Base Building Modifications except for;
(i) reasonable wear and tear and
(ii) damage to the Leased Premises, which damage caused
the termination of this Lease pursuant to Section
8.06 infra, provided however, that nothing in this
Section 8.03 will restrict or cancel the insurance
provision of this Lease.
In the event that, in the sole opinion of the Landlord and/or
environmental agency having jurisdiction, the Tenant has, or is believed to have
caused any environmental damage in or about the Development, Leased Premises or
Common Areas, the Tenant shall be fully liable at its expense and fully
responsible to the environmental authority having jurisdiction for the removal
of/or decontamination of the affected areas.
8.04 Notice of Accident, Defects, Etc.
The Tenant shall give to the Landlord and the environmental
agency responsible, if applicable, prompt notice of any accident to or defect in
the plumbing, water pipes, HVAC, electrical equipment, conduits or wires or of
any damage or injury to the Leased Premises or to any person therein howsoever
caused, provided that nothing herein shall be construed so as to require repairs
to be made by the Landlord except as expressly provided in this Lease.
8.05 Deleted
8.06 Total or Partial Destruction of Leased Premises
-----------------------------------------------
(a) If the Leased Premises are damaged by a peril against which
the Landlord is required to insure under Section 7.05 supra,
and are rendered unusable in part, the Landlord at its expense
will cause the damage to be repaired and the Minimum Rent
shall abate proportionately as to the proportion of the Leased
Premises rendered unusable, from the date of the damage until
the Landlord's Architect certifies that the Leased Premises
have been made wholly usable. If by reason of this damage the
Leased Premises are rendered wholly unusable, the Landlord
may:
(i) cause the damage to be repaired at its expense in
which event the Minimum Rent shall abate entirely
provided Rental Insurance is in place from the date
of damage until the Landlord's Architect certifies
that the Leased Premises has been made wholly usable
or,
(ii) within sixty (60) days after the damage notify the
Tenant in writing that it has elected not to repair
or reconstruct the Leased Premises, whereupon this
Lease will cease of the date of the damage and the
Rent will be adjusted as of that date.
In no event will the Landlord be liable for damage to or the
replacement or repair of leasehold improvements, fixtures,
tenant fixtures, floor coverings, furniture or equipment
owned, leased or in the possession of the Tenant in the Leased
Premises or elsewhere in the Development or for which the
Tenant is required to insure pursuant to Section 7.05, supra.
If the Landlord rebuilds or restores the Leased Premises it
will restore the Leased Premises to the same standard as
existing prior to such damage in all material respects.
In the event the Leased Premises or the Development are
damaged or destroyed by reason of the wilful act, omission to
act or negligence of the Tenant or those for whom it is in law
responsible, there shall be no abatement of Rent;
(b) Notwithstanding Section 8.06(a) supra, if fifty percent (50%)
or more of the Rentable Area of the Development or the
Development is damaged or destroyed by any cause,
notwithstanding that the Leased Premises may be unaffected,
the Landlord may terminate this Lease by giving to the Tenant
written notice of the Landlord's election to terminate, which
notice will be given within sixty (60) days following the date
of the damage or destruction. Rent will be adjusted as of the
date of termination;
(c) After the date upon which the Tenant is notified in writing by
the Landlord that the Landlord's work of reconstruction or
repair is completed, the Tenant forthwith will complete in
accordance with the provisions of Article VIII, all additional
work required to restore fully the Leased Premises and to
enable the Tenant to reopen the Leased Premises for business.
The certificate of the Landlord's Architect will find the
parties hereto as to the state of usability of the Leased
Premises and as to the date upon which the Landlord's work of
reconstruction or repair is completed;
(d) The Tenant acknowledges the desirability and necessity of the
Landlord under law or in prudence, of organizing and
coordinating arrangements within the Development appropriate
to maximize safety of all occupants in the event of fire or
other potential disaster which may require the evacuation of
the Development. The Tenant undertakes to cooperate and to
participate in simulated exercises in respect of the
foregoing, arranged from time to time by the Landlord. The
Tenant shall indemnify and hold the Landlord harmless from all
loss, damage or injury arising from such exercise.
ARTICLE IX TAXES
9.00 Tenant's Taxes
The Tenant shall pay promptly when due all business, sales,
machinery, equipment and all other taxes, assessments, charges and rates, as
well as any permit or license fees, attributable to the Leased Premises or the
property, business, sales or income of the Tenant in respect of the Leased
Premises.
9.01 Payment of Taxes by Tenant
The Tenant shall pay to the Landlord as Additional Rent the
Tenant's Proportionate Share of Taxes.
9.02 Increases in Taxes
The Tenant shall pay to the Landlord as Additional Rent an
amount equal to any increase in the Taxes by reason of any installation,
alteration or use made in or to the Leased Premises by or for the benefit of the
Tenant or any assignee, concessionaire, licensee or sub-tenant of the Tenant
and, without in any way restricting the generality of the foregoing, the Tenant
is completely responsible for any such increase in the Taxes and must pay the
full amount of such increase to the Landlord as Additional Rent.
9.03 Payment of Taxes by Landlord
The Landlord agrees to pay all Taxes as they become due and
payable that may be assessed by a lawful authority against the Development,
subject to the provisions of this Article IX. The Landlord may appeal any
official assessment of Taxes. In connection with any such appeal, the Landlord
may defer payment of any Taxes to the extent permitted by law and the Tenant
shall cooperate with the Landlord and provide the Landlord with all relevant
information reasonably required by the Landlord in connection with this appeal.
9.04 Payment of Business Transfer Tax
The Tenant shall pay promptly when due the Business Transfer
Tax. In the event that such taxes are by statute, by-law or regulation imposed
upon or payable by the Landlord as recipient of the Minimum Rent and Additional
Rent, the Tenant shall pay to the Landlord as Additional Rent the Tenant's
Proportionate Share of Business Transfer Tax.
9.05 Change in Taxes
Should it be that due to changes in the method of levying or
collection of any tax, levy, rate or charge to be imposed upon the Development,
or any part thereof, or should any new tax, levy, rate or charge be levied or
imposed in lieu of or in addition to those contemplated by the definition of
Taxes, the Landlord and the Tenant hereby agree to negotiate an amendment or new
provision to this Lease as is necessary to deal with such tax, levy, rate or
charge in an equitable manner and should the Landlord and the Tenant fail to
agree on such amendment or new provision, the same shall be settled by
arbitration in accordance with the Arbitration Act of Alberta, R.S.A. 1991,
Chapter A-43.1 as amended and the cost of such arbitration shall be borne
equally between the parties.
ARTICLE X LICENSES, ASSIGNMENTS AND SUBLETTINGS
10.00 Licenses, Etc.
The Tenant shall not permit all or any part of the Leased
Premises to be used or occupied by any person other than the Tenant, any
assignees and sub-tenants permitted under Section 10.01, infra and the employees
and invitees of the Tenant or any such permitted assignee or sub-tenant, nor
shall the Tenant permit any part of the Leased Premises to be used or occupied
by a licensee or concessionaire.
10.01 Consent Required
The Tenant shall have the right to assign this Lease in whole
or in part, or to sublet all or any part of the Leased Premises, or to mortgage
by either specific or floating charge or encumber in any way whatsoever this
Lease or the Leased Premises or any part thereof, or to suffer or permit the
occupation of all or any part of the Leased Premises by others, with the consent
of the Landlord in each instance, which consent shall not be unreasonably
withheld or delayed. This consent by the Landlord will not constitute a waiver
of the necessity for consent to a subsequent assignment, subletting, mortgage,
encumbrance or occupation. This prohibition against assigning or subletting will
be construed to include a prohibition as against assignment or subletting by
operation of law. If this Lease is assigned or if the Leased Premises or a part
thereof are sublet or occupied by anybody other than the Tenant without consent,
the Landlord may collect rent from the assignee, subtenant or occupant and apply
the net amount collected to the Rent herein reserved, but no such assignment,
sublease, occupancy or collection will be deemed a waiver of the requirements of
this Section 10.01, nor the acceptance of the subtenant or occupant as tenant,
nor a release of the Tenant from the further performance by the Tenant of its
covenants, herein contained. Notwithstanding an assignment or sublease, the
Tenant will remain fully liable on this Lease and will not be released from
performing the terms, covenants and conditions of this Lease and any breach by
any assignee/sublessee of any term or condition of this Lease or its respective
assignment or sublease agreement shall constitute a breach under this Lease and
the Landlord shall have all remedies available to it under this Lease. If the
Landlord consents to an assignment of this Lease or a subletting of the Leased
Premises, the Landlord's standard consent document then in use will be prepared
by the Landlord or its solicitors and all the Landlord's costs with respect
thereto will be borne by the Tenant.
10.02 Conditions of Consent
If the Tenant receives consent under Section 10.01 supra, the
consent will be conditional upon: (a) the proposed assignee or subtenant
agreeing with the Landlord to assume and perform each of the covenants,
obligations and agreements of the Tenant in this Lease, (b) the Minimum Rent
payable by the assignee, subtenant or occupant thereafter not being less than
the Minimum Rent payable by the Tenant immediately prior to the assignment,
sublease or change of control, (c) the Tenant paying to the Landlord as
Additional Rent, an amount equal to that sum (if any) received by the Tenant in
consideration of the assignment or sublease (whether such sum is in the form of
a lump sum, monthly payment or otherwise, save for the payment of Rent hereunder
and (d) the proposed Assignee or Subtenant agreeing with the Landlord to pay
directly to the Landlord any monies in excess of that required to be paid by the
Tenant whether such sum is in the form of a lump sum, monthly payment or
otherwise it being expressly agreed that the Tenant hereunder is not to make a
profit from any assignment or subtenancy of this Lease (e) the proposed
assignment or sublease occurring within three (3) months after receipt by the
Landlord of the "Tenant's Request" (as defined in Section 10.03 infra).
10.03 Landlord's Option
If the Tenant desires to assign, sublet or part with
possession of all or any part of the Leased Premises or to transfer this Lease
in any other manner in whole or in part, or any estate or interest hereunder,
then and so often as such event occurs, the Tenant will give prior written
notice to the Landlord of its desire, specifying therein the proposed assignee,
transferee or subtenant and providing a copy of the offer or agreement
respecting the proposed assignment, subletting, parting with possession or
transfer (the "Tenant's Request"). Within twenty (20) business days after the
receipt of the Tenant's Request, the Landlord may request information pertaining
to the reputation, business experience, financial status and proposed business
of the proposed assignee/subtenant/transferee, (the "Landlord's Information").
The Tenant shall provide the Landlord's Information before the Landlord need
consider the Tenant's request for an assignment or sublease. The Landlord shall
approve or deny the requested assignment, sublease, parting with possession or
transfer within twenty (20) business days of receiving the requested Landlord's
Information, but if no Landlord's Information is requested, then within thirty
(30) business days after receipt of the Tenant's Request.
