<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 28, 1997
REGISTRATION NO. 333-38339
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ICON CMT CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7373 13-3603128
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1200 HARBOR BLVD.
WEEHAWKEN, NEW JERSEY 07087
(201) 601-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SCOTT A. BAXTER
PRESIDENT
ICON CMT CORP.
1200 HARBOR BLVD.
WEEHAWKEN, NEW JERSEY 07087
(201) 601-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
MICHAEL WEINSIER, ESQ. KRIS F. HEINZELMAN, ESQ.
PARKER CHAPIN FLATTAU & KLIMPL, LLP CRAVATH, SWAINE & MOORE
1211 AVENUE OF THE AMERICAS WORLDWIDE PLAZA
NEW YORK, NEW YORK 10036 825 EIGHTH AVENUE
TELEPHONE NO.: (212) 704-6000 NEW YORK, NEW YORK 10019
FACSIMILE NO.: (212) 704-6288 TELEPHONE NO.: (212) 474-1000
FACSIMILE NO.: (212) 474-3700
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this
registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT AGGREGATE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share................................. 4,427,500 $14.00 $ 61,985,000 $18,783.33
Previously filed...................................................................................... $17,424.24
Amount due............................................................................................ $ 1,359.09
</TABLE>
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 28, 1997
3,850,000 Shares
[Logo]
Common Stock
($.001 par value)
------------------
All of the shares of Common Stock, par value $.001 per share (the 'Common
Stock'), of Icon CMT Corp. (the 'Company') offered hereby (the
'Offering') are being sold by the Company except that certain
stockholders of the Company (the 'Selling Stockholders') named
herein under 'Principal and Selling Stockholders' have
granted the Underwriters an option to purchase shares solely
to cover over-allotments, if any. The Company will
not receive any of the proceeds from the shares
sold, if any, by the Selling Stockholders.
Prior to the Offering, there has been no public market for the Common Stock. It
is anticipated that the initial public offering price will be between $12.00
and $14.00 per share. For information relating to the factors to be
considered in determining the initial public offering price, see
'Underwriting'.
Application has been made to list the Common Stock on The Nasdaq Stock Market's
National Market ('NNM').
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK, SEE 'RISK FACTORS'
BEGINNING ON PAGE 8 HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS COMPANY(1)
--------------- --------------- ---------------
<S> <C> <C> <C>
Per share................................................ $ $ $
Total (2)................................................ $ $ $
</TABLE>
(1) Before deduction of expenses payable by the Company estimated at
$ .
(2) The Company and the Selling Stockholders have granted to the Underwriters an
option, exercisable by Credit Suisse First Boston Corporation for 30 days
from the date of this Prospectus, to purchase a maximum of 346,500
additional shares from the Company and an aggregate of 231,000 additional
outstanding shares from the Selling Stockholders to cover over-allotments of
shares. If the option is exercised in full, the total Price to Public will
be $ , Underwriting Discounts and Commissions will be
$ , Proceeds to Company will be $ and total proceeds
to the Selling Stockholders will be $ .
The shares are offered by the several Underwriters when, as and if issued
by the Company, delivered to and accepted by the Underwriters and subject to
their right to reject orders in whole or in part. It is expected that the shares
will be ready for delivery on or about , 1997, against payment in
immediately available funds.
CREDIT SUISSE FIRST BOSTON
BANCAMERICA ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
TUCKER ANTHONY
INCORPORATED
Prospectus dated , 1997.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
[LOGO]
Icon CMT Corp. provides single-source, end-to-end Internet solutions to
corporate customers.
News organizations at CBS-affiliated television stations across the country
access information from the CBS News extranet designed, built and managed by
Icon.
Bear Stearns engaged Icon on projects to integrate Bear Stearns' document
management system into an IP-network through a web gateway and to design,
develop and implement its Correspondence System Project.
Employees at Comedy Central can better manage their daily operations by using an
intranet designed and developed by Icon.
Today, many customers in the Bell Atlantic calling region use Icon's high-speed
ATM back-bone to access the Internet.
Online shoppers can now purchase designer apparel from Nicole Miller's virtual
store designed, deployed and hosted by Icon.
Consumers can plan and confirm travel on Swissair by using a website designed
and deployed by Icon.
Application has been made by the Company for the trademarks 'Icon CMT
Corp.,' 'IconFeed,' 'IconCache,' 'IconChat,' 'Word' and 'Charged'. All other
tradenames and trademarks appearing in this Prospectus are the property of their
respective holders.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE 'UNDERWRITING'.
[logo]
Combining a value-added communications infrastructure with professional services
to deliver single-source, end-to-end solutions to corporate customers.
WEBSITE DESIGN AND DEVELOPMENT
Award-winning design staff
Online branding
Integration of technologies, such as streaming audio and video
INTEGRATION WITH LEGACY SYSTEMS
Staff is trained and certified in Sun Solaris, Netscape, Microsoft NT, Cisco
Systems
Installation and configuration of systems, including networks and hardware
Third-party software expertise, including databases, operating systems and
firewalls
CUSTOM SOFTWARE APPLICATION DEVELOPMENT
Design and development of software applications tailored for customer needs
Browser-based gateway development to access and distribute corporate information
and data
Staff is trained in technologies such as C, C++ and Java
MAINTENANCE AND SUPPORT OF CUSTOMER IT INFRASTRUCTURE
Hardware and software maintenance to support customer IT infrastructure 24 hours
a day, 7 days a week
Services include call-in support, troubleshooting, software and hardware
updates, on-site helpdesk and general support personnel
HOSTING AND MANAGEMENT SOLUTIONS
Maintenance and management of mission-critical websites and applications
Network Operations Center, staffed 24 hours a day, 7 days a week
ACCESS SOLUTIONS
Nationwide Tier I ATM backbone
Bandwidth ranging from 56kbps to 45Mbps
Peered at major peering points
Icon-developed intelligent network technologies, including wide-area data
caching
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and financial statements
(including the notes thereto) (the 'Financial Statements') appearing elsewhere
in this Prospectus. Unless otherwise indicated, all information contained in
this Prospectus (i) assumes that the Underwriters' over-allotment option is not
exercised, (ii) has been adjusted to give effect to a decrease in the number of
shares of the Common Stock through a 1-for-2.75 reverse split of the Common
Stock that will be effected immediately prior to the date of this Prospectus,
(iii) assumes the automatic conversion of the Company's Series A Convertible
Participating Preferred Stock (the 'Series A Preferred Stock') and 10% PIK
Series B Convertible Participating Preferred Stock (the 'Series B Preferred
Stock') upon consummation of the Offering, (iv) reflects the filing of the
Restated Certificate of Incorporation of the Company and the adoption of the
Restated By-laws of the Company, both of which will occur prior to the
consummation of the Offering and (v) gives effect to an increase of 545,455
shares of Common Stock with respect to which options may be granted under the
Company's 1995 Stock Option Plan (the '1995 Option Plan') upon consummation of
the Offering. Certain terms used herein are defined under 'Glossary'. All
references to the Company contained in this Prospectus, unless otherwise noted,
include the Company's predecessor, Integration Consortium, Inc. ('ICI').
THE COMPANY
Icon CMT Corp. ('Icon' or the 'Company') is an Internet solutions provider
that offers a comprehensive range of services and products that enable corporate
customers to implement their Internet, intranet and extranet strategies. Icon's
mission is to provide end-to-end solutions to its customers by facilitating the
distribution of the customers' information and applications over Icon's
communications infrastructure as well as access to such information and
applications.
In order to provide end-to-end solutions, Icon offers services and products
in three key areas: (i) communications services, including high quality Internet
access and web/server hosting and management, enhanced by the Company's
proprietary technologies; (ii) a range of professional services, including
custom application and website development and design, systems integration and
maintenance and support services; and (iii) product resales, including hardware
and software, which are an integral component of systems design and integration.
Icon differentiates itself by integrating its services and products in order to
provide customized turnkey solutions for the needs of corporate customers.
Unlike many of Icon's competitors who focus on a single service or product, the
Company continuously expands the breadth of its services and its engineering
expertise to optimize its end-to-end solutions.
The emergence of the Internet and the widespread adoption of Internet
Protocol ('IP') as a data transmission standard has resulted in an increasing
number of corporations exploring opportunities to provide IP-based applications
and services within their organization, and to their customers and business
partners. The broad range of business applications, combined with security and
performance requirements, have resulted in demand for high bandwidth networked
systems and for integration and custom application development services.
Revenues generated by the Internet communications services market in the
United States, comprised of access and hosting, are expected to increase from
$1.4 billion in 1996 to $28.1 billion in 2000 according to Forrester Research,
Inc. while the worldwide Internet-related professional services market is
expected to grow from $2.5 billion in 1996 to $13.8 billion in 2000 according to
International Data Corporation. Icon focuses on the corporate market due to its
high growth, low customer turnover and demand for a broad range of higher
value-added Internet services and products.
The Company's communications infrastructure is a key element of its
end-to-end solutions. The Company maintains a nationwide Asynchronous Transfer
Mode ('ATM') backbone that incorporates certain proprietary technologies and is
managed to deploy and distribute information and applications. The Company
manages its network to achieve utilization levels that enable it to operate in a
reliable and high performance manner. The Company controls its network and
provides hosting and management services from its state-of-the-art network
operations center ('NOC'). By controlling its
3
<PAGE>
<PAGE>
own network, the Company can develop, select and integrate appropriate
technologies that enhance the speed, security, reliability, flexibility and
overall performance of its communications infrastructure, enabling the Company
to compete effectively and meet increasingly demanding customer requirements.
Icon's growth strategy is based on leveraging its capability to provide
end-to-end Internet solutions, which is often a decisive factor in attracting
new customers, as well as generating additional revenue from the existing
customer base. Icon's relationships with several customers, such as The
Associated Press, ADP Financial Information Services, Inc. ('ADP'), Bear,
Stearns & Co. Inc. ('Bear Stearns') and CBS, Inc. ('CBS'), demonstrate how
single service or product offerings evolved into broader solutions opportunities
encompassing multiple communications and professional services and products. To
maintain its competitive advantage, Icon intends to: (i) maintain its reliable
and high performance communications infrastructure; (ii) expand the bandwidth
and reach of its network; (iii) expand and integrate professional services
offerings; (iv) continue to build efficient distribution of services and
products through direct and indirect sales channels; and (v) potentially
strengthen its market position through acquisitions.
Icon's distribution strategy depends on a direct sales force, which has
increased from 25 to 33 sales staff during the first nine months of 1997,
dedicated to large accounts with significant revenue generating potential, and
on indirect distribution channels, such as significant relationships with
telecommunications providers like Bell Atlantic Internet Solutions, Inc. ('Bell
Atlantic Internet Solutions') and Fiberlink Communications Corp. ('Fiberlink'),
that extend the Company's reach without substantial costs. Bell Atlantic
Internet Solutions makes Icon's communications services available to requesting
corporate and residential customers and represents a rapidly growing revenue
stream for Icon. In November 1997, Icon entered into an agreement with Teleway
Corporation that extends the reach of the Company's network into Japan.
Icon serves major corporations, predominantly in the financial services,
media, telecommunications and travel industries, including ABC Radio Network,
ACC Long Distance Corp., ADP, Alliance Capital Management LP, The Associated
Press, Barnes and Noble.com Inc., Bear Stearns, Bell Atlantic Internet
Solutions, Bloomberg Financial Markets, CBS, C-NET: The Computer Network, Comedy
Central Network, Daiwa Securities America, Inc., Deutsche Morgan Grenfell,
Eastman Kodak Company, Fiberlink, Galileo International, Merrill Lynch & Co.
Inc., Metropolitan Life Insurance Co., Moore Capital Management, Inc., Kobra
International (Nicole Miller), Nomura Securities Co. Ltd., Omnipoint
Communications, Swissair, Tudor Investment Company and John Wiley & Sons, Inc.
ICI, the Company's predecessor, was incorporated in New York in February
1991. Icon was incorporated in Delaware in February 1995, and ICI was merged
with and into Icon in December 1995. The Company's principal executive offices
are located at 1200 Harbor Blvd., Weehawken, New Jersey 07087, and its telephone
number is (201) 601-2000. The Company also maintains an office at 1700 Broadway,
New York, New York 10019. Icon's e-mail address is [email protected], and its
website, which is not a part of this Prospectus, is http://www.icon.com.
4
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
Common Stock offered hereby............................. 3,850,000 shares(a)
<S> <C>
Common Stock to be outstanding after the Offering....... 15,025,329 shares(b)
Use of proceeds......................................... Expansion and upgrade of the Company's communications
infrastructure and for working capital and general
corporate purposes, including acquisitions. See 'Use of
Proceeds'.
Dividend policy......................................... The Company has not paid any dividend to stockholders
and does not anticipate such dividends in the
foreseeable future. See 'Dividend Policy'.
Proposed NNM symbol..................................... ICMT
</TABLE>
- ------------
(a) In addition, the Company and the Selling Stockholders have granted the
Underwriters an option to purchase 346,500 and 231,000 shares of Common
Stock, respectively, solely to cover over-allotments, if any. Any shares of
Common Stock purchased pursuant to the exercise of such option will be
purchased first from the Selling Stockholders and thereafter from the
Company.
(b) Does not include (i) 2,181,818 shares of Common Stock reserved for issuance
under the 1995 Option Plan pursuant to which options to purchase 1,227,885
shares have been granted and (ii) 948,889 shares of Common Stock reserved
for issuance upon exercise of outstanding warrants. See 'Management -- 1995
Option Plan' and 'Description of Capital Stock -- Warrants'.
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should consider carefully the risk factors and other
information set forth in this Prospectus before making an investment in the
Common Stock offered hereby. See 'Risk Factors'.
5
<PAGE>
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data for each of the years in the
three-year period ended December 31, 1996 and the nine-month period ended
September 30, 1997 are derived from, and are qualified by reference to, the
Company's audited Financial Statements included elsewhere herein. The following
summary financial data for each year in the two-year period ended December 31,
1993 are derived from, and are qualified by reference to, the Company's audited
financial statements not included herein. The summary financial data for the
nine-month period ended September 30, 1996 are derived from the unaudited
financial statements of the Company included elsewhere herein and, in the
opinion of management, include all adjustments, consisting of normal recurring
accruals necessary for a fair presentation of the data presented. The summary
financial data for each three-month period in the 21-month period ended
September 30, 1997 are derived from, and are qualified by reference to, the
Company's unaudited financial statements not included herein. The results for
the nine months ended September 30, 1997 are not necessarily indicative of
results for the full year. The pro forma share and per share information for the
year ended December 31, 1996 and the nine months ended September 30, 1997 are
derived from, and are qualified by reference to, certain unaudited pro forma
finanical information included elsewhere herein. The information presented below
should be read in conjunction with 'Management's Discussion and Analysis of
Financial Condition and Results of Operation' and the Financial Statements
included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Services:
Professional..................... $ 611 $ 996 $ 1,914 $ 4,397 $ 6,570 $ 3,936 $11,988
Communications................... -- -- -- 189 1,268 685 3,931
Media............................ -- -- -- 202 529 353 77
------ ------- ------- ------- ------- ------- -------
Total services revenues........ 611 996 1,914 4,788 8,367 4,974 15,996
------ ------- ------- ------- ------- ------- -------
Products............................ 3,066 10,605 17,083 21,424 29,741 22,341 14,306
------ ------- ------- ------- ------- ------- -------
Total revenues, net................... 3,677 11,601 18,997 26,212 38,108 27,315 30,302
------ ------- ------- ------- ------- ------- -------
Cost of revenues:
Services............................ 222 382 758 2,596 6,842 4,333 11,521
Products............................ 2,521 9,596 14,132 17,653 24,607 18,406 11,676
------ ------- ------- ------- ------- ------- -------
Total cost of revenues................ 2,743 9,978 14,890 20,249 31,449 22,739 23,197
------ ------- ------- ------- ------- ------- -------
Gross profit.......................... 934 1,623 4,107 5,963 6,659 4,576 7,105
------ ------- ------- ------- ------- ------- -------
Operating expenses:
General and administrative.......... 378 652 1,548 2,435 7,006 5,049 7,577
Selling and marketing............... 345 742 1,393 3,450 6,504 4,390 6,546
Research and development............ 40 69 501 411 969 598 920
Depreciation and amortization....... 36 75 94 228 460 311 601
------ ------- ------- ------- ------- ------- -------
Total operating expenses.............. 799 1,538 3,536 6,524 14,939 10,348 15,644
------ ------- ------- ------- ------- ------- -------
Income (loss) from operations......... 135 85 571 (561) (8,280) (5,772) (8,539)
Net income (loss)..................... 89 44 291 (440) (8,038) (5,553) (9,088)
Pro forma net loss per common
share(a)............................ $(0.80) $(0.88)
Pro forma weighted average common
shares outstanding(a)............... 10,109,279 10,311,285
OTHER DATA:
Capital expenditures.................. $ 98 $ 153 $ 232 $ 1,000 $ 3,701 $ 3,017 $ 2,679
(footnote on following page)
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(B)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $ 4,556 $ 50,253
Working capital....................................................................... 5,090 50,787
Total assets.......................................................................... 18,262 63,959
Total liabilities..................................................................... 8,074 8,074
Mandatorily redeemable preferred stock................................................ 26,626 --
Stockholders' (deficit) equity........................................................ (16,438) 55,884
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1996 1996 1996 1997 1997
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Services:
Professional....................... $ 1,203 $ 1,062 $ 1,671 $ 2,634 $ 3,207 $ 4,268
Communications..................... 147 185 353 583 938 1,233
Media.............................. 124 113 116 176 77 --
--------- -------- ------------- ------------ --------- --------
Total services revenues.......... 1,474 1,360 2,140 3,393 4,222 5,501
--------- -------- ------------- ------------ --------- --------
Products............................. 7,281 7,328 7,732 7,400 4,795 4,885
--------- -------- ------------- ------------ --------- --------
Total revenues, net.................... 8,755 8,688 9,872 10,793 9,017 10,386
--------- -------- ------------- ------------ --------- --------
Cost of revenues:
Services............................. 1,270 1,237 1,826 2,509 3,137 3,592
Products............................. 6,157 5,865 6,384 6,201 3,813 4,092
--------- -------- ------------- ------------ --------- --------
Total cost of revenues................. 7,427 7,102 8,210 8,710 6,950 7,684
--------- -------- ------------- ------------ --------- --------
Gross profit........................... 1,328 1,586 1,662 2,083 2,067 2,702
Operating expenses..................... 2,566 3,873 3,909 4,591 4,652 5,269
Loss from operations................... (1,238) (2,287 ) (2,247) (2,508) (2,585) (2,567)
Net loss............................... (1,169) (2,205 ) (2,179) (2,485) (2,950) (2,734)
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Services:
Professional....................... $ 4,513
Communications..................... 1,760
Media.............................. --
-------------
Total services revenues.......... 6,273
-------------
Products............................. 4,626
-------------
Total revenues, net.................... 10,899
-------------
Cost of revenues:
Services............................. 4,792
Products............................. 3,771
-------------
Total cost of revenues................. 8,563
-------------
Gross profit........................... 2,336
Operating expenses..................... 5,723
Loss from operations................... (3,387)
Net loss............................... (3,404)
</TABLE>
- ------------
(a) For information concerning the computation of pro forma net loss per share
of Common Stock and pro forma weighted average common shares of Common
Stock outstanding, see Notes 3 and 12 to the Financial Statements.
(b) Gives effect to (i) the conversion of 422,607 shares of Series A Preferred
Stock and 180,240 shares of Series B Preferred Stock into 1,637,097 and
2,992,777 shares of Common Stock, respectively, upon consummation of the
Offering and (ii) the sale of Common Stock offered hereby, net of expenses,
at an assumed initial public offering price of $13.00 per share (the
mid-point of the range indicated on the front cover of this Prospectus).
7
<PAGE>
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should consider carefully the following risk
factors, in addition to the other information set forth in this Prospectus,
before making an investment in the Common Stock offered hereby.
This Prospectus contains forward-looking statements, which are typically
identified by the words 'believe,' 'expect,' 'intend,' 'estimate' and similar
expressions. Those statements appear in a number of places in this Prospectus
and include statements regarding the intent, belief or current expectation of
the Company or its directors or officers with respect to, among other things:
(i) trends affecting the Company's financial condition or results of operations;
and (ii) the Company's business and growth strategies. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected, expressed or implied in the
forward-looking statements as a result of various factors ('Cautionary
Statements'). The accompanying information contained in this Prospectus,
including the information set forth below and under 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and 'Business,'
identifies important factors that could cause such differences. Such
forward-looking statements speak only as of the date of this Prospectus, and the
Company cautions potential investors not to place undue reliance on such
statements. Neither the Company nor the Underwriters undertakes any obligation
to update or revise any forward-looking statements. All subsequent written or
oral forward-looking statements attributable to the Company or persons acting on
behalf of the Company are expressly qualified in their entirety by the
Cautionary Statements.
LIMITED OPERATING HISTORY; HISTORY OF NEGATIVE CASH FLOW AND OPERATING LOSSES;
GOING CONCERN EXPLANATORY PARAGRAPH IN ACCOUNTANTS' REPORT
The Company was founded in 1991, and consequently there is only a limited
operating history upon which an evaluation of the Company and its prospects can
be based. Although the Company has experienced revenue growth in recent years,
it has not been profitable for the last two years and the Company's recent
growth rate may not be sustainable and may not be indicative of future operating
results. To date, the Company has incurred negative cash flow from operations
and substantial and increasing net losses. Net cash used in operations for the
years ended December 31, 1995 and 1996 and the nine months ended September 30,
1996 and 1997 was $1.3 million, $5.0 million, $4.4 million and $8.6 million,
respectively. Losses from operations for the years ended December 31, 1995 and
1996 and the nine months ended September 30, 1996 and 1997 were $0.6 million,
$8.3 million, $5.8 million and $8.5 million, respectively. The Company had an
accumulated deficit at September 30, 1997 of $17.2 million. The Company expects
to continue to incur significant losses at least through 1998. The report of
independent accountants on the Financial Statements contains an explanatory
paragraph stating that the Financial Statements have been prepared assuming that
the Company will continue as a going concern while expressing substantial doubt
about the Company's ability to do so. The Company's present ability to continue
as a going concern is dependent on its ability to generate sufficient cash flow
to meet its obligations as they become due. The Company's significant operating
losses, expected additional losses and increasing cash and working capital
requirements (see Note 2 to the Financial Statements) raise substantial doubt
about the Company's ability to continue as a going concern.
There can be no assurance that the Company will be successful in attracting
new customers or retaining current customers or continue to increase revenues or
generate profits. There can be no assurance that the Company will ever achieve
profitability. Furthermore, the Company will rely to a great extent on resellers
to market certain of its Internet access services. A substantial portion of such
services is currently resold by a limited number of such resellers. There can be
no assurance that any such resellers will continue to actively market the
Company's services. The Company's prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stage of development, particularly companies in new and rapidly evolving
markets. To address these risks, the Company must, among other things, respond
to competitive developments, continue to attract, retain and motivate qualified
persons and continue to upgrade its technologies and commercialize services and
products incorporating such technologies. There can be no assurance that the
Company will be successful in addressing such risks.
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POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have in the past and may in the
future vary significantly depending upon factors such as the timing and
installation of significant orders, which in the past have been, and will in the
future be, delayed from time to time by delays in the provisioning of
telecommunications services and products by subcontractors. Additional factors
contributing to variability of quarterly operating results include the pricing
and mix of services and products sold by the Company, terminations of service,
new service and product introductions by the Company and its competitors, market
acceptance of new and enhanced versions of the Company's services and products,
changes in pricing or marketing policies by its competitors and the Company's
responses thereto, the Company's ability to obtain sufficient supplies of sole
source or limited source components, changes in the Company's communications
infrastructure costs, as a result of demand variation or otherwise, the
lengthening of the Company's sales cycle, access to capital and the timing of
the expansion of the Company's communications infrastructure.
CONCENTRATION OF REVENUES
The Company in the past has derived, and, in the future, expects to derive,
a significant portion of its revenue from a relatively limited number of
customers. In 1994, 1995, 1996 and the first nine months of 1997, the Company
derived 25%, 28%, 30% and 49%, respectively, of its revenues from a single
customer, Bear Stearns. In 1994, 1995 and 1996, the Company derived 11%, 15% and
13%, respectively, of its revenues from a second customer, Nomura Securities Co.
Ltd. ('Nomura Securities'). In 1995, the Company derived 10% of its revenues
from a third customer, Merrill Lynch & Co. Inc. ('Merrill Lynch'). In 1996 and
the first nine months of 1997, the Company's top ten customers (in terms of
revenues to the Company) accounted for approximately 66% and 74% of its
revenues, respectively. A substantial majority of sales to Bear Stearns is
attributable to purchase orders issued from time to time and written agreements
with a duration of one year. The Company expects that revenues from Bear Stearns
will decrease as a percentage of revenues in future periods; however revenues
derived from a limited number of current and future customers are expected to
continue to represent a significant portion of the Company's revenues. As a
result, the loss of any of such customers could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, there can be no assurance that revenues from customers that have
accounted for significant revenues in past periods, individually or as a group,
will continue, or if continued, will reach or exceed historical levels in any
future period. See 'Business -- Customers'.
MANAGEMENT OF GROWTH
The Company is currently experiencing rapid growth that could strain the
Company's managerial and other resources. During the 12 months ended September
30, 1997, the number of the Company's employees increased from 161 to 229
full-time employees, and further significant increases are anticipated during
the balance of 1997 and in 1998. The Company's ability to manage its growth
effectively will require it to continue to improve its operational, financial
and other internal systems, and to train, motivate, manage and retain its
current employees and attract new employees. Any inability of the Company's
management to manage growth effectively could have a material adverse effect on
the Company's business, financial condition and results of operations.
DEPENDENCE UPON SUPPLIERS; SOLE AND LIMITED SOURCES OF SUPPLY
The Company relies on other companies to supply certain key components of
its communications infrastructure, including telecommunications services and
networking equipment that, in the quantities and quality demanded by the
Company, are available only from sole or limited sources. MFS Datanet, Inc.
('MFS') is the primary provider to the Company of data communications facilities
and capacity and leases to the Company physical space for switches, modems and
other equipment. The Company has entered into an agreement with MFS that allows
the Company access to all MFS communications facilities, including facilities at
any future sites. Such agreement may be terminated as early as December 1998, is
not exclusive and is subject to early termination under certain circumstances.
MFS
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can enter into similar arrangements with the Company's competitors regarding its
backbone. In 1996, MFS merged with UUNET Technologies, Inc. ('UUNET'), a
competitor of the Company in the area of Internet access. MFS has been acquired
by WorldCom, Inc. ('WorldCom'), which is also a supplier of network services to
Icon. WorldCom has reached an agreement to acquire MCI Communications
Corporation ('MCI'), which is a major provider of Internet backbone services.
The combination of MFS, UUNET, WorldCom and MCI means that one of the Company's
major suppliers is also one of its most formidable competitors in providing
Internet services. The Company is also dependent upon LECs to provide
telecommunications services to the Company and its customers. The Company has
from time to time experienced delays in receiving telecommunications services,
and there can be no assurance that the Company will be able to obtain such
services on the scale and within the time frames required by the Company at an
acceptable cost, or at all. Any failure to obtain such services on a timely
basis at an acceptable cost, including termination or non-renewal of the
Company's relationship with MFS, would have a material adverse effect on the
Company's business, financial condition and results of operations.
Certain of the Company's suppliers, including the RBOCs and other LECs,
currently are subject to tariff controls and other price constraints that in the
future may be changed. In addition, regulatory proposals are pending that may
affect the prices charged by the RBOCs and other LECs to their customers,
including the Company. Any such regulatory changes could result in increased
prices for services to the Company, which could have a material adverse effect
on the Company's business, financial condition and results of operations.
The routers, switches and modems used in the Company's communications
infrastructure are currently supplied solely by Cisco Systems Inc. ('Cisco').
The Company purchases these components pursuant to purchase orders placed from
time to time, does not carry significant inventories of these components and has
no guaranteed supply arrangements with Cisco. Cisco sells products to the
Company's competitors and may in the future become a competitor of the Company.
There can be no assurance that Cisco will not enter into exclusive arrangements
with the Company's competitors or that Cisco will continue to sell its products
or components to the Company at commercially reasonable prices, or at all. The
Company from time to time has experienced delays in receiving components from
Cisco. Expansion of communications infrastructures by the Company and others is
placing, and will continue to place, a significant demand on the Company's
suppliers, some of whom have limited resources and production capacity. In
addition, certain of the Company's suppliers, in turn, rely on sole or limited
sources of supply of components included in their products. Failure of the
Company's suppliers to meet such increasing demand may prevent them from
continuing to supply components and products in the quantities and quality and
at the times required by the Company, or at all. The Company's inability to
obtain sufficient quantities of sole or limited source components or to develop
alternative sources, if required, could result in delays and increased costs in
expanding, and overburdening of, the Company's communications infrastructure,
which would have a material adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE UPON COMMUNICATIONS INFRASTRUCTURE
The Company is dependent on its suppliers' ability to provide necessary
products and components that comply with various Internet and telecommunications
standards and that interoperate with products and components from other vendors.
Any failure of the Company's sole or limited source suppliers to provide
products or components that comply with evolving Internet and telecommunications
standards or that interoperate with other products or components used by the
Company in its communications infrastructure could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company's success will depend upon the capacity, reliability and
security of its communications infrastructure, including the facilities and
capacity leased from suppliers, including MFS. The Company must continue to
expand and adapt its communications infrastructure as the number of users and
the amount of information they wish to transport increases and to meet changing
customer requirements. The expansion and adaptation of the Company's
communications infrastructure will require substantial financial, operational
and management resources. There can be no assurance that the Company will be
able to expand or adapt its communications infrastructure to meet additional
demand or its customers'
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changing requirements on a timely basis and at a commercially reasonable cost,
or at all. Any failure of the Company to expand its communications
infrastructure on a timely basis or adapt it either to changing customer
requirements or to evolving industry standards could have a material adverse
effect on the Company's business, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL; ATTRACTION AND RETENTION OF EMPLOYEES
The Company's performance is substantially dependent on the performance of
its executive officers and key employees. In particular, the future success of
the Company is dependent upon the personal efforts of the Company's founders,
Scott A. Baxter, Richard M. Brown and Scott Harmolin, each of whom is a director
and an executive officer of the Company. In the past 12 months, the Company has
hired 11 senior managers, including Kenneth J. Hall, Frank C. Cicio, Jr., Robert
J. Thalman, Jr. and Michael J. Gold. There can be no assurance these individuals
will remain with the Company or be successful. The loss of the services of any
of its executive officers or other key employees could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company does not maintain, nor is it currently contemplating obtaining, 'key
man' life insurance policies on any of its employees. See 'Management'.
The Company's professional services business is labor intensive. The
Company's success will depend in large part upon its ability to attract,
develop, motivate and retain highly skilled technical employees, particularly
project managers and other senior personnel. Qualified project managers are in
great demand and are likely to remain a limited resource for the foreseeable
future. There can be no assurance that the Company will be able to attract and
retain sufficient numbers of highly skilled technical employees and project
managers. The loss of some or all of the Company's project managers and other
senior personnel could have a material adverse effect on the Company, including
its ability to secure and complete projects. While project managers and most
other senior personnel have not entered into employment agreements with the
Company, substantially all the Company's key employees and independent
contractors are parties to nonsolicitation, confidentiality and noncompetition
agreements with the Company. However, no assurance can be given that such
agreements will be honored or that the Company will be able to effectively
protect its rights to its unpatented trade secrets and know-how.
COMPETITION
The markets served by the Company are extremely competitive. The Company
expects competition to persist, intensify and increase in the future. Because
there are no substantial barriers to entry, an influx of new market entrants is
expected to continue in response to the growing demand for information and data
communication technology services and products. Most of the Company's current
and potential competitors enjoy a greater market presence and possess
substantially greater technical, financial and marketing resources than the
Company.
COMMUNICATIONS SERVICES
The Company's current and prospective competitors in the Internet
communications services sector generally may be divided into the following five
groups: (i) telecommunications companies, such as AT&T Corp. ('AT&T'), MCI,
Sprint Corp. ('Sprint'), WorldCom, Intermedia Telecommunications Inc.
('Intermedia'), GTE Corporation ('GTE') and LECs; (ii) online services
providers, such as America Online Inc. ('America Online'),The Microsoft Network
('MSN') of Microsoft Corporation and Prodigy Services Company ('Prodigy'); (iii)
Internet service providers ('ISPs'), such as NETCOM On-Line Communications
Services, Inc. ('NETCOM'), PSINet, Inc. ('PSI'), Concentric Network Corporation
('Concentric') and other national and regional providers; (iv) cable modem
connectivity providers such as @Home Networks, Inc. ('@Home'); and (v) data
center providers such as Exodus Communications ('Exodus'). Most of these
competitors have greater market presence, engineering and marketing
capabilities, and financial, technological and personnel resources than those
available to the Company. As a result, they may be able to develop and expand
their communications infrastructures more quickly, adapt more swiftly to new or
emerging technologies and changes in customer
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requirements, take advantage of acquisitions and other opportunities more
readily, and devote greater resources to the marketing and sale of their
services than can the Company.
Although most of the established online services companies and
telecommunications companies currently offer only limited Internet access
services, many of these companies have announced plans to offer expanded
Internet access services. In addition, the combination of MFS, UUNET, WorldCom
and MCI means that one of the Company's major suppliers is also one of its most
formidable competitors in providing Internet services. In addition, the Company
believes that new competitors, including large computer hardware and software,
media and telecommunications companies, such as the RBOCs, may enter or expand
their presence in the Internet access market, resulting in even greater
competition for the Company.
The Company believes that competitive factors in the communications
services market include market presence, capacity, reliability, security of
communications infrastructure, quality of technical personnel, price, customer
support, new services and enhancements and conformity with industry standards.
There can be no assurance that the Company will have the financial resources,
technical expertise or marketing and support capabilities to compete
successfully in the communications services market. See
'Business -- Competition'.
PROFESSIONAL SERVICES
The professional services market is highly fragmented. The Company
currently encounters competition from mid-sized and regional consulting, design
and systems integration firms such as Cambridge Technology Partners, Inc.
('Cambridge Technology Partners') and Technology Solutions Co. ('Technology
Solutions'), and increasingly competes with large-scale systems integrators,
such as EDS Corp. ('EDS'). The Company's design group also competes with a
variety of interactive design firms including agency.com, Razorfish, USWeb and
CKS Group. The Company believes that the primary competitive factors at work in
this market are price, the ability to fashion and deliver efficient solutions to
customer needs, the quality of service, including project management and ongoing
support and maintenance, and the availability and quality of hardware and
software. Accordingly, the Company competes on the basis of its reputation,
personnel, technical sophistication and ability to provide single-source,
end-to-end solutions, including hardware and software product resales and
communications services. There can be no assurance that the Company will have
the financial resources, personnel, technical expertise or marketing and support
capabilities to continue to compete successfully in the professional services
market. See 'Business -- Competition'.
PRODUCT RESALES
The product resales market in which the Company competes is a high volume,
low margin business with minimal barriers to entry. Product resellers such as
the Company purchase information technology hardware and software products from
OEMs or wholesale distributors and resell the products to its customers. The
Company's current and prospective competitors generally can be divided into
three groups: (i) national and regional VARs, such as EJV Bridge Networks, Bell
Technology Group Ltd. ('Bell Technology') and LANCOM; (ii) national and regional
systems integrators, such as EDS, Sapient, Computer Associates International,
Inc. ('Computer Associates') and The Ergonomics Group; and (iii) hardware
distributors, such as CHS Electronics and ITOCHU Corporation ('ITOCHU'). Growing
product complexity, shorter product life cycles and an increasing number of
information technology products due to the emergence of open systems
architectures and the recognition of certain industry standards have led
resellers to depend on wholesale distributors for more of their product,
marketing and technical support needs. In addition, resellers increasingly rely
on wholesale distributors for inventory management and credit to avoid stocking
large inventories and maintaining credit lines to finance their working capital
needs. The need for resellers to implement high volume/low cost operations is
imperative in light of ongoing price competition and the increasing demand for
value-added services.
The product resales industry is intensely competitive and such competition
is based primarily on price, product availability, speed and accuracy of
delivery, effectiveness of sales and marketing
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programs, credit availability, ability to tailor specific solutions to customer
needs, quality and breadth of product lines and services, and availability of
technical and product information. Resellers are experiencing additional
pressures from manufacturers that have been successful in selling directly to
the end-user, without the use of resellers. There can be no assurance that
resellers will not lose market share, or that they will not be forced in the
future to reduce prices in response to the actions of competitors and thereby
experience a further reduction in gross margins. As a result of intense price
competition in the product sales industry, reseller margins have continued to
narrow. To the Company, these narrow margins magnify the impact on operating
results of variations in operating costs. Recognizing the challenging dynamics
of the product resales market, the Company has de-emphasized its previous
product resales focus. However, the Company will continue to participate in the
product resales business, which the Company expects will be a source of
significant revenues for the foreseeable future, in order to include OEM
hardware and software in its comprehensive, end-to-end Internet solutions.
DEPENDENCE ON DISTRIBUTION AND MARKETING AGREEMENTS
The Company believes that its success in penetrating markets for its
services depends in large part on its ability to maintain and develop additional
relationships with leading technology and communications companies and to
cultivate alternative relationships if distribution channels change. In May
1996, the Company and Bell Atlantic Internet Solutions entered into an
arrangement whereby Bell Atlantic Internet Solutions agreed to provide billing
services in connection with the selection by its customers of the Company's
communications services for both dedicated and switched access. In October 1997,
the Company extended its arrangement by entering into an updated global service
provider ('GSP') agreement with Bell Atlantic Internet Solutions. Also during
1996, the Company entered into agreements with each of Access Graphics, Inc.
('Access Graphics') and Merisel Americas, Inc. ('Merisel'), whereby these
companies agreed to distribute the Company's services and products to the
Company's resellers.
The Company's distribution and marketing agreements, as well as the
arrangement with Bell Atlantic Internet Solutions, are non-exclusive, and many
of the companies with which the Company has such agreements also have similar
agreements with the Company's competitors or potential competitors.
Additionally, the Company's arrangement with Bell Atlantic Internet Solutions is
subject to regulatory scrutiny by federal and state authorities. See
'Business -- Government Regulation'. There can be no assurance that the
Company's distributors and OEM partners, most of which have significantly
greater financial and marketing resources than the Company, will not develop and
market products in competition with the Company in the future, discontinue their
relationships with the Company or form additional competing arrangements with
the Company's competitors. If certain of these agreements were discontinued or
renegotiated in a manner adverse to the Company, it could have a material
adverse effect on the Company's business, financial condition and results of
operations.
RISK OF SYSTEMS FAILURE
The Company's operations are dependent upon its ability, and the ability of
its suppliers, such as MFS, to protect its communications infrastructure against
damage from fire, earthquakes, power loss, telecommunications failures and
similar events. Despite taking precautions, other Internet access providers have
suffered interruptions as a result of natural disasters and other unanticipated
problems, and in the future such events could cause interruptions in the
services provided by the Company. In addition, failure of the Company's
telecommunications vendors to provide the data communications capacity required
by the Company as a result of operational disruption or for any other reason
could cause interruptions in the services provided by the Company. Any damage or
failure that causes interruptions in the Company's operations could have a
material adverse effect on the Company's business, financial condition and
results of operations.
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SECURITY RISKS
Despite the implementation of security measures, any communications
infrastructure is vulnerable to computer viruses and other disruptive problems.
Other Internet access providers have in the past experienced, and the Company
may in the future experience, interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees or others. Unauthorized use could also potentially jeopardize the
security of confidential information stored in the computer systems of the
Company and its customers, which may result in liability of the Company to its
customers and also may deter potential subscribers. Although the Company intends
to continue to implement industry-standard security measures, such measures have
been circumvented in the past, and there can be no assurance that measures
implemented by the Company will not be circumvented in the future. Eliminating
computer viruses and alleviating other security problems may require
interruptions, delays or cessation of service to the Company's customers, all of
which could have a material adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGIES
The Company's success and ability to compete is dependent in part upon its
proprietary technologies. While the Company relies on patent, trademark,
contract, trade secret and copyright law to protect its proprietary
technologies, it is possible for a third party to copy or otherwise obtain and
use the Company's technologies without authorization, or to develop similar
technologies independently. In addition, effective copyright and trade secret
protection may be unavailable or limited in certain foreign countries. Policing
unauthorized use of the Company's technologies is difficult. Certain of the
Company's software products are currently accessible over the Internet. Such
accessibility to such products increases the likelihood that third parties will
misappropriate them. There can be no assurance that the steps taken by the
Company will prevent misappropriation of its technologies. In addition,
litigation may be necessary in the future to enforce the Company's intellectual
property rights or to protect the Company's trade secrets. Such litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Although the Company does not believe that its services or products
infringe the proprietary rights of any third parties, there can be no assurance
that third parties will not assert such claims against the Company in the future
or that such claims will not be successful. Additionally, the Company could
incur liability from alleged infringements of third party proprietary rights by
the Company's customers. The Company could incur substantial costs and diversion
of management resources with respect to the defense of any claims relating to
proprietary rights, which could materially adversely affect the Company's
business, financial condition and results of operations. Parties making such
claims could secure a judgment awarding substantial damages, as well as
injunctive or other equitable relief that could effectively block the Company's
ability to use or exploit the affected products in the United States or abroad.
Such a judgment could have a material adverse effect on the Company's business,
financial condition and results of operations. See 'Business -- Proprietary
Rights'.
Certain technologies used in the Company's solutions are licensed or leased
from third parties, generally on a non-exclusive basis. The termination of any
of these licenses or leases may have a material adverse effect on the Company's
business, financial condition and results of operations. Replacement of certain
technologies licensed or leased by the Company could be costly and could result
in delays that could have a material adverse effect on the Company's business,
financial condition and results of operations. While it may be necessary or
desirable in the future to obtain other licenses or leases relating to one or
more of the Company's services or products or relating to current or future
technologies, there can be no assurance that the Company will be able to do so,
if at all, on commercially reasonable terms.
TECHNOLOGICAL CHANGE; MARKET ACCEPTANCE OF EVOLVING STANDARDS
The markets the Company serves are subject to rapid technological change,
changing customer requirements, frequent new product introductions and evolving
industry standards that may render existing services and products obsolete. As a
result, the Company's position in its existing markets or
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other markets that it may enter could be eroded rapidly by product advancements
by competitors. The life cycles of the Company's services and products are
difficult to estimate. The Company's future success will depend, in part, upon
its ability to enhance existing services and products and to develop new
services and products on a timely basis. In addition, its services and products
must keep pace with technological developments, conform to evolving industry
standards, particularly client/server and Internet communications and security
protocols, and publishing formats, and address increasingly sophisticated
customer needs. There can be no assurance that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of services and products, or that new services and
products and enhancements will meet the requirements of the marketplace and
achieve market acceptance. If the Company is unable to develop and introduce
services and products in a timely manner in response to changing market
conditions or customer requirements, the Company's business, financial condition
and results of operations could be materially and adversely affected.
DEPENDENCE UPON GROWTH OF THE INTERNET
The markets that the Company serves with its services and products are in
the early stage of development and dependent on the Internet. Since the markets
are relatively new and the level of competition is increasing, it is difficult
to anticipate the market growth rate and potential saturation. Sales of the
Company's services and products will depend in large part upon a robust industry
and infrastructure for providing commercial Internet access and carrying
Internet traffic and upon increased commercial use of the Internet. The Internet
may not prove to be a viable commercial marketplace or may develop at a slower
rate than would support the Company's continued growth because of inadequate
development of the necessary infrastructure, such as a reliable network, or
timely development of complementary products, such as high speed modems. There
can be no assurance that the infrastructure or complementary products necessary
to make the Internet a viable commercial marketplace will be developed or
available to the Company on reasonable terms. If the necessary infrastructure or
complementary products are not developed or are not made available to the
Company on reasonable terms, or if the Internet and related markets do not
become a significant commercial marketplace, the Company's business, financial
condition and results of operations and will be materially adversely affected.
See 'Business -- Market and Industry Overview'.
RISKS ASSOCIATED WITH ACQUISITIONS
As part of its growth strategy, the Company intends to pursue acquisitions
of businesses or customer bases, and investments in, and strategic alliances
with, entities that complement or expand the Company's current operations or
capabilities. The Company is continuously evaluating potential investment
opportunities, but no assurance can be given that the Company will enter into
any understandings, commitments or agreements with respect to any acquisition,
investment, strategic alliance or related effort. Any acquisitions, investments,
strategic alliances or related effort will be accompanied by the risks commonly
encountered in such transactions or efforts. Such risks include, among others,
the failure to identify appropriate candidates, the inability to assimilate
operations and personnel of the respective entities, the potential disruption of
the Company's ongoing business, the inability of management to capitalize on the
opportunities presented by acquisitions, investments, strategic alliances or
related efforts, the failure to successfully incorporate licensed or acquired
technology and rights into the Company's services, the inability to maintain
uniform standards, controls, procedures and policies and the impairment of
relationships with employees and customers as a result of changes in management
or otherwise. Additionally, the Company may incur substantial additional
indebtedness in any acquisition, investment, strategic alliance or related
effort. Such indebtedness could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that the Company would be successful in overcoming these risks or any
other difficulties encountered with respect to such acquisitions, investments,
strategic alliances or related efforts.
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GOVERNMENT REGULATION
To date, the Federal Communications Commission (the 'FCC') has not actively
sought to regulate the provision of Internet access and related services. The
Company believes it is not currently subject to direct regulation by the FCC or
any other governmental agency, other than regulations applicable to businesses
generally. Under current law, operators of 'enhanced' services are exempt from
FCC regulation, but operators of 'basic' services are not similarly exempt. The
FCC has not yet addressed whether providing transport services, including
Internet telephony, to customers over an IP-based network is an enhanced
service. A determination by the FCC that providing Internet transport or
telephony services to customers over an IP-based network is subject to
regulation could adversely impact the Company's ability to provide various
existing and planned services, to provide Bell Atlantic Internet Solutions'
customers with the option to purchase the Company's communications and other
services, and could have a material adverse effect on the Company's business,
financial condition and results of operations.
In February 1996, the Telecommunications Act of 1996 was signed into law by
the President of the United States. Changes in the regulatory environment
relating to the Internet access industry, including regulatory changes that
directly or indirectly affect the regulatory status of Internet services, affect
telecommunications costs, including the application of access charges to
Internet services, or increase the likelihood or scope of competition from
regional telephone companies or others, could also have a material adverse
effect on the Company's business, financial condition and results of operations.
Due to the increase in Internet use and publicity, it is possible that laws and
regulations may be adopted with respect to the Internet, including with respect
to privacy, pricing and characteristics of services or products. Certain other
legislative initiatives, including those involving taxation of Internet services
and transactions, Internet regulation and universal service contribution
requirements for Internet providers, have also been proposed. The Company cannot
predict the impact, if any, that those or other future laws and regulations or
legal or regulatory changes may have on its business.
Bell Atlantic Internet Solutions' relationship with the Company is subject
to review and regulation by state and federal authorities, including the FCC.
Although Bell Atlantic Internet Solutions has received the requisite approvals
to provide service and make the Company's services available to those of Bell
Atlantic Internet Solutions' customers who request them (which has only included
customers in the traditional Bell Atlantic southern region through the date of
this Prospectus), a petition submitted by MFS in July, 1996 for reconsideration
of such FCC approvals is currently pending before the FCC. Additionally, the
extension of the Company's service offerings into the Bell Atlantic northern
(NYNEX) region is subject to approvals at the state and federal levels. There
can be no assurance that Bell Atlantic Internet Solutions will be successful in
maintaining or procuring the requisite regulatory approvals. Failure of Bell
Atlantic Internet Solutions to maintain or prospectively procure such approvals
at the federal or state level could adversely affect the Company's existing
agreements with Bell Atlantic Internet Solutions, and, as a result, the
Company's business, financial condition and results of operations.
Federal and state laws and regulations relating to the liability of online
services companies and Internet access providers for information carried on or
disseminated through their networks is currently unsettled. Several private
lawsuits seeking to impose such liability upon online services companies and
Internet access providers are currently pending. In addition, legislation has
been enacted and new legislation has been proposed that imposes liability for or
prohibits the transmission on the Internet of certain types of information. The
imposition upon the Company and other Internet access providers of potential
liability for information carried on or disseminated through their systems could
require the Company to implement measures to reduce its exposure to such
liability, which may require the expenditure of substantial resources, or to
discontinue certain service or product offerings. The increased attention
focused upon liability issues as a result of these lawsuits and legislative
actions and proposals could impact the growth of Internet use. While the Company
carries professional liability insurance, it may not be adequate to compensate
or may not cover the Company in the event the Company becomes liable for
information carried on or disseminated through its networks. Any costs not
covered by insurance incurred as a result of such liability or asserted
liability could have a material adverse effect on the Company's business,
financial condition and results of operations.
16
<PAGE>
<PAGE>
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company currently anticipates that the net proceeds from the Offering,
the existing credit facility and funds from operations will be sufficient to
meet its anticipated working capital and capital expenditure requirements at
least through the end of 1998. The Company may need to raise additional funds
through public or private debt or equity financings or by contracting for an
expanded credit facility in order to meet its working capital and capital
expenditure requirements through the end of 1998, to take advantage of
unanticipated opportunities, including more rapid international expansion or
significant acquisitions of complementary businesses or technologies, or to
develop new products or otherwise respond to unanticipated competitive
pressures. Certain covenants under the Company's secured line of credit restrict
the Company, under certain conditions, from, among other things, incurring
additional borrowing or merging with another company. The Company's inability to
borrow additional funds could result in the Company seeking alternative forms of
equity financing, and there can be no assurance that the Company would be
successful in obtaining such financing. If additional funds are raised through
the issuance of equity securities, the percentage ownership of then current
stockholders of the Company may be reduced and such equity securities may have
rights, preferences or privileges senior to those of the holders of the Common
Stock. Any such equity financing may be dilutive to the Company's stockholders.
It is likely that any debt financing or credit facility would restrict the
Company's ability to make acquisitions, borrow from other sources or pay
dividends to stockholders in certain cases. The terms of any such debt or equity
financing could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not currently
have any commitments for any additional equity or debt financing, and there can
be no assurance that any financing will be available to the Company or, if
available, that it can be obtained on terms acceptable to the Company. If
adequate funds are not available or are not available on acceptable terms, the
Company may not be able to take advantage of unanticipated opportunities,
develop new technologies or otherwise respond to unanticipated competitive
pressures, or fund its operations. Such inability could have a material adverse
effect on the Company's business, financial condition and results of operations.
See 'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources'.
CONTINUING CONTROL BY CURRENT MANAGEMENT AND EXISTING STOCKHOLDERS
Upon completion of the Offering, Scott A. Baxter, the Company's President,
Chief Executive Officer and Chairman of the Board of Directors, Richard M.
Brown, the Company's Vice President -- Information Technologies and Secretary,
and Scott Harmolin, the Company's Senior Vice President and Chief Technology
Officer, each of whom is a director of the Company, will beneficially own, in
the aggregate, approximately 44% of the issued and outstanding shares of Common
Stock. As a result, these stockholders, if they were to act in concert, would
have effective control over the Company and on the outcome of any matters
submitted to the Company's stockholders for approval, which influence might not
be consistent with the interests of other stockholders. In addition, if they
were to act in concert, they may be able to deter or cause a change in control
of the Company and otherwise generally control the Company's affairs.
BROAD DISCRETION IN APPLICATION OF PROCEEDS
A substantial portion of the estimated net proceeds from the Offering will
be allocated to the Company's working capital and general corporate purposes.
Due to the number and variability of factors that will be analyzed before the
Company determines how to use such net proceeds, the Company will have broad
discretion in allocating a significant portion of the net proceeds from the
Offering without any action or approval of the Company's stockholders.
Accordingly, investors will not have the opportunity to evaluate the economic,
financial and other relevant information that will be considered by the Company
in determining the application of such net proceeds. See 'Use of Proceeds'.
DILUTION
Purchasers of the Common Stock offered hereby will suffer immediate and
substantial dilution in the amount of $9.28 per share in the net tangible book
value per share of the Common Stock as of
17
<PAGE>
<PAGE>
September 30, 1997 (assuming that the initial public offering price of the
Common Stock is the mid-point of the range indicated on the front cover of this
Prospectus). See 'Dilution'.
BENEFITS OF OFFERING TO CURRENT STOCKHOLDERS
Upon consummation of the Offering, the Company's existing stockholders will
receive substantial benefits, including the creation of a public trading market
for their shares of Common Stock (although the holders of more than 10 million
shares of Common Stock have agreed that, for a period of 180 days after the date
of this Prospectus, they will not, among other things, sell such shares without
the prior written consent of Credit Suisse First Boston Corporation), the
corresponding facilitation of such sales in the secondary market and an
immediate increase in net tangible book value of $2.81 per share (based upon the
difference between the adjusted net tangible book value per share at September
30, 1997 and the mid-point of the range indicated on the front cover of this
Prospectus). If the Underwriters exercise their option to purchase 231,000
shares of Common Stock from the Selling Stockholders, such Selling Stockholders
will realize $2.8 million (after deducting underwriting discounts and
commissions and assuming the initial public offering price of the Common Stock
is the mid-point of the range on the cover of this Prospectus).
NO DIVIDENDS
The Company has not paid dividends on the Common Stock and does not
anticipate paying any dividends to its stockholders in the foreseeable future.
The declaration and payment of any dividends in the future will be determined at
the discretion of the Board of Directors, and will depend upon the Company's
earnings, capital requirements, financial condition and other relevant factors.
The payment of cash dividends by the Company is prohibited under its revolving
line of credit. In addition, any future bank or other financing may restrict the
Company's ability to declare and pay dividends. See ' -- Future Capital Needs;
Uncertainty of Additional Financing'.
NO PRIOR MARKET; POSSIBLE VOLATILITY
Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined by
negotiations among the Company, the Selling Stockholders and the Representatives
of the Underwriters. See 'Underwriting' for a discussion of the factors to be
considered in determining the initial public offering price. There can be no
assurance that an active public market will develop or be sustained after the
Offering or that the market price of the Common Stock will not decline below the
initial public offering price. Future announcements concerning the Company or
its competitors, quarterly variations in operating results, announcements of
technological innovations, the introduction of new services or products or
changes in services or products pricing policies by the Company or its
competitors, proprietary rights or other litigation, changes in earnings
estimates by analysts or other factors could cause the market price of the
Common Stock to fluctuate substantially. In addition, stock prices for many
technology companies fluctuate widely for reasons which may be unrelated to
operating results. These fluctuations, as well as general economic, market and
political conditions such as recessions or military conflicts, may materially
and adversely affect the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of shares of Common Stock by existing stockholders pursuant to
Rule 144 ('Rule 144') promulgated under the Securities Act or otherwise could
have an adverse effect on the price of the shares of the Common Stock. Upon
completion of the Offering, the Company will have 15,025,329 shares of Common
Stock outstanding (15,371,829 shares if the over-allotment option is exercised
in full). In addition, the Company has reserved for issuance 2,181,818 shares of
Common Stock upon exercise of options granted under the 1995 Option Plan and
948,889 shares of Common Stock upon exercise of outstanding warrants.
The 3,850,000 shares of Common Stock offered hereby (4,427,500 if the
over-allotment option is exercised in full) will be freely transferable without
restriction or further registration under the Securities Act except for any
shares purchased by an 'affiliate' of the Company within the meaning of Rule
144. The remaining 11,175,329 shares of Common Stock will be 'restricted
securities' as that term is defined in Rule 144, and may only be sold pursuant
to a registration statement under the Securities
18
<PAGE>
<PAGE>
Act or an applicable exemption from registration thereunder, including
exemptions provided by Rule 144 and Rule 701. No prediction can be made as to
the effect that future sales of Common Stock, or the availability of shares of
Common Stock for future sales, will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock, or
the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock and could impair the Company's ability to
raise capital through the future sale of equity securities. See 'Management,'
'Principal and Selling Stockholders,' 'Shares Eligible for Future Sale' and
'Underwriting'.
In addition, after the Offering, the holders of 4,629,874 shares of Common
Stock and 948,889 warrants will be entitled to certain rights with respect to
registration of such securities and/or securities underlying such securities
under the Securities Act. Registration of such securities under the Securities
Act would result in such securities becoming freely tradeable under the
Securities Act (except for securities purchased by affiliates of the Company)
immediately upon the effectiveness of such registration. See 'Description of
Capital Stock -- Registration Rights of Certain Holders'.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
and Restated By-laws could make it more difficult for a third party to acquire,
and could discourage a third party from attempting to acquire, control of the
Company. Certain of these provisions allow the Company to issue preferred stock
with rights senior to those of the Common Stock without any further vote or
action by the stockholders and other requirements which could make it more
difficult for stockholders to effect certain corporate actions. Such provisions
could limit the price that certain investors might be willing to pay in the
future for shares of the Common Stock and may have the effect of delaying or
preventing a change in control of the Company. The issuance of preferred stock
also could decrease the amount of earnings and assets available for distribution
to the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In addition,
certain provisions of the Delaware General Corporation Law prevent certain
stockholders from engaging in business combinations with the Company, subject to
certain exceptions. See 'Description of Capital Stock -- Certain Anti-Takeover
Charter Provisions and Statutory Provisions'.
LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS
The Restated Certificate of Incorporation and Restated By-laws of the
Company contain provisions limiting the liability of directors of the Company
for monetary damages for breach of fiduciary duty to the fullest extent
permissible under Delaware law. In addition, the Restated Certificate of
Incorporation and Restated By-laws require the Company to indemnify directors,
officers, employees and agents of the Company serving at the request of the
Company against expenses, judgments (including derivative actions), fines and
amounts paid in settlement, except in limited circumstances. The Restated
Certificate of Incorporation and Restated By-laws provide for the
indemnification of directors and officers in connection with civil, criminal,
administrative or investigative proceedings when acting in their capacities as
agents for the Company. The foregoing provisions may reduce the likelihood of
derivative litigation against directors and officers and may discourage or deter
stockholders or management from suing directors or officers for breaches of
their duties to the Company, even though such an action, if successful, might
otherwise benefit the Company and its stockholders. See 'Description of Capital
Stock -- Limitations on Liability and Indemnification of Officers and
Directors'.
LIMITATION ON USE OF NET OPERATING LOSS CARRYFORWARDS
Upon consummation of the Offering, there will be an 'ownership change' in
the Company within the meaning of Section 382 of the Internal Revenue Code of
1986, as amended (the 'Code'), which limits the ability of the Company to use
its net operating losses in a given year. Following an 'ownership change,' the
amount of available net operating loss carryforwards and credit equivalents from
periods before the ownership change that may be used by the Company in any tax
year following the change cannot exceed the 'long-term tax-exempt rate' at the
time of the Offering (which rate is 5.27% as of the date of this Prospectus)
multiplied by the value of the Company at the time of the Offering (with certain
adjustments).
19
<PAGE>
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $45.7 million ($49.9 million if the over-allotment option is
exercised in full) after deducting underwriting discounts and commissions and
estimated expenses of the Offering payable by the Company.
The Company intends to use approximately $7.5 million of the net proceeds
for upgrade and expansion of its communications infrastructure. The balance of
the net proceeds ($38.2 million) will be used to fund working capital
requirements and for other general corporate purposes, including acquisitions.
Although the Company is continuously evaluating potential investment
opportunities, it does not have, nor can any assurance be given that it will
have, any understanding, commitment or agreement with respect to any
acquisition. If the over-allotment option is exercised in full, additional net
proceeds ($4.2 million) will be added to the Company's working capital.
The amounts of the Company's expected expenditures described herein are
estimates and are subject to change. Unforeseen developments may require that
the Company reallocate a portion of the net proceeds. Pending application of the
proceeds of the Offering, the Company intends to invest the proceeds in
marketable, investment grade, interest-bearing instruments.
DIVIDEND POLICY
The Company has not paid any cash dividend to stockholders and does not
anticipate paying such dividends in the foreseeable future, as the Company's
Board of Directors intends to retain earnings for use in the development and
continued expansion of the Company's business. The payment of cash dividends by
the Company is prohibited under its revolving line of credit. Any future
determination concerning the payment of dividends will be within the sole
discretion of the Board of Directors and will depend upon the existence of such
restriction, the Company's financial condition, the Company's results of
operations and such other factors as the Board of Directors deems relevant.
20
<PAGE>
<PAGE>
DILUTION
Dilution is the amount by which the initial public offering price paid by
the purchasers of shares of Common Stock in the Offering exceeds the net
tangible book value per share of Common Stock after the Offering. The net
tangible book value per share of Common Stock is determined by subtracting the
total liabilities of the Company from the total book value of the tangible
assets of the Company and dividing the difference by the pro forma number of
shares of Common Stock deemed to be outstanding on the date as of which such
book value is determined.
The net tangible book value of the Common Stock as of September 30, 1997
was $0.91 per share. After giving effect to the sale by the Company of the
3,850,000 shares of Common Stock offered hereby and the application of the net
proceeds therefrom of $45.7 million, the pro forma as adjusted net tangible book
value of the Company at September 30, 1997 would have been $55.9 million, or
$3.72 per share (assuming that the initial public offering price of the Common
Stock is the mid-point of the range indicated on the front cover of this
Prospectus). This represents an immediate increase in the net tangible book
value of $2.81 per share to existing holders of Common Stock and an immediate
dilution of $9.28 per share to new investors. The following table illustrates
this per share dilution (assuming that the initial public offering price of the
Common Stock is the mid-point of the range indicated on the front cover of this
Prospectus):
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................................... $13.00
Net tangible book value before the Offering............................ $0.91
Increase attributable to new investors................................. 2.81
As adjusted net tangible book value after the Offering...................... 3.72
------
Dilution to new investors................................................... $ 9.28
------
------
</TABLE>
If the over-allotment option is exercised in full, the pro forma net
tangible book value per share of Common Stock after giving effect to the
Offering would be $3.91 per share, the increase in the net tangible book value
per share would be $3.00 and the dilution to persons who purchase shares of
Common Stock in the Offering would be $9.09 per share (assuming that the initial
public offering price of the Common Stock is the mid-point of the range
indicated on the front cover of this Prospectus).
The following table summarizes, as of September 30, 1997, the number of
shares of Common Stock purchased from the Company, the total consideration paid
and the average price per share paid by the existing stockholders (including
holders of shares of Series A Preferred Stock and Series B Preferred Stock, all
of which will automatically convert into shares of Common Stock upon
Consummation of the Offering) and new investors, adjusted to give effect to the
sale of the shares of Common Stock offered hereby (assuming that the initial
public offering price of the Common Stock is the mid-point of the range
indicated on the front cover of this Prospectus) and before deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company:
<TABLE>
<CAPTION>
TOTAL CASH
SHARES PURCHASED CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 11,175,329 74.4% $28,183,421 36.0% $ 2.52
New investors........................... 3,850,000 25.6 50,050,000 64.0 13.00
---------- ------- ----------- -------
Total......................... 15,025,329 100.0% $78,233,421 100.0%
---------- ------- ----------- -------
---------- ------- ----------- -------
</TABLE>
As of September 30, 1997, there were outstanding options to purchase an
aggregate of 1,186,176 shares of Common Stock at a weighted average exercise
price of $6.83 per share and warrants to purchase 948,889 shares of Common Stock
exercisable at a weighted average exercise price of $5.59 per share. Since
September 30, 1997, the Company has granted options to purchase an additional
41,709 shares of Common Stock, each at an exercise price of $13.00. To the
extent these options or warrants are exercised, there will be further dilution
to new investors. See 'Management -- 1995 Option Plan' and 'Description of
Capital Stock -- Warrants'.
21
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the actual cash position and capitalization
of the Company at September 30, 1997, and as adjusted to give effect to the
conversion of the Company's Series A Preferred Stock and Series B Preferred
Stock, the Offering and the application of the estimated net proceeds therefrom.
The table should be read in conjunction with the Financial Statements appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(A)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................................. $ 4,556 $ 50,253
-------- --------------
-------- --------------
Credit facility(b).................................................................... $ -- $--
Mandatorily redeemable 10% PIK Series B Convertible Participating Preferred Stock
($.01 par value; 415,000 shares authorized, 180,240 issued and outstanding actual,
none issued and outstanding pro forma as adjusted).................................. 16,205 --
Mandatorily redeemable Series A Convertible Participating Preferred Stock ($.01 par
value; 450,000 shares authorized, 422,607 issued and outstanding actual, none issued
and outstanding pro forma as adjusted).............................................. 10,421 --
Stockholders' equity:
Preferred Stock ($.01 par value; 1,000,000 shares authorized, 865,000 designated
as mandatorily redeemable Series A and B Preferred Stock, none issued or
outstanding pro forma as adjusted).............................................. -- --
Common Stock ($.001 par value; 50,000,000 shares authorized, 6,545,455 issued and
outstanding actual; 15,025,329 shares issued and outstanding pro forma as
adjusted)(c).................................................................... 7 15
Additional paid-in capital....................................................... 1,104 73,030
Accretion of mandatorily redeemable preferred stock.............................. (388) --
Accumulated deficit.............................................................. (17,161) (17,161)
-------- --------------
Total stockholders' (deficit) equity........................................ (16,438) 55,884
-------- --------------
Total capitalization................................................... $ 10,188 $ 55,884
-------- --------------
-------- --------------
</TABLE>
- ------------
(a) Gives effect to the conversion of (i) 422,607 shares of Series A Preferred
Stock and 180,240 shares of Series B Preferred Stock into 1,637,097 and
2,992,777 shares of Common Stock, respectively, upon consummation of the
Offering and (ii) the sale of Common Stock offered hereby, net of expenses,
at an assumed initial public offering price of $13.00 per share (the
mid-point of the range set forth on the cover of this Prospectus).
(b) As of September 30, 1997, the Company had a $10 million secured line of
credit. Borrowings under this line are limited to a specified percentage of
qualifying accounts receivable less outstanding obligations of the Company
owed to the lending institution. As of September 30, 1997, there was $2.5
million available under the line. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources'.
(c) Excludes 2,181,819 shares of Common Stock reserved for issuance under the
1995 Option Plan, under which options covering 1,227,885 shares at a
weighted average exercise price of $7.04 per share are outstanding and (ii)
948,889 shares of Common Stock reserved for issuance pursuant to
outstanding Warrants at exercise prices ranging from $0.01 to $6.02 per
share. See 'Management -- 1995 Option Plan' and 'Description of Capital
Stock -- Warrants'.
22
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data for each of the years in the
three-year period ended December 31, 1996 and the nine-month period ended
September 30, 1997 are derived from, and are qualified by reference to, the
audited Financial Statements included elsewhere herein. The following selected
financial data for each year in the two-year period ended December 31, 1993 are
derived from, and are qualified by reference to, the Company's audited financial
statements not included herein. The selected financial data for the nine-month
period ended September 30, 1996 are derived from the unaudited financial
statements of the Company included elsewhere herein and, in the opinion of
management, include all adjustments, consisting of normal recurring accruals
necessary for a fair presentation of the data presented. The results for the
nine months ended September 30, 1997 are not necessarily indicative of results
for the full year. The pro forma share and per share information for the year
ended December 31, 1996 and the nine months ended September 30, 1997 are derived
from, and are qualified by reference to, certain unaudited pro forma financial
information included elsewhere herein. The information presented below should be
read in conjunction with 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the Financial Statements included
elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1992 1993 1994 1995 1996
------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Services:
Professional.............. $ 611 $ 996 $ 1,914 $ 4,397 $ 6,570
Communications............ -- -- -- 189 1,268
Media..................... -- -- -- 202 529
------ ------- ------- ------- -------
Total services
revenues............ 611 996 1,914 4,788 8,367
------ ------- ------- ------- -------
Products.................... 3,066 10,605 17,083 21,424 29,741
------ ------- ------- ------- -------
Total revenues, net........... 3,677 11,601 18,997 26,212 38,108
------ ------- ------- ------- -------
Cost of revenues:
Services.................... 222 382 758 2,596 6,842
Products.................... 2,521 9,596 14,132 17,653 24,607
------ ------- ------- ------- -------
Total cost of revenues........ 2,743 9,978 14,890 20,249 31,449
------ ------- ------- ------- -------
Gross profit.................. 934 1,623 4,107 5,963 6,659
------ ------- ------- ------- -------
Operating expenses:
General and
administrative.......... 378 652 1,548 2,435 7,006
Selling and marketing..... 345 742 1,393 3,450 6,504
Research and
development............. 40 69 501 411 969
Depreciation and
amortization............ 36 75 94 228 460
------ ------- ------- ------- -------
Total operating expenses...... 799 1,538 3,536 6,524 14,939
------ ------- ------- ------- -------
Income (loss) from
operations.................. 135 85 571 (561) (8,280)
Total other income
(expense)................... -- 2 9 (62) 32
Provision (benefit) for income
taxes....................... 46 43 289 (183) (210)
------ ------- ------- ------- -------
Net income (loss)............. $ 89 $ 44 $ 291 $ (440) $(8,038)
------ ------- ------- ------- -------
------ ------- ------- ------- -------
Pro forma net loss per
common share(a)(b).......... $ (0.80)
-------
-------
Pro forma weighted average
common shares
outstanding(a)(b)........... 10,109,279
BALANCE SHEET DATA (AT PERIOD
END):
Cash and cash equivalents..... $ 430 $ 74 $ 82 $ 620 $ 515
Working capital
(deficiency)................ 246 212 423 (712) (1,900)
Total assets.................. 1,351 1,967 4,510 8,611 13,292
Total liabilities............. 981 1,553 3,805 8,213 11,543
Mandatorily redeemable
preferred stock............. -- -- -- -- 9,881
Stockholders'equity
(deficit)................... 370 414 705 398 (8,132)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1996 1997
------- --------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Services:
Professional..............$3,936 $11,988
Communications............ 685 3,931
Media..................... 353 77
------- --------
Total services
revenues............ 4,974 15,996
------- --------
Products....................22,341 14,306
------- --------
Total revenues, net...........27,315 30,302
------- --------
Cost of revenues:
Services.................... 4,333 11,521
Products....................18,406 11,676
------- --------
Total cost of revenues........22,739 23,197
------- --------
Gross profit.................. 4,576 7,105
------- --------
Operating expenses:
General and
administrative.......... 5,049 7,577
Selling and marketing..... 4,390 6,546
Research and
development............. 598 920
Depreciation and
amortization............ 311 601
------- --------
Total operating expenses......10,348 15,644
------- --------
Income (loss) from
operations..................(5,772 ) (8,539 )
Total other income
(expense)................... 62 (293 )
Provision (benefit) for income
taxes....................... (157 ) 256
------- --------
Net income (loss).............$(5,553) $(9,088 )
------- --------
------- --------
Pro forma net loss per
common share(a)(b).......... $ (0.88 )
--------
--------
Pro forma weighted average
common shares
outstanding(a)(b)........... 10,311,285
BALANCE SHEET DATA (AT PERIOD
END):
Cash and cash equivalents..... $ 4,556
Working capital
(deficiency)................ 5,090
Total assets.................. 18,262
Total liabilities............. 8,074
Mandatorily redeemable
preferred stock............. 26,626
Stockholders'equity
(deficit)................... (16,438 )
</TABLE>
- ------------
(a) For information concerning the computation of pro forma net loss per common
share and pro forma weighted average common shares of Common Stock
outstanding, see Notes 3 and 12 to the Financial Statements.
(b) Gives effect to the conversion of 422,607 shares of Series A Preferred
Stock and 180,240 shares of Series B Preferred Stock into 1,637,097 and
2,992,777 shares of Common Stock, respectively, upon consummation of the
Offering.
23
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements included elsewhere in this Prospectus. This discussion contains
forward-looking statements based on current expectations which involve risks and
uncertainties. Actual results and the timing of certain events may differ
significantly from those projected in such forward-looking statements due to a
number of factors, including those set forth under 'Risk Factors' and elsewhere
in this Prospectus.
OVERVIEW
ICI, the Company's predecessor, was incorporated in New York in February
1991. Icon was incorporated in Delaware in February 1995, and ICI was merged
with and into Icon in December 1995. ICI was primarily engaged in the design,
marketing, installation and on-going support of high-end network-based
information management systems. ICI also focused on developing, customizing and
integrating both third-party and proprietary software applications.
In 1995, recognizing the emergence of IP as a data transmission standard,
the Company's management redefined the Company's strategy to provide end-to-end
solutions that enable corporate customers to implement their Internet, intranet
and extranet strategies. The Company's revenues are primarily derived from the
following services and products: (i) a range of professional services, including
custom application and website development and design, systems integration and
maintenance and support services; (ii) communications services including
high-quality Internet access and related services, such as web/server hosting
and management, enhanced by the Company's proprietary technologies; and (iii)
product resales, including hardware and software sold as an integral part of
systems design and integration and as a means to sell integrated communications
and professional services and establish customer relationships.
STATEMENT OF OPERATIONS
The Company provides professional services to its customers to facilitate
the delivery of their information and applications over Icon's communications
infrastructure, including development, design and integration services and
maintenance and support services. Revenues from development, design and systems
integration contracts are recognized on a percentage-of-completion basis.
Maintenance and support services are typically provided in accordance with
annual agreements that are renewable at the discretion of the customer and
subject to change annually. Maintenance and support revenues are recognized
ratably over the term of the respective agreement.
Revenues from communications services are generated by providing Internet
access and other related communications services, such as web/server hosting and
management. Communications services are generally provided based on one-year or
multi-year service agreements, which are renewable at the discretion of the
customer. Communications services revenues are recognized ratably over the term
of the respective service agreement.
As a result of the Company's implementation of its end-to-end solutions
strategy, services revenues (which incorporate professional, communications and
media services) have increased on a yearly basis as a percentage of total
revenue. For the years ended December 31, 1994, 1995 and 1996, services revenues
comprised 10.1%, 18.3% and 22.0% of total net revenues, respectively. For the
nine months ended September 30, 1997 services revenues were 52.8% of total net
revenues as compared to 18.2% for the similar period in 1996. The increase in
services revenues as a percentage of total net revenues is expected to continue
to increase in the future. Historically, the Company generated limited media
revenues from selling advertisement space on its three new-media properties,
Word, Charged and SportsFan Online. The Company is not actively marketing these
properties and does not expect to expand this business. The Company has
experienced and expects to continue to experience operating losses in connection
with the ongoing operation of its media properties. The Company has recently
commenced efforts to identify potential strategic partners to assist in the
exploitation of these properties. While it is the Company's intention and desire
to continue to design, produce and distribute such properties, it does not
intend to continue its role as a publisher of proprietary properties. The
24
<PAGE>
<PAGE>
Company's media properties have historically operated at a loss, but have
nevertheless served a valuable marketing function, helping the Company attract
employees and win new business.
Historically the Company has experienced relatively stable gross margins on
product sales. For the years ended December 31, 1994, 1995 and 1996 gross
margins on product sales were 17.3%, 17.6% and 17.3%, respectively, and for the
nine months ended September 30, 1996 and 1997 were 17.6% and 18.4%,
respectively. Over the same periods gross margins on services have fluctuated as
cost of revenues, particularly on communications services, have increased in
advance of revenue growth for such services. The Company anticipates that in the
future services will provide greater opportunities for increased gross margins.
The Company generates products revenues through the reselling of computer
and networking hardware and software, including network servers, routers,
firewall software, and database management software. Products revenues are
recognized upon shipment.
Professional services cost of revenues consists of the labor and overhead
costs for the personnel performing the service including the cost of project
management, quality control and project review. Cost of communications services
revenues consists primarily of the cost to maintain and operate the Company's
communications infrastructure and customers' hosted web servers, access charges
from LECs and network and related communications facilities costs, depreciation
of network equipment and rental expenses for equipment pursuant to operating
leases. The Company expects its services revenues to continue to increase in
dollar amount, while declining as a percentage of services revenue as the
Company expands its customer base and more fully utilizes its communications
infrastructure. Cost of revenues for products consists primarily of the
Company's acquisition cost of computer and networking hardware and software that
is purchased from the manufacturers' distributors.
General and administrative expenses consist primarily of personnel expense
and professional fees, as well as rent and operating costs of the Company's
facilities. The Company expects general and administrative expenses to increase
in dollar amount, reflecting the continued growth of its operations and the
costs associated with being a publicly held entity, but to decrease in future
years as a percentage of total net revenues.
Selling and marketing expenses consist primarily of personnel expenses,
including salary, benefits, commissions, overhead costs and the cost of
marketing programs, such as advertising, trade shows and public relations. The
Company expects selling and marketing expenses to continue to increase in dollar
amount in future years as the Company's business grows and as it increases its
presence at trade shows, increases the size of its sales force and develops
additional materials to reach a larger audience. The Company expects marketing
expenses to decrease as a percentage of total net revenues due to the fact that
initial marketing expenses, such as development and preparation of collateral
materials, were incurred upon the expansion of business lines.
Research and development expenses consist primarily of personnel and
related costs associated with the development of the Company's technologies. The
Company expects its research and development spending to continue to grow and to
increase modestly as a percentage of total operating expenses in future years.
The Company's expectations of significant revenue growth are not dependent,
however, upon the success of ongoing future research and development activities.
OTHER
In order to provide nationwide communications services including Internet
access, the Company entered into a three-year agreement in June 1995 with MFS to
access MFS' nationwide communications facilities and related communications
products and services. The terms of the agreement provide for the Company to pay
MFS primarily based on the average bandwidth of the Company's traffic
transmitted over MFS' communications facilities. The Company believes that the
usage-based pricing plan established in the agreement has allowed, and will
continue to allow, the Company to grow communications services revenues without
incurring the full fixed costs typically associated with building a nationwide
network and Internet access. The Company also believes that as the utilization
of
25
<PAGE>
<PAGE>
its network increases the Company may elect to lease and install its own
dedicated high speed connections between nodes and may rely less on MFS'
communications facilities for data transport.
The Company, which had been profitable prior to 1995, has incurred net
losses and negative cash flow from operations since transitioning its strategy
to provide end-to-end Internet solutions and expects to continue to operate at a
loss and experience negative cash flow at least through 1998. The Company's
attainment of profitability and positive cash flow is dependent upon its ability
to substantially grow its revenue base and achieve related operating
efficiencies.
The Company will continue to focus on growing its professional services and
communications services businesses, which could require it to significantly
increase its expenses for personnel and marketing.
The Company serves major customers in information intensive industries,
such as financial services, telecommunications, media and travel. Revenues
attributable to Bear Stearns comprised 24%, 28% and 30% of the Company's total
net revenues in 1994, 1995 and 1996, respectively, and 49% for the nine months
ended September 30, 1997. Revenues attributable to Nomura Securities comprised
11%, 15% and 13% of the Company's total net revenues in 1994, 1995 and 1996,
respectively, and 3% for the nine months ended September 30, 1997. Revenues
attributable to Merrill Lynch comprised 10% of the Company's total net revenues
in 1995. No other customers represented over 10% of the Company's total net
revenues in the same time periods. Management expects revenue concentration to
decline as the Company grows its services revenues.
Historically, the Company has marketed and sold its services and products
through its direct sales force and through indirect channels. In May 1996, the
Company entered into an arrangement with Bell Atlantic Internet Solutions
whereby Bell Atlantic Internet Solutions agreed to provide billing services in
connection with the offering of the Company's communications services to
requesting Bell Atlantic Internet Solutions customers for both dedicated and
switched access, including residential customers. Revenues from customers
acquired through Bell Atlantic Internet Solutions were a significant portion of
communications services revenues in the nine months ended September 30, 1997.
The Company believes that revenues from this arrangement will continue to grow
and that this relationship will represent a significant element of Icon's
distribution strategy in Bell Atlantic Internet Solutions' region. In October
1997, the Company extended its arrangement by entering into an updated GSP
agreement with Bell Atlantic Internet Solutions to continue to make its services
available in the traditional Bell Atlantic southern region for switched and
dedicated services and to expand the Company's reach with respect to dedicated
services into the Bell Atlantic northern region (previously NYNEX) through
October 1999. The Company currently plans that it will make its services
available to requesting Bell Atlantic Internet Solutions business customers in
the northern region during the first half of 1998. See 'Business -- Sales and
Marketing'. The Company also has agreements with Access Graphics, Fiberlink,
Merisel and other resellers to resell the Company's communications services.
The Company has incurred losses in 1995, 1996 and the nine months ended
September 30, 1997 that have generated net operating loss carryforwards of
approximately $15.3 million at September 30, 1997 for federal and state income
tax purposes. These carryforwards are available to offset future taxable income
and expire in 2011 through 2012 for federal income tax purposes. See 'Risk
Factors -- Limitations on Use of Net Operating Loss Carryforwards'.
26
<PAGE>
<PAGE>
RESULTS OF OPERATIONS
The following table shows various items on the Company's Statement of
Operations as a percentage of total net revenues (except where otherwise noted).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1992 1993 1994 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Services:
Professional............. 16.6% 8.6% 10.1% 16.8% 17.3%
Communications........... -- -- -- 0.7 3.3
Media.................... -- -- -- 0.8 1.4
----- ----- ----- ----- -----
Total services
revenues............ 16.6 8.6 10.1 18.3 22.0
----- ----- ----- ----- -----
Products.................... 83.4 91.4 89.9 81.7 78.0
----- ----- ----- ----- -----
Total revenues, net........... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Cost of revenues:
Services(a).............. 36.3% 38.4% 39.6% 54.2% 81.8%
Products(b).............. 82.2 90.5 82.7 82.4 82.7
Total cost of revenues........ 74.6 86.0 78.4 77.3 82.5
Gross profit.................. 25.4 14.0 21.6 22.7 17.5
Operating expenses:
General and
administrative......... 10.2 5.6 8.2 9.2 18.4
Selling and marketing.... 9.4 6.5 7.3 13.1 17.1
Research and
development............ 1.1 0.6 2.6 1.6 2.5
Depreciation and
amortization........... 1.0 0.6 0.5 0.9 1.2
----- ----- ----- ----- -----
Total operating expenses...... 21.7 13.3 18.6 24.8 39.2
----- ----- ----- ----- -----
Income (loss) from
operations.................. 3.7 0.7 3.0 (2.1) (27.1)
Net income (loss)............. 2.4 0.4 1.5 (1.7) (21.1)
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
1996 1997
----- -----
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Services:
Professional............. 14.4% 39.6%
Communications........... 2.5 13.0
Media.................... 1.3 0.2
----- -----
Total services
revenues............ 18.2 52.8
----- -----
Products.................... 81.8 47.2
----- -----
Total revenues, net...........100.0% 100.0%
----- -----
----- -----
Cost of revenues:
Services(a).............. 87.1% 72.0%
Products(b).............. 82.4 81.6
Total cost of revenues........ 83.2 76.6
Gross profit.................. 16.8 23.4
Operating expenses:
General and
administrative......... 18.5 25.0
Selling and marketing.... 16.1 21.6
Research and
development............ 2.2 3.0
Depreciation and
amortization........... 1.1 2.0
----- -----
Total operating expenses...... 37.9 51.6
----- -----
Income (loss) from
operations..................(21.1) (28.2)
Net income (loss).............(20.3) (30.0)
</TABLE>
- ------------
(a) As a percentage of total services revenues.
(b) As a percentage of products revenues.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
Revenues. Total net revenues were $30.3 million for the nine months ended
September 30, 1997, a $3.0 million increase over total net revenues of $27.3
million for the nine months ended September 30, 1996.
Professional services revenues were $12.0 million and $3.9 million for the
nine months ended September 30, 1997 and 1996, respectively, representing an
increase of 205%. This increase was attributable to the growing demand for
professional services in its existing customer base and the acquisition of
several new customers, a high renewal rate of existing maintenance contracts, an
increased number of systems engineers available to perform these services and a
higher utilization and average billing rate per systems engineer.
Communications services revenues were $3.9 million and $0.7 million for the
nine months ended September 30, 1997 and 1996, respectively, representing an
increase of over 470%. This increase is primarily attributable to the
acquisition of new customers and the arrangement with Bell Atlantic Internet
Solutions under which the Company began providing service in the third quarter
of 1996. Revenues derived from the Bell Atlantic Internet Solutions arrangement
were a significant component of communications revenues in the nine months ended
September 30, 1997.
Products revenues were $14.3 million and $22.3 million for the nine months
ended September 30, 1997 and 1996, respectively. This decrease was due primarily
to the transition of the Company's focus from its historical role as a VAR to
providing IP network-related services.
Cost of revenues. Total cost of revenues were $23.2 million and $22.7
million for the nine months ended September 30, 1997 and 1996, respectively,
representing 76.6% and 83.2% of total net revenues,
27
<PAGE>
<PAGE>
respectively. The overall margin improvement was primarily attributable to the
continued successful implementation of the Company's strategy to sell
higher-margin professional services.
Services cost of revenues were approximately $11.5 million and $4.3 million
for the nine months ended September 30, 1997 and 1996, respectively. This growth
is primarily attributable to the hiring of 23 additional professional services
personnel and the continued expansion of the Company's communications
infrastructure. As a percentage of services revenues, such costs declined to
72.0% in the nine months ended September 30, 1997 from 87.1% in the year earlier
period, mostly due to increased utilization of systems engineers.
Products cost of revenues were $11.7 million and $18.4 million for the nine
months ended September 30, 1997 and 1996, respectively, representing 81.6% and
82.4% of products revenues for the nine months ended September 30, 1997 and
1996, respectively. The slight decrease in margin was due primarily to a change
in the mix of resold products.
General and administrative. General and administrative expenses were $7.6
million and $5.0 million for the nine months ended September 30, 1997 and 1996,
respectively. This higher level of expenses reflects an increase in personnel
and professional fees necessary to manage the financial, legal and
administrative aspects of the business as well as rent and operating costs of
the Company's facilities. General and administrative expenses as a percentage of
total net revenues increased to 25.0% for the nine months ended September 30,
1997 from 18.5% in the year earlier period due to the expansion of the Company's
administrative infrastructure necessary to manage the rapid growth of the
Company's services business.
Selling and marketing. Selling and marketing expenses were $6.5 million and
$4.4 million for the nine months ended September 30, 1997 and 1996,
respectively. The 49.1% increase in 1997 reflects increased spending including
the development of new marketing materials. Selling and marketing expenses as a
percentage of total net revenues increased to 21.6% for the nine months ended
September 30, 1997 from 16.1% in the year earlier period as a result of the
increased marketing effort.
Research and development. Research and development expenses were $0.9
million and $0.6 million for the nine months ended September 30, 1997 and 1996,
respectively. This higher level of expense reflects an overall increase in the
number of personnel required to develop new technologies that enhance the
performance and reliability of the Company's network. Research and development
expenses as a percentage of total net revenues increased to 3.0% for the nine
months ended September 30, 1997 from 2.2% in the year earlier period as a result
of the Company's increased efforts to deliver enhanced communications services
to its customers.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues. Total net revenues were $38.1 million in 1996, an $11.9 million
increase over total net revenues of $26.2 million in 1995.
Professional services revenues were $6.6 million and $4.4 million in 1996
and 1995, respectively, representing an increase of 49.4%. This increase was
attributable to the growing demand for professional services in the Company's
existing customer base and the acquisition of several new customers, a high
renewal rate of existing maintenance contracts, the increased number of systems
engineers available to perform these services and a higher utilization and
average billing rate per systems engineer.
Communications services revenues increased to $1.3 million in 1996 from
$0.2 million in 1995, representing an increase of 570%. This increase is
primarily attributable to the acquisition of new customers, the rollout of the
Bell Atlantic Internet Solutions arrangement in the second half of 1996 and the
continued cross-selling of communications services to the Company's existing
professional services and products customers.
Products revenues were $29.7 million and $21.4 million in 1996 and 1995,
respectively, representing an increase of 38.8%. This increase was due primarily
to hardware and software resales related to large scale systems integration
projects for customers in the financial services industry.
28
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<PAGE>
Cost of revenues. Total cost of revenues were $31.4 million and $20.2
million in 1996 and 1995, respectively, representing 82.5% and 77.3% of total
net revenues, respectively. This decline in margin is primarily attributable to
the expansion of the Company's network, resulting in significant fixed costs
with minimal communications services revenues.
Services cost of revenues were $6.8 million and $2.5 million in 1996 and
1995, respectively. This growth is primarily attributable to the hiring of
professional services personnel, expansion of the Company's communications
infrastructure and costs associated with the Company's media properties. Such
costs increased to 81.8% as a percentage of services revenues in 1996 from 54.2%
in the prior year, reflecting the significant fixed costs involved in expanding
the Company's communications infrastructure.
Products cost of revenues were $24.6 million and $17.7 million in 1996 and
1995, respectively, representing 82.7% and 82.4%, respectively, of products as a
percentage of products revenues in 1996 and 1995, respectively.
General and administrative. General and administrative expenses were $7.0
million and $2.4 million in 1996 and 1995, respectively. This higher level of
expense reflects an increase in personnel and professional fees necessary to
manage the financial, legal and administrative aspects of the business as well
as rent and operating costs of the Company's facilities. General and
administrative expenses as a percentage of total net revenues increased to 18.4%
from 9.3% in the year earlier period due to expansion of the Company's
administrative infrastructure necessary to manage the rapid growth of the
Company's services business.
Selling and marketing. Selling and marketing expenses were $6.5 million and
$3.5 million in 1996 and 1995, respectively. The 88.5% increase in 1996 reflects
an increase in sales commissions resulting from increased services and products
revenues combined with increased marketing and promotional activities, including
advertising and trade shows. Selling and marketing expenses as a percentage of
total net revenues increased to 17.1% in 1996 from 13.2% in 1995 as a result of
the higher sales commissions and increased marketing and promotional activities.
Research and development. Research and development expenses were $1.0
million and $0.4 million in 1996 and 1995, respectively. This higher level of
expenses reflected an increase in personnel to develop new technologies that
allow the Company's network to more efficiently transport data.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues. Total net revenues were $26.2 million in 1995, a $7.2 million
increase over total net revenues of $19.0 million in 1994.
Professional services revenues were $4.4 million and $1.9 million in 1995
and 1994, respectively, representing an increase of 130%. This increase was
attributable to the Company's broadened services offerings relating to
IP-networks, the increased number of systems engineers available to perform
these services and the acquisition of several new customers.
Communications services revenues were $0.2 million in 1995, the first year
the Company provided communications services.
Products revenues were $21.4 million and $17.1 million in 1995 and 1994,
respectively, representing an increase of 25.4%. This increase was due primarily
to hardware and software resales related to large scale systems integration
projects for customers in the financial services industry.
Cost of revenues. Total cost of revenues was $20.2 million and $14.9
million in 1995 and 1994, respectively, representing 77.3% and 78.4% of total
net revenues, respectively.
Services cost of revenues were $2.6 million and $0.8 million in 1995 and
1994, respectively. This growth was primarily attributable to the hiring of
professional services personnel and the initial investment in the communications
network. As a percentage of services revenues, such costs increased to 54.2% in
1995 from 39.6% in 1994, reflecting a lower utilization of professional services
personnel, combined with the initial costs of the communications infrastructure.
29
<PAGE>
<PAGE>
Products cost of revenues were $17.7 million and $14.1 million in 1995 and
1994, respectively, representing 82.4% and 82.7%, respectively, as a percentage
of products revenues, respectively.
General and administrative. General and administrative expenses were $2.4
million and $1.5 million in 1995 and 1994, respectively, representing 9.3% and
8.1% of total net revenues, respectively. This higher level of expense reflects
an increase in personnel and professional fees necessary to manage the
financial, legal and administrative aspects of the business.
