UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|x| Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number 0-27176
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)
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. |x| Yes |_| No
Number of shares outstanding of the registrant's class of Ordinary Shares as of
August 5, 1999 was 39,224,714.
<PAGE>
SAVILLE SYSTEMS PLC
FORM 10-Q REPORT
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
TABLE OF CONTENTS
Part I - Financial Information PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1999
(unaudited) and December 31, 1998 3
Consolidated Statements of Income for the three months and
for the six months ended June 30, 1999 and 1998 (unaudited) 4
Consolidated Statements of Cash Flows for the six months ended
June 30, 1999 and 1998 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-19
Item 3. Market Risk 20
Part II - Other Information
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
<PAGE>
Saville Systems PLC
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share data amounts)
<TABLE>
June 30 December 31
1999 1998
(unaudited)
- ------------------------------------------------------ ------------ -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $51,699 $40,330
Short-term investments 47,256 47,492
Accounts receivable, less allowance for doubtful
accounts of $3,593 and $1,943, respectively 37,550 43,729
Prepaid expenses and other assets 8,160 4,471
- ------------------------------------------------------ ------------ -----------
Total current assets 144,665 136,022
Property and equipment, net 15,027 12,277
Other assets, net 12,292 13,346
- ------------------------------------------------------ ------------ -----------
Total assets $171,984 $161,645
- ------------------------------------------------------ ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable 6,137 5,377
Accrued compensation and related benefits 8,004 7,128
Accrued expenses and other liabilities 6,647 4,644
Income taxes payable 7,080 8,804
Deferred revenue 7,432 947
Current portion of long-term liabilities 1,144 1,116
- ------------------------------------------------------ ------------ -----------
Total current liabilities 36,444 28,016
Long-term liabilities 113 1,178
Minority interest 253 361
- ------------------------------------------------------ ------------ -----------
Total liabilities 36,810 29,555
- ------------------------------------------------------ ------------ -----------
Commitments and Contingencies (note 5)
Shareholders' equity
Ordinary Shares, nominal value $0.0025 per share
Authorized: 75,000,000
Issued and outstanding: 39,181,575
and 38,908,488, respectively 98 97
Deferred Ordinary Shares, nominal value IR(pound)
1.00 per share
Authorized, issued and outstanding: 30,000 48 48
Additional paid-in capital 66,443 63,766
Retained earnings 69,370 69,802
Accumulated other comprehensive income (785) (1,623)
- ------------------------------------------------------ ------------ -----------
Total shareholders' equity 135,174 132,090
- ------------------------------------------------------ ------------ -----------
Total liabilities and shareholders' equity $171,984 $161,645
- ------------------------------------------------------ ------------ -----------
</TABLE>
See accompanying notes
<PAGE>
Saville Systems PLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
(in thousands of U.S. dollars, except share and per share data)
<TABLE>
Three months ended Six months ended
June 30 June 30 June 30 June 30
1999 1998 1999 1998
- ---------------------------------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE
Services $30,832 $31,114 $57,215 $61,053
License fees 10,666 11,797 14,451 19,880
- ---------------------------------- --------- --------- ---------- ----------
Total revenue 41,498 42,911 71,666 80,933
- ---------------------------------- --------- --------- ---------- ----------
EXPENSES
Cost of services 19,857 16,063 37,814 30,111
Cost of license fees 358 270 449 550
Sales and marketing 3,142 2,186 5,599 4,108
Research and development 6,080 5,968 12,168 9,899
General and administrative 9,228 8,108 17,637 14,651
Charge for purchased in-process
research and development - 9,168 - 9,168
- ---------------------------------- --------- --------- ---------- ----------
Total expenses 38,665 41,763 73,667 68,487
- ---------------------------------- --------- --------- ---------- ----------
Income (loss) from operations 2,833 1,148 (2,001) 12,446
Other income, net 722 631 1,441 1,354
- ---------------------------------- --------- --------- ---------- ----------
Income (loss) before income taxes 3,555 1,779 (560) 13,800
Income tax provision (benefit) 818 1,743 (128) 4,568
- ---------------------------------- --------- --------- ---------- ----------
- ---------------------------------- --------- --------- ---------- ----------
Net income (loss) $ 2,737 $ 36 $(432) $9,232
- ---------------------------------- --------- --------- ---------- ----------
Basic earnings (loss) per share $ 0.07 $ - $ (0.01) $ 0.24
Diluted earnings (loss) per share $ 0.07 $ - $ (0.01) $ 0.23
- ---------------------------------- --------- --------- ---------- ----------
(in thousands)
Ordinary shares 39,188 38,554 39,108 38,188
Ordinary shares assuming dilution 39,905 41,269 39,108 41,057
- ---------------------------------- --------- --------- ---------- ----------
</TABLE>
See accompanying notes
<PAGE>
Saville Systems PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands of U.S. dollars)
<TABLE>
Six months ended
June 30 June 30
1999 1998
- -------------------------------------------------------- ----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (432) $ 9,232
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation of property and equipment 1,640 1,170
Amortization of other assets 1,638 543
Provision for doubtful accounts 2,420 585
Loss (gain) on sale of property and equipment 26 (119)
Compensation related to stock transactions 103 103
Deferred income taxes (1,318) (1,088)
Charge for purchased in-process research
and development - 9,168
Changes in operating assets and liabilities:
Accounts receivable 3,754 (15,023)
Prepaid expenses and other assets (2,408) (1,768)
Accounts payable (332) 160
Accrued compensation and related benefits 876 2,367
Accrued expenses and other liabilities 1,978 (339)
Income taxes payable (1,724) 651
Deferred revenue 6,485 5,610
- -------------------------------------------------------- ----------- ----------
Net cash provided by operating activities 12,706 11,252
- -------------------------------------------------------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (2,902) (2,893)
Purchase of other assets - (2,089)
Purchase of business assets - (19,167)
Net maturity (purchase) of short-term investments 236 (34,596)
- -------------------------------------------------------- ----------- ----------
Net cash used in investing activities (2,666) (58,745)
- -------------------------------------------------------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on capital lease obligations (67) (64)
Repayment of long-term liabilities (981) -
Advances on operating line of credit 383 15,100
Repayments on operating line of credit (383) (15,100)
Proceeds from share issuances 2,481 23,356
Share issue costs (25) (428)
Tax benefit on employee stock transactions 38 634
- -------------------------------------------------------- ----------- ----------
Net cash provided by financing activities 1,446 23,498
- -------------------------------------------------------- ----------- ----------
Effect of exchange rate changes on cash (117) 90
- -------------------------------------------------------- ----------- ----------
Net increase (decrease) in cash and cash equivalents 11,369 (23,905)
Cash and cash equivalents, beginning of period 40,330 55,785
- -------------------------------------------------------- ----------- ----------
Cash and cash equivalents, end of period $ 51,699 $ 31,880
- -------------------------------------------------------- ----------- ----------
Short-term investments 47,256 47,611
- -------------------------------------------------------- ----------- ----------
Cash and short-term investments $ 98,955 $ 79,491
- -------------------------------------------------------- ----------- ----------
</TABLE>
See accompanying notes
<PAGE>
Saville Systems PLC
Notes to Consolidated Financial Statements as of June 30, 1999 (unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by Saville Systems PLC ("the Company" or "Saville") in accordance with U.S.
generally accepted accounting principles for interim financial information and
with instructions to Form 10-Q. Accordingly, certain information and footnote
disclosure normally included in the Company's audited annual consolidated
financial statements have been condensed or omitted in accordance with the rules
and regulations of the United States Securities and Exchange Commission. The
unaudited interim consolidated financial statements, in the opinion of
management, reflect all adjustments (consisting only of normal and recurring
adjustments) necessary for a fair presentation of the results of the interim
periods ended June 30, 1999 and 1998 and the financial position as of June 30,
1999.
The results of operations for the interim periods are not necessarily indicative
of the results of operations to be expected for the fiscal year. These interim
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements of the Company which are contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
2. ACQUISITION BY ADC TELECOMMUNICATIONS, INC.
In June 1999, the Company announced, in conjunction with ADC Telecommunications,
Inc. ("ADC"), that the two companies had reached a definitive agreement dated
June 19, 1999 (as amended by the First Amendment to Agreement between the
parties, dated June 30, 1999, the "Agreement") for ADC to acquire 100% of the
Company pursuant to a Scheme of Arrangement under the Companies Act of Ireland
(the "Acquisition"). ADC is a leading global supplier of voice, video and data
systems and software for communications networks. Through the Acquisition, which
is structured as a tax-free reorganization for U.S. federal income tax purposes,
ADC will issue 0.358 of a share of its Common Stock for each Ordinary Share of
the Company (the "Exchange Ratio") and 0.027 of a share of its Common Stock for
each Deferred Share. Outstanding options to purchase the Company's Ordinary
Shares will be assumed by ADC with adjustments to the shares issuable thereunder
and the exercise price thereof based on the Exchange Ratio.
The Company has also granted ADC an option to purchase up to 19.9% of the
Company's Ordinary Shares exercisable in certain circumstances, including
certain events causing termination of the Agreement. Pursuant to the Agreement,
the Company has agreed to pay ADC's actual expenses up to $1.5 million if the
agreement is terminated in certain circumstances and has also agreed, if the
Agreement is terminated in certain other circumstances, to purchase the option
from ADC for cash and limit the profit which ADC can realize in conjunction with
the option and the payment of a termination fee combined to $21.0 million.
The Acquisition, which is expected to close during the Company's fourth quarter,
is intended to be accounted for as a "pooling of interests", and is subject to
certain conditions, including Company shareholder approval and other regulatory
filings and approvals, which includes the sanction of the High Court in Ireland.
3. SUPPLEMENTAL CASH FLOW INFORMATION
(in thousands of U.S. dollars)
<TABLE>
Six Months Ended
June 30 June 30
1999 1998
- ------------------------------------------------- ------------- -----------
<S> <C> <C>
Cash Transactions:
Cash paid for interest 64 157
Cash paid for income taxes 3,688 4,043
Non-Cash Transactions:
Technology acquired by long-term liabilities - 2,000
- ------------------------------------------------- ------------- -----------
</TABLE>
4. LONG-TERM LIABILITIES
Line of credit
During the quarter ended March 31, 1999 the Company received an extension of its
US $15.0 million line of credit until August 31, 2000. This multi-currency line
of credit was obtained in 1997 from a financial institution and was available to
the Company and its subsidiaries for a two year period ending August 31, 1999.
The terms of the line of credit including interest rates, standby fees and
financial covenants remain unchanged from December 31, 1998. The Company was in
compliance with the covenants at June 30, 1999 and December 31, 1998 and no
advances were outstanding on either date.
Minimum Royalty Payments
During the six months ended June 30, 1999 the Company made a royalty payment of
$982,000 which was required as part of the purchase of telecommunications
interconnect billing software technology made in 1998. The remaining $1.0
royalty payment (less any additional royalties paid in 1999) is due in 2000 and
is included in the current portion of long-term liabilities.
5. COMMITMENTS AND CONTINGENCIES
During the six months ended June 30, 1999, the Company entered into new office
leases with commitments totaling $23.1 million through 2010.
On April 19, 1999, the Company received a notice of demand for arbitration filed
by a former customer, Cellular Holdings, Inc. (also known as Cellular South and
Telepak), alleging certain failures to perform under the agreements between the
Company and Cellular Holdings. The customer seeks a refund of approximately $6.6
million paid to Saville under the agreements plus additional expenses and costs.
The Company denies Cellular Holdings' allegations and believes that its claims
are without merit. In addition, Cellular Holdings presently owes the Company
approximately $4.0 million for work performed under these agreements. On May 11,
1999 the Company filed an answering statement and counterclaim in arbitration to
pursue the payment of all outstanding amounts, applicable interest and expenses.
There can be no assurance, however, as to the outcome of this dispute.
6. SHARE CAPITAL
During the three and six month periods ended June 30, 1999 the Company issued
96,681 and 273,087 Ordinary Shares, respectively, for approximately $466,000 and
$2.5 million to officers and employees pursuant to option exercises and stock
purchases under the 1995 Share Option Plan ("1995 Plan") and the 1996 Employee
Share Purchase Plan ("1996 Plan").
Also during the six month period ended June 30, 1999, the Company granted
approximately 2,355,000 options under the 1995 Plan to employees at a weighted
average exercise price of $19.48. The Company also granted to ADC an option to
purchase up to 19.9% of the Company's Ordinary Shares at an exercise price of
$17.50 (7,793,133 optioned shares as at June 30, 1999).
7. COMPREHENSIVE INCOME
The Company's comprehensive income was as follows:
(in thousands of U.S. dollars)
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
1999 1998 1999 1998
- ------------------------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net income $ 2,737 $ 36 $ (432) $9,232
Foreign currency translation
adjustment, net of NIL tax 324 (1,007) 838 (976)
- ------------------------------ ---------- ---------- ---------- ------------
Comprehensive (loss) income $ 3,061 $ (971) $ 406 $8,256
- ------------------------------ ---------- ---------- ---------- ------------
</TABLE>
The earnings of the Company's non-Irish foreign subsidiaries, which give rise to
the foreign currency translation adjustments, are reinvested with no plan for
repatriation. Therefore, there is no tax effect on this component of other
comprehensive income.
8. EARNINGS (LOSS) PER SHARE
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
1999 1998 1999 1998
- --------------------------------------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C>
(in thousands of U.S. dollars)
Numerator:
Net income (loss) $ 2,737 $ 36 $ (432) $ 9,232
(in thousands)
Denominator:
Denominator for basic earnings
per share -
Weighted average shares outstanding 39,188 38,554 39,108 38,188
- --------------------------------------- -------- --------- ---------- ---------
Effect of dilutive securities:
Stock options 717 2,715 - 2,869
- --------------------------------------- -------- --------- ---------- ---------
Denominator for diluted earnings
per share 39,905 41,269 39,108 41,057
Basic earnings (loss) per share $ 0.07 $ - $ (0.01) $ 0.24
Diluted earnings (loss) per share $ 0.07 $ - $ (0.01) $ 0.23
- --------------------------------------- -------- --------- ---------- ---------
</TABLE>
Options to purchase approximately 195,000 and 5,892,000 shares, outstanding as
of June 30, 1998 and June 30, 1999, respectively, were excluded in the above
computation for the respective three month periods because the exercise price of
such options was greater than the average market price of the shares and
therefore would be anti-dilutive.
Options to purchase approximately 6,990,000 shares, outstanding as of June 30,
1999, were not included in the above computation of diluted loss per share for
the six months ended June 30, 1999 because, given the net loss for this period,
the effect of such options would be anti-dilutive on an earnings per share
basis.
The computation for the six month period ended June 30, 1998 also excluded
approximately 210,000 options to purchase shares as the exercise price exceeded
the average market price of the shares.
Also excluded in the calculation of diluted earnings (loss) per share for the
three and six month periods ended June 30, 1999 was the option granted to ADC to
purchase 7,793,133 shares, the exercise price for which was also greater than
the average market price of the shares, but is only exercisable under certain
circumstances.
9. SEGMENT INFORMATION
The Company operates in a single business segment which offers similar products
and services. The Company's products are similar in nature, providing customer
care and billing solutions software for service providers in the
telecommunications and energy industries. The Company distributes its products
throughout the world through a direct sales force.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
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 and energy markets. Saville offers
products and services designed to enable telecommunications and energy service
providers to bring new service offerings to market quickly, and to bill
accurately and reliably for multiple services on one convergent invoice. In
order to meet the current and evolving billing requirements of its customers,
the Company continuously refines its sophisticated convergent billing platform
(CBP(R)) software products for both the UNIX/Oracle(R) and DB2/400 platforms.