Notwithstanding the aforesaid, the Landlord may also terminate this Lease within
thirty (30) business days after receipt of the Tenant's Request, by providing
the Tenant with a notice of termination (the "Termination Notice"), which
Termination Notice will stipulate the termination date of this Lease and which
termination date will be the last day of that month immediately following the
month in which the Termination Notice was received by the Tenant. Within ten
(10) business days of receipt of the Termination Notice, the Tenant may withdraw
its Tenant's Request by written notice (the "Withdrawal Notice") to the
Landlord. If the Withdrawal Notice is given as aforesaid, the Termination Notice
and the requested assignment or sublease shall be null and void.
10.04 Share Transfer
Unless the shares of the Tenant are listed for sale on a
recognized stock exchange in Canada (in which case this Section 10.04 does not
apply to the Tenant), if after the date of execution of this Lease part of or
all the corporate shares or voting rights of shareholders of the Tenant or of an
associated, affiliated or parent company of the Tenant, are transferred by sale,
assignment, bequest, inheritance, operation of law or other disposition, or
issued by subscription or allotment, or cancelled or redeemed, so as to result,
in the opinion of the Landlord, in a change in the effective voting or other
control of the Tenant by the person or persons holding control on the date of
execution of this Lease, or if other steps or actions which result in a change
of control, the Tenant will promptly notify the Landlord in writing of the
change, which change will be considered to be an assignment of this Lease in
respect of which Article X shall apply and whether or not the Tenant does so
notify the Landlord, the Landlord may terminate this Lease within thirty (30)
business days next following the day on which the Landlord learns of the change
unless the Landlord previously had consented to the change. This termination
will occur upon the last day of that month following the month during which the
Tenant received the Landlord's notice of its termination of the Lease pursuant
to this Section 10.04.
The Tenant shall, upon request of the Landlord, make available
to the Landlord for inspection, copying or both, all books and records of the
Tenant which, alone or with other data, show the applicability or
inapplicability of this Section 10.04. If any stockholder or shareholder thereof
upon the request of the Landlord fails or refuses to furnish to the Landlord any
date, which data alone or with other data shows the applicability or,
inapplicability of this Section 10.04 then, at the Landlord's option this Lease
may be terminated as aforesaid stated in this Section 10.04.
Where the Tenant is a partnership, any increase, decrease,
substitution of vote transfer amongst the partners which causes a change in the
effectively voting control or other control of the Tenant by the partners
holding control on the date of execution of this Lease, then the provisions of
this Section 10.04 will apply mutatis mutandis.
ARTICLE XI DEVELOPMENT TITLE
11.00 Subordination
(a) This Lease is subject and subordinate to any and all present or
future mortgages (including any deed of trust and mortgage securing
bonds, all indentures supplemental thereto or any other instrument of
financing, refinancing or collateral financing) which may now or
hereafter affect the Development and to all renewals, modifications,
consolidations, replacements or extensions thereof. Provided the
Tenant receives a satisfactory Non-Disturbance Agreement, the Tenant
agrees to execute promptly any certificate or instrument in
confirmation of such subordination, any estoppel certificate or other
document in connection with the Landlord's financing or refinancing as
the Landlord may request and will, if requested, attorn to the holder
or holders of such mortgages or to the registered owners of the
Development upon the terms of this Lease, and the Tenant hereby
constitutes the Landlord its agent and attorney for the purpose of
executing any such certificate, instrument, estoppel certificate or
other instrument and of making application at any time and from time
to time register postponements in favour of any such mortgage or other
instrument in order to give effect to the foregoing provisions;
(b) Without limiting the right of the Landlord to assign this Lease,
the Landlord shall be entitled to assign this Lease as security for
any mortgage(s) upon the Development or any part thereof and the
Tenant covenants if requested, to acknowledge in writing any notice of
assignment of this Lease by the Landlord;
(c) If at any time during the Term of the Lease the Tenant is directed
to attorn pursuant to the provisions of this Lease and/or the Tenant
does not attorn, this Lease shall continue in full force and by fully
binding upon the Tenant.
11.01 Tenant Acknowledgments
The Tenant agrees that it will at any time upon not less than
ten (10) days' prior notice, execute and deliver to the Landlord (and, if
required, to any mortgagee of the Landlord), a certificate in writing as to the
status at that time of this Lease, including; whether this Lease is unmodified
and in full force and effect (or if modified, stating the modification and that
the same is in full force and effect as modified), the amount of the Annual Rent
then being paid and the dates to which the Rent by installments or otherwise,
has been paid, whether or not there is any existing default on the part of the
Landlord of which the Tenant has given notice and any other matter pertaining to
this Lease to which the Landlord has requested a statement.
11.02 Mechanics' and Other Liens
The Tenant covenants not to permit any construction,
mechanics' or other liens, mortgagees, or conditional sales contracts to be
registered against title to the Leased Premises or to the Development and the
Tenant shall promptly pay all its contractors and suppliers and shall do all
things necessary to prevent same from being registered on title and that
whenever and so often as any lien, mortgage or contract shall be registered on
title or claim be filed, the Tenant shall within ten (10) days after the Tenant
has notice of the claim, lien, mortgage or contract, procure the discharge
thereof by payment or by giving security therefor in such other manner as is or
may be required or permitted by law. The Landlord shall have the right, but not
the obligation to procure the discharge as aforesaid whereupon all sums paid by
the Landlord to procure the discharge, as well as all the Landlord's costs
including legal fees on a solicitor and client basis, shall be repaid forthwith
upon demand by the Tenant as Additional Rent. Notwithstanding the foregoing, the
Tenant may contest the validity of any such lien, provided the Tenant shall
first either obtain an order from a Court of competent jurisdiction discharging
the lien or encumbrance from the title to the Development by payment into Court,
or furnish to the Landlord against all loss or damage which the Landlord might
suffer or incur thereby, security satisfactory to the Landlord in format and
amount.
11.03 No Registration
The Tenant covenants and agrees with the Landlord that it will
not register this Lease but may register a caveat disclosing the existence and
term of this Lease and renewal option.
ARTICLE XII LIABILITIES
12.00 Excuse for Non-Performance by Landlord or Tenant
------------------------------------------------
Whenever and to the extent that either the Landlord or the
Tenant shall be unable to fulfil, or shall be delayed or restricted in the
fulfilment of any obligation of this Lease (other than the Payment of Rent) by
reason of;
(a) a strike, lockout, war or acts of military authority,
rebellion or civil commotion, act of God or other reason of a
like nature; or
(b) not being able to obtain the material, goods, equipment,
services, utility or labour required to enable it to fulfil
such obligation; or
(c) any statute, law or order-in-council or any regulation or
order passed or made pursuant thereto or by reason of the
order or direction of any administrator, controller or board
or any governmental department or officer or other authority
or by reason of not being able to obtain any permission or
authority required thereby; or
(d) any other cause beyond its control whether of the foregoing
character or not,
and not caused by its default or its act of commission or omission and not
avoidable by the exercise of reasonable effort or foresight by it, such party
shall, so long as any such impediment exists, be relieved from the fulfilment of
such obligation and the other party shall not be entitled to compensation for
any damage, inconvenience, nuisance or discomfort thereby occasioned. Subject to
the provisions of Section 3 of Schedule "B" attached hereto, notwithstanding the
aforesaid provisions of Section 12.00, Section 12.00 shall not cancel, postpone,
excuse or delay the due date of the payment of Rent.
12.01 Claims for Compensation
Subject to Section 8.06 supra, no claim for compensation shall
be made by the Tenant by reason of inconvenience, damage or annoyance arising
from the necessity of repairing any portion of the Development howsoever the
necessity may arise.
The Landlord shall not be liable for the death or injury of,
nor for the damage to property of, the Tenant or of others located on the Leased
Premises or any other part of Development, nor for the loss of or damage to any
property of the Tenant or of others by theft or otherwise from any cause, it
being expressly agreed that this Section 12.01 excludes damage, loss or injury
resulting from the negligence of the Landlord, its agents, servants or
employees. Without limiting the generality of the foregoing, the Landlord shall
not be liable for injury or damage to persons or property resulting from fire,
explosion, earthquake, flood, falling plaster, steam, gas, electricity, water,
rain, or snow or leaks from any part of the Leased Premises or from the pipes
appliances or plumbing works or from the roof, street or sub-surface or from any
other place or by dampness or by any other cause of any nature. The Landlord
shall not be liable for any damage caused by other tenants or persons in the
Leased Premises, occupants of adjacent property or of other parts of
Development, or the public, or caused by the construction of any private, public
or quasi-public work.
The Tenant agrees that there is no promise, representation or
undertaking by or binding upon the Landlord with respect to alterations,
remodelling or the decoration of, or the installation of equipment or fixtures,
in the Leased Premises, except those, if any, which are expressly set forth in
this Lease, but where there is such an express provision then unless it provides
for the completion of the alteration, remodelling or decoration or of the
installation after the Tenant's taking of possession hereunder, the taking of
possession will constitute conclusive evidence as against the Tenant that the
alterations, remodelling or decoration or installation of equipment or fixtures
has been satisfactorily completed. The certificate of the Landlord's Architect
that the Landlord has fulfilled its obligation in respect of the Leased Premises
will bind the parties in any event. All property of the Tenant kept or stored on
the Leased Premises or Development will be kept or stored at the risk of the
Tenant and the Tenant will hold the Landlord harmless from any claims arising
out of damage to the same, including subrogated claims by the Tenant's insurers.
12.02 Theft
The Landlord shall not be liable for the theft of any property
at any time in the Leased Premises or the Development.
12.03 Premises Not Available
Subject to the provisions of Sections 8 of the Offer to Lease,
if for any reason beyond the control of the Landlord, the Leased Premises are
not available for occupancy by the Tenant on the Term Commencement Date, Rent
hereby reserved shall abate until the earlier of; (a) fifteen (15) days after
the Landlord shall have delivered to the Tenant written notice that the Leased
Premises are vacant, or, (b) the date when the Tenant commences to use any
portion of the Leased Premises for business purposes. It is further understood
and agreed that the Lease shall otherwise remain in full force and effect and
the abatement of Rent hereby specified shall be accepted by the Tenant in full
settlement of all claims which the Tenant might otherwise have by reason of the
Leased Premises not being available for occupancy on the Term Commencement Date,
nor shall any such overholding operate to extend the Term.
12.04 Condemnation and Expropriation
If the whole or any part of the Leased Premises shall be taken
by federal, provincial, county, city of other authority for public use or under
any statute or by right of eminent domain, the Tenant shall not be entitled to
any part of any award that may be made for such taking nor to any damages
attributable thereto. In the event of a taking which reduces the area of the
Leased Premises and renders the remainder of the Leased Premises unusable (in
the opinion of the Landlord, acting reasonably) for the Tenant's purpose as
outlined in Section 7.00 supra, the Tenant shall have the option to be exercised
by notice in writing to the Landlord within thirty (30) days after the taking,
to terminate this Lease or accept the smaller premises and the Rent shall be
reduced proportionately. In the event of termination, such termination shall not
take place until thirty (30) days after receipt of such notice by the Landlord.