Selling and marketing. Selling and marketing expenses were $3.5 million and
$1.4 million in 1995 and 1994, respectively. The $2.1 million increase in 1995
reflected the Company's shift to a focus on providing IP-based network
solutions. In connection with this new focus, the Company incurred increased
expenses related to development of strategic relationships and marketing
communications.
Research and development. Research and development expense was $0.4 million
and $0.5 million in 1995 and 1994, respectively.
QUARTERLY RESULTS OF OPERATIONS
The Company's quarterly operating results have in the past and may in the
future vary significantly depending upon factors such as the timing and
installation of significant orders, which in the past have been and will in the
future be, delayed from time to time by delays in the provisioning of
telecommunications services and products by subcontractors. Additional factors
contributing to variability of quarterly operating results include the pricing
and mix of products and services sold by the Company, terminations of service,
new services and products introductions by the Company and its competitors,
market acceptance of new and enhanced versions of the Company's services and
products, changes in pricing or marketing policies by its competitors and the
Company's responses thereto, the Company's ability to obtain sufficient supplies
of sole source or limited source components, changes in the Company's
communications infrastructure costs, as a result of demand variation or
otherwise, the lengthening of the Company's sales cycle, access to capital and
the timing of the expansion of the Company's communications infrastructure.
The following tables set forth the statement of operations data for each of
the seven quarters through September 30, 1997, as well as such operations data
as a percentage of the Company's revenues. This information has been derived
from the Company's unaudited financial statements. In the opinion of management,
the unaudited information set forth below has been prepared on the same basis as
the audited financial statements contained herein and includes all adjustments,
consisting only of normal recurring adjustments necessary to present fairly the
information set forth herein. The operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1996 1996 1996 1997 1997 1997
--------- -------- ------------- ------------ --------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Services:
Professional...................... $ 1,203 $ 1,062 $ 1,671 $ 2,634 $ 3,207 $ 4,268 $ 4,513
Communications.................... 147 185 353 583 938 1,233 1,760
Media............................. 124 113 116 176 77 -- --
--------- -------- ------------- ------------ --------- -------- -------------
Total services revenues......... 1,474 1,360 2,140 3,393 4,222 5,501 6,273
--------- -------- ------------- ------------ --------- -------- -------------
Products............................ 7,281 7,328 7,732 7,400 4,795 4,885 4,626
--------- -------- ------------- ------------ --------- -------- -------------
Total revenues, net................... 8,755 8,688 9,872 10,793 9,017 10,386 10,899
--------- -------- ------------- ------------ --------- -------- -------------
Cost of revenues:
Services............................ 1,270 1,237 1,826 2,509 3,137 3,592 4,792
Products............................ 6,157 5,865 6,384 6,201 3,813 4,092 3,771
--------- -------- ------------- ------------ --------- -------- -------------
Total cost of revenues................ 7,427 7,102 8,210 8,710 6,950 7,684 8,563
--------- -------- ------------- ------------ --------- -------- -------------
Gross profit.......................... 1,328 1,586 1,662 2,083 2,067 2,702 2,336
Operating expenses.................... 2,566 3,873 3,909 4,591 4,652 5,269 5,723
--------- -------- ------------- ------------ --------- -------- -------------
Loss from operations.................. (1,238) (2,287 ) (2,247) (2,508) (2,585) (2,567 ) (3,387)
Net loss.............................. (1,169) (2,205 ) (2,179) (2,485) (2,950) (2,734 ) (3,404)
</TABLE>
30
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1996 1996 1996 1997 1997 1997
--------- -------- ------------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Services:
Professional...................... 13.7% 12.3% 16.9% 24.4% 35.5% 41.1% 41.4%
Communications.................... 1.7 2.1 3.6 5.4 10.4 11.9 16.2
Media............................. 1.4 1.3 1.2 1.6 0.9 0.0 0.0
--------- -------- ----- ----- --------- -------- -----
Total services revenues......... 16.8 15.7 21.7 31.4 46.8 53.0 57.6
--------- -------- ----- ----- --------- -------- -----
Products............................ 83.2 84.3 78.3 68.6 53.2 47.0 42.4
--------- -------- ----- ----- --------- -------- -----
Total revenues, net................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
--------- -------- ----- ----- --------- -------- -----
--------- -------- ----- ----- --------- -------- -----
Cost of revenues:
Services(a)......................... 86.2% 91.0% 85.3% 73.9% 74.3% 65.3% 76.4%
Products(b)......................... 84.6 80.0 82.6 83.8 79.5 83.8 81.5
Total cost of revenues................ 84.8 81.7 83.2 80.7 77.1 74.0 78.6
Gross profit.......................... 15.2 18.3 16.8 19.3 22.9 26.0 21.4
Operating expenses.................... 29.3 44.6 39.6 42.5 51.6 50.7 52.5
--------- -------- ----- ----- --------- -------- -----
Loss from operations.................. (14.1) (26.3) (22.8) (23.2) (28.7) (24.7) (31.1)
Net loss.............................. (13.4) (25.4) (22.1) (23.0) (32.7) (26.3) (31.2)
</TABLE>
- ------------
(a) As a percentage of total services revenues.
(b) As a percentage of products revenues.
The increase in services revenues as a percentage of total net revenues,
which has been experienced over the last five quarters, is expected to continue
to increase in the future. The Company expects cost of services revenues to
continue to increase in dollar amount but to decline in future years as a
percentage of services revenues as the Company expands its customer base and
more fully utilizes its communications infrastructure. The Company expects
operating expenses to continue to increase in dollar amount but to decrease in
future years as a percentage of total net revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company had an accumulated deficit of $17.2 million at September 30,
1997 and has used cash of $14.9 million in the aggregate to fund operations
during 1995, 1996 and the nine months ended September 30, 1997. To date, the
Company has satisfied its cash requirements primarily through the sale of
preferred stock and borrowings under credit agreements. The Company's principal
uses of cash are to fund operations, working capital requirements and capital
expenditures. At September 30, 1997 the Company had $4.6 million in cash and
cash equivalents and $5.1 million in working capital. Net cash used in operating
activities for the nine months ended September 30, 1997 and 1996 was
approximately $8.6 million and $4.4 million, respectively. Net cash used in
investing activities for the nine months ended September 30, 1997 and 1996 was
approximately $2.7 million and $3.0 million, respectively. For the nine months
ended September 30, 1997 and 1996, cash of approximately $15.3 million and $7.0
million, respectively, was provided by financing activities. Cash provided by
financing activities in the nine months ended September 30, 1997 includes
approximately $16.5 million in net proceeds from the issuance of the Series B
Preferred Stock.
Net cash used in operating activities for the years ended December 31, 1995
and 1996 was $1.3 million and $5.0 million, respectively. Net cash flow provided
by financing activities was $2.9 million and $8.6 million for 1995 and 1996,
respectively.
As of September 30, 1997, the Company's operating lease obligations were
projected to be $1.7 million, $1.4 million, and $1.1 million for 1998, 1999 and
2000, respectively.
On August 13, 1996, the Company obtained a secured line of credit with The
CIT Group/Business Credit, Inc. ('CIT') for $10.0 million which expires on
August 13, 1998. Borrowings under this line are secured by substantially all of
the assets of the Company and are limited to a specified percentage of
qualifying accounts receivable less outstanding obligations of the Company owed
to CIT including outstanding letters of credit. Under this secured line of
credit, the Company may not pay cash dividends, pledge any of its assets to
third parties, borrow money from third parties, lend money to third parties or
merge or consolidate with third parties without CIT's prior written consent. At
December 31, 1996, borrowings under this line amounted to $2.2 million, and no
amounts were outstanding at September 30, 1997. The Company does not currently
expect that it will be necessary to use the secured line of credit to meet its
working capital and capital expenditure requirements through the end of 1998.
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Interest is payable monthly at an annual rate equal to the prime rate plus one
percent. Following a change in the prime rate, the rate adjusts on the first of
the month following any change. Interest expense amounted to $0.1 million and
$0.4 million for the year ended December 31, 1996 and the nine-month period
ended September 30, 1997, respectively. As of September 30, 1997, there was $2.5
million available under the line.
As of September 30, 1997, trade payables to a vendor in the amount of $2.6
million were secured by a lien on substantially all of the Company's assets.
The Company has made capital investments in its network, NOC and other
capital assets totaling $1.0 million and $3.7 million in 1995 and 1996,
respectively, and $2.7 million in the nine months ended September 30, 1997. The
Company expects to make additional capital investments to expand and enhance its
operations of $2.5 million during the last quarter of 1997, and $4.9 million in
1998. The foregoing expectation with respect to capital investment is a
forward-looking statement that involves risks and uncertainties and the actual
amount of capital investment could vary materially as a result of a number of
factors, including those described in 'Risk Factors -- Future Capital Needs;
Uncertainty of Additional Financing'.
Since the Company expects to incur additional operating losses, the Company
intends to utilize the net proceeds from the Offering to meet its short term
capital requirements. The Company believes that proceeds from the Offering will
be sufficient to meet its anticipated cash needs for working capital and for the
acquisition of capital equipment through the end of 1998. However, there can be
no assurance that the Company will not require additional financing within this
time frame. The Company's forecast of the period of time through which its
financial resources will be adequate to support its operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could vary. The Company may be required to raise additional funds
through public or private financing, strategic relationships or other
arrangements. There can be no assurance that such additional financing, if
needed, will be available on terms attractive to the Company, or at all.
Furthermore, any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may involve restrictive covenants. Strategic
arrangements, if necessary to raise additional funds, may require the Company to
relinquish its rights to certain of its technologies. See 'Risk
Factors -- Future Capital Needs; Uncertainty of Additional Financing'.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ('FASB') issued
Financial Accounting Standards No. 128, 'Earnings per Share' ('FAS 128'), which
requires presentation of basic earnings per share ('Basic EPS') and diluted
earnings per share ('Diluted EPS') by all entities that have publicly traded
common stock or potential common stock (options, warrants, convertible
securities or contingent stock arrangements). FAS 128 also requires presentation
of earnings per share by an entity that has made a filing or is in the process
of filing with a regulatory agency in preparation for the sale of those
securities in a public market. Basic EPS is computed by dividing income
available to common stockholders by the weighted-average potential common shares
outstanding during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period. The computation of
Diluted EPS does not assume conversion, exercise or contingent exercise of
securities that would have an antidilutive effect on earnings. The statement is
effective for both interim and annual periods ending after December 15, 1997.
The effect on the Company's earnings per share resulting from the adoption of
FAS 128 is not expected to be significant.
In June 1997, FASB issued Financial Accounting Standards No. 130,
'Reporting Comprehensive Income' ('FAS 130'), which requires the presentation of
components of comprehensive income in a company's financial statements for the
reporting periods begining subsequent to December 15, 1997. Comprehensive income
is defined as the change in a company's equity during a financial reporting
period from transactions and other circumstances from nonowner sources
(including cumulative translation adjustments, minimum pension liabilities and
unrealized gains/losses on available for sale securities). The adoption of FAS
130 is not expected to have a material impact on the Company's financial
statements.
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BUSINESS
GENERAL
Icon is an Internet solutions provider that offers a comprehensive range of
services and products that enable corporate customers to implement their
Internet, intranet and extranet strategies. Icon's mission is to provide
end-to-end solutions to its customers by facilitating the distribution of the
customers' information and applications over Icon's communications
infrastructure as well as access to such information and applications. In order
to provide end-to-end solutions, Icon integrates services and products in three
key areas: (i) communications services, including high quality Internet access
and web/server hosting and management, enhanced by the Company's proprietary
technologies; (ii) a range of professional services, including custom
application and website development and design, systems integration and
maintenance and support services; and (iii) product resales, including hardware
and software, which are an integral component of systems design and integration
and serve as a means of establishing customer relationships. Icon differentiates
itself by integrating its services and products to provide customized turnkey
solutions for the needs of corporate customers. Icon's customers include major
corporations in the financial services, telecommunications, travel and media
industries, such as ABC Radio Network Inc. ('ABC Radio'), ADP, The Associated
Press, Bear Stearns, Bell Atlantic Internet Solutions, CBS, Galileo
International ('Galileo') and Swissair.
MARKET AND INDUSTRY OVERVIEW
The emergence of the Internet and the widespread adoption of IP as a data
transmission standard in the 1990s, combined with deregulation of the
telecommunications industry and advances in telecommunications technology, have
significantly increased the demand for providing data communications
applications and services over public networks. At the same time, growth in
client/server and distributed computing, multimedia personal computers and
online computing services and the proliferation of networking technologies have
resulted in a large and growing group of end-users who are accustomed to using
networked computers for a variety of purposes, including electronic mail,
electronic file transfers, online computing and electronic financial
transactions. These trends have increasingly led businesses to explore
opportunities to provide IP-based applications and services internally within
their organizations via intranets, externally to selected customers and business
partners via extranets and to the general public via the Internet.
The ubiquitous nature and relatively low cost of the Internet have resulted
in its widespread usage for certain applications, most notably web browsing and
electronic mail. Use of the Internet for mission-critical business applications
is increasing even with the limited security and unreliable performance inherent
in the structure and management of the Internet, as well as the difficulties of
integrating web gateways and IP-based networks with applications traditionally
run on legacy systems. Additionally, emerging applications such as IP-based
audio and video applications and certain multimedia applications require a
communications infrastructure that has high performance characteristics,
including low latency (response time) and high throughput. These factors have
resulted in demand from an increasing number of businesses for high bandwidth
Internet access, secure networked systems, technology-related products and
integration and custom application development services. Revenues generated by
the Internet communications services market in the United States, comprised of
access and hosting, are expected to increase from $1.4 billion in 1996 to $28.1
billion in 2000 according to Forrester Research, Inc., while the worldwide
Internet-related professional services market is expected to grow from $2.5
billion in 1996 to $13.8 billion in 2000 according to International Data
Corporation.
As the amount of information transmitted over the Internet has grown and
the speed and complexity of networks has increased, IP-based services and
products have become increasingly intertwined. Corporate customers have not only
come to rely on IP-based networks for distributing mission-critical information
and applications to end-users but have become dependent on the technical
services that enable access and distribution of this information, resulting in
an increasing number of outside vendors offering services to corporate
customers. However, given the growth in complexity and expenditures related to
implementation of Internet, intranet and extranet strategies, the Company
believes that customers are increasingly seeking a single-source provider.
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STRATEGY
Icon is an Internet solutions provider that offers a comprehensive range of
services and products that enable corporate customers to implement their
Internet, intranet and extranet strategies. Icon's mission is to provide
end-to-end solutions to its customers by facilitating the distribution of
customers' information and applications over Icon's communications
infrastructure as well as access to such information and applications. Unlike
many of its competitors who focus on a single service or product, the Company
continuously expands the breadth of its services and its engineering expertise
to provide customized turnkey solutions to meet the increasingly demanding
requirements of corporate customers. In order to provide end-to-end solutions,
Icon offers communications and professional services, as well as product resales
capabilities. The key strategic initiatives of the Company are to:
Leverage Capability to Provide End-to-End Internet Solutions. Icon's
ability to provide end-to-end solutions is often a decisive factor in
attracting and retaining customers and contributes to generating
additional business from its existing customer base. While some of the
Company's customers are initially attracted to Icon's end-to-end
solutions, others seek a specific service or product. The Company has
historically succeeded in migrating many of such customers to become users
of the Company's additional services and products. Icon's relationships
with several customers, such as The Associated Press, Bear Stearns, CBS
and Galileo, began with a single offering and evolved into an end-to-end
solution encompassing multiple communications and professional services.
The Company's strategy is to expand the number of customers who demand
end-to-end solutions and to become an integral component of its customers'
information technology infrastructure.
Maintain Reliable and High Performance Communications Infrastructure. The
Company maintains a nationwide communications infrastructure that
incorporates proprietary technologies and is managed to deploy and
distribute information and applications. The Company manages its network
to achieve utilization levels that enable it to operate in a reliable and
high performance manner. Icon controls its network and provides hosting
and management services from its state-of-the-art NOC, enabling it to meet
increasingly demanding customer requirements. The Company will continue to
develop network-centric proprietary technologies and integrate third party
technologies to optimize network performance and provide value-added
network services to its customers. The Company currently focuses on new
communications services offerings, such as back-up and recovery and wide
area data caching, as well as real-time audio and video streaming and
Internet telephony. Icon will seek to continue to develop its
communications infrastructure to enhance the speed, security, reliability
and overall performance of its network.
Expand Network Domestically and Overseas. The Company plans to expand its
network to specifically address the growing bandwidth and global reach
requirements of its customers, both in the United States and
internationally. Icon's agreement with MFS provides for access to all MFS
communications facilities throughout the country. The Company believes
that the usage-based pricing model in its agreement with MFS enables it to
enter new markets in a more advantageous manner than many of its
competitors which, in many cases, must expend greater resources to build
or lease facilities on a fixed-price basis. The Company also has
agreements with other vendors who provide similar services, and the
Company will pursue similar arrangements in the future as the Company
continues to expand its network. In November 1997, the Company entered
into an agreement with Teleway Corporation ('Teleway') that extends the
reach of the Company's network into Japan; however, this transaction is
subject to third party and governmental consents and and no assurance can
be made that the Company will obtain the required consents or that the
transaction will otherwise be successful.
Expand and Integrate Professional Services Offerings. Icon's professional
services include software application development, website design and
development, integration with legacy systems, maintenance and support
services and consulting. Unlike many of Icon's competitors, who focus on a
single service or product, the Company continuously expands the breadth of
its services and its engineering expertise to optimize its end-to-end
solutions. The Company intends to continue to develop and leverage both
its expertise in designing graphical user interfaces (so-called 'front-
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end' design) and integrating with legacy data that resides on databases or
mainframe systems (so-called 'back-end' integration).
Continue to Build Efficient Distribution Through Direct and Indirect
Channels. Icon will continue to grow its direct sales force, which has
grown from 25 at the beginning of 1997 to 33 as of September 30, 1997. The
direct sales force targets large accounts with significant revenue-
generating potential. It focuses on information-intensive industries, such
as financial services, media, telecommunications and travel. The Company
believes that the organization of its direct sales force along industry
lines enables it to leverage its expertise and develop solutions that can
be replicated and tailored to meet recurring demands of corporate
customers throughout a particular industry. In addition, the Company will
continue to expand distribution relationships that enable it to compete
effectively by expanding its customer base without substantial costs. The
Company's indirect sales channels include relationships with
telecommunications providers, such as Bell Atlantic Internet Solutions and
Fiberlink, as well as resellers and master distributors. Bell Atlantic
Internet Solutions offers its customers the option to select Icon as their
global service provider to provide the long distance portion of the
Internet access services. In October 1997, the Company extended its GSP
agreement through October 1999 to continue to make its services available
in the traditional Bell Atlantic southern region and to include the Bell
Atlantic northern region (previously NYNEX) for dedicated access service.
The Company currently plans that it will make its services available to
Bell Atlantic Internet Solutions business customers in the northern region
during the first half of 1998.
Grow Through Acquisitions. The Company intends to strengthen its market
position through acquisitions of companies that bring complementary
expertise in certain segments of the Internet business and maximize value
through cross-selling opportunities.
RECENT DEVELOPMENT
In November 1997, the Company entered into an agreement with Teleway, a
Japanese communications company, pursuant to which they established Icon-Teleway
Internet Corporation, ('ITIC') to operate an Internet solutions business to
market end-to-end solutions to corporate customers in Japan (including Japanese
subsidiaries of United States corporations). Teleway, established in 1984, is
one of the largest long distance companies in Japan, with sales of approximately
$850 million in fiscal year 1996. Teleway will hold a 52% equity stake and Icon
will hold a 48% equity stake in ITIC, which will be formally established by the
first quarter of 1998. The services provided by ITIC will be similar to the
services provided by Icon in the United States, including communications
services, professional services and product resales. ITIC's network
infrastructure will be based on Teleway's nationwide ATM network.
Teleway has agreed to provide ITIC an initial loan of /Y/1 billion
(approximately $8.3 million) and, upon request, to make an additional loan for
up to /Y/500 million (approximately $4.2 million) to fund operations. In
connection with the creation of the venture, the Company licensed to ITIC the
exclusive right to exploit Icon's intellectual property in Japan for a period of
five years. Any royalties received by Icon (up to a maximum of $8 million) will
be contributed back to ITIC as equity and will be matched by Teleway such that
the relative ownership is maintained. ITIC will use such equity contributions to
repay outstanding loans from Teleway and to fund operations. Icon and Teleway
have agreed to establish a network cross-connection between Icon's network in
the United States and Teleway's network in Japan. The parties have further
agreed to a reciprocal wholesale arrangement, on a 'most favored nations' basis,
pursuant to which Icon and ITIC will purchase communications services (including
Internet access) from each other at a wholesale price and resell such services
to customers in their respective countries. The transaction is subject to third
party and governmental consents.
COMMUNICATIONS INFRASTRUCTURE
The Company developed its communications infrastructure in recognition of
the market need for commercial-grade Internet access and value-added deployment
of mission-critical information and applications. The Company's customers use
the Company's communications infrastructure for private networks and commercial
applications. The Company has developed proprietary technologies that enhance
network performance in terms of speed, reliability, security and flexibility.
See ' -- Research and Development.' The Company's communications infrastructure
is based upon an ATM architecture.
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As shown on the map below, customers can connect to the Company's network from
major cities across the United States through dedicated high-speed leased lines.
The network is logically designed as a 'cloud,' with multiple high-speed paths
between switches, so as to reduce the possibility that any single point of
failure will cause network outage. The network uses state-of-the-art routing
platforms, including Cisco routers. Currently, the Company's backbone consists
of 19 nodes, and the Company currently plans to add several additional nodes.
MAP OF UNITED STATES AND THE COMPANY'S BACKBONE:
After a customer's data has entered the Company's backbone, it is routed to
its destination, either over the Company's backbone or to another ISP's
backbone, which is facilitated through peering arrangements with other ISPs. In
order to peer with other Tier 1 ISPs, an ISP must demonstrate that its network
transports sufficient volumes of data and that it can peer at geographically
diverse locations. The Company has established Tier 1 peering arrangements with
other ISPs and long distance carriers enabling it to exchange traffic at major
peering points, including MAE-East, MAE-West, Ameritech Advanced Data Services
NAP, Digital Internet Exchange (including the CIX), Sprint Communications NAP
and Pacific Bell NAP. Peered ISPs share routing tables with each other so that
each ISP's customers can have access to the information on a peered-ISP's
network. Although many ISPs have recently been adding to their peering
eligibility requirements, the Company has been successful in qualifying for
these arrangements. The Company believes that the need to enter into peering
arrangements and the increasingly stringent eligibility standards to be met to
qualify for these relationships now provide a significant barrier to entry for
other companies trying to build nationwide backbones to provide Internet access.
The Company believes that its combination of a nationwide backbone and peering
arrangements establishes the Company as a Tier 1 provider, which differentiates
the Company from regional ISPs who, without peering arrangements, may have to
pay transit fees to national Internet carriers in order to exchange network
traffic.
The Company's communications network consists of facilities leased from a
number of providers, including MFS, WorldCom and certain RBOCs, LECs and CAPs.
In June 1995, the Company entered into a service agreement with MFS that
provides the Company access to all of MFS' communications facilities throughout
the country. The Company believes that the usage-based pricing model in its
agreement with MFS enables it to enter new markets in a more advantageous manner
than many of its competitors which, in many cases, must expend greater resources
to build or lease facilities on a fixed-price basis. Furthermore, Icon's
agreement with MFS affords the Company the flexibility of converting
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to a fixed price model, at its option, as utilization of facilities by the
Company increases. Pursuant to the agreement, MFS also provides certain
additional related services including, upon request by the Company, the
provisioning of local telecommunications services and co-location of certain of
the Company's equipment. Either MFS or Icon may terminate the agreement with or
without cause, with six months written notice, such termination to be effective
as early as December 1998. The Company has recently commenced discussions with
MFS regarding the potential extension of the agreement past December 1998 while
at the same time identifying alternative vendors who provide similar services to
ensure the continued uninterrupted operation of its high performance network. In
November 1997, the Company entered into an agreement with Teleway pursuant to
which they established ITIC to operate an Internet solutions business to
corporate customers in Japan (including Japanese subsidiaries of United States
corporations); however, no assurance can be made at this time that this
transaction will be successful.
The Company's network is monitored 24 hours per day, 7 days per week by its
NOC, located at its Weehawken, New Jersey headquarters. The NOC is the primary
control and networking equipment center for all forms of network operations.
Redundant network paths connect the NOC to the backbone, reducing the
possibility that a single point of failure will cause a network outage. The NOC
hosts systems, which consist of networking equipment, hardware and software, for
customers by providing space, connectivity, data protection and continuous
monitoring and maintenance. The Company maintains a second internal secure
network as a dedicated data conduit for backup and restoration of hosted client
data. To date, the Company has not experienced any network-wide outages or
significant losses of customer data.
SERVICES AND PRODUCTS
The Company integrates services and products in three key areas: (i)
communications services, (ii) professional services and (iii) product resales.
COMMUNICATIONS SERVICES
Access Solutions. Icon's network access solutions enable customers to
deploy mission-critical information and applications over the Internet,
intranets and extranets. In some cases, the Company provides guaranteed levels
of service for dedicated Internet access to corporate customers and targets
performance benchmarks for connection success rates, latency levels and
throughput. The Company also provides switched Internet access including ISDN
and dial-up through Bell Atlantic Internet Solutions and may, in the future,
seek to expand its switched services to augment its dedicated offerings to its
corporate customers, who may want to provide switched access to their employees
or customers. In addition, the Company offers data back-up services by acting as
an outsourcer for archiving customers' data on its servers and systems, and
provides business recovery solutions by using its proprietary technologies. See
' -- Research and Development.'
Depending upon the size of the customer and corresponding application and
information needs, bandwidth requirements vary widely. For example, audio and
video applications typically require greater bandwidth than text-based
applications. Icon offers five levels of Internet access to meet the wide range
of bandwidth needs:
56 Kbps
Fractional DS-1 (n x 64 Kbps; n < 24)
DS-1 (1.544 Mbps)
Fractional DS-3 (n x 3 Mbps; 1 < n < 15)
DS-3 (45 Mbps)
Hosting and Management Solutions. Hosting and management solutions consist
of the provisioning, installation, maintenance and monitoring of the hardware
and software components that comprise a hosted system. The actual components of
web hosting are the server, the physical workstation or PC upon which the
website or application resides, the Company's NOC which hosts the server, a high
speed physical connection to the Company's backbone, server and power backup to
ensure 24 hour functionality, and maintenance, monitoring and management
services to ensure ongoing operation of the server. Within both the NT and UNIX
product lines, the Company offers a diversity of hardware, software, network and
service level configuration options to meet the requirements of its
sophisticated customer base. By outsourcing its web server management function
to the Company, a customer can
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reduce costs while increasing reliability and performance of its servers. The
Company offers 24 hours per day, 7 days per week monitoring of the server and
Internet connection through the Company's technical staff. In addition, Icon
provides upgrades as the customer's speed and capacity requirements grow. In
addition to its existing hosting facility at its corporate headquarters, the
Company currently plans to expand its hosting locations to include New York City
and San Francisco.
PROFESSIONAL SERVICES
Custom Software Application Development. The Company designs and develops
specialized software applications that enable corporations to communicate
business information and conduct commerce through IP-based networks. The
Company's engineering staff is exprienced in programming languages such as C,
C++ and Java and works closely with its customers to analyze and design
specifications for IP-based applications. The Company has completed custom
application projects for customers including ABC Radio, The Associated Press,
ADP, Bear Stearns, CBS and Galileo.
Website Design and Development. The Company is an established provider of
advanced website design and implementation services. The Company designs
websites ranging from basic 'inquiry only' sites to complex, interactive sites
featuring sophisticated graphics, animation, sound and other multimedia content.
The Company has completed website design projects for customers including Bell
Atlantic Internet Solutions, CBS News, a division of CBS, Comedy Central,
Deutsche Morgan Grenfell, Galileo, Eastman Kodak Company, Kobra International
(Nicole Miller) and Swissair.
In addition, the Company operates an interactive publishing unit that
produces three Internet-based media properties: Word, a 'lifestyle' publication
targeted at 18-34 year olds; Charged, focusing on the extreme sports market; and
SportsFan On-Line, a spectator-sports media property that is a joint venture
with Sports Fan Radio Network, a division of Winstar Communications, Inc. The
Company has experienced and expects to continue to experience operating losses
in connection with the ongoing operation of its media properties. The Company
has recently commenced efforts to identify potential strategic partners to
assist in the exploitation of these properties. While it is the Company's
intention and desire to continue to design, produce and distribute such
properties, it does not intend to continue its role as publisher of interactive
media. The Company's interactive media properties have historically operated at
a loss, but have nevertheless served a valuable marketing function, helping the
Company attract employees and new business.
Integration with Legacy Systems. The Company combines its expertise in
communications services, systems design and custom software and website design
and development to offer integration services. Icon's integration services
enable its customers to access corporate information that resides on legacy
systems, such as IBM or Unix mainframes, that are connected by network
architectures. The Company's technical engineers, whose training and
certification includes Sun Solaris, Netscape, Microsoft NT and Cisco, are
skilled at design and implementation of databases in order to reduce demands on
legacy systems and increase the efficiency of transporting corporate data
between legacy and client/server systems over an IP-based network. The Company
has completed integration projects for customers including ABC Radio, ADP, The
Associated Press, Bear Stearns, CBS News, Galileo, Merrill Lynch, Nomura
Securities, Omnipoint Communications ('Omnipoint'), Swissair, Tudor Investment
Company and John Wiley & Sons, Inc. ('John Wiley').
Maintenance and Support of Customer IT Infrastructure. The Company's
maintenance and support services organization offers 24 hours per day, 7 days
per week hardware and software maintenance and support for its customers.
Services include call-in support, troubleshooting, software and hardware updates
and on-site helpdesk and general support personnel. Engagements of the Company
to perform maintenance and support services have often developed when or after
the customer has purchased products from the Company or used other professional
services. The Company has provided maintenance and support services for
customers including Bear Stearns, CBS, Merrill Lynch, Moore Capital Management,
Inc., Omnipoint, Tudor Investment Company and John Wiley.
PRODUCT RESALES
Product resales are an integral part of providing end-to-end solutions. The
Company identifies and resells hardware and software that become components of
its customers' information technology infrastructure. The Company, in certain
cases, leverages product resales to cross-sell Icon's end-to-end solutions to a
growing customer base. The products include hardware and networking equipment
such as Sun Microsystems servers and Cisco routers, and software such as
Checkpoint firewalls, Netscape web servers and Oracle, Informix and Sybase
databases.
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SALES AND MARKETING
The Company's distribution strategy entails expanding its sales channels to
sell its services and products directly to commercial users and through a
network of indirect distribution channels, including OEM relationships, regional
systems integrators, VARs, distributors and relationships with
telecommunications companies, including Bell Atlantic Internet Solutions and
Fiberlink.
DIRECT SALES FORCE
The Company's direct sales force targets large accounts with significant
revenue-generating potential. The Company's sales group focuses on
information-intensive industries, such as financial services, media,
telecommunications and travel and includes customers such as ABC Radio, Bear
Stearns, CBS, Galileo and Nomura Securities. The Company believes that the
organization of its direct sales force along industry lines enables it to
leverage its expertise and develop solutions that can be replicated and tailored
to meet recurring demands of corporate customers throughout a particular
industry. As the size of the direct sales force grows, the Company plans to
expand into additional vertical segments, including general commercial and
consumer brand products. The Company has expanded its sales staff from 25 at the
beginning of 1997 to 33 as of September 30, 1997. Typically, the Company's sales
representatives receive a compensation package that includes a salary and
commissions that are based on actual sales and oriented toward selling higher
margin services.
INDIRECT DISTRIBUTION CHANNELS
The Company markets its services and products through a network of
third-party relationships, thereby expanding its customer base throughout the
country without incurring the associated sales, marketing and administrative
costs. Regional systems integrators, VARs and, in some cases, regional ISPs may
also resell the Company's services and products. By reselling the Company's
services and products, these companies are able to expand their service and
product offerings and provide more comprehensive solutions to their customers.
As an example of this strategy, the Company has entered into master distribution
agreements with Access Graphics and Merisel, two leading distributors of Sun
Microsystems Computer Company ('Sun') workstations, to bundle Sun web servers
with the Company's Internet access services. Such distributors and resellers may
participate in the Company's indirect distribution channel either by (i)
sublicensing the Company's services and products and reselling them to their
customers or (ii) referring orders to the Company in exchange for an agency
commission.
Icon has also pursued a distribution strategy that enlists the assistance
of telecommunications companies who are already providing communications
services (such as local phone service or cable television) to existing
customers. This strategy enables the Company to leverage not only a
substantially larger sales and marketing infrastructure, but also strong
customer relationships. While the Company's margins are lower in this
distribution channel, the Company's resellers absorb all of the
customer-acquisition and administrative costs that would otherwise be borne by
the Company.
In addition to its reseller agreements, pursuant to the arrangement with
Bell Atlantic Internet Solutions, Bell Atlantic Internet Solutions offers its
customers the option to purchase Icon's communications services and bills the
customers on Icon's behalf. In October 1997, the Company extended its
arrangement with Bell Atlantic Internet Solutions by entering into an updated
GSP agreement with Bell Atlantic Internet Solutions. The Company currently plans
to make its services available to requesting Bell Atlantic Internet Solutions
business customers in the Bell Atlantic northern region during the first quarter
of 1998. The Company intends to pursue additional relationships with other
telecommunications providers, including additional 'local telco service'
providers both using wireline and wireless facilities, including LECs, RBOCs,
CAPs and cable television companies.
MARKETING
The Company employs marketing and public relations personnel and works with
third-party advertising firms and consultants to provide broad coverage in
network computer and vertical industry publications. The Company participates in
nationwide industry trade shows, historically including NetWorld+InterOp,
Internet World and CompTel. The Company also participates in co-branding
promotions with strategic partners including Sun, Access Graphics and Merisel.
Recently, the Company expanded its marketing budget in an effort to increase its
brand recognition among potential customers in its target vertical markets.
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CUSTOMERS
Customers served by the Company in the 12 months ended September 30, 1997
include the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<CAPTION>
SOLUTION COMPONENTS
COMMUNICATIONS PROFESSIONAL
CUSTOMER SERVICES SERVICES PRODUCTS
<S> <C> <C> <C>
FINANCIAL SERVICES
Alliance Capital Management LP
Automated Data Processing Financial Information
Bear, Stearns & Co. Inc
Daiwa Securities America Inc.
Deutsche Morgan Grenfell
Goldman, Sachs & Co.
Merrill Lynch & Co., Inc.
Nomura Securities Co. Ltd.
Tudor Investment Company
TELECOMMUNICATIONS
ACC Long Distance Corp.
Bell Atlantic Internet Solutions, Inc.
Fiberlink Communications Corp.
Omnipoint Communications
MEDIA
ABC Radio Network Inc.
CBS, Inc.
CMP Publications, Inc.
C-NET: The Computer Network
Comedy Central Network
Economist Intelligence Unit
John Wiley & Sons, Inc.
Wire Networks, Inc. (Women's Wire)
TRAVEL
Galileo International
KLM Royal Dutch Airlines
Swissair
Swissotel
RETAIL/CONSUMER PRODUCTS
Eastman Kodak Company
Kobra International (Nicole Miller)
INFORMATION SERVICES
The Associated Press
Bloomberg Financial Markets Inc.
INSURANCE AND HEALTHCARE
Group Health, Inc.
Insurance Services Office, Inc.
Metropolitan Life Insurance Co.
National Preferred Provider Network, Inc.
</TABLE>
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In 1994, 1995, 1996 and the first nine months of 1997, the Company derived
25%, 28%, 30%, respectively, and 49%, respectively, of its revenues from a
single customer, Bear Stearns. In 1994, 1995 and 1996, the Company derived 11%,
15% and 13%, respectively, of its revenues from a second customer, Nomura
Securities. In 1995, the Company derived 10% of its revenues from a third
customer, Merrill Lynch. Except for such revenues from such customers, the
Company did not derive 10% or more of its revenues from a single customer in
1994, 1995, 1996 or the first nine months of 1997.
KEY APPLICATIONS
The following examples illustrate how the Company has provided
communications and professional services to facilitate access to and
distribution of mission-critical IP-based information and applications.
AUTOMATED DATA PROCESSING FINANCIAL INFORMATION
In the first quarter of 1997, ADP selected Icon to develop a business
application to enable its employees and customers to better manage their
document-centric information resources. The Company successfully developed the
application in accordance with ADP's functional specifications and technology
requirements. Subsequently, ADP identified the need for an intranet-based,
browser-accessible document library that would handle and archive both internal
ADP documents and documents generated outside ADP. Because of Icon's expertise
in integrating legacy systems with new IP-based technology and its
communications services capabilities, ADP selected Icon to design, develop and
web-enable an IP-based document management system. In light of the Company's
successful completion of these projects, coupled with its breadth of expertise
and communications capabilities, in the third quarter 1997, ADP identified Icon
as a member of its newly formed 'Preferred Provider Organization,' through which
ADP actively recommends the Company to ADP customers for IP-based integration
and communications services, including Internet access and web server hosting.
BEAR, STEARNS & CO. INC.
Historically, Icon had been a major technology product supplier for Bear
Stearns, reselling hardware and software products to the financial services
company since January 1994. In 1995, Bear Stearns hired the Company's
professional services unit to assist in the roll-out of desktop computers within
the firm. As part of the engagement, a number of the Company's engineers were
staffed on-site to assist with the installation and maintenance of the new
systems. Subsequently, Bear Stearns engaged Icon on projects to integrate Bear
Stearns' document management system into an IP-network through a web gateway and
to design, develop and implement its Correspondence System Project. Bear Stearns
also selected the Company to facilitate the migration of Bear Stearns' brokerage
clearing system to an IP-based network, to run the back-office transaction
processing on existing legacy networks and to operate Bear Stearns' systems and
mainframes consistent with its exacting reliability and security requirements.
Icon's solution included initial project consultation, design and development of
the application and IP-network, integration of the application and web gateway
with existing back-office legacy equipment and applications and associated
communications and maintenance services. With respect to this project, Icon
currently provides Internet access services, manages the server on which the
application resides, manages and maintains the IP-network and provides ongoing
consulting services. By implementing this solution, the Company believes that
Bear Stearns has been able to reduce the cost of maintaining a client/server
infrastructure, eliminate the need for application support on the PC level
through the use of Java and reduce WAN expenses by using the Company's network
rather than building its own.
BELL ATLANTIC INTERNET SOLUTIONS
In May 1996, Bell Atlantic Internet Solutions entered into an arrangement
to provide billing services in connection with the inclusion of Icon's
communications services as an option available to Bell Atlantic Internet
Solutions' customers. As a result of this arrangement, a significant percentage
of Bell Atlantic Internet Solutions' customers have selected Icon as their
global service provider to provide the long distance portion of the Internet
access services for both dedicated and switched access services.
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In light of the success of this relationship, in June 1997, Bell Atlantic
Internet Solutions contracted with the Company to provide professional services
to develop a website for Bell Atlantic Internet Solutions' online marketing
campaign. Icon's professional services included the design and development of a
system architecture that facilitated users' access to product information and
was capable of distributing geographically specific information to users in
disparate locations. The Company also re-purposed existing marketing material to
take advantage of the interactive nature of the Internet. In October 1997, the
Company extended its arrangement with Bell Atlantic Internet Solutions by
entering into an updated GSP agreement with Bell Atlantic Internet Solutions.
The Company currently plans to make its services available to requesting Bell
Atlantic Internet Solutions customers in the northern region during the first
quarter of 1998.
CBS, INC.
Commencing in 1991, the Company began acting as a VAR for CBS. CBS
thereafter engaged Icon's professional services division to design and develop
an extranet to facilitate CBS' affiliates' access to programming information and
CBS' ability to distribute real-time news and other corporate information from
internal databases. The Company provided consulting services to help CBS design
an efficient and cost-effective technology infrastructure and integrate a
streamlined data-filtering information distribution application with back-end
legacy databases and a web-based user interface. In 1995, the customer selected
Icon to provide hosting and Internet access for the CBS website and other
CBS-related websites. At the same time, CBS selected Icon to develop and manage
an Internet site providing live coverage of the 1996 Presidential election,
entitled 'Campaign '96.' The Company provided CBS with an end-to-end solution,
including design and implementation of the back-end database architecture and
the creation of dynamically-generated pages with live streaming audio and video.
The Company also provided hosted systems management and maintenance and
monitored bandwidth needs on a real-time basis. In September 1997, CBS selected
Icon as its communications services provider to provide various services
including hosting and access for the websites 'cbsnow.com' and 'cbs.com,'
provide systems integration and infrastructure planning services, and to provide
technology products and associated integration, maintenance and support
services.
RESEARCH AND DEVELOPMENT
To optimize overall network performance, Icon develops and markets
proprietary technologies. Icon's proprietary technologies are based on a modular
development approach that offers flexibility and allows for the reuse of
individual components and the rapid implementation of custom solutions. In
addition, Icon maintains a technology-neutral position thereby enabling it to
integrate third-party technologies to optimize its clients' solutions
irrespective of technology platform.
OLive -- Objects Live. OLive is an object-oriented development platform
developed and used by the Company in the design of its proprietary technologies.
The Company designed OLive to simplify the development process of customized
network-centric applications solutions and is focused on re-usability,
interoperability and ease of customization.
NESI. The protection of mission-critical data is of vital importance to a
company's business. As a result, corporations need business recovery
capabilities to replicate data in remote locations. To address data backup and
recovery needs, the Company developed NESI, a technology that extends the
distance over which computers can communicate with peripherals such as disk
drives. Data can be sent over a WAN to be processed on a device at a remote
location, in the same manner as if the device were local. As a result,
administrative tools may be used to manage remote devices without modification.
Major benefits of NESI include the ability to be integrated with third-party
data mirroring products, such as Sun's Solstice DiskSuite and the Veritas Volume
Manager, and with data backup software. The Company plans to provide a business
recovery service by combining NESI with its proprietary IP replication
technology. IP replication technology redirects requests for data stored on a
specific server to one or more servers that are hosted on the Company's network
by replicating the IP address or identity of the original server. If data is
requested from a server that has failed, the request is re-directed to a
different NESI-enabled server that is storing a mirrored copy of the data. This
further improves
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recoverability of the data and speed of access to it. The Company has a patent
pending on the NESI technology.
IconCache. End users often experience poor performance while waiting for
content to be downloaded from a web server. IconCache, an OLive-based,
intelligent caching technology speeds this download process, enhancing the
access to and distribution of information over the Internet. Traditionally, when
end-users request data via the Internet, a server in a single location fulfills
the request. This configuration may result in poor performance due to high
server loads caused by overburdening the server with a high volume of requests
or increased latency or transmission delays caused by end-user requests
originating a significant distance from the server. IconCache improves network
performance by addressing both of these problems. Icon addresses server load and
distance-related latency problems in areas experiencing high request volume by
replicating server data and offloading or caching it to other servers.
Ultimately, IconCache diversifies single server loads and moves data closer to
the end-user, minimizing backbone traffic and enhancing performance. IconCache
is different from other caching technologies, such as proxy servers, that do not
provide high levels of data management and are typically used for simple static
websites. Icon plans to enhance the flexibility of IconCache by combining it
with IP replication. The Company has a patent pending on this technology.
IconFeed. In order to fulfill the growing need to publish and distribute
content over the Internet, Icon developed IconFeed, an OLive-based content
publishing and distribution technology. IconFeed is an application that resides
on a server and receives data, regardless of format, and normalizes it for
optimal storage, maintenance and distribution on the web. The normalized data
can be stored in and accessed by a variety of data storage devices, including
databases and file systems. Ultimately, it is distributed and converted into a
format suitable for presentation via web servers, including HTML. The Company
has a patent pending on this technology.
IconChat. The Internet enables the real-time interaction of end-users via
text, audio and video technologies. By incorporating these increasingly popular
interactive technologies into their websites, corporations are realizing
benefits, including the extended duration of end-user visits to revenue-
generating sites and the reduction of traditional communications costs. While
currently integrated with a third-party software product, IconChat, a text-based
real-time discussion system, is the Company's first Internet-based interactive
offering. IconChat includes proprietary functionalities, including a message
board functionality that enables the electronic posting of messages similar to
that of a traditional bulletin board. The Company believes that IconChat is
ideal for corporate customers who want to facilitate real-time text-based dialog
among users of a company's website. It is offered as a value-added service to
Icon's communications services customers.
COMPETITION
The markets served by the Company are extremely competitive. The influx of
new market entrants is expected to continue in each sector of the Company's
business to meet the growing demand for information technology and
communications services and products. Additionally, the Company believes that
such factors as shifting customer demands and the rapid pace of technological
advance will intensify competition and result in continual pressures to reduce
prices, enhance services and products and develop and exploit new technology.
Most of the Company's current and potential competitors enjoy a greater market
presence and possess substantially greater technical, financial and marketing
resources than the Company. The Company believes that its ability to compete
successfully depends upon a number of factors, including the performance,
reliability and security of its communications infrastructure, continued ability
to provide end-to-end Internet solutions, its ability to maintain and expand its
channels of distribution, its continued expertise in proprietary and third party
technologies, its ability to attract and retain service engineers, the pricing
policies of its competitors and suppliers, the variety of services it offers,
the timing of introductions of new services by the Company and its competitors,
customer support, the Company's ability to support industry standards and
industry and general economic trends.
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COMMUNICATIONS SERVICES
The Company's current and prospective competitors in the Internet
communications services sector generally may be divided into the following five
groups: (i) telecommunications companies, such as AT&T, MCI, Sprint, WorldCom,
Intermedia, GTE and LECs; (ii) online services providers, such as America
Online, MSN and Prodigy; (iii) ISPs, such as NETCOM, PSI, Concentric and other
national and regional providers; (iv) cable modem connectivity providers such as
@Home; and (v) data center providers such as Exodus. Most of these competitors
have greater market presence, engineering and marketing capabilities, and
financial, technological and personnel resources than those available to the
Company. As a result, they may be able to develop and expand their
communications infrastractures more quickly, adapt more swiftly to new or
emerging technologies and changes in customer requirements, take advantage of
acquisition and other opportunities more readily, and devote greater resources
to the marketing and sale of their services and products than the Company. In
addition to the companies named above, various organizations have entered into
or are forming joint ventures or consortiums to provide services similar to
those of the Company. The Company believes that competitive factors in the
Internet services market include market presence, network capacity, reliability
and security, price, new products and enhancements and conformity with industry
standards.
Certain companies, including WorldCom, Intermedia and GTE, have also
obtained or expanded their Internet access services and products as a result of
acquisitions. In 1996, MFS merged with UUNET, a competitor of the Company in the
area of Internet access. MFS has been acquired by WorldCom, which is also a
supplier of network services to Icon. WorldCom has reached an agreement to
acquire MCI, which is a major provider of Internet backbone services. The
combination of MFS, UUNET, WorldCom and MCI means that one of the Company's
major suppliers is also one of its formidable competitors in providing Internet
services. Such acquisitions may permit the Company's competitors to devote
greater resources to the development and marketing of new competitive products
and services and the marketing of existing competitive products and services.
Certain companies are also providing high-speed data services using alternative
delivery methods such as cable television, direct broadcast satellites and
wireless cable.
As a result of increased competition and vertical and horizontal
integration and consolidation in the industry, the Company could encounter
significant pricing pressure, which in turn could result in significant
reductions in the average selling price of the Company's services. For example,
certain of the Company's competitors that are telecommunications companies may
be able to provide customers with reduced communications costs in connection
with their Internet access services or private network services, reducing the
overall cost of their solutions and significantly increasing price pressures on
the Company. There can be no assurance that the Company will be able to offset
the effects of any such price reductions with an increase in the number of its
customers, higher revenue from enhanced services, cost reductions or otherwise.
PROFESSIONAL SERVICES
The professional services market is highly fragmented and served by
numerous providers, including consulting and systems integration firms,
facilities management and MIS outsourcing companies, applications software
firms, major equipment providers through their professional services units,
major accounting firms, general management consulting firms and website/intranet
design firms. The Company typically encounters competition from mid-sized and
regional consulting and systems integration firms, such as Cambridge Technology
Partners and Technology Solutions, and increasingly competes with large-scale
systems integrators, such as EDS. The Company's design group also competes with
a variety of interactive design firms including agency.com, Razorfish, USWeb and
CKS Group. The Company believes that the primary competitive factors at work in
this market are price, the ability to fashion and deliver efficient solutions to
customer needs, the quality of service, including project management and ongoing
support and maintenance, its ability to attract and retain service engineers and
the availability and quality of hardware. Accordingly, the Company competes on
the basis of its reputation, personnel, technical sophistication and ability to
provide single-source, end-to-end solutions.
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PRODUCT RESALES
The product resales business is a highly competitive market with low
margins and no substantial barriers to entry. The Company believes that its
ability to compete successfully depends on a number of factors, including its
ability to integrate value-added services with its product resales, the price at
which the Company resells products, the speed and accuracy of delivery, the
effectiveness of sales and marketing programs, credit availability, the ability
to tailor specific solutions to customer needs, the quality and breadth of
products offered, the availability to offer product information and technical
support and industry and general economic trends.
The Company's current and prospective competitors generally can be divided
into three groups: (i) national and regional VARs, such as EJV Bridge Networks,
Bell Technology and LANCOM; (ii) national and regional systems integrators, such
as EDS, Sapient, Computer Associates and The Ergonomics Group; and (iii)
hardware distributors, such as CHS Electronics and ITOCHU. Many of these
competitors have greater market presence and financial resources than those
available to the Company. As a result, they may be able to adapt more swiftly to
changes in market prices and customer requirements, provide financing to
customers for purchases, take advantage of acquisition and other opportunities
more readily, and devote greater resources to the marketing and sale of their
products than can the Company. In addition, the Company expects that additional
competitive pressure may arise from manufacturers that have been successful in
selling directly to the end-users without the use of resellers.
PROPRIETARY RIGHTS
The Company believes that factors such as the technical and business
expertise of its personnel, attentive high-quality customer service and
strategic alliances with its suppliers and other vendors, have to date played a
predominant role in promoting its reputation and the growth of its business but
recognizes that its ability to compete effectively and to continue to grow will
depend increasingly on the use and appeal of its proprietary technology. While
the Company relies on patent, trademark, contract, trade secret and copyright
law to protect its proprietary technologies, it is possible for a third party to
copy or otherwise obtain and use the Company's technologies without
authorization, or to develop similar technologies independently. Although the
Company has not to date registered any trademark or service mark, it has applied
to register its name and logo design as trademarks and certain of its product
and service names and marks as trademarks or service marks in the United States.
The Company does not own but has applied for patents on certain of its
proprietary technologies. Although the Company does not believe that its
services or products infringe the proprietary rights of any third parties, there
can be no assurance that third parties will not assert such claims against the
Company in the future or that such claims will not be successful.
In accordance with the Company's policy, all of the Company's employees and
consultants have entered into, and all future employee and consultants are
expected to enter into, agreements containing confidentiality and
nonsolicitation covenants. Similarly, the Company's agreements with customers
and suppliers include provisions prohibiting or restricting the disclosure of
proprietary information and products, the use of software in source code form
and the sublicensing of licensed software. The Company also monitors and limits
access to and the distribution of its proprietary technologies. In addition, the
Company sells or licenses its services and products in, and the Internet and
other global networks facilitate the delivery of the Company's software to,
other countries where the laws may not afford adequate protection of the
Company's proprietary rights in such products or provide effective means for its
enforcement of such rights.
Certain technologies used in the Company's solutions are licensed or leased
by the Company, generally on a non-exclusive basis. There can be no assurance
that such technology will continue to be available to the Company on
commercially reasonable terms. The loss of such technology could impair the
Company's products or services or require the Company to obtain substitute
technologies of lower quality or performance standards or at greater cost. See
'Risk Factors -- Dependence on Proprietary Technologies'.
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GOVERNMENTAL REGULATION
To date, the FCC has not actively sought to regulate the provision of
Internet access and related services. The Company believes it is not currently
subject to direct regulation by the FCC or any other governmental agency, other
than regulations applicable to businesses generally. Under current law,
operators of 'enhanced' services are exempt from FCC regulation, but operators
of 'basic' services are not similarly exempt. The FCC has not yet addressed
whether providing transport services, including Internet telephony, to customers
over an IP-based network is an enhanced service. A determination by the FCC that
providing Internet transport or telephone services to customers over an IP-based
network is subject to regulation would adversely impact the Company's ability to
provide various existing and planned services, to provide Bell Atlantic Internet
Solutions' customers with the option to purchase the Company's communications
and other services, and could have a material adverse effect on the Company's
business, financial condition and results of operations.
The FCC also extensively regulates the cable and broadcasting industries.
These regulations address, among other things, technical, ownership, competition
and content-related issues. To date, the FCC has not determined whether or to
what extent its regulatory framework can or should be extended to directly
govern analogous communications on the Internet, such as video and audio
streaming. There can be no guarantee that the limited regulatory burdens on the
Internet to date will not increase or that new laws governing the Internet will
not be passed.
In February 1996, the Telecommunications Act of 1996 was signed into law by
the President of the United States. Changes in the regulatory environment
relating to the Internet access industry, including regulatory changes that
directly or indirectly affect the regulatory status of Internet services, affect
telecommunications costs, including the application of access charges to
Internet services, or increase the likelihood or scope of competition from
regional telephone companies or others, could have a material adverse effect on
the Company's business, financial condition and results of operations. Due to
the increase in Internet use and publicity, it is possible that laws and
regulations may be adopted with respect to the Internet, including with respect
to privacy, pricing and characteristics of services or products. Certain other
legislative initiatives, including those involving taxation of Internet services
and transactions, Internet regulation and universal service contribution
requirements for Internet providers have also been proposed. The Company cannot
predict the impact, if any, that these or other laws and regulations or legal or
regulatory changes may have on its business.
Bell Atlantic Internet Solutions' relationship with the Company is subject
to review and regulation by state and federal authorities, including the FCC.
Although Bell Atlantic Internet Solutions has received the requisite approvals
to provide service and make the Company's services available to those of Bell
Atlantic Internet Solutions' customers who request them (which has only included
customers in the traditional Bell Atlantic southern region through the date of
this Prospectus), a petition submitted by MFS in July 1996 for reconsideration
of such FCC approvals is currently pending before the FCC. Additionally, the
extension of the Company's service offerings into the traditional Bell Atlantic
northern region (NYNEX) is subject to approvals at the state and federal levels.
There can be no assurance that Bell Atlantic Internet Solutions will be
successful in maintaining or procuring the requisite regulatory approvals.
Failure of Bell Atlantic Internet Solutions to maintain or prospectively procure
such approvals at the federal or state level could adversely affect the
Company's existing agreements with Bell Atlantic Internet Solutions, and, as a
result, the Company's business, financial condition and results of operations.
Additionally, certain lobbying groups are attempting to initiate
legislation which would compel ISPs to pay access charges for the use of some of
the local networks operated by the RBOCs. The adoption of such laws or
regulations could inhibit the continued growth of the Internet or other wide
area information networks, impose additional costs on the Company, expose the
Company to greater potential liability from regulatory actions or private legal
proceedings or otherwise adversely affect the Company's business operations or
performance. However, at present, the Company is unable to predict whether any
laws or regulations specifically applicable to the Company or its businesses
will be adopted, or, if any such laws or regulations are adopted, the nature or
extent of their impact on the information technology industry or the Company's
business operations or performance.
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Federal and state laws and regulations relating to the liability of online
services companies and Internet access providers for information carried on or
disseminated through their networks is currently unsettled. Several private
lawsuits seeking to impose such liability upon online services companies and
Internet access providers are currently pending. Except for the stand-alone
provision of underlying basic transmission capability, the offering of Internet
services or access to the Internet has generally been considered to be a type of
services offering that is not currently regulated by the FCC. Some states may,
however, seek to exercise regulatory jurisdiction over certain aspects of such
offerings.
Whether the FCC will assert regulatory authority over the Internet and the
level of such regulation, if asserted, are pending issues at that agency, and
regulation of the Internet and related services in general is being considered
by lawmakers at many levels of government. The Company cannot predict whether
regulation may be imposed in the future, what form such regulation may take or
that such regulation will not adversely affect the Company's business, financial
condition or results of operations.
In addition, legislation has been enacted and new legislation has been
proposed that imposes liability for or prohibits the transmission on the
Internet of certain types of information. The imposition upon the Company and
other Internet access providers of potential liability for information carried
on or disseminated through their systems could require the Company to implement
measures to reduce its exposure to such liability, which may require the
expenditure of substantial resources, or to discontinue certain service or
product offerings. The increased attention focused upon liability issues as a
result of these lawsuits and legislative actions and proposals could impact the
growth of Internet use. While the Company carries professional liability
insurance, it may not be adequate to compensate or may not cover the Company in
the event the Company becomes liable for information carried on or disseminated
over its networks. See 'Risk Factors -- Government Regulation.'
LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property the subject of,
any material pending legal proceedings.
EMPLOYEES
As of September 30, 1997, the Company had 229 employees, all of whom were
full time. Of these, 98 were principally engaged in professional services, 28
were principally engaged in the communications services, 11 were principally
engaged in the interactive publishing group, 36 were principally engaged in
sales and marketing, 13 were principally engaged in research and development, 10
were principally engaged in operations and 33 were principally engaged in
finance, administration, legal, management information systems and human
resources. None of the Company's employees is represented by a labor union. The
Company considers its relations with its employees to be satisfactory.
PROPERTIES
The Company currently occupies approximately 55,000 square feet in a modern
office building in Weehawken, New Jersey, under a lease which expires on
February 28, 2006. The Company's NOC is located at its Weehawken building. The
Company also leases approximately 5,700 square feet for its New York City office
and is negotiating a possible lease of approximately 20,000 square feet of space
to replace the existing New York City office.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information (ages as of September
30, 1997) concerning each of the Company's directors, executive officers and
certain key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Scott A. Baxter................... 34 President, Chief Executive Officer and Chairman of the Board
of Directors
Richard M. Brown.................. 48 Vice President -- Information Technologies, Secretary and
Director
Scott Harmolin.................... 38 Senior Vice President, Chief Technology Officer and Director
Kenneth J. Hall................... 39 Senior Vice President, Chief Financial Officer and Treasurer
Susan A. Massaro.................. 41 Senior Vice President -- Professional Services
Frank C. Cicio, Jr................ 43 Senior Vice President -- Sales and Business Development
Anthony R. Scrimenti.............. 43 Senior Vice President -- Communications Services
David L. Goret.................... 33 Vice President -- Business Affairs, General Counsel and
Assistant Secretary
Robert J. Thalman, Jr............. 44 Vice President -- Strategic Marketing
Michael J. Gold................... 33 Vice President -- Corporate Development
Samuel A. Plum.................... 53 Director
Wayne B. Weisman.................. 41 Director
</TABLE>
Scott A. Baxter, a founder of the Company, has been the President, Chief
Executive Officer and Chairman of the Board of Directors of the Company since
its inception in 1991. From June 1987 to February 1991, Mr. Baxter was an
account executive at Sun. From 1984 to 1987, Mr. Baxter was an account executive
at Data General Corporation ('Data General').
Richard M. Brown, a founder of the Company, has been the Vice
President -- Information Technologies, Secretary and a Director of the Company
since its inception in 1991. From November 1986 to February 1991, Mr. Brown was
President of Custom Applied System Techniques Inc., a consulting firm that
specialized in computer systems.
Scott Harmolin, a founder of the Company, has served as Senior Vice
President, Chief Technology Officer and Director of the Company since its
inception in 1991. From November 1986 to February 1991, Mr. Harmolin was Vice
President of Custom Applied System Techniques Inc., a consulting firm that
specialized in computer systems.
Kenneth J. Hall has served as the Company's Senior Vice President, Chief
Financial Officer and Treasurer since April 1997. From February 1996 to March
1997, he was the Chief Financial Officer of Global Direct Mail Corp. ('Global'),
an international direct marketer of computer products and office supplies. Prior
to such time, Mr. Hall was employed by the National Football League Properties,
Inc. as Vice President of Finance and Administration and Chief Financial Officer
from 1992 to 1995 and Director of Finance from 1990 to 1991. Mr. Hall's
experience also includes management positions with Price Waterhouse LLP and
Coopers & Lybrand L.L.P.
Susan A. Massaro has served as the Company's Senior Vice
President -- Professional Services since March 1996. From January 1979 to March
1996, Ms. Massaro worked for Data General, a computer hardware and software
manufacturer, where she held many technical and business management positions,
including the U.S. Director of Professional Services, Eastern U.S. Director of
Systems Engineering, Northeast Technical Services Manager, and various Systems
Engineering consultant and management positions. Prior to joining Data General,
Ms. Massaro held Programmer/Analyst positions at LeCroy Research Systems, a test
and measurement instrumentation manufacturer, and STC Systems, a business
application solutions provider and integrator.
Frank C. Cicio, Jr. has served as Icon's Senior Vice President -- Sales and
Strategic Business Development since February 1997. Mr. Cicio served from July
1993 to February 1997 as Executive Vice
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President of Sales and Marketing of Logic Works Incorporated, a computer
software company. Prior to joining Logic Works, Mr. Cicio was Director of
Strategic Alliances at Bachman Information, a computer software company, and
served in various capacities at MAI Systems, a manufacturer of application
software and hardware products for the retail, distribution and financial
markets, beginning as an engineering project manager in 1977 and rising to
General Manager of the North American Industry Business Unit in 1989.
Anthony R. Scrimenti has served as the Company's Senior Vice
President -- Communications Services since November 1997 and was its Chief
Information Officer from August 1994 to November 1997. From October 1993 to
August 1994, Mr. Scrimenti was employed by Novell, Inc., a networking software
manufacturer, as a senior systems consultant. From January 1986 to October 1993,
Mr. Scrimenti was employed by Data General, a computer hardware and software
manufacturer, in various capacities, including as Manager, Network Services.
David L. Goret has served as the Company's General Counsel since February
1996 and Vice President -- Business Affairs since February 1997. From July 1992
to January 1996, Mr. Goret served as Vice President -- Business Affairs and
General Counsel of Interfilm, Inc., a public company that he co-founded, which
produced interactive motion pictures. From May 1991 to July 1992, Mr. Goret
served as director of Business Affairs for Controlled Entropy Entertainment, an
entertainment production company. From October 1989 to July 1992, Mr. Goret
served as Director of Business Affairs for Tour-Toiseshell, Inc., the production
company of the Teenage Mutant Ninja Turtles live shows. Mr. Goret was an
attorney at Haythe & Curley from September 1988 to October 1989. Mr. Goret is
admitted to practice in New York and New Jersey.
Robert J. Thalman, Jr. has served as the Company's Vice President of
Strategic Marketing since January 1997. Prior to joining Icon, Mr. Thalman spent
16 years with Turner Broadcasting System, where he oversaw strategic marketing
for both international (1991-1996) and domestic (1986-1990) network
distribution.
Michael J. Gold has served as the Company's Vice President -- Corporate
Development since August 1997. From October 1996 to May 1997, Mr. Gold was the
Chief Executive Officer of Tumble Interactive Media, Inc., an interactive media
agency. From May 1993 to February 1996, he was the President and founder of
Beyond Fitness, a multimedia fitness-information services company. From August
1986 to April 1993, Mr. Gold was employed by AT&T and Bell Laboratories in
various capacities, including Manager, New Business Development in the
electronic commerce area and District Manager, Sales.
Samuel A. Plum has been a Managing General Partner of the general partner
SCP Private Equity Partners, L.P. ('SCP'), a private equity investment fund,
since its inception in August 1996 and was a Managing Director of Safeguard
Scientifics Inc., an information technology company, from 1993 to 1996. From
February 1989 to January 1993, Mr. Plum served as President of Charterhouse Inc.
and Charterhouse North America Securities, Inc., the U.S. investment banking and
broker-dealer arms, respectively, of Charterhouse PLC, a merchant bank in the
U.K. From 1973 to 1989, Mr. Plum served in various capacities at the investment
banking division of PaineWebber, Inc. and Blyth Eastman Dillon & Co., Inc.
Wayne B. Weisman has been a Partner of the general partner of SCP, a
private equity investment fund, since its inception in August 1996. He has been
Vice President of CIP Capital, L.P., a licensed Small Business Investment
Company, since its formation in 1990. From January 1992 to May 1994, Mr. Weisman
was an Executive Vice President of Affinity Biotech, Inc., a healthcare
technology company, and Vice President and General Counsel of its successor,
IBAH, Inc., a clinical trials management company. He formerly practiced law with
the Philadelphia firm of Saul, Ewing, Remick & Saul. Mr. Weisman is a director
of Microleague Multimedia, Inc.
Prior to consummation of the Offering, the Board of Directors shall be
divided into three classes, with each class containing as equal a number of
Directors as possible; after an interim period of three years following
consummation of the Offering, all directors will be elected for three years and
only one class of directors will come up for election each year. Officers serve
at the discretion of the Board of Directors. There are no family relationships
between any of the Directors or executive officers of the
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Company. There will be five people on the Company's Board of Directors
immediately after the consummation of the Offering.
Upon consummation of the Offering, the Board of Directors intends to
establish an Audit Committee and a Compensation and Stock Option Committee, a
majority of whose members will be independent directors. The Audit Committee
will communicate with and receive information directly from the Company's
independent accountants and will review the Company's financial controls,
policies and procedures. The Compensation and Stock Option Committee is expected
to review and evaluate periodically the compensation of the Company's officers
and will administer the 1995 Option Plan.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company are not entitled to receive any
fees for serving as directors. All directors are reimbursed for out-of-pocket
expenses related to their service as directors. Under the 1995 Option Plan,
non-employee directors will be entitled to receive formula grants of stock
options.
An option to purchase 3,273 shares will be automatically granted to each
non-employee director when he or she is elected or appointed to the Board (the
'Initial Grant'), and an option to purchase an additional 2,182 shares will be
automatically granted at each annual meeting of the Board of Directors following
the Initial Grant (the 'Subsequent Grant') where such person is re-elected as a
director of the Company. Such options have not yet been issued to Messrs. Plum
and Weisman. The director's right to exercise all of the shares of the Initial
Grant will vest immediately upon grant. Each Subsequent Grant of options will
vest immediately upon grant. The option price per share of Common Stock granted
to non-employee directors will be 100% of the fair market value of the Common
Stock at the date of grant. Each option granted to non-employee directors will
be exercisable for ten years after the date of grant.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table specifies the components of the
compensation packages of the Company's Chief Executive Officer and four other
most highly compensated executive officers (the 'named executive officers') for
the fiscal year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
--------------------------
ANNUAL NUMBER OF
COMPENSATION(A) SHARES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS OPTIONS COMPENSATION
POSITION YEAR ($) ($) (#) ($)
- ------------------------------------------------------ ------ -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Scott A. Baxter ...................................... 1996 $176,981 $120,000 109,091 $--
Chief Executive Officer and President
Richard M. Brown ..................................... 1996 157,077 35,000 -- 5,376
Vice President -- Information Technologies and
Secretary
Scott Harmolin ....................................... 1996 157,577 35,000 -- 5,820
Senior Vice President and Chief Technology Officer
Ari Horowitz ......................................... 1996 95,447 24,002 21,818 --
Chief Financial Officer
David L. Goret ....................................... 1996 98,019 9,000 10,909 --
Vice President -- Business Affairs, General Counsel
and Assistant Secretary
</TABLE>
- ------------
(a) Does not indicate supplementary compensation amounts less than the greater
of 10% of the named executive officer's salary and bonus or $50,000.
50
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OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to the named executive officers for the year ended December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF POTENTIAL REALIZABLE
SECURITIES TOTAL OPTIONS VALUE AT ASSUMED
UNDERLYING GRANTED TO PER SHARE ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION PRICE VALUATION FOR
NAME GRANTED FISCAL YEAR PRICE DATE OPTION TERM
- --------------------------------- ---------- ------------- --------- ---------- ------------------------
10%
5% ----------
----------
<S> <C> <C> <C> <C> <C> <C>
Scott A. Baxter.................. 109,091 22.7% $ 6.63(a) 1/30/06 $1,587,000 $2,955,000
Ari Horowitz..................... 21,818 4.6 14.27(b) 4/15/06 151,000 424,000
David L. Goret................... 10,909 2.3 6.02(c) 4/15/06 165,000 302,000
</TABLE>
- ------------
(a) Reflects the repricing of such options in June 1997 when the exercise price
of such options was reduced from $11.76 to $6.63 per share.
(b) In January 1997, these options, which had an initial exercise price of
$11.00, and options to purchase an additional 21,818 shares of Common Stock
for $6.42 per share were replaced with options to purchase 65,455 shares of
Common Stock at an exercise price of $14.27 per share.
(c) Reflects the repricing of such options in June 1997 when the exercise price
of such options was reduced from $11.00 to $6.02 per share.
FISCAL YEAR-END VALUE OF UNEXERCISED OPTIONS
The following table contains information concerning the value of
unexercised options (which includes the value of such options both before and
after giving effect to the repricing and/or replacement of such options in
January and June 1997, respectively) of the named executive officers at December
31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS THE-MONEY OPTIONS
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Scott A. Baxter.................................. -- 109,091 -- $ 695,000
Ari Horowitz..................................... -- 43,636 -- --
David L. Goret................................... -- 10,909 -- 76,000
</TABLE>
EMPLOYMENT AGREEMENTS
In December 1995, the Company entered into five-year employment agreements
with Messrs. Baxter, Brown and Harmolin. In May 1997, each of the agreements was
amended to extend the employment term until May 2002. The agreements provide for
Mr. Baxter to serve as the Company's Chief Executive Officer and President, for
Mr. Brown to serve as the Company's Vice President -- Information Technologies
and Secretary and for Mr. Harmolin to serve as the Company's Senior Vice
President and Chief Technology Officer at a minimum annual base salary of
$185,000, $180,000 and $180,000, respectively. Mr. Baxter's agreement also
provides for the payment of a guaranteed quarterly bonus in the amount of
$30,000, and Mr. Brown's and Mr. Harmolin's agreements each provide for the
payment of a guaranteed quarterly bonus in the amount of $10,000. Each also
receives additional benefits, salary increases and bonuses as the Board of
Directors may grant, as well as those benefits generally provided to other
executive officers of the Company, and an automobile allowance. In the event of
termination of employment of any of such executives following a change of
control (as defined in such employment agreements) of the Company that has not
been approved by the Board of Directors, the Company has agreed to pay the
respective executive severance in an amount equal to 2.99 multiplied by his base
amount (as defined in section 280G(b)(3) of the Internal Revenue Code of 1986,
as amended (the 'Code')). Each executive has also agreed not to compete against
the Company
51
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<PAGE>
during the term of his employment, and not to solicit or perform services for
any customers or solicit any employee of the Company for a period of 12 months
after the termination of his employment.
In February and March 1997, the Company entered into employment agreements
with Messrs. Cicio and Hall, respectively, pursuant to which they are
employees-at-will. The agreements provide for each to be paid a minimum annual
base salary of $200,000 and a performance-based bonus. If either is terminated
without cause, he is entitled to receive his salary compensation otherwise
payable for a period of six months; provided, however, that if the Company has
extended such employee's related non-compete agreement, then such employee is
entitled to receive his salary compensation otherwise payable for a period of 12
months. Messrs. Cicio and Hall were each granted an option to purchase 109,091
and 87,273 shares of Common Stock, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a compensation committee during the fiscal year
ended December 31, 1996; its function was performed by the Board of Directors.
Messrs. Baxter, Brown and Harmolin, as the three members of the Board of
Directors, each participated in deliberations concerning executive officer
compensation. In June 1997, the Company established a Compensation Committee and
an Audit Committee. The members of the Compensation Committee are Messrs.
Baxter, Brown, Harmolin and Weisman and the members of the Audit Committee are
Messrs. Baxter, Harmolin and Weisman. Upon the consummation of this Offering,
the Board of Directors intends to reconstitute the Audit Committee such that a
majority of the members of such Committee will be non-employee directors (as
defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended).
1995 OPTION PLAN
In October 1995, the Board of Directors adopted and the stockholders of the
Company approved the 1995 Option Plan. The 1995 Option Plan provides for the
grant of (i) options that are intended to qualify as incentive stock options
('Incentive Stock Options') within the meaning of Section 422 of the Code to
certain employees and consultants and (ii) options not intended so to qualify
('Nonqualified Stock Options') to employees (including directors and officers
who are employees of the Company), non-employee directors and consultants. The
total number of shares of Common Stock for which options may be granted under
the 1995 Option Plan is 2,181,818 shares.
The 1995 Option Plan is to be administered by a committee of the Board of
Directors, which will determine to whom options are granted, the number of
shares subject to such options, and the terms, exercise prices and other terms
and conditions of the exercise thereof.
The exercise price of any Incentive Stock Option granted under the 1995
Option Plan must be at least equal to the fair market value of the shares
subject to such option on the date of grant, while the exercise price of any
Incentive Stock Option granted to any participant who owns stock possessing more
than 10% of the total combined voting power of the Company's outstanding capital
stock must be at least equal to 110% of the fair market value of the shares
subject to such option on the date of grant. The determination of fair market
value is made by the Board of Directors based primarily upon reference to the
fair market value of recent sales of the Company's securities to unrelated third
parties. The term of each Incentive Stock Option granted pursuant to the 1995
Option Plan cannot exceed ten years, while the term of any Incentive Stock
Option granted to a participant who owns stock possessing more than 10% of the
total combined voting power of the Company's outstanding capital stock. Options
become exercisable at such times and in such installments as is provided in the
option contract for each individual option. No option granted under the 1995
Option Plan is transferable by the optionee other than by will or the laws of
descent and distribution and each option is exercisable during the lifetime of
the optionee only by such optionee.
Pursuant to option contracts granted to executive officers and certain key
employees of the Company, the vesting of certain unvested options granted to
such individuals will accelerate (i) upon such individual's termination of
employment without cause, as a result of death or as a result of disability and
(ii) upon certain changes in control (each, an 'Acceleration Date'). Pursuant to
such
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<PAGE>
agreements, the options otherwise exercisable within up to three years
(depending on the terms of the option contract such individual has negotiated
with the Company) will vest upon the occurrence of an Acceleration Date.
As of the date of this Prospectus, under the 1995 Option Plan, the Company
has granted to certain of its employees options to purchase up to 1,162,430
shares of Common Stock at an exercise price between $6.02 and $13.48 per share,
of which options with respect to 211,091 shares are currently exercisable and
the balance thereof becomes exercisable at various times after January 15, 1998.
The Company has also granted to one of its former employees options to purchase
up to 65,455 shares of Common Stock at an exercise price of $14.27 per share,
all of which options are currently exercisable. All such options have terms of
ten years, and provide that, upon the earliest to occur of the death, permanent
total disability or termination without cause of employment of the option
holder, such option will become immediately exercisable with respect to all
shares of Common Stock subject thereto as to which such option would otherwise
have been exercisable within three years after the occurrence of such event.
AGREEMENTS WITH EMPLOYEES
Each employee of the Company is required to enter into an agreement with
the Company pursuant to which such person agrees (i) to assign to the Company
any inventions relating to such person's employment conceived during such
person's employment by the Company, (ii) not to disclose confidential
information to third parties, (iii) not to engage in any business that is
competitive with the Company during the term of such person's employment, (iv)
not to hire any employee of the Company during such person's employment and for
a period of 12 months following the termination of such person's employment and
(v) not to perform services for any customer of the Company for a period of 12
months following the termination of such person's employment. The agreement also
provides that the employee is an 'at will' employee and that either the Company
or the employee may terminate employment with the Company at any time with or
without cause.
401(K) PLAN
In January 1993 the Company adopted a tax-qualified employee savings and
retirement plan (the '401(k) Plan') covering the Company's employees. Pursuant
to the 401(k) Plan, employees may elect to reduce their current compensation by
up to the lesser of 10% of eligible compensation or the statutorily prescribed
annual limit ($9,500 in 1997) and have the amount of such reduction contributed
to the 401(k) Plan. The trustees under the 401(k) Plan, at the direction of each
participant, invest the assets of the 401(k) Plan. The 401(k) Plan is intended
to qualify under Section 401 of the Code so that contributions by employees to
the 401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn.
PROFIT SHARING PLAN
The Company has a profit sharing plan covering substantially all full-time
employees. Contributions by the Company to the profit sharing plan amounted to
$129,000 and $28,000 in 1994 and 1996, respectively. There were no contributions
to the profit sharing plan during 1995 and the nine months ended September 30,
1997.
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<PAGE>
CERTAIN TRANSACTIONS
On August 30, 1995, the Company made loans of $50,000 to Messrs. Baxter,
Brown and Harmolin. Interest accrues at an annual rate of 7%. The loans
including accrued interest are due on demand.
Messrs. Baxter, Brown and Harmolin are party to a Stockholders' Agreement
dated as of July 17, 1995, as amended, pursuant to which, in the event any of
them desires to accept an offer from a third-party to purchase any shares of
Common Stock owned by such stockholder, the Company and the other two
stockholders have the right to purchase such shares at a price that is adjusted
annually pursuant to the mutual agreement of Messrs. Baxter, Brown and Harmolin
(the 'Agreed Upon Price'). If any of Messrs. Baxter, Brown or Harmolin becomes
disabled, is terminated for any reason, engages in a competitive business or is
adjudicated bankrupt, then the Company and the remaining two stockholders have
the right to purchase all the shares then owned by such stockholder at the
Agreed Upon Price. Upon the death of any of them, the Company is obligated to
purchase all the decedent's shares of Common Stock, and the decedent's estate is
obligated to sell such shares, at the Agreed Upon Price.
On March 19, 1997, Tudor BVI Futures, Ltd. ('Tudor BVI'), as agent and
holder on behalf of itself and each of The Raptor Global Fund L.P. ('Raptor
L.P.'), The Raptor Global Fund Ltd. ('Raptor ULtd.') and Tudor Arbitrage
Partners L.P. ('TAP'), loaned to the Company an aggregate principal amount of
$1.0 million pursuant to a convertible note bearing interest at a rate of 10%
per annum. In consideration for such loan, the Company granted to such lenders a
warrant to purchase an aggregate of 41,511 shares of Common Stock at an exercise
price of $6.02 per share. On May 30, 1997, such lenders converted the $1.0
million note and $20,000 of accrued but unpaid interest thereon into an
aggregate of 10,200 shares of Series B Preferred Stock.
54
<PAGE>
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding ownership of
the Common Stock as of September 30, 1997 and immediately following the Offering
by (i) each person or entity who owns of record or beneficially five percent or
more of the Company's Common Stock, (ii) each director and named executive
officer of the Company, (iii) all directors and executive officers of the
Company as a group and (iv) each of the Selling Stockholders. To the knowledge
of the Company, each of such stockholders has sole voting and investment power
as to the shares shown unless otherwise noted. Unless otherwise noted, the
address of each beneficial owner named below is the Company's corporate address.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------------------
PERCENT PERCENT
NUMBER OF PRIOR TO AFTER
BENEFICIAL OWNER SHARES OFFERING OFFERING
- ----------------------------------------------------------------------- --------- --------- -------
<S> <C> <C> <C>
Scott A. Baxter........................................................ 2,181,818 19.5% 14.5%(a)
Richard M. Brown....................................................... 2,181,818 19.5 14.5(a)
Scott Harmolin......................................................... 2,181,818 19.5 14.5(a)
Kenneth J. Hall........................................................ 4,981 * *
Susan A. Massaro(b).................................................... 6,364 * *
Frank C. Cicio, Jr..................................................... -- * *
David L. Goret(b)...................................................... 6,364 * *
Samuel A. Plum(c)(d)................................................... 2,499,639 20.8 15.8
Wayne B. Weisman....................................................... -- * *
SCP Private Equity Partners, L.P.(c)(e)................................ 2,499,639 20.8 15.8
Paul Tudor Jones, II(f)(g)............................................. 875,044 7.8 5.8
Mellon Ventures, L.P.(h)............................................... 830,220 7.4 5.5
MVMA, Inc.(h)(i)....................................................... 830,220 7.4 5.5
Tudor Investment Corporation(g)(j)..................................... 697,625 6.2 4.6
All directors and executive officers as a group
(9 persons)(k)....................................................... 9,062,802 75.4% 57.1%
</TABLE>
- ------------
* Less than 1%.
(a) Each of Messrs. Baxter, Brown and Harmolin is a Selling Stockholder and has
granted the Underwriters an option to purchase up to 77,000 shares of
Common Stock solely to cover over-allotments. If the Underwriters'
over-allotment is exercised in full, Messrs. Baxter, Brown and Harmolin
will each own 13.7% of the Common Stock after consummation of the Offering.
(b) Includes currently exercisable options to purchase 6,364 shares of Common
Stock.
(c) The address for the beneficial owner is 800 The Safeguard Building, 435
Devon Park Drive, Wayne, Pennsylvania 19087.
(d) Includes 1,660,440 shares of Common Stock and currently exercisable
warrants to purchase 839,199 shares of Common Stock, each held of record by
SCP which Mr. Plum may be deemed to beneficially own. Mr. Plum is a general
partner of the general partner of SCP. Mr. Plum disclaims beneficial
ownership of such securities.
(e) Includes currently exercisable warrants to purchase 839,199 shares of
Common Stock.
(f) The address for the beneficial owner is c/o Tudor Investment Corporation,
40 Rowes Wharf, Boston, Massachusetts 02110.
(g) Includes 477,827 shares of Common Stock and currently exercisable warrants
to purchase 23,784 shares of Common Stock beneficially owned by Tudor BVI,
77,193 shares of Common Stock and currently exercisable warrants to
purchase 3,862 shares of Common Stock beneficially owned by Raptor L.P.,
109,522 shares of Common Stock and warrants convertible into 5,437 shares
of
(footnotes continued on next page)
55
<PAGE>
<PAGE>
Common Stock beneficially owned by Raptor Ltd. and, in the case of Mr.
Jones, 168,991 shares of Common Stock and currently exercisable warrants to
purchase 8,428 shares of Common Stock beneficially owned by TAP. Mr. Jones
is the Chairman, Chief Executive Officer and principal stockholder of Tudor
Investment Corporation ('Tudor'), which acts as general partner and/or
investment adviser to Tudor BVI, Raptor L.P. and Raptor Ltd. Mr. Jones is
also the Chairman and indirect principal equity owner of the general
partner of TAP. As a result, Mr. Jones and Tudor may be deemed to be the
beneficial owners of the shares of Common Stock beneficially held by Tudor
BVI, Raptor L.P., Raptor Ltd. and, in the case of Mr. Jones, TAP. Each of
Mr. Jones and Tudor disclaims beneficial ownership of shares of Common
Stock beneficially owned by such entities.
(h) The address for the beneficial owner is Plymouth Meeting Executive Campus,
610 West Germantown Pike, Suite 200, Plymouth Meeting, Pennsylvania 19462.
(i) MVMA, Inc. ('MVMA') is the general partner of the general partner of Mellon
Ventures L.P. ('Mellon Ventures'). MVMA disclaims beneficial ownership of
shares of Common Stock owned by Mellon Ventures.
(j) The address for the beneficial owner is 40 Rowes Wharf, Boston,
Massachusetts 02110.
(k) Includes currently exercisable options to purchase 12,728 shares of Common
Stock and warrants to purchase 839,199 shares of Common Stock. Mr. Plum
disclaims beneficial ownership of 1,660,440 shares of Common Stock and
currently exercisable warrants to purchase 839,199 shares of Common Stock.
56
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The total amount of authorized capital stock of the Company consists of
50,000,000 shares of Common Stock, par value $.001 per share, and 1,000,000
shares of preferred stock, par value $.01 per share (the 'Preferred Stock'),
450,000 shares of which are designated as Series A Convertible Participating
Preferred Stock and 415,000 shares of which are designated as 10% PIK Series B
Convertible Participating Preferred Stock. Upon consummation of the Offering,
15,025,329 shares of Common Stock will be issued and outstanding and no shares
of Preferred Stock will be outstanding. The discussion herein describes the
Company's capital stock, Restated Certificate of Incorporation and Restated
By-laws. The following summary description of the Company's capital stock
describes all material provisions of, but does not purport to be complete and is
subject to, and qualified in its entirety by, the Restated Certificate of
Incorporation and the Restated By-laws of the Company that are included as
exhibits to the Registration Statement of which this Prospectus forms a part and
by the provisions of applicable law.
COMMON STOCK
As of September 30, 1997, there were 6,545,455 shares of Common Stock
outstanding held by three holders of record. The issued and outstanding shares
of Common Stock are, and the shares of Common Stock being offered will be upon
payment therefor, validly issued, fully paid and non-assessable. Subject to the
prior rights of the holders of any Preferred Stock, the holders of outstanding
shares of Common Stock are entitled to receive dividends out of assets legally
available therefor at such times and in such amounts as the Board of Directors
may from time to time determine. See 'Dividend Policy'. Following consummation
of the Offering, shares of Common Stock will not be redeemable or convertible,
and the holders thereof will have no preemptive or subscription rights to
purchase any securities of the Company. Upon liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive pro rata
the assets of the Company which are legally available for distribution, after
payment of all debts and other liabilities and subject to the prior rights of
any holders of Preferred Stock then outstanding. Each outstanding share of
Common Stock is entitled to one vote on all matters submitted to a vote of
stockholders.
Application has been made to list the Common Stock on the NNM under the
symbol 'ICMT'.
PREFERRED STOCK
As of September 30, 1997, there were 422,607 shares of Series A Preferred
Stock outstanding, which shares were sold by the Company in January 1996 for an
aggregate of $9.9 million, held by approximately 60 holders of record. The
issued and outstanding shares of Series A Preferred Stock are validly issued,
fully paid and non-assessable. Pursuant to the terms of the Certificate of
Incorporation in effect prior to the Offering, upon the consummation of this
Offering, the shares of Series A Preferred Stock will be converted automatically
into 1,637,097 shares of Common Stock. Each share of Series A Preferred Stock
converts into approximately 3.87 shares of Common Stock at the option of the
holder and automatically upon consummation of a public offering by the Company
in which it receives at least $20 million in gross proceeds or the sale of all
or substantially all of the Company's assets or outstanding capital stock, each
at a price of at least $12.05 per share of Common Stock.
As of September 30, 1997, there were 180,240 shares of Series B Preferred
Stock outstanding, which shares were sold by the Company from May through
September 1997 for an aggregate of $18.0 million, held by 18 holders of record.
The issued and outstanding shares of Series B Preferred Stock are validly
issued, fully paid and non-assessable. Pursuant to the terms of the Certificate
of Incorporation in effect prior to the Offering, upon the consummation of the
Offering, the shares of Series B Preferred Stock will be converted automatically
into 2,992,777 shares of Common Stock. Each share of Series B Preferred Stock
converts into approximately 16.60 shares of Common Stock at the option of the
holder and automatically upon consummation of a public offering by the Company
in which it receives at least $20 million in gross proceeds or the sale of all
or substantially all of the Company's assets or outstanding capital stock, each
at a price of at least $12.05 per share of Common Stock.
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The Company's Board of Directors may, without further action by the
Company's stockholders, from time to time, direct the issuance of up to
1,000,000 shares of Preferred Stock in series and may, at the time of issuance,
determine the rights, preferences and limitations of each series. Satisfaction
of any dividend preferences of outstanding shares of Preferred Stock would
reduce the amount of funds available for the payment of dividends on shares of
Common Stock. Holders of shares of Preferred Stock may be entitled to receive a
preference payment in the event of any liquidation, dissolution or winding-up of
the Company before any payment is made to the holders of shares of Common Stock.
Under certain circumstances, the issuance of shares of Preferred Stock may
render more difficult or tend to discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management. The Board of Directors of the
Company, without stockholder approval, may issue shares of Preferred Stock with
voting and conversion rights which could adversely affect the holders of shares
of Common Stock. Upon consummation of the Offering, there will be no shares of
Preferred Stock outstanding, and the Company has no present intention to issue
any shares of Preferred Stock.
WARRANTS
There are currently outstanding warrants to purchase an aggregate of
948,889 shares of Common Stock, of which warrants to purchase 68,179 shares of
Common Stock have an exercise price of $.03 and warrants to purchase 880,710
shares of Common Stock have an exercise price of $6.02. Of the warrants with an
exercise price of $.03, 15,541 expire on January 29, 2001; 94 expire on March
14, 2001; 50,042 expire on May 30, 2007; and 2,502 expire on September 2, 2007.
Of the warrants with an exercise price of $6.02, 41,511 expire on December 31,
2002; 838,199 expire on May 30, 2007; and 1,001 expire on September 2, 2007. The
warrants have customary anti-dilution provisions.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
Pursuant to an Investors' Rights Agreement among the Company and the
holders of the Series A Preferred Stock, dated as of January 30, 1996,
Registration Rights Agreements between the Company and each holder of the Series
B Preferred Stock, dated between May 30, 1997 and September 22, 1997 and certain
warrants issued by the Company (collectively, the 'Registration Rights
Agreements'), certain securityholders of the Company (the 'Holders') that will
own approximately 4,629,874 shares of Common Stock, shares of Common Stock
issuable upon exercise of warrants to purchase 933,254 shares of Common Stock
and 891,743 warrants to purchase Common Stock (collectively, the 'Registrable
Securities') or their permitted transferees are entitled to registration rights
with respect to the Registrable Securities at any time following the earlier of
(i) 180 days following consummation of the Offering and (ii) January 30, 1999.
Additionally, the holders of warrants to purchase 15,635 shares of Common Stock
have the right to register such shares of Common Stock on a registration
statement filed by the Company.
Under the terms of the Registration Rights Agreements between the Company
and the Holders of such Registrable Securities, if the Company proposes to
register any of its securities under the Securities Act, either for its own
account or for the account of other securityholders exercising registration
rights, such Holders are entitled to notice of such registration and are
entitled to include their Registrable Securities therein at the Company's
expense; such Holders, however, have waived their right to register their
Registrable Securities in the Offering. Holders of Registrable Securities also
have the right to demand that the Company file a registration statement under
the Securities Act, subject to certain conditions and limitations, among them
the right of the underwriters of an offering to limit the number of shares
included in such registration in certain circumstances.
CERTAIN ANTI-TAKEOVER CHARTER PROVISIONS AND STATUTORY PROVISIONS
The Restated Certificate of Incorporation requires that special meetings of
the stockholders of the Company be called only by a majority of the Board of
Directors or by certain officers. The Restated Certificate of Incorporation also
provides that the Board of Directors shall be divided into three classes, with
each class containing as equal a number of directors as possible; after an
interim period of three
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years following consummation of the Offering, all directors will be elected for
three years and only one class of directors will come up for election each year.
The Restated By-laws provide that stockholders seeking to bring business
before or to nominate directors at any annual meeting of stockholders must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal executive offices
of the Company not less than 60 days nor more than 90 days prior to such meeting
or, if less than 70 days' notice was given for the meeting, within 10 days
following the date on which such notice was given. The Restated By-laws also
will specify certain requirements for a stockholder's notice to be in proper
written form. These provisions will restrict the ability of stockholders to
bring matters before the stockholders or to make nominations for directors at
meetings of stockholders.