The customer can either license CBP from Saville or CBP can be provided by a
Company-operated service bureau. Saville has also introduced facilities
management services, which allow customers to license CBP from Saville and have
Saville manage the operation of the software on customer-owned hardware.
Additionally, Saville has developed relationships with authorized integrators to
assist it in providing implementation services to purchasers of CBP products.
Saville also offers its interconnect billing platform (IBPTM) software product
which allows telecommunications companies to bill for carrier-to-carrier
transactions. In addition, during the three months ended March 31, 1999, Saville
released its SavilleCareTM product and its SavilleExpressTM GSM product module.
SavilleCare allows telecommunications service providers to integrate the
SavilleCare call center desktop with the providers' billing and other business
support systems. SavilleExpress GSM is a pre-configured module that, through the
SavilleExpress modular billing platform, supports the billing of services using
the Global System for Mobile Communications (GSM) standard for wireless
telecommunications. Each of these three products was developed from technologies
purchased in 1998.
In addition to its product offerings, Saville provides its customers with a full
range of professional services, including assisting a customer in analyzing its
requirements and then designing, developing and implementing a customer care and
billing solution. The Company assists its customers on an ongoing basis by
addressing their changing business needs through future enhancements and
developments to their customer care and billing solutions.
Pursuant to a definitive agreement dated June 19, 1999, by and between the
Company and ADC Telecommunication, Inc., a Minnesota corporation ("ADC"), as
amended by the First Amendment to Agreement between the parties, dated June 30,
1999 (as so amended, the "Agreement"), ADC will acquire the Company pursuant to
a Scheme of Arrangement under the Companies Act of Ireland (the "Acquisition").
Through the Acquisition, which is structured as a tax-free reorganization for
U.S. federal income tax purposes, ADC will issue 0.358 of a share of its Common
Stock for each Ordinary Share (or each American Depositary Receipt representing
an Ordinary Share) of the Company and 0.027 of a share of its Common Stock for
each Deferred Share. The Company has also granted ADC an option to purchase up
to 19.9% of the Company's Ordinary Shares exercisable in certain circumstances,
including certain events causing termination of the Agreement. Pursuant to the
Agreement, the Company has agreed to pay ADC's actual expenses up to $1.5
million if the agreement is terminated in certain circumstances and has also
agreed , if the Agreement is terminated in certain other circumstances, to
purchase the option from ADC for cash and limit the profit which ADC can realize
in conjunction with the option and the payment of a termination fee combined to
$21.0 million. The Acquisition is intended to be accounted for as a "pooling of
interests," and is subject to certain conditions, including Company shareholder
approval, certain governmental approvals, and the sanction of the High Court of
Ireland. The Acquisition is expected to close during the Company's fourth
quarter. In the event that the Acquisition is not successfully completed, the
Company's results of operations and Ordinary Share price could be materially
adversely affected.
The following information should be read in conjunction with the Unaudited
Consolidated Financial Statements and Notes thereto included in Item 1 of this
Quarterly Report and the Audited Consolidated Financial Statements and Notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
Results of Operations
Revenue. Total revenue decreased 3.3% from $42.9 million in the three
months ended June 30, 1998 to $41.5 million in the three months ended June 30,
1999, and decreased 11.5% from $80.9 million in the six months ended June 30,
1998 to $71.7 million in the six months ended June 30, 1999. Both license and
services revenue were lower due primarily to fewer new customers being added
during the first quarter, some delay in previously initiated projects, as well
as additional work required during the first quarter of 1999 to bring several
UNIX/Oracle sites into production.
Services revenue decreased slightly from $31.1 million in the three months ended
June 30, 1998 to $30.8 million in the three months ended June 30, 1999 and
decreased 6.3% from $61.1 million in the six months ended June 30, 1998 to $57.2
million in the six months ended June 30, 1999. The decreases for the three and
six month periods were primarily due to several existing customers' changing
implementation schedules, additional work required to bring several UNIX/Oracle
sites into production and a decline in new services revenue resulting from the
shortfall in new license sales.
License fees revenue decreased 9.6% from $11.8 million in the three months ended
June 30, 1998 to $10.7 million in the three months ended June 30, 1999 and
decreased 27.3% from $19.9 million in the six months ended June 30, 1998 to
$14.5 million in the six months ended June 30, 1999. The decrease was due
primarily to fewer new license sales in the first quarter of 1999. The Company's
new license sales were adversely affected by a lengthening of the sales cycle
due, in part, to uncertainty caused by recent consolidation among the Company's
competition, as well as marketing issues related to the Company's UNIX customers
going into production later in the first quarter of 1999 than expected. This
decrease was offset, partially, by license fee revenue realized as several of
the Company's customers reached incremental thresholds on their license fees.
Cost of Services. 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 costs of external contractors,
operating costs of computer equipment, training and travel expenses. Cost of
services increased 23.6% from $16.1 million in the three months ended June 30,
1998 to $19.9 million in the three months ended June 30, 1999 and increased
25.6% from $30.1 million in the six months ended June 30, 1998 to $37.8 million
in the six months ended June 30, 1999. As a percentage of services revenue, cost
of services increased from 51.6% and 49.3% in the three months and six months
ended June 30, 1998, respectively, to 64.4% and 66.1% in the same periods in
1999. The overall dollar increase in cost of services was due primarily to
increased expenses to support the Company's UNIX/Oracle product implementations,
specifically, additional personnel hired during 1998, including personnel at the
Company's Australian subsidiary which the Company acquired in April 1998, a
larger proportion of outside consultants used for implementation of the
Company's CBP for UNIX/Oracle product, as well as increased costs to retain
qualified personnel. Additionally, computer system costs to support the growth
of Saville's business during 1998 and increased costs associated with Y2K
readiness testing, also contributed to the increase. The increase in cost of
services as a percentage of services revenue was due primarily to the higher
overall services costs and lower services revenue, each as described above. As
the market demands for skilled employees and contractors increase, the Company
expects that the costs to attract, retain and train qualified personnel will
continue to increase in absolute dollars.
Cost of License Fees. Cost of license fees consists of the commission
expense on license fee revenue earned by the Company. Cost of license fees
increased 32.6% from $270,000 in the three months ended June 30, 1998 to
$358,000 in the three months ended June 30, 1999, but decreased 18.4% from
$550,000 in the six months ended June 30, 1998 to $449,000 in the six months
ended June 30, 1999. Although total dollar amounts may fluctuate on a quarter to
quarter basis, the Company expects that the cost of license fees as a percentage
of license fees revenue will remain substantially the same.
Sales and Marketing. Sales and marketing expenses consist of the
salaries, sales commissions and benefits of those employees performing these
duties as well as the related travel, marketing and promotional expenses. Sales
and marketing expenses increased 43.7% from $2.2 million in the three months
ended June 30, 1998 to $3.1 million in the three months ended June 30, 1999 and
increased 36.3% from $4.1 million in the six months ended June 30, 1998 to $5.6
million in the six months ended June 30, 1999. As a percentage of total revenue,
sales and marketing expenses increased from 5.1% in the three months ended June
30, 1998 to 7.6% in the three months ended June 30, 1999 and increased from 5.1%
in the six months ended June 30, 1998 to 7.8% in the six months ended June 30,
1999. The results from the three and six months ended June 30, 1999 include
$500,000 of incremental compensation expense related to the departure of a
senior sales executive. The remainder of the overall dollar increase was
primarily due to the growth of the Company's worldwide sales force and marketing
efforts during 1998. The increase in costs as a percentage of total revenue was
due primarily to higher overall sales and marketing costs and lower revenue,
each as described above. The Company anticipates that the continued emphasis on
its North American and European marketing efforts to increase market penetration
will increase its sales and marketing expenses in absolute dollars but expects
such expenses to decrease slightly from current levels as a percentage of total
revenue for the remainder of 1999.
Research and Development. Research and development expenses are
comprised of the salaries and related benefits of the employees and external
contractors involved in product software development, as well as computer,
travel and related expenses. Research and development expenses increased
slightly from $6.0 million in the three months ended June 30, 1998 to $6.1
million in the three months ended June 30, 1999, but increased 22.9% from $9.9
million in the six months ended June 30, 1998 to $12.2 million in the six months
ended June 30, 1999. As a percentage of total revenue, research and development
expenses increased from 13.9% and 12.2% in the three and six months ended June
30, 1998, respectively, to 14.7% and 17.0%, respectively, in the same periods in
1999. The overall dollar increase was due to new release development efforts by
the Company on its CBP products on both the UNIX/Oracle platform and to a lesser
extent, the DB2/400 platform, and additional stabilization efforts on the
current release of the CBP product for UNIX/Oracle. As well, increased
development efforts for product releases of SavilleCare and SavilleExpress in
the first quarter of 1999 and the continued development of new releases of
Saville IBP contributed to the increase. In addition, the increase in research
and development expenses as a percentage of revenue was due primarily to overall
decreases in total revenue and, to a lesser extent, additional development costs
of technologies purchased in 1998. The Company intends to continue to invest
resources to expand and enhance its product offerings in the future and
therefore expects that research and development expenses will remain at similar
levels in absolute dollars during the remainder of 1999.
General and Administrative. General and administrative expenses consist
mainly of the salaries and related benefits of management and administrative
personnel, related travel expenses, 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
amortization, and provision for doubtful collections. General and administrative
expenses increased 13.8% from $8.1 million in the three months ended June 30,
1998 to $9.2 million in the three months ended June 30, 1999, and increased
20.4% from $14.7 million in the six months ended June 30, 1998 to $17.6 million
in the six months ended June 30, 1999. As a percentage of total revenue, general
and administrative expenses also increased from 18.9% and 18.1% in the three and
six months ended June 30, 1998, respectively, to 22.2% and 24.6%, respectively,
in the same periods in 1999. The overall increase in total general and
administrative expenses was attributable, in part, to facility and service
expansion in several locations associated with the growth in the Company's
employee base and the expansion of the Company's business, including the
acquisition of the Company's Australian subsidiary in April 1998. Additional
general and administrative expenses in the six months ended June 30, 1999 were
due to increased provisions for doubtful accounts due to uncertainty regarding
the collectibility of certain specific customer accounts, as well as
amortization of goodwill and completed technology arising from the acquisition
of the Company's Australian subsidiary. In addition to the overall increases
discussed above, the increase in general and administrative expenses as a
percentage of total revenue was also due to the decrease in total revenue as
compared to 1998. Although the Company expects that general and administrative
expenses will remain fairly consistent in absolute dollars, the Company expects
such expenses to decrease as a percentage of total revenue.
Charge for Purchased In-Process Research and Development. The charge
for purchased in-process research and development during the three and six
months ended June 30, 1998 was based on the fair value of acquired technology
that had not yet reached technological feasibility and had no future alternative
use. The value assigned to the intangible assets purchased as part of the
acquisition of Saville's Australian subsidiary and to the interconnect billing
software technology purchased was determined with the assistance of an
independent appraiser based on fair market value using a risk adjusted
discounted cash flow approach. The significant assumptions that affected the
valuations included potential revenues and cost of completion, as well as the
timing of the product releases.
Based on this valuation, the Company assigned fair values to SavilleExpress of
$2.1 million, to SavilleCare of $3.0 million and to Saville IBP of $4.1 million.
These in-process technologies had not reached technological feasibility at the
time of acquisition and had no alternative future use in other research and
development projects or otherwise. Accordingly, the acquired technology was
expensed as in-process research and development for a total charge of $9.2
million to the Company's consolidated results in the second quarter of 1998.
Other Income, Net. Other income, net, increased 14.4% from $631,000 in
the three months ended June 30, 1998 to $722,000 in the three months ended June
30, 1999, and remained relatively unchanged at $1.4 million in both the six
months ended June 30, 1998 and 1999. Increased interest income on larger cash
and short-term investment balances offset by losses on revaluation of foreign
currency denominated items due to fluctuations of market rates accounted for the
overall change.
Income Tax Provision (Benefit). The Company recorded tax provisions of
$2.5 million and $5.3 million in the three and six months ended June 30, 1998,
before the deferred tax benefit of $773,000 recognized on the one-time charge
for purchased in-process research and development. These provisions for the 1998
periods represent effective tax rates of 23.0% and 23.2%, respectively. In the
three months ended June 30, 1999, the Company recorded a tax provision of
$818,000 (effective tax rate of 23%) while in the six months ended June 30,
1999, the Company recorded an overall tax benefit of $128,000. The Company's
effective tax rate is largely dependent on the proportion of the Company's
income earned in different tax jurisdictions. The Company earns a significant
portion of its taxable income in the Republic of Ireland of which its
"manufacturing income" qualifies for a reduced tax rate of 10% which is
substantially lower than statutory rates in Ireland, Canada, the United States,
the United Kingdom and Australia. 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
1998 that the standard Irish tax rate would be reduced to 28% as of January 1,
1999 and will be reduced gradually to a tax rate of 12.5% for taxation years
ending after 2002 (as compared to 32% in 1998). Under the announced plan, the
tax rate on manufacturing income will remain at 10% until the tax relief program
is due to terminate in 2010, at which time the tax rate would increase to the
standard rate of 12.5%. Should the Company no longer qualify for this lower tax
rate or if tax laws were rescinded or changed, the effect on net income would be
materially adversely affected.
Liquidity and Capital Resources
On a combined basis, cash and cash equivalents and short-term investments of
$99.0 million at June 30, 1999 increased $11.1 million from $87.8 million at
December 31, 1998. During the first six months of 1999, cash and cash
equivalents increased $11.4 million to $51.7 million at June 30, 1999, while
short-term investments decreased slightly to $47.3 million at June 30, 1999.
Operating Activities. During the six months ended June 30, 1999, net
cash provided by operating activities was $12.7 million. An increase in deferred
revenue, a decrease in accounts receivable, and the non-cash effect of the
provision for doubtful accounts accounted for the majority of the cash provided
by the Company's operating activities.
Investing Activities. The cash used in investing activities was due
primarily to the purchase of property and equipment of $2.9 million, consisting
mainly of furniture and fixtures associated with the build out of new premises
in Brisbane, Australia and Galway, Ireland.
Financing Activities. During the six months ended June 30, 1999 net
cash provided by financing activities was $1.4 million. This was due to the
issuance of Ordinary Shares to employees pursuant to exercises of options under
the 1995 Share Option Plan and to shares issued under the 1996 Employee Share
Purchase Plan which were partially offset by the payment of a royalty of
approximately $1.0 million during the period pursuant to the Company's purchase
of certain interconnect billing software in 1998.
The Company and its subsidiaries have available a $15.0 million multi-currency
operating line of credit (the "Line of Credit") from a financial institution
that expires on August 31, 2000. The Line of Credit bears interest at rates
varying from 0.25% to 1% above the base rate which 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. No amounts were
outstanding under the Line of Credit at June 30, 1999.
At June 30, 1999, the Company had outstanding an irrevocable standby letter of
credit for $493,000 that expired on July 30, 1999, which was issued to a
customer to serve as a performance bond associated with the completion of the
Company's contract. During the six months ended June 30, 1999, a letter of
credit was also issued to one of the Company's lessors for approximately
$162,000 which is due to expire September 30, 2000. Funds available under the
Line of Credit are reduced by amounts under any letters of credit outstanding.