ARTICLE XIII ACCESS
13.00 Access by Landlord
The Landlord shall be permitted at any time to enter or to
have its authorized agents, employees or contractors enter the Leased Premises
for the purpose of inspection, providing janitor service, conducting an
environmental audit, or any testing required to satisfy itself that the Tenant's
operation is in compliance with the applicable environmental laws and
regulations, conducting maintenance, making repairs, alterations or improvements
to the Leased Premises or the Development or to have access to utilities and
services. The Tenant shall provide free and unhampered access for the aforesaid
purposes and shall not be entitled to compensation for any inconvenience,
nuisance or discomfort caused thereby.
13.01 Exhibit Leased Premises
The Tenant will permit the Landlord or the agents of the
Landlord to exhibit the Leased Premises at all reasonable hours during the last
six (6) months of the Term to prospective tenants or to any other person having
the written authority from the Landlord or the agents of the Landlord, to view
the Leased Premises. The Landlord shall further have the right to enter upon the
Leased Premises at all reasonable hours during the Term for the purpose of
exhibiting the Development to any prospective purchaser or mortgagee.
ARTICLE XIV TENANT'S DEFAULT
14.00 Re-Entry
The Landlord shall be entitled to re-enter the Leased Premises
on the non-payment of Rent whether or not the Landlord has made a formal demand
for the payment thereof, the failure by the Tenant to perform any other term or
condition of this Lease required to be performed by the Tenant, or if the Tenant
(or its agent) falsifies any report or information required to be furnished to
the Landlord pursuant to this Lease.
14.01 Bankruptcy, Etc.
If the Term or any of the goods and chattels of the Tenant on
the Leased Premises are seized or taken in execution or attachment by a creditor
of the Tenant; or in the event that the Tenant or Indemnifier becomes insolvent
or bankrupt or makes an assignment for the benefit of creditors or is declared
bankrupt, or takes the benefit of any legislation that may be in force for
bankrupt or insolvent debtors, or should proceedings be taken by or against the
Tenant under any legislation to wind up companies, or in the event of the
non-payment of Rent or in the event of the Tenant selling its assets (except as
permitted by Section 10.01 supra), then notwithstanding anything herein
contained to the contrary, the current month's Rent and Rent for the next
ensuing three (3) months shall thereupon become immediately due and payable and
the Landlord may, at its option,
re-enter and take possession of the Leased Premises as though the Tenant or the
servants of the Tenant or any other occupants of the Leased Premises was or were
holding over after the expiration of the Term and the Term shall be terminated
as of the re-entry.
14.02 Premises Vacated or Improperly Used
In the event that the Leased Premises become vacant or are
abandoned or are not used for the purpose permitted by Section 7.00 supra, or if
the Leased Premises shall be used by any other person or persons other than the
Tenant or any person permitted by Article X supra, or if the Tenant has not paid
Rent then the installments of Rent accruing during the next ensuing three (3)
months shall immediately become due and payable to the Landlord. The Landlord,
in addition to any other remedies which it may have, shall have the right to
enter the Leased Premises as agent of the Tenant, either by force or otherwise,
(without being liable for any prosecution therefor, nor being deemed to have
terminated this Lease) to relet the Leased Premises as the agent of the Tenant
and to receive Rent therefor which Rent shall be applied first to all the
Landlord's costs incurred in this reletting and the balance on account of the
Rent. Alternatively the Landlord may at its option, terminate this Lease by
re-entry or otherwise and in addition to the obligation to pay Rent accruing due
during the next ensuing three (3) months on account of the Landlord's damages,
the Tenant shall also be liable to the Landlord for any and all further damages
occasioned by reason of such abandonment, vacating or improper use of the Leased
Premises. The amount payable by the Tenant to the Landlord pursuant to this
Section 14.02 shall be considered liquidated damages and not as a penalty.
14.03 Distress
The Tenant hereby agrees with the Landlord that none of the
goods and chattels of the Tenant at any time during the continuance of the Term
hereby created on the Leased Premises shall be exempt from levy by distress for
Rent in arrears by the Tenant. If any claim is made for such exemption, right,
benefit or protection by the Tenant under the said Act, this covenant and
agreement may be pleaded as an estoppel against the Tenant in any action brought
to test the rights of the Landlord; the Tenant waiving, as it hereby does, all
and every benefit, right and protection that could or might have accrued to the
Tenant under and by virtue of any Sections of the said Act, or any amendments
thereto or replacement thereof.
14.04 Rental Arrears
In the event Rent is not paid to the Landlord when it is due
and payable as stipulated herein, the Landlord in addition to its other remedies
hereunder, shall be entitled to collect interest computed on such arrears at the
Stipulated Rate of Interest. Notwithstanding the aforesaid a minimum of one (1)
month's interest shall be charged on all arrears. Such interest shall be
computed from the due date of such Rent up to and including that day immediately
preceding the date that the payment is received and this interest shall be
considered as Additional Rent.
14.05 Landlord's Right to Perform
In addition to all other remedies the Landlord may have by
this Lease at law or in equity, if the Tenant defaults in any of its obligations
hereunder, the Landlord may at its option perform any such obligation after
fifteen (15) days' written notice to the Tenant and in such event the cost of
performing the obligation plus an administrative charge of fifteen percent (15%)
of this cost, shall be payable by the Tenant to the Landlord as Additional Rent,
together with interest at the Stipulated Rate of Interest calculated from the
date of the performance of the obligation by the Landlord forthwith upon demand.
On Default of this payment, the Landlord shall have the same remedies as on the
default of payment of Rent.
14.06 Alternative Remedies
The Landlord may from time to time resort to any or all the
rights and remedies available to it in the event of any default hereunder by the
Tenant, either by any provision of this Lease or by statute, at law or in equity
and all rights and remedies are intended to be cumulative and not alternative
and the express provisions hereunder as to certain rights and remedies are not
to be interpreted as excluding any other or additional rights and remedies
available to the Landlord at law or in equity.
14.07 Waiver
The waiver by the Landlord of a breach of a term, covenant or
condition herein contained will not be deemed to be a waiver of a subsequent
breach of the same or another term, covenant or condition herein contained. The
subsequent acceptance of Rent by the Landlord will not be deemed to be a waiver
of a preceding breach by the Tenant of a term, covenant or condition of this
Lease, other than the failure of the Tenant to pay the particular Rent accepted,
regardless of the Landlord's knowledge of the preceding breach at the time of
acceptance of the Rent. No covenant, term or condition of this Lease will be
deemed to have been waived by the Landlord unless the waiver is in writing
signed by the Landlord.
14.08 Costs
In the event the Tenant defaults under any term of this Lease,
the Tenant shall reimburse the Landlord forthwith for all legal fees and
disbursements on a solicitor and client basis and for all bailiff's fees and
disbursements that the Landlord may incur as a result of such default, such fees
and disbursements being payable by the Tenant on demand as Additional Rent.
ARTICLE XV INDEMNIFIER
15.00 Indemnifier's Covenants
In order to induce the Landlord to execute and deliver this
Lease and in consideration of the execution and delivery thereof by the Landlord
and the sum of two ($2.00) dollars now paid by the Landlord to the Indemnifier
(the receipt and sufficiency of which is by the Indemnifier hereby acknowledged)
and other good and valuable consideration, the Indemnifier as principal and not
a surety hereby covenants with the Landlord that:
(a) The Tenant shall duly perform and observe each and every term,
covenant or condition of this Lease on the part of the Tenant to be
performed and observed on the days and at the times and in the manner
therein specified and that if for any reason, including the insolvency
or bankruptcy of the Tenant and whether or not this Lease has been
disaffirmed or disclaimed, the Tenant shall fail to pay the Rent as
and when it is due and payable or defaults performance or observance
of any other term, covenant or condition which is to be performed or
observed by the Tenant, the Indemnifier shall forthwith pay to the
Landlord on demand such Rent and all damages that may arise in
consequence of the non-observance or non-performance of any of the
said terms, covenants, or conditions and the Indemnifier shall at the
option of the Landlord, become the tenant of the Landlord upon the
same terms and conditions as are contained in this Lease applied
mutatis mutandis, without however in any way relieving the Tenant of
its obligations under the Lease.
(b) The Indemnifier is jointly and severely bound with the Tenant for
the fulfilment of all obligations of the Tenant under this Lease,
including any renewal or extension of this Lease. In the enforcement
of its rights hereunder, the Landlord may proceed against the
Indemnifier as if the Indemnifier were named a Tenant under this Lease
and the Landlord shall not proceed against the Tenant or to proceed
against or to exhaust any security held from the Tenant to pursue any
other remedy whatsoever which may be available to the Landlord for
proceeding against the Indemnifier and the Indemnifier hereby waives
any right to require the Landlord to do so. The Landlord has the right
to enforce this indemnify regardless of the acceptance of addition
security from the Tenant by the Landlord or by release or discharge of
the Tenant by the Landlord or by others or by operation of any law.
(c) No release or discharge of the Tenant in any receivership,
bankruptcy, wind-up or other creditor proceeding or any disclaimer of
the Lease; no neglect or forbearance of the Landlord in endeavouring
to obtain payment of the Rent reserved in the Lease as and when it
becomes due; no delay, waiver or failure of the Landlord in taking
steps to enforce performance or observance of the terms, covenants, or
conditions in this Lease to be performed or observed by the Tenant; no
assignment or subletting of this Lease by the Tenant or by any
trustee, receiver or liquidator or any consent which the Landlord
gives to any such assignment or subletting; no amendment to this
Lease; no waiver by the Tenant of any of its rights under this Lease;
nor the expiration of the Term; no extension or extensions of time or
indulgence or modifications which may be given by the Landlord from
time to time to the Tenant with respect to the performance of any of
the obligations of the Tenant under this Lease; no repossession of the
Leased Premises by the Landlord; and no other act or failure to act of
or by the Landlord, shall waive, release, discharge or in any way
reduce the obligations of the Indemnifier under its covenants herein
contained, the Indemnifier hereby expressly waives all notice of
non-payment of Rent and non-performance and non-observance by the
Tenant of the terms, covenants and conditions contained in this Lease.
The liability of the Indemnifier shall not affected by any
repossession of the Leased Premises by the Landlord, providing however
that the net payments received by the Landlord after deducting all
costs and expenses of repossessing and reletting the Leased Premises
shall be credited by the Landlord against the indebtedness of the
Indemnifier by the hereunder and the Indemnifier shall pay any balance
owing to the Landlord immediately upon demand.
(d) No action or proceeding brought or instituted under this Section
15 is, and no recovery in pursuance thereof shall be a bar or a
defence to any further action or proceeding which may be brought under
this Section 15 by reason of any further default by the Tenant or
Indemnifier in the performance and observance of the terms, covenants
and conditions contained in this Lease.