Following the consummation of the Offering, the Company will be subject to
the 'business combination' provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly held Delaware corporation from
engaging in various 'business combination' transactions with any 'interested
stockholder' for a period of three years after the date of the transaction in
which the person became an 'interested stockholder,' unless (i) the transaction
is approved by the Board of Directors prior to the date the interested
stockholder obtained such status, (ii) upon consummation of the transaction
which resulted in the stockholder becoming an 'interested stockholder,' the
'interested stockholder' owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned by
(a) persons who are directors and also officers and (b) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (iii) on or subsequent to such date the 'business combination' is
approved by the board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the 'interested stockholder.' A
'business combination' is defined to include mergers, asset sales and other
transactions resulting in financial benefit to a stockholder. In general, an
'interested stockholder' is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of a corporation's
voting stock. The statute could prohibit or delay mergers or other takeover or
change in control attempts with respect to the Company and, accordingly, may
discourage attempts to acquire the Company. In addition, the Restated
Certificate of Incorporation will provide that the affirmative vote of at least
80% of the outstanding voting stock is required for a business combination
between the Company or any subsidiary and the beneficial owner of more than five
percent of the outstanding voting stock unless such transaction (i) has been
approved by a majority of the disinterested directors or (ii) involves a person
who, as of the completion of the Offering, was the beneficial owner of more than
five percent of the outstanding voting stock.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Restated Certificate of Incorporation limits the liability of directors
to the fullest extent permitted by the Delaware General Corporation Law. In
addition, the Restated Certificate of Incorporation provides that the Company
shall indemnify directors, officers, employees and agents of the Company acting
in such capacity to the fullest extent permitted by such law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be ChaseMellon
Shareholder Services, L.L.C.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion the Offering the Company will have 15,025,329 shares of
Common Stock outstanding (15,371,829 shares if the over-allotment option is
exercised in full). The 3,850,000 shares of Common Stock (4,427,500 shares if
the over-allotment option is exercised in full) sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act, unless held by an 'affiliate' of the Company as that term is
defined in Rule 144 promulgated under the Securities Act ('Rule 144'), which
shares will be subject to the resale limitations of Rule 144. The remaining
11,175,329 shares of Common Stock have not been registered under the Securities
Act and may not be sold unless they are registered or unless an exemption from
registration, such as the exemption provided by Rule 144 or Rule 701 under the
Securities Act ('Rule 701'), is available.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned shares
constituting 'restricted securities' (generally defined as securities acquired
from the Company or an affiliate of the Company in a non-public transaction) for
at least one year, is entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the outstanding Common
Stock or the average weekly trading volume in the Common Stock during the four
calendar weeks preceding the date on which notice of such sale is filed pursuant
to Rule 144. Sales under Rule 144 are also subject to certain provisions
regarding the manner of sale, notice requirements and the availability of
current public information about the Company. A stockholder (or stockholders
whose shares are aggregated) who is not an affiliate of the Company for at least
90 days prior to a proposed transaction and who has beneficially owned
'restricted securities' for at least two years is entitled to sell such shares
under Rule 144 without regard to the limitations described above. Rule 701
provides that, beginning 90 days after the date of this Prospectus, shares of
Common Stock acquired on the exercise of options outstanding prior to the date
of this Prospectus may be resold by persons other than affiliates of the Company
without regard to the current public information, holding period, volume
limitations and notice provision of Rule 144, and by affiliates subject to all
the provisions of Rule 144 except its one-year minimum holding period.
Accordingly, the Company believes that, under prevailing interpretations of
Rules 144 and 701, 6,545,454 shares of Common Stock that constitute 'restricted
securities' will be eligible for sale, subject to the contractual lock-up
provisions described below, 90 days after the date of this Prospectus, and
4,629,875 shares of Common Stock would be eligible for sale beginning one year
from the date of this Prospectus, subject to certain volume and other
limitations under Rule 144. The Company intends to file one or more registration
statements under the Securities Act to register the shares of Common Stock
issued and reserved for issuance in compensatory arrangements and under the 1995
Option Plan. Registration would permit the resale of such shares by
non-affiliates and affiliates, subject to the lock-up described below, in the
public markets without restriction under the Securities Act.
The Company, its officers, directors, the Selling Stockholders and holders
of more than 10 million additional shares of Common Stock have agreed that, for
a period of 180 days after the date of this Prospectus, they will not (i) offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly,
or, in the case of the Company, file with the Securities and Exchange Commission
a registration statement under the Securities Act relating to, any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
any shares of Common Stock, or publicly disclose the intention to make any such
offer, sale, contract to sell, pledge, disposition or, in the case of the
Company, filing, or (ii) enter into any swap or other agreement that transfers,
in whole or in part, any of the economic consequences of ownership of such
shares of Common Stock, whether any transaction described in clause (i) or (ii)
above is to be settled by delivery of shares of Common Stock or such other
securities, in cash or otherwise, in each case without the prior written consent
of Credit Suisse First Boston Corporation, except in the case of the Company,
issuances of Common Stock pursuant to the conversion or exchange of convertible
or exchangeable securities or the exercise of warrants or options, in each case
outstanding on the date of this Prospectus, grants of employee stock options
pursuant to the 1995 Option Plan and issuances of Common Stock pursuant to the
exercise of such options, and except in the case of an individual, bona fide
gifts or similar transfers to or for the benefit, directly or indirectly, of
members of such individual's family for estate planning purposes provided that
such gifts or transfers are made other than on any securities exchange or in the
over-the-counter market and that
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such donees or transferees agree to terms substantially similar to the foregoing
for the benefit of the Company and the Underwriters.
In addition, after the Offering, the holders of 4,629,875 shares of Common
Stock will be entitled to certain rights with respect to registration of such
shares under the Securities Act. Registration of such shares under the
Securities Act would result in such shares becoming freely tradeable without
restriction under the Securities Act (except for shares purchased by affiliates
of the Company) immediately upon the effectiveness of such registration. See
'Description of Capital Stock -- Registration Rights of Certain Holders'.
Prior to the Offering, there has been no public trading market for the
shares of Common Stock, and there can be no assurance that a regular trading
market will develop after the Offering, or that if it is developed, it will be
sustained. In addition, no prediction can be made as to the effect, if any, that
market sales of shares of Common Stock or the availability of such shares for
sale will have on the market prices prevailing from time to time. Nevertheless,
the possibility that substantial numbers of shares of Common Stock may be sold
in the public market may adversely affect prevailing market prices for the
shares of Common Stock and could impair the Company's ability to raise capital
through the sale of its equity securities.
CERTAIN UNITED STATES FEDERAL TAX
CONSEQUENCES TO NON-U.S. HOLDERS
The following is a general summary of certain U.S. Federal income and
estate tax consequences expected to result under current law from the purchase,
ownership, sale or other taxable disposition of Common Stock by any person or
entity other than (a) a citizen or resident of the United States, (b) a
corporation created or organized in or under the laws of the United States or of
any State thereof (including the District of Columbia), (c) an estate or trust
described in Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended (the 'Code') or (d) a person or entity otherwise subject to U.S. Federal
income taxation on income from sources outside the United States (a 'Non-U.S.
Holder'). This summary does not address all U.S. Federal income and estate tax
considerations that may be relevant to Non-U.S. Holders in light of their
particular circumstances or to certain Non-U.S. Holders that may be subject to
special treatment under U.S. Federal income tax laws. Furthermore, this summary
does not discuss any aspects of foreign, state or local taxation. This summary
is based on current provisions of the Code, existing, temporary and proposed
regulations promulgated thereunder and administrative and judicial
interpretations thereof, all of which are subject to change, possibly with
retroactive effect. No legal opinion is being rendered to the Company in respect
of the United States tax consequences to a holder of Common Stock who is a
non-U.S. Holder. PROSPECTIVE PURCHASERS OF COMMON STOCK ARE ADVISED TO CONSULT
THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF ACQUIRING, HOLDING
AND DISPOSING OF COMMON STOCK.
DIVIDENDS
Dividends paid to a Non-U.S. Holder of Common Stock generally will be
subject to withholding of U.S. Federal income tax at a 30% rate (or such lower
rate as may be specified by an applicable income tax treaty) unless the dividend
is (a) effectively connected with the conduct of a trade or business of the
Non-U.S. Holder within the United States or (b) if a tax treaty applies, is
attributable to a United States permanent establishment of the Non-U.S. Holder,
in which cases the dividend will be taxed at ordinary U.S. Federal income tax
rates. If the Non-U.S. Holder is a corporation, such effectively connected
income may also be subject to an additional 'branch profits tax.' A Non-U.S.
Holder may be required to satisfy certain certification requirements in order to
claim treaty benefits or otherwise claim a reduction of, or exemption from, the
withholding obligation pursuant to the above described rules.
SALE OR OTHER DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. Federal income or
withholding tax in respect of any gain recognized on the sale or other taxable
disposition of Common Stock unless (a) the gain is effectively connected with a
trade or business of the Non-U.S. Holder in the United States; (b) in
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the case of a Non-U.S. Holder who is an individual and holds the Common Stock as
a capital asset, the holder is present in the United States for 183 or more days
in the taxable year of the disposition and satisfies certain other conditions;
(c) the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S.
Federal income tax law applicable to certain United States expatriates; or (d)
(i) the Company is or has been during certain periods preceding the disposition
a 'U.S. real property holding corporation' for U.S. Federal income tax purposes
(which the Company does not believe it is or is likely to become) and, (ii)
assuming that the Common Stock will be 'regularly traded on an established
securities market' for tax purposes, the Non-U.S. Holder held, directly or
indirectly, at any time during the five-year period ending on the date of
disposition, more than 5% of the outstanding Common Stock.
BACKUP WITHHOLDING AND REPORTING REQUIREMENTS
On October 6, 1997, the Internal Revenue Service issued final regulations
relating to withholding, information reporting and backup withholding that unify
current certification procedures and forms and clarify reliance standards (the
'Final Regulations'). The Final Regulations generally will be effective with
respect to payments made after December 31, 1998. Except as provided below, this
section describes rules applicable to payments made on or before December 31,
1998.
Dividends. United States backup withholding tax generally will not apply to
dividends paid on Common Stock to a Non-U.S. Holder at an address outside the
United States. The Company must report annually to the Internal Revenue Service
and to each Non-U.S. Holder the amount of dividends paid to, and the tax
withheld with respect to, such holder, regardless of whether any tax was
actually withheld. This information may also be made available to the tax
authorities in the Non-U.S. Holder's country of residence.
Sale or Other Disposition of Common Stock. Upon the sale or other taxable
disposition of Common Stock by a Non-U.S. Holder to or through a United States
office of a broker, the broker must backup withhold at a rate of 31% and report
the sale to the Internal Revenue Service, unless the holder certifies its
Non-U.S. status under penalties of perjury or otherwise establishes an
exemption. Upon the sale or other taxable disposition of Common Stock by a
NonU.S. Holder to or through the foreign office of a United States broker, or a
foreign broker with certain types of relationships to the United States, the
broker must report the sale to the Internal Revenue Service (but not backup
withhold), unless the broker has documentary evidence in its files that the
seller is a Non-U.S. Holder and/or certain other conditions are met, or the
holder otherwise establishes an exemption.
Amounts withheld under the backup withholding rules generally are allowable
as a credit against such Non-U.S. Holder's U.S. Federal income tax liability (if
any), which may entitle such Non-U.S. Holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
The Final Regulations eliminate the general prior legal presumption that
dividends paid to an address in a foreign country are paid to a resident of that
country. In addition, the Final Regulations impose certain certification and
documentation requirements on Non-U.S. Holders claiming the benefit of a reduced
withholding rate with respect to dividends under a tax treaty or otherwise
claiming a reduction of, or exemption from, the withholding obligation described
above.
PROSPECTIVE PURCHASERS OF THE COMMON STOCK ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE EFFECT, IF ANY, OF THE FINAL REGULATIONS ON THEIR
PURCHASE, OWNERSHIP AND DISPOSITION OF THE COMMON STOCK.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual Non-U.S. Holder who
is not a citizen or resident (as specially defined for U.S. Federal estate tax
purposes) of the United States at the time of death will be included in such
individual's gross estate for U.S. Federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1997 (the 'Underwriting Agreement'), the underwriters
named below (the 'Underwriters'), for whom Credit Suisse First Boston
Corporation, BancAmerica Robertson Stephens, Donaldson, Lufkin & Jenrette
Securities Corporation and Tucker Anthony Incorporated are acting as
representatives (the 'Representatives'), have severally but not jointly agreed
to purchase from the Company the following respective numbers of shares of
Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------------------------------------------------------------- ---------
<S> <C>
Credit Suisse First Boston Corporation.....................................................
BancAmerica Robertson Stephens.............................................................
Donaldson, Lufkin & Jenrette Securities Corporation........................................
Tucker Anthony Incorporated................................................................
---------
Total................................................................................. 3,850,000
---------
---------
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all the shares of Common Stock
offered hereby (other than those shares covered by the over-allotment option
described below) if any are purchased. The Underwriting Agreement provides that,
in the event of a default by an Underwriter, in certain circumstances the
purchase commitments of non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
Under the Underwriting Agreement, the Company and the Selling Stockholders
have granted to the Underwriters an option, exercisable by Credit Suisse First
Boston Corporation on behalf of the Underwriters, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
346,500 additional shares from the Company and an aggregate of 231,000
additional outstanding shares from the Selling Stockholders at the initial
public offering price less the underwriting discounts and commissions, all as
set forth on the cover page of this Prospectus. Such option may be exercised
only to cover over-allotments in the sale of the shares of Common Stock offered
hereby. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of additional shares being sold to the Underwriters as the number of
shares set forth next to such Underwriter's name in the preceding table bears to
the total number of shares. Any shares of Common Stock purchased pursuant to the
exercise of such option will be purchased first from the Selling Stockholders
and thereafter from the Company.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock offered hereby to the public
initially at the offering price set forth on the cover page of this Prospectus
and, through the Representatives, to certain dealers at such price less a
concession of $ per share and that the Underwriters and such dealers may
allow a discount of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price and concession and discount
to dealers may be changed by the Representatives.
The Representatives have informed the Company that the Underwriters will
not make discretionary sales of the shares of Common Stock offered hereby.
Tucker Anthony Incorporated, one of the Underwriters, may be deemed to be
an affiliate of the Company. The Offering is therefore being conducted in
accordance with the applicable provisions of Rule 2720 of the National
Association of Securities Dealers, Inc. Conduct Rules ('Rule 2720'). Rule 2720
requires that the initial public offering price of the shares of Common Stock
offered hereby not be higher than that recommended by a 'qualified independent
underwriter' meeting certain standards. Accordingly, Credit Suisse First Boston
Corporation is assuming the responsibilities of acting as the qualified
independent underwriter in pricing the Offering and conducting due diligence.
The initial public offering price of the shares of Common Stock offered hereby
set forth on the cover page of this Prospectus is no higher than the price
recommended by Credit Suisse First Boston Corporation.
The Company, its officers, directors, the Selling Stockholders and holders
of more than 10 million additional shares of Common Stock have agreed that, for
a period of 180 days after the date of this
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Prospectus, they will not (i) offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or, in the case of the Company, file with
the Securities and Exchange Commission a registration statement under the
Securities Act relating to, any shares of Common Stock or securities convertible
into or exchangeable or exercisable for any shares of Common Stock, or publicly
disclose the intention to make any such offer, sale, contract to sell, pledge,
disposition or, in the case of the Company, filing, or (ii) enter into any swap
or other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of such shares of Common Stock, whether any
transaction described in clause (i) or (ii) above is to be settled by delivery
of shares of Common Stock or such other securities, in cash or otherwise, in
each case without the prior written consent of Credit Suisse First Boston
Corporation, except in the case of the Company issuances of Common Stock
pursuant to the conversion or exchange of convertible or exchangeable securities
or the exercise of warrants or options, in each case outstanding on the date of
this Prospectus, grants of employee stock options pursuant to the 1995 Option
Plan and issuances of Common Stock pursuant to the exercise of such options, and
except in the case of an individual, bona fide gifts or similar transfers to or
for the benefit, directly or indirectly, of members of such individual's family
for estate planning purposes provided that such gifts or transfers are made
other than on any securities exchange or in the over-the-counter market and that
such donees or transferees agree to terms substantially similar to the foregoing
for the benefit of the Company and the Underwriters.
The Company has reserved for purchase from the Underwriters at the initial
public offering price up to 192,500 shares of Common Stock which may be
purchased by certain employees of the Company and certain other individuals
through a directed share program. The number of shares of Common Stock available
for sale to the general public in the Offering will be reduced to the extent
such persons purchase the reserved shares. Any reserved shares not so purchased
will be offered by the Underwriters to the general public on the same terms as
the other shares offered hereby.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, and to contribute to payments which the Underwriters may be
required to make in respect thereof.
Application has been made to list the shares of Common Stock on the NNM.
Prior to the Offering there has been no public market for the Common Stock.
The initial public offering price for the Common Stock will be determined by
negotiation between the Company and Credit Suisse First Boston Corporation on
behalf of the Underwriters and does not reflect the market price of the Common
Stock following the Offering. Among the principal factors to be considered in
determining the initial public offering price will be market conditions for
initial public offerings, the history of and prospects for the Company's
business, the Company's past and present operations, its past and present
earnings and current financial position, an assessment of the Company's
management, the market of securities of companies in businesses similar to those
of the Company, the general condition of the securities markets and other
relevant factors. There can be no assurance that the initial public offering
price will correspond to the price at which the Common Stock will develop and
continue after the Offering.
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Representatives to reclaim a selling concession from a
syndicate member when Common Stock originally sold by such syndicate member is
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Common Stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on the NNM or otherwise and, if commenced, may be discontinued at any
time.
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NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and the
Selling Stockholders prepare and file a prospectus with the securities
regulatory authorities in each province where trades of Common Stock are
effected. Accordingly, any resale of the Common Stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the Selling
Stockholders and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities laws
to purchase such Common Stock without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent, and (iii) such purchaser has reviewed
the text above under 'Resale Restrictions.'
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein and the Selling Stockholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Common Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
Legislation.
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LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby will be
passed upon for the Company by Parker Chapin Flattau & Klimpl, LLP, New York,
New York. The Underwriters have been represented by Cravath, Swaine & Moore, New
York, New York.
EXPERTS
The financial statements as of December 31, 1995 and 1996 and September 30,
1997 and for each of the three years in the period ended December 31, 1996 and
for the nine months ended September 30, 1997 included in this Prospectus have
been so included in reliance on the report (which contains an explanatory
paragraph relating to the Company's ability to continue as a going concern as
described in Note 2 to such financial statements) of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form S-1 under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus, which constitutes a
part of the Registration Statement, omits certain of the information contained
in the Registration Statement and the exhibits and schedules thereto on file
with the Commission pursuant to the Securities Act and the rules and regulations
of the Commission thereunder. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement
and the exhibits and schedules thereto.
After the consummation of the Offering, the Company will be subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended, and in accordance therewith, will be required to file reports, proxy
statements and other information with the Commission. The Registration
Statement, including exhibits and schedules thereto, as well as any such report,
proxy statement or other information filed by the Company with the Commission
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at 75 Park Place, Room
1400, New York, New York 10007 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and copies may be obtained at the
prescribed rates from the Public Reference Section of the Commission at its
principal office in Washington, D.C. In addition, the Company is required to
file electronic versions of these documents on the Commission's Electronic Data
Gathering Analysis and Retrieval system. The Commission maintains a website that
contains reports, proxy and information statements and other information filed
with the Commission; the address of this site is http://www.sec.gov. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in its entirety
by such reference.
The Company intends to furnish to its stockholders annual reports
containing audited financial statements examined and reported upon by
independent certified public accountants and quarterly reports containing
unaudited financial information for each of the first three fiscal quarters.
66
<PAGE>
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
ATM................................. Asynchronous Transfer Mode. An information transfer standard that is one of
a general class of packet technologies that relay traffic by way of an
address contained within the first five bytes of a standard fifty-three
byte-long packet or cell. The ATM format can be used by many different
information systems, including LANs, to deliver traffic at varying rates,
permitting a mix of data, voice and video.
Backbone............................ A centralized high-speed network that connects smaller, independent
networks.
Bandwidth........................... The number of bits of information which can move over a communications
medium in a given amount of time.
Browser............................. Software that enables users to browse the World Wide Web. Netscape
Navigator and Microsoft's Internet Explorer are the primary browsers today.
Cache............................... Memory or disk space where frequently accessed data is stored for rapid
access.
CAP................................. Competitive Access Provider. A data and/or voice service provider that
competes with LECs. CAPs typically offer regional service rather than
national service.
CIX................................. Commercial Internet eXchange Association. A non-profit trade association of
Internet access providers that promotes and encourages development of the
public data communications internetworking services industry and that
operates a router at the Digital Internet Exchange.
Client/server system................ An interconnected system of computers centered around a server, such as
minicomputer, which stores data and applications and distributes them to
user stations.
Cloud............................... A network designed such that each of its nodes is logically connected to
every other node.
Distributed computing............... The process by which data and applications are distributed to
minicomputers, workstations and personal computers within a network rather
than maintained on a centralized mainframe.
DS-1................................ A data communications line with transmission speeds of up to 1.54 Mbps.
DS-3................................ A data communications line with transmission speeds of up to 45 Mbps.
Extranet............................ A network that enables two or more institutions to privately share
resources and communicate over the Internet in their own virtual space.
This technology is typically used to enhance business-to-business
communications.
Firewall............................ A gateway between two networks that buffers and screens all information
that passes between such networks.
Gateway............................. Hardware and/or software that enables communication between dissimilar
systems.
Graphical user interface............ A means of communicating with a computer by manipulating Icons and windows
rather than using text commands.
Hosting............................. Housing and managing a user's website or application.
HTML................................ HyperText Markup Language. The programming language used to create World
Wide Web pages.
</TABLE>
67
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Internet............................ An open global network of interconnected commercial, educational and
governmental computer networks which utilize a common communications
protocol, TCP/IP.
Internetworking..................... The process of communicating between and among networks.
Intranet............................ A private network within an institution that uses Internet software only
for internal use. For example, many companies have web servers that are
available only to employees. An intranet may simply be a network.
IP Address.......................... Internet Protocol Address. The address or identification number of a host
computer or other intelligent device on the Internet.
ISDN................................ Integrated Services Digital Network. A digital network that combines voice
and digital network services through a single medium, making it possible to
offer customers digital data services as voice connections.
ISP................................. Internet Service Provider. An institution that provides access to the
Internet.
Java................................ A programming language intended to be used in networked environments.
Kbps................................ Kilobits per second. A measure of digital information transmission rates.
One kilobit equals 1,000 bits of digital information.
LAN................................. Local Area Network. A data communications network designed to interconnect
personal computers, workstations, minicomputers, file servers and other
communications and computing devices within a localized environment.
Leased Line......................... A dedicated telecommunications line rented for use along a predetermined
route.
LEC................................. Local Exchange Carrier. A local telephone company for a given geographic
area. In return for being given a monopoly over residential connections to
the telephone network, the LEC is subject to strict regulation of the
services it offers and rates it may charge for those services. The 1996
Telecommunications Act formed two types of LECs: Incumbent Local Exchange
Carriers (ILEC), including RBOCs, and Competitive Local Exchange Carriers
(CLEC).
Local loop.......................... The last mile or last several miles from an Internet access provider's
backbone to a customer's phone or modem. Operation of the local loop is the
responsibility of the LEC
MAE-East............................ Metropolitan Area Ethernet. Network access peering point located in
Washington, D.C.
MAE-West............................ Metropolitan Area Ethernet. Network access peering point located in San
Jose, California.
Mbps................................ Megabits per second. A measure of digital information transmission rates.
One megabit equals 1,000 kilobits.
NAP................................. Network access point. The peering points at which major Internet access
provides connect and exchange Internet traffic.
Nodes............................... An interlinked group of modems, routers and/or other computer equipment,
located in a particular city or metropolitan area.
On-line services.................... Commercial information services that offer a computer user access through a
modem to specified information, entertainment and communications.
</TABLE>
68
<PAGE>
<PAGE>
<TABLE>
<S> <C>
OEM................................. Original Equipment Manufacturer. An institution that typically sells its
product to other companies or resellers for integration into systems.
Peering............................. The exchange of routing announcements between two Internet access providers
for the purpose of ensuring that traffic from the first can reach all
customers of the second, and vice-versa. Peering takes place predominantly
at NAPs and MAEs.
Protocol............................ A formal description of message formats and the rules two or more machines
must follow in order to exchange such messages.
Routing Table....................... A list that provides the path to an IP address.
RBOC................................ Regional Bell Operating Company. The 1984 divestiture of AT&T left local
telephone service under the control of seven RBOCs. An RBOC is an ILEC,
which is a type of LEC.
Router.............................. A device that receives and transmits data packets between segments in a
network or different networks.
Server.............................. A computer that offers a service to another computer. In addition, such
term means the software which resides on the computer.
Source code......................... Software that is in the format in which it was originally programmed and
has not been compiled or interpreted into machine code to run on end users'
computers. Typically, software cannot be modified once it is compiled.
Switch.............................. A device that creates and maintains circuit connections between points on a
network.
TCP/IP.............................. Transmission Control Protocol/Internet Protocol. A compilation of network-
and transport-level protocols that allow computers with different
architectures and operating system software to communicate with other
computers on the Internet.
Tier 1 ISP.......................... Tier 1 Internet Service Provider. An ISP that controls its own backbone, is
directly connected to the Internet and directly exchanges Internet traffic
with other Tier 1 ISPs. Other non-Tier 1 ISPs typically lease their
connections and possibly other services from Tier 1 providers.
VAR................................. Value Added Reseller. An institution that sells OEM product to other
companies.
WAN................................. Wide Area Network. A communications network which connects geographically
dispersed users.
Web................................. World Wide Web. A network of computer servers that uses a special
communications protocol to link different servers throughout the Internet
and permits communication of graphics, video and audio.
</TABLE>
69
<PAGE>
<PAGE>
ICON CMT CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Balance Sheet as of December 31, 1995 and 1996 and September 30, 1997...................................... F-3
Statement of Operations for the years ended December 31, 1994, 1995 and 1996 and for the nine months ended
September 30, 1996 (unaudited) and 1997.................................................................. F-4
Statement of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 1994, 1995 and 1996
and for the nine months ended September 30, 1997......................................................... F-5
Statement of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and for the nine months ended
September 30, 1996 (unaudited) and 1997.................................................................. F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
ICON CMT CORP.
The reverse stock split described in Note 12 to the accompanying financial
statements has not been consummated at November 26, 1997. When it has been
consummated, we will be in a position to furnish the following report:
'In our opinion, the accompanying balance sheet and the related
statements of operations, of changes in stockholders' equity (deficit) and
of cash flows present fairly, in all material respects, the financial
position of Icon CMT Corp. (the 'Company') at December 31, 1995 and 1996
and September 30, 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 and
the nine months ended September 30, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred substantial operating
losses, expects to incur substantial additional losses and expects that its
cash and working capital requirements will continue to increase as the
Company's operations continue to expand. These and other factors, as
discussed in Note 2, raise substantial doubt about its ability to continue
as a going concern. Management's plans in regards to these matters are also
described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.'
PRICE WATERHOUSE LLP
Stamford, Connecticut
November 17, 1997
F-2
<PAGE>
<PAGE>
ICON CMT CORP.
BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, SEPTEMBER 30,
---------------- SEPTEMBER 30, 1997
1995 1996 1997 (NOTE 12)
------ ------- ------------- -------------
(IN THOUSANDS, EXCEPT (UNAUDITED)
SHARE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 620 $ 515 $ 4,556
Accounts receivable, net of allowance for
doubtful accounts of $328, $437 and $516,
respectively................................ 6,036 7,348 6,527
Unbilled costs and accrued earnings.......... -- 184 986
Notes receivable from stockholders (Note
7).......................................... 153 167 175
Inventories.................................. 21 92 78
Prepayments and other current assets......... 364 752 842
Deferred tax asset (Note 10)................. 260 430 --
------ ------- -------------
Total current assets.................... 7,454 9,488 13,164
Equipment, net (Note 4)........................... 1,074 3,721 5,015
Other assets...................................... 83 83 83
------ ------- -------------
Total assets............................ $8,611 $13,292 $ 18,262
------ ------- -------------
------ ------- -------------
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................. $3,447 $ 6,689 $ 4,997
Notes payable................................ 3,000 2,194 --
Accrued expenses............................. 1,463 2,213 3,042
Deferred revenue............................. 241 273 35
Income taxes payable......................... 15 19 --
------ ------- -------------
Total current liabilities............... 8,166 11,388 8,074
Deferred tax liability............................ 47 155 --
------ ------- -------------
Total liabilities....................... 8,213 11,543 8,074
------ ------- -------------
Commitments (Note 11)............................. -- -- --
Mandatorily redeemable 10% PIK Series B
Convertible Participating Preferred Stock ($.01
par value; 415,000 shares authorized, none
issued and outstanding in 1995 and 1996, 180,240
shares issued in 1997, pro forma none issued and
outstanding) (liquidating preference of $18,640
at September 30, 1997).......................... -- -- 16,205
Mandatorily redeemable Series A Convertible
Participating Preferred Stock ($.01 par value;
450,000 shares authorized, none issued and
outstanding in 1995, 422,607 issued and
outstanding in 1996 and 1997, pro forma none
issued and outstanding) (liquidating preference
of $10,401 and $10,845 at December 31, 1996 and
September 30, 1997, respectively)............... -- 9,881 10,421
Stockholders' equity
Preferred stock ($.01 par value; 1,000,000
shares authorized)..........................
Common stock ($.001 par value; 50,000,000
shares authorized, 6,545,455 shares issued
and outstanding in 1995, 1996 and 1997,
respectively, pro forma 11,175,329 shares
issued and outstanding)..................... 7 7 7 $ 11
Additional paid-in capital................... 426 23 1,104 27,338
Accretion of mandatorily redeemable preferred
stock....................................... -- (89) (388) --
Accumulated deficit.......................... (35) (8,073) (17,161) (17,161)
------ ------- ------------- -------------
Total stockholders' equity (deficit).... 398 (8,132) (16,438) $ 10,188
------ ------- ------------- -------------
-------------
Total liabilities, mandatorily
redeemable convertible preferred
stock and stockholders' equity
(deficit)........................ $8,611 $13,292 $ 18,262
------ ------- -------------
------ ------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<PAGE>
ICON CMT CORP.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- --------------------------
1994 1995 1996 1997
------- ------- ------- 1996 -----------
-----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues, net:
Services
Professional........................................... $ 1,914 $ 4,397 $ 6,570 $ 3,936 $11,988
Communications......................................... -- 189 1,268 685 3,931
Media.................................................. -- 202 529 353 77
------- ------- ------- ----------- -----------
Total services revenues.............................. 1,914 4,788 8,367 4,974 15,996
------- ------- ------- ----------- -----------
Products (Note 9)........................................... 17,083 21,424 29,741 22,341 14,306
------- ------- ------- ----------- -----------
Total revenues, net............................... 18,997 26,212 38,108 27,315 30,302
------- ------- ------- ----------- -----------
Cost of revenues:
Services.................................................... 758 2,596 6,842 4,333 11,521
Products.................................................... 14,132 17,653 24,607 18,406 11,676
------- ------- ------- ----------- -----------
Total cost of revenues............................ 14,890 20,249 31,449 22,739 23,197
------- ------- ------- ----------- -----------
Gross profit..................................................... 4,107 5,963 6,659 4,576 7,105
------- ------- ------- ----------- -----------
Operating expenses:
General and administrative.................................. 1,548 2,435 7,006 5,049 7,577
Selling and marketing....................................... 1,393 3,450 6,504 4,390 6,546
Research and development.................................... 501 411 969 598 920
Depreciation and amortization............................... 94 228 460 311 601
------- ------- ------- ----------- -----------
Total operating expenses............................. 3,536 6,524 14,939 10,348 15,644
------- ------- ------- ----------- -----------
Income (loss) from operations.................................... 571 (561) (8,280) (5,772) (8,539)
------- ------- ------- ----------- -----------
Other income (expense)
Interest income............................................. 9 16 107 88 58
Interest expense............................................ -- (78) (75) (26) (351)
------- ------- ------- ----------- -----------
Total other income (expense)......................... 9 (62) 32 62 (293)
------- ------- ------- ----------- -----------
Income (loss) before income taxes................................ 580 (623) (8,248) (5,710) (8,832)
Provision (benefit) for income taxes............................. 289 (183) (210) (157) 256
------- ------- ------- ----------- -----------
Net income (loss)................................................ $ 291 $ (440) $(8,038) $(5,553) $(9,088)
------- ------- ------- ----------- -----------
------- ------- ------- ----------- -----------
Pro forma data (unaudited) (Note 12)
Pro forma net loss per common share......................... $ (0.80) $ (0.88)
------- -----------
------- -----------
Pro forma weighted average common shares outstanding........ 10,109,279 10,311,285
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<PAGE>
ICON CMT CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ACCRETION OF
MANDATORILY
REDEEMABLE RETAINED TOTAL
COMMON STOCK ADDITIONAL CONVERTIBLE EARNINGS STOCKHOLDERS'
------------------- PAID-IN PREFERRED (ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL STOCK DEFICIT) (DEFICIT)
--------- ------ ---------- ------------ ------------- -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994.............. 6,545,455 $ 7 $ 293 $ 114 $ 414
Net income.............................. -- -- -- 291 291
--
--------- ---------- ------------- -------------
BALANCE AT DECEMBER 31, 1994............ 6,545,455 7 293 405 705
Issuance of compensatory stock options
to employees.......................... -- -- 133 -- 133
Net loss................................ -- -- -- (440) (440)
--
--------- ---------- ------------- -------------
BALANCE AT DECEMBER 31, 1995............ 6,545,455 7 426 (35) 398
Issuance of warrants in connection with
sale of Series A convertible
participating preferred stock......... -- -- 166 -- 166
Expenses related to issuance of Series A
convertible participating preferred
stock................................. -- -- (569) -- (569)
Accretion of mandatorily redeemable
convertible preferred stock to
redemption value...................... -- -- -- $ (89) -- (89)
Net loss................................ -- -- -- -- (8,038) (8,038)
--
--------- ---------- ------ ------------- -------------
BALANCE AT DECEMBER 31, 1996............ 6,545,455 7 23 (89) (8,073) (8,132)
Issuance of warrants in connection with
sale of 10% PIK Series B convertible
participating preferred stock......... -- -- 2,362 -- -- 2,362
Expenses related to issuance of 10% PIK
Series B convertible participating
preferred stock....................... -- -- (497) -- -- (497)
Accretion of mandatorily redeemable
convertible preferred stock to
redemption values..................... -- -- (784) (299) -- (1,083)
Net loss................................ -- -- -- -- (9,088) (9,088)
--
--------- ---------- ------ ------------- -------------
BALANCE AT SEPTEMBER 30, 1997........... 6,545,455 $ 7 $1,104 $ (388) $ (17,161) $ (16,438)
--
--
--------- ---------- ------ ------------- -------------
--------- ---------- ------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<PAGE>
ICON CMT CORP.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, NINE MONTHS ENDED
----------------------------- SEPTEMBER 30,
1994 1995 1996 ---------------------------
------- ------- ------- 1996
----------- 1997
------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $ 291 $ (440) $(8,038) $(5,553) $ (9,088)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization.............. 94 228 1,054 639 1,385
Stock option compensation.................. -- 133 -- -- --
Loss on disposal of equipment.............. 30 -- -- -- --
Deferred income taxes, net................. (3) (198) (62) (45) 275
Non-cash interest expense.................. -- -- -- -- 20
Changes in assets and liabilities:
Accounts receivable........................ (2,271) (2,230) (1,312) (963) 821
Unbilled costs and accrued earnings........ -- -- (184) -- (802)
Inventories................................ (100) 223 (71) (499) 14
Prepayments and other current assets....... (15) (352) (402) (529) (98)
Other assets............................... (5) (69) -- -- --
Accounts payable........................... 1,415 697 3,242 1,986 (1,692)
Accrued expenses........................... 512 771 750 544 828
Deferred revenue........................... -- 241 32 (43) (238)
Income taxes payable....................... 292 (316) 4 20 (19)
------- ------- ------- ----------- ------------
Net cash provided by (used in)
operating activities................ 240 (1,312) (4,987) (4,443) (8,594)
------- ------- ------- ----------- ------------
Cash flows from investing activities:
Capital expenditures............................ (232) (1,000) (3,701) (3,017) (2,679)
------- ------- ------- ----------- ------------
Net cash used for investing
activities.......................... (232) (1,000) (3,701) (3,017) (2,679)
------- ------- ------- ----------- ------------
Cash flows from financing activities:
Proceeds from issuance of short-term notes...... -- 3,000 2,194 -- 6,750
Net repayments of short-term notes.............. -- -- (3,000) (2,399) (7,944)
Loans to stockholders........................... -- (150) -- -- --
Net proceeds from issuance of mandatorily
redeemable convertible preferred stock........ -- -- 9,389 9,389 16,508
------- ------- ------- ----------- ------------
Net cash provided by financing
activities.......................... -- 2,850 8,583 6,990 15,314
------- ------- ------- ----------- ------------
Net increase (decrease) in cash...................... 8 538 (105) (470) 4,041
Cash and cash equivalents at beginning of period..... 74 82 620 620 515
------- ------- ------- ----------- ------------
Cash and cash equivalents at end of period........... $ 82 $ 620 $ 515 $ 150 $ 4,556
------- ------- ------- ----------- ------------
------- ------- ------- ----------- ------------
Cash paid (received) for:
Income taxes.................................... $ 2 $ 461 $ (175) $-- $ (22)
------- ------- ------- ----------- ------------
------- ------- ------- ----------- ------------
Interest........................................ $ -- $ 56 $ 75 $ 25 $ 331
------- ------- ------- ----------- ------------
------- ------- ------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. ORGANIZATION AND BUSINESS
ORGANIZATION
Icon CMT Corp. (the 'Company' or 'Icon') was incorporated in February 1995
under the laws of the State of Delaware for the purpose of merging with
Integration Consortium, Inc. (the 'Predecessor'), which was incorporated in 1991
under the laws of the State of New York. In July 1995, the stockholders of the
Predecessor exchanged their shares of the Predecessor for 6,545,455 shares of
the common stock of Icon and the Predecessor became a wholly owned subsidiary of
Icon. A merger of Icon and the Predecessor was effected in December 1995, and
pursuant to the merger agreement, Icon was the surviving entity. The share
exchange and subsequent merger has been accounted for in a manner similar to a
pooling of interests. References herein to the operations and historical
financial information of the 'Company' prior to the date of the share exchange
refer to the operations and historical financial information of the Predecessor.
Unless the context otherwise requires, all other references herein to the
'Company' refer to Icon.
BUSINESS
From inception through 1994, the Company was primarily engaged in the
design, marketing, sale, installation and on-going support of information
management systems and distribution of information over networks. Through 1994,
the Company primarily generated revenue through the sales of hardware and
services to migrate its customers' networks to local client/server environments
and by managing, maintaining and expanding those networks.
During 1995 the Company began its transition to become an end-to-end
Internet solutions provider to corporate customers. The Company currently
derives its revenues from the following services and products: (i) professional
services including custom application development and design, systems
integration and maintenance and support services, (ii) high quality Internet
access and related communications services such as web/server hosting and
management and (iii) product resales, including hardware and software, as a part
of systems design and integration.
2. BASIS OF PRESENTATION
The Company has incurred significant operating losses for the year ended
December 31, 1996 and the nine months ended September 30, 1997. At December 31,
1996 and September 30, 1997 the Company had an accumulated deficit of $8,073 and
$17,161, respectively, and working capital of ($1,900) and $5,090, respectively.
Such losses have resulted principally from general and administrative and
selling and marketing expenses associated with the Company's expanded level of
operations. The Company expects that its cash and working capital requirements
will continue to increase as the Company's operations continue to expand and it
will require additional financing to achieve its business objectives. In order
to fund these efforts, the Company completed private placements of its
mandatorily redeemable Series A Convertible Participating Preferred Stock (the
'Series A Preferred') during 1996 (Note 6) and its mandatorily redeemable 10%
PIK Series B Convertible Participating Preferred Stock (the 'Series B
Preferred') during the nine months ended September 30, 1997. The Company
utilized the net proceeds from these issuances for the repayment of short-term
debt and working capital, including marketing and product line expansions.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company's significant net
operating losses, expected substantial additional losses and increasing working
capital requirements raise substantial doubt about the Company's present ability
to continue as a going concern. The Company's ability to continue as a going
concern is dependent upon its ability to generate sufficient cash flow to meet
its obligations as they come due.
F-7
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
At September 30, 1997, the Company had an option to issue and sell up to an
additional 50,000 shares of Series B Preferred to investors at a per share price
of $100.00 to fund its future cash requirements (Note 6). Additionally, the
Company had a secured line of credit available at September 30, 1997 (Note 5).
Management is also actively pursuing other financing options which include
securing additional equity financing through an initial public offering and
believes that sufficient funding will be available to meet its planned business
objectives; however, there can be no assurance that the Company will be
successful in its efforts to raise additional capital. The financial statements
do not include any adjustments relating to the recoverability of the carrying
amount of recorded assets or the amount of liabilities that might result from
the outcome of these uncertainties.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
SERVICES REVENUE
Revenue from custom software development, database design, outsourcing and
corporate website production is recognized as the services are rendered or on a
percentage of completion basis for contracts requiring milestone achievements
prior to invoicing.
Revenue from communications services, such as Internet access, hosting
services, on-site maintenance, product enhancements and telephone support, is
recognized ratably over the period of the agreement as the services are
provided, typically one year.
Revenue from sponsorships of digital publications is recognized ratably
over the period in which the sponsorship is displayed on a website or webzine
produced by the Company.
Unbilled costs and accrued earnings consist primarily of services performed
which were not billed at the end of the period due to specific contractual terms
established with certain customers.
PRODUCTS REVENUE
Revenue from the resale of products, which consist of high-end
non-proprietary network hardware and software products, is recognized upon
shipment to the customer when no significant vendor obligations exist and
collectibility is probable.
DEFERRED REVENUE
Deferred revenue consists principally of billings in advance for services
not yet provided.
CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid investments, with
original maturities of less than three months when purchased and are stated at
cost. Interest is accrued as earned.
F-8
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
INVENTORIES
Inventories, which consist principally of purchased computer hardware, are
stated at the lower of cost (determined on a first-in, first-out basis) or
market value.
EQUIPMENT
Equipment is stated at cost. Depreciation is provided on a straight-line
basis over the estimated useful lives of the respective assets, none of which
exceeds five years. Depreciation expense related to equipment used solely for
communications-related services is included in services cost of revenues.
RESEARCH AND DEVELOPMENT
The Company charges all costs incurred to establish the technological
feasibility of a product or product enhancement to research and development
expense.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recorded for temporary differences between financial
statement carrying amounts and the tax basis of assets and liabilities. Deferred
tax assets and liabilities reflect the tax rates expected to be in effect for
the years in which the differences are expected to reverse. A valuation
allowance is provided if it is more likely than not that some or all of the
deferred tax asset will not be realized.
PRO FORMA NET LOSS PER COMMON SHARE
Pro forma net loss per common share is computed using the weighted average
number of common shares and common share equivalents assumed to be outstanding
during the period. Common share equivalents consist of the Company's common
shares issuable upon conversion of stock options and outstanding warrants and
are reflected when dilutive. Pursuant to the requirements of the Securities and
Exchange Commission, stock options granted and warrants and shares issued by the
Company within one year of the date of the initial filing of a registration
statement in connection with an initial public offering at prices below the
proposed offering price have been included in the calculation of weighted
average shares outstanding as if they were outstanding for all periods presented
using the treasury stock method.
INTERIM FINANCIAL DATA
The unaudited financial data for the nine months ended September 30, 1996
has been prepared by management and include all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the results of
operations and cash flows. The results of operations for the nine months ended
September 30, 1997 are not necessarily indicative of the operating results to be
expected for the year ending December 31, 1997.
F-9
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with their
1997 presentation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of accounts receivable, notes receivable, accounts
payable, accrued expenses and notes payable approximate their fair values due to
the relatively short maturity of these instruments.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ('FASB') issued
Financial Accounting Standards No. 128, 'Earnings per Share' ('FAS 128') which
requires presentation of basic earnings per share ('Basic EPS') and diluted
earnings per share ('Diluted EPS') by all entities that have publicly traded
common stock or potential common stock (options, warrants, convertible
securities or contingent stock arrangements). FAS 128 also requires presentation
of earnings per share by an entity that has made a filing or is in the process
of filing with a regulatory agency in preparation for the sale of those
securities in a public market. Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period. The computation of
Diluted EPS does not assume conversion, exercise or contingent exercise of
securities that would have an antidilutive effect on earnings. The statement is
effective for both interim and annual periods ending after December 15, 1997.
The effect on the Company's earnings per share resulting from the adoption of
FAS 128 is not expected to be significant.
In June 1997, the FASB issued Financial Accounting Standards No. 130,
'Reporting Comprehensive Income' ('FAS 130'), which requires the presentation of
the components of comprehensive income in a company's financial statements for
reporting periods beginning subsequent to December 15, 1997. Comprehensive
income is defined as the change in a company's equity during a financial
reporting period from transactions and other circumstances from nonowner sources
(including cumulative translation adjustments, minimum pension liabilities and
unrealized gains/losses on available-for-sale securities). The adoption of FAS
130 is not expected to have a material impact on the Company's financial
statements.
4. EQUIPMENT
Equipment is comprised of the following at December 31, 1995 and 1996 and
September 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
<S> <C> <C> <C>
Computer equipment....................................... $ 1,288 $ 4,688 $ 6,823
Furniture and fixtures................................... 89 397 408
Vehicles................................................. 42 35 35
Leasehold improvements in process........................ -- -- 533
------- ------- -------------
1,419 5,120 7,799
Less: accumulated depreciation and amortization.......... (345) (1,399) (2,784)
------- ------- -------------
$ 1,074 $ 3,721 $ 5,015
------- ------- -------------
------- ------- -------------
</TABLE>
During 1994, the Company incurred a loss of $30 relating to the retirement
of computer equipment with a cost of $128.
F-10
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
5. NOTES PAYABLE
SECURED LINE OF CREDIT
On August 14, 1995, the Company obtained a secured line of credit with a
bank for $3,000 which expired on June 30, 1996. Borrowings under this line were
secured by certain assets of the Company. At December 31, 1995, borrowings under
this line amounted to $3,000. Interest was charged at the bank's prime rate plus
one percent, which was 9.5% at December 31, 1995. Interest expense amounted to
$78 and $25 in 1995 and 1996, respectively. This line of credit was repaid in
full on January 31, 1996.
On August 13, 1996, the Company obtained a secured line of credit with a
lending institution for $10,000 which expires on August 13, 1998. Borrowings
under this line are secured by substantially all of the assets of the Company.
Borrowings under this line are limited to a specified percentage of qualifying
accounts receivable less outstanding obligations of the Company owed to the
lending institution including outstanding letters of credit. The payment of cash
dividends is prohibited under this secured line of credit. At December 31, 1996,
borrowings under this line amounted to $2,194 and no amounts were outstanding at
September 30, 1997. Interest is payable monthly at an annual rate equal to the
lending institution's prime rate plus one percent, which was 9.25% and 9.50% at
December 31, 1996 and September 30, 1997, respectively. The rate adjusts on the
first of the month following any change. Interest expense amounted to $50 and
$314 for the year ended December 31, 1996 and the nine month period ended
September 30, 1997, respectively. The agreement requires an annual commitment
fee of approximately $28.
At December 31, 1996 and September 30, 1997, irrevocable letters of credit
of $500 and $1,000, respectively, were issued under this agreement which are
being maintained as security for performance under long-term property lease
agreements.
At September 30, 1997, amounts available under the secured line of credit
were $2,479.
BRIDGE FINANCING
In March 1997, the Company obtained a $1,000 unsecured bridge loan which
bore interest at a rate of 10% per annum from a holder of the Series A
Preferred. The terms of the loan provided for a rate of interest of 10% per
annum through June 30, 1997 and 18% per annum from July 1, 1997, payable
monthly. The loan was payable upon demand by the holder at any time after the
earliest of the following to occur: (i) the closing of initial public offering
in the amount of $8,000 or greater, (ii) the closing of a private placement of
any class of the Company's capital stock equal to or exceeding $8,000, (iii) a
'Disposal Event' as defined by the loan agreement, or (iv) September 30, 1997.
The loan agreement also provided that upon completion of a public offering
or private placement equal to or exceeding $8,000, the holder of the loan had
the option to convert the outstanding principal amount of the note and accrued
and unpaid interest into the class of capital stock issued in the public or
private offering. In May 1997 the holder of the loan converted the loan plus
accrued interest thereon, in the amount of $20, into 10,200 shares of Series B
Preferred.
In further consideration of the loan, upon completion of the Series B
Preferred financing, the Company issued a warrant to the Series A Preferred
holder to purchase 41,511 shares of common stock at an initial exercise price of
$6.02 per share. The warrant is exercisable for a period of ten years from the
date of issuance. The fair value of the warrant, in the amount of $103, has been
recorded as additional paid-in capital.
F-11
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
6. COMMON STOCK AND CONVERTIBLE PARTICIPATING PREFERRED STOCK
COMMON STOCK SPLIT, INCREASE IN AUTHORIZED COMMON SHARES AND CHANGE TO PAR VALUE
OF COMMON STOCK
Effective May 30, 1997, the Company implemented a six-for-one stock split
applicable to all issued and outstanding shares of the Company's common stock
and increased the number of authorized shares of common stock from 10,000,000 to
50,000,000. In addition, the par value of the Company's common stock was changed
from $.01 per share to $.001 per share.
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
In January 1996, the Company issued 422,607 shares of Series A Preferred at
$23.33 per share providing gross proceeds of $9,859 and net proceeds, after
deducting expenses, of $9,389. Each share of Series A Preferred is convertible
at the option of the holder into the number of shares of common stock determined
by dividing $23.33 by the conversion price. The initial conversion price was
$10.70, which is subject to adjustment to the share price of any security
issuances at a per share price lower than $10.70 prior to the second anniversary
of the date of issuance of the Series A Preferred stock. Subsequent to the
second anniversary of the issuance of the Series A Preferred the Series A shares
are subject to weighted average anti-dilution provisions. Upon issuance of the
initial Series B Preferred on May 30, 1997 (See below), the conversion price of
the Series A Preferred was adjusted to $6.02 per share. The Series A Preferred
shares will automatically convert into common stock upon the consummation of a
public offering of the Company's common stock with gross proceeds and a per
share price of qualifying amounts.
At any time after the fifth anniversary of the date of issuance of the
Series A Preferred, a holder, at their option, may sell such shares to the
Company at a redemption price of $23.33 per share plus a redemption premium
equal to $1.40 per annum accruing from the date of issuance to the redemption
date, less any dividends paid thereon prior to the redemption date and including
the amount of any dividends or other distributions declared but unpaid on the
Series A Preferred. The Series A Preferred will have an aggregate redemption
value of $12,817 at January 30, 2001, the earliest date at which redemption may
be required. The excess of the redemption value over the carrying value is being
recorded by periodic charges to stockholders' equity through the earliest date
at which the Series A Preferred holders may require redemption of the Series A
Preferred.
The holders of Series A Preferred are entitled to vote on matters which
holders of common stock have the right to vote.
In connection with this transaction, the Company issued a warrant for the
purchase of 15,541 shares of the Company's common stock, at an initial exercise
price of $0.03 per share, as a placement fee to a financial advisor. The fair
value of the warrant in the amount of $166 has been recorded to additional
paid-in capital. The warrant is exercisable for a period of ten years from the
date of issuance.
10% PIK SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK
On May 30, 1997, the Company issued and sold 100,000 shares of the Series B
Preferred at $100.00 per share providing gross proceeds of $10,000 and net
proceeds, after deducting expenses, of $9,601. Subsequent to the initial
issuance, and prior to the first anniversary of the closing date, subject to
certain closing conditions, the Company has the option to issue and sell up to
an additional 50,000 shares to the original investors at a price per share of
$100.00. As of September 30, 1997, the Company has not exercised this option.
This option lapses upon the closing of an initial public offering by the
Company. In connection with this transaction, the Company issued a warrant for
the purchase of 838,199 shares of the Company's common stock, at an initial
exercise price of $6.02 per share, to the
F-12
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
original investors of the Series B Preferred. The warrant is exercisable for a
period of ten years from the date of issuance. The fair value of the warrant, in
the amount of $1,958, has been recorded as additional paid-in capital.
The holders of the Series B Preferred have the right to convert such shares
into common stock at an initial conversion rate of $100.00 divided by a
conversion price of $6.02 per share. In the event the Company exercises its
option to sell the additional 50,000 shares of Series B Preferred to the
original investors, the conversion price will be amended to $4.51 per share. In
addition: (i) such shares will automatically convert into common stock upon the
consummation of a public offering or sale transaction of qualifying size of the
Company's common stock, (ii) any time after the fifth anniversary of the date of
issuance of the Series B Preferred, a holder at its option may sell such shares
to the Company at a redemption amount, and (iii) in the event of a liquidation
of the Company the holders of the Series B Preferred are entitled to a senior
liquidation preference (each as defined).
An in-kind dividend will accrue at an annual rate of 10%. The excess of
redemption value over carrying value, is being recorded by periodic charges to
stockholders' equity through May 30, 2002, the earliest date the Series B
Preferred holders may require redemption of the Series B Preferred. The Series B
Preferred will have an aggregate redemption value of $16,530 at May 30, 2002.
The holders of Series B Preferred shall participate equally per share in any
dividends to holders of common stock or the Series A Preferred in excess of an
annual rate of 10% and shall be entitled to vote on matters which holders of
common stock have the right to vote.
Also in connection with the initial issuance of Series B Preferred, the
Company issued a warrant to a financial advisor for the purchase of 50,042
shares of common stock at an exercise price of $0.03 per share. The fair value
of the warrant, in the amount of $301, has been recorded to additional paid-in
capital.
Prior to the initial issuance of the Series B Preferred, the original
Series B Preferred investors advanced amounts to the Company in the form of
bridge loans totaling $5,750 bearing interest at an annual rate of 10%. Such
advances were repaid with interest in the amount of $16, upon the closing of the
initial issuance of the Series B Preferred.
During the period from July 1997 to September 1997, the Company issued and
sold an additional 70,040 shares of the Series B Preferred at $100.00 per share,
providing gross proceeds of $7,004 and net proceeds, after deducting expenses,
of $6,907.
7. TRANSACTIONS WITH RELATED PARTIES
On July 17, 1995, the three founders and principal stockholders of the
Company entered into an agreement whereby, among other things, each of these
stockholders agreed to grant to the other two stockholders the right of first
refusal to purchase any shares of the Company's common stock they propose to
sell on substantially the same terms as a potential third-party is offering and,
upon their death, the right to purchase any or all of their shares of common
stock of the Company at the fair market value on the date of death.
In August 1995, the Company made loans in the amount of $50 to each of its
three principal stockholders. The loans bear interest at a rate of 7% per annum.
Interest income from such loans amounted to $3, $14, and $8 for the years ended
December 31, 1995 and 1996 and the nine month period ended September 30, 1997,
respectively. The loans, and accrued interest thereon, are due on demand.
On December 4, 1995, the Company entered into employment agreements with
each of its three principal stockholders and founders, which expire five years
from the date of the agreement. The
F-13
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
employment agreements, which provide for base salaries and guaranteed bonuses,
contain certain non-compete clauses which are in effect for a period of one year
following termination of employment. In the event of termination of employment
of any of such principal stockholders following a change in control (as defined
in the employment agreements), that has not been approved by the Board of
Directors, the principal stockholders will receive a termination payment equal
to 2.99 times their respective base salary. On June 2, 1997, the employment
agreements were amended by the Company. As a result of these amendments, the
expiration dates of the agreements were extended to May 29, 2002.
8. STOCK OPTION, DEFINED CONTRIBUTION AND PROFIT SHARING PLANS
STOCK OPTION PLANS
In July 1995, the Company adopted a stock option plan (the 'July Plan')
which was subsequently terminated by the Company's Board of Directors on October
23, 1995. Pursuant to the July Plan, the Company granted certain employees
options to purchase 552,000 shares of the Company's common stock at $0.27 per
share. The Company recorded $133 of compensation expense during 1995 related to
the grant of such options. As of the date of grant, 65,455 options were
exercisable, and none were exercised prior to October 23, 1995, the date on
which the July Plan and all options granted pursuant thereto were canceled.
On October 23, 1995, the Company implemented its 1995 Stock Option Plan
(the 'Plan'), whereby incentive and nonqualified options to purchase up to
1,090,909 shares of the Company's common stock may be granted to key employees,
directors and consultants. On March 14, 1997, the Board of Directors approved an
amendment to the Plan whereby the aggregate number of shares of common stock for
which options may be granted under the Plan was increased to 1,636,363. The
exercise and vesting periods and the exercise price for options granted under
the Plan are determined by a Committee of the Board of Directors. The Plan
stipulates that no option may be exercisable after ten years from the date of
grant. The fair market value of the Company's common stock is determined by the
Board of Directors. Options granted under the Plan generally vest in equal
installments over periods ranging from one to five years.
Under the Plan, each non-employee director, upon their initial appointment,
shall be granted options to purchase 3,273 shares of the Company's common stock
at a price equal to its fair market value at the date of grant. Additionally,
options to purchase 2,182 shares of the Company's common stock at the then fair
market value shall be granted immediately following each annual meeting of the
stockholders. These options are exercisable for five years from the date of
grant. No such options have yet been granted as of December 31, 1996 and
September 30, 1997.
On June 18, 1997 outstanding employee stock options, with exercise prices
ranging from $6.42 to $14.27, to purchase 868,364 shares of common stock were
repriced at $6.02 per share, which was the fair market value as determined by
the Board of Directors at such date. Outstanding stock options to purchase
109,091 shares of common stock held by an employee who is also a principal
stockholder were also repriced on such date from $11.76 to $6.63 per share.
F-14
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The following table summarizes activity regarding stock options for the
years ended December 31, 1995 and 1996 and the nine months ended September 30,
1997:
<TABLE>
<CAPTION>
SHARES WEIGHTED-
UNDER AVERAGE
OPTION EXERCISE PRICE
---------- --------------
<S> <C> <C>
Options outstanding, December 31, 1994................................ -- --
Options granted at $0.27.............................................. 552,000 $ 0.27
Options granted at $6.42.............................................. 614,182 6.42
Options cancelled..................................................... (552,000) 0.27
----------
Options outstanding at December 31, 1995.............................. 614,182 6.42
Options granted at $11.00-$11.74...................................... 479,127 11.17
Options forfeited at $6.42............................................ (148,364) 6.42
Options forfeited at $11.00........................................... (35,127) 11.00
----------
Options outstanding at December 31, 1996 at $6.42..................... 465,818 6.42
Options outstanding at December 31, 1996 at $11.00-$11.74............. 444,000 11.19
----------
Total options outstanding at December 31, 1996........................ 909,818 8.74
----------
Options granted at $13.48-$14.27...................................... 342,905 14.16
Options cancelled at $6.42-$14.27..................................... (977,455) 9.92
Options re-granted at $6.02-$6.63..................................... 977,455 6.09
Options granted at $6.02.............................................. 106,364 6.02
Options forfeited at $6.02-$11.00..................................... (172,911) 9.48
----------
Options outstanding at September 30, 1997 at $13.48-$14.27............ 113,814 13.93
Options outstanding at September 30, 1997 at $6.02-$6.63.............. 1,072,362 6.08
----------
Total options outstanding at September 30, 1997....................... 1,186,176 6.83
----------
----------
Exercisable at September 30, 1997..................................... 144,547 9.76
----------
----------
Options available for grant at September 30, 1997..................... 450,187
----------
----------
Weighted average remaining contractual life for options at
$6.02-$6.63......................................................... 2.4years
Weighted average remaining contractual life for options at
$13.48-$14.27....................................................... 2.7years
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 'Accounting
for Stock Issued to Employees,' and related interpretations in accounting for
its Plan and other stock-based compensation issued to employees and directors.
During the year ended December 31, 1996 and the nine months ended September 30,
1997, the Company was not required to recognize compensation expense for options
granted to employees.
Had compensation cost for options grants to employees been determined based
upon the fair value at the date of grant for awards under the Plan consistent
with the methodology prescribed under Financial Accounting Standards No. 123,
'Accounting for Stock Based Compensation,' ('FAS 123'), the Company's net loss
for the years ended December 31, 1995 and 1996 and the nine months ended
September 30, 1997 would have increased by approximately $35, $529 and $401,
respectively.
The fair values of options granted to employees during the years ended
December 31, 1995 and 1996 and the nine months ended September 30, 1997 has been
determined on the date of the respective
F-15
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
grant using the Black-Scholes option-pricing model based on the following
weighted average assumptions:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Dividend yield............................................... None None None
Weighted average risk free interest rate on date of grant.... 6.3% 6.3% 6.45%
Forfeitures.................................................. None None None
Expected life................................................ 5 years 5 years 5 years
</TABLE>
DEFINED CONTRIBUTION AND PROFIT SHARING PLANS
The Company has a defined contribution savings plan (the 'Plan'), which
qualifies under Section 401(k) of the Internal Revenue Code, for employees
meeting certain service requirements. Participants may contribute up to 10% of
their gross wages not to exceed, in any given year, a limitation set by Internal
Revenue Service regulations. The Plan provides for discretionary contributions
to be made by the Company as determined by the Company's Board of Directors. The
Company has not made any contributions to the Plan during periods presented. The
Company also has a profit sharing plan (the 'PSP') covering substantially all
full-time employees. Contributions by the Company to the PSP amounted to $129
and $28 in 1994 and 1996, respectively. There were no contributions to the PSP
during 1995 and the nine months ended September 30, 1997.
9. CONCENTRATION OF RISK AND CUSTOMER INFORMATION
A significant percentage (49%, 58%, 68% and 62% in the years ended December
31, 1994, 1995 and 1996 and the nine months ended September 30, 1997,
respectively) of the Company's revenues are derived from domestic third-party
financial services companies. Financial instruments which potentially subject
the Company to concentrations of credit risk are primarily cash, accounts
receivable, notes receivable, accounts payable and short-term notes payable. The
Company generally does not require collateral and the majority of its trade
receivables are unsecured. The Company is directly affected by the well being of
the financial services industry; however, the Company does not believe
significant credit risk exists at September 30, 1997. The Company relies on
other companies to supply certain key components of its network infrastructure,
including telecommunications services and networking equipment, which, in the
quantities and quality required by the Company, are available only from a
limited number of sources. The Company is also dependent upon local exchange
carriers to provide telecommunications services to the Company and its
customers. There can be no assurance that the Company will be able to obtain
such services on the scale and within the time frames required by the Company at
an acceptable cost, or at all.
The network-based information management systems sold by the Company are
provided by one manufacturer for whom the Company serves as a value-added
reseller. Termination or loss of the Company's agreement with this manufacturer
may have a material adverse impact on the Company's financial position and
results of operations.
For the years ended December 31, 1994, 1995 and 1996 and the nine months
ended September 30, 1997 a single customer accounted for 25%, 28%, 30% and 49%
of net revenues, respectively. For the years ended December 31, 1994, 1995 and
1996 a second customer accounted for 11%, 15% and 13% of net revenues,
respectively. For the year ended December 31, 1995 a third customer accounted
for 10% of net revenues.
F-16
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
10. INCOME TAXES
The Company has incurred losses during 1995, 1996 and the nine months ended
September 30, 1997, which have generated net operating loss carryforwards of
approximately $15,272 at September 30, 1997, for federal and state income tax
purposes. These carryforwards are available to offset future taxable income and
expire in 2011 through 2012 for federal income tax purposes. At September 30,
1997 the Company also had research and development tax credit carryforwards in
the amount of $87 which expire in 2001. These losses and credits are subject to
limitation on future years utilization should certain ownership changes occur.
The net operating loss carryforwards and temporary differences between
carrying amounts of assets and liabilities for financial reporting and income
tax purposes result in a net deferred tax benefit of $7,486 at September 30,
1997. The Company's operating plans anticipate taxable income in future periods;
however, such plans make significant assumptions which cannot be reasonably
assured including continued market acceptance of the Company's products and
services by customers. Therefore, in consideration of the Company's accumulated
losses and the uncertainty of its ability to utilize this deferred tax benefit
in the future, the Company has recorded a valuation allowance in the amount of
$7,486 at September 30, 1997, respectively, to offset the deferred tax benefit
amount.
Significant components of the noncurrent deferred tax assets at December
31, 1994, 1995, 1996 and September 30, 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
----- ------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable reserves......................................... $ 142 $ 185 $ 232
Net operating loss................................................... 70 3,296 6,872
Accruals............................................................. 48 245 409
Research and development credits..................................... -- -- 87
----- ------- -------------
Total deferred tax assets....................................... 260 3,726 7,600
----- ------- -------------
Deferred tax liabilities:
Depreciation......................................................... (47) (117) (76)
Other................................................................ -- (38) (38)
----- ------- -------------
Total deferred tax liabilities.................................. (47) (155) (114)
----- ------- -------------
Net deferred tax asset.................................................... 213 3,571 7,486
Less: valuation allowance................................................. -- (3,296) (7,486)
----- ------- -------------
Deferred tax asset, net................................................... $ 213 $ 275 $--
----- ------- -------------
----- ------- -------------
</TABLE>
F-17
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------- SEPTEMBER 30,
1994 1995 1996 1997
----- ----- ----- -------------
<S> <C> <C> <C> <C>
Current taxes
Federal....................................................... $ 158 -- $(148) --
State and city................................................ 134 $ 15 -- --
----- ----- ----- ------
Total current taxes...................................... 292 15 (148) --
----- ----- ----- ------
Deferred taxes
Federal....................................................... (2) (114) (51) $ 174
State and city................................................ (1) (84) (11) 82
----- ----- ----- ------
Total deferred taxes..................................... (3) (198) (62) 256
----- ----- ----- ------
Provision (benefit) for income taxes............................... $ 289 $(183) $(210) $ 256
----- ----- ----- ------
----- ----- ----- ------
</TABLE>
The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable U.S. income (loss) tax rate to income
before taxes as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED
--------------------------- SEPTEMBER 30,
1994 1995 1996 1997
----- ----- ----- -------------
<S> <C> <C> <C> <C>
Federal income tax statutory rate................................. 35.0% (35.0%) (35.0%) (35.0%)
State income taxes, net of federal tax benefit.................... 14.8 (7.2) (9.6) (10.7)
Stock compensation................................................ -- 7.4 -- --
Other nondeductible items......................................... -- 5.4 2.1 1.2
Valuation allowance............................................... -- -- 40.0 47.4
----- ----- ----- ------
Income tax rate as recorded....................................... 49.8% (29.4%) (2.5%) 2.9%
----- ----- ----- ------
----- ----- ----- ------
</TABLE>
11. COMMITMENTS
LEASES
Future minimum payments under non-cancelable operating leases, which
primarily relate to network capacity and office space, with initial or remaining
terms of one year or more, consist of the following as of September 30, 1997:
<TABLE>
<CAPTION>
YEAR
- ---------------------------------------------------------------
<S> <C>
1998........................................................... $ 1,703
1999........................................................... 1,350
2000........................................................... 1,132
2001........................................................... 1,093
2002........................................................... 1,143
2003 and thereafter............................................ 3,904
-------
$10,325
-------
-------
</TABLE>
Rent expense amounted to $112, $210 and $584 for 1994, 1995 and 1996,
respectively, and $550 for the nine months ended September 30, 1997.
F-18
<PAGE>
<PAGE>
ICON CMT CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED WITH RESPECT TO THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
OTHER
In February 1997, the Company entered into an agreement to purchase
interexchange telecommunications services through February 29, 2000. Pursuant to
this agreement the Company has a monthy commitment, before discounts, of $50.
These purchase commitments are not expected to exceed usage requirements in any
of the months covered by the agreement.
At September 30, 1997 trade payables to a vendor in the amount of $2,614
were secured by substantially all of the assets of the Company. The security
agreement is subordinated to the security interests of a lending institution in
connection with a secured line of credit (Note 5).
12. INITIAL PUBLIC OFFERING AND PRO FORMA PRESENTATION
On October 16, 1997, the Board of Directors of the Company authorized
management to pursue an underwritten sale of shares of the Company's common
stock in an initial public offering (the 'IPO') pursuant to the Securities Act
of 1933. In connection with the IPO, on October 16, 1997 the Company's Board of
Directors approved a 1-for-2.75 reverse stock split to be applicable to all
issued and outstanding shares of the Company's common stock. All common shares,
stock options, warrants and related per share data, reflected in the
accompanying financial statements and notes thereto, have been presented as if
the stock split had occurred on January 1, 1994. In addition the Board of
Directors has approved an increase in the shares available for grant under the
Plan from 1,636,364 to 2,181,818. Such increase will be effective only upon
completion of the initial public offering.
Upon the closing of the IPO, all outstanding shares of Series A and Series
B Preferred Stock will automatically convert into an aggregate of 4,629,874
shares of common stock. The pro forma effects of this conversion have been
reflected in unaudited pro forma stockholders' equity at September 30, 1997 and
pro forma earnings per share for the year ended December 31, 1996 and the nine
months ended September 30, 1997.
Upon consummation of the IPO, the agreement among the three founders and
principal stockholders of the Company (Note 7) will be terminated.
F-19
<PAGE>
<PAGE>
[LOGO]
Icon is proud to have provided Internet solutions for the following
customers in the 12 months ended September 30, 1997:
<TABLE>
<CAPTION>
COMMUNICATIONS PROFESSIONAL PRODUCT
CUSTOMERS SERVICES SERVICES RESALES
<S> <C> <C> <C>
FINANCIAL SERVICES
Alliance Capital Management LP X X
ADP Financial Information X
Bear, Stearns & Co. Inc. X X X
Daiwa Securities America Inc. X X X
Deutsche Morgan Grenfell X X
Goldman, Sachs & Co. X
Merrill Lynch & Co., Inc. X X
Nomura Securities Co. Ltd. X X X
Tudor Investment Company X X
TELECOMMUNICATIONS
ACC Long Distance Corp. X
Bell Atlantic Internet Solutions, Inc. X X
Fiberlink Communications Corp. X
Omnipoint Communications X X X
MEDIA
ABC Radio Network Inc. X X
CBS, Inc. X X X
CMP Publications, Inc. X X X
C-NET: The Computer Network X X
Comedy Central Network X
Economist Intelligence Unit X X X
John Wiley & Sons, Inc. X X
Wire Networks, Inc. (Women's Wire) X X
TRAVEL
Galileo International X X X
KLM Royal Dutch Airlines X
Swissair X X
Swissotel X X X
RETAIL/CONSUMER PRODUCTS
Eastman Kodak Company X X
Kobra International (Nicole Miller) X X
INFORMATION SERVICES
The Associated Press X X X
Bloomberg Financial Markets Inc. X X
INSURANCE AND HEALTHCARE
Group Health, Inc. X X X
Insurance Services Office, Inc. X X X
Metropolitan Life Insurance Co. X X
National Preferred Provider Network, Inc. X X X
<PAGE>
<PAGE>
__________________________________ __________________________________
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE.
------------------------
TABLE OF CONTENTS
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................................................................................... 3
Risk Factors..................................................................................................... 8
Use of Proceeds.................................................................................................. 20
Dividend Policy.................................................................................................. 20
Dilution......................................................................................................... 21
Capitalization................................................................................................... 22
Selected Financial Data.......................................................................................... 23
Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 24
Business......................................................................................................... 33
Management....................................................................................................... 48
Certain Transactions............................................................................................. 54
Principal and Selling Stockholders............................................................................... 55
Description of Capital Stock..................................................................................... 57
Shares Eligible For Future Sale.................................................................................. 60
Certain United States Federal Tax Consequences to Non-U.S. Holders............................................... 61
Underwriting..................................................................................................... 63
Notice to Canadian Residents..................................................................................... 65
Legal Matters.................................................................................................... 66
Experts.......................................................................................................... 66
Available Information............................................................................................ 66
Glossary......................................................................................................... 67
Index to Financial Statements.................................................................................... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING)
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[LOGO]
3,850,000 Shares
Common Stock
($.001 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
BANCAMERICA
ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
TUCKER ANTHONY
INCORPORATED
__________________________________ __________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses, other than underwriting
discounts and commissions, in connection with the issuance and distribution of
the securities being registered hereby. All such expenses will be borne by the
registrant; none shall be borne by any selling stockholder.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......................................... $ 18,783
NASD filing fee............................................................................. 6,699
Nasdaq listing fees......................................................................... 50,000
Legal fees and expenses..................................................................... 200,000
Accounting fees and expenses................................................................ 200,000
Transfer agent fees......................................................................... 2,000
Printing and engraving expenses............................................................. 350,000
Miscellaneous............................................................................... 22,518
--------
Total.................................................................................. $850,000
--------
--------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
Section 145 of the General Corporation Law of Delaware provides that
directors, officers, employees or agents of Delaware corporations are entitled,
under certain circumstances, to be indemnified against expenses (including
attorneys' fees) and other liabilities actually and reasonably incurred by them
in connection with any suit brought against them in their capacity as a
director, officer, employee or agent, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, if they
had no reasonable cause to believe their conduct was unlawful. Section 145 also
provides that directors, officers, employees and agents may also be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
them in connection with a derivative suit bought against them in their capacity
as a director, officer, employee or agent, as the case may be, if they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation, except that no indemnification may be
made without court approval if such person was adjudged liable to the
corporation.
Article Ninth of the Restated Certificate of Incorporation provides that
the registrant shall indemnify any and all persons whom it shall have power to
indemnify to the fullest extent permitted by the General Corporation Law of
Delaware. Article VII of the Restated By-laws provides that the registrant shall
indemnify authorized representatives of the registrant to the fullest extent
permitted by the General Corporation Law of Delaware. The Restated By-laws also
permit the registrant to purchase insurance on behalf of any such person against
any liability asserted against such person and incurred by such person in any
capacity, or out of such person's status as such, whether or not the registrant
would have the power to indemnify such person against such liability under the
foregoing provision of the Restated By-laws.
Section 7 of the Underwriting Agreement (Exhibit 1.1) provides for
indemnification by the underwriters of directors, officers and controlling
persons of the registrant for certain liabilities, including certain liabilities
under the Securities Act of 1933, under certain circumstances.
The Company maintains a directors and officers liability insurance policy
with Executive Risk Indemnity. The policy insures the directors and officers of
the Company against loss arising from certain claims made against such directors
or officers by reason of certain wrongful acts. The policy provides combined
limit of liability of $3,000,000 per policy year for both directors' and
officers' liability coverage at an annual premium of $25,100.
II-1
<PAGE>
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) On May 30, 1997, the registrant effected a 6 for 1 stock split of its
Common Stock. For each share of Common Stock outstanding on May 30, 1997, the
holder thereof received six shares of Common Stock.
(b) In January 1996, the Company sold 422,607 shares of Series A
Convertible Participating Preferred Stock, par value $.01 per share ('Series A
Preferred Stock'), at $23.33 per share, each of which is convertible into shares
of Common Stock at a price of $6.02 per share, and issued between January and
March 1996 five-year warrants to purchase 15,635 shares of Common Stock at an
exercise price of $.01 per share.
Between May 1997 and September 1997, the Company sold 180,240 shares of 10%
PIK Series B Convertible Participating Preferred Stock, par value $.01 per share
('Series B Preferred Stock'), at $100.00 per share, each of which is convertible
into shares of Common Stock at a price of $6.02 per share and between March 1997
and September 1997 issued ten-year warrants to purchase 880,710 shares of Common
Stock at an exercise price of $6.02 per share and 52,544 shares of Common Stock
at an exercise price of $.0275 per share.
The issuance of securities set forth in (a) above is believed by the
registrant to be exempt from registration under the Securities Act of 1933 in
reliance upon Section 3(a)(9) of such Act. The issuance of securities set forth
in (b) above is believed by the registrant to be exempt from registration in
reliance upon Section 4(2) of such Act as transactions not involving any public
offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
The following exhibits are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ -----------------------------------------------------------------------------------------------------------
<S> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Form of Restated Certificate of Incorporation of the registrant.
3.2 -- Form of Restated By-laws of the registrant.
4.1* -- Specimen Copy of Stock Certificate for shares of Common Stock of the registrant.
4.2* -- Form of Investors' Rights Agreement between the registrant and each of the holders of its Series A
Convertible Participating Preferred Stock.
4.3 -- Form of Registration Rights Agreement between the registrant and each of the holders of its 10% PIK
Series B Convertible Participating Preferred Stock.
5.1* -- Opinion of Parker Chapin Flattau & Klimpl, LLP as to the legality of the securities being registered.
10.1 -- Employment Agreement dated as of December 4, 1995 between the registrant and Scott A. Baxter, as
amended.
10.2 -- Employment Agreement dated as of December 4, 1995 between the registrant and Richard M. Brown, as
amended.
10.3 -- Employment Agreement dated as of December 4, 1995 between the registrant and Scott Harmolin, as amended.
10.4 -- Employment Agreement dated February 1997 between the registrant and Frank C. Cicio, Jr.
10.5 -- Employment Agreement dated March 21, 1997 between the registrant and Kenneth J. Hall.
10.6* -- 1995 Stock Option Plan of the registrant.
10.7 -- Form of Stock Option Contract granted to employees of the registrant.
10.8 -- Form of Stock Option Contract of the registrant granted to executive officers certain and key employees
of the registrant.
10.9 -- Lease dated November 3, 1995 between the registrant and Hartz-PW Tower B Limited Partnership as
supplemented on November 15, 1995.
10.10* -- Financing Agreement dated August 13, 1996 between the registrant and The CIT Group/Business Credit, Inc.
10.11'D' -- Master Service Agreement dated June 29, 1995 between the registrant and MFS Datanet, Inc. (the 'MFS
Agreement').
10.12'D' -- Addendum No. 1 dated June 29, 1995 to the MFS Agreement. Confidential treatment has been sought as to
various portions of this exhibit. Such portions have been confidentially filed with the Securities and
Exchange Commission.
10.13'D' -- Modification Agreement to Addendum No. 1 to the MFS Agreement.
10.14 -- Indirect Value Added Reseller Agreement dated November 2, 1992 between the registrant and Sun
Microsystems Computer Company, as amended through December 13, 1996.
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ -----------------------------------------------------------------------------------------------------------
<S> <C>
10.15 -- Master Value Added Reseller Agreement as amended through October 31, 1996 between the registrant and
Cisco Systems Inc.
10.16* -- Agreement for the Provision of Billing Services between the registrant and Bell Atlantic Internet
Solutions, Inc.
10.17* -- Form of Application for Data Service between the registrant and WorldCom Inc.
10.18* -- Stockholders' Agreement dated July 17, 1995 between the registrant, Scott A. Baxter, Richard M. Brown
and Scott Harmolin.
10.19 -- Interconnection Agreement effective as of August 18, 1997 between the registrant and UUNET Technologies,
Inc.
10.20 -- Intercreditor Agreement dated August 13, 1996 among the registrant, The CIT Group/Business Credit, Inc.
and Access Graphics, Inc.
10.21* -- Savings plan of the registrant.
11.1 -- Computation of per share earnings.
23.1 -- Consent of Price Waterhouse LLP.
23.2* -- Consent of Parker Chapin Flattau & Klimpl, LLP (included in their opinion filed as Exhibit 5.1)
24.1'D' -- Power of Attorney.
27.1 -- Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
'D' Previously filed.
(b) Financial Statement Schedules, and Reports of Independent Accountants.
The following financial statement schedule of the registrant is filed
herewith:
(B) SCHEDULE
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as requested by the underwriters to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 28th day of November, 1997.
Icon CMT Corp.
By: /s/
...................................
SCOTT A. BAXTER
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND
CHAIRMAN OF THE BOARD OF DIRECTORS
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
/s/ President, Chief Executive Officer and November 28, 1997
......................................... Chairman of the Board of Directors
(SCOTT A. BAXTER) (Principal Executive Officer)
/s/ Vice President -- Information Technologies, November 28, 1997
......................................... Secretary and Director
(RICHARD M. BROWN)
/s/ Senior Vice President, Chief Technology November 28, 1997
......................................... Officer, and Director
(SCOTT HARMOLIN)
/s/ Senior Vice President, Chief Financial November 28, 1997
......................................... Officer and Treasurer (Principal Financial
(KENNETH J. HALL) Officer and Principal Accounting Officer)
* Director November 28, 1997
.........................................
(SAMUEL A. PLUM)
/s/ Director November 28, 1997
.........................................
(WAYNE B. WEISMAN)
* By /s/
.........................................
(SCOTT A. BAXTER)
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
<PAGE>
SCHEDULE II
ICON CMT CORP.
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1994................. $ 22 $ 81 -- -- $ 103
Year ended December 31, 1995................. 103 225 -- -- 328
Year ended December 31, 1996................. 328 109 -- -- 437
Nine months ended September 30, 1997......... 437 79 -- -- 516
VALUATION RESERVE -- DEFERRED TAX ASSETS
Year ended December 31, 1994................. -- -- -- -- --
Year ended December 31, 1995................. -- -- -- -- --
Year ended December 31, 1996................. -- 3,296 -- -- 3,296
Nine months ended September 30, 1997......... 3,296 4,190 -- -- 7,486
</TABLE>
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------------ --------------------------------------------------------------------------------------------------- ----
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Form of Restated Certificate of Incorporation of the registrant.
3.2 -- Form of Restated By-laws of the registrant.
4.1* -- Specimen Copy of Stock Certificate for shares of Common Stock of the registrant.
4.2* -- Form of Investors' Rights Agreement between the registrant and each of the holders of its Series
A Convertible Participating Preferred Stock.
4.3 -- Form of Registration Rights Agreement between the registrant and each of the holders of its 10%
PIK Series B Convertible Participating Preferred Stock.
5.1* -- Opinion of Parker Chapin Flattau & Klimpl, LLP as to the legality of the securities being
registered.
10.1 -- Employment Agreement dated as of December 4, 1995 between the registrant and Scott A. Baxter, as
amended.
10.2 -- Employment Agreement dated as of December 4, 1995 between the registrant and Richard M. Brown,
as amended.
10.3 -- Employment Agreement dated as of December 4, 1995 between the registrant and Scott Harmolin, as
amended.
10.4 -- Employment Agreement dated February 1997 between the registrant and Frank C. Cicio, Jr.
10.5 -- Employment Agreement dated March 21, 1997 between the registrant and Kenneth J. Hall.
10.6* -- 1995 Stock Option Plan of the registrant.
10.7 -- Form of Stock Option Contract granted to employees of the registrant.
10.8 -- Form of Stock Option Contract granted to executive officers and certain key employees of the
registrant.
10.9 -- Lease dated November 3, 1995 between the registrant and Hartz-PW Tower B Limited Partnership as
supplemented on November 15, 1995.
10.10* -- Financing Agreement dated August 13, 1996 between the registrant and The CIT Group/Business
Credit, Inc.
10.11'D' -- Master Service Agreement dated June 29, 1995 between the registrant and MFS Datanet, Inc. (the
'MFS Agreement').
10.12'D' -- Addendum No. 1 dated June 29, 1995 to the MFS Agreement. Confidential treatment has been sought
as to various portions of this exhibit. Such portions have been confidentially filed with the
Securities and Exchange Commission.
10.13'D' -- Modification Agreement to Addendum No. 1 to the MFS Agreement.
10.14 -- Indirect Value Added Reseller Agreement dated November 2, 1992 between the registrant and Sun
Microsystems Computer Company, as amended through December 13, 1996.
10.15 -- Master Value Added Reseller Agreement as amended through October 31, 1996 between the registrant
and Cisco Systems Inc.
10.16* -- Agreement for the Provision of Billing Services between the registrant and Bell Atlantic
Internet Solutions, Inc.
10.17* -- Form of Application for Data Service between the registrant and WorldCom Inc.
10.18* -- Stockholders' Agreement dated July 17, 1995 between the registrant, Scott A. Baxter, Richard M.
Brown and Scott Harmolin.
10.19 -- Interconnection Agreement effective as of August 18, 1997 between the registrant and UUNET
Technologies, Inc.
10.20 -- Intercreditor Agreement dated August 13, 1996 among the registrant, The CIT Group/Business
Credit, Inc. and Access Graphics, Inc.
10.21* -- Savings plan of the registrant.
11.1 -- Computation of per share earnings.
23.1 -- Consent of Price Waterhouse LLP.
23.2* -- Consent of Parker Chapin Flattau & Klimpl, LLP (included in their opinion filed as Exhibit 5.1)
24.1'D' -- Power of Attorney.
27.1 -- Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
'D' Previously filed.
<PAGE>
<PAGE>
[CS&M Draft--10/20/97]
[ ] SHARES
ICON CMT CORP.
COMMON STOCK
($.001 PAR VALUE)
UNDERWRITING AGREEMENT
, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
BANCAMERICA ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Icon CMT Corp. , a Delaware corporation ("Company"),
proposes to issue and sell shares of its Common Stock, par
value $.001 per share (the "Securities") (such shares of
Securities being hereinafter referred to as the "Firm Securities"). The Company
also proposes to sell to the Underwriters, at the option of the Underwriters, an
aggregate of not more than additional shares of its Securities, and
certain stockholders listed in Schedule A hereto (the "Selling Stockholders")
also propose to sell to the Underwriters, at the option of the Underwriters, an
aggregate of not more than additional outstanding shares of the
Company's Securities, as set forth below (such additional shares
being hereinafter referred to as the "Optional Securities"). The Firm Securities
and the Optional Securities are herein collectively called the "Offered
Securities". The Company and the Selling Stockholders hereby agree with the
several Underwriters named in Schedule B hereto (the "Underwriters") as follows:
2. Representations and Warranties of the Company and the Selling
Stockholders. (a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) A registration statement (No. 333-xxxx) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission (the "Commission") and either
(A) has been declared effective under the Securities Act of 1933 (the
"Act") and is not proposed to be amended or (B) is proposed to be
amended by amendment or post-effective amendment. If such registration
statement (the "initial registration statement") has been declared
effective, either (A) an additional registration statement (the
"additional registration statement") relating to the Offered Securities
may have been filed with the Commission pursuant to Rule 462(b) ("Rule
462(b)") under the Act and, if so filed, has become effective upon
filing pursuant to such Rule and the Offered Securities all have been
duly registered under the Act pursuant to the
<PAGE>
<PAGE>
2
initial registration statement and, if applicable, the additional
registration statement or (B) such an additional registration statement
is proposed to be filed with the Commission pursuant to Rule 462(b) and
will become effective upon filing pursuant to such Rule and upon such
filing the Offered Securities will all have been duly registered under
the Act pursuant to the initial registration statement and such
additional registration statement. If the Company does not propose to
amend the initial registration statement or if an additional
registration statement has been filed and the Company does not propose
to amend it, and if any post-effective amendment to either such
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent amendment (if
any) to each such registration statement has been declared effective by
the Commission or has become effective upon filing pursuant to Rule
462(c) ("Rule 462(c)") under the Act or, in the case of the additional
registration statement, Rule 462(b). For purposes of this Agreement,
"Effective Time" with respect to the initial registration statement or,
if filed prior to the execution and delivery of this Agreement, the
additional registration statement means (A) if the Company has advised
the Representatives that it does not propose to amend such registration
statement, the date and time as of which such registration statement,
or the most recent post-effective amendment thereto (if any) filed
prior to the execution and delivery of this Agreement, was declared
effective by the Commission or has become effective upon filing
pursuant to Rule 462(c), or (B) if the Company has advised the
Representatives that it proposes to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or
post-effective amendment, as the case may be, is declared effective by
the Commission. If an additional registration statement has not been
filed prior to the execution and delivery of this Agreement but the
Company has advised the Representatives that it proposes to file one,
"Effective Time" with respect to such additional registration statement
means the date and time as of which such registration statement is
filed and becomes effective pursuant to Rule 462(b). "Effective Date"
with respect to the initial registration statement or the additional
registration statement (if any) means the date of the Effective Time
thereof. The initial registration statement, as amended at its
Effective Time, including all information contained in the additional
registration statement (if any) and deemed to be a part of the initial
registration statement as of the Effective Time of the additional
registration statement pursuant to the General Instructions of the Form
on which it is filed and including all information (if any) deemed to
be a part of the initial registration statement as of its Effective
Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is
hereinafter referred to as the "Initial Registration Statement". The
additional registration statement, as amended at its Effective Time,
including the contents of the initial registration statement
incorporated by reference therein and including all information (if
any) deemed to be a part of the additional registration statement as of
its Effective Time pursuant to Rule 430A(b), is hereinafter referred to
as the "Additional Registration Statement". The Initial Registration
Statement and the Additional Registration are hereinafter referred to
collectively as the "Registration Statements" and individually as a
"Registration Statement". The form of prospectus relating to the
Offered Securities, as first filed with the Commission pursuant to and
in accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no
such filing is required) as included in a Registration Statement, is
hereinafter referred to as the "Prospectus". No document has been or
will be prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of
the Act and the rules and regulations of the Commission (the "Rules and
Regulations") and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, (B) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed or will conform, in all respects to
the requirements of the Act and the Rules and Regulations and did not
include, or will not include, any untrue
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3
statement of a material fact and did not omit, or will not omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (C) on the date of this
Agreement, the Initial Registration Statement and, if the Effective
Time of the Additional Registration Statement is prior to the execution
and delivery of this Agreement, the Additional Registration Statement
each conforms, and at the time of filing of the Prospectus pursuant to
Rule 424(b) or (if no such filing is required) at the Effective Date of
the Additional Registration Statement in which the Prospectus is
included, each Registration Statement and the Prospectus will conform,
in all respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents includes, or will include,
any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading. If the Effective Time of
the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement: on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement and the
Prospectus will conform in all respects to the requirements of the Act
and the Rules and Regulations, neither of such documents will include
any untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do not
apply to statements in or omissions from a Registration Statement or
the Prospectus based upon written information furnished to the Company
by any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(c) hereof.
(iii) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification.
(iv) Each subsidiary of the Company has been duly incorporated
and is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectus; and each subsidiary of the Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification; all of the issued
and outstanding capital stock of each subsidiary of the Company has
been duly authorized and validly issued and is fully paid and
nonassessable; and the capital stock of each subsidiary owned by the
Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects.
(v) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized and validly
issued, fully paid and nonassessable and conform to the description
thereof contained in the Prospectus; and the stockholders of the
Company have no preemptive rights with respect to the Securities.
(vi) There are no contracts, agreements or understandings
between the Company and any person that would give rise to a valid
claim against the Company or any Underwriter for a brokerage
commission, finder's fee or other like payment in connection with the
offering of the Offered Securities.
(vii) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities
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4
registered pursuant to a Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Company under the Act.
(viii) The Securities have been approved for listing subject to
notice of issuance on The Nasdaq Stock Market.
(ix) No consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required to be
obtained or made by the Company for the consummation of the
transactions contemplated by this Agreement in connection with the
offer and sale of the Offered Securities, except such as have been
obtained and made under the Act and such as may be required under state
securities laws.
(x) The execution, delivery and performance of this Agreement,
and the consummation of the transactions herein contemplated will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute, any rule, regulation or
order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any subsidiary of the
Company or any of their properties, or any agreement or instrument to
which the Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, or the
charter or by-laws of the Company or any such subsidiary.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) The Company and its subsidiaries have good and marketable
title to all properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or to be made
thereof by them; and the Company and its subsidiaries hold any leased
real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or to be
made thereof by them.
(xiii) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by
them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(xiv) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(xv) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively,
"intellectual property rights") necessary to conduct the business now
operated by them, or presently employed by them, and have not received
any notice of infringement of or conflict with asserted rights of
others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(xvi) Neither the Company nor any of its subsidiaries is in
violation of any statute, any rule, regulation, decision or order of
any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic
substances
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<PAGE>
5
or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively,
"environmental laws"), owns or operates any real property contaminated
with any substance that is subject to any environmental laws, is liable
for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a material adverse effect
on the Company and its subsidiaries taken as a whole; and the Company
is not aware of any pending investigation which might lead to such a
claim.
(xvii) There are no pending actions, suits or proceedings against
or affecting the Company, any of its subsidiaries or any of their
respective properties that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a
material adverse effect on the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole, or would materially and adversely affect
the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale
of the Offered Securities; and no such actions, suits or proceedings
are threatened or, to the Company's knowledge, contemplated.