The Company had capital lease obligations in principal amounts of $257,000 as of
June 30, 1999. The current portion of long-term liabilities includes
approximately $1.0 million of royalty payments due in 2000 pursuant to the
Company's purchase agreement relating to certain interconnect billing software
in 1998.
The Company believes that existing cash balances, funds generated by operations
and the availability of the Line of Credit will be sufficient to meet its
anticipated liquidity and working capital requirements for at least 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 customers who are invoiced primarily in
Canadian dollars, Pounds Sterling, Australian dollars, New Zealand dollars,
Swiss Francs, and Japanese Yen. The impact of foreign currency translation has
not been material to the Company's operations.
Euro Conversion
On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing currencies (legacy
currencies) and one common currency, the Euro. The Euro now trades on currency
exchanges and may be used in business transactions. Beginning in January 2002,
new Euro-denominated bills and coins will be issued and legacy currencies will
be withdrawn from circulation. The Company has begun to identify and ensure that
all Euro conversion compliance issues are addressed during this transition
period ending in 2001. The Company does not expect the effect of the Euro
conversion on its business operations to be significant since the Company's
international sales are predominately invoiced and paid in U.S. currency and the
cost of modification to internal systems is not expected to be significant.
Therefore, based on current information, the Company does not expect that the
Euro conversion will have a material adverse impact on its business or financial
condition.
Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued Statement of Financial
Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133") and No. 137 "Accounting for Derivative Instruments and Hedging
Activities Deferral of the Effective Date of FASB Statement No. 133" ("SFAS
137"). SFAS 137 delays the effective date of SFAS 133 to fiscal years beginning
after June 15, 2000. The Company has not determined the impact, if any, of these
pronouncements on its consolidated financial statements.
Year 2000 Readiness Disclosure
The Company has reviewed and continues to review 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 use a field of two
digits to define the applicable year. In such applications, a date using "00"
may be recognized as the year 1900 rather than the year 2000. The Company
considers "Year 2000 Ready" to mean that a product, when used in accordance with
its associated documentation, is capable of correctly processing, providing
and/or receiving date data within and between the twentieth and twenty-first
centuries, provided that all non-Saville products (i.e., hardware, software and
firmware) used with such product properly exchange accurate date data with it.
The Company's internal systems include both its information technology ("IT")
and non-IT systems. The Company has assessed and continues to assess its
material internal IT systems including its accounting and software development
systems and its non-IT systems including security systems, building equipment
and utilities. To the extent that the Company is not able to test the technology
provided by third-party vendors, the Company is seeking assurances from such
vendors that their systems are Year 2000 Ready. Management believes that all
material systems which the Company uses will be Year 2000 Ready when necessary
and that the cost to ensure that those systems are Year 2000 Ready will not be
material. It should be noted, however, that the Company depends on timely and
uninterrupted interactions with its vendors and its customers, through the use
of banking systems, commercial airline travel, telecommunications via
long-distance and local service providers, and local utilities, including power.
To the extent that Year 2000 Ready alternatives are not readily available at the
time, any interruption caused by a lack of Year 2000 Readiness on the part of
such vendors could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company has designed, tested and continues to test the most current versions
of its products to ensure that they are Year 2000 Ready. However, a portion of
the Company's currently installed customer base may require upgrade or other
remediation to become Year 2000 Ready. The Company is assessing on a
case-by-case basis whether testing, upgrade or modification for Year 2000
Readiness is required. The Company's total cost relating to these activities,
and any modifications required thereby, has not been and is not expected to be
material to the Company's financial condition, results of operations, or cash
flows. Any such expenditures to date have been, and any such expenditures in the
future are expected to be, treated as normal business expenses funded out of
operating cash flow. The Company believes that its exposure to legal liability
for any such Year 2000 Readiness failures is limited and that it will be able to
make any necessary modifications on a timely basis. There can be, however, no
assurance that there will not be increased costs associated with the
implementation of any such activities or required modifications and there can be
no assurance that there will not be significant legal liabilities, either of
which could have a material adverse effect on the Company's business, operating
results and financial condition.
Despite testing by the Company and current and potential customers, the
Company's new and installed products and the IT and non-IT systems used by the
Company may contain undetected errors or defects associated with Year 2000 date
functions. Known or unknown errors or defects in the Company's IT systems,
non-IT systems, or products could result in delay or loss of revenue, diversion
of development resources, damage to the Company's reputation, and increased
service and warranty costs, any of which could materially adversely affect the
Company's business, operating results, or financial condition. In addition, the
Company is aware of the potential for claims against it and other companies for
damages arising from products and services provided by it and third party
suppliers that were not Year 2000 Ready. Because of the unprecedented nature of
such litigation, it is uncertain whether or to what extent the Company may be
affected by any such claims.
The Company believes that the most likely worst case scenario related to Year
2000 risks is a material business interruption that leads to client
dissatisfaction and the termination of a project or projects by dissatisfied
clients. Such an interruption in services could occur due to a breakdown in any
number of the Company's IT or non-IT Systems, or the systems of third parties.
The Company currently does not have a contingency plan in the event a particular
system or vendor is not Year 2000 Ready. Such a plan will be developed if it
becomes clear that the Company is not going to achieve its scheduled objectives
in respect of Year 2000 Readiness. There can be no assurance that unexpected
Year 2000 Readiness problems of the Company or its vendors, customers and
service providers will not materially adversely affect the Company's business,
operating results and financial condition. The foregoing assessment represents
management's best estimates at the present time, which could change
significantly in the future.
Certain Factors That May Affect Future Results
This Quarterly Report contains forward-looking statements that involve a number
of 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 expectations regarding future
growth in revenue, the Company's expectation that the Acquisition by ADC will
close during the Company's fourth quarter, the Company's plans to expand its
product lines and international 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 1999, 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, the Company's expectation that the result
of Euro conversion will not have a material adverse effect, 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,
fluctuations in the Company's sales cycle, the Company's ability to attract and
retain qualified 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.
On June 19, 1999 the Company and ADC entered into a definitive agreement,
pursuant to which ADC will acquire the Company through a Scheme of Arrangement
under the Companies Act of Ireland. Through this acquisition, which is
structured as a tax-free reorganization for U.S. federal income tax purposes and
is intended to be accounted for as a "pooling of interests," ADC will issue
0.358 of a share of its Common Stock for each Ordinary Share (or each American
depositary receipt representing an Ordinary Share) of the Company and 0.027 of a
share of its Common Stock for each Deferred Share. The announcement of the
acquisition could have an adverse impact on the ability of the Company to market
its products and services to its customers, possibly causing operating results
to vary from those expected. The acquisition is subject to certain conditions,
including Company shareholder approval and compliance with the Hart-Scott-Rodino
Antitrust Improvements Act, as well as certain other governmental filings and
approvals, including the sanction of the High Court of Ireland, and there can be
no assurance that the acquisition will be successfully completed. In the event
that the acquisition is not successfully completed, the Company's results of
operations and ordinary share price could be materially adversely affected.
If the acquisition is successfully completed, holders of the Company's ordinary
shares will become holders of ADC common stock. ADC's business is different from
that of the Company, and ADC's results of operations, as well as the price of
ADC common stock, may be affected by factors different than those affecting the
Company's results of operations and the price of the Company's common stock. For
a discussion of ADC's business and certain important factors to consider in
connection with such business, see ADC's public filings with the Securities
Exchange Commission, including ADC's Annual Report on Form 10-K for the fiscal
year ended October 31, 1998.
Historically, the Company has been dependent on long-term customer
relationships. The Company's future success depends in large part on its ability
to maintain its current relationships and develop new customer relationships
with successful telecommunications and energy service providers. There can be no
assurance that the Company will be able to develop and maintain such long-term
relationships, including obtaining references from such existing customers, or
that emerging service providers that are or become customers of the Company will
be successful. In addition, the telecommunications market is presently
experiencing significant merger, consolidation and alliance formation activity
among both established and start-up carriers. A consolidation or alliance
affecting any of the Company's customers could result in such customer shifting
to another billing system, thus decreasing such customer's use of the Company's
products and services as well as the cancellation of any projects underway. A
significant decrease in business from any of its major customers or the failure
of the Company to compete effectively for new customers or projects in the
telecommunications and energy markets, would have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company's quarterly and annual operating results may fluctuate from quarter
to quarter and year to year depending on various factors including new product
development and other expenses, introduction of new products by competitors,
fluctuations in the numbers and types of customer contracts (i.e. service bureau
or license) signed in any given quarter, the hiring of additional staff, pricing
pressures, the effect of acquisitions, the evolving and unpredictable nature of
the markets in which the Company's products and services are sold and general
economic conditions. The sales cycle for the Company's products has lengthened
recently due, in part, to consolidation within the industry. This has made the
timing of revenues difficult to predict. Because of the significant size of
customer projects, a delay in one or more projects during a particular quarter
could have a material adverse impact on the Company's operating results for that
quarter. Most of the Company's expenses, such as employee compensation, computer
costs and rent, are relatively fixed in the short term. Moreover, the Company's
expense levels are based, in part, on the Company's expectations regarding
future revenue levels. As a result, if revenue for a particular quarter is below
the Company's expectations, the Company may not be able to reduce operating
expenses proportionately for that quarter, and, therefore, this revenue
shortfall would have a disproportionately negative effect on the Company's
operating results for that quarter.
The billing and customer care industry is intensely competitive. The Company
competes with both independent providers of systems and services similar to
those offered by the Company and with internal billing departments of existing
telecommunications and energy service providers, many of which have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition, than the Company. For example,
in February 1999, Lucent Technologies, Inc., a telecommunications equipment
maker with substantially greater resources and name recognition than the Company
and with which the Company had entered into several alliance agreements,
purchased Kenan Systems Corp., a customer care and billing software competitor
of 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 market for the Company's products is characterized by rapid technological
change, frequent new product introductions, evolving industry standards and
changing customer needs. The Company currently offers both DB2/400-based and
UNIX-based CBP products and is devoting significant resources to develop, refine
and enhance these CBP products, as well as its other customer care and billing
technology. The Company believes that its future success will depend in large
part on its ability to maintain and enhance its current product and service
offerings and to continually develop and introduce new products and services
that will keep pace with technological advances and satisfy evolving customer
requirements. If the Company is unable to develop and introduce new products and
services in a timely manner, or if the Company's new products, developments and
enhancements do not perform or gain market acceptance, or if there should be a
rapid shift from the telecommunications industry's use of either DB2/400 or UNIX
as a standard platform for billing, 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
Latin America and Asia Pacific regions have experienced a downturn in economic
conditions, the continuation of which could adversely affect the Company's
ability to expand into this region. Additionally, credit markets for smaller
telecommunications companies in the U.S. have weakened, while competition has
increased, all of which could adversely affect the Company's ongoing projects
for such customers, as well as the Company's ability to attract and maintain
relationships with such companies.
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,
as well as to attract and retain qualified personnel, including highly-sought
UNIX software development personnel. 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.
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.
The Company regards its software products as proprietary and relies primarily on
a combination of statutory and common law copyright, trademark and trade secret
laws, customer licensing agreements, employee and third-party nondisclosure
agreements and other methods to protect its proprietary rights. These laws and
contractual provisions provide only limited protection of the Company's
proprietary rights. Despite the Company's precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's technology without
authorization. Furthermore, the laws of certain countries in which the Company
sells its products do not protect the Company's software and intellectual
property rights to the same extent, as do the laws of the United States. If
unauthorized copying or misuse of the Company's products was to occur to any
substantial degree, the Company's business, results of operations and financial
condition could be materially adversely affected.
From time to time, the Company may receive threats of or become involved in
litigation in the ordinary course of its business. In April 1999, the Company
received a notice of demand for arbitration filed by a customer alleging certain
failures to perform by the Company. The customer alleges damages of
approximately $6.6 million. The Company denies all such 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 is taxed on its Irish
"manufacturing income" at a rate that is substantially lower than U.S. tax
rates. This incentive tax arrangement is due to terminate in 2010, but during
the period to 2010, the general income tax rate is scheduled to gradually
decline until the rate for manufacturing income is only marginally lower than
the rate on all income. If the Company could no longer qualify for the lower tax
rate on manufacturing income 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, Australian, United Kingdom 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.
<PAGE>
Item 3. Market Risk
The Company is exposed to market risks, which include changes in currency
exchange rates as measured against the U.S. dollar and each other which could
positively or negatively affect results of operations and retained earnings.
As of June 30, 1999, the Company has evaluated its risk and determined that any
exposure to currency exchange is not significant to the Company's overall
consolidated financial results. There can be no assurance that the Company's
exposure will remain at these levels, especially in the event of significant and
sudden fluctuations in the value of local currencies.
<PAGE>
SAVILLE SYSTEMS PLC
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1999 Annual General Meeting of Shareholders (the
"Annual Meeting) on May 18, 1999. At the Annual meeting, the following
actions were taken.
1. The shareholders considered the audited accounts of the Company for
the year ended December 31, 1998 and the Reports of the Directors and
the Accountants thereon and approved by a vote of 36,705,729 Ordinary
Shares voted for, 25,355 Ordinary Shares against and 6,672 Ordinary
Shares not voting;
2. The shareholders re-elected William F. Cunningham, Fergus G. McGovern
and David P. Mixer as Class I Directors of the Company, each to serve
for a three year term. Holders of 36,637,640 Ordinary Shares voted for
Mr. Cunningham, 73 Ordinary Shares against and 100,043 shares not
voting. Holders of 36,638,040 Ordinary Shares voted for Messrs.
McGovern and Mixer, respectively, 73 Ordinary Shares against and
99,643 Ordinary Shares not voting. In addition to Messrs. Cunningham,
McGovern and Mixer, the Company's continuing Directors are Messrs.
John A. Blanchard III, Brian E. Boyle, John J. Boyle III, Richard A.
Licursi, James B. Murray, Jr., Bruce A. Saville and John W. Sidgmore;
3. The shareholders passed a special resolution which proposed certain
amendments to the Company's Articles of Association required to obtain
a listing of the Company's Ordinary Shares on the Irish Stock Exchange
by a vote of 36,636,611 Ordinary Shares for, 90,054 Ordinary Shares
against and 11,091 Ordinary Shares not voting;
4. The shareholders passed a special resolution which authorizes the
Company, in the discretion of the Board of Directors and subject to
the listing of the Company's Ordinary Shares on the Irish Stock
Exchange, to purchase up to 5,000,000 of the Company's Ordinary Shares
and authorizes the Company to reissue any such Ordinary Shares
purchased by it and not cancelled by a vote of 36,702,488 Ordinary
Shares for, 25,473 Ordinary Shares against and 9,795 Ordinary Shares
not voting;
5. The shareholders ratified the appointment of PricewaterhouseCoopers
LLP as the Company's independent accountants for the current fiscal
year by a vote of 36,703,452 Ordinary Shares for, 26,286 Ordinary
Shares against and 8,018 Ordinary Shares not voting;
6. The shareholders authorized the Directors to determine the
remuneration of the independent accountants by a vote of 36,653,591
Ordinary Shares for, 69,540 Ordinary Shares against and 14,625
Ordinary Shares not voting, and
7. The shareholders authorized the holding of the 2000 Annual General
Meeting of the Company in North America by a vote of 36,521,045
Ordinary Shares for, 211,600 Ordinary Shares against and 5,111
Ordinary Shares not voting.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the Exhibit Index as part of or included in
this report.