(e) If two or more individuals, corporations, partnerships or other
business associations (or any combinations of two or more thereof)
execute this indemnify as Indemnifier the liability of each such
individual, corporation, partnership or other business association
hereunder is joint and several. Similarly, if the Indemnifier named in
the indemnifier is a partnership for other business associations and
the members of personal liability, then the liability of such member
is joint and several under this Section 15.
(f) No modifications of this indemnify shall be effective unless the
same is in writing and is executed by all of the Indemnifier, the
Tenant and the Landlord.
(g) All of the terms, covenants and conditions of this Section 15
extend to and are binding upon the Indemnifier, its heirs, executors,
administrators, successors and assigns, and shall ensure to the
benefit of any may be enforced by the Landlord, its successors and
assigns, any mortgagee, trustee under a deed of trust or any other
encumbrances of all or any part of the Development. Wherever in this
Section 15 reference is made to either the Landlord or the Tenant, the
reference is deemed also to apply also to the respective heirs,
executors, administrators, successors and assigns and permitted
assigns of the Landlord and the Tenant.
ARTICLE XVI GENERAL PROVISIONS
16.00 Lease Entire Agreement
It is hereby understood and agreed by and between the parties
hereto that the terms and conditions set forth herein, together with the terms
and conditions set forth in the rules and regulations and any exhibits,
schedules and/or plans and the Offer to Lease annexed hereto embrace all of the
terms and conditions of the Lease and Riders entered into by the Landlord,
Indemnifier and Tenant or any other party hereto and supersede and take the
place of any and all previous agreements or representations of any kind,
written, oral or implied heretofore made by anyone in reference to the Leased
Premises or in any way affecting the Development or equipment of which the same
forms a part and that the said rules and regulations and any exhibits, schedules
and/or plans shall and do form a part of this Lease as fully as if the same were
included in the main body hereof, above the execution by the parties hereto. All
of the provisions of this Lease shall be construed as covenants and agreements.
If any provision of this Lease is illegal or unenforceable it shall be
considered separate and severable from the remaining provisions of this Lease,
and the remaining provisions shall remain in force and be binding as though the
said illegal or unenforceable provisions had never been included.
16.01 Modification to the Agreement
No amendment to or waiver of any provision of this Lease or
any consent required or permitted hereunder shall be deemed or taken as made or
given unless such amendment, waiver or consent is in writing and signed under
the corporate seal by an officer of the Landlord. The Landlord's employees,
superintendents and agents, unless specifically authorized in a written
instrument signed under corporate seal by an officer of the Landlord, are not
authorized to amend this Lease, grant any waiver or provide any consent
hereunder or make any commitments or enter into any agreements on behalf of the
Landlord.
16.02 Laws of Alberta to Govern
This Agreement shall be governed in accordance with the laws
of the Province of Alberta and the parties hereto submit to such jurisdiction.
16.03 No Partnership
Nothing contained herein shall be deemed or construed by the
parties hereto nor by any third party, as creating the relationship of principal
and agent or of partnership, or of a joint venture agreement between the parties
hereto (save and except as provided in Section 14.02 supra), it being understood
and agreed that none of the provisions contained herein nor any act of the
parties hereto shall be deemed to create any relationship between the parties
hereto other than the relationship of a Landlord and Tenant, and Indemnifier(s).
16.04 Notices
A notice, demand, request, consent or other instrument
required or permitted to be given under this Lease (in this Section 16.04 called
"Notice") shall be in writing and shall be given and deemed to have been
received as provided in this Section 16.04.
(a) to the Landlord as follows:
Brookfield Management Services Western Ltd.
#200, 10130 - 103 Street
Edmonton, Alberta
T5J 3N9
(b) to the Tenant as follows:
To the address of the Leased Premises or to the Tenant's
registered office.
(c) to the Indemnifier as follows:
To the address of the Leased Premises or to the Tenant's
registered office.
Any Notice must be mailed in Canada or the continental United
States of America by prepaid registered post, Electronic Facsimile Transmission
or prepaid courier. A Notice shall be deemed to have been received by the party
to whom the Notice is addressed on that day which is five (5) business days
following the date that the Notice was mailed, provided that at the time of
mailing there is not an actual or apprehended interruption in mail service by
labour dispute of otherwise. Notwithstanding the aforesaid, in the event of an
actual or apprehended interruption in mail service, or at any time if the party
giving notice so elects, Notice shall be in writing and delivered to and left at
the address for Notice of the party to whom it is to be given during normal
business hours on a business day and shall have been deemed to be received on
the date of delivery.
A party may at any time give Notice to the other party of a
change of its address for the purpose of giving Notice and from and after the
giving of such Notice, the address therein shall be deemed to be the address of
that party.
16.05 Captions
The captions in bold face for clauses of this Lease are for
convenience only and are not to be considered a part of this Lease and do not in
any way limit or amplify the terms and provisions of this Lease.
16.06 Time of the Essence
Time shall be of the essence for this Lease and for each and
every part hereof.
16.07 Managing Agent
The Landlord may perform all or any of its obligations or
exercise any of its rights hereunder by or through such managing or other agency
or agencies as it may from time to time appoint and the Tenant shall, as from
time to time directed by the Landlord pay to any such agent any monies payable
hereunder to the Landlord.
16.08 Brokerage
As part of the consideration of the granting of this Lease,
the Tenant represents and warrants to the Landlord that no broker or agent
negotiated or was instrumental in negotiating or consummating this Lease.
16.09 Interpretation, Landlord and Tenant
It is hereby agreed that in construing this Lease, the word
"Tenant" and the personal pronoun "he" or "his" relating thereto and used
therewith shall be read and construed as "Tenant" or "Tenant's" and "his",
"her", "it", "its" and "their" respectively as the number and gender of the
party or parties referred to in each case require and the number of the verb
agreeing therewith shall be considered as agreeing with the said word or pronoun
so substituted. It is further provided that the Landlord, its successors and
assigns, the Tenant and their respective heirs, executors, administrators
permitted successors and permitted assigns shall be respectively bound by and be
entitled to the benefit of these presents and of the like manner as if the word
"successors and assigns" were inserted next after the words "Landlord" and
"Tenant" throughout, unless the context shall require different construction. It
is further agreed that where the Tenant is more than one
person/entity/corporation, all persons/entities/corporations designated as being
part of the Tenant shall be jointly and severally bound by the terms, covenants
and agreements contained in the Lease. The term "mortgage" and "mortgagee" when
used herein shall also mean respectively "charge" and "chargee".
16.10 Deleted
16.11 Deleted
16.12 Energy Conservation
The Tenant covenants with the Landlord to cooperate with the
Landlord in conserving energy in the Development including complying at the
Tenant's own cost with all reasonable requests and demands of the Landlord made
with a view to energy conservation. Any reasonable expenditure made by the
Landlord in an effort to promote energy conservation shall be included in
Operating Costs in the financial year in which such expenditure was incurred.
16.13 Additional Terms and Conditions
The Landlord and Tenant acknowledge and agree that the terms
and conditions of this Lease are subject to those additional terms and
conditions as outlined in Schedule "B" attached hereto which forms a part of
this Lease.
IN WITNESS WHEREOF the Parties hereto by their respective
signing officers, have executed this Agreement as of 24th day of November, 1997.
715864 ALBERTA LTD.
PER: /s/Mark Schlossberg
SAVILLE SYSTEMS CANADA LTD.
PER: /s/Christopher A. Hanson
PER: /s/Jane Lewchuk
SAVILLE SYSTEMS PLC
PER: /s/Christopher A. Hanson
SCHEDULE "A" TO THAT CERTAIN OFFICE LEASE MADE AS OF THE 24th DAY OF
NOVEMBER, 1997, BETWEEN 715864 ALBERTA LTD. (AS LANDLORD) AND SAVILLE
SYSTEMS CANADA LTD. (AS TENANT)
(Floor Plan)
<PAGE>
SCHEDULE "B" TO THAT CERTAIN OFFICE LEASE MADE AS OF THE 24th DAY OF
NOVEMBER, 1997, BETWEEN 715864 ALBERTA LTD. (AS LANDLORD) AND SAVILLE
SYSTEMS CANADA LTD. (AS TENANT) AND SAVILLE SYSTEMS PLC (AS INDEMNIFIER)
1. RENEWAL OPTION
Provided the Tenant is not in default under the Lease and it shall have given
the Landlord six (6) months written notice of its election to renew the Lease,
but no earlier than nine (9) months prior to the expiration of the Term
hereof, the Tenant shall have the option to renew the Lease for a further term
of five (5) years (the "Renewal Term") upon the same terms and conditions
except the Tenant inducements and allowances as outlined herein, the option to
renew provision and the minimum rent (the "Renewal Minimum Rent") for the
Renewal Term shall be the then fair market rent for the Leased Premises to be
negotiated between the Landlord and the Tenant. Provided however, if the
Landlord and Tenant cannot agree on the Renewal Minimum Rent by the ninetieth
(90th) day prior to the expiration of the Term, the Tenant shall have the
right to revoke its notice of election to renew the Lease and any right or
obligation to renew shall be cancelled. If such revocation right is not
exercised, then the Renewal Minimum Rent shall be determined by three (3)
accredited real estate brokers (the "Three Experts") at least thirty (30) days
prior to the expiration of the Term of the Lease, which experts shall be
familiar with rental rates in the area of the Lease Premises. One of the Three
Experts shall be appointed by the Landlord (the "Landlord's Expert") and all
costs associated with the Landlord's Expert shall be the sole responsibility
of the Landlord, and one expert shall be appointed by the Tenant (the
"Tenant's Expert") and all costs associated with the Tenant's Expert shall be
the sole responsibility of the Tenant. The appointment of the third (3rd)
expert (the "Third Expert") shall be agreed upon by the Landlord's Expert and
the Tenant's Expert and fifty (50%) percent of costs attributed to the Third
Expert shall be borne by the Tenant and the remaining fifty (50%) percent of
the costs attributable to the Third Expert shall be borne by the Landlord.
Together, the Three Experts, acting reasonably shall make the final
determination of the Renewal Minimum Rent and should the Three Experts be
unable to agree among themselves on the determination, the opinion of the
majority, being two (2) of the Three Experts, shall be final and binding on
the Landlord and Tenant. During any arbitration, the Tenant may remain in the
Leased Premises on the same terms and conditions as set out in this Lease and
the Renewal Minimum Rent shall be the same as the Minimum Rent payable during
the last year of the Term until the final determination of the Renewal Minimum
Rent for the renewal period has been made.
2. PARKING
The Landlord shall make available to the Tenant sixty-one (61) parking stalls
located in the underground parking garage of the Development throughout the
Term of the Lease. The Landlord further agrees to provide the Tenant with the
use of seventeen (17) surface parking stalls at no charge throughout the Term
of the Lease and shall allow the Tenant at its own cost to install signage
designating specific parking stalls as visitor parking. The Landlord agrees to
use its best efforts to secure an additional one hundred and fifty (150)
parking stall across from the Development currently known as the Allendale
Bingo and the Tenant agrees to pay all costs associated with securing the
additional parking stalls inclusive of ongoing rental costs and G.S.T..