(xviii) The Company and its subsidiaries have in effect all
regulatory licenses, permits, authorizations, consents and approvals
("Licenses") required to be obtained from the [Federal Communications
Commission ("FCC")] or otherwise for the Company and its subsidiaries
to conduct their respective businesses as presently conducted, except
for Licenses that the failure to obtain would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
The Company and its subsidiaries are not required to obtain any
Licenses or to file any tariffs for telecommunications services in the
States of New York or New Jersey, or in any other State where the
Company or any of its subsidiaries is currently qualified to transact
business, because the Company and its subsidiaries do not offer or
provide intrastate telecommunications services within the United
States. To the best of such counsel's knowledge and except as described
in the Prospectuses, the Licenses obtained by the Company or its
subsidiaries have been duly and validly issued and are in full force
and effect and no proceedings to revoke or restrict such Licenses are
pending or have been threatened against the Company or any of its
subsidiaries by the FCC.
(xix) Except as described in the Prospectuses, to the knowledge
of such counsel, the Company and its subsidiaries are not in violation
of any policy, rule or regulation or any judgment, injunction, order or
decree of the FCC or of the regulatory authority of the States of New
York or New Jersey, or of any other state where the Company or any of
its subsidiaries is currently qualified to transact business, except
for violations that would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(xx) There is no outstanding adverse judgment, injunction,
decree or order that has been issued by the FCC against the Company or
any of its subsidiaries or, to the best of such counsel's knowledge
after due inquiry and except as described in the Prospectus, any
action, proceeding or investigation pending before or threatened by the
FCC against the Company or any of its subsidiaries which, if the
subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the Company and its subsidiaries taken as a
whole.
(xxi) No license, permit, consent, approval, order or
authorization of, or filing with, the FCC or with the Public Utilities
Commission ("PUC") of the States of New York and New Jersey, or of any
other State where the Company or any of its subsidiaries is currently
qualified to transact business, on the part of the Company or its
subsidiaries is required in connection with the issuance of the
Securities.
(xxii) Neither the issue and sale of the Securities nor the
performance by the Company of its obligations under this Agreement will
result in a violation of the Communications Act
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<PAGE>
6
of 1934, as amended ("Communications Act"), or any applicable rules or
the regulations promulgated under the Communications Act binding on the
Company or any of its subsidiaries or, to the best of such counsel's
knowledge after due inquiry, any order, writ, judgment, injunction,
decree or award of the FCC binding on the Company or any of its
subsidiaries.
(xxiii) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of
the Company and its consolidated subsidiaries as of the dates shown and
their results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied
on a consistent basis and the schedules included in each Registration
Statement present fairly the information required to be stated therein.
(xxiv) Since the date of the latest audited financial
statements included in the Prospectus there has been no material
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole, and there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(xxv) The Company is not, and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Prospectus, will not be, an
"investment company" as defined in the Investment Company Act of 1940.
(b) Each Selling Stockholder severally represents and warrants
to, and agrees with, the several Underwriters that:
(i) Such Selling Stockholder has and on each Optional Closing
Date hereinafter mentioned will have valid and unencumbered title to
the Optional Securities to be delivered by such Selling Stockholder on
such Optional Closing Date and full right, power and authority to enter
into this Agreement and to sell, assign, transfer and deliver the
Optional Securities to be delivered by such Selling Stockholder on such
Optional Closing Date hereunder; and upon the delivery of and payment
for the Optional Securities on such Optional Closing Date hereunder the
several Underwriters will acquire valid and unencumbered title to the
Optional Securities to be delivered by such Selling Stockholder on such
Optional Closing Date.
(ii) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of
the Act and the Rules and Regulations and did not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (B) on the Effective Date of the Additional
Registration Statement (if any), each Registration Statement conformed,
or will conform, in all respects to the requirements of the Act and the
Rules and Regulations did not include, or will not include, any untrue
statement of a material fact and did not omit, or will not omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (C) on the date of this
Agreement, the Initial Registration Statement and, if the Effective
Time of the Additional Registration Statement is prior to the execution
and delivery of this Agreement, the Additional Registration Statement
each conforms, and at the time of filing of the Prospectus pursuant to
Rule 424(b) or (if no such filing is required) at the Effective Date of
the Additional Registration Statement in which the Prospectus is
included, each Registration Statement and the Prospectus will conform,
in all respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents includes, or will include,
any untrue statement
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7
of a material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of
this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules
and Regulations, neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading. The two preceding sentences apply only to the
extent that any statements in or omissions from a Registration
Statement or the Prospectus are based on written information furnished
to the Company by such Selling Stockholder specifically for use
therein.
(iii) There are no contracts, agreements or understandings
between such Selling Stockholder and any person that would give rise to
a valid claim against such Selling Stockholder or any Underwriter for a
brokerage commission, finder's fee or other like payment in connection
with the offering of the Optional Securities.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to each
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Company, at a purchase price of $ per share, that number of Firm
Securities set forth opposite the name of such Underwriter in Schedule B hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, against payment of the purchase price in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC")
drawn to the order of the Company, at the office of Cravath, Swaine & Moore,
Worldwide Plaza, 825 Eighth Avenue, New York, N.Y. 10019-9745, at 10:00 a.m.,
New York time, on , 1997, or at such other time not later than seven
full business days thereafter as CSFBC and the Company determine, such time
being herein referred to as the "First Closing Date". The certificates for the
Firm Securities so to be delivered will be in definitive form, in such
denominations and registered in such names as CSFBC requests, and will be made
available for checking and packaging at the above office of Cravath, Swaine &
Moore at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company and
the Selling Stockholders from time to time not more than 30 days subsequent to
the date of the Prospectus, the Underwriters may purchase all or less than all
of the Optional Securities at the purchase price per Security to be paid for the
Firm Securities. The Company and the Selling Stockholders agree, severally and
not jointly, to sell to the Underwriters the respective numbers of Optional
Securities obtained by multiplying the number of Optional Securities specified
in such notice by a fraction the numerator of which is in the
case of the Company and the number of shares set forth opposite the names of
such Selling Stockholders in Schedule A hereto under the caption "Number of
Optional Securities to be Sold" in the case of the Selling Stockholders and the
denominator of which is the total number of Optional Securities (subject to
adjustment by CSFBC to eliminate fractions). Such Optional Securities shall be
purchased from the Company and each Selling Stockholder for the account of each
Underwriter in the same proportion as the number of Firm Securities set forth
opposite such Underwriter's name bears to the total number of Firm Securities
(subject to adjustment by CSFBC to eliminate fractions) and may be purchased by
the Underwriters only for the purpose of covering over-allotments made in
connection with the sale of the Firm Securities. No Optional Securities shall be
sold or delivered unless the Firm Securities previously have been, or
simultaneously are, sold and delivered. The right to purchase the Optional
Securities or any portion thereof may be exercised from time to time and to the
extent not previously exercised may be surrendered and terminated at any time
upon notice by CSFBC to the Company and the Selling Stockholders.
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8
Certificates in negotiable form for the Optional Securities to be sold
by the Selling Stockholders hereunder have been placed, prior to the execution
of this Agreement, in custody, for delivery under this Agreement, under Custody
Agreements made with , as custodian ("Custodian"). Each Selling
Stockholder agrees that the shares represented by the certificates held in
custody for the Selling Stockholders under such Custody Agreements are subject
to the interests of the Underwriters hereunder, that the arrangements made by
the Selling Stockholders for such custody are to that extent irrevocable, and
that the obligations of the Selling Stockholders hereunder shall not be
terminated by operation of law, whether by the death of any individual Selling
Stockholder or the occurrence of any other event, or in the case of a trust, by
the death of any trustee or trustees or the termination of such trust. If any
individual Selling Stockholder or any such trustee or trustees should die, or if
any other such event should occur, or if any of such trusts should terminate,
before the delivery of the Optional Securities hereunder, certificates for such
Optional Securities shall be delivered by the Custodian in accordance with the
terms and conditions of this Agreement as if such death or other event or
termination had not occurred, regardless of whether or not the Custodian shall
have received notice of such death or other event or termination.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company and the Custodian
will deliver the Optional Securities being purchased on each Optional Closing
Date to the Representatives for the accounts of the several Underwriters,
against payment of the purchase price therefor in Federal (same day) funds by
official bank check or checks or wire transfer to an account at a bank
acceptable to CSFBC drawn to the order of in the case
of Optional Securities and in the case
of Optional Securities, at the above office of Cravath, Swaine &
Moore. The certificates for the Optional Securities being purchased on each
Optional Closing Date will be in definitive form, in such denominations and
registered in such names as CSFBC requests upon reasonable notice prior to such
Optional Closing Date and will be made available for checking and packaging at
the above office of Cravath, Swaine & Moore at a reasonable time in advance of
such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company and the Selling Stockholders. (A)
The Company agrees with the several Underwriters and the Selling Stockholders
that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Company will file the Prospectus with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to
by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier
of (A) the second business day following the execution and delivery of
this Agreement or (B) the fifteenth business day after the Effective
Date of the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing
pursuant to Rule 424(b). If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement and an additional registration statement is necessary to
register a portion of the Offered Securities under the Act but the
Effective Time thereof has not occurred as of such execution and
delivery, the Company will file the additional registration statement
or, if filed, will file a post-effective amendment thereto with the
Commission pursuant to and in accordance with Rule 462(b) on or prior
to 10:00 p.m., New York time, on the date of this Agreement or, if
earlier, on or prior to the time the Prospectus is printed and
distributed to any Underwriter, or will make such filing at such later
date as shall have been consented to by CSFBC.
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9
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or supplementation
without CSFBC's consent; and the Company will also advise CSFBC
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission of
any stop order proceedings in respect of a Registration Statement and
will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent
to, nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section
6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its securityholders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (four of which will be signed and will
include all exhibits), each related preliminary prospectus, and, so
long as a prospectus relating to the Offered Securities is required to
be delivered under the Act in connection with sales by any Underwriter
or dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The
Prospectus shall be so furnished on or prior to 3:00 p.m., New York
time, on the business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other such documents shall be so furnished
as soon as available. The Company will pay the expenses of printing and
distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so
long as required for the distribution.
(g) During the period of 10 years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year,
a copy of its annual report to stockholders for such year; and the
Company will furnish to the Representatives (i) as soon as available, a
copy of each report and any definitive proxy statement of the Company
filed with the Commission under the Securities Exchange Act of 1934 or
mailed to stockholders, and (ii) from time to time, such other
information concerning the Company as CSFBC may reasonably request.
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10
(h) For a period of 180 days after the date of the initial
public offering of the Offered Securities, the Company will not (i)
offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, or file with the Commission a registration statement
under the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, or (ii) enter into
any swap or other agreement that transfers, in whole or in part, any of
the economic consequences of ownership of such shares of Securities,
whether any transaction described in clause (i) or (ii) above is to be
settled by delivery of shares of Securities or such other securities,
in cash or otherwise, in each case without the prior written consent of
CSFBC, except issuances of Securities pursuant to the conversion or
exchange of convertible or exchangeable securities or the exercise of
warrants or options, in each case outstanding on the date hereof,
grants of employee stock options pursuant to the terms of a plan in
effect on the date hereof and issuances of Securities pursuant to the
exercise of such options.
(i) The Company agrees with the several Underwriters that the
Company will pay all expenses incident to the performance of the
obligations of the Company and the Selling Stockholders, as the case
may be, under this Agreement, for any filing fees and other expenses
(including fees and disbursements of counsel) in connection with
qualification of the Offered Securities for sale under the laws of such
jurisdictions as CSFBC designates and the printing of memoranda
relating thereto, for the filing fee incident to, and the reasonable
fees and disbursements of counsel to the Underwriters in connection
with, the review by the National Association of Securities Dealers,
Inc. of the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities, for any transfer taxes on the
sale by the Selling Stockholders of the Offered Securities to the
Underwriters and for expenses incurred in distributing preliminary
prospectuses and the Prospectus (including any amendments and
supplements thereto) to the Underwriters.
(B) Each Selling Stockholder agrees, severally and not jointly, with
the several Underwriters and the Company that:
(a) Such Selling Stockholder shall deliver to CSFBC,
Attention: Transactions Advisory Group, on or prior to the First
Closing Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
(b) Such Selling Stockholder shall, for a period of [180] days
after the date of the initial public offering of the Offered
Securities, not (i) offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any additional shares of the
Securities or securities convertible into or exchangeable or
exercisable for any shares of Securities, or publicly disclose the
intention to make any such offer, sale, pledge or disposal, or (ii)
enter into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of such shares of
Securities, whether any transaction described in clause (i) or (ii)
above is to be settled by delivery of shares of Securities or such
other securities, in cash or otherwise, in each case without the prior
written consent of CSFBC.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the
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11
performance by the Company and the Selling Stockholders of their obligations
hereunder and to the following additional conditions precedent:
(a) The Representatives shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time of the
Initial Registration Statement is prior to the execution and delivery
of this Agreement, shall be on the date of this Agreement or, if the
Effective Time of the Initial Registration Statement is subsequent to
the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to such Effective Time), of Price
Waterhouse LLP, confirming that they are independent public accountants
within the meaning of the Act and the applicable published Rules and
Regulations thereunder and stating to the effect that [if unaudited
financial statements will be used, additional language will be
included]:
(i) in their opinion the financial statements and
schedules examined by them and included in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations;
(ii) on the basis of a reading of the latest available
interim financial statements of the Company, inquiries of
officials of the Company who have responsibility for
financial and accounting matters and other specified
procedures, nothing came to their attention that caused them
to believe that:
(A) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of this Agreement,
there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt
of the Company and its consolidated subsidiaries or,
at the date of the latest available balance sheet
read by such accountants, there was any decrease in
consolidated net current assets or net assets, as
compared with amounts shown on the latest balance
sheet included in the Prospectus; or
(B) for the period from the closing date of
the latest income statement included in the
Prospectus to the closing date of the latest
available income statement read by such accountants
there were any decreases, as compared with the
corresponding period of the previous year and with
the period of corresponding length ended the date of
the latest income statement included in the
Prospectus, in consolidated net sales or net
operating income in the total or per share amounts of
consolidated net income; and
(iii) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information are derived from
the regularly maintained general accounting records of the
Company and its subsidiaries subject to the internal controls
of the Company's accounting system or are derived directly
from such records by analysis or computation) with the results
obtained from inquiries, a reading of such general accounting
records and other procedures specified in such letter and have
found such dollar amounts, percentages and other financial
information to be in agreement with such results.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statements is subsequent to the execution and
delivery of this Agreement, "Registration Statements" shall mean the
initial registration statement as proposed to be amended by the
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12
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statements is prior to the execution and delivery of this Agreement but
the Effective Time of the Additional Registration Statement is
subsequent to such execution and delivery, "Registration Statements"
shall mean the Initial Registration Statement and the additional
registration statement as proposed to be filed or as proposed to be
amended by the post-effective amendment to be filed shortly prior to
its Effective Time, and (iii) "Prospectus" shall mean the prospectus
included in the Registration Statements.
(b) If the Effective Time of the Initial Registration Statement
is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 p.m., New York
time, on the date of this Agreement or such later date as shall have
been consented to by CSFBC. If the Effective Time of the Additional
Registration Statement (if any) is not prior to the execution and
delivery of this Agreement, such Effective Time shall have occurred not
later than 10:00 p.m., New York time, on the date of this Agreement or,
if earlier, the time the Prospectus is printed and distributed to any
Underwriter, or shall have occurred at such later date as shall have
been consented to by CSFBC. If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, the Prospectus shall have been filed with the Commission in
accordance with the Rules and Regulations and Section 5(a) of this
Agreement. Prior to such Closing Date, no stop order suspending the
effectiveness of a Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of any Selling Stockholder, the Company or the
Representatives, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company or its subsidiaries which, in the judgment of a majority in
interest of the Underwriters including the Representatives, is material
and adverse and makes it impractical or inadvisable to proceed with
completion of the public offering or the sale of and payment for the
Offered Securities; (ii) any downgrading in the rating of any debt
securities or preferred stock of the Company by any "nationally
recognized statistical rating organization" (as defined for purposes of
Rule 436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt
securities or preferred stock of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any
suspension or limitation of trading in securities generally on the New
York Stock Exchange, or any setting of minimum prices for trading on
such exchange, or any suspension of trading of any securities of the
Company on any exchange or in the over-the-counter market; (iv) any
banking moratorium declared by U.S. Federal or New York authorities; or
(v) any outbreak or escalation of major hostilities in which the United
States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the
judgment of a majority in interest of the Underwriters including the
Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable
to proceed with completion of the public offering or the sale of and
payment for the Offered Securities.
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13
(d) The Representatives shall have received written opinions,
dated such Closing Date, of Parker Chapin Flattau & Klimpl, LLP,
special counsel for the Company, [ ], special FCC/regulatory counsel
for the Company, and David L. Goret, Vice President and General Counsel
of the Company1 to the effect that:
(i) the Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own
its properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to do business
as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification;
(ii) the Offered Securities delivered on such Closing
Date and all other outstanding shares of the Common Stock of
the Company have been duly authorized and validly issued, are
fully paid and nonassessable and conform to the description
thereof contained in the Prospectus; and the stockholders of
the Company have no preemptive rights with respect to the
Securities;
(iii) there are no contracts, agreements or
understandings known to such counsel between the Company and
any person granting such person the right to require the
Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned
by such person or to require the Company to include such
securities in the securities registered pursuant to the
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the
Company under the Act;
(iv) the Company is not and, after giving effect to
the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the
Prospectus, will not be an "investment company" as defined in
the Investment Company Act of 1940;
(v) no consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required to be obtained or made by the Company for the
consummation of the transactions contemplated by this
Agreement in connection with the sale of the Offered
Securities, except such as have been obtained and made under
the Act and such as may be required under state securities
laws;
(vi) the execution, delivery and performance of this
Agreement and the consummation of the transactions herein or
therein contemplated will not result in a breach or violation
of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any
governmental agency or body or any court having jurisdiction
over the Company or any subsidiary of the Company or any of
their properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject,
or the charter or by-laws of the Company or any such
subsidiary;
(vii) the Initial Registration Statement was declared
effective under the Act as of the date and time specified in
such opinion, the Additional Registration Statement (if any)
was filed and became effective under the Act as of the date
and
- --------
(1) The requested opinions may be allocated among the three opinion-givers as
they see fit, provided that Parker Chapin is requested at a minimum to render
the opinions in clauses (vi) and (vii) and Mr. Goret is requested at a minimum
to render a "10b-5" opinion.
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14
time (if determinable) specified in such opinion, the
Prospectus either was filed with the Commission pursuant to
the subparagraph of Rule 424(b) specified in such opinion on
the date specified therein or was included in the Initial
Registration Statement or the Additional Registration
Statement (as the case may be), and, to the best of the
knowledge of such counsel, no stop order suspending the
effectiveness of a Registration Statement or any part thereof
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act, and
each Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective
effective or issue dates, complied as to form in all material
respects with the requirements of the Act and the Rules and
Regulations; such counsel have no reason to believe that any
part of a Registration Statement or any amendment thereto, as
of its Effective Date or as of such Closing Date, contained
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
to make the statements therein not misleading; or that the
Prospectus or any amendment or supplement thereto, as of its
issue date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading;
(viii) the descriptions in the Registration
Statements and Prospectus of statutes, legal and governmental
proceedings and contracts and other documents, including under
"Business--Regulation", are accurate and fairly present the
information required to be shown; and such counsel do not know
of any legal or governmental proceedings or statutes or
regulations required to be described in a Registration
Statement or the Prospectus which are not described as
required or of any contracts or documents of a character
required to be described in a Registration Statement or the
Prospectus or to be filed as exhibits to a Registration
Statement which are not described and filed as required;
(ix) this Agreement has been duly authorized,
executed and delivered by the Company;
(x) the Company and its subsidiaries have in effect
all Licenses required to be obtained from the [FCC] or
otherwise for the Company and its subsidiaries to conduct
their respective businesses as presently conducted, except for
Licenses that the failure to obtain would not have a material
adverse effect on the Company and its subsidiaries taken as a
whole. The Company and its subsidiaries are not required to
obtain any Licenses or to file any tariffs for
telecommunications services in the States of New York or New
Jersey, or in any other State where the Company or any of its
subsidiaries is currently qualified to transact business,
because the Company and its subsidiaries do not offer or
provide intrastate telecommunications services within the
United States. To the best of such counsel's knowledge and
except as described in the Prospectuses, the Licenses obtained
by the Company or its subsidiaries have been duly and validly
issued and are in full force and effect and no proceedings to
revoke or restrict such Licenses are pending or have been
threatened against the Company or any of its subsidiaries by
the FCC;
(xi) except as described in the Prospectuses, to the
knowledge of such counsel, the Company and its subsidiaries
are not in violation of any policy, rule or regulation or any
judgment, injunction, order or decree of the FCC or of the
regulatory authority of the States of New York or New Jersey,
or of any other state where the Company or any of its
subsidiaries is currently qualified to transact business,
except for violations that would not have a material adverse
effect on the Company and its subsidiaries taken as a whole;
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15
(xii) there is no outstanding adverse judgment,
injunction, decree or order that has been issued by the FCC
against the Company or any of its subsidiaries or, to the best
of such counsel's knowledge after due inquiry and except as
described in the Prospectus, any action, proceeding or
investigation pending before or threatened by the FCC against
the Company or any of its subsidiaries which, if the subject
of an unfavorable decision, ruling or finding, would have a
material adverse effect on the Company and its subsidiaries
taken as a whole;
(xiii) no license, permit, consent, approval, order
or authorization of, or filing with, the FCC or with the PUC
of the States of New York and New Jersey, or of any other
State where the Company or any of its subsidiaries is
currently qualified to transact business, on the part of the
Company or its subsidiaries is required in connection with the
issuance of the Securities; and
(xiv) neither the issue and sale of the Securities
nor the performance by the Company of its obligations under
this Agreement will result in a violation of the
Communications Act or any applicable rules or the regulations
promulgated under the Communications Act binding on the
Company or any of its subsidiaries or, to the best of such
counsel's knowledge after due inquiry, any order, writ,
judgment, injunction, decree or award of the FCC binding on
the Company or any of its subsidiaries.
(e) the Representatives shall have received the opinion
contemplated in the Power of Attorney executed and delivered by each
Selling Stockholder and an opinion, dated such Closing Date, of
[ ], counsel for the Selling Stockholders, to the effect that:
(i) each Selling Stockholder had valid and
unencumbered title to the Offered Securities delivered by such
Selling Stockholder on such Closing Date and had full right,
power and authority to sell, assign, transfer and deliver the
Offered Securities delivered by such Selling Stockholder on
such Closing Date hereunder; and the several Underwriters have
acquired valid and unencumbered title to the Offered
Securities purchased by them from the Selling Stockholders on
such Closing Date hereunder;
(ii) no consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required to be obtained or made by any Selling Stockholder
for the consummation of the transactions contemplated by the
Custody Agreements or this Agreement in connection with the
sale of the Offered Securities sold by the Selling
Stockholders, except such as have been obtained and made under
the Act and such as may be required under state securities
laws;
(iii) the execution, delivery and performance of the
Custody Agreements and this Agreement and the consummation of
the transactions therein and herein contemplated will not
result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body
or any court having jurisdiction over any Selling Stockholder
or any of his or its properties or any agreement or instrument
to which any Selling Stockholder is a party or by which any
Selling Stockholder is bound or to which any of the properties
of any Selling Stockholder is subject;
(iv) the Power of Attorney and related Custody
Agreement with respect to each Selling Stockholder has been
duly authorized, executed and delivered by such Selling
Stockholder and constitute valid and legally binding
obligations of each such Selling Stockholder enforceable in
accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and similar
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16
laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and
(v) this Agreement has been duly authorized, executed
and delivered by each Selling Stockholder.
(f) The Representatives shall have received from Cravath,
Swaine & Moore, counsel for the Underwriters, such opinion or opinions,
dated such Closing Date, with respect to the incorporation of the
Company, the validity of the Offered Securities delivered on such
Closing Date, the Registration Statements, the Prospectus and other
related matters as the Representatives may require, and the Selling
Stockholders and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(g) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company in this Agreement are true and correct; the Company has
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to such Closing
Date; no stop order suspending the effectiveness of any Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of
subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule
462(b), including payment of the applicable filing fee in accordance
with Rule 111(a) or (b) under the Act, prior to the time the Prospectus
was printed and distributed to any Underwriter; and, subsequent to the
[If closing date of latest income statement in Prospectus is more
recent than latest balance sheet date, insert--respective] date[s] of
the most recent financial statements in the Prospectus, there has been
no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company
and its subsidiaries taken as a whole.
(h) The Representatives shall have received a letter, dated
such Closing Date, of Price Waterhouse LLP which meets the requirements
of subsection (a) of this Section, except that the specified date
referred to in such subsection will be a date not more than three
business days prior to such Closing Date for the purposes of this
subsection.
The Selling Stockholders and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably request. CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue
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17
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (c) below.
(b) Each Selling Stockholder, severally and not jointly, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with information relating to such Selling Stockholder furnished in
writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred.
(c) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company and each Selling Stockholder against any losses, claims,
damages or liabilities to which the Company or such Selling Stockholder may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company and each Selling Stockholder in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred, it being understood and agreed that the only such information
furnished by any Underwriter consists of the following information in the
Prospectus furnished on behalf of each Underwriter: the last paragraph at the
bottom of the cover page concerning the terms of the offering by the
Underwriters, the legend concerning over-allotments and stabilizing on the
inside front cover page, the concession and reallowance figures appearing in the
fourth paragraph under the caption "Underwriting".
(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a), (b) or (c) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a), (b) or (c) above. In case any such action
is brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
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18
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(e) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholders on
the one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company and the Selling Stockholders bear to the total underwriting discounts
and commissions received by the Underwriters. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the Selling
Stockholders or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (e).
Notwithstanding the provisions of this subsection (e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under
this Section shall be in addition to any liability which the Company and the
Selling Stockholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company and the Selling Stockholders for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
<PAGE>
<PAGE>
19
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC, the Company and the Selling Stockholders for the purchase of such Offered
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Selling Stockholders, of the Company or its officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, any Selling
Stockholder, the Company or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If this Agreement is terminated pursuant to Section
8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by them pursuant to Section 5 and the
respective obligations of the Company, the Selling Stockholders, and the
Underwriters pursuant to Section 7 shall remain in effect, and if any Offered
Securities have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall also remain in effect. If
the purchase of the Offered Securities by the Underwriters is not consummated
for any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in clause (iii),
(iv) or (v) of Section 6(c), the Company will reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at Icon CMT Corp., 1200
Harbor Boulevard, Weehawken, N.J. 07087, Attention: Chief Executive Officer, or,
if sent to the Selling Stockholders or any of them, will be mailed, delivered or
telegraphed and confirmed to at ; provided,
however, that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will enure to the benefit of and be
binding upon the parties hereto and their respective personal representatives
and successors and the officers and directors and controlling persons referred
to in Section 7, and no other person will have any right or obligation
hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters. will act for
the Selling Stockholders in connection with such transactions, and any action
under or in respect of this Agreement taken by
will be binding upon all the Selling Stockholders.
<PAGE>
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20
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the nonexclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
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21
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement among the
Selling Stockholders, the Company and the several Underwriters in accordance
with its terms.
Very truly yours,
ICON CMT CORP.,
By
------------------------
Name:
Title:
SELLING STOCKHOLDERS,
--------------------------
Scott A. Baxter
--------------------------
Richard M. Brown
--------------------------
Scott Harmolin
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above
written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BANCAMERICA ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
Acting on behalf of themselves and as the
Representatives of the several Underwriters.
By CREDIT SUISSE FIRST BOSTON CORPORATION
By
--------------------------------------
Name:
Title:
<PAGE>
<PAGE>
SCHEDULE A
NUMBER OF OPTIONAL
SELLING STOCKHOLDER SECURITIES TO BE SOLD
- ------------------- ---------------------
Scott A. Baxter .....................................
Richard M. Brown....................................
Scott Harmolin ......................................
----------------
Total ......................................
================
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<PAGE>
SCHEDULE B
NUMBER OF
FIRM SECURITIES
UNDERWRITER TO BE PURCHASED
- ----------- ---------------
Credit Suisse First Boston Corporation ....................
BancAmerica Robertson Stephens.............................
Donaldson, Lufkin & Jenrette Securities Corporation .......
-------------
Total ............................................
=============
<PAGE>
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
ICON CMT CORP.
It is hereby certified that:
ARTICLE I
The present name of the corporation (hereinafter called the
"Corporation") is ICon CMT Corp. The name under which the Corporation was
originally incorporated was ICon International Inc. The date of filing of its
original certificate of incorporation with the Secretary of State of the State
of Delaware was February 27, 1995.
ARTICLE II
The restated certificate of incorporation of the Corporation
filed with the Secretary of State of the State of Delaware on May 30, 1997 (the
"Old Certificate") is hereby amended by amending Paragraphs First and Fourth of
Article V thereof, by striking out Paragraphs Fifth, Sixth and Tenth of Article
V thereof, by adding new Paragraphs Fifth through Eighth and by renumbering the
remaining Paragraphs Seventh, Eighth, Ninth and Eleventh of the Old Certificate
as Paragraphs Ninth through Twelfth of Article V hereof, all of which is set
forth in the Restated Certificate of Incorporation hereinafter provided for.
ARTICLE III
The provisions of the certificate of incorporation of the
Corporation as heretofore amended and/or supplemented, and as herein amended,
are hereby restated and integrated into the single instrument which is
hereinafter set forth, and which is entitled Restated Certificate of
Incorporation of ICon CMT Corp. without any further amendments other than the
amendments herein certified and without any discrepancy between the provisions
of the certificate of incorporation as heretofore amended and supplemented and
the provisions of the said single instrument hereinafter set forth.
ARTICLE IV
The amendments and the restatement of the certificate of
incorporation herein certified have been duly adopted by the stockholders in
accordance with the provisions of Section 228, 242 and 245 of the General
Corporation Law of the State of Delaware (the "GCL").
<PAGE>
<PAGE>
ARTICLE V
The certificate of incorporation of the Corporation, as
amended and restated herein, reads as follows:
RESTATED CERTIFICATE OF INCORPORATION
OF
ICON CMT CORP.
FIRST: The name of the Corporation is Icon CMT Corp.
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1013 Centre Road, Wilmington, New Castle
County, Delaware 19805. The name of its registered agent at such address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the GCL.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 51,000,000 shares, consisting of:
(a) 50,000,000 shares of a single class of common stock, par value $.001 per
share (the "Common Stock"); and (b) 1,000,000 shares of a single class of
preferred stock, par value $.01 per share (the "Preferred Stock"). The number of
shares of Preferred Stock may be issued from time to time in one or more series.
The Preferred Stock may be issued from time to time, when and as authorized by
the Board of Directors, in one or more subseries as to the date of issuance,
upon such terms and conditions as the Board of Directors may approve in one or
more additional series. The Board of Directors is expressly authorized to
provide for the issuance of all or any shares of the Preferred Stock in one or
more classes or series, and, subject to the provisions hereof, to fix by
resolution or resolutions the designations, powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions, of each such class or series.
Effective upon the filing of the certificate of incorporation,
each two and three-quarters (2.75) shares of Common Stock then issued shall be
automatically reclassified into one (1) share of Common Stock of the
Corporation. In lieu of any fractional share to which the holder would otherwise
be entitled, the Corporation shall pay cash in an amount equal to the same
fraction of the fair market value, as determined in good faith by the Board of
Directors, of one share of Common Stock after such conversion.
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<PAGE>
FIFTH: Except as required by law, and subject to the rights of
holders of any series of Preferred Stock established pursuant to Article Fourth
of this Certificate of Incorporation, a special meeting of stockholders may be
called at any time by the Board of Directors, the Chairman or the President, and
shall be called only by the Board of Directors or the Chairman or the President
pursuant to a resolution approved by a majority of the directors of the
Corporation then in office. Any such call must specify the matter or matters to
be acted upon at such meeting and only such matter or matters shall be acted
upon thereat. Any such meeting shall be at such time and at such place, within
or without the State of Delaware, as shall be set forth in the Board of
Directors' resolution calling for such meeting.
SIXTH:
(a) The number of directors of the Corporation shall
be fixed in accordance with the By-laws of the Corporation, and may be increased
or decreased from time to time in such a manner as may be prescribed in the
By-laws of the Corporation.
(b) Unless and except to the extent that the By-laws
of the Corporation shall so require, the election of directors of the
Corporation need not be by written ballot.
(c) The directors of the Corporation, other than
those who may be elected by the holders of any series of Preferred Stock, voting
as a separate class, shall be divided into three classes, as nearly equal in
number as possible. One class of directors of the Corporation shall be initially
elected for a term expiring at the annual meeting of stockholders to be held in
1998, another class shall initially be elected for a term expiring at the annual
meeting of stockholders to be held in 1999 and another class shall initially be
elected for a term expiring at the annual meeting of stockholders to be held in
2000. Members of each class shall hold office until their successors are elected
and qualified. At each succeeding annual meeting of the stockholders of the
Corporation, the successors of the class of directors of the Corporation whose
term expires at that meeting shall be elected, in accordance with the By-laws of
the Corporation, to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election.
SEVENTH: The By-laws of the Corporation or any of them may be
amended or repealed, in any respect, and new By-laws may be adopted, at any time
either (i) by an affirmative vote of 66-2/3% of the stockholders entitled to
vote generally for the election of directors of the Corporation or (ii) by an
affirmative vote of a majority of the directors of the Corporation present at a
meeting of the Board of Directors, in each case, in accordance with the terms of
the By-laws. Notwithstanding the foregoing and anything contained in this
Restated Certificate of Incorporation to the contrary, Section 5 ("Special
Meetings") or Section 7 ("Order of Business") of Article II ("Meetings of
Stockholders") of the By-laws; Section 1 ("Number and Term"), Section 4
("Nomination of Directors, Elections") or Section 8 ("Meetings") of Article III
("Directors") of the By-laws; or Article VI ("Amendments") of the By-laws shall
not be amended or repealed and no provision inconsistent with any thereof shall
be adopted without the
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<PAGE>
affirmative vote of the 66-2/3% of the stockholders entitled to vote generally
for the election of directors of the Corporation, voting together as a single
class.
EIGHTH:
(a) Notwithstanding anything contained in this
Restated Certificate of Incorporation to the contrary, Articles Fifth, Sixth and
Seventh hereof shall not be altered, amended or repealed and no provision
inconsistent therewith shall be adopted without the affirmative vote of the
holders of at least 66-2/3% of all of the shares of the Corporation entitled to
vote generally in the election of directors of the Corporation, voting together
as a single class. Notwithstanding anything contained in this Restated
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 66-2/3% of all of the shares of the Corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to alter, amend or repeal or adopt any provision inconsistent
with this paragraph (a) of Article Eighth.
(b) The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Restated Certificate of
Incorporation, or any amendment thereof, in the manner now or thereafter
prescribed by the laws of the State of Delaware or this Restated Certificate of
Incorporation, and all rights conferred upon the stockholders of the Corporation
are granted subject to this reservation.
NINTH: Whenever a compromise or arrangement is proposed
between the Corporation and its creditors or any class of them and/or between
the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of the Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of the GCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
TENTH: No director shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing
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<PAGE>
<PAGE>
violation of law, (iii) under Section 174 of the GCL or (iv) for any transaction
from which the director derived an improper personal benefit.
ELEVENTH: The Corporation shall, to the fullest extent
permitted by the GCL, as the same may be amended and supplemented, indemnify any
and all persons whom it shall have power to indemnify from and against any and
all liabilities, including without limitation expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement of any suit, action or
proceeding to which such person is made, or is threatened to be made, a party.
The indemnification provided for herein shall not be deemed exclusive of any
other rights to which any person may be entitled under any By-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office; shall continue as to a person who has ceased to be a director, officer,
employee or agent; and shall inure to the benefit of the heirs, executors and
administrators of such a person.
TWELFTH: The Corporation reserves the right to amend, or to
repeal any provision of, this certificate of incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred hereby
upon the stockholders of the Corporation are granted subject to the reservation
of such right.
IN WITNESS WHEREOF, the undersigned has duly signed this
certificate on , 1997.
ICON CMT CORP.
By:
--------------------------------------
Scott A. Baxter
President, Chief Executive Officer and
Chairman of the Board
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<PAGE>
<PAGE>
RESTATED BY-LAWS
OF
ICON CMT CORP.
-------------
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The corporation's registered
office in the State of Delaware shall be established and maintained at the
office of Corporation Service Company, in the City of Wilmington, in the County
of New Castle, in the State of Delaware, and Corporation Service Company shall
be the registered agent of this corporation in charge of the corporation's
registered office in the State of Delaware.
SECTION 2. OTHER OFFICES. The corporation may have other
offices, either within or without the State of Delaware, at such place or places
as the board of directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders
for the election of directors and for such other business as may be stated in
the notice of the meeting, shall be held at such place, either within or without
the State of Delaware, and at such time and date as the board of directors, by
resolution, shall determine and as set forth in the notice of the meeting.
If the date of the annual meeting shall fall upon a legal
holiday, the meeting shall be held on the next succeeding business day. At each
annual meeting, the stockholders entitled to vote shall elect a board of
directors and they may transact such other corporate business as shall be stated
in the notice of the meeting.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any
purpose other than the election of directors may be held at such time and place,
within or without the State of Delaware, as shall be stated in the notice of the
meeting.
<PAGE>
<PAGE>
SECTION 3. VOTING. Except as otherwise provided in the
certificate of incorporation of the corporation or in a resolution of the board
of directors adopted pursuant to the certificate of incorporation establishing a
series of preferred stock of the corporation, each stockholder entitled to vote
in accordance with the terms of the corporation's certificate of incorporation
and these by-laws shall be entitled to one vote, in person or by proxy, for each
share of stock entitled to vote held by that stockholder, but no proxy shall be
voted after three years from its date unless that proxy provides for a longer
period. Upon the demand of any stockholder, the vote for directors and the vote
upon any question before the meeting, shall be by ballot. All elections for
directors shall be decided by plurality vote; all other questions shall be
decided by majority vote except as otherwise provided by the corporation's
certificate of incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the
ensuing election, arranged in alphabetical order, with the address of each, and
the number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM. Except as otherwise required by law, by the
corporation's certificate of incorporation or by these by-laws, the presence, in
person or by proxy, of stockholders holding a majority of the stock of the
corporation entitled to vote shall constitute a quorum at all meetings of the
stockholders. In case a quorum shall not be present at any meeting, a majority
in interest of the stockholders entitled to vote thereat, present in person or
by proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until the requisite amount of
stock entitled to vote shall be present. At any such adjourned meeting at which
the requisite amount of stock entitled to vote shall be represented, any
business may be transacted that might have been transacted at the meeting as
originally noticed; but only those stockholders entitled to vote at the meeting
as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof.
SECTION 5. SPECIAL MEETINGS. Except as required by law, and
subject to the right of holders of any series of preferred stock established
pursuant to Article Fourth of the certificate of incorporation, a special
meeting of stockholders may be called at any time by the board of directors, the
chairman or the president, and shall be called only by the board of directors or
the chairman or the president pursuant to a resolution approved by a majority of
the directors of the corporation then in office. Any such calls must specify the
matter or matters to be acted upon at such meeting and only such matter or
matters shall be acted upon thereat.
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<PAGE>
<PAGE>
SECTION 6. NOTICE OF MEETINGS. Except as otherwise may be
required by law, notice of each meeting of stockholders, whether an annual
meeting or a special meeting, shall be in writing, shall state the purpose or
purposes of the meeting, the place, date and hour of the meeting and, unless it
is an annual meeting, shall indicate that the notice is being issued by or at
the direction of the person or persons calling the meeting, and a copy thereof
shall be delivered or sent by mail to each stockholder entitled to vote thereat
at his address as it appears on the records of the corporation, not less than 10
nor more than 60 days before the date of said meeting, unless he shall have
filed with the secretary a written request that notices to him be mailed to some
other address, in which case it shall be directed to him at such other address.
Notice of an adjourned meeting need not be given if the time and place to which
the meeting is to be adjourned was announced at the meeting at which the
adjournment was taken, unless (i) the adjournment is for more than 30 days or
(ii) the board shall fix a new record date for such adjournment meeting after
the adjournment. Whenever any notice is required to be given under the
provisions of the General Corporation Law of the State of Delaware, the
certificate of incorporation or these by-laws, a waiver thereof, signed by the
stockholder entitled to such notice, whether before or after the time dstate
therein, shall be deemed equivalent thereto. Attendance of a stockholder at the
meeting shall be deemed equivalent to a written waiver of notice of such
meeting.
SECTION 7. ORDER OF BUSINESS.
(a) At the annual meeting, only such business shall be
conducted as shall have been brought before the annual meeting (i) by or at the
direction of the board of directors or (ii) by any stockholder who complies with
the procedures set forth in this Section 7. At any special meeting, only such
business shall be conducted as shall have been set forth in the notice of such
meeting.
(b) For business properly to be brought before an annual
meeting by a stock holder, the stockholder must have given timely notice thereof
in proper written form to the secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than 60 days nor more
than 90 days prior to the annual meeting; provided, however, that in the event
that less than 70 day's notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by the stockholder to be
timely must be received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. To be in proper written form, a
stockholder's notice to the secretary shall be set forth in writing as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (ii) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business; (iii) the class and number of shares of the corporation that are
beneficially owned by the stockholder; and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in the by-laws to the
contrary, no business shall be conducted at the annual meeting of
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<PAGE>
stockholders except in accordance with the procedures set forth in this Section
7. The chairman of an annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the annual
meeting in accordance with the provisions of this Section 7 and, if he should so
determine, he shall so declare to the annual meeting and any such business not
properly brought before the annual meeting shall not be transacted.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. The number of directors
constituting the board of directors may be determined from time to time by a
vote of a majority of the directors then in office; provided, however, that such
number shall not be less than a minimum of three nor more than a maximum of
fifteen. The initial number of directors shall be five. The directors shall be
elected at the annual meeting of the stockholders and each director shall be
elected to serve until his or her successor shall be elected and shall qualify.
Directors need not be stockholders.
SECTION 2. RESIGNATIONS. Any director, member of a committee
or other officer may resign at any time. That resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the president or secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director, member of
a committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill the vacancy and that person shall hold office for the unexpired term and
until his successor shall be duly elected and qualified, provided, however, that
if there are no directors then in office due to a vacancy, the stockholders may
elect a successor who shall hold office for the unexpired term and until his
successor shall be duly elected and qualified.
SECTION 4. NOMINATION OF DIRECTORS, ELECTIONS. Nominations for
the election of directors may be made by the board of directors or a committee
appointed by the board of directors, or by any stockholder entitled to vote
generally in the election of directors who complies with the procedures set
forth in this Section 4. Directors shall be at least 21 years of age. Directors
need not be stockholders. At each meeting of stockholders for the election of
directors at which a quorum is present, the persons receiving a plurality of the
votes cast shall be elected directors. All nominations by stockholders shall be
made pursuant to timely notice in proper written form to the secretary of the
corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the corporation not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that in the event that less than 70 days' notice or prior public disclosure of
the date of
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<PAGE>
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. To be in proper written form, such
stockholder's notice shall set forth in writing (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director, all
information relating to such person that is required to be disclosed in
solicitation of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, or any successor regulation or law including, without limitation,
such person's written consent to being named in the proxy statement as a nominee
and to serving as director if elected; and (ii) as to the stockholder giving the
notice, (x) the name and address, as they appear on the corporation's books, of
such stockholder and (y) the class and number of shares of the corporation that
are beneficially owned by such stockholder. In the event that a stockholder
seeks to nominate one or more directors, the secretary shall appoint two
inspectors, who shall not be affiliated with the corporation, to determine
whether a stockholder has complied with this Section 4. If the inspectors shall
determine that a stockholder has not complied with this Section 4, the
inspectors shall direct the chairman of the meeting to declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the by-laws of the corporation, and the chairman shall so declare to the meeting
and the defective nomination shall be disregarded.
SECTION 5. REMOVAL. Except as hereinafter provided, any
director or directors may be removed either for or without cause at any time by
the affirmative vote of the holders of a majority of all the shares of stock
outstanding and entitled to vote, at a special meeting of the stockholders
called for the purpose, and the vacancies thus created may be filled, at the
meeting held for the purpose of removal, by the affirmative vote of a majority
in interest of the stockholders entitled to vote.
Unless the corporation's certificate of incorporation
otherwise provides, stockholders may effect removal of a director who is a
member of a classified board of directors only for cause. If the corporation's
certificate of incorporation provides for cumulative voting and if less than the
entire board is to be removed, no director may be removed without cause if the
votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire board of directors, or, if there
be classes of directors, at an election of the class of directors of which he is
a part.
If the holders of any class or series are entitled to elect
one or more directors by the provisions of the corporation's certificate of
incorporation, these provisions shall apply, with respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole.
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SECTION 6. POWERS. The board of directors shall exercise all
of the powers of the corporation except such powers as are by law, or by the
corporation's certificate of incorporation or by these by-laws, conferred upon
or reserved to the stockholders.
SECTION 7. COMMITTEES. The board of directors may, by
resolution or resolutions passed by a majority of the whole board, designate one
or more committees, each committee to consist of one or more of the directors of
the corporation. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of any member
of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of the absent or disqualified member or members.
Any committee, to the extent provided in the resolution of the
board of directors, or in these by-laws, shall have and may exercise all the
powers and authority of the board of directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers that may require it; but no committee shall have the
power or authority in reference to amending the corporation's certificate of
incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a disso lution, or amending
the by-laws of the corporation; and, unless the resolution, these by-laws or the
corporation's certificate of incorporation expressly so provide, no committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
SECTION 8. MEETINGS. The directors elected upon any annual
meeting of the stockholders may hold their first meeting for the purpose of
organization and the transaction of business, if a quorum be present,
immediately after the annual meeting of the stockholders; or the time and place
of that meeting may be fixed by consent in writing of all the directors.
Regular meetings of the directors may be held without notice
at such places and times as shall be determined from time to time by resolution
of the directors.
Special meetings of the board may be called by the chairman,
vice chairman, chief executive officer or the president on the written request
of majority of the directors on at least two days notice to each director and
shall be held at such place or places as may be determined by the directors, or
as shall be stated in the call of the meeting.
Unless otherwise restricted by the corporation's certificate
of incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of
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conference telephone or similar communications equipment by means of which all
persons partici pating in the meeting can hear each other, and that
participation in a meeting shall constitute presence in person at the meeting.
SECTION 9. QUORUM. A majority of the directors shall
constitute a quorum for the transaction of business. If at any meeting of the
board there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no further
notice thereof need be given other than by announcement at the meeting that is
so adjourned.
SECTION 10. COMPENSATION. Directors shall not receive any
stated salary for their services as directors or as members of committees, but
by resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing in these by-laws shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting, if a written consent thereto
is signed by all members of the board or committee, as the case may be, and that
written consent is filed with the minutes of proceedings of the board or
committee.
SECTION 12. WAIVER OF NOTICE. Whenever any notice is required
to be given under the provisions of the General Corporation Law of the State of
Delaware, the certificate of incorporation or these by-laws, a waiver thereof,
signed by the director entitled to such notice, whether before or after the time
stated herein, shall be deemed equivalent thereto. Attendance of a director at a
meeting shall be deemed equivalent to a written waiver of notice of such
meeting.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be
a president, a treasurer, and a secretary, all of whom shall be elected by the
board of directors and who shall hold office until their successors are elected
and qualified. In addition, the board of directors may elect a chairman, a
vice-chairman, a chief executive officer, a chief operating officer, one or more
vice-presidents and such assistant secretaries and assistant treasurers as they
may deem proper. None of the officers of the corporation need be directors.
Each of the foregoing officers shall have the power and
authority to sign instruments and stock certificates in accordance with section
103(a)(2) of the Delaware General Corporation Law and to sign agreements on
behalf of the corporation. The officers shall be
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elected at the first meeting of the board of directors after each annual meeting
of the stockholders. Any two or more offices may be held at the same time by the
same person. Any officer may be removed, with or without cause, by the board of
directors. Any vacancy may be filled by the board of directors.
SECTION 2. OTHER OFFICERS AND AGENTS. The board of directors
may appoint such other officers and agents as it may deem advisable, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board of directors.
SECTION 3. CHAIRMAN. The chairman, if one be elected, shall
preside at all meetings of the stockholders and at all meetings of the board of
directors, and shall have such other power and authority and perform such other
duties as may be prescribed by these by-laws or as may be assigned from time to
time by the board of directors.
SECTION 4. VICE-CHAIRMAN. The vice-chairman, if one be
elected, shall, in the absence or disability of the chairman, preside at all
meetings of the stockholders and at all meetings of the board of directors, and
shall have such other power and authority and perform such other duties as may
be prescribed by these by-laws or as may be assigned from time to time by the
board of directors or the chairman.
SECTION 5. CHIEF EXECUTIVE OFFICER. The chief executive
officer, if one be elected, shall, in the absence or disability of the chairman
and vice-chairman, preside at all meetings of the stockholders and at all
meetings of the board of directors, and shall have general supervision,
direction and control of the business and affairs of the corporation subject to
the authorization and control of the board of directors, and shall have such
other power and authority and perform such other duties as may be prescribed by
these by-laws or as may be assigned from time to time by the board of directors.
In the absence or disability of the chief executive officer,
the president, if available, and if the president is not available the chief
operating officer, if available, shall have the authority, and shall perform the
duties, of the chief executive officer.
SECTION 6. PRESIDENT. The president shall, in the absence or
disability of the chairman, vice-chairman and chief executive officer, preside
at all meetings of the stockholders and at all meetings of the board of
directors, and shall have such other power and authority and perform such other
duties as may be prescribed by these by-laws or as may be assigned from time to
time by the board of directors or the chief executive officer.
In the absence or disability of the chief executive officer,
the president, if available, shall have the authority, and shall perform the
duties, of the chief executive officer.
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SECTION 7. CHIEF OPERATING OFFICER. The chief operating
officer, if one be elected, shall have such power and authority and perform such
duties as may be prescribed by these by-laws or as may be assigned from time to
time by the board of directors.
In the absence or disability of the president, the chief
operating officer, if available, shall have the authority, and shall perform the
duties, of the president. In addition, in the absence or disability of the chief
executive officer and the president, the chief operating officer, if available,
shall have the authority and perform the duties of the chief executive officer.
SECTION 8. VICE-PRESIDENT. Each vice-president shall have such
power and authority and perform such duties as may be prescribed by these
by-laws or as may be assigned from time to time by the board of directors or the
chief executive officer.
The board of directors may designate one or more vice-
presidents, in such order of priority as shall be specified by the board of
directors, to have the authority, and to perform the duties, of the chief
executive officer in the absence or disability of the chief executive officer,
the president and the chief operating officer; provided, however, that no
vice-president shall have such authority or perform such duties unless
specifically designated for that purpose by the board of directors.
SECTION 9. TREASURER. The treasurer shall have the custody of
the corporate funds and securities, shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the board of directors.
The Treasurer shall disburse the funds of the corporation as
may be ordered by the board of directors, or the chief executive officer, taking
proper vouchers for such disbursements. He shall render to the chief executive
officer and board of directors at the regular meetings of the board of
directors, or whenever they may request it, an account of all his transactions
as treasurer and of the financial condition of the corporation. If required by
the board of directors, he shall give the corporation a bond for the faithful
discharge of his duties in such amount and with such surety as the board of
directors shall prescribe.
SECTION 10. SECRETARY. The secretary shall give, or cause to
be given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these by- laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the chief executive officer, the president, the chairman,
the vice-chairman or by the board of directors or stockholders, upon whose
requisition the meeting is called as provided in these by- laws.
The secretary shall record all the proceedings of the meetings
of the corporation and of the directors in a book to be kept for that purpose,
and shall perform such other duties as
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may be assigned to him by the chief executive officer or the board of directors.
He shall have custody of the seal of the corporation and shall affix the same to
all instruments requiring it, when authorized by the chief executive officer or
the board of directors, and attest the same.
SECTION 11. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
Assistant treasurers, if any shall be elected, shall, in the absence of the
treasurer, have the authority, and perform the duties, of the treasurer, and
shall have such other power and authority and perform such other duties as may
be prescribed by these by-laws or as may be assigned from time to time by the
board of directors or the chief executive officer.
Assistant secretaries, if any shall be elected, shall, in the
absence of the secretary, have the authority, and perform the duties, of the
secretary, and shall have such other power and authority and perform such other
duties as may be prescribed by these by-laws or as may be assigned from time to
time by the board of directors or the chief executive officer.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock,
signed by the chairman or vice chairman of the board of directors, if they be
elected, president or vice- president, and the treasurer or an assistant
treasurer, or secretary or an assistant secretary, shall be issued to each
stockholder certifying the number of shares owned by him in the corporation. Any
or all the signatures may be facsimiles.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may
be issued in the place of any certificate theretofore issued by the corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
the certificate, or the issuance of the new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the
corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
transfer the old certificates shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be canceled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
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SECTION 4. STOCKHOLDERS RECORD DATE. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than 60 nor less than ten days
before the date of the meeting, nor more than 60 days before any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of the
corporation's certificate of incorporation, the board of directors may, out of
funds legally available therefor at any regular or special meeting, declare
dividends upon the capital stock of the corporation as and when they deem
expedient. Before declaring any dividend there may be set apart out of any funds
of the corporation available for dividends, such sum or sums as the directors
from time to time in their discretion deem proper for working capital or as a
reserve fund to meet contingencies or for equalizing dividends or for such other
purposes as the directors shall deem conducive to the interests of the
corporation.
SECTION 6. SEAL. The corporate seal shall be circular in form
and shall contain the name of the corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. The fiscal year of the corporation
shall be determined by resolution of the board of directors.
SECTION 8. CHECKS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of
the corporation, and in such manner, as shall be determined from time to time by
resolution of the board of directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required by these by-laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage prepaid,
addressed to the person entitled thereto at his address as it appears on the
records of the corporation, and that notice shall be deemed to have been given
on the day of the mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
statute.
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Whenever any notice whatsoever is required to be given under
the provisions of any law, or under the provisions of the corporation's
certificate of incorporation or these by-laws, a waiver thereof in writing,
signed by the person or persons entitled to that notice, whether before or after
the time stated therein, shall be deemed equivalent to that notice.
ARTICLE VI
AMENDMENTS
These by-laws may be altered or repealed and by-laws may be
made at any annual meeting of the stockholders or at any special meeting thereof
if notice of the proposed alteration or repeal of the by-law or by-laws to be
made be contained in the notice of that special meeting, by the affirmative vote
of a majority of the stock issued and outstanding and entitled to vote thereat,
or by the affirmative vote of a majority of the board of directors, at any
regular meeting of the board of directors, or at any special meeting of the
board of directors, if notice of the proposed alteration or repeal, or of the
by-law or by-laws to be made, be contained in the notice of that special
meeting.
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of July ___, 1997 (this
"Agreement"), among ICON CMT CORP., a Delaware corporation (the "Company"), and
[NAME OF INVESTOR], a __________ (the "Investor").
Pursuant to the Stock Purchase Agreement, dated as of the date hereof,
among the Investor, the Company and the management stockholders of the Company
named therein (the "Purchase Agreement"), the Company has agreed to issue and
sell to the Investor shares of its 10% PIK Series B Convertible Participating
Preferred Stock.
In order to induce the Investor to enter into the Purchase Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement.
In consideration of the foregoing and the covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Definitions.
As used herein, unless the context otherwise requires or
unless otherwise defined, the following terms have the following respective
meanings:
"Affiliate": The meaning set forth in Rule 12b-2 under the
Exchange Act (as in effect on the date of this Agreement).
"Agreement": As defined in the first paragraph hereof.
"Blue Sky Filing": As defined in Section 2.8.
"Commission": The Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock": The Company's common stock, $.001 par value,
such term to include any stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification of such Common Stock,
and all other stock of any class or classes (however designated) of the Company
the holders of which have the right, without limitation as to amount, either to
all or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
"Company": As defined in the first paragraph hereof.
"Company Plans": The Company's 1995 Stock Option Plan, as
amended.
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"Exchange Act": The Securities Exchange Act of 1934, as
amended.
"Germano Warrants": The warrants to purchase shares of Common
Stock originally issued by the Company to Lou Germano on May 30, 1997, and any
warrants thereafter issued by the Company to Lou Germano pursuant thereto and
pursuant to the agreement described on Schedule 2.25 to the Purchase Agreement.
"Indemnitees": As defined in Section 2.8.
"Investor": As defined in the first paragraph hereof.
"Investor Affiliate": As defined in Section 6.
"Loss": As defined in Section 2.8.
"Person": A corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement": As defined in the second paragraph
hereof.
"Qualified Public Offering": The first underwritten public
offering by the Company pursuant to an effective registration statement under
the Securities Act covering the offer and sale of Common Stock to the public in
which the gross proceeds received by the Company, before deducting underwriting
discounts and commissions, equal or exceed $20,000,000 and the per share price
to the public is at least $4.38 or, following the first Additional Investment
(as defined in the SCP Purchase Agreement) of SCP, if any, $3.28, in each case
as appropriately adjusted for stock dividends, splits combinations or similar
transactions.
"Registrable Securities": Any (i) shares of Common Stock
issuable upon conversion of the Series B Preferred Stock, (ii) the SCP Warrants
and the Germano Warrants, and the shares of Common Stock issuable upon exercise
of the SCP Warrants and the Germano Warrants, and (iii) shares of Common Stock
issued or issuable with respect to any such Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) such securities shall have been sold pursuant to Rule 144 (or any
successor provision) under the Securities Act, (c) such securities shall have
been otherwise transferred, new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any similar state
law then in force, or (d) such securities shall have ceased to be outstanding.
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"Registration Expenses": All expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all registration, filing and NASD fees, all fees and expenses of
complying with securities or blue sky laws, all fees and expenses of listing the
Registrable Securities being registered on any securities exchange, all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or "comfort"
letters required by or incidental to such performance and compliance, the
reasonable fees (not to exceed $5,000) and disbursements of one counsel retained
by the Investor and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any; provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event; provided further, that Registration Expenses in
connection with a registration statement shall not include the fees and
disbursements of more than one law firm retained by all persons selling
Registrable Securities pursuant to such registration statement and shall not
include any other professional fees or costs of accounting, financial or legal
advisors to any holders of Registrable Securities.
"SCP": SCP Private Equity Partners, L.P., a Delaware limited
partnership.
"SCP Purchase Agreement": The Stock Purchase Agreement dated
as of May 7, 1997, among SCP, the Company and the management stockholders of the
Company named therein, as the same may be amended or modified from time to time
in the manner provided therein.
"SCP Warrants": The warrants to purchase shares of Common
Stock originally issued by the Company to SCP on May 30, 1997, and any warrants
thereafter issued by the Company to SCP pursuant thereto and in connection with
any additional warrants issued by the Company to Lou Germano pursuant to the
agreement described on Schedule 2.25 to the Purchase Agreement.
"Securities Act": The Securities Act of 1933, as amended.
"Series B Preferred Stock": The Company's 10% PIK Series B
Convertible Participating Preferred Stock, $.01 par value per share.
2. Registration under Securities Act.
2.1 Demand Registration.
(a) Request. At any time after the earlier of (i)
January 30, 1999 or (ii) 180 days after the closing of a Qualified Public
Offering, upon the written request of holders of at
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least 25% of the then outstanding shares of Series B Preferred Stock that the
Company effect the registration under the Securities Act of all or part of the
Registrable Securities consisting of at least 25% of the then outstanding
Registrable Securities (or any lower percentage if the reasonably anticipated
price to the public of such offering would exceed $5,000,000 in the aggregate),
the Company shall promptly give written notice of such request to all registered
holders of Registrable Securities, and thereupon the Company shall use its best
efforts to effect the registration under the Securities Act of the Registrable
Securities that the Company has been so requested to register by all such
holders for disposition in accordance with the intended method of disposition
stated in such request. Promptly after receipt of such request, the Company
shall give notice thereof to all other securityholders of the Company, if any,
that are entitled to participate in such registration. The Company shall file
the registration statement requested pursuant to this subsection (a) not later
than 90 days following such request, subject to Section 2.6, and shall use its
best efforts to have such registration statement declared effective as soon as
possible after the filing thereof.
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 2.1 in connection
with an underwritten offering by one or more holders of the Registrable
Securities, no securities other than Registrable Securities shall be included
among the securities covered by such registration unless (i) the managing
underwriter of such offering shall have advised the holders of the Registrable
Securities proposed to be sold in writing that the inclusion of such other
securities would not adversely affect such offering or (ii) the holders of a
majority of the Registrable Securities proposed to be sold shall have consented
in writing to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under
this Section 2.1 shall be on such appropriate registration form of the
Commission (i) as shall be selected by the Company and as shall be reasonably
acceptable to holders of a majority of the Registrable Securities proposed to be
sold and (ii) as shall permit the disposition of such Registrable Securities in
accordance with the intended method or methods of disposition.
(d) Expenses. The Company shall pay all Registration
Expenses in connection with any registration requested pursuant to this Section
2.1; provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 2.1 if the
registration request is subsequently withdrawn at the request of the holders of
a majority of the Registrable Securities to be registered, in which case, unless
the reason for the withdrawal is a material adverse change in the Company's
business or financial condition, all participating holders of Registrable
Securities shall bear such expenses, unless the holders of a majority of the
Registrable Securities then outstanding agree to forfeit their right to their
one registration pursuant to Section 2.1.
(e) Effective Registration Statement. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been effected
and shall not be considered the demand registration which may be requested
pursuant to subsection (a) of this Section 2.1 (i) unless (A) a registration
statement with respect thereto has become effective, (B) such registration
statement has
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remained effective for so long as the selling holders of the Registrable
Securities shall request (but in no event longer than one year in connection
with a firm commitment underwritten public offering or 150 days in connection
with any other public offering) and (C) such registration statement has not
become subject to any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason or such
registration statement has become effective within 30 days thereafter, or (ii)
if the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied or
waived other than by reason of the failure or refusal of a holder of Registrable
Securities to satisfy or perform a condition to such closing.
(f) One Demand Registration. The Investor shall be
entitled to demand one registration pursuant to this Section 2.1.
Notwithstanding anything to the contrary contained herein, no request may be
made under this Section 2.1 within 120 days after the effective date of a
registration statement filed by the Company covering an underwritten public
offering in which the Investor shall have been entitled to join pursuant to
Section 2.2 hereof and shall have disposed of at least 50% of the Registrable
Securities that the Investor requested to be registered in such offering. A
registration shall not count as a registration pursuant to this Section 2.1
unless the selling holders of the Registrable Securities are able to register
and sell at least 80% of the Registrable Securities requested to be included in
such registration pursuant to this Section 2.1.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the
Company at any time proposes to register any of its securities under the
Securities Act by registration on Forms S-1, S-2 or S-3 or any successor or
similar form(s), whether or not for sale for its own account, it shall give
prompt written notice to all holders of Registrable Securities of its intention
to do so and of such holders' rights under this Section 2.2. Upon the written
request of any such holder specifying the Registrable Securities intended to be
disposed of by such holder, made within 30 days after the receipt of any such
notice (10 days if the Company gives telephonic notice to all holders of
Registrable Securities, with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such shorter
period of time is required because of a planned filing date), which request
shall specify the Registrable Securities intended to be disposed of by such
holder, the Company shall use its best efforts to effect the registration under
the Securities Act of all Registrable Securities which the Company has been so
requested to register by the holders thereof, to the extent requisite to permit
the disposition (in accordance with the Company's intended method) of such
Registrable Securities to be so registered. If the Company thereafter determines
for any reason not to register or to delay registration of such securities, the
Company may, at its election, give written notice of such determination to each
holder of Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
such Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights (if any) of the Investor or any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1, and (ii) in the
case of a determination to delay
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registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other securities. No
registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect any registration upon request under Section 2.1, nor shall
it be deemed to have been effected pursuant to Section 2.1. The Company shall
pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 2.2.
(b) Priority in Incidental Registrations. In a
registration pursuant to this Section 2.2 involving an underwritten offering,
whether or not for sale for the account of the Company, if the managing
underwriter of such underwritten offering shall inform the Company by letter of
its belief that the number of securities requested by stockholders to be
included in such registration would substantially interfere with its ability to
effect such offering in accordance with the intended method thereof (such letter
to state the basis of such belief and the approximate number of such securities
that may be distributed without such effect), then the Company may, upon written
notice to all holders of such securities, reduce the number of Germano Warrants
and shares of Common Stock issuable upon exercise thereof, if any, requested to
be included in such registration (if and to the extent stated by such managing
underwriter to be necessary to eliminate such effect) and, if such reduction is
not sufficient to eliminate such effect, then reduce pro rata (if and to the
extent stated by such managing underwriter to be necessary to eliminate such
effect) the number of securities requested to be registered by the holders of
the Registrable Securities, on the one hand, and the holders of other securities
of the Company, on the other hand, in proportion (as nearly as practicable) to
the amount of Registrable Securities owned by the holders thereof participating
in such registration, on the one hand, and the amount of other securities of the
Company owned by the holders thereof participating in such registration, on the
other hand, so that the aggregate number of securities included in such
registration shall be equal to the number of shares stated in such managing
underwriter's letter. The number of securities to be included in such
registration by the holders of Registrable Securities shall be apportioned among
all holders thereof participating in the registration in proportion (as nearly
as practicable) to the amount of Registrable Securities owned by each holder
thereof or as they may otherwise agree. The number of securities to be included
in such registration by the holders of other securities of the Company shall be
apportioned among all holders thereof participating in the registration in
proportion (as nearly as practicable) to the amount of other securities owned by
each holder thereof or as they may otherwise agree.
2.3 Registration Procedures. In connection with the Company's
obligations pursuant to Sections 2.1 and 2.2, the Company will use its best
efforts to effect such registrations to permit the sale of Registrable
Securities (and, in the case of Section 2.1, in accordance with the intended
method or methods of disposition thereof), and pursuant thereto the Company will
as expeditiously as possible:
(a) prepare and file with the Commission a
registration statement or registration statements on any appropriate form under
the Securities Act and use its best efforts to cause such registration statement
to become effective and to remain continuously effective for so long as the
selling holders of the Registrable Securities shall request (but in no event
longer than one year
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in connection with a firm commitment underwritten public offering or 150 days in
connection with any other public offering), provided that the Company shall have
no obligation to maintain the effectiveness of such registration statement after
the sale of all Registrable Securities registered thereunder;
(b) prepare and file with the Commission such
amendments and post- effective amendments to a registration statement as may be
necessary to keep such registration statement effective for the applicable
period; cause the related prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to the
Securities Act, provided that prior to filing any such amendments or supplements
or any documents that would be incorporated by reference in such registration
statement, the Company shall furnish to the Investor, its counsel and the
underwriters, if any, copies of all such documents proposed to be filed (other
than documents filed under the Exchange Act), and the Company shall consider all
reasonable requests by the Investor or the underwriters for modifications of any
such amendments, supplements or documents incorporated by reference; and comply
with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement during the
applicable period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement or supplement to such
prospectus;
(c) notify the selling holders of Registrable
Securities, and the managing underwriters, if any, as promptly as practicable,
and (if requested by any such Person) confirm such advice in writing, (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a registration statement or any post-effective
amendment, when it has become effective, (ii) of any request by the Commission
for amendments or supplements to a registration statement or related prospectus
or for additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of a registration statement or the
initiation of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company made as contemplated by subsection
(k) below cease to be true and correct, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (vi) of the happening of any event that requires
the making of any changes in a registration statement or related prospectus so
that such documents will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (vii) of the Company's reasonable
determination that a post-effective amendment to a registration statement would
be appropriate;
(d) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction, as soon as practicable;
(e) if requested in a timely manner by the managing
underwriters, as promptly as practicable incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriters and
the holders of Registrable Securities being sold in
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connection with an underwritten offering agree should be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being sold to such underwriters, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
offering of the Registrable Securities to be sold in such offering; make all
required filings of such prospectus supplement or post-effective amendment as
soon as practicable after being notified of the matters to be incorporated in
such prospectus supplement or post-effective amendment; and supplement or make
amendments to any registration statement with respect to information relating to
any holder or the terms of the sale or offering of the Registrable Securities if
requested in a timely manner in writing by any holder of Registrable Securities
covered by such registration statement or any underwriter of such Registrable
Securities;
(f) furnish to the lead managing underwriter and each
holder of Registrable Securities selling Registrable Securities thereunder,
without charge, at least one signed copy of the registration statement or
statements and any post-effective amendment thereto, and to each other selling
holder of Registrable Securities, at least one conformed copy thereof, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(g) deliver to each holder of Registrable Securities
and the underwriters, if any, without charge, as many copies of the prospectus
or prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons may reasonably request;
(h) prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
selling holders of Registrable Securities, the underwriters, if any, and their
respective counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as any selling holder or underwriter reasonably requests
in writing, keep each such registration or qualification effective during the
period such registration statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by the applicable
registration statement; provided that the Company shall not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(i) cooperate with the selling holders of Registrable
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends unless required by applicable
law; and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters may request at least two
business days prior to the closing of any sale of Registrable Securities to the
underwriters;
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(j) upon the occurrence of any event contemplated by
clause (c)(vi) above, prepare a supplement or post-effective amendment to the
applicable registration statement or related prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the selling holders of the Registrable Securities,
such prospectus will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading;
(k) enter into such agreements (including an
underwriting agreement) and take all such other reasonable actions in connection
therewith in order to expedite or facilitate the disposition of such Registrable
Securities and in connection therewith, whether or not an underwriting agreement
is entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the holders of
such Registrable Securities with respect to the registration statement,
prospectus and documents incorporated by reference, if any, in form, substance
and scope as are customarily made by issuers in similar offerings and confirm
the same if and when requested; (ii) obtain opinions of counsel to the Company
(which may be the general counsel) and updates thereof in the form, scope and
substance as are customary in similar offerings; (iii) in the case of an
underwritten offering, enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings; (iv) furnish to each seller
of Registrable Securities a signed counterpart, addressed to such seller (and
the underwriters, if any) of a "comfort" letter, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have certified the
Company's financial statements included in such registration statement, covering
the matters with respect to such registration statement (and the prospectus
included therein) and with respect to events subsequent to the date of such
financial statements, as are customarily covered in accountants' letters
delivered to the underwriters in underwritten public offerings of securities and
such other financial matters as such seller or such holder (or the underwriters,
if any) may reasonably request; (v) if an underwriting agreement is entered
into, the same shall set forth in full the indemnification provisions and
procedures of Section 2.8 with respect to all parties to be indemnified pursuant
to such section, with such other indemnification provisions as are customary and
acceptable to the underwriters, the holders of a majority of the Registrable
Securities proposed to be sold and the Company; and (vi) the Company shall
deliver such documents and certificates as may be requested by the selling
holders of the Registrable Securities and the managing underwriters, if any, to
evidence compliance with this paragraph (k) and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company. The above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder;
(l) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its security holders earnings statements satisfying the provisions of Section
11(a) of the Securities Act no later than 90 days after the end of any 12-month
period (i) beginning with the first day of the Company's first fiscal quarter
next succeeding each sale of Registrable Securities after the effective date of
a registration statement and (ii) beginning with the first day of the Company's
first fiscal quarter next succeeding any fiscal quarter
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in which Registrable Securities are sold to underwriters in a firm or best
efforts underwriting offering, which statements shall cover such 12-month
periods;
(m) use its best efforts to cause all such
Registrable Securities to be listed on each securities exchange, if any, on
which securities of the class then being registered are listed; and
(n) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement.
The Company may require each holder of Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding such holder and the distribution of such
Registrable Securities as the Company may from time to time reasonably request
in writing in order to comply with the Securities Act. Each holder of
Registrable Securities as to which any registration is being effected agrees to
notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such holder to the Company or of the
happening of any event as a result of which any prospectus relating to such
registration contains an untrue statement of a material fact regarding such
holder or the distribution of such Registrable Securities or omits to state any
material fact regarding such holder or the distribution of such Registrable
Securities required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and to promptly furnish to the Company any additional information
required to correct and update any previously furnished information or required
so that such prospectus shall not contain, with respect to such holder or the
distribution of such Registrable Securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
Each holder of Registrable Securities agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 2.3(c)(ii), (iii), (v), (vi) or (vii), such holder
will forthwith discontinue disposition of such Registrable Securities covered by
such registration statement or prospectus until such holder's receipt of the
copies of the supplemented or amended prospectus relating to such registration
statement or prospectus, or until it is advised in writing by the Company that
the use of the applicable prospectus may be resumed, and has received copies of
any additional or supplemental filings that are incorporated by reference in
such Prospectus, and, if so directed by the Company, such holder will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such holder's possession, of the prospectus covering the
Registrable Securities at the time of receipt of such notice.
2.4 Underwritten Offerings. In the case of any underwritten
offering requested pursuant to Section 2.1, the holders of a majority of the
Registrable Securities proposed to be sold shall select the investment banking
firm or firms, which shall be reasonably satisfactory to the Company. The
Company shall enter into an underwriting agreement which shall contain, without
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limitation, the terms and provisions contemplated by Section 2.3(k) and shall be
reasonably satisfactory in form and substance to the holders of a majority of
the Registrable Securities proposed to be sold.
If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by Section 2.2 and such
securities are to be distributed by or through one or more underwriters, the
holders of Registrable Securities to be distributed therein shall be parties to
the underwriting agreement between the Company and the underwriters and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities.
2.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company shall give the selling holders of
Registrable Securities, their underwriters, and their respective counsel and
accountants, a reasonable opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto (other than
documents filed under the Exchange Act and incorporated by reference therein),
and shall give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
2.6 Limitations, Conditions and Qualifications to Obligations
Under Registration Covenants. The obligations of the Company to use its best
efforts to cause the Registrable Securities to be registered under the
Securities Act are subject to each of the following limitations, conditions and
qualifications:
(a) The Company shall be entitled to postpone the
filing or effectiveness of any registration statement otherwise required to be
prepared and filed by it pursuant to Section 2.1 for a reasonable period of time
(but not exceeding 120 days) if the Company determines, in its reasonable
judgment, that such registration and offering, or such offers and sales, would
interfere with any financing, acquisition, corporate reorganization or other
material transaction involving the Company or any of its Affiliates or would
require the Company to disclose material non-public information. The Company
shall promptly give the requesting holders of Registrable Securities written
notice of such determination, containing a general statement of the reasons for
such postponement and an approximation of the anticipated delay. If the Company
shall so postpone the filing of a registration statement, the requesting holders
of Registrable Securities shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days (or within
the period of postponement if such period is less than 30 days) after receipt of
the notice of
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postponement in the event of such withdrawal, such request shall not be deemed a
request for registration pursuant to Section 2.1 hereof.
(b) No holder of Registrable Securities may
participate in any underwritten offering hereunder unless such holder (i) agrees
to sell such holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
2.7 Restrictions on Sales.
(a) Each holder of Registrable Securities that are
covered by a registration statement filed pursuant to Section 2.1 or 2.2 agrees,
if requested by the managing underwriters in an underwritten offering, not to
effect any public sale or distribution of any securities of the Company of the
same class as the securities included in such registration statement, including
a sale pursuant to Rule 144 under the Securities Act (except as part of such
underwritten registration), during the period commencing 10 days prior to the
closing date of each underwritten offering made pursuant to such registration
statement and ending on the earlier of (i) the termination of such offering and
(ii) 180 days after such closing in the case of an initial public offering or 90
days after such closing in the case of any other offering, to the extent timely
notified in writing by the Company or the managing underwriters.
(b) The Company agrees (i) without the written
consent of the managing underwriters, not to effect any public or private sale
or distribution of any securities of the Company of the same class as the
securities included in a registration statement filed pursuant to Section 2.1
during the period commencing 10 days prior to the closing date of each
underwritten offering made pursuant to such registration statement and ending on
the earlier of (x) the termination of such offering and (y) 90 days after such
closing, to the extent timely notified in writing by the holders of a majority
of the Registrable Securities sold in such offering or the managing underwriters
and (ii) to use its best efforts to cause each holder of privately placed
securities purchased from the Company (other than the Investor) at any time on
or after the date of this Agreement to agree not to effect any public sale or
distribution of any such securities during such period, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
underwritten offering, if permitted).
2.8 Indemnification.
(a) Indemnification by the Company. In the event of
any registration of Registrable Securities, the Company shall indemnify, defend
and hold harmless the holder of any Registrable Securities that are covered by
such registration statement, each other Person who participates as an
underwriter in the offering or sale of such securities and each person who
controls any such holder or underwriter within the meaning of the Securities
Act, and each of the respective partners, officers, directors, employees and
agents of the foregoing in their respective capacities as
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such (the "Indemnitees"), to the full extent lawful, from and against any and
all actions, suits, claims, proceedings, costs, damages, judgments, amounts paid
in settlement and expenses (including, without limitation, reasonable attorneys'
fees and disbursements), whether joint or several (collectively, a "Loss"), to
which any such Indemnitee may become subject under the Securities Act or any
other statute or common law, insofar as any such Loss may arise out of or be
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement thereto, or in any filing made in connection with
the qualification of the offering under blue sky or other securities laws of
jurisdictions in which the Registrable Securities are offered ("Blue Sky
Filing"), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading or (ii) any violation by the Company of any federal,
state or common law, rule or regulation applicable to the Company and relating
to action required of or inaction by the Company in connection with any such
registration, and the Company will reimburse each Indemnitee for any legal or
other expenses reasonably incurred in connection with investigating or defending
such Loss; provided, however, that such indemnification covenant shall not (i)
apply to any Loss arising out of, or based upon, any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Indemnitee
specifically stating that it is for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any underwriter or person
controlling such underwriter to the extent that any such Loss arises out of such
Indemnitee's failure to send or give a copy of the final prospectus, as the same
may be then supplemented or amended, to the Person asserting an untrue statement
or alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement filed
pursuant to Section 2.1 or 2.2, the Company shall have received an undertaking
satisfactory to it from the prospective seller of such Registrable Securities to
indemnify, defend and hold harmless (in the same manner and to the same extent
as set forth in subsection (a) of this Section 2.8) the Company, each director
of the Company, each officer of the Company and each other person, if any, who
controls the Company within the meaning of the Securities Act, with respect to
any untrue statement or alleged untrue statement in, or omission or alleged
omission from, such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein or any Blue Sky Filing, or
any amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such seller specifically
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stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller. In no event shall any indemnity paid by any seller to the
Company pursuant to this Section 2.8(b) or otherwise exceed the proceeds
received by such seller in such offering.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 2.8 unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In the event that the indemnifying party advises an indemnified
party that it will contest a claim for indemnification hereunder, or fails,
within 30 days of receipt of any indemnification notice to notify, in writing,
such person of its election to defend, settle or compromise, at its sole cost
and expense, any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim with
the consent of the indemnifying party, not to be unreasonably withheld. The
indemnified party shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the indemnified party that relates to such action or
claim. The indemnifying party shall keep the indemnified party fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. If the indemnifying party elects to defend any such action or
claim, then the indemnified party shall be entitled to participate in such
defense with counsel of its choice at its sole cost and expense. If the
indemnifying party does not assume such defense, the indemnified party shall
keep the indemnifying party apprised at all times as is reasonably practicable
as to the status of the defense; provided, however, that the failure to keep the
indemnifying party so informed shall not affect the obligations of the
indemnifying party hereunder. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the indemnified party (not to be unreasonably withheld), consent
to entry of any judgment or enter into any settlement that does not include as
an unconditional term
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thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification
required by this Section 2.8 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or a Loss is incurred.
(e) Other Rights, Liabilities. The indemnity
covenants contained herein shall be in addition to (i) any cause of action or
similar right of the indemnified party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to law.
2.9 Registration Expenses. All expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all Registration Expenses, shall be borne by the Company whether or
not any registration statement becomes effective. The Company shall, in any
event, pay its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit, the fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, rating agency fees and the fees and expenses of any Person, including
special experts, retained by the Company.
3. Amendments and Waivers. This Agreement may be amended with the
consent of the Company and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holders of a majority of the amount of Registrable
Securities then outstanding. Each holder of any Registrable Securities at the
time or thereafter outstanding shall be bound by any consent authorized by this
Section 3, whether or not such securities shall have been marked to indicate
such consent.
4. Registration Rights. The Company covenants that it will not grant
any right of registration under the Securities Act relating to any of its shares
of capital stock or other securities to any Person other than pursuant to this
Agreement unless the rights so granted to such other Person are pari passu or
junior to those of the Investor hereunder and, except as provided herein, do not
limit or restrict the Investor's rights hereunder.
5. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, such
beneficial owner may, at its election and upon notice to the Company, be treated
as the holder of such securities for purposes of any request or other action by
any holder or holders of securities pursuant to this Agreement or any
determination of any number or percentage of shares of securities held by any
holder or holders of securities contemplated by this Agreement. If the
beneficial owner of any Registrable Securities so elects, the Company may
require assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.
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6. Notices. Any notice or demand that is required or provided to be
given under this Agreement shall be deemed to have been sufficiently given and
received for all purposes when delivered by hand, facsimile transmission or
courier, or five days after being sent by certified or registered mail, postage
and charges prepaid, return receipt requested, to the following addresses:
If to the Company:
1200 Harbor Boulevard
Weehawken, NJ 07087
Attn: Scott Baxter, President, Chief Executive Officer and Chairman
Facsimile: (201) 601-1917
With a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036-8735
Attn: Michael Weinsier, Esquire
Facsimile: (212) 704-6288
If to the Investor, at the address shown on the signature page hereto.
If to any other holder of Registrable Securities, at such address set forth in
the Company's records, or with respect to any party hereto, at any other address
designated in writing in accordance with the provisions of this Section 6.
7. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. The rights or any portion thereof of the Investor herein
may be assigned by the Investor at its sole discretion (and thereupon by such
assignee) without the consent of the Company to (a) an Investor Affiliate (as
defined below) and (b) any Person who acquires at least such amount of
Registrable Securities as equals the lesser of (i) 80% of the aggregate amount
of Registrable Securities acquired by the Investor and (ii) Registrable
Securities which consist of at least 100,000 shares of Common Stock (including,
for this purpose, the shares of Common Stock into which the Registrable
Securities are then convertible and for which the Registrable Securities are
then exercisable), as adjusted for any dividend, split, combination,
recapitalization or similar transaction with respect to the capital stock of the
Company; provided, however, that (A) the Company is given prior written notice
by the assignor stating the name and address of the permitted assignee and
identifying the Registrable Securities with respect to which such rights are
being assigned, and (B) such assignee agrees in writing to be bound by the terms
of this Agreement. For purposes of this Section 7, an "Investor Affiliate" is
any Person controlled by or under common control with the Investor or any fund
as to which the Investor provides investment management or advisory services.
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8. Determination of Amount of Securities Held. For all purposes of this
Agreement, the amount of securities held shall be determined by the number of
shares of Common Stock included therein and the number of shares of Common Stock
issuable upon the exercise or conversion, as the case may be, of any other
securities included therein.
9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. Governing Law. The validity and interpretation of this Agreement
shall be governed by, and construed and enforced in accordance with, the laws of
the Commonwealth of Pennsylvania, without giving effect to the principles of
conflicts of law thereof; provided, however, that in the event that the
foregoing choice of governing law is held to be unenforceable for any reason,
then this Agreement shall be governed by the laws of the State of New York.
11. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
12. Termination. This Agreement shall terminate on the earlier to occur
of the sale of all of the Registrable Securities or May 30, 2007.
[END OF PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
ICON CMT CORP.
By:______________________________________
Name:
Title:
[NAME OF INVESTOR]
By:______________________________________
Name:
Title:
Address:
________________________________
________________________________
________________________________
With a copy to:
________________________________
________________________________
________________________________
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated as of December 4, 1995,
between ICON CMT CORP., a Delaware corporation having an address at 420
Lexington Avenue, New York, New York 10170 (the "Company"), and SCOTT A BAXTER,
an individual residing at 129 Deerhaven Road, Mahwah, New Jersey
07430 ("Employee").
W I T N E S S E T H :
WHEREAS, Employee has been employed directly or indirectly
by the Company for more than 4 years; and
WHEREAS, the Company desires that Employee continue to be
employed by it and render services to it, and Employee is willing to be so
employed and to render such services to the Company, all upon the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Employment. Subject to and upon the terms and conditions
contained in this Agreement, the Company hereby agrees to continue to employ
Employee and Employee agrees to continue in the employ of the Company, for the
period set forth in Paragraph 2 hereof, to render to the Company, its affiliates
and/or subsidiaries the services described in Paragraph 3 hereof.
2. Term. Employee's term of employment under this Agreement
shall be five (5) years, commencing on the date hereof and continuing through
and including December 3, 2000, unless extended in writing as provided below or
earlier terminated pursuant to the terms and conditions set forth herein (the
"Employment Term"). Such term shall be extended for successive one (1) year
terms unless either party hereto gives written notice to the other of its desire
to terminate this Agreement at least 90 days prior to the commencement of any
such extension.
3. Duties. (a) Employee shall serve as a senior executive of
the Company subject to the authority of the Board of Directors of the Company.
If elected by the Board of Directors, Employee will serve as President and Chief
Executive Officer of the Company. Employee shall perform all duties and services
incident to the positions held by him.
(b) Employee agrees to abide by all By-laws and
policies of the Company promulgated from time to time by the Company.
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4. Exclusive Services and Best Efforts. Employee agrees to
devote his best efforts, energies and skill to the discharge of the duties and
responsibilities attributable to his position, and to this end, he will devote
his full time and attention during regular business hours to the business and
affairs of the Company, subject to the provisions of the last sentence of
subparagraph 11(b) hereof.
5. Compensation. (a) As compensation for his services and
covenants hereunder, Employee shall receive a salary ("Salary"), payable
pursuant to the Company's normal payroll procedures in place from time to time,
at the rate of $140,000 per annum, less all necessary and required federal,
state and local payroll deductions.
(b) In addition to such Salary, Employee shall be
entitled to receive such bonuses and salary increases as may be determined from
time to time by the Board of Directors of the Company.
(c) Upon the earliest to occur of the date (i) of
the closing by the Company of a private placement of shares of its Common Stock,
$.01 par value per share ("Common Stock"), or any other class of its capital
stock, the aggregate proceeds of which to the Company are at least $1,000,000
(the "Private Placement"), (ii) a registration statement is declared effective
by the Securities and Exchange Commission with respect to an initial public
offering by the Company of shares of Common Stock (the "Public Offering"), or
(iii) which is three (3) months following the date hereof (the date of the
earliest to occur of the events described in clauses (i) through (iii) above
shall hereinafter be referred to as the "Option Grant Date"), Employee shall be
granted an incentive stock option entitling Employee to acquire 50,000 shares of
Common Stock under the Company's 1995 Stock Option Plan, subject to the terms
and conditions of an Incentive Stock Option Contract to be entered into between
the Company and Employee substantially in the form attached hereto as Exhibit A.
In the event of any change in the shares of Common Stock prior to the Option
Grant Date by reason of any stock dividend or stock split, the number of shares
of Common Stock subject to such option and the exercise price of such option
shall be appropriately adjusted.
6. Business Expenses. Employee shall be reimbursed for, and
entitled to advances (subject to repayment to the Company if not actually
incurred by Employee) with respect to, only those business expenses incurred by
him (a) which are reasonable and necessary for Employee to perform his duties
under this Agreement in accordance with policies established from time to time
by the Company, and (b) for which Employee has submitted vouchers and/or
receipts.
7. Employee Benefits. (a) During the Employment Term,
Employee shall be entitled to such insurance, disability and health and medical
benefits and be entitled to participate in such retirement plans or programs as
are from time to time generally made available to executive employees of the
Company pursuant to the policies of the Company; provided that Employee shall be
required to comply with the conditions attendant to coverage by such plans and
shall comply with and be entitled to benefits only in accordance with the terms
and conditions of such plans. The Com pany may withhold from any benefits
payable to Employee all federal, state, local and other taxes and
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amounts as shall be permitted or required to be withheld pursuant to any
applicable law, rule or regulation.
(b) Employee shall be entitled to vacation in
accordance with the Company's policy in effect for executive staff, which shall
be taken at such time or times as shall be mutually agreed upon with the
Company.
(c) During the Employment Term, Employee shall, at
his option, either (i) be provided with the full-time use of an automobile owned
or leased by the Company and reasonably satisfactory to Employee and the
Company, all of the operating, maintenance and insurance expenses of which shall
be borne by the Company, or (ii) be reimbursed by the Company for all of the
operating, maintenance and insurance expenses (including lease payments, if
applicable) incurred by Employee in connection with an automobile owned or
leased by Employee and reasonably satisfactory to Employee and the Company.
8. Death and Disability. (a) The Employment Term shall
terminate on the date of Employee's death, in which event Employee's Salary,
reimbursable expenses and benefits owing to Employee through the date of
Employee's death shall be paid to his estate. In addition, the Company shall pay
to Employee's estate, within 60 days of the date of Employee's death, in a
lump-sum, an amount equal to Employee's then annual Salary. Employee's estate
will not be entitled to any other compensation upon termination of this
Agreement pursuant to this subparagraph 8(a).
(b) If, during the Employment Term, in the opinion
of a duly licensed physician selected by the Company, Employee, because of
physical or mental illness or incapacity, shall become substantially unable to
perform the duties and services required of him under this Agreement for a
period, of 180 consecutive days or 270 days in the aggregate during any
twelve-month period, the Company may, upon at least ten (10) days' prior written
notice given at any time after the expiration of such 180 or 270-day period, as
the case may be, to Employee of its intention to do so, terminate his employment
as of such date as may be set forth in the notice. In case of such termination,
Employee shall be entitled to receive his Salary, reimbursable expenses and
benefits owing to Employee through the date of termination. In addition, the
Company shall pay to Employee, within 60 days of the date of Employee's
termination, in a lump-sum, an amount equal to Employee's then annual Salary.
Employee will not be entitled to any other compensation upon termination of his
employment pursuant to this subparagraph 8(b).
9. Termination. The Company shall have the right to
terminate the employment of Employee and to terminate this Agreement in the
event: (a) Employee fails to substantially perform or repeatedly neglects his
duties assigned in accordance with this Agreement in any continuing manner after
notice from the Company of such failure or neglect; (b) Employee willfully fails
or refuses to substantially follow or comply with the directions of the Board of
Directors or of a superior officer or the policies or work rules of the Company;
(c) Employee through his intentional action or inaction has subjected the
Company to any criminal or civil liability under any applicable law; (d)
Employee is indicted for or convicted of any misdemeanor involving moral
turpitude or any
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felony; (e) Employee has used any narcotic or other illegal or
controlled substance or abused or otherwise excessively used any alcoholic
product or any prescription stimulant or depressant; (f) Employee has
misappropriated any asset or property of the Company, including (without
limitation) any theft or embezzlement or any diversion of any corporate
opportunity; (g) Employee has breached any of his covenants and agreements
contained in this Agreement, including (without limitation) those contained in
Paragraph 11 hereof; or (h) Employee concealed or misrepresented any material
fact in seeking employment hereunder. Upon such termination, the Company shall
be released from any and all further obligations under this Agreement, except
that the Company shall be obligated to pay Employee his Salary, reimbursable
expenses and benefits owing to Employee through the day on which Employee is
terminated. Employee will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Paragraph 9.