(b) Reports on form 8-K
The Company filed current reports on Form 8-K dated April 8, 1999 and
June 23, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
SAVILLE SYSTEMS PLC
(Registrant)
Date: August 11, 1999 By: /s/ Christopher A. Hanson
--------------- --------------------------
Christopher A. Hanson
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
SAVILLE SYSTEMS PLC
FORM 10-Q REPORT
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
INDEX TO EXHIBITS
<TABLE>
Exhibit No. Description
<S> <C>
10.1 Lease agreement between Saville Systems PLC, Patrick J. O'Grady
and Bernadette O'Grady, Clybaun Construction Limited and O'Grady
Construction Limited dated January 27, 1999
27.0 Financial Data Schedule
99.1 First Amendment to Agreement, dated as of June 30, 1999 by and
among Saville and ADC Telecommunications, Inc.
</TABLE>
EXHIBIT 10.1
Dated 27th January 1999
(1) PATRICK J O'GRADY AND BERNADETTE O'GRADY
(2) SAVILLE SYSTEMS PLC
(3) CLYBAUN CONSTRUCTION LIMITED
(4) O'GRADY CONSTRUCTION LIMITED
AGREEMENT TO LEASE
IDA Business Park, Newcastle, Galway
McCann FitzGerald
Solicitors
2 Harbourmaster Place
Custom House Dock
Dublin 1
1:\msr\saville2.agr
<PAGE>
THIS AGREEMENT is made on 27th January 1999
BETWEEN
(1) PATRICK J O'GRADY AND BERNADETTE O'GRADY both of 4, The Maples, Dr. Mannix
Road, Salthill, Galway (hereinafter called "the Landlord" which expression shall
where the context so admits or requires includes their and each of their
personal representatives and assigns and such other persons or parties in whom
for the time being the reversion immediately expectant on the term granted by
the Lease the draft of which is annexed hereto, shall be vested), of the first
part;
(2) SAVILLE SYSTEMS PLC having its registered office at IDA Business Park,
Newcastle, Galway (hereinafter called "the Tenant") of the second part;
(3) CLYBAUN CONSTRUCTION LIMITED having its registered office at 4, The Maples,
Dr Mannix Road, Salthill, Galway (hereinafter called "Clybaun" which expression
shall where the context so admits or requires includes its successors and
assigns in fee simple of the area shaded green on the map attached to the draft
Lease annexed hereto);
(4) O'GRADY CONSTRUCTION LIMITED having its registered office at 4, The Maples,
Dr Mannix Road, Salthill, Galway (hereinafter called "the Contractor").
RECITALS:
The Landlord has orally agreed terms with the Contractor for the Contractor to
erect an office block on the premises at IDA Business Park, Newcastle, Galway
which said premises is for purposes of identification (hereinafter called "the
Premises") delineated on the map or plan annexed to the draft lease annexed
hereto. Subject to clause 15 hereunder the Landlord's Works to the Landlord's
Specification (as hereinafter defined) to be constructed on the Premises shall
be completed to a weathertight state and condition as defined in Clause 15, no
later than 30 January 1999 and the date of Practical Completion of the
Landlord's Works as hereafter defined shall be no later than 31 May 1998.
NOW IT IS HEREBY AGREED as follows:
1. The Landlord shall grant and the Tenant shall take a Lease in the form of
the draft annexed hereto (hereinafter called "the Lease") of the Premises for
the term of years commencing at the Date of Practical Completion of the
Landlord's Works as hereinafter defined and expiring on the date which shall
fall 20 years and one day following the Date of Practical Completion of the
Landlord's Works.
2. The "Date of Practical Completion of the Landlord's Works" shall be the date
of the issue of the Certificate of Mr. Niall J Kearns of Niall J Kearns &
Company, Chartered Architects, 27 William Street West, Galway, the Architect
appointed by the Landlord and accepted by the Contractor to supervise the
carrying out of the Landlord's Works in accordance with the Landlord's
Specification (as such terms are hereinafter defined) in accordance with an oral
agreement for the construction of the Landlord's Works in accordance with the
Landlord's Specification for an agreed and adequate consideration between the
Landlord and the Contractor, the existence of which the Landlord and the
Contractor hereby acknowledge to the Tenant. A duplicate of the said Certificate
of the Architect signed by him shall be furnished to the Tenant and shall be
deemed to be the Certificate of Practical Completion of the Landlord's Works for
the purposes of this Contract.
3. The "Landlord's Specification" shall mean the outline specification and
matters to be done and provided by the Landlord as contained in the First
Schedule hereto which have been furnished by the Landlord to the Tenant and
agreed by the Tenant prior to the execution of this Agreement.
4. The "Landlord's Works" means the works to be carried out by the Landlord
pursuant to the terms of this Agreement and the Landlord's Specifications for
the construction of the Landlord's Works in accordance with the Third Schedule
hereto.
5. The Landlord warrants that the construction of the Landlord's Works on the
Premises will comply with the Planning Permission /Permissions granted for the
Landlord's Works pursuant to the Local Government (Planning and Development) Act
1963 (as amended) and Building Regulations and Building Control Regulations made
pursuant to the Building Control Act, 1990 (which shall include any enactments
amending or extending same) and shall furnish to the Tenant Certificates
respectively of the Architect to this effect in the appropriate RIAI/Law Society
then, currently recommended form, in each case, when furnishing the final
certificate of practical completion of the Landlord's Works and the Tenant's
fitout works referred to at Clause 16.
6. The rent to be reserved by the Lease shall be calculated at the rate of
IR(pound)10.50 per square foot of the nett lettable office space which is agreed
to be 35,165 square feet and shall be payable from the Date of Practical
Completion of the Landlord's Works which the parties are agreed determines the
initial rent to be reserved by the Lease as IR(pound)369,232.
7. The Lease and Counterpart shall be prepared by the Landlord's Solicitor at
the expense of the Landlord but the Tenant shall pay Stamp Duty on the Original
and Counterpart and all Value Added Tax within the meaning of the Value Added
Tax Act, 1972 ("VAT") payable on delivery of the Lease. If required by the
Tenant the Landlord shall co-operate with an application under Section 4A of the
Value Added Tax Act 1972 as amended.
8. Strictly subject to the earlier fulfilment of the obligations of the Landlord
and the Contractor under Clause 15, within 10 days from the posting to the
Tenant's Solicitor of the engrossment of the Lease and counterpart the Tenant
shall execute and deliver to the Landlord's Solicitors the Lease and Counterpart
duly executed by the Tenant, together with the said Stamp Duty, VAT, (if
appropriate) rent and service charge calculated from the Date of Practical
Completion of the Landlord's Works to the next succeeding quarter day.
9. Upon fulfilment of the obligations of the Landlord and the Contractor
pursuant to the respective warranties on their respective parts in Clause 15
and, execution of the Lease and Counterpart and payment of Stamp Duty, VAT, rent
and service charge as aforesaid, whichever last occurs, the Tenant shall be
entitled to possession and the Tenant shall be entitled to delivery of the Lease
and the Landlord agrees to deliver the Lease executed by the Landlord to the
Tenant not later than 7 days following satisfaction of the respective
obligations of the parties under Clause 15 and this Clause 9.
10. This Agreement shall not operate as a demise of the Premises until the Lease
shall have been delivered by the Landlord to the Tenant as aforesaid and the
payments made to the Landlord by the Tenant in respect of Stamp Duty, VAT, rent
and service charge.
11. The Landlord and the Contractor agree to permit the Tenant at any time
following execution of this Agreement by the parties to have access to the
Premises and the Landlord's Works for the purpose of planning and designing of
the works to be executed by the Tenant.
12. Notwithstanding Clause 8 (but subject to Clause 14 hereof) hereof as from
the Date of Practical Completion of the Landlord's Works the Tenant shall pay to
the Landlord by way of a licence fee (but not by way of rent) the same sums as
would have been payable by it by way of rent and other sums reserved and made
payable under the terms of the Lease had the same been delivered and been in
full force and effect such sums to be paid at the same time or times and in the
same manner in all respects as the rent and other sums which would have been
payable under the Lease had it been delivered and shall further observe and
perform the covenants on its part and the conditions contained in the Lease
insofar as the same may be applicable as though the same were herein contained
and set forth in full and shall indemnify the Landlord against all rent and
other outgoings payable in respect of the Premises as and from the Date of
Practical Completion of the Landlord's Works.
13. The Landlord shall not be required to deduce, approve or furnish to the
Tenant or any other person any abstract or information concerning the Landlord's
title to the Premises nor the Landlord's power to grant or cause to be granted
the Lease hereby agreed to be delivered and the Tenant shall not raise any
objection or make any enquiry or requisition in respect thereof PROVIDED
nevertheless that the Landlord has furnished to the Tenant the documents of
title and other documents listed at Schedule 2 to this Agreement as evidence of
the Landlord's title and of the matters to which such other documents refer and
has given reasonable replies (subject to compliance and performance where
necessary) to the Law Society recommended pre-lease enquiries as raised by the
Tenant's solicitors.
14. The Tenant shall not assign underlet mortgage charge share or part with or
otherwise in any way whatever (either directly or indirectly) deal with its
interest under this Agreement or any part thereof nor with the Lease prior to
its delivery.
15. The Landlord and the Contractor jointly and severally warrant to the Tenant
that the Date of Practical Completion of the Landlord's Works under the said
oral Building Agreement, between the Landlord and the Contractor, (save in
circumstances of force majeure as hereafter defined in this Clause) shall be no
later than 31 May 1998. The Landlord and the Tenant further warrant jointly and
severally with the Tenant that the Landlord's Works shall be completed to a
weathertight state and condition by 30 January 1999. For the purposes of this
Contract the term "weathertight state and condition" shall mean that the
Landlord's Works have reached a state or condition of fitness to exclude all of
the elements of the weather including rain, wind and snow. "Weathertight state
and condition" does not mean that the Premises and buildings then constructed
thereon are habitable or in any way serviced with utilities of electricity, heat
and water supply. Completion to a weathertight state and condition shall
hereinafter be called "the Date of Completion of the Shell". The Landlord and
the Contractor shall not be responsible for any delay in carrying out of the
Landlord's Works to weathertight state and condition on or before 30 January
1999, or, for the Date of Practical Completion of the Landlord's Works being
later than 31 May 1998 through force majeure, strike, lockout or other
industrial action or cause outside of the control ("force majeure") of the
Landlord and the Contractor. However, in case of default by the Landlord and the
Contractor other than for reasons of force majeure the Tenant shall be relieved
and discharged and fully acquitted of each of one month's licence fees or rent
as the case may be for each of every period of one week (if any) that the
Landlord's Works have not been completed after 31 May 1998 until the Date of
Practical Completion of the Landlord's Works.
16. It is hereby agreed that Tenant's fitout works shall be carried out by the
Tenant subject to the prior approval of drawings and specifications by the
Landlord which approval shall not be unreasonably withheld or delayed. The
Tenant has also retained Niall J Kearns of Niall J Kearns & Company Architects
to prepare drawings and specifications for the Tenant's fitout works to be
carried out following the Date of Completion of the Shell, on which date the
Tenant shall be entitled to share possession with the Contractor for the purpose
of commencing and completing the Tenant's fitout works. The Tenant shall
complete the Tenant's fitout works within 6 months following the Date of
Practical Completion of the Landlord's Works but the Tenant shall not be
responsible for delays due to force majeure (as defined in Clause 15). On the
date when the Tenant's works have been completed to the satisfaction of Niall J
Kearns as the Tenant's architect, Mr Kearns shall issue to both Landlord and
Tenant a final certificate of practical completion of the Landlord's Works and
of the Tenant's fitout works and in addition shall furnish to the Landlord and
to the Tenant (if required by the Tenant) certificates respectively of
compliance as referred to in Clause 5 and in the terms referred to at Clause 5,
but extending to include the fully completed Landlord's Works and fully
completed fitout works of the Tenant.
17. The Landlord and Tenant respectively appoint Niall J Kearns & Company
Architects as Project Supervisor for all works respecting the construction of
the Landlord's Works and the Tenant's fitout works respectively for the purposes
of the Safety, Health and Welfare at Work (Construction) Regulations 1995.
18. With respect to the Date of Completion of the Shell, the Date of Practical
Completion of the Landlord's Works and the final certificate of the Landlord
with respect to Practical Completion of both the Landlord's Works and the
Tenant's Works, the respective certificates of the Architect will be final,
conclusive and binding on the parties.
18.1 Clybaun agrees with the Tenant that following commencement of the term of
the Lease, Clybaun as the Landlord named in a Lease dated 27 April 1994 made
with the Tenant respecting a site and office buildings currently occupied by the
Tenant at IDA Business Park, Galway, shall accept surrender of such lease at any
time following six month's notice in writing from the Tenant upon the expiry of
which neither party shall have any further liabilities to the other under such
lease.
18.2 Clybaun further agrees with the Tenant to grant, if required by the
Landlord and the Tenant, and to procure that Anglo Irish Bank Corporation as
chargee of Clybaun shall confirm and grant, a Deed of Grant of Right of Way in
fee simple in whatever terms are required by the Landlord and the Tenant for
access to the Premises over the area shown shaded green on the Plan attached to
the Lease.
19. The Landlord agrees with the Tenant not to construct or to permit
construction of a link corridor between the Premises with the buildings to be
constructed thereon and the buildings located on the said demise of 27 April
1994.
20. This Agreement is conditional upon the Landlord obtaining prior to the Date
of Practical Completion any consent to sub-division and sub-letting for the
Lease as may be necessary under Section 12 Land Act 1965 and the Tenant
obtaining any consent as may be necessary under Section 45 Land Act 1965.
21. The Contractor warrants with the Tenant to execute the Landlord's Works to
the Landlord's Specification using good and proper materials in a good and
workmanlike manner discharging to the Tenant the duty to exercise due skill and
care in all respects as if the Contractor and the Tenant were parties to an RIAI
standard form Building Contract for the construction by the Contractor for the
Tenant, as employer, of the Landlord's Works and the Tenant shall be deemed to
have all the rights of the employer under such a contract.
22. Clybaun and the Contractor join in this Agreement for other good and
sufficient considerations from the Landlord and for the benefit of the Tenant.
23. Air conditioning plant shall be installed by a sub-contractor to the
Contractor first approved by the Tenant and to a specification first agreed
between the Tenant and the Landlord.
24. This Agreement is conditional on the prior grant of the Head Lease, draft of
which is referred to in the Second Schedule hereto by IDA Agency (Ireland) to
the Landlord prior to the Lease by the Landlord to the Tenant.
IN WITNESS whereof the parties have executed this Agreement the day and year
first above Written.
SIGNED by PATRICK J O'GRADY /s/Patrick J. O'Grady
and BERNADETTE O'GRADY /s/Bernadette O'Grady
in the presence of:
/s/Kieran Murphy
Solicitor
Galway
SIGNED on behalf of SAVILLE SYSTEMS PLC in the presence of:
Witness Name: /s/Lisa Miller /s/John J. Boyle III
Director duly authorised
Address: Saville, One Van de Graaff Drive
Burlington, MA 01803
Occupation: Executive Assistant to CEO
/s/C. Jane Lewchuk
C. Jane Lewchuk
Manager, Global Administrative Services
SIGNED on behalf of CLYBAUN
CONSTRUCTION LIMITED by
PATRICK J O'GRADY /s/Patrick J. O'Grady
in the presence of:
/s/Kieran Murphy
Solicitor
Galway
SIGNED on behalf of O'GRADY
CONSTRUCTION LIMITED by
PATRICK J O'GRADY /s/Patrick J. O'Grady
in the presence of:
/s/Kieran Murphy
Solicitor
Galway
<PAGE>
APPENDIX 1
(Landlord's Specifications
for the Landlord's Works as agreed
by the parties prior to execution of the within Agreement)
<PAGE>
PROPOSED OFFICE DEVELOPMENT PHASE 2
AT
I.D.A. BUSINESS PARK, DANGAN, GALWAY.
for
SAVILLE SYSTEMS p1c.