3. FIXTURING
The Tenant shall be granted unlimited access to the Leased Premises within
fifteen (15) days after execution of the Lease for the purpose of preparing
the Leased Premises for their intended use. The Landlord shall use every best
effort to complete the Landlord's Work prior to the Fixturing Period, but if
necessary to complete the Landlord's Work, the Landlord and the Tenant shall
coordinate their efforts and have joint access to the Leased Premises for the
purpose of completing their respective work. During the Fixturing Period the
Tenant shall not be required to pay any Net or Additional Rent.
In the event that the Tenant's access to the Leased Premises is delayed so
that the Fixturing Period is less than ninety (90) days, then all dates
contained herein including the Commencement Date and shall be adjusted
accordingly with no loss of benefit to the Tenant. All other terms and
conditions shall remain as agreed to in the Offer.
4. PERMITS AND APPROVALS
It is the Tenant's responsibility to secure all of the necessary building
permits and approvals required by the City of Edmonton and any other
applicable government authority having jurisdiction, as it applied to
occupancy and leasehold improvements. The Tenant shall also be responsible for
making application for a certificate of occupancy if required by the City of
Edmonton as it applies to its leasehold improvements.
5. LEASEHOLD IMPROVEMENT ALLOWANCE
The Landlord agrees to provide, based on professionally prepares plans and
specifications approved by the Tenant, an allowance (the "Leasehold
Improvement Allowance") for the Leased Premises, the cost of which shall
include but not be limited to all design and consultant fees, demolition,
heating, ventilation, and air conditioning modification, construction
materials and labour, electrical and lighting finishes. The Leasehold
Improvement Allowance shall be up to a maximum of fifteen ($15.00) dollars per
square foot of Rentable Area of the Leased Premises and shall be paid on the
following basis:
a) Fifty (50%) percent of the net amount of the invoice payable, after
deduction of all holdbacks required by the Canadian Lien Act of Alberta
("Act") shall be paid by the Landlord to the Tenant within fifteen (15)
days of receipt of the invoice and the certificate of the Tenant's
architect that the work subject to the invoice has been completed in
accordance with the plans and specifications of the subject work; and
b) The remaining amounts of the invoices payable including all holdbacks,
shall be paid by the Landlord to the Tenant forthwith after the receipt
by the Landlord of the certificate of the Tenant's architect that the
Leasehold Improvements have been substantially completed in accordance
with the plans and specifications and that all periods for the filing of
liens under the Act, without any notice of lien of any contractor or
subcontractor having been filed.
The Tenant shall repay the Leasehold Improvement Allowance to the Landlord by
amortizing such costs over the Term of the Lease to be paid on the same dates
as the payment of Minimum Rent. At fifteen ($15.00) dollars per square foot,
the amortized cost of the Leasehold Improvements Allowance payable by the
Tenant shall be four dollars and thirty-two ($4.32) cents per square foot per
annum. No Landlord mark-up will be charged to the Tenant for services related
to Leasehold Improvements. The Tenant acknowledges that this is calculated
based on an annual interest rate of nine (9%) percent, or three dollars and
seventh-two cents ($3.72) per square foot plus commissions of sixty ($.60)
cents per square foot. The Tenant itself shall pay for the costs of any and
all costs which exceed fifteen ($15.00) dollars per square foot of the
Rentable Area of the Leased Premises (four hundred and twenty-eight thousand
seven hundred and forty-five ($428,745.00) dollars). The Landlord shall be
entitled to exercise all of its remedies under this Lease applicable to the
non-payment of Minimum or Additional Rent in any default in by the Tenant in
such payments or for costs exceeding the fifteen ($15.00) dollars per square
foot maximum (four hundred and twenty-eight thousand seven hundred and
forty-five ($428,745.00) dollars). The cost, for base building modifications
as provided for in paragraph 6 below shall not be deducted from the Leasehold
Improvement Allowance.
6. BASE BUILDING MODIFICATION
Subject to the Landlord's approval which shall not be unreasonably withheld or
delayed, the Tenant shall, at its own expense be permitted to effect
modifications, upgrades and/or additions to the existing Base Building Systems
affecting the Leased Premises according to the Tenant's consulting report as
attached hereto being Schedule "C" to the Offer to Lease. Base Building
Systems shall include, but be limited to all heating, ventilating and air
conditioning systems and equipment, electrical equipment, including lighting,
and plumbing, including sprinklers. The Landlord shall not charge any
supervision or management fee in connection with such work. The Landlord
agrees to provide the Tenant with an allowance up to a maximum of eight
($8.00) dollars per square foot of the Rentable Area of the Leased Premises
(two hundred and twenty-eight thousand six hundred and sixty-four
($228,664.00) dollars) for purposes of making such modifications. The Landlord
agrees to pay all of the Tenant's invoices up to such maximum within fifteen
(15) days of receipt.
7. EARLY OCCUPANCY
To the extent that the Leasehold Improvements are completed prior to the
commencement Date, the Tenant shall be permitted occupancy free of Minimum
Rent and Additional Rent until the Commencement Date. Other than the
requirement to pay Minimum Rent and Additional Rent, all terms and conditions
of this Lease shall be in full force and effect during this period.
8. RESTORATION
Notwithstanding any other provision in this Lease, it is agreed that the
Tenant shall not be required to restore the Leased Premises to the original
condition. Upon expiry of the Lease, the Tenant shall leave the Leased
Premises in a vacant, broom-swept condition.
9. BUILDING ACCESS
Except in the cases of emergency, the Landlord agrees to provide the Tenant
with access to the Development on a twenty-four (24) hour basis, seven (7)
days a weeks throughout the main lobby, stairs and entrances as well as
parking lots and all elevators. The Landlord agrees that the existing security
(card access) or the equivalent will be available to the Tenant throughout the
Term of the Lease and there will be no access to the Leased Premises other
than through card access.
10. SIGNAGE
Provided the Tenant is the original lessee, Saville Systems Canada Ltd., and
is itself in possession of and conducting its business from the whole of the
Leased Premises, the Tenant shall have the sole right to install a corporate
sign (the "Sign") at the Tenant's sole expense, to be located on and affixed
to the Development. Details as to location, colour, size, style, wording,
character, installation, operation, maintenance and materials (as each relates
to the Sign) shall be provided in writing to the Landlord for the Landlord's
written approval. The Tenant must receive written approval from Landlord prior
to installation of the Sign and the Sign shall be in full compliance with all
existing governmental regulations and/or bylaws. The Landlord agrees to remove
the existing signage and repair any damages as a result of removal of such
signage at its sole cost. The Landlord shall provide the Tenant with
identification signs posted on ground floor lobby directory boards and the
Development's exterior at Tenant's cost.
11. LEASE CANCELLATION
Notwithstanding anything contained in this Lease to the contrary, provided the
Tenant is then carrying on business in the Leased Premises, the Tenant shall
have the right to terminate this Lease on the fourth (4th) anniversary of the
Term Commencement Date of this Lease upon providing not less than six (6)
months' prior written notice to the Landlord. During the six (6) months'
notice period, the Tenant shall have the right to either occupy the Leased
Premises under the Terms of this Lease or vacate the Leased Premises and pay
the Landlord a lump sum equal to the Minimum Rent to be paid during such
notice period. In addition, in the event that the Tenant exercises the right
to terminate its Lease in the manner described above, then the Tenant shall
pay to the Landlord a lump sum of one hundred and seventy-five thousand
($175,000.00) dollars on the termination date as a fee for exercising such
right.
12. 1997 ADDITIONAL RENTS
The Landlord agrees that all Additional Rent will not exceed the sum of seven
(7.00) dollars per square foot of Rentable Area for 1997.
<PAGE>
SCHEDULE "C" TO THAT CERTAIN OFFICE LEASE MADE AS OF THE 24th DAY OF
NOVEMBER, 1997, BETWEEN 715864 ALBERTA LTD. (AS LANDLORD) AND SAVILLE
SYSTEMS CANADA LTS. (AS TENANT) AND SAVILLE SYSTEMS PLC (AS INDEMNIFIER)
RULES AND REGULATIONS
(Section 7.06)
1. The sidewalks, entrances, elevators, stairways and corridors of the
Development shall not be obstructed by the Tenant or used by it for
any other purpose than for ingress and egress to and from its
respective offices, and the Tenant shall not place or allow to be
placed in the hallways, corridors or stairways any waste paper, dust,
garbage, refuse or anything whatsoever that shall tend to make them
appear unclean or untidy.
2. The skylights and windows that reflect or admit light into passageways
or into any place in the Development shall not be covered or
obstructed by the Tenant, and no awnings, curtains or blinds shall be
put up without the prior written consent of the Landlord.
3. The Tenant, its servants, agents, and invitees shall use such
water-closets, other water apparatus and washroom facilities in the
Development as shall be from time to time designated by the Landlord
for use in connection with the Leased Premises. The water-closets,
other water apparatus and washroom facilities shall not be used for
any purpose other than those for which they were constructed and no
sweepings, rubbish, rags, ashes or other substances shall be thrown
therein. The cost of repairing any damage resulting from misuse shall
be borne by the Tenant. The Tenant shall not let the water run unless
in actual use.
4. No safe, heavy merchandise or anything liable to injure or destroy any
part of the Development (the "Item") shall be taken into or out of it
without the consent of the Landlord, and the Landlord shall in all
cases retain the power to prescribe the weight, and indicate the place
where said Item is to stand. The cost of repairing any and all damage
done to the Development by taking in or putting out an Item or during
the time it is in or on the Leased Premises, shall be paid for, on
demand, by the Tenant who so causes it, as Additional Rent. No Tenant
shall load any floor beyond its reasonable weight-carrying capacity.
5. The Tenant, its agents, servants and invitees shall not make, commit
or permit any improper noises in the Development, or interferes in any
way with other tenants or those having business with them.
6. Nothing shall be thrown by the Tenant, its servants, agents or
invitees, out of the windows or doors or down or into the passage,
elevator shafts or skylights of the Development.
7. No birds or animals shall be kept in or about the Leased Premises, nor
shall musical instruments be played in the Leased Premises.
8. The Tenant shall not permit the Leased Premises to be used for
sleeping apartments or residential purposes, or for the storage of
personal effects or for articles other than those required for
business purposes.
9. No public or private auction of other similar type of sale of any
goods, wares or merchandise shall be conducted in or from the Leased
Premises.
10. No telephonic, telegraphic, electronic wire service or other
connections or electric wiring shall be made in places other than
those designated by the Landlord or without the authority of the
Landlord, who will direct the electricians or other workmen as to
where and how any wires or equipment are to be introduced and without
any such directions, no boring or cutting or otherwise will be
permitted.
11. Furniture, fixtures, equipment and construction equipment, materials
and supplies shall not be taken into or removed from the Leased
Premises except at such times and in such manner as may be previously
consented to and approved by the Landlord in writing. No heavy
furniture shall be moved over floors of offices, halls, landings or
stairs so as to mark same.