10. Change in Control - Termination of Employment and
Compensation in Event of Termination. (a) After a Change in Control (as defined
below) of the Company has occurred, if either Employee terminates his employment
within six (6) months after he has obtained actual knowledge of the Change in
Control or the Company (or any successor thereto) terminates Employee's
employment with the Company within one (1) year after the Change in Control,
Employee shall be entitled to receive (i) his salary, bonuses, awards,
perquisites and benefits, including, without limitation, benefits and awards
under the Company's stock option plans and the Company's pension and retirement
plans and programs, accrued through the date Employee's employment with the
Company is terminated (the "Termination Date"), and (ii) a lump-sum payment (the
"Termination Compensation"), in cash, on the Termination Date, in an amount
equal to 2.99 times Employee's "base amount" (as such term is defined in
Section 28OG(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")). The amount of the Termination Compensation shall be computed, at
the expense of the Company, by an independent certified public accounting firm
selected by the Board of Directors (the "Accountants"), whose computation shall
be conclusive and binding upon Employee and the Company.
(b) For purposes hereof, a "Change in Control"
shall be deemed to have occurred if: (i) any "person" or "group" (as such terms
are used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Act")), except for an employee stock ownership trust (or
any of the trustees thereof) or any of Scott A. Baxter, Richard M. Brown or
Scott Harmolin, becomes a "beneficial owner" (as such term is used in Rule 13d-3
promulgated under the Act), after the date hereof, directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities; (ii) a change in "control" of the
Company (as the term "control" is defined in Rule 12b-2 or any successor rule
promulgated under the Act) shall have occurred; (iii) the majority of the Board
of Directors, as such entire Board of Directors is composed at the date of this
Agreement, no longer serve as directors of the Company, except that there shall
not be counted toward such majority who no longer serve as directors any
director who ceased to serve either prior to the date of a Change in Control,
for any reason, or at any other time due to his death, disability or termination
for cause; (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; or (v) the
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stockholders of the Company approve a merger or consolidation of the Company
with any other company, other than a merger or consolidation which would result
in the combined voting power of the Company's voting securities outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 70% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation. Notwithstanding the foregoing, any transaction involving a
leveraged buyout or other acquisition of the Company which would otherwise
constitute a Change in Control, in which Employee participates in the surviving
or successor entity (other than solely as an employee or consultant), shall not
constitute a Change in Control.
(c) Notwithstanding anything in this Agreement to
the contrary, Employee shall have the right, prior to the receipt by him of any
amounts due thereunder, to waive the receipt thereof or, subsequent to the
receipt by him of any amounts due hereunder, to treat some or all of such
amounts as a loan from the Company which Employee shall repay to the Company,
within 90 days from the date of receipt, with interest at the rate provided in
Section 7872 of the Code. Notice of any such waiver or treatment of amounts
received as a loan shall be given by Employee to the Company in writing and
shall be binding upon the Company.
(d) It is intended that the "present value" of the
payments and benefits to Employee, whether under this Agreement or otherwise,
which are includable in the computation of "parachute payments" shall not, in
the aggregate, exceed 2.99 times the "base amount" (the terms "present value",
"parachute payments" and "base amount" being determined in accordance with
Section 28OG of the Code). Accordingly, if Employee receives payments or
benefits from the Company prior to payment of the Termination Compensation
which, when added to the Termination Compensation, would, in the opinion of the
Accountants, subject any of the payments or benefits to Employee to the excise
tax imposed by Section 4999 of the Code, the Termination Compensation shall be
reduced by the smallest amount necessary, in the opinion of the Accountants, to
avoid such tax. In addition, the Company shall have no obligation to make any
payment or provide any benefit to Employee subsequent to payment of the
Termination Compensation which, in the opinion of the Accountants, would subject
any of the payments or benefits to Employee to the excise tax imposed by Section
4999 of the Code. No reduction in the Termination Compensation or release of the
Company from any payment or benefit obligation in reliance upon any aforesaid
opinion of the Accountants shall be permitted unless the Company shall have
provided to Employee a copy of any such opinion, specifically entitling Employee
to rely thereon, no later than the date otherwise required for payment of the
Termination Compensation or any such later payment or benefit.
11. Disclosure of Trade Secrets and Other Proprietary
Information; Restrictive Covenants. Employee acknowledges that, by his
employment, he has been and will be in a confidential relationship with the
Company and will have access to confidential information and trade secrets of
the Company, its subsidiaries and affiliates. Confidential information and trade
secrets include, but are not limited to, customer, supplier and client lists,
panels and interviewers, price lists, marketing, strategies and procedures,
operational techniques, business plans and systems, quality
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<PAGE>
control procedures and systems, special projects and survey and market research,
including projects, research and reports for any entity or client, and any other
records, files, drawings, discoveries, applications, data, computer software
programs and source codes and information concerning the business of the Company
and its customers and clients which are not in the public domain. Employee
agrees that in consideration of the execution of this Agreement by the Company:
(a) Employee will not, during the term of this
Agreement or at any time thereafter, use, or disclose to any third party, trade
secrets or confidential information of the Company, including, but not limited
to, confidential information or trade secrets belonging or relating to the
Company, its subsidiaries, affiliates, customers and clients or proprietary
procedures of the Company, its subsidiaries, affiliates customers and clients.
Proprietary procedures shall include, but shall not be limited to, all
information which is known or intended to be known only by employees of the
Company, its subsidiaries and affiliates or others in a confidential
relationship with the Company or its subsidiaries and affiliates which relates
to business matters.
(b) Employee will not, during the term of this
Agreement, directly or indirectly, as an employee, employer, consultant, agent,
principal, partner, manager, stockholder, officer, director, or in any other
individual or representative capacity, engage in or participate in any business
that is competitive with any business carried on by the Company or any of its
subsidiaries or affiliates during the term of this Agreement. The ownership by
Employee of 5% or less of the issued and outstanding shares of a class of
securities which is traded on a national securities exchange or in the
over-the-counter market, shall not cause Employee to be deemed a shareholder
under this subparagraph 11(b) or constitute a breach of this subparagraph 11(b).
(c) Employee will not, during the term of this
Agreement and for a period of twelve (12) months thereafter, directly or
indirectly, work as an employee, employer, consultant, agent, principal,
partner, manager, stockholder, officer, director, or in any other individual or
representative capacity for any person or entity who or which was a customer of
the Company or any of its subsidiaries or affiliates during the term of
Employee's employment with the Company. The ownership by Employee of 5% or less
of the issued and outstanding shares of a class of securities which is traded on
a national securities exchange or in the over-the-counter market, shall not
cause Employee to be deemed a shareholder under this subparagraph 11(c) or
constitute a breach of this subparagraph 11(c).
(d) Employee will not, during the term of this
Agreement and for a period of twelve (12) months thereafter, on his behalf or on
behalf of any other business enterprise, directly or indirectly, under any
circumstance other than at the direction and for the benefit of the Company, (i)
solicit for employment or employ any person who was employed by the Company or
any of its subsidiaries or affiliates during Employee's employment with the
Company, or (ii) call on, solicit, or take away any person or entity who or
which was a customer or the Company or any of its subsidiaries or affiliates
during Employee's employment with the Company.
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(e) It is expressly agreed by Employee that the
nature and scope of each of the provisions set forth above in this Paragraph 11
are reasonable and necessary. If, for any reason, any aspect of the above
provisions as it applies to Employee is determined by a court of competent
jurisdiction to be unreasonable or unenforceable, the provisions shall only be
modified to the minimum extent required to make the provisions reasonable and/or
enforceable, as the case may be. Employee acknowledges and agrees that his
services are of unique character and expressly grants to the Company or any
subsidiary or affiliate of the Company or any successor of any of them, the
right to enforce the above provisions through the use of all remedies available
at law or in equity, including, but not limited to, injunctive relief.
(f) This Paragraph 11 and Paragraphs 12 and 13
hereof (and Paragraphs 14 through 19 hereof as they may apply to such
Paragraphs) shall survive the expiration or termination of this Agreement for
any reason.
12. Company Property. (a) Any patents, inventions,
discoveries, applications or processes designed, devised, planned, applied,
created, discovered or invented by Employee in the
course of Employee's employment under this Agreement and which pertain to any
aspect of the Company's or its subsidiaries' or affiliates' business shall be
the sole and absolute property of the Company, and Employee shall promptly
report the same to the Company and promptly execute any and all documents that
may from time to time reasonably be requested by the Company to assure the
Company the full and complete ownership thereof.
(b) All records, files, lists, including computer
generated lists, drawings, documents, equipment and similar items relating to
the Company's business which Employee shall prepare or receive from the Company
shall remain the Company's sole and exclusive property. Upon termination of this
Agreement, Employee shall promptly return to the Company all property of the
Company in his possession. Employee further represents that he will not copy or
cause to be copied, print out or cause to be printed out any software, documents
or other materials originating with or belonging to the Company. Employee
additionally represents that, upon termination of his employment with the
Company, he will not retain in his possession any such software, documents or
other materials.
13. Equitable Relief. It is mutually understood and agreed
that Employee's services are special, unique, unusual, extraordinary and of an
intellectual character giving them a peculiar value, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law.
Accordingly, in the event of any breach of this Agreement by Employee,
including, but not limited to, the breach of any of the provisions of Paragraphs
11 or 12 hereof, the Company shall be entitled to equitable relief by way of
injunction or otherwise in addition to any damages which the Company may be
entitled to recover. In addition, the Company shall be entitled to reimbursement
from Employee, upon request, of any and all reasonable attorneys' fees and
expenses incurred by it in enforcing any term or provision of this Agreement.
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14. Consent to New York Jurisdiction and Venue. The Employee
hereby consents and agrees that the Supreme Court of the State of New York for
the County of New York and the United States District Court for the Southern
District of New York each shall have personal jurisdiction and proper venue with
respect to any dispute between the Employee and the Company. In any dispute with
the Company, the Employee will not raise, and hereby expressly waives, any
objection or defense to any such jurisdiction as an inconvenient forum.
15. Notice. Except as otherwise expressly provided, any
notice, request, demand or other communication permitted or required to be given
under this Agreement shall be in writing, shall be sent by one of the following
means to the Employee at his address set forth on the first page of this
Agreement and to the Company at its address set forth on the first page of this
Agreement, Attention: Board of Directors, with a copy to Parker Chapin
Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York, New York 10036,
Attention: James Alterbaum, Esq. (or to such other address as shall be
designated hereunder by notice to the other parties and persons receiving
copies, effective upon actual receipt), and shall be deemed conclusively to have
been given: (a) on the first business day following the day timely deposited
with Federal Express (or other equivalent national overnight courier) or United
States Express Mail, with the cost of delivery prepaid or for the
account of the sender; (b) on the fifth business day following the day duly sent
by certified or registered United States mail, postage prepaid and return
receipt requested; or (c) when otherwise actually received by the addressee on a
business day (or on the next business day if received after the close of normal
business hours or on any non-business day).
16. Interpretation; Headings. The parties acknowledge and
agree that the terms and provisions of this Agreement have been negotiated,
shall be construed fairly as to all parties hereto, and shall not be construed
in favor of or against any party. The section headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
17. Successors and Assigns; Assignment; Intended
Beneficiaries. Neither this Agreement, nor any of Employee's rights, powers,
duties or obligations hereunder, may be assigned by Employee. This Agreement
shall be binding upon and inure to the benefit of Employee and his heirs and
legal representatives and the Company and its successors. Successors of the
Company shall include, without limitation, any corporation or corporations
acquiring, directly or indirectly, all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed "the Company" for the purpose hereof.
18. No Waiver by Action. Any waiver or consent from the
Company respecting any term or provision of this Agreement or any other aspect
of the Employee's conduct or employment shall be effective only in the specific
instance and for the specific purpose for which given and shall not be deemed,
regardless of frequency given, to be a further or continuing waiver or consent.
The failure or delay of the Company at any time or times to require performance
of, or to exercise any of its powers, rights or remedies with respect to, any
term or provision of this Agreement or any other aspect of the Employee's
conduct or employment in no manner (except as
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otherwise expressly provided herein) shall affect the Company's right at a later
time to enforce any such term or provision.
19. Counterparts; New York Governing Law; Amendments; Entire
Agreement. This Agreement may be executed in two counterpart copies, each of
which may be executed by one of the parties hereto, but all of which, when taken
together, shall constitute a single agreement binding upon all of the parties
hereto. This Agreement and all other aspects of the Employee's employment shall
be governed by and construed in accordance with the applicable laws pertaining
in the State of New York (other than those that would defer to the substantive
laws of another juris diction). Each and every modification and amendment of
this Agreement shall be in writing and signed by the parties hereto, and any
waiver of, or consent to any departure from, any term or provision of this
Agreement shall be in writing and signed by each affected party hereto. This
Agreement contains the entire agreement of the parties and supersedes all prior
representations, agreements and understandings, oral or otherwise, between the
parties with respect to the matters contained herein.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ICON CMT CORP.
By: /s/ Richard M. Brown
---------------------------------
Name: Richard M. Brown
Title: Vice President
/s/ Scott A. Baxter
---------------------------------
SCOTT A. BAXTER
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AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
AMENDMENT TO EMPLOYMENT AGREEMENT dated as of the 22nd day of
January, 1996, by and between ICON CMT CORP., a Delaware corporation having its
principal place of business at 420 Lexington Avenue, New York, New York 10170
(the "Company"), and SCOTT A. BAXTER, an individual residing at 129 Deerhaven
Road, Mahwah, New Jersey 07430 ("Employee").
W I T N E S S E T H:
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WHEREAS, the Company and Employee have previously entered
into an Employment Agreement dated as of December 4,1995 (the "Employment
Agreement"); and
WHEREAS, the Company and the Employee wish to amend the
Employment Agreement with respect to and in accordance with the terms and
provisions set forth below.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and premises contained herein, the parties hereto hereby agree
as follows:
1. Clause (b) of Section 1 of Exhibit A to the Employment
Agreement is hereby amended by deleting the reference therein to "$36.67" and
substituting in its place the amount of "$25.66".
2. Except as expressly amended by this Amendment, the
Employment Agreement and all of its terms, covenants, conditions and provisions
are hereby ratified and confirmed in all respects and shall continue in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
ICON CMT CORP.
By: Richard M. Brown
---------------------------
Name: Richard M. Brown
Title: Secretary
SCOTT A. BAXTER
----------------------------
SCOTT A. BAXTER
<PAGE>
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT TO EMPLOYMENT AGREEMENT dated as of the 2nd day
of June, 1997, by and between ICON CMT CORP., a Delaware corporation having its
principal place of business at 1200 Harbor Boulevard, Lincoln Harbor, Weehawken,
New Jersey 07087 (the "Company"), and SCOTT A. BAXTER, an individual having an
address c/o the Company at 1200 Harbor Boulevard, Lincoln Harbor, Weehawken, New
Jersey 07087 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and the Employee have previously
entered into an Employment Agreement dated as of December 4, 1995, as amended
January 22, 1996 (the "Employment Agreement"); and
WHEREAS, the Company and the Employee wish to amend the
Employment Agreement with respect to and in accordance with the terms and
provisions set forth below.
NOW, THEREFORE, in consideration of the foregoing and of
the mutual covenants and premises contained herein, the parties hereto hereby
agree as follows:
1. Section 2 of the Employment Agreement is hereby amended
by deleting the reference therein to "December 3, 2000" and substituting in its
place the date of "May 29, 2002".
2. Section 5(a) of the Employment Agreement is hereby
amended by deleting the reference therein to "$140,000" and by substituting in
its place the amount of "$185,000".
3. Section 5(b) of the Employment Agreement is hereby
deleted in its entirety and the following new Section 5(b) is hereby inserted in
its place:
"In addition to such Salary, Employee shall be entitled to receive
a guaranteed quarterly bonus in the amount of $30,000, payable
within 45 days of the end of each calendar quarter during the
Employment Term, and such salary increases and other bonuses as may
be determined from time to time by the Board of Directors of the
Company."
4. Except as expressly amended by this Amendment, the
Employment Agreement and all of its terms, covenants, conditions and provisions
are hereby ratified and confirmed in all respects and shall continue in full
force and effect.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment as of the date first above written.
ICON CMT CORP.
By: /s/ Scott A. Baxter
-------------------------
Name:
Title:
/s/ Scott A. Baxter
------------------------
SCOTT A. BAXTER
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated as of December 4, 1995,
between ICON CMT CORP., a Delaware corporation having an address at 420
Lexington Avenue, New York, New York 10170 (the "Company"), and RICHARD M.
BROWN, an individual residing at 115 Pemberton Avenue, Plainfield, New Jersey
07060 ("Employee").
W I T N E S S E T H :
WHEREAS, Employee has been employed directly or indirectly
by the Company for more than 4 years; and
WHEREAS, the Company desires that Employee continue to be
employed by it and render services to it, and Employee is willing to be so
employed and to render such services to the Company, all upon the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Employment. Subject to and upon the terms and conditions
contained in this Agreement, the Company hereby agrees to continue to employ
Employee and Employee agrees to continue in the employ of the Company, for the
period set forth in Paragraph 2 hereof, to render to the Company, its affiliates
and/or subsidiaries the services described in Paragraph 3 hereof.
2. Term. Employee's term of employment under this Agreement
shall be five (5) years, commencing on the date hereof and continuing through
and including December 3, 2000, unless extended in writing as provided below or
earlier terminated pursuant to the terms and conditions set forth herein (the
"Employment Term"). Such term shall be extended for successive one (1) year
terms unless either party hereto gives written notice to the other of its desire
to terminate this Agreement at least 90 days prior to the commencement of any
such extension.
3. Duties. (a) Employee shall serve as a senior executive of
the Company subject to the authority of the Board of Directors and Chief
Executive Officer of the Company. If elected by the Board of Directors, Employee
will serve as Vice President, Information Technologies of the Company. Employee
shall perform all duties and services incident to the positions held by him.
(b) Employee agrees to abide by all By-laws and
policies of the Company promulgated from time to time by the Company.
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<PAGE>
4. Exclusive Services and Best Efforts. Employee agrees to
devote his best efforts, energies and skill to the discharge of the duties and
responsibilities attributable to his position, and to this end, he will devote
his full time and attention during regular business hours to the business and
affairs of the Company, subject to the provisions of the last sentence of
subparagraph 11(b) hereof.
5. Compensation. (a) As compensation for his services and
covenants hereunder, Employee shall receive a salary ("Salary"), payable
pursuant to the Company's normal payroll procedures in place from time to time,
at the rate of $140,000 per annum, less all necessary and required federal,
state and local payroll deductions.
(b) In addition to such Salary, Employee shall be
entitled to receive such bonuses and salary increases as may be determined from
time to time by the Board of Directors of the Company.
6. Business Expenses. Employee shall be reimbursed for, and
entitled to advances (subject to repayment to the Company if not actually
incurred by Employee) with respect to, only those business expenses incurred by
him (a) which are reasonable and necessary for Employee to perform his duties
under this Agreement in accordance with policies established from time to time
by the Company, and (b) for which Employee has submitted vouchers and/or
receipts.
7. Employee Benefits. (a) During the Employment Term,
Employee shall be entitled to such insurance, disability and health and medical
benefits and be entitled to participate in such retirement plans or programs as
are from time to time generally made available to executive employees of the
Company pursuant to the policies of the Company; provided that Employee shall be
required to comply with the conditions attendant to coverage by such plans and
shall comply with and be entitled to benefits only in accordance with the terms
and conditions of such plans. The Com pany may withhold from any benefits
payable to Employee all federal, state, local and other taxes and amounts as
shall be permitted or required to be withheld pursuant to any applicable law,
rule or regulation.
(b) Employee shall be entitled to vacation in
accordance with the Company's policy in effect for executive staff, which shall
be taken at such time or times as shall be mutually agreed upon with the
Company.
(c) During the Employment Term, Employee shall, at
his option, either (i) be provided with the full-time use of an automobile owned
or leased by the Company and reasonably satisfactory to Employee and the
Company, all of the operating, maintenance and insurance expenses of which shall
be borne by the Company, or (ii) be reimbursed by the Company for all of the
operating, maintenance and insurance expenses (including lease payments, if
applicable) incurred by Employee in connection with an automobile owned or
leased by Employee and reasonably satisfactory to Employee and the Company.
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<PAGE>
8. Death and Disability. (a) The Employment Term shall
terminate on the date of Employee's death, in which event Employee's Salary,
reimbursable expenses and benefits owing to Employee through the date of
Employee's death shall be paid to his estate. In addition, the Company shall pay
to Employee's estate, within 60 days of the date of Employee's death, in a
lump-sum, an amount equal to Employee's then annual Salary. Employee's estate
will not be entitled to any other compensation upon termination of this
Agreement pursuant to this subparagraph 8(a).
(b) If, during the Employment Term, in the opinion
of a duly licensed physician selected by the Company, Employee, because of
physical or mental illness or incapacity, shall become substantially unable to
perform the duties and services required of him under this Agreement for a
period, of 180 consecutive days or 270 days in the aggregate during any
twelve-month period, the Company may, upon at least ten (10) days' prior written
notice given at any time after the expiration of such 180 or 270-day period, as
the case may be, to Employee of its intention to do so, terminate his employment
as of such date as may be set forth in the notice. In case of such termination,
Employee shall be entitled to receive his Salary, reimbursable expenses and
benefits owing to Employee through the date of termination. In addition, the
Company shall pay to Employee, within 60 days of the date of Employee's
termination, in a lump-sum, an amount equal to Employee's then annual Salary.
Employee will not be entitled to any other compensation upon termination of his
employment pursuant to this subparagraph 8(b).
9. Termination. The Company shall have the right to
terminate the employment of Employee and to terminate this Agreement in the
event: (a) Employee fails to substantially perform or repeatedly neglects his
duties assigned in accordance with this Agreement in any continuing manner after
notice from the Company of such failure or neglect; (b) Employee willfully fails
or refuses to substantially follow or comply with the directions of the Board of
Directors or of a superior officer or the policies or work rules of the Company;
(c) Employee through his intentional action or inaction has subjected the
Company to any criminal or civil liability under any applicable law; (d)
Employee is indicted for or convicted of any misdemeanor involving moral
turpitude or any felony; (e) Employee has used any narcotic or other illegal or
controlled substance or abused or otherwise excessively used any alcoholic
product or any prescription stimulant or depressant; (f) Employee has
misappropriated any asset or property of the Company, including (without
limitation) any theft or embezzlement or any diversion of any corporate
opportunity; (g) Employee has breached any of his covenants and agreements
contained in this Agreement, including (without limitation) those contained in
Paragraph 11 hereof; or (h) Employee concealed or misrepresented any material
fact in seeking employment hereunder. Upon such termination, the Company shall
be released from any and all further obligations under this Agreement, except
that the Company shall be obligated to pay Employee his Salary, reimbursable
expenses and benefits owing to Employee through the day on which Employee is
terminated. Employee will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Paragraph 9.
10. Change in Control - Termination of Employment and
Compensation in Event of Termination. (a) After a Change in Control (as defined
below) of the Company has occurred, if either Employee terminates his employment
within six (6) months after he has obtained actual
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<PAGE>
<PAGE>
knowledge of the Change in Control or the Company (or any successor thereto)
terminates Employee's employment with the Company within one (1) year after the
Change in Control, Employee shall be entitled to receive (i) his salary,
bonuses, awards, perquisites and benefits, including, without limitation,
benefits and awards under the Company's stock option plans and the Company's
pension and retirement plans and programs, accrued through the date Employee's
employment with the Company is terminated (the "Termination Date"), and (ii) a
lump-sum payment (the "Termination Compensation"), in cash, on the Termination
Date, in an amount equal to 2.99 times Employee's "base amount" (as such term is
defined in Section 28OG(b)(3) of the Internal Revenue Code of 1986, as amended
(the "Code")). The amount of the Termination Compensation shall be computed, at
the expense of the Company, by an independent certified public accounting firm
selected by the Board of Directors (the "Accountants"), whose computation shall
be conclusive and binding upon Employee and the Company.
(b) For purposes hereof, a "Change in Control"
shall be deemed to have occurred if: (i) any "person" or "group" (as such terms
are used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Act")), except for an employee stock ownership trust (or
any of the trustees thereof) or any of Scott A. Baxter, Richard M. Brown or
Scott Harmolin, becomes a "beneficial owner" (as such term is used in Rule 13d-3
promulgated under the Act), after the date hereof, directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities; (ii) a change in "control" of the
Company (as the term "control" is defined in Rule 12b-2 or any successor rule
promulgated under the Act) shall have occurred; (iii) the majority of the Board
of Directors, as such entire Board of Directors is composed at the date of this
Agreement, no longer serve as directors of the Company, except that there shall
not be counted toward such majority who no longer serve as directors any
director who ceased to serve either prior to the date of a Change in Control,
for any reason, or at any other time due to his death, disability or termination
for cause; (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; or (v) the
stockholders of the Company approve a merger or consolidation of the Company
with any other company, other than a merger or consolidation which would result
in the combined voting power of the Company's voting securities outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 70% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation. Notwithstanding the foregoing, any transaction involving a
leveraged buyout or other acquisition of the Company which would otherwise
constitute a Change in Control, in which Employee participates in the surviving
or successor entity (other than solely as an employee or consultant), shall not
constitute a Change in Control.
(c) Notwithstanding anything in this Agreement to
the contrary, Employee shall have the right, prior to the receipt by him of any
amounts due thereunder, to waive the receipt thereof or, subsequent to the
receipt by him of any amounts due hereunder, to treat some or all of such
amounts as a loan from the Company which Employee shall repay to the Company,
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<PAGE>
<PAGE>
within 90 days from the date of receipt, with interest at the rate provided in
Section 7872 of the Code. Notice of any such waiver or treatment of amounts
received as a loan shall be given by Employee to the Company in writing and
shall be binding upon the Company.
(d) It is intended that the "present value" of the
payments and benefits to Employee, whether under this Agreement or otherwise,
which are includable in the computation of "parachute payments" shall not, in
the aggregate, exceed 2.99 times the "base amount" (the terms "present value",
"parachute payments" and "base amount" being determined in accordance with
Section 28OG of the Code). Accordingly, if Employee receives payments or
benefits from the Company prior to payment of the Termination Compensation
which, when added to the Termination Compensation, would, in the opinion of the
Accountants, subject any of the payments or benefits to Employee to the excise
tax imposed by Section 4999 of the Code, the Termination Compensation shall be
reduced by the smallest amount necessary, in the opinion of the Accountants, to
avoid such tax. In addition, the Company shall have no obligation to make any
payment or provide any benefit to Employee subsequent to payment of the
Termination Compensation which, in the opinion of the Accountants, would subject
any of the payments or benefits to Employee to the excise tax imposed by Section
4999 of the Code. No reduction in the Termination Compensation or release of the
Company from any payment or benefit obligation in reliance upon any aforesaid
opinion of the Accountants shall be permitted unless the Company shall have
provided to Employee a copy of any such opinion, specifically entitling Employee
to rely thereon, no later than the date otherwise required for payment of the
Termination Compensation or any such later payment or benefit.
11. Disclosure of Trade Secrets and Other Proprietary
Information; Restrictive Covenants. Employee acknowledges that, by his
employment, he has been and will be in a confidential relationship with the
Company and will have access to confidential information and trade secrets of
the Company, its subsidiaries and affiliates. Confidential information and trade
secrets include, but are not limited to, customer, supplier and client lists,
panels and interviewers, price lists, marketing, strategies and procedures,
operational techniques, business plans and systems, quality control procedures
and systems, special projects and survey and market research, including
projects, research and reports for any entity or client, and any other records,
files, drawings, discoveries, applications, data, computer software programs and
source codes and information concerning the business of the Company and its
customers and clients which are not in the public domain. Employee agrees that
in consideration of the execution of this Agreement by the Company:
(a) Employee will not, during the term of this
Agreement or at any time thereafter, use, or disclose to any third party, trade
secrets or confidential information of the Company, including, but not limited
to, confidential information or trade secrets belonging or relating to the
Company, its subsidiaries, affiliates, customers and clients or proprietary
procedures of the Company, its subsidiaries, affiliates customers and clients.
Proprietary procedures shall include, but shall not be limited to, all
information which is known or intended to be known only by employees of the
Company, its subsidiaries and affiliates or others in a confidential
relationship with the Company or its subsidiaries and affiliates which relates
to business matters.
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<PAGE>
<PAGE>
(b) Employee will not, during the term of this
Agreement, directly or indirectly, as an employee, employer, consultant, agent,
principal, partner, manager, stockholder, officer, director, or in any other
individual or representative capacity, engage in or participate in any business
that is competitive with any business carried on by the Company or any of its
subsidiaries or affiliates during the term of this Agreement. The ownership by
Employee of 5% or less of the issued and outstanding shares of a class of
securities which is traded on a national securities exchange or in the
over-the-counter market, shall not cause Employee to be deemed a shareholder
under this subparagraph 11(b) or constitute a breach of this subparagraph 11(b).
(c) Employee will not, during the term of this
Agreement and for a period of twelve (12) months thereafter, directly or
indirectly, work as an employee, employer, consultant, agent, principal,
partner, manager, stockholder, officer, director, or in any other individual or
representative capacity for any person or entity who or which was a customer of
the Company or any of its subsidiaries or affiliates during the term of
Employee's employment with the Company. The ownership by Employee of 5% or less
of the issued and outstanding shares of a class of securities which is traded on
a national securities exchange or in the over-the-counter market, shall not
cause Employee to be deemed a shareholder under this subparagraph 11(c) or
constitute a breach of this subparagraph 11(c).
(d) Employee will not, during the term of this
Agreement and for a period of twelve (12) months thereafter, on his behalf or on
behalf of any other business enterprise, directly or indirectly, under any
circumstance other than at the direction and for the benefit of the Company, (i)
solicit for employment or employ any person who was employed by the Company or
any of its subsidiaries or affiliates during Employee's employment with the
Company, or (ii) call on, solicit, or take away any person or entity who or
which was a customer or the Company or any of its subsidiaries or affiliates
during Employee's employment with the Company.
(e) It is expressly agreed by Employee that the
nature and scope of each of the provisions set forth above in this Paragraph 11
are reasonable and necessary. If, for any reason, any aspect of the above
provisions as it applies to Employee is determined by a court of competent
jurisdiction to be unreasonable or unenforceable, the provisions shall only be
modified to the minimum extent required to make the provisions reasonable and/or
enforceable, as the case may be. Employee acknowledges and agrees that his
services are of unique character and expressly grants to the Company or any
subsidiary or affiliate of the Company or any successor of any of them, the
right to enforce the above provisions through the use of all remedies available
at law or in equity, including, but not limited to, injunctive relief.
(f) This Paragraph 11 and Paragraphs 12 and 13
hereof (and Paragraphs 14 through 19 hereof as they may apply to such
Paragraphs) shall survive the expiration or termination of this Agreement for
any reason.
12. Company Property. (a) Any patents, inventions,
discoveries, applications or processes designed, devised, planned, applied,
created, discovered or invented by Employee in the
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<PAGE>
course of Employee's employment under this Agreement and which pertain to any
aspect of the Company's or its subsidiaries' or affiliates' business shall be
the sole and absolute property of the Company, and Employee shall promptly
report the same to the Company and promptly execute any and all documents that
may from time to time reasonably be requested by the Company to assure the
Company the full and complete ownership thereof.
(b) All records, files, lists, including computer
generated lists, drawings, documents, equipment and similar items relating to
the Company's business which Employee shall prepare or receive from the Company
shall remain the Company's sole and exclusive property. Upon termination of this
Agreement, Employee shall promptly return to the Company all property of the
Company in his possession. Employee further represents that he will not copy or
cause to be copied, print out or cause to be printed out any software, documents
or other materials originating with or belonging to the Company. Employee
additionally represents that, upon termination of his employment with the
Company, he will not retain in his possession any such software, documents or
other materials.
13. Equitable Relief. It is mutually understood and agreed
that Employee's services are special, unique, unusual, extraordinary and of an
intellectual character giving them a peculiar value, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law.
Accordingly, in the event of any breach of this Agreement by Employee,
including, but not limited to, the breach of any of the provisions of Paragraphs
11 or 12 hereof, the Company shall be entitled to equitable relief by way of
injunction or otherwise in addition to any damages which the Company may be
entitled to recover. In addition, the Company shall be entitled to reimbursement
from Employee, upon request, of any and all reasonable attorneys' fees and
expenses incurred by it in enforcing any term or provision of this Agreement.
14. Consent to New York Jurisdiction and Venue. The Employee
hereby consents and agrees that the Supreme Court of the State of New York for
the County of New York and the United States District Court for the Southern
District of New York each shall have personal jurisdiction and proper venue with
respect to any dispute between the Employee and the Company. In any dispute with
the Company, the Employee will not raise, and hereby expressly waives, any
objection or defense to any such jurisdiction as an inconvenient forum.
15. Notice. Except as otherwise expressly provided, any
notice, request, demand or other communication permitted or required to be given
under this Agreement shall be in writing, shall be sent by one of the following
means to the Employee at his address set forth on the first page of this
Agreement and to the Company at its address set forth on the first page of this
Agreement, Attention: Scott A. Baxter, President, with a copy to Parker Chapin
Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York, New York 10036,
Attention: James Alterbaum, Esq. (or to such other address as shall be
designated hereunder by notice to the other parties and persons receiving
copies, effective upon actual receipt), and shall be deemed conclusively to have
been given: (a) on the first business day following the day timely deposited
with Federal Express (or other equivalent national overnight courier) or United
States Express Mail, with the cost of delivery prepaid or for the
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<PAGE>
account of the sender; (b) on the fifth business day following the day duly sent
by certified or registered United States mail, postage prepaid and return
receipt requested; or (c) when otherwise actually received by the addressee on a
business day (or on the next business day if received after the close of normal
business hours or on any non-business day).
16. Interpretation; Headings. The parties acknowledge and
agree that the terms and provisions of this Agreement have been negotiated,
shall be construed fairly as to all parties hereto, and shall not be construed
in favor of or against any party. The section headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
17. Successors and Assigns; Assignment; Intended
Beneficiaries. Neither this Agreement, nor any of Employee's rights, powers,
duties or obligations hereunder, may be assigned by Employee. This Agreement
shall be binding upon and inure to the benefit of Employee and his heirs and
legal representatives and the Company and its successors. Successors of the
Company shall include, without limitation, any corporation or corporations
acquiring, directly or indirectly, all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed "the Company" for the purpose hereof.
18. No Waiver by Action. Any waiver or consent from the
Company respecting any term or provision of this Agreement or any other aspect
of the Employee's conduct or employment shall be effective only in the specific
instance and for the specific purpose for which given and shall not be deemed,
regardless of frequency given, to be a further or continuing waiver or consent.
The failure or delay of the Company at any time or times to require performance
of, or to exercise any of its powers, rights or remedies with respect to, any
term or provision of this Agreement or any other aspect of the Employee's
conduct or employment in no manner (except as otherwise expressly provided
herein) shall affect the Company's right at a later time to enforce any such
term or provision.
19. Counterparts; New York Governing Law; Amendments; Entire
Agreement. This Agreement may be executed in two counterpart copies, each of
which may be executed by one of the parties hereto, but all of which, when taken
together, shall constitute a single agreement binding upon all of the parties
hereto. This Agreement and all other aspects of the Employee's employment shall
be governed by and construed in accordance with the applicable laws pertaining
in the State of New York (other than those that would defer to the substantive
laws of another jurisdiction). Each and every modification and amendment of
this Agreement shall be in writing and signed by the parties hereto, and any
waiver of, or consent to any departure from, any term or provision of this
Agreement shall be in writing and signed by each affected party hereto. This
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<PAGE>
Agreement contains the entire agreement of the parties and supersedes all prior
representations, agreements and understandings, oral or otherwise, between the
parties with respect to the matters contained herein.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ICON CMT CORP.
By: /s/Scott A. Baxter
---------------------------------
Scott A. Baxter, President
/s/ Richard M. Brown
---------------------------------
RICHARD M. BROWN
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<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT TO EMPLOYMENT AGREEMENT dated as of the 2nd day
of June, 1997, by and between ICON CMT CORP., a Delaware corporation having its
principal place of business at 1200 Harbor Boulevard, Lincoln Harbor, Weehawken,
New Jersey 07087 (the "Company"), and RICHARD M. BROWN, an individual having an
address c/o the Company at 1200 Harbor Boulevard, Lincoln Harbor, Weehawken, New
Jersey 07087 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and the Employee have previously
entered into an Employment Agreement dated as of December 4, 1995 (the
"Employment Agreement"); and
WHEREAS, the Company and the Employee wish to amend the
Employment Agreement with respect to and in accordance with the terms and
provisions set forth below.
NOW, THEREFORE, in consideration of the foregoing and of
the mutual covenants and premises contained herein, the parties hereto hereby
agree as follows:
1. Section 2 of the Employment Agreement is hereby amended
by deleting the reference therein to "December 3, 2000" and substituting in its
place the date of "May 29, 2002".
2. Section 5(a) of the Employment Agreement is hereby
amended by deleting the reference therein to "$140,000" and by substituting in
its place the amount of "$180,000".
3. Section 5(b) of the Employment Agreement is hereby
deleted in its entirety and the following new Section 5(b) is hereby inserted in
its place:
"In addition to such Salary, Employee shall be entitled to receive
a guaranteed quarterly bonus in the amount of $10,000, payable
within 45 days of the end of each calendar quarter during the
Employment Term, and such salary increases and other bonuses as may
be determined from time to time by the Board of Directors of the
Company."
4. Except as expressly amended by this Amendment, the
Employment Agreement and all of its terms, covenants, conditions and provisions
are hereby ratified and confirmed in all respects and shall continue in full
force and effect.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment as of the date first above written.
ICON CMT CORP.
By: /s/ Scott A. Baxter
--------------------------
Name:
Title:
/s/ Richard M. Brown
--------------------------
RICHARD M. BROWN
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EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated as of December 4, 1995,
between ICON CMT CORP., a Delaware corporation having an address at 420
Lexington Avenue, New York, New York 10170 (the "Company"), and SCOTT HARMOLIN,
an individual residing at 30 Walsh Drive, Mahwah, New Jersey 07430 ("Employee").
W I T N E S S E T H :
WHEREAS, Employee has been employed directly or indirectly
by the Company for more than 4 years; and
WHEREAS, the Company desires that Employee continue to be
employed by it and render services to it, and Employee is willing to be so
employed and to render such services to the Company, all upon the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Employment. Subject to and upon the terms and conditions
contained in this Agreement, the Company hereby agrees to continue to employ
Employee and Employee agrees to continue in the employ of the Company, for the
period set forth in Paragraph 2 hereof, to render to the Company, its affiliates
and/or subsidiaries the services described in Paragraph 3 hereof.
2. Term. Employee's term of employment under this Agreement
shall be five (5) years, commencing on the date hereof and continuing through
and including December 3, 2000, unless extended in writing as provided below or
earlier terminated pursuant to the terms and conditions set forth herein (the
"Employment Term"). Such term shall be extended for successive one (1) year
terms unless either party hereto gives written notice to the other of its desire
to terminate this Agreement at least 90 days prior to the commencement of any
such extension.
3. Duties. (a) Employee shall serve as a senior executive of
the Company subject to the authority of the Board of Directors and Chief
Executive Officer of the Company. If elected by the Board of Directors, Employee
will serve as Vice President, Advanced Technology of the Company. Employee shall
perform all duties and services incident to the positions held by him.
(b) Employee agrees to abide by all By-laws and
policies of the Company promulgated from time to time by the Company.
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4. Exclusive Services and Best Efforts. Employee agrees to
devote his best efforts, energies and skill to the discharge of the duties and
responsibilities attributable to his position, and to this end, he will devote
his full time and attention during regular business hours to the business and
affairs of the Company, subject to the provisions of the last sentence of
subparagraph 11(b) hereof.
5. Compensation. (a) As compensation for his services and
covenants hereunder, Employee shall receive a salary ("Salary"), payable
pursuant to the Company's normal payroll procedures in place from time to time,
at the rate of $140,000 per annum, less all necessary and required federal,
state and local payroll deductions.
(b) In addition to such Salary, Employee shall be
entitled to receive such bonuses and salary increases as may be determined from
time to time by the Board of Directors of the Company.
6. Business Expenses. Employee shall be reimbursed for, and
entitled to advances (subject to repayment to the Company if not actually
incurred by Employee) with respect to, only those business expenses incurred by
him (a) which are reasonable and necessary for Employee to perform his duties
under this Agreement in accordance with policies established from time to time
by the Company, and (b) for which Employee has submitted vouchers and/or
receipts.
7. Employee Benefits. (a) During the Employment Term,
Employee shall be entitled to such insurance, disability and health and medical
benefits and be entitled to participate in such retirement plans or programs as
are from time to time generally made available to executive employees of the
Company pursuant to the policies of the Company; provided that Employee shall be
required to comply with the conditions attendant to coverage by such plans and
shall comply with and be entitled to benefits only in accordance with the terms
and conditions of such plans. The Com pany may withhold from any benefits
payable to Employee all federal, state, local and other taxes and amounts as
shall be permitted or required to be withheld pursuant to any applicable law,
rule or regulation.
(b) Employee shall be entitled to vacation in
accordance with the Company's policy in effect for executive staff, which shall
be taken at such time or times as shall be mutually agreed upon with the
Company.
(c) During the Employment Term, Employee shall, at
his option, either (i) be provided with the full-time use of an automobile owned
or leased by the Company and reasonably satisfactory to Employee and the
Company, all of the operating, maintenance and insurance expenses of which shall
be borne by the Company, or (ii) be reimbursed by the Company for all of the
operating, maintenance and insurance expenses (including lease payments, if
applicable) incurred by Employee in connection with an automobile owned or
leased by Employee and reasonably satisfactory to Employee and the Company.
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8. Death and Disability. (a) The Employment Term shall
terminate on the date of Employee's death, in which event Employee's Salary,
reimbursable expenses and benefits owing to Employee through the date of
Employee's death shall be paid to his estate. In addition, the Company shall pay
to Employee's estate, within 60 days of the date of Employee's death, in a
lump-sum, an amount equal to Employee's then annual Salary. Employee's estate
will not be entitled to any other compensation upon termination of this
Agreement pursuant to this subparagraph 8(a).
(b) If, during the Employment Term, in the opinion
of a duly licensed physician selected by the Company, Employee, because of
physical or mental illness or incapacity, shall become substantially unable to
perform the duties and services required of him under this Agreement for a
period, of 180 consecutive days or 270 days in the aggregate during any
twelve-month period, the Company may, upon at least ten (10) days' prior written
notice given at any time after the expiration of such 180 or 270-day period, as
the case may be, to Employee of its intention to do so, terminate his employment
as of such date as may be set forth in the notice. In case of such termination,
Employee shall be entitled to receive his Salary, reimbursable expenses and
benefits owing to Employee through the date of termination. In addition, the
Company shall pay to Employee, within 60 days of the date of Employee's
termination, in a lump-sum, an amount equal to Employee's then annual Salary.
Employee will not be entitled to any other compensation upon termination of his
employment pursuant to this subparagraph 8(b).
9. Termination. The Company shall have the right to
terminate the employment of Employee and to terminate this Agreement in the
event: (a) Employee fails to substantially perform or repeatedly neglects his
duties assigned in accordance with this Agreement in any continuing manner after
notice from the Company of such failure or neglect; (b) Employee willfully fails
or refuses to substantially follow or comply with the directions of the Board of
Directors or of a superior officer or the policies or work rules of the Company;
(c) Employee through his intentional action or inaction has subjected the
Company to any criminal or civil liability under any applicable law; (d)
Employee is indicted for or convicted of any misdemeanor involving moral
turpitude or any felony; (e) Employee has used any narcotic or other illegal or
controlled substance or abused or otherwise excessively used any alcoholic
product or any prescription stimulant or depressant; (f) Employee has
misappropriated any asset or property of the Company, including (without
limitation) any theft or embezzlement or any diversion of any corporate
opportunity; (g) Employee has breached any of his covenants and agreements
contained in this Agreement, including (without limitation) those contained in
Paragraph 11 hereof; or (h) Employee concealed or misrepresented any material
fact in seeking employment hereunder. Upon such termination, the Company shall
be released from any and all further obligations under this Agreement, except
that the Company shall be obligated to pay Employee his Salary, reimbursable
expenses and benefits owing to Employee through the day on which Employee is
terminated. Employee will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Paragraph 9.
10. Change in Control - Termination of Employment and
Compensation in Event of Termination. (a) After a Change in Control (as defined
below) of the Company has occurred, if either Employee terminates his employment
within six (6) months after he has obtained actual
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knowledge of the Change in Control or the Company (or any successor thereto)
terminates Employee's employment with the Company within one (1) year after the
Change in Control, Employee shall be entitled to receive (i) his salary,
bonuses, awards, perquisites and benefits, including, without limitation,
benefits and awards under the Company's stock option plans and the Company's
pension and retirement plans and programs, accrued through the date Employee's
employment with the Company is terminated (the "Termination Date"), and (ii) a
lump-sum payment (the "Termination Compensation"), in cash, on the Termination
Date, in an amount equal to 2.99 times Employee's "base amount" (as such term is
defined in Section 28OG(b)(3) of the Internal Revenue Code of 1986, as amended
(the "Code")). The amount of the Termination Compensation shall be computed, at
the expense of the Company, by an independent certified public accounting firm
selected by the Board of Directors (the "Accountants"), whose computation shall
be conclusive and binding upon Employee and the Company.
(b) For purposes hereof, a "Change in Control"
shall be deemed to have occurred if: (i) any "person" or "group" (as such terms
are used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Act")), except for an employee stock ownership trust (or
any of the trustees thereof) or any of Scott A. Baxter, Richard M. Brown or
Scott Harmolin, becomes a "beneficial owner" (as such term is used in Rule 13d-3
promulgated under the Act), after the date hereof, directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities; (ii) a change in "control" of the
Company (as the term "control" is defined in Rule 12b-2 or any successor rule
promulgated under the Act) shall have occurred; (iii) the majority of the Board
of Directors, as such entire Board of Directors is composed at the date of this
Agreement, no longer serve as directors of the Company, except that there shall
not be counted toward such majority who no longer serve as directors any
director who ceased to serve either prior to the date of a Change in Control,
for any reason, or at any other time due to his death, disability or termination
for cause; (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; or (v) the
stockholders of the Company approve a merger or consolidation of the Company
with any other company, other than a merger or consolidation which would result
in the combined voting power of the Company's voting securities outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 70% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation. Notwithstanding the foregoing, any transaction involving a
leveraged buyout or other acquisition of the Company which would otherwise
constitute a Change in Control, in which Employee participates in the surviving
or successor entity (other than solely as an employee or consultant), shall not
constitute a Change in Control.
(c) Notwithstanding anything in this Agreement to
the contrary, Employee shall have the right, prior to the receipt by him of any
amounts due thereunder, to waive the receipt thereof or, subsequent to the
receipt by him of any amounts due hereunder, to treat some or all of such
amounts as a loan from the Company which Employee shall repay to the Company,
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within 90 days from the date of receipt, with interest at the rate provided in
Section 7872 of the Code. Notice of any such waiver or treatment of amounts
received as a loan shall be given by Employee to the Company in writing and
shall be binding upon the Company.
(d) It is intended that the "present value" of the
payments and benefits to Employee, whether under this Agreement or otherwise,
which are includable in the computation of "parachute payments" shall not, in
the aggregate, exceed 2.99 times the "base amount" (the terms "present value",
"parachute payments" and "base amount" being determined in accordance with
Section 28OG of the Code). Accordingly, if Employee receives payments or
benefits from the Company prior to payment of the Termination Compensation
which, when added to the Termination Compensation, would, in the opinion of the
Accountants, subject any of the payments or benefits to Employee to the excise
tax imposed by Section 4999 of the Code, the Termination Compensation shall be
reduced by the smallest amount necessary, in the opinion of the Accountants, to
avoid such tax. In addition, the Company shall have no obligation to make any
payment or provide any benefit to Employee subsequent to payment of the
Termination Compensation which, in the opinion of the Accountants, would subject
any of the payments or benefits to Employee to the excise tax imposed by Section
4999 of the Code. No reduction in the Termination Compensation or release of the
Company from any payment or benefit obligation in reliance upon any aforesaid
opinion of the Accountants shall be permitted unless the Company shall have
provided to Employee a copy of any such opinion, specifically entitling Employee
to rely thereon, no later than the date otherwise required for payment of the
Termination Compensation or any such later payment or benefit.
11. Disclosure of Trade Secrets and Other Proprietary
Information; Restrictive Covenants. Employee acknowledges that, by his
employment, he has been and will be in a confidential relationship with the
Company and will have access to confidential information and trade secrets of
the Company, its subsidiaries and affiliates. Confidential information and trade
secrets include, but are not limited to, customer, supplier and client lists,
panels and interviewers, price lists, marketing, strategies and procedures,
operational techniques, business plans and systems, quality control procedures
and systems, special projects and survey and market research, including
projects, research and reports for any entity or client, and any other records,
files, drawings, discoveries, applications, data, computer software programs and
source codes and information concerning the business of the Company and its
customers and clients which are not in the public domain. Employee agrees that
in consideration of the execution of this Agreement by the Company:
(a) Employee will not, during the term of this
Agreement or at any time thereafter, use, or disclose to any third party, trade
secrets or confidential information of the Company, including, but not limited
to, confidential information or trade secrets belonging or relating to the
Company, its subsidiaries, affiliates, customers and clients or proprietary
procedures of the Company, its subsidiaries, affiliates customers and clients.
Proprietary procedures shall include, but shall not be limited to, all
information which is known or intended to be known only by employees of the
Company, its subsidiaries and affiliates or others in a confidential
relationship with the Company or its subsidiaries and affiliates which relates
to business matters.
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(b) Employee will not, during the term of this
Agreement, directly or indirectly, as an employee, employer, consultant, agent,
principal, partner, manager, stockholder, officer, director, or in any other
individual or representative capacity, engage in or participate in any business
that is competitive with any business carried on by the Company or any of its
subsidiaries or affiliates during the term of this Agreement. The ownership by
Employee of 5% or less of the issued and outstanding shares of a class of
securities which is traded on a national securities exchange or in the
over-the-counter market, shall not cause Employee to be deemed a shareholder
under this subparagraph 11(b) or constitute a breach of this subparagraph 11(b).
(c) Employee will not, during the term of this
Agreement and for a period of twelve (12) months thereafter, directly or
indirectly, work as an employee, employer, consultant, agent, principal,
partner, manager, stockholder, officer, director, or in any other individual or
representative capacity for any person or entity who or which was a customer of
the Company or any of its subsidiaries or affiliates during the term of
Employee's employment with the Company. The ownership by Employee of 5% or less
of the issued and outstanding shares of a class of securities which is traded on
a national securities exchange or in the over-the-counter market, shall not
cause Employee to be deemed a shareholder under this subparagraph 11(c) or
constitute a breach of this subparagraph 11(c).
(d) Employee will not, during the term of this
Agreement and for a period of twelve (12) months thereafter, on his behalf or on
behalf of any other business enterprise, directly or indirectly, under any
circumstance other than at the direction and for the benefit of the Company, (i)
solicit for employment or employ any person who was employed by the Company or
any of its subsidiaries or affiliates during Employee's employment with the
Company, or (ii) call on, solicit, or take away any person or entity who or
which was a customer or the Company or any of its subsidiaries or affiliates
during Employee's employment with the Company.
(e) It is expressly agreed by Employee that the
nature and scope of each of the provisions set forth above in this Paragraph 11
are reasonable and necessary. If, for any reason, any aspect of the above
provisions as it applies to Employee is determined by a court of competent
jurisdiction to be unreasonable or unenforceable, the provisions shall only be
modified to the minimum extent required to make the provisions reasonable and/or
enforceable, as the case may be. Employee acknowledges and agrees that his
services are of unique character and expressly grants to the Company or any
subsidiary or affiliate of the Company or any successor of any of them, the
right to enforce the above provisions through the use of all remedies available
at law or in equity, including, but not limited to, injunctive relief.
(f) This Paragraph 11 and Paragraphs 12 and 13
hereof (and Paragraphs 14 through 19 hereof as they may apply to such
Paragraphs) shall survive the expiration or termination of this Agreement for
any reason.
12. Company Property. (a) Any patents, inventions,
discoveries, applications or processes designed, devised, planned, applied,
created, discovered or invented by Employee in the
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course of Employee's employment under this Agreement and which pertain to any
aspect of the Company's or its subsidiaries' or affiliates' business shall be
the sole and absolute property of the Company, and Employee shall promptly
report the same to the Company and promptly execute any and all documents that
may from time to time reasonably be requested by the Company to assure the
Company the full and complete ownership thereof.
(b) All records, files, lists, including computer
generated lists, drawings, documents, equipment and similar items relating to
the Company's business which Employee shall prepare or receive from the Company
shall remain the Company's sole and exclusive property. Upon termination of this
Agreement, Employee shall promptly return to the Company all property of the
Company in his possession. Employee further represents that he will not copy or
cause to be copied, print out or cause to be printed out any software, documents
or other materials originating with or belonging to the Company. Employee
additionally represents that, upon termination of his employment with the
Company, he will not retain in his possession any such software, documents or
other materials.
13. Equitable Relief. It is mutually understood and agreed
that Employee's services are special, unique, unusual, extraordinary and of an
intellectual character giving them a peculiar value, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law.
Accordingly, in the event of any breach of this Agreement by Employee,
including, but not limited to, the breach of any of the provisions of Paragraphs
11 or 12 hereof, the Company shall be entitled to equitable relief by way of
injunction or otherwise in addition to any damages which the Company may be
entitled to recover. In addition, the Company shall be entitled to reimbursement
from Employee, upon request, of any and all reasonable attorneys' fees and
expenses incurred by it in enforcing any term or provision of this Agreement.
14. Consent to New York Jurisdiction and Venue. The Employee
hereby consents and agrees that the Supreme Court of the State of New York for
the County of New York and the United States District Court for the Southern
District of New York each shall have personal jurisdiction and proper venue with
respect to any dispute between the Employee and the Company. In any dispute with
the Company, the Employee will not raise, and hereby expressly waives, any
objection or defense to any such jurisdiction as an inconvenient forum.
15. Notice. Except as otherwise expressly provided, any
notice, request, demand or other communication permitted or required to be given
under this Agreement shall be in writing, shall be sent by one of the following
means to the Employee at his address set forth on the first page of this
Agreement and to the Company at its address set forth on the first page of this
Agreement, Attention: Scott A. Baxter, President, with a copy to Parker Chapin
Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York, New York 10036,
Attention: James Alterbaum, Esq. (or to such other address as shall be
designated hereunder by notice to the other parties and persons receiving
copies, effective upon actual receipt), and shall be deemed conclusively to have
been given: (a) on the first business day following the day timely deposited
with Federal Express (or other equivalent national overnight courier) or United
States Express Mail, with the cost of delivery prepaid or for the
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account of the sender; (b) on the fifth business day following the day duly sent
by certified or registered United States mail, postage prepaid and return
receipt requested; or (c) when otherwise actually received by the addressee on a
business day (or on the next business day if received after the close of normal
business hours or on any non-business day).
16. Interpretation; Headings. The parties acknowledge and
agree that the terms and provisions of this Agreement have been negotiated,
shall be construed fairly as to all parties hereto, and shall not be construed
in favor of or against any party. The section headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
17. Successors and Assigns; Assignment; Intended
Beneficiaries. Neither this Agreement, nor any of Employee's rights, powers,
duties or obligations hereunder, may be assigned by Employee. This Agreement
shall be binding upon and inure to the benefit of Employee and his heirs and
legal representatives and the Company and its successors. Successors of the
Company shall include, without limitation, any corporation or corporations
acquiring, directly or indirectly, all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed "the Company" for the purpose hereof.
18. No Waiver by Action. Any waiver or consent from the
Company respecting any term or provision of this Agreement or any other aspect
of the Employee's conduct or employment shall be effective only in the specific
instance and for the specific purpose for which given and shall not be deemed,
regardless of frequency given, to be a further or continuing waiver or consent.
The failure or delay of the Company at any time or times to require performance
of, or to exercise any of its powers, rights or remedies with respect to, any
term or provision of this Agreement or any other aspect of the Employee's
conduct or employment in no manner (except as otherwise expressly provided
herein) shall affect the Company's right at a later time to enforce any such
term or provision.
19. Counterparts; New York Governing Law; Amendments; Entire
Agreement. This Agreement may be executed in two counterpart copies, each of
which may be executed by one of the parties hereto, but all of which, when taken
together, shall constitute a single agreement binding upon all of the parties
hereto. This Agreement and all other aspects of the Employee's employment shall
be governed by and construed in accordance with the applicable laws pertaining
in the State of New York (other than those that would defer to the substantive
laws of another juris diction). Each and every modification and amendment of
this Agreement shall be in writing and signed by the parties hereto, and any
waiver of, or consent to any departure from, any term or provision of this
Agreement shall be in writing and signed by each affected party hereto. This
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Agreement contains the entire agreement of the parties and supersedes all prior
representations, agreements and understandings, oral or otherwise, between the
parties with respect to the matters contained herein.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ICON CMT CORP.
By: /s/ Scott A. Baxter
--------------------------
Scott A. Baxter, President
/s/ Scott Harmolin
--------------------------
SCOTT HARMOLIN
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AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT TO EMPLOYMENT AGREEMENT dated as of the 2nd day
of June, 1997, by and between ICON CMT CORP., a Delaware corporation having its
principal place of business at 1200 Harbor Boulevard, Lincoln Harbor, Weehawken,
New Jersey 07087 (the "Company"), and SCOTT HARMOLIN, an individual having an
address c/o the Company at 1200 Harbor Boulevard, Lincoln Harbor, Weehawken, New
Jersey 07087 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and the Employee have previously
entered into an Employment Agreement dated as of December 4, 1995 (the
"Employment Agreement"); and
WHEREAS, the Company and the Employee wish to amend the
Employment Agreement with respect to and in accordance with the terms and
provisions set forth below.
NOW, THEREFORE, in consideration of the foregoing and of
the mutual covenants and premises contained herein, the parties hereto hereby
agree as follows:
1. Section 2 of the Employment Agreement is hereby amended
by deleting the reference therein to "December 3, 2000" and substituting in its
place the date of "May 29, 2002".
2. Section 5(a) of the Employment Agreement is hereby
amended by deleting the reference therein to "$140,000" and by substituting in
its place the amount of "$180,000".
3. Section 5(b) of the Employment Agreement is hereby
deleted in its entirety and the following new Section 5(b) is hereby inserted in
its place:
"In addition to such Salary, Employee shall be entitled to receive
a guaranteed quarterly bonus in the amount of $10,000, payable
within 45 days of the end of each calendar quarter during the
Employment Term, and such salary increases and other bonuses as may
be determined from time to time by the Board of Directors of the
Company."
4. Except as expressly amended by this Amendment, the
Employment Agreement and all of its terms, covenants, conditions and provisions
are hereby ratified and confirmed in all respects and shall continue in full
force and effect.
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IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment as of the date first above written.
ICON CMT CORP.
By: /s/ Scott A. Baxter
------------------------
Name:
Title:
/s/ Scott Harmolin
------------------------
SCOTT HARMOLIN
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EMPLOYMENT AGREEMENT
AGREEMENT made as of this __ day of February, 1997, by and between ICON CMT
CORP., a Delaware corporation with an address at 1200 Harbor Boulevard,
Weehawken, New Jersey (the "COMPANY"), and FRANK CICIO, an individual with an
address at 7 Aldgate Court, Princeton, New Jersey 08540 (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, Company wishes to secure the employment of Executive with the
Company and the Executive wishes to accept such employment upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. EMPLOYMENT
The Company agrees to employ the Executive and the Executive
agrees to accept such employment, upon the terms and conditions hereinafter set
forth.
2. TERM
The "TERM" of Executive's employment hereunder shall commence
upon execution hereof and continue until terminated by either Executive or
Company. Executive acknowledges and agrees that his employment status is that of
an employee-at-will and that Executive's employment may be terminated by Company
or Executive at any time with or without cause (as defined in paragraph 8(b)
below). The effective date of the termination of the Executive's employment with
the Company, regardless of the reason therefor, is referred to in this Agreement
as the "DATE OF TERMINATION".
3. DUTIES AND RESPONSIBILITIES
(a) During the Term, the Executive shall have the position of
Senior Vice President, Sales and Business Development. The Executive shall
report to the Board of Directors of the Company (the "BOARD") and the President
of the Company and/or such other person or persons as the Board may from time to
time designate, at such times and in such detail as they shall reasonably
require.
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(b) The Executive shall have all of the powers, duties and
responsibilities customary to his office as are reasonably necessary to the
operations of the Company and as may be assigned to him from time to time by or
under authority of the Board and/or the President of the Company, consistent
with his position as designated in paragraph 3(a) above.
(c) The Executive will, at all times, use all reasonable efforts
to perform his duties and responsibilities in a manner consistent with the
policies of the Company as from time to time in effect and the parameters of the
then-current profit plan and capital expenditure budget of the Company as
provided by the Company. The Executive shall use his best efforts to ensure that
the Company and its subsidiaries, if any, comply on a timely basis with all
budgetary and reporting requirements reasonably requested by the Board. In no
event will the Executive, without the approval of the Board or the President of
the Company incur obligations on behalf of the Company other than in the
ordinary course of business or enter into any transaction on behalf of the
Company not in the ordinary course of business.
(d) The Executive's employment by the Company shall be full-time
and exclusive and, during the Term, the Executive agrees that he will (i) devote
substantially all of his business time and attention, his best efforts, and all
his skill and ability to promote the interests of the Company; (ii) carry out
his duties in a competent and professional manner; (iii) work with other
employees of the Company in a competent and professional manner; and (iv)
generally promote the interests of the Company and its clients. Notwithstanding
the foregoing, the Executive shall be permitted to engage in other business or
charitable activities (as an active participant or a passive investor), provided
that such activities are not rendered for a company which transacts business
with the Company or directly competes (as hereinafter defined) with the Company
(or, if such company does transact business with the Company or does directly
compete with the Company, it is a publicly held corporation and the Executive's
participation is limited to owning less than 1% of its outstanding shares) and
further provided that such activities (individually or collectively) do not
materially interfere with the performance of his duties or responsibilities
under this Agreement.
(e) The Executive's services hereunder shall be performed at the
offices of the Company in Weehawken, New Jersey and New York, New York, subject
to necessary travel requirements of his position and duties hereunder.
4. COMPENSATION
(a) As compensation for his services hereunder and in
consideration of his agreement not to compete as set forth in paragraph 8 below,
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during the Term, the Company shall pay the Executive, in accordance with its
normal payroll practices, initial base salary at an annual rate of $200,000 for
calendar year 1997 (it being agreed that during such period, the Executive's
compensation shall not be decreased without his consent). After calendar year
1997, the Executive's annual rate of salary compensation may be increased by or
under the authority of the Board in accordance with the salary review policy of
the Company (currently every 12 months) and within the guidelines and budgeting
procedures of the Company. Any adjustment to the Executive's salary shall become
effective on the applicable salary review date.
5. PERFORMANCE BONUS
(a) During the first year of Executive's employment, Executive
will be eligible for performance bonuses (the "Performance Bonus") based on the
Company's achievement of the revenue targets stated below.
(b) The Performance Bonus, if any, will be paid, within 45 days
of the end of the applicable quarter, as follows:
(i) if the Company achieves (A) $7,882,428 in Gross
Revenues (as defined below) in connection with sales of
Products during the three month period ending on March 31,
1997, Executive will be paid $12,500, and (B) $4,415,498
in Gross Revenues in connection with sales of Services
during such period, Executive will be paid $12,500;
(ii) if the Company achieves (A) $8,297,192 in
Gross Revenues in connection with sales of Products during
the three month period ending on June 30, 1997, Executive
will be paid $12,500, and (B) $6,233,423 in Gross Revenues
in connection with sales of Services during such period,
Executive will be paid $12,500;
(iii) if the Company achieves (A) $8,637,995 in
Gross Revenues in connection with sales of Products during
the three month period ending on September 30, 1997,
Executive will be paid $12,500, and (B) $9,544,138 in
Gross Revenues in connection with sales of Services during
such period, Executive will be paid $12,500;
(iv) if the Company achieves (A) $8,904,896 in
Gross Revenues in connection with sales of Products during
the three month period ending on December 31, 1997,
Executive will be paid $12,500, and (B) $13,743,247 in
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Gross Revenues in connection with sales of Services during
such period, Executive will be paid $12,500;
(v) if the Company achieves less than 100% but
greater than 75% of the Gross Revenues amounts stated in
(i) through (iv) above, in any of the time periods stated
above, then the portion of the Performance Bonus which
would otherwise paid by the Company with respect to such
period shall be reduced pro rata (i.e. if the Company
achieves 80% of the Gross Revenues amounts, Executive will
be paid 80% of the Performance Bonus contemplated above
for the relevant period); and
(vi) if the Company achieves greater than 100% of
the Gross Revenues amounts stated in (i) through (iv)
above, in any of the time periods stated above, then the
portion of the Performance Bonus that would otherwise paid
by the Company with respect to such period shall be
increased pro rata (i.e. if the Company achieves 110% of
the Gross Revenues amounts, Executive will be paid 110% of
the Performance Bonus contemplated above for the relevant
period).
(c) For purposes of this Agreement, (i) "PRODUCTS" and "SERVICES"
shall be defined and accounted for as currently defined and accounted for in the
Company's financial statements; and (ii) GROSS REVENUES shall be those amounts
stated in the Company's financial statements.
(d) The Board or the President of the Company shall set Gross
Revenues targets for each fiscal year, and in connection therewith, establish
Performance Bonus incentive compensation criteria for Executive.
6. STOCK OPTION CONTRACT.
Simultaneously with the execution hereof, Executive and the
Company are entering into a Stock Option Contract and related Stockholder
Agreement substantially in the form of Exhibit A hereto.
7. EXPENSES; FRINGE BENEFITS
(a) In addition to the compensation provided for under paragraphs
4 and 5, the Company agrees to pay or to reimburse the Executive during the Term
for all reasonable, ordinary and necessary, and reasonably documented business
or entertainment expenses incurred in the performance of his services hereunder
in accordance with the policy of the Company as from
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time to time in effect. The Executive, as a condition precedent to obtaining
such payment or reimbursement, shall provide to the Company any and all
statements, bills or receipts evidencing the travel or out-of-pocket expenses
for which the Executive seeks payment or reimbursement, and any other
information or materials, as the Company may from time to time reasonably
require.
(b) During the Term, the Executive and, to the extent eligible,
his dependents, shall be entitled to participate in and receive all benefits
under any welfare benefit plans and programs provided by the Company to senior
management of the Company (including without limitation, medical, dental,
disability, group life (including accidental death and dismemberment) and
business travel insurance plans and programs) applicable generally to the
employees of the Company, subject, however, to the applicable eligibility and
other provisions of the various plans and programs in effect from time to time.
(c) During the Term, the Executive shall be entitled to
participate in all retirement plans and programs (including without limitation
any profit sharing/401(k) plan) applicable generally to senior management of the
Company, subject, however, to applicable eligibility and other provisions of the
various plans and programs in effect from time to time. In addition, during the
Term, the Executive shall be entitled to receive fringe benefits and perquisites
in accordance with the plans, practices, programs and policies of the Company
from time to time in effect and available generally to the senior management of
the Company and consistent with the applicable guidelines determined by the
Company.
(d) The Executive shall be entitled to two (2) weeks paid
vacation during each calendar year during the Term, to be taken at such time(s)
as shall not, in the reasonable judgment of the Board, materially interfere with
the Executive's fulfillment of his duties hereunder, and shall be entitled to as
many holidays, sick days and personal days as are in accordance with the
Company's policy then in effect for its senior management generally, upon such
terms as may be provided of general application to senior management of the
Company.
(e) Notwithstanding anything to the contrary contained above, the
Company shall be entitled to terminate or reduce any employee benefit or
perquisite enjoyed by the Executive pursuant to the provisions of paragraph
7(b), (c), or (d) above if such reduction is part of a reduction applicable to
senior management of the Company generally.
8. TERMINATION
(a) The Company, by direction of the Board and/or the
President, shall be entitled to terminate the Term and to discharge the
Executive
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for "CAUSE" effective immediately upon the giving of written notice. The term
"CAUSE" shall include the following:
(i) The misappropriation of funds or property of
the Company;
(ii) The use of alcohol or illegal drugs,
materially interfering with the performance of the
Executive's obligations under this Agreement, continuing
after written warning;
(iii) The conviction in a court of law of, or
entering a plea of guilty or no contest to, any felony or
any crime involving moral turpitude, dishonesty or theft;
or
(iv) The commission by the Executive, in the course
of his employment hereunder, of any willful or intentional
act which injures and may reasonably be expected to injure
the reputation, business or business relationships of the
Company, including without limitation, a breach of the
provisions of paragraphs 10 and 11 of this Agreement.
(b) Upon the termination of the employment of the Executive with
the Company (x) pursuant to paragraph 8(a) or (y) any termination by the
Executive other than a termination contemplated under paragraph 8(c) below, the
Company shall pay the Executive, subject to any appropriate offsets, as
permitted by applicable law, for debts or money due to the Company
(collectively, "OFFSETS"), his salary compensation, Performance Bonus
compensation earned, any unused accrued vacation only through, and any unpaid
reimbursable expenses outstanding as of, the Date of Termination. Any benefits
to which the Executive or his beneficiaries may be entitled under the plans and
programs described in paragraphs 7(b) and (c) above, or any other applicable
plans and programs, as of his Date of Termination shall be determined in
accordance with the terms of such plans and programs. In connection with the
Executive's termination by the Company for cause, except as provided in this
paragraph 8(b), the Company shall have no further liability to the Executive or
the Executive's heirs, beneficiaries or estate for damages, compensation,
benefits, severance, indemnities or other amount of whatever nature.
(c) In the event that the Company is in default of a material
term of this Agreement (including, without limitation, the assignment to the
Executive of duties which are materially inconsistent with the duties described
in paragraph 3(b) above or any attempted substantial reduction of compensation
or benefits), which default remains uncured for a period of 30 days after
written notice of such default from the Executive to the Company (such notice to
specify the specific
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nature of the claimed default and the manner in which the Executive requires
such default to be cured), and Executive elects to terminate his employment
hereunder, then the Executive shall be deemed to have been terminated by the
Company without cause. Such termination by the Executive, or in the event the
Company terminates the employment of the Executive other than for cause as
contemplated in paragraph 8(a) above shall hereinafter be referred to as a
"TERMINATION WITHOUT CAUSE".
(d) In the event of a termination without cause by the Company,
as liquidated damages, the Executive shall be entitled to continue to receive
from the Company, subject to any Offsets, for so long as the Executive is not in
breach of his obligations to the Company under paragraphs 10 hereof, (i) his
then applicable salary compensation when otherwise payable through the Date of
Termination and for a period of six (6) months (or twelve (12) months if
extended pursuant to the terms of paragraph 10(c) hereunder) commencing on the
Date of Termination, and (ii) any unpaid reimbursable expenses outstanding,
Performance Bonus earned but unpaid, and any unused accrued vacation, as of the
Date of Termination. Any benefits to which Executive or his beneficiaries may be
entitled under the plans and programs described in paragraphs 7(b) and (c)
above, or any other applicable plans and programs, as of his Date of Termination
shall be determined in accordance with the terms of such plans and programs.
Except as specifically provided in this paragraph 8(c), the Company shall have
no further liability to the Executive or the Executive's heirs, beneficiaries or
estate for damages, compensation, benefits, severance, indemnities or other
amount of whatever nature.
9. DISABILITY: DEATH
(a) In the event the Executive shall be unable to perform his
duties hereunder by virtue of illness or physical or mental incapacity or
disability (from any cause or causes whatsoever) in substantially the manner and
to the extent required hereunder prior to the commencement of such disability
(all such causes being herein referred to as "DISABILITY") and the Executive
shall fail to perform such duties for periods aggregating 180 days, whether or
not continuous, in any continuous period of 270 days, the Company shall have the
right, in addition to all of its other rights hereunder, to terminate the
Executive's employment hereunder as at the end of any calendar month after the
180th day of disability, upon at least 30 days' prior written notice to him. In
the event of the Executive's death, the Date of Termination shall be the date of
such death.
(b) In the event the Executive's employment terminates pursuant
to paragraph 9(a), the Executive, or in the case of his death, the Executive's
estate, shall be entitled to receive when otherwise payable, subject to any
Offsets, (i) all salary compensation and Performance Bonus earned but unpaid as
of the Date of Termination and (ii) any unpaid reimbursable expenses
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outstanding, and any unused accrued vacation, as of such date. Any benefits to
which the Executive or his beneficiaries may be entitled under the plans and
programs described in paragraphs 7(b) and (c) above, or any other applicable
plans and programs, as of his Date of Termination shall be determined in
accordance with the terms of such plans and programs. In the event of the
Executive's termination due to disability or death, except as provided in this
paragraph 9(b), the Company shall have no further liability to the Executive or
the Executive's heirs, beneficiaries or estate for damages, compensation,
benefits, severance, indemnities or other amounts of whatever nature.
10. NON-COMPETITION AND PROTECTION OF CONFIDENTIAL INFORMATION
(a) The Executive agrees that his services hereunder are of a
special, unique, extraordinary and intellectual character, and his position with
the Company places him in a position of confidence and trust with the clients
and employees of the Company. The Executive acknowledges that the rendering of
services to the clients of the Company necessarily requires the disclosure to
the Executive of confidential information and trade secrets of the Company (such
as, without limitation, marketing plans, media plans, budgets, corporate
policies, client preferences, proprietary technologies, technical specifications
and the like, and policies, and identity of appropriate personnel of clients
with sufficient authority to influence a shift in suppliers). The parties hereto
agree that, in the course of the Executive's employment with the Company, the
Executive has and will continue to develop a personal relationship with the
Company's clients and a knowledge of those clients' affairs and requirements,
and that the relationship of the Company with its established clientele will
therefore be placed in the Executive's hands in confidence and trust. The
Executive consequently agrees that it is reasonable and necessary for the
protection of the trade secrets, goodwill and business of the Company that the
Executive make the covenants contained herein. Accordingly, the Executive agrees
that, while he is in the employ of the Company and for a one-year period after
the Date of Termination, he shall not except on behalf of the Company, directly
or indirectly, and regardless of the reason for his ceasing to be employed by
the Company:
(i) attempt in any manner, either on his own behalf
or on behalf of any other person or entity, to solicit
from any client of the Company business of the type
performed by the Company or to persuade any client to
cease to do business or to reduce the amount of business
which any such client has customarily done or is
reasonably expected to do with the Company, whether or not
the relationship between the Company and such client was
originally established in whole or in part through his
efforts; or
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(ii) employ as an employee or retain as a
consultant any person who is then or at any time during
the preceding twelve months was an employee of or
exclusive consultant to the Company, or persuade or
attempt to persuade any employee of or exclusive
consultant to the Company to leave the employ of the
Company or to become employed as an employee or retained
as a consultant by anyone other than the Company.
As used in this paragraph 10, the noun "COMPANY" shall include
subsidiaries or affiliates of the Company which the Company owns or controls,
and the term "CLIENT" shall mean (1) anyone who is a client of the Company on
the Date of Termination (the "DETERMINATION DATE"); (2) anyone who was a client
of the Company at any time during the one-year period immediately preceding the
Determination Date; and (3) any prospective clients in respect of whom there is
a proposal outstanding which the Company had made a business presentation at any
time during the six (6) month period immediately preceding the Determination
Date.
(b) The Executive also agrees that he will not at any time
(whether during the Term or after termination of this Agreement), disclose to
anyone any confidential information or trade secret of the Company, or any
client of the Company, or utilize such confidential information or trade secret
for his own benefit, or for the benefit of any third party. All memoranda,
notes, records or other documents compiled by him or made available to him
during the Term pertaining to the business of the Company or its respective
clients shall be the property of the Company and shall be delivered to the
Company immediately upon the termination of his employment or at any other time,
upon request. The term "confidential information or trade secret" does not
include information which (i) becomes generally available to the public other
than by breach of this provision or (ii) the Executive learns from a third party
who is not under an obligation of confidence to the Company. In the event that
the Executive becomes legally required to disclose any confidential information
or trade secret, he will provide the Company with prompt notice thereof so that
the Company may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this paragraph 10(b). In the event that such
protective order or other remedy is not obtained, or that the Company waives
compliance with the provisions of this paragraph 10(b), the Executive will
furnish only that portion of the confidential information or trade secret which
is legally required and will exercise his best efforts to obtain a protective
order or other reliable assurance that confidential treatment will be accorded
the confidential information or trade secret.
(c) Executive agrees that during the Term and for a period of six
months thereafter (the "NON-COMPETITION PERIOD"), he shall have no interest in
any business the products or services of which DIRECTLY COMPETE with
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the products or services of the Company, or its affiliates, and Executive shall
perform no services for nor lease, license or sell any product or property to
any person, firm or corporation engaged in any such business other than for or
on behalf of the Company and its subsidiaries or affiliates which it owns or
controls. Further, the Company may, at its option, at any time within 60 days
after the Date of Termination, elect to extend the Non-Competition Period for an
additional six months by agreeing to continue to pay the Executive the salary
compensation applicable to Executive's last regular pay period for such
additional six month period, payable in accordance with the Company's standard
payroll practices, commencing at the time that the Non-Competition Period would
otherwise expire. The foregoing shall not preclude Executive from owning not
more than one percent (1%) of the outstanding common stock of any company whose
shares are publicly traded. For purposes of this paragraph 10(c), a business
shall be deemed to DIRECTLY COMPETE with the Company if it offers for sale,
lease or license, products and/or services which are substantially similar to
the Company's proprietary products and services including internet access
communications services and certain proprietary productized network-related
software applications which are developed prior to and during the period of
Executive's employment hereunder.
(d) If the Executive commits a breach, or is about to commit a
breach, of any of the provisions of paragraphs 10(a), (b) or (c) above, the
Company shall have the right to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction without being
required to post bond or other security and without having to prove the
inadequacy of the available remedies at law, it being acknowledged and agreed
that any such breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company. In addition, the Company may take all such other actions and seek all
such other remedies available to them under law or in equity and shall be
entitled to such damages as they can show they have sustained by reason of such
breach.
(e) The parties acknowledge that the type and periods of
restriction imposed in the provisions of paragraphs 10(a), (b) and (c) above are
fair and reasonable and are reasonably required for the protection of the
Company and the goodwill associated with the business of the Company; and that
the time, scope, geographic area and other provisions of this paragraph 10 have
been specifically negotiated by sophisticated commercial parties, it being
understood that the clients of the Company may be serviced from any location and
accordingly it is reasonable that the restrictive covenants set forth herein are
not limited by narrow geographic area. The Executive specifically acknowledges
that his being restricted from servicing clients as provided by paragraph
10(a)(i) of this Agreement will not prevent him from being employed or earning a
livelihood in the type of business conducted by the Company. If
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any of the covenants in paragraphs 10(a), (b) or (c) above, or any part thereof,
is hereafter construed to be invalid or unenforceable, the same shall not affect
the remainder of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions. If any of the covenants contained in
paragraphs 10(a), (b) or (c), or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered thereby, the
parties agree that the court making such determination shall have the power to
reduce the duration and/or areas of such provision and, in its reduced form,
such provision shall then be enforceable. The parties hereto intend to and
hereby confer jurisdiction to enforce the covenants contained in paragraphs
10(a), (b) and (c) above upon the courts of New Jersey and New York.
11. INTELLECTUAL PROPERTY
During the Term, the Executive will disclose to the Company all ideas,
inventions and business plans developed by him during the course of employment
which relate directly or indirectly to the business of the Company, including
without limitation, any design, logo, slogan or campaign or any process,
operation, product or improvement which may be patentable or copyrightable. The
Executive agrees that all patents, licenses, copyrights, tradenames, trademarks,
service marks, advertising campaigns, promotional campaigns, designs, logos,
slogans and business plans developed or created by the Executive in the course
of his employment hereunder will be deemed works for hire and the sole and
absolute property of the Company. The Executive agrees that, at the Company's
request, at any time during the Term of this Agreement and thereafter, he will
promptly take all steps necessary to secure the rights thereto to the Company by
patent, copyright or otherwise.
12. ENFORCEABILITY
The failure of any party at any time to require performance by
another party of any provision hereunder shall in no way affect the right of
that party thereafter to enforce the same, nor shall it affect any other party's
right to enforce the same, or to enforce any of the other provisions in this
Agreement; nor shall the waiver by any party of the breach of any provision
hereof be taken or held to be a waiver of any subsequent breach of such
provision or as a waiver of the provision itself.
13. ASSIGNMENT
This Agreement is a personal contract and the Executive's rights
and obligations hereunder may not be sold, transferred, assigned, pledged or
hypothecated by the Executive. The rights and obligations of the Company
hereunder shall be binding upon and run in favor of the successors and assigns
of the Company; provided, however, the Company may not assign or transfer its
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rights under this Agreement except in connection with a merger or consolidation
(whether or not the Company is the continuing entity), or the sale or
liquidation of all or substantially all the assets of the Company in connection
with which such assignee or transferee assumes the liabilities, obligations and
duties of the Company as contained in this Agreement, either contractually or as
a matter of law.
14. MODIFICATION
This Agreement may not be orally canceled, changed, modified or
amended, and no cancellation, change, modification or amendment shall be
effective or binding, unless in writing and signed by the parties to this
Agreement and approved by the President of the Company.
15. SEVERABILITY; SURVIVAL
In the event that any one or more of the provisions of this
Agreement shall be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not be affected, or if any one or more of the provisions
contained herein shall be held to be excessively broad as to duration, activity
or subject, such provision shall be construed by limiting and reducing such
provisions so as to be enforceable to the maximum extent compatible with
applicable law. The respective rights and obligations of the parties hereunder
shall survive the termination of the Executive's employment to the extent
necessary to the intended preservation of such rights and obligations.
16. LIFE INSURANCE
The Executive agrees that the Company shall have the right to
obtain life insurance on the Executive's life, at the sole expense of the
Company, as the case may be, and with the Company as the sole beneficiary
thereof. The Executive shall (a) cooperate fully in obtaining such life
insurance, (b) sign any necessary consents, applications and other related forms
or documents and (c) take any reasonably required medical examinations. Upon
termination, Executive shall have the right to convert any such policy so
obtained by the Company for Executive's own benefit; provided however, that
Executive assumes all obligations pertaining to such policies including but not
limited to the payment of any and all premiums.
17. NOTICES
Any notice, request, instruction or other document to be given
hereunder by any party hereto to another party shall be in writing and shall be
deemed effective (a) upon personal delivery, if delivered by hand, or (b) three
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days after the date of deposit in the mails, postage prepaid if mailed by
certified or registered mail, or (c) on the next business day, if sent by
facsimile transmission or prepaid overnight courier service, and in each case,
addressed as follows:
If to the Executive:
Mr. Frank Cicio
7 Aldgate Court
Princeton, New Jersey 08540
with a copy to:
Elliot Stein, Esq.
562 Central Avenue
Murray Hill, New Jersey 07974
Fax: 908 508-1298
If to the Company:
ICon CMT Corp.
1200 Harbor Boulevard
Weehawken, New Jersey 07087
Attention: General Counsel
Fax: 201 601-1917
with a copy to:
James Alterbaum, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Fax: (212) 704-6288
Any party may change the address to which notices are to be sent by giving
notice of such change of address to the other party in the manner herein
provided for giving notice.
18. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey, without application of conflict of law
provisions applicable herein.
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19. NO CONFLICT
The Executive represents and warrants that he is not subject to
any agreement, instrument, order, judgment or decree of any kind, or any other
restrictive agreement of any character, which would prevent him from entering
into this Agreement or which would be breached by the Executive upon his
performance of his duties pursuant to this Agreement.
20. ENTIRE AGREEMENT
This Agreement represents the entire agreement between the Company and
the Executive with respect to the subject matter hereof, and all prior
agreements, plans and arrangements relating to the employment of the Executive
by the Company are nullified and superseded hereby.
21. HEADINGS
The headings contained in this Agreement are for reference
purposes only, and shall not affect the meaning or interpretation of this
Agreement.
22. MISCELLANEOUS
(a) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(b) Following the date hereof and regardless of any dispute that
may arise in the future, the Executive will not, and will use his best efforts
to cause his business associates to not, disparage, criticize or make statements
to the detriment of the Company, or any of their affiliates; and the Company
will not, and will use their best efforts to cause their affiliated companies to
not, disparage, criticize or make statements to the detriment of the Executive.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ICON CMT CORP.
By: /s/ David L. Goret
-------------------------------------------
Name: David L. Goret
Title: Vice President, Business Affairs
/s/ Frank Cicio
----------------------------------------------
FRANK CICIO
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EMPLOYMENT AGREEMENT
AGREEMENT made as of this 21st day of March, 1997, by and between ICON CMT
CORP., a Delaware corporation with an address at 1200 Harbor Boulevard,
Weehawken, New Jersey (the "COMPANY"), and KENNETH J. HALL, an individual with
an address at 49 Breezemont Avenue, Riverside, CT 06878 (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, Company wishes to secure the employment of Executive with the
Company and the Executive wishes to accept such employment upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. EMPLOYMENT
The Company agrees to employ the Executive and the Executive
agrees to accept such employment, upon the terms and conditions hereinafter set
forth.
2. TERM
The "TERM" of Executive's employment hereunder shall commence
upon execution hereof and continue until terminated by either Executive or
Company. Executive acknowledges and agrees that his employment status is that of
an employee-at-will and that Executive's employment may be terminated by Company
or Executive at any time with or without cause (as defined in paragraph 8(b)
below). The effective date of the termination of the Executive's employment with
the Company, regardless of the reason therefor, is referred to in this Agreement
as the "DATE OF TERMINATION".
3. Duties and Responsibilities
(a) During the Term, the Executive shall have the position of
Senior Vice President, Chief Financial Officer. The Executive shall report to
the President of the Company and/or such other person or persons as the
President or the Board of Directors of the Company (the "BOARD") may from time
to time designate, at such times and in such detail as they shall reasonably
require.
(b) The Executive shall have all of the powers, duties and
responsibilities customary to his office as are reasonably necessary to the
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operations of the Company and as may be assigned to him from time to time by the
President of the Company, consistent with his position as designated in
paragraph 3(a) above.
(c) The Executive will, at all times, use all reasonable efforts
to perform his duties and responsibilities in a manner consistent with the
policies of the Company as from time to time in effect and the parameters of the
then-current profit plan and capital expenditure budget of the Company as
provided by the Company. The Executive shall use his best efforts to ensure that
the Company and its subsidiaries, if any, comply on a timely basis with all
budgetary and reporting requirements reasonably requested by the President. In
no event will the Executive, without the approval of the President of the
Company, incur obligations on behalf of the Company other than in the ordinary
course of business or enter into any transaction on behalf of the Company not in
the ordinary course of business.
(d) The Executive's employment by the Company shall be full-time
and exclusive and, during the Term, the Executive agrees that he will (i) devote
substantially all of his business time and attention, his best efforts, and all
his skill and ability to promote the interests of the Company; (ii) carry out
his duties in a competent and professional manner; (iii) work with other
employees of the Company in a competent and professional manner; and (iv)
generally promote the interests of the Company and its clients. Notwithstanding
the foregoing, the Executive shall be permitted to engage in other business or
charitable activities (as an active participant or a passive investor), provided
that such activities are not rendered for a company which transacts business
with the Company or competes with the Company (or, if such company does transact
business with the Company or does compete with the Company, it is a publicly
held corporation and the Executive's participation is limited to owning less
than 1% of its outstanding shares) and further provided that such activities
(individually or collectively) do not materially interfere with the performance
of his duties or responsibilities under this Agreement.
(e) The Executive's services hereunder shall be performed at the
offices of the Company in Weehawken, New Jersey and New York, New York, subject
to necessary travel requirements of his position and duties hereunder.
4. COMPENSATION
(a) As compensation for his services hereunder and in
consideration of his agreement not to compete as set forth in paragraph 8 below,
during the Term, the Company shall pay the Executive, in accordance with its
normal payroll practices, the base salary at an annual rate of $200,000 for the
first year of the Term. After the first year of the Term, the Executive's annual
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rate of salary compensation may be increased in accordance with the salary
review policy of the Company (currently every 12 months) and within the
guidelines and budgeting procedures of the Company. Any adjustment to the
Executive's salary shall become effective on the applicable salary review date.
5. PERFORMANCE BONUS
(a) During the first year of Executive's employment, Executive
will be eligible for performance bonuses (the "Performance Bonus") based on the
Company's achievement of the revenue targets stated below.
(b) The Performance Bonus, if any, will be paid, within 45 days
of the end of the applicable quarter, as follows:
(i) if the Company achieves (A) $8,297,192 in Gross
Revenues in connection with sales of Products during the
three month period ending on June 30, 1997, Executive will
be paid $7,291, and (B) $6,233,423 in Gross Revenues in
connection with sales of Services during such period,
Executive will be paid $7,291;
(ii) if the Company achieves (A) $8,637,995 in
Gross Revenues in connection with sales of Products during
the three month period ending on September 30, 1997,
Executive will be paid $7,291, and (B) $9,544,138 in Gross
Revenues in connection with sales of Services during such
period, Executive will be paid $7,291;
(iii) if the Company achieves (A) $8,904,896 in
Gross Revenues in connection with sales of Products during
the three month period ending on December 31, 1997,
Executive will be paid $7,291, and (B) $13,743,247 in
Gross Revenues in connection with sales of Services during
such period, Executive will be paid $7,291;
(iv) if the Company achieves less than 100% but
greater than 75% of the Gross Revenues amounts stated in
(i) through (iv) above, in any of the time periods stated
above, then the portion of the Performance Bonus which
would otherwise paid by the Company with respect to such
period shall be reduced pro rata (i.e. if the Company
achieves 80% of the Gross Revenues amounts, Executive will
be paid 80% of the Performance Bonus contemplated above
for the relevant period); and
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(v) if the Company achieves greater than 100% of
the Gross Revenues amounts stated in (i) through (iv)
above, in any of the time periods stated above, then the
portion of the Performance Bonus that would otherwise paid
by the Company with respect to such period shall be
increased pro rata (i.e. if the Company achieves 110% of
the Gross Revenues amounts, Executive will be paid 110% of
the Performance Bonus contemplated above for the relevant
period).
(c) For purposes of this Agreement, (i) "PRODUCTS" and "SERVICES"
shall be defined and accounted for as currently defined and accounted for in the
Company's financial statements; and (ii) "GROSS REVENUES" shall be those amounts
stated in the Company's financial statements.
6. STOCK OPTION CONTRACT.
Simultaneously with the execution hereof, Executive and the
Company are entering into a Stock Option Contract and related Stockholder
Agreement substantially in the form of Exhibit A hereto. It is understood and
agreed that the exercise price of the options to be granted under the Stock
Option Agreement shall be at the price per share which is equal to the price per
share in the initial private equity financing which is consummated by the
Company within 180 days immediately following the execution of this Agreement;
provided however, that if there is no such private equity financing consummated
within 180 days following the execution of this Agreement, the price per share
shall be the fair market value price as of the date of this Agreement.
7. EXPENSES; FRINGE BENEFITS
(a) In addition to the compensation provided for under paragraphs
4 and 5, the Company agrees to pay or to reimburse the Executive during the Term
for all reasonable, ordinary and necessary, and reasonably documented business
or entertainment expenses incurred in the performance of his services hereunder
in accordance with the policy of the Company as from time to time in effect. The
Executive, as a condition precedent to obtaining such payment or reimbursement,
shall provide to the Company any and all statements, bills or receipts
evidencing the travel or out-of-pocket expenses for which the Executive seeks
payment or reimbursement, and any other information or materials, as the Company
may from time to time reasonably require.