Construction by:
O'GRADY CONSTRUCTION LTD.,
4 THE MAPLES,
DR. MANNIX ROAD,
SALTHILL,
GALWAY.
Architects:
NIALL J. KEARNS & COMPANY
CHARTERED ARCHITECTS
27, WILLIAM STREET WEST
GALWAY.
TEL: (091)66176.
Structural Engineers:
LEO WILSON C.ENG.M.I. STRUCT.E M.I.E.I.
CONSULTING CIVIL & STRUCTURAL
ENGINEERS,
10,MOUNTPELIER TERRACE,
GALWAY.
TEL(091) 587426.
APRIL 1998.
<PAGE>
Superstructure Details: to be constructed from drawings prepared and approved by
Niall J.Kearns & Co., Chartered Architects in compliance with conditions and
terms of the appropriate planning consent from Galway Corporation on Planning
Permission No 848/97 dated 21st April 1998.
Statutory Requirements: Contractor to ensure compliance with all relevant
requirements regarding health and safety aspects. A full time health and safety
officer to be on site throughout the projection of the structural building
works.
Architectural Drawings: The building to be constructed in compliance with
Architects Drawings: No's 971/01, 971/02(b); 971/03 (a); 971/04(C); 971/05(C);
971/06(b) 971/07 & 971/09.
Building:
The building consists of a three storey structure suitable for office use
designed to accommodate the internal layout system requested by Saville Systems
P.L.C.
Structural Design:
Consists of a prefabricated concrete structural portal frame with supporting
hallowcore floors to upper floors. All structural elements to be designed by Leo
Wilson, C.Eng.M.I.Struct.EM.I.E.I. Foundation design as shown on Structural
Engineers Drawing Ref No's 9820/01; 02 as appended to this specification.
Building Structural Practices:
To be carried out in compliance with the general standard practices outlined in
the appointed structural engineers recommendations detailed hereafter:
1.0 General Requirements
1.1 Unless stated otherwise all concrete and relevant work to comply with
standards BS 5328 part 2, BS 8110, IS 326.
2.0 Materials
2.1 Cement shall comply to relevant British or Irish standards 2.2 Aggregates
2.2.1 Aggregates shall comply with the relevant British Standard.
3.0 Admixtures
3.1 Admixture only to be used in agreement with Consulting Engineer. Calcium
Chloride must not be used.
4.0 Concrete (Ready Mix)
4.1 The concrete mix to be designed by the ready mix suppliers and to be
approved by Leo Wilson Associates Ltd before any concrete supplied. 4.2 No extra
water to be added to the mix after the ready mix lorry has left the ready mix
depot. 4.3 Concrete to be placed within one hour of initial mixing. This may be
increased to two hours providing the drum is kept rotating. 4.4 Concrete mixes
All structural concrete 35N grade, 20mm aggregate minimum cement
concrete 325kg m3
Lean Mix 18N grade, 20mm aggregate minimum cement
200mgms m3
Watertight concrete
Lift shaft pit & 40N dense watertight mix with a
retaining wall minimum of 360kg cement per m3
20mm aggregate.
4.5 Compacting
4.5.1 All concrete to be vibrated with a mechanical vibrator.
4.6 Concreting in cold weather
4.6.1 The minimum temperature of the concrete at time of placing to be not less
than 10C and to be protected (if necessary in cold weather) so that the
temperature of the concrete does not fall lower than 5C for 10 days.
4.6.2 No concreting should take place (unless special precautions are carried
out) when the falling temperature is 5C or the rising temperature is 2C.
4.6.3. All recently poured concrete to be protected from ice and snow.
4.7 Concreting in hot weather
4.7.1 Special precautions are to be taken in hot weather to prevent rapid drying
out of the concrete.
4.8 Test cubes and testing
4.8.1 Test cubes to be taken at 7 days, 14 days if 7 day cube low, 28 days if 14
day cube is low. Plus one spare cube. In the event of a cube being low the
contractor may only proceed with the work at his own risk. In the event of all
cubes failing the Consulting Engineer will require core test to be taken at the
Contractors expense. In the event of concrete fails all tests the Contractor is
fully responsible for removing concrete (or any remedial work required) and for
all loss of time to be contract for his own work and to that of other trades.
The Consulting Engineer reserves the right to have cores or any other tests to
be carried out to any concrete, whether the cubes fail or not, at any time at
the Contractors expense.
4.8.2 The Contractor to supply and maintain on site a maximum and minimum
thermometer, a thermometer for measuring the concrete temperature and a cone for
testing the slump on the concrete.
4.9 The concrete to be handled in such a manner that segregation does not occur.
4.9.1 Special care to avoid segregation must be taken with columns and walls.
5.0 Steel Reinforcement
5.1 Unless shown otherwise on the drawing concrete cover to be 50mm to main
reinforcement except for foundation and water retaining structure where it is to
be 50mm to all reinforcement.
5.2 All reinforcement to be firmly fixed.
5.3 Contractor to supply all chairs and spacers to maintain the reinforcement in
its correct position during concreting.
5.4 Before any concreting the contractor to give reasonable notice to the
Consulting Engineer so that the Engineer has the opportunity of inspecting the
reinforcement before concreting commences.
6.0 Shuttering
6.1 All framework shall comply to BS 5975.
6.2 All releasing agents to be of an approved type.
6.3 All framework used to of a type that will give a finish to the concrete that
is required by the Architect.
6.4 The framework with its props and clamps to be sufficiently firm and rigid to
ensure the concrete once cured is in the correct position.
6.5 Unless shown on the drawings the Contractor shall obtain approval for the
position and type of construction joints before work commences.
6.6 Kickers for walls and columns will be generally 75mm.
6.7 Kickers for watertight concrete will generally be 100 to 150 high and cast
with the base slab.
6.8 Unless stated otherwise all watertight joints horizontal and vertical will
be bridged with a water bar. Joints in waterbars to be welded.
6.9 Accuracy
6.9.1 General tolerance unless modified by the following clauses -+15mm
6.9.2 Cross Section, beams, cols, wall beams, opening etc. -+5mm
6.9.3 Vertical and raking elements -+10 mm
6.9.4 Rotation of elements -+2 degrees
6.9.5 Level and foundation surfaces -+25mm
6.9.6 Slabs and similar tolerance to datum -+15 Difference in slope over 600mm
4mm
6.9.7 Element thickness _+ 10 mm
Superstructure:- The superstructure frame includes columns, beams and floor
slabs. The structural details on the Engineering drawings consists of a
reinforced ground floor slab supported by specified ground beams/pads bases as
detailed thereon.
External Finish: The ground floor walls finished in selected Hallmark Stone
Walling -Random Bond, Pewter Blend Colour as supplied by Roadstone. The
remainder of the external facade to be of cladding panel - Europanel 900/800
Metallic Silver Satinline 1500 U Value 0.45 70mm E.P.S with long life
durability. Metal cladding rails to support system incorporating 70mm insulation
with plaster board fixed to inside leaf.
Windows:- To be manufactured in aluminum with opening sections. All windows to
be fitted with double glazing.
Roof:- FS 1000 RW insulation roof panel by Kingspan W/. 5mm 2275 Galvatte Hot
Dip Zinc coated steel W/colour coat HP200 Plastisol, 200 microns thick.
Insulation core of 40mm thick, CFC free, rigid polyurethane insulation.
Internal Walls:- Lower level walls to be finished blockwork plaster skim and
finish in selected emulsion paint. Upper ground floor and upper levels in gypsum
plaster board painted finish.
Floors:- 75mm sand & cement floor screed, finished with selected Saville carpet
as currently installed in existing building No 1.
Ceilings:- Mineral fibre acoustic modular system in concealed metal suspension
grip with integrated light fittings.
Toilet Areas:- Suspended grid system with inlay tiles of the moisture resistant
type.
Internal Doors & Screens:- Generally solid core mahogany doors with hardwood
veneer fire rated as necessary with top quality selected ironmongery as supplied
by specialist suppliers A.W.Laidlaw. All internal doors to be fitted with
overhead door closers as required by client. An alternative door specification
will be considered if desired by tenant.
Toilet Walls:- To be finished in white glazed tiling throughout.
Toilet Floors:- To be finished with selected tarquet P.V.C. sheet flooring or
other approved selected non slip tile if so required by tenant.
Disabled Toilet:- To be supplied with appropriate fittings to comply with
statutory requirements.
Stairs:- Main stairway and fire escape stairs to be cast insitu concrete. Steel
balustrades and handrails to be selected in compliance with tenants
requirements.
Mechanical Installation:
Heating System:- Supply and fit appropriately designed E.S.B. Gold Shield
Heating System as approved by E.S.B. Consultants, alternatively an oil fired
radiator heating system thermostat controlled will be considered if deemed more
economic for clients requirements.
Water Services:- Supply and fit hot and cold water installation to all sanitary
fittings.
Ventilation:- Mechanical extract ventilation to all internal toilets in
compliance with CISBE regulations. Passive supply ventilation to all toilet
lobbies.
Soils, Wastes Installation:- Supply and install soils and wastes installation to
all sanitary fittings in accordance with part H of the building requirements.
Electrical Installation.
Distribution:- Supply and install main distribution panel and sub-distribution
panel installation in accordance with E.S.B. National Code of Practice and ETC
Regulation 1.
Lighting:- Supply and install in staircase and toilet areas recessed and surface
mounted fluorescent luminarie to provide approx 350 lux. Supply and fit in
office areas 1200mm x 600mm recessed fluorescent luminaries to provide
approximately 500 lux. Supply and fit emergency lighting IS.3217.
Power:- Supply and install proprietary busbar trunking to external perimeter of
building internally: also provide floor laid ducting in mid floor area to
service appropriate power requirements to all work stations as detailed by
Saville Systems in conjunction with Architects internal work station plan.
Fire Alarm:- Supply and install zoned/addressable fire alarm system to IS3218 to
open plan layout.
Computer Cabling :- To be supplied and fitted by selected sub-contractor
nominated by Savilles, the costs of installation to be borne by the latter.
Sub-Contractor to work in close liaison with Main Contractor to pre-determined
programme. Strict adherence to programme will be insisted upon to ensure
compliance with rigid building deadlines.
Telecommunications Network:- To be carried out and funded by tenant to work in
strict pre-determined fitting sequence to ensure effective control of main
contractors programme. The busbar system fitted by builder to have sufficient
space to accommodate such network as required by tenant.
Intruder Alarm:- To be the responsibility of the tenant. Installation programme
to be agreed with main contractor prior to placing of order with appropriate
source.
External Lighting:- Security and car parking lighting will be provided to all
car parking areas, paths and selected areas. The installation to be provided
with both time switch and photo electric control.
Landscaping Areas:- All areas to be professionally landscaped at the earliest
possible planting opportunity after construction completed.
Air Conditioning:- To be installed as additional item. Cost of same to be
capitalised and appropriate rental adjusted to be agreed upon prior to
installation. Full design drawings and specification not yet available. A
provisional estimate of (pound)140,000.00 approximately including design fees is
suggested. Full installation details to be agreed with tenant prior to
authorisation.
Internal Fit out:- All individual office layouts as detailed on Architects
fitout drawings not included in landlords rental estimate. Builder will be happy
to quote for same with costs paid on invoice or capitalised on rental as deemed
appropriate by Saville Systems.
Passenger Lift:- Supply and fit Hydraulic Passenger Lift. Load capacity 630kgs
or 8 persons. Fully automatic- VVVF Door Motor Control - two panel telescopic
side opening 808mm x 2000 mm. Stainless steel finish. Internal car size 1,100mm
wide x 1,400mm x 2050 mm (Supplied by Ennis Lift Manufacturers.
Siteworks:- Precast concrete paving to footpaths and tarmac surface dressing to
car parking complete with line marking and kerbing. Car spaces as detailed on
Architects site layout drawing No. 971/01.
Drainage:- Foul sewer connected to mains network. Surface water discharged to
existing stream.
Hydrants:- Underground fire hydrants as appropriate to proposed building
regulations and fire officers requirements.
<PAGE>
APPENDIX 2
(Documents of Title and other documents furnished
by the Landlord to the Tenant prior to the execution)
of the within Agreement
1. Land Registry certified copy Folio 3231L County Galway and File Plan
2. Solicitor's certified copy Lease 8 July 1985 University College Galway to
Industrial development Authority
3. Draft Lease IDA to Patrick J O'Grady and Bernadette O'Grady
4. Copy Planning Permission references 491/82 and 484/97
5. Copy Galway Corporation receipt for payment of (pound)36,308 to comply with
Condition 1 of Planning Permission 848/97
6. Copy Commencement Notice for the Landlord's Works
7. Copy Fire Safety Certificate of the Landlord's Works FSC 98/42
8. Draft Lease Patrick J O'Grady and Bernadette O'Grady to Saville Systems Plc
<PAGE>
THIS LEASE is made the ____ day of ____ 199_ BETWEEN
PATRICK J.O'GRADY AND BERNADETTE O'GRADY of 4 The Maples, Dr. Mannix Road,
Salthill, Galway in the County of Galway (hereinafter called "the Landlord") of
the One Part and SAVILLE SYSTEMS PLC. having its registered office at IDA
Business Park, Newcastle, Galway in the County of Galway (hereinafter called
"the Tenant") of the Other Part.
WITNESSETH as follows:
DEFINITIONS:
1.1 The terms defined in this clause shall for all purposes of this Lease have
the meanings specified in this clause.
1.2 "the Premises" shall mean ALL THAT part of the lands of Dangan Lower in the
Barony and County Borough of Galway more particularly delineated and edged red
on the map attached hereto TOGETHER WITH the Office Building erected thereon or
on some part thereof TOGETHER ALSO WITH the Landlord's fixtures and fittings
therein.
1.3 "the Rights" shall mean the rights set out in Schedule I hereof.
1.4 "the Exceptions" shall mean the exceptions and reservations set out in
Schedule II hereof.
1.5 "Pipes" shall mean and include pipes, sewers, drains, conduits, ditches,
water courses, culverts, wires, cables, channels and all other conducting media.
1.6 "the Term" shall mean the term of 20 years and 1 day from ("the Date of
Practical Completion of the Landlords Works" as defined in the Agreement for
Lease) and in relation to Clauses 4 to 6 hereof shall include the period of any
holding-over or any extension or continuance thereof whether by statute or by
common law where the context so admits.
1.7 "the Rent" shall mean;
(a) until the 22nd day of September 2002 the yearly rent of IR(pound)369,232.00
or the equivalant sum in any other currency that the parties hereto may agree)
exclusive;
(b) during the remainder of the Term such other rent as may become payable under
the provisions of Schedule III hereof.
1.8 "the Tenant's Covenants" shall mean the covenants set out in Schedule IV
hereof.