12. Nothing shall be placed on the outside of window sills or projections
of the Leased Premises, nor shall the Tenant place any
air-conditioning unit or any other equipment or projection so that it
will project out from the Leased Premises beyond the surface of the
main walls of the Development. The Tenant may not install
air-conditioning equipment of any kind in any part of the Leased
Premises without the prior written consent of the Landlord.
13. All glass and trimmings in, upon or about the doors and windows of the
Leased Premises shall be kept whole, and whenever any part thereof
shall become broken, the same shall be immediately replaced or
repaired under the direction and to the satisfaction of the Landlord
and shall be paid for by the Tenant as Additional Rent.
14. No bicycles or other vehicles shall be brought within the Development
except as specifically designated by the Landlord.
15. No inflammable oils or other inflammable, dangerous or explosive
materials shall be brought into the Development or kept or permitted
to be kept in the Leased Premises.
16. Notwithstanding Section 6.01(a) of the Lease, the Tenant shall not use
the elevators in the Development for delivery of supplies, freight or
merchandise to or from the Leased Premises except during such
reasonable intervals and hours as the Landlord may designate and if an
elevator operation is provided by the Landlord for such purpose the
Tenant will pay, as Additional Rent, a reasonable price for the use of
such elevator.
17. No locks shall be placed on any access doors of the Leased Premises
without the prior written consent of the Landlord. The Landlord may,
at its option require that any or all such locks be a part of the
Landlord's master keying system.
18. Notwithstanding Section 6.01(a) of the Lease, the Landlord shall have
the right to regulate delivery of food and beverages into the
Development and the Leased Premises.
19. The Tenant shall not use nor permit to be used any hand trucks or
wagons or other portable machinery for transporting food, merchandise
or other goods into the Leased Premises or within the Common Areas of
the Development except as may have received the prior written approval
of the Landlord.
20. No persons will be allowed into the Development outside Business Hours
without an authorized access card to their office premises. The
Landlord may institute a photo-identification security system in which
case photo identification cards, at the Tenant's expense, may be
obtained from the Landlord's security company.
21. The Tenant shall immediately notify the Landlord if any of the
Tenant's Access Cards to the Development have been lost or misplaced.
22. Should the Tenant require any lampage which is not standard to the
Building, such lampage shall be at the sole expense of the Tenant and
the Tenant shall maintain a supply of replacement bulbs as required by
the Landlord's personnel.
<PAGE>
SCHEDULE "D" TO THAT CERTAIN OFFICE LEASE MADE AS OF THE 24th DAY OF
NOVEMBER, 1997, BETWEEN 715864 ALBERTA LTD. (AS LANDLORD) AND SAVILLE
SYSTEMS CANADA LTD. (AS TENANT) AND SAVILLE SYSTEMS PLC (AS INDEMNIFIER)
PLAN 3553P
BLOCK FORTY ONE (41)
LOTS ONE (1) TWO(2) AND THREE(3) EXCEPTING THEREOUT: ALL THAT
PORTION OF SAID LOT ONE (1) WHICH LIES NORTHEAST OF A LINE
JOINING TWO POINTS ON EAST AND NORTH BOUNDARIES OF THE SAID
LOT, FOUR AND SIX TENTHS (4.6) METRES RESPECTIVELY DISTANT
SOUTHERLY AND WESTERLY FROM THE NORTHEAST CORNER THEREOF
EXCEPTING THEREOUT ALL MINES AND MINERALS
AND
PLAN 3553P
BLOCK 41
LOTS 4 AND 5
EXCEPTING THEREOUT ALL MINES AND MINERALS
<PAGE>
SCHEDULE "E" TO THAT CERTAIN OFFICE LEASE MADE AS
OF THE 24th DAY OF NOVEMBER, 1997, BETWEEN 715864
ALBERTA LTD. (AS LANDLORD) AND SAVILLE SYSTEMS CANADA
LTD. (AS TENANT) AND SAVILLE SYSTEMS PLC (AS INDEMNIFIER)
OFFER TO LEASE
(ICI)
TO: 715884 ALBERTA LTD. Lessor (Landlord)
1/WE SAVILLE SYSTEMS CANADA, LTD. Lessee (Tenant)
having inspected the premises or plans, hereby offer to lease through CB
Commercial Real Estate Group Canada, Inc. (Broker), the premises known
municipally as 5020 104th Street, in the City of Edmonton comprising
approximately 28,583 of gross rentable square feet floor more or less for a term
of five (5) years from January 1st, 1998 to December 31st, 2002, at a rental of
$ See Schedule "A" per annum payable $ See Schedule "A" monthly, in advance, on
the first day of each month during the said term.
Cash/Cheque in the amount of $70,087.90 as a deposit, payable to the Listing
Broker in trust for the Lessor, is submitted herewith to be held pending
completion or other termination of this Agreement, and is to be credited on
account of rental payments as they become due.
The lease shall be drawn by the Lessor and executed by the Lessee and the lessor
forthwith subject to amendments as negotiated between the Lessor's and the
Lessee's Solicitors, both acting reasonably upon the execution of the written
Offer to Lease, the Lessor shall supply the Lessee with a Standard Form of Lease
for perusal and comments by the Lessee and its solicitors.
The Premises is to be used for general office purposes and/or data centre and
all other uses permitted by prevailing municipal by-laws.
IT IS UNDERSTOOD AND AGREED that
SCHEDULES "A", "B" AND "C" ATTACHED HERETO SHALL BE READ WITH AND FORM A PART OF
THIS OFFER TO LEASE
It is further understood that all representations by the Lessor or any of his
representatives, are set out in this Agreement.
The heirs, executors, administrators, successors and assigns of the undersigned
are bound by the terms hereof. This Agreement shall be read with such changes of
gender or number as may be required by the context.
DATED AT Edmonton this 17th day of July 1997
SIGNED, SEALED and DELIVERED IN WITNESS whereof I have hereunto set my hand and
seal:
In the presence of I have authority to bind the Company
SAVILLE SYSTEMS CANADA, LTD.
/s/ Jane Lewchuk 97-07-19
I hereby accept the above Offer and agree with the named Broker to pay in
consideration of procuring this Offer a commission of as per exclusive listing
agreement.
Any deposit in respect of any agreement shall first be applied to reduce the
commission payable. Should such amounts paid to you from the deposit or by
my/our solicitor not be sufficient, I shall be liable to pay you, on demand, any
deficiency in commission and taxes owing on such commission. All amounts set out
as commission are to be paid plus applicable federal goods and services tax
(G.S.T.) on such commission.
DATED AT ______________ this _______day of _____________19________
SIGNED, SEALED and DELIVERED IN WITNESS whereof I have hereunto set my hand and
seal:
In the presence of I have authority to bind the Company
715864 ALBERTA LTD.
SCHEDULE "A"
To be read with and form a part of this Offer to Lease between:
715864 ALBERTA LTD. (LESSOR) AND
SAVILLE SYSTEMS CANADA, LTD. (LESSEE)
1. LEASE
The Lease shall be drawn on the Lessor's standard form but will be
otherwise subject to the terms herein. The Lease may not conflict with
any of the provisions of the Offer but may deal in greater detail with
the matters dealt with herein as well as other matters normally dealt
with in commercial office leases and subject to such amendments as may
be reasonably requested by the Lessee and the Lessor in consultation
with their solicitors. The Lease shall be executed by both parties
within fifteen (15) business days of acceptance of the Offer and prior
to commencement of any Lessee work.
2. NET RENT
The Lessee shall pay to the Lessor the following net rent in equal
monthly installments in advance on the first day of each calendar month
at the rate of:
January 1, 1998 - December 31, 1998 $2.43 per square foot per annum
January 1, 1999 - December 31, 1999 $2.93 per square foot per annum
January 1, 2000 - December 31, 2000 $3.43 per square foot per annum
January 1, 2001 - December 31, 2001 $3.93 per square foot per annum
January 1, 2002 - December 31, 2002 $4.43 per square foot per annum
3. ADDITIONAL RENT
In addition to the above net rent a proportionate share of costs
applicable to the leased premises all as more particularly outlined in
the Lease, including realty taxes, operating expenses and electrical
power, applicable to the Leased Premises, will be paid by the Lessee in
equal monthly installments as additional rent, and shall be subject to
escalation from time to time throughout the term of the Lease. The
Lessor agrees that all additional rents will not exceed Seven Dollars
($7.00) per rentable square foot for 1997.
4. PREMISES
Approximately 28,583 square feet of gross rentable area in the building
("Initial Premises") subject to actual measurement in accordance with
the B.O.M.A. standard method of measuring floor area in office
buildings.
5. AUDIT OF ADDITIONAL RENT
The Lessor shall provide annually to the Lessee, an unaudited statement
of Additional Rent within one hundred and eight (180) days of year end.
Said statement shall be completed by a certified accountant or other
independent qualified financial person. The Lessee or the Lessor as the
case may be, has the right to remedy any differences between said
statement and the additional rent paid by the Lessee to the Lessor in
the previous year of the Lease term.
6. CONDITION OF PREMISES
The Lessee accepts the Premises in "as is" condition. The Lessee shall
be responsible, at its own expense, for any modifications or
renovations within the Premises, subject to Paragraph #12/29 of this
Offer.
7. FIXTURING PERIOD
The Lessee shall be granted unlimited access to the Premises within
fifteen (15) days after execution of the Lease for the purpose of
preparing the Premises for their intended use. The Lessor shall use
every best effort to complete the Lessor's Work prior to the Fixturing
Period, but if necessary to complete the Lessor's Work, the Lessor and
the Lessee shall coordinate their efforts and have joint access to the
Premises for the Purpose of completing their respective work. During
the Fixturing Period the Lessee shall not be required to pay any Net or
Additional Rent.
8. OCCUPANCY - DELAY
In the event that the Lessee's access to the Premises is delayed so
that the Fixturing Period is less than 90 days, then all dates
contained herein including the Commencement Date and shall be adjusted
accordingly with no loss of benefit to the Lessee. All other terms and
conditions shall remain as agreed to in this Offer.
9. LESSEE'S WORK
The Lessee shall be permitted to construct Leasehold Improvements in
the premises (the Lessee's Work), at its sole expense save and except
the Lessor's Leasehold Improvements allowances and in a good and
workmanlike manner, in accordance with a space plan to be finalized by
the Lessee, subject to the Lessor's prior approval of all plans, which
approval shall not be unreasonably withheld or delayed. The Lessee
shall be permitted to select its own contractors, consultants, trades,
mechanical and electrical contractors, etc. The Lessee shall coordinate
the construction of the Leasehold Improvements and will not be required
to pay any supervision or management fees to the Lessor.
10. WORKING DRAWINGS
The Lessee shall submit to the Lessor for approval which approval shall
not be unreasonably withheld, working drawings of the proposed Lessee's
improvements to the Leased Premises, which drawings must be approved by
the Lessor prior to the commencement of any such work, and provided
further that such work shall be done by qualified and licensed
contractors or sub-contractors. The Lessee shall improve the Leased
Premises to a standard in keeping with the appearance and character of
a first class office building.