(b) During the Term, the Executive and, to the extent eligible,
his dependents, shall be entitled to participate in and receive all benefits
under any welfare benefit plans and programs provided by the Company to senior
management of the Company (including without limitation, medical, dental,
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disability, group life (including accidental death and dismemberment) and
business travel insurance plans and programs) applicable generally to senior
management of the Company, subject, however, to the applicable eligibility and
other provisions of the various plans and programs in effect from time to time.
During the period of employment with the Company in which Executive is not
eligible for medical and dental coverage by the Company's welfare benefit plans
and programs, the Company will reimburse Executive for Executive's expenses
which are estimated at $725.00 in connection with the continuation of medical
and dental coverage from Executive's previous employer under COBRA.
(c) During the Term, the Executive shall be entitled to
participate in all retirement plans and programs (including without limitation
any profit sharing/401(k) plan) applicable generally to senior management of the
Company, subject, however, to applicable eligibility and other provisions of the
various plans and programs in effect from time to time. In addition, during the
Term, the Executive shall be entitled to receive fringe benefits and perquisites
in accordance with the plans, practices, programs and policies of the Company
from time to time in effect and available generally to the senior management of
the Company and consistent with the applicable guidelines determined by the
Company.
(d) The Executive shall be entitled to three (3) weeks paid
vacation during each calendar year during the Term, to be taken at such time(s)
as shall not materially interfere with the Executive's fulfillment of his duties
hereunder, and shall be entitled to as many holidays, sick days and personal
days as are in accordance with the Company's policy then in effect for its
senior management generally, upon such terms as may be provided of general
application to senior management of the Company.
(e) During the Term, Executive shall have the use of a
Company-owned car to be used in connection with Executive's travel and commuting
needs which will be provided at no expense to Executive.
(f) Notwithstanding anything to the contrary contained above, the
Company shall be entitled to terminate or reduce any employee benefit or
perquisite enjoyed by the Executive pursuant to the provisions of paragraph
7(b), (c), or (d) above if such reduction is part of a reduction applicable to
senior management of the Company generally.
8. TERMINATION
(a) The Company, by direction of the President and/or the Board,
shall be entitled to terminate the Term and to discharge the Executive for
"cause" effective immediately upon the giving of written notice. The term
"cause" shall include the following:
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(i) After notice and a fifteen (15) day
opportunity to cure, in the case of either of the
following: (x) the Executive's failure or refusal
to perform his duties and responsibilities as set
forth in paragraph 3 hereof in any material
respect, or (y) the failure of the Executive to
devote substantially all of his business time and
attention exclusively to the business and affairs
of the Company in accordance with the terms hereof;
(ii) The misappropriation of funds or
property of the Company;
(iii) The use of alcohol or illegal drugs,
materially interfering with the performance of the
Executive's obligations under this Agreement,
continuing after written warning;
(iv) The conviction in a court of law of, or
entering a plea of guilty or no contest to, any
felony or any crime involving moral turpitude,
dishonesty or theft;
(v) The commission by the Executive of any
willful or intentional act which injures or could
reasonably be expected to injure the reputation,
business or business relationships of the Company,
including without limitation, a breach of the
provisions of paragraphs 10 and 11 of this
Agreement; and
(vi) Any material breach (not covered by any
of the clauses (i) through (v) above) of any term,
provision or condition of this Agreement.
(b) Upon the termination of the employment of the Executive with
the Company (x) pursuant to paragraph 8(a) or (y) any termination by the
Executive other than a termination contemplated under paragraph 8(c) below, the
Company shall pay the Executive, subject to any appropriate offsets, as
permitted by applicable law, for debts or money due to the Company
(collectively, "OFFSETS"), his salary compensation, Performance Bonus
compensation earned but unpaid, any unused accrued vacation only through, and
any unpaid reimbursable expenses outstanding as of, the Date of Termination. In
the event that Executive's Date of Termination is other than the last day of a
period used to determine a Performance Bonus, Executive shall be paid a
Performance Bonus for the period in which the Date of Termination occurs pro
rated to the Date of Termination in accordance with the provisions of paragraph
5(b) above. Any benefits to which the Executive or his beneficiaries may be
entitled under the plans and programs described in paragraphs 7(b) and (c)
above, or any other applicable plans and programs, as of his Date of
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Termination shall be determined in accordance with the terms of such plans and
programs. In connection with the Executive's termination by the Company for
cause, except as provided in this paragraph 8(b), the Company shall have no
further liability to the Executive or the Executive's heirs, beneficiaries or
estate for damages, compensation, benefits, severance, indemnities or other
amount of whatever nature.
(c) In the event that the Company is in default of a material
term of this Agreement (including, without limitation, the assignment to the
Executive of duties which are materially inconsistent with the duties described
in paragraph 3(b) above), which default remains uncured for a period of 30 days
after written notice of such default from the Executive to the Company (such
notice to specify the specific nature of the claimed default and the manner in
which the Executive requires such default to be cured), and Executive elects to
terminate his employment hereunder, then the Executive shall be deemed to have
been terminated by the Company without cause. Such termination by the Executive,
or in the event the Company terminates the employment of the Executive other
than for cause as contemplated in paragraph 8(a) above shall hereinafter be
referred to as a "TERMINATION WITHOUT CAUSE".
(d) Notwithstanding any other provision of this agreement to the
contrary, the Executive shall be deemed to have been terminated without cause in
the case of any of the following:
(i) a change in Executive's title or reporting
structure such that a demotion can reasonably be inferred from such change;
provided however, that nothing contained herein shall be deemed to limit
Company's ability to change the reporting structure hereunder in such a manner
that a demotion would not be reasonably inferred (e.g. Company may choose to
have Executive report to another member of senior management);
(ii) a reduction in excess of 10% in Executive's
base compensation or the elimination of an opportunity for a raise in the normal
course, other than as generally applicable to other members of senior
management;
(iii) a material reduction in, interference with or
elimination of a performance bonus opportunity or incentive stock option, other
than as generally applicable to other members of senior management; provided
however that nothing contained herein shall be deemed to (i) modify in any
respect the rights and obligations of the parties hereto under the Stock Option
Contract; or (ii) obligate Company to grant additional incentive stock options
during the Term solely as a result of the Company's election to grant incentive
stock options to another member or a minority of members of senior management,
provided further, however, that during the first six months of the
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Term, the Company may grant incentive stock options to any member or members of
senior management or to employees generally without regard to the limitation
stated in this paragraph 8(d)(iii); or
(iv) a change in job location outside of 50 miles
of the Company's current offices; provided however, so long as the Company
agrees to pay Executive's reasonable moving and relocation expenses; such change
in job location shall not be deemed to be termination without cause.
(e) In the event of a termination without cause by the Company,
as liquidated damages, the Executive shall be entitled to continue to receive
from the Company, subject to any Offsets, for so long as the Executive is not in
breach of his obligations to the Company under paragraphs 10 and 11 hereof, (i)
his then applicable salary compensation when otherwise payable through the Date
of Termination and for a period of six (6) months (or twelve (12) months if
extended pursuant to the terms of paragraph 10(c) hereunder) commencing on the
Date of Termination (the "Severance Period'), and (ii) any unpaid reimbursable
expenses outstanding, Performance Bonus earned but unpaid, and any unused
accrued vacation, as of the Date of Termination. In the event that Executive's
Date of Termination is other than the last day of a period used to determine a
Performance Bonus, Executive shall be paid a Performance Bonus for the period in
which the Date of Termination occurs pro rated to the Date of Termination in
accordance with the provisions of paragraph 5(b) above. Furthermore, during the
Severance Period, Executive shall also continue to participate in or receive,
without cost to Executive, all of the plans and programs stated in paragraphs
7(b) and (c) above, as well as life insurance policies, if any, stated in
paragraph 16, all of which were provided to Executive prior to the Date of
Termination. Except as specifically provided in this paragraph 8(c), the Company
shall have no further liability to the Executive or the Executive's heirs,
beneficiaries or estate for damages, compensation, benefits, severance,
indemnities or other amount of whatever nature.
9. DISABILITY: DEATH
(a) In the event the Executive shall be unable to perform his
duties hereunder by virtue of illness or physical or mental incapacity or
disability (from any cause or causes whatsoever) in substantially the manner and
to the extent required hereunder prior to the commencement of such disability
(all such causes being herein referred to as "disability") and the Executive
shall fail to perform such duties for periods aggregating 180 days, whether or
not continuous, in any continuous period of 270 days, the Company shall have the
right, in addition to all of its other rights hereunder, to terminate the
Executive's employment hereunder as at the end of any calendar month after the
180th day of disability, upon at least 30 days' prior written notice to him. In
the event of the Executive's death, the Date of Termination shall be the date of
such death.
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(b) In the event the Executive's employment terminates pursuant
to paragraph 9(a), the Executive, or in the case of his death, the Executive's
estate, shall be entitled to receive when otherwise payable, subject to any
Offsets, (i) all salary compensation and Performance Bonus earned but unpaid as
of the Date of Termination and (ii) any unpaid reimbursable expenses
outstanding, and any unused accrued vacation, as of such date. Any benefits to
which the Executive or his beneficiaries may be entitled under the plans and
programs described in paragraphs 7(b) and (c) above, or any other applicable
plans and programs, as of his Date of Termination shall be determined in
accordance with the terms of such plans and programs. In the event of the
Executive's termination due to disability or death, except as provided in this
paragraph 9(b), the Company shall have no further liability to the Executive or
the Executive's heirs, beneficiaries or estate for damages, compensation,
benefits, severance, indemnities or other amounts of whatever nature.
10. NON-COMPETITION AND PROTECTION OF CONFIDENTIAL INFORMATION
(a) The Executive agrees that his services hereunder are of a
special, unique, extraordinary and intellectual character, and his position with
the Company places him in a position of confidence and trust with the clients
and employees of the Company. The Executive acknowledges that the rendering of
services to the clients of the Company necessarily requires the disclosure to
the Executive of confidential information and trade secrets of the Company (such
as, without limitation, marketing plans, media plans, budgets, corporate
policies, client preferences, proprietary technologies, technical specifications
and the like, and policies, and identity of appropriate personnel of clients
with sufficient authority to influence a shift in suppliers). The parties hereto
agree that, in the course of the Executive's employment with the Company, the
Executive has and will continue to develop a personal relationship with the
Company's clients and a knowledge of those clients' affairs and requirements,
and that the relationship of the Company with its established clientele will
therefore be placed in the Executive's hands in confidence and trust. The
Executive consequently agrees that it is reasonable and necessary for the
protection of the trade secrets, goodwill and business of the Company that the
Executive make the covenants contained herein. Accordingly, the Executive agrees
that, while he is in the employ of the Company and for a one-year period after
the Date of Termination, he shall not except on behalf of the Company, directly
or indirectly, and regardless of the reason for his ceasing to be employed by
the Company:
(i) attempt in any manner, either on his own behalf
or on behalf of any other person or entity, to solicit
from any client business of the type performed by the
Company or to persuade any client to cease to do business
or to reduce the amount of
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business which any such client has customarily done or
is reasonably expected to do with the Company, whether or
not the relationship between the Company and such client
was originally established in whole or in part through his
efforts; or
(ii) employ as an employee or retain as consultant
any person who is then or at any time during the preceding
twelve months was an employee of or consultant to the
Company, or persuade or attempt to persuade any employee
of or consultant to the Company to leave the employ of the
Company or to become employed as an employee or retained
as a consultant by anyone other than the Company; or
(iii) render to or for any client any services of
the type rendered by the Company.
As used in this paragraph 10, the noun "COMPANY" shall include subsidiaries and
affiliates of the Company and the term "CLIENT" shall mean (1) anyone who is a
client of the Company on the Date of Termination or, if the Executive's
employment shall not have terminated, at the time of the alleged prohibited
conduct (the "DETERMINATION DATE"); (2) anyone who was a client of the Company
at any time during the two year period immediately preceding the Determination
Date; and (3) any prospective clients to whom the Company had made a new
business presentation at any time during the one year period immediately
preceding the Determination Date.
(b) The Executive also agrees that he will not at any time
(whether during the Term or after termination of this Agreement), disclose to
anyone any confidential information or trade secret of the Company, or any
client of the Company, or utilize such confidential information or trade secret
for his own benefit, or for the benefit of any third party. All memoranda,
notes, records or other documents compiled by him or made available to him
during the Term pertaining to the business of the Company or its respective
clients shall be the property of the Company and shall be delivered to the
Company immediately upon the termination of his employment or at any other time,
upon request. The term "confidential information or trade secret" does not
include information which (i) becomes generally available to the public other
than by breach of this provision or (ii) the Executive learns from a third party
who is not under an obligation of confidence to the Company. In the event that
the Executive becoMes legally required to disclose any confidential information
or trade secret, he will provide the Company with prompt notice thereof so that
the Company may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this paragraph 10(b). In the event that such
protective order or other remedy is not obtained, or that the Company waives
compliance with the provisions of this paragraph 10(b), the Executive will
furnish
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only that portion of the confidential information or trade secret which is
legally required and will exercise his best efforts to obtain a protective order
or other reliable assurance that confidential treatment will be accorded the
confidential information or trade secret.
(c) Executive agrees that during the Term and for a period of six
months thereafter (the "NON-COMPETITION PERIOD"), he shall have no interest
directly or indirectly in any business, the products or services of which
directly compete with the products or services of the Company, or its
affiliates, and Executive shall perform no services for nor lease, license or
sell any product or property to any person, firm or corporation engaged in any
such business other than for or on behalf of the Company and its affiliates.
Further, the Company may, at its option, at any time within 90 days after the
Date of Termination, by written notice to Executive in accordance with paragraph
17 hereof, elect to extend the Non-Competition Period for an additional six
months by agreeing to continue to pay the Executive the salary compensation
applicable to Executive's last regular pay period for such additional six month
period, payable in accordance with the Company's standard payroll practices,
commencing at the time that the Non-Competition Period would otherwise expire.
If the Company elects to extend the Non-Competition Period as contemplated
hereunder, Executive will continue to participate in or receive, without cost to
Executive, all of the plans and programs stated in paragraph 8(e). The foregoing
shall not preclude Executive from owning not more than one percent (1%) of the
outstanding common stock of any company whose shares are publicly traded; nor
preclude Executive from working for a division or part of such a firm or
corporation which division or part is not engaged in any manner in such
business.
(d) If the Executive commits a breach, or is about to commit a
breach, of any of the provisions of paragraphs 10(a), (b) or (c) above, the
Company shall have the right to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction without being
required to post bond or other security and without having to prove the
inadequacy of the available remedies at law, it being acknowledged and agreed
that any such breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company. In addition, the Company may take all such other actions and seek all
such other remedies available to them under law or in equity and shall be
entitled to such damages as they can show they have sustained by reason of such
breach.
(e) The parties acknowledge that the type and periods of
restriction imposed in the provisions of paragraphs 10(a), (b) and (c) above are
fair and reasonable and are reasonably required for the protection of the
Company and the goodwill associated with the business of the Company; and
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that the time, scope, geographic area and other provisions of this paragraph 10
have been specifically negotiated by sophisticated commercial parties, it being
understood that the clients of the Company may be serviced from any location and
accordingly it is reasonable that the restrictive covenants set forth herein are
not limited by narrow geographic area. The Executive specifically acknowledges
that his being restricted from servicing clients as provided in paragraph 10 of
this Agreement will not prevent him from being employed or earning a livelihood
in the type of business conducted by the Company. If any of the covenants in
paragraphs 10(a), (b) or (c) above, or any part thereof, is hereafter construed
to be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid portions. If any of the covenants contained in paragraphs 10(a), (b) or
(c), or any part thereof, is held to be unenforceable because of the duration of
such provision or the area covered thereby, the parties agree that the court
making such determination shall have the power to reduce the duration and/or
areas of such provision and, in its reduced form, such provision shall then be
enforceable. The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in paragraphs 10(a), (b) and (c) above upon the
courts of any state or other jurisdiction within the geographical scope of such
covenants in which a breach or alleged breach of a covenant contained in
paragraph 10(a), (b) or (c) has been alleged to have occurred. In the event that
the courts of any one or more of such states or other jurisdictions shall hold
any such covenants wholly or partially unenforceable by reason of the breadth of
such scope or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the right of the Company to the
relief provided above in the courts of any other states or other jurisdictions
within the geographical scope of such covenants, as to breaches of such
covenants in such other respective states or other jurisdictions, the above
covenants as they relate to each state or other jurisdiction being, for this
purpose, severable into diverse and independent covenants.
11. INTELLECTUAL PROPERTY
During the Term, the Executive will disclose to the Company all ideas,
inventions and business plans developed by him during the course of employment
which relate directly or indirectly to the business of the Company, including
without limitation, any design, logo, slogan or campaign or any process,
operation, product or improvement which may be patentable or copyrightable. The
Executive agrees that all patents, licenses, copyrights, tradenames, trademarks,
service marks, advertising campaigns, promotional campaigns, designs, logos,
slogans and business plans developed or created by the Executive in the course
of his employment hereunder will be deemed works for hire and the sole and
absolute property of the Company. The Executive agrees that, at the Company's
request, at any time during the Term of this
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Agreement and thereafter, he will promptly take all steps necessary to secure
the rights thereto to the Company by patent, copyright or otherwise.
12. ENFORCEABILITY
The failure of any party at any time to require performance by
another party of any provision hereunder shall in no way affect the right of
that party thereafter to enforce the same, nor shall it affect any other party's
right to enforce the same, or to enforce any of the other provisions in this
Agreement; nor shall the waiver by any party of the breach of any provision
hereof be taken or held to be a waiver of any subsequent breach of such
provision or as a waiver of the provision itself.
13. ASSIGNMENT
This Agreement is a personal contract and the Executive's rights
and obligations hereunder may not be sold, transferred, assigned, pledged or
hypothecated by the Executive. The rights and obligations of the Company
hereunder shall be binding upon and run in favor of the successors and assigns
of the Company; provided, however, the Company may not assign or transfer its
rights under this Agreement except in connection with a merger or consolidation
(whether or not the Company is the continuing entity), or the sale or
liquidation of all or substantially all the assets of the Company in connection
with which such assignee or transferee assumes the liabilities, obligations and
duties of the Company as contained in this Agreement, either contractually or as
a matter of law.
14. MODIFICATION
This Agreement may not be orally canceled, changed, modified or
amended, and no cancellation, change, modification or amendment shall be
effective or binding, unless in writing and signed by the parties to this
Agreement and approved by the President of the Company.
15. SEVERABILITY; SURVIVAL
In the event that any one or more of the provisions of this
Agreement shall be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not be affected, or if any one or more of the provisions
contained herein shall be held to be excessively broad as to duration, activity
or subject, such provision shall be construed by limiting and reducing such
provisions so as to be enforceable to the maximum extent compatible with
applicable law. The respective rights and obligations of the parties hereunder
shall survive the
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termination of the Executive's employment to the extent necessary to the
intended preservation of such rights and obligations.
16. LIFE INSURANCE
The Executive agrees that the Company shall have the right to
obtain life insurance on the Executive's life, at the sole expense of the
Company, as the case may be, and with the Company as the sole beneficiary
thereof. The Executive shall (a) cooperate fully in obtaining such life
insurance, (b) sign any necessary consents, applications and other related forms
or documents and (c) take any reasonably required medical examinations. Upon
termination, Executive shall have the right to convert any such policy so
obtained by the Company for Executive's own benefit; provided however, that
Executive assumes all obligations pertaining to such policies including but not
limited to the payment of any and all premiums.
17. NOTICES
Any notice, request, instruction or other document to be given
hereunder by any party hereto to another party shall be in writing and shall be
deemed effective (a) upon personal delivery, if delivered by hand, or (b) three
days after the date of deposit in the mails, postage prepaid if mailed by
certified or registered mail, or (c) on the next business day, if sent by
facsimile transmission or prepaid overnight courier service, and in each case,
addressed as follows:
If to the Executive:
Mr. Kenneth J. Hall
49 Breezemont Avenue
Riverside, CT 06878
If to the Company:
ICon CMT Corp.
1200 Harbor Boulevard
Weehawken, New Jersey 07087
Attention: General Counsel
Fax: 201 601-1917
Any party may change the address to which notices are to be sent
by giving notice of such change of address to the other party in the manner
herein provided for giving notice.
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18. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey, without application of conflict of law
provisions applicable herein.
19. NO CONFLICT
The Executive represents and warrants that he is not subject to
any agreement, instrument, order, judgment or decree of any kind, or any other
restrictive agreement of any character, which would prevent him from entering
into this Agreement or which would be breached by the Executive upon his
performance of his duties pursuant to this Agreement.
20. ENTIRE AGREEMENT
This Agreement represents the entire agreement between the Company and
the Executive with respect to the subject matter hereof, and all prior
agreements, plans and arrangements relating to the employment of the Executive
by the Company are nullified and superseded hereby.
21. HEADINGS
The headings contained in this Agreement are for reference
purposes only, and shall not affect the meaning or interpretation of this
Agreement.
22. MISCELLANEOUS
(a) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(b) Following the date hereof and regardless of any dispute that
may arise in the future, the Executive will not, and will use his best efforts
to cause his business associates to not, disparage, criticize or make statements
to the detriment of the Company, or any of their affiliates; and the Company
will not, and will use their best efforts to cause their affiliated companies to
not, disparage, criticize or make statements to the detriment of the Executive.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ICON CMT CORP.
By: /s/ Scott Baxter
----------------------------------------
Name: Scott Baxter
Title: President & CEO
/s/ Kenneth J. Hall
------------------------------------------
KENNETH J. HALL
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1995 STOCK OPTION PLAN
INCENTIVE STOCK OPTION CONTRACT
This INCENTIVE STOCK OPTION CONTRACT is entered into as of
_______ __, 1997 between ICON CMT CORP., a Delaware corporation (the "Company"),
and __________ (the "Optionee").
W I T N E S S E T H:
1. The Company, in accordance with the allotment made by the
Committee and subject to the terms and conditions of the 1995 Stock Option Plan
of the Company adopted by the Company's Board of Directors and approved by the
Company's stockholders on October 23, 1995 (the "Plan"), grants as of the date
hereof to the Optionee an option to purchase an aggregate of ________ shares of
the common stock, $.001 par value per share, of the Company ("Common Stock") at
$_____ per share, being at least equal to the fair market value of such shares
of Common Stock on the date hereof. This option is intended to constitute an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended.
2. The term of this option shall be 10 years from the date
hereof, subject to earlier termination as provided in the Plan. This option
shall become exercisable as to [(a) _____ shares on the first anniversary of the
date hereof, (b) ______ shares on the second anniversary of the date hereof, (c)
_______ shares on the third anniversary of the date hereof, (d) _____ shares on
the fourth anniversary of the date hereof, and (e) _____ shares on the fifth
anniversary of the date hereof]. The right to purchase shares of Common Stock
under this option shall be cumulative, so that if the full number of shares
purchasable in a period shall not be purchased, the balance may be purchased at
any time or from time to time thereafter, but not after the expiration of the
option. Notwithstanding the foregoing, in no event may a fraction of a share of
Common Stock be purchased under this option.
3. This option shall be exercised by giving written notice to the
Company at its principal office, presently 1200 Harbor Boulevard, Lincoln
Harbor, Weehawken, New Jersey 07087, Attn.: Scott Baxter, President, stating
that the Optionee is exercising this incentive stock option, specifying the
number of shares being purchased and accompanied by payment in full of the
aggregate purchase price therefor (a) in cash or by certified check, (b) with
previously acquired shares of Common Stock which have been held by the Optionee
for at least six months, or (c) a combination of the foregoing.
4. Notwithstanding the foregoing, this option shall not be
exercisable by the Optionee unless (a) a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
shares of Common Stock to be received upon the exercise of the option shall be
effective and current at the time of exercise, or (b) there is an exemption from
registration under the Securities Act for the issuance of the shares of Common
Stock upon exercise. The Optionee hereby represents and warrants to the Company,
that (i) the shares of Common Stock to be issued upon the exercise of this
option are being acquired by the Optionee for his own account,
<PAGE>
<PAGE>
for investment only and not with a view to the resale or distribution thereof,
and (ii) any subsequent resale or distribution of shares of Common Stock by him
will be made only pursuant to (x) a Reg istration Statement under the Securities
Act which is effective and current with respect to the shares of Common Stock
being sold, or (y) a specific exemption from the registration requirements of
the Securities Act, but in claiming such exemption, the Optionee shall, prior to
any offer of sale or sale of such shares of Common Stock, provide the Company
with a favorable written opinion of counsel satisfactory to the Company, in
form, substance and scope satisfactory to the Company, as to the applicability
of such exemption to the proposed sale or distribution. Such representations and
warranties shall also be deemed to be made by the Optionee upon each exercise of
this option. Nothing herein shall be construed as requiring the Company to
register the shares subject to this option under the Securities Act.
5. Notwithstanding anything herein to the contrary, if at any
time the Committee shall determine in its sole discretion that the listing or
qualification of the shares of Common Stock subject to this option on any
securities exchange, Nasdaq or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of an option, or the issue of
shares of Common Stock thereunder, this option may not be exercised in whole or
in part unless such listing, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
6. Nothing in the Plan or herein shall confer upon the Optionee
any right to continue in the employ of the Company, any of its Subsidiaries or a
Parent, or interfere in any way with any right of the Company, any Subsidiary or
a Parent to terminate such employment at any time for any reason whatsoever
without liability to the Company, the Subsidiary or Parent.
7. The Company may affix appropriate legends upon the
certificates for shares of Common Stock issued upon exercise of this option and
may issue such "stop transfer" instructions to its transfer agent in respect of
such shares as it determines, in its discretion, to be necessary or appropriate
to (a) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act and any applicable state securities laws, or
(b) implement the provisions of the Plan or any agreement between the Company
and the Optionee with respect to such shares of Common Stock.
8. The Company may withhold cash and/or shares of Common Stock to
be issued to the Optionee in the amount which the Company determines is
necessary to satisfy its obligation to withhold taxes or other amounts incurred
by reason of the grant or exercise of this option, its disposition or the
disposition of the underlying shares of Common Stock. Alternatively, the Company
may require the Optionee to pay the Company such amount in cash promptly upon
demand.
9. In the event of any disposition of the shares of Common Stock
acquired pursuant to the exercise of this option within two years from the date
hereof or one year from the date of transfer of such shares to him, the Optionee
shall notify the Company thereof in writing within 30 days after such
disposition. In addition, the Optionee shall provide the Company on demand with
2
<PAGE>
<PAGE>
such information as the Company shall reasonably request in connection with
determining the amount and character of the Optionee's income, the Company's
deduction and its obligation to withhold taxes or other amount incurred by
reason of such disqualifying disposition, including the amount thereof. The
Optionee shall pay the Company in cash on demand the amount, if any, which the
Company determines is necessary to satisfy such withholding obligation.
10. The Company and the Optionee agree that they will both be
subject to and bound by all of the terms and conditions of the Plan, a copy of
which is attached hereto and made a part hereof. Any capitalized term not
defined herein shall have the meaning ascribed to it in the Plan. In the event
of a conflict between the terms of this Contract and the terms of the Plan, the
terms of the Plan shall govern.
11. The Optionee represents and agrees that he will comply with
all applicable laws relating to the Plan and the grant and exercise of the
option and the disposition of the shares of Common Stock acquired upon exercise
of the option, including without limitation, federal and state securities and
"blue sky" laws.
12. This option is not transferable otherwise than by will or the
laws of descent and distribution and may be exercised, during the lifetime of
the Optionee, only by him or his legal representatives.
13. This Contract shall be binding upon and inure to the benefit
of the parties hereto, any successor or assign of the Company and to any Legal
Representative of the Optionee.
14. This Contract shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without regard
to the conflicts of law rules thereof.
15. The invalidity, illegality or unenforceability of any
provision herein shall not affect the validity, legality or enforceability of
any other provision, all of which shall be valid, legal and enforceable to the
fullest extent permitted by applicable law.
3
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<PAGE>
16. The Optionee agrees that the Company may amend the Plan and
the options granted to the Optionee under the Plan, subject to the limitations
contained in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this
Contract as of the day and year first above written.
ICON CMT CORP.
By:
---------------------------------
Scott A. Baxter, President
------------------------------------
[NAME OF EMPLOYEE]
------------------------------------
------------------------------------
(Address)
4
<PAGE>
<PAGE>
1995 STOCK OPTION PLAN
INCENTIVE STOCK OPTION CONTRACT
This INCENTIVE STOCK OPTION CONTRACT entered into as of ______
__, 1997 between ICON CMT CORP., a Delaware corporation (the "Company"), and
___________ (the "Optionee").
W I T N E S S E T H:
1. The Company, in accordance with the allotment made by the
Committee and subject to the terms and conditions of the 1995 Stock Option Plan
of the Company adopted by the Company's Board of Directors and approved by the
Company's stockholders on October 23, 1995 (the "Plan"), grants as of the date
hereof to the Optionee an option to purchase an aggregate of ______ shares of
the common stock, $.001 par value per share, of the Company ("Common Stock") at
$______ per share, being at least equal to the fair market value of such shares
of Common Stock on the date hereof. This option is intended to constitute an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended.
2. The term of this option shall be 10 years from the date
hereof, subject to earlier termination as provided in the Plan. This option
shall become exercisable as to [(a) _____ shares on the first anniversary of the
date hereof, (b) ______ shares on the second anniversary of the date hereof, (c)
_______ shares on the third anniversary of the date hereof, (d) _____ shares on
the fourth anniversary of the date hereof, and (e) _____ shares on the fifth
anniversary of the date hereof]. The right to purchase shares of Common Stock
under this option shall be cumulative, so that if the full number of shares
purchasable in a period shall not be purchased, the balance may be purchased at
any time or from time to time thereafter, but not after the expiration of the
option. Notwithstanding the foregoing, in no event may a fraction of a share of
Common Stock be purchased under this option.
3. Notwithstanding the foregoing, upon the earliest to occur of
(a) the termination of the Optionee's employment by the Company without cause
(as defined below), (b) the death of the Optionee while employed by the Company,
(c) the termination of the Optionee's employment by the Company by reason of the
Optionee's disability, (d) the taking of any corporate action by either the
Board of Directors or stockholders of the Company to authorize a merger or
consolidation in which the Company is not the surviving corporation or (e) a
sale by any of Scott A. Baxter, Scott Harmolin or Richard M. Brown
(collectively, the "Founders") to another person or persons of shares of Common
Stock representing a majority of the total number of shares of Common Stock held
by the Founders on the date hereof, which sale occurs (other than pursuant to a
public offering) in a single transaction or series of related transactions (the
date of the earliest to occur of the events described in clauses (a) through (e)
above shall hereinafter be referred to as the "Acceleration Date"), any portion
of this option not yet exercisable on the Acceleration Date that would otherwise
become exercisable (x) in the case of an Acceleration Date occurring prior to
the first anniversary of the date hereof, within 2 years after the Acceleration
Date or (y) in the case of an Acceleration Date occurring on or after the first
anniversary of the date hereof, within 1 year after
<PAGE>
<PAGE>
the Acceleration Date, shall then become immediately exercisable. The term
"cause" shall mean the following: (i) the misappropriation of funds or property
of the Company; (ii) the use of alcohol or illegal drugs, materially interfering
with the performance of Optionee's duties for the Company, continuing after
written warning; (iii) the conviction in a court of law of, or entering a plea
of guilty or no contest to, any felony or any crime involving moral turpitude,
dishonesty or theft; or (iv) the commission by the Optionee, in the course of
his employment with the Company, of any willful or intentional act which injures
and may reasonably be expected to injure the reputation, business or business
relationships of the Company.
4. This option shall be exercised by giving written notice to the
Company at its principal office, presently 1200 Harbor Boulevard, Lincoln
Harbor, Weehawken, New Jersey 07087, Attn.: Scott Baxter, President, stating
that the Optionee is exercising this incentive stock option, specifying the
number of shares being purchased and accompanied by payment in full of the
aggregate purchase price therefor (a) in cash or by certified check, (b) with
previously acquired shares of Common Stock which have been held by the Optionee
for at least six months, or (c) a combination of the foregoing.
5. Notwithstanding the foregoing, this option shall not be
exercisable by the Optionee unless (a) a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
shares of Common Stock to be received upon the exercise of the option shall be
effective and current at the time of exercise, or (b) there is an exemption from
registration under the Securities Act for the issuance of the shares of Common
Stock upon exercise. The Optionee hereby represents and warrants to the Company,
that (i) the shares of Common Stock to be issued upon the exercise of this
option are being acquired by the Optionee for his own account, for investment
only and not with a view to the resale or distribution thereof, and (ii) any
subsequent resale or distribution of shares of Common Stock by him will be made
only pursuant to (x) a Reg istration Statement under the Securities Act which is
effective and current with respect to the shares of Common Stock being sold, or
(y) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption, the Optionee shall, prior to any offer of
sale or sale of such shares of Common Stock, provide the Company with a
favorable written opinion of counsel satisfactory to the Company, in form,
substance and scope satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution. Such representations and
warranties shall also be deemed to be made by the Optionee upon each exercise of
this option. Nothing herein shall be construed as requiring the Company to
register the shares subject to this option under the Securities Act.
6. Notwithstanding anything herein to the contrary, if at any time
the Committee shall determine in its sole discretion that the listing or
qualification of the shares of Common Stock subject to this option on any
securities exchange, Nasdaq or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of an option, or the issue of
shares of Common Stock thereunder, this option may not be exercised in whole or
in part unless such listing, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
-2-
<PAGE>
<PAGE>
7. Nothing in the Plan or herein shall confer upon the Optionee
any right to continue in the employ of the Company, any of its Subsidiaries or a
Parent, or interfere in any way with any right of the Company, any Subsidiary or
a Parent to terminate such employment at any time for any reason whatsoever
without liability to the Company, the Subsidiary or Parent.
8. The Company may affix appropriate legends upon the certificates
for shares of Common Stock issued upon exercise of this option and may issue
such "stop transfer" instructions to its transfer agent in respect of such
shares as it determines, in its discretion, to be necessary or appropriate to
(a) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act and any applicable state securities laws, or
(b) implement the provisions of the Plan or any agreement between the Company
and the Optionee with respect to such shares of Common Stock.
9. The Company may withhold cash and/or shares of Common Stock to
be issued to the Optionee in the amount which the Company determines is
necessary to satisfy its obligation to withhold taxes or other amounts incurred
by reason of the grant or exercise of this option, its disposition or the
disposition of the underlying shares of Common Stock. Alternatively, the Company
may require the Optionee to pay the Company such amount in cash promptly upon
demand.
10. In the event of any disposition of the shares of Common Stock
acquired pursuant to the exercise of this option within two years from the date
hereof or one year from the date of transfer of such shares to him, the Optionee
shall notify the Company thereof in writing within 30 days after such
disposition. In addition, the Optionee shall provide the Company on demand with
such information as the Company shall reasonably request in connection with
determining the amount and character of the Optionee's income, the Company's
deduction and its obligation to withhold taxes or other amount incurred by
reason of such disqualifying disposition, including the amount thereof. The
Optionee shall pay the Company in cash on demand the amount, if any, which the
Company determines is necessary to satisfy such withholding obligation.
11. The Company and the Optionee agree that they will both be
subject to and bound by all of the terms and conditions of the Plan, a copy of
which is attached hereto and made a part hereof. Any capitalized term not
defined herein shall have the meaning ascribed to it in the Plan. In the event
of a conflict between the terms of this Contract and the terms of the Plan, the
terms of the Plan shall govern.
12. The Optionee represents and agrees that he will comply with
all applicable laws relating to the Plan and the grant and exercise of the
option and the disposition of the shares of Common Stock acquired upon exercise
of the option, including without limitation, federal and state securities and
"blue sky" laws.
-3-
<PAGE>
<PAGE>
13. This option is not transferable otherwise than by will or the
laws of descent and distribution and may be exercised, during the lifetime of
the Optionee, only by him or his legal representatives.
14. This Contract shall be binding upon and inure to the benefit
of the parties hereto, any successor or assign of the Company and to any Legal
Representative of the Optionee.
15. This Contract shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware, without regard to the
conflicts of law rules thereof.
16. The invalidity, illegality or unenforceability of any
provision herein shall not affect the validity, legality or enforceability of
any other provision, all of which shall be valid, legal and enforceable to the
fullest extent permitted by applicable law.
17. The Optionee agrees that the Company may amend the Plan and
the options granted to the Optionee under the Plan, subject to the limitations
contained in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Contract
as of the day and year first above written.
ICON CMT CORP.
By:
---------------------------------
Scott A. Baxter, President
------------------------------------
[NAME OF EMPLOYEE]
------------------------------------
------------------------------------
(Address)
-4-
<PAGE>
<PAGE>
ICon International Inc.
420 Lexington avenue
New York, New York 10170
November 15, 1995
Mr. Ernest A. Christoph
Hartz-PW Tower B Limited Partnership
400 Plaza Drive
Seacaucus, New Jersey 07094-3688
Re: Lease Agreement between Hartz-PW Tower B Limited Partnership ("Landlord")
And ICon International Inc. ("Tenant")
Premises: 1200 Harbor Boulevard, Weehawken, New Jersey
Dear Ernie:
This will confirm that notwithstanding anything contained in Article 8 of the
Lease to the contrary, you will accept as complying with such Article 8 the
Security Deposit in the form of an irrevocable letter of credit which has a term
of at least one year expiring no earlier than on November 2, 1996, although it
does not automatically renew on an annual basis, provided that at least thirty
(30) days prior to November 2, 1996 and each anniversary thereof during the Term
we deliver to you a substitute irrevocable letter of credit with a term of at
least one year expiring no earlier than the next such anniversary or a term
which expires no earlier than thirty (30) days after the Expiration Date of the
Lease, whichever is sooner, in the amount provided in such Article 8 and
otherwise conforming to the requirements of such Article 8.
Sincerely,
ICon International Inc.
By: /s/ Scott Baxter
----------------------------------
Scott Baxter, President
Accepted and Agreed:
Hartz-PW Tower B Limited Partnership
By: Hartz Mountain Industries, Inc.
By: /s/ Irwin A. Horowitz
-----------------------------------------
Name: Irwin A. Horowitz
Title: Executive Vice President
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLES PAGE
- -------- ----
<S> <C>
1 - DEFINITIONS.............................................1
2 - DEMISE AND TERM.........................................7
3 - RENT....................................................7
4 - USE OF DEMISED PREMISES ................................8
5 - PREPARATION OF DEMISED PREMISES.........................9
6 - TAX AND OPERATING EXPENSE PAYMENTS.....................10
7 - COMMON AREAS...........................................12
8 - SECURITY...............................................13
9 - SUBORDINATION..........................................15
10 - QUIET ENJOYMENT........................................18
11 - ASSIGNMENT, SUBLETTING AND MORTGAGING..................18
12 - COMPLIANCE WITH LAWS...................................21
13 - INSURANCE AND INDEMNITY................................23
14 - RULES AND REGULATIONS..................................26
15 - ALTERATIONS............................................26
16 - LANDLORD'S AND TENANT'S PROPERTY.......................27
17 - REPAIRS AND MAINTENANCE................................28
18 - ELECTRIC ENERGY........................................29
19 - HEAT, VENTILATION AND AIR-CONDITIONING.................30
20 - OTHER SERVICES; SERVICE INTERRUPTION...................31
21 - ACCESS, CHANGES AND NAME...............................32
22 - MECHANICS' LIENS AND OTHER LIENS.......................33
23 - NON-LIABILITY .........................................33
24 - DAMAGE OR DESTRUCTION..................................34
25 - EMINENT DOMAIN.........................................36
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLES PAGE
- -------- ----
<S> <C>
26 - SURRENDER..............................................38
27 - CONDITIONS OF LIMITATION...............................38
28 - RE-ENTRY BY LANDLORD...................................39
29 - DAMAGES................................................40
30 - AFFIRMATIVE WAIVERS....................................43
31 - NO WAIVERS.............................................43
32 - CURING A PARTY'S DEFAULTS..............................43
33 - BROKER.................................................44
34 - NOTICES................................................44
35 - ESTOPPEL CERTIFICATES..................................45
36 - ARBITRATION............................................45
37 - MEMORANDUM OF LEASE....................................46
38 - RELOCATION OF DEMISED PREMISES.........................46
39 - MISCELLANEOUS..........................................46
</TABLE>
EXHIBITS
EXHIBIT A - DEMISED PREMISES
EXHIBIT A1 - DEVELOPMENT
EXHIBIT B - DESCRIPTION OF LAND
EXHIBIT C - WORKLETTER
EXHIBIT D - RULES AND REGULATIONS
EXHIBIT E - CLEANING SPECIFICATIONS
EXHIBIT X - PSE&G LETTER
<PAGE>
<PAGE>
LEASE, dated November 3, 1995, by and between HARTZ-PW TOWER B LIMITED
PARTNERSHIP, a New Jersey Limited Partnership having an office at 400 Plaza
Drive, Secaucus, New Jersey 07094-3688 ("Landlord"), and ICON INTERNATIONAL
INC., a Delaware corporation having an office at 420 Lexington Avenue, New York,
New York 10170 ("Tenant").
ARTICLE 1 - DEFINITIONS
1.01. As used in this Lease (including in all Exhibits and any Riders
attached hereto, all of which shall be deemed to be part of this Lease) the
following words and phrases shall have the meanings indicated:
A. Advance Rent: $48,400.67
B. Additional Charges: All amounts that become payable by Tenant to
Landlord hereunder other than the Fixed Rent.
C. Architect: Kenneth Carl Bonte, or as Landlord may designate.
D. Base Year: The calendar year 1996.
E. Broker: Pyramid Real Estate & Management Co.
F. Building: The building or buildings now or hereafter located on the
Land (excluding any portion of the Retail Mall on the Land) and known or to
be known as 1200 Harbor Boulevard in Lincoln Harbor, Weehawken, New Jersey.
G. Building Fraction: a fraction the numerator of which is the Floor
Space of the Building (approximately 367,825 square feet) and the denominator
of which is the aggregate Floor Space of the buildings in the Development.
If the aggregate Floor Space of the buildings in the Development
shall be changed due to any construction or alteration, the denominator of the
Building Fraction shall be increased or decreased to reflect such change.
H. Business Days: All days except Saturdays, Sundays, days observed
by the federal or state government as legal holidays and such other holidays
as shall be designated as holidays by the applicable building service union
employees' service contract or by the applicable operating engineers'
contract.
I. Business Hours: Generally customary daytime business hours, but not
before 9:00 A.M. or after 6:00 P.M.
J. Calendar Year: Any twelve-month period commencing on a January 1.
K. Commencement Date: The earlier of (a) the date on which both: (i)
the Demised Premises shall be Ready for Occupancy, and (ii) actual possession
of the Demised Premises shall have been delivered to Tenant by notice to
Tenant, or (b) the date Tenant, or anyone claiming under or through Tenant,
first occupies the Demised Premises for normal business operations.
1
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L. Common Areas: All areas, spaces and improvements in the Building and
on the Land which Landlord makes available from time to time for the common use
and benefit of the tenants and occupants of the Building and which are not
exclusively available for use by a single tenant or occupant, including, without
limitation, parking areas, roads, walkways, sidewalks, landscaped and planted
areas, community rooms, if any, the managing agent's office, if any, and public
rest rooms, if any.
M. Demised Premises: The space that is or will be located on the
eighth (8th) floor of the Building and that is indicated on the floor plan
attached hereto as Exhibit A. The Demised Premises contains or will contain
approximately 31,600 square feet of Floor Space subject to adjustment upon
verification by the Architect.
N. Development: All lands and improvements now existing or
hereafter constructed located in the area outlined on Exhibit A-1.
O. Development Common Areas: All areas in the Development excluding
Common Areas that are not exclusively available for use by a single tenant
including, but not limited to: walkways, landscaped areas, open spaces, roads,
ramps, buildings and riverbank bulkheads.
P. Expiration Date: The date that is the day before the tenth (10th)
anniversary of the Commencement Date if the Commencement Date is the first day
of a month, or the tenth (10th) anniversary of the last day of the month in
which the Commencement Date occurs if the Commencement Date is not the first day
of a month. However, if the Term is extended by Tenant's effective exercise of
Tenant's right, if any, to extend the Term, the "Expiration Date" shall be
changed to the last day of the last extended period as to which Tenant shall
have effectively exercised its right to extend the Term. For the purposes of
this definition, the earlier termination of this Lease shall not affect the
"Expiration Date."
Q. Fixed Rent: An amount at the annual rate of Eighteen and 34/100
Dollars ($18.34) multiplied by the Floor Space of the Demised Premises for years
one (1) through five (5) of the Lease Term and an amount at the annual rate of
Twenty and 00/100 Dollars ($20.00) multiplied by the Floor Space of the Demised
Premises for years six (6) through ten (10) of the Lease Term.
R. Floor Space: As to the Demised Premises, the sum of the floor area
stated in square feet bounded by the exterior faces of the exterior walls, or by
the exterior or Common Area face of any wall between the Demised Premises and
any portion of the Common Areas, or by the center line of any wall between the
Demised Premises and space leased or available to be leased to a tenant or
occupant plus eighteen percent (18%). Any reference to Floor Space of a building
shall mean the floor area of all levels or stories of such building, excluding
any roof, except such portion thereof (other than cooling towers, elevator
penthouses, mechanical rooms, chimneys and staircases, entrances and exits) as
is permanently enclosed, and including any interior basement level or mezzanine
area not occupied or used by a tenant on a continuing or repetitive basis, and
any mechanical room, enclosed or interior truck dock, interior Common Areas, and
areas used by Landlord for storage, for housing
2
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<PAGE>
meters and/or other equipment or for other purposes. Any reference to the Floor
Space is intended to refer to the Floor Space of the entire area in question
irrespective of the Person(s) who may be the owner(s) of all or any part
thereof.
S. Guarantor: None.
T. INTENTIONALLY DELETED.
U. Land: The Land upon which the Building and Common Areas are
located. The Land is described on Exhibit B.
V. Landlord's Work: The materials and work to be furnished, installed
and performed by Landlord at its expense in accordance with the provisions of
Exhibit C.
W. Legal Requirements: Laws and ordinances of all federal, state, city,
town, county, borough and village governments, and rules, regulations, orders
and directives of all departments, subdivisions, bureaus, agencies or offices
thereof, and of any other governmental, public or quasi-public authorities
having jurisdiction over the Land and Building, whether now or hereafter in
force, including, but not limited to, those pertaining to environmental matters.
X. Mortgage: A mortgage and/or a deed of trust.
Y. Mortgagee: A holder of a mortgage or a beneficiary of a deed of
trust.
Z. Operating Expenses: The sum of the following: (1) the cost and
expense (whether or not within the contemplation of the parties) for the repair,
replacement, maintenance, policing, insurance and operation of the Building and
Land, and (2) the Building Fraction of the sum of (a) the cost and expense for
the repair, replacement, maintenance, policing, insurance and operation of the
Development Common Areas; (b) the Real Estate Taxes, if any, attributable to the
Development Common Areas; and (3) the Parking Charges attributable to the
Building as defined in 1.01 (AA) and (4) fifty percent (50%) of the cost and
expense for repair, replacement, maintenance, policing insurance and operation
of the lobbies that service the Building and the Retail Mall in common. The
"Operating Expenses" shall, include, without limitation, the following: (i) the
cost for rent, casualty, liability, boiler and fidelity insurance, (ii) if an
independent managing agent is employed by Landlord, the fees payable to such
agent (provided the same are competitive with the fees payable to independent
managing agents of comparable facilities in Hudson County), and (iii) reasonable
legal, accounting and other professional fees. In all years including the Base
Year, if Landlord is itself managing the Building and has not employed a
independent third party for such management, Landlord shall be entitled to 25%
of the resulting total of all of the foregoing items making up "Operating
Expenses" for Landlord's home office administration and overhead cost and
expense. All items included in Operating Expenses shall be determined in
accordance with generally accepted accounting principles consistently applied.
In no event shall
3
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<PAGE>
Landlord's home office administration and overhead costs and expenses exceed the
normal customary industry third party management fees.
"Operating Expenses" shall not include the following:
(i) Costs for which Landlord is reimbursed by its insurer, any tenant's
insurer or any tenant (other than through operating expense provisions);
(ii) Interest, principal or other payments on mortgages or other debt
costs, if any;
(iii) Rent concessions or expenditures for any alteration, renovation,
redecoration or finish of any other tenant space in the Building whether
performed in connection with the occupancy of such space by a new tenant or in
connection with a renewal of a lease for such space by the existing tenant
thereof or the relocation of a tenant or otherwise;
(iv) Leasing commissions, marketing and advertising costs related to
leasing space in the Building;
(v) Rent under any ground lease;
(vi) interest, late charges and late penalties on any charges payable by
Landlord which are included in Operating Expenses, except as the result of a
default by Tenant;
(vii) Legal, accounting and other professional fees and disbursements
incurred in connection with any negotiation of, or disputes arising out of, any
lease in the Building, with respect to new leases, enforcing Landlord's rights
under existing leases, financing, refinancing, litigation with tenants or
third-parties (all exclusive, however, of any legal, accounting or other
professional fees and disbursements incurred in connection with an appeal of
Real Estate Taxes);
(viii) services provided for the exclusive use of another tenant in the
Building;
(ix) capital improvements, except as follows: in the event any of the
items which would constitute Operating Expenses are classified as capital
improvements pursuant to generally accepted accounting principles, the monthly
amount included in Operating Expenses during the Term with respect thereto will
be limited to the monthly amount necessary to amortize the cost of such item,
with interest thereon (at the floating Prime Rate of Chemical Bank [or its
successor in interest] plus 1%), over the useful life of such item, in
accordance with generally accepted accounting principles consistently applied.
AA. Parking Charges: The Building's pro-rata share of the cost and
expense for the repair, replacement, striping, lighting maintenance, policing,
insurance, Real Estate Taxes, utilities, and landscaping of the parking
facility or facilities serving to the Building. The Building's pro-rata share
shall be a fraction the numerator of which is the Floor Space of the Building
and the denominator of which is the Floor Space of the Building and any other
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building or buildings that use such parking facility in common with the
Building.
BB. Permitted Uses: General offices, including offices for executive,
administrative, marketing, sales, accounting, credit departments and any other
lawful use consistent with that of a first class office building; such use may
include, in addition to Tenant's primary use of the Demised Premises for general
offices as above described, the utilization by Tenant of those portions of the
Demised Premises identified on Exhibit A as "Lab", Shipping and Receiving" and
"Computer Room", for purposes of shipping and receiving, and the installation,
storage, maintenance, and operation of computers, printers, scanners, routers,
telecommunications equipment and machines, photocopying and facsimile equipment
and machines, and other office mechanical, electronic, optical and other
equipment; Landlord shall not unreasonably withhold or delay its consent to the
utilization by Tenant of up to an additional five (5%) percent of the Demised
Premises for such uses. It is understood and agreed that Tenant may employ use,
maintain and operate desk top computers, printers, scanners, routers,
telecommunications equipment and machines, photocopying and facsimile equipment
and machines, and other office mechanical, electronic, optical and other
equipment as part of its general office use. For the purposes hereof "first
class office building" shall mean: In keeping with the present operation and
management of the Building and in keeping with the character and tenants of the
Building. Under no circumstances shall Tenant be permitted to use or store,
except in de minimis amounts consistent with general office use, any flammables,
explosives, radioactive materials, polychlorinated biphenyls (PCBs), hazardous
wastes, toxic substances or related materials, petroleum and petroleum products,
and substances declared to be hazardous or toxic under any Legal Requirements
now or hereafter enacted or promulgated by any governmental authority. Any and
all Permitted Uses hereunder shall be conducted by Tenant in a manner complying
with all applicable Legal Requirements.
CC. Person: A natural person or persons, a partnership, a corporation,
or any other form of business or legal association or entity.
DD. Ready for Occupancy: The condition of the Demised Premises when for
the first time the Landlord's Work shall have been completed other than for
minor or insubstantial details of construction, mechanical adjustment or
decoration, the noncompletion of which does not materially interfere with
Tenant's use of the Demised Premises, and Landlord has obtained a temporary,
permanent, or continuing Certificate of Occupancy permitting use of the Demised
Premises for the Permitted Uses.
EE. Real Estate Taxes: The real estate taxes, assessments and special
assessments imposed upon the Building and Land by any federal, state, municipal
or other governments or governmental bodies or authorities, and any expenses
incurred by Landlord in contesting such taxes or assessments and/or the assessed
value of the Building and Land, which expenses shall be allocated to the period
of time to which such expenses relate. If at any time during the Term the
methods of taxation prevailing on the date hereof shall be altered so that in
lieu of, or as an addition to or as a substitute for, the whole or any part of
such real estate taxes, assessments and special
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assessments now imposed on real estate there shall be levied, assessed or
imposed (a) a tax, assessment, levy, imposition, license fee or charge wholly or
partially as a capital levy or otherwise on the rents received therefrom, or (b)
any other such additional or substitute tax, assessment, levy, imposition or
charge, then all such taxes, assessments, levies, impositions, fees or charges
or the part thereof so measured or based shall be deemed to be included within
the term "Real Estate Taxes" for the purposes hereof. The term "Real Estate
Taxes" shall not include: (i) interest and penalties for late payment, unless
Tenant shall fail to make timely payment of its taxes; (ii) gross receipts,
excess profits, income, payroll, and stamp taxes; (iii) inheritance, gift,
estate, succession, sales, transfer, corporate, franchise, excise, capital
levies, capital stock and personal property taxes; and (iv) any assessment for
improvements levied against other tenants of the Building to the extent the same
are designated by the taxing authority.
FF. Rent: The Fixed Rent and the Additional Charges.
GG. Retail Mall: The grade level areas, spaces and improvements now
or hereafter used or constructed for retail shops, services and restaurants.
HH. Rules and Regulations: The reasonable rules and regulations that
may be promulgated by Landlord from time to time, which may be reasonably
changed by Landlord from time to time. The Rules and Regulations now in
effect are attached hereto as Exhibit D.
II. Security Deposit: $500,000.00 Letter of Credit, subject to
reduction as more particularly set forth in Article 8 below.
JJ. INTENTIONALLY DELETED.
KK. Successor Landlord: As defined in Section 9.03.
LL. Superior Lease: Any lease to which this Lease is, at the time
referred to, subject and subordinate.
MM. Superior Lessor: The lessor of a Superior Lease or its successor
in interest, at the time referred to.
NN. Superior Mortgage: Any Mortgage to which this Lease is, at the time
referred to, subject and subordinate.
OO. Superior Mortgagee: The Mortgagee of a Superior Mortgage at the
time referred to.
PP. Tenant's Fraction: 8.6%. If the size of the Demised Premises or
the Building shall be changed from the initial size thereof, due to any
taking, any construction or alteration work or otherwise, the Tenant's
Fraction shall be changed to the fraction the numerator of which shall be the
Floor Space of the Demised Premises and the denominator of which shall be the
Floor Space of the Building.
QQ. Tenant's Property: As defined in Section 16.02.
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RR. Tenant's Work: The facilities, materials and work which may be
undertaken by or for the account of Tenant (other than the Landlord's Work)
to equip, decorate and furnish the Demised Premises for Tenant's occupancy in
accordance with the provisions of Exhibit C.
SS. Term: The period commencing on the Commencement Date and ending
at 11:59 p.m. of the Expiration Date, but in any event the Term shall end on
the date, if any when this Lease is earlier terminated.
TT. Unavoidable Delays: A delay arising from or as a result of a strike,
lockout, or labor difficulty, explosion, sabotage, accident, riot or civil
commotion, act of war, fire or other catastrophe, Legal Requirement or an act of
the other party and any cause beyond the reasonable control of that party,
provided that the party asserting such Unavoidable Delay has exercised its best
efforts to minimize such delay.
ARTICLE 2 - DEMISE AND TERM
2.01. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the Demised Premises, for the Term. Promptly following the
Commencement Date, the parties hereto shall enter into an agreement in form and
substance satisfactory to Landlord and Tenant setting forth the Commencement
Date.
ARTICLE 3 - RENT
3.01. Tenant shall pay the Fixed Rent in equal monthly installments in
advance on the first day of each and every calendar month during the Term
(except that Tenant shall pay, upon the execution and delivery of this Lease by
Tenant, the Advance Rent, to be applied against the first installment or
installments of Fixed Rent becoming due under this Lease). If the Commencement
Date occurs on a day other than the first day of a calendar month, the Fixed
Rent for the partial calendar month at the commencement of the Term shall be
prorated.
3.02. The Rent shall be paid in lawful money of the United States to
Landlord at its office, or such other place, or Landlord's agent, as Landlord
shall designate by notice to Tenant. Tenant shall pay the Rent promptly when due
without notice or demand therefor and without any abatement, deduction or setoff
for any reason whatsoever, except as may be expressly provided in this Lease. If
Tenant makes any payment to Landlord by check, same shall be by check of Tenant
and Landlord shall not be required to accept the check of any other Person, and
any check received by Landlord shall be deemed received subject to collection.
If any check is mailed by Tenant, Tenant shall post such check in sufficient
time prior to the date when payment is due so that such check will be received
by Landlord on or before the date when payment is due. Tenant shall assume the
risk of lateness or failure of delivery of the mails, and no lateness or failure
of the mails will excuse Tenant from its obligation to have made the payment in
question when required under this Lease.
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3.03. No payment by Tenant or receipt or acceptance by Landlord of a
lesser amount than the correct Rent shall be deemed to be other than a payment
on account, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance or pursue any other remedy in this Lease or at law
provided.
3.04. If Tenant is in arrears in payment of Rent, Tenant waives Tenant's
right, if any, to designate the items to which any payments made by Tenant are
to be credited, and Landlord may apply any payments made by Tenant to such items
as Landlord sees fit, irrespective of and notwithstanding any designation or
request by Tenant as to the items to which any such payments shall be credited.
3.05. In the event that any installment of Rent due hereunder shall be
overdue for five (5) Business Days or more on more than one occasion in any
Calendar Year, a "Late Charge" equal to four percent (4%) or the maximum rate
permitted by law, whichever is less ("Late Payment Rate") for Rent so overdue
may be charged by Landlord for each month or part thereof that the same remains
overdue (so that, for example, in the case of a payment of Fixed Rent which has
not been paid within the applicable grace period), the Late Charge shall
commence to accrue retroactive to the first day of the month to which such
payment relates). Any such Late Charges if not previously paid shall, at the
option of the Landlord, be added to and become part of the next succeeding Rent
payment to be made hereunder.
ARTICLE 4 - USE OF DEMISED PREMISES
4.01. Tenant shall use and occupy the Demised Premises for the Permitted
Uses, and Tenant shall not use or permit or suffer the use of the Demised
Premises or any part thereof for any other purpose.
4.02. If any governmental license or permit, other than a Certificate of
Occupancy, shall be required for the proper and lawful conduct of Tenant's
business in the Demised Premises or any part thereof, Tenant shall duly procure
and thereafter maintain such license or permit and submit the same to Landlord
for inspection. Landlord shall secure a Certificate of Occupancy for the Demised
Premises pursuant to which the Demised Premises may be used and occupied for the
Permitted Uses. Tenant shall at all times comply with the terms and conditions
of each such license or permit. Tenant shall not at any time use or occupy, or
suffer or permit anyone to use or occupy the Demised Premises, or do or permit
anything to be done in the Demised Premises, in any manner which (a) violates
the Certificate of Occupancy for the Demised Premises or for the Building; (b)
causes or is liable to cause injury to the Building or any equipment, facilities
or systems therein; (c) constitutes a violation of the Legal Requirements; (d)
impairs the appearance of the Building as a first-class office building; (e)
adversely impairs the proper and economic maintenance, operation and repair of
the Building and/or its equipment, facilities or systems; or (f) unreasonably
interferes with other tenants or occupants of the Building.
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ARTICLE 5 - PREPARATION OF DEMISED PREMISES
5.01.(a) Upon satisfaction of the contingencies set forth in Section
9.01 below, Landlord shall with reasonable diligence commence and prosecute to
completion the preparation of the Demised Premises for Tenant's occupancy in the
manner described in, and subject to the provisions of, Exhibit C. Tenant shall
occupy the Demised Premises promptly after the same are Ready for Occupancy and
possession thereof is delivered to Tenant by Landlord giving to Tenant a notice
of such effect.
(b) Tenant shall, within ten (10) days of the date hereof, provide
Landlord with all information Landlord needs to prepare working drawings for the
construction of Landlord's Work. Such information shall include, but not be
limited to layout of the Demised Premises, electrical, mechanical, plumbing &
structural requirements, materials & finishes. Within fifteen (15) days of
Landlord's receipt of all necessary information, Landlord shall deliver working
drawings to Tenant. Tenant shall, within five (5) days of its receipt of working
drawings, review and approve the working drawings by giving Landlord written
notice thereof. If Tenant does not respond within said five (5) day period, the
working drawings shall be deemed approved. If Tenant disapproves of the working
drawings, it shall specify in detail the reasons for its disapproval. If Tenant
makes changes in the working drawings which causes any delay, then the
provisions of Section 5.02 shall apply. Within ten (10) days after the working
drawings are approved or deemed approved, Landlord shall submit to Tenant prices
for the construction of any items in excess of Landlords' Work. Tenant shall,
within five (5) days of its receipt of prices, review and approve the prices by
giving Landlord written notice thereof. If Tenant does not respond within said
five (5) day period, the prices shall be deemed approved. If Tenant disapproves
of any prices, the provisions of Section 5.02 shall apply. In responding to any
Tenant requests for change orders Landlord shall advise Tenant of the additional
cost (or savings) and delay in completion (or savings of time) anticipated as a
result of such change order.
5.02. If the substantial completion of the Landlord's Work shall be
delayed due to (a) any act or omission of Tenant or any of its employees, agents
or contractors (including, without limitation, [i] any delays due to changes in
or additions to the Landlord's Work, or [ii] any delays by Tenant in the
submission of plans, drawings, specifications or other information or in
approving any working drawings or estimates or in giving any authorizations or
approvals), or (b) any additional time needed for the completion of the
Landlord's Work by the inclusion in the Landlord's Work of any items specified
by Tenant that require long lead time for delivery or installation, then the
Demised Premises shall be deemed Ready for Occupancy on the date when they would
have been ready but for such delay(s). Tenant shall take occupancy of the
Demised Premises once the same shall be Ready for Occupancy, notwithstanding
that there may be minor or insubstantial "punchlist" items in need of repair or
correction. Not later than thirty (30) days from the Commencement Date, Tenant
shall have the right to submit to Landlord a "punchlist" noting any incomplete
or incorrect Landlord's Work in detail sufficient for Landlord to act thereon.
Landlord shall use its reasonable efforts to promptly perform and complete such
punchlist items and to minimize
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any inconvenience, annoyance, interruption or injury to Tenant's use and
occupancy; provided, however, that the foregoing reasonable efforts shall not,
in any event, require Landlord to perform or cause work to be performed other
than on Business Days during Business Hours.
5.03. Landlord reserves the right, at any time and from time to time, to
increase, reduce or change the number, type, size, location, elevation, nature
and use of any of the Common Areas and the Building (other than the Demised
Premises) and any other buildings and other improvements on the Land, including,
without limitation, the right to move and/or remove same, provided same shall be
done in such a manner so as to minimize the interference with Tenant's use of
the Demised Premises as contemplated by this Lease and not unreasonably
interfere with Tenant's means of ingress or egress to and from the Demised
Premises.
ARTICLE 6 - TAX AND OPERATING EXPENSE PAYMENTS
6.01. Tenant shall pay to Landlord, as hereinafter provided, Tenant's
Fraction of the Real Estate Taxes. Tenant's Fraction of the Real Estate Taxes
shall be the Real Estate Taxes in respect of the Building for the period in
question, less the Real Estate Taxes attributable to the Base Year, multiplied
by the Tenant's Fraction, plus the Real Estate Taxes in respect of the Land for
the period in question, less the Real Estate Taxes attributable to the Base
Year, multiplied by the Tenant's Fraction. In the event any part of the Retail
Mall is located on the Land, there shall be deducted from Real Estate Taxes the
proportionate share of Real Estate Taxes attributable to the Retail Mall based
upon the Floor Space of the portion of the Retail Mall located on the Land. If
any portion of the Building shall be exempt from all or any part of the Real
Estate Taxes, then for the period of time when such exemption is in effect, the
Floor Space on such exempt portion shall be excluded when making the above
computations in respect of the part of the Real Estate Taxes for which such
portion shall be exempt. Landlord shall in good faith estimate the annual amount
of Tenant's Fraction of the Real Estate Taxes (which estimate may be changed by
Landlord in good faith at any time and from time to time), and Tenant shall pay
to Landlord 1/12th of the amount so estimated on the first day of each month in
advance. Tenant shall also pay to Landlord within fifteen (15) days after
invoice or notice, from time to time, the amount which, together with said
monthly installments, will be sufficient in Landlord's good faith estimation to
pay Tenant's Fraction of any Real Estate Taxes thirty (30) days prior to the
date when such Real Estate Taxes shall first become due. When the amount of any
item comprising Real Estate Taxes is finally determined, including, without
limitation, after the end of the Term, for a real estate fiscal tax year,
Landlord shall submit to Tenant a statement in reasonable detail of the same,
and the figures usedfor computing Tenant's Fraction of the same, and if Tenant's
Fraction so stated is more or less than the amount theretofore paid by Tenant
for such item based on Landlord's estimate, Tenant shall pay to Landlord the
deficiency within fifteen (15) days after submission of such statement, or
Landlord, at its election, shall either within such fifteen (15) day period
refund to Tenant the excess, if any, or apply the same to the next installment
of Real Estate Taxes due hereunder. Any Real Estate Taxes for a real estate
fiscal tax year,
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a part of which is included within the Term and a part of which is not so
included, shall be apportioned on the basis of the number of days in the real
estate fiscal tax year included in the Term, and the real estate fiscal tax year
for any improvement assessment will be deemed to be the one-year period
commencing on the date when such assessment is due, except that if any
improvement assessment is payable in installments, the real estate fiscal tax
year for each installment will be deemed to be the one-year period commencing on
the date when such installment is due. The above computations shall be made by
Landlord in accordance with generally accepted accounting principles
consistently applied, and the Floor Space referred to will be based upon the
average of the Floor Space in existence on the first day of each month during
the period in question. In addition to the foregoing, Tenant shall be
responsible for any increase in Real Estate Taxes attributable to assessments
for improvements installed by or for the account of Tenant in the Demised
Premises. If the Demised Premises are not separately assessed, the amount of any
such increase shall be determined by reference to the records of the tax
assessor.
6.02. Tenant shall pay to Landlord, as hereinafter provided, Tenant's
Fraction of the Operating Expenses. Tenant's Fraction of the Operating Expenses
shall be the Operating Expenses for the period in question, less the Operating
Expenses for the Base Year, multiplied by Tenant's Fraction. Landlord shall in
good faith estimate Tenant's annual Fraction of the Operating Expenses (which
estimate may be reasonably changed by Landlord in good faith from time to time),
and Tenant shall pay to Landlord 1/12th of the amount so estimated on the first
day of each month in advance. If at any time Landlord changes its estimate of
Tenant's Fraction of the Operating Expenses for the then current Calendar Year
or partial Calendar Year, Landlord shall give notice to Tenant of such change
and within fifteen (15) days after such notice Landlord and Tenant shall adjust
for any overpayment or underpayment during the prior months of the then current
Calendar Year or partial Calendar Year. After the end of each Calendar Year,
including any partial Calendar Year at the beginning of the Term, and after the
end of the Term, Landlord shall submit to Tenant a statement in reasonable
detail stating Tenant's Fraction of the Operating Expenses for such Calendar
Year, or partial Calendar Year in the event the Term shall begin on a date other
than a January 1st and/or end on a date other than a December 31st, as the case
may be, and stating the Operating Expenses for the period in question and the
figures used for computing Tenant's Fraction of Operating Expenses, and if
Tenant's Fraction of Operating Expenses so stated for such period is more or
less than the amount paid for such period, Tenant shall pay to Landlord the
deficiency within fifteen (15) days after submission of such statement of
Tenant's Fraction, or Landlord, at its election, either shall within such
fifteen (15) day period refund to Tenant the excess, if any, or apply same to
the next installment(s) of Operating Expenses coming due hereunder. All
computations shall be madein accordance with generally accepted accounting
principles consistently applied.
6.03. Each such annual statement given by Landlord pursuant to Section
6.01 or Section 6.02 shall be conclusive and binding upon Tenant unless within
ninety (90) days after the receipt of such statement Tenant shall notify
Landlord that it disputes the correctness of the statement, specifying the
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particular respects in which the statement is claimed to be incorrect. If such
dispute is not settled by agreement, either party may submit the dispute to
arbitration as provided in Article 36. Pending the determination of such dispute
by agreement or arbitration as aforesaid, Tenant shall, within fifteen (15) days
after receipt of such statement, pay the Additional Charges in accordance with
Landlord's statement, without prejudice to Tenant's position. If the dispute
shall be determined in Tenant's favor, Landlord shall forthwith pay to Tenant
the amount of Tenant's overpayment resulting from compliance with Landlord's
statement.
6.04. Provided Tenant is not in default beyond any applicable cure
period under this Lease, Tenant shall have the right, at its sole cost and
expense, upon at least thirty (30) days' prior written notice to Landlord, to
examine Landlord's records relating to Operating Expenses of the Demised
Premises and Real Estate Taxes for no more than five (5) days per Calendar Year.
Landlord shall make records available for examination at Landlord's principal
office during Landlord's normal business days and normal business hours. If any
such review discloses that Operating Expenses or Real Estate Taxes were
overstated by Landlord, Landlord, at its election, either shall within fifteen
(15) days refund or credit to Tenant any such excess or apply same to the next
installment(s) of Operating Expenses or Real Estate Taxes coming due hereunder,
together with an interest equivalent thereon from the applicable date(s) of such
overpayment at the floating prime rate of Chemical Bank, New York (or successor
thereto). In addition, in the event that any such review discloses that
Operating Expenses or Real Estate Taxes were overstated by Landlord by more than
five (5%) percent, Landlord shall pay to Tenant within fifteen days after demand
therefor, Tenant's reasonable accountants' fees in connection with the review of
Landlord's records under this Section 6.04. This provision shall not be deemed
to give Tenant the right to offset or deduct or withhold payment of Rent. No
subtenant shall have the right to conduct an examination and no assignee shall
conduct an inspection for any period during which such assignee was not in
possession of the Demised Premises. In the event Tenant elects to exercise an
inspection of Landlord's records relating to Operating Expenses or Real Estate
Taxes of the Demised Premises in accordance with this Section 6.04, such
inspection must be conducted by an independent nationally recognized accounting
firm that is not being compensated by Tenant on a contingency fee basis.
ARTICLE 7 - COMMON AREAS
7.01. Subject to the provisions of Section 5.03, Landlord will operate,
manage, equip, light, repair and maintain, or cause to be operated, managed,
equipped, lighted, repaired and maintained, the Common Areas for their intended
purposes. Landlord reserves the right, at any time and from time to time, to
construct within the Common Areas kiosks, fountains, aquariums, planters, pools
and sculptures, and to install vending machines, telephone booths, benches and
the like, provided same shall not unreasonably block or interfere with Tenant's
means of ingress or egress to and from the Demised Premises and shall be
constructed and/or installed in such a manner as to minimize interference with
Tenant's use of the Demised Premises as contemplated by this Lease.
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7.02. Tenant and its subtenants and concessionaires, and their
respective officers, employees, agents, customers and invitees, shall have the
non-exclusive right, in common with Landlord and all others to whom Landlord has
granted or may hereafter grant such right, but subject to the Rules and
Regulations, to use the Common Areas. Landlord reserves the right, at any time
and from time to time, to close temporarily all or any portions of the Common
Areas when in Landlord's reasonable judgment any such closing is necessary or
desirable (a) to make repairs or changes or to effect construction, (b) to
prevent the acquisition of public rights in such areas, (c) to discourage
unauthorized parking, or (d) to protect or preserve natural persons or property.
Landlord may do such other acts in and to the Common Areas as in its judgment
may be desirable to improve or maintain same. Landlord shall use reasonable
efforts to minimize interference with Tenant's use of the Demised Premises or
means of ingress or egress to and from the Demised Premises. Furthermore,
Landlord shall use reasonable efforts to promptly pursue and complete such
improvements and maintenance; provided, however, that the foregoing reasonable
efforts shall not, in any event, require Landlord to perform or cause work to be
performed other than on Business Days during Business Hours.
7.03. Except as otherwise provided for in Rider R4, Tenant agrees that
it, any subtenant or licensee and their respective officers, employees,
contractors and agents will park their automobiles and other vehicles only where
and as permitted by Landlord. Tenant will, if and when so requested by Landlord,
furnish Landlord with the license numbers of any vehicles of Tenant, any
subtenant or licensee and their respective officers, employees and agents.
ARTICLE 8 - SECURITY
8.01. (a) Tenant has deposited with Landlord the Security Deposit as
security for the full and faithful payment and performance by Tenant of Tenant's
obligations under this Lease. If Tenant defaults in the full and prompt payment
and performance of any of its obligations under this Lease beyond any applicable
cure period, including, without limitation, the payment of Rent, Landlord may
use, apply or retain the whole or any part of the Security Deposit to the extent
required for the payment of any Rent or any other sums as to which Tenant is in
default beyond any applicable cure period or for any sum which Landlord may
expend or may be required to expend by reason of Tenant's default beyond any
applicable cure period in respect of any of Tenant's obligations under this
Lease, including, without limitation, any damages or deficiency in the reletting
of the Demised Premises, whether such damages or deficiency accrue before or
after summary proceedings or other re-entry by Landlord. If Landlord shall so
use, apply or retain the whole or any part of the security, Tenant shall upon
demand immediately deposit with Landlord a sum equal to the amount so used,
applied and retained, as security as aforesaid. If Tenant shall fully and
faithfully pay and perform all of Tenant's obligations under this Lease, the
Security Deposit or any balance thereof to which Tenant is entitled shall be
returned or paid over to Tenant after the date on which this Lease shall expire
or sooner end or terminate, and after delivery to Landlord of entire possession
of the Demised Premises. In the event of any sale or leasing of the Land and the
Building, Landlord shall have the right to transfer the security to which Tenant
is entitled to
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the vendee or lessee and Landlord shall thereupon be released by Tenant from all
liability for the return or payment thereof upon the acknowledgement to Tenant
by the vendee or lessee of its receipt of the Security Deposit from Landlord and
its agreement to be bound by Landlord's obligations and liabilities with regard
to the Security Deposit; and Tenant shall look solely to the new landlord for
the return or payment of the same; and the provisions hereof shall apply to
every transfer or assignment made of the same to a new landlord. Tenant shall
not assign or encumber or attempt to assign or encumber the monies deposited
herein as security, and neither Landlord nor its successors or assigns shall be
bound by any such assignment, encumbrance, attempted assignment or attempted
encumbrance.
(b) Tenant shall provide to Landlord an irrevocable Letter of Credit in
the amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) in form and
substance reasonably satisfactory to Landlord and issued by a financial
institution approved by Landlord. Landlord shall have the right, upon at least
ten (10) days written notice specifying the nature of the default to Tenant
(except for Tenant's non-payment of Rent [beyond any applicable cure period] or
for Tenant's failure to comply with Article 8.03 for which not less than five
(5) days written notice specifying the nature of the default shall be required),
and regardless of the exercise of any other remedy the Landlord may have by
reason of a default beyond any applicable cure period, to draw upon said Letter
of Credit to cure any default of Tenant beyond any applicable cure period or for
any purpose authorized by section 8.01(a) of this Lease and if Landlord does so,
Tenant shall, upon demand, additionally fund the Letter of Credit with the
amount so drawn so that Landlord shall have the full deposit on hand at all
times during the Term of the Lease and for a period of thirty (30) days'
thereafter. In the event of a sale of the Building or a lease of the Building
subject to this Lease, Landlord shall have the right to transfer the security to
the vendee or lessee in accordance with Section 8.01(a) above, and Landlord
shall thereupon be released by Tenant from all liability for the return or
payment thereof upon the acknowledgement to Tenant by the vendee or lessee of
its receipt of the Security Deposit from Landlord and its agreement to be bound
by Landlord's obligations and liabilities with regard to the Security Deposit;
and Tenant shall look solely to the new landlord for the return or payment of
the same; and the provisions hereof shall apply to every transfer or assignment
made of the same to a new landlord. The Letter of Credit may contain the
condition that any sight draft to be drawn thereunder in accordance with this
Lease be signed by an officer (President, Executive Vice President, Vice
President or Treasurer) of the corporate general partner of Landlord and state
that Landlord is entitled to draw on the Letter of Credit and that Landlord has
provided to Tenant all requisite notices regarding the same as provided in this
Section 8.01(b) and 8.03 below.
8.02. The Letter of Credit shall expire not earlier than thirty (30)
days after the Expiration Date of this Lease. The Letter of Credit may be of the
type which is automatically renewed on an annual basis (Annual Renewal Date),
provided however, in such event Tenant shall maintain the Letter of Credit and
its renewals in full force and effect during the entire Term of this Lease
(including any renewals or extensions) and for a period of thirty (30) days
thereafter. The Letter of Credit will contain a provision requiring
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the issuer thereof to give the beneficiary (Landlord) sixty (60) days' advance
written notice of its intention not to renew the Letter of Credit on the next
Annual Renewal Date.
8.03. In the event Tenant shall fail to deliver to Landlord a substitute
irrevocable Letter of Credit, in the amount stated above or subject to the
provisions of 8.04 below, on or before thirty (30) days prior to the next Annual
Renewal Date, said failure shall be deemed a default under this Lease. Landlord
may, in its discretion treat this the same as a default in the payment of Rent
or any other default and pursue the appropriate remedy. In addition, and not in
limitation, Landlord shall be permitted to draw upon the Letter of Credit as in
the case of any other default by Tenant under the Lease, except that Landlord
need only provide Tenant with five (5) days prior written notice specifying the
nature of the default to draw upon the Letter of Credit.
8.04. Provided Tenant is not then in default of its obligations under
this Lease beyond any applicable cure period, (i) Landlord shall consent to a
reduction of the Security Deposit in the amount of Three Hundred Fifty Seven
Thousand Eight Hundred and 00/100 Dollars ($357,800.00) on the second
anniversary of the Commencement Date resulting in a total Security Deposit of
One Hundred Forty Two Thousand Two Hundred and 00/100 Dollars ($142,200.00); and
(ii) Landlord shall consent to a further reduction of the Security Deposit in
the amount of Thirty Six Thousand Eight Hundred Sixty Six and 67/100 Dollars
($36,866.67) on the fifth (5th) anniversary of the Commencement Date resulting
in a total Security Deposit of One Hundred Five Thousand Three Hundred Thirty
Three and 33/100 Dollars ($105,333.33) which shall be held for the balance of
the Term. In each case, the applicable reduction shall be reflected by a
reduction in the amount of the Letter of Credit as so indicated. In no event
however shall the Letter of Credit contain a provision for its automatic
reduction.
ARTICLE 9 - SUBORDINATION
9.01. This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate to all ground leases and underlying leases of the Land
and/or the Building now or hereafter existing and to all Mortgages which may now
or hereafter affect the Land and/or Building and/or any of such leases, whether
or not such Mortgages or leases shall also cover other lands and/or buildings,
to each and every advance made or hereafter to be made under such Mortgages, and
to all renewals, modifications, replacements and extensions of such leases and
such Mortgages and spreaders and consolidations of such Mortgages. The
provisions of this Section 9.01 shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any such lease or the Mortgagee of
any such Mortgage or any of their respective successors in interest may
reasonably request to evidence such subordination. Notwithstanding any of the
foregoing to the contrary, this Lease shall be contingent upon Landlord
obtaining for Tenant a Non-Disturbance, Subordination, and Attornment Agreement
with the holder of the first mortgage on the Demised Premises on such
mortgagee's standard form (the "SNDA") providing, in effect, that so long
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as no default exists which would entitle Landlord to terminate this Lease, (i)
Mortgagee shall not join Tenant in summary or foreclosure proceedings in
connection with the foreclosure of the Mortgage or other similar action in
connection with any Superior Lease, and (ii) Mortgagee will recognize Tenant and
will not disturb Tenant in its possession of the Demised Premises, which Tenant
shall promptly execute, acknowledge and deliver to evidence such subordination,
non-disturbance and attornment; Landlord represents that such Mortgagee is the
only Mortgagee of the Land and Building. Landlord and Tenant shall cooperate in
all respects with each other and such mortgagee, and shall provide any
information reasonably required by such mortgagee. Landlord shall not be
required to use anything other than reasonable efforts nor shall Landlord be
required to institute any legal action or proceeding, in order to obtain said
agreement. If Landlord is unable to deliver such SNDA by the date which is ten
(10) Business Days from the date hereof, then, in such event, either party
hereto shall have the right to terminate this Lease upon written notice to the
other given no later than five (5) days after Landlord shall have provided to
Tenant notice from Landlord that it is unable to deliver such SNDA; it being
understood and agreed, however, that Landlord may only terminate this Lease in
the event that such Mortgagee has refused or declined to grant its consent to
this Lease. In such event, Landlord shall promptly return to Tenant the Advance
Rent and Security Deposit and the rights and obligations of each party hereunder
and this Lease shall be deemed null and void and without force and effect.
Further notwithstanding anything to the contrary set forth herein, this Lease
shall be subordinate to future mortgages or leases only on the condition that
Landlord shall obtain from any such future mortgagee or lessor a subordination,
non-disturbance and attornment agreement with respect to this Lease on such
mortgagee's or lessor's standard form, providing, in effect, that so long as no
default exists which would entitle Landlord to terminate this Lease, (i) such
mortgagee and/or lessor, as the case may be, shall not join Tenant in summary or
foreclosure proceedings in connection with the foreclosure of the Mortgage or
other similar action in connection with any Superior Lease, and (ii) such
mortgagee and/or lessor, as the case may be, will recognize Tenant and will not
disturb Tenant in its possession of the Demised Premises, which Tenant shall
promptly execute, acknowledge and deliver to evidence such subordination,
non-disturbance and attornment. Landlord represents that the Land and Building
is the subject of a Superior Lease with Hartz Mountain Industries, Inc., as
lessor, and Landlord, as lessee. Landlord agrees that it shall provide to Tenant
on substantially the same form of SNDA used by the Superior Mortgagee an SNDA
from Hartz Mountain Industries, Inc., as Superior Lessor, in favor of Tenant,
subject and subordinate, however, to the Superior Mortgage to which the Superior
Lease is subject, which is the same Mortgage to which the Demised Premises and
this Lease is subject. The SNDA from the holder of the first mortgage on the
Demised Premises shall be effective notwithstanding the existence or
non-existence of any Superior Lease. Landlord agrees that it shall pay all
reasonable legal fees and/or other reasonable charges imposed by any Mortgagee
with respect to the agreements requested under this Section 9.01 with respect to
any standard form SNDA executed and delivered by Tenant and any such Mortgagee;
provided, however, that Tenant agrees to pay not later than fifteen days after
demand therefor any and all legal fees and/or other
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expenses charged by such Mortgagee as a result of any negotiation or
modification of such Mortgagee's standard form SNDA after the execution and
delivery of this Lease.
9.02. If any act or omission of Landlord would give Tenant the right,
immediately or after lapse of a period of time, to cancel or terminate this
Lease, or to claim a partial or total eviction, Tenant shall not exercise such
right (a) until it has given written notice of such act or omission to Landlord
and each Superior Mortgagee and each Superior Lessor whose name and address
shall at least fifteen (15) days previously have been furnished to Tenant, and
(b) until a reasonable period for remedying such act or omission shall have
elapsed following the giving of such notice and following the time when such
Superior Mortgagee or Superior Lessor shall have become entitled under such
Superior Mortgage or Superior Lease, as the case may be, to remedy the same
(which reasonable period shall in no event be less than the period to which
Landlord would be entitled under this Lease or otherwise, after similar notice,
to effect such remedy), provided such Superior Mortgagee or Superior Lessor
shall with due diligence give Tenant notice of intention to, and commence and
continue to, remedy such act or omission.
9.03. If any Superior Lessor or Superior Mortgagee shall succeed to the
rights of Landlord under this Lease, whether through possession or foreclosure
action or delivery of a new lease or deed, then at the request of such party so
succeeding to Landlord's rights ("Successor Landlord") and upon such Successor
Landlord's written agreement to accept Tenant's attornment, Tenant shall attorn
to and recognize such Successor Landlord as Tenant's landlord under this Lease
and shall promptly execute and deliver any instrument that such Successor
Landlord may reasonably request to evidence such attornment. Upon such
attornment this Lease shall continue in full force and effect as a direct lease
between the Successor Landlord and Tenant upon all of the terms, conditions and
covenants as are set forth in this Lease except that, as may otherwise be
specifically set forth in any applicable SNDA, the Successor Landlord shall not
(a) be liable for any previous act or omission of Landlord under this Lease; (b)
be subject to any offset, not expressly provided for in this Lease, which
theretofore shall have accrued to Tenant against Landlord; (c) be liable for the
return of any Security Deposit, in whole or in part, to the extent that same is
not paid over to the Successor Landlord; or (d) be bound by any previous
modification of this Lease or by any previous prepayment of more than one
month's Fixed Rent or Additional Charges, except for any adjustments, refunds,
or credits due to Tenant on account of any overpayments of Additional Charges,
unless such modification or prepayment shall have been expressly approved in
writing by the Superior Lessor of the Superior Lease or the Mortgagee of the
Superior Mortgage through or by reason of which the Successor Landlord shall
have succeeded to the rights of Landlord under this Lease.
9.04. If any then present or prospective Superior Mortgagee shall
require any reasonable modification(s) of this Lease, Tenant shall promptly
execute and deliver to Landlord such instruments effecting such reasonable
modification(s) as Landlord shall request, provided that such modification(s) do
not adversely affect any of Tenant's rights under this Lease.
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ARTICLE 10 - QUIET ENJOYMENT
10.01. So long as Tenant pays all of the Rent and performs all of
Tenant's other obligations hereunder, Tenant shall peaceably and quietly have,
hold and enjoy the Demised Premises without hindrance, ejection or molestation
by Landlord or any person lawfully claiming through or under Landlord, subject,
nevertheless, to the provisions of this Lease and to Superior Leases and
Superior Mortgages.
ARTICLE 11 - ASSIGNMENT, SUBLETTING AND MORTGAGING
11.01. Tenant shall not, whether voluntarily, involuntarily, or by
operation of law or otherwise, (a) assign or otherwise transfer this Lease, or
offer or advertise to do so, (b) sublet the Demised Premises or any part
thereof, or offer or advertise to do so, or allow the same to be used, occupied
or utilized by anyone other than Tenant or its Affiliates, or (c) mortgage,
pledge, encumber or otherwise hypothecate this Lease in any manner whatsoever,
without in each instance obtaining the prior written consent of Landlord;
provided, however, that Landlord agrees not to unreasonably withhold or delay
its consent to a subletting or assignment under subsections (a) and (b) of this
Section 11.01. In determining reasonableness, Landlord may take into
consideration all relevant factors surrounding the proposed sublease and
assignment, including, without limitation, the following: (i) The business
reputation of the proposed assignee or subtenant and its officers or directors
in relation to the other tenants or occupants of the Building; (ii) The nature
of the business and the proposed use of the Demised Premises by the proposed
assignee or subtenant in relation to the other tenants or occupants of the
Building; (iii) the proposed assignee or subtenant shall not be a tenant (or
subsidiary, affiliate or parent of a tenant) of other space in the Building;
(iv) The financial condition of the proposed assignee or subtenant; (v)
Restrictions, if any, contained in leases or other agreements affecting the
Building; (vi) The effect that the proposed assignee's or subtenant's occupancy
or use of the Demised Premises would have upon the operation and maintenance of
the Building and Landlord's investment therein; (vii) The extent to which the
proposed assignee or subtenant and Tenant provide Landlord with assurances
reasonably satisfactory to Landlord as to the satisfaction of Tenant's
obligations hereunder. In any event, at no time shall there be more than three
(3) subtenants (in addition to Tenant) of the Demised Premises permited. For
purposes of this Article, "Affiliates" shall mean any Person owning or
controlling Tenant or controlled by Tenant, or under common ownership or control
with or by Tenant. For purposes hereof, "ownership or control" shall mean the
legal or beneficial ownership of fifty-one percent (51%) or more of the voting
stock of any corporation, or, if not a corporation, fifty-one percent (51%) of
the partnership interest or other form of ownership.
11.02. If at any time (a) the original Tenant named herein, (b) the then
Tenant, (c) any Guarantor, or (d) any Person owning a majority of the voting
stock of, or directly or indirectly controlling, the then Tenant shall be a
corporation or partnership, any transfer of voting stock or partnership interest
resulting in the person(s) who shall have owned a majority of such corporation's
shares of voting stock or the general partners' interest in such
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partnership, as the case may be, immediately before such transfer, ceasing to
own a majority of such shares of voting stock or general partner's interest, as
the case may be, except as the result of transfers by inheritance, shall be
deemed to be an assignment of this Lease as to which Landlord's consent shall
have been required, and in any such event Tenant shall notify Landlord. The
provisions of this Section 11.02 shall not be applicable to any corporation all
the outstanding voting stock of which is listed on a national securities
exchange (as defined in the Securities Exchange Act of 1934, as amended) or is
traded in the over-the-counter market with quotations reported by the National
Association of Securities Dealers through its automated system for reporting
quotations and shall not apply to transactions with a corporation into or with
which the then Tenant is merged or consolidated or to which substantially all of
the then Tenant's assets are transferred or to any corporation which controls or
is controlled by the then Tenant or is under common control with the then
Tenant, provided that in any of such events (i) the successor to Tenant has a
net worth computed in accordance with generally accepted accounting principles
at least equal to the net worth of the original Tenant on the date of this
Lease, and (ii) proof satisfactory to Landlord of such net worth shall have been
delivered to Landlord at least 10 days prior to the effective date of any such
transaction. For the purposes of this Section, the words "voting stock" shall
refer to shares of stock regularly entitled to vote for the election of
directors of the corporation. Landlord shall have the right at any time and from
time to time during the Term to inspect the stock record books of the
corporation to which the provisions of this Section 11.02 apply, and Tenant will
produce the same on request of Landlord; provided, however, that for so long as
Tenant shall be a privately held corporation, Landlord shall agrees to keep such
information confidential, except that Landlord may disseminate such information
to its legal counsel and accountants and shall not be restricted from using any
such information in connection with the enforcement of this Lease or any claims
or litigation arising therefrom or otherwise under this Lease. The foregoing
provisions of this Article 11.02, as to the original named Tenant or any
Affiliate thereof only, shall not be applicable to, and shall not be deemed to
require Landlord's consent to (i) transfers of stock among existing stockholders
or among spouses, children or grandchildren of existing stockholders or inter
vivos or testamentary transfers to rusts established for the benefit of such
persons, (ii) a public offering of the stock of Tenant or (iii) the transfer of
outstanding voting stock registered under applicable securities laws of Tenant
which are traded on a recognized national securities exchange, or (iv) the sale
of a majority of Tenant's shares of voting stock in one or more transactions,
unless at the time of such transfer or series of transfers, the primary asset of
the Tenant as then constituted shall be this Lease.
11.03 If this Lease is assigned, whether or not in violation of this
Lease, Landlord may collect rent from the assignee. If the Demised Premises or
any part thereof are sublet or used or occupied by anybody other than Tenant,
whether or not in violation of this Lease, Landlord may, after default by
Tenant, and expiration of Tenant's time to cure such default, collect rent from
the subtenant or occupant. In either event, Landlord may apply the net amount
collected to the Rent, but no such assignment, subletting, occupancy or
collection shall be deemed a waiver of any of the provisions of Section 11.01 or
Section 11.02, or the acceptance of the assignee, subtenant or
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occupant as tenant, or a release of Tenant from the performance by Tenant of
Tenant's obligations under this Lease. The consent by Landlord to any
assignment, mortgaging, subletting or use or occupancy by others shall not in
any way be considered to relieve Tenant from obtaining the express written
consent of Landlord to any other or further assignment, mortgaging or subletting
or use or occupancy by others not expressly permitted by this Article 11.