1.9 "the Landlord's Covenants" shall mean the covenants set out in Schedule V
hereof.
1.10 "the Insured Risks" shall mean fire, lightning, explosion, storm, tempest,
flood, bursting and overflowing of water tanks, apparatus or pipes, impact from
aircraft and other aerial devices and any articles dropped therefrom,
earthquake, riot, civil commotion, strikes, locked out workers and malicious
persons and such other risks as the Landlord shall from time to time consider
necessary subject to the availability of insurance cover against such risks and
to the extent that and subject to such conditions as insurance cover against any
such buildings is generally available.
1.11 "interest" shall mean interest at the rate of interest charged in respect
of Income Tax under the Taxes Consolidation Act 1997.
1.12 "the Planning Acts" shall mean the Local Government (Planning and
Development) Acts 1963 to 1998 and all statutes regulations and orders included
by virtue of Clause 2.5 hereof.
1.13 "development" shall have the meaning given to it by the Planning Acts.
1.14 "the Surveyor" shall mean any person or firm appointed by or acting for the
Landlord to perform the function of the Surveyor for any purposes of this Lease.
1.15 "the Superior Lease" shall mean the Lease under which the Landlord holds
the property from Industrial Development Agency (Ireland).
INTERPRETATION:
2.1 The expression "the Landlord" means the above named their personal
representatives and assigns and where the context so admits includes such other
person or parties in whom for the time being the reversion immediately expectant
upon the term granted by this Lease shall be vested and "the Tenant" means the
above named its successors in title and permitted assigns and where the context
so admits includes such other parties or party in whom for the time being the
Term shall be vested.
2.2 Where the Landlord or the Tenant for the time being are two or more
individuals the terms the Landlord and the Tenant shall include the plural
number and the obligations expressed or implied to be made by or with such party
shall be deemed to be made by or with such individuals jointly and severally.
2.3 Words importing the neuter gender include the masculine or feminine gender
(as the case may be) and words importing the masculine gender include the
feminine gender and vice versa and words importing the singular number include
the plural number and vice versa.
2.4 References to any right exercised by the Landlord or any right exercisable
by the Tenant in common with the Landlord shall be construed as including (where
appropriate) the exercise of such right by and in common with all persons
authorised by the Landlord and all other persons having a like right.
2.5 Any reference to a statute shall include any statutory extension or
modification or re-enactment of such statute and any regulations or orders made
thereunder.
2.6 Any covenant by the Tenant not to do an act or thing shall be deemed to
include an obligation not to permit such act or thing to be done.
2.7 The paragraph headings do not form part of this Lease and shall not be taken
into account in the construction or interpretation thereof.
THE DEMISE
3. The Landlord HEREBY DEMISES unto the Tenant the Premises (having an agreed
net lettable area of 35,165 square feet) TOGETHER WITH the Rights EXCEPT and
RESERVING unto the Landlord the Exceptions TO HOLD the same unto the Tenant for
the Term PAYING therefor unto the Landlord the Rent without any deduction by
equal quarterly payments in advance on (commencement date and quarterly
thereafter) in every year and so in proportion for any period less than a year
the first such payment to be paid on the execution hereof.
COVENANTS:
4.1 The Tenant hereby covenants with the Landlord to observe and perform the
Tenant's Covenants at all times during the term.
4.2 The Landlord hereby covenants with the Tenant to observe and perform the
Landlord's Covenants at all times during the Term.
PROVISOES:
5.1 If and whenever during the Term
(a) the rents (that is the rent as defined and the proportion of the insurance
premium) shall be in arrear and unpaid for twenty one days next after becoming
payable (whether formally demanded or not); or
(b) there shall be any breach or non performance or non-observance of any of the
covenants on the part of the Tenant herein contained; or
(c) the Tenant (being an individual) shall become bankrupt or (being a company)
shall enter into liquidation whether compulsory or voluntary (save for the
purpose of amalgamation or reconstruction of a solvent company) or have a
receiver appointed of its undertaking or (in either case) shall enter into an
arrangement or composition for the benefit of its creditors or suffer any
distress or execution to be levied on its goods; then, and in any of the said
cases, it shall be lawful for the Landlord at any time thereafter and
notwithstanding the waiver of any previous right of re-entry to re-enter into
and upon the Premises or any part thereof in the name of the whole and thereupon
the Term shall absolutely cease and determine but without prejudice to any
rights or remedies which may then have accrued to either party against the other
in respect of any antecedent breach of any of the covenants herein contained.
5.2 Nothing herein contained or implied shall give the Tenant the benefit of or
the right to enforce or to prevent the release or modification of any covenant
agreement or condition entered into by any Tenant of the Landlord in respect of
any property not comprised in this Lease.
5.3 The Landlord shall not be responsible to the Tenant or (save as is otherwise
provided by statute) to the Tenant's Licensees, servants, agents or other
persons in the Premises or calling upon the Tenant for any accident happening or
injury suffered or damage to or loss of any chattel or property sustained in the
Premises or the building of which the same forms part.
5.4 Each of the Tenant's Covenants shall remain in full force both at law and in
equity notwithstanding that the Landlord shall have waived or released
temporarily any such covenant or waived or released temporarily or permanently
revocably or irrevocably a similar covenant or similar covenants affecting other
adjoining or neighbouring premises belonging to the Landlord.
5.5 Nothing in this Lease or in any consent granted by the Landlord under this
Lease shall imply or warrant that the Premises may be used for the purpose
herein authorised under the Planning Acts.
5.6 The Tenant acknowledges that this Lease has not been entered into in
reliance wholly or partly on any statement or representation made by or on
behalf of the Landlord save in so far as such statement or representation is
expressly set out in this Lease.
5.7 Except where any statutory provision prohibits the Tenant's right to
compensation being reduced or excluded by agreement the Tenant shall not be
entitled to claim from the Landlord on quitting the Premises or any part thereof
any compensation under the Landlord and Tenant (Amendment) Act, 1980.
5.8 Any notice or document under or in connection with this Lease shall be
effectively given or served if sent by post or delivered in the case of the
Landlord to their last known address and in the case of the Tenant to its
registered office (as noted in the Companies Registration Office). Where sent
by post, the notice or document shall be deemed to be given or served on the
second day after posting.
5.9 If the Premises or any part thereof or access thereto shall at any time
during the Term be destroyed or so damaged by fire or any other risk insured
against by the Landlord so that the Premises or any part thereof shall be unfit
for occupation or use then (i) the Tenant shall not be entitled to surrender
this Lease under the provisions of Section 40 of the Landlord and Tenant Law
Amendment Act, Ireland, 1860; (ii) unless the insurance of the Premises shall
have been vitiated by the act, neglect, default or omission of the Tenant the
Rents hereby reserved or a fair proportion thereof according to the nature and
extent of the damage sustained, the amount of such proportion to be determined
by the Surveyor, shall be suspended and cease to be payable until the Premises
or the damaged portion thereof shall have been reinstated or made fit for
occupation; and (iii) should the Premises or the damaged portion thereof not
have been reinstated or made fit for occupation within three years of the
catastrophe the Tenant shall be entitled to give three months notice of its
intention to surrender the Lease and should the Premises or the damaged portion
thereof not have been reinstated or made fit for occupation on the expiry of the
Notice period this Lease shall cease and be void but without prejudice to any
claim by either party against the other in respect of any antecedent breach of
any covenant or condition herein contained.
5.10 The agreed net lettable space for the purposes of this Lease and the review
of rent 35,165 square feet.
OPTION TO SURRENDER
6. If the Tenant is desirous of determining this Lease on 22nd September 2007 ,
22nd September 2012 or 22nd September 2017 and of such its desire gives to the
Landlord not less than four months notice in writing and pays all rent and
performs and observes all the covenants and conditions hereinbefore contained
and on its part to be performed and observed up to such determination then and
in either such case on 22nd September 2007, 22nd September 2012 or 22nd
September 2017 as the case may be this Lease shall cease and be void but without
prejudice to any claim by either party against the other in respect of any
antecedent breach of any covenant or condition herein contained.
SCHEDULE I THE RIGHTS
Right of Way
1. Full right and liberty for the Tenant its servants and licensees (in common
with the Landlord) with or without vehicles at all times for all purposes
connected with the Premises but not for any other purpose to pass and repass to
and from the Premises over and along the roadway leading thereto.
Services
2. The free right of passage and running of water, soil, gas, electricity and
other services to and from the Premises through all pipes laid, made (or to be
laid and made within twenty one years) in, upon, through or under the adjoining
property to and from the Premises and the free and uninterrupted use of all
electric, telephone and other pipes serving the Premises now (or at any time
within twenty one years) to be in, upon, through or under the adjoining
property.
SCHEDULE II THE EXCEPTIONS
Services
1. The free passage and running of water, soil, gas, electricity and other
services from and to adjoining and neighbouring land and the buildings now or
hereafter erected therein and through the pipes laid, made (or to be laid and
made within 21 years) in, upon, through, or under the Premises and the free and
uninterrupted use of all gas, electric, telephone and other Pipes serving such
adjoining and neighbouring land and buildings now or at any time (within twenty
one years) during the term upon through, or under the Premises.
Construction of Services
2. The right to construct and maintain in, over or under the Premises (but
excluding the building thereon) any services for the benefit of any adjoining
property of the Landlord.
Access
3. The right at any time during the Term (but except in cases of emergency only
at reasonable times during normal office hours after giving reasonable prior
notice to the Tenant) to enter (or in case of emergency to break and enter) upon
the Premises in order;
(a) to inspect, cleanse, repair, amend, remove or replace with others the Pipes
referred to in Paragraph 1 of this Schedule;
(b) to inspect and execute works in connection with any of the services referred
to in this Schedule;
(c) to view the state and condition of and to repair and maintain any adjoining
property where such work would not otherwise be reasonably practicable;
(d) to carry out work or to do anything whatsoever comprised within the
Landlord's obligations herein contained whether or not the Tenant is liable
hereunder to make a contribution;
(e) to exercise any of the rights possessed by the Landlord under the terms of
this Lease.
Light
4. Full right and liberty at any time hereafter and from time to time to execute
works and erections upon or to alter or rebuild any of the buildings erected on
the Landlord's adjoining and neighbouring lands and to use such adjoining and
neighbouring lands and buildings now or hereafter erected thereon in such manner
as it shall think fit notwithstanding that the access of light and air to the
premises may thereby be interfered with.
SCHEDULE III RENT REVIEW
Definitions and interpretation
1. For the purpose of this Lease;
(1) "Review Date" shall mean the 22nd day of September 2002 and every fifth
anniversary of that date.
(2) "the Open Market Rent" shall mean the rent at which the Premises might
reasonably be expected to be let as a whole at the relevant Review Date in the
open market by a willing Landlord to a willing Tenant without a premium with
vacant possession of the whole and subject to the provisions of this Lease other
than the amount of the Rent but including the provisions for rent review for a
term equal to that granted by this Lease.
(a) on the assumptions that;
(i) at the relevant Review Date the Premises are fit for immediate occupation
and use and that no alterations nor additions had been carried out thereto by
the Tenant or its predecessors in title during the Term which have diminished
the rental value of the Premises and that if the Premises have been destroyed or
damaged they have been fully restored;
(ii) the Tenant's covenants herein contained have been fully performed and
observed until the relevant Review Date;
(b) but there shall be disregarded
(i) all trade fixtures and fittings affixed to the Premises either by the Tenant
its sub-tenants or their respective predecessors in title during the Term or
during any period of occupation prior thereto arising out of an agreement to
grant the Term or by any tenant or sub-tenant of the Premises before the
commencement of the Term so long as the Landlord or its predecessors in title
have not since the affixing to the Premises of the said fixture and fitting had
vacant possession of the relevant part of the Premises;
(ii) any effect on rent of the fact that the Tenant its sub-tenants or their
respective predecessors in title have been in occupation of the Premises;
(iii) any goodwill attached to the Premises by reason of the carrying on thereat
of the business of the Tenant its sub-tenants or their respective predecessors
in title in their respective businesses; and
(iv) any increase in the rental value of the Premises attributable to the
existence at the relevant Review Date of any improvement to the Premises or any
part thereof carried out with consent (where required) of and otherwise than in
pursuance of an obligation to the Landlord or its predecessors in title either
by the Tenant its sub-tenants or their respective predecessors in title during
the Term or during any period of occupation prior thereto arising out of an
agreement to grant the Term or by any tenant or sub-tenant of the Premises
before the commencement of the Term so long as the Landlord or its predecessors
in title have not since the improvement was carried out had vacant possession of
the relevant part of the Premises.
(3) Any reference to the President for the time being of the Society of
Chartered Surveyors in the Republic of Ireland or to the President of the
Incorporated Law Society of Ireland shall include the duly appointed deputy of
the said President or any person authorised by either of the said Presidents to
make appointments on his behalf.
The Rent Review
2. At each Review Date the Rent shall be reviewed in accordance with the
provisions of this Schedule and from and after each Review Date the Rent payable
in respect of the Premises shall be the greater of the Rent being paid
immediately before the Review Date and the Open Market Rent on the Review Date.
Fixing the Reviewed Rent
3. The Open Market Rent at any Review Date may be agreed at any time between the
Landlord and the Tenant or (in the absence of agreement) will be determined by
an arbitrator to be appointed either by agreement between the parties or subject
to paragraph 4 of this Schedule on the application of either party made not more
than three months before or at any time after the relevant Review Date by the
Chairman for the time being of the Society of Chartered Surveyors in the
Republic of Ireland or the President for the time being of the Incorporated Law
Society of Ireland.
The Appointer
4. If the parties cannot agree which Chairman or President shall nominate the
arbitrator within 14 days, time being of the essence, of either party giving
notice to the other of its intention to make application for the appointment of
an arbitrator such notice specifying the Chairman or President who in the
opinion of the party giving the notice should make the appointment either party
may apply to the President for the time being of the Incorporated Law Society of
Ireland who will decide having regard to the issues which of the Chairman or
President would be the more appropriate to nominate the Arbitrator and whose
decision as to who shall make the said nomination shall be final and binding.
Arbitration
5. The arbitration shall be conducted in accordance with the Arbitration Acts,
1954 to 1998 and the decision of the arbitrator shall be final and binding.
Memoranda of Revised Rent
6. When the amount of any Rent to be ascertained as hereinbefore provided shall
have been so ascertained, memoranda thereof shall thereupon be signed by or on
behalf of the Landlord and the Tenant and annexed to this Lease and counterpart
thereof and the parties shall bear their own costs in respect thereof.
Payment on Account pending Determination
7. If and so often as the Rent in respect of any period has not been ascertained
pursuant to the foregoing provisions before the first day hereby appointed for
payment the Tenant shall continue to pay at the rate equal to the Rent payable
immediately before the commencement of the relevant period (such payments being
on account of the Rent for that period) until the first day for payment of the
Rent after Rent for that period has been ascertained (hereinafter called "the
Payment Date").
Payment on Determination
8. On the payment date there shall be payable by the Tenant to the Landlord by
way of rent (in addition to the amount of the Rent otherwise due on that day)
the aggregate of the amounts by which the instalments of the Rent payable on
account in respect of that period in accordance with paragraph 7 hereof fall
short of the amounts which would have been payable if the Rent for that period
had been ascertained before the first day for payment (hereinafter called "the
Ascertained Rent") and the arbitrator may direct that interest at the rate
prescribed under Section 22 Courts Act 1981 be paid on each instalment due prior
to the Payment Date on the difference between the Rent paid on account in
accordance with paragraph 7 hereof and the Ascertained Rent for the period from
the date the said instalment was due up to the date upon which payment is
actually made and the arbitrator shall so direct if in his view it is reasonable
in all the circumstances including the parties' conduct on the review and the
result of his substantive determination.