11. PERMITS AND APPROVALS
It is the Lessee's responsibility to secure all the necessary building
permits and approvals required by the City of Edmonton and any other
applicable governmental authority having jurisdiction, as it applies to
occupancy and leasehold improvements. The Lessee shall also be
responsible for making application for a certificate of occupancy if
required by the City of Edmonton, as it applies to its leasehold
improvements.
12. LEASEHOLD IMPROVEMENT ALLOWANCE
The Lessor agrees to provide, based on professionally prepared plans
and specifications approved by the Lessee, a Leasehold Improvement
Allowance for the Leased Premises, the costs of which shall include but
not be limited to all design and consultant fees, demolition, heating,
ventilation and air conditioning modifications, construction material
and labour, electrical and lighting and finishes.
The Lessor shall pay for the cost of the Leasehold Improvement
Allowance up to a maximum of Fifteen Dollars ($15.00) per square foot
of Rentable Area leased. The Lessee shall repay the total cost of the
Leasehold Improvement Allowance to the Lessor by amortizing such costs
over the Term of the lease to be paid on the same dates as the payment
of Basic Rent. The amortized cost of Leasehold Improvements payable by
the Lessee shall be Four Dollars and Thirty-Two Cents ($4.32) per
square foot per annum. No Lessor markup will be charged to the Lessee
for services related to Leasehold Improvements. The Lessee shall pay
for the cost of any and all costs which exceed Fifteen Dollars ($15.00)
per square foot of the Rentable Area leased. The Lessor shall be
entitled to exercise all of its remedies in this Lease applicable to
the non-payment of Basic Rent in respect of any default in the payment
of any payments of such costs for Leasehold Improvements and for such
costs exceeding Fifteen Dollars ($15.00) per square foot. At the
termination of the Lease, the Lessee shall not be required to restore
the Leased Premises to the original base building standard or to the
condition existing prior to the commencement of the Lease.
The cost, for the base building modifications including, without
limitation, the demolition of the existing improvements, Clause #29 of
this Offer to Lease, shall not be deducted form the Leasehold
Improvement Allowance.
13. EARLY OCCUPANCY
To the extent that the Leasehold Improvements are completed prior to
the Commencement Date, the Lessee shall be permitted occupancy on a
Gross Rent free basis until the Commencement Date. During this gross
rent free period all terms and conditions of the Lease shall be in full
force and effect.
14. RESTORATION
It is understood and agreed that the Lessee shall not be required to
restore the Premises to their original condition. Upon expiry of the
Lease, the Lessee shall leave the Premises in vacant, broom-swept
condition.
15. OPTION TO RENEW
The Lessee, if not then in default under the Lease, either in payment
of rent or observance of the covenants therein, shall have the Option
to renew the Lease for a further term of five (5) years upon giving the
Lessor at least six (6) months' notice of the exercise of such right
subject to substantially the same provisions as are contained in the
Lease except that there shall be no further right of renewal, the rent
for the extended term the New Annual Basic Rent shall be the then fair
market rent for the Premises with allowance for improvement allowance,
turnkey package and/or cash inducements given by Lessor's to achieve
such rent which rent shall be negotiated between the Lessor and the
Lessee at that time.
In the event that the parties cannot arrive at a mutually agreed upon
New Annual Basic Rent for the Premises within three (3) months prior to
the expiration of the term, the Lessee shall have the right to revoke
its notice of intent to renew within five (5) days from such date (in
which case the notice shall be deemed to never have been sent) failing
which the matter shall be determined by three (3) accredited real
estate brokers (the "Three Experts") at least thirty (30) days prior to
the expiration of the Lease Term, which experts shall be familiar
rental rates in the area of the Premises, one of whom shall be
appointed by the Lessor (the "Lessor's Expert) and all costs associated
with the Lessor's Expert shall be the sole responsibility of the
Lessor, and one expert shall be appointed by the Less (the Lessee's
Expert) and all costs associated with the Lessee's Expert shall be the
sole responsibility of the Lessee. The appointment of the third expert
(the "Third Expert") shall be agreed upon by the Lessor's Expert and
the Lessee's Expert and fifty percent (50%) of costs attributable to
the Third Expert shall be borne by the Lessee and the remaining fifty
percent (50%) of costs attributable to the Third Expert shall be borne
by the Lessor. Together the Three Experts, acting reasonably, shall
make the final determination of New Annual Basic Rent and should the
Three Experts be unable to agree among themselves on the determination,
the opinion of the majority, being two(2) of the Three Experts, shall
be final and binding on the Lessor and the Lessee. During any
arbitration, the Lessee may remain in the Premises on the same terms
and conditions as are set out in this Offer to Lease and in the lease
and the annual net rent shall at the same rate as the annual net rent
payable during the last year of the first renewal period until the
final determination of New annual Basic Rent has been made.
16. BUILDING ACCESS
Except in cases of emergency, the Lessor agrees to provide the Lessee
with access to the building on a twenty-four (24) hour basis, seven (7)
days a week through the main lobbies, stairs and entrances as well as
parking lots and all elevators. The Lessor agrees that the existing
security (card access) or the equivalent will be available to the
Lessee throughout the term of the Lease, and that there will be no
access to the Premises other than through card access.
17. DEPOSIT
Upon execution of this Lease and waiver of all conditions by both
parties, the Lessee shall deliver to the Selling Broker a deposit equal
to Two (2) month gross rent. The Selling Broker shall hold these funds
in an interest bearing account, with interest accruing to the Lessee's
account, bearing interest at the then current rates offered by the
Selling Broker's Canadian Chartered Bank. The full amount of the
Deposit together with all accrued interest shall be applied to the
first rents owing as at the Commencement Date.
18. ASSIGNMENT AND SUBLETTING
The Leases shall have the right to sublet the Premises at any time or
times with the Lessor's consent, which consent shall not be
unreasonably withheld.
19. USE OF PREMISES
The Lessee shall not cause, suffer or permit the Premises to be used
for any purpose other than general office space and/or data centre or
any other permitted use under the municipal by-laws.
20. IDENTIFICATION
The Lessor shall provide the Lessee with identification signs posted on
ground floor lobby directory boards and the building exterior at
Lessee's cost.
21. SIGNAGE
Provided that lessee is the original Lessee, Saville Systems Canada,
Ltd. and is itself in possession of and conducting its business from
the whole of the Premises Lessee shall have the sole right to install a
corporate sign ("Sign") at Lessee's sole expense, to be located on and
affixed to the Building. Details as to location, colour, size style,
wording, character, installation, operation, maintenance, and materials
(as each relates to the Sign) shall be provided in writing to Lessor
for Lessor's written approval. Lessee must receive written approval
from Lessor prior to installation of the sign and the sign shall in all
ways be in full compliance with all existing governmental regulations
and/or by-laws. The Lessor further agrees to remove the existing
signage and repair any damages as a result of the removal of such
signage at its sole cost. All agreements relating to building signage
shall be completed at the time of the execution of the Lease.
22. LEASE CANCELLATION
Initial Premises
Notwithstanding anything contained in the Lease to the contrary, and
provided Saville Systems Canada, Ltd. are carrying on business in the
Premises, the Lessee shall have the right to terminate the Lease on the
fourth anniversary of the Term of the Lease upon not less than six (6)
months prior written notice to the Lessor. During the six (6) months
notice period, the Lessee shall have the right to occupy the Premises
under the terms of its Lease, or the Lessee may vacate the premises and
pay the Lessor a lump sum equal to the gross rent remaining during said
notice period.
In the event the Lessee exercises the right to terminate its Lease as
of the fourth (4th) anniversary in the manner described above, then the
Lessor shall be entitled to receive from the Lessee a lump sum of One
Hundred and Seventy-Five Thousand Dollars ($175,000.00). Payment shall
occur on the date of termination.
23. PARKING
The Lessor shall make available to the Lessee, Sixty-Two (62) parking
spaces located in the underground parking garage of the Building
throughout the Term of the Lease at no charge. The Lessor further
agrees to provide the Lessee with the use of Eighteen (18) surface
parking space at no charge throughout the term of the lease and shall
allow the Lessee at their own cost to install signage designating
specific parking stalls as visitor parking. The Lessor further agrees
to use its best efforts to secure an additional 150 parking stalls
across from the Premises currently known as the Allendale Bingo and the
Lessee agrees to pay all costs associated with securing the additional
parking stalls.
24. FINANCIAL STANDING
Saville Systems PLC agrees to guarantee the Lease throughout the term
on behalf of Saville Systems Canada, Ltd.
25. LEGAL ADVICE
The Parties to this Agreement acknowledge that CB Commercial Real
Estate Group Canada, Inc. has recommended that they obtain advice from
their Legal Counsel prior to signing this document. The Parties further
acknowledge that no information provided by CB Commercial Real Estate
Group Canada, Inc. is to be construed as legal or tax advice.
26. FAX TRANSMISSION
Acceptance of this Offer may be communicated by facsimile transmission
of an accepted Offer or by delivery of such facsimile without limiting
other methods of communicating acceptance available to the parties.
27. NO REPRESENTATION
It is agreed and understood that there are no covenants,
representations, agreements, warranties or conditions in any way
relating to this Offer whether express or implied, collateral or
otherwise, except those set forth in this Offer.
28. TIME OF THE ESSENCE
Time is of the essence of this agreement and each part of it.
29. BASE BUILDING MODIFICATION
Subject to the Lessor's reasonable approval which shall not be withheld
or delayed, the Lessee shall at its own expense be permitted to effect
modifications, upgrades and/or additions to the existing base building
systems, affecting the Lessee's Premises according to the Lessee's
Consulting Report attached hereto as Schedule "C". Base Building
Systems shall include but not be limited to all heating, ventilating
and air conditioning systems and equipment, electrical equipment,
including lighting, and plumbing, including sprinklers. The Lessee
shall be permitted to use its own forces to complete the work. The
Lessor shall not charge any supervision or management fee in connection
with the work.
The Lessor agrees to provide the Lessee with an allowance up to a
maximum of Eight Dollars ($8.00) per square foot for the purposes of
making modifications to the Base Building. The Lessor agrees to pay all
Lessee invoices to a maximum of Eight Dollars ($8.00) per square foot
relating to Base Building Work within fifteen (15) days of receipt.
30. LESSEE'S CONDITIONS
This Offer shall be conditional for ten (10) business days following
acceptance by both parties pending approval of the Lessee's Board of
Directors. In the event that this condition is not waived, this Offer
shall be considered null and void with all deposit monies to be
returned to the Lessee without interest or deduction.