References in this Lease to use or occupancy by others (that is, anyone other
than Tenant) shall not be construed as limited to subtenants and those claiming
under or through subtenants but shall be construed as including also licensees
and others claiming under or through Tenant, immediately or remotely.
11.04. Any permitted assignment or transfer, whether made with
Landlord's consent pursuant to Section 11.01 or without Landlord's consent if
permitted by Section 11.02, shall be made only if, and shall not be effective
until, the assignee shall execute, acknowledge and deliver to Landlord an
agreement in form and substance reasonably satisfactory to Landlord whereby the
assignee shall assume Tenant's obligations under this Lease and whereby the
assignee shall agree that all of the provisions in this Article 11 shall,
notwithstanding such assignment or transfer, continue to be binding upon it in
respect to all future assignments and transfers. Notwithstanding any assignment
or transfer, whether or not in violation of the provisions of this Lease, and
notwithstanding the acceptance of Rent by Landlord from an assignee, transferee,
or any other party, the original Tenant and any other person)s) who at any time
was or were Tenant shall remain fully liable for the payment of the Rent and for
Tenant's other obligations under this Lease.
11.05. The liability of the original named Tenant and any other
Person(s) (including but not limited to any Guarantor) who at any time are or
become responsible for Tenant's obligations under this Lease shall not be
discharged, released or impaired by any agreement extending the time of, or
modifying any of the terms or obligations under this Lease, or by any waiver or
failure of Landlord to enforce, any of this Lease.
11.06. The listing of any name other than that of Tenant, whether on the
doors of the Demised Premises or the Building directory, or otherwise, shall not
operate to vest any right or interest in this Lease or in the Demised Premises,
nor shall it be deemed to be the consent of Landlord to any assignment or
transfer of this Lease or to any sublease of the Demised Premises or to the use
or occupancy thereof by others.
11.07. Without limiting any of the provisions of Article 27, if pursuant
to the Federal Bankruptcy Code (or any similar law hereafter enacted having the
same general purpose), Tenant is permitted to assign this Lease notwithstanding
the restrictions contained in this Lease, adequate assurance of future
performance by an assignee expressly permitted under such Code shall be deemed
to mean the deposit of cash security in an amount equal to the sum of one (1)
year's Fixed Rent plus an amount equal to the Additional Charges for the
Calendar Year preceding the year in which such assignment is intended to become
effective, which deposit shall be held by Landlord for the balance
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of the Term, without interest, as security for the full performance of all of
Tenant's obligations under this Lease, to be held and applied in the manner
specified for security in Section 8.01.
11.08. If Tenant shall propose to assign or in any manner transfer this
Lease or any interest therein, or sublet the Demised Premises or any part or
parts thereof, or grant any concession or license or otherwise permit occupancy
of all or any part of the Demised Premises by any person, Tenant shall give
notice thereof to Landlord, together with a copy of the proposed instrument that
is to accomplish same and such financial and other information pertaining to the
proposed assignee, transferee, subtenant, concessionaire or licensee as Landlord
shall reasonably require. Notwithstanding anything contained in this Lease to
the contrary, Landlord shall not be obligated to entertain or consider any
request by Tenant to consent to any proposed assignment of this Lease or sublet
of all or any part of the Demised Premises unless each request by Tenant is
accompanied by a non-refundable fee payable to Landlord in the amount of One
Thousand Dollars ($1,000.00) to cover Landlord's administrative, legal, and
other costs and expenses incurred in processing each of Tenant's requests.
Neither Tenant's payment nor Landlord's acceptance of the foregoing fee shall be
construed to impose any obligation whatsoever upon Landlord to consent to
Tenant's request. If Tenant does not consummate the subject transaction within
sixty (60) days after notice of such transaction to Landlord, Tenant shall again
be required to comply with the provisions of this Section 11.08 in connection
with any such transaction as if the notice by Tenant referred to above in this
Section 11.08 had not been given.
11.09. If Landlord shall give its consent to any assignment of this
Lease or to any sublease of all or any portion of the Demised Premises, Tenant
shall in consideration therefor pay to Landlord as an Additional Charge the
following amounts less the actual reasonable expense incurred by Tenant in
connection with such assignment or subletting, as substantiated by Tenant, in
writing, to Landlord's reasonable satisfaction, including, without limitation, a
reasonable brokerage fee and reasonable legal fees, as the case may be: (i) in
the case of an assignment, an amount equal to fifty (50%) percent of the amount
by which all sums and other consideration paid to Tenant by the assignee for or
by reason of such assignment exceed the Fixed Rent and Additional Charges
hereunder; and (ii) in the case of a sublease, fifty (50%) percent of any rents,
additional charge or other consideration payable under the sublease to Tenant by
the subtenant which is in excess of the Fixed Rent and Additional Charges
accruing during the term of the sublease in respect of the subleased space (at
the rate per square foot payable by Tenant hereunder) pursuant to the terms
hereof. The sums payable under this Section 11.09 shall be paid to Landlord as
an Additional Charge as and when paid by the assignee or subtenant to Tenant.
The terms and provisions of this Section 11.09 and the preceding Section 11.08
shall not apply to any transaction permitted pursuant to the terms and
provisions of Section 11.02 hereof.
ARTICLE 12 - COMPLIANCE WITH LAWS
12.01. Landlord represents and warrants to Tenant that as of the
Commencement Date the Demised Premises shall be in compliance with all Legal
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Requirements. After the Commencement Date, Tenant shall comply with all Legal
Requirements which shall, in respect of the Demised Premises or the use and
occupation thereof, or the abatement of any nuisance in, on or about the Demised
Premises, impose any violation, order or duty on Landlord or Tenant; and Tenant
shall pay all the costs, expenses, fines, penalties and damages which may be
imposed upon Landlord or any Superior Lessor by reason of or arising out of
Tenant's failure to fully and promptly comply with and observe the provisions of
this Section 12.01. However, Tenant need not comply with any such law or
requirement of any public authority so long as Tenant shall be contesting the
validity thereof, or the applicability thereof to the Demised Premises, in
accordance with Section 12.02. Notwithstanding any of the foregoing to the
contrary, after the Commencement Date, Landlord is to perform all work requiring
a capital expenditure at the Demised Premises for compliance with Legal
Requirements, and the cost thereof shall be payable by Tenant as Rent, as an
Operating Expense (in addition to the Operating Expenses payable pursuant to
Section 6.01 hereof), except that, the monthly amount included in Rent during
the Term with respect thereto will be limited to the monthly amount necessary to
amortize the cost of such item, without interest, over its useful life (it being
understood and agreed that Tenant shall not have any liability for the
amortization thereof extending beyond the Term of this Lease), in accordance
with generally accepted accounting principles consistently applied; provided,
however, that Tenant, at its sole expense, shall pay for all capital
expenditures to comply with Legal Requirements which are required due to
Tenant's Work, or negligence or willful acts or Tenant's particular use or
particular manner of use of the Demised Premises. Landlord shall comply with all
Legal Requirements which shall, in respect of the Common Areas of the Building,
impose any violation, order or duty on Landlord, and the cost of same as
reasonably incurred shall be included in Operating Expenses.
12.02. Tenant may contest, by appropriate proceedings prosecuted
diligently and in good faith, the validity, or applicability to the Demised
Premises, of any Legal Requirement, provided that (a) Landlord shall not be
subject to criminal penalty or to prosecution for a crime, and neither the
Demised Premises nor any part thereof shall be subject to being condemned or
vacated, by reason of non-compliance or otherwise by reason of such contest; (b)
before the commencement of such contest, Tenant shall furnish to Landlord either
(i) the bond of a surety company reasonably satisfactory to Landlord, which bond
shall be, as to its provisions and form, reasonably satisfactory to Landlord,
and shall be in an amount at least equal to 125% of the cost of such compliance
(as estimated by a reputable contractor designated by Landlord) and shall
indemnify Landlord against the cost thereof and against all liability for
damages, interest, penalties and expenses (including reasonable attorneys' fees
and expenses), resulting from or incurred in connection with such contest or
non-compliance, or (ii) other security in place of such bond reasonably
satisfactory to Landlord; (c) such non-compliance or contest shall not
constitute or result in any violation of any Superior Lease or Superior
Mortgage, or if any such Superior Lease and/or Superior Mortgage shall permit
such non-compliance or contest on condition of the taking of action or
furnishing of security by Landlord, such action shall be taken and such security
shall be furnished at the expense of Tenant; and (d) Tenant shall keep Landlord
advised as to the status of such proceedings.
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Without limiting the application of the above, Landlord shall be deemed subject
to prosecution for a crime if Landlord, or its managing agent, or any officer,
director, partner, shareholder or employee of Landlord or its managing agent, as
an individual, is charged with a crime of any kind or degree whatsoever, whether
by service of a summons or otherwise, unless such charge is withdrawn before
Landlord or its managing agent, or such officer, director, partner, shareholder
or employee of Landlord or its managing agent (as the case may be) is required
to plead or answer thereto. Notwithstanding anything contained in this Lease to
the contrary, Tenant shall not file any Real Estate Tax Appeal with respect to
the Land, Building or the Demised Premises.
ARTICLE 13 - INSURANCE AND INDEMNITY
13.01. Throughout the Term, Landlord shall maintain or cause to be
maintained All Risk insurance in respect of the Building, the improvements in
the Demised Premises constructed as part of Landlord's Work, but excluding
Tenant's Property) and other improvements on the Land normally covered by such
insurance (except for the property Tenant is required to cover with insurance
under Section 13.02 and similar property of other tenants and occupants of the
Building or buildings and other improvements which are on land neither owned by
nor leased to Landlord) for the benefit of Landlord, any Superior Lessors, any
Superior Mortgagees and any other parties Landlord may at any time and from time
to time designate, as their interests may appear, but not for the benefit of
Tenant, and shall maintain rent insurance as required by any Superior Lessor or
any Superior Mortgagee. The All Risk insurance will be in the amounts required
by any Superior Lessor or any Superior Mortgagee but not less than the amount
sufficient to avoid the effect of the co-insurance provisions of the applicable
policy or policies. Landlord may also maintain any other forms and types of
insurance which Landlord shall deem reasonable in respect of the Building and
Land. Landlord shall have the right to provide any insurance maintained or
caused to be maintained by it under blanket policies.
13.02. Tenant shall maintain the following insurance: (a) comprehensive
general public liability insurance in respect of the Demised Premises and the
conduct and operation of business therein, having not less than a $5,000,000.00
combined single limit per occurrence for bodily injury or death to any one
person and for bodily injury or death to any number of persons in any one
occurrence, and for property damage, including water damage and sprinkler
leakage legal liability (coverage to include but not be limited to (i) premises
operation, completed operations, broad form contractual liability and product
liability, (ii) comprehensive automobile, truck and vehicle liability insurance
covering all owned, hired and non-owned vehicles used by the contractor(s) in
connection with their work and any loading of such vehicles, with limits as
stated above and (iii) worker's compensation, employers liability and
occupational disease insurance as required by statutes), (b) air conditioning
and machinery insurance, protecting Landlord and Tenant, with limits of not less
than $500,000, if there is a boiler or pressure object or other similar
equipment in the Demised Premises owned by Tenant, and (c) All Risk insurance in
respect of Tenant's stock in trade, fixtures, furniture, furnishings, removable
floor coverings, equipment, signs
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and all other property of Tenant in the Demised Premises in any amounts
reasonably required by any Superior Lessor or any Superior Mortgagee but not
less than eighty percent (80%) of the full insurable value of the property
covered and not less than the amount sufficient to avoid the effect of the
co-insurance provisions of the applicable policy or policies. Landlord may at
any time and from time to time require that the limits for the comprehensive
general public liability insurance to be maintained by Tenant be reasonably
increased to the limits that new tenants in the Building are required by
Landlord to maintain. Tenant shall deliver to Landlord and any additional
insured(s) certificates for such policies at least ten (10) days before the
Commencement Date. Tenant shall procure renewals of such insurance from time to
time before the expiration thereof, and Tenant shall deliver to Landlord and any
additional insured(s) certificates therefor at least thirty (30) days before the
expiration of any existing policy. All such policies shall be issued by
companies of recognized responsibility, having a Bests Key Rating Guide of not
less than A-, Class VII, licensed to do business in New Jersey, and all such
policies shall contain a provision whereby the same cannot be canceled unless
Landlord and any additional insured(s) are given at least thirty (30) days'
prior written notice of such cancellation. The certificates of insurance to be
delivered to Landlord by Tenant shall upon fifteen (15) days notice name
Landlord as an additional insured and, at Landlord's request, shall also name
upon fifteen (15) days notice any Superior Lessors or Superior Mortgagees as
additional insureds, and the following will be added to the policy and shown on
any certificate of insurance thereof or be attached thereto as an endorsement:
"Hartz Mountain Industries, Inc., and its respective subsidiaries, affiliates,
associates, joint ventures, and partnerships, are hereby named as additional
insureds as their interests may appear (and if Landlord has so requested, Tenant
shall include any Superior Lessors and Superior Mortgagees as additional
insured(s)). It is intended for this insurance to be primary and
non-contributing." Tenant shall give Landlord at least thirty (30) days' prior
written notice that any such policy is being canceled or replaced.
13.03. Tenant shall not do, permit or suffer to be done any act, matter,
thing or failure to act in respect of the Demised Premises or use or occupy the
Demised Premises or conduct or operate Tenant's business in any manner whereby
the fire insurance or any other insurance then in effect in respect of the Land
and Building or any part thereof shall become void or suspended or whereby any
premiums in respect of insurance maintained by Landlord shall be higher than
those which would normally have been in effect for the occupancy contemplated
under the Permitted Uses. In case of a breach of the provisions of this Section
13.03, in addition to all other rights and remedies of Landlord hereunder,
Tenant shall (a) indemnify Landlord and the Superior Lessors and hold Landlord
and the Superior Lessors harmless from and against any loss which would have
been covered by insurance which shall have become void or suspended because of
such breach by Tenant and (b) pay to Landlord any and all increases of premiums
on any insurance, including, without limitation, rent insurance, resulting from
any such breach.
13.04. Tenant shall indemnify and hold harmless Landlord and all
Superior Lessors and its and their respective partners, joint venturers,
directors, officers, agents, servants and employees from and against any and
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all claims arising from or in connection with (a) the conduct or management of
the Demised Premises or of any business therein, or any work or thing whatsoever
done, or any condition created (other than by Landlord) in the Demised Premises
during the Term or during the period of time, if any, prior to the Commencement
Date that Tenant may have been given access to the Demised Premises; (b) any
act, omission or negligence of Tenant or any of its subtenants or licensees or
its or their partners, joint ventures, directors, officers, agents, or employees
in connection with the Demised Premises; and (c) any accident, injury or damage
whatever (except to the extent caused solely by Landlord's negligence) occurring
in the Demised Premises; together with all costs, expenses and liabilities
incurred in or in connection with each such claim or action or proceeding
brought thereon, including, without limitation, all attorneys' fees and
expenses. In case any action or proceeding is brought against Landlord and/or
any Superior Lessor and/or its or their partners, joint venturers, directors,
officers, agents and/or employees by reason of any such claim, Tenant, upon
notice from Landlord or such Superior Lessor, shall resist and defend such
action or proceeding (by counsel reasonably satisfactory to Landlord). Landlord
shall indemnify and hold harmless Tenant and its partners, joint venturers,
directors, officers, agents, servants from and against any and all claims
arising from or in connection with (a) the possession, use, occupation,
management, repair, maintenance or control of the Common Areas or Building or a
portion thereof by Landlord during the Term, (b) willful or negligent act or
omission of Landlord or its partners, joint ventures, directors, officers,
agents, or employees in connection with the Commo Areas or Building, (c) any
accident, injury or damage to persons or property or loss of life sustained in
the Common Areas or the Building to the extent due to the negligent or willful
acts or omission of Landlord or its partners, joint ventures, directors,
officers, agents, or employees; together with all costs, expenses and
liabilities incurred in connection with each such claim, action or proceeding
brought thereon including, without limitation, all attorney's fees and expenses.
In case any action or proceeding it brought against Tenant and/or its partners,
joint venturers, directors, officers, agents and/or employees by reason of any
such claim, Landlord, upon notice from Tenant, shall resist and defend such
action or proceeding by counsel reasonably satisfactory to Tenant.
13.05. Neither party shall be liable or responsible for, and each party
hereby releases the other from, all liability and responsibility to the other
and any person claiming by, through or under the other, by way of subrogation
for any injury, loss or damage to any person or property in or around the
Demised Premises, the Building or Common Areas or to the other's business
covered by insurance carried or required to be carried hereunder irrespective of
the cause of such injury, loss or damage, and each party shall require its
insurers to include in all of such party's insurance policies which could give
rise to a right of subrogation against the other a clause or endorsement whereby
the insurer waives any rights of subrogation against the other or permits the
insured, prior to any loss, to agree with a third party to waive any claim it
may have against said third party without invalidating the coverage under the
insurance policy.
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ARTICLE 14 - RULES AND REGULATIONS
14.01. Tenant and its employees and agents shall faithfully observe and
comply with the Rules and Regulations and such reasonable changes therein
(whether by modification, elimination or addition) as Landlord at any time or
times hereafter may make and communicate to Tenant, which in Landlord's
judgment, shall be necessary for the reputation, safety, care or appearance of
the Land and Building, or the preservation of good order therein, or the
operation or maintenance of the Building or its equipment and fixtures, or the
Common Areas, and which do not unreasonably affect the conduct of Tenant's
business in the Demised Premises; provided, however, that in case of any
conflict or inconsistency between the provisions of this Lease and any of the
Rules and Regulations, the provisions of this Lease shall control. Nothing in
this Lease contained shall be construed to impose upon Landlord any duty or
obligation to enforce the Rules and Regulations against any other tenant or any
employees or agents of any other tenant, and Landlord shall not be liable to
Tenant for violation of the Rules and Regulations by any other tenant or its
employees, agents, invitees or licensees. Notwithstanding the foregoing,
Landlord agrees not to apply or enforce the Rules and Regulations in a
discriminatory manner.
ARTICLE 15 - ALTERATIONS
15.01. Tenant shall not make any alterations or additions to the Demised
Premises, or make any holes or cuts in the walls, ceilings, roofs, or floors
thereof, or change the exterior color or architectural treatment of the Demised
Premises, without on each occasion first obtaining the consent of Landlord.
Tenant shall submit to Landlord plans and specifications for such work at the
time Landlord's consent is sought. Notwithstanding anything to the contrary
contained in this Lease, it is understood and agreed that Landlord shall not
unreasonably withhold, condition or delay its consent to non-structural
alterations and additions to the Demised Premises. Landlord's consent shall not
be required for the decoration, painting and/or fixturing of the Demised
Premises, or for any non-structural work costing less than $20,000 and which
does not require a building permit and which does not affect or tie-in to
Building mechanical systems ("Decorative Work"). Tenant shall pay to Landlord
not later than fifteen days after invoice or notice thereof the reasonable cost
and expense of Landlord in (a) reviewing said plans and specifications and (b)
inspecting the alterations to determine whether the same are being performed in
accordance with the approved plans and specifications and all Legal
Requirements, including, without limitation, the fees of any architect or
engineer employed by Landlord for such purpose; provided, however, that (i)
there shall be no charge in respect of Landlord's Work or the initial Tenant's
Work, (ii) Landlord shall not charge Tenant for any reviews or inspections
performed by in-house personnel, and (iii) in all other instances Landlord shall
use reasonable efforts to ensure that any such fees charged are only those
necessary to complete the task. Before proceeding with any permitted alteration
which will cost more than $50,000 (exclusive of the costs of decorating work and
items constituting Tenant's Property), as estimated by a reputable contractor
designated by Landlord, Tenant shall obtain and deliver to Landlord either (i) a
performance bond and a labor and materials payment bond (issued by a corporate
surety licensed to do business
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in New Jersey), each in an amount equal to 125% of such estimated cost and in
form reasonably satisfactory to Landlord, or (ii) such other security as shall
be reasonably satisfactory to Landlord. Tenant shall fully and promptly comply
with and observe the Rules and Regulations then in force in respect of the
making of alterations. Any review or approval by Landlord of any plans and/or
specifications with respect to any alterations is solely for Landlord's benefit,
and without any representation or warranty whatsoever to Tenant in respect of
the adequacy, correctness or efficiency thereof or otherwise.
15.02. Tenant shall obtain all necessary governmental permits and
certificates for the commencement and prosecution of permitted alterations and
for final approval thereof upon completion, and shall cause alterations to be
performed in compliance therewith and with all applicable Legal Requirements.
Alterations shall be diligently performed in a good and workmanlike manner,
using new materials and equipment at least equal in quality and class to the
better of (a) the original installations of the Building, or (b) the then
standards for the Building established by Landlord. Except for Decorative Work,
Alterations shall be performed by contractors first approved by Landlord, which
approval shall not be unreasonably withheld or delayed; provided, however, that
any alterations in or to the mechanical, electrical, sanitary, heating,
ventilating, air conditioning or other systems of the Building shall be
performed only by the contractor(s) approved by Landlord, which approval shall
not be unreasonably withheld or delayed. Alterations shall be made in such
manner as not to unreasonably interfere with or delay and as not to impose any
additional expense upon Landlord in the construction, maintenance, repair or
operation of the Building; and if any such additional expense shall be incurred
by Landlord as a result of Tenant's making of any alterations, Tenant shall pay
any such additional expense upon demand. Throughout the making of alterations,
Tenant shall carry, or cause to be carried, worker's compensation insurance in
statutory limits and general liability insurance, with completed operation
endorsement, for any occurrence in or about the Building, under which Landlord
and its managing agent and any Superior Lessor whose name and address shall
previously (at least fifteen days prior thereto) have been furnished to Tenant
shall be named as additional insureds, in such limits as Landlord may reasonably
require, with insurers reasonably satisfactory to Landlord. Tenant shall furnish
Landlord with reasonably satisfctory evidence that such insurance is in effect
at or before the commencement of alterations and, on request, at reasonable
intervals thereafter during the making of alterations.
ARTICLE 16 - LANDLORD'S AND TENANT'S PROPERTY
16.01 All fixtures, equipment, improvements and appurtenances attached
to or built into the Demised Premises at the commencement of or during the Term,
whether or not by or at the expense of Tenant, shall be and remain a part of the
Demised Premises, shall be deemed to be the property of Landlord and shall not
be removed by Tenant, except as provided in Section 16.02. Further, any
carpeting or other personal property in the Demised Premises on the Commencement
Date, unless installed and paid for by Tenant, shall be and shall remain
Landlord's property and shall not be removed by Tenant.
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16.02. All movable partitions, business and trade fixtures, machinery
and equipment, communications equipment and office equipment, whether or not
attached to or built into the Demised Premises, which are installed in the
Demised Premises by or for the account of Tenant without expense to Landlord and
can be removed without structural damage to the Building and all furniture,
furnishings, and other movable personal property owned by Tenant and located in
the Demised Premises (collectively, "Tenant's Property") shall be and shall
remain the property of Tenant and may be removed by Tenant at any time during
the Term; provided that if any of the Tenant's Property is removed, Tenant shall
repair or pay the cost of repairing any damage to the Demised Premises, the
Building or the Common Areas resulting from the installation and/or removal
thereof. Any equipment or other property for which Landlord shall have granted
any allowance or credit to Tenant shall not be deemed to have been installed by
or for the account of Tenant without expense to Landlord, shall not be
considered as the Tenant's Property and shall be deemed the property of
Landlord.
16.03. At or before the Expiration Date or the date of any earlier
termination of this Lease, or within fifteen (15) days after such an earlier
termination date, Tenant shall remove from the Demised Premises all of the
Tenant's Property (except such items thereof as Landlord shall have expressly
permitted to remain, which property shall become the property of Landlord if not
removed), and Tenant shall repair any damage to the Demised Premises, the
Building and the Common Areas resulting from any installation and/or removal of
the Tenant's Property. Any items of the Tenant's Property which shall remain in
the Demised Premises after the Expiration Date or after a period of fifteen (15)
days following an earlier termination date, may, at the option of Landlord, be
deemed to have been abandoned, and in such case such items may be retained by
Landlord as its property or disposed of by Landlord, without accountability, in
such manner as Landlord shall reasonably determine at Tenant's expense.
ARTICLE 17 - REPAIRS AND MAINTENANCE
17.01. Tenant shall, throughout the Term, take good care of the Demised
Premises, the fixtures and appurtenances therein. Damage resulting from insured
risks shall be governed by Article 24 hereof. Tenant shall be responsible for
all repairs, interior and exterior, structural and nonstructural, ordinary and
extraordinary, in and to the Demised Premises, and the Building (including the
facilities and systems thereof) and the Common Areas the need for which arises
out of (a) the performance or existence of the Tenant's Work or alterations, (b)
the installation, use or operation of the Tenant's Property in the Demised
Premises, (c) the moving of the Tenant's Property in or out of the Building, or
(d) the act, omission, misuse or neglect of Tenant or any of its subtenants or
its or their employees, agents, contractors or invitees. Tenant shall promptly
replace all scratched, damaged or broken doors and glass in and about the
Demised Premises and shall be responsible for all repairs, maintenance and
replacement of wall and floor coverings in the Demised Premises and for the
repair and maintenance of all sanitary and electrical fixtures and equipment
therein. Tenant shall promptly make all repairs in or to the Demised Premises
for which Tenant is responsible, and any repairs required to be made by Tenant
to the mechanical,
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electrical, sanitary, heating, ventilating, air-conditioning or other systems of
the Building shall be performed only by contractor(s) approved by Landlord,
which approval shall not be unreasonably withheld. Any other repairs in or to
the Building and the facilities and systems thereof for which Tenant is
responsible shall be performed by Landlord at Tenant's expense; but Landlord
may, at its option, before commencing any such work or at any time thereafter,
require Tenant to furnish to Landlord such security, in form (including, without
limitation, a bond issued by a corporate surety licensed to do business in New
Jersey) and amount, as Landlord shall deem necessary to assure the payment for
such work by Tenant. Tenant shall not permit or suffer the overloading of the
floors of the Demised Premises beyond one hundred (100) pounds per square foot.
17.02. Landlord shall be responsible for all repairs and maintenance in
and to the Building and structure thereof (including the facilities and systems
thereof), except for those repairs and maintenance for which Tenant is
responsible pursuant to any of the provisions of this Lease. Landlord shall use
reasonable efforts to promptly make all repairs and perform all maintenance for
which it is responsible; provided, however, that the foregoing reasonable
efforts shall not, in any event, require Landlord to perform or cause work to be
performed other than on Business Days during Business Hours.
17.03. Except as otherwise expressly provided in this Lease, Landlord
shall have no liability to Tenant, nor shall Tenant's covenants and obligations
under this Lease be reduced or abated in any manner whatsoever, by reason of any
inconvenience, annoyance, interruption or injury to business arising from
Landlord's doing any repairs, maintenance, or changes which Landlord is required
or permitted by this Lease, or required by Law, to make in or to any portion of
the Building. Landlord shall use its reasonable efforts to minimize any such
inconvenience, annoyance, interruption or injury to Tenant's business; provided,
however, that the foregoing reasonable efforts shall not, in any event, require
Landlord to perform or cause work to be performed other than on Business Days
during Business Hours.
ARTICLE 18 - ELECTRIC ENERGY
18.01. Landlord shall furnish to Tenant and Tenant shall purchase the
electric energy required by it in the Demised Premises on a sub-metered basis
from Landlord. Landlord shall bill actual metered costs from the public utility
to Tenant but shall add thereto Landlord's direct cost of meter reading,
billing, and maintaining the meters, transformers and switches on a pro-rata
basis among the Building's Tenants. The cost of electric energy to Tenant shall
in no event exceed what the Tenant would have paid directly to the public
utility had it been directly metered for secondary service. Tenant agrees to pay
such electric energy bills within fifteen (15) days from receipt thereof.
Landlord shall not be liable for any failure, inadequacy or defect in the
character or supply of electric current furnished to the Demised Premises not
caused by the negligence of Landlord. In the event Tenant is unable to use and
occupy the Demised Premises during any period of failure, of supply of electric
current furnished to the Demised Premises for a period of three (3) Business
Days or longer, Tenant shall be entitled to an abatement of Rent during the
period of such closure, unless (i) such failure of supply
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of electric current furnished to the Demised Premises is as a result of a breach
of Tenant's obligations under this Lease or otherwise due to the negligent or
intentional act of Tenant, or (ii) Tenant shall have used or occupied all or any
portion of the Demised Premises during such period, or (iii) Tenant shall be
compensated by its business interruption insurance with respect to such period.
The terms and provisions of the preceding two sentences shall apply only and be
personal to the original named Tenant hereunder. Nothing contained herein shall
be deemed to limit Landlord's ability or right to make a claim for or to collect
rent insurance proceeds in connection with any such failure of supply of
electric current. The provisions of this Section 18.01, shall not apply in the
case of damage by fire or other casualty or by eminent domain, in which case the
obligations of the parties shall be as provided in other Sections of this Lease.
18.02. Tenant's use of electric energy in the Demised Premises shall not
at any time exceed the capacity of any of the electrical conductors and
equipment in or otherwise serving the Demised Premises. In order to insure that
such capacity is not exceeded and to avert possible adverse effect upon the
Building's electric service, Tenant shall not, without Landlord's prior consent
in each instance (which shall not be unreasonably withheld or delayed), connect
any fixtures, appliances or equipment to the Building's electric distribution
system or make any alteration or addition to the electric system of the Demised
Premises existing on the Commencement Date. Should Landlord grant such consent,
all additional risers or other equipment required therefor shall be provided by
Landlord and the cost thereof shall be paid by Tenant to Landlord on demand.
ARTICLE 19 - HEAT, VENTILATION AND AIR-CONDITIONING
19.01. Landlord shall repair, maintain and operate the heating,
ventilating and air-conditioning ("HVAC") systems serving the Demised Premises,
and shall furnish HVAC in the Demised Premises as may be reasonably required
(except as otherwise provided in this Lease and except for any special
requirements of Tenant arising from its particular use of the Demised Premises)
for reasonably comfortable occupancy of the Demised Premises, during Business
Hours on Business Days. If Tenant shall require HVAC at any other time, Landlord
shall furnish such service for such times upon not less than six (6) hours
advance notice from Tenant, and Tenant shall pay to Landlord not later than
fifteen (15) days after invoice or notice thereof Landlord's then established
charges therefor. Landlord's present charge is $75 per hour, which may increase
based upon changes in PSE&G electricity billing rates (which are passed through
to Tenant without markup) or changes in those factors making up Landlord's
reasonable administrative and overhead expense with respect thereto. The
temperature maintained in the Demised Premises shall at all times be within the
limits prescribed by the Legal Requirements. Notwithstanding anything to the
contrary set forth herein, Tenant shall be solely responsible, at its expense,
to repair, maintain and operate the supplemental air-conditioning system serving
Tenant's computer room (the "Supplemental HVAC").
19.02. The performance by Landlord of its obligation under Section
19.01 in respect of HVAC is conditioned on the connected electric load within
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the Demised Premises not exceeding three and one-half (3 1/2) watts per usable
square foot in the Demised Premises and the occupancy of the Demised Premises
not exceeding one (1) person for each two hundred (200) usable square feet, as
more particularly set forth in Exhibit C hereof. Use of the Demised Premises, or
any part thereof, in a manner exceeding the HVAC design conditions (including
occupancy and connected electrical load, all as more particularly described in
Exhibit C hereof), or rearrangement of partitioning which interferes with normal
operation of the HVAC in the Demised Premises, or the use of computer or data
processing machines or other machines or equipment, may require changes in the
HVAC systems servicing the Demised Premises, in order to provide comfortable
occupancy. Such changes, so occasioned, shall be made by Tenant, at its expense,
as alterations in accordance with the provisions of Article 15, but only to the
extent permitted and upon the conditions set forth in Article 15.
ARTICLE 20 - OTHER SERVICES; SERVICE INTERRUPTION
20.01. Landlord shall provide elevator service to the Demised Premises
(via the five passenger elevators and one freight elevator presently serving the
Building) during Business Hours on Business Days, and Landlord shall have at
least one (1) elevator subject to call at all other times. The use of the
elevators shall be subject to the Rules and Regulations.
20.02. Landlord shall cause the Demised Premises, including the exterior
and the interior of the windows thereof, to be cleaned in a manner standard to
the Building and in accordance with the standards set forth in Exhibit E. Tenant
shall pay to Landlord not later than fifteen (15) days after written request
therefor the costs incurred by Landlord for (a) extra cleaning work in the
Demised Premises required because of (i) misuse or neglect on the part of Tenant
or its subtenants or its or their employees or visitors, (ii) use of portions of
the Demised Premises for preparation, serving, consumption of food or beverages,
training rooms, data processing or reproducing operations, private lavatories or
toilets or other special purposes requiring greater or more difficult cleaning
work than office areas, (iii) interior glass partitions or unusual quantity of
interior glass surfaces, and (iv) non-building standard materials or finishes
installed by Tenant or at its request, and (b) removal from the Demised Premises
and the Building of any refuse and rubbish of Tenant in excess of that
ordinarily accumulated in business office occupancy or at times other than
Landlord's standard cleaning times, and (c) the use of the Demised Premises by
Tenant other than during Business Hours on Business Days. Landlord's cleaning
specifications as set forth on Exhibit E shall not require any extra cleaning
work as a result of any data processing or reproducing operations based upon the
original Tenant's Permitted Uses.
20.03. Landlord, its cleaning contractor and their employees shall have
access to the Demised Premises after 5:30 P.M. and before 8:00 A.M. and shall
have the right to use, without charge therefor, all light, power and water in
the Demised Premises reasonably required to clean the Demised Premises as
required under Section 20.02.
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20.04. Landlord shall furnish adequate hot and cold water to the Demised
Premises for drinking, lavatory and cleaning purposes. If Tenant uses water for
any other purpose Landlord may install and maintain, at Tenant's expense, meters
to measure Tenant's consumption of cold water and/or hot water for such other
purpose. Tenant shall reimburse Landlord for the quantities of cold water and
hot water shown on such meters not later than fifteen (15) days after invoice or
notice thereof.
ARTICLE 21 - ACCESS, CHANGES AND NAME
21.01. Except for the space within the inside surfaces of all walls,
hung ceilings, floors, windows and doors bounding the Demised Premises, all of
the Building, including, without limitation, exterior Building walls, core
corridor walls and doors and any core corridor entrance, any terraces or roofs
adjacent to the Demised Premises, and any space in or adjacent to the Demised
Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or
other utilities, sinks or other Building facilities and the use thereof, as well
as reasonable access thereto through the Demised Premises for the purpose of
operating, maintenance, decoration and repair, are reserved to Landlord.
Landlord also reserves the right, to install, erect, use and maintain pipes,
ducts and conduits in and through the Demised Premises, provided (i) such are
properly enclosed, (ii) same do not materially interfere with Tenant's use and
occupancy of the Demised Premises, except in a de minimis manner (iii) same do
not reduce the size of the useable area of the Demised Premises, except in a de
minimis manner; and (iv) Landlord shall use reasonable efforts to locate same in
"back-room" areas, closets and the like.
21.02. Landlord and its agents shall have the right to enter and/or pass
through the Demised Premises at all reasonable times upon reasonable prior
notice to Tenant and accompanied by a representative of Tenant (except in the
event of emergency) (a) to examine the Demised Premises and to show them to
actual and prospective Superior Lessors, Superior Mortgagees, or prospective
purchasers of the Building, and (b) to make such repairs, alterations, additions
and improvements in or to the Demised Premises and/or in or to the Building or
its facilities and equipment as Landlord is required or desires to make.
Landlord shall be allowed to take all materials into and upon the Demised
Premises that may be required in connection therewith, without any liability to
Tenant and without any reduction of Tenant's obligations hereunder. During the
period of twelve (12) months prior to the Expiration Date, Landlord and its
agents may exhibit the Demised Premises to prospective tenants at all reasonable
times upon reasonable prior notice to Tenant and accompanied by a representative
of Tenant. Landlord shall use its reasonable efforts to minimize any
interference with Tenant's use and occupancy; provided, however, that the
foregoing reasonable efforts shall not, in any event, require Landlord to
perform or cause work to be performed other than on Business Days during
Business Hours.
21.03. If at any time any windows of the Demised Premises are
temporarily darkened or obstructed by reason of any repairs, improvements,
maintenance and/or cleaning in or about the Building, or if any part of the
Building or the Common Areas, other than the Demised Premises, is temporarily or
permanently closed or inoperable, the same shall not be deemed a
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constructive eviction and shall not result in any reduction or diminution of
Tenant's obligations under this Lease. Landlord shall use reasonable efforts to
promptly make or do all such repairs, improvements, maintenance and cleaning and
to promptly remedy any such closing and inoperability and shall use its
reasonable efforts in connection therewith to minimize any interference with
Tenant's use and occupancy; provided, however, that the foregoing reasonable
efforts shall not, in any event, require Landlord to perform or cause work to be
performed other than on Business Days during Business Hours.
21.04. If, during the last month of the Term, Tenant has removed all or
substantially all of the Tenant's Property from and shall have vacated the
Demised Premises, Landlord may, without notice to Tenant, immediately enter the
Demised Premises and alter, renovate and decorate the same, without liability to
Tenant and without reducing or otherwise affecting Tenant's obligations
hereunder.
21.05. Landlord reserves the right, at any time and from time to time,
to make such changes, alterations, additions and improvements in or to the
Building (other than the Demised Premises) and the fixtures and equipment
thereof as Landlord shall deem necessary or desirable.
ARTICLE 22 - MECHANICS' LIENS AND OTHER LIENS
22.01. Nothing contained in this Lease shall be deemed, construed or
interpreted to imply any consent or agreement on the part of Landlord to subject
Landlord's interest or estate to any liability under any mechanic's or other
lien law. If any mechanic's or other lien or any notice of intention to file a
lien is filed against the Land, or any part thereof, or the Demised Premises, or
any part thereof, for any work, labor, service or materials claimed to have been
performed or furnished for or on behalf of Tenant or anyone holding any part of
the Demised Premises through or under Tenant, Tenant shall cause the same to be
canceled and discharged of record by payment, bond or order of a court of
competent jurisdiction within fifteen (15) days after notice by Landlord to
Tenant.
ARTICLE 23 - NON-LIABILITY
23.01. Neither Landlord nor any partner, joint venturer, director,
officer, agent, servant or employee of Landlord shall be liable to Tenant for
any loss, injury or damage to Tenant or to any other Person, or to its or their
property, irrespective of the cause of such injury, damage or loss, unless
caused by or resulting from the negligence of Landlord, its agents, servants or
employees in the operation or maintenance of the Land or Building without
contributory negligence on the part of Tenant or any of its subtenants or
licensees or its or their employees, agents or contractors. Further, neither
Landlord nor any partner, joint venturer, director, officer, agent, servant or
employee of Landlord shall be liable (a) for any such damage caused by other
tenants or Persons in, upon or about the Land or Building, or caused by
operations in construction of any private, public or quasi-public work; or (b)
even if negligent, for consequential damages arising out of any loss of
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use of the Demised Premises or any equipment or facilities therein by Tenant or
any Person claiming through or under Tenant.
23.02. INTENTIONALLY DELETED.
23.03. Notwithstanding any provision to the contrary, Tenant shall look
solely to the estate and property of Landlord in and to the Land and Building
(or the proceeds received by Landlord on a sale of such estate and property but
not the proceeds of any financing or refinancing thereof) in the event of any
claim against Landlord arising out of or in connection with this Lease, the
relationship of Landlord and Tenant or Tenant's use of the Demised Premises or
the Common Areas, and Tenant agrees that the liability of Landlord arising out
of or in connection with this Lease, the relationship of Landlord and Tenant or
Tenant's use of the Demised Premises or the Common Areas shall be limited to
such estate and property of Landlord (or sale proceeds). No other properties or
assets of Landlord or any partner, joint venturer, director, officer, agent,
servant or employee of Landlord shall be subject to levy, execution or other
enforcement procedures for the satisfaction of any judgement (or other judicial
process) or for the satisfaction of any other remedy of Tenant arising out of,
or in connection with, this Lease, the relationship of Landlord and Tenant or
Tenant's use of the Demised Premises or the Common Areas and if Tenant shall
acquire a lien on or interest in any other properties or assets by judgment or
otherwise, Tenant shall promptly release such lien on or interest in such other
properties and assets by executing, acknowledging and delivering to Landlord an
instrument to that effect prepared by Landlord's attorneys. Notwithstanding any
of the foregoing to the contrary, as to the original Tenant hereunder, Landlord
agrees that the exculpatory provisions of this Section 23.03 shall not apply to
any cash proceeds of any Security Deposit wrongfully retained by Landlord and
not turned over to any Successor Landlord, and as a result thereof such
Successor Landlord does not credit Tenant with having paid over the Security
Deposit.
ARTICLE 24 - DAMAGE OR DESTRUCTION
24.01. If the Building or the Demised Premises shall be partially or
totally damaged or destroyed by fire or other casualty (and if this Lease shall
not be terminated as in this Article 24 hereinafter provided), Landlord shall
repair the damage and restore and rebuild the Building and/or the Demised
Premises (except for the Tenant's Property) with reasonable dispatch after
notice to it of the damage or destruction and the collection of the insurance
proceeds attributable to such damage.
24.02. Subject to the provisions of Section 24.05, if all or part of the
Demised Premises shall be damaged or destroyed or rendered completely or
partially untenantable on account of fire or other casualty, the Rent shall be
abated or reduced, as the case may be, in the proportion that the untenantable
area of the Demised Premises bears to the total area of the Demised Premises,
for the period from the date of the damage or destruction to (a) the date the
Demised Premises are rendered tenantable, as reasonably determined by Landlord
and Tenant, or (b) if the Building and not the Demised Premises is so damaged or
destroyed, the date on which the Demised Premises
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shall be made tenantable; provided, however, should Tenant reoccupy a portion of
the Demised Premises during the period the repair or restoration work is taking
place and prior to the date that the Demised Premises are substantially repaired
or made tenantable the Rent allocable to such reoccupied portion (except to the
extent that Landlord continued to receive the proceeds of rent insurance as to
such reoccupied portion during such restoration period), based upon the
proportion which the area of the reoccupied portion of the Demised Premises
bears to the total area of the Demised Premises, shall be payable by Tenant from
the date of such occupancy.
24.03. If (a) the Building or the Demised Premises shall be totally
damaged or destroyed by fire or other casualty, or (b) the Building shall be so
damaged or destroyed by fire or other casualty (whether or not the Demised
Premises are damaged or destroyed) that its repair or restoration requires the
expenditure, as estimated by a reputable contractor or architect designated by
Landlord, of more than twenty percent (20%) (or ten percent [10%] if such
casualty occurs during the last two [2] years of the Term) of the full insurable
value of the Building immediately prior to the casualty, or (c) the Building
shall be damaged or destroyed by fire or other casualty (whether or not the
Demised Premises are damaged or destroyed) and either the loss shall not be
covered by Landlord's insurance or the net insurance proceeds (after deducting
all expenses in connection with obtaining such proceeds) shall, in the
estimation of a reputable contractor or architect designated by Landlord be
insufficient to pay for the repair or restoration work, then in either such case
Landlord may terminate this Lease by giving Tenant notice to such effect as soon
as practicable, but not later than ninety (90) days after the date of the fire
or other casualty. Notwithstanding any of the foregoing to the contrary, if the
Building shall be so damaged or destroyed by fire or other casualty so that it
is rendered untenantable for Tenant's use and occupancy and its repair would
take more than ten (10) months from the date of the fire or other casualty to
accomplish (the "Restoration Period"), as reasonably estimated by the Architect,
(the "Architect's Determination"), then Tenant shall have the right to terminate
this Lease upon written notice to Landlord given within thirty (30) days of
notice of the Architect's Determination. Landlord shall give Tenant written
notice of the Architect's Determination as soon as practicable, but not later
than ninety (90) days after such damage or destruction.
24.04. Tenant shall not be entitled to terminate this Lease (except as
provided in Section 24.03 above) and no damages, compensation or claim shall be
payable by Landlord for inconvenience, loss of business or annoyance arising
from any repair or restoration of any portion of the Demised Premises or of the
Building pursuant to this Article 24. Landlord shall use its best efforts to
make such repair or restoration promptly and in such manner as not unreasonably
to interfere with Tenant's use and occupancy of the Demised Premises, but
Landlord shall not be required to do such repair or restoration work except
during Business Hours on Business Days.
24.05. Notwithstanding any of the foregoing provisions of this Article
24, if by reason of some act or omission on the part of Tenant or any of its
subtenants or its or their partners, directors, officers, servants, employees,
agents or contractors, Landlord or any Superior Lessor or any Superior
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Mortgagee shall be unable to collect all of the insurance proceeds (including,
without limitation, rent insurance proceeds) applicable to damage or destruction
of the Demised Premises or the Building by fire or other casualty, then, without
prejudice to any other remedies which may be available against Tenant, there
shall be no abatement or reduction of the Rent. Further, nothing contained in
this Article 24 shall relieve Tenant from any liability that may exist as a
result of any damage or destruction by fire or other casualty. Notwithstanding
anything to the contrary set forth herein, nothing contained in this Section
24.05 shall vitiate the mutual waiver of subrogation contained in Section 13.05
hereof with respect to insured risks.
24.06. Landlord will not carry insurance of any kind on the Tenant's
Property,and, except as provided by law or by reason of Landlord's breach of any
of its obligations hereunder, shall not be obligated to repair any damage to or
replace the Tenant's Property.
24.07. The provisions of this Article 24 shall be deemed an express
agreement governing any case of damage or destruction of the Demised Premises
and/or Building by fire or other casualty, and any law providing for such a
contingency in the absence of an express agreement, now or hereafter in force,
shall have no application in such case.
ARTICLE 25 - EMINENT DOMAIN
25.01 If the whole of the Demised Premises shall be taken by any public
or quasi-public authority under the power of condemnation, eminent domain or
expropriation, or in the event of conveyance of the whole of the Demised
Premises in lieu thereof, this Lease shall terminate as of the day possession
shall be taken by such authority. If 25% or less of the Floor Space of the
Demised Premises shall be so taken or conveyed, this Lease shall terminate only
in respect of the part so taken or conveyed as of the day possession shall be
taken by such authority and Rent shall be abated pro rata. If more than 25% of
the Floor Space of the Demised Premises shall be so taken or conveyed, this
Lease shall terminate only in respect of the part so taken or conveyed as of the
day possession shall be taken by such authority, Rent shall be abated pro rata,
but either party shall have the right to terminate this Lease upon notice given
to the other party within 30 days after such taking possession. If more than 25%
of the Floor Space of the Building shall be so taken or conveyed, Landlord may,
by notice to Tenant, terminate this Lease as of the day possession shall be
taken. If so much of the parking facilities shall be so taken or conveyed that
the number of parking spaces necessary, in Landlord's reasonable judgment, for
the continued operation of the Building shall not be available, Landlord shall,
by notice to Tenant given within fifteen (15) days of such taking, terminate
this Lease as of the day possession shall be taken. Notwithstanding anything to
the contrary contained herein, in the event of a taking of a substantial portion
of the Demised Premises which, in Tenant's reasonable judgment, renders the
Demised Premises unusable for the normal and efficient operation of Tenant's
business, then, at Tenant's election, this Lease shall terminate as of the date
of possession by the condemning authority, which election shall be made by
notice to Landlord within fifteen (15) days after Tenant receives notice of the
taking. If this Lease shall continue in effect as to any portion of the Demised
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Premises not so taken or conveyed, the Rent shall be computed as of the day
possession shall be taken on the basis of the remaining Floor Space of the
Demised Premises. Except as specifically provided herein, in the event of any
such taking or conveyance there shall be no reduction in Rent. If this Lease
shall continue in effect, Landlord shall, at its expense, but shall be obligated
only to the extent of the net award or other compensation (after deducting all
expenses in connection with obtaining same) available to Landlord for the
improvements taken or conveyed (excluding any award or other compensation for
land or for the unexpired portion of the term of any Superior Lease), promptly
make all necessary alterations so as to constitute the remaining Building a
complete architectural and tenantable unit, except for the Tenant's Property,
and Tenant shall make all alterations or replacements to the Tenant's Property
and decorations in the Demised Premises. All awards and compensation for any
taking or conveyance, whether for the whole or a part of the Land or Building,
the Demised Premised or otherwise, shall be the property of Landlord, and Tenant
hereby assigns to Landlord all of Tenant's right, title and interest in and to
any and all such awards and compensation, including, without limitation, any
award or compensation for the value of the unexpired portion of the Term. Tenant
shall be entitled to claim, prove and receive in the condemnation proceeding
such award or compensation as may be allowed for the Tenant's Property and for
loss of business, good will, and depreciation or injury to and cost of removal
of the Tenant's Property, moving expenses and decorations, but only if such
award or compensation shall be made by the condemning authority in addition to,
and shall not result in a reduction of, the award or compensation made by it to
Landlord.
25.02. If the temporary use or occupancy of all or any part of the
Demised Premises shall be taken during the Term, Tenant shall be entitled,
except as hereinafter set forth, to receive that portion of the award or payment
for such taking which represents compensation for the use and occupancy of the
Demised Premises, for the taking of the Tenant's Property and for moving
expenses, and Landlord shall be entitled to receive that portion which
represents reimbursement for the cost of restoration of the Demised Premises.
This Lease shall be and remain unaffected by such taking and Tenant shall
continue to be responsible for all of its obligations hereunder insofar as such
obligations are not affected by such taking and shall continue to pay the Rent
in full when due. If the period of temporary use or occupancy shall extend
beyond the Expiration Date, that part of the award or payment which represents
compensation for the use and occupancy of the Demised Premises (or a part
thereof) shall be divided between Landlord and Tenant so that Tenant shall
receive (except as otherwise provided below) so much thereof as represents
compensation for the period up to and including the Expiration Date and Landlord
shall receive so much thereof as represents compensation for the period after
the Expiration Date. All monies to be paid to Tenant as, or as part of, an award
or payment for temporary use and occupancy for a period beyond the date to which
the Rent has been paid shall be received, held and applied by the first Superior
Mortgagee (or if there is no Superior Mortgagee, by Landlord as a trust fund)
for payment of the Rent becoming due hereunder. In the event the temporary use
or occupancy of all or any part of the Demised Premises shall be taken during
the Term for a period of ten (10) or more consecutive months, such taking shall
be deemed a permanent taking covered by Section 25.01 hereof.
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ARTICLE 26 - SURRENDER
26.01. On the Expiration Date, or upon any earlier termination of this
Lease, Tenant shall quit and surrender the Demised Premises to Landlord
"broom-clean" and in good order, condition and repair, except for ordinary wear
and tear and such damage or destruction, condemnation as Landlord is required to
repair or restore under this Lease or other insured casualty, and Tenant shall
remove all of Tenant's Property therefrom except as otherwise expressly provided
in this Lease.
26.02. If Tenant remains in possession of the Demised Premises after the
expiration of the Term, Tenant shall be deemed to be occupying the Demised
Premises as a tenant from month to month at the sufferance of Landlord subject
to all of the provisions of this Lease, except that the monthly Fixed Rent shall
be one and one-half times the Fixed Rent in effect during the last month of the
Term for the first month of holdover only, and thereafter shall be twice the
Fixed Rent in effect during the last month of the Term.
26.03. No act or thing done by Landlord or its agents shall be deemed an
acceptance of a surrender of the Demised Premises, and no agreement to accept
such surrender shall be valid unless in writing and signed by Landlord.
ARTICLE 27 - CONDITIONS OF LIMITATION
27.01. This Lease is subject to the limitation that whenever Tenant or
any Guarantor (a) shall make an assignment for the benefit of creditors, or (b)
shall commence a voluntary case or have entered against it an order for relief
under any chapter of the Federal Bankruptcy Code (Title 11 of the United States
Code) or any similar order or decree under any federal or state law, now in
existence, or hereafter enacted having the same general purpose, and such order
or decree shall have not been stayed or vacated within 30 days after entry, or
(c) shall cause, suffer, permit or consent to the appointment of a receiver,
trustee, administrator, conservator, sequestrator, liquidator or similar
official in any federal, state or foreign judicial or nonjudicial proceeding, to
hold, administer and/or liquidate all or substantially all of its assets, and
such appointment shall not have been revoked, terminated, stayed or vacated and
such official discharged of his duties within 30 days of his appointment, then
Landlord, at any time after the occurrence of any such event, may give Tenant a
notice of intention to end the Term at the expiration of ten (10) days from the
date of service of such notice of intention, and upon the expiration of said ten
(10) day period, whether or not the Term shall theretofore have commenced, this
Lease shall terminate with the same effect as if that day were the expiration
date of this Lease, but Tenant shall remain liable for damages as provided in
Article 29.
27.02. This Lease is subject to the further limitations that: (a) if
Tenant shall default when due in the payment of any Rent, and such default shall
continue for ten (10) days after notice to Tenant specifying the nature of the
default, or (b) if Tenant shall, whether by action or inaction, be in default of
any of its obligations under this Lease (other than a default in the payment of
Rent) and such default shall continue and not be remedied within twenty (20)
days after Landlord shall have given to Tenant a notice
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specifying the same, or, in the case of a default which cannot with due
diligence be cured within a period of twenty (20) days and the continuance of
which for the period required for cure will not subject Landlord or any Superior
Lessor to prosecution for a crime (as more particularly described in the last
sentence of Section 12.02) or termination of any Superior Lease or foreclosure
of any Superior Mortgage, if Tenant shall not, (i) within said twenty (20) day
period advise Landlord of Tenant's intention to take all steps necessary to
remedy such default, (ii) duly commence within said twenty (20) day period, and
thereafter diligently prosecute to completion all steps necessary to remedy the
default, and (iii) complete such remedy within a reasonable time after the date
of said notice by Landlord, or (c) if any event shall occur or any contingency
shall arise whereby this Lease would, by operation of law or otherwise, devolve
upon or pass to any person, firm or corporation other than Tenant, except as
expressly permitted by Article 11, or (d) if Tenant shall abandon the Demised
Premises, then in any of said cases Landlord may give to Tenant a notice of
intention to end the Term at the expiration of ten (10) days from the date of
the service of such notice of intention, and upon the expiration of said ten
(10) days, whether or not the Term shall theretofore have commenced, this Lease
shall terminate with the same effect as if that day were the expiration date of
this Lease, but Tenant shall remain iable for damages as provided in Article 29.
ARTICLE 28 - RE-ENTRY BY LANDLORD
28.01. If Tenant shall default in the payment of any Rent, and such
default shall continue for ten (10) days after notice to Tenant specifying the
nature of the default, or if this Lease shall terminate as provided in Article
27, Landlord or Landlord's agents and employees may, upon ten (10) days written
notice (which notice shall not be required if Tenant has been given a
termination notice, and this Lease shall have been terminated, pursuant to
Section 27.02 above) immediately or at any time thereafter re-enter the Demised
Premises, or any part thereof, either by summary dispossess proceedings or by
any suitable action or proceeding at law without being liable to indictment,
prosecution or damages therefor, and may repossess the same, and may remove any
Person therefrom, to the end that Landlord may have, hold and enjoy the Demised
Premises. The word "re-enter," as used herein, is not restricted to its
technical legal meaning. If this Lease is terminated under the provisions of
Article 27, or in the event of the termination of this Lease, or of re-entry, by
or under any summary dispossess or other proceedings or action or any provision
of law by reason of default hereunder on the part of Tenant, Tenant shall
thereupon pay to Landlord the Rent payable up to the time of such termination of
this Lease, or of such recovery of possession of the Demised Premises by
Landlord, as the case may be, and shall also pay to Landlord damages as provided
in Article 29.
28.02. In the event of a breach or threatened breach by Tenant of any of
its obligations under this Lease, Landlord shall also have the right of
injunction. The special remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies to which
Landlord may lawfully be entitled at any time and Landlord may invoke any
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remedy allowed at law or in equity as if specific remedies were not provided
for herein.
28.03. If this Lease shall terminate under the provisions of Article 27,
or in the event of the termination of this Lease, or of re-entry, by or under
any summary dispossess or other proceeding or action or any provision of law by
reason of default hereunder on the part of Tenant, Landlord shall be entitled to
retain all monies, if any, paid by Tenant to Landlord, whether as Advance Rent,
security or otherwise, but such monies shall be credited by Landlord against any
Rent due from Tenant at the time of such termination or re-entry or, at
Landlord's option, against any damages payable by Tenant under Article 29 or
pursuant to law, and any sums remaining, if any, after the payment to Landlord
of such Rent and damages shall be returned to Tenant within fifteen (15) days
after written request therefor.
ARTICLE 29 - DAMAGES
29.01. If this Lease is terminated under the provisions of Article 27,
or in the event of the termination of this Lease, or of re-entry, by or under
any summary dispossess or other proceeding or action or any provision of law by
reason of default hereunder on the part of Tenant, Tenant shall pay as
Additional Charges to Landlord, at the election of Landlord, either or any
combination of:
(a) a sum which at the time of such termination of this Lease or
at the time of any such re-entry by Landlord, as the case may be,
represents the then value (discounted to present value by using a
discount rate equivalent of the yield to maturity of the U.S. Treasury
Issue scheduled for maturity on or closest to the Expiration Date, as
published in the Wall Street Journal; In the event there is no market
activity in this issue, then Landlord shall choose a comparable Treasury
Bond, Note or Bill) of the excess, if any, of (i) the aggregate amount
of the Rent which would have been payable by Tenant (conclusively
presuming the average monthly Additional Charges to be the same as were
the average monthly Additional Charges payable for the year, or if less
than 365 days have then elapsed since the Commencement Date, the partial
year, immediately preceding such termination or re-entry) for the period
commencing with such earlier termination of this Lease or the date of
any such re-entry, as the case may be, and ending with the Expiration
Date, over (ii) the aggregate rental value of the Demised Premises for
the same period; or
(b) sums equal to the Fixed Rent and the Additional Charges which
would have been payable by Tenant had this Lease not so terminated, or
had Landlord not so re-entered the Demised Premises, payable upon the
due dates therefor specified herein following such termination or such
re-entry and until the Expiration Date, provided, however, that if
Landlord shall relet the Demised Premises during said period, Landlord
shall credit Tenant with the net rents received by Landlord from such
reletting, such net rents to be determined by first deducting from the
gross rents as and when received by Landlord from such reletting the
reasonable expenses incurred or paid by Landlord in terminating this
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Lease or in re-entering the Demised Premises and in securing possession
thereof, as well as the reasonable expenses of reletting, including,
without limitation, altering and preparing the Demised Premises for new
tenants, brokers' commissions, legal fees, and all other reasonable
expenses properly chargeable against the Demised Premises and the rental
therefrom, it being understood that any such reletting may be for a
period shorter or longer than the period ending on the Expiration Date;
but in no event shall Tenant be entitled to receive any excess of such
net rents over the sums which would have been payable by Tenant to
Landlord had this Lease not so terminated, nor shall Tenant be entitled
in any suit for the collection of damages pursuant to this subdivision
(b) to a credit in respect of any rents from a reletting, except to the
extent that such net rents are actually received by Landlord with
respect to the period through the Expiration Date hereof (i.e. the date
upon which this Lease would have expired in the normal course but for
the earlier termination of this Lease). If the Demised Premises or any
part thereof should be relet in combination with other space, then
proper apportionment on a square foot basis shall be made of the rent
received from such reletting and of the reasonable expenses of
reletting; or
(c) a sum which at the time of such termination of this Lease or
at the time of any such re-entry by Landlord, as the case may be,
represents the aggregate amount of the Rent which would have been
payable by Tenant (conclusively presuming the average monthly Additional
Charges to be the same as were the average monthly Additional Charges
payable for the year, or if less than 365 days have then elapsed since
the Commencement Date, the partial year, immediately preceding such
termination or re-entry) for the period commencing with such earlier
termination of this Lease or the date of any such re-entry, as the case
may be, and ending with the Expiration Date (discounted to present value
by using a discount rate equivalent of the yield to maturity of the U.S.
Treasury Issue scheduled for maturity on or closest to the Expiration
Date, as published in the Wall Street Journal; In the event there is no
market activity in this issue, then Landlord shall choose a comparable
Treasury Bond, Note or Bill); provided, however, that if Landlord shall
relet the Demised Premises during said period, Landlord shall credit
Tenant with the net rents received by Landlord from such reletting, such
net rents to be determined by first deducting from the gross rents as
and when received by Landlord from such reletting the reasonable
expenses incurred or paid by Landlord in terminating this Lease or in
re-entering the Demised Premises and in securing possession thereof, as
well as the reasonable expenses of reletting, including, without
limitation, altering and preparing the Demised Premises for new tenants,
brokers' commissions, legal fees, and all other reasonable expenses
properly chargeable against the Demised Premises and the rental
therefrom, it being understood that any such reletting may be for a
period shorter or longer than the period ending on the Expiration Date;
but in no event shall Landlord have to account to Tenant for any rents
in excess of the total sums which would have been payable by Tenant to
Landlord had this Lease not so terminated, nor shall Tenant be entitled
in any suit for the collection of damages pursuant to this subdivision
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(c) to a credit in respect of any rents from a reletting, except to the
extent that such net rents are actually received by Landlord with
respect to the period through the Expiration Date (i.e. the date upon
which this Lease would have expired in the normal course but for the
earlier termination of this Lease). If the Demised Premises or any part
thereof should be relet in combination with other space, then proper
apportionment on a square foot basis shall be made of the rent received
from such reletting and of the reasonable expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord before
presentation of proof of such damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall, prima facie, be the fair and
reasonable rental value for the Demised Premises, or part thereof, so relet
during the term of the reletting. Landlord shall not be liable in any way
whatsoever for its failure or refusal to relet the Demised Premises or any part
thereof, or if the Demised Premises or any part thereof are relet, for its
failure to collect the rent under such reletting, and no such refusal or failure
to relet or failure to collect rent shall release or affect Tenant's liability
for damages or otherwise under this Lease.
29.02. Suit or suits for the recovery of such damages or, any
installments thereof, may be brought by Landlord at any time and from time to
time at its election, and nothing contained herein shall be deemed to require
Landlord to postpone suit until the date when the Term would have expired if it
had not been so terminated under the provisions of Article 27, or under any
provision of law, or had Landlord not re-entered the Demised Premises. Nothing
herein contained shall be construed to limit or preclude recovery by Landlord
against Tenant of any sums or damages to which, in addition to the damages
particularly provided above, Landlord may lawfully be entitled by reason of any
default hereunder on the part of Tenant. Nothing herein contained shall be
construed to limit or prejudice the right of Landlord to prove for and obtain as
damages by reason of the termination of this Lease or re-entry of the Demised
Premises for the default of Tenant under this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time, whether or
not such amount be greater than, equal to, or less than any of the sums referred
to in Section 29.01.
29.03. [INTENTIONALLY OMITTED]
29.04. In addition to any other remedies Landlord may have under this
Lease, and without reducing or adversely affecting any of Landlord's rights and
remedies under this Article 29, but subject to the terms and provisions of
Section 3.05 hereof, if any Rent or damages payable hereunder by Tenant to
Landlord are not paid when due, the same shall bear interest at the Late Payment
Rate or the maximum rate permitted by law, whichever is less, from the due date
thereof until paid, and the amounts of such interest shall be Additional Charges
hereunder.
29.05. In addition to any remedies which Landlord may have under this
Lease, if there shall be a default hereunder by Tenant which shall not have been
remedied within the applicable grace period, Landlord shall not be obligated to
furnish to Tenant or the Demised Premises any HVAC services
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outside of Business Hours or Business Days, or any extra or additional cleaning
services; and the discontinuance of any one or more such services shall be
without liability by Landlord to Tenant and shall not reduce, diminish or
otherwise affect any of Tenant's covenants and obligations under this Lease.
ARTICLE 30 - AFFIRMATIVE WAIVERS
30.01. Tenant, on behalf of itself and any and all persons claiming
through or under Tenant, does hereby waive and surrender all right and privilege
which it, they or any of them might have under or by reason of any present or
future law, to redeem the Demised Premises or to have a continuance of this
Lease after being dispossessed or ejected from the Demised Premises by process
of law or under the terms of this Lease or after the termination of this Lease
as provided in this Lease.
30.02. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, and Tenant's use or occupancy of the
Demised Premises and use of the Common Area, including, without limitation, any
claim of injury or damage, and any emergency and other statutory remedy with
respect thereto. Tenant shall not interpose any counterclaim of any kind, except
compulsory counterclaims as permitted by applicable Court Rule, in any action or
proceeding commenced by Landlord to recover possession of the Demised Premises.
ARTICLE 31 - NO WAIVERS
31.01. The failure of either party to insist in any one or more
instances upon the strict performance of any one or more of the obligations of
this Lease, or to exercise any election herein contained, shall not be construed
as a waiver or relinquishment for the future of the performance of such one or
more obligations of this Lease or of the right to exercise such election, but
the same shall continue and remain in full force and effect with respect to any
subsequent breach, act or omission. The receipt by Landlord of Fixed Rent or
Additional Charges with knowledge of breach by Tenant of any obligation of this
Lease shall not be deemed a waiver of such breach.
ARTICLE 32 - CURING A PARTY'S DEFAULTS
32.01. If Tenant shall default in the performance of any of Tenant's
obligations under this Lease beyond applicable periods of grace, Landlord,
without thereby waiving such default, may (but shall not be obligated to)
perform the same for the account and at the expense of Tenant, without notice in
a case of emergency, and in any other case only if such default shall not be
remedies within the applicable grace period provided for in Article 27 of this
Lease. Bills for any expenses actually and reasonably incurred by Landlord in
connection with any such performance by it for the account of Tenant, and bills
for all costs, expenses and disbursements of every kind and nature whatsoever,
including reasonable attorneys' fees and expenses, involved in collecting or
endeavoring to collect the Rent or any part thereof or
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enforcing or endeavoring to enforce any rights against Tenant or Tenant's
obligations hereunder, under or in connection with this Lease or pursuant to
law, including any such cost, expense and disbursement involved in instituting
and prosecuting summary proceedings or in recovering possession of the Demised
Premises after default by Tenant or upon the expiration of the Term or sooner
termination of this Lease, and interest on all sums advanced by Landlord under
this Article at the Late Payment Rate or the maximum rate permitted by law,
whichever is less, may be sent by Landlord to Tenant monthly, or immediately, at
Landlord's option, and such amounts shall be due and payable within fifteen (15)
days of receipt of such bills.
32.02. If Landlord shall default in the performance of any of Landlord's
obligations under this Lease, Tenant, without thereby waiving such default, may
(but shall not be obligated to) perform the same for the account and at the
expense of Landlord, without notice in a case of emergency, and in any other
case only if such default continues after the expiration of fifteen (15) days
from the date Tenant gives Landlord notice of the default. Bills for any
expenses incurred by Tenant in connection with any such performance by it for
the account of Landlord, may be sent by Tenant to Landlord monthly, or
immediately, at Tenant's option, and such amounts shall be due and payable in
accordance with the terms of such bills, but in no event shall any such bill be
due and payable less than fifteen (15) days from the date of such bills. Nothing
contained in this Section 32.02 shall be construed to allow or permit Tenant to
deduct or offset or reduce any amounts due against any Rent due Landlord under
this Lease.
ARTICLE 33 - BROKER
33.01. Landlord and Tenant each represents to the other that it dealt
with no broker except the Broker in bringing about or consummating this Lease
and that each respectively had no conversations or negotiations with any broker
except the Broker concerning the leasing of the Demised Premises. Landlord and
Tenant agree to indemnify, defend and hold each other harmless against and from
any claims for any brokerage commissions and all costs, expenses and liabilities
in connection therewith, including, without limitation, reasonable attorneys'
fees and expenses, arising out of any conversations or negotiations had by the
indemnifying party with any broker other than the Broker. Landlord shall pay any
brokerage commissions due the Broker pursuant to a separate agreement between
Landlord and the Broker.
ARTICLE 34 - NOTICES
34.01. Any notice, statement, demand, consent, approval or other
communication required or permitted to be given, rendered or made by either
party to the other, pursuant to this Lease or pursuant to any applicable Legal
Requirement, except for Rent invoices which may be sent by regular mail, shall
be in writing and shall be deemed to have been properly given, rendered or made
only if sent by hand delivered or overnight commercial delivery or sent by
United States registered or certified mail, return receipt requested, addressed
to the other party at the address hereinabove set forth, as to Tenant,
Attention: President and Chief Executive Officer (except that after the
Commencement Date, Tenant's address, unless Tenant shall give notice to
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the contrary, shall be the Building) as to Landlord, to the attention of General
Counsel with a concurrent notice to the attention of Controller, and shall be
deemed to have been given, rendered or made upon receipt or refusal. Either
party may, by notice as aforesaid, designate a different address or addresses
for notices, statements, demands, consents, approvals or other communications
intended for it. In addition, upon and to the extent requested by Landlord,
copies of notices shall be sent to the Superior Mortgagee.
ARTICLE 35 - ESTOPPEL CERTIFICATES
35.01. Each party shall, at any time and from time to time with
reasonable frequency, as requested by the other party, upon not less than ten
(10) days' prior notice, execute and deliver to the requesting party a statement
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), certifying the dates to which the Fixed
Rent and Additional Charges have been paid, stating whether or not, to the best
knowledge of the party giving the statement, the requesting party is in default
in performance of any of its obligations under this Lease, and, if so,
specifying each such default of which the party giving the statement shall have
knowledge, and stating whether or not, to the best knowledge of the party giving
the statement, any event has occurred which with the giving of notice or passage
of time, or both, would constitute such a default of the requesting party, and,
if so, specifying each such event; any such statement delivered pursuant hereto
shall be deemed a representation and warranty to be relied upon by the party
requesting the certificate and by others with whom such party may be dealing,
regardless of independent investigation. Tenant also shall include in any such
statement such other information concerning this Lease as Landlord may
reasonably request.
ARTICLE 36 - ARBITRATION
36.01. Landlord may at any time request arbitration, and Tenant may at
any time when not in default in the payment of any Rent beyond any applicable
periods of grace (provided that Tenant shall prior to the end of such grace
period have paid in full all Rent then due and owing to Landlord), request
arbitration, of any matter in dispute but only where arbitration is expressly
provided for in this Lease. The party requesting arbitration shall do so by
giving notice to that effect to the other party, specifying in said notice the
nature of the dispute, and said dispute shall be determined in Newark, New
Jersey, by a single arbitrator, in accordance with the rules then obtaining of
the American Arbitration Association (or any organization which is the successor
thereto). The award in such arbitration may be enforced on the application of
either party by the order or judgment of a court of competent jurisdiction. The
fees and expenses of any arbitration shall be borne by the parties equally, but
each party shall bear the expense of its own attorneys and experts and the
additional expenses of presenting its own proof. If Tenant gives notice
requesting arbitration as provided in this Article, Tenant shall simultaneously
serve a duplicate of the notice on each Superior Mortgagee and Superior Lessor
whose name and address shall previously have
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been furnished to Tenant at least fifteen days in advance of same, and such
Superior Mortgagees and Superior Lessor shall have the right to participate in
such arbitration.
ARTICLE 37 - MEMORANDUM OF LEASE
37.01. Tenant shall not record this Lease. However, at the request of
Landlord, Tenant shall promptly execute, acknowledge and deliver to Landlord a
memorandum of lease in respect of this Lease sufficient for recording. Such
memorandum shall not be deemed to change or otherwise affect any of the
obligations or provisions of this Lease. Whichever party records such memorandum
of Lease shall pay all recording costs and expenses, including any taxes that
are due upon such recording.
ARTICLE 38 - INTENTIONALLY DELETED
ARTICLE 39 - MISCELLANEOUS
39.01. Tenant expressly acknowledges and agrees that Landlord has not
made and is not making, and Tenant, in executing and delivering this Lease, is
not relying upon, any warranties, representations, promises or statements,
except to the extent that the same are expressly set forth in this Lease or in
any other written agreement(s) which may be made between the parties
concurrently with the execution and delivery of this Lease. All understandings
and agreements heretofore had between the parties are merged in this Lease and
any other written agreement(s) made concurrently herewith, which alone fully and
completely express the agreement of the parties and which are entered into after
full investigation. Neither party has relied upon any statement or
representation not embodied in this Lease or in any other written agreement(s)
made concurrently herewith.
39.02. No agreement shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease, in whole
or in part, unless such agreement is in writing, refers expressly to this Lease
and is signed by the party against whom enforcement of the change, modification,
waiver, release, discharge, termination or effectuation of abandonment is
sought.
39.03. If Tenant shall at any time request Landlord to sublet or let the
Demised Premises for Tenant's account, Landlord or its agent is authorized to
receive keys for such purposes without releasing Tenant from any of its
obligations under this Lease, and Tenant hereby releases Landlord of any
liability for loss or damage to any of the Tenant's Property in connection with
such subletting or letting.
39.04. Except as otherwise expressly provided in this Lease, the
obligations under this Lease shall bind and benefit the successors and assigns
of the parties hereto with the same effect as if mentioned in each instance
where a party is named or referred to; provided, however, that (a) no violation
of the provisions of Article 11 shall operate to vest any rights in
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any successor or assignee of Tenant and (b) the provisions of this Section 39.04
shall not be construed as modifying the conditions of limitation contained in
Article 27.
39.05. Except for Tenant's obligations to pay Rent, the time for
Landlord or Tenant, as the case may be, to perform any of its respective
obligations hereunder shall be extended if and to the extent that the
performance thereof shall be prevented due to any Unavoidable Delay. Except as
expressly provided to the contrary, the obligations of Tenant hereunder shall
not be affected, impaired or excused, nor shall Landlord have any liability
whatsoever to Tenant, (a) because Landlord is unable to fulfill, or is delayed
in fulfilling, any of its obligations under this Lease due to any of the matters
set forth in the first sentence of this Section 39.05, or (b) because of any
failure or defect in the supply, quality or character of electricity, water or
any other utility or service furnished to the Demised Premises for any reason
beyond Landlord's reasonable control.
39.06. Any liability for payments hereunder (including, without
limitation, Additional Charges and the refund thereof, if any) shall survive the
expiration of the Term or earlier termination of this Lease.
39.07. If Tenant shall request Landlord's consent and Landlord shall
fail or refuse to give such consent, Tenant shall not be entitled to any damages
for any withholding by Landlord of its consent; Tenant's sole remedy shall be an
action for specific performance or injunction, and such remedy shall be
available only in those cases where Landlord has expressly agreed in writing not
to unreasonably withhold or delay its consent or where as a matter of law
Landlord may not unreasonably withhold its consent.
39.08. INTENTIONALLY DELETED.
39.09. Tenant shall not exercise its rights under Article 15 or any
other provision of this Lease in a manner which would violate Landlord's union
contracts or create any work stoppage, picketing, labor disruption or dispute or
any unreasonable interference with the business of Landlord or any tenant or
occupant of the Building.
39.10. Tenant shall give prompt notice to Landlord of (a) any occurrence
in or about the Demised Premises for which Landlord might be liable, (b) any
fire or other casualty in the Demised Premises, (c) any damage to or defect in
the Demised Premises, including the fixtures and equipment thereof, for the
repair of which Landlord might be responsible, and (d) any damage to or defect
in any part of the Building's sanitary, electrical, heating, ventilating,
air-conditioning, elevator or other systems located in or passing through the
Demised Premises or any part thereof.
39.11. This Lease shall be governed by and construed in accordance with
the laws of the State of New Jersey. Tenant hereby irrevocably agrees that any
legal action or proceeding arising out of or relating to this Lease may be
brought in the Courts of the State of New Jersey, or the Federal District Court
for the District of New Jersey. By execution and delivery of this Lease, Tenant
hereby irrevocably accepts and submits generally and unconditionally
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for itself and with respect to its properties, to the jurisdiction of any such
court in any such action or proceeding, and hereby waives in the case of any
such action or proceeding brought in the courts of the State of New Jersey, or
Federal District Court for the District of New Jersey, any defenses based on
jurisdiction, venue or forum non conveniens. If any provision of this Lease
shall be invalid or unenforceable, the remainder of this Lease shall not be
affected and shall be enforced to the extent permitted by law. The table of
contents, captions, headings and titles in this Lease are solely for convenience
of reference and shall not affect its interpretation. This Lease shall be
construed without regard to any presumption or other rule requiring construction
against the party causing this Lease to be drafted. If any words or phrases in
this Lease shall have been stricken out or otherwise eliminated, whether or not
any other words or phrases have been added, this Lease shall be construed as if
the words or phrases so stricken out or otherwise eliminated were never included
in this Lease and no implication or inference shall be drawn from the fact that
said words or phrases were so stricken out or otherwise eliminated. Each
covenant, agreement, obligation or other provision of this Lease on Tenant's
part to be performed, shall be deemed and construed as a separate and
independent covenant of Tenant, not dependent on any other provision of this
Lease. All terms and words used in this Lease, regardless of the number or
gender in which they are used, shall e deemed to include any other number and
any other gender as the context may require. In the event Landlord permits
Tenant to examine Landlord's books and records with respect to any Additional
Charge imposed under this Lease, such examination shall be conducted at Tenant's
sole cost and expense and shall be conditioned upon Tenant retaining an
independent accounting firm for such purposes which shall not be compensated on
any type of contingent fee basis with respect to such examination. Wherever in
this Lease or by law Landlord is authorized to charge or recover costs and
expenses for legal services or attorneys' fees, same shall include, without
limitation, the costs and expenses for in-house or staff legal counsel or
outside counsel at rates not to exceed the reasonable and customary charges for
any such services as would be imposed in an arms length third party agreement
for such services.
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39.12. Within thirty (30) days of Landlord's written request, Tenant
shall furnish to Landlord for distribution to Landlord's mortgagee or
prospective mortgagee or such mortgagee's or prospective mortgagee's loan
correspondent a copy of its then current audited (if available) financial
statement which shall be employed by such mortgagee or prospective mortgagee for
purposes of financing the Land and/or Building or otherwise for compliance with
the terms of any mortgage financing encumbering the Demised Premises and not
distributed otherwise without prior authorization of Tenant; provided however,
that if such financial statement is not a matter of public record, Tenant may
require of Landlord and such mortgagee or prospective mortgagee or loan
correspondent as a condition of providing such financial statement a
confidentiality agreement in form reasonably acceptable to Tenant and Landlord
and/or such mortgagee, prospective mortgagee and/or loan correspondent.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as
of the day and year first above written.
HARTZ-PW TOWER B LIMITED PARTNERSHIP
("Landlord")
BY: HARTZ MOUNTAIN INDUSTRIES, INC.
("general partner")
BY: /s/ Irwin A. Horowitz
------------------------------------
Irwin A. Horowitz
Executive Vice President
[Corporate Seal]
ICON INTERNATIONAL INC.
("Tenant")
BY: /s/ Scott Baxter
------------------------------------
Name: Scott Baxter
[Corporate Seal] Title: President
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RIDER TO LEASE DATED NOVEMBER 3, 1995 BY AND BETWEEN HARTZ-PW TOWER B LIMITED
PARTNERSHIP, AS LANDLORD AND ICON INTERNATIONAL INC., AS TENANT.
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R1. If any of the provisions of this Rider shall conflict with any of
the provisions, printed or typewritten, of this Lease, such conflict shall
resolve in every instance in favor of the provisions of this Rider.
R2. Provided Tenant is not in default beyond any applicable cure period
under the Lease and provided Tenant has not assigned this Lease or is not
subletting more than fifty (50%) of the Demised Premises, Tenant expressly
acknowledging and agreeing that the option rights contained herein are personal
to the original named Tenant, Tenant shall have one option to extend the Term of
its lease of the Demised Premises, from the date upon which this Lease would
otherwise expire for one extended period of five (5) years (herein referred to
as the "Extended Period"), upon the following terms and conditions:
1. If Tenant elects to exercise said option, it shall do so by giving
notice of such election to Landlord on or before the date which is ten (10)
months before the beginning of the Extended Period for which the Term is to be
extended by the exercise of such option. Tenant agrees that it shall have
forever waived its right to exercise any such option if it shall fail for any
reason whatsoever to give such notice to Landlord by the time provided herein
for the giving of such notice, whether such failure is inadvertent or
intentional, time being of the essence as to the exercise of such option.
2. If Tenant elects to exercise said option, the Term shall be
automatically extended for the Extended Period covered by the option so
exercised without execution of an extension or renewal lease. Within ten (10)
days after request of either party following the effective exercise of any such
option, however, Landolord and Tenant shall execute, acknowledge and deliver to
each other duplicate originals of an instrument in recordable form confirming
that such option was effectively exercised.
3. The Extended Period shall be upon the same terms and conditions as
are in effect immediately preceding the commencement of such Extended Period;
provided, however, that Tenant shall have no right or option to extend the Term
for any period of time beyond the expiration of the Extended Period and,
provided further, that in the Extended Period the Fixed Rent shall be at Fair
Market Value ("FMV"). FMV shall be determined by mutual agreement of the
parties. If the parties are unable to agree on the FMV, the parties shall choose
a licensed Real Estate Appraiser who shall determine the FMV. The cost of said
Real Estate Appraiser shall be borne equally by the parties. If the parties are
unable to agree on a licensed Real Estate Appraiser, each party shall select one
Appraiser to appraise the FMV. If the difference between the two appraisals is
20% or less of the lower appraisal, then the FMV shall be the average of the two
appraisals. If the difference between the two appraisals is greater than 20% of
the lower appraisal, the two Appraisers shall select a third licensed Real
Estate Appraiser to appraise the FMV. The FMV shall in such case be the average
of the three appraisals. The cost of the third appraisal shall be borne equally
by the parties. Anything to the
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contrary contained herein notwithstanding, the Fixed Rent for such Extended
Period shall not be less than the Fixed Rent for the period immediately
preceding the Extended Period for which the Fixed Rent is being calculated.
4. Any termination, expiration, cancellation or surrender of this Lease
shall terminate any right or option for the Extended Period not yet exercised.
5. The option provided herein to extend the Term of the Lease may not be
severed from the Lease or separately sold, assigned or otherwise transferred.
R3. (A) Landlord agrees that during the first five (5) years of the Term
only, prior to entering into any new lease with a prospective Tenant for any
additional premises on the eighth (8th) floor of the Building (other than
extensions or renewals of existing leases), Landlord shall, provided Tenant is
not in default of this Lease beyond any applicable grace or cure periods, first
notify Tenant in writing of its intention to do so, which notice shall set forth
the rent, terms and other conditions upon which such lease is intended to be
consummated with such prospective Tenant ("Landlord's Notice"). Tenant shall
have a period of ten (10) days following the giving of Landlord's Notice to
notify Landlord, in writing, of its election to enter into a lease for such
additional premises as tenant upon the rent, terms and conditions set forth in
Landlord's Notice. If Tenant shall notify Landlord in writing of its election to
enter into such lease as tenant for the additional premises within the said ten
(10) day period, Landlord shall deliver and Tenant shall execute a modification
of this lease incorporating the rent, terms and conditions as set forth in
Landlord's Notice to Tenant with respect to the additional premises. Time is of
the essence with respect to Tenant's exercise of its right of first refusal.
(B) If Tenant shall fail to notify Landlord in writing of its election
to enter into a modification to its lease incorporating the additional premises,
within the ten (10) day period referred to in subsection (A) hereof, then the
right of first refusal granted to the tenant as set forth in subsection (A) of
this Section with respect to the additional premises referred to in Landlord's
notice, shall automatically terminate and come to and end.
(C) If Tenant shall not elect to lease the additional premises referred
to in Landlord's Notice within the ten (10) day period following Landlord's
Notice then, Landlord may thereafter deliver the lease for such additional
premises to the proposed tenant free of the restrictions herein stated;
provided, however, that Landlord agrees that it shall not materially reduce the
rent or otherwise materially change the business terms of the lease as offered
to Tenant so that they are more favorable to the proposed Tenant than the terms
offered to Tenant, without again being required to offer the same to Tenant
pursuant to the preceding provisions of this Rider paragraph R3.
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(D) This right of first refusal so granted to Tenant shall terminate and
become null and void upon the expiration or sooner termination of this Lease.
(E) This right of first refusal is subject and subordinate to any prior
rights of first refusal or first offer of any existing tenants of the Building
under existing leases.
R4. Parking: Tenant shall be entitled to three (3) reserved parking
spaces in the parking deck designated for the Building. Said parking spaces
shall be located on the first level of the parking deck and the location of same
shall be determined by Landlord. Tenant shall also be entitled to fifty (50)
parking spaces on a non-exclusive basis in the parking areas shared in common
with other tenants of the Building and Development. Said parking areas shall be
designated by Landlord. There shall be no additional charge to Tenant under this
Lease (other than those expressly included as part of the Operating Expenses)
for the parking provided under this Rider Paragraph R4.
R5. Gross Up: If the Building is not a least ninety-five (95%) percent
occupied during the Base Year or any subsequent Calendar Year, the Operating
Expenses and Real Estate Taxes for the Base Year and for any such subsequent
Calendar Year will be adjusted to reflect ninety-five (95%) percent occupancy of
the Building.
R6. Electricity: Notwithstanding anything to the contrary set forth in
Section 18.02 hereof, Tenant shall have the right, without Landlord's consent,
to use and connect to the Building's existing electric distribution system all
computers, printers, scanners, routers and telecommunications equipment,
photocopying and facsimile equipment and other optical and electronic and
electric powered equipment, all consistent with the Permitted Uses of the
Demised Premises, provided that the total rated power consumption of such
machines and equipment and Tenant's actual connected electrical load in the
Demised Premises (inclusive of power, lighting and Supplemental HVAC) shall not
exceed 8 watts per usable square foot (inclusive of power, lighting and
Supplemental HVAC). Landlord shall not unreasonably withhold its consent to the
installation of additional risers in the Building in order to increase the watts
per usable square foot available to the Demised Premises; provided, however that
all such work shall be performed by Landlord and the cost thereof shall be paid
by Tenant to Landlord not later than fifteen (15) days after written request
therefor.
Tenant has reviewed the electrical capacity available to the Demised Premises
and represents that its satisfied therewith. Landlord represents that 8 watts
per usable square foot (inclusive of power, lighting and Supplemental HVAC) is
available to the Demised Premises.
Landlord represents to Tenant that the Building is served by two
underground circuits, as more particularly described in the correspondence from
PSE&G attached hereto as Exhibit "X".
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R7. UPS Generator: For use at the Demised Premises, Tenant shall have
the right to install a gas-fired emergency back-up (uninterrupted power supply)
generator (the "Generator") upon the following terms and conditions:
(a) Landlord hereby grants Tenant the right at Tenant's sole cost and
expense, to install the Generator on the roof of the Building or on the Land, as
determined by Landlord, in a location thereon as designated by Landlord. Tenant
agrees to provide Landlord with complete specifications regarding the dimensions
of such Generator, the materials to be used in its construction, the method of
its installation and the piping, wire, cabling and utilities required as a
result thereof. Tenant's plans and specifications shall be subject to Landlord's
reasonable approval.
(b) Tenant shall be responsible, at its sole cost and expense, and
throughout the Term, to maintain, operate (including utility costs), replace,
and repair the Generator.
(c) In regards to the Generator, Tenant shall comply with all Legal
Requirements (including, without limitation, acquisition of all necessary
permits) and all reasonable requirements of Landlord's insurer. Tenant shall
insure the Generator and pay any additional premiums of Landlord's insurer as a
result of the Generator installation or operation.
(d) All work required to construct and/or install the Generator, shall
be performed by Tenant at its sole cost and risk, it being understood and agreed
to by the parties hereto that the Tenant will have full responsibility for any
resulting damage to the Building, Land, and the surrounding improvements.
(e) Tenant shall and does hereby agree to indemnify, defend, and hold
harmless Landlord and its successors and assigns from any and all claims of
whatever nature made by any third party arising out of or in connection with the
installation and operation of the Generator.
(f) Tenant fully acknowledges that Landlord is granting Tenant the right
to use the Generator at Tenant's request and in reliance on Tenant's
representations that the installation and operation of the Generator will in no
way interfere with the operations and quiet enjoyment of Landlord's other
tenants in the Building and Development. In the event the operation of Tenant's
Generator is interfering with the operations or quiet enjoyment of Landlord's
other tenants, on written notice thereof from Landlord to Tenant, Tenant will
cease such interference with the operations or quiet enjoyment of Landlord's
other tenants.
(g) Upon the expiration or earlier termination of this Lease, Tenant
shall remove the Generator at its sole cost and expense, and in accordance with
the provisions of the Lease regarding removal of Tenant's Property.
(h) Tenant shall upon thirty (30) days written notice from Landlord to
Tenant, relocate the Generator to another location which Landlord shall
reasonably designate. Such relocation shall be at Landlord's sole cost and
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expense. Tenant shall not relocate the Generator for any other reason without
the prior written consent of Landlord.
R8. Landlord's Work:
(a) Landlord shall inform Tenant of the anticipated date the Demised
Premises shall be Ready for Occupancy and shall otherwise keep Tenant informed
of the progress of the Landlord's Work during the pendency thereof and shall
advise Tenant of any anticipated delays.
(b) Landlord shall use reasonable efforts to complete all Landlord's
Work no later than March 1996. If the Demised Premises are not Ready for
Occupancy by such date, then, commencing on the day Fixed Rent first becomes
payable under the Lease, Tenant shall be entitled to a one day abatement of
Fixed Rent for each day thereafter for which the Demised Premises shall not be
Ready for Occupancy; provided, however, that said March 1996 date shall be
extended by a day for each day of delay covered by Section 5.02 hereof.
R9. Tax Appeals:
(a) Decrease in Base Year Tax. If Real Estate Taxes in the Base Year are
reduced, including but not limited to reduction as the result of, any
application or proceeding brought by Landlord for reduction in the amount of
Real Estate Taxes payable with respect to the Base Year, and if, as a result of
such application or proceeding Real Estate Taxes attributable to the Base Year
shall be decreased, Landlord may promptly bill Tenant for any Tenant's Fraction
of Real Estate Taxes in accordance with Article 6 hereof, for any Calendar Year
reflecting such decrease in Real Estate Taxes in the Base Year. In no event
shall the Fixed Rent payable under this Lease be affected or changed as a result
of any such Real Estate Tax appeal, whether or not affecting the Base Year.
(b) Decrease in Taxes. If the Real Estate Taxes are reduced (other than
in the Base Year, which shall be governed by Rider Paragraph R9(a) above), for
which Tenant's Fraction of Real Estate Taxes have been paid by Tenant pursuant
to Article 6 of this Lease, such Tenant's Fraction of Real Estate Taxes shall be
recomputed on the basis of any such reduction and Landlord will, at its
election, either credit against the next accruing installments of Tenant's
Fraction of Real Estate Taxes due under this Lease after receipt by Landlord of
a tax refund any sums paid by Tenant in excess of the recomputed amounts, less a
sum equal to Tenant's Fraction of all costs, expenses, and fees, including, but
not limited to, attorneys' fees and appraisal fees incurred by Landlord in
connection with such application or proceeding, except to the extent such costs,
expenses and fees have already been included in Operating Expenses or Real
Estate Taxes (said resulting amount being the "Tenant's Tax Credit"), or
promptly refund to Tenant an amount equal to the Tenant's Tax Credit.