Statutory Rent Restriction
9. If at any of the Review Dates there shall be in force a statute which shall
prevent, restrict or modify the Landlord's right to review and increase the Rent
in accordance with this Lease, the Landlord shall when such restriction or
modification is removed, relaxed or modified be entitled on giving not less than
one month's notice in writing to the Tenant to proceed with any review of the
Rent which may have been prevented (or further to review the Rent in respect of
any review where the Landlord's right was restricted or modified) and the date
specified in the said notice shall be deemed for the purposes hereof to be a
Review Date (providing that nothing herein shall be construed as varying any
subsequent Review Dates) and the Landlord shall be entitled to recover any
resulting increase in Rent with effect from such date as shall then be permitted
by law.
SCHEDULE IV THE TENANT'S COVENANTS
Rent
1. To pay the rent on the days and in the manner aforesaid provided that if and
so long as the amount of rent which the Tenant is liable to pay shall be
restricted by law the Tenant will in lieu of the Rent pay the maximum amount of
rent which such restriction may from time to time allow and in such
circumstances the term "the Rent" shall be construed as meaning such maximum
amount.
Outgoings
2. To pay and indemnify the Landlord against all rates, taxes, assessments,
duties, charges, impositions and outgoings which now are or during the Term
shall be charged, assessed or imposed upon the Premises or any part thereof or
upon the owner or occupier thereof and to pay the Value Added Tax and Stamp Duty
due or payable or arising under or in connection with this Lease and the
Counterpart thereof.
Superior Lease
3. Not to do or permit to be done anything which would constitute a breach of
the covenants on the lessee's part and conditions contained in the Superior
Lease and to reimburse the Landlord and indemnify it in respect of any payments
falling due to be paid to Industrial Development Agency (Ireland) under the
terms of the superior Lease.
Insurance
4.1 To repay to the Landlord on demand the sums which the Landlord shall from
time to time pay by way of Premiums (and all of any increased premiums payable
by reason of any act use or omission by or on the part of the Tenant) for
keeping the Premises insured under the covenant on the part of the Landlord
contained in Paragraph 2 of Schedule V hereof.
4.2 Not to do or omit anything whereby any policy of insurance on the Premises
may become void or voidable wholly or in part nor (unless the Tenant shall have
previously notified the Landlord and has agreed to pay the increased premiums)
anything whereby additional insurance premiums may become payable.
4.3 In the event of the Premises or any part thereof being destroyed by any of
the Insured Risks at any time during the Term and the insurance money under any
policy of insurance effected thereon being by reason of any act or default of
the Tenant wholly or partially irrecoverable forthwith in every such case to
rebuild and reinstate at its own expense the Premises or the part destroyed or
damaged to the reasonable satisfaction and under the supervision of the Surveyor
the Tenant being allowed towards the expenses of so doing upon such rebuilding
and reinstatement being completed the amount (if any) actually received in
respect of such destruction or damage under any such insurance as aforesaid.
4.4 If at any time the Tenant shall be entitled to the benefit of any insurance
on the Premises (which is not effected or maintained in pursuance of an
obligation herein contained) then to apply all moneys received by virtue of such
insurance in making good the loss or damage in respect of which the same shall
have been received.
Repair
5. To keep the Premises (but not the foundations structure and roof) and the
Pipes therein or used exclusively by the Tenant together with the fences or
walls and any other means of demarcation on the boundaries in good and
substantial repair and condition and well cleansed and maintained.
Decoration
6. In the year 2001 and every fifth year thereafter and also in the last year of
the Term (whether determined by affluxion of time or otherwise) to prepare and
paint, grain and varnish in a good and workmanlike manner all necessary external
parts of the Premises previously or usually painted, grained and varnished
respectively in colours approved by the Landlord and in the year 2001 and every
fifth year thereafter and also in the last year of the Term whether determined
by affluxion of time or otherwise) in like manner to paint, grain, varnish,
whitewash, colour and paper with paper of a suitable quality all internal parts
of the Premises previously or usually so treated such painting (both external
and internal) to be with two coats of good quality paint previously approved by
the Landlord.
Keep Tidy
7. Not at any time during the Term to allow or permit any weeds or undergrowth
to accumulate upon the Premises or any part thereof for the time being remaining
unbuilt upon nor to cause or allow any roads or pavements abutting on the
Premises to be untidy or in a dirty condition but at all times to keep the
Premises and the said land, roads and footpaths in a clean neat and tidy state
and condition and free from weeds, deposits of materials and refuse and not to
bring or keep or suffer to be brought or kept upon any land as aforesaid any
materials, equipment or plant or anything which is or might become untidy,
uncleanly, unsightly or in any way detrimental to the amenity of the area and
within one month of the service thereof to comply with the requirements of any
written notice to restore the amenity as aforesaid and in the event of the
Tenant failing to comply with such notice the Landlord shall be entitled to
enter upon the Premises and carry out any necessary works and to recover the
cost thereof from the Tenant.
Amenity Land
8. To maintain any amenity land comprising part of the Premises in good order
and condition and properly tended, manured, planted, cultivated and restored and
keep cut and properly trimmed any grass, hedges, trees and bushes and not to cut
down any trees at any time growing on the Premises.
Residence
9. Not to permit or suffer the Premises or any part thereof to be used as a
residence or sleeping place of any person.
Smoke Abatement
10. To ensure that every furnace employed in the working of engines by steam or
other motive power and every other furnace employed in any building or erection
on the Premises is constructed so as substantially to consume or burn the smoke
arising therefrom and not to use or suffer to be used negligently any such
furnace so that the smoke arising therefrom is not substantially consumed or
burned and not to cause or permit any grit or noxious or offensive effluvia to
be emitted from any engine, furnace, chimney or other apparatus on the Premises
without using the best practicable means for preventing or counteracting such
emission.
Pollution
11. Not to permit any oil or grease or any deleterious objectionable, dangerous,
poisonous or explosive matter or substance to be discharged into any Pipes and
to take all reasonable measures for ensuring that any effluent so discharged
will not be corrosive or otherwise harmful to the Pipes or cause obstruction or
deposit therein nor to discharge or allow to be discharged therein any fluid of
a poisonous or noxious nature or of a kind calculated to or that does in fact
destroy sicken or injure the fish or contaminate or pollute the water of any
stream or river and not to do or omit or allow or suffer to be done or omitted
any act or thing whereby the waters of any stream or river may be polluted or
the composition thereof so changed as to render the Landlord liable to any
action or proceedings by any person whomsoever.
Drains
12. To bear and pay and indemnify the Landlord against all the costs and
expenses which the Landlord as the Owner of the Premises or any part thereof
during the continuance of the Term ought or would be liable to bear or
contribute to in or about any works, drainage or sewerage by any Act or Acts of
the Oireachtas already made or hereafter to be made or by any direction or
requirement of any local or public Authority in pursuance of any such Act or
Acts.
Roof and Floor Weighting
13.1 Not without the consent in writing of the Landlord to
(a) suspend any weight from the roof or roof trusses or use the roof or roof
trusses of any building forming part of the Premises for the storage of goods or
to place or permit or suffer to be placed any weight thereon;
(b) bring or permit to remain upon the said Buildings any safes, machinery,
goods or other articles which shall or may strain or damage the said Buildings
or any part thereof.
13.2 On any application by the Tenant for the Landlord's consent under Paragraph
13.1 hereof the Landlord shall be entitled to consult and obtain the advice of
an Engineer in relation to the roof or floor loading proposed by the Tenant and
the Tenant shall repay to the Landlord on demand the fees of such Engineer.
Refuse
14. Not to deposit or permit to be deposited any rubbish or refuse or to store,
stack or lay out any material used for the purpose of manufacture or otherwise
on any part of the land surrounding the buildings on the Premises.
Machinery
15. To keep all plant apparatus and machinery (including any boilers or lifts)
upon the Premises properly maintained and in good working order and to ensure by
directions to the Tenant's staff and otherwise that such plant apparatus and
machinery is properly operated and to avoid damage to the Premises by vibration
or otherwise.
Unloading
16. Not to unload any goods or materials from carts, wagons or lorries and
convey the same from an estate road or the public highway into the Premises
except through the approved entrance or entrances provided for the purpose and
not to cause thereby congestion of the adjoining estate roads and public
highways nor inconvenience any other use thereof and not to permit any vehicles
or animals belonging to the Tenant or its licensees, servants, agents or other
persons calling on the Tenant or the Premises to stand on the estate road or any
footpath or public highway in the neighbourhood of the Premises and to use its
best endeavours to ensure that such licensees, servants, agents, and other
persons calling on the Tenant or the Premises shall not permit any vehicle or
animals to stand on any such estate, road, footpath or public highway.
User
17.1 Not to do (or permit or suffer to remain upon the Premises or any part
thereof) anything which may be or become a nuisance, annoyance, disturbance,
inconvenience, injury or damage to the Landlord or its Tenants or the occupiers
of adjacent or neighbouring Premises.
17.2 Not to store or bring upon the Premises any article, substance or liquid of
especially combustible, inflammable or dangerous nature and to comply with all
recommendations of the insurers and fire authority as to fire precautions
relating to the Premises.
17.3 Not to use the Premises or any part thereof nor permit the same to be used
for any dangerous, noxious, noisy or offensive trade or business or as a betting
office or for residential purposes nor for any illegal or immoral act or purpose
and no sale by auction shall take place therein.
17.4 To use and occupy the Premises for such trade or business as is permitted
by the Planning Acts and any regulatory laws or instruments and as may from time
to time be approved in writing by the Landlord (such approval not to be
unreasonably withheld).
17.5 Not to use the Premises for any purpose other than the business of a
service industry as defined in the Industrial Development Act 1986 (as amended)
as may from time to time be approved by Industrial Development Agency (Ireland)
and in particular not to use the Premises for any purpose other than such as
will allow the Landlord to claim an Industrial Buildings Allowance in respect of
the Premises.
Alterations
18.1 Not to excavate or dig remove sell or dispose of any minerals, earth, clay,
gravel, chalk or sand from the Premises nor to sink any well thereon except so
far as shall be approved by the Landlord in writing.
18.2 Not to commit or permit waste and not to cut, remove, divide, alter, maim
or injure the Premises or any part thereof or any of the ceilings, walls,
floors, principal girders or structure of any buildings now or at any time
hereafter forming part of the Premises nor the Pipes in on or under or serving
the Premises nor to
(a) build, erect, construct, or place any new or additional building erections
or work on the Premises or any part thereof;
(b) make any alterations or additions or improvement to the Premises or any
buildings now or at any time hereafter forming part of the Premises.
18.3 Not to change the design or appearance or decorative scheme of the exterior
of the Premises.
PROVIDED (with reference to 18.1, 18.2 and 18.3) the Tenant shall be entitled to
apply for consent to carry out alterations or additions and the Landlords
consent shall not be unreasonably withheld.
18.4 To remove any additional buildings, additions or alterations made to the
Premises at the expiration or sooner determination of the Term if so requested
by the Landlord.
Planning Acts
19.1 To comply in all respects with the provisions and requirements of the
Planning Acts whether as to the permitted user hereunder or otherwise and to
indemnify (both after the expiration of the Term by affluxion of time or
otherwise and during its continuance) and to keep the Landlord indemnified
against all liability whatsoever including costs and expenses in respect of any
contravention thereof.
19.2 Forthwith to produce to the Landlord any notice, order or proposal,
permission or consent relating to the Premises given or issued to the Tenant by
a Planning Authority under or by virtue of the Planning Acts and at the cost of
the Landlord join with the Landlord in making any objection or representation
against the same that the Landlord shall deem appropriate.
19.3 To obtain at the expense in all respects of the Tenant all planning
permissions and serve all such notices as may be required for the carrying out
of any operations on the Premises or any use thereof at the commencement which
may constitute development provided that no application for planning permission
shall be made without the previous consent in writing of the Landlord.
19.4 Subject only to any statutory direction to the contrary to pay and satisfy
any charge or levy that may hereafter be imposed under the Planning Acts in
respect of the carrying out or maintenance of any such operations or the
commencement or continuance of any such use as aforesaid.
19.5 Notwithstanding any consent which may be granted by the Landlord under this
Lease not to carry out or make any alteration or addition to the Premises or any
change of use thereof before all necessary notices under the Planning Acts in
respect thereof have been served or before all such notices and all such
necessary planning permissions have been produced to the Landlord and in the
case of a planning permission acknowledged by it in writing as is satisfactory
to the Landlord it being understood that the Landlord may refuse so to express
its satisfaction with any such planning permission on the grounds that any
condition contained therein or anything omitted therefrom or the period thereof
would in the reasonable opinion of the Surveyor be or be likely to be
prejudicial to its interest in the Premises or the building of which the
Premises forms part whether during the Term or following the determination or
expiration thereof.
19.6 Unless the Landlord shall otherwise direct to carry out and complete before
the expiration or sooner determination of the Term;
(a) any works stipulated to be carried out to the Premises by a date subsequent
to such expiration or sooner determination as a condition of any planning
permission granted for any development begun before such expiration or sooner
determination; and
(b) any development begun upon the Premises in respect of which the Landlord
shall or may be or become liable for any charge or levy under the Planning Acts.
Statutory Obligations
20.1 At its own expense to do and execute all such works as shall be required at
any time during the Term to be done or executed in or upon the Premises by the
occupier under or by virtue of any Act being in force or by the direction of any
Local or Public Authority.
20.2 Without prejudice to the generality of the foregoing provisions to comply
in all respects with the provisions of any statutes and any other obligations
imposed by law or by any bye laws applicable to the Premises or in regard to
carrying on the trade or business for the time being carried on by the Tenant on
the Premises.
Access of Landlord and Notice to Repair
21.1 To permit the Landlord at reasonable times to enter upon the Premises for
the purpose of
(a) taking schedules or inventories of fixtures and fittings to be yielded up at
the expiration of the Term; and
(b) ascertaining that the covenants and conditions herein contained have been
duly observed and performed and in particular to view the state of repair and
condition of the Premises and of defects and wants of repair, cleansing,
maintenance amendments and painting then and there found and to give to the
Tenant or leave upon the Premises a notice in writing specifying any repairs,
cleaning, maintenance, amendments and painting necessary to be done and to
require the Tenant forthwith to execute the same.
21.2 To forthwith repair, cleanse, maintain, amend and paint the Premises as
required by such notice and in accordance with the covenants in that behalf
hereinbefore contained.
21.3 If the Tenant shall not within one month after service of such notice
proceed diligently with the execution of the same or shall have failed to
complete the same within two months to permit the Landlord and its contractors,
agents and work-men to enter upon the Premises to execute such works as may be
necessary to comply with the same and to pay to the Landlord the cost of
executing such works and all expenses incurred by the Landlord in connection
with the same (including legal costs and surveyor's fees) within fourteen days
of a written demand in that behalf.
Dealing
22.1 In the case of an underlease not to underlet the Premises at a rent below
the Rent payable by the Tenant hereunder at the date of the said underletting.