31. GOODS AND SERVICES TAX (G.S.T.)
The Lessee covenants with the Lessor to pay, to the person or authority
to whom they are payable, on or before the due date thereof, any and
all sales or services taxes on the Lessee's premises, however
designated which are levied, imposed or assessed by lawful authority in
this Lease, and whether they are levied, imposed or assessed against
the Lessor or the Lessee. The Lessee further covenants to indemnify and
serve the Lessor harmless from any and all liability, costs, expenses
or penalties incurred by the Lessor as a result of such sales or
services taxes. The Lessee's obligation to observe or perform this
covenant shall survive the expiration or other termination of its Lease
Agreement.
The Lessor will comply with all provisions of the goods and services
tax.
<PAGE>
SCHEDULE "C"
KRAWFORD CONSTRUCTION INC.
Cost Estimates for Cooperators Building
July 16, 1997
Cost per Square
Square Foot Footage Total
1. Floor Preparation $0.40 x27,000 $10,800.00
2. Demolition 2.15 x27,000 58,050.00
3. New T-bar grid and Ceiling Tile 1.40 x27,000 37,800.00
a) Remove and reinstall existing lighting 0.65 x27,000 17,550.00
b) Clean existing light fixtures 0.20 x27,000 5,400.00
c) Relamp existing light fixtures 0.24 x27,000 6,480.00
4. Life Safety Upgrading ? n/a 5,000.00
5. Re-ballast Existing Light Fixtures ? n/a 5,000.00
6. Exterior Re-caulking of Building ? n/a 10,000.00
7. Mechanical HVAC Upgrading 4.23 x27,000 114,210.00
8. Repair Existing Mechanical ? n/a 5,000.00
9. Clean Air Systems ? n/a 6,000.00
10. Service Existing Hot Water Heater Pump ? n/a 1,500.00
11. New Washroom Fixtures (6) 0.30 x27,000 8,100.00
BUDGET TOTAL (G.S.T. EXTRA) 10.77 $290,890.00
To Convert existing drive through area into leasable floor space:
a) Exterior Windows
b) Exterior Masonry
c) Demolition
d) Floor Preparation +/- 40,000.00 - 50,000.00/total
e) T-bar
f) Electrical
g) Mechanical
EXHIBIT 21.1
SUBSIDIARIES
NAME OF SUBSIDIARY JURISDICTION
Saville Systems Canada, Ltd. Canada
Saville Systems, Inc. United States
Saville Systems (UK) Limited United Kingdom
Saville C.I. Limited Jersey
2916746 Canada Inc. Canada
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 File Nos. 33-80607 and 333-39149) pertaining to the 1995 Share Option
Plan and the 1996 Employee Share Purchase Plan of Saville Systems PLC and in the
related Prospectuses of our reports dated January 22, 1998 with respect to the
consolidated financial statements of Saville Systems PLC incorporated by
reference in this Annual Report (Form 10-K) for the year ended December 31,1997.
Our audits also included the financial statement schedule of Saville Systems PLC
listed in Item 14(a)(2). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
ERNST & YOUNG
/s/ Ernst & Young
Galway, Ireland
March 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 55,785
<SECURITIES> 13,015
<RECEIVABLES> 24,060
<ALLOWANCES> 1,687
<INVENTORY> 0
<CURRENT-ASSETS> 94,754
<PP&E> 13,367
<DEPRECIATION> 2,746
<TOTAL-ASSETS> 105,375
<CURRENT-LIABILITIES> 24,371
<BONDS> 336
0
48
<COMMON> 94
<OTHER-SE> 80,160
<TOTAL-LIABILITY-AND-EQUITY> 105,375
<SALES> 0
<TOTAL-REVENUES> 107,045
<CGS> 0
<TOTAL-COSTS> 46,448
<OTHER-EXPENSES> 27,365
<LOSS-PROVISION> 1,010
<INTEREST-EXPENSE> 61
<INCOME-PRETAX> 32,161
<INCOME-TAX> 7,989
<INCOME-CONTINUING> 23,937 <F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,937
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.61
<FN>
<F1> After deducting minority interest of 235
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<CURRENCY> U.S.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 24,141 24,141
<SECURITIES> 5,000 5,000
<RECEIVABLES> 11,262 11,262
<ALLOWANCES> 486 486
<INVENTORY> 0 0
<CURRENT-ASSETS> 41,253 41,253
<PP&E> 4,179 4,179
<DEPRECIATION> 959 959
<TOTAL-ASSETS> 45,217 45,217
<CURRENT-LIABILITIES> 7,193 7,193
<BONDS> 0 0
0 0
48 48
<COMMON> 44 44
<OTHER-SE> 37,642 37,642
<TOTAL-LIABILITY-AND-EQUITY> 45,217 45,217
<SALES> 0 0
<TOTAL-REVENUES> 12,305 22,860
<CGS> 0 0
<TOTAL-COSTS> 5,957 11,094
<OTHER-EXPENSES> 3,070 5,925
<LOSS-PROVISION> 39 116
<INTEREST-EXPENSE> 5 11
<INCOME-PRETAX> 3,234 5,714
<INCOME-TAX> 597 1,037
<INCOME-CONTINUING> 2,562 <F1> 4,604 <F1>
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,562 4,604
<EPS-PRIMARY> 0.07 0.13
<EPS-DILUTED> 0.07 0.12
<FN>
<F1> After deducting minority interest of 75 and 73, respectively
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<CURRENCY>U.S.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 28,681 28,681
<SECURITIES> 0 0
<RECEIVABLES> 15,793 15,793
<ALLOWANCES> 671 671
<INVENTORY> 0 0
<CURRENT-ASSETS> 45,118 45,118
<PP&E> 5,139 5,139
<DEPRECIATION> 1,168 1,168
<TOTAL-ASSETS> 49,832 49,832
<CURRENT-LIABILITIES> 7,910 7,910
<BONDS> 0 0
0 0
48 48
<COMMON> 45 45
<OTHER-SE> 41,527 41,527
<TOTAL-LIABILITY-AND-EQUITY> 49,832 49,832
<SALES> 0 0
<TOTAL-REVENUES> 14,747 37,607
<CGS> 0 0
<TOTAL-COSTS> 6,992 18,086
<OTHER-EXPENSES> 3,334 9,259
<LOSS-PROVISION> 185 301
<INTEREST-EXPENSE> 3 14
<INCOME-PRETAX> 4,233 9,947
<INCOME-TAX> 910 1,947
<INCOME-CONTINUING> 3,311 <F1> 7,915 <F1>
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,311 7,915
<EPS-PRIMARY> 0.09 0.22
<EPS-DILUTED> 0.09 0.21
<FN>
<F1> After deducting minority interest of 12 and 85, respectively
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 34,395
<SECURITIES> 1,000
<RECEIVABLES> 16,064
<ALLOWANCES> 756
<INVENTORY> 0
<CURRENT-ASSETS> 52,214
<PP&E> 5,684
<DEPRECIATION> 1,409
<TOTAL-ASSETS> 56,489
<CURRENT-LIABILITIES> 9,558
<BONDS> 0
0
48
<COMMON> 45
<OTHER-SE> 46,518
<TOTAL-LIABILITY-AND-EQUITY> 56,489
<SALES> 0
<TOTAL-REVENUES> 53,920
<CGS> 0
<TOTAL-COSTS> 25,744
<OTHER-EXPENSES> 12,984
<LOSS-PROVISION> 386
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 14,761
<INCOME-TAX> 3,052
<INCOME-CONTINUING> 11,569 <F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,569
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.31
<FN>
<F1> After deducting minority interest of 140
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 27,935
<SECURITIES> 8,000
<RECEIVABLES> 23,714
<ALLOWANCES> 1,120
<INVENTORY> 0
<CURRENT-ASSETS> 60,244
<PP&E> 6,036
<DEPRECIATION> 1,658
<TOTAL-ASSETS> 64,622
<CURRENT-LIABILITIES> 12,074
<BONDS> 0
0
48
<COMMON> 45
<OTHER-SE> 52,128
<TOTAL-LIABILITY-AND-EQUITY> 64,622
<SALES> 0
<TOTAL-REVENUES> 20,130
<CGS> 0
<TOTAL-COSTS> 9,327
<OTHER-EXPENSES> 4,662
<LOSS-PROVISION> 370
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 5,767
<INCOME-TAX> 1,325
<INCOME-CONTINUING> 4,402<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,402
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.11
<FN>
<F1> After deducting minority interest of 40.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<CURRENCY> U.S.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<EXCHANGE-RATE> 1 1
<CASH> 30,642 30,642
<SECURITIES> 19,059 19,059
<RECEIVABLES> 25,055 25,055
<ALLOWANCES> 1,365 1,365
<INVENTORY> 0 0
<CURRENT-ASSETS> 76,455 76,455
<PP&E> 7,185 7,185
<DEPRECIATION> 1,980 1,980
<TOTAL-ASSETS> 81,660 81,660
<CURRENT-LIABILITIES> 22,715 22,715
<BONDS> 0 0
0 0
48 48
<COMMON> 46 46
<OTHER-SE> 58,468 58,468
<TOTAL-LIABILITY-AND-EQUITY> 81,660 81,660
<SALES> 0 0
<TOTAL-REVENUES> 25,493 45,623
<CGS> 0 0
<TOTAL-COSTS> 11,098 20,425
<OTHER-EXPENSES> 6,637 11,299
<LOSS-PROVISION> 244 614
<INTEREST-EXPENSE> 3 7
<INCOME-PRETAX> 7,511 13,278
<INCOME-TAX> 1,995 3,320
<INCOME-CONTINUING> 5,441 <F1> 9,843 <F1>
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,441 9,843
<EPS-PRIMARY> 0.15 0.27
<EPS-DILUTED> 0.14 0.25
<FN>
<F1> After deducting minority interest of 75 and 115, respectively
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<CURRENCY>U.S.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<EXCHANGE-RATE> 1 1
<CASH> 34,524 34,524
<SECURITIES> 22,004 22,004
<RECEIVABLES> 29,834 29,834
<ALLOWANCES> 1,760 1,760
<INVENTORY> 0 0
<CURRENT-ASSETS> 87,702 87,702
<PP&E> 9,492 9,492
<DEPRECIATION> 2,313 2,313
<TOTAL-ASSETS> 94,881 94,881
<CURRENT-LIABILITIES> 23,063 23,063
<BONDS> 0 0
0 0
48 48
<COMMON> 93 93
<OTHER-SE> 71,371 71,371
<TOTAL-LIABILITY-AND-EQUITY> 94,881 94,881
<SALES> 0 0
<TOTAL-REVENUES> 28,581 74,204
<CGS> 0 0
<TOTAL-COSTS> 12,617 33,042
<OTHER-EXPENSES> 7,131 18,430
<LOSS-PROVISION> 396 1,010
<INTEREST-EXPENSE> 7 14
<INCOME-PRETAX> 8,430 21,708
<INCOME-TAX> 2,096 5,416
<INCOME-CONTINUING> 6,284 <F1> 16,127 <F1>
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,284 16,127
<EPS-PRIMARY> 0.17 0.44
<EPS-DILUTED> 0.16 0.41
<FN>
<F1> After deducting minority interest of 50 and 165, respectively
</FN>
</TABLE>