R10. Telecommunications Providers: Landlord agrees that it shall not
unreasonably withhold or delay its consent to permit access to the Building to
any reputable, nationally recognized telecommunications provider
-R5-
<PAGE>
<PAGE>
recommended to Landlord by Tenant which Tenant desires to use so that such
telecommunications provider may provide its services to Tenant and any other
tenant of the Building; provided, however, that (i) such telecommunications
provider shall agree to and shall execute and deliver to Landlord a License
Agreement in form and substance reasonably satisfactory to Landlord; (ii) such
telecommunications provider shall agree to pay to Landlord reasonable and
customary fees therefor; and (iii) the installation and subsequent provision of
such service to the Building shall not, in Landlord's sole and reasonable
judgment, interfere or cause damage to the Land, the Building, the Development
or the use and occupancy thereof by the tenants thereof. The terms and
provisions of this Rider Paragraph R10 shall be personal to the original named
Tenant and/or any Affiliate thereof.
R11. Management: Landlord shall operate and manage or cause to be
operated and managed the Building and the Common Areas and shall perform or
cause to be performed all obligations on the part of Landlord to be performed
under this Lease in a manner consistent with the present operation and
management of the Building and Common Areas and in keeping with the character
and tenants of the Building.
R12. Tenant's Work: Tenant shall have the right, upon written notice to
Landlord, to enter the Demised Premises prior to Landlord's delivery of the
Demised Premises Ready for Occupancy for the sole purpose of performing Tenant's
Work therein provided:
(i) Tenant first delivers a Certificate of insurance to Landlord as
required under this Lease;
(ii) Tenant's Work does not unreasonably interfere with Landlord's Work
or Landlord's workmen;
(iii) Tenant pays all costs of additional utilities and services
incurred as a result of Tenant's entry;
(iv) Tenant agrees to all reasonable rules and regulations set forth by
Landlord during such period;
(v) Tenant complies with all Legal Requirements applicable thereto; and
(vi) Tenant comply in all respects with the terms and provisions of
Section 39.09 of the Lease.
Landlord agrees that it shall cooperate with Tenant and its contractors
to coordinate and schedule the timing and performance of Landlord's Work and
Tenant's Work and provide to or for the benefit of Tenant access to appropriate
facilities and services, all in a manner reasonably acceptable to Landlord.
-R6-
<PAGE>
<PAGE>
R13. Attorneys' Fees: In the event either party brings an action to
enforce this Lease, or to collect Rent or other sums due under this Lease, or to
recover the possession of the Demised Premises, the prevailing party shall be
entitled to recover its reasonable attorney's fees.
R14. Consequential Damages: Notwithstanding anything to the contrary
contained in this Lease, neither Landlord nor Tenant shall be liable to the
other for consequential damages.
HARTZ-PW TOWER B LIMITED PARTNERSHIP
("Landlord")
BY: HARTZ MOUNTAIN INDUSTRIES, INC.
("general partner")
By: /s/ Irwin A. Horowitz
------------------------------------
Irwin A. Horowitz
Executive Vice President
ICON INTERNATIONAL INC.
("Tenant")
By: /s/ Scott A. Baxter
------------------------------------
-R7-
<PAGE>
<PAGE>
SUN MICROSYSTEMS COMPUTER COMPANY
2550 Garcia Avenue, MSUPAL
Mountain View, CA 91013-1100
415 960-1300
415 936-0112 fax
[SUN LOGO]
November 25, 1996
Scott Baxter
Icon CMT Corporation
420 Lexington Avenue 10th Floor
New York, NY 10170
RE: Sun Microsystems Computer Company ("SMCC")
U.S. Value Added Reseller Agreement ("Agreement") #IV-0092TP
Renewal Notification and Expiration date modification
This letter is to notify you that SMCC is pleased to conditionally renew the
above referenced Agreement with your company for an additional term. This
renewal is conditioned upon your agreement that your renewal date be extended
sixty days to February 28, 1997.
This extension is necessary to avoid any conflict of having the renewal process
coincide with the last (and busiest) month of SMCC's fiscal quarter. This sixty
day extension means the term of your Agreement will extend through February 28,
1998.
Therefore, if you wish to change your Master Reseller purchasing affiliation,
your opportunity to do so will be during the month of February, 1997.
It is extremely important that you sign where indicated below and return this
letter as soon as possible, but certainly no later than February 28, 1997.
Should you fail to do so, your Agreement will automatically expire without
further notice from SMCC on March 1, 1997.
Should you have any questions, please feel free to contact your Sun Sales
Representative.
Sincerely,
/s/Mark Nishihara
- -------------------------------
Mark Nishihara
Contract Support Representative
SMCC Contracts Management
We hereby agree to the Expiration
date being modified in out Agreement.
Authorized Signatory: [signature illegible]
---------------------
Date: 12/31/96
-------------------------------------
ATTN: SMCC CONTRACTS DEPT.
901 San Antonio Road M/S UPALO1-455
Palo Alto, Ca. 94303
cc: PAUL WELCH, SMCC Sales Representative
Access Graphics Technology, Inc.
<PAGE>
<PAGE>
Integration Consortium, Inc.
420 Lexington Avenue
New York, New York 10170
December 4, 1995
Mr. Jim Lee
Contracts Department
Sun Microsystems Computer Corporation
2550 Garcia Avenue
Mountain View, California 94043
Re: Integration Consortium, Inc.
Dear Mr. Lee:
Reference is made to the U.S. Indirect Value Added Reseller
Agreement, dated as of November 2, 1992 (the "Agreement"), between Integration
Consortium, Inc. (the "Company") and Sun Microsystems Computer Corporation
("Sun").
Please be advised that the Company intends to merge with and
into its parent corporation, ICon CMT Corp. ("ICon"), a Delaware corporation
(the "Merger"), and that, pursuant to Section 17C of the Agreement, Sun's prior
written consent is required to the assignment of the Agreement from the Company
to ICon which will result from the Merger. Accordingly, kindly confirm Sun's
consent to such assignment by countersigning this letter in the space provided
below and returning it to me as soon as possible. There is no change in the
ownership of the company.
Very truly yours,
INTEGRATION CONSORTIUM, INC.
By: /s/Ari Horowitz
---------------------------------------
Ari Horowitz, Chief Financial Officer
Consented and Agreed to:
SUN MICROSYSTEMS COMPUTER CORPORATION
By: /s/Janet Roth
-----------------------------------
Name:
Title: Manager, NAFO Contracts
<PAGE>
<PAGE>
SUN MICROSYSTEMS COMPUTER COMPANY
2550 Garcia Avenue
Mountain View, CA 90015-1100
[SUN LOGO]
October 23, 1995
Mr. Scott Baxter
ICON International Inc.
420 Lexington Avenue
New York, NY 10170
Dear Mr. Baxter:
This letter will serve as a response to your request for an exception to the
obligations set forth in Section 2 of the Indirect Value Added Reseller
Agreement ("IVAR") No. IV-0092TP between Sun Microsystems Computer Company
("SUN") and Integration Consortium Inc. ("ICON"), that all Netra Products be
sold direct to the end user. ICON is hereby granted authority to sell the
current Netra product line to those Netra Resellers currently authorized by
Access Graphics, provided that:
1) Sun preapprove each reseller in writing prior to the
commencement of any sale of such product;
2) the Netra Products are sold with ICON's added value, as
identified Exhibit C of the IVAR Agreement;
3) that the resellers to whom ICON sells such identified
product can not unbundle the product and it must be subsequently sold direct to
the end user.
All sales made by ICON must be identified through an ICON sales-out report,
identifying the ICON reseller and end user, per agreed upon guidelines for
report submission.
This letter further acknowledges that it is Sun's intent to authorize ICON to
become part of Suns' Preferred Internet Provider Program ("PIPP") program, once
that program has been implemented by Sun, and to receive all benefits that such
a program will provide. Additionally once this program has been implemented, Sun
will consider a pilot marketing fund credit, similar to the PIPP Reseller
Development fund ("RDF") for ICON sales of SPARC 1000 and SPARC 2000 based
systems when all of the following conditions are met:
<PAGE>
<PAGE>
1) systems are sold through the ICON channel for the Internet
application;
2) systems sales are reported on the ICON channel Productivity
Status Report ("PSR");
3) the systems sold include the ICON Internet value-add.
This credit will be made available to ICON for a maximum period of twelve (12)
months OR until there is a Netra based SPARC 1000/2000 product, whichever comes
first. The above referenced funds are to be used for marketing by ICON and will
be subject to the prior approval of Sun.
In consideration of the above authorization ICON agrees to an incremental annual
sales commitment of five million dollars ($5,000,000.00).
Either party has the right to terminate this amendment upon sixty (60) days
notice to the other party, without effecting any other terms and conditions of
the current IVAR Agreement between Sun and ICON.
Please acknowledge your approval of the above amendment to your current IVAR
Agreement with Sun, by signing and returning this letter to my attention at your
earliest convenience.
Sincerely, Acknowledged and Agreed:
Deborah A. Hofmeister /s/ Scott Baxter
Senior Corporate Contract Manager ---------------------------
NAFO Contract Management Name
President
---------------------------
Title
10/23/95
---------------------------
Date
cc: Joe Doherty, Sun
Brian O'Connor, Sun
-2-
<PAGE>
<PAGE>
SUN MICROSYSTEMS COMPUTER COMPANY
6 New England Executive Park
Burlington, MA 01803
617 270-7200
617 270-7210 fax
[SUN LOGO]
September 5, 1995
Mr. Scott A. Baxter
ICon International Inc.
420 Lexington Avenue
New York, NY 10170
Congratulations!
Sun Microsystems Computer Corporation, Inc. (SMCC) is pleased to acknowledge
that ICon is accepted to participate in the Sun Netra "Preferred Internet
Provider Program" (PIPP).
The Preferred Internet Provider Program identifies "best-of-breed" Internet
Providers (IP) who have exceptional offerings in Internet access, service and
support for reseller channels and end users.
PIPP participation has significant benefits: you will be recognized by Sun as
part of an elite class of Internet providers and integrators. We will announce
this program and introduce your services to our channels and their customers
through our communications vehicles. Plus, for those IPs who are sun Netra
Internet Resellers, we are offering a special Reseller Development Fund, which
IPs can use according to the terms of the attached Sun Netra PIPP RDF
Guidelines.
In turn, we require that the PIPP participants work with SMCC and develop and
execute a marketing plan which outlines how IPs will provide Internet access,
services and programs to Sun's reseller channels and customers.
PIPP participants are the preferred Internet Providers for participation in Sun
training, seminars, and local and national events. These activities will bolster
your ties with Sun, our channels and our customers who need Internet access and
services.
By your acceptance of this letter, you agree to participate in the Sun Preferred
IP Program and we are looking forward to forging an even stronger relationship
with you, and expand our on-line opportunities!
ICon International Inc.
Internet Provider
Sincerely,
[Signature Illegible]
----------------------
Name
Scott A. Baxter
----------------------
Title
President
/s/ Ken Sauter
- ------------------------------ ----------------------
Ken Sauter, Regional Director Date 9/26/95
<PAGE>
<PAGE>
ADDENDUM TO U.S. VALUE ADDED RESELLER AGREEMENT
The Addendum is entered into by and between Sun Microsystems, Inc. ("Sun") and
Integration Consortium, Inc. who are parties to a U.S. Value Added Reseller
(VAR) Agreement, IV298 (the "Main Agreement").
The provisions of the Main Agreement are hereby modified as follows:
1. PARAGRAPH 5, VAR'S RESPONSIBILITIES.
Add the following subparagraph S:
"VAR shall not sell, lease, or otherwise deal in any product based in SPARC
Architecture, unless such product (a) bears the Sun trademark or (b) is a
"laptop system."
A product is a "laptop system" if it is (i) transportable,
(ii) battery operated, (iii) under 16 pounds total weight
including case, and (iv) packaged without a CRT.
VAR is not prohibited by this Agreement from selling any
product that does not contain the SPARC Architecture."
2. PARAGRAPH 15, TERM AND TERMINATION.
Delete the text of subparagraph A and substitute in its place the following:
"This Agreement shall commence on May 1, 1991 and shall remain in force until
the date established according to the following schedule:
If Effective Date Falls Between: Then Expiration Date Is:
(1) January 1 - March 31 March 31 (of each following year)
(2) April 1 - June 30 June 30 (of each following year)
(3) July 1 - September 30 September 30 (of each following year)
(4) October 1 - December 31 December 31 (of each following year)
It shall be automatically renewed on a yearly basis thereafter, unless at least
thirty (30) days prior to any year's Expiration Date, Sun or VAR tenders written
notice of intention not to renew. This Agreement may be terminated by either
party for any reason or for no reason, with or without cause, by giving the
other party notice not less than sixty (60) days prior to the effective date of
such termination."
3. PARAGRAPH 22, GENERAL.
Delete the text of subparagraph C and substitute in its place the following:
"Assignment. Except as provided herein, neither party may assign or otherwise
transfer this Agreement, or any orders issued under it, without prior written
consent of the other party. Sun shall have the right to sell or assign any of
its rights to payments (and any related rights or interests) under this
Agreement. Any such assignments shall be with respect to such rights or
interests only and shall not affect Sun's obligations under this Agreement."
Sun: [signature illegible] VAR: [signature illegible] Name
--------------------------- --------------------------------
V.P., U.S. Field Marketing President Title
--------------------------------
July 26, 1991 8/6/91 Date
-------------------------------------
(Effective Date of Addendum)
<PAGE>
<PAGE>
ADDENDUM TO THE
SUN MICROSYSTEMS COMPUTER CORPORATION
U.S. INDIRECT VALUE ADDED RESELLER ("IVAR") AGREEMENT
This Addendum, effective on January 1, 1994, is entered into by and between Sun
Microsystems Computer Corporation ("SMCC") and Integrated Consortium, who are
parties to the indirect Value Added Reseller ("IVAR") Agreement No. IV-0092TP
(the "Main Agreement").
The provisions of the Main Agreement are hereby adopted as follows:
A. SECTION 1: SCOPE.
Delete the parenthetical ("identified by 'Product Tiers')" in second
sentence.
B. SECTION 2: APPOINTMENT.
Delete the text of Section 2 and substitute in its place the following:
Sun appoints Reseller as a non-exclusive Indirect Value Added Reseller
("IVAR"). IVAR is authorized to purchase Product from its designated
Master Reseller. Product must be:
(i) sold, leased or rented (collectively referred to as 'sold') in
conjunction with the services and/or products set out on Exhibit B
(collectively referred to as 'Value Added Services');
(ii) sold directly to End Users on a face-to-face basis; and
(iii) installed at an End User site in the United States ('Authorized
Sale").
The sale of Products to resellers is prohibited. The sale of Products
to the Federal Government is prohibited unless IVAR executes a
Government System Intergrator (GSI) Addendum. IVAR's primary business
must at all times be the sale and support of computer systems and
related Added Value Services.
IVAR has executed the "Representation and Warranty" attached as Exhibit
E, thereby representing and warranting that it currently operates under
(or will establish no later than July 1, 1994), and will maintain for
the remainder of the term of this Agreement, a business model so that
at least fifty percent (50%) of IVARs aggregate revenue for any six
month period is generated by the sale of Value Added Services. IVAR
agrees, upon reasonable notice and at its own expense, to provide to
SMCC in confidence, financial reports and documentation sufficient to
establish that it is in conformity with this Representation and
Warranty. SMCC reserve the right, upon reasonable notice and at SMCC's
expense, to audit IVAR's conformity."
C. SECTION 3; RESELLER DEVELOPMENT FUNDS.
Insert before the period at the end of the first sentence (after the
word "resale"), the following:
"and Products that IVAR's Master Reseller did not purchase
from SMCC"
D. SECTION 4; BUSINESS PLAN.
Delete the text from the beginning of the second sentence to the end of
the Section and substitute in its place the following:
"Either party may initiate a review of IVAR's compliance with
its Business Plan upon thirty (30) days' notice, provided that
SMCC shall initiate no more than one review per calendar
quarter. IVAR's failure to comply with its Business Plan will
constitute a material breach of this Agreement."
<PAGE>
E. SECTION 5; IVAR'S OBLIGATIONS.
Insert new Subsection C as follows (and redesignate the remaining
Subsections accordingly):
"C. UPGRADES. The list price of upgrades is based upon the
return to SMCC of specified parts from the system(s) being
upgraded, as set out in the U.S. Price List. IVAR is
responsible for assuring that the specified parts are received
by SMCC within thirty (30) days after shipment of the upgrade
to IVAR. If the specified parts are not timely received,
Master Reseller will invoice and IVAR agrees to pay Master
Reseller (net 30 days) for the non-returned parts, the
difference between the list price of the purchased upgrade(s)
and the list price of the upgraded system(s) if purchased
new."
F. SECTION 12; TERM AND TERMINATION.
Insert before the period at the end of Subsection B(2) the following:
", or (iv) IVAR fails to maintain the business model as set
out in Section 2."
G. EXHIBIT A: PRODUCT TIERS/AUTHORIZED LOCATIONS/MASTER RESELLER.
Delete all references to "Product Tiers" and related text, and
substitute in its place the following:
"Products: IVAR may purchase for resale only Products for
which it has, at the time of purchase, established the
required level of training and certification. SMCC reserves
the right to discontinue any Product upon sixty days notice."
H. EXHIBIT B; ADDED VALUE.
Delete the text of Exhibit B in its entirety and substitute in its
place the following:
"Value 'Added Services' means:
"1. Services such as installation, training, consulting,
integration, systems management, and software
maintenance.
"2. Products such as proprietary/customized software and
proprietary/customized hardware peripherals/add-ons;
but NOT widely available general purpose products
that are undifferentiated by channel, such as word
processing and spread sheet applications, and generic
hardware peripherals, such as printers."
Except as modified herein, the provisions of the Main Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by
their duly authorized representative.
SUN MICROSYSTEMS COMPUTER CORPORATION IVAR
By: /s/James P. Lee By:/s/Scott A. Baxter
Name: James P. Lee Name: Scott A. Baxter
Title: Director, NAAFO, Contract Management Title: President
Date: 11/16/93 Date: 11/1/93
<PAGE>
<PAGE>
[SUN LOGO]
SUN MICROSYSTEMS COMPUTER CORPORATION
U.S. INDIRECT VALUE ADDED RESELLER ("IVAR") AGREEMENT
This AGREEMENT is effective on February 1, 1992 ("Effective Date"), by and
between Sun Microsystems Computer Corporation ("Sun"), a Delaware corporation,
having a place of business at 2550 Garcia Avenue, Mountain View, California
94043 and Integration Consortium Inc., aka ICON Inc. ("Reseller") having a place
of business at 919 Third Avenue, 21st Floor, New York, NY 10022.
1. SCOPE
This Agreement governs Reseller's authorization to purchase certain Sun
products ("Products") from a designated Sun Authorized master reseller
("Master Reseller") and to resell those Products in the United States
to end users other than the Federal Government ("End Users"). Products
(identified by "Product Tiers"), approved buying and selling locations,
and the identity of the designated Master Reseller are set out in
Exhibit A. Sun may discontinue any Product upon sixty (60) days'
notice.
2. APPOINTMENT
Sun appoints Reseller as a non-exclusive Indirect Value Added Reseller
("IVAR"). IVAR is authorized to purchase Products from its designated
Master Reseller. Products must be (i) sold, leased or rented
(collectively referred to as "sold") as part of a total solution
consisting of Products and the added value set forth in Exhibit B, (ii)
sold directly to End Users on a face-to-face basis, and (iii) installed
at an End User site in the United States ("Authorized Sale"). The sale
of Products to resellers and to the federal government is prohibited
unless consented to in writing by Sun. IVAR's primary business must at
all times be the sale and support of computer systems.
3. RESELLER DEVELOPMENT FUNDS
IVAR shall receive directly from Sun Reseller Development Funds ("RDF")
equal to two and thirty-six hundredths percent (2.36%) of the value of
its purchases of Products computed at Sun's list price, excluding
Products purchased from Sun Express and Products not purchased for
resale. Sun may modify this Section upon ninety (90) days' Notice.
4. BUSINESS PLAN
IVAR agrees to market and support Products in compliance with Business
Plans developed by IVAR and approved by Sun (attached as Exhibit C).
Either party may initiate a review of IVAR's selection of and/or
compliance with objectives, strategies, and tactics under the Business
Plan upon thirty (30) days' notice, provided that Sun shall initiate no
more than one review per calendar quarter. IVAR's failure to comply
with its tactics under the Business Plan shall constitute a material
breach of this Agreement.
5. IVAR REFERENCE GUIDE
Sun's IVAR products are detailed in its VAR Reference Guide ("Guide").
IVAR represents that it has read the Guide and will comply with all
applicable rules and procedures. Sun may modify the Guide from time to
time upon sixty (60) days' Notice.
6. RESELLER COMMISSION PROGRAM
IVAR may participate in Sun's Reseller Commission Program as detailed
in the Guide.
7. EXHIBITS
The attached Exhibits may be modified only upon the mutual consent of
the parties, except that Sun may modify Exhibit D (Object Code license)
at any time. The current version of each Exhibit is hereby incorporated
by reference.
8. IVAR'S OBLIGATIONS
A. Sale and Support. IVAR shall use its best efforts to promote
the sale of Products, and shall purchase and maintain the
demonstration configuration identified in the Guide for each
authorized Product Tier at each authorized selling location.
IVAR shall provide to each End User, as detailed in the Guide
and the Business Plan (i) complete pre- and post-installation
support, including complete installation, training, and
continuous technical service and (ii) hardware and software
maintenance support. IVAR must submit and Sun must approve a
detailed, location specific support plan prior to installing
Products at any End User site located more than 200 miles from
an authorized selling location. The sale and direct support of
Products must be performed at all times by full-time employees
who are Sun trained and Sun certified, including at least one
full time Sun dedicated sales representative and one full
time, Sun dedicated systems engineer per authorized selling
location. Training and certification may be secured directly
from Sun or from any Sun Authorized training provider. Sun's
support options are set out in the Guide.
<PAGE>
B. Spare Parts. The use of spare parts purchased under the
authority granted by this Agreement is strictly limited to (i)
resale to an IVAR's End User for internal use or (ii) the
Service of Products sold and installed by IVAR under this
Agreement except that IVAR may use such parts to service all
of an End User's systems if IVAR has sold and installed at
least twenty-five percent (25%) of the systems for which
service is being provided.
C. IVAR Documentation Business Records and Reports. IVAR shall
furnish to its End Users, at the time of delivery of Products,
a sales receipt stating the date of sale, and, if applicable,
the serial number of Products sold. IVAR shall, during the
term of this Agreement and for five (5) years thereafter, keep
and maintain complete and accurate business records with
respect to its purchase and sale of all Products, including
all documents relating to or exchanged between IVAR and its
End Users, Master Reseller and Sun. Sun may review these
records upon request.
IVAR shall provide monthly Productivity Status Reports
("PSRs") to Sun as detailed in the Guide. Upon the initial
failure to timely submit a complete PSR, Sun will put IVAR on
notice that it is in breach of its obligation. If IVAR fails
to remedy this initial breach or subsequently fails to timely
submit a PSR Sun may cancel RDF accruals and suspend
participation in other programs. Any subsequent failure to
remedy or timely submit a PSR may result in immediate
termination of this Agreement.
D. Indemnity and Insurance. IVAR agrees to indemnify and hold Sun
harmless from and against all claims from IVAR's End Users or
third parties arising out of any acts and/or omissions of IVAR
or its employees or representatives. IVAR shall carry
liability insurance to protect Sun from all such claims, pay
the premiums therefor, and deliver to Sun, upon request, proof
of such insurance (which shall require thirty (30) days'
written notice to Sun in event of modification or
termination).
E. Fair Representation. IVAR shall display, demonstrate, and
represent Products fairly and shall make no representations
concerning Sun or its Products which are false, misleading, or
inconsistent with those representations set forth in
promotional materials, literature and manuals published and
supplied by Sun. IVAR shall comply with all applicable laws
and regulations in performing under this Agreement.
F. "Sun SPARC Out". IVAR shall not sell, lease, or otherwise deal
in any product based on SPARC Architecture, unless such
product (i) is a Sun Product or (ii) is a "laptop system". A
product is a "laptop" system if it is (i) transportable, (ii)
battery operated, (iii) under sixteen (16) pounds total weight
including case, and (iv) packaged without a CRT. IVAR is not
prohibited by this Agreement from selling any product that
does not contain the SPARC Architecture.
G. IVAR shall purchase all Sun Products for resale from its
designated Master Reseller unless an exception is granted by
Sun in writing. Purchase terms and conditions as may be agreed
upon between IVAR and designated Master Reseller shall govern
the purchase of Products. All Product warranties or claims
against such warranties shall be between IVAR and its
designated Master Reseller. Sun will permit IVAR to change the
identity of its designated Master Reseller only once per year,
by Notice (which shall include the effective date of the
transaction), during the thirty (30) days' period prior to
each year's Expiration Date.
H. Limited Warranty. IVAR must provide a warranty to its End
Users at least equivalent to the warranty provided by Master
Reseller. IVAR agrees to indemnify Sun for any liability or
damages caused by IVAR's provision or any other warranty.
I. Failure to comply with any of the foregoing obligations will
constitute a material breach of this Agreement.
9. HIGH RISK ACTIVITIES
A. PRODUCTS ARE NOT FAULT-TOLERANT AND ARE NOT DESIGNED,
MANUFACTURED OR INTENDED FOR USE OR RESALE AS ON-LINE CONTROL
EQUIPMENT IN HAZARDOUS ENVIRONMENTS REQUIRING FAILSAFE
CONTROLS, SUCH AS IN THE OPERATION OF NUCLEAR FACILITIES,
AIRCRAFT NAVIGATION OR COMMUNICATION SYSTEMS. AIR TRAFFIC
CONTROL LIFE SUPPORT OR WEAPONS SYSTEMS ("HIGH RISK
ACTIVITIES"). SUN SPECIFICALLY DISCLAIMS ANY EXPRESS OR
IMPLIED WARRANT OF FITNESS FOR SUCH HIGH RISK ACTIVITIES.
<PAGE>
<PAGE>
B. IVAR represents and warrants that it will not use, or
knowingly distribute or resell, Products for such High Risk
Activities and that it will ensure that its customers and End
Users of Products are provided with the notice in A. above.
10. TRADEMARKS
"Sun Trademarks" shall mean all names, logos, designs, and other
designations or brands used by Sun in connection with Products,
including Sun, Sun Microsystems and the Sun logo and the Sun system
enclosure design elements. IVAR is granted the right or license to use,
any Sun Trademarks, except that IVAR has the right to use the Sun Value
Added Reseller logo and to refer to Sun products and technologies by
their associated Sun Trademarks in IVAR's advertising or marketing
materials, in the form set out in the Guide. Sun shall have the right
to approve all such materials, and IVAR agrees, on request, to modify
any materials which do not comply with these provisions. IVAR may not
re-logo or co-logo Products, or otherwise modify, conceal or remove any
Trademark or other proprietary rights notice without Sun's written
consent.
11. SOFTWARE
A. License. IVAR is granted a non-exclusive nontransferable
limited license to distribute and sublicense Products
consisting of software in machine readable form ("Software")
to run on Sun CPUs sold to End Users in accordance with the
terms of this Agreement. IVAR shall require each of its End
Users to execute a sublicense containing, at a minimum, the
provisions set forth on Exhibit D and shall provide copies to
Sun on request. IVAR shall keep records specifying the End
User, its location, the serial numbers of the CPU(s) on which
the Software was licensed, and the license capacity (single
user or multi-user). The records may be audited once per year
by Sun.
B. Internal Use. The provisions of Exhibit D (Object Code
license) shall govern IVAR's internal use of Software,
including use for demonstration, development or training
purposes.
C. Restrictions. Title to all copies of Software is retained by
Sun or its Licensor. IVAR agrees not to decompile,
disassemble, or otherwise reverse engineer Software.
12. TERM AND TERMINATION
A. Term. This Agreement shall commence on the Effective Date and
shall remain in full force until the date established
according to the following schedule:
EFFECTIVE DATE: EXPIRATION DATE
(of each following year):
January 1 - March 31 March 31
April 1 - June 30 June 30
July 1 - September 30 September 30
October 1 - December 31 December 31
It shall be automatically renewed on an annual basis thereafter, unless
at least thirty (30) days prior to any years Expiration Date, Sun or
IVAR tenders Notice of intention not to renew.
B. Termination.
(1) This Agreement (which, for purposes of termination by
Sun, may be construed as referring to an individual
authorized buying or selling locations) may be
terminated by either party ((i)without cause, for any
reason, on ninety (90) days' Notice to the other
party; (ii) immediately, by Notice, upon material
breach by the other party, if such breach cannot be
remedied; (iii) by Notice, if the other party fails
to cure any material remediable breach of this
Agreement within thirty (30) days of receipt of
Notice of such breach; or (iv) immediately by Notice
upon the second commission of a previously remedied
material breach.
(2) Sun may terminate this Agreement immediately by
Notice in the event that (i) there is any material
change in the management or control of IVAR, or
transfer of any substantial part of IVAR's business,
(ii) Sun discovers that IVAR has made a material
misrepresentation or omission in its Reseller
Application, or (iii) IVAR makes an unauthorized
sale.
C. Effect of Termination. Upon any termination or expiration of
this Agreement, IVAR shall no longer be authorized to purchase
Products from Master Reseller. With the exception of those
rights and obligations which by their nature should survive,
all rights and licenses granted to IVAR under this Agreement
shall immediately cease and terminate. Neither party shall be
liable to the other for damages of any kind on account of the
termination or expiration of this Agreement in accordance with
its terms and conditions.
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13. LIMITATION OF LIABILITY
Except for express obligations to indemnity under this Agreement,
and/or breach of Sections 9 (High Risk Activity, 11 (Software), or 15
(Confidentiality):
A. Each party's liability to the other for claims related to this
Agreement, whether for breach or in tort shall be limited to
$10,000; and
B. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY INDIRECT,
PUNITIVE, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGE IN
CONNECTION WITH OR RELATED TO THIS AGREEMENT (INCLUDING
LOSS OF PROFITS, USE, DATA, OR OTHER ECONOMIC ADVANTAGE),
HOWSOEVER ARISING, WHETHER FOR BREACH OF THIS AGREEMENT,
INCLUDING BREACH OF WARRANTY OR IN TORT, EVEN IF THAT PARTY
HAS BEEN PREVIOUSLY ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE.
14. DISCLAIMER OF WARRANTY
EXCEPT AS SPECIFIED IN THIS AGREEMENT, ALL EXPRESS OR IMPLIED
REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT, ARE HEREBY EXCLUDED.
15. CONFIDENTIALITY
If Sun desires that information provided to IVAR under this Agreement
be held in confidence, Sun agrees to identify such information as
"Confidential" or "Proprietary" ("Confidential Information"). All
Software is Confidential Information. IVAR will not disclose
Confidential Information and will use it only for purposes specifically
related to this Agreement. This Agreement shall not affect any
confidential disclosure agreement between the parties.
16. NO EXPORTATION
IVAR agrees that it shall resell products only to End Users in the
continental United States, Alaska and Hawaii unless IVAR has been
accepted into Sun's Passport Program and has executed a Passport
Addendum to this Agreement. Products, including technical data are
subject to the U.S. Export Administration Act and its associated
regulations and may be subject to export or import regulations in other
countries. IVAR agrees to comply strictly with all such regulations and
acknowledges that it has the responsibility to obtain licenses to
export or re-export Products.
17. GENERAL
A. Dispute Resolution. Any action related to this Agreement will
be governed by California law, excluding choice of law rules,
and will be brought exclusively in the United States District
Court for Northern California or the California Superior Court
of Santa Clara. The parties hereby submit to the personal
jurisdiction and venue of such courts.
B. Relationship. The partes are independent contractors under
this Agreement and no other relationship is intended,
including a partnership, franchise, joint venture, agency,
employer/employee, or master/servant relationship. Neither
party shall be authorized to bind the other, or as a manner
which expresses or implies a relationship other than that of
independent contractor.
C. Assignment. IVAR may not assign or otherwise transfer any of
its rights or obligations under this Agreement without the
prior written consent of Sun.
D. Waiver or Delay. Any waiver of any provision of this
Agreement, or a delay by either party in the enforcement of
any right hereunder, shall neither be construed as a
continuing waiver, nor create an expectation of nonenforcement
of that or any other provision or right.
E. Force Majeure. A party is not liable for non-performance of
this Agreement, to the extent to which the non-performance is
caused by events or conditions beyond that party's control,
and the party gives prompt Notice and makes all reasonable
efforts to perform.
F. Notice. All Notices (upper case "N", under this Agreement must
be in writing and delivered either in person or by a means
evidenced by a delivery receipt to the address specified
below. Notice will be effective upon receipt:
If to Sun: Sun Microsystems Computer Corporation
2550 Garcia Avenue, MF MIL06-20
Mountain View, CA
Attn: Manager, Sales Contracts
If to IVAR: Integration Consortium, Inc. aka ICON, Inc.
919 Third Avenue, 21st Floor
New York, NY 10022
G. Execution. This Agreement shall become effective only after it
has been signed by an authorized officer of IVAR and an
authorized officer of Sun.
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H. Entire Agreement. This Agreement, including all attachments
incorporated by reference, is the parties' entire agreement
relating to Products and: (i) supersedes all prior or
contemporaneous oral or written communication, proposals and
representations with respect to its subject matter, and (ii)
prevails over any conflicting or additional terms of any
quote, order, acknowledgment or similar communication between
the parties during the term of this Agreement. No modification
to this Agreement will be binding unless in writing and signed
by a duly authorized representative of each party.
Sun and IVAR acknowledge that each has read and understood this Agreement and
consents to be bound by its terms.
SUN MICROSYSTEMS COMPUTER CORPORATION IVAR
By: /s/James Hoffman By:/s/Scott A. Baxter
Name: James Hoffman Name: Scott A. Baxter
Title: Title: President
Date: 11/2/92 Date: 10/1/92
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CISCO SYSTEMS, INC.
MASTER VALUE ADDED RESELLER AGREEMENT
This Master Value Added Reseller Agreement ("Agreement") is made as of November
__, 1995 by and between Cisco Systems, Inc. ("Cisco"), a California corporation
having its principal place of business at 170 West Tasman Drive, San Jose, CA,
95134, and ICon CMT Corp. ("ICon"), a Delaware corporation having its principal
place of business at 1200 Harbor Blvd, Weehawken, NJ 07087.
The parties hereto agree as follows:
1. Definitions
1.1 "Commercial Territory" is ICon's territory for commercial integration and
resale listed in Exhibit A-1.
1.2 "End User" is a person or entity who acquires the Commercial Products for
ordinary business usage and not for resale.
1.3 "Hardware" is the hardware made available to Customer by Cisco from time to
time on Cisco's then-current published U. S. Price List.
1.4 "Internetworking Territory" is ICon's territory for internetworking
integration and reselling listed in Exhibit A-2.
1.5 "Price List" is Cisco's then current price list for the Products.
1.6 "Product" is the Hardware and Software as integrated into a single product
or Hardware and Software sold or licensed in an unintegrated form and listed in
Cisco's then current Price List.
1.7 "Purchase Order" is a written order from Customer to Cisco for Hardware or
Software to be licensed or sold under this Agreement.
1.8 "Resellers" are the entities that (a) acquire Internetworking Products from
ICon for the purpose of resale to end users, and (b) have met the Reseller
certification requirements as set forth herein.
1.9 "Software" is the machine readable (object code) version of the computer
programs listed from time to time on Cisco's United States Price List and
licensed for use and distribution by ICon, and any copies thereof.
2. Scope.
2.1 General. This Agreement sets forth the terms and conditions for ICon's
purchase of Hardware and license of Software solely for: (i) internal business
use, (ii) commercial integration and resale to End Users, and (iii)
internetworking integration and resale to Resellers.
2.2 Federal Sales. Cisco's Federal Operations Director authorizes ICon to sell
to the U.S. Federal Government and to resellers who will sell to the U.S.
Federal Government only when the Product is sold in conjunction with the
components as listed on Exhibit A-2. ICon will not distribute the Products to
non-commercial customers or other Governments unless authorized by Cisco's
Federal Operations Director.
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Cisco does not accept any flowdown provisions including but not limited to FAR,
DFAR, or NASA FAR provisions notwithstanding existence of such provisions on
Integrator's Purchase Orders or supplementary documentation or Cisco's
acceptance of such Purchase Orders.
GSA: This Agreement shall not be construed by ICon as a representation that
Cisco will furnish supplies needed by ICon to fulfill any of ICon's GSA contract
obligations.
2.3 Preferred Internetworking Equipment Vendor. ICon agrees that during the term
of this Agreement, Cisco shall be its Preferred Internetworking Equipment
Vendor. Preferred Internetworking Equipment Vendor shall mean that ICon shall
provide a Cisco solution as part of primary integrated package unless otherwise
requested by the reseller or end user.
3. Appointment
3.1 Appointment; Certification. Cisco hereby appoints ICon, and ICon accepts
Cisco's appointment, as a non-exclusive authorized Value Added Reseller of
Commercial Products, as herein defined and as an authorized Master Value Add
Reseller ("Master VAR") of Internetworking Products, as herein defined. ICon
certifies that it maintains the facilities and experienced personnel, and adds
value as set forth below. These appointments are effective only so long as ICon
complies with the terms and conditions of this Agreement and may be terminated
as provided in Section 18 of the Agreement.
3.2 Distribution.
A. Internal Business Use
ICon may purchase the Products for its internal business use in the
United States.
B. Commercial Integration and Resale to End Users
Cisco grants ICon a non-exclusive, nontransferable right to resell
Hardware and sublicense Software as a component of a total solution of
Products and additional significant ICon added value (collectively, the
"Commercial Product') in the vertical market segments in the Commercial
Territory as approved by Cisco. ICon shall resell the Commercial Product
solely to End Users in Commercial Territory and ICon's value add shall,
at all times, be the primary reason for the end users' purchase of
Commercial Products from ICon. In this capacity, ICon will act as a
"Value Added Reseller.
C. Internetworking Integration and Resale to Resellers
Cisco grants ICon a non-exclusive, nontransferable right to resell
Hardware and sublicense Software as a component of a total solution of
Products and additional significant ICon added value (collectively, the
"Products") in the vertical market segments in the Global
internetworking Territory as approved by Cisco. ICon shall resell the
internetworking Products solely to Resellers in the internetworking
Territory and ICon's value add shall, at all times, be the primary
reason for the Reseller's purchase of the internetworking Products from
ICon. In this capacity, ICon will act as a "Master VAR".
ICon's appointment as a Master VAR is conditioned upon the following:
ICon shall only sell Products to Resellers who (a) redistribute the
Products only to end user customers, and (b) meet the certification
requirements set forth in Exhibit H and are certified by ICon in
accordance with Exhibit H.
4. Prices.
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Prices for Products shall be those specified in Cisco's then current Price List,
as updated from time to time by Cisco, less the applicable discounts specified
in Exhibit B-1 for Commercial Resale and Exhibit B-2 for internetworking Global
Internetworking Distribution, as the case may be. All prices are F.O.B. Cisco's
San Jose facility. Prices for the Products may be changed upon thirty (30) days
prior written notice to ICon (the "Notice Period"). Purchase Orders received
before the Notice Period, and those received during the Notice Period which
specify a delivery date within sixty (60) days following the effective date of a
price increase, will be invoiced to ICon without regard to the price change.
Price decreases will be effective for all orders accepted by Cisco following
notice of the price decrease, and all Product on order at the time of notice.
5. Payment
Upon credit approval by Cisco, payment terms shall be net thirty (30) days from
date of shipment. All payments shall be made in U.S. currency. If at any time
ICon is delinquent in the payment of any invoice or is otherwise in breach of
this Agreement, Cisco may, at its discretion, withhold shipment (including
partial shipments) of any order or may, at its option, require ICon to pre-pay
for further shipments. Any sum not paid by ICon when due shall bear interest
until paid at a rate of 1.5% per month (18% per annum) or the maximum rate
permitted by law, whichever is less. ICon grants Cisco a security interest in
Products purchased under this Agreement to secure payment for those products
purchased. If requested by Cisco, ICon agrees to execute financing statements to
perfect this security interest.
6. Taxes
All stated prices are exclusive of any taxes, fees and duties. Any taxes related
to Products purchased or licensed pursuant to this Agreement shall be paid by
ICon or ICon shall present an exemption certificate acceptable to the taxing
authorities. Applicable taxes shall be billed as a separate item on the invoice.
7. Purchase Orders.
ICon shall purchase Products by issuing a written Purchase Order indicating
specific products, quantity, price, total purchase price, shipping instructions,
requested delivery dates, and any other special instructions. All Purchase
Orders issued under this Agreement shall reference the tracking number assigned
to this Agreement by Cisco and shall indicate whether the Products are for
internal use, commercial integration and resale, or internetworking integration
and distribution. The terms and conditions of this Agreement prevail regardless
of any conflicting terms on the Purchase Order, other correspondence, and any
and all verbal communication . All Purchase Orders must be approved and accepted
by the Cisco office in Santa Clara, CA.
8. Shipping and Delivery
8.1 Shipping Dates. Shipping dates will be established by Cisco upon receipt of
Purchase Orders from ICon. Cisco will assign shipping dates which are as close
as practicable to the Icon's requested date. Cisco will use commercially
reasonable efforts to notify ICon of the actual scheduled shipping date within
five (5) working days after receipt of order.
8.2 Rescheduling. ICon has the right to defer Product shipment for no more than
(30) days from the scheduled shipping date, provided written notice is received
by Cisco at least fifteen (15) days before the originally scheduled shipping
date.
8.3 Change Order Charge. Canceled orders, rescheduled deliveries or Product
configuration changes made by ICon within ten (10) days of the original shipping
date will be subject to (i)
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acceptance by Cisco, and (ii) a charge of 15% of the total invoice amount. Cisco
reserves the right to reschedule delivery in cases of configuration changes made
within ten (10) days of scheduled shipment.
8.4 Shipment Terms. ICon shall be responsible for all freight, handling and
insurance charges. Unless given written instructions by ICon, Cisco shall select
the carrier. In no event shall Cisco have any liability in connection with
shipment, nor shall the carrier be deemed to be an agent of Cisco. Cisco shall
not be liable for damage or penalty for delay in delivery or for failure
to give notice of any delay.
8.5 Title and Risk of Loss. Title and risk of loss shall pass from Cisco to ICon
at Cisco's dock, San Jose, California, or such other place of manufacture as
Cisco may from time to time use.
9. ICon's Obligations.
9.1 ICon as a Value Added Reseller. In a manner satisfactory to Cisco
and at ICon's sole expense, ICon agrees at all times during this
Agreement to:
employ a competent and aggressive sales and technical support
organization (pre and post-sales) who shall be full time direct
employees of ICon to sell, install and secure acceptance of the
Products. ICon's ratio of technical support employees to sales
employees at all times will be greater than or equal to 1: 1;
provide 1st tier hardware and software support and maintenance to
End Users as is set forth in Exhibit D;
have a minimum of one current sales person per selling location
participate in any sales training courses which Cisco may conduct
for ICon personnel as specified in the then current channel
certification program;
have minimum of one current technical support person per support
location participate in and successfully complete a technical
training course which Cisco may conduct for ICon personnel as
specified by the then current channel certification program;
maintain adequate manpower and facilities to assure prompt
handling of inquiries, orders and shipments for Products;
validate and certify customer network configuration design and
associated components; assist customers with system design and
site certification;
keep Cisco informed as to problems encountered and to communicate
promptly to Cisco.
maintain records concerning its distribution of the Products
including End User software configuration orders for at least two
(2) years following the termination of this Agreement. ICon agrees
to allow an authorized Cisco representative to audit these records
to insure compliance with the terms of this Agreement.
provide non-binding quarterly forecasts to Cisco. ICon will also
provide quarterly inventory and point of sales reports to Cisco.
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9.2 ICon as a Master VAR. In a manner satisfactory to Cisco and at
ICon's sole expense, ICon agrees at all times during this
Agreement to:
employ a competent and aggressive sales and technical support
organization who shall be full time direct employees of ICon to
sell, install and secure acceptance of the Products.
provide support and maintenance to its customers.
have a majority of the appropriate ICon sales personnel
participate in and successfully complete any sales training
courses which Cisco may conduct for the benefit of ICon personnel.
employ and maintain a sufficient technical support organization
that has successfully completed any technical training course
which Cisco may conduct for the benefit of ICon personnel
maintain adequate manpower and facilities to ensure prompt
handling of inquiries, orders and shipments for Products.
validate and certify customer network configuration design and
associated components, assist customers with system design and
site certification.
keep Cisco informed as to problems encountered and to communicate
such problems promptly to Cisco.
provide non-binding quarterly forecasts to Cisco. ICon will also
provide monthly Inventory and Point of Sales (POS) reports to
Cisco in accordance with Exhibit G.
adhere to the Reseller certification requirements as set forth in
Exhibit H.
10. Cisco's Obligations
In a manner satisfactory to ICon, and at Cisco's sole expense, Cisco agrees
during the term of this Agreement to:
employ a competent and aggressive sales and technical support
organization who will be able to assist ICon in selling the Products.
provide Tier One level introductory training to sales and technical
support personnel from ICon's selling and support locations.
maintain adequate manpower and facilities to assure prompt handling of
inquiries, orders and shipments for Products.
keep ICon informed as to problems encountered and to communicate such
problems promptly to ICon.
provide to ICon access to Cisco's current documentation, presentations
product information, and sales tools as set forth in the CDROM-based
"SynchroniCD" or then current product.
provide to ICon access to above information also through access to
Cisco's Cisco Information On-line (CIO) offering or then current
product.
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11. Proprietary Rights and Software Licensing.
11.1 License. Cisco hereby grants ICon a nonexclusive, nontransferable license
to distribute the Software, in object code form only, in the Territory solely to
end users and to resellers (who may distribute to end users) in accordance with
the terms of this Agreement. ICon shall not make any copies or duplicates of any
Software without the prior written consent of Cisco.
11.2 Title. Cisco retains all title to, and, except as expressly licensed
herein, all rights to the Software, all copies thereof and all related
Documentation and materials, and all of Cisco's service marks, trademarks, trade
names or any other designations. Any invoices of Cisco purporting to cover such
items do not convey title to, or patent rights, copyrights or any other
proprietary interest in, such items to ICon.
11.3 Limitations. ICon agrees, except as otherwise expressly authorized
hereunder not to; (i) make any copies or duplicates of any Software, (ii)
reverse compile or engineer the Products, and (iii) remove any product
identification or notices of any proprietary or copyright restrictions from the
Products.
11.4 Restricted Rights. Cisco's software is provided with RESTRICTED RIGHTS and
its supporting documentation is provided with LIMITED RIGHTS. Use, duplication,
or disclosure by the Government is subject to the restrictions as set forth in
subparagraph (c) of the Commercial Computer Software - Restricted Rights clause
at FAR 52.227-19 and subparagraph (c)(1)(ii) of The Rights in Technical Data and
Computer Software clause at DFARS 52.227-7013.
12. Limited Warranty.
Notwithstanding any other provision hereof, Cisco's sole and exclusive warranty
obligations for the Products sold hereunder are set forth in Cisco's Limited
Warranty Statement delivered with the Product. A copy of Cisco's current Limited
Warranty Statement is attached hereto as Exhibit C. Cisco warrants the Products
to end users only and ICon will be entitled to pass through Cisco's Limited
Warranty to end users and to resellers (who may pass through to end users). ICon
SHALL NOT MAKE ANY WARRANTY COMMITMENT, WHETHER WRITTEN OR ORAL, ON CISCO'S
BEHALF.
CISCO DISCLAIMS ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING THOSE OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM A COURSE
OF DEALING, USAGE OR TRADE PRACTICE.
13. Marketing Materials and Documentation.
Cisco will provide ICon in its role as Value Added Reseller with marketing
materials and documentation in amounts and for fees set forth in the then
current policy on such materials.
14. Trademark Usage.
ICon is permitted to use the name, logo and other marks of Cisco ("Marks") for
all proper purposes in the sale of the Products and the performance of ICon's
duties hereunder only so long as this Agreement is in effect. ICon's use of such
trademark, logo and trade name shall be in accordance with Cisco's policies
including, but not limited to, trademark usage and advertising policies.
ICon shall have no claim or right in the trademarks, service marks, or trade
names owned, used or claimed now or in the future by Cisco. ICon shall not make
any claim to the Cisco Marks or lodge
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any filings with respect to such Marks or marks confusingly similar to the
Marks, whether on behalf of Cisco or in its own name or interest, without the
prior written consent of Cisco.
15. Confidential Information.
ICon acknowledges that, in the course of selling the Products and performing its
duties under this Agreement, it may obtain information relating to the Products
and to Cisco which is of a confidential and proprietary nature ("Proprietary
Information"). Such Proprietary Information may include, but is not limited to,
trade secrets, know how, invention techniques, processes, programs, schematics,
software source documents, data, lists, financial information, and sales and
marketing plans. ICon shall at all times, both during the term of this Agreement
and for a period of at least three (3) years after its termination, keep in
trust and confidence all such Proprietary Information, and shall not use such
Proprietary Information other than in the course of its duties under this
Agreement, nor shall ICon disclose any such Proprietary Information without
Cisco's written consent. ICon further agrees to immediately return to Cisco all
Proprietary Information (including copies thereof) in ICon's possession,
custody, or control upon termination of this Agreement at any time and for any
reason.
Neither party shall disclose the terms of this Agreement without the prior
written consent of the other party.
The above obligations will not apply to information which was (a) in ICon's
possession prior to disclosure by Cisco; (b) is or becomes public knowledge not
in violation of this Agreement; (c) is received by ICon from a third party with
the liability to disclose such information; or (d) is required to be disclosed
by a court of competent jurisdiction pursuant to a legal proceeding.
16. Patent and Copyright Indemnity.
Cisco will hold harmless ICon and defend any claim, suit or proceeding brought
against ICon so far as it is based on a claim that any Product supplied
hereunder infringes a patent or copyright in the United States, if notified
promptly in writing of the claim and given full authority, information and
assistance for the defense. If such claim has occurred, or in Cisco's opinion is
likely to occur, ICon agrees to permit Cisco, at its option and expense, either
to procure for ICon the right to continue using the Product or to replace or
modify the same so that it becomes non-infringing, or, if neither of the
foregoing alternatives is reasonably available, remove the Product and refund
ICon the price thereof as depreciated or amortized by an equal annual amount
over the lifetime of the Product as established by Cisco.
Cisco has no liability for any claim based upon the combination, operation or
use of any Product supplied hereunder with equipment, devices or software not
supplied by Cisco. Cisco has no liability for any claim based upon alteration or
modification of any Product supplied hereunder.
Notwithstanding any other provisions hereof, Cisco shall not be liable for any
claim based on ICon use of the Products as shipped after Cisco has informed the
ICon of modifications or changes in the Products required to avoid such claims
and offered to implement those modifications or changes, if such claim would
have been avoided by implementation of Cisco's suggestions.
THE FOREGOING STATES THE ENTIRE OBLIGATION OF CISCO WITH RESPECT TO
INFRINGEMENT OF PATENTS AND COPYRIGHTS. THE FOREGOING IS GIVEN TO ICon
SOLELY FOR ITS BENEFIT AND IN LIEU OF, AND CISCO DISCLAIMS, ALL
WARRANTIES OF NON-INFRINGEMENT WITH RESPECT TO THE PRODUCTS
17. Indemnification
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ICon agrees to indemnify and hold Cisco harmless against claims or damages
(inclusive of attorney's fees) made against Cisco as a result of negligence,
misrepresentation, error or omission by ICon or its representatives, or failure
to pay required taxes due under this Agreement. ICon will be responsible for any
warranties it makes to End Users beyond the scope of this Agreement.
18. Term and Termination.
This Agreement shall commence on the date first set above and continue
thereafter for a period of one year (the "Initial Term").
This Agreement may be terminated immediately by either party through a written
notice if either party breaches of any of the material provisions of this
Agreement and fails to remedy such breach within (30) days after written
notification by the other party of such breach.
Upon termination of this Agreement, all rights and licenses of ICon hereunder
shall terminate except that ICon may continue to distribute, in accordance with
normal business practice and the terms of this Agreement, Products shipped to it
by Cisco prior to the date of termination and Cisco will fulfill ICon purchase
orders accepted by Cisco within seven (7) calendar days of the date of
termination.
19. Support.
ICon will deliver first level technical support and service for all products
that it sells to its channels and customers, as described in Exhibit D. Cisco
agrees to provide the second tier software support services to ICon described in
Exhibit E, provided however, that ICon shall retain primary responsibility for
providing support to its customers and Cisco shall have no obligation to provide
support directly to ICon's customers unless such customers have a maintenance
agreement with Cisco in effect. ICon shall be required to procure maintenance
services from Cisco for all Products purchased during the term of this
Agreement.
Cisco may, at its option, to protect its business reputation/interests, provide
support directly to ICon's Customers. Cisco agrees to timely notify ICon of any
such maintenance complaint and further agrees to make every reasonable effort to
assist ICon in ICon's attempt at resolving any such complaint.
20. Reports.
ICon shall keep full, true and accurate records and accounts, in accordance with
generally accepted accounting principles, of each Product distributed. ICon
shall make these records available for audit by Cisco upon fifteen (15) days
prior written notice, during regular business hours at ICon's principal place of
business.
By the tenth day of each month, ICon shall prepare and forward reports
reasonably required by Cisco such as but not limited to, a Point of Sales Report
(POS) of ICon's end of month inventory of Products and sales by customer,
location, model, serial number, ICon purchase order number, and warranty start
date. Cisco shall have the right to verify the information in such reports and
shall be provided with reasonable proof (shippers, invoices, etc.) confirming
the information on request.
ICon shall submit a monthly sales forecast of Products covering the next four
(4) months by the third week of each month.
21. Export Law Compliance.
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ICON shall not transmit, directly or indirectly, the Products or any technical
data received from Cisco, nor the direct product thereof, outside the United
States without Cisco's prior written consent and in accordance with all export
laws and regulations of the United States.
22. Force Majeure.
Except for the obligation to pay money properly due and owing, neither party
shall be liable for any delay or failure in performance due to such acts of God,
earthquake, labor disputes, riots, war, fire, epidemics, or transportation
difficulties. The obligations and rights of the excused party shall be extended
on a day to day basis for the time period equal to the period of the excusable
delay.
23. General.
No waiver of rights under this agreement by either party shall constitute a
subsequent waiver of this or any other right under this Agreement.
Neither this Agreement nor any rights under this Agreement, other than moneys
due or to become due, shall be assigned or otherwise transferred by either party
without the prior written consent of the other party. This Agreement may be
transferred or otherwise assigned to any company or other entity which acquires
all or substantially all of the assets of such party.
In the event that any of the terms of this Agreement become or are declared to
be illegal by any Court or tribunal of competent jurisdiction, such term or
terms shall be null or void and shall be deemed deleted from this Agreement. All
the remaining terms of this Agreement shall remain in full force and effect
provided, however, that if this paragraph becomes applicable and if the effect
thereof is to substantially impair the value of this Agreement to either party,
then the affected party may terminate this Agreement by written notice to the
other.
In the event of a breach, the breaching party will pay to the other party any
reasonable attorneys' fees and other costs and expenses incurred by such other
party in connection with the enforcement of any provisions of this Agreement.
This Agreement (including the Exhibits hereto) constitutes the entire Agreement
between the parties hereto concerning the subject matter of this Agreement; and
there are no conditions, understandings, agreements, representations, or
warranties, expressed or implied, which are not specified herein. This Agreement
may only be modified by a written document executed by the parties thereto.
Neither party may bring an action against the other more than twelve (12) months
after the facts giving arise to such action occurred. Neither party has the
right or authority to, and shall not, assume or create any obligation of any
nature whatsoever on behalf of the other party or bind the other party in any
respect whatsoever.
Neither party has the right or authority to, and shall not, assume or create any
obligation of any nature whatsoever on behalf of the other party or bind the
other party in any respect whatsoever.
This Agreement shall bind and insure to the benefit of the successors and
permitted assigns of the parties.
This Agreement shall be interpreted and construed and legal relations created
shall be determined in accordance with the Laws of the State of New York.
24. Notice.
9
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Any notice which may be given by a party under this Agreement shall be in
writing and shall be either delivered in person, via U.S. mail, first class,
postage prepaid, air courier, or telex or facsimile to the party to be notified,
at the address set forth below.
If to Cisco: If to ICon:
Cisco Systems, Inc. ICon CMT Corp.
170 West Tasman Drive _______________________
San Jose, California 95134 _______________________
Attention: VP -North American Sales Attention: ___________
25. Limitation of Liability.
EXCEPT AS SET FORTH IN SECTION 16 PATENT AND COPYRIGHT INDEMNITY, ALL LIABILITY
OF CISCO UNDER THIS AGREEMENT OR OTHERWISE SHALL BE LIMITED TO MONEY PAID TO
CISCO UNDER THIS AGREEMENT DURING THE TWELVE (12) MONTH PERIOD PRECEDING THE
EVENT OR CIRCUMSTANCES GIVING RISE TO SUCH LIABILITY.
26. Consequential Damages Waiver.
EXCEPT FOR LIABILITY ARISING OUT OF ICON'S BREACHES OF (A) CISCO'S SOFTWARE
LICENSE (INCLUDING THE SCOPE OF THE LICENSE AND BREACHES OF THE REVERSE
ENGINEERING PROVISION), (B) CISCO'S PROPRIETARY RIGHTS, OR (C) CISCO'S
CONFIDENTIAL INFORMATION, NEITHER PARTY SHALL BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES, LOST PROFITS, OR LOST DATA, OR ANY OTHER INDIRECT DAMAGES
EVEN IF SUCH PARTY HAS BEEN INFORMED OF THE POSSIBILITY THEREOF.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
CISCO SYSTEMS, INC. ICON CMT CORP.
By:/s/ Donala A. LeBeau By:/s/Ari Horowitz
---------------------------- ----------------------------
Name: Donala A. LeBeau Name: Ari Horowitz
-------------------------- --------------------------
Title: Sr. V.P. WW Operations Title V.P., CFO
------------------------- -------------------------
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AMENDMENT NO.1
MASTER VALUE ADDED RESELLER AGREEMENT
This Amendment No. 1 ("Amendment") to the MASTER VALUE ADDED RESELLER AGREEMENT
("Agreement") by and between Cisco Systems, Inc., ("Cisco") a California
corporation having its principal place of business at 170 West Tasman Drive, San
Jose, CA, 95134, and ICon CMT Corp. ("ICON"), a Delaware corporation having its
principal place of business at 1200 Harborside Drive, Weehansken, NJ 07087
WHEREAS, Cisco and Integrator have previously entered into the Agreement in
November 1995 and
NOW WHEREFORE, the parties agree to amend the Agreement as follows:
1. All references to "Cisco's then current Price List" are replaced with
"Cisco's then current Global Price List."
2. Exhibit B-2 is replaced with the attached Exhibit B-3.
3. Exhibit I (Integrator's Reporting Requirements), attached hereto is
incorporated into the Agreement.
4. All other terms and conditions of the Agreement remain unchanged.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
CISCO SYSTEMS, INC. ICON
BY:/s/William Conlon BY: /s/Ari Horowitz
------------------------ ---------------------------
(Authorized Signature) (Authorized Signature)
NAME: William Conlon NAME: Ari Horowitz
---------------------- -------------------------
(Type/Print) (Type/Print)
TITLE: 10-31-96 TITLE: Vice President
--------------------- -----------------------
(Type/Print) (Type/Print)
July 24 1996 ICON Cisco Confidential 1
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INTERCONNECTION AGREEMENT
This Interconnection Agreement (the "Agreement") is made, effective as
of August 18th, 1997 (the "Effective Date"), by and between Icon CMT Corp., a
Delaware corporation, with its principal place of business at 1200 Harbor Blvd.,
8th Floor, Weehawken, NJ 07087 ("Company") and UUNET Technologies, Inc., a
Delaware corporation, with its principal place of business at 3060 Williams
Drive, Fairfax, VA 22031 ("UUNET").
R E C I T A L S
1. Each of Company and UUNET operates an Internet Network, as defined
below; and
2. The parties wish to provide for the interconnection of, and exchange of
traffic between, their respective Internet Networks on the terms and conditions
herein.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "Internet Network" shall mean a communications network
running the TCP/IP and other Internet protocols.
1.2 "Interconnection Point" shall mean any interconnection
point at which the parties agree to connect their respective Internet Networks
under this Agreement. A description of all Interconnection Points, together with
all direct interconnections agreed to by the parties, is set forth on the
attached Schedule 1, and Schedule 1 shall be amended by the agreement of Company
and UUNET in the event of any changes.
2. EXCHANGE OF TRAFFIC
2.1 The parties agree to exchange digital communications
traffic over their respective Internet Networks at the Interconnection Points,
subject to the terms and conditions set forth in this Agreement. Each party
shall provide, at its own expense, a connection from its Internet Network to the
Interconnection Point(s) upon a schedule to be mutually agreed. Each party will
send over the Interconnection Points only traffic destined for the other party's
customers.
2.2 The data rates at which the parties will connect hereunder
is set forth in the attached Schedule 1.
2.3 The parties agree not to restrict the use of their
respective Internet Networks based on the subject matter of the traffic unless
required to do so by applicable law.
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2.4 Except for control traffic which must be examined in order
for the parties to operate their respective Internet Networks, neither party
shall monitor or capture the contents of any data or other traffic which passes
through the Interconnection Points. Neither party shall modify the
infrastructure in any way to examine any data unless an appropriate court order
is in force. Except as otherwise agreed between the parties and with third
parties as appropriate, neither party shall provide to third parties any
statistical information itemized by service provider, by company, or by IP
address; provided, that each party may provide its customers with their own
statistical data.
2.5 Neither party will establish a route of last resort
directed toward the other party's Internet Network. Instead, the parties will
fully exchange explicit routes comprising public Internet service destinations
of entities to whom either party is contractually obligated to handle traffic.
3. TERM AND TERMINATION
This Agreement shall have an initial term of one year
following the Effective Date. Either party may terminate this Agreement upon 60
calendar days' written notice to the other at any time after the end of the
initial term. If neither party terminates this Agreement upon expiration of the
initial term, this Agreement shall continue on its present terms and conditions,
specifically including the requirement that the parties continue their
discussions and activities under Paragraphs 4 and 5 hereof, until either party
terminates it by 60 calendar days' written notice to the other.
4. TECHNICAL AND OPERATIONAL MATTERS
4.1 The parties will work together during the term of this
Agreement to establish mutually agreed performance objectives and operational
procedures to enable each party to provide the highest practical quality of
service over its Internet Network and the interconnection provided hereunder, in
a cost effective fashion. In connection therewith, the parties shall use their
reasonable efforts to achieve a minimum end-to-end one-way packet delay.
4.2 Each of the parties will use its reasonable efforts to
achieve a mean time to repair of four hours or less for all outages at the
Interconnection Point(s) set forth on Schedule 1. The parties will cooperate
with each other in each party's efforts under this paragraph 4.b.
4.3 Each of the parties will develop scheduled maintenance
procedures that provide for notification by one party to the other of all
scheduled maintenance that could cause end-to-end connectivity loss for any user
of more than five minutes. Each party agrees to give the other three calendar
days advance notice for scheduled maintenance that is expected to result in 30
minutes or more of end-to-end connectivity loss.
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4.4 Each party will, at its own expense and on a reasonable
efforts basis, provide Network Operations Center ("NOC") support in cooperation
with the other so as to maintain the smooth operation of the network service.
The parties shall develop operational procedures for the interconnection of
their respective Internet Networks, including without limitation inter-NOC
problem management information exchanges (e.g., trouble ticket tracking), and
NOC escalation procedures for addressing unscheduled outages or emergency
maintenance.
4.5 Each of the parties will provide the other with certain
limited access to data for the purpose of operational monitoring and the
diagnosis of end-to-end connectivity problems. The parties will use their
reasonable efforts to develop procedures to govern the timing and other terms
and conditions upon which this access will be provided.
4.6 Each of the parties will use its reasonable efforts to
collect during the term hereof and provide to the other party traffic
information with respect to its Internet Network in order to better understand
the nature of the traffic passing through the parties' respective Internet
Networks. In addition, each party shall use its reasonable efforts to track and
provide the other party with average and peak utilization data over the
interconnection facilities set forth on Schedule 1 hereto.
5. CUSTOMER RELATIONS
Each party will be responsible for communicating with its own
customers with respect to its Internet Network. Each party will use its
reasonable efforts to notify the other promptly in writing of all trouble
reports made to it by customers of the other party. Each party shall be
responsible to screen the traffic of its own customers not desiring public
Internet access from distribution across the Interconnection Point(s). Each
party will independently establish the charges to its own customers for the
services provided in connection with this Agreement.
6. LIMITATION ON SERVICES
This Agreement shall apply only to traffic passing through the
public Internet. Virtual private data network services and services involving
protocols other than the Internet protocols are not covered by this Agreement.
Neither party shall be entitled or required to carry traffic hereunder if doing
so would conflict with any condition imposed by an agreement between the other
party and any third party with whom the other party connects; each party agrees
to give the other party at least 180 days' notice of any such conflicting
agreement that such party intends to enter into after the Effective Date.
7. NONEXCLUSIVITY
This Agreement shall not prohibit or restrain either party's
entry into any separate similar or dissimilar contract or agreement with one or
more third parties.
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8. NO LIABILITY
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY LOSS OR
DAMAGE ARISING FROM: (I) ANY FAILURE IN OR BREAKDOWN OF ANY FACILITIES OR
SERVICES HEREUNDER, WHATSOEVER THE CAUSE AND HOWEVER LONG IT SHALL LAST; (II)
ANY INTERRUPTION OF SERVICE, WHATSOEVER THE CAUSE AND HOWEVER LONG IT SHALL
LAST; (III) SUCH PARTY'S SUBMITTING TRAFFIC TO OR ACCEPTING TRAFFIC FROM THE
OTHER PARTY HEREUNDER; OR (IV) ANY OTHER CIRCUMSTANCE RELATING TO THIS
AGREEMENT.
9. INSURANCE
Each party is responsible for assessing its own need for
property, casualty and liability insurance and each shall obtain such insurance
as each sees fit. Each party shall bear the risk of loss and damage with respect
to its own equipment and agrees not to make any claims against the other, or
assign any such claims to third parties, for any property loss or damage.
10. AUTHORIZATIONS
All undertakings and obligations assumed hereunder by either
party are subject to all applicable existing and future laws, rules and
regulations, and are further subject to the issuance and continuance of all
necessary governmental licenses, waivers, consents, registrations, permissions
and approvals.
11. FORCE MAJEURE
No failure or omission by either party to carry out or observe
any of the terms and conditions of this Agreement shall give rise to any claim
against the party in question or be deemed to be a breach of this Agreement if
such failure or omission arises from any cause reasonably beyond the control of
that party (a "Force Majeure Event'). Each party shall give the other notice in
the event it experiences a failure or delay due to a Force Majeure Event. Upon
such notice, the party affected by the Force Majeure Event may delay performance
hereunder during the pendency of such Force Majeure Event, and shall have no
liability for such delay.
12. RELATIONSHIP OF PARTIES
In their performance hereunder the parties are acting as
independent contractors, and nothing contained herein shall be construed to
create a partnership, joint venture or other agency relationship between the
parties.
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<PAGE>
13. REGULATORY APPROVAL
The parties acknowledge that this Agreement, and any or all of
the terms hereof, may become subject to regulatory approval by various local,
state or federal agencies. Should such approval be required from time to time or
at any time, the parties shall cooperate, to the extent reasonable and lawful,
in providing such information as is necessary to complete any required filing.
14. ASSIGNMENT
Neither party shall transfer or assign its rights or
obligations under this Agreement or transfer by way of merger, consolidation,
sale of all or substantially all of its assets without the prior written consent
of the other party which consent shall not be unreasonably withheld; provided,
that either party may transfer its interest herein to any subsidiary or
affiliate of such party.
15. NOTICES
All notices between the parties required or permitted
hereunder shall be effective if hand delivered or sent by post or courier,
postage or fees paid, or by facsimile to the address specified below. All
notices shall be effective when sent.
If to Company: If to UUNET:
Icon CMT Corp. UUNET Technologies, Inc.
1200 Harbor Blvd., 8th Floor 3060 Williams Drive
Weehawken, NJ 07087 Fairfax, VA 22031
ATTN: Scott Baxter ATTN: Vice-President, Systems Engineering
Fax: 201-601-1917 Fax: 703-206-5601
with a copy to: with a copy to:
Icon CMT Corp. UUNET Technologies, Inc.
1200 Harbor Blvd. 3060 Williams Drive
Weehawken, NJ 07087 Fairfax, VA 22031
ATTN: General Counsel ATTN: General Counsel
Fax: 201-601-1917 Fax: 703-206-5807
16. ENTIRE AGREEMENT
This Agreement represents the entire understanding between the
parties regarding the subject matter hereof and supersedes all other prior and
contemporaneous agreements, understandings, negotiations and discussions between
the parties with respect to such subject matter. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia, without regard to the conflicts of laws principles thereof.
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17. SEVERABILITY
If any provision of this Agreement is held by a court of
competent jurisdiction to be contrary to law, the remaining provisions of this
Agreement will remain in full force and effect.
18. AMENDMENT
This Agreement may be modified only by a written amendment
signed by both parties.
19. NO THIRD PARTY BENEFICIARIES
Nothing contained in this Agreement shall be deemed to confer
any rights in any third party not a signatory to this Agreement.
20. CONFIDENTIALITY
All information exchanged between the parties under this
Agreement or during the negotiations preceding this Agreement and relating
either to the terms and conditions of this Agreement or any activities
contemplated by this Agreement is confidential and neither party shall disclose
to any third party any of the other party's confidential information disclosed
to it. Any announcement of this Agreement must be mutually agreed upon by both
parties, including the timing and wording of press releases and other
announcements to third parties. Should the parties not come to agreement on a
press release or other announcement of the Agreement within 60 days after
execution and delivery of the Agreement, either party may publicly acknowledge
that this Agreement exists, provided that the acknowledgment is not in the form
of a press release.
21. DISPUTES
All disputes arising out of or relating to this Agreement
which are not resolved within 30 days after notice of the dispute is given by
either party to the other shall be finally settled by arbitration conducted
expeditiously in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The arbitration shall be conducted by a single
arbitrator in Washington, D.C. The arbitration shall be governed by the United
States Arbitration Act, and judgment upon the award rendered by the arbitrator
may be entered by any court with jurisdiction. The arbitrator is not empowered
to award damages in excess of direct compensatory damages. EACH PARTY HEREBY
WAIVES ANY DAMAGES IN EXCESS OF DIRECT COMPENSATORY DAMAGES.
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IN WITNESS WHEREOF, the parties have caused their respective authorized
representatives to sign this Agreement on their behalf, effective as of the date
first written above.
Icon CMT Corp. UUNET Technologies, Inc.
By: /s/ David L. Goret By: /s/ Martina W. Knee
Name: David L. Goret Name: Martina W. Knee
Title: VP, Business Affairs Title: Vice President
& General Counsel & General Counsel
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SCHEDULE I
INTERCONNECTION POINTS
MAE-E
MAE-W
SPEED
Connected via
public media exchange
over FDDI
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<PAGE>
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT, dated August 13, 1996 by and among
The CIT Group/Business Credit, Inc. ("CIT"), Access Graphics, Inc. (the "JUNIOR
LIENHOLDER"), and Icon CMT Corp. (the "Company").
W I T N E S S E T H :
WHEREAS, the Company has entered or is about to enter into a
certain Financing Agreement with CIT (the "CIT Financing Agreement") pursuant to
which CIT has made, or will make certain loans, advances and extensions of
credit to or for the benefit of the Company upon the security of the Collateral
(as defined herein) including without limitation the Company's Account,
Inventory, Equipment, Documents of Title, and General Intangibles all as more
fully set forth in said CIT Financing Agreement; and
WHEREAS, the Company has entered into a certain financing
agreement with the JUNIOR LIENHOLDER (the "JUNIOR LIENHOLDER Financing
Agreement") pursuant to which JUNIOR LIENHOLDER has made certain loans, advances
or extensions of credit to the Company upon the security of the Collateral, all
as more fully set forth in said JUNIOR LIENHOLDER Financing Agreement; and
WHEREAS, JUNIOR LIENHOLDER wishes to subordinate its lien on
all of the Collateral to CIT as herein provided.
NOW THEREFORE, in consideration of each of the parties hereto
entering into the above referred agreements and arrangements with the Company
and in order to determine the relative priorities of the respective security
interests in the Collateral and the application of the proceeds thereof, it is
hereby agreed as follows:
1. Definitions. As used in this Intercreditor Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"Accounts" shall mean all present and future accounts,
receivables, instruments, documents, contract rights, chattel paper, general
intangibles, unpaid seller's rights,
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<PAGE>
returned and repossessed goods, all rights to the goods represented by the
foregoing and all cash and non-cash Proceeds thereof.
"CIT Obligations" shall mean any and every obligation,
Indebtedness and liability of the Company to CIT of whatsoever nature and
however evidenced, whether now existing or hereafter incurred, originally
contracted with CIT and/or with another or others and now or hereafter owing to
or acquired in any manner. In whole or in part, by CIT, or in which CIT may
acquire a participation, whether alone or jointly and/or severally with another
or others, whether direct or indirect, absolute or contingent, secured or not
secured, matured or not matured, including but in no way limited to any and
every obligation, indebtedness and liability arising out of or in any way
connected with the CIT Financing Agreement or any financing under section 364 of
the Bankruptcy Code or any arrangement for the use of cash collateral under
section 363 of the Bankruptcy Code.
"Collateral" shall mean all present and future Accounts,
Inventory, Equipment, Documents of Title, and General Intangibles of the Company
and all cash and non-cash Proceeds thereof.
"Documents of Title" shall mean all present and future
warehouse receipts, bills of lading, shipping documents, chattel paper,
instruments and similar documents, all whether negotiable or not and all goods
and inventory relating thereto and all cash and non-cash Proceeds of the
foregoing.
"Equipment" shall mean all present and hereafter acquired
machinery, equipment, furnishings and fixtures, and all additions, substitutions
and replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all cash and non-cash Proceeds thereof.
"General Intangibles" shall have the meaning set forth in the
Uniform Commercial code as in effect in the State of New York and shall include,
without limitation, all present and future right, title and interest in and to
all tradenames, Trademarks (together with the good will associated therewith).
Patents, licenses, customer lists, distribution agreements, supply agreements
and tax refunds, together with all monies and claims for monies now or hereafter
due and payable in connection with any of the foregoing or otherwise and all
cash and non-cash Proceeds thereof.
"Inventory" shall mean all present and hereafter acquired
merchandise, Inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in all
stages of production - from raw materials through work-in-process to finished
goods - and all cash and non-cash Proceeds thereof.
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"JUNIOR LIENHOLDER Obligations" shall mean any and every
obligation, indebtedness and liability of the Company to JUNIOR LIENHOLDER of
whatsoever nature and howsoever evidenced, whether now existing or hereafter
incurred, whether direct or indirect, absolute or contingent, secured or not
secured, matured or not matured, which in any way are connected with or arise
under the JUNIOR LIENHOLDER Financing Agreement.
"Obligations" shall mean the CIT Obligations and the JUNIOR
LIENHOLDER Obligations.
"Patents" shall mean all present and hereafter acquired
patents and/or patents rights and all cash and non-cash Proceeds thereof.
"Proceeds" shall mean all proceeds as defined in the Uniform
Commercial Code of New York State as well as all cash, securities, insurance
proceeds, condemnation awards and other property received in respect of any
Collateral, including any cash, securities or other property received from any
liquidations or adjustment of debt of the Company and any portion of the
Collateral or the proceeds thereof which may be distributed in kind.
"Secured Parties" shall mean CIT and JUNIOR LIENHOLDER.
"Trademarks" shall mean all present and hereafter acquired
trademarks and/or trademark rights together with the good will associated
therewith and all cash and non-cash Proceeds thereof.
2. Priorities. Irrespective of any statement contained in any
of the CIT Financing Agreement or the JUNIOR LIENHOLDER Financing Agreement to
the contrary and irrespective of the time, order or method of attachment or
perfection of the security interests granted thereby or the time or order of
filing or recording of financing statements or other liens, mortgages or
security interests, and irrespective or anything contained in any filing or
agreement to which either CIT or JUNIOR LIENHOLDER may now or hereafter be a
party, any lien upon or security interest which JUNIOR LIENHOLDER may now or
hereafter have in any Collateral, including without limitation all Accounts,
Inventory, Equipment, Documents of Title, and General Intangibles, shall be, and
hereby is, subject and subordinate to CIT's lien upon or security interest in
such Collateral.
3. Exercise of Rights and Remedies. Irrespective of any other
agreement or arrangement, as to such Collateral of the Company and so long as
the CIT Financing Agreement remains in effect, CIT shall have the exclusive
right to carry out the provisions of the CIT Financing Agreement and to enforce
and collect any loans, advances, or CIT Obligations secured thereby and to
exercise and enforce all rights and privileges accruing to CIT by reason of said
CIT Financing Agreement and any other agreements, security,
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<PAGE>
guarantees or claims given to CIT in connection therewith, all in CIT's sole
discretion and in the exercise of its sole business judgment. This includes more
specifically, without limitation, the rights to make overadvances in its sole
discretion, to effect collection of all open Accounts and to settle and adjust
the amounts due thereon directly with the customers, to sell or otherwise
dispose of Inventory, all in a manner which CIT deems to be necessary in CIT's
sole discretion, and to incur expenses in relation to the foregoing; all as may
be necessary in CIT's sole discretion, all as more fully provided in the CIT
Financing Agreement and to exercise all the rights and remedies of a secured
lender under the Uniform Commercial Code of the State of New York. In exercising
its rights as aforesaid, CIT agrees that it shall handle all transactions
relating to the Collateral in accordance with its usual practices in the
ordinary course of its business and shall adhere to the same standards of
conduct as would be the case if there were no subordinate liens. JUNIOR
LIENHOLDER agrees that, so long as the Company may be indebted or obligated to
CIT in any manner whatsoever under the CIT Financing Agreement or otherwise,
JUNIOR LIENHOLDER shall not exercise any rights or assert any claims with
respect to any Collateral, including without limitation all Accounts, Inventory,
Equipment, Documents of Title, and/or General Intangibles of the Company nor
shall JUNIOR LIENHOLDER seek to foreclose on its junior security interest in any
of such Collateral, nor take any action, nor institute any proceedings with
respect thereto, provided, however, that JUNIOR LIENHOLDER shall be entitled to
enforce all of its other rights against the Company as permitted by law,
including seeking, obtaining, entering and enforcing a judgment against the
Company solely without reliance on its perfected security interest in the
Collateral.
4. Other Agreements
(a) Releases. (i) If CIT releases any of its liens on any part
of the Collateral in connection with the sale, lease, exchange, transfer or
other disposition thereof as permitted under the CIT Financing Agreement or in
connection with any restructuring of the indebtedness of the Company, the liens
of the JUNIOR LIENHOLDER shall be automatically, unconditionally and
simultaneously released on such Collateral and JUNIOR LIENHOLDER shall execute
and deliver to CIT or the Company such termination statements, releases and
other documents as the CIT or the Company may request to effectively confirm
such release. Notwithstanding the foregoing and notwithstanding anything to the
contrary contained herein, the lien granted to the JUNIOR LIENHOLDER shall,
subject to all of the provisions of this Intercreditor Agreement, continue in
the proceeds of any sale, leases, exchange or other disposition of the
Collateral made pursuant to Paragraph 3 of Section 10 of the CIT Financing
Agreement if such proceeds, subject to this Intercreditor Agreement, are not
applied to the CIT Obligations in accordance with said Paragraph 3 of Section 10
of the CIT Financing Agreement.
(ii) At the request of CIT, the JUNIOR LIENHOLDER agrees not
to hinder or delay any sale, lease, exchange, transfer or other disposition of
the Collateral, whether by foreclosure or otherwise. The JUNIOR LIENHOLDER
hereby waives any and all rights it
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may have to object to the manner in which CIT may seek to enforce or collect the
CIT Obligations or the liens granted in any of the Collateral including waiving,
as permitted by law, any right based on any duty to conduct any such sale,
lease, exchange, transfer or other disposition in a commercially reasonable
manner.
(iii) In furtherance of the foregoing, the JUNIOR LIENHOLDER
on the date hereof and from time to time, has executed and delivered or will
execute and deliver to CIT undated UCC termination and/or release statements in
respect of all of the Collateral in such number and such jurisdictions as
determined by CIT. The JUNIOR LIENHOLDER hereby irrevocably appoints CIT its
attorney-in-fact and authorizes CIT to complete the UCC termination and/or
release statements and file them in order to carry out the purposes of this
Intercreditor Agreement; CIT agrees to use its best efforts to give the JUNIOR
LIENHOLDER notice either concurrent with or prior to any such filing of the UCC
termination and/or release statements provided, however, that the failure of CIT
to give JUNIOR LIENHOLDER such notice shall not i) affect CIT's ability to file
such UCC statement(s) or ii) result in any liability whatsoever to CIT. This
appointment and authorization is coupled with an interest and is irrevocable.
Any such UCC termination or release filed by CIT to terminate or release the
JUNIOR LIENHOLDER'S lien shall not release the security interest in the proceeds
or the pertinent Collateral covered by such UCC statement.
(iv) In the event that the CIT Obligations are paid and
indefeasibly satisfied in full and the CIT Financing Agreement is terminated, a)
CIT shall file UCC termination statements covering the Collateral solely on its
behalf and b) CIT shall return all of the unused UCC terminations and releases
delivered by the JUNIOR LIENHOLDER to CIT pursuant to clause (iii) above to the
JUNIOR LIENHOLDER unless CIT is directed to do otherwise by the JUNIOR
LIENHOLDER.
(b) Insurance. Unless and until the CIT Obligations are paid
in full and the CIT Financing Agreement terminated, CIT shall have the sole and
exclusive right, subject to the rights of the Company under the CIT Financing
Agreement to adjust settlement for any insurance policy covering the Collateral
in the event of any loss thereunder and to approve any award granted in any
condemnation or similar proceeding affecting the Collateral. Unless and until
the CIT Obligations are paid in full, all proceeds of any such policy and any
such award shall be paid to CIT and applied in accordance with the provisions of
the CIT Financing Agreement. In the event CIT allows any portion of such
insurance proceeds or condemnation or similar award to be used by the Company to
repair or replace the Collateral affected or for any other purpose, the JUNIOR
LIENHOLDER hereby consents thereto.
(c) Prohibition on Contesting Liens and CIT Obligations; No
New Liens. The JUNIOR LIENHOLDER agrees that it shall not (and hereby waives any
right to) contest or support any other person in contesting, in any action or
proceeding or otherwise
-5-
<PAGE>
<PAGE>
(including, without limitation, any federal or state bankruptcy, insolvency or
liquidation proceeding), the priority, the validity or enforceability of the CIT
Obligations or any lien held by CIT. Without the prior written consent of CIT,
JUNIOR LIENHOLDER shall not hold any lien on any assets of the Company, other
than liens in the Collateral granted pursuant to the JUNIOR LIENHOLDER Financing
Agreement in effect on or about the date hereof.
(d) Financing Issues. If the Company shall be subject to any
federal or state bankruptcy, insolvency or liquidation proceeding and CIT shall
desire to permit the use of cash Collateral or to permit the Company to obtain
financing under section 363 or section 384 of the Bankruptcy Code, then the
JUNIOR LIENHOLDER agrees that it will raise no objection to such use of
financing and will not request adequate protection or any other relief in
connection therewith and, to the extent necessary, will subordinate its liens in
the Collateral to such financing.
(e) Adequate Protection. The JUNIOR LIENHOLDER shall not seek
or request adequate protection nor shall it consent (or support any other person
contesting) (i) any request by CIT for adequate protection or (ii) any objection
by CIT to any motion, relief, action or proceeding based on CIT claiming a lack
of adequate protection.
(f) Automatic Stay. No JUNIOR LIENHOLDER shall seek relief
from the automatic stay or any other stay in any federal or state bankruptcy,
insolvency or liquidation proceeding in respect of the Collateral.
5. Further Assurances. CIT and JUNIOR LIENHOLDER each agree to
execute any further documents or amendments as may be necessary to effect the
purpose of this Intercreditor Agreement on any applicable public records.
6. Application of Proceeds.
Collateral. The Proceeds of any sale, disposition or other
realization upon all or any part of the Accounts and the Collateral of the
Company shall be applied in the following order of priorities:
first, to the payment in full of all of CIT's expenses of such
sale, disposition or other realization, including all expenses, liabilities and
advances incurred or made by CIT in connection therewith, including attorney's
fees;
second, to the payment in full of all CIT obligations;
third, to the payment in full of JUNIOR LIENHOLDER's expenses
of such sale, disposition or other realization, including all expenses,
liabilities and advances incurred or made by JUNIOR LIENHOLDER in connection
therewith, including attorneys' fees;
-6-
<PAGE>
<PAGE>
fourth, to the payment in full of all JUNIOR LIENHOLDER
Obligations;
finally, to pay to the Company or its representatives or as a
court of competent jurisdiction may direct, any surplus then remaining from such
Proceeds.
7. Notices. Each Secured Party agrees to use its best efforts
to notify the other Secured Party within a reasonable time in the event of any
material event of default or material breach by the Company resulting, or which
may result, in acceleration of any Obligation due to the Secured Party giving
notice and secured by any Collateral. Each Secured Party further agrees to use
its best efforts to furnish the other Secured Party with copies of any notices
of default, acceleration, demand or foreclosure as the Secured Party giving the
notice may send to the Company, provided that failure to give any of the
foregoing notices shall not (i) affect the priorities of the liens upon the
Collateral set forth herein or (ii) result in any liability whatsoever to the
other party.
8. No Representations. The Secured Parties have not made to
each other nor do they hereby or otherwise make to each other any warranties,
express or implied, nor do they assume any liability to each other with respect
to: (a) obligors under any instruments of guarantees; (b) the enforceability,
validity, value or collectibility of the loans made to the Company, the
Accounts, the Inventory, Equipment, Documents of Title, General Intangibles, or
any guarantee or security which may have been granted to any of them in
connection with any of their agreements; or (c) title or right to transfer any
Collateral or security. JUNIOR LIENHOLDER expressly acknowledges that CIT may,
in its sole discretion, make loans, advances and extensions of credit to the
Company in excess of the amounts otherwise available to the Company based upon
the advance formulas set forth in the CIT Financing Agreement. No party shall be
liable to the other for any action or failure to act or any error of judgment,
negligence, or mistake, or oversight whatsoever on the part of any party's
agents, officers, employees or attorneys with respect to any transaction
relating to the agreements or security or guarantees therefor, provided said
party has acted in good faith and has not been guilty of willful misconduct.
9. Waivers. The JUNIOR LIENHOLDER agrees not to assert and
hereby waives any rights to demand, request, plead or otherwise assert or claim
the benefit of any marshalling or other similar right that may otherwise be
available under applicable law (i.e., hereby waives any right to require CIT to
marshall any security or Collateral or otherwise to compel CIT to seek recourse
against or satisfaction of the CIT Obligations from one source before seeking
recourse or satisfaction from another source).
10. Miscellaneous. a) Except as otherwise provided in this
Intercreditor Agreement, the rights and priorities of the parties shall be
determined in accordance with applicable law. This Intercreditor Agreement shall
be governed by the laws of the State of New York and, except as otherwise
defined in this Intercreditor Agreement, all terms used herein
-7-
<PAGE>
<PAGE>
which are defined in the Uniform Commercial Code shall have the meanings therein
stated. This Intercreditor Agreement is solely for the benefit of the parties
hereto and their respective successors and assigns, and no other person, firm,
entity or corporation shall have any right, benefit, priority or, interest
under, or because of the existence of, this Intercreditor Agreement. The
Company, although not a party hereto, has signed below to confirm its agreement
to all of the foregoing.
b) It is agreed that with respect to this
Intercreditor Agreement, as may be amended, modified, or supplemented from time
to time, signed faxed documents shall be deemed to be of the same force and
effect as an original of a manually signed copy.
c) This Intercreditor Agreement may be signed in
multiple counterparts, each which shall constitute an original, but all of which
when taken together shall constitute but one (1) agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Intercreditor Agreement to be duly executed by their proper and duly authorized
officers as of the day and year first above written.
ACCESS GRAPHICS, INC.
By /s/
-------------------------------------------
Title: Financial Services Regional Manager
THE CIT GROUP/BUSINESS CREDIT, INC.
By /s/
-------------------------------------------
Title: A V P
ICON CMT CORP.
By /s/
-------------------------------------------
Title: CFO
-8-
<PAGE>
<PAGE>
EXHIBIT 11.1
ICON CMT CORP.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
WEIGHTED
DAYS AVERAGE
SHARES OUTSTANDING SHARES
--------- ----------- -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Shares outstanding at January 1, 1996................................... 6,545,455 365 6,545,455
Cheap stock consideration for stock, stock options and warrants issued
during 1997........................................................... 3,563,824 365 3,563,824
-----------
Pro forma weighted average common shares outstanding............... 10,109,279
-----------
Net loss for the year ended December 31, 1996...................... $(8,038,000)
-----------
Pro forma net loss per common share................................ $ (0.80)
-----------
-----------
NINE MONTHS ENDED SEPTEMBER 30, 1997
Shares outstanding at January 1, 1997................................... 6,545,455 273 6,545,455
Issuance of common stock upon conversion of preferred stock............. 4,981 9 164
830,220 13 39,534
83,022 29 8,819
4,151 32 487
33,209 64 7,785
41,345 72 10,904
166,044 82 49,874
3,466,902 92 1,168,334
Cheap stock consideration for stock, stock options and warrants issued
during 1997........................................................... 1,860,792 150 1,022,413
553,691 181 367,099
89,121 191 62,352
22,191 201 16,338
2,228 241 1,967
44,561 244 39,827
445,605 260 424,386
2,674 264 2,586
542,961 273 542,961
-----------
Pro forma weighted average common shares outstanding............... 10,311,285
-----------
Net loss for the nine months ended September 30, 1997.............. $(9,088,000)
-----------
Pro forma net loss per common share................................ $ (0.88)
-----------
-----------
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated November 17, 1997
relating to the financial statements of Icon CMT Corp. which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the three years in the period ended December 31, 1996 and
the nine months ended September 30, 1997 listed under Item 16(b) of this
Registration Statement when such schedule is read in conjunction with the
financial statements referred to in our report. The audits referred to in such
report also included this schedule. We also consent to the reference to us under
the heading 'Experts' in such Prospectus.
PRICE WATERHOUSE LLP
Stamford, Connecticut
November 26, 1997
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> 1996 1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<EXCHANGE-RATE> 0 0
<CASH> 515 4,556
<SECURITIES> 0 0
<RECEIVABLES> 7,785 7,043
<ALLOWANCES> 437 516
<INVENTORY> 92 78
<CURRENT-ASSETS> 9,488 13,164
<PP&E> 5,120 7,799
<DEPRECIATION> 1,339 2,784
<TOTAL-ASSETS> 13,292 18,262
<CURRENT-LIABILITIES> 11,388 8,074
<BONDS> 0 0
<COMMON> 7 7
9,881 26,626
0 0
<OTHER-SE> (8,139) (16,445)
<TOTAL-LIABILITY-AND-EQUITY> 13,292 18,262
<SALES> 38,108 30,302
<TOTAL-REVENUES> 38,108 30,302
<CGS> 31,449 23,197
<TOTAL-COSTS> 31,449 23,197
<OTHER-EXPENSES> 14,939 15,644
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 75 351
<INCOME-PRETAX> (8,248) (8,832)
<INCOME-TAX> (210) 256
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,038) (9,088)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> (0.80) (0.88)
<PAGE>