22.2 Not to assign, charge, underlet nor part with possession of the whole or
any part of the Premises except with the previous written consent of the
Landlord which shall not be unreasonably withheld and upon any assignment or
underletting to:
(a) obtain a direct covenant by the assignee or under-tenant with the Landlord
to observe and perform the covenants and restrictions of this Lease for the
remainder of the Term and in the case of an assignment to pay the rent reserved
by this Lease; and
(b) if the Landlord shall require, provide two acceptable Guarantors for any
private limited company.
22.3 To include in or to ensure that there is included in every underlease and
sub-lease similar restrictions on assignment, underletting and parting with
possession and the same provisions for direct covenants with and registration
with the Landlord as those contained in this Lease.
Signs and Advertisements
23. Not to erect any hoardings or advertising station on the Premises and not to
permit any signs, placards or bills to affixed to any buildings forming part of
the Premises other than such reasonable notices relating to the Tenant's
business which are normally and reasonably displayed subject to the approval of
the Landlord and compliance with the Planning Acts.
24. Not to erect or to bring upon the Premises or any part thereof any hut,
shed, garage, cycle shelter, store, caravan, house on wheels or any building or
erection of a temporary or moveable character, design or nature without the
approval of the Landlord such approval not to be unreasonably refused.
Notices Specifying Breach
25.1 To pay all costs, charges and expenses including Solicitors' costs and
Surveyors' fees incurred by the Landlord for the purposes of and incidental to
the preparation and service of a notice under Section 14 of the Conveyancing
Act, 1881 and Section 2 and 4 of the Conveyancing Act, 1892 or incurred in or in
contemplation of proceedings under the said Sections notwithstanding in any such
case forfeiture is avoided otherwise than by relief granted by the Court.
25.2 To pay all costs, charges and expenses including Solicitors' costs and
Surveyors' fees incurred by the Landlord for the purposes of and incidental to
the service of all notices and schedules relating to wants of repair to the
Premises and whether served during or after the expiration or sooner
determination of the Term (but relating in all cases to such wants of repair
that accrued not later than such expiration or sooner determination).
Indemnities
26. To he responsible for and to indemnify the Landlord against all damage
occasioned to the Premises or any adjacent or neighbouring Premises or to any
person and to indemnify the Landlord against all actions, claims, proceedings,
costs, expenses and demands made against the Landlord as a result of
(a) any act, omission or negligence of the Tenant or the servants, agents,
licensees or invitees of the Tenant and
(b) any breach or non-observance by the Tenant of the Tenant's Covenants and
other terms hereof.
Re-Letting Boards
27. To permit the Landlord at any time during the last six months of the Term
(or sooner if the Rent or any part thereof shall be in arrear and unpaid for
upwards of one calendar month) to enter upon the Premises and affix and retain
without interference upon any part of the Premises a notice for re-letting the
same and during such period to permit persons with written authority of the
Landlord or its agent at reasonable times of the day to view the Premises
without interruption.
Landlord's Rights
28. To permit the Landlord at all times during the Term to exercise without
interruption or interference any of the rights excepted and reserved to it by
virtue of the provisions of this Lease, creating as little disturbance,
interference or inconvenience to the Tenant as is reasonably possible.
Plans
29. If and when called upon so to do to produce to the Landlord or the Surveyor
all such Plans documents and other evidence as the Landlord may reasonably
require in order to satisfy itself that the provisions of this Lease have been
complied with in all respects.
Encroachment
30.1 Not to stock up darken or obstruct any windows or lights belonging to the
Premises or any other premises belonging to the Landlord.
30.2 Not to permit any new window light opening doorway path passage drain or
other encroachment or easement to be made or acquired in against out of or upon
the Premises and that in case any such window, light, opening, path, passage,
drain or other encroachment or easement shall be made or acquired or attempted
to be made or acquired the Tenant will give immediate notice thereof to the
Landlord and will at the request and cost of the Landlord adopt such means as
may be reasonably required or deemed proper for preventing any such encroachment
or the acquisition of any such easement.
Yield Up
31. To yield up the Premises at the expiration or sooner determination of the
Term in good and substantial repair and condition in accordance with the
Tenant's covenants and to dismantle and remove from the Premises all the
Tenant's fixtures if so required by the Landlord and to make good any part or
parts of the Premises which may be damaged in such dismantling and/or removal.
Licence Fees
32. To pay all legal costs and surveyors' fees incurred by the Landlord
attendant upon or incidental to every application made by the Tenant for a
consent or licence hereinbefore required or made necessary whether the same be
granted, refused, withdrawn or offered subject to qualifications or conditions.
Interest on Arrears
33. If and whenever the Tenant shall fail to pay the Rent or any other sum due
under this Lease within fourteen days of the due date the Tenant shall pay to
the Landlord Interest on such Rent or other money as the case may be from the
date when it was due to the date on which it is actually paid.
Sale of reversion
34. To permit upon reasonable notice at any time during the Term prospective
purchasers of or dealers in or agents instructed in connection with the sale of
the Landlord's reversion or of any interest superior to the Term upon reasonable
notice to view the Premises without interruption providing the same are
authorised in writing by the Landlord or its agents.
Notices
35. To give full particulars to the Landlord of any notice direction or order or
proposal for the same made, given or issued to the Tenant by any Local or Public
Authority within seven days of the receipt of the same and if so required by the
Landlord to produce the same to the Landlord and without delay to take all
necessary steps to comply with any such notice, direction or order and at the
request of the Landlord to make or join with the Landlord in making, such
objection or representation against or in respect of any proposal for such a
notice, direction or order as the Landlord shall deem expedient.
SCHEDULE V THE LANDLORD'S COVENANTS
Quiet Enjoyment
1. That the Tenant may peaceably and quietly hold and enjoy the Premises without
any lawful interruption or disturbance from or by the Landlord or any person
claiming under or in trust for the Landlord.
Insurance
2.1 To insure and keep insured (unless such insurance shall be vitiated by any
act of the Tenant or the Tenants servants or visitors) in such sum as the
Landlord shall from time to time be advised by the Surveyor as being the full
cost of reinstatement thereof the Premises (together with an appropriate
addition for professional fees and three years loss of rent under this Lease)
against loss or damage by any or all of the Insured Risks and to produce to the
Tenant on demand either a policy of such insurance and the receipt for the last
premium or reasonable evidence from the insurers of the terms of the policy and
the fact that the same is subsisting and in effect and (subject as hereinafter
provided) in case of destruction of or damage to the Premises by the Insured
Risks or any of them the Landlord will with all convenient speed take such steps
as may be requisite and proper to obtain any necessary permits and consents
under any regulations or enactment for the time being in force to enable the
Landlord to rebuild and reinstate the same and will as soon as such permits and
consents have been obtained, spend and lay out all monies received in respect of
such Insurance (except sums in respect of loss of rent) in rebuilding or
reinstating the part of the Premises so destroyed or damaged provided always
that if the rebuilding or reinstatement of the Premises shall be prevented or
frustrated, all such insurance monies relating to the Premises shall be the
absolute property of the Landlord.
2.2 To procure that the Insurers shall waive the subrogation rights against the
Tenant or alternatively to procure that the Tenants interest be noted on the
Insurance Policy.
2.3 To procure from the Insurers confirmation that the Policy includes a
"non-invalidation" Clause.
MAINTAIN STRUCTURE
3. To maintain and repair and keep in good order and condition the roof
foundations and the structure of the building of which the Premises forms part
provided that;
a. This covenant shall not be construed as requiring the Landlord to carry out
any works required as a result of
(i) Negligence on the part of the tenant or
(ii) On or arising out of any alterations or additions to the Premises or the
installations therein carried out by the Tenant.
b. The Landlord shall not be liable to the Tenant for any breach of this
covenant unless the Landlord shall have failed to carry out any such work within
a reasonable time after written notice of any want of repair shall have been
given by the Tenant to the Landlord.
IT IS HEREBY CERTIFIED that the consideration (other than rent) for the Lease is
wholly attributable to property which is not residential property and that the
transaction hereby effected does not form part of a larger transaction or of a
series of transactions in respect of which the amount or value or the aggregate
amount or value of the consideration (other than rent) which is attributable to
property which is not residential property exceeds five thousand pounds.
IT IS HEREBY FURTHER CERTIFIED that for the purposes of stamping this Instrument
this is an Instrument to which the provisions of Section 112 of the Finance Act
1990 do not apply for the reason that there is no arrangement to erect a
dwelling house or apartment.
IT IS HEREBY FURTHER CERTIFIED that the property hereby demised is situate in
the County Borough of Galway.
IT IS HEREBY FURTHER CERTIFIED that for the purposes of Section 29 Companies Act
1990 the Landlord is not a Director or a person connected with a Director of the
Tenant or any associated or holding company.
IN WITNESS WHEREOF the seals of the parties were affixed hereto the day and year
first herein written.
SIGNED SEALED AND DELIVERED
by the said PATRICK J. O'GRADY /s/Patrick J. O'Grady
and BERNADETTE O'GRADY /s/Bernadette O'Grady
in the presence of:
PRESENT when the Common Seal
of SAVILLE SYSTEMS PLC., /s/John J. Boyle III
was affixed hereto;
<PAGE>
1. Definitions
1.2 The Premises
1.3 The Rights
1.4 The Exceptions
1.5 The Pipes
1.6 The Term
1.7 The Rent
1.8 The Tenant's Covenants
1.9 The Landlord's Covenants
1.10 The Insured Risks
1.11 Interest
1.12 The Planning Acts
1.13 Development
1.14 The Surveyor
1.15 Superior Lease
2. Interpretation
3. The Demise
4. The Covenants
5. Provisoes
5.1 Re-entry
5.2 Covenants relating to Adjoining Land
5.3 Accidents
5.4 Effect of Waiver
5.5 Exclusion of Use Warranty
5.6 Representations
5.7 Compensation
5.8 Service of Notices
5.9 Suspension of Rent
5.10 Net lettable space
6. Option to Surrender
Schedules
I. The Rights
1. Right of Way
2. Services
II. The Exceptions
1. Services
2. Construction of services
3. Access
4. Light
III. Rent Review
1. Definitions and Interpretation
2. The Rent Review
3. Fixing the Reviewed Rent
4. The Appointer
5. Arbitration
6. Memoranda of Revised Rent
7. Payment on Account pending Determination
8. Payment on Determination
9. Statutory Rent Restriction
IV. The Tenant's Covenants
1. Rent
2. Outgoings
3. Superior Lease
4. Insurance
5. Repair
6. Decoration
7. Keep Tidy
8. Amenity Land
9. Residence
10. Smoke Abatement
11. Pollution
12. Drains
13. Roof and Floor Weighting
14. Refuse
15. Machinery
16. Unloading
17. User
18. Alterations
19. Planning Acts
20. Statutory Obligations
21. Access of Landlord and Notice to Repair
22. Dealing
23. Signs and Advertisements
24. Temporary Buildings
25. Notices Specifying Breach
26. Indemnities
27. Reletting Boards
28. Landlord's Rights
29. Plans
30. Encroachment
31. Yield Up
32. Licence Fees
33. Interest on Arrears
34. Registration of Documents
35. Sale of Reversion
36. Notices
V. The Landlord's Covenants
1. Quiet Enjoyment
2. Insurance
3. Maintain Structure
<PAGE>
Dated the day of 199
BETWEEN
PATRICK J. O'GRADY AND BERNADETTE O'GRADY
Landlord
SAVILLE SYSTEMS PLC.,
Tenant
L E A S E
Kieran Murphy & Co.,
Solicitors,
9 The Crescent,
Galway.
Ref: bl26-98/KM/MG
21.12.1998
Map of Premises
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
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-31-1999 DEC-31-1999
<PERIOD-START> APR-01-1999 JAN-01-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 51,699 51,699
<SECURITIES> 47,256 47,256
<RECEIVABLES> 41,143 41,143
<ALLOWANCES> 3,593 3,593
<INVENTORY> 0 0
<CURRENT-ASSETS> 144,665 144,665
<PP&E> 22,161 22,161
<DEPRECIATION> 7,134 7,134
<TOTAL-ASSETS> 171,984 171,984
<CURRENT-LIABILITIES> 36,444 36,444
<BONDS> 113 113
0 0
48 48
<COMMON> 98 98
<OTHER-SE> 135,028 135,028
<TOTAL-LIABILITY-AND-EQUITY> 171,984 171,984
<SALES> 0 0
<TOTAL-REVENUES> 41,498 71,666
<CGS> 0 0
<TOTAL-COSTS> 20,215 38,263
<OTHER-EXPENSES> 17,304 32,984
<LOSS-PROVISION> 1,146 2,420
<INTEREST-EXPENSE> 12 33
<INCOME-PRETAX> 3,555 (560)
<INCOME-TAX> 818 (128)
<INCOME-CONTINUING> 2,737 (432)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,737 (432)
<EPS-BASIC> 0.07 (0.01)
<EPS-DILUTED> 0.07 (0.01)
</TABLE>
FIRST AMENDMENT
TO
AGREEMENT
This First Amendment (this "First Amendment"), dated as of this 30th day of
June, 1999, amends that certain Agreement dated as of June 19, 1999, by and
among ADC Telecommunications, Inc. ("ADC") and Saville Systems PLC ("Saville")
(the "Agreement"), which Agreement provides for the acquisition of Saville by
ADC in accordance with the terms and conditions set forth therein.
WHEREAS, for the avoidance of doubt, the parties desire to amend the
Agreement to clarify an agreed condition thereof and to confirm the parties'
understandings with respect to the matter set forth in this First Amendment; and
WHEREAS, this First Amendment is being made by the parties in furtherance
of their mutual desire to consummate the transactions contemplated by the
Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Section 7.2(g) of the Agreement is hereby amended in its entirety to
read as follows:
"(g) Pooling Letters. Buyer and the Company shall have received the letters
described in the third Recital to this Agreement from Pricewaterhouse
Coopers LLP and Arthur Andersen LLP and such letters shall not have
been withdrawn, modified or qualified in any material respect as of
the Effective Time, as certified by Pricewaterhouse Coopers LLP and
Arthur Andersen LLP, respectively, in a writing addressed to their
respective addressees and dated as of the Effective Date, and Buyer
shall have received the letter of Arthur Andersen LLP, addressed to
Buyer and dated as of the Effective Date, stating that, in reliance on
the letter and the certification of Pricewaterhouse Coopers LLP
described in this paragraph (g) and based on its familiarity with
Buyer, the Acquisition will qualify as a pooling-of-interests
transaction under Opinion 16."
2. Any capitalized term used herein and not otherwise defined herein
shall have the meaning given to such term in the Agreement.
3. This First Amendment constitutes an amendment of the Agreement in
conformity with and pursuant to the terms of Section 9.6 of the
Agreement. Except as expressly amended herein, all terms set forth in
the Agreement shall continue in full force and effect.
4. The operative terms of this First Amendment may be inserted into a
First Amended and Restated Agreement by the parties and shall have a
date as of the day and year first set forth herein.
5. The internal law, and not the law of conflicts, of the State of
Minnesota will govern all questions concerning the construction,
validity and interpretation of this First Amendment and the
performance of the obligations imposed by this First Amendment.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the day and year first above written.
ADC TELECOMMUNICATIONS, INC. SAVILLE SYSTEMS PLC
By /s/Robert E. Switz By /s/John J. Boyle, III
------------------------- ----------------------------
Robert E. Switz John J. Boyle, III
Senior Vice President and Chairman of the Board and
Chief Financial Officer Chief Executive Officer
